Festive optimism amidst Geopolitical uncertainty

Amnish Aggarwal [email protected] 91-22-6632 2233

 India Strategy

THIS PAGE IS INTENTIONALLY LEFT BLANK

October 11, 2024 2

October 11, 2024 Festive optimism amidst Geopolitical uncertainty

Top Picks NIFTY has been mainly flattish in past 6 weeks, which have seen extreme
market volatility led by rising geopolitical tensions in Middle East, 50bps
Large Cap interest rate cut by US FED and state elections in India. Demand conditions
Ambuja Cement remain uncertain; prolonged rains and floods have affected 2Q growth. Rural
Bharti Airtel demand is slowly recovering and recent initiatives to improve rural incomes by

Bharat Electronics increasing MSP, raising import duty on edible oils, allowing export of onions and
removing price caps on Rice exports will boost farm incomes, however these
HDFC Asset Management Company
measures might jack up food inflation in coming months.
ICICI Bank
IndusInd Bank
Victory of ruling BJP in Haryana has provided push to markets. Outcome of
InterGlobe Aviation
elections in Maharashtra (Elections likely in Nov24) and Jharkhand (Dec24)
Larsen & Toubro
will be a key volatility factor for markets. Global geopolitical situation remains
Max Healthcare Institute
bad as Middle East conflict can impair global supply chains. Post 50bps interest
Mahindra & Mahindra rate cut by US FED, Markets could watch for outcome of US elections for
Reliance Industries getting the next direction.
Titan Company
We believe Capital Goods, Infra, Ports, EMS, Hospitals, Tourism, New Energy,
Mid / Small Caps
E-com and Telecom are emerging themes to play, at right valuations. We
BEML believe markets and street estimates factor in strong rebound in demand in
Crompton Greaves Consumer Electricals festival and marriage season, any disappointment on this front can result in
Cyient further cut in EPS estimates on top of 3.8/2.8% cut in EPS for FY25/26. We
J.B. Chemicals & Pharmaceuticals rollover to Sept 26 and increase our base case NIFTY target to 27867 (26820
Jindal Stainless earlier). We remain cautiously optimistic with stock specific approach and
Lemon Tree Hotels advise avoiding FOMO (Fear of missing out) in current volatile times.

R R Kabel
We estimate 5% sales growth with flat EBIDTA and 3.8% decline in PBT of our
Safari Industries (India) coverage universe. Ex oil & Gas, we estimate 6.6% growth in EBIDTA and 10.1% in
PBT. Auto, Capit
lead PBT growth. Oil and Gas, Building Materials, cement and Media will report
Model Portfolio v/s Nifty decline in EBIDTA. Banks, consumer, IT and travel will grow EBIDTA in single digit.
Model
Returns Nifty Perf.
Portfolio Strong EBIDTA growth trends is likely to sustain in Hospitals, Pharma, Capital
Since
Goods and Chemicals. Auto, banks and Durables will also show double-digit
155.8% 132.3% 23.5%
Nov'18 EBIDTA growth. Rural demand is showing signs of recovery for staples,
Since although 2Q will show some impact of prolonged rains. Discretionary
Last 1.8% 0.9% 0.9% spending on travel, housing, Jewellery and 2W remains positive while PV, QSR,
Report
apparel, footwear, Building materials remain affected. Auto, CG, Pharma and
Since Hospitals will report robust margin expansion while Building Materials,
50.4% 41.2% 9.2%
Apr'23
Consumers, Media, Oil and gas and cement will report decline in margins.
Source: PL
2Q has been a mixed lot, as prolonged rains and floods have shown impact on
demand. Demand conditions remain mixed and all hopes rest on strong
Amnish Aggarwal demand revival in festival and wedding season. Infra spends and ordering has
[email protected] | 91-22-66322233 shown a pickup and FY25 will remain volatile as Maharashtra, Jharkhand and
Delhi are going to polls in coming few months. RBI has held on to interest rates
amongst fears on inflation resurfacing as GOI has taken several steps to
improve crop realizations in edible oilseeds, onion and Rice. We see some repo
rate cut materializing in Dec24 only.

October 11, 2024 3

 India Strategy

Capital Goods (govt capex and PLI), Travel

Pharma seem well placed for sustained growth in coming quarters. Cement
and metals should report better growth and profitability in 2H25. Banks are
likely to see NIM compression in coming quarters as well. Wire and cable
companies are on a strong wicket. 2H25 will be a test for urban discretionary
spends; any disappointments on this front can lead to cut in earnings in
consumption related sectors.

Market tide shifted in favor of defensives as valuations in many cyclicals had

become quite expensive even after factoring in sustained growth. With hopes
of higher growth and less risk, FMCG, IT Services, Pharma and consumer
durables have seen strong bounce back.

FII inflows in past 6 weeks are up by Rs335bn, despite strong selling in past
few days. DII inflows at Rs891bn continue to remain strong.

NIFTY EEPS has seen a cut of 3.8/2.8% for FY25/26 and we introduce FY27
EPS. We estimate EPS CAGR of 15% over FY24-27 with EPS of
Rs1200/1371/1546 for FY25/26/27. Our EPS estimates are lower by
2.2/3.3/4.6% in FY25/26/27 than Bloomberg consensus EPS estimates.

NIFTY is trading at 19.4x 1-year forward EPS, which is at 1.6% premium to 15-
year average PE of 19.1x. Base Case: we value NIFTY at 15 year average PE of
19.1x and based on Sept26 EPS of 1459 and arrive at 12-month target of 27867
(26820 earlier). Bull Case: we value NIFTY at 5% premium to 15-year average
PE 20x and arrive at bull case target of 29260 (28564 earlier). Bear case: Nifty
can trade at 10% discount to LPA with a target of 25080 (24407 earlier).

Model Portfolio: We are reducing weights in Capital Goods and Consumer

and turn equal weight in IT services. We cut weights in IIB, Siemens, Britannia,
and remove Carborandum and Cipla from model portfolio. We are increasing
weights in KMB, Astral, Interglobe Aviation, NEST and Sun Pharma. We add
Bharat Electronics and HCL Tech in Model portfolio. We are overweight on
Banks, Consumer, Capital Goods, Cement, Telecom and Healthcare.

High Conviction Picks: We are adding Bharat Electronics, Crompton

Consumer, Jindal Stainless, Safari, Cyient and JB Chem in conviction picks.
We are removing Siemens, Praj, Apar and Lupin labs post sharp run up in these
stocks recently.

Rural Demand, Infra Spends positive: Election Freebies a LT issue

Headwinds Tailwinds
Mixed demand scenario in discretionary India remains fastest growing economy,
segments GDP growth likely at +7% in FY25
Growing freebies and populism across
Normal monsoons, gradual uptick in rural
states can impair capex and essential
demand
spends
Geopolitical uncertainties in Middle East, Capex push on Infra, PLI, Energy transition
Ukraine and SE Asia and Digitization
India not under single party majority rule Relative political stability post Haryana
after a decade election victory of ruling party
Source: PL

October 11, 2024 4

 India Strategy

US Elections Stable Geopolitics, Crude and

Technology key to Indian Interests

The upcoming US presidential election could have critical implications for India
against the backdrop of escalating geopolitical tensions, change in leadership in
Bangladesh, and fragile situation in South East Asia. With India navigating tensions
in South Asia and managing strategic shifts in the Indo-Pacific, the US stance
becomes crucial to preserve political stability in South Asia. If elected, Kamala
-driven
approach, while D
trade tactics, including potential tariffs and stricter immigration policies. However,
return of Donald Trump as president of USA might put some cold water on rising
tensions and wars in Russia Ukraine and Middle East.

Given that the election outcome will shape areas like defense, immigration and
energy, it is crucial for India to assess and adapt to US policy shifts without viewing
either outcome as categorically favorable or unfavorable.

