Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Interesting Articles

| More

India Equity Strategy - Up too much, too soon - HDFC Securities

Posted On: 2020-05-06 14:18:45


We are not fully convinced of the durability of current market up-move (Nifty up 30% since 23rd March'20) and believe that street has not fully factored in the impact of CoVid-19 induced lockdown. Mar-20 volume/earnings disappointment from large index stocks such as HUVR, RIL and rising CoVid19 provisioning for banks are precursors to greater systemic earnings weakness in coming months. Nifty is now down ~20% since pre CoVid-19 highs in mid Feb'20 (vs. ~40% decline till mid March), while as per our assessment CoVid-19 impact on FY21 EPS of HSIE univ could be >30%. Already, FY21 EPS growth est for HSIE coverage has been cut from +20% YoY (pre CoVid-19) to -5%YoY, and we see potential for further cuts. RBI's rate cut/liquidity measures are not percolating into the system as intended while fiscal measures have been delayed and underwhelming. We continue to recommend a largely quality, value and defensive portfolio bias given ongoing uncertainty and heightened volatility with ~4% allocation to cash. Our key picks are: Bharti, ITC, UNSP, Ultratech, SBI Life, ICICI Bank, Axis Bank. IGL, CDSL.

Consensus earnings analysis- negative impact not yet fully priced in

Based on our analysis of consensus earnings estimates for Nifty constituents (details pls see pg 5) we believe that street has not yet fully factored the impact of CoVid-19 on corporate earnings. In our earlier note (link here) we estimated a hit of >30% on FY21 aggregate PAT of HSIE univ in a scenario of protracted lockdown and slower return-to-normalcy trajectory. However, till date consensus FY21 Nifty EPS has been cut by ~15% and for FY21 consensus is still building in a growth of 13%YoY. This is optimistic - given the intensity and extent of lockdown FY21 will be a negative earnings growth year. In contrast, HDFC sec has already cut FY21 aggregate PAT est by 26% and we currently expect -5%YoY FY21 PAT growth for HSIE univ.

4QFY20 earnings: disappointments likely to strain market in May'20

Many large sector leaders have posted Mar-20 earnings disappointment on an already muted expectation. Most notably, HUVR's 7%/2% YoY volume/PAT decline in 4QFY20 (despite a trend run rate till mid Mar'20) -clearly points to an underestimation bias, which is likely to unravel as we move through the chunky part of earnings season in May'20. We expect more disappointments than surprises, implying a continuation of cuts in May'20 and a likely pronounced negative price reaction given the recent run up. We expect a continuation of negative mgt commentary w.r.t. CoVid-19 impact on FY21 earnings.

Recent uptick - a bear market rally rather than a decisive turnaround

We would deem recent mkt surge more as a bear market rally and not a resumption of bull market. Proactive and co-ordinated moves of global central bankers and governments have helped to mend financial market sentiments, but the impact on real economy and corporate earnings seem to be underestimated after current rally, in our view.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com





Other Headlines:

How to apply for Rights Issue of Arvind Fashions Limited?

How to apply for Rights Issue of Aditya Birla Fashion and Retail Limited?

An insight on Aarti Surfactants Limited

Covid-19 and its impact on businesses

Nifty Gained 8% in the June Series, Bank Nifty Surged 12%-Highest Since March 19 - HDFC Securities

IMF Growth Revision for India - Acuité Ratings & Research

Co-operative Banks - RBI Supervision - Acuité Ratings & Research

HDFC Securities views on relaxations announced by SEBI

India can reduce China trade deficit by over $8 billion in FY21-22 - Acuité Ratings & Research

How can investors preserve their wealth during times of crisis

JM Financial Yield Enhancer (Distressed Opportunity) Fund I raises Rs.160 crore in its first close

Samco Securities launches BTPT - Buy Today, Pay In Two days for Investors Buying Stocks

No data breach of BHIM app: Report

India's sovereign rating downgrade by Moody's - Acuité Ratings & Research

Banking Sector Credit Trends - Unusual trends - HDFC Securities

Rollover Report for May - June 2020: Angel Broking

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Q4 GDP

Mr. Dhiraj Relli views on GDP Numbers - HDFC Securities

Banking Sector Update - NIM compression on the cards - HDFC Securities

May series ends with a bang: Angel Broking

May 2020 F&O Series Expiry - Mr. Nandish Shah, Technical Research Analyst, HDFC Securities

Views on Impact of Locusts Attack on Agriculture - Acuité Ratings & Research

ICAI establishes Center for Audit Quality

Bharti Telecom raised over Rs. 8433 crores through Accelerated Book-build offering of equity shares of Bharti Airtel

SATYA MicroCapital raises INR 105 crore equity funding from Japan-based Gojo & Company Inc.

Mr. Rajnish Kumar, Chairman, SBI & IBA on the announcements made by RBI today

Views of Mr. Umesh Revankar, MD and CEO, Shriram Transport Finance on RBI announcement

Views of Mr. George Alexander Muthoot, MD, Muthoot Finance on RBI announcement today

Views of Ms. Anagha Deodhar - Economist, ICICI Securities on the RBI announcement today

Views on RBI Policy announcement today - Federal Bank

RBI Monetary Policy (May 2020) by Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

Religare Finvest Ltd. on today's monetary policy by RBI

RBI monetary policy announcement - Mr. Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd

RBI's proactive measure will help revive economy: Dr.Niranjan Hiranandani

Mr. Dhiraj Relli views on today's announcement made by RBI

Views of Mr. R K Gurumurthy, Head - Treasury, Lakshmi Vilas Bank on the RBI announcement today

Suvodeep Rakshit, Vice President & Sr. Economist, Kotak Institutional Equities on RBI announcement

Suman Chowdhury, Chief Analytical Officer at Acuité Ratings & Research, on today's RBI announcement

General Insurance Sector Update - GDPI continues to decline due to Lockdown - HDFC Securities

Stress in Banking Sector to Continue: Geojit Financial Services

Banking Sector Update - What have banks said - HDFC Securities

Satyam Shivam Sundaram, EY India on measures announced by Finance Minister today

HDFC Securities: Mr. Dhiraj Relli views on Fourth Set of Economic Measures announced by Finance Minister

Structural intervention to spur investments - Ramesh Nair, CEO and Country Head (India) JLL

MNCs & their unlisted subsidiaries - A case of misplaced premium & forgotten risk

India Equity Strategy - FM's package: Addressing liquidity concerns - HDFC Securities

Mr. Umesh Revankar, MD and CEO, Shriram Transport Finance on package announced by FM

Mr. Rajnish Kumar, Chairman, SBI on FM's announcement

Central Government's Atmanirbhar Bharat Initiative - Tata Projects Ltd

FM Stimulus View: Mr. Shachindra Nath, Executive Chairman at Ugro Capital







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019