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Asset Management:For 2QFY20, monthly SIP inflows remained stable at ~Rs 82bn aggregating to Rs 248bn (+8.2/1.1% YoY/QoQ), while lump-sum outflows declined substantially to ~Rs 27bn (1QFY20: Rs 162bn), leading to total equity inflows (ex. arbitrage and ETF) of Rs 221bn (-32.3%/+2.7x YoY/QoQ). Broking:On account of increased volatility in equity markets, total market ADTV (ex-prop) for 2QFY20, continues to grow at a healthy pace of 49.4/12.1% YoY/QoQ; cash ADTV (higher yielding) growth remained lackluster at -3.4/-1.0% vs. 51.8/12.5% YoY/QoQ for derivatives. Consequentially derivative : Cash mix moved further towards derivatives at 97.2 : 2.8% in 2QFY20 (vs . 95.7:4.3% in 2QFY19). Life Insurance: After a growth of 23.5% YoY in 1QFY20, overall pvt. indiv. APE growth has slipped considerably to 11.1% in 2QFY20. The high base set after strong growth of 22.8% CAGR during FY17-19 and a slowing economy has put growth for the sector at risk in 2HFY19. General Insurance: While Jul-Aug19 industry GDPI growth was robust at 19.5% YoY, growth for pvt. multi-line insurers was slow at just 7.5% YoY, however growth ex-crop was at 18.3%
Broking: Competitive intensity continues to remain at extremely elevated levels and brokers have resorted to lower pricing for intraday trades eg. Brokers are not charging for derivative trades being squared off within 5 mins. Total market ADTV (ex-prop) for 2QFY20, continues to grow at a healthy pace of 49.4/12.1% YoY/QoQ; cash ADTV (higher yielding) growth remained lackluster at -3.4/-1.0% vs. 51.8/12.5% YoY/QoQ for derivatives. Consequentially derivative : cash mix has moved further towards derivatives at 97.2% : 2.8% in 2QFY20 (vs. 95.7% : 4.3% in 2QFY19). Active clients base of discount brokers such as Zerodha, Upstox and 5Paisa Capital has increased by 15/178/121% respectively during 1HFY20. ISEC too has displayed a strong +62k (1HFY20) addition in active customers i.e. +7.4% over FY19. Life insurance: After a strong 1Q (+27.8 YoY), private life insurers individual NBP growth tapered to 13.5% YoY in 2QFY20. Base numbers are high after a FY17-19 growth CAGR of ~22.8%. Additionally, we believe that slowing economy has put 2HFY20 growth for the sector at risk. Growth in group business has also slowed down considerably in 2QFY19 to 12.9% vs. 38.3% in 1QFY20 as a slowdown in loan growth for banks and even more so for NBFCs is having a bearing on the credit protect business. Mutual funds: For 2QFY20, monthly SIP inflows remained stable at ~Rs 82bn aggregating to Rs 248bn (+8.2/1.1% YoY/QoQ), while lump-sum outflows declined substantially to ~Rs 27bn (1QFY20: Rs 162bn), leading to total equity (ex. arbitrage and ETF) inflows of Rs 221bn (-32.3%/+2.7x YoY/QoQ). QAAUM growth is challenged as...
Asian markets are trading higher as investor sentiment improved after a partial trade deal agreement that would delay the proposed increase in tariffs worth Rs 250 billion on Chinese imports. Nikkei is trading higher by 1.15% and Hang Sang is trading higher by 1.02% and Shanghai is trading higher by
INFY's growth has accelerated over the past six quarters from 6% to 11.4% YoY CC and growth metrics vs. TCS have improved (from 340bps lag to 140bps lead organic). Margin erosion from 23.7% (-130bps vs. TCS) to 21.7% (-230bps vs. TCS) has bottomed out, with stability in delivery metrics (localisation, sub-con). We expect USD rev/EPS CAGR of 9.7/9.2% over FY19-22E. Current valuations (18.6x FY21E) largely bake in this recovery and the recent stock outperformance is mostly done. We await more triggers to confirm a sustainable upgrade; our passive optimism works for now. Despite the hoopla around catchup with TCS, we maintain NEUTRAL on Infosys post a mostly in-line 2QFY20 (unchanged est). Lower band of rev guidance was upped, margin band maintained even as core verticals lagged. Our TP of Rs 835 is based on 18x Sep-21E EPS.
Sharp slowdown in growth: Individual APE growth for private players slowed down to 2.5% YoY v/s 10% YoY seen in Aug'19 and +20% YoY seen from Apr- Individual APE growth turns weak...
Sharp slowdown in growth: Individual APE growth for private players slowed down to 2.5% YoY v/s 10% YoY seen in Aug'19 and +20% YoY seen from Apr- Individual APE growth turns weak...
