The Eagle Eye: Going from strength to strength By Motilal Oswal
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The Eagle Eye: Going from strength to strength
In this version of ‘The Eagle Eye’, we highlight (a) the relatively resilient performance from the Indian markets despite the sell-off in EM, on the back of the regulatory clampdown on China tech companies, b) the divergence in 12-month rolling returns across sectors v/s the Nifty, c) the breakdown of price returns in sectoral indices over the past 10 years, d) the 1QFY22 earnings season thus far, and e) changes in allocation by FIIs and DIIs as of June’21.
* The impact of China’s regulatory clampdown on the Tech and Education sectors led to 13% decline in the HSCEI index and 7% in the MSCI EM index.
* Divergence in sectoral returns v/s the Nifty: There has been a sharp divergence in 12-month rolling returns v/s the Nifty as IT and PSU Banks have outperformed, while Auto and FMCG have been laggards.
* The breakdown of sectoral returns in MOFSL sectors over the past 10 years indicates Auto, Consumer, and Tech have benefitted from valuation re-ratings, while Private Banks, O&G, and Metals have not seen witnessed re-rating.
* FIIs and DIIs have sharply increased their stakes in Pharma, Metals, and IT QoQ. The earnings season in 1QFY22 has been in line with expectations and the upgrade-to-downgrade ratio has remained stable at 1:1.
* Macro trends – exports, daily e-way bill generation, GST collections, railway freight, and the Manufacturing PMI indicate an uptick in economic activity in 1QFY22.
* COVID-19 cases declined below 430k in July’21, with the vaccination pace picking up to 4.3m per day in July v/s 4m in June’21.
* Our Research Team has released several interesting thematic reports in June’21. We have highlighted some of these in the presentation – the initiation on Burger King, the Tyres sector, and the Global Economic Report.
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