Highlights of The May'21 Edition: Sectors in Order of Their Premium/discount To Their Historical Averages

Retail
Technology
Infrastructure
Oil and Gas
Consumer
Financials
Cement
Healthcare
Capital Goods
Automobiles
Metals
Utilities
*Sectors in order of their Media
premium/discount to their Telecom
historical averages
BEST PERFORMERS MoM (%) WORST PERFORMERS MoM (%) Highlights of the May’21 edition
UPL 34
IOC 20 -1 Tata Consumer  Nifty back in green after declining in
SBI 20
Shree Cement
Apr’21
-1
Asian Paints 17
BPCL 12
-1 JSW Steel
 Top performers: PSU Banks, Media,
Coal India 11 Utilities, and Capital Goods
Eicher Motors 11 -1 HUL
ICICI Bank 10  India outperforms global markets
0 Bharti Airtel
Maruti
Wipro
10
9
 FII inflows back after outflows in April
0 Britannia
Research & Quant Team (Deven@MotilalOswal.com) June 2021

Contents
 Strategy: Nifty closes at record high in May’21
About the product
 Valuation deep-dive for the month: Technology As the tagline suggests, BULLS & BEARS is a handbook
 Indian equities: Nifty, sectoral performance, and key valuation metrics on valuations in India. Every month, it will cover:
 Valuations of Indian market vis-à-vis global markets
 Global equities: Performance and valuation snapshot
 Current valuation of companies in various sectors
 Valuations: Nifty/Midcap companies  Sectors that are currently valued at
 Sector highlights: Overview and sector valuations premium/discount to their historical long-period
averages
 AUTO
NOTES:
 BANKS/FINANCIALS
 CAPITAL GOODS  Prices as on 31 May’21
 CEMENT  BULL icon:
 CONSUMER Sectors trading at a premium to their historical
 HEALTHCARE average
 INFRASTRUCTURE  BEAR icon:
 MEDIA Sectors trading at a discount to their historical
 METALS Motilal Oswal values your support in the average
 OIL AND GAS Asiamoney Brokers Poll 2021 for India
Research, Sales, Corporate Access and
 Valuations are on a 12-month forward basis unless
 RETAIL Trading team. We request your ballot. otherwise mentioned
 TECHNOLOGY  Sector valuations are based on MOSL coverage
 TELECOM companies
 UTILITIES  Global equities data sourced from Bloomberg; Nifty
valuations based on MOSL estimates
Investors are advised to refer to important disclosures made at the end of this report.
BULLS & BEARS | June 2021 2

Strategy: Nifty closes at record high in May’21; India outperforms global markets
 Nifty resumes upward journey in May’21: After consolidating in Apr’21 (down 0.4% MoM), the Nifty headed north in May’21 (up 6.5% MoM)
to close at an all-time high of 15,583. The Nifty is up 11.5% thus far in CY21. The rally was propelled by strong FII inflows in the second half of
the month and steady decline in daily COVID-19 cases in India as well as supported by strength in other Asian stock markets. FII inflows were
back and stood at USD0.7b. DIIs saw inflows for the third consecutive month at USD0.3b. Over the last 12 months, midcaps are up 94% v/s a
rise of 63% for the Nifty. Over the last five years, midcaps have outperformed by 3%. The Nifty Midcap-100 P/E ratio now trades in line with
largecaps.
 Real GVA/GDP up 3.7%/1.6% YoY in 4QFY21; expect real GVA/GDP to grow 15–20% YoY in 1QFY22: Real GVA growth came in at 3.7% YoY in
4QFY21 and declined 6.2% YoY in FY21, against growth of 4.1% YoY in FY20. Real GDP came in at 1.6% YoY in 4QFY21 and fell 7.3% YoY in FY21
v/s growth of 4% YoY in FY20. Surprisingly, nominal GDP grew 8.7% YoY in 4QFY21 (marginally lower than 8.8% YoY in 4QFY20), leading to 3%
YoY decline in FY21 (v/s 7.8% YoY growth in FY20).
 Earnings season broadly in-line thus far: As of 2nd June’21, 165/46 MOFSL Universe/Nifty companies have announced their 4QFY21 results.
Sales/EBITDA/PBT/PAT for the 46 Nifty companies has grown 18%/40%/107%/88% YoY (v/s our estimate of 20%/33%/98%/76% YoY). 16 Nifty
companies have beaten our PAT expectations, while 15 have missed. For the MOFSL Universe, sales/EBITDA/PBT/PAT growth stands at
18%/44%/117%/87% YoY (v/s our expectation of 20%/39%/108%/82% YoY).
 India the best performing market in May’21: Barring Taiwan (-3% MoM) and Indonesia (-1%), May’21 saw all the key global markets, such as
India (+7%), Brazil (+6%), China (+5%), Russia (+2%), MSCI EM (+2%), Korea (+2%), the UK (+1%), and the US (+1%), end higher in local currency
terms. Over the last 12 months, MSCI India (+60%) has outperformed MSCI EM (+48%). Over the last 10 years, MSCI India has outperformed
MSCI EM by 127%. In P/E terms, MSCI India is trading at an 87% premium to MSCI EM, above the historical average of 57%.
 PSU Banks, Media, Utilities, and Capital Goods the top performers: Among the sectors, PSU Banks (+18%), Media (+14%), Utilities (+14%),
Capital Goods (+11%), and Oil & Gas (+10%) were the top performers in May’21. UPL (+34%), IOCL (+20%), SBI (+20%), Asian Paints (+17%), and
BPCL (+12%) were the top performers. Tata Consumer (-1%), Shree Cement (-1%), JSW Steel (-1%), HUL (-1%), Bharti Airtel (-0%), and Britannia
(-0%) were the only laggards. In this edition, we dive deep into the valuation metrics of the Technology sector.
 Demand recovery and cost optimization key to FY22: The second COVID wave has now started to recede, with the number of active COVID
cases down >50% since 9th May to sub-18 lakhs now. There is greater visibility on vaccine supply now v/s April’21 and May’21. The expeditious
containment of active COVID-19 cases and accelerated pace of vaccinations would boost and provide confidence in economic growth recovery
in FY22E. As states ease restrictions gradually in Jun’21, we expect the demand environment to get better. However, after the recent run-up,
the Nifty now trades at rich valuations of 17.9x FY23 EPS. Thus, any misses in the FY22E earnings delivery may act as a dampener.
 Top Ideas | Largecaps: ICICI Bank, SBI, UltraTech Cement, Divi’s Labs, Hindalco, SBI Cards, Infosys, HCL Tech, M&M, HUVR, and Titan
Midcaps: Gujarat Gas, Orient Electric, Varun Beverages, SAIL, L&T Technology, Chola. Inv., Gland Pharma, Endurance, Emami, and Federal Bank

Valuation deep-dive for the month: Technology
 Companies across the industry are seeing a big change, with Technology at Trend in Technology P/E – 1-year forward
the center of large enterprises. It has shifted from being a cost on the P&L Technology P/E (x) 5 Yr Avg (x)
36.0
to an investment driving better growth and connect. Clients undergoing 10 Yr Avg (x) 15 Yr Avg (x)
digital transformation is a good medium-term trend driving growth for the 26.0 25.5
IT industry. 18.5 17.4
16.0
 4QFY21 marked the third quarter of robust QoQ revenue growth of +3.7% 17.3
QoQ USD (largely in line with our estimates) for our large-cap IT Services 6.0
Coverage Universe – despite a high base (4.9% QoQ USD growth in 3Q).
Nov-08
Nov-13
Nov-18
Aug-07
May-06
Feb-10
Aug-12
Aug-17
May-11
Feb-15
May-16
Feb-20
May-21
 Most companies have reported strong deal wins (while moderating slightly
from the higher base of 3Q), with improved visibility on growth going Technology sector premium/discount to Nifty
forward. TCS has reported the highest ever deal wins of USD9.2b, while
Technology Relative to Nifty PB (%) 15 Yr Avg (x)
Infosys’ deals wins have moderated to USD2.1b. Management 230.0
commentaries have also highlighted a strong tech spending environment, 137.3
160.0
with a high focus on cloud migration.
81.7
 The cumulative EBIT margin for the Top 5 IT Services companies has 90.0
declined 120bps QoQ – weighed by wage hikes, employee additions, and
20.0
some moderation in utilization. However, on a YoY basis, margins are up
Nov-08
Nov-13
Nov-18
May-06
Aug-07
May-11
Aug-12
May-16
Feb-10
Aug-17
May-21
Feb-15
Feb-20
180bps on account of lower travel expenses, increased offshoring, and
relatively higher utilization.
Strong growth in 4QFY21, indicating increased digital adoption
 Total headcount additions for 4Q stood at 45k – among the highest
increases seen in recent history. This further assures sustained growth Tier-1 (YoY % CC)
momentum in our IT Services Universe. 10.6 10.1

8.4
5.5
 Despite the sector trading at a 47% premium to its 10-year average 4.8
1.0
multiple, we remain positive as we expect the sector to sustain double- -2.7 -1.6
digit topline growth in FY22. We continue with our bottom-up stance for
the sectoral picks. Among the Tier I players, we like INFO and HCLT on the 1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
expectation of industry-leading growth. From the Tier II pack, we prefer
LTTS, CYL, and ZENT given their attractive and industry-relevant portfolios.
Indian equities: Nifty up 6.5% MoM in May’21
 After consolidating in Apr’21 (down 0.4% MoM), the Nifty MoM change (%) — up in May’21 after declining in Apr’21
Nifty headed north in May’21 (up 6.5% MoM) to close
14.7
Nifty MoM Change (%)
11.4
at an all-time high of 15,583. The Nifty is up 11.5% in
7.8
7.7
7.5
7.5
CY21 YTD.
6.6
6.2
6.0
6.5
4.7
4.7
4.1
3.5
3.5
2.9
2.8
 Among the sectors, PSU Banks (+18%), Media (+14%),
1.5
1.5
1.1
1.1
0.9
Utilities (+14%), Capital Goods (+11%), and Oil & Gas
0.0
-0.1
-0.2
-0.3
-0.4
-0.4
(+10%) were the top performers in May’21.
-0.9
-1.1
-1.2
-1.7
-2.5
-2.8
-3.6
-4.9
-5.0
 Smallcaps outperformed largecaps /midcaps by 1.7%
-5.7
-6.4
-6.4
in May’21.
Mar-20 -15.0
 FII inflows were back at USD0.7b. DIIs saw inflows for
Jul-18
Jul-19
Jul-20
Mar-18
May-18
Sep-18
Jan-19
Mar-19
May-19
Sep-19
May-20
Sep-20
Mar-21
May-21
Jan-18
Nov-18
Nov-19
Jan-20
Nov-20
Jan-21
the third consecutive month at USD0.3b.
Institutional flows (USD b) — FIIs inflows seen after outflows in Sectoral MoM change (%) — PSU Banks, Media, Utilities, Capital Goods,
Apr’21; DIIs post third consecutive month of inflows and Oil & Gas are the top performers
FIIs (USDb) DIIs (USDb) 18 MoM Chg (%)
9.6
14 14
7.5
7.3
11 10
6.1
9 9
3.0
8
2.5
2.5
2.4
2.3
2.0
7
1.7
1.5
7
1.4
1.2
7 7 6
0.01
6
0.7
0.7
1.5
0.4
0.3
0.3
0.3
6 5 4
0.0
-0.1
-0.8
-1.5
-1.3
-1.5
0
-1.6
-2.2
-2.4
-5.1
Utilities
Oil & Gas
Infra
Finance
Healthcare
Telecom
Bank PSU
Capital Goods
Metal
Media
Auto
Real Estate
Smallcap 100
Midcap 100
Nifty-50
Bank PVT
Technology
Consumer
-6.6
-8.4
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May
2020 2021

