Summary of the Conference Call on India's Equity Strategy Industry Overview - The focus is on the Indian equity market, particularly in the context of macroeconomic conditions and policy changes affecting growth and valuations. Key Points and Arguments 1. Market Correction and Recovery - Indian equities have experienced a significant correction since September 2024, but signs indicate a potential recovery as the growth cycle turns [1][2][3]. 2. Factors Influencing Underperformance - Key factors for India's underperformance include a growth slowdown in the second half of 2024, high relative valuations, lack of explicit AI-related trades, and delays in the US trade deal [2]. 3. Positive Growth Outlook - A positive growth surprise is anticipated due to: - Reflation efforts by the Reserve Bank of India (RBI) and government through rate cuts and liquidity infusion. - Expected GST rate cuts amounting to nearly ₹1.5 trillion, favoring mass consumption. - Improved relations with China and a potential India-US trade deal [3]. 4. Case for Re-rating - Structural changes such as a declining intensity of oil in GDP and an increasing share of exports, particularly in services, suggest lower real rates and reduced inflation volatility, which could lead to higher P/E ratios [4]. 5. Key Catalysts and Risks - Catalysts include: - Anticipated positive earnings revisions. - Expected RBI rate cuts. - Ongoing policy reforms, including GST cuts and privatization efforts. - Potential India-US trade deal. - Risks involve slowing global growth and geopolitical tensions [5]. 6. Portfolio Strategy - Recommended strategy includes: - Overweighting sectors like Financials, Consumer Discretionary, and Industrials. - Underweighting sectors such as Energy, Materials, Utilities, and Healthcare. - Emphasis on domestic cyclicals over defensives and external-facing sectors [6]. 7. Economic Indicators - Key economic indicators suggest a positive outlook for growth, with nominal GDP growth expected to outpace policy rates, which historically correlates with strong stock performance [36][41]. 8. Valuation Insights - Current P/B ratios suggest modest long-term returns, with the market cap to M2 ratio indicating lower returns in the near term [80][84]. 9. Sentiment and Flows - Institutional flows are currently off highs, indicating a potential contra indicator for market performance. The proprietary sentiment indicator suggests a buy zone, indicating favorable conditions for risk-taking [93][94]. 10. Macro Forecasts - GDP growth is projected at 6.5% for FY2025, with a gradual decline in the repo rate to 5.00% by FY2026. EPS growth for the Sensex is expected to compound at 16.8% annually through FY2028 [97][99]. 11. Index Target - The BSE Sensex target is set at 89,000 by June 2026, implying a 6% upside potential, supported by macro stability and positive growth expectations [98]. Additional Important Insights - The report emphasizes the importance of macroeconomic stability and policy predictability in driving equity performance, with a focus on domestic consumption and investment as key growth drivers [40][99]. This summary encapsulates the critical insights from the conference call regarding the Indian equity market's outlook, key drivers, and strategic recommendations for investors.

Investment Rating - The report suggests that India will likely outperform a global bear market while underperforming in a bull market, indicating a positive long-term investment outlook for India despite global uncertainties [1][3]. Core Insights - Strong macroeconomic fundamentals are highlighted, including improving terms of trade, declining primary deficit, and falling inflation volatility, which are expected to support mid- to high-teens earnings growth annually over the next three to five years [6]. - Technical indicators are favorable, with orderly declines in the market and persistent retail buying, suggesting a structural nature to the current market dynamics [6]. - Key catalysts for India include dovish actions from the Reserve Bank of India (RBI), potential stimulus through GST rate cuts, and a trade deal with the US, while global factors such as US policy and growth rates remain crucial [6]. Summary by Sections Macro Stability - The report emphasizes strong macro stability with a reliable source of domestic risk capital and a dovish RBI, which are expected to support economic growth [6][35]. Corporate Fundamentals - Earnings growth is projected to be robust, with estimates suggesting a compound annual growth rate of 16% through fiscal year 2028, driven by increased private investment and macro stability [94][96]. Valuations - The current price-to-book (P/B) ratio of 3.8 implies a 10-year annual return of 9.6%, indicating improved long-term return prospects [77][78]. Portfolio Strategy - The recommended portfolio strategy favors domestic cyclicals over defensives and external-facing sectors, with an overweight position in financials, consumer discretionary, and industrials [6][100]. Economic Forecasts - GDP growth is forecasted at 6.3% for fiscal year 2025, with a gradual decline in the repo rate expected to support economic activity [94]. Index Target - The base case target for the BSE Sensex is set at 82,000 by December 2025, reflecting a modest upside potential of 2% from current levels [95][96]. Sentiment Indicators - The proprietary sentiment indicator remains in the buy zone, suggesting positive market sentiment despite global uncertainties [6][91]. Institutional Flows - Institutional flows are currently off highs, indicating potential shifts in market dynamics that could impact equity returns in the near term [88]. Risk Factors - While the report identifies several risks, it emphasizes that the overall outlook for India remains positive, supported by strong fundamentals and favorable technicals [6].