Trump Govt might be favorable for Global Geopolitics, Crude prices, Defence technology and Pharma
Trade Policy
Kamala Harris Donald Trump
Emphasizes multilateral trade agreements and regional collaborations Strongly favors protectionism with a focus on renegotiating trade deals
(e.g., Indo-Pacific Economic Framework). and imposing heavy tariffs.
The termination of GSP in 2019 alone affected US$6.3bn worth of
Renewal of Generalized System of Preferences (GSP)
Indian exports that previously enjoyed duty-free status
Bilateral trade CAGR during Biden regime is 9.2% Bilateral trade CAGR at 7.5% during Donald Trump's term
Implications for India
S NO major change likely Could cause disruptions in global trade, but might open up
in current policy. opportunities for India to replace Chinese imports in the US market.

Immigration Policy
Kamala Harris Donald Trump
Favors expanding skilled worker visas, like H-1B - H-1B visa approval Plans to tighten immigration rules reduce H-1B visas. Under Trump, the
rates under Biden peaked at 98% in FY21, the highest in over a decade. number of approvals fell in 2017/18 but recovered in 2019/20.
Implications for India
Stricter education based via norms likely, it might affect unskilled
Positive for Indian IT service and GCC exports
workers, however might not affect IT services and GCC exports.

Energy and Environment

Kamala Harris Donald Trump
Proposes a significant increase in renewable energy incentives (e.g., EV Plans to prioritize traditional energy sources (oil, gas, coal), revoke
subsidies, clean energy R&D) environmental regulations, and expand drilling on federal lands
KH likely to continue big push for renewable energy for reducing fossil Trump favours expanding oil and gas drilling on federal lands, which had
fuels. Could take forward US-India Climate and Clean Energy Agenda led to an increase in US oil production by 36% between 2016 and 2019.
2030 Partnership (mobilized US$2bn in PPP clean energy finance to
support India's energy transition and renewable goals) were 25% lower than under
Implications for India
Lower global prices of crude and Gas are positive for an import
energy and reducing dependency on fossil fuels. dependant country like India

October 11, 2024 5

 India Strategy

Defense
Kamala Harris Donald Trump
Strong focus on strengthening Indo-Pacific partnerships to
Credited with the decision to revive the Quad partnership in 2017
counterbalance China in South Asia through initiatives like INDUS-X
Biden and Harris emphasized technology transfer, co-production and -
integration of supply chains, and the co-production of GE engines for production (Apache and Chinook attack helicopters), leading to 30%
Tejas Mark-2 fighters (though delivery has been severely delayed) increase in defense imports in FY17-FY20.
Exports reached an all-time high of Rs44bn in FY24. defence exports to the US stood at Rs3.1bn.
Implications for India
Strategic realignment through the Initiative on Critical and Emerging
US stance to strengthen QUAD and empower India in SE Asia can result
Technologies and G7, making India a cornerstone of the US strategy in
in improved sourcing of hardware and technology for defence/ space
the Indo-Pacific

Healthcare & Pharmaceuticals

Kamala Harris Donald Trump
Proposes expanding Medicare and lowering drug prices by empowering Seeks to privatize Medicare, reduce government intervention in drug
the government to negotiate with pharmaceutical companies pricing, and deregulate health insurance markets.
Under Biden, Indian pharmaceutical exports to the US have increased Under Trump, Indian pharmaceutical exports to the US have increased
by a CAGR of ~7%, to $6.77 billion in FY23. by a CAGR of ~6.2%
Efforts to establish a mutual recognition of conformity assessments to
eliminate duplicative testing, reducing compliance costs for trade in key role in supplying HCQ in the covid pandemic, situation changed for
high-quality medical goods the better.
Implications for India
Favorable for Indian generics if Medicare expands coverage, and Could lead to improved pricing for Indian generic firms. Deregulation
continued support for a stable regulatory environment. may increase penetration of Indian generics into the US market.
Source: PL

October 11, 2024 6

 India Strategy

Rural outlook improves on Monsoon/ Govt steps

The demand outlook from Rural India is improving with normal monsoons and
expectations of higher output, policy interventions in key crops for higher
realizations and improved job scenario as demand for work under MNREGA has
gone down by 15% in first five months of FY25.

The 2024 southwest monsoon has been robust, with cumulative rainfall 8% above
-divisions reported
normal to above-normal rainfall, while only 3 states were deficient. Water reservoir
levels across the country reached a comfortable 87% ( ), up from
71% last year, with only lag in the northern region (68% vs. 86% in 2023).

While a strong monsoon has improved agricultural output, India's policy landscape
is shifting to more pro-farmer measures like 1) removal of export restrictions on
non-basmati rice and floor level for exports 2) Import taxes on edible oils were
raised by 20% and 3) Ban on onion exports have been removed

These measures, driven by strong crop output are aimed at improving farm
economics and rural support. However, they also risk reigniting food inflation, with
expected increase in prices of Edible oils, onion and other food products.

Monsoon: Normal monsoons in ~90% of divisions

Cumulative rainfall activity in surplus: st

Jun to
30 Sep 24, was 8% above the LPA at 934.8mm, compared to 820mm in 2023 and
th

the normal LPA of 868.6mm.

Regional performance: Out of 36 sub-divisions, 33 recorded normal or above-

normal rainfall, with 3 sub-divisions recording a deficit.

Central region: Leading with 19% above LPA rainfall, including states like
Madhya Pradesh (MP), Uttar Pradesh (UP), Chhattisgarh and Jharkhand

Northwestern region: Registered 7% above LPA rainfall, with significant

surplus in Rajasthan, Gujarat and Maharashtra. Himachal Pradesh, Uttarakhand
and Haryana showed normal levels, while Punjab and Jammu & Kashmir (J&K)
saw deficient rainfall

South Peninsula: Registered 14% above LPA rainfall, with normal rainfall in
Kerala, Karnataka and Tamil Nadu

Northeastern region: The East & Northeast continued to face challenges with
a deficit of 15%. Assam, Meghalaya and Mizoram received normal rainfall, but
Arunachal Pradesh, Nagaland and Manipur reported deficits

La Niña & rabi outlook: The likelihood of La Niña conditions emerging later this
year could be favorable for the rabi season, supporting wheat and mustard sowing.
However, excessive rains in some regions may pose a risk to crop quality during
the season.

October 11, 2024 8

 India Strategy

East and North East has seen below normal rainfall

Week Season
Region 26.09.2024 TO 02.10.2024 26.09.2024 TO 02.10.2024
Actual Normal % dev Actual Normal % dev
East & Northeast India 86.1 51.3 68% 1178.7 1367.3 -14%
Northwest India 24.3 8.7 179% 628.6 587.6 7%
Central India 52.9 24.5 116% 1168.5 978 19%
South Peninsula 22 40.9 -46% 815.5 716.2 14%
Country as a whole 43.3 27.1 60% 934.8 868.6 8%
Source: IMD, PL

33 out of 36 subdivisions recorded normal or above normal rainfall

Source: IMD, PL

October 11, 2024 9

 India Strategy

Water reservoir levels up 16 ppt over last year

All-India reservoir storage (as of 3rd 24): 88% of total capacity vs. 74% last
year. Adequate reservoir levels and favorable sowing trends position the upcoming
Rabi season for strong performance

North India at low storage capacity (-17% departure from normal)

Source: CWC, PL

Northern region: Lowest reservoir levels at 68% vs. 85% last year, due to
significant deficits in Punjab (65% below normal) and Himachal Pradesh (20%
below normal), while Rajasthan recorded 9% above normal

Western region: Highest reservoir level at 97%, driven by Maharashtra (32

reservoirs with storage 15% above normal) and Gujarat (17 reservoirs with 34%
above normal)

Central region: Reservoirs in UP, MP, Uttarakhand and Chhattisgarh all above
normal levels

Southern region: Andhra Pradesh, Telangana, Karnataka and Tamil Nadu

recorded above normal storage, whereas Kerala recorded -3% deviation from
normal

Eastern region: Healthy reservoir levels at 86% of total capacity

India's Policy Shift from Inflation to farmer Champion

Export policy easing: The easing was aimed at boosting farmer incomes and
clearing inventories in key states of Maharashtra (major onion, soybean producer)
and Haryana, West UP (major basmati rice grower).

