India equities are poised to continue upgrading in 2013 according to Right Horizons PMS. The outlook is positive due to lower borrowing costs, higher liquidity, strong consumption, and potential turnarounds in underperforming sectors like financials and infrastructure. Nifty is projected to reach 6800 by end of 2013 implying 16% annual growth. Further radical gains could be seen by 2015 on the back of policy changes, corporate balance sheet improvements, and investments in growth sectors. Right Horizons PMS offers various portfolio options to benefit from the expected wealth creation.

1. India Equities – Upgrade could continue
Outlook 2013
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2. Agenda / Table of contents
Why we could be closer to the take off point?
1 A review of the asset markets in 2012
2 The dud period, compared with earlier duds
3 Where are we as compared to peers
4 What is the outlook for 2013 and beyond
5 How are we closer to the inflection point?
6 Right Horizons PMS – why is there no traction?
g y
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3. 1 2012: A year in review
Equities have been a runaway success in 2012
Though equities have had a stellar run in
2012,
2012 the returns has been volatile at Asset return in 2012 in India
best.
40.00%
Rise in equities has been on the back of
p
poor p
performance in 2011 ( (-24%) and
) 30.00%
hence majority could have missed the
20.00%
bus.
10.00%
Debt returns have been higher than in
those witnessed i 2011 (7.5%)
th it d in (7 5%)
0.00%
Equities - Equities - Bond - Bond - Gold - Real
Gold performed badly as compared with Nifty CNX Mid Short Long ETF Estate -
Cap Term Term Tier I
earlier 3-5 year time frame and returns (GILT)
from real estate are showing signs of
investor fatigue.
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4. 2 The dud period; compared with earlier dud
The seven year period 1996-2003 was classic dud where the stock markets did provide for high
volatility, negative real returns and were highly frustrating to the average investor. 2008-2012 appears to
be one such classic dud period where the volatility remained high, negative real returns ensued and
considerable anxiety was created. Dud periods are followed by heavy bull periods where wealth
creation is astounding 2003-2007 was one such period. Investor should consolidate their position in dud
astounding. period
period to reap benefits during Bull ones.
?
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5. 3 Where are we compared with our peer set?
Indian Fundamentals remain strong
1. Barring the “expensive defensives”, which is a Asian
wide syndrome, the relative cheapness of other sectors
– notably investment/CAPEX driven ones in the region
is a mild positive.
2. Bigger Asian markets such as China, Korea and
Australia are cheaper than India on this metric,
however, fundamental factors point to worse off
situation in these countries relative to India For
India. Source: Credit Suisse December 2012 Asia Equity Strategy report.
report
instance, slow down in China appears to be far deeper India still in the relatively cheaper territory
than that compared with India. Consumer confidence
indicators are also worse off in China than India –
Relative value of the Asian region on the basis of
P/B versus R E valuation model. M t of th hi h
RoE l ti d l Most f the higher
explaining the relative cheapness and inability for a valuation of the countries are driven by the
rapid turnaround on a relative basis. “expensive defensives” sectors.
The same is true for India as well.
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6. 4 Outlook for 2013 and beyond (Summary)
Nifty target of around 6800 by December 2013, implying a 16% annual upside
- Factors taking Nifty higher to these levels include
- Lower cost of borrowing levels than 2011 & 2012 by nearly 100-150 bps, driven by reversal of the
yields
- Higher liquidity conditions, generally healthy business environment and easier availability of credit
- Strong consumption due to end-use demand from staples, consumer discretionary and durables.
- Sectors which have underperformed in the medium term could start to turn around. Read – financials
around financials,
consumer discretionary, global cyclical and infrastructure.
The radical index levels would be reached by 2015, led by catalyst such
as:
- Strong policy level changes driven by fresh mandate in 2014, strong thrust on growth
- Better corporate balance sheet and twin impact of low debt/low interest payouts and
strong earnings
- Strong investments across a spectrum of growth sectors, infrastructure, energy, power,
industrials and housing.
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7. 4 Outlook 2013 – all the brass tacks
Valuations appears cheap even with all
those downgrades:
It appears that most of the earnings downgrades have
been factored in for the FY14 earnings. At the current
level too; the 1 year forward multiple does not exceed
the long period average, which is very reasonable
given the consistent, through lower, growth in
earnings.
earnings
Long period average valuations and cheaper
relative value is compelling for investors:
1. Improving earnings profile and a long period
average valuations provide comfort to investors
2. Average premium over emerging markets also
provide lot of scope for upside.
upside
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8. 4 Outlook 2013 – all the brass tacks …cont’d
The consumption story has
just begun:
Domestic cyclical could take the lead in
the upcoming upgrade season, followed
by defensives.
The biggest let down has been during
the ‘dud period’ (2008-2012) from the
Infrastructure & cap goods sector due to
a variety of issues, largely internal. The
uptick on this segment could provide the
boost to this segment.
Global cyclical could remain the ‘wild
card’. Domestically this is the most
under-rated segment.
d t d t
Expensive defensives, could lose favor if
the re-rating begins.
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9. 5 Inflexion point: closer than we might think!
The Lessons from 2003
Bull markets in the past have all but been gradual and steady unlike ‘shock & awe’ bear phases
have, but, steady, shock awe phases.
Bull markets are normally preceded by sustainable bond rallies and cooling of yields. The general level of
inflation is also lower
Bull markets start with defensives getting expensive and higher risk appetite for rate sensitive's beginning
sensitive s
to gather momentum.
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10. 6 Right Horizons PMS portfolios – wealth creation vehicles
Right Horizons – Portfolios
1 Nifty Plus Portfolio
2 Flexicap Portfolio
3 Capital Protection Portfolio – December 2012 (hurry now)
4 Super Value Portfolio
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11. 1 Nifty Plus Portfolio
Double Click to launch
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12. 2 Flexicap Portfolio
Double Click to launch
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13. 3 Capital Protection Portfolio – (Open for subscription - hurry)
Double Click to launch
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14. 4 Super Value Portfolio
Double Click to launch
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15. Disclaimer
The information contained herein has been obtained from reports secured from third parties, publicly available sources and
Right Horizons, its affiliates, subsidiaries and/or Group companies take no responsibilities – express or implied for
inaccuracies contained herein.
This document is meant for the use of the intended recipient only. Though dissemination to all intended recipients is
simultaneous, not all intended recipients may receive this document at the same time. This document is neither an offer nor
solicitation for an offer to buy and/or sell any securities mentioned herein and/or official confirmation of any transaction.
This document is provided for assistance only and is not intended to be, and must not be taken as, the sole basis for an
investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document
should make such investigation as he deems necessary to arrive at an independent evaluation, including the merits and risks
involved, for investment in the securities referred to in this document and should consult his own advisors to determine the
merits and risks of such investment
investment.
The investment discussed or views expressed may not be suitable for all investors. This document has been prepared on the
basis of information obtained from publicly available, accessible resources. Right Horizons has not independently verified all
the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to
accuracy, completeness or fairness of the information and opinion contained in this document.
y, p p
The information given in this document is as of the date of this document and there can be no assurance that future results
or events will be consistent with this information. Though Right Horizons endeavors to update the information contained
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(“Right Horizons and its affiliates”) are under no obligation to update or keep the information current. Also, there may be
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l li h h from d i so.
doing
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16. Questions?
Q ti ?
Reach us:
contactus@righthorizons.com
+91 80 41209582
+91 22 3225 2864
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