Don’t Bet Against India

Sensex may hit 2,00,000 in 10 years!

Raamdeo Agrawal
27 May 2021
Prediction is dangerous,
especially of the future!

2
II have
have but
but one
one lamp
lamp by
by which
which my
my feet
feet are
are guided,
guided,
and
and that
that is
is the
the lamp
lamp of
of experience.
experience. II know
know of
of no
no
way
way to
to judge
judge the
the future
future but
but by
by the
the past.
past.
—
— Patrick
Patrick Henry,
Henry, American
American politician
politician

3
India – Reviewing the last 10 years

4
Market has delivered modest return last 10 years
BSE
BSESensex
Sensex 49,509
50,000 49,509
50,000

40,000
40,000
10%
10% CAGR
CAGR
30,000
30,000
19,445
20,000 19,445
20,000

10,000
10,000
Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21
Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-19

Mar-20

Mar-21
Mar-18
Crises like Demonetisation, ILFS fiasco and Covid have been taken in stride
5
India’s growth: Better than world, but not China

Nominal
NominalUS$
US$GDP
GDP- -Indexed
Indexedtoto100
100
5,000
5,000
China:
China:10%
10%CAGR 13.2
CAGR 13.2tntn
4,000 World:
World:2%2%CAGR
CAGR
4,000
India:
India:4%
4%CAGR
CAGR
3,000
3,000

2,000
2,000
66tntn 2.6
2.6tntn
1,000
1,000
1.7
1.7tntn
66 tntn 82
82tntn
0
0
66
2010

2011

2012

2013

2014

2015

2017

2018

2019

2020E
2016
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020E
6
Long runway ahead for India
India
Indiav/s
v/sChina
China- -GDP
GDPinin$$trillion
trillion
16  India is today where
16
14 China was in 2006
14
India
India China
China
12
12
14.3
14.3
10
 From 2006 to 2020,
10
8
China’s GDP CAGR
8
6
Where India
Where India
is a robust 12%
6 is today
4
is today 2.9
4 2.9
2
2
0
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
7
India – The NTD Opportunity

8
 FY51 22
FY51 22
FY60 34
FY60 34
FY70 59
FY70 59
FY80 155
FY80 155
FY90 301
FY90 301
FY00 465
FY00 465
FY01 475

1st US$ tn
58 years
FY01 475

1st US$ tn
58 years
FY02 494
FY02 494
FY03 524
FY03 524
FY04 618
India GDP trend (USD B)

7 years
FY04 618
India GDP trend (USD B)

FY05 721
2nd US$ tn

7 years
FY05 721
FY06
FY06
834
834 2nd US$ tn
FY07 948
FY07 948
FY08 1,239
FY08 1,239
FY09 1,226
FY09 1,226
FY10 1,366
FY10 1,366
FY11 1,708
FY11 1,708
8 years

FY12 1,879
8 years
3rd US$ tn

FY12 1,879
3rd US$ tn

FY13 1,827
FY13 1,827
FY14 1,858
FY14 1,858
FY15 2,039
FY15 2,039
FY16 2,091
FY16 2,091
3 years

FY17 2,290
4th US$ tn

3 years

FY17 2,290
4th US$ tn

FY18 2,653
FY18 2,653
FY19 2,713
FY19 2,713
FY20 2,869
FY20 2,869
FY21E 2,628
FY21E 2,628
FY22E 2,868
India is the ultimate NTD story

FY22E 2,868
FY23E 3,107
FY23E 3,107
FY24E 3,366
5th US$ tn
3 years

FY24E 3,366
5th US$ tn
3 years

FY25E 3,646
FY25E 3,646
FY26E 3,950
FY26E 3,950
FY27E 4,279
FY27E 4,279
FY28E 4,636
FY28E 4,636
FY29E 5,022
FY29E 5,022
few years
dollar of GDP

dollar) in successively

9
 60 years for first trillion

 Every NTD (next trillion

Linear growth, exponential opportunity
 Trebling of per capita GDP implies 10x opportunity in discretionary
& 4x opportunity in savings & investment services

Basic spend
Basic spend
Discretionary spend
Discretionary spend
Saving 1200
Saving 4x4x 1200
300
300 10x
100
100 10x 1,050
1,050
600
600
750
750
GDP p.c. $1,000
GDP p.c. $1,000
GDP p.c. $3,000
GDP p.c. $3,000