Non-basmati rice: Export restrictions lifted, new floor price set at $490/ton.
Export duty on parboiled rice reduced from 20% to 10%

Basmati rice: Minimum export price (MEP) of $1,200/ton (revised to $950/ton

earlier) removed to boost global competitiveness

Onions: MEP of $550/ton and 40% export tax halved to 20% to support
farmers and control local prices

October 11, 2024 10

 India Strategy

Import duty increased for edible oils: To protect farmers from falling
domestic oilseed prices ahead of harvest season. India meets 70% of its
vegetable oil demand via imports, with palm oil comprising over 50%

Crude edible oils: Effective duty on crude palm, soy and sunflower oils
raised to 27.5% (from 5.5%)

Refined edible oils: Duty on refined variants hiked to 35.75% (from

13.75%)

State-level procurement initiatives: Govt. will procure soybean at MSP

(Rs4,892/100kg) in MP, Maharashtra and Karnataka, as market prices dropped
below MSP. These 3
production

Wheat stock limits: Stocking limits for traders/millers reduced to 2,000 tons
(from 3,000 tons) to curb hoarding and control prices

Yellow peas: Duty-free import window extended until Dec 24

Policy interventions to increase food inflation: policy interventions in agriculture

are likely to be inflationary as it is increasing prices of onion, edible oils etc.

Vegetable prices: Up 8% in Sep (MoM), reversing price decline in August

Persistent Food Inflation Volatility: Despite CPI falling to a five-year low of

3.65% in August, the RBI raised its Q3 FY25 inflation forecast to 4.8% (from
4.7%), indicating a cautious outlook due to heightened risks from food
inflation. FY25 inflation forecast was retained at 4.50%.
concern that volatile food prices, driven by erratic rainfall and geopolitical
uncertainties, could disrupt the current disinflation trend.

Inflation projection remain unchanged for FY25 Growth for Q2FY25 revised to 7%

Source: RBI, PL Source: RBI, PL

Impact of La Niña and Geopolitical Risks: The RBI highlighted that adverse
weather patterns (La Niña) and escalating tensions in West Asia specifically
the Israel-Iran conflict pose significant upside risks to global commodity
prices, particularly oil and food items. A potential spike in these prices could
fuel a resurgence in inflation, complicating efforts to anchor CPI durably at
the 4% target.

October 11, 2024 11

 India Strategy

Impact of Food Prices on Growth: The RBI, in its Oct-24 MPC review meeting,
noted that despite strong Kharif sowing and adequate reservoir levels,
adverse food price dynamics could squeeze rural demand critical for
leading to a potential drag on
Q2 growth projections, which were revised down to 7.0% (from 7.2%).

Rural India less reliant on MGNREGA

Employment demanded under MGNREGA declined by 17% YoY in 24 to 19mn

compared to 23mn in 23. The MNREGA demand during first five months of
FY25 has been at the level of FY20 and is lower by 15% YoY. This sharp reduction
suggests pick up in farm activity, indicating improved rural economic stability and
greater availability of alternative employment opportunities.

Employment Demanded under MGNREGA falls by 17% YoY

Source: MGNREGA, PL

Central government raises wages by 7%: Average daily wages increased by

7% YoY to Rs265/day in
of the variable dearness allowance to counter rising living costs, resulting in
higher minimum wages across all skill levels and regions.

Average Wages continue to consistently show an uptick in FY25

Source: MOSPI, PL

October 11, 2024 12

 India Strategy

Electoral Populism Sweeps India

BJP (NDA) has put up impressive show in Haryana and Jammu & Kashmir elections,
but the focus has now shifted to the upcoming elections in Maharashtra and
Jharkhand. The Bharatiya Janata Party (BJP) managed to retain majority in Haryana
and secured all time high number of seats in J&K (NC and INC won the polls),
however there is a clear policy change for freebies post Lok Sabha polls.

In preparation for the remaining state polls, both BJP and the opposition have
ramped up populist measures, including cash handouts, loan waivers, and
increased welfare spending. This has triggered concerns over fiscal stability,
especially in states like Maharashtra, where the fiscal deficit is estimated at 3.2%
of state GDP. The increased revenue spending to fulfill electoral promises has the
potential to create fiscal slippage and potentially affecting long-term investments
in infrastructure development. This has been seen in states like Karnataka,
Himachal Pradesh and Punjab where freebies have impacted investments.

Key Points:

Electoral Context: BJP lost its parliamentary majority in the general elections
as populist schemes announced by certain political parties drew voters away.
In the aftermath, all political parties introduced significant freebie schemes in
states holding elections this year. The freebies like cash handouts, free
electricity, and monthly unemployment allowances, however, are expected to
exacerbate state fiscal deficits, delay fiscal consolidation, and widen the
divergence in fiscal priorities between the states and the central government.

Assembly elections in Nov-

Maharashtra: Fiscal deficit target has been increased to 2.6% of state

GDP (vs. 2.3% earlier) to accommodate Rs960bn ($11.45 billion) in
handouts and freebies. Revenue expenditure increased by 0.3 percentage
points of GSDP, reflecting increased spending on schemes like Ladki
Bahin (Rs460bn annually).

Jharkhand: The fiscal health is under strain as pre-election

populist schemes including a Rs2 lakh farm loan waiver, Rs1,000
monthly cash transfers to 4 million women, and free electricity up to 200
units are now consuming nearly 27% of its own tax revenue and 1.7% of
GSDP, risking long-term fiscal stability and crowding out essential
developmental spending.

Newly elected state governments to implement freebies as well:

Jammu & Kashmir: The Congress-NC alliance in Jammu & Kashmir has
announced expansive welfare schemes, including direct cash transfers
and subsidies, which are estimated to increase the fiscal deficit. This
comes against the backdrop of
capacity and high dependency on central funds, posing a risk to long-
term fiscal stability. Jammu & Kashmir's average subsidy burden stands at
Rs18,000 crores annually equivalent to nearly 15% of its GSDP

October 11, 2024 13

 India Strategy

Haryana: Post- is poised to

implement a range of populist measures, including partial loan waivers
and unemployment allowances, which are expected to cost the
exchequer around Rs
been revised upward by 0.2% of GSDP, pushing its overall deficit to 3.6%
of GSDP, breaching the FRBM limit, in FY25.

Populism vs. fiscal prudence

Average fiscal deficit of states is pegged at 3.2% of state GDP, 20 basis

points higher than interim budgets due to higher welfare spending.

Revenue spending in states accounts for 84.3% of total expenditure in

FY25, far exceed .

trend wherein states prioritize short-term welfare over long-term asset

creation.

Populist spending is straining state finances, as seen in Karnataka, where

five flagship guarantee schemes introduced by the Siddaramaiah-led
government account for nearly Rs52,
Rs3.46 lakh crore annual budget. This significant allocation has reduced
fiscal space for developmental projects. Similar strains are visible in
Himachal Pradesh and Punjab, which has struggled to balance welfare
spending with necessary capital investments, highlighting the risk of
fiscal stress across states adopting expansive welfare schemes.

Populist promises made by parties could put long-term infrastructure and

development projects at risk, while affecting the fiscal consolidation
roadmap.

The increased fiscal burden may weigh on state-level credit ratings,

complicating borrowing costs and budgetary flexibility.

