Highlights of December Edition: Best Performers Mom (%)

*
* Sectors in order of premium /

discount to historical averages
BEST PERFORMERS MoM (%)
WORST PERFORMERS MoM (%)
Highlights of December edition

Nifty ended 3% higher at 8,186 in
CY16. However, sharp currency
depreciation led to flat returns in USD
terms.
Metals , Oil, Cement and Auto were

the top outperformers for CY16.
Telecom, Healthcare and Technology

were the worst performers in CY16.
Investors are advised to refer to important disclosures made at the end of this report.
January 2017
Contents
Strategy: Flat end to an eventful year
NOTES:
Valuation deep dive for the month: Financials
Prices as on Dec 30, 2016
Indian equities: Nifty, sector performance and key valuation metrics
Global equities: Performance and valuation snapshot
Valuations: Nifty/Midcap companies
Sector highlights: Overview and sector valuations
Sectors trading
at a premium to
historical averages
BEAR icon:
AUTO
BANKS / FINANCIALS
CAPITAL GOODS
CEMENT
CONSUMER
HEALTHCARE
MEDIA
METALS
OIL & GAS
RETAIL
TECHNOLOGY
TELECOM
UTILITIES
Sectors trading
at a discount to historical
averages
Valuations are on
12-month forward basis
unless otherwise
mentioned
Sector valuations are

based on MOSL coverage
companies
Global equities data

sourced from Bloomberg.
Sensex valuations based
on MOSL estimates
Research & Quant Team (Deven@MotilalOswal.com)

BULLS & BEARS | January 2017
BULL icon:
Strategy: Flat end to an eventful year
Flat returns in a year marked by major disruptive events: Nifty ended CY16 flat in USD terms and 3% higher in INR terms. The second
half of CY16 was rather eventful (Brexit, US elections, Indias demonetization, US Fed hike, and geopolitical tensions with Pakistan, among others),
fueling significant volatility in the markets. However, demonetization triumphed over other narratives, wiping out bulk of the CY16 gains (Nifty was
up 8.5% until 8-Nov). In CY16, Brazil (+39%), Russia (+24%), Indonesia (+15%) and the UK (+14%) were the best performers among the key global
markets. Over the last 12 months, MSCI EM delivered +9% return, as against MSCI Indias flat return. Over the last five years, MSCI India
outperformed MSCI EM by 81%. India witnessed FII equity inflows of USD3b in CY16 (USD6.8 b until 8-Nov). DII inflows of USD3.5b post 8-Nov
offset FII outflows of USD3.8b during the same period. In fact, on a full-year CY16 basis, two-thirds of DII equity inflows were received post 8-Nov.
On debt side, FII debt outflow was more pronounced at USD6.5b in CY16 (USD6b post 8-Nov). Notably, despite these outflows, the INR remained
relatively stable with just 2.5% annual depreciation.
Earnings growth remains elusive; FY18 earnings visibility hazy: The prevalent narrative of 2HFY17 consumption recovery post normal
monsoon and 7th Pay Commission awards has been turned upside down after demonetization. As the near-term impact of demonetization
unfolds, we expect 2HFY17 earnings growth to remain subdued (especially in B2C sectors). We expect Sensex EPS to grow only 4% in FY17,
implying another year of flattish earnings growth. Even for FY18, earnings growth will be a function of consumption recovery post demonetization
and implementation of GST. We forecast 23% Sensex EPS growth for FY18.
Valuations below 10-year average; Mid-cap valuation premium comes off further: Correction in December has brought valuations
marginally below 10-year averages. The Sensex trades at a P/E of 16.3x, below its long-period average of 17.1x, while the UK, Russia, the US and
Indonesia trade at a significant premium to their respective LPA. MSCI India trades at a 34% premium to MSCI EM (historical average premium:
42%). Mid-cap outperformance continued in CY16, delivering +7% return as against +2% by the Sensex. However, valuation premium of midcaps
over large-caps has come off to 3%. We believe this premium can shrink further as mid-caps bear the disproportionate brunt of demonetization.
Laggards of yesteryears outperformed in CY16: Metals and Oil, the underperformers of CY15, outperformed in CY16 with 37% and 27%
returns, respectively. Bottoming out of commodity prices, coupled with inexpensive valuations, drove the outperformance, in our view. From a
sector standpoint, PSU Banks trade at a 30% discount to historical average P/B. The sector was the second-worst performer in December (-6%
MoM) after six months of continuous outperformance.
CY17 likely to be volatile as well: In CY16, markets did all the running to stay where they are. We expect CY17 to be volatile as well, given
the uncertainties on several fronts. Budget fiscal stimulus, US Fed rate cycle and consequent repercussion on Indian monetary policy, several state
elections, GST implementation, and the impact of demonetization are some of the important catalysts for CY17, in our view.
Valuation Deep Dive for the month: Financials

Earnings growth for the sector trended lower
-7.0
FY16
FY14
FY13
FY 12
FY 11
FY 10
FY 09
FY 08
FY 07
FY06
FY 05
FY 04
FY15
Loss in FY16
-25.0
De-rating in recent time in line with deteriorating profitability

PSU Banks Sector - PB (x)
2.2
ROA (%)
1.2
0.8
1.6
0.4
1.0
0.8
0.4
0.4
0.0
-0.4
Dec-16
Sep-15
Jun-14
Mar-13
Dec-11
Sep-10
Jun-09
-0.2
RoA dipped on account of lower profitability of corporate lenders

PVT Banks Sector - PB (x)
4.0
ROA (%)
1.9
3.2
1.7
2.4
2.4
1.5
1.6
1.4
1.3
0.8
Dec-16
Sep-15
Jun-14
Mar-13
Dec-11
1.1
Sep-10
A relaxed monetary policy, low interest rate and improvement in

resolution process are the strong tailwinds that would benefit the sector
and state-owned banks in particular. Availability of state-owned banks at
valuations of 0.8x PBV FY18 and 10-20% of MCAP coming from strategic
investments offer an attractive opportunity for some of the large stateowned banks, in our view.
11.0
Jun-09
In our view, private banks can sustain their premium valuations. P/BV has
been able to sustain the premium valuation, considering high return
ratios, healthy capitalization and faster market share gains.
29.0
Mar-08
Private banks sector P/BV is at ~2.3x. It is trading at its 5-year average

P/BV, but above the 15-year average P/BV. State-owned banks are trading
at a 27% discount to average valuations.
47.0
Mar-08
The recent exercise of demonetization by the government also had its

impact on valuations as banks focus on liabilities and asset quality
moderated their balance sheet growth. Smaller private banks are better
placed as their low market share could enable them to keep growth
momentum intact.
Pvt Banks Earning Growth (%)