Aviation: Industry growth has been impacted due to the closure of Jet Airways. However, the incumbent airlines are witnessing healthy growth of c.25%. Both Indigo and Spice are growing at 20%+ levels. Autos: While auto volumes have been weak in 2QFY20, we believe that sales will revive from hereon as highlighted above. Over 2Q, two wheeler and passenger car volumes declined c.25% and MHCV volumes fell c.50%.
Jewellery:Our coverage universe is expected to be washout as the sudden spike in gold prices June-end onwards have kept consumers at bay. Revenue/EBITDA/EBITDA margins are expected to be flat YoY as the lower-margin gold-exchange scheme is pushed to salvage volumes. Channel checks suggest most of the big-box jewellery retailers have clocked flattish-to-single digit declines in revenue for 2Q. That said, key monitor-able would be the off-take in the upcoming festive season and assessing how big the lag could be before consumers adjust to the new price. This will be the second quarter of Un-Titan-like performance and investors would be keen to understand for how long the pain could last. Thangamayil could be hurt even more given the heavy base of 2QFY19. FMCG: Our FMCG coverage universe is expected to deliver 7/9% YoY revenue/EBITDA growth in 2QFY20 (vs. 13/14% in 2QFY19 and 7/10% in 1QFY20). Rural stress has aggravated and is now growing slower than urban (vs. 1.2-1.3x in FY19). Weak consumer sentiments has led to downtrading in few categories. Consumer Appliances: Our coverage universe is expected to post 9/16% revenue/EBITDA growth (18/1% in 2QFY19). Appliances is expected to deliver a better quarter vs. FMCG. Outperformance is driven by low channel inventory of cooling products owing to a harsh summer. However, we expect growth to moderate in categories ex-cooling products. We expect margins to expand led by favorable base, soft commodity inflation and price hikes.
Top Picks: LT, PNC, KNR & Capacite. All engines yet to fire: After big bang announcements on infra spend in Roads/Railways/Water etc, the ordering is yet to play out on the ground. NHAI bidding is expected to pickup from Nov-19 where we estimate 4,500km to be bid out at an EPC cost of Rs 743bn. State project awards from UP worth Rs 120bn will fill the order vacuum in 1HFY20. To sum up, 1HFY20 was a washout for most of the road developers with 2HFY20 looking robust.
Asian markets are trading mixed amid positive cues from Wall Street overnight. Nikkei is trading higher by 0.97% and Hang Sang is trading higher by 1.30% and Shanghai is trading lower by 0.14%. Indian indices are expected to open lower and focus will be quarterly earnings releases for further direct
Top Picks: DLF and Sobha. The NIFTY Realty index has corrected 12.1% over the last 3 months. Weak property buying sentiments, high unsold inventory and paucity of new launches has impacted 2QFY20 pre-sales. As we enter into the festive season, new launches have picked up. We believe that discounts/sales promotion will speed up ready inventory monetization. We remain constructive on volumes with muted expectation on pricing power.
Top picks: UltraTech, Dalmia Bharat and JK Cement. We also like Orient Cement owing to its strong earnings recovery in FY20E. Another quarter of flattish sales growth: Cement demand remained weak in 2QFY20, on continued slowdown in construction activities. Liquidity constraints, heavy monsoon and project cancellations in AP drove the slowdown. We, therefore, estimate aggregate sales volume for 11 cement companies under coverage to remain flattish YoY. We expect Star Cement to record 8% volume growth on demand recovery in the north-east region. We estimate UltraTech to deliver 3.5% volume growth mainly aided by inorganic contribution coming from the Binani Cements acquisition. JK Cements 3% volume growth is driven by higher white cement sales. We estimate ~5-15% volume decline for companies with high sales exposure to AP/T markets (Deccan, Orient Cement).
Asian markets are trading in the green tracking cues from Wall Street overnight while investors focus on US China trade negotiations in the day ahead. Nikkei is trading higher by 0.43% and Hang Sang is trading higher by 0.30% and Shanghai is trading higher by 0.24%. Indian indices are expected to op
Cos with large DTAs (SBIN, AXSB, ICICIBC and IIB) are a large bump up in tax expense in 2Q. 2QFY20's earnings may be particularly volatile, due to deferred tax impact. The aftershocks of the Aug-18 episode may become more pronounced in 2QFY20 earnings. As a result of ratings downgrades, large defaults and guidance for higher stress in 1QFY20 (AXSB, RBK), reported delinquencies may rise in 2QFY20, led by mid-corporate loans. LLPs too, are likely to be higher. Our interaction with participants at the HDFC Sec Reality Check Investor Forum suggests that while the rise in retail delinquencies for the sector is likely to sustain, current level is not particularly worrisome and PVT Banks portfolios continue to fare, better.
