Green shoots or sales push?

You swing the best when you have the fewest things to think about
– Bobby Jones (amateur golfer & lawyer)
Prithviraj Srinivas Sr. VP – Economist - Institutional Equity Research 1
prithviraj.srinivas@axiscap.in; 91 22 4325 1108 December 2019
Summary

Data signals a bottom in growth deceleration helped by consumer-oriented sectors. But there isn't enough evidence to
indicate sharp uptrend from here. Our diagnosis is that activity has been supported by discounts which will have to sustain
in 2020 (aided by corporate tax cut) to prop-up demand.

Key macro data readings: PMI manufacturing and services showed improvement in activity led by consumer-oriented
sectors. Meanwhile, inflation and price pressures rose primarily in food. There are tentative signs that interest rate dynamics
are improving but much depends on fiscal. On this point, sharp rise in GST collections in November helped by rise in
returns filed is a positive indication. Meanwhile, RBI’s pause has delivered effective rate hike of 20 bps for bond markets.
 Key sector trends
♦ FIIs continue to be solid buyers with BFSI, Oil & Gas and Media  24/36 rainfall divisions have seen excess rains post
being key beneficiaries. They remain net sellers in FMCG, IT etc September, which has supported robust Rabi acreage

 Despite sturdy SIP flows, DII flows have turned net negative in  Dip in auto sales growth post festive season has propped
November up discount levels in December

 Bank credit and deposit growth slowed. Pvt. banks gaining

 Low fares push up domestic airline traffic to 11% YoY
market share from PSUs and NBFCs

 Project awards and announcements rose. Road & Railways led the
increase in awards while water & power drove announcements
 FMCG channel checks do not suggest improvement in demand. Input
price increase seen in food and palm oil
 Residential real estate launches fall while office space demand
remains strong
 Pharma volume growth highest in 17 months
 Lack of pricing power in cement due to weak demand
 Port & rail cargo (bulk) show sequential improvement but
container growth eased
 Discom dues continue to climb, sector requires reform
intervention
 Global steel prices move up on improving risk appetite
from China just as trade tensions with the US ease

20 DEC 2019 2
Key conclusions

Page
 Eco 4
 Flows 9
 Key events 11
 Sector
 Agriculture 12
 Automobile 14
 Aviation 15
 BFSI 16
 Capital goods 17
 Cement 18
 FMCG 19
 IT 20
 Logistics 21
 Metal 22
 Pharma 23
 Power 24
 Real Estate 25
 Telecom 28

 Appendix (heat map & macro forecasts) 29

20 DEC 2019 3
Eco: November data is mixed – green shoots or discounted sales
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

November PMIs improve but underlying issues remain

Highlights
PMI Mfg PMI Services
♦ Manufacturing PMI improved in November led by 56
consumer and intermediate goods with evidence of (index)
54
stronger export volumes. Meanwhile, services PMI saw
52
expansion after two months of contraction. Consumer
services, information & communication and real estate & 50
business services were key drivers of demand uptick. 48
Meanwhile transport & financial services saw declines 46
♦ Consumption uptick could find traction from falling 44
lending rates and strong agro-inflation (positive terms of

Feb-17

May-17

Feb-18

May-18

Feb-19

May-19
Aug-17

Nov-17

Aug-18

Nov-18

Aug-19

Nov-19
trade for rural India)
♦ For macro stability, much depends on fiscal management Source: Bloomberg, CEIC

Investment activity continues to decline Excess rains have pushed both perishable and non-perishable inflation

CPI food: Perishable CPI food: Non Perishable

Capital goods imports % YoY 15
40 (YoY%)

30 10

20
5
10
0 0

(10) (5)
-10.8

Feb-17

May-17

Feb-18

May-18

Feb-19

May-19
Nov-16

Aug-17

Nov-17

Aug-18

Nov-18

Aug-19

Nov-19
(20)
(30)
Nov 14 Nov 15 Nov 16 Nov 17 Nov 18 Nov 19
Source: CEIC Source: CEIC

20 DEC 2019 4
Eco: Dynamic for interest rates improving at margin but much depends on fiscal
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Banking system liquidity has been in surplus since June 2019… …which has accelerated transmission

Banking system liqiudity Policy rate cuts MCLR decrease

(6,000) 160
(Rs bn) (bps) 135 135
(4,000) 140
120 110
(2,000) 100 75
0 80
50 47.5
60
2,000 40 25 25.0
20 10.0
4,000 0.0 2.5
0
Dec 12

Dec 13

Dec 14

Dec 15

Dec 16

Dec 17

Dec 18

Dec 19
(20) -5.0
Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19

GST collections have bounced back (on activity or compliance?) FII equity flows taking a breather while debt seeing small outflows

20 10 FII Equity FII Debt

GST collections % y-o-y (USD bn)
15
5
10
6.0
5 0

0
(5)
(5)
-5.3
(10)
(10)
Dec 18 Mar 19 Jun 19 Sep 19 Dec 19
Nov 18 Feb 19 May 19 Aug 19 Nov 19
Source: CEIC, November data as of 20th

Source: CEIC
20 DEC 2019 5
December special 1: Auto data trends
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Trends in auto production, sales and export figures indicate that there is a long way to go before the previous peak is regained.
Will it be a V like FY09 or U like FY12 to FY18 is the question. We believe it will be the latter since corporate tax cut impact on
investment rate and jobs would come gradually. Meanwhile, rate cuts, bump-up in government spending and tax cuts will provide
a bottom and support recovery before there is a shift up in trend

CV production (in thousands)

PV production (in thousands)
355 120 108
400 (units) -21% (units) -37%
100
300 80
290 68
60
200
40
100 20
0
0

01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19

Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
TW production (in thousands) 3W production (in thousands)
140
3,000 (units) (units) 122
2,383 120 -13%
2,500 -22%
100
2,000 106
80
1,500 1,870 60
1,000 40
500 20
0
0 01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19

Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov
Nov

Source: CEIC

20 DEC 2019 6
December special 2: RBI has delivered an effective hike for capital markets
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

The RBI’s pause, despite sharp downgrade to growth outlook, has been taken as end to rate cut cycle by bond markets. Operation
twist (buying longer tenures while simultaneously selling shorter tenures) should flatten the curve. But, much depends on fiscal.

Pre RBI (4 Dec 2019) Post RBI (6 Dec 2019)

7.50
7.24 7.27
7.18

7.00 6.83 7.12

7.03 7.07

6.50 6.74
6.50

6.30
6.00 5.83

5.51
5.50 5.64

5.28
5.00
1Y 2Y 5Y 10Y 15Y 20Y 30Y

Source: CEIC

20 DEC 2019 7
December special 3: Prepare for tax offensive
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Government is likely to widen its tax base as it races to manage fiscal

Press reports indicate tax officials have Rs 1.1 trn per month GST collection target for the remainder of the year
(achieved only in April this year). And to compensate for corporate tax cut, will go after past arrears (see)

# of GSTR 3B returns filed

8.0
(mn)
+12% y-o-y
7.8
7.6

7.5

7.0

6.5
Nov 18 Feb 19 May 19 Aug 19 Nov 19

Source: CEIC

20 DEC 2019 8
FPI flows: What investors did during the month
(pankaj.kadu@axiscap.in; 91 22 4325 1111) (nitesh.momaya@axiscap.in)

FPI sectoral investment trend over last 12 months: FII buys USD 13.2 bn worth of equity in CY19. The highest since CY15
Sector Dec- 18 Jan- 19 Feb- 19 Mar- 19 Apr- 19 May- 19 Jun- 19 Jul- 19 Aug- 19 Sep- 19 Oct- 19 Nov- 19
Automobiles 90 (132) (20) (69) 194 (154) 204 (247) 11 179 (40) (132)
Banks & Fin Serv 143 (428) 1,489 3,335 1,199 913 535 (831) (1,245) 700 1,441 2,468
Cement 55 (18) 3 67 (176) (215) (99) (52) (155) (76) 12 2
Chemicals & Ferts (64) (2) 76 37 8 50 3 30 25 (30) (23) (33)
Cons. Durables (8) 9 14 77 58 (24) 10 (14) (42) 31 105 31
Cons. Discretionary (23) (43) 13 (27) (41) (36) 1 7 15 4 (23) 4
Engineering (89) (225) (83) 248 (41) 200 258 (168) (162) 166 171 89
FMCG 60 115 (199) 207 140 (98) (110) (246) (207) (147) (17) (252)
IT (244) (27) 96 78 (14) (462) (299) (863) (386) (383) (481) (285)
Logistics (32) (81) 31 59 6 23 10 (10) (73) (48) (152) (125)
Media (2) 95 94 (63) (21) 75 16 19 85 13 129 599
Metals/ Mining (23) (112) (32) 254 167 33 31 (36) (137) (6) (39) 33
Oil & Gas (108) 283 7 849 612 88 11 (169) (539) (95) 422 581
Others 611 (191) 750 (998) 926 1,060 (113) 800 267 948 272 773
Pharma (104) 131 36 295 (43) (339) (221) (51) (41) (38) (21) (82)
Power 160 20 122 322 231 37 142 18 60 (40) 68 (102)
Realty (7) (12) 13 (7) (138) 2 38 4 (5) (40) (2) 72
Retail 34 (50) (32) 130 12 37 (55) (23) (15) 3 74 (79)
Telecom (2) 67 39 98 (25) (55) 10 26 72 (85) (152) (44)
Total 445 (602) 2,418 4,892 3 ,054 1,13 5 3 73 (1,805) (2,471) 1,057 1,742 3 ,517