Sensex Earning Growth (%)
65.0
Dec-06
Indias Banking sector can be divided into two segments: (1) State-owned
banks and (2) Private banks. While the period of FY04-08 saw strong
earnings growth and outperformance for the both segments, significant
divergence was seen post FY09. Private banks sustained/improved their
return ratios on the back of higher growth, improved efficiency and
healthy asset quality, resulting into premium valuation. However, in the
recent period, even private corporate lenders saw a rise in stress levels
and in turn impact on valuations. State-owned banks over the last five
years were marred by a rise in stressed assets, low capitalization and
weakening core revenue and earnings growth.
Dec-06
BANKS
Valuation Deep Dive for the month: Financials

Trend in NBFC PB (x) one year forward
NBFC P/B (x)
4.0
3.0
1.9
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-04
Dec-03
Dec-02
Trend in NBFC PE (x) one year forward

NBFC P/E (x)
31
5 Yr Avg (x)
24
17
12.9
12.1
10
12.6
10.2
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-05
Dec-04
Trend in NBFC PB v/s Sensex PB one year forward
However, since the global financial crisis in 2008, NBFC stocks have
traded at valuations in line with that of the Sensex.
4.5
The NBFC sector trades at 2.2x P/B (one-year forward), in line with its 10year average of 2.3x and Sensex P/B of 2.4x. The sector has witnessed
significant de-rating since demonetization announcement on 8-Nov.
2.5
NBFC P/B (x)
Sensex PB (x)
3.5
2.4
2.2
1.5
Dec-16
Mar-16
Jun-15
Sep-14
Dec-13
Mar-13
Jun-12
Sep-11
Dec-10
Mar-10
Jun-09
Sep-08
Dec-07
Mar-07
Jun-06
Sep-05
Dec-04
Mar-04
Jun-03
Sep-02
0.5
Dec-01
2.3
0.0
Dec-03
Another reason for the strong re-rating of NBFCs was asset quality
performance. HFCs have traditionally enjoyed sub-1% GNPLs on a
consistent basis, better than most banks.
15 Yr Avg (x)
2.2
1.0
Dec-02
While NBFCs earlier relied primarily on banks for funding, they have
diversified their funding sources over the years. Most NBFCs are able to
raise short-term and long-term money from capital markets. Some
NBFCs, like HDFC, are authorized by the RBI to accept public deposits
too. As a result of liability funding diversification, NBFCs have been able
to reduce their cost of funds significantly.
2.0
Dec-01
Large untapped opportunity, the lack of presence of banks in rural areas

and niche loan appraisal skills led to the emergence of NBFCs. Over the
years, HFCs have gained market share from banks in housing finance.
NBFCs too have been dominating the CV financing markets, especially
used CVs.
10 Yr Avg (x)
2.2
Dec-01
This was driven primarily by large housing finance companies like HDFC
Ltd and niche asset financing companies like Shriram Transport Finance.
5 Yr Avg (x)
Dec-06
At the turn of the millennium, NBFC stocks, like other financials stocks,
started gaining momentum. The sector witnessed significant re-rating
over the first decade of the millennium.
Dec-05
NBFCs
Key Highlights
Indian equities: Nifty ends CY16 with +3% return
Stock performance: Breadth equally balanced in CY16; 27 Nifty stocks close higher
In CY16, Brazil (+39%), Russia (+24%), Indonesia (+15%) and the UK (+14%) were the best performers among key
global markets. China (-12%), Japan (0%) and India-Sensex (2%) were the bottom performing markets for CY16.
Over the last 12 months, MSCI EM delivered 9% positive return, as against MSCI Indias flat return. Over the last
five years, MSCI India outperformed the MSCI EM by 81%.
Sector valuations: Technology and Oil outperform; Healthcare underperforms
Hindalco (+83%), Yes Bank (+59%), Tata Steel (+51%), BPCL (+42%) and Power Grid (+30%) were the top
performers. Idea (-49%), BHEL (-28%), Aurobindo (-24%), Sun Pharma (-23%) and Bharti Infratel (-20%) were the
worst performers.
Global equities: India among the bottom performing markets for CY16
Nifty ended CY16 at 8,186, implying a positive return of 3%. However, sharp currency depreciation led to flat
returns in USD terms. The year ended on a disappointing note as gains made in 9MCY16 were wiped off by weak
last quarter performance the anticipated near-term moderation in economic growth and adverse impact on
corporate earnings from the governments demonetization move led to a sell-off by FIIs in 4QCY16.
Metals (+37%), Oil (+27%), Cement (+17%) and Auto (+9%) are the top outperformers for CY16.
Telecom (-25%), Healthcare (-13%) and Technology (-8%) were the worst performers in CY16.
Technology sector trades at a P/E of 15x, (9% discount). Stocks have been holding on to current levels, despite a
seasonally weak 3Q ahead. The support comes from the sector being shielded from demonetization, INR
depreciation post US elections, and expectations of a better FY18. The sector was the top performer for the
month of December (+3.3%).
Oil & Gas trades at a P/B of 1.4x (13% discount to historical average) and a P/E of 10.8x (8% discount). Oil prices
increased ~10% during Nov-Dec16 due to production cuts agreed upon by OPEC and non-OPEC. OMCs (HPCL,
BPCL and IOCL) debunked the threat of regulation by increasing retail prices again in mid-December 2016.
Nifty-50 highlights: PSU Banks underperform after six consecutive months of outperformance
PSU Banks trade at a 30% discount to historical avg. P/B. The sector was the second worst performer for
December (-6% MoM) after six months of continuous outperformance. Impact of demonetization is expected to
hurt loan growth and NIM. Overall, we expect stress addition in FY17 to be lower than in FY16.
About the product

As the tagline suggests,
BULLS & BEARS is a
handbook on valuations in
India. Every month, it will
cover:
Valuations of Indian
markets vis--vis global
markets
Current valuation of
companies in various
sectors
Sectors that are
currently valued at
premium/discount to
their historical longperiod averages
Indian equities: Nifty ends CY16 with 3% positive return
3.0
1.7
0.2
2.3
CY16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
7.6
Nov-16
4.7
May-16
4.8
Dec-16
2.0
Apr-16
4.1
4.2
1.6
1.4
Mar-16
Telecom (-25%), Healthcare (-13%) and Technology (-8%) were

the worst performers in CY16.
4.0
Feb-16
Metals (+37%), Oil (+27%), Cement (+17%) and Auto (+9%)

were the top outperformers for CY16.
Demonetization drags 4QCY16 performance

10.8
Jan-16
The year ended on a disappointing note as gains made in

9MCY16 were wiped off by a weak last quarter performance
the anticipated near-term moderation in economic growth and
adverse impact of demonetization on corporate earnings led to
sell-off by FIIs in 4QCY16.
Nifty CY and MoM change (%) ends with 3% positive return in CY16
CY15
Nifty ended CY16 at 8,186, implying positive return of 3%.

