Morgan Stanley Says India's Lesser Noticed Earnings Growth Will Power Markets In Next 2 Years
29 July 2023 12:00 PM GMT
- <01:00> Morgan Stanley Says India's Lesser Noticed Earnings Growth Will Power Markets In Next 2 Years
- <06:55> A whopping 134 of 684 aircraft belonging to Indian airlines are actually parked on ground with Kapil Kaul
- <13:43> House prices are rising all over the country except in Mumbai where it is falling
- <16:56> More long range electric cars are coming
TRANSCRIPT
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
Good morning, it's Thursday, the 15th of June and I'm Govindraj Ethiraj coming to you from Mumbai, India's financial capital..the only city where according to a most recent report, the cost of buying a house has not gone up in recent times.
More on that soon but the other top reports for now.
- Morgan Stanley Says India's Lesser Noticed Earnings Growth Will Power Markets In Next 2 Years
- A whopping 134 of 684 aircraft belonging to Indian airlines are actually parked on ground
- House prices are rising all over the country except in Mumbai where it is falling
- More long range electric cars are coming
Morgan Stanley
Investment banker Morgan Stanley has made a strong case for a major earnings upswing in the next year which may not be entirely reflected in current stock prices, high as they might seem.
This fundamentally means that a sizeable basket of Indian companies are set to be more profitable and turn in better margins in the next year and two than they have till now, even if growth overall is steady and the world slows down.
A June 5 report put out by Morgan Stanley's India Equity Strategy team says net profit growth of Sensex and Nifty year on year at 21% and 18%, beat their analyst expectations by 10 percentage points and 4 percentage points.
The larger point is that earnings growth was positive for 8 of the 10 sectors covered with consumer discretionary reporting the best earnings growth followed by communication services.
Significantly, the top down view may not reflect the earnings upswing, which people may have missed, Riddham Desai, Head of Equity Research and India Equity Strategist for Morgan Stanley told Bloomberg Television yesterday.
Before I play back his quote, what he is saying is:
Some sectors like IT sesrvices and even global materials and energy will not do well. But what will do well is rate sensitives like financials, sectors exposed to India's growth like discretionary consumption and industrials.
Let's listen in:
Now, The big question, how should one look at this going forward. Last month, Morgan Stanley released an extremely bullish and rosy report called How India Has Transformed In Less Than A Decade, referring quite obviously to the Narendra Modi Government's rule since 2014.
It talked about 10 big changes including supply side reforms, formalisation of the economy and so on and 10 implications of this including manufacturing and capital expenditure as percentage of GDP rising, export market share doubling and shifts in India's consumption basket as India's per capita GDP goes from $2,200 now to around $5,200 in 9 years time.
I would term this broadly as hope and desire, in a positive way of course.
But one point which caught my eye then now is the profit boom, share of corporate profits in India's GDP doubling from all time lows in 2020, leading to strong absolute and relative earnings, which in term explain the rich valuations.
So, should you buy now ?
Earnings are still ahead, right now, the markets continued to hold strong with the Sensex up 85 points to 63,228 and the Nifty up 40 points to 18,755, all close to record highs.
Airlines
India is one of the hottest aviation markets in the world right now and rightly so as we see both infrastructure and airline expansion at levels not seen before.
And yet, we are not fully off the starting point yet.
A shopping 130 of 684 aircraft or almost 20% of the country's fleet are grounded, as in they cannot fly and won't be able to for some time to come.
Of these 59, belong to GoFirst which has been grounded since May 4 last month but even if you take them out, it is a large number.
The reasons are many and range from financial which is GoFirst, currently in insolvency to technical, broadly termed as supply chain issues involving aircraft engines. Interestingly, Indigo which is in the pink of financial health at least relatively, at this moment, also has around 30 aircraft grounded.
What does this mean from a capacity and availability of seats perspective and most importantly for fares in coming months which as we know are sky high, particularly for late bookings. To discuss this, am joined by Kapil Kaul, CEO of airline consulting and research firm CAPA India.