Indian equities: Positive breadth in May’21; 44 Nifty constituents end higher
 Best and worst Nifty performers in May’21: UPL (+34%), IOCL (+20%), SBI (+20%), Asian Paints (+17%), and BPCL (+12%) were the top performers.
Tata Consumer (-1%), Shree Cement (-1%), JSW Steel (-1%), HUL (-1%), Bharti Airtel (-0%), and Britannia (-0%) were the only laggards.
 Best and worst Nifty performers in CY21 YTD: JSW Steel (+83%), Tata Steel (+75%), UPL (+75%), Tata Motors (+73%), and Hindalco (+64%) were the
top performers. Kotak Mahindra Bank (-9%), Maruti Suzuki (-7%), Nestlé (-4%), Britannia (-4%), and Hero MotoCorp (-3%) were the key laggards.
Best and worst Nifty performers (MoM) in May’21 (%) – positive breadth; 88% Nifty stocks trade higher
34
20 20
17
12 11 11 10 10
9 9 9 9 8 8 8 8 8 8 7 7
7 7 7 7 7 7 6 6 5 5 5 5 5 5
4 4 3 3 3
3 3 2 2 0
0 0 -1 -1 -1 -1
SBI
Maruti
Eicher Motors
Tata Motors
Bajaj Finserv
JSW Steel
UPL
Tata Steel
HDFC Bank
M&M
Nifty
HDFC
Cipla
HUL
IOC
BPCL
ICICI Bank
Nestle
Hindalco
Wipro
L&T
ITC
Hero Moto
Adani Ports
Axis Bank
ONGC
TCS
HDFC Life
Bharti Airtel
Kotak Mah.Bk
Bajaj Auto
Reliance Ind.
Bajaj Fin.
Britannia
Shree Cement
Tata Consumer
Asian Paints
Coal India
NTPC
UltraTech
Tech Mah.
HCL Tech
SBI Life Ins
Infosys
Dr Reddy's
Sun Pharma
IndusInd Bk
Titan Co
Grasim Ind
Power Grid
Divi's Lab.
Best and worst Nifty performers (YoY) in CY21 YTD (%) – 41 constituents trade higher
83
75 75 73
64 59 59
54
40
32 27
24 24 22 22 21 20 19
16 15 14 13 13 13 12 11
11 11 10 9 9 9 8 8 6 6 6 5 5 4 2 2
0 0 -1 -2 -3 -4 -4 -7 -9
SBI
IOC
Bajaj Finserv
Cipla
M&M
Nifty
JSW Steel
UPL
Tata Motors
Eicher Motors
Maruti
Bharti Airtel
Wipro
BPCL
ONGC
Axis Bank
L&T
SBI Life Ins
HDFC Bank
HDFC Life
HUL
Nestle
Kotak Mah.Bk
Adani Ports
Sun Pharma
Bajaj Fin.
Tech Mah.
ITC
HCL Tech
HDFC
Hero Moto
Britannia
Tata Steel
UltraTech
ICICI Bank
Bajaj Auto
NTPC
Infosys
TCS
Coal India
Reliance Ind.
Power Grid
Shree Cement
Tata Consumer
Asian Paints
Dr Reddy's
Titan Co
Hindalco
Grasim Ind
IndusInd Bk
Divi's Lab.

Indian equities: Midcaps outperform largecaps in last 12 months
 In the last 12 months, midcaps have risen 94% v/s a rise of 63% for the Nifty. In the last five years, midcaps have outperformed by 3%.
 The Nifty Midcap-100 P/E ratio now trades in line with largecaps.
Midcaps outperform largecaps in last 12 months Performance of midcaps v/s largecaps in last five years
Nifty Rebased Nifty Midcap 100 Rebased Nifty Rebased Nifty Midcap 100 Rebased
205 225
194 5 Year CAGR | Nifty: 13.8% | Midcap: 14.2%
175 190
194
163 191
145 155
115 120
85 85
May-16
May-17
May-18
May-19
May-20
May-21
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Jul-20
May-20
Aug-20
Oct-20
Dec-20
Sep-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-20
Nov-20
12-month forward P/E (x) Midcaps trade at 0% discount to largecaps

Midcap PE (x) Nifty PE (x) Midcap Vs Nifty PE Prem/(Disc) (%)
31 63
Nifty Avg: 21.0x
Midcap Avg: 19.3x
26 36
21 20.3 9
20.2 Average: -7% 0
16 -18
11 -45
May-16
May-17
May-18
May-19
May-20
May-21
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
May-16
May-17
May-18
May-19
May-20
May-21
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Source: MOFSL, Bloomberg for midcap valuation

Indian equities: Nifty valuations above historic averages
 The Nifty trades at a 12-month forward P/E of 20.3x, an 8% premium to its LPA. P/B, at 3.0x, is at a 19% premium to its historical average.
 Nifty’s 12-month trailing P/E, at 27.1x, is at a 34% premium to its LPA of 20.2x. At 3.4x, Nifty’s 12-month trailing P/B is above its historical average of
2.8x.
12-month forward Nifty P/E (x) 12-month forward Nifty P/B (x)
28 3.3
3.0
24 3.0
10 Year Avg: 18.8x

20.3 10 Year Avg: 2.6x
20 2.6
16 2.3
12 1.9
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
May-21
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
May-21
Trailing Nifty P/E (x) Trailing Nifty P/B (x)
31 3.6
3.4
27
27.1
3.2
24 10 Year Avg: 2.8x
10 Year Avg: 20.2x 2.8
20
2.4
17
13 2.0
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
May-21
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
May-21

Indian equities: Market capitalization-to-GDP ratio rebounds
 India’s Mcap-to-GDP ratio has been volatile, moving to 56% (FY20 GDP) in Mar’20 from 79% in FY19, and has rebounded to 99% currently (FY22E
GDP) – above the long-term average of 79%.
 The Nifty is trading at a 12-month forward RoE of 15%, above its long-term average.
India’s Mcap-to-GDP ratio (%) trading above long-term average
105
103 95 99
Average of 79% for the period
83 88 81 83
82 79 79
71 69
64 66
55 56
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21E
FY22E
12-month forward Nifty RoE (%) Trend in Nifty RoE (%)
17.3 16.5 17.0
16.2 16.1
15.6 15.0 15.3 15.0
14.9 Average of 14.5% 14.9
10 Year Avg: 13.8%
13.9
13.4 13.7
12.8 12.6
12.2
11.7 11.9
10.5
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
May-21
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E

Global equities: India the best performing market in May’21
 Barring Taiwan (-3% MoM) and Indonesia (-1%), May’21 saw all the key global markets – such as India (+7%), Brazil (+6%), China (+5%), Russia
(+2%), MSCI EM (+2%), Korea (+2%), the UK (+1%), and the US (+1%) – end higher in local currency terms.
 Indian equities are trading at 20.8x FY22E earnings. The US is the only market trading at a premium, while other key markets continue to trade at a
discount to India.
India (Nifty) v/s other markets

Prem / Disc to India MoM Chg (%)
` CY21YTD Chg (%) PE (x) PB (x) RoE (%)
PE (%)
India 7
Index Mkt Cap Local CY20 / CY21 / CY20 / CY21 / CY20 / CY21 / CY20 / CY21 /
In USD Brazil 6
Value (USD T) Currency FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22
India 15,583 3.0 11 12 28.9 20.8 3.4 3.1 11.9 14.9 China 5
US 4,204 48.2 12 12 34.1 22.5 18 8 4.6 4.3 10.6 20.3 Russia 2
Japan 28,860 6.8 5 -1 33.0 20.0 14 -4 2.1 1.9 7.0 9.5
MSCI EM 2
Indonesia 5,947 0.5 -1 -2 38.5 18.1 33 -13 1.6 2.1 3.7 14.4
Korea 2
Taiwan 17,068 2.1 16 18 22.6 15.4 -22 -26 2.4 2.4 10.8 17.8
MSCI EM 1,376 24.7 7 7 23.4 14.9 -19 -28 2.0 1.9 9.3 11.9 UK 1
UK 7,023 3.7 9 13 101.2 14.0 250 -33 1.9 1.8 2.9 8.4 US 1
China 3,615 12.0 4 7 18.5 13.2 -36 -36 1.7 1.5 9.3 10.5 Japan 0
Korea 3,204 2.3 12 10 28.0 12.7 -3 -39 1.2 1.2 4.7 10.0 Indonesia -1
Brazil 1,26,216 1.0 6 5 31.3 10.7 8 -49 2.4 2.0 8.4 19.5
Taiwan -3
Russia 5,708 0.7 6 8 21.4 6.8 -26 -68 1.0 0.8 5.0 19.6
Source: Bloomberg/MOFSL