However, sharp currency depreciation led to flat returns in USD
terms.
Sectoral performanceabsolute and relative to Nifty (%) Metal, Oil, Cement top performers
Sector
Metal
Oil
Cement
Auto
Banks - PSU
Nifty Midcap
Media
Banks - Pvt
NBFC
Consumer
Utilities
Capital Goods
Real Estate
Technology
Healthcare
Telecom
Nifty Chg
Jan16
-7
-3
-3
-8
-19
-7
-6
-6
-8
-6
-6
-12
-10
1
-4
-20
-5
MoM Abs. Performance (%)

CY16
Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Chg
16
16
16
16
16 16 16
16
16
16
16
(%)
-2
12
6
0
7
10
6
-2
6
3
-5
37
-11 12
2
0
4
9
5
3
8
-3
2
27
-3
18
0
4
8
7
10
-4
0
-11
-5
17
-7
14
3
5
2
7
4
1
0
-9
1
9
-11 20
0
3
9
6
9
2
1
0
-6
9
-7
10
3
1
4
7
4
0
3
-6
-4
7
-12
7
5
5
2
11
7
2
0
-13
1
6
-10 14
5
5
0
5
4
-3
1
-5
-2
5
-10
8
1
10
2
11
5
-1
0
-7
-3
4
-4
8
0
5
5
3
1
-4
1
-5
1
3
-14 12
4
1
7
4
1
-5
1
1
-2
2
-9
14
3
10
3
4
-2
-4
2
-6
-3
-3
-13 17
10
5
8
5
-4
-2
3
-18
-1
-6
-8
11
-1
2
-3
-3
-3
-2
-2
-2
3
-8
-7
0
3
-2
2
5
-1
0
2
-4
-6
-13
5
9
5
-4
2
-1
-8
-8
1
0
-6
-25
-8
11
1
4
2
4
2
-2
0
-5
0
3
Relative to Nifty MoM Performance (%)

CY16
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Chg
16 16
16
16
16
16 16 16
16
16
16
16
(%)
-2
6
1
4
-4
6
6
4
0
6
8
-5
34
2
-4
1
1
-4
3
5
3
5
8
2
2
24
2
4
7
-1
0
6
3
8
-2
0
-6
-5
14
-3
1
3
1
1
0
3
3
3
0
-5
1
6
-15 -4
10
-2
0
8
1
7
4
1
5
-6
6
-2
0
0
2
-3
2
3
2
2
3
-2
-3
4
-1
-4
-4
3
1
0
7
6
4
0
-8
1
3
-2
-2
3
3
1
-1
1
2
-1
1
0
-2
2
-3
-2
-3
-1
6
0
6
3
1
0
-3
-2
1
-1
3
-3
-1
1
4
-1
-1
-2
0
-1
1
0
-1
-6
1
3
-3
5
0
-1
-3
1
6
-2
-1
-8
-2
4
1
6
1
0
-3
-2
2
-1
-2
-6
-5
-5
6
9
1
6
1
-6
0
3
-13
-1
-9
6
-1
1
-2
-2
-5
-8
-5
0
-2
3
4
-11
1
1
-11
1
-6
0
1
-3
2
2
0
-6
-16
-15 13
-2
4
-8
0
-5 -10 -6
0
5
-5
-28
Indian equities: Breadth equally balanced in CY16; 27 Nifty stocks close higher
Nifty best and worst performers in CY16: Hindalco (+83%), Yes Bank (+59%), Tata Steel (+51%), BPCL (+42%) and Power Grid (+30%) were the top
performers. Idea (-49%), BHEL (-28%), Aurobindo (-24%), Sun Pharma (-23%) and Bharti Infratel (-20%) were the worst performers.
Nifty best and worst performers in December: Reliance (+9%), TCS (+4%), Infosys (+4%), ITC (+3%) and GAIL (+3%) were the top performers on
MoM basis. Hindalco (-12%), Sun Pharma (-11%), Ultratech (-10%), Aurobindo (-10%), and Bharti Infratel (-8%) were the worst performers.
Best and worst Nifty performers (YoY) in CY16 (%) 27 companies in Nifty have given positive returns
83
59 51
42
30 29 20
19 17 17 15 15 14 13 13 12 11 11 11 10 7
6 4 3
3 3 1 1 0 0
-24 -28
-49
Hindalco
Yes Bank
Tata Steel
BPCL
Power Grid
Eicher Motors
Tata Motors
ONGC
GAIL
UltraTech
Maruti
Grasim Ind.
IndusInd Bk
Hero Moto
NTPC
Bosch
Tata Power
SBI
HDFC Bank
ITC
Reliance Ind.
L&T
Bajaj Auto
Zee Ent
Nifty
Adani Ports
Ambuja Cem.
Asian Paints
Axis Bank
Kotak Mah.Bk
HDFC
Dr Reddy's
ACC
ICICI Bank
BoB
TCS
HCL Tech
HUL
Tech Mah.
M&M
Infosys
Coal India
Bharti Airtel
Cipla
Wipro
Lupin
Bharti Infratel
Sun Pharma
Aurobindo
BHEL
Idea Cellular
0 -1 -2 -2 -2 -3 -3 -4 -6 -7 -8
-9 -10 -13
-15 -19 -20 -23
Best and worst Nifty performers (MoM) in December 2016 (%) Technology stocks outperform
9
4 4 3 3 3 3 2 2 2 2
1 1 1 1 0 0
-11 -12
Reliance Ind.
TCS
Infosys
ITC
GAIL
HCL Tech
Tata Motors
Tata Power
Bosch
Wipro
IndusInd Bk
Maruti
NTPC
Tech Mah.
Eicher Motors
HDFC Bank
Cipla
M&M
HDFC
Nifty
ONGC
Zee Ent
ACC
Grasim Ind.
Yes Bank
Lupin
BPCL
Bajaj Auto
Ambuja Cem.
HUL
L&T
Coal India
SBI
Adani Ports
ICICI Bank
Hero Moto
Axis Bank
Dr Reddy's
Power Grid
Idea Cellular
Kotak Mah.Bk
Tata Steel
Bharti Airtel
BoB
BHEL
Asian Paints
Bharti Infratel
Aurobindo
UltraTech
Sun Pharma
Hindalco
0 0 0 -1 -1 -1 -1 -1 -1 -1 -2 -2 -2 -2 -3
-3 -3 -4 -4 -4 -4 -4
-5 -5 -6 -6
-7 -7 -8
-8 -10 -10
Indian equities: Midcaps outperform in CY16; trade near Sensex P/E