♦ The last three months (including Nov-19) saw positive flows. Key beneficiaries being BFSI, Consumer durables, Engineering, Media and Oil
♦ Selling pressure continues in FMCG, IT, Logistics and Pharma

Source: NSDL, Axis Capital

20 DEC 2019 9
Domestic flows: What investors did during the month
(pankaj.kadu@axiscap.in; 91 22 4325 1111) (nitesh.momaya@axiscap.in)

DII flows: Turn negative in November Mutual funds: Net inflow-outflow in growth/ equity-oriented schemes

MFs Others 18
12 (Rs bn)
4,000 (USD mn) 12 8
5 3
3,000 6 3 2
2,000 0
1,000 (6) (1)
(3) (6)
0
(12) (10)
(1,000)

Sectoral/Thematic
ELSS

Large & Mid Cap

Focused Fund
Mid Cap Fund

Small Cap Fund

Value Fund/Contra
Large Cap Fund

Multi Cap Fund

Dividend Yield Fund

(2,000)
(3,000)

Funds
Fund

Fund
Jul-19
May-19
Mar-19
Feb-19

Sep-19

Oct-19
Jan-19
Dec-18

Jun-19
Apr-19
Nov-18

Nov-19
Aug-19

SIP flows: Persistent inflows into equities continue Highlights

85 (Rs bn)
♦ Inflows into equity schemes hit almost a three and a half
83

83
83

82
year low of Rs 13 bn. Highest inflows seen in Large
82

82
82

81
81
81

81
80
80

70 Cap fund
♦ MFs added 0.26 mn investor account in November.
55 Pace of growth in folio numbers has dropped MoM on
the back of low inflows into equities
40
♦ SIP – 11th continuous month of Rs 80 bn + inflows
May-19

Jul-19
Mar-19
Feb-19

Sep-19

Oct-19
Jan-19
Dec-18
Nov-18

Jun-19

Nov-19
Apr-19

Aug-19

Source: AMFI, SEBI, CEIC, Axis Capital 20 DEC 2019 10

Key events during the month

 Essar Steel acquisition: Supreme Court clears path for the INR 420 billion acquisition of Essar Steel by
Arcelor Mittal. Essar steel ramps up capacity by 50% to 12-15 million tons per annum (mtpa) after the acquisition.

 RBI policy statement:

 Regulations for Co-operative banks: Regulations for Urban Co-operative Banks (UCBs) were tightened.
CRILC regulatory framework for larger UBCs and comprehensive cyber security framework.
 New regulations for NBFCs: Aggregate limit for NBFC peer-to-peer lending raised from INR 1 million to INR 5 million.
Development of a secondary market for corporate loans which through a proposed self-regulatory body responsible for
standardizing documents, covenants and practices related to secondary market transactions.
 Government gives pre-budget status report
 Credit flow: Capital infusion of INR 603 billion to PSBs with INR 4.9 trillion credit disbursed. Disbursement broken down as
INR 2.2 trillion for corporates, INR 730 billion for MSMEs and INR 395 billion to retail borrowers.
 Alternative Investment Funds for stalled housing projects worth INR 250 billion reached approval stage in record time and set to
be utilized over coming quarters.
 Competitiveness: Unified regulator for international financial services, rationalized stamp duty with planned divestment to reduce
impact on tax collections.
 Capex: 66% of budgeted capex utilized and record USD 35 billion FDI inflows, with CPSEs projected to undertake capex of
INR 600 billion for the rest of the year.
 TRAI aids beleaguered Telecos by deferring scrapping of IUC levy by one year as they prepare to clear spectrum and
license dues by raising tariffs ~30%.
 Operation twist: RBI attempt to smoothen yield curve by buying 10Y bonds worth INR 100 billion and selling short term
bonds on an equivalent value.
 MPC minutes indicate that they are more concerned about inflation risks than growth slowdown, especially from
non-vegetable food inflation.

20 DEC 2019 11
Sectors

20 DEC 2019 12
Agriculture: Prospects for agriculture good over next 6 months
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

24 out of 36 subdivisions have seen excess to large excess rains

Highlights
♦ Post-monsoon rainfall is 35% in excess across India,
with only Bihar and some North-eastern states
deficient
♦ Reservoir levels 46% above last year and 37%
above LPA
♦ Rabi sowing is improving with 5.1% YoY growth in
acreage particularly in cereals. But, what matters is
how horticulture production performs.]

Crop acreage down 5.1% YoY as excess rainfall fills reservoirs

As of 6 December 2019 Area sown in Area sown in

Crop (in Lac hectares) 2018-19 2019-20 % YoY

Wheat 226.25 248.03 9.6

Rice 9.36 11.34 21.2

Pulses 120.91 119.16 (-1.4)

Coarse cereals 36.01 40.32 12.0

Oilseeds 70.71 68.24 (-3.5)

Total Crops 463.33 487.09 5.1

Source: CEIC, IMD, Agricoop

20 DEC 2019 13
Automobile: 2W, CV weak; PV volumes flat
(nishit.jalan@axsicap.in; 91 22 4325 1148) (nikhil.kale@axiscap.in; 91 22 4325 1137)

PVs: Volumes flat YoY despite a seasonally weak month; OEMs likely CVs: Volumes declined 15% YoY, as both LCVs (-5% YoY) and
increased inventory levels ahead of model year change in Dec M&HCV (-33% YoY) remained weak

Cars UVs Vans YoY growth (RHS)

M&HCVs LCV YoY growth (RHS)
350 ('000) (% ) 50
11 40 120 ('000) 100
300 18 18
21
11 (% )
16 30 80
13 14 100
250 18 13 10
83 93 11 9 101 20 60
200 70 83 93
66 74 77 10 80 65 40
73 82
150 67 71 0 60 53 53 20
(10) 47
45
100 180 155 179 171 178 160 44 45 45 0
174 160 (20) 40 39 44 51 45
50 148 140 123 116 131 36 (20)
(30)
20 31 34 34
44
(40)
0 (40) 25 25 24 25 18 16 17
15 15
0 (60)
Feb-19
Dec-18
Nov-18

Oct-19

Nov-19
Jan-19

Aug-19
May-19
Apr-19

Jul-19
Mar-19

Jun-19

Sep-19

Feb-19
Dec-18

Nov-19
Nov-18

Oct-19
May-19
Jan-19

Aug-19
Apr-19

Jul-19
Mar-19

Jun-19

Sep-19
Two-wheelers: Volumes were down 14% with scooters down 12%
YoY while motorcycles were down 15% YoY)
Highlights
Motorcycles Scooters Mopeds YoY growth (RHS) ♦ November was a seasonally weak month after the
2,000 ('000) (% ) 30
64
52
52 57
60 festive buying in Oct. This along with continued
75 73 75
1,500 71
51 56
58 15
weak demand reflected in the wholesale dispatches
512
60
497 493 490 513 556
580
which remained weak for 2Ws and CVs
522 388 527 521
460
1,000 0
♦ While PV retails were also negative, wholesales
1,117

406
1,085

1,044

were flat YoY. We understand OEMs have increased

934
1,050

1,028

1,047

937

500 (15)
1,162

1,085

894
793

inventory level in anticipation of pick up in retails in

982

0 (30) December ahead of model-year change.

