India at lifetime high, other emerging markets 30% away from peaks

New Delhi: Indian equities are trading at their lifetime highs while the emerging markets are 30 per cent away from their peaks.

This is largely a result of strong FPI equity flows (highest among select EMs for four months in a row), pick-up in MF equity flow, benign crude oil prices, sharp progress in south-west monsoon, continued demand traction (with signs of rural and capex cycle recovery), and likely mid-teen corporate earnings growth (with minimal earnings downgrade), Antique Stock Broking said in a note.

Indian equities are trading at 20x 1-year forward P/E multiple (as against a long-term average of 18.4x) helped by strong FPI equity flows (highest equity inflow of USD 3.5 billion among emerging markets in June — the fourth month in a row), pick-up in mutual fund equity flow (Rs 98 billion till 26th June), benign crude oil prices, sharp pick-up in monsoon, resilient domestic macro (as evident from various macro indicators like GDP growth, IIP, GST collection, PMI, e-way bill, electricity demand, petroleum consumption, etc.), and likely mid-teen corporate earnings growth (with minimal earnings downgrade), the report said.

India is at a lifetime high, unlike other emerging markets with almost all sectors indices reaching their lifetime high, the report said.

India continues to trade at above mean valuations and at premium levels relative to global equities. Mid-caps are now trading at average premium levels helped by pick-up in FPI equity inflow into India especially in financial services, industrials, and auto sectors.

Healthy demand accompanied by margin uptick to drive 1QFY24 earnings, the report said. Various high-frequency indicators along with various RBI surveys point to healthy demand traction in 1Q (RBI estimates a 1QFY24 real GDP growth of 8 per cent YoY), which along with lower commodity prices (LME metal index down 17 per cent YoY and Brent crude oil down by 30 per cent YoY), is likely to result in mid-teen corporate earnings.

Most of the sectors are likely to report in-line earnings, with a positive surprise likely in store for oil & gas (due to Russian blending and GRM) and cement (driven by strong volume growth).


It is merger season in Indian banking sector

Mumbai: It seems to be a merger season in the Indian banking sector. Earlier this week, the Board of Directors of listed IDFC FIRST Bank Ltd approved the composite scheme of amalgamation amongst IDFC Financial Holding Company Ltd, IDFC Ltd and the bank.

The IDFC FIRST Bank and IDFC Ltd are listed on the bourses while IDFC Financial Holding is not.

The new amalgamation comes soon after HDFC merged with HDFC Bank Ltd.

The IDFC group rejig scheme is a two-step process.

As per the amalgamation scheme, IDFC Financial Holding will be amalgamated with IDFC Ltd and then the IDFC Ltd which will amalgamate with IDFC FIRST Bank.

Part of the rejig scheme is the reduction of the securities premium account of the bank.

The merger will help create an institution with diversified public and institutional shareholders, like other large private sector banks, with no promoter holding.

Image courtesy of File photo

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