Over the last 12 months, midcaps have delivered 7% positive returns, as against +2% by the Sensex. Also, over the last five years, midcaps have
outperformed the Sensex by 60%.
Midcaps now trade at just 3% premium to the Sensex on P/E basis.
Midcaps significantly outperformed large caps in last 12 months
Nifty Midcap 100 Rebased
175
Source: MOSL, Bloomberg for Midcap valuation.
Dec-16
Aug-16
Apr-16
Dec-15
Apr-15
Dec-14
Aug-14
Apr-14
Aug-15
Aug-16
Apr-16
Dec-15
Aug-15
Dec-13
Aug-13
Apr-13
Dec-12
Dec-11
Dec-16
Aug-16
Apr-16
Dec-15
Aug-15
Apr-15
Dec-14
Aug-14
Apr-14
Dec-13
Aug-13
Apr-13
-35
Dec-12
9.0
Aug-12
-20
Apr-12
12.5
Aug-12
-5
Apr-12
16.0
Average: -6%
Dec-16
10
16.8
16.3
Apr-15
Sensex Avg: 17.1x

Midcap Avg: 16.1x
Midcap Vs Sensex PE Prem/(Disc) (%)
25
Dec-14
Sensex PE (x)
Aug-14
Midcap PE (x)
Dec-11
Dec-13
Midcaps trading at 3% premium to Sensex
Apr-14
12-month forward P/E (x)
Aug-13
Dec-11
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
75
Feb-16
80
Jan-16
125
Dec-15
92
170
Apr-13
102
19.5
230
Dec-12
104
Nifty Midcap 100 Rebased
225
107
Aug-12
116
23.0
Sensex Rebased
275
Apr-12
Sensex Rebased
128
Midcaps outperformed large caps by 60% in last five years
Indian equities: Valuations below long-term averages

Valuations of Indian equities remain attractive. The Sensex now trades at a P/E of 16.3x, below its long-period average of 17.1x. At 2.4x, the
Sensex P/B is also below its 10-year average of 2.7x. RoE is at 15.1%, below its long-term average.
Market cap-to-GDP ratio is 70% (FY17E GDP), below its long-term average of 78%.
12-month forward Sensex P/E (x)
27
12-month forward Sensex P/B (x)

4.3
24.6
4.2
3.5
22
10 Year Avg: 17.1x
17
10 Year Avg: 2.7x
2.8
16.3
2.4
2.0
Dec-15
Dec-16
70
FY16
FY17E
Dec-14
Dec-13
Dec-12
Dec-11
Dec-08
Dec-07
70
Trend in Indias market cap-to-GDP (%)
21.0
82
95
83
18.5
Average of 78% for

the period
88
71
64
66
FY14
103
FY13
23.0
FY12
12-month forward Sensex RoE (%)
Dec-06
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
23.5
1.8
1.3
Dec-10
10.7
Dec-09
12
55
10 Year Avg: 16.6%
16.0
81
15.1
15.9
10
FY15
FY11
FY10
FY09
FY08
FY07
FY06
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
13.5
Global equities: India among the bottom performing markets for CY16
In CY16, Brazil (+39%), Russia (+24%), Indonesia (+15%) and the UK (+14%) were the best performers among the key global markets. China
(-12%), Japan (0%) and India-Sensex (2%) were the bottom performing markets for CY16.
Indian equities are trading at 19.2x FY17E earnings.
All key markets are trading at a discount to India. However, Indias RoE remains superior to most EMs, an important differentiator for valuation
premium.
Sensex v/s other markets
CY16 Chg (%)
India
Japan
US
Indonesia
UK
Brazil
Taiwan
China
MSCI EM
Korea
Russia
Index Mkt Cap

Local
In USD
Value
(USD T) Currency
26,626
1.6
2
-1
19,114
5.1
0
4
2,239 25.2
10
10
5,297
0.4
15
18
7,143
3.1
14
-4
60,227
0.7
39
69
9,254
1.0
11
13
3,104
6.5
-12
-18
862
7.7
9
9
2,026
1.2
3
1
4,919
0.6
24
49
PE (x)
CY15 /
FY16
20.1
21.3
20.6
32.1
39.2
-514.2
15.3
16.3
16.7
14.7
8.0
CY16 /
FY17
19.2
19.3
18.8
17.5
17.0
15.6
15.0
14.8
13.5
10.1
5.9
Prem / Disc to India

PE (%)
CY15 /
CY16 /
FY16
FY17
6
2
60
95
-2656
-24
-19
-17
-27
-60
0
-2
-9
-12
-19
-22
-23
-30
-47
-70
PB (x)
CY15 /
FY16
2.9
1.7
3.0
2.6
2.1
1.6
1.6
1.7
1.5
1.0
0.7
CY16 /
FY17
2.7
1.7
2.8
2.4
1.8
1.5
1.7
1.5
1.5
0.9
0.7
RoE (%)
CY15 /
FY16
14.6
7.9
14.8
8.2
5.3
-0.3
10.5
10.6
9.0
6.6
8.7
CY16 /
FY17
13.8
8.8
14.9
13.6
10.5
9.6
11.2
10.2
11.0
9.1
11.3
CY16 Chg (%)

Brazil
39
Russia
24
Indonesia
15
UK
14
Taiwan
11
US
10
MSCI EM
Korea
India
Japan
China
-12
Source: Bloomberg/MOSL
11
Global equities: MSCI EM outperforms MSCI India in CY16

Over the last 12 months, MSCI EM delivered 9% positive return, as against MSCI Indias flat return. Over the last five years, MSCI India has
outperformed the MSCI EM by 81%.
MSCI India P/E is at a premium of 34% to MSCI EM P/E, below its historical average premium of 42%.
MSCI EM outperformed MSCI India in last 12 months
MSCI India Rebased
122
MSCI India outperformed MSCI EM by 81% in last five years
MSCI EM Rebased
MSCI India Rebased
210
112
130
100
92
175
170
109
102
MSCI EM Rebased
94
90
50
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
MSCI India v/s MSCI EM trailing P/E (x)

MSCI India PE (x)
33.0
MSCI India v/s MSCI EM P/E premium (%)

MSCI EM PE (x)
MSCI India Vs EM PE Premium (%)
100
26.0
20.8
MSCI India Avg: 19.2x
19.0
15.5
75
Average of 42%
50
34
25
12.0
Source: Bloomberg
12
Jun-16
Dec-15
Jun-15
Dec-14
Jun-14
Jun-13
Dec-13
Dec-12
Jun-12
Dec-11
Jun-11
Jun-10
Dec-10
Dec-09
Jun-09
Dec-08
Jun-08
Jun-07
Dec-07
Dec-06
Dec-16
Jun-16
Jun-15
Dec-15
Dec-14
Jun-14
Dec-13
Jun-13
Jun-12
Dec-12
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Dec-11
MSCI EM Avg: 13.6x
5.0
Dec-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
82
Global equities: Indias share in world market cap near historical average
Indias share in the world market cap is at 2.3%, marginally below its long-term average of 2.4%.
Over the last 12 months, world market cap has increased 3.5% (USD2.3t); Indias market cap has increased 3.2%.
Trend in India's contribution to world market cap (%)
Market cap change in last 12 months (%)
India's Contribution to World Mcap (%)