October 11, 2024 14

 India Strategy

Recent state elections indicate rising trend of Freebies announcements

Haryana Jammu & Kashmir Maharashtra Jharkhand
Freebies Oct'24 Oct'24 Nov'24
BJP NC+ Mahyuti Alliance Jharkhand Mukti Morcha
PM Muft Bijli Yojana to CM Baliraja Mofat Vij Yojana: Free electricity up to 200
200 units per month Free to
provide free electricity for 5 Free electricity to agricultural units per month for over
each household
lakh BPL households pumps of up to 7.5HP 41.4 lakh families
Electricity
Est annual expenditure:
Est annual expenditure: Est annual expenditure: Est annual expenditure:
Rs2,500 crores
Rs720 crores Rs14,761 crores Rs6,655 crores
Pradhan Mantri Garib Kalyan
Anna Yojana: Free ration 10kg of free rice/atta per
distribution to 48 lakh BPL person per month
Food families across Haryana.
Est annual expenditure:
Est annual expenditure: Rs1,200 crores
Rs2,430 crores
Agricultural loan waivers of
up to Rs50,000 for small
Waiver for agricultural and Farm loan waiver of up to
and marginal farmers
KCC loans Rs2 lakh for 1.91 lakh farmers
affected by natural
Loan Waiver
calamities.
Est annual expenditure: Est annual expenditure:
Rs3,000 crores Rs400 crores
Est annual expenditure:
Rs2,000 crores.
- Ladli Laxmi Yojana:
Rs2,100 per month financial Rs1,000 monthly cash
support for women aged 18- assistance to 4 million
60 years women (25-50 age group)
under Mukhamantri Bahan
- Pension scheme of Majhi Ladki Bahin Yojana: Beti Swabalamban Yojana
Rs5,000/month to female
Rs5,100 for senior citizens, Rs1,500 monthly stipend for Est annual expenditure:
heads of EWS families.
widows and disabled women Rs400 crore
Financial
Est annual expenditure:
- Mukhya Mantri Kanyadan Est annual expenditure: Subsidized distribution of
Rs3,600 crores
Yojana: Rs21,000 for Rs46,000 crores dhoti/lungi and saree at
daughters of BPL families at Rs10 twice a year for 57 lakh
the time of their wedding BPL families
Est annual expenditure:
Est annual expenditure: Rs500 crores
Rs42,910 crore
CM Teerth Darshan Yojana:
Free bus services for women
Free public transportation for Free visit to pilgrimage centers
and senior citizens across
women through accredited tourists
the state
Transportation companies
Est annual expenditure:
Est annual expenditure:
Rs3,600 crores Est annual expenditure: Rs.
Rs250 crores
300 crores
- Har Ghar Jal Yojana: 100%
rural household water
Distribution of subsidized
connectivity. Mukhyamantri Annapurna
12 free LPG cylinders/year and LPG cylinders and Rs1,000
Scheme:
free water supply assistance for household
Household - LPG Subsidy Scheme: 3 free gas cylinders
utilities
(water/gas/houses) Rs500 per LPG cylinder for
Est annual expenditure:
Antyodaya and BPL families Est annual expenditure:
Rs2,400 crores Est annual expenditure:
Rs829 crores
Rs1,000 crores
Est annual expenditure:
Rs2,600 crores

October 11, 2024 15

 India Strategy

Haryana Jammu & Kashmir Maharashtra Jharkhand

Freebies Oct'24 Oct'24 Nov'24
BJP NC+ Mahyuti Alliance Jharkhand Mukti Morcha
Free professional education
Guruji Credit Card Yojana:
for woman
Free education up to Rs15 lakh loan assistance for
EWS, OBC and socially and
university level higher education, targeting
economically backward
Education needy students
categories
Est annual expenditure:
Rs1,000 crores Est annual Expenditure:
Est annual expenditure:
Rs1,500 crores
Rs.2,000 crore
- Chirayu Haryana Yojana:
Provides free health insurance
CM Vayoshri Yojana:
worth Rs10 lakh to BPL families
Above 65 years and with
Coverage: Rs10 lakh health Rs5 lakh free insurance cover Health insurance scheme with
annual income less than Rs2
insurance for BPL families for terminal diseases per Rs15 lakh coverage, benefiting
lakh will get aid up to Rs3,000
Additional coverage: Rs5 lakh family low-income families
Healthcare to buy assisted living devices
for senior citizens above 70
and physical aids
years of age Est annual expenditure: Est annual expenditure:
Target group: 20 lakh families Rs4,500 crores Rs2,500 crores
Est annual expenditure:
Rs450 crores
Est annual expenditure:
Rs2,000 crore
- Skill Development and CM Yuva Karya Prashikshan
Employment Schemes: Yojana:
Employment support for Creation of 1 lakh new jobs On-the-job training for youth.
50,000 rural youth through Each trainee will get Rs10,000
Employment
government initiatives Est annual expenditure: per month
Rs2,500 crores
Est annual expenditure: Est annual expenditure:
Rs300 crores Rs10,000 crores
Source: Company, PL

October 11, 2024 16

 India Strategy

Nifty Valuation

Source: Company Data, PL

Note: Sector Weightages updated as on October 10, 2024

FY25 NIFTY EPS to be driven by CG, BFSI, Healthcare, Metals, Ports and Telecom, Oil and Gas drag to continue
NIFY Sectoral EPS - PLe (Rs) % Gr. % Contribution to total EPS
2024 2025 2026 2027 2024 2025 2026 2027 2024 2025 2026 2027
Auto 89.7 102.3 117.6 128.7 144.4% 14.0% 14.9% 9.5% 8.8% 8.5% 8.6% 8.3%
BFSI 429.3 510.4 565.3 650.9 12.9% 18.9% 10.8% 15.1% 42.2% 42.5% 41.2% 42.1%
Cement 6.3 8.1 10.7 12.5 29.4% 29.2% 31.3% 17.7% 0.6% 0.7% 0.8% 0.8%
Cosnumer 62.3 72.7 81.0 89.7 6.4% 16.7% 11.4% 10.7% 6.1% 6.1% 5.9% 5.8%
Eng. & Power 69.9 87.5 103.0 114.3 10.5% 25.3% 17.6% 11.0% 6.9% 7.3% 7.5% 7.4%
Healthcare 26.8 33.2 38.2 39.4 15.3% 24.1% 14.8% 3.2% 2.6% 2.8% 2.8% 2.5%
Metals 57.9 87.0 116.6 132.8 -5.9% 50.3% 34.0% 13.9% 5.7% 7.3% 8.5% 8.6%
Oil & Gas 145.7 127.1 137.9 150.3 40.9% -12.8% 8.5% 8.9% 14.3% 10.6% 10.1% 9.7%
Others 8.7 12.8 15.7 17.6 -17.6% 47.2% 22.3% 12.2% 0.9% 1.1% 1.1% 1.1%
Ports & Logistics 6.3 9.5 10.8 11.2 42.9% 50.6% 14.7% 3.0% 0.9% 1.1% 1.1% 1.1%
Technology 103.5 125.8 142.1 163.2 -5.0% 21.6% 12.9% 14.8% 0.6% 0.8% 0.8% 0.7%
Telecom 12.0 23.5 32.5 36.1 26.5% 94.8% 38.4% 11.1% 10.2% 10.5% 10.4% 10.5%
Nifty 1,018.4 1,200.0 1,371.4 1,546.6 17.7% 17.8% 14.3% 12.8%
Source: PL

October 11, 2024 17

 India Strategy

Nifty trading at 1.6% premium to 15- year average 1-year forward PE

Source: PL

NIFTY EPS trend FY24-27 CAGR at 15%

We introduce FY27 NIFTY EPS at
Rs1547, FY25/26 EPS has seen a cut
of 3.8/2.8% while consensus EPS has
seen a cut of 1.6/1.5%

Source: PL

October 11, 2024 18

 India Strategy

Model Portfolio

Model Portfolio v/s Nifty

Model
Returns Nifty Perf.
Portfolio

Since
155.8% 132.3% 23.5%
Nov'18

Since
Last 1.8% 0.9% 0.9%
Report

Since
50.4% 41.2% 9.2%
Apr'23

Source: PL

PL Model Portfolio has outperformed NIFTY by 23.5% since Nov 2018, 9.2%
since April 23 and 0.9% since last report.