10
Can India be the next China?
Most indicators are favourable

11
#1 Democracy
 India is the largest democracy in the world
 Rule of law prevails

 Well-established federal structure

 Centre-State relations continuously improving

 Moving towards a one-nation idea

 One unified market
 One income tax
 One GST
 One Aadhaar
 One ration card
 One mobile number
 One bank account

12
#2 Demography
 Second highest population in the world …
 A huge domestic market

 … dominated by youth
 40% below 20, 85% below 50

13
#2 Demography (continued)

 Burgeoning middle class Source: Bain & Co / Consultancy Asia

Long runway of high demand for goods & services 14

#3 Digitization
 India’s global reputation built on the back of software exports
 India’s domestic digitization – internet and mobile – comparable
with the best in the world

India Software Exports ($ bn) 150

136 150
FUN FACTS:
India Software Exports ($ bn)
122 136
113 122
107 113 • Over 120 crore telecom
21% CAGR 98 107
21% CAGR 87 98
76 87
subscribers, equal number of
69 76
59 69 mobile phones
47 50 59
40 47 50
31 40
18 2424 31
• Over 45 crore smart phones
3 4 6 8 10 1313 18
8 10
3 4 6
• Over 56 crore internet users,
FY00
FY01

FY04
FY05
FY06

FY10

FY14
FY15
FY16

FY18
FY19
FY99

FY02
FY03

FY07
FY08
FY09

FY11
FY12
FY13

FY17

FY20E
2nd only to China
FY99

FY01
FY02
FY03
FY04

FY06
FY07
FY08
FY09

FY11
FY12
FY13

FY16
FY17
FY00

FY05

FY10

FY14
FY15

FY18
FY19
FY20E 15
 #4 Dollar inflows & Forex reserves
Forex reserves from less than $5 billion in 1991 to $590 billion now
600 590
Forex inflows ($ billion) 73 600 590
Forex inflows ($ billion) 73 Forex reserves - $ billion
Net FDI Net FPI 500 Forex reserves - $ billion
Net FDI Net FPI 500
50 52
50 47 52 44 400
43 42 39 47 43
43 42 39 43 44 400
32
28
17% CAGR
26 32
28
300 17% CAGR
8 26 300
14 13 16161515 8
200
14 8 8 7 13
5 200
5 8 8 7
100
100
4
0 4
0

FY87
FY89
FY91

FY95
FY97
FY99
FY01
FY03

FY07
FY09
FY11
FY13
FY15
FY17
FY19
Latest
FY85

FY93

FY05
FY00

FY02
FY03
FY04
FY05

FY10
FY11
FY12
FY13
FY14
FY15
FY16

FY19
FY20
FY01

FY06
FY07
FY08
FY09

FY17
FY18

FY85

FY91
FY93

FY01

FY05

FY09

FY13

FY17

Latest
FY87
FY89

FY95
FY97
FY99

FY03

FY07

FY11

FY15

FY19
FY00
FY01

FY04
FY05
FY06
FY07
FY08
FY09

FY12
FY13

FY15
FY16
FY17
FY18
FY02
FY03

FY10
FY11

FY14

FY19
FY20

16
 4
5
6
7
8
9
10
11
12

4
5
6
7
8
9
10
11
12
Apr-99
Apr-99
Apr-00
Apr-00
Apr-01
Apr-01
Apr-02
Apr-02
Apr-03
Apr-03
Apr-04
Apr-04
Apr-05
Apr-05
Apr-06
Apr-06
Apr-07
Apr-07
Apr-08
Apr-08
Apr-09
Apr-09
Apr-10
Apr-10
Apr-11
10 year G-Sec, %

Apr-11
10 year G-Sec, %

Apr-12
Apr-12
Apr-13
Apr-13
Apr-14
Apr-14
Apr-15
Apr-15
Apr-16
Apr-16
Apr-17
 Inflation is fairly benign

Apr-17
Apr-18
Apr-18
Apr-19
Apr-19
0
3
6
9
12
15
18

0
3
6
9
12
15
18

Apr-99
Apr-99
Apr-00
Apr-00
Apr-01
Apr-01
Apr-02
Apr-02
Apr-03
Apr-03
Apr-04
Apr-04
Apr-05
#5 Declining interest rates & inflation