Global equities: MSCI India outperforms MSCI EM over the last 12 months
 For the last 12 months, MSCI India (+60%) has outperformed MSCI EM (+48%). For the last 10 years, MSCI India has outperformed MSCI EM by 127%.
 In P/E terms, MSCI India is trading at an 87% premium to MSCI EM, above its historical average of 57%.
MSCI EM v/s MSCI India performance over last 12 months MSCI India outperforms MSCI EM by 127% over last 10 years
MSCI India Rebased MSCI EM Rebased MSCI India Rebased MSCI EM Rebased
170 300
160 10 Year CAGR: 5 Year CAGR:
250 MSCI India: 9.4% MSCI India: 12.5%
150 245
MSCI EM: 1.7% MSCI EM: 11.3%
148 200
130
150
110 118
100
90 50
May-11
May-12
Nov-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
May-21
Nov-11
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Jul-20
May-20
Aug-20
Sep-20
Oct-20
Feb-21
Mar-21
Apr-21
May-21
Jun-20
Nov-20
Dec-20
Jan-21
MSCI India v/s MSCI EM trailing P/E (x) MSCI India v/s MSCI EM P/E premium (%)
MSCI India PE (x) MSCI EM PE (x) MSCI India Vs EM PE Premium (%)

45.0 135
35.0 105
32.3
Average of 57% 87
25.0 MSCI India Avg: 21.9x
75
15.0
17.2
45
MSCI EM Avg: 14x
5.0 15
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
Nov-18
May-19
Nov-19
May-20
May-21
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-20
May-11
May-12
May-13
May-14
May-15
May-16
Nov-16
May-17
May-18
May-19
May-20
May-21
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-17
Nov-18
Nov-19
Nov-20
Source: Bloomberg

Global equities: India’s share in world Mcap above historical average
 India’s share in world Mcap stands at 2.6% – above its historical average of 2.4%.
 Over the last 12 months, the world Mcap increased 47.7% (USD37.2t), while India Mcap rose 82.2%.
Trend in India's contribution to world Mcap (%)

India's Contribution to World Mcap (%)
3.1
2.6
2.7
Average: 2.4%
2.3
1.9
1.6
1.5
Jul-13
Oct-18
May-11
Apr-12
Sep-12
Feb-13
Jan-14
Jun-14
Apr-15
Sep-15
Mar-16
Aug-16
Jan-17
Jun-17
May-18
Mar-19
Aug-19
Jan-20
Jun-20
Dec-20
May-21
Nov-11
Nov-14
Nov-17
Mcap change over last 12 months (%)
3.0 2.3 2.1 12.0 1.0 48.2 3.7 0.5 0.7 6.8
82 81 Mkt cap chg 12M (%) Curr Mcap (USD Tr)
71
61
58
50
42
32
24
17
India Korea Taiwan China Brazil US UK Indonesia Russia Japan
Source: Bloomberg

~60% of Nifty constituents trade at premium to their historical averages
 Companies trading at a significant premium to their historical averages: Asian Paints (+77%), Wipro (+75%), HCL Technologies (+74%), BPCL (+71%),
and Divi’s Labs. (+60%)
 Companies trading at a significant discount to their historical averages: Tata Steel (-70%), ONGC (-56%), Coal India (-54%), NTPC (-45%), and JSW
Steel (-40%)
Valuations of Nifty constituents
PE (x) Relative to Nifty P/E (%) PB (x) Relative to Nifty P/B (%)
Name Sector Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
Bajaj Auto Auto 20.2 17.0 19 0 -9 4.7 4.7 0 55 85
Eicher Motors Auto 28.1 28.2 0 39 50 5.3 6.7 -21 74 164
Hero MotoCorp Auto 16.3 17.8 -8 -19 -5 3.6 5.7 -36 19 123
Mahindra & Mahindra Auto 20.4 18.2 12 1 -3 2.4 2.7 -10 -20 7
Maruti Suzuki Auto 28.5 24.5 16 40 31 3.7 3.5 5 21 38
Tata Motors Auto NA 14.7 NA NA -22 1.8 1.7 9 -39 -34
Axis Bank Banks - Private 13.9 37.3 -63 -32 98 1.9 1.9 1 -37 -25
HDFC Bank Banks - Private 21.6 20.5 6 7 9 3.5 3.4 2 14 33
ICICI Bank Banks - Private 20.5 20.2 2 1 7 2.7 1.8 54 -11 -31
IndusInd Bank Banks - Private 13.8 19.6 -30 -32 4 1.6 2.7 -40 -47 5
Kotak Mahindra Bank Banks - Private 28.5 25.5 12 41 36 3.6 3.2 15 19 24
State Bank Banks - PSU 9.8 13.5 -27 -52 -28 1.3 1.1 18 -58 -58
Bajaj Finance Banks - NBFC 36.5 22.2 64 80 18 7.3 3.8 93 142 49
HDFC Banks - NBFC 39.5 35.0 13 95 86 3.9 4.2 -8 27 64
HDFC Life Ins Banks - Insurance 83.6 76.1 10 312 305 4.2 4.4 -5 37 73
SBI Life Ins Banks - Insurance 56.3 52.2 8 178 178 2.2 2.4 -9 -26 -4
Larsen & Toubro Capital Goods 21.7 21.6 1 7 15 2.5 2.7 -6 -17 5
Grasim Inds Cement 14.8 11.3 31 -27 -40 2.2 1.7 27 -28 -33
Shree Cement Cement 37.0 33.3 11 82 77 5.5 4.7 16 82 86
Ultratech Cement Cement 29.3 28.5 3 45 52 3.7 2.9 26 21 14
Asian Paints Consumer 78.9 44.6 77 289 137 20.2 12.0 68 565 372
Britannia Inds. Consumer 43.5 36.1 21 115 92 17.0 13.6 26 460 431
Hind. Unilever Consumer 56.7 44.1 29 180 135 11.1 29.4 -62 266 1050
ITC Consumer 16.2 25.6 -37 -20 36 3.9 6.6 -41 28 158
Nestle India Consumer 69.0 50.6 36 241 169 78.5 33.6 134 2483 1217
Tata Consumer Consumer 52.4 35.7 47 159 90 4.0 2.3 72 31 -10

~60% of Nifty constituents trade at a premium to their historical averages
Prem/Disc Prem/Disc
Current 10 Yr Avg Current 10 Yr Avg Current 10 Yr Avg Current 10 Yr Avg
Name Sector (%) (%)
Cipla Healthcare 28.7 27.8 3 42 48 3.7 3.2 14 21 27
Divi's Lab. Healthcare 39.3 24.5 60 94 31 9.6 5.3 82 216 107
Dr Reddy’ s Labs Healthcare 26.1 25.5 3 29 36 4.2 3.7 13 39 47
Sun Pharma Healthcare 22.5 29.4 -23 11 56 3.0 4.3 -31 -1 70
Hindalco Metals 9.1 9.3 -2 -55 -51 1.7 1.2 43 -46 -55
JSW Steel Metals 7.8 13.0 -40 -62 -31 2.5 1.4 82 -18 -46
Tata Steel Metals 4.7 15.7 -70 -77 -16 1.4 1.3 12 -52 -49
BPCL Oil & Gas 16.0 9.4 71 -21 -50 2.1 1.8 15 -31 -28
IOCL Oil & Gas 7.5 9.1 -18 -63 -52 0.8 1.1 -22 -72 -58
ONGC Oil & Gas 4.2 9.7 -56 -79 -48 0.6 1.2 -49 -80 -54
Reliance Inds. Oil & Gas 22.6 14.4 57 11 -24 1.8 1.4 27 -40 -44
Titan Co Retail 73.1 48.1 52 261 156 16.5 10.6 56 444 314
HCL Technologies Technology 18.2 10.5 74 -10 -44 3.8 2.5 54 24 -4
Infosys Technology 25.4 17.0 49 25 -10 7.0 4.1 71 130 60
TCS Technology 28.3 18.6 52 40 -1 12.5 6.8 83 312 168
Tech Mahindra Technology 17.0 13.2 29 -16 -30 3.2 2.7 18 5 6
Wipro Technology 26.1 14.9 75 29 -21 5.4 2.8 90 77 11
Bharti Airtel Telecom NA 39.3 NA NA 109 4.7 2.5 86 53 -2
Coal India Utilities 5.8 12.6 -54 -72 -33 2.0 5.4 -63 -35 113
NTPC Utilities 6.5 11.8 -45 -68 -37 0.8 1.3 -36 -73 -51
Power Grid Corp. Utilities 8.7 10.7 -19 -57 -43 1.5 1.7 -6 -49 -35
UPL Others 13.5 12.2 11 -33 -35 1.9 2.5 -25 -39 -3
Nifty 20.3 18.8 8 3.0 2.6 19

Midcaps perform in line with largecaps in May’21
 In May’21, the Nifty Midcap-100 and Nifty-50 were both up by 6.5% MoM.
 BHEL (+47%), ICICI Securities (+32%), Coforge (+23%), BOB (+21%), and Concor (+16%) were the best midcap performers in May’21.
PE (x) Relative to Nifty P/E (%) PB (x) Relative to Nifty P/B (%) Price Chg (%)
Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg MoM CY21YTD
BHEL 50.3 29.2 72 148 55 0.9 1.3 -32 -71 -50 47 98
ICICI Securities 17.6 14.3 23 -13 -24 8.8 7.2 22 190 183 32 30
Coforge 32.3 15.4 110 60 -18 7.1 2.8 154 134 10 23 30
Bank of Baroda 14.5 13.8 5 -28 -27 0.6 0.8 -35 -82 -67 21 31
Container Corpn. 41.6 26.5 57 105 41 3.9 2.7 42 28 7 16 71
Laurus Labs 21.2 5.1 318 5 -73 7.2 111.2 -94 136 4259 16 48
RBL Bank 12.4 30.5 -59 -39 63 0.9 2.2 -57 -69 -14 15 -7
LIC Housing Fin. 6.8 10.7 -36 -66 -43 1.0 1.7 -41 -67 -34 15 29
Endurance Tech. 28.8 29.0 -1 42 54 5.0 5.2 -2 66 103 15 11
Mindtree 30.0 15.7 90 48 -16 7.6 3.5 119 151 37 14 44
Zee Entertainmen 12.4 30.8 -60 -39 64 1.7 5.2 -67 -43 105 13 -6
CESC 7.0 9.5 -27 -66 -49 0.8 0.8 6 -73 -70 13 11
Bharat Forge 38.6 33.0 17 90 76 5.2 4.3 19 70 70 11 29
Godrej Agrovet 27.9 35.8 -22 37 91 4.6 5.3 -13 51 108 11 3
Bharat Electron 16.8 15.6 7 -17 -17 2.9 2.7 7 -6 4 10 21
Guj.St.Petronet 15.9 12.1 32 -21 -36 1.8 1.6 14 -40 -38 0 23
M & M Fin. Serv. 10.4 14.0 -26 -49 -25 1.2 1.4 -13 -60 -45 0 -7
Sun TV Network 13.6 18.2 -25 -33 -3 3.1 4.3 -28 3 70 0 13
L&T Technology 30.9 20.5 50 52 9 6.8 5.1 33 125 102 -1 16
AU Small Finance 29.2 32.0 -9 44 70 4.2 4.7 -11 37 83 -2 16
Ipca Labs. 22.4 26.0 -14 10 38 4.5 3.4 32 47 33 -2 -5
The Ramco Cement 27.3 22.4 22 35 19 3.5 2.7 29 16 7 -2 21
TVS Motor Co. 26.1 24.9 5 29 33 5.6 5.0 12 85 96 -3 27
Whirlpool India 46.0 36.5 26 127 94 8.0 6.7 21 165 161 -3 -18
Alembic Pharma 17.8 17.1 4 -12 -9 3.1 4.0 -24 1 58 -4 -8
Cholaman.Inv.&Fn 22.4 14.7 52 10 -22 3.9 2.4 63 27 -7 -4 42
Cummins India 33.2 27.6 20 64 47 4.7 5.3 -12 55 109 -6 37
Indiamart Inter. 64.2 39.0 65 217 107 11.2 7.1 58 269 178 -7 15
Amara Raja Batt. 17.5 20.9 -17 -14 11 2.7 4.0 -32 -11 56 -9 -20
Tata Chemicals 24.5 8.6 186 21 -54 1.2 0.6 93 -60 -75 -11 48