Feb-19
Nov-18

Dec-18

Oct-19

Nov-19
May-19
Jan-19

Apr-19

Aug-19
Jul-19
Mar-19

Jun-19

Sep-19

♦ PV discounts which had dipped in November have

also gone up in Dec. Inventory levels remain
manageable.

Source: SIAM, CEIC, Axis Capital 20 DEC 2019 14

Aviation: Volumes Surge on Low Fares
(kunal.lakhan@axiscap.in; 91 22 4325 1147)

Highest Volume growth recorded in ‘19 at 11% YoY… …with large players reporting strong volume growth

Passengers YoY growth (RHS) Passenger growth (YoY) Load factor (RHS)
14 (mn) 30%
60% 95
13 20%
40% 90
12 10%
39%
43%
11 0% 20% 85
23%
10 May-… -10%
0% 80

Jul-19
Mar-19

Sep-19
Feb-19

Oct-19
Dec-18

Jan-19

Jun-19

Nov-19
Nov-18

Apr-19

Aug-19
Indigo Spicejet Go Air

Highlights
Market share remains largely stable for most carriers
♦ Overall passenger traffic grew the fastest in 2019 coming
at 11.2%, led by Spicejet reporting the highest growth of
Indigo Jet Airways Air India Spicejet Go Air 43%YoY. Passenger growth of Go-Air, Indigo (fleet size up
100%
9% 9% 9% 9% 10% 11% 11% 11% 11% 12% 12% 11% 11% 30% YoY) and other airlines came in at 40%, 23% and
80% 13% 12% 13% 14% 14% 13%
15% 16% 16% 16% 15% 16% 16% 59% respectively..
11% 11% 11% 11% 12%
12% 12% 11% 11%
60% 11% 11% 13% 12%
13% 12% 12% 10% 5% 1% 0% 0% 0% 0% 0% 0% 0% ♦ Our view: Passenger growth in November has been
40% spurred by low fares.. We expect fares to remain subdued
in the near-term led by (1) double-digit increase in capacity
50%

49%

48%
48%
48%

48%
47%

47%
47%
43%
43%

43%

44%

20%
announced by airlines for the winter schedule, and
0% (2) lower economic growth. Following quarterly losses
across listed players in Q2, we do not see any respite in
Jul-19
May-19
Mar-19

Sep-19

Oct-19
Feb-19
Jan-19
Dec-18

Jun-19
Nov-18

Nov-19
Apr-19

Aug-19

near term as airlines continue to sell seats cheap to capture

market share/ improve load factors (IndiGo, SpiceJet),
leaving the near-term earnings outlook weak.

Source: DGCA, CEIC, Axis Capital

20 DEC 2019 15
BFSI: Growth in slow lane
(manish.karwa@axiscap.in; 91 22 4325 1103) (praveen.agarwal@axiscap.in; 91 22 4325 1102)

Credit growth remains below 10% CD ratio largely unchanged

(Rs trn) Deposits Loans Loan growth YoY (RHS) (%) (%)
ID Ratio CD Ratio (RHS)
150 17% 32 80
31 78.0 78.1 77.7
120 13.3% 15% 77.1 77.1 76.8
12.1% 30 78
13% 76.4 76.5 28.6 28.476.1
90 29 75.7
10.2%
11% 28 76
8.7%8.9% 28.5 28.7
60 27
6.9% 9% 27.9 27.6 27.7 27.7 27.6 27.8 28.0 75.7 75.8
26 26.9 74
30
120

121

126

125

126

126

128

129

130

130
120

127
7% 25
92

94

94

96

97

97

97

98

98

99
98

97
0 5% 24 72

Mar-19

Jul-19
May-19
Feb-19

Sep-19

Oct-19
Jan-19
Dec-18
Nov-18

Jun-19

Nov-19
Apr-19

Aug-19
May-19

Jul-19
Mar-19

Sep-19
Feb-19

Oct-19
Dec-18

Jan-19

Jun-19

Nov-19
Nov-18

Apr-19

Aug-19

Life insurance: Individual Single business gains traction

Highlights
FYP - Individual Single FYP - Individual Non Single
FYP - Group Single FYP - Group Non Single
♦ Credit growth declined in Nov’19 at 6.9% YoY, as
slowdown engulfed most sectors, deposit growth was
100 4 5 4 3
17 15 also slow at 8.3% YoY due to decline in term
80
46 42
58 deposits.
60 47 45
49 ♦ Private banks are aggressive in unsecured segment
40 23
32 32
20 22 29 30 and lending selectively to other sectors. Large banks
31
0
18 16 11 10 10 are gaining market share at cost of PSU banks and
NBFCs.
Mar-19

Jul-19
May-19
Feb-19

Sep-19

Oct-19
Jan-19
Dec-18
Nov-18

Jun-19

Nov-19
Apr-19

Aug-19

♦ In life insurance, LIC continued to dominate with

the share of First Year Premium (FYP) at 71.5% as of
Nov’19 (64.0%/66.1% in Nov’18/Oct’19).

Source: CEIC, RBI, IRDA, Axis Capital

ID Ratio: Investment Deposit Ratio; CD Ratio: Credit to Deposit ratio; FYP: First Year Premium; GDP: Gross Direct Premium 20 DEC 2019 16
Capital goods: Infra projects making a comeback
(abhishek.puri@axiscap.in; 91 22 4325 1144) (vaibhav.saboo@axiscap.in; 91 22 4325 1123)

Highlights

♦ Projects data for Nov’19 shows strong awards (led by Infra – Roads/Railways) at Rs 281 bn, however, monthly awarding
of Rs 170 bn in FY20-YTD is still much lower than Rs 270 bn/month for FY18/19.
♦ Announcements remained strong (Power, Irrigation, and Water) – Rs 711 bn. Monthly average of Rs 977 bn/month in
FY20-YTD was in line with Rs 1,000 bn/month in FY18/19. Expect infra spending to be back ended this year, vs.
front-ended last year.

Projects Data heat map…

Yo y gro wth (% ) / R s b n Ap r- 19 M ay- 19 J un- 19 J ul - 19 Aug- 19 S ep - 19 Oc t- 19 No v - 19 YT D- F Y20
Manufacturing Awarded 4175% -44% 165% -44% -5% 82% 50% -67% 0%
- Announced -14% 74% 437% -1% -50% -92% -93% -84% -36%
Mining Awarded -99% -100% - - -100% 24% -100% 444% 0%
- Announced 1451% 9275% 590% -64% -72% -100% -62% -100% 63%
Electricity Awarded -60% -91% 27% -46% -15% -63% 2196% 415% 0%
- Announced -99% -55% -61% 572% 53% 118% -79% 2571% 23%
Infra Awarded (RHS) -82% -88% -72% -78% -61% 35% -78% 89% 0%
Infra Announced 62% 107% 283% -4% -49% -61% 83% 4% 38%
Irrigation Awarded -100% -99% 48% -80% -56% 0% 0% 69% 0%
- Announced -65% -91% -31% 368% 62% -66% 60% 99% -11%
Pro jec ts Awarded 185 41 203 92 155 230 163 281 1, 34 9
- yoy % -34% -90% -42% -73% -55% 31% -57% 67% -45%
Pro jec ts Anno unc ed 54 7 1, 130 1, 919 788 789 330 1, 599 711 7, 812
- yoy % -26% 63% 315% 47% -35% -68% 7% 16% 15%

Source: Projects Today, Axis Capital 20 DEC 2019 17

Cement: Prices and demand remains soft, cost favorable
(arijit.dutta@axiscap.in; 91 22 4325 1122)

Cement prices weakened on low demand Cement monthly production as per DIPP data – volumes remain soft

Kolkata Delhi Chennai Mumbai mmt % YoY (RHS)

40 20
425 (Rs/bag) 15
400 30
10
375
20 5
350
0
325 10
300 (5)
275 0 (10)

May-19

Jul-19
Mar-19

Sep-19
Feb-19
Oct-18

Oct-19
Dec-18

Jan-19

Jun-19
Nov-18

Apr-19

Aug-19
Jul-19
May-19
Mar-19

Oct-19
Sep-19
Feb-19
Jan-19
Dec-18

Jun-19
Nov-18

Nov-19
Apr-19

Aug-19
Fuel prices continue to be favorable Highlights
♦ Cement prices failed to rise post monsoon, as demand
Gulf (9% Sulphur) USA (6.5% Sulphur)
continues to remain weak. Price sustainability remain weakest
Domestic Petcoke (RHS)
150 11,000 in regions with weak demand-supply dynamics like East
(USD/t) (Rs/t) region and Andhra/Telangana and Karnataka in South
region. Our dealer interaction suggests price hikes move
120 9,000
failed twice in last one month. Cost continues to be favorable,
as both coal and pet coke prices softened.
90 7,000
♦ Volumes remained muted, as demand has not recovered from
60 5,000 hit due to general elections in May. Liquidity in the economy
continues to be a key issue. Post festive and monsoon season
Mar-19

May-19

Jul-19

Sep-19
Feb-19

Oct-19
Jan-19
Dec-18
Nov-18

Jun-19

Nov-19
Apr-19

Aug-19

demand spike (in November) have not taken place.