3.3
3.60
2.95
Mkt cap chg 12M (%)
Average of 2.4%
2.30
2.3
1.65
1.6
Curr Mcap (USD Tr)
Brazil
57
0.7
Russia
53
0.6
Indonesia
21
0.4
Dec-06
Jun-07
Nov-07
Apr-08
Sep-08
Feb-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Oct-11
Mar-12
Aug-12
Jan-13
Jun-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jul-16
Dec-16
1.00
Global market-cap-to-GDP (%)

Current mkt cap to GDP (%)
44
40
Brazil
49
Russia
China
59
Indonesia
* Based on GDP for Dec 2015
70
India
88
Korea
108
UK
123
Japan
US
140
Source: Bloomberg
13
Taiwan
11
1.0
25.2
US
India
1.6
Korea
1.2
Japan
5.1
UK
-8
3.1
China
-9
6.5
Nifty: PSU Banks underperform after six months of continuous outperformance

PSU Banks trade at a 30% discount to historical average P/B. The sector was second-worst performer for December (-6% MoM) after six months of
continuous outperformance. The impact of demonetization is expected to hurt loan growth and NIM. Overall, we expect stress addition in FY17 to be
lower than in FY16. Sustained traction in large corporate deleveraging and a reduction in net slippages are key catalysts for a re-rating.
Name
Bajaj Auto
Eicher Motors
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
Axis Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Kotak Mahindra Bank
Yes Bank
Bank of Baroda
State Bank
HDFC
BHEL
Larsen & Toubro
ACC
Ambuja Cements
Grasim Industries
Ultratech Cement
Asian Paints
Hind. Unilever
ITC
Sector
Auto
Auto
Auto
Auto
Auto
Auto
Banks - Private
Banks - Private
Banks - Private
Banks - Private
Banks - Private
Banks - Private
Banks - PSU
Banks - PSU
Banks - NBFC
Capital Goods
Capital Goods
Cement
Cement
Cement
Cement
Consumer
Consumer
Consumer
Current
16.4
26.8
15.1
14.6
17.7
8.5
22.1
17.8
14.3
19.6
23.2
12.4
8.5
13.3
24.3
23.7
20.8
25.8
26.4
9.9
24.7
40.5
38.0
26.3
PE (x)
Relative to Sensex P/E (%)
10 Yr Avg Prem/Disc (%)
Current
10 Yr Avg
14.6
12
1
-15
18.2
47
64
7
15.6
-3
-8
-9
14.8
-1
-11
-13
16.6
7
9
-3
9.0
-5
-48
-47
14.8
49
36
-13
20.7
-14
9
21
17.3
-17
-12
1
16.3
21
20
-5
22.9
2
43
34
12.2
1
-24
-28
7.1
20
-48
-58
11.9
12
-18
-30
24.6
-1
49
44
20.1
18
45
17
24.3
-15
28
43
23.3
11
59
36
21.8
21
62
28
9.6
3
-39
-44
19.5
26
51
14
30.2
34
148
77
31.0
22
133
82
24.5
7
61
44
14
Current
4.8
9.6
5.4
2.7
4.2
1.6
1.8
3.2
1.6
3.0
3.1
2.6
0.9
1.0
4.8
0.9
2.5
2.9
2.0
1.3
3.5
12.2
29.2
6.9
PB (x)
5.5
-12
4.5
112
6.9
-21
3.2
-16
2.8
50
2.3
-33
2.1
-11
3.4
-4
1.8
-11
2.3
31
2.9
6
2.3
12
1.1
-14
1.3
-19
4.7
0
3.6
-76
3.8
-35
2.9
1
2.7
-25
1.3
-4
2.9
19
10.1
20
27.7
5
6.8
1
Relative to Sensex P/B (%)

Current
10 Yr Avg
98
103
291
67
122
156
10
18
71
3
-36
-14
-25
-23
32
24
-33
-32
22
-16
27
8
6
-15
-63
-61
-58
-53
94
75
-65
31
1
40
20
8
-17
0
-49
-52
42
8
399
275
1092
923
182
153
Nifty: Capital Goods trades at 38% discount to historical P/B average

Companies trading at a significant premium to their historical averages: Eicher Motors (+47%), Asian Paints (+34%), UltraTech (+26%), HUL (+22%),
Ambuja Cement (+21%), BHEL (+18%) and Bajaj Auto (+12%).
Companies trading at a significant discount to their historical averages: Sun Pharma (-31%), Tata Steel (-29%), NMDC (-25%), Reliance Inds (-24%),
NTPC (-19%), Wipro (-19%), and Bharti Airtel (-18%).
Name
Aurobindo Pharma
Cipla
Dr Reddy s Labs
Lupin
Sun Pharma
Zee Ent.
Hindalco
NMDC
Tata Steel
BPCL
GAIL
ONGC
Reliance Inds.
HCL Technologies
Infosys
TCS
Tech Mahindra
Wipro
Bharti Airtel
Bharti Infratel
Idea Cellular
Coal India
NTPC
Power Grid Corp.
Sensex
Sector
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
Media
Metals
Metals
Metals
Oil & Gas
Oil & Gas
Oil & Gas
Oil & Gas
Technology
Technology
Technology
Technology
Technology
Telecom
Telecom
Telecom
Utilities
Utilities
Utilities
Current
13.9
24.0
23.8
20.3
17.1
25.3
7.3
11.9
13.2
9.7
12.7
11.5
10.2
13.4
15.1
16.7
13.7
12.2
24.5
19.6
14.4
11.7
11.2
16.3
PE (x)
Relative to Sensex P/E. %
Current
10 Yr Avg
12.5
12
-14
-27
25.0
-4
47
46
23.8
0
46
39
19.2
6
24
12
25.0
-31
5
46
24.1
5
55
41
8.9
-18
-55
-48
15.8
-25
-27
-8
18.5
-29
-19
9
11.4
-15
-41
-33
13.6
-6
-22
-21
11.3
1
-29
-34
13.4
-24
-37
-22
14.5
-8
-18
-15
17.7
-15
-7
4
17.8
-6
3
4
15.5
-11
-16
-9
15.1
-19
-25
-12
29.9
-18
51
75
23.6
-17
20
38
27.5
61
14.9
-3
-11
-13
14.5
-19
-28
-15
11.7
-4
-31
-32
17.1
-5
15
Current
3.4
3.2
3.3
4.3
3.7
7.2
1.2
1.6
2.9
2.4
1.6
1.3
1.1
3.2
3.1
4.9
2.5
2.2
1.7
3.2
1.1
9.4
1.3
1.7
2.4
PB (x)
2.6
30
3.5
-10
3.7
-9
4.5
-6
4.9
-24
5.4
34
1.7
-27
4.3
-63
2.6
14
1.5
65
2.0
-21
1.8
-29
1.6
-32
3.3
-3
4.4
-30
6.1
-19
3.9
-37
3.2
-34
3.1
-47
3.0
5
2.4
-56
10.6
-12
1.9
-31
1.7
4
2.7
-10
Relative to Sensex P/B .%