Sector valuations: PSU Banks / Capital Goods outperforms, Healthcare underperforms in May’21
 PSU Banks are trading at a P/B of 1.1x, near the historical average of 1x. Some of the PSBs reported a lower retail slippage trend v/s few midcap private
banks. The corporate cycle is also clearly turning; therefore, some PSBs are expected to also benefit from this trend. Within PSBs, SBI appears well-placed
to report a strong uptick in earnings as the COVID-led uncertainty appears to have receded now. We expect credit costs to normalize and business
momentum to improve in both Retail and Corporate.
 The Capital Goods sector trades at a one-year forward P/E multiple of 27x, on par with its 10-year average P/E of 26.9x. Even on a P/B basis, the sector
trades at 2.8x – on par with the 10-year average multiple of 2.7x. The valuation premium relative to the Nifty on a P/B basis has narrowed. It now trades at
a 7% discount (v/s its 10-year average premium of 6%). On a P/E basis, the premium multiple stands at 33%, below the 10-year average (~42%). Company
valuations have recently run up owing to: a) improving execution rates at project sites, b) strong order inflows across most core sectors, c) rising liquidity in
the system, d) strengthening government financials, and e) strong capex spending by the central government.
 Healthcare P/E has seen an uptick in the past few months with a ~5% premium to the 10-year average. It still remains at a discount relative to the Nifty. The second
COVID wave has boosted growth in the India Pharma market (IPM), with a sharp uptick seen in drugs used to treat COVID-19 as well as immunity boosters.
Snapshot: Sector valuations
Relative to Nifty P/E Relative to Nifty P/B
PE (x) PB (x)
Sector (%) (%)
Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
Auto 21.6 21.7 -0.3 7 11 3.3 3.1 5.9 9 22
Banks - Private 19.8 19.7 0.6 -2 3 2.9 2.4 17.9 -5 -5
Banks - PSU 10.2 20.7 -51.0 -50 0 1.1 1.0 16.7 -63 -62
NBFC 22.4 19.2 16.8 10 2 3.1 2.6 17.8 1 2
Capital Goods 27.0 26.9 0.3 33 42 2.8 2.7 4.7 -7 6
Cons. Durables 48.9 30.9 58.1 141 61 8.7 5.5 57.3 185 112
Cement 24.5 22.7 7.8 21 20 3.2 2.6 24.5 6 1
Consumer 43.3 36.5 18.5 114 96 10.0 9.8 1.7 228 286
Consumer Ex ITC 58.0 43.3 33.9 186 131 13.0 12.2 6.3 328 379
Healthcare 24.9 23.8 4.8 23 27 3.9 3.9 0.5 29 54
Infrastructure 13.8 10.4 32.5 -32 -44 1.0 1.3 -21.7 -67 -50
Media 14.9 24.2 -38.5 -27 30 2.4 4.7 -49.4 -21 87
Metals 7.4 11.3 -35.0 -64 -39 1.7 1.1 50.2 -45 -57
Oil & Gas 14.3 11.8 21.4 -29 -36 1.5 1.4 5.1 -51 -44
Oil & Gas Ex RIL 8.2 10.1 -19.0 -60 -44 1.1 1.4 -18.8 -63 -46
Retail 127.3 73.0 74.3 528 285 14.9 7.9 88.1 391 209
Technology 25.5 17.3 47.5 26 -7 7.2 4.5 59.3 137 78
Telecom Loss - - 10.6 3.1 240.7 248 21
Utilities 7.9 12.0 -33.7 -61 -33 1.3 1.8 -31.7 -59 -27

Autos: Demand for PVs/Tractors remains strong; consumer behavior a key monitorable
Auto P/E (x) 10 Yr Avg (x) Auto Relative to Nifty PE (%)
 The Auto sector is trading at P/E of 21.6x its 130
48
historical average on high FY22E earnings.
 2W/PV/MHCV/LCV/Tractor volumes declined at a 33 70
21.7
34%/35%/47%/40%/-1.5% CAGR (v/s May’19). The 11.2
18 21.6 10
performance of Tractor was attributable to inventory 6.7
buildup, while CV volumes were a fair show without 3 -50
moratorium. PV was impacted by shutdown, while
Sep-19
Sep-14
Jul-15
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
May-16
May-11
Nov-13
May-21
Nov-18
Sep-14
Sep-19
Jul-15
Jul-20
Jan-18
Jan-13
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
2W was impacted by high inventory and low
demand, supported by exports.
Auto P/B (x) 10 Yr Avg (x) Auto Relative to Nifty PB (%)
 Valuations on a P/E basis have reverted below the 5 90
10-year LPA due to recovery in FY21. On a P/B basis, 4 60
valuations are now trading at a 6% premium over 3.3
3 30
the 10-year average of 3.1x. 3.1 22.3
2 0
 We expect PV to sustain on a strong order book and 9.3
Tractor on strong demand in the upcoming kharif 1 -30
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
May-21
May-11
May-16
Nov-18
Sep-14
Sep-19
Jul-15
Jan-13
Jan-18
Jul-20
Mar-12
Mar-17
May-21
May-11
May-16
Nov-18
Nov-13
sowing season. 2W/CV volumes would remain
under pressure due to continued COVID disruption.
Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
Amara Raja Batt. 17.5 20.9 -17 -14 11 2.7 4.0 -32 -11 56
Ashok Leyland Na 21.6 Na na 15 4.5 3.0 50 48 18
Bajaj Auto 20.2 17.0 19 0 -9 4.7 4.7 0 55 85
Bharat Forge 38.6 33.0 17 90 76 5.2 4.3 19 70 70
Bosch 31.8 36.3 -12 57 93 4.1 5.5 -25 34 114
CEAT 14.6 11.2 31 -28 -40 1.5 1.4 8 -52 -47
Eicher Motors 28.1 28.2 0 39 50 5.3 6.7 -21 74 164
Endurance Tech. 28.8 29.0 -1 42 54 5.0 5.2 -2 66 103
Escorts 13.7 9.9 38 -33 -47 2.0 1.3 54 -35 -49
Exide Inds. 17.9 22.0 -19 -12 17 2.1 2.9 -27 -30 15
Hero Motocorp 16.3 17.8 -8 -19 -5 3.6 5.7 -36 19 123
M&M 20.4 18.2 12 1 -3 2.4 2.7 -10 -20 7
Mahindra CIE 12.9 28.8 -55 -36 53 1.4 2.3 -39 -54 -10
Maruti Suzuki 28.5 24.5 16 40 31 3.7 3.5 5 21 38
Motherson Sumi 30.5 28.5 7 50 52 5.5 5.0 11 81 95
Tata Motors 0.0 14.7 -100 -100 -22 1.8 1.7 9 -39 -34
TVS Motor Co. 26.1 24.9 5 29 33 5.6 5.0 12 85 96

Private Banks: Gearing up for recovery; large ones better placed
 Private banks are trading at P/B of 2.9x, a 17.9% Private Banks P/E (x) 10 Yr Avg (x) Private Banks Relative to Nifty PE (%)
33 40
premium to the historical average of 2.4x.
 Large private banks are well-placed to accelerate market 26 20
19.8 3.1
share gains given their strong capital positions, robust 19.7
19 0
balance sheets, and higher provisioning coverage on -2.2
stressed assets. 12 -20
 Private banks have reported a strong sequential uptick in 5 -40
loan growth, led by healthy trends in Retail. Conversely,
Sep-14
Sep-19
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
Nov-18
May-11
Nov-13
May-16
May-21
Sep-14
Sep-19
Jul-20
Jan-13
Jul-15
Jan-18
Mar-17
Mar-12
May-11
May-16
May-21
Nov-13
Nov-18
deposit growth has remained strong, led by a higher mix
of CASA deposits.
 Most banks (barring AUBANK) reported an improvement Private Banks P/B (x) 10 Yr Avg (x) Private Banks Relative to Nifty PB (%)
30
in asset quality ratios from the proforma ratios reported 4
in Dec’20, with slippage seeing sequential decline and 2.9 10 -4.9
controlled restructuring. Larger banks are also better 3
2.4 -10
placed with high proforma provision coverage and high
2 -5.4
COVID-related provision buffers – as the resurgence of -30
COVID-19 remains a near-term overhang to access the 1 -50
further impact on asset quality.
Sep-14
Sep-19
Jul-15
Jan-13
Jan-18
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-18
Nov-13
Sep-14
Sep-19
Jan-13
Jan-18
Jul-20
Jul-15
Mar-17
Mar-12
Nov-13
Nov-18
May-11
May-16
May-21
 Overall, large private banks are better placed with the
focus shifting from asset quality issues to strong growth
opportunities, market share gains, and earnings
oscillation to decade-high RoEs.
AU Small Finance 29.2 32.0 -9 44 70 4.2 4.7 -11 37 83
Axis Bank 13.9 37.3 -63 -32 98 1.9 1.9 1 -37 -25
Bandhan Bank 12.7 24.0 -47 -37 28 2.4 4.3 -45 -22 68
DCB Bank 8.5 13.6 -38 -58 -28 0.8 1.4 -42 -74 -46
Equitas Holdings 5.5 54.5 -90 -73 190 0.9 1.7 -49 -72 -35
Federal Bank 7.8 12.1 -35 -61 -36 0.9 1.2 -20 -69 -54
HDFC Bank 21.6 20.5 6 7 9 3.5 3.4 2 14 33
ICICI Bank 20.5 20.2 2 1 7 2.7 1.8 54 -11 -31
IndusInd Bank 13.8 19.6 -30 -32 4 1.6 2.7 -40 -47 5
Kotak Mah. Bank 28.5 25.5 12 41 36 3.6 3.2 15 19 24
RBL Bank 12.4 30.5 -59 -39 63 0.9 2.2 -57 -69 -14