Source: Bloomberg, CEIC, Axis Capital 20 DEC 2019 18

FMCG: Demand weakness persists; RM prices benign
(anand.shah@axiscap.in; 91 22 4325 1142) (gaurav.jogani@axiscap.in; 91 22 4325 1124) (raghav.malik@axiscap.in; 91 2243251139)

New launches Price monitor

Pric e P r odu ct Gr am m age Nov- 1 9 MoM ch g.
C o mp any Pro duc t Weight
(R s) Dove Moisturising Cream 3*100gm 155 -9.9%
Dabur Real aloe vera kiwi 110 1 litre Vim Drop Dishwash Gel (Green) 250ml 65 18.2%
HUL Ponds anti-pollution crème 80 23 g Dant Kanti 200gm 80 6.7%
GCPL Good Knight Gold Flash 89 Vaseline Healthy White Body Lotion 100ml 95 -17.4%
United Dabur Amla Hair Oil 90ml 44 -16.7%
Witbier 150 500ml
Breweries
ITC Fiama hand wash 142 400ml

Raw material price trend

P r ice P r ice ch an ge
Highlights
Com m odit y U n it M on t h - A vg 1m 3m 6m 1 yr
♦ As per our channel checks and management
Kardi (Safflower) Oil Rs/10kg 1,971 26% 26% 26% 55%
commentary, no significant recovery has been seen in
Palm Oil Rs/metric ton 51,661 27% 23% 32% 7% the demand scenario across categories. Several new
Coffee Arabica - Intl. US cents/Pound 149 12% 11% 16% 5% launches were seen across companies, especially
RBD Palmolein Kakinada Rs/10kg 716 16% 18% 23% 15% HUL and GCPL. Promotional activity remained high in
PFAD US$/MT 508 15% 21% 22% 41%
hair oils.
Styrene - domestic Rs/kg 845 - 2 3 % -41% -42% -36% ♦ On raw material side, prices for the food basket
surged as Kardi Oil, Palm Oil and Coffee Arabica
saw ~26%/27%/12% hike in price. On non-food
side, while PFAD prices shot up ~15%, Styrene
fell ~23%.

Source: Bloomberg, NCDEX, MRCO, RIL, CMIE, Capital Line, Tea Board 20 DEC 2019 19
IT: Acceleration in hiring; dichotomy in growth within cloud space
(shashi.bhusan@axiscap.in; 91 22 4325 1104) (santosh.sinha@axiscap.in; 91 22 4325 1121)

Tech hiring momentum accelerates Sales force: Strong growth momentum continues

IT-Software/Software Services Sales Cloud (yoy gr.) Service Cloud (yoy gr.)
50% (YoY growth) 80% Marketing Cloud (yoy gr.) App Cloud (yoy gr.)
Total Cloud (yoy gr.)
40%
39% 60%
30% 36% 38% 38%
32% 31% 33%
20% 26% 25% 40%

10% 17%
14% 20%
0%
0%
Jul-19
May-19
Mar-19

Oct-19
Feb-19

Sep-19
Jan-19

Jun-19

Nov-19
Apr-19

Aug-19

4Q16A

3Q18A

3Q20A
2Q15A
3Q15A
4Q15A
1Q16A
2Q16A
3Q16A

1Q17A
2Q17A
3Q17A
4Q17A
1Q18A
2Q18A

4Q18A
1Q19A
2Q19A
3Q19A
4Q19A
1Q20A
2Q20A
Oracle: Moderation in cloud services growth
Highlights
Cloud license and on-premise license
♦ Hiring in IT-Software industry accelerated to 25% YoY
Cloud services and license support (SaaS/PaaS/IaaS/Support) (vs. 17% YoY in Oct-19). IT hiring growth was highest
15%
(YoY growth) compared to other sectors.
8%
♦ Sales force reported strong beat to consensus expectation
1% with revenue acceleration in some of the key segments
(6%) (+73% YoY in App cloud space). Indian IT does not
disclose cloud revenue, but directionally this indicates
(13%)
strong revenue momentum in the same.
(20%)
♦ Oracle’s revenue missed consensus expectation and was
May-18

May-19
May-17
Feb-17

Feb-18

Feb-19
Nov-16

Nov-17

Nov-19
Nov-18
Aug-16

Aug-17

Aug-18

Aug-19

below top end of the guidance. Moreover, the cloud

services growth continues to moderate, a trend contrary to
AWS and Azure (that are largely stable).

Source: Companies, Naukri Jobspeak 20 DEC 2019 20

Logistics: Macro pressure persists, container wavers (November volumes)
(ankur.periwal@axiscap.in; 91 22 4325 1149) (nitesh.dhoot@axiscap.in; 91 22 4325 1138)

Cargo performance across major ports Container tonnage growth across ports

Others Coal JNPT Major Ports Growth (RHS)

Container Iron Ore 20 24
(mn tons) (YoY%)
POL Overall Growth (RHS)
80 (mn tons) 10
(YoY%) 15 16
60

11.6

11.0
0 10 8
40 21 22
12 11 (10) 5 0
20

5.0

4.5
14 11
0 -8
0 (20)

May-19

Jul-19
Mar-19

Sep-19
Feb-19

Oct-19
Dec-18

Jan-19

Jun-19
Nov-18

Nov-19
Apr-19

Aug-19
May-19

Jul-19
Mar-19
Feb-19

Sep-19

Oct-19
Jan-19
Dec-18

Jun-19
Nov-18

Nov-19
Apr-19

Aug-19

Railways – aggregate cargo growth Highlights

(YoY%) Agg Cargo Coal Container (RHS) (YoY%) ♦ Cargo volume across major ports remained flat
30 (similar in September; down 5.5% in October),
10 58
POL*/iron ore volume rebounded (39/9% share),
20 while volume declined for containers (19% share),
4
1
7 10 thermal coal (12% share) and coking coal (6%
(2)
3 -3 share).
(8) 0
♦ Among containers, non-JNPT tonnage declined 2%
(14) (10) YoY, while JNPT vol. dropped 10% YoY.
Jul-19
May-19
Mar-19

Sep-19
Feb-19

Oct-19
Dec-18

Jan-19

Jun-19
Nov-18

Apr-19

Nov-19
Aug-19

♦ Railway container volume grew 7% YoY (+3% YTM);

Exim volumes grew 9% (+4% YTM), while domestic
volumes remained flat (down 3% YTM).

Source: CIEC, Axis Capital *Petroleum, Oil & Lubricants 20 DEC 2019 21
Metal: Moderate rise in steel prices, but overall volatility remains
(arijit.dutta@axiscap.in; 91 22 4325 1122)

China HRC export (FOB) prices have started recovering Zinc inventory decline continues – to support prices

LME Zinc Inventory (RHS) LME Zinc

China HRC export (FOB)
600 (USD/t) 3,200 240
(USD/t) (tons/'000)
550
2,800 160
500
2,400 80
450

400 2,000 0
Jul-19
May-19
Mar-19

Sep-19

Oct-19
Feb-19
Jan-19
Dec-18

Dec-19
Jun-19

Nov-19
Apr-19

Aug-19

May-19

Jul-19
Mar-19
Feb-19

Sep-19

Oct-19
Jan-19
Dec-18

Dec-19
Jun-19

Nov-19
Apr-19

Aug-19
Highlights
Aluminium – remains weak with new supplies coming

LME Primary Aluminium Inventory (RHS) LME Aluminium ♦ Global steel prices have moved up in past few days on
2,500 1,400
strong demand from China. Risk of quick reversal looms
(USD/t) (tons/'000) on trade deal progress. Prices of metals to remain volatile
2,250 1,250 till details of the deal is agreed upon.
♦ Indian steel prices were marginally up in Dec post
2,000 1,100 monsoon weakness and in-line with global prices.
1,750 950 ♦ Aluminum prices remained weak on softening Alumina
prices and demand.
1,500 800 ♦ Zinc prices continue to remain weak, as sizable capacity
May-19

Jul-19
Mar-19
Feb-19

Sep-19

Oct-19
Jan-19
Dec-18

Dec-19
Jun-19

Nov-19
Apr-19

Aug-19

addition amidst lackluster consumption is expected to

impact supply-demand balance.
♦ Cost moderated on decline in coal/ coking coal prices.