Current
10 Yr Avg
40
-3
30
31
36
36
75
68
52
82
193
98
-50
-38
-34
60
20
-5
-2
-46
-36
-27
-49
-35
-55
-39
29
21
27
64
100
125
1
44
-12
20
-32
15
30
12
-56
-9
282
292
-46
-29
-29
-38
Midcaps underperform Nifty by 3.3% in December

In December 2016, Nifty Midcap100 was down 3.7%, as against 0.5% fall in Nifty.
Worst midcap performers in December 2016: Bharat Financials (-21%), Indian Bank (-13%), Thermax (-12%) and GSPL (-11%).
Best midcap performers in December 2016: Coromandel (+11%), Tata Elxsi (+11%), TTK Prestige (+10%) and Voltas (+4%).
Company
Coromandel Intl.
Tata Elxsi
TTK Prestige
Voltas
Gateway Distriparks
GRUH Finance
JSW Energy
Kaveri Seed
Monsanto India
Jain Irrigation
SRF
DCB Bank
Sanofi India
Jyothy Lab.
P I Inds.
Symphony
Birla Corpn.
Federal Bank
Va Tech Wabag
Radico Khaitan
GE T&D India
Ipca Labs.
Alembic Pharma
Bank of India
Guj.St.Petronet
Thermax
Indian Bank
Bharat Financial
PE (x)
Current 10 Yr Avg Prem/Disc (%)
15.5
12.2
27
20.0
17.6
13
38.4
23.3
65
24.3
21.5
13
17.3
16.1
7
35.1
19.5
80
16.6
15.4
7
15.0
13.5
11
26.5
24.4
9
11.7
27.3
-57
15.1
7.2
108
13.3
16.5
-20
24.9
24.1
3
41.3
32.9
25
22.5
11.2
102
34.8
18.8
85
13.0
10.2
28
12.8
10.3
24
15.2
22.7
-33
16.9
24.7
-32
31.8
52.1
-39
20.7
22.6
-8
19.8
14.3
38
7.7
7.3
5
13.1
13.8
-5
27.1
25.4
7
6.9
5.7
22
14.9
16.3
-9

Current
10 Yr Avg
-5
-29
23
3
136
36
49
26
6
-5
115
14
2
-10
-8
-21
63
43
-28
60
-8
-58
-18
-3
53
41
153
93
38
-35
114
10
-20
-40
-21
-39
-6
33
4
45
95
205
27
32
21
-16
-53
-57
-20
-19
67
49
-58
-67
-9
-5
16
PB (x)
Current 10 Yr Avg Prem/Disc (%)
2.9
2.5
15
7.5
5.4
40
7.4
5.2
42
3.7
3.8
-2
2.0
1.8
10
9.8
5.5
79
1.0
1.8
-42
2.8
3.2
-12
9.1
5.6
61
1.3
2.6
-50
2.6
1.2
123
1.4
1.6
-11
4.8
4.0
21
6.4
3.2
98
6.1
2.9
114
20.5
7.6
171
1.3
1.2
16
1.2
1.1
16
2.2
2.6
-18
1.4
2.6
-45
5.5
5.8
-5
2.5
3.0
-17
4.8
4.6
5
0.4
1.0
-56
1.7
1.9
-14
3.3
4.8
-31
0.7
0.8
-16
2.6
3.0
-15

Current
10 Yr Avg
20
-6
208
100
204
93
52
40
-19
-33
302
103
-58
-33
14
17
270
108
-46
-3
6
-57
-41
-41
97
48
163
20
150
6
738
180
-45
-57
-49
-60
-12
-3
-42
-5
125
115
2
11
98
70
-83
-64
-32
-29
35
77
-72
-70
6
12
Price Chg (%)

MoM
CY16
11
55
11
-38
10
22
4
1
4
-24
3
17
2
-29
-1
17
-1
2
-2
27
-2
22
-3
32
-4
-1
-4
7
-4
29
-5
0
-5
40
-5
19
-6
-32
-7
-6
-7
-37
-8
-28
-10
-14
-10
-7
-11
2
-12
-17
-13
91
-21
18
Sector valuations: Technology and Oil outperform; Healthcare among top underperformers
Technology sector trades at a P/E of 15x, below its historical average (9% discount). Stocks have been holding on to current levels,
despite a seasonally weak 3Q ahead. The support comes from the sector being shielded from demonetization, INR depreciation post
US elections, and expectations of a better FY18. The sector was top performer for December (+3.3%).
Oil & Gas trades at a P/B of 1.4x (13% discount to historical average) and a P/E of 10.8x (8% discount). Oil prices increased ~10% in
Nov-Dec16 due to production cuts agreed upon by OPEC and non-OPEC. OMCs (HPCL, BPCL and IOCL) debunked the threat of
regulation by increasing retail prices again in mid-December 2016. RIL outperformed relatively on the basis of strong GRM.
PSU Banks trade at a 30% discount to historical average P/B. The sector was second worst performer for December (-6% MoM) after six
months of continuous outperformance. Impact of demonetization is expected to hurt loan growth and NIM. Overall, we expect stress
addition in FY17 to be lower than in FY16. Sustained traction in large corporate deleveraging and a reduction in net slippages are key
catalysts for a re-rating.
Snapshot: Sector valuations
Relative to Sensex
P/E (%)
PE (x)
Sector
Current
Auto
Banks - Private
Banks - PSU
NBFC
Capital Goods
Cement
Consumer
Healthcare
Media
Metals
Oil & Gas
Retail
Technology
Telecom
Utilities
14.7
17.7
10.4
12.9
26.5
20.2
33.7
19.7
21.7
12.3
10.8
36.3
15.0
36.4
11.9
10 Yr Avg Prem/Disc (%) Current 10 Yr Avg

14.4
16.5
8.9
12.6
26.9
17.1
29.1
21.8
22.7
12.1
11.7
35.4
16.4
27.9
14.9
2.1
7.6
16.5
3.1
-1.5
18.7
15.7
-9.9
-4.0
2.0
-7.6
2.3
-8.7
30.5
-20.2
-10
9
-36
-21
63
24
107
21
33
-24
-34
123
-8
123
-27
17
-17
-5
-47
-27
53
-1
72
28
32
-30
-31
106
-4
68
-11
Relative to Sensex
P/B (%)
PB (x)
Current
3.1
2.4
0.8
2.2
2.6
2.5
10.0
3.8
4.9
1.2
1.4
5.8
3.4
1.5
1.5
10 Yr Avg Prem/Disc (%) Current 10 Yr Avg