PSU Banks: SBI well-placed for earnings normalization
 PSU Banks are trading at P/B of 1.1x, near the historical PSU Banks P/B (x) 10 Yr Avg (x) PSU Banks Relative to Nifty PB (%)
averages of 1x. 1.8 -40
 Some of the PSBs reported a lower retail slippage trend v/s -50
1.3
few midcap private banks .The corporate cycle is also 1.1 -62.1 -62.9
1.0 -60
clearly turning; therefore some PSBs are expected to
0.8
benefit from this trend. -70
 Within PSBs, SBI appears well-positioned to report a strong 0.3 -80
uptick in earnings as the COVID-led uncertainty appears to
Feb-20
Feb-14
Sep-17
Jul-16
Aug-11
Dec-18
May-21
Nov-12
Apr-15
Feb-14
Aug-11
Jul-16
Oct-17
Mar-20
Apr-15
Nov-12
Dec-18
May-21
have receded now. We expect credit costs to normalize and
business momentum to improve in both Retail and
Corporate. Among the PSUs, we estimate SBIN to reach a
decade-high ROE of ~15% by FY23E.
 Overall, we believe PSBs (barring SBIN) would continue to
lose market share given the technology limitations, weak
capital base, and earning normalization being some time
away. However, we believe SBI is the value call owing to its
strong balance sheet, high provision coverage, and earnings
normalization; it would continue to reflect market share
gains across segments.
 The privatization of some public sector banks would be key
to watch out for in the sector.
Bank of Baroda 14.5 13.8 5 -28 -27 0.6 0.8 -35 -82 -67
St Bk of India 9.8 13.5 -27 -52 -28 1.3 1.1 18 -58 -58

NBFCs: Collection efficiency to improve post lifting of lockdowns
 NBFCs trade at P/B of 3.1x, above the historical average of NBFC P/E (x) 10 Yr Avg (x) NBFC Relative to Nifty PE (%)
40
2.6x (an 18% premium). 33
 Housing finance companies have a positive sentiment 20 10.3
26 22.4 2.1
toward the demand uptick. They are better placed than in the 19.2 0
19
first quarter of FY20.
12 -20
 The impact of gold price fluctuation is impacting financiers’
5 -40
loan book growth . Shorter tenured products are bearing the
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
May-21
May-11
May-16
Nov-18
Sep-14
Sep-19
Jan-13
Jul-15
Jan-18
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-18
Nov-13
brunt.
 Lockdowns have resulted in disbursement slowdown for
most of the vehicle financiers . The uptick in new NBFC P/B (x) 10 Yr Avg (x) NBFC Relative to Nifty PB (%)
registrations is sporadic across states. 4 40
 Financiers continue to hold on to the excess liquidity on the 3 3.1 25
books. Margins are likely to be impacted as a result. 2.2
10
 Collection efficiency is expected to pick up post the lifting of 2 2.6 1.2
-5
the lockdowns. Check bounce rates are increasing.
 The share of incremental customers acquired from Tier II & 2 -20
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-21
May-11
May-16
Nov-13
Nov-18
Jan-13
Sep-14
Sep-19
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
Nov-18
Nov-13
May-11
May-16
May-21
III cities is rising among select traditional brokers.
AAVAS Financiers 46.5 39.3 18 130 109 6.4 4.9 31 109 91
Aditya Birla Cap 19.1 25.7 -25 -6 37 1.9 2.2 -12 -38 -15
Bajaj Fin. 36.5 22.2 64 80 18 7.3 3.8 93 142 49
Can Fin Homes 15.7 11.1 41 -22 -41 2.3 1.9 23 -23 -25
Cholaman.Inv.&Fn 22.4 14.7 52 10 -22 3.9 2.4 63 27 -7
HDFC 39.5 35.0 13 95 86 3.9 4.2 -8 27 64
ICICI Securities 17.6 14.3 23 -13 -24 8.8 7.2 22 190 183
IIFL Wealth Mgt 22.8 26.1 -13 12 39 4.0 3.6 11 30 39
IndoStar Capital 24.1 28.1 -14 19 50 0.9 1.0 -8 -69 -60
L&T Fin.Holdings 8.8 14.7 -41 -57 -22 1.1 1.7 -35 -65 -35
LIC Housing Fin. 6.8 10.7 -36 -66 -43 1.0 1.7 -41 -67 -34
M & M Fin. Serv. 10.4 14.0 -26 -49 -25 1.2 1.4 -13 -60 -45
Manappuram Finance 6.5 8.3 -22 -68 -56 1.5 1.4 4 -52 -45
MAS Financial 30.6 24.4 26 51 30 3.9 3.7 7 29 43
Muthoot Finance 12.0 8.3 45 -41 -56 2.8 1.8 61 -7 -31
Piramal Enterprises 14.8 20.8 -29 -27 10 1.2 1.3 -6 -61 -50
PNB Housing 6.3 15.0 -58 -69 -20 0.9 1.8 -53 -72 -28
Repco Home Fin 6.8 15.6 -57 -67 -17 0.9 2.4 -62 -70 -5
Shri.City Union. 8.9 13.4 -33 -56 -29 1.2 1.8 -36 -61 -28
Shriram Trans. 10.8 11.9 -9 -47 -37 1.5 1.7 -13 -51 -33

Capital Goods: Execution rate declines sequentially as state-wide lockdown extended
 The Capital Goods sector trades at a one-year forward P/E Capital Goods P/E (x) 10 Yr Avg (x) Capital Goods Relative to Nifty PE (%)
57 190
multiple of 27.0x, on par with its 10-year average P/E of
26.9x. 47 140
 Even on a P/B basis, the sector trades at 2.8x – on par with 37 26.9 90
27.0
its 10-year average multiple of 2.7x. 27 42.1 33.3
 The valuation premium relative to the Nifty on a P/B basis 17 40
has narrowed. It now trades at a 7% discount (v/s its 10- 7 -10
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
May-21
May-11
May-16
Nov-18
year average premium of 6%). On a P/E basis, the premium
Sep-19
Sep-14
Jan-13
Jul-15
Jan-18
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
multiple stands at 33%, which is lower than its 10-year
average (~42%).
Capital Goods P/B (x) 10 Yr Avg (x) Capital Goods Relative to Nifty PB (%)
 Company valuations have recently run up owing to: a)
5
improving execution rates at project sites, b) strong order 170
inflows across most core sectors, c) rising liquidity in the 4 115
2.7
system, d) strengthening government financials, and e) 3 2.8
60
strong capex spending by the central government. 5.9 -6.7
2 5
 The prolonged shutdowns due to the second COVID wave
and the run-up in commodity prices pose a risk to the 1 -50
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-21
May-11
May-16
Nov-13
Nov-18
Sep-19
Sep-14
Jan-13
Jan-18
Jul-15
Jul-20
Mar-17
Mar-12
Nov-13
Nov-18
May-11
May-16
May-21
execution and margins of EPC companies.
ABB 78.5 73.7 7 287 292 8.8 6.4 38 189 150
BHEL 50.3 29.2 72 148 55 0.9 1.3 -32 -71 -50
Bharat Electron 16.8 15.6 7 -17 -17 2.9 2.7 7 -6 4
Cummins India 33.2 27.6 20 64 47 4.7 5.3 -12 55 109
Engineers India 11.3 18.6 -39 -44 -1 2.3 3.2 -26 -23 24
K E C Intl. 15.6 15.8 -1 -23 -16 2.6 2.1 22 -14 -16
Larsen & Toubro 21.7 21.6 1 7 15 2.5 2.7 -6 -17 5
Siemens 64.0 53.4 20 216 184 7.0 5.8 21 132 128
Thermax 39.7 35.9 10 96 91 4.5 3.7 20 47 47

Cement: Demand weak, but pricing remains strong
 The sector trades at a one-year forward EV/EBITDA of Cement P/E (x) 10 Yr Avg (x) Cement Relative to Nifty PE (%)
43 145
17.3x against the historical average of 14.7x (15%
premium). 33 90
24.5 20.5 20.8
 Our channel checks indicate demand is expected to 23 35
decline 40–60% MoM across regions due to the 22.7
13 -20
impact of local lockdowns. We expect demand to
3 -75
improve in June as the lockdowns ease gradually.
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
May-21
May-11
May-16
Nov-18
Sep-19
Sep-14
Jan-13
Jul-15
Jan-18
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
 Pricing, however, has held up well across regions, and
the industry average price is flat MoM in May and up
6% QoQ in 1QFY22 - led by sharp hikes in East, South, Cement P/B (x) 10 Yr Avg (x) Cement Relative to Nifty PB (%)
and Maharashtra. 4 30
5.6
3.2
 We do not expect margins to be impacted despite the 3 10
sharp commodity cost inflation – petcoke, coal, and 2.6 1.2
-10
diesel prices are up 106%, 82%, and 37% YoY, 2
-30
respectively.
1 -50
 We remain structurally positive on the sector and
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-21
May-11
May-16
Nov-13
Nov-18
Sep-14
Sep-19
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
Nov-18
Nov-13
May-11
May-16
May-21
expect demand to recover strongly once the
lockdowns ease up.
Relative to Nifty Relative to Nifty Cement EV/EBDITA (x) 10 Yr Avg (x)
PE (x) PB (x) EV/EBIDTA (x)
P/E (%) P/B (%) 23
10 Yr Prem/Disc 10 Yr 10 Yr Prem/Disc Prem/Dis 17.3
Company Current Current Current Current 10 Yr Avg Current 10 Yr Avg 18
Avg (%) Avg Avg (%) c (%)
ACC 19.5 26.2 -26 -4 39 2.6 2.8 -9 -16 11 10 12 -18 13 14.7
Ambuja Cem. 30.0 30.7 -2 48 63 2.9 2.6 13 -5 1 19 17 13
8
Birla Corpn. 15.2 15.4 -1 -25 -18 1.6 1.1 50 -48 -59 9 8 14
Grasim Inds 14.8 11.3 31 -27 -40 2.2 1.7 27 -28 -33 35 25 42 3
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-21
May-11
May-16
Nov-13
Nov-18
India Cements na 31.5 na na 67 1.0 0.7 44 -68 -73 12 9 36
J K Cements 26.4 22.0 20 30 17 5.0 2.2 127 66 -13 14 9 46
JK Lakshmi Cem. 15.2 24.5 -38 -25 31 2.5 2.1 23 -16 -19 8 11 -27
Shree Cement 37.0 33.3 11 82 77 5.5 4.7 16 82 86 22 18 23
Ramco Cem 27.3 22.4 22 35 19 3.5 2.7 29 16 7 15 13 23
UltraTech 29.3 28.5 3 45 52 3.7 2.9 26 21 14 16 14 8