Source: Bloomberg, Axis Capital 20 DEC 2019 22

Pharma: Domestic formulations Nov’19 scorecard
(prakash.agarwal@axiscap.in; 91 22 4325 1145) (dhagash.vora@axiscap.in; 91 22 4325 1129) (mehul.sheth@axiscap.in; 91 22 4325 1131)

Therapy-wise growth Indian domestic formulations – growth drivers

% of
Yo Y Gro wth F Y17 F Y18 F Y19 Q1'20 Q2'20 Oc t'19 No v '19
IPM T o tal Volume Price New Product
Anti-Infective 13 4 1 6 6 14 3 17 16 (%) 15
Cardiac 13 11 6 13 10 12 8 14
12 3
Gastro Intestinal 11 10 6 9 6 11 5 15 10
11 10
Anti-Diabetic 10 19 12 15 11 14 6 11
8 3
Vitamins/ Nutrients 9 10 4 9 8 10 2 14 3 2 5 6
6
Respiratory 7 9 8 8 7 13 5 20 2 3
6 2 4 6
Pain / Analgesics 7 10 4 8 7 12 5 15 3
Neuro / CNS 6 10 6 10 9 10 6 14 5 5 6
5 4 4
Derma 7 12 10 11 6 8 4 13 1 3
1
Gynaecological 5 11 4 9 7 7 3 12
(1)
Anti-Malarial 0 (4) (18) 1 1 14 (0) 14
(4) (3)
T o tal IPM (R s b n) 1, 305 10 6 10 8 12 5 15
FY17 FY18 FY19 Q1'20 Q2'20 Oct'19 Nov'19

Company-wise growth
Yo Y Gro wth % F Y17 F Y18 F Y19 Q1'20 Q2'20 H 1'20 Oc t'19 No v '19
Highlights
Alkem 15 5 11 12 18 15 3 17
Alembic Pharma 7 (1) 11 2 3 2 (3) 9
Cadila 12 6 8 11 14 12 7 17
♦ IPM* posted 14.5% growth in Nov’19 (vs. 5.1% in
Cipla 8 4 9 9 8 8 2 13 Oct’19 which was led by Diwali vs. Nov last year);
Dr Reddy's 5 6 9 15 19 17 18 28 9.8% in H1FY20) -- one of the best growth seen in more
Glenmark Pharma 12 9 13 8 8 8 9 20 than 32 months. Oct-Nov’19 avg. growth was at 9.8%
IPCA 9 (6) 23 9 10 10 1 11
Lupin 12 10 15 14 17 16 9 15 ♦ Nov’19 growth was led by 5.9% volume growth (highest
Sun Pharma 11 6 8 7 11 9 7 15 in last 17 months), 5.7% pricing growth and 3% new
Torrent Pharma 13 5 15 9 13 12 5 18
Mankind 10 7 11 9 13 15 6 18
introductions’ growth (highest in last 16 months).
Eris Life Sciences 13 0 9 13 10 11 3 8 ♦ Growth continued to be led by chronic segments vs.
acute segments; among acute segments, anti-infective
growth was strong at 17% YoY.

Source: AIOCD, % of FY19 sales *IPM: Indian Pharmaceutical Market 20 DEC 2019 23
Power: Discom dues surge despite LCs; reforms imperative to improve sector heath
(abhishek.puri@axiscap.in; 91 22 4325 1144 ) (vaibhav.saboo@axiscap.in; 91 22 4325 1123 )

8.6 GW capacity added till Oct’19; thermal gross addition at Generation subdued with a decline of ~6% - thermal declined
3.2 GW; RE addition at ~5.7 GW – 4x more than last year’s 10% YoY

15%
Thermal Hydro RE
10%
400 356 365
5%
78 83 0%
300
45 45 -5%
200 -10%
Addn: 8.86 GW
233 236 -15%
100

May-18

Jul-18

May-19

Jul-19
Mar-19
Sep-18

Sep-19
Feb-19
Oct-18

Oct-19
Dec-18
Jan-19
Jun-18

Jun-19
Nov-18

Nov-19
Apr-18

Apr-19
Aug-18

Aug-19
0
Mar'19 Oct'19

LC mechanism assisting in the decline of dues due <60days Highlights

♦ Power demand was subdued. Generation declined 6% in
Outstanding dues (> 60 days)
60 55 57 35 Nov 2019 following weak industrial activity.
Outstanding dues - RHS (< 60 days) 51 ♦ Thermal generation declined 10% in Nov’19 – sharply hit
48
50 45 by strong growth in hydro generation (+24%).
42 30
39 39 38 40 ♦ LC mechanism implemented from 1st Aug’19 seeing
40 35
30 32 25
positive effects – Discom dues (<60%) substantially down.
30 27 27 However, the overall dues were up 50% YoY at Rs 811 bn.
24
~70% of these dues are over 60 days. Discoms expect
20 20
package settlement for prior outstanding dues through
Jul-18

Jul-19
May-19
Mar-19
Oct-18
Sep-18

Sep-19

Oct-19
Feb-19
Jan-19
Dec-18

Jun-19
Nov-18

Apr-19
Aug-18

Aug-19

centre’s aid – government planning to relook at

Uday program.

Source: CEA, Bloomberg, Axis Capital 20 DEC 2019 24

Real estate: Residential cycle slows down, commercial demand steady…
(kunal.lakhan@axiscap.in; 91 22 4325 1147) (utkarsh.punkhia@axiscap.in; 91 22 4325 1127 )

Residential sales growth slows down in Q3CY19

Highlights

♦ Residential: The housing segment recorded subdued 160,000 (No. of units)

growth even during the festive season. Due to the
120,000
substantial inventory overhang, there is negligible price

45,230
appreciation during the construction phase and the
80,000
segment is only witnessing sales of ready to move
in units. 40,000
♦ Commercial: Gross Absorption was 40.1 msf in the
first three quarters of ‘19 up 9% YoY. With office 0

Q1FY15

Q3FY16
Q4FY15

Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q2FY15

Q1FY16
absorption surpassing the level achieved in ’17&’18, it
is only strengthening the narrative set out in the
beginning of the year. Source: Anarock

Residential launches plunged in Q3CY19 Housing affordability has worsened over past 4 years

100,000 (No. of units) Loan to annual inc. ratio (RHS)

55,080
80,000 EMI to Inc Ratio (%)
80 4
60,000
70 3
40,000 60
2
20,000 50
40 1
0
30 0
Q1FY15
Q2FY15
Q3FY16
Q4FY15

Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18

Q1FY19
Q2FY19
Q3FY19
Q1FY16

Q4FY18

Mar-15

Mar-17

Mar-18

Mar-19
Mar-16
Sep-15

Sep-16

Sep-17

Sep-18
Dec-15

Dec-16

Dec-17

Dec-18
Jun-15

Jun-16

Jun-17

Jun-18
Source: Anarock Source: Anarock

Note: Data release pending, hence this is the latest available 20 DEC 2019 25
…Residential cycle slows down, commercial demand steady…
(kunal.lakhan@axiscap.in; 91 22 4325 1147) (utkarsh.punkhia@axiscap.in; 91 22 4325 1127 )

Office space: Demand surges in H1CY19

Bank credit to housing improving after demonetization dive

Mumbai NCR Bangalore Pune Chennai

Housing Credit (YoY%)
30 15 (msf)
25
20 10
15
10 5
5
0 0
Oct 07

Oct 08

Oct 09

Oct 10

Oct 11

Oct 12

Oct 13

Oct 14

Oct 15

Oct 16

Oct 17

Oct 18

Oct 19
CY14 CY15 CY16 CY17 CY18 H1 CY19

Source: Knight Frank

Source: CEIC

Steady growth in office rentals on paucity of grade A supply and

Office space: Supply continues to lag demand stable demand from tenants in key markets (Bangalore, Pune)

Avg. commercial propert rates (INR/sqft)

Mumbai NCR Bangalore Pune Chennai 300
Mumbai Delhi Kolkata
15 (msf) Chennai Bangalore Gurgaon
200
10
100
5
0