3.0
2.2
1.1
2.3
4.1
2.3
9.5
4.1
4.4
1.6
1.6
8.1
4.4
2.8
1.8
2.5
9.0
-30.2
-1.8
-37.9
9.4
5.4
-5.4
12.4
-24.7
-12.9
-28.8
-22.0
-46.4
-20.5
27
-2
-69
-9
5
4
310
57
101
-51
-43
135
41
-38
-40
13
-19
-60
-16
48
-14
261
52
62
-43
-40
201
62
4
-31
Autos: Demonetization impact to hit demand in 2HFY17

24
40
10
25
Current
23.0
13.2
16.4
28.4
33.9
26.8
9.6
19.1
15.1
14.6
17.7
8.5
22.5
PE (x)
10 Yr Avg
13.5
16.0
14.6
29.2
26.0
18.2
12.0
19.3
15.6
14.8
16.6
9.0
14.7
Prem/Disc (%)
70
-17
12
-3
30
47
-20
-1
-3
-1
7
-5
54

Current
10 Yr Avg
41
-21
-19
-6
1
-15
74
71
108
52
64
7
-41
-30
17
13
-8
-9
-11
-13
9
-3
-48
-47
38
-14
18
Current
5.0
3.1
4.8
4.9
7.5
9.6
1.4
2.9
5.4
2.7
4.2
1.6
6.0
PB (x)
10 Yr Avg
3.2
2.6
5.5
3.8
5.0
4.5
0.8
3.3
6.9
3.2
2.8
2.3
2.6
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Prem/Disc (%)
56
18
-12
30
49
112
80
-13
-21
-16
50
-33
128
Dec-16
Feb-16
Apr-15
Jun-14
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
-20
Jun-09
1.0
Aug-08
MoM: +1% | CY16: +9%
Oct-07
-5
Dec-06
1.9
Aug-13
10
Oct-12
3.1
Feb-11
2.8
27
13
Apr-10
3.0
Sector Performance
Company
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
Eicher Motors
Escorts
Exide Inds.
Hero Motocorp
M&M
Maruti Suzuki
Tata Motors
TVS Motor Co.
Relative to Sensex PB (%)
40
Oct-07
3.7
Aug-08
Dec-16
Feb-16
Apr-15
10 Yr Avg (x)
-10
-50
Jun-09
Auto Sector P/B (x)
4.6
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Dec-06
M&M and Hero Motocorp trade near their

historical average P/E, while Maruti, Bajaj Auto
and Eicher are at a premium to their average
P/E.
Oct-07
-17
-20
Aug-08
10
Oct-07
14.7
Dec-11
14.4
17
Maruti and Eicher are likely to be relatively

insulated on account of waiting periods for
some models.
Relative to Sensex PE (%)
70
Dec-06
2HFY17 demand to be hit on account of

demonetization woes. 2Ws and CVs are
expected to be the worst hit.
10 Yr Avg (x)
Auto Sector P/E (x)
31
Dec-06
Auto sector trades at 14.7x, near its historical

average P/E of 14.4x (2% premium).

Current
10 Yr Avg
105
19
28
-2
98
103
100
39
206
86
291
67
-44
-72
16
21
122
156
10
18
71
3
-36
-14
145
-3
Private Banks: Slowing retail growth; corporate segment under stress

20
16.5
19
17.7
12
5
10 Yr Avg (x)
3.0
Company
Axis Bank
DCB Bank
Federal Bank
HDFC Bank
ICICI Bank
IndusInd Bank
J & K Bank
Kotak Mah. Bank
South Ind.Bank
Yes Bank
Current
22.1
13.3
12.8
17.8
14.3
19.6
11.6
23.2
5.6
12.4
2.4
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Jun-09
Aug-08
Oct-07
Apr-10
-2
-19
-20
-35

Current
10 Yr Avg
36
-13
-18
-3
-21
-39
9
21
-12
1
20
-5
-29
-58
43
34
-65
-60
-24
-28
19
Current
1.8
1.4
1.2
3.2
1.6
3.0
0.5
3.1
0.6
2.6
PB (x)
10 Yr Avg
2.1
1.6
1.1
3.4
1.8
2.3
1.0
2.9
0.9
2.3
Prem/Disc (%)
-11
-11
16
-4
-11
31
-48
6
-34
12
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
-50
Oct-07
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
Prem/Disc (%)
49
-20
24
-14
-17
21
61
2
-18
1
Dec-06
-5
2.2
2.2
10
0.7
PE (x)
10 Yr Avg
14.8
16.5
10.3
20.7
17.3
16.3
7.2
22.9
6.9
12.2
-20
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Private Banks P/B (x)
3.7
MoM: -2% | CY16: +5%
-40
1.5
Sector Performance
-5
Dec-06
Private Sector Banks are well equipped to grow

their retail portfolios once the uncertainty
reduces. Credit costs are likely to remain
elevated for corporate lenders in FY17/18.
40
26
Oct-07
Demonetization has impacted the performance

of Indian Financials. However, banks with low
market share, well-diversified business loan
book, granular retail liabilities and a focus on
digitalization are likely to be the key
beneficiaries.
10 Yr Avg (x)
Private Banks P/E (x)
33
Dec-06
Private Banks are trading near the long-period

average valuations, despite improvement in
return ratios.

Current
10 Yr Avg
-25
-23
-41
-41
-49
-60
32
24
-33
-32
22
-16
-80
-65
27
8
-75
-66
6
-15
PSU Banks: Higher trading gains and reduced slippages to be key catalysts
Overall, we expect stress addition in FY17 to be

lower than in FY16. Sustained traction in large
corporate deleveraging and a reduction in net
slippages are the key catalysts for re-rating.
-40
-50
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Jun-09
-80
Aug-08
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Dec-16
0.8
0.3
-69
-70
Oct-07
0.8
Aug-08
-60
-60
Feb-11
1.1
Dec-06
1.3
Apr-10
10 Yr Avg (x)
1.8
Oct-07
Impact of demonetization is expected to hurt

loan growth and NIM. Hence, core revenue is
expected to be under pressure. Credit cost is
expected to remain elevated, but higher
trading gains are expected to more than
compensate the same.
PSU Banks P/B (x)
2.3
Dec-06
PSU Banks trade at a 30% discount to historical

average P/B. The sector was the second-worst
performer for December (-6% MoM) after six
months of continuous outperformance.
Sector Performance
MoM: -6% | CY16: +9%
All PSU Banks are trading at a big discount to

historical averages.
Company
Bank of Baroda
Bank of India
Canara Bank
IDBI Bank
Indian Bank
Oriental Bank
Punjab Natl.Bank
St Bk of India
Union Bank (I)
Current
8.5
7.7
7.6
13.3
6.9
5.0
8.9
13.3
4.6
PE (x)
10 Yr Avg
7.1
7.3
6.2
9.5
5.7
7.4
7.3
11.9
6.6
Prem/Disc (%)
20
5
21
40
22
-32
22
12
-31