Consumer: Essentials demand momentum continues; pain in discretionary returns
 The Consumer sector P/E of 43.3x in May’21 is at a premium of Consumer P/E (x) 10 Yr Avg (x) Consumer Relative to Nifty PE (%)
18.5% to its 10-year average of 36.5x. On a P/B basis, it trades at 55 190
10.0x, on par with its 10-year average multiple of 9.8x. 140
45
 Fewer COVID cases, relaxation in lockdowns, and recovery in 36.5
96.2
43.3
consumer sentiment have led to a strong sector sales performance 35 90 113.6
in 4QFY21, especially in Discretionary. However, state governments
25 40
have imposed lockdowns across the country after the resurgence of
COVID cases. 15 -10
 Although companies are now better prepared to handle the
Sep-14
Sep-19
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
May-16
May-21
May-11
Nov-18
Nov-13
Sep-14
Jul-15
Sep-19
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
May-11
May-16
May-21
Nov-18
Nov-13
disruption, lesser consumer mobility, higher in-home consumption,
and restrictions allowing the sale of only essential products are
likely to have led to a near washout in discretionary products sales Consumer P/B (x) 10 Yr Avg (x) Consumer Relative to Nifty PB (%)
in May’21. Companies with a higher skew toward discretionary 15 480
products would thus see significant earnings cuts for 1QFY22.
13 380
 The recent inflation in some key commodities has led to pressure 286.1
on gross margins. Companies are taking price hikes to mitigate this 10 280
10.0
impact. Advertisement, which returned to near normal levels in 9.8
8 180 227.6
4QFY21, is likely to see a sharp reduction in 1QFY22 on account of
the weak operating environment. 5 80
 The relaxation of lockdowns and signs of an uptick in vaccinations –
Sep-14
Sep-19
Jul-15
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
Sep-14
Sep-19
Jul-15
Nov-13
Nov-18
Jul-20
Jan-13
Jan-18
May-11
May-16
May-21
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
after ongoing supply constrained the lull – would be key
monitorables.
Asian Paints 78.9 44.6 77 289 137 20.2 12.0 68 565 372
Britannia Inds. 43.5 36.1 21 115 92 17.0 13.6 26 460 431
Colgate-Palm. 42.3 37.9 12 109 101 40.1 25.6 57 1221 903
Dabur India 50.9 37.7 35 151 100 11.5 10.3 13 280 302
Emami 29.3 31.0 -6 45 65 10.6 10.5 0 247 313
Godrej Consumer 44.7 37.5 19 121 99 8.8 7.6 15 190 199
Hind. Unilever 56.7 44.1 29 180 135 11.1 29.4 -62 266 1050
ITC 16.2 25.6 -37 -20 36 3.9 6.6 -41 28 158
Jyothy Lab. 26.9 34.7 -23 33 85 3.9 4.6 -14 29 80
Marico 47.3 36.5 29 133 94 13.4 11.6 16 342 355
Nestle India 69.0 50.6 36 241 169 78.5 33.6 134 2483 1217
P & G Hygiene 55.6 51.1 9 174 172 41.8 23.2 80 1274 810
Page Industries 70.6 52.0 36 248 177 34.8 23.3 49 1045 814
Pidilite Inds. 86.5 41.2 110 327 119 16.1 9.8 65 430 283
Tata Consumer 52.4 35.7 47 159 90 4.0 2.3 72 31 -10
United Breweries 93.3 86.8 8 361 362 8.7 9.6 -9 185 274
United Spirits 65.0 99.9 -35 221 431 9.1 12.9 -30 198 405
Varun Beverages 39.8 43.7 -9 97 132 6.8 5.6 22 125 119

Consumer Durables: Demand for summer products to be adversely impacted
 The Consumer Durables sector trades at a one-year forward Consumer Durables P/E (x) 10 Yr Avg (x) Consumer Durables Relative to Nifty PE (%)
P/E multiple of 48.9x, a 58% premium to its 10-year average 70 200 10 Yr Avg (x)
141.2
P/E of 30.9x. 150
50
 On a P/B basis, the sector trades at 8.7x – a 57% premium 48.9 100
to its 10-year average multiple. 30 50 60.8
 The valuation premium relative to the Nifty on a P/E basis 30.9 0
has widened. It now trades at a ~141% premium (v/s its 10- 10 -50
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-21
May-11
May-16
Nov-13
Nov-18
year average premium of ~61%). On a P/B basis, the
Sep-19
Sep-14
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
Nov-18
May-11
May-16
May-21
premium multiple stands at 185%, higher than the 10-year
average (~112%).
Consumer Durables Relative to Nifty PB (%)
 Company valuations have run up since FY18, primarily due Consumer Durables P/B (x) 10 Yr Avg (x)
13 10 Yr Avg (x)
to: a) strong demand for electrical and white goods, led by 300
rising income levels, b) market share gains in large electrical 185.1
9 200
brands at the expense of the unorganized sector , c) market 8.7
112.4
consolidation in the White Goods segment, and d) strong 5 100
pent-up demand usually following the disruption 5.5
(demonetization, GST, COVID-19). 1 0
Sep-19
Sep-14
Jan-13
Jan-18
Jul-15
Jul-20
Mar-17
Mar-12
Nov-13
Nov-18
May-11
May-16
May-21
 The resurgence of COVID cases and lockdown in states pose
Sep-14
Sep-19
Jul-15
Jan-18
Jul-20
Jan-13
Mar-12
Mar-17
May-21
May-11
May-16
Nov-13
Nov-18
risk to demand for summer products such as air
conditioners, air coolers, and fans.
Blue Star 45.0 36.4 24 122 94 8.0 6.0 34 165 135
CG Consumer Elect. 39.9 35.2 13 97 87 10.6 11.8 -10 249 362
Havells India 54.7 34.5 59 170 83 10.5 6.5 63 247 154
Orient Electric 45.0 38.5 17 122 105 11.3 9.3 22 271 264
Voltas 51.7 26.5 95 155 41 6.0 3.4 76 97 33
Whirlpool India 46.0 36.5 26 127 94 8.0 6.7 21 165 161

Healthcare: Valuations plummet due to second COVID wave
 After stabilizing near the 10-year average, the Healthcare sector Healthcare P/E (x) 10 Yr Avg (x) Healthcare Relative to Nifty PE (%)
P/E has seen an uptick in the past month, with a ~5% premium to 36 90
the 10-year average. It remains at a discount relative to the Nifty.
30 60
 The second COVID wave boosted growth in IPM, with a sharp 24.9
23.8 27.5
uptick seen in drugs used to treat COVID-19 as well as immunity 24 30 23.1
boosters.
18 0
 The second wave downtrend, coupled with seasonal change,
would result in a higher off-take of drugs associated with Acute 12 -30
Sep-14
Jan-18
Sep-19
Jan-13
Jul-20
Jul-15
Mar-12
Mar-17
May-16
May-21
May-11
Nov-13
Nov-18
therapies, aiding better growth prospects over the medium term.
Sep-14
Jul-15
Sep-19
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
May-11
May-16
May-21
Nov-18
Nov-13
 The outlook for Formulations/API/CDMO in the developed and
emerging markets remains robust. The developed markets are
recovering from COVID faster owing to their robust vaccination Healthcare P/B (x) 10 Yr Avg (x) Healthcare Relative to Nifty PB (%)
programs. This would enable the normalization of sales in the US. 140
7
 Particularly, injectables associated with elective surgeries are 100
expected to see demand revival with the easing of COVID-led 5 54.0
lockdowns. Furthermore, the pace of approvals would also 3.9 60
29.1
improve with fewer administrative hurdles. 4 3.9
20
 We remain positive on companies with differentiated business
models (SUNP/DIVI), robust ANDA pipelines (ARBP/LPC), and 2 -20
Sep-14
Sep-19
Jul-15
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
Nov-13
Nov-18
May-11
May-16
May-21
Sep-14
Sep-19
Jan-13
Jul-20
Jul-15
Jan-18
Mar-17
Mar-12
May-16
May-11
May-21
Nov-13
Nov-18
superior executors (such as LAURUS); vaccine distribution and/or
manufacturing provide an upside to GLAND/DRRD/ARBP/STR.
Ajanta Pharma 23.1 18.9 22 14 0 4.7 4.9 -5 54 92
Alembic Pharma 17.8 17.1 4 -12 -9 3.1 4.0 -24 1 58
Alkem Lab 21.3 23.3 -8 5 24 4.0 4.0 0 32 57
Aurobindo Pharma 16.1 13.6 19 -20 -28 2.3 2.8 -19 -26 9
Biocon 46.9 33.4 40 131 78 5.5 3.6 53 81 42
Cadila Health. 24.5 21.3 15 21 13 3.6 4.4 -19 19 74
Cipla 28.7 27.8 3 42 48 3.7 3.2 14 21 27
Divi's Lab. 39.3 24.5 60 94 31 9.6 5.3 82 216 107
Dr Reddy's Labs 26.1 25.5 3 29 36 4.2 3.7 13 39 47
Glaxosmith Pharma 39.5 52.6 -25 95 180 14.3 12.0 19 370 369
Glenmark Pharma. 15.7 22.6 -31 -23 20 2.0 3.8 -46 -33 49
Granules India 13.4 11.5 17 -34 -39 2.8 2.0 43 -8 -23
Ipca Labs. 22.4 26.0 -14 10 38 4.5 3.4 32 47 33
Jubilant Pharmova 14.1 10.6 33 -30 -43 2.8 1.5 82 -9 -40
Laurus Labs 21.2 5.1 318 5 -73 7.2 111.2 -94 136 4259
Lupin 29.2 30.1 -3 44 60 3.6 4.3 -17 17 68
Strides Pharma 18.1 61.6 -71 -11 228 2.2 3.2 -31 -28 25
Sun Pharma.Inds. 22.5 29.4 -23 11 56 3.0 4.3 -31 -1 70
Torrent Pharma. 31.2 23.2 34 54 24 6.9 5.0 37 127 98