October 11, 2024 19

 India Strategy

Automobiles: overweight: We remain overweight given expected pickup in

demand in festival season, despite some slackness in PV sales in past few
months. We believe revival is rural demand and normal monsoons will benefit
M&M and Hero Motocorp. Also entry-level segment of Maruti, which has been
under pressure from quite some time, my see some gains in coming periods.

Banks: Overweight: While near term issues like slow deposit growth and
expected cut in Repo remain, but structurally Banks remain in a good spot. We
believe valuations remain compelling for a good run in coming 12-15 months.
We remain over weight in ICICI, KMB, IIB and SBI. We slightly shift weight from
IIB to KMB even as we retain our overweight stance on both stocks.

Capital Goods Over weight: We cut overweight from 450bp to 280bps

post sharp run in stocks recently. Structural story remains intact while we
believe that margins might be near peak for many players. We cut weight on
Siemens by 100bps post recent rally, although it remains a strong play on
power, railways and automation with significant value unlocking from
demerger of energy business. We replace Carborandum with BEL in model
portfolio as recent correction in BEL provides a good opportunity in a well-
diversified defence play.

Consumer: overweight: We cut overweight from 170bps to 20bps. We

believe current scenario factors in a lot of optimism around strong demand in
2H25, which has fair chances of disappointments and earnings cut. We cut
weight behind Britannia and Interglobe Aviation by 50/30bps and increase
weight on Astral by 50bps and Nestle by 20bps.

Healthcare: Over weight: We remain structurally positive on Hospitals led by

Max healthcare with huge overweight given expected gains from recent
acquisitions and brownfield expansion in Mumbai and NCR. We are removing
Cipla but increase weight behind Sun Pharma as growing specialty portfolio
will enable strong growth in earnings in coming years.

IT services: Equal weight: IT services is showing initial signs of recovery in

BFSI, telecom and manufacturing. Segments like EDS, Data Analytics, Digital,
Artificial intelligence and supply chain etc. will drive growth in next cycle. We
believe worst is over and revival of spends by US companies in 2025. We
increase weight on Infy and introduce HCL Tech in model portfolio.

Oil and Gas: overweight; we remain overweight on RIL. We believe sustained

growth in retail and expected forays in new energy segments will drive next
leg of growth in the company. We believe demerger of Jio Platforms and Retail
will unlock value for shareholders.

Telecom: we retain overweight on Bharti Airtel as a structural play on rising

data usage in telecom. While recent tariff hikes have been absorbed, we
expect more tariff hikes after a lag, which will further improve profitability.

Cement Overweight: We remain positive on cement demand and industry

consolidation and increase weight behind Ambuja cement.

October 11, 2024 20

 India Strategy

Conviction Picks Changes

High Conviction Picks: We are removing Siemens, Praj, Apar and Lupin Labs after
recent rally in stock prices, although we are positive on these names from medium
to long term. We are adding Bharat Electronics,, Crompton Consumer, Cyient, JB
Chemicals, Jindal Stainless and Safari in conviction picks.

Bharat Electronics: -term prospects remain robust given 1) healthy

order backlog of ~Rs767bn (3.7x TTM revenue), 2) ~Rs500bn defense opportunity
pipeline over the next 2 years (including 5-6 programs worth Rs50-100bn each) 3)
diversification into non-defense verticals such as civil, aviation, infrastructure and
rail & metro including 5-6 year opportunity to supply Kavach to Indian Railways.
We expect company to report revenue/adj. PAT CAGR of 17.6%/17.3% over FY24-
26E. Recent correction offers a good opportunity to accumulate for LT gains.

Crompton Greaves Consumer Electricals: We have a high conviction BUY on

Crompton Greaves Consumer with target price of Rs536 valuing at 32.4x FY27
EPS. We believe Crompton Greaves Consumer is a play on several opportunities in
the ECD segment given 1) Plans to expand geographical reach and product
categories (solar pump, cooktop, etc.) 2) Focus on sourcing and in-house
manufacturing to improve efficiency and reduce expenses 3) Channel expansion
plans. We estimate Revenue / EBITDA / PAT CAGR of 13.2%/20.5%/24.9% over
FY24-27

Cyient:
organic level between FY21-24 after reporting revenue growth of just 6% CAGR
between FY16-20. The recent acqusitions of Citec, Celfinet & Grit consulting have

engineering, new energy transition & communications. Despite the slowdown in

Q1FY25 due to macro headwinds in few segments we expect broad based
recovery in FY26 & FY27 due to improving macro environment and easing Central
Bank policies in US, UK & Europe. We expect Cyient DET business to report a CAGR
of 7%/7.8% & 10% in USD revenue/INR revenue & Net margin between FY24-27E.
Also, the stock is currently trading at an inexpensive valuation of 26.6x & 22.5x PE
mutiple of FY26E & FY27E EPS of DET business.

J.B. Chemicals & Pharmaceuticals: We believe JBCP will sustain strong domestic
market growth on the back of the geographic expansion of its legacy brands,
increase in MR productivity and expansion of its Razel, Azmarda and Sanzyme
franchises. Its continuous efforts on scaling emerging opportunities in the export
market also places it in an advantageous position to ride on the growth prospects.
We expect CAGR of 18/23.5% in EBITDA/EPS over FY24-27E. At CMP the stock is
trading at 32.3x FY26E EPS Adj for ESOP and amortization.

October 11, 2024 21

 India Strategy

Jindal Stainless: We expect JDSL to deliver strong 15%+ CAGR volume growth on
the back of rising usage due to its corrosion resistance, high strength & durability.
Some GoI initiatives such as replacement of carbon steel in coastal areas, railway
station modernization & increasing metro network are expected to aid volume
growth. With newly announced Indonesian capex plan and Chromeni asset buy-
out, JDSL has enough capacities to cater to strong domestic growth. We expect
EBITDA/PAT growth of 20%/25% over FY24/FY27E. At CMP, the stock is trading

Safari Industries: are expected to increase, as demand is set to

bounce back led by festive pre-stocking, as compared to preceding quarter which
was marred by heatwave. Yet, margins are expected to remain under pressure as
competitive intensity persists within the luggage industry. We maintain our sales
CAGR at 21% for FY24-FY26E and expect an additional boost from the Greenfield
plant once it begins operations in 3QFY25E.