Sep-10

Sep-13
Sep-08

Sep-09

Sep-11

Sep-12

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19
0
CY14 CY15 CY16 CY17 CY18 H1 CY19

Source: CEIC, Colliers

Note: Data release pending, hence this is the latest available 20 DEC 2019 26
…Residential cycle slows down, commercial demand steady
(kunal.lakhan@axiscap.in; 91 22 4325 1147) (utkarsh.punkhia@axiscap.in; 91 22 4325 1127 )

Residential launches plunge in all major cities Sales decline after a steady quarter

Q3'19 QoQ (RHS) YoY (RHS) Q3'19 QoQ (RHS) YoY (RHS)
16,000 (Units) 80% 20,000 0%
(Units)
12,000 40% 16,000
12,000
8,000 0%
8,000
4,000 -40% 4,000
0 -80% 0 -40%
MMR

Pune
NCR

Chennai
Bengaluru

Kolkata
Hyderabad

MMR

Pune
NCR

Chennai
Bengaluru

Kolkata
Hyderabad
Inventory levels decrease marginally as sales exceed new launches Prices remain range-bound in most of the cities

Q3'19 QoQ (RHS) YoY (RHS) Q3'19 YoY (RHS)

250,000 20% 12,000 (Rs/sq. ft.) 1.2%
(Units)
200,000 10,000 1.0%
10%
8,000 0.8%
150,000
0% 6,000 0.6%
100,000 4,000 0.4%
50,000 -10%
2,000 0.2%
0 -20% 0 0.0%

MMR

Pune
NCR

Chennai
Bengaluru

Kolkata
MMR

Pune
NCR

Hyderabad
Chennai
Bengaluru

Kolkata
Hyderabad

Note: Data release pending, hence this is the latest available 20 DEC 2019 27
Telecom: Rjio’s market share gain moderates in September
(shashi.bhusan@axiscap.in; 91 22 4325 1104) (santosh.sinha@axiscap.in; 91 22 4325 1121)

Total reported mobile subscribers (mn) – RJio added 7.0 mn subs in Total active mobile subscribers (mn) – RJio added 0.5 mn MoM
Sep 2019 vs. 2.6 mn/2.4 mn lost by Vodafone Idea/Bharti active subs vs. 5.9 mn / 3.5 mn lost by Vodafone Idea/ Bharti
C o mp any (mn) S ep - 19 Aug- 19 M o M S ep - 18 Yo Y C o mp any (mn) S ep - 19 Aug- 19 MoM S ep - 18 Yo Y

Bharti (incl. TTSL) 326 328 (2.4) 368 (42.2) Bharti (incl. TTSL) 303 306 (3.5) 337 (34.6)

Vodafone Idea 372 375 (2.6) 435 (62.5) Vodafone Idea 302 308 (5.9) 403 (100.3)

RJio 355 348 7.0 252 103.0 RJio 290 289 0.5 208 82.2

Others 120 120 0.7 114 6.2 Others 66 66 (0.4) 65 0.3

T o tal 1, 174 1, 171 2. 8 1, 169 4.5 T o tal 961 970 (9. 3) 1, 013 (52. 4 )

Active mobile subscriber share (%) – Rjio’s active SMS was up

34 bps MoM at 29.8% at the end of Sep 2019
Highlights
Bharti Vodafone Idea RJio Others
♦ Rjio maintained its active subscriber market share at
100% 7% 6% 7% 7% 7% 7% 7% 30.2% (+34 bps MoM) adding 0.5 mn active
80% 20% 23% 25% 28% 29% 30% 30%
subscribers in September

60% ♦ Vodafone Idea lost another 5.9 mn subscribers with

40% 38% 36% 33% 32% 32% 31%
its market share down 31 bps MoM at 31.5%
40%
♦ Bharti (including Tata Teleservices) lost 3.5 mn active
20% 33% 33% 32% 32% 32%
subscribers with its market share stable at 31.5%
32% 32%
(-5 bps MoM)
0%
Sep-18 Dec-18 Mar-19 Jun-19 Jul-19 Aug-19 Sep-19

Source: TRAI Note: SMS = Subscriber Market Share; Active subscriber is calculated based on reported Visitor Location
Register (VLR), a key metric reflecting the number of active users on a mobile network 20 DEC 2019 28
Note: Data release pending, hence this is the latest available
Appendix

20 DEC 2019 29
Heat map – high frequency trends (chg YoY)…
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Decreasing trend and negative Decreasing trend but positive

Increasing trend but negative Increasing trend and positive
No growth NA - Not Available

M on t h Nov- 1 8 De c- 1 8 Jan - 1 9 Fe b - 1 9 M ar - 1 9 A p r - 1 9 M ay- 1 9 Ju n - 1 9 Ju l - 1 9 A u g- 1 9 Se p - 1 9 Oct - 1 9 Nov- 1 9

Ou t p u t
PMI mfg index (Value) 54.0 53.2 53.9 54.3 52.6 51.8 52.7 52.1 52.5 51.4 51.4 50.6 51.2
PMI serv index (Value) 53.7 53.2 52.2 52.5 52.0 51.0 50.2 49.6 53.8 52.4 48.7 49.2 52.7
IIP 0.2 2.5 1.6 0.2 2.7 3.2 4.5 1.3 4.9 (1.4) (4.3) (3.8) NA
IIP mfg (0.7) 2.9 1.3 (0.3) 3.1 2.5 4.4 0.3 4.8 (1.6) (4.0) (2.1) NA
IIP cons goods (1.4) 5.6 3.3 3.3 (0.6) 4.0 4.6 (0.8) 3.6 (2.4) (4.6) (8.7) NA
IIP cap goods (4.1) 4.2 (3.6) (9.3) (9.1) (1.4) (2.1) (6.9) (7.0) (21.4) (20.3) (21.9) NA
IIP Infra goods 4.8 9.0 6.4 1.9 5.1 (0.7) 3.0 (1.3) 2.9 (4.8) (6.8) (9.2) NA

Ext e r n al
Export (0.8) 0.3 3.7 2.4 11.0 0.6 3.9 (9.7) 2.2 (6.0) (6.6) (1.1) (0.3)
Import 5.5 (2.4) 0.0 (5.4) 1.4 4.5 4.3 (9.1) (10.4) (13.4) (13.8) (16.3) (12.7)
Trade bal (USD bn) (17.6) (13.1) (14.7) (9.6) (10.9) (15.3) (15.4) (15.3) (13.4) (13.5) (10.9) (11.0) (12.1)
FX reserves (USD bn) 394 393 398 399 412 419 422 428 430 429 434 443 451

P r i ce s
CPI 2.3 2.1 2.0 2.6 2.9 3.0 3.0 3.2 3.1 3.3 4.0 4.6 5.5
CPI core 5.7 5.6 5.2 5.4 5.1 4.6 4.1 4.1 4.5 4.2 4.2 3.4 3.7
WPI 4.5 3.5 2.8 2.9 3.1 3.2 2.8 2.0 1.2 1.2 0.3 0.2 0.6
WPI core 4.9 4.2 3.1 2.5 2.5 2.0 1.3 0.8 0.1 (0.4) (1.1) (1.7) (1.9)

Source: Axis Capital, Bloomberg, CMIE, DGCA, EA Industry, CEA, SIAM, MoPNG

Tentative signs of improvement

20 DEC 2019 30
…Heat map – high frequency trends (chg YoY)
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Decreasing trend and negative Decreasing trend but positive

Increasing trend but negative Increasing trend and positive
No growth NA - Not Available

M on t h Nov- 1 8 De c- 1 8 Jan - 1 9 Fe b - 1 9 M ar - 1 9 A p r - 1 9 M ay- 1 9 Ju n - 1 9 Ju l - 1 9 A u g- 1 9 Se p - 1 9 Oct - 1 9 Nov- 1 9