Apr-05
Apr-06
Apr-06
Apr-07
Apr-07
 10-year GSec rate has halved in the last 10 years

Apr-08
Apr-08
Apr-09
Apr-09
Apr-10
Apr-10
Apr-11
Apr-11
CPI Inflation, % YoY

Apr-12
CPI Inflation, % YoY

Apr-12
Apr-13
Apr-13
Apr-14
Apr-14
Apr-15
Apr-15
Apr-16
Apr-16
Apr-17
Apr-17
Apr-18
Apr-18
17

Apr-19
Apr-19
 #6 Declining crude easing CAD
 Crude is down 50% from its peak levels …
 … significantly easing current account deficit

Crude oil price ($/Barrel)

FY91
FY93
FY95
FY97

FY05
FY07
FY09
FY11
FY13
FY15
FY17
FY99
FY01
FY03

FY19
Crude oil price ($/Barrel)

FY93
FY95
FY97
FY99
FY01
FY03
FY05

FY15
FY17
FY19
FY91

FY07
FY09
FY11
FY13
160
160 20 3
140
133 20 3
140
133 125 2
120 125 0 2
120 0 1
1
100
100 -20 0
81 -20 0
80 81 68 -1
80 68 -1
-40
60 -40 -2
60 -2
40 -60 -3
40 -60 -3
20 32 CAD ($ bn) % of GDP (RHS)
20 32 CAD ($ bn) % of GDP (RHS)
-4
-4
-80
0 -80 -5
0 Current Account Deficit -5
Apr-99
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06

Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14

Apr-16
Apr-17
Apr-18
Apr-19
Latest
Apr-07

Apr-15

Current Account Deficit

Apr-99
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Latest -100 -6
-100 -6

18
 The added advantage
Most stable government in place

19
Make “business” the business of India!
 No business to be in business
 Aggressively divest PSU holdings

 Minimum government, maximum governance

 All blockades should be cleared
 Focus should be on creating jobs

 Kickstart growth
 Accelerated investment in economic & social infrastructure

20
Covid – a temporary blip
Beginning of the end

21
Covid pointers
 Covid now a known beast

 Global fiscal and monetary response

 In India …
 Fiscal deficit of 9.5%
 RBI ensuring sufficient liquidity

 Vaccination marks the beginning of the end

 Expect K-shaped recovery; larger businesses will recover faster

22
Sensex can hit 2,00,000 in 10 years
Required CAGR is just 15%

23
 FY01 73
FY01 73
FY02 78
FY02 78
FY03 92
FY03 92
FY04 131
FY04 131
FY05 169

FY01-09:
FY05 169

17% CAGR
FY01-09:
FY06 184

17% CAGR
FY06 184
FY07 236
FY07 236
FY08 281
FY08 281
FY09 251
FY09 251
FY10 247
FY10 247
FY11 315
FY11 315
FY12 348
FY12 348
FY13 369
FY13 369
FY14 405
FY14 405
FY15 416
FY09-20:
6% CAGR

FY15 416
FY09-20:
6% CAGR

FY16 397
FY16 397
FY17 426
FY17 426
FY18 449
FY18 449
FY19 483
FY19 483
FY20 472
FY20 472
FY20-22E:
26% CAGR

FY21E 535
FY20-22E:
26% CAGR

FY21E 535
FY22E 750
FY22E 750
FY23E 871
FY23E 871
13
17
20
24
27
31

13
17
20
24
27
31

May-11
May-11

May-12
May-12

May-13
May-13
10 Year Avg: 20x
10 Year Avg: 20x

May-14
May-14

May-15
May-15
Expect earnings growth to revive, PEG 1x

May-16
May-16

May-17
May-17

May-18
May-18

May-19
May-19

May-20
May-20

May-21
27

24

May-21
27
How 2,00,000 can happen
 12-13% nominal GDP growth
 7-8% real + 4-5% inflation

 Corporate Profit growth to be slightly higher than GDP growth

(i.e. 15% CAGR)

 Market growth broadly in line with Corporate Profit growth

 15% CAGR over 10 years is 4x

 50,000 x 4 = 2,00,000
25
 Sectors to watch out
Go for Value Migration & Open-up plays