October 11, 2024 22

 India Strategy

Current Valuations in ~42% (36% earlier) Nifty50 companies are lower than 2016-20 avg. levels
Current
12 Month Forward Average PE 2009-11 2011-13 2013-16 2016-20 2022 2023 2024
Valuations*
Nifty Index 16.3 14.7 18.8 22.0 20.4 18.4 18.0 19.4
Adani Enterprises 3.0 2.8 4.2 13.4 114.0 112.1 64.7 43.5
Adani Ports & Special Economic Zone Ltd 28.8 18.5 18.3 18.1 31.2 25.4 20.4 24.4
Apollo Hospital Enterprises 24.5 29.9 58.6 81.2 66.5 71.8 64.8 58.3
Asian Paints Ltd 21.5 30.1 39.9 51.7 82.7 61.8 57.1 55.5
Axis Bank Ltd 13.1 9.9 14.0 72.8 20.2 15.0 12.0 12.6
Bajaj Auto Ltd 9.7 15.1 17.5 17.7 17.4 15.6 19.2 34.0
Bajaj Finance Ltd 10.2 10.8 15.5 11.4 10.5 7.2 8.8 11.2
Bajaj Finserv Ltd 5.5 6.6 9.9 26.9 43.2 32.4 26.7 26.5
Bharat Electronics Ltd 15.8 12.7 14.4 17.8 16.8 19.7 24.4 40.0
Bharat Petroleum Corp Ltd 15.6 13.7 8.6 11.0 15.3 7.5 4.6 9.6
Bharti Airtel Ltd 20.9 45.4 29.3 72.6 57.3 54.2 42.5 31.4
Britannia Industries Ltd 28.8 23.3 28.3 47.3 46.9 44.5 51.2 57.0
Cipla Ltd/India 23.5 19.3 34.3 29.8 28.3 24.1 21.6 27.3
Coal India Ltd 2.9 13.7 15.8 14.2 4.0 3.8 5.2 7.7
Dr Reddy's Laboratories Ltd 27.6 16.8 26.8 30.2 24.3 14.3 16.1 18.8
Eicher Motors Ltd 7.0 12.0 NA 34.7 31.9 24.8 23.2 27.1
Grasim Industries Ltd 6.0 8.2 19.1 20.0 14.5 17.1 36.3 61.1
HCL Technologies Ltd 13.3 9.0 14.1 12.9 21.3 18.3 21.4 27.3
HDFC Bank Ltd 20.7 18.5 18.0 21.5 19.9 17.3 17.1 16.0
HDFC Life Insurance Co. Ltd. NA NA - NA 103.0 80.4 77.2 74.1
Hero MotoCorp Ltd 16.0 17.5 17.4 18.0 20.4 15.4 15.6 22.1
Hindalco Industries Ltd 9.9 9.0 17.2 9.9 8.6 9.4 9.1 11.6
Hindustan Unilever Ltd 24.3 25.2 37.1 50.1 60.2 58.1 56.4 55.9
ICICI Bank Ltd 19.5 13.6 15.0 30.5 17.7 16.0 15.8 15.1
IndusInd Bank Ltd 12.3 14.4 17.6 26.4 13.0 10.1 11.7 9.8
Infosys Ltd 20.5 16.0 16.5 16.4 29.9 25.2 22.6 28.2
ITC Ltd 20.5 24.2 32.3 25.6 17.1 20.1 26.0 26.7
JSW Steel Ltd 16.2 25.2 25.6 10.2 15.7 26.1 18.7 16.9
Kotak Mahindra Bank Ltd 17.6 18.6 25.9 29.1 27.1 21.8 19.7 18.8
Larsen & Toubro Ltd 20.9 18.0 26.2 19.8 24.7 22.6 27.7 27.2
Mahindra & Mahindra Ltd 12.0 13.5 22.6 34.4 17.5 16.5 16.2 29.0
Maruti Suzuki India Ltd 17.2 15.9 17.5 31.9 38.1 24.5 22.1 24.8
Nestle India Ltd 32.3 40.5 63.5 55.6 78.7 65.4 68.0 65.8
NTPC Ltd 17.9 11.9 10.8 10.7 7.2 8.3 11.0 17.5
Oil & Natural Gas Corp Ltd 10.8 9.2 17.1 10.4 4.3 4.3 5.0 7.1
Power Grid Corp of India Ltd 17.6 12.5 11.5 10.5 8.1 10.0 12.5 18.5
Reliance Industries Ltd 13.5 10.5 9.4 13.4 21.9 22.8 22.9 22.2
SBI Life Insurance Co. NA NA - NA 68.3 66.2 61.8 66.1
State Bank of India 11.9 8.9 25.1 200.4 8.9 7.8 7.9 9.5
Sun Pharmaceutical Industries Ltd 18.1 20.6 37.2 42.0 32.8 25.1 27.4 38.1
Tata Consultancy Services Ltd 16.3 16.9 20.1 20.7 32.0 27.5 26.5 26.8
Tata Consumer Products 19.9 18.1 3.7 32.6 65.2 60.5 64.1 61.0
Tata Motors Ltd 5.3 6.5 11.6 -0.8 -13.5 14.7 9.4 13.1
Tata Steel Ltd -6.7 -1,397.8 -13.6 7.5 7.2 -1.0 -62.5 14.4
Tech Mahindra Ltd 12.9 7.2 15.6 13.4 23.0 27.7 33.0 26.5
Titan Co Ltd 21.2 29.4 38.8 56.5 67.8 64.1 76.4 67.9
Trent Ltd NA -117.4 81.6 36.7 140.2 52.5 49.6 125.8
UltraTech Cement Ltd 13.7 16.1 28.4 35.4 33.5 31.7 33.2 31.1
UPL Ltd 5.9 6.7 13.3 33.9 48.6 34.7 29.6 18.5
Wipro Ltd 15.6 13.2 15.1 14.8 27.7 20.3 19.3 22.0
Source: PL * as of August 21, 2024

October 11, 2024 24

 India Strategy

Global cues volatile, demand hopes on

festival/wedding season
NIFTY has been mainly flattish in past 6 weeks, which have seen extreme
market volatility led by rising geopolitical tensions in Middle East, 50bps
interest rate cut by US FED and recent elections in the state of Haryana and
J&K. Strong DII inflows continue to power the markets. Chinese markets have
seen strong comeback post stimulus and there has been heavy FII selling from
past few days. Unexpected victory of ruling BJP in Haryana and highest vote
share in J&K has put to rest near term political uncertainty and provided a
major push to the markets. Elections freebies are on a sharp upswing and
recent experience in states like Karnataka, Punjab and Himachal Pradesh
indicate a serious threat to growth and state finances in coming years.

2Q has been a mixed lot, as prolonged rains and floods have shown impact on
demand. Demand conditions remain mixed and all hopes rest on strong
demand revival in festival and wedding season. Infra spends and ordering has
shown a pickup and FY25 will remain volatile as Maharashtra, Jharkhand and
Delhi are going to polls in coming few months. RBI has held on to interest rates
amongst fears on inflation resurfacing as GOI has taken several steps to
improve crop realizations in edible oilseeds, onion and Rice. We see some cut
materializing in Dec24 only.

Market tide shifted in favor of defensives as valuations in many cyclicals had

become quite expensive even after factoring in sustained growth. With hopes
of higher growth and less risk, FMCG, IT Services, Pharma and consumer
durables have seen strong bounce back.

Return variation between large to mid-cap indices has converged

considerably in past 3 months. Return variation with small cap indices is now
less than 1% for 3-month period, however for 6/12 month period the gap
remains considerable.

FII inflows in past 6 weeks are up by Rs335bn, despite strong selling in past
few days. DII inflows at Rs891bn continue to remain strong.

India up 2.7% YTD amidst high volatility and FII selling

20.0 18.1
CHG_PCT_3M
15.0 10.9
10.0 7.1
4.8 4.7 3.5
5.0 3.1 2.9 2.7
0.9
-
(5.0)
(10.0) (6.1)
(9.5)
(15.0) (13.1)

Source: PL

October 11, 2024 25

 India Strategy

Defensives led by IT, Healthcare, Consumers lead returns

CHG_PCT_3M CHG_PCT_6M

30.0
25.0
20.0
15.0
10.0
5.0
-
(5.0)
(10.0)

Source: PL

Large cap and mid\small cap returns are showing convergence

Source: PL

DII flows strong, FII flows volatile NIFTY positive YTD, FII flows remain volatile

Source: PL Source: PL

October 11, 2024 26

 India Strategy

High Frequency indicators remain resilient

IIP growth steady at PMI slips to 59.3 due to slower export growth in
Sep

Source: Ministry of commerce, PL

Source: Ministry of commerce, PL

IIP growth Capital goods (up 12.0%) and Consumer durables (up 8.2%) and Electricity (7.9%)
Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24
General 6.2 10.9 6.4 11.9 2.5 4.4 4.2 5.6 5.5 5.0 6.2 4.7 4.8
Mining 10.7 12.3 11.5 13.1 7.0 5.2 6.0 8.1 1.3 6.8 6.6 10.3 3.7
Manufacturing 5.3 10.0 5.1 10.6 1.3 4.6 3.6 4.9 5.9 3.9 5.0 3.2 4.6
Electricity 8.0 15.3 9.9 20.4 5.8 1.2 5.6 7.6 8.6 10.2 13.7 8.6 7.9
Use-Based
Basic goods 7.7 12.4 8.0 11.4 8.4 4.8 2.9 5.9 3.0 7.0 7.3 6.3 5.9
Intermediate goods 3.2 7.4 6.1 9.5 3.4 3.7 5.3 8.6 6.1 3.2 3.9 3.0 6.8
Capital goods 5.1 13.1 8.4 21.7 -1.1 3.7 3.2 1.7 7.0 2.7 2.9 3.8 12.0
Infra/Construction Goods 12.6 15.7 10.1 12.6 1.5 5.5 5.5 8.3 7.4 8.0 6.3 7.1 4.9
Consumer Durables -3.6 6.0 1.0 15.9 -4.8 5.2 11.6 12.6 9.5 10.0 12.6 8.7 8.2
Consumer Non-durables 8.3 9.9 2.7 9.3 -3.4 3.0 0.3 -3.2 5.2 -2.5 2.5 -1.5 -4.4
Source: MOSPI, PL

