Edelweiss Research: Macro & Markets Chart Book

Macro Trends

• Economic activity indicators remain mixed. IIP is now improving on a trend basis. However, industry oriented indicators namely cement and steel production and consumption oriented such as auto sales, 2 wheeler sales are slowing down. Further some of the services indicators such as railway traffic, tourist arrivals which were growing at a good pace until recently, have also slowed.

• February retail inflation came in 5.4% YoY, marginally higher than previous month. However, core CPI continues to disinflate and is now below 4%. WPI continues to remain negative.

• Trade deficit further narrowed to ~USD6.9bn. The improvement was mainly on the imports front, with oil and non-oil and non-gold imports tapering off significantly. Non-oil exports also slowed.

• RBI kept the repo rate unchanged, despite cutting its March end CPI forecast by 20bps. It is worth noting that, monetary conditions for India INC. have actually tightened since the first rate cut owing to higher real rates and INR appreciation (REER basis) 

Market Trends

• Performance: Indian equities lost 1.9% (USD terms), underperforming MSCI EM over last one month. Within India, financials and IT underperformed while defensives outperformed.

• Valuations: MSCI India now trades at 16.6x forward earnings, 0.5 standard deviation above its 10Y avg.

• Earnings downgrades:  Sensex earnings have been further downgraded by 2-3%. FY15E and FY16E consensus EPS are pegged at INR1,470 and INR1,730  - Edelweiss: INR1,400 and INR1,730 - respectively.

• Flows: There were net FII inflows of USD1.7bn in March, while the DIIs flows were marginally positive

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