Monthly Presentation - SBI MF

[Pages:38]Monthly Presentation

March 2019

EQUITY MARKET

Global equity market snapshot: February 2019

Performance in February 2019 (local currency returns)

Performance YTD (local currency returns)

Performance in February 2019 (US$ returns)

Performance YTD (US$ returns)

Source: Bloomberg, SBIMF Research

Indian stock market sector-wise returns: February 2019

Performance in February 2019 (local currency returns)

Performance YTD - local currency returns

? Indian equity market delivered negative returns across most of the sectors in February. Nifty and Sensex were down by 0.4% and 1.1% respectively during the month. On YTD basis, both Nifty and Sensex were down 0.6%.

? Large caps continued to outperform mid and small cap. Mid-cap index and small-cap index were down by 1.7% each during the month. On YTD basis, performance down the capitalization curve has been worse with mid and small cap index falling 7.3% and 6.9% respectively.

? PSUs and banks were the underperformers while auto and oil & gas were the outperformers during the month. On YTD basis, consumer durables and oil & gas were the sector outperformers while capital goods and metals were the sectoral laggards.

Source: Bloomberg, SBIMF Research

Q3 FY19 GDP growth moderated to 6.6%

Q3 FY19 GDP growth moderates to 6.6% vs. 7.0% in Q2 FY19

? Q3 FY19 GDP moderated to 6.6% vs. 7.0% in Q2 FY19 led by moderation in consumption spending. Consumption growth moderated from 9.4% in Q2 FY19 to 8.4% in Q3 FY19, though at +8%, it is still healthy. Investment growth improved marginally (10.6% vs. 10.2% in Q2) and net exports situation improved marginally.

? Investment growth has been holding up for nearly one and a half year and is supporting the incremental growth in India. On the other hand, consumption growth trends appears to have broadly stabilized 7-8%.

? GVA growth moderated to 6.3% (vs. 6.8% in Q2) led by softer agriculture and services growth. Industrial activities on the other hand improved. Within industrial sector, it was the robustness in construction activities and improvement in mining output which pulled the growth higher while utilities and manufacturing softened.

? Looking ahead, the government has lowered its FY19 advance estimate of growth from 7.2% to 7% for FY19. This implies a growth of 6.6% in Q4 FY19. For FY20 as well, overall growth is likely to hover around 7-7.3%.

Source: CMIE economic outlook, SBIMF Research,

Q3 FY19 depicts strength in investment and construction activities

Investment growth recovery seen since FY18; Consumption growth trends broadly stable around 7-8%

Agriculture output moderating, weak farm prices dragging the Agri-income growth even lower

Industrial activities are improving mainly due to robustness in the construction activities

Core GVA (GVA ? ex agriculture & public services), a rough proxy of private sector activity, improved marginally

Source: CMIE Economic Outlook, SBIMF Research

Economic activity tracker gave mixed signals in January 2019

High frequency indicator gave mixed signals in January 2019. Construction and investment activities continue to stay robust.

Weakness in wage growth, and moderation NBFC loan disbursement has weighed down on the demand for select consumer

(across all segments). But, pre-election spending (reflected in high CIC growth), and banks filling in some of the void left by the

NBFCs may keep the overall consumption growth supported. The launch of PM Kisan Nidhi Scheme (income support for small and

medium farmers) have gone favourably thus far. Production of consumer non-durables (i.e. low ticket consumption items) are

holding strong. IIP manufacturing, merchandise exports growth and freight activity has been softening but February PMI data was

encouraging. In services, the overall PMI services indicates robustness.

% growth

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-19

5yr average

Indicators that are Robust

Bank retail loans

18.2

15.1

16.8

17.2

17.0

16.9

16.5

Currency in circulation

22.7

21.2

20.0

21.1

19.6

19.1

11.6

IIP: Capital goods production

10.3

6.9

17.0

-3.1

5.9

0.0

2.9

Imports of capital goods

45.7

7.0

11.9

17.3

12.2

10.3

6.2

Services exports

20.6

19.3

18.8

8.3

12.0

0.0

6.3

Cement production

14.6

11.8

18.4

8.8

11.6

11.0

5.7

Bitumen consumption

-0.6

34.5

42.8

-15.3

2.0

15.1

8.0

Steel consumption

6.8

7.7

8.1

12.6

6.5

8.6

5.8

Indicators that have recently turned positive

Bank industrial credit

1.9

2.3

3.7

4.0

4.4

5.1

3.2

IIP: Consumer non-durables production

6.5

6.4

8.8

-0.6

5.3

0.0

5.8

Indicators that have weakened in recent months

Fertilizers production

-5.3

2.5

-11.5

-8.1

-2.4

10.5

1.9

IIP: Manufacturing production

5.2

4.8

8.2

-0.6

2.7

N/A

4.1

IIP: Mining production

-0.6

0.1

7.2

2.7

-1.0

N/A

2.9

IIP: Electricity production

7.6

8.2

10.9

5.1

4.4

-0.4

7.6

IIP: Consumer durables production

5.5

5.4

18.0

-2.1

2.9

0.0

3.9

Merchandise exports

19.3

-2.2

17.9

0.6

0.3

3.8

1.6

Freight handled at ports, railways and airways

6.7

4.2

8.4

3.8

0.5

0.7

3.6

Domestic Tractor sales

12.7

-10.5

23.6

24.5

4.8

2.8

6.8

Domestic sale of commercial vehicles

29.6

24.1

24.8

5.7

-7.8

2.2

10.2

Domestic sale of two-wheelers

2.9

4.1

17.2

7.1

-2.2

-5.2

8.8

Domestic sale of passenger Cars

-1.0

-5.6

0.4

-0.9

-2.0

-2.6

4.9

AUM of MFs

22.4

8.0

3.8

5.4

6.9

4.3

23.5

Foreign tourist arrivals

9.1

-0.1

1.7

1.4

2.0

5.3

8.9

Domestic air traffic

16.9

18.0

13.1

10.4

12.3

9.1

17.8

Indicators that are weak for long

Rural wage growth

3.6

3.5

3.8

N/A

N/A

0.0

5.3

Source: CMIE economic outlook, SBIMF Research; NB: 1. Green denotes improvement in the growth and Pink indicates a moderation. 2. We use some subjectivity in categorizing the data by looking at both the trends in the recent months as well as trends relative to long term average. 3. We have shifted to steel consumption data from steel production data since Jan 2019.

February PMI indicates improvement in economic activity

PMI manufacturing rose to a 14-month high of 54.3 in February PMI services inched higher to 52.5 in February

? PMI manufacturing increased to a 14-months high of 54.3 (vs. 53.9 in January) in February, higher than its historical average of 51.9. This is mainly led by an increases in manufacturing output, new orders and employment. The growth in the order book came, to a large extent, from new export orders. Input and output prices grew at a faster pace compared to January, with output prices growing faster than input prices leading to manufacturing margins improving a notch.

? In February, PMI Services inched higher to 52.5 vs. 52.2 in January. New business received by services companies rose to a greater extent in February amid strengthening underlying demand. At the same time, growth of factory orders climbed to a 28month peak. Business sentiment also improved, while rates of both input cost and output charge inflation cooled. One area of weakness was international trade, with exports down from January.

Source: CMIE Economic Outlook, Markiteconomics, SBIMF Research

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