Sept at Rs.1.73bn up 6.5% YoY, showing impact of prolonged rains and inauspicious period

Source: GOI, PL

October 11, 2024 27

 India Strategy

FEI-CEI gap remain sticky in Jul CPI at 3.7% for 2nd month

Source: CMIE, PL Source: MOSPI, PL

India's CPI at 3.65% in August , Food Inflation remains elevated at 5.3% due to late onset of monsoon/floods
Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24
Consumer Price Index (CPI)
Weight 6.8 5.0 4.9 5.6 5.7 5.1 5.1 4.9 4.83 4.80 5.08 3.60 3.65
Food, Beverages and Tobacco 45.9 9.2 6.3 6.3 8.0 8.7 7.6 7.8 7.7 7.9 7.9 8.4 5.1 5.3
Pan Tobacco and Intoxicants 2.4 4.1 3.9 3.9 3.8 3.6 3.3 3.1 3.1 3.0 3.0 3.1 3.0 2.7
Clothing and Footwear 6.5 5.2 4.6 4.3 3.9 3.6 3.4 3.1 3.0 2.9 2.7 2.7 2.7 2.7
Housing 10.1 4.4 4.0 3.8 3.6 3.6 3.2 2.9 2.7 2.7 2.6 2.7 2.7 2.7
Fuel and Light 6.8 4.3 -0.1 -0.4 -0.8 -1.0 -0.6 -0.8 -3.4 -4.0 -3.7 -3.6 -5.5 -5.3
Miscellaneous 28.3 4.9 4.8 4.5 4.4 4.1 3.8 3.6 3.5 3.5 3.4 3.4 3.8 3.9
Consumer Food Price Index 39.1 9.9 6.6 6.6 8.7 9.5 8.3 8.7 8.5 8.7 8.7 9.4 5.4 5.7
Source: MOSPI, PL

hits 10-Month high of USD29.6bn, lower import duty pushes up Gold imports by 225% MoM
Merchandise Trade
Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24
(USD bn)
Exports 38.3 34.4 33.4 33.7 38.4 37.3 41.4 41.7 35.3 39.6 35.2 33.9 34.7
YoY % 3% -3% 6% -3% 1% 4% 12% -1% 2% 13% 2% -2% -9%
Imports 62.3 54.5 63.4 54.5 56.4 53.3 60.1 57.3 54.7 62.1 56.7 57.5 64.3
YoY % 1% -14% 10% -4% -8% 1% 12% -6% 10% 8% 7% 9% 3%
- Oil 16.3 14.0 16.1 14.9 14.9 15.5 16.9 17.2 16.5 19.9 15.0 13.9 11.0
YoY % -6% -20% -1% -8% -23% -2% 0% -4% 9% 28% 20% 18% -32%
- Gold 4.9 4.1 7.2 3.4 3.0 1.9 6.1 1.5 3.1 3.3 3.1 3.1 10.1
YoY % 39% 7% 96% 2% 156% 174% 134% -54% 178% -10% -39% -11% 104%
- Non Oil Non Gold 41.1 36.4 40.1 36.1 38.5 35.9 37.1 38.5 35.1 38.8 38.6 40.5 43.3
YoY % 0% -13% 7% -3% -5% -1% 9% -3% 4% 2% 8% 7% 5%
Trade Deficit (24.0) (20.1) (30.0) (20.7) (18.1) (16.0) (18.7) (15.6) (19.4) (22.5) (21.5) (23.6) (29.6)
YoY % -3% -28% 15% -6% -22% -6% 13% -18% 28% 0% 15% 28% 23%
Source: Ministry of Commerce, PL

I Services sector exports rise to USD30.7bn in August 24, boosting Services Balance to USD15bn (up 10% YoY)
Services Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24
Exports (Receipts) 28.7 29.4 28.7 28.7 27.9 32.8 32.2 28.5 29.6 30.2 30.3 28.4 30.7
YoY % 8% 1% 13% 9% -11% 2% 17% -6% 15% 12% 9% 8% 7%
Imports (Payments) 15.1 14.9 14.3 13.4 13.3 16.1 15.4 15.8 17.0 17.3 17.3 14.6 15.7
YoY % -1% -8% 6% 0% -16% 2% 3% -7% 22% 9% 11% 6% 4%
Services balance 13.6 14.5 14.4 15.3 14.6 16.8 16.8 12.7 12.6 12.9 13.0 13.9 15.0
YoY % 21% 12% 22% 20% -5% 2% 35% -6% 7% 16% 7% 11% 10%
Source: Ministry of Commerce, PL

October 11, 2024 28

 India Strategy

Geopolitical issues inflate crude $81/barrel Coal prices decline 7% over past 2 months

Source: PL Source: Bigmint, PL

Steel prices soften 9% in past 2 months Aluminium price up 13% from recent lows

Source: Bigmint, PL Source: PL

Palm oil prices up 26% from April lows SMP prices up 8% from recent levels

Source: PL Source: PL

October 11, 2024 29

 India Strategy

Sugar prices range bound up just 3% in 3 months Wheat prices up 21% since April harvesting time

3100 Wheat
2900 2967 2900
2727
2700
2500
2303
2300 2400
2100 2163
1900
1700
1500

Source: PL Source: PL

C-D gr. gap reduces 210bps from July levels

Source: CEA, PL Research Source: RBI, PL

Industry credit growth up by 210bps in last 2 months, Service, Agri and retail credit growth steady to range bound

Source: RBI, PL

October 11, 2024 30

 India Strategy

Diesel usage drops 2.0%YoY to 6.4mn ton in Sep Sep 1mn ton (up 3.0%)

Source: PPAC, PL Source: PPAC, PL

Railway haulage down by 5% YoY in Aug Energy generation down 4.3% in Aug

Source: Indian Railway, PL Source: CEA, PL

Aug 24 Credit Card transaction up 34% CC Spending up 13.2% YoY

Spends Amount (bn)

2000

1500

1000

500

Source: RBI, PL Source: RBI, PL

October 11, 2024 31

 India Strategy

FMCG sales growth improves to 5.5% YoY Aug Air traffic rises by 6% YoY to 13mn

Domestic passenger traffic (in mn) YoY (%) (RHS)

16 200%
14
12 150%
10
8 100%
6
4 50%
2
0 0%

Source: Company, PL Source: DGCA, PL

Aug up by 10.4% YoY remain flattish at 375, down 0.1%

Source: SIAM, PL Source: SIAM, PL (*TATA motors only gives Quarterly numbers)

Tractor volumes at 59,000, down by 5.5% 1QFY25 CV volumes up by 3.8% YoY

350 CV
300
250
200
150
100
50
0

Source: SIAM, PL Source: SIAM, PL

October 11, 2024 32

 India Strategy

All eyes on 2H25 demand recovery

We estimate 5% sales growth with flat EBIDTA and 3.8% decline in PBT of our
coverage universe. Ex oil & Gas, we estimate 6.6% growth in EBIDTA and 10.1% in
PBT. Auto, , Pharma, Chemicals and Durables will
lead PBT growth. Oil and Gas, Building Materials, cement and Media will report
decline in EBIDTA. Banks, consumer, IT and travel will grow EBIDTA in single digit.