Con su m p t i on
Passenger cars (domestic) (0.9) (2.0) (2.6) (4.3) (6.9) (19.9) (26.0) (24.1) (36.0) (41.1) (33.4) (6.3) (10.8)
2-Wheelers (domestic) 7.1 (2.2) (5.2) (4.2) (17.3) (16.4) (6.7) (11.7) (16.8) (22.2) (22.1) (14.4) (14.3)
Domestic air pax traffic 11.0 12.9 9.1 5.6 0.1 (4.5) 3.0 6.2 3.0 3.9 1.2 3.9 11.2
Electricity generation 4.5 3.9 (1.0) (0.6) 1.2 5.2 5.4 8.6 5.6 0.4 (2.9) (12.9) (6.3)
Petrol consumption 8.8 10.0 13.3 8.0 7.2 7.7 11.4 10.9 8.9 9.0 6.3 8.9 9.2
Tourist arrivals 1.5 2.0 5.6 3.7 (4.8) 3.5 0.7 5.4 1.4 1.6 4.3 6.1 7.8
Rural Wages (Men&Women) 6.1 4.7 4.7 4.7 5.1 4.8 4.8 4.6 4.8 4.0 4.0 NA NA

I n ve st m e n t
LCVs (Domestic) 17.5 4.1 3.2 5.8 3.9 (1.1) (3.7) (9.8) (18.8) (28.2) (23.1) (8.7) (5.4)
MHCVs (Domestic) (10.9) (20.7) 0.7 (8.8) (4.7) (13.6) (19.7) (16.4) (37.5) (54.3) (62.1) (50.1) (32.8)
Cement production 8.8 11.6 11.0 8.0 15.7 2.3 2.8 (1.9) 7.7 (5.1) (2.0) (7.7) NA
Diesel consumption (4.5) 3.8 6.3 3.0 1.5 2.1 2.9 1.5 3.4 (1.2) (3.2) (7.3) 8.8
Steel production 5.3 10.1 5.5 4.9 11.5 13.3 13.3 10.8 8.1 5.1 (1.5) (1.6) NA
Govt Capex ^ 9.2 (3.4) 1.5 10.7 14.0 (35.0) (19.6) (26.0) 2.0 10.3 13.5 13.0 NA

Fi scal H e al t h
Total Revenue ^ 3.4 4.9 5.8 4.2 7.4 36.6 15.2 4.0 14.4 29.6 18.0 15.6 NA
Total Expenditure ^ 9.1 7.8 8.8 9.5 7.9 14.0 8.5 2.0 6.5 9.8 14.1 13.6 NA

Source: Axis Capital, Bloomberg, CMIE, DGCA, EA Industry, CEA, SIAM, MoPNG Note: ^FYTD growth rate

Air traffic, fuel consumption, tourist arrivals show growth while auto industry slowdown is showings signs of a bottom

20 DEC 2019 31
Demand indicators
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Lat e st Lat e st M oM Y oY FY 2 0 FY 1 9
I n di cat or s m on t h val u e ch g (% ) ch g (% ) Y t d (% ) Y oY (% )
A u t os (n os 0 0 0 )
Passenger Vehicles Nov-19 264 (7.5) (0.8) (18.0) 2.7
Passenger Cars Nov-19 160 (7.7) (10.8) (25.0) 2.0
Commercial Vehicles Nov-19 62 (7.3) (15.0) (22.1) 17.6
2-Wheelers Nov-19 1,411 (19.7) (14.3) (15.7) 4.9
Cem ent
Cement - Production (mn tonnes) Oct-19 26 4.3 (7.7) (0.6) 13.3
Cement price - Mumbai (Rs /50 kg) Nov-19 340 1.5 3.0 0.0 0.0
Cement prices - Delhi (Rs /50 kg) Nov-19 345 (1.4) 11.3 15.0 (4.8)
Cement price - Kolkata (Rs /50 kg) Nov-19 315 (4.5) (4.5) (8.7) (1.4)
P or t s (m n t on s)
Overall cargo volume Nov-19 58 1.3 (0.3) 0.3 2.9
Goods traffic on railways Nov-19 101 7.7 0.9 (1.3) 5.3
Te l e com (m n n os)
Cellular Subscribers Sep-19 1,174 0.2 0.4 1.03 (1.8)
Net cellular additions Sep-19 2.8 2.2 15.1 - -
Broadband Subscribers Sep-19 19 3.8 5.7 3.20 2.6
Source: SIAM, EA Industry, CMIE, IPA, TRAI; Note: NM = Not meaningful

Goods traffic on railways improves sharply in MoM terms; is it irregular Diwali impact?

20 DEC 2019 32
Supply indicators
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Lat e st Lat e st M oM Y oY FY 2 0 FY 1 9
I n di cat or s m on t h val u e ch g (% ) ch g (% ) Y t d (% ) Y oY (% )
B an ki n g
Deposits (Rs bn) Nov-19 129,588 (0.2) 9.7 3.1 10.0
Credit (Rs bn) Nov-19 98,609 0.2 8.0 0.9 13.3
Non-Food Credit (Rs bn) Nov-19 97,696 0.0 7.8 0.4 13.4
Food Credit (Rs bn) Nov-19 913 30.8 26.3 119.4 (0.9)
Credit Deposits Ratio (% ) * Nov-19 76 76 77 - 78
Money Supply - M1 (Rs bn) Nov-19 36,529 (0.4) 11.1 (1.9) 13.8
Money Supply - M2 (Rs bn) Nov-19 159,462 (0.0) 9.8 3.3 10.6
Foreign Currency Assets (USD bn) * Nov-19 419 410 368 - 384
M e t al s (m n t on s)
Steel Production Oct-19 9 4.7 (1.6) 6.7 5.1
Coal Production Oct-19 50 25.5 (17.6) (5.8) 7.4
Oi l & Gas
Diesel Consumption (000 tons) Nov-19 7,552 16.0 8.8 1.0 3.0
Petrol Consumption (000 tons) Nov-19 2,533 (0.3) 9.2 9.1 8.1
Kerosene Consumption (000 tons) Nov-19 188 10.6 (32.2) (25.8) (10.0)
I n t e r n at i on al Oi l & Gas P r i ce s
Oil - WTI ($/bbl) Nov-19 55 1.8 8.3 (8.3) (7.4)
Natural Gas - ($/mmbtu) Nov-19 2 (9.9) (46.6) (9.9) (2.8)
P owe r (b n kwh )
Electricity Generaion Nov-19 94 (5.4) (6.3) 0.3 3.6
Source: Bloomberg, RBI, EA Industry, CEA, MoPNG Note: * Absolute figures in that period

Oil prices have moved up 8% YoY

20 DEC 2019 33
Eco indicators
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Lat e st Lat e st M oM Y oY FY 2 0 FY 1 9 Lat e st Lat e st M oM Y oY FY 2 0 FY 1 9

I n di cat or s m on t h val u e ch g (% ) ch g (% ) Y t d (% ) Y oY (% ) I n di cat or s m on t h val u e ch g (% ) ch g (% ) Y t d (% ) Y oY (% )
I I P (% ) ^ Oct-19 128 3 .7 (3 .8 ) 0 .5 3 .8 C u r r e n cy
Manufacturing ^ Oct-19 131 3.7 (2.1) 0.6 3.8 INR vs USD Nov-19 71.7 1.1 3.1 3.7 6.1
Mining ^ Oct-19 100 15.2 (8.0) (0.4) 2.8 I n t e r e st Rat e s (% ) *
Electricity ^ Oct-19 146 (8.1) (12.2) 1.6 5.2 Repo Rate Nov-19 5.15 5.15 6.50 - 6.25
Capital Goods ^ Oct-19 89 (2.7) (21.9) (12.0) 2.7 10 Year Nov-19 6.47 6.45 7.61 - 7.35
Cons Goods ^ Oct-19 129 (4.3) (8.7) (0.7) 4.6 I n ve st m e n t s (U SD m ) *
WP I (% ) ^ Nov-19 122 0 .1 0 .6 1 .4 4 .3 FII [Equity] Nov-19 3,150 - - 6,527 122
Mfg Products ^ Nov-19 118 (0.1) (0.8) 0.3 3.7 MF [Equity] Nov-19 (681) - - 6,919 12,570
All Primary ^ Nov-19 147 0.9 7.7 6.4 2.7 DII (excl MF) [Equity] Nov-19 (439) - - 958 (2,311)
Fuel ^ Nov-19 101 (0.8) (7.3) (3.4) 11.5 FDI Oct-19 3,027 - - 30,268 44,743
C P I Re t ai l (% ) ^ Nov-19 149 1 .0 5 .5 3 .9 3 .4 Fi scal B al an ce (I NR b n ) *
For e i gn Tr ade (U SD b n ) Tax revenue Oct-19 761 - - 6,835 13,170
Exports Nov-19 26 (1.5) (0.3) (2.2) 8.4 Total expenditure Oct-19 1,663 - - 16,549 23,114
Imports Nov-19 38 1.9 (12.7) (8.6) 10.1 Fiscal deficit Oct-19 689 - - 7,204 6,454
Trade Balance * Nov-19 (12) (11) (18) (107) (180)
Forex Reserves * Nov-19 451 443 394 - 412