Infrastructure: Ordering activity to gradually resume once lockdowns end
 The Infrastructure sector is trading at a P/B of 1.0x, a Infrastructure P/E (x) 10 Yr Avg (x) Infrastructure Relative to Nifty PE (%)
32 60
22% discount to its historical average.
 After muted ordering activity was seen over FY19– 24 20
10.4 -31.7
20, business momentum weakened further with 16 13.8 -20 -43.9
suspension in toll collections for ~30 days due to the
8 -60
COVID-19 outbreak. After the lifting of lockdown
restrictions, ordering by NHAI has picked up pace, 0 -100
Sep-14
Sep-19
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
May-16
May-21
May-11
Nov-18
Nov-13
Sep-14
Sep-19
Jul-20
Jul-15
Jan-13
Jan-18
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
with 1,330km worth of orders awarded in 1HFY21
(60% YoY). Overall, NHAI ended FY21 with ~4,600kms
of ordering activity (~40% YoY increase). Infrastructure P/B (x) 10 Yr Avg (x) Infrastructure Relative to Nifty PB (%)
 While the center has drawn out massive Infra 0
4
development plans, with expected investment of -25
INR100t by CY24, FY21 still looks like a washout. 2
-50
 We expect strong business opportunities for all -49.5 -66.7
1
players in the sector, which should boost their 1.3 1.0 -75
balance sheets. This should gradually lead to 0 -100
Sep-14
Sep-19
Jul-15
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
improvement in their operational performances.
Nov-13
Nov-18
May-21
May-11
May-16
Sep-14
Sep-19
Jan-18
Jul-20
Jan-13
Jul-15
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
 Recent state-wide lockdowns pose a risk to execution
in 1QFY22.
Ashoka Buildcon 8.2 12.2 -33 -60 -35 0.8 1.5 -45 -73 -43
IRB Infra.Devl. 18.7 11.5 62 -8 -39 0.6 1.2 -53 -82 -53
KNR Construct. 15.9 9.6 64 -22 -49 2.7 1.6 70 -12 -38

Media: Broadcasters face production issues
 The Media sector P/E of 14.9x is at a discount of Media P/E (x) 10 Yr Avg (x) Media Relative to Nifty PE (%)
39% to its 10-year historical average of 24.2x. 90
40
 The second COVID wave has led to the closure of
29.5
cinemas across India, which has led to further strain 28 40
on the financials and businesses of exhibitors – with 24.2 14.9
16 -10
the lack of visibility on cinema reopenings and the
withdrawal of theatrical movie releases by 4 -60
-26.7
producers (‘Radhe’ launched via the OTT channel).
Sep-14
Sep-19
Jan-13
Jul-20
Jul-15
Jan-18
Mar-12
Mar-17
May-16
May-11
May-21
Nov-13
Nov-18
Sep-14
Jan-18
Sep-19
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
Nov-18
May-11
May-16
May-21
 Subscription revenues and viewership may be
impacted over the next 2–3 months if the lockdowns
continue; broadcasters are facing production issues, Media P/B (x) 10 Yr Avg (x) Media Relative to Nifty PB (%)
280
and fresh content could be an issue from June. 7
200
6 87.0
120
4 4.7
2 40
2.4 -21.0
1 -40
Sep-14
Sep-19
Jan-13
Jan-18
Jul-20
Jul-15
Sep-14
Sep-19
Jul-15
Jan-18
Jul-20
Mar-12
Mar-17
Jan-13
May-16
May-11
May-21
Nov-13
Nov-18
Mar-12
Mar-17
May-11
May-21
May-16
Nov-13
Nov-18
PVR na 39.9 na na 112 3.7 3.9 -6 21 54
Sun TV Network 13.6 18.2 -25 -33 -3 3.1 4.3 -28 3 70
Zee Entertainment 12.4 30.8 -60 -39 64 1.7 5.2 -67 -43 105

Metals: Domestic demand weakens; pricing holds up
 The Metals sector is trading at an EV/EBITDA of 5.0x, Metals P/E (x) 10 Yr Avg (x) Metals Relative to Nifty PE (%)
28 20
below its 10-year historical average of 6.8x.
 Improving demand across the globe has helped base 21 -5
metal prices sustain prices at higher levels. 14
11.3
-30 -39.4
 We expect domestic steel demand to have declined
7 7.4 -55
~40% in Mar’21 due to lockdowns across the country. -63.7
 Domestic steel prices, however, remained stable at 0 -80
Sep-14
Sep-19
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-18
Nov-13
Sep-14
Sep-19
Jul-20
Jul-15
Jan-13
Jan-18
Mar-17
Mar-12
May-11
May-16
May-21
Nov-13
Nov-18
INR66,000/t for HRC and INR55,000/t for rebar. NMDC
iron ore prices increased ~30%/10% MoM to
INR6,560/INR7,660 per ton for fines/lumps.
Metals P/B (x) 10 Yr Avg (x) Metals Relative to Nifty PB (%)
 China steel prices increased sharply (~20% over Apr’21) 2 20
during the month, led by an increase in iron ore prices; 1.7
2 -5
however, they fell ~15% from the peak at month-end on 1.1
the crackdown on speculations by China authorities. 1 -30
-56.9 -45.4
 We expect larger mills to export more to compensate for 1 -55
domestic demand. With spreads remaining high and
0 -80
better realization on exports (~10% over domestic), we
Sep-14
Sep-19
Jul-15
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
Nov-13
Nov-18
May-11
May-16
May-21
Sep-14
Sep-19
Jul-20
Jan-13
Jul-15
Jan-18
Mar-17
Mar-12
May-11
May-16
May-21
Nov-13
Nov-18
expect the margins of steel companies to remain
elevated.
Relative to Nifty Relative to Nifty Metals EV/EBDITA (x) 10 Yr Avg (x)
PE (x) PB (x) EV/EBIDTA (x) 15
P/E (%) P/B (%)
10 Yr Prem/Di 10 Yr 10 Yr Prem/ 10 Yr 10 Yr Prem/ 11
Company Current Current Current Current Current
Avg sc (%) Avg Avg Disc (%) Avg Avg Disc (%)
6.8
Hindalco Inds. 9.1 9.3 -2 -55 -51 1.7 1.2 43 -46 -55 6 7 -19 7 5.0
Hind.Zinc 12.6 10.5 20 -38 -44 3.9 2.4 66 29 -7 7 6 21
3
Jindal Steel na 17.7 na na -6 1.0 0.9 16 -65 -65 4 9 -57
Sep-14
Sep-19
Jan-13
Jan-18
Jul-20
Jul-15
Mar-17
Mar-12
May-11
Nov-13
May-16
May-21
Nov-18
JSW Steel 7.8 13.0 -40 -62 -31 2.5 1.4 82 -18 -46 6 7 -22
NALCO 10.8 14.7 -26 -47 -22 1.3 1.0 35 -57 -62 6 6 -2
NMDC 7.6 8.7 -12 -62 -54 1.6 1.7 -3 -47 -35 6 7 -21
SAIL 6.9 14.0 -50 -66 -26 1.0 0.7 52 -67 -74 6 11 -50
Tata Steel 4.7 15.7 -70 -77 -16 1.4 1.3 12 -52 -49 4 7 -47
Vedanta 7.0 10.7 -34 -65 -43 1.5 1.5 -2 -50 -40 5 5 -6

Oil & Gas: Margins mellow down; prices plump
 The sector trades at a P/B of 1.5x near its historical Oil & Gas P/E (x) 10 Yr Avg (x) Oil & Gas Relative to Nifty PE (%)
22 -8
average and P/E of 14.3x (21% premium to historical
average of 11.8x). 18 -23
 Brent prices in May’21 averaged higher MoM at -35.7
14 11.8 -38 -29.2
USD68.6/bbl (from USD64.8 in Apr), as the US and 14.3
Europe rebounded – driving up demand recovery. 10 -53
 SG GRM averaged at USD2.1/bbl in May’21 (v/s USD2.7
6 -68
in Apr), primarily due to a fall in FO cracks. While,
Sep-14
Sep-19
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-18
Nov-13
Sep-14
Sep-19
Jul-20
Jul-15
Jan-13
Jan-18
Mar-17
Mar-12
May-11
May-16
May-21
Nov-13
Nov-18
gasoline cracks moderated to USD8.1/bbl (from USD8.8
in Apr), ATF and gasoil cracks improved to USD5.5/bbl
(up from ~USD3.8–4.4 in Apr).
Oil & Gas P/B (x) 10 Yr Avg (x) Oil & Gas Relative to Nifty PB (%)
 Average gross marketing margins declined (~INR1/lit 0
2
MoM) to INR0–3.5/lit for Petrol-Diesel as Brent prices
climbed. We reiterate that over the medium term, 1.4 1.5
2 -25
margins reverted to the normalized average of INR3/lit. -43.9
 Petchem margins cooled off from multi-year high levels 1 -50
in May’21, after a consecutive MoM rise since the start
-50.7
of 2021. PE/PP/PVC margins were down 16%/20%/8% 1 -75
MoM, in line with softening downstream margins.
Sep-14
Sep-19
Jul-15
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
Nov-13
Nov-18
May-11
May-16
May-21
Sep-14
Sep-19
Jul-20
Jan-13
Jul-15
Jan-18
Mar-17
Mar-12
May-11
May-16
May-21
Nov-13
Nov-18
 Spot LNG prices were ~USD9.5/mmbtu (up from USD8.5
in Apr) on the back of strong summer demand.
Aegis Logistics 33.9 26.0 30 67 39 5.4 3.4 56 77 35
BPCL 16.0 9.4 71 -21 -50 2.1 1.8 15 -31 -28
Castrol India 15.8 27.0 -42 -22 44 8.2 19.7 -58 171 672
GAIL (India) 10.0 12.8 -21 -50 -32 1.3 1.5 -12 -56 -40
Gujarat Gas 26.1 22.8 15 29 21 6.5 4.6 43 115 79
Guj.St.Petronet 15.9 12.1 32 -21 -36 1.8 1.6 14 -40 -38
HPCL 8.2 14.9 -45 -60 -21 1.1 1.2 -12 -65 -53
IOCL 7.5 9.1 -18 -63 -52 0.8 1.1 -22 -72 -58
IGL 29.0 18.0 61 43 -4 5.3 3.5 48 73 39
Mahanagar Gas 16.5 15.5 7 -19 -18 3.2 3.4 -8 4 34
MRPL 10.6 14.0 -24 -47 -25 1.0 1.4 -28 -66 -44
Oil India 5.5 8.5 -35 -73 -55 0.6 1.0 -43 -81 -61
ONGC 4.2 9.7 -56 -79 -48 0.6 1.2 -49 -80 -54
Petronet LNG 10.8 13.1 -18 -47 -30 2.8 2.7 3 -8 7
Reliance Inds. 22.6 14.4 57 11 -24 1.8 1.4 27 -40 -44