Strong EBIDTA growth trends is likely to sustain in Hospitals, Pharma, Capital

Goods and Chemicals. Auto, banks and Durables will also show double-digit
EBIDTA growth. Rural demand is showing signs of recovery for staples,
although 2Q will show some impact of prolonged rains. Discretionary
spending on travel, housing, Jewellery and 2W remains positive while PV, QSR,
apparel, footwear, Building materials remain affected.

Auto, CG, Pharma and Hospitals will report robust margin expansion while
Building Materials, Consumers, Media, Oil and gas and cement will report
decline in margins by 149, 55, 369,417 and 154bps.

We believe Capital Goods (govt capex and PLI), Travel

Telecom and Pharma seem well placed for sustained growth in coming
quarters. Cement and metals should report better growth and profitability in
2H25. Banks are likely to see NIM compression in coming quarters as well. Wire
and cable companies are on a strong wicket. 2H25 will be a test for urban
discretionary spends; any disappointments on this front can lead to cut in
earnings in consumption related sectors.

PL Universe Auto, Capital Goods, Hospitals, Durables lead growth; Cement, O&G, Media drag
Revenue (%) EBITDA Growth (%) EBITDA Margin (bps) PBT Growth (%) PAT Gr. (%)
1QFY25 Results
YoY QoQ YoY QoQ YoY QoQ YoY QoQ YoY QoQ
AMC 33.9 10.3 43.2 (3.4) 26.2 (9.8)
Automobiles 5.6 2.6 12.5 2.0 88 (9) 15.9 7.3 15.5 9.0
Banks 10.2 3.2 12.5 (1.1) 141 (301) 7.8 (1.7) 6.1 (1.5)
Building Material 2.2 (4.3) (7.8) (10.3) (149) (92) (14.5) (13.6) (11.8) (8.9)
Capital Goods 15.0 11.7 22.2 24.0 71 122 21.8 24.3 20.0 27.8
Cement (4.5) (14.7) (13.7) (24.4) (154) (186) (37.2) (41.8) (39.8) (45.3)
Chemicals 15.9 1.2 18.6 5.7 41 75 20.7 9.1 21.8 10.6
Consumer Durables 11.5 (16.7) 14.5 (16.1) 25 8 17.0 (16.7) 20.1 (16.9)
Consumer Staples 8.9 4.9 6.0 4.5 (58) (8) 4.5 5.3 4.6 5.2
Education 7.0 (64.2) (21.4) (118.6) 473 (3,820) (16.9) (134.1) (30.2) (161.2)
HFCs 0.1 3.6 (1.4) 3.5 (134) (8) 5.0 (5.8) 4.3 (5.8)
Hospitals 12.9 6.3 18.7 13.9 95 130 21.2 18.0 22.1 20.2
IT 5.5 2.7 8.5 4.8 55 40 10.3 3.6 10.2 4.4
Logistics 9.4 2.1 123.6 0.4 255 (8) (225.2) (5.0) (187.2) (1.1)
Media (17.0) 5.6 (30.6) 13.4 (369) 130 (65.6) 89.4 (69.4) 88.7
Metals 0.2 0.9 9.0 (6.9) 103 (108) 19.8 (11.7) (0.4) (6.3)
Oil & Gas 2.6 (4.0) (24.5) 0.8 (417) 55 (36.9) 4.0 (44.4) (11.3)
Pharma 12.0 2.4 20.6 0.0 188 (62) 23.6 (0.2) 24.4 2.0
Telecom 11.2 7.0 11.3 10.2 2 152 1.8 14.5 189.3 7.3
Travel 11.2 (13.7) 5.7 (49.7) (89) (1,217) (41.8) (87.4) (52.4) (91.0)
PL Universe 5.0 (0.3) 0.0 0.2 (95) 8 (3.8) 0.4 (6.1) (2.2)
PL Universe (Ex-BFSI) 4.6 (0.5) (3.7) 0.6 (131)bps 17 bps (8.0) 1.4 (10.7) (2.5)
PL Universe (Ex-Oil) 6.6 2.2 10.9 (0.0) 93 bps (52)bps 10.1 (0.4) 9.8 (0.1)
Source: PL

October 11, 2024 33

 India Strategy

Mixed demand, margins expand due to lower input costs

AMC, Hospitals, CG boost sales Cement, Bild Material drag sales

Source: Company, PL Source: Company, PL

CG, Hospitals, Pharma, Chemicals lead Cement, Media, Travel and Consumer drag

Source: Company, PL Source: Company, PL

AMC, CG, Hospitals and Durables led growth 9.8% PAT growth as O&G PAT declined 44.4%

Source: Company, PL Source: Company, PL

October 11, 2024 34

 India Strategy

2QFY25 Results Trading BUY & SELL Ideas

Oil India
MGL Jubilant Food
Engineers India Shree Cement
HDFC AMC Bajaj Electricals
Polycab RBA
Max Healthcare
KIMS

These are purely for tactical trades and do not reflect our long term fundamental
calls.

October 11, 2024 35

 India Strategy

Notes

October 11, 2024 49

 India Strategy

Notes

October 11, 2024 50

 India Strategy

Nomenclature
Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

October 11, 2024 51

 India Strategy

ANALYST CERTIFICATION
(Indian Clients)
We/I Mr. Amnish Aggarwal- MBA, CFA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.

(US Clients)
The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately
reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific
recommendation or views expressed in this research report.

DISCLAIMER
Indian Clients
rtfolio Manager, Depository Participant and distribution for
third party financial products. PL is a subsidiary of Prabhudas Lilladher Advisory Services Pvt Ltd. which has its various subsidiaries engaged in business of commodity broking,
investment banking, financial services (margin funding) and distribution of third party financial/other products, details in respect of which are available at www.plindia.com.
This document has been prepared by the Research Division of PL and is meant for use by the recipient only as information and is not for circulation. This document is not to be
reported or copied or made available to others without prior permission of PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.
The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy or completeness
of the same. Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given,
made available or expressed herein or for any omission therein.
Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or
otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor.
Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in
transactions of securities of companies referred to in this report and they may have used the research material prior to publication.
PL may from time to time solicit or perform investment banking or other services for any company mentioned in this document.
PL is a registered with SEBI under the SEBI (Research Analysts) Regulation, 2014 and having registration number INH000000271.
PL submits that no material disciplinary action has been taken on us by any Regulatory Authority impacting Equity Research Analysis activities.
PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company.
PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month
immediately preceding the date of publication of the research report.
PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report.
PL or its associates might have received compensation from the subject company in the past twelve months.
PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company fo r
any other assignment in the past twelve months.
PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
PL or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject
company in the past twelve months
PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report.
PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. PL or its analysts did not receive any compensation or
other benefits from the subject Company or third party in connection with the preparation of the research report. PL or its Research Analysts do not have any material conflict of
interest at the time of publication of this report.
It is confirmed that Mr. Amnish Aggarwal- MBA, CFA Research Analysts of this report have not received any compensation from the companies mentioned in the report in the
preceding twelve months
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and
its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
The research analysts for this report has not served as an officer, director or employee of the subject company PL or its research analysts have not engaged in market making activity
for the subject company
Our sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary
to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed
herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest.
PL and its associates, their directors and employees may (a) from time to time, have a long or short position in, and buy or sell the securities of the subject company or (b) be
engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company
or act as an advisor or lender/borrower to the subject company or may have any other potential conflict of interests with respect to any recommendation and other related information
and opinions.

US Clients
This research report is a product of Prabhudas Lilladher Pvt. Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s)
preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. reg ulated broker-dealer and therefore the analyst(s) is/are
not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules
or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.
This report is intended for distribution by Prabhudas Lilladher Pvt. Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act,
1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major
Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or
transmitted onward to any U.S. person, which is not the Major Institutional Investor.
In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major
Institutional Investors, Prabhudas Lilladher Pvt. Ltd. has entered into an agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo").
Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer.

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India | Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
www.plindia.com

October 11, 2024 52