Source: Bloomberg, SEBI Note: * Abs. figures in that period; ^ FY20 (YTD) are avg;
NM = Not meaningful

USD/INR has depreciated 3.7% so far this fiscal year

20 DEC 2019 34
GDP growth estimates
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

J un- 17 S ep - 17 Dec - 17 M ar- 18 J un- 18 S ep - 18 Dec - 18 M ar- 19 J un- 19 S ep - 19 F Y18 F Y19 F Y20E F Y21F
GDP
Econ om i c act i vi t y (Y oY % )
Agriculture 4.2 4.5 4.6 6.5 5.1 4.9 2.8 (0.1) 2.0 2.1 5.0 2.9 3.0 3.4
Industry* 0.8 6.9 8.0 8.1 9.8 6.7 7.0 4.2 2.7 0.5 5.9 6.9 1.9 4.8
Services 9.4 6.8 8.0 8.2 7.1 7.3 7.2 8.4 6.9 6.8 8.1 7.5 6.9 7.1
Re al GV A 5 .9 6 .6 7 .3 7 .9 7 .7 6 .9 6 .3 5 .7 4 .9 4 .3 6 .9 6 .6 4 .8 5 .9
Exp e n di t u r e (Y oY % )
PFCE 10.1 6.0 5.0 8.8 7.3 9.8 8.1 7.2 3.1 5.1 7.4 8.1 4.7 5.7
GFCE 21.9 7.6 10.8 21.1 6.6 10.9 6.5 13.1 8.8 15.6 15.0 9.2 8.0 8.0
GFCF 3.9 9.3 12.2 11.8 13.3 11.8 11.7 3.6 4.0 1.0 9.3 10.0 3.0 7.0
Exports 4.9 5.8 5.3 2.8 10.2 12.7 16.7 10.6 5.7 (0.4) 4.7 12.5 4.0 5.0
Imports 23.9 15.0 15.8 16.2 11.0 22.9 14.5 13.3 4.2 (6.9) 17.6 15.4 2.0 6.0
Re al GDP (Y oY % ) 6 .0 6 .8 7 .7 8 .1 8 .0 7 .0 6 .6 5 .8 5 .0 4 .5 7 .2 6 .8 5 .0 6 .0

I n fl at i on
CPI (Avg YoY% ) 2.2 3.0 4.6 4.6 4.8 3.9 2.6 2.5 3.1 3.5 3.6 3.4 4.3 4.4
Core CPI (Avg YoY% ) 4.1 4.4 4.9 5.2 6.3 6.0 5.9 5.2 4.3 4.3 4.7 5.8 4.0 3.8

Cu r r e n cy
INR vs USD (Avg) 64.5 64.3 64.7 64.3 67.1 70.1 72.1 70.5 69.6 70.3 64.5 69.9 70.0 71.4

Source: CMIE, Bloomberg, Axis Capital estimates *includes construction

GDP growth update: We revise downwards FY20 and FY21 GDP growth to 5% and 6% respectively. The modest
recovery in FY21 will be led by agriculture and manufacturing on the supply side, most of which will be
normalization of production albeit at a lower than trend pace. This will be supported by trickle down impact of
monetary policy and small terms of trade gain for agriculture.

20 DEC 2019 35
BoP estimates
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

(US D b n) Dec - 18 M ar- 18 J un- 18 S ep - 18 Dec - 19 M ar- 19 J un- 19 F Y17 F Y18 F Y19 F Y20E F Y21F
Current Account (14) (13) (16) (19) (18) (5) (14) (14) (49) (57) (36) (43)
% of GDP (2.1) (1.8) (2.3) (2.9) (2.7) (0.7) (2.0) (0.6) (1.8) (2.1) (1.2) (1.4)
Goods trade balance (44) (42) (46) (50) (49) (35) (46) (112) (160) (180) (158) (164)
- Exports 78 82 83 83 83 87 83 280 309 337 336 359
Of which oil 10 11 12 12 13 10 11 32 37 47 44 47
- Imports 122 124 129 133 132 123 129 393 469 518 494 523
Of which oil 29 33 35 35 38 32 35 87 109 141 129 133
Of which gold 10 7 8 9 7 8 11 28 34 33 30 38
Services 21 20 19 20 22 21 20 68 78 82 81 82
Transfers 16 16 17 19 17 16 18 56 62 70 71 72
Income (6) (8) (6) (9) (8) (7) (6) (26) (29) (29) (29) (33)
Capital Account 23 25 5 17 14 19 28 36 91 54 76 59
% of GDP 3.4 3.5 0.7 2.5 2.1 2.7 4.0 1.6 3.4 2.0 2.6 1.9
- FDI 4 6 10 7 7 6 14 36 30 31 35 31
- Portfolio Investment 5 2 (8) 0 (2) 9 5 8 22 (1) 12 4
- Others 13 16 3 9 9 3 9 (7) 39 24 29 24
Errors & Omissions 1 1 (0) 1 (0) (0) 0 (0) 1 (0) 0 0
Overall balance 9 13 (11) (2) (4) 15 14 22 44 (3) 40 16

Source: CEIC RBI, Axis Capital estimates

FY21 BoP balance outlook remains benign given weak domestic demand but the key risk is fiscal management
and its impact on capital account outlook

20 DEC 2019 36
Fiscal position
(prithviraj.srinivas@axiscap.in; 91 22 4325 1108)

Central government fiscal position State governments fiscal position

% of GDP FY 1 8 FY 1 9 P r ov. FY 2 0 B E FY 2 0 (A xi scap ) % of GDP FY 1 8 FY 1 9 (p r ov) FY 2 0 B E FY B E (A xi scap )

Tot al r e ve n u e s 9 .2 % 8 .8 % 9 .9 % 9 .4 % Tot al r e ve n u e s 1 3 .8 % 1 5 .4 % 1 5 .3 % 1 4 .8 %

Tax revenue 7.4% 6.9% 7.8% 6.8% - Tax receipts 10.1% 10.7% 10.7% 10.2%

Non tax revenue 1.1% 1.3% 1.5% 1.8% - Non-tax receipts 3.5% 4.4% 4.3% 4.3%

Non-debt capital receipts 0.7% 0.5% 0.6% 0.8% - Non-debt capital receipts 0.2% 0.3% 0.3% 0.3%

Tot al e xp e n di t u r e 1 2 .8 % 1 2 .2 % 1 3 .2 % 1 3 .4 % Tot al e xp e n di t u r e 1 6 .2 % 1 8 .2 % 1 7 .8 % 1 7 .8 %

Revenue expenditure 11.2% 10.6% 11.6% 11.8% - Revenue expenditure 13.7% 15.1% 14.9% 14.9%

- o/w interest payment 3.2% 3.1% 3.1% 3.2% - o/w interest payment 1.7% 1.7% 1.7% 1.7%

Capital expenditure 1.6% 1.6% 1.6% 1.6% - Capital expenditure 2.5% 3.1% 2.9% 2.9%

Fi scal de fi ci t - 3 .5 % - 3 .4 % - 3 .3 % - 4 .0 % Fi scal de fi ci t - 2 .4 % - 2 .8 % - 2 .5 % - 3 .0 %

Revenue deficit -2.6% -2.3% -2.3% -3.2% Revenue deficit -0.1% 0.0% 0.1% -0.4%

Primary deficit -0.4% -0.3% -0.2% -0.8% Primary deficit -0.7% -1.1% -0.8% -1.3%
Source: Union budget documents, CEIC RBI, Axis Capital Fiscal deficit (ex. UDAY) -2.5%
Primary deficit (ex. UDAY) -0.7%
% of GDP FY 1 8 FY 1 9 (P r ov) FY 2 0 B E FY B E (A xi scap )
General govt. fiscal deficit -5.9% -6.2% -5.8% -7.0%
General govt. fiscal deficit (ex. UDAY)
-6.0% -6.2% -5.8% -7.0%

Source: CEIC, CGA, RBI, Axis Capital, State Budget Documents

Due to corporate tax giveaway and weak growth, general government fiscal deficit likely to be near 7%. If
crowding out is to be avoided then government has no choice but to issue USD sovereigns or sovereign
masala bonds.

20 DEC 2019 37
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BUY More than 15%

ADD Between 5% to 15%

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