Still on aviation, a new airline called Jettwings has said it has received a NOC to operate scheduled commuter air transport services and wants start flying from October.
It will be based in Guwahati and plans to connect regional destinations in the east and north east initially.
The airline said at a press conference yesterday it aims to start flying under the Government's regional airport and connectivity scheme or UDAN or Ude Desh Ka Aam Nagrik scheme.
The airline promises, in it's logo, to connect the North East to the world.
Right now, Jettwings, as I could see runs a multi dimensional training institute based in the north east offering training for everything from pilots and cabin crew to fashion, interior design and architecture.
Unusual, but the aviation industry has always attracted entrepreneurs from varied backgrounds. Many hail from air travel or linked fields. Indigo fits right there as did Jet Airways which by the way has a new owner after having gone through an agonisingly law and debilitating insolvency process but is yet to get off the ground. The most unusual background I would say in India's short aviation history would be Damania Airways, started by a businessman Parvez Damania who ran a hatchery before venturing into the skies.
Air Fares Are Up, Stocks too, so house prices.
Housing prices across top 8 cities in India, increased 8% year on year thanks to strong housing demand supplemented by what the construction industry claims is consistent quality launches by top developers.
The highest rate increase in residential prices was in Delhi at 16% followed by Kolkata at 15% and Bangalore at 14%.
These numbers are from the Credai - Colliers - Liases Foras Housing price tracker report for the first quarter, which is until March 31, 2023.
The only city according to the report where prices fell on an average square feet price of Rs 19,219, also the highest in the country by 2% is Mumbai. Which also has the highest unsold inventory in the country at 37%, a testament to the sheer size of bank balances of the builders and developers in the city I would imagine, or more likely sheer size of ego.
Not for nothing do i call it the most rocking city in the world.
Unsold inventory also shot up in Hyderabad, currently around Rs 10,410 a square feet.
Back in Delhi, areas like Dwarka Expressway saw prices rising by 59% thanks to opening of various roads connecting to it.
Friends of mine who live there, I will surely visit you now.
Ahmedabad has the most affordable real estate around Rs 6,324 average and Chennai and Kolkata are close around Rs 7,395 and Rs 7,211.
And finally, more long range electric cars are coming.
Toyota has said it is planning an EV with a range of 1,200 km and a charge time of only 10 minutes. So Mumbai to Bangalore in one charge, assuming you don't get stuck at the ghats in Khandala.
That will come a few years later though.
Toyota says it will introduce a high-performance lithium-ion battery to its next-generation EVs by 2026 which will charge quickly and have a range of 1,000 km (620 miles) of range.
And even closer, like in a few months, Volvo has unveiled the C40 Recharge, an all-electric SUV that will be launched in August, with deliveries starting in September.
The C40 Recharge will be Volvo's second electric offering in India, after the fully-electric XC40 Recharge last year.
Volvo Cars India which manufactures in Bangalore had earlier said it wants to be fully electric in India by around 2025, ahead of its global target of becoming a full-electric car company by 2030.
The company said the C40 offers a range of 530 km on a single charge and supports fast charging, enabling 10-80% charging in 27 minutes. Expected price is 60 lakh
And among some international news with relevance to us before I go..
The European Union has said it may seek the breakup of Google's ad-tech business after it charged the tech giant with abusing its dominance of the online advertising technology industry.
The European Commission, the European Union's antitrust regulator, said Google abused its dominant role in the buying and selling of online ads across third-party websites and apps to drive business and give other advantages to its own advertising auction house, known as an ad exchange.
The unit of Alphabet could, for instance, be required to sell off its ad server that works with website publishers and its advertising exchange, Margrethe Vestager, the EU's competition chief, told the Wall Street Journal.
That's it from me for today, hope you have a great day and do share this podcast with friends and family and send in your feedback to me on [email protected]