26
What is Value Migration?
“Value (i.e. profits & market cap) migrates
from outmoded business design to superior
business design.”
— Adrian Slywotzxy
Examples
 Telecom – from Wired to Wireless
 IT – from Boston to Bengaluru
 Banks – from public sector to private sector
 Many businesses – from unorganized to organized

Value Migration creates massive opportunity for sectors which see value inflow

27
 IT
 India has global competitive advantage
 Long digitalization runway ahead

IT Sector Performance (INR '000 crores) IT - Share of India Inc PAT & Mkt Cap 1995 2020
90 IT Sector Performance (INR '000 crores) 1,800 IT - Share of India Inc PAT & Mkt Cap 1995 2020
90 Mkt Cap (RHS) 1,800
80 Mkt Cap (RHS) 1,600 27.0%
80 PAT 1,600 27.0%
70 PAT 1,400
70 1,400
60 1,200
60 1,200
50 1,000
50 1,000
40 800 12.4%
40 800 12.4%
30 600
30 600
20 400
20 400
10 200
10 200 0.5% 0.7%
0 0 0.5% 0.7%
0 0
1995
1996
1997

1999
2000
2001
2002

2004
2005
2006
2007

2009

2011
2012
2013
2014
2015
2016
2017
2018

2020
1998

2003

2008

2010

2019
1995
1996
1997
1998
1999
2000
2001

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

2015
2016
2017

2019
2020
2002

2014

2018

Share of PAT Share of Mkt Cap

Share of PAT Share of Mkt Cap

28
Private Banking
 Value Migration story will sustain for a long time

Banking Sector PAT (INR '000 crores) Banking Sector Mkt Cap Mix Public Sector Private Sector
60 Banking Sector PAT (INR '000 crores) Banking Sector Mkt Cap Mix Public Sector Private Sector
60 Private Sector 100%
40 Private Sector 100%
90%
40 Public Sector 90%
Public Sector 80%
20 80%
20 70%
70%
60%
0
0 60%
50%
-20 50%
-20 40%
40%
30%
-40
-40 30%
20%
-60 20%
10%
-60 10%
-80 0%
0%

1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
-80

1997

2002

2004
2005

2008

2016

2019
1995
1996

1998
1999
2000
2001

2003

2006
2007

2009
2010
2011
2012
2013
2014
2015

2017
2018

2020
-100
-100
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

2011
2012
2013

2015
2016

2018
2019
2020
2010

2014

2017
CAGR - Private Sector: 31%; Public Sector: 15%
1995
1996
1997
1998
1999

2001
2002

2005
2006

2009
2010

2013
2014

2016
2017

2019
2020
2000

2003
2004

2007
2008

2011
2012

2015

2018
CAGR - Private Sector: 31%; Public Sector: 15%

29
Private Life Insurance
 Sunrise sector
 Here too, there’s Value Migration from public to private

Life Insurance Sector PAT (INR crores) Private Life Insurance Sector Mkt Cap (INR crores)
Life Insurance Sector PAT (INR crores) Private Life Insurance Sector Mkt Cap (INR crores)
2,964 3,013 1,59,385
2,964 3,013 1,59,385 1,50,611
2,705 2,720 2,679 1,38,251 1,50,611
2,705 2,720 2,679 2,509 1,38,251
2,426 2,509
2,426

70,277
70,277

2014 2015 2016 2017 2018 2019 2020 2017 2018 2019 2020
2014 2015 2016 2017 2018 2019 2020 2017 2018 2019 2020

30
Open-up Plays
 Sectors can be classified based on two types of demand –
 Lost demand
 Postponed demand

 Given Covid, market has hammered both sectors equally

 Post open-up, sectors with Postponed demand should surge

 Positive for sectors like Autos, Consumer durables, Paints,

selective Industrials

31
Conclusions
 India is the ultimate Next Trillion Dollar Opportunity
 Adding 1 trillion dollars of GDP in successively shorter periods

 Key indicators are favourable …

 Democracy, Demography, Digitisation, Dollar reserves, Stable government

 Covid is a temporary blip

 Vaccination marks the beginning of the end

 Sensex can hit 2,00,000 in 10 years

 Required CAGR is just 15%

 Play Value Migration and Open-up plays

 IT, Private banks, Life insurance, Auto, Consumer durables, Paints, select Industrials

 Don’t bet against India

 Be optimistic and patient 32
 Thank You !
&
Happy Wealth Creation !

33