Retail: Retailers worst hit in second COVID wave
 The Retail sector trades at P/E of 127.3x, at a 74% Retail P/E (x) 10 Yr Avg (x) Retail Relative to Nifty PE (%)
premium to its 10-year historical average. 304 1950
 The Retail industry is once again at the forefront of the 204

1450
lockdown crisis as the majority of Indian states have 950
imposed strict restrictions over store operations, leading 104 73.0 127.3 450 284.5 527.9
to closures.
4 -50
 Grocery & FMCG retailers are less impacted as they fall
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
Sep-14
Jan-18
Sep-19
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
Nov-18
May-11
May-16
May-21
under the Essentials category.
 E-Commerce has also been impacted as only essentials
are allowed for home delivery. Retail P/B (x) 10 Yr Avg (x) Retail Relative to Nifty PB (%)
18 600
14.9
 Furthermore, the rising raw material prices of cotton , 450
391.4
14
yarn fiber over the past two quarters could lead to rising 209.0
input costs, thereby impacting gross margins – as demand 10 7.9 300
remains low. 6 150
2 0
Sep-14
Sep-19
Sep-14
Jan-18
Sep-19
Jan-13
Jan-13
Jan-18
Jul-20
Jul-15
Jul-20
Jul-15
Mar-12
Mar-17
Mar-12
Mar-17
May-11
May-21
May-16
May-16
May-11
May-21
Nov-13
Nov-18
Nov-13
Nov-18
Aditya Birla Fashion na 180.8 na na 862 9.6 9.6 0 217 277
Avenue Supermarts 121.6 95.2 28 500 407 13.6 11.3 21 348 342
Jubilant 76.5 70.6 8 277 276 25.0 13.8 81 724 443
Shoppers Stop na 49.1 na na 161 0.0 12.0 -100 -100 369
Titan 73.1 48.1 52 261 156 16.5 10.6 56 444 314
Trent na 93.9 na na 400 12.6 4.9 159 315 91
V-Mart Retail na 38.7 na na 106 10.3 5.8 78 239 128

Technology: Demand tailwinds
 The Technology sector is trading at a P/E of 25.5x, a Technology P/E (x) 10 Yr Avg (x) Technology Relative to Nifty PE (%)
47.5% premium to its historical average of 17.3x. 27 25.5 40
25.7
 4QFY21 marks the third quarter of robust growth of
22 20
+3.7% QoQ USD for our large-cap IT Services Coverage
17.3 -6.7
Universe – despite the high base (4.9% QoQ) of 3Q. 17 0
 Most companies have reported strong deal wins, with 12 -20
improved growth visibility going forward. TCS reported
the highest ever deal wins of USD9.2b. 7 -40
Sep-14
Sep-19
Jan-13
Jul-20
Jul-15
Jan-18
Mar-12
Mar-17
May-16
May-11
May-21
Nov-13
Nov-18
Sep-19
Jan-13
Sep-14
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
Nov-13
Nov-18
May-11
May-16
May-21
 Total headcount additions for 4Q stood at 45k, among
the highest increases in recent history. This further
assures sustained growth momentum in our IT Services
Technology P/B (x) 10 Yr Avg (x) Technology Relative to Nifty PB (%)
Universe. 8 200
 While the managements of Tier1 companies have guided 7.2
150 137.3
for conservative double-digit revenue growth for FY22, 6
we believe this would increase over the course of the 4.5 100 77.8
year – given that the deal pipeline remains strong. We 4
are confident that the sector would report growth in the 50
mid-teens for FY22 and hence maintain our positive 2 0
Sep-14
Sep-19
Jan-13
Jan-18
Jul-20
Jul-15
Mar-12
Mar-17
May-16
May-11
May-21
Nov-13
Nov-18
stance on the sector.
Sep-14
Jan-18
Sep-19
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-11
May-21
May-16
Nov-13
Nov-18
 We continue to like INFO/HCLT from Tier I and LTTS/PSYS
from Tier II.
Coforge 32.3 15.4 110 60 -18 7.1 2.8 154 134 10
Cyient 18.7 14.8 26 -8 -21 3.0 2.4 30 0 -8
HCL Technologies 18.2 10.5 74 -10 -44 3.8 2.5 54 24 -4
Infosys 25.4 17.0 49 25 -10 7.0 4.1 71 130 60
L & T Infotech 32.2 18.0 79 59 -4 7.8 4.9 60 157 92
L&T Technology 30.9 20.5 50 52 9 6.8 5.1 33 125 102
Mindtree 30.0 15.7 90 48 -16 7.6 3.5 119 151 37
MphasiS 25.0 14.0 79 23 -25 5.0 2.3 121 66 -11
Persistent Sys 31.2 18.1 73 54 -4 5.9 3.1 92 94 20
TCS 28.3 18.6 52 40 -1 12.5 6.8 83 312 168
Tech Mahindra 17.0 13.2 29 -16 -30 3.2 2.7 18 5 6
Wipro 26.1 14.9 75 29 -21 5.4 2.8 90 77 11
Zensar Tech. 17.4 11.8 47 -14 -37 2.5 2.0 25 -19 -23

Telecom: Telcos pay for spectrum auction
 The Telecom sector is trading at an EV/EBITDA of Telecom P/B (x) 10 Yr Avg (x) Telecom Relative to Nifty PB (%)
13 330
7.3x, a 9% discount to the 10-year historical average 10.6
247.5
11
of 7.8x. 230
8
 Telcos have made upfront spectrum payments – 130
6 21.5
Bharti paid INR63b, RJio paid INR50b, while VIL paid 3.1
3 30
just INR5.7b (as it bought a lesser amount of
1 -70
spectrum last month).
Sep-14
Sep-19
Jul-15
Jan-18
Jul-20
Jan-13
Mar-12
Mar-17
Nov-13
Nov-18
May-21
May-11
May-16
Sep-19
Sep-14
Jan-13
Jul-15
Jan-18
Jul-20
Mar-17
Mar-12
May-11
May-16
May-21
Nov-13
Nov-18
 RJio plans to foray into the Submarine Data Cable
segment – connecting undersea cables from India to
the Europe and Southeast Asia – which could open Telecom EV/EBDITA (x) 10 Yr Avg (x)
up large opportunities in the Data Transmission 18
business.
13
7.3
7.8
8
Sep-14
Jan-18
Sep-19
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
Bharti Airtel na 39.3 na na 109 4.7 2.5 86 53 -2
Indus Towers 11.2 20.8 -46 -45 11 3.7 3.6 3 22 42
Vodafone Idea na 18.0 na na -4 na 1.4 na na -46
Tata Comm 20.1 26.0 -23 -1 38 16.3 16.2 1 437 534

Utilities: Electricity generation up 39% YoY in Apr’21
 The Utilities sector trades at P/B of 1.3x, a 32% Utilities P/E (x) 10 Yr Avg (x) Utilities Relative to Nifty PE (%)
19 25
discount to its historical average.
16 0
 Barring Torrent Power, JSW Energy, IEX, and CESC, all 13
-25
stocks under our coverage are trading at a discount 10 12.0
-33.4 -60.8
to the historical average P/B. 7 7.9 -50
4
 Short-term power prices were lower MoM at -75
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-21
May-11
May-16
Nov-13
Nov-18
Sep-14
Sep-19
Jan-13
Jan-18
Jul-15
Jul-20
Mar-12
Mar-17
Nov-18
Nov-13
May-11
May-16
May-21
INR3.7/kWh in Apr’21.
 Electricity generation increased 39% YoY in Apr’21.
Utilities P/B (x) 10 Yr Avg (x) Utilities Relative to Nifty PB (%)
3 30
2 5
1.8
2 -20
-27.2 -58.7
1 -45
1.3
1 -70
Sep-14
Sep-19
Jan-18
Jan-13
Jul-15
Jul-20
Mar-12
Mar-17
May-21
May-11
Nov-13
May-16
Nov-18
Sep-14
Sep-19
Jul-15
Jul-20
Jan-13
Jan-18
Mar-12
Mar-17
May-11
May-16
May-21
Nov-13
Nov-18
CESC 7.0 9.5 -27 -66 -49 0.8 0.8 6 -73 -70
Coal India 5.8 12.6 -54 -72 -33 2.0 5.4 -63 -35 113
Indian Energy Exchange 39.0 26.7 46 92 42 17.0 11.7 46 460 357
JSW Energy 19.5 13.5 44 -4 -28 1.5 1.2 26 -50 -53
NHPC 8.4 9.6 -12 -58 -49 0.8 0.8 -6 -75 -69
NTPC 6.5 11.8 -45 -68 -37 0.8 1.3 -36 -73 -51
Power Grid Corpn 8.7 10.7 -19 -57 -43 1.5 1.7 -6 -49 -35
Tata Power Co. 19.7 23.1 -14 -3 23 1.5 1.6 -1 -49 -39
Torrent Power 13.6 16.1 -15 -33 -14 1.8 1.3 39 -40 -49

Quant Research & India Strategy Gallery
BULLS & BEARS | June 2021

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momentum in our IT Services Universe. 10.6 10.1

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10 Year Avg: 18.8x

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 The Retail industry is once again at the forefront of the 204

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BULLS & BEARS | June 2021

Disclosure of Interest Statement Companies where there is interest

Regional Disclosures (outside India)

For Hong Kong:

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