Current
10 Yr Avg
-48
-58
-53
-57
-54
-63
-18
-44
-58
-67
-69
-57
-45
-57
-18
-30
-72
-61
20
Current
0.9
0.4
0.5
0.6
0.7
0.2
0.6
1.0
0.4
PB (x)
10 Yr Avg
1.1
1.0
0.8
0.8
0.8
0.7
1.1
1.3
0.9
Prem/Disc (%)
-14
-56
-40
-21
-16
-62
-44
-19
-58

Current
10 Yr Avg
-63
-61
-83
-64
-79
-69
-75
-71
-72
-70
-90
-76
-76
-61
-58
-53
-85
-67
NBFCs: Severe impact of demonetization
Current
21.6
14.9
7.0
35.1
24.3
12.2
19.1
9.1
4.8
3.9
11.0
PE (x)
10 Yr Avg
16.4
16.3
6.8
19.5
24.6
9.3
13.9
8.2
7.6
5.9
11.9

0
NBFC P/B (x)
4.0
10 Yr Avg (x)
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
-21
15
3.3
-5

Current
10 Yr Avg
32
-4
-9
-5
-57
-60
115
14
49
44
-25
-46
17
-19
-44
-52
-70
-55
-76
-66
-33
-30
21
Current
4.4
2.6
1.1
9.8
4.8
2.3
2.2
1.6
0.7
0.7
1.6
-45
PB (x)
10 Yr Avg
1.8
3.0
1.1
5.5
4.7
1.7
2.1
1.4
1.2
1.2
2.1
Prem/Disc (%)
145
-15
-1
79
0
34
4
16
-39
-43
-25
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
-65
Jun-09
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
1.0
Aug-08
1.8
-25
Oct-07
2.2
-9
-16
Dec-06
2.3
2.5
Prem/Disc (%)
32
-9
4
80
-1
31
38
12
-36
-34
-8
Dec-06
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
-48
Aug-08
Oct-07
-36
Dec-06
Jun-09
12.9
-27
-24
Aug-08
13
Dec-16
-12
12.6
Oct-07
17
MoM: -3% | CY16: +4%

Company
Bajaj Finance
Bharat Financial
Dewan Housing
GRUH Finance
HDFC
LIC Housing Fin.
M & M Financial
Muthoot Finance
Power Fin.Corpn.
Rural Elec.Corp.
Shriram Trans.
10 Yr Avg (x)
NBFC P/E (x)
21
Dec-06
NBFCs now trade at a P/B of 2.2x, at the historical

average.
Demonetization has impacted all NBFCs, especially
those with higher share of cash business. HFCs are
bullish on long-term prospects of retail lending as
demand picks up with property price correction and
softening interest rates.
LAP portfolio is expected to be severely impacted,
as borrowers generally do their business in cash.
Gold financiers and microfinance companies are
most impacted currently, but expect the business to
recover once new currency circulation improves.
CV financiers are likely to report sustained
slowdown in disbursements over next 2-3 quarters.
Collection efficiency of CV players too has been
badly hit.
Sector Performance

Current
10 Yr Avg
80
-34
6
12
-55
-59
302
103
94
75
-5
-36
-12
-23
-34
-48
-69
-55
-73
-57
-36
-23
Capital Goods: Private capex cycle recovery elusive, efforts on to revive capex cycle
52
140
90
26.9
26.5
Capital Goods P/B (x)
12.0
Current
38.6
23.7
38.7
27.3
31.8
33.1
12.1
20.8
58.2
30.5
27.1
24.3
Prem/Disc (%)
-37
18
96
25
-39
32
-22
-15
24
87
7
13
22
Current
5.6
0.9
0.8
6.1
5.5
7.2
1.9
2.5
5.9
5.4
3.3
3.7
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
15
PB (x)
10 Yr Avg
7.2
3.6
1.2
5.7
5.8
5.3
2.4
3.8
7.9
3.2
4.8
3.8
Prem/Disc (%)
-23
-76
-31
8
-5
36
-21
-35
-26
69
-31
-2
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
-50
Apr-10
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
Company
ABB
BHEL
Crompton Greaves
Cummins India
GE T&D India
Havells India
K E C Intl.
Larsen & Toubro
Siemens
Solar Inds.
Thermax
Voltas

Current
10 Yr Avg
137
256
45
17
137
15
68
28
95
205
103
47
-26
-9
28
43
257
174
87
-5
67
49
49
26
48
Jun-09
2.6
0.0
PE (x)
10 Yr Avg
60.8
20.1
19.7
21.9
52.1
25.1
15.5
24.3
46.8
16.3
25.4
21.5
Apr-10
80
4.1
Aug-08
3.0
145
Oct-07
MoM: -3% | CY16: -3%
210
Dec-16
6.0
Jun-09
Dec-06
10 Yr Avg (x)
9.0
Sector Performance
63
-10
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
53
40
Aug-08
22
Oct-07
37
Dec-06
L&T trades at a 35% discount to its long-term

average on a P/B basis.
190
Oct-07
We expect BTG/EPC ordering to remain weak in

2HFY17. The state of Uttar Pradesh (UP) is
heading into elections and is thus unlikely to see
order finalization until a new government is
formed.
10 Yr Avg (x)
Capital Goods P/E (x)

67
Dec-06
Capital Goods sector trades at a 38% discount to

historical P/B average and near its historical P/E
average.

Current
10 Yr Avg
128
166
-65
31
-67
-56
148
109
125
115
195
96
-23
-13
1
40
141
193
119
17
35
77
52
40
Cement: All-India price declines by INR5/bag; South realizations least affected
20.2
17.1
12
10 Yr Avg (x)
Company
ACC
Ambuja Cem.
Birla Corpn.
Grasim Inds
India Cements
Shree Cement
UltraTech Cem.
Current
25.8
26.4
13.0
9.9
16.4
25.5
24.7
PE (x)
10 Yr Avg
23.3
21.8
10.2
9.6
18.8
20.6
19.5
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Feb-11
Apr-10
Jun-09
Aug-08
Dec-11
-14
-25
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
-50
Feb-11
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
2.0
Jun-09
0.5
Apr-10
2.5
Jun-09
2.3
Aug-08
3.0
Aug-08
6.0
Oct-07
25
Oct-07
10.7
50
4.3
8.5
-75
Dec-06
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Cement P/B (x)
5.5
Dec-06
10.0
24
-35
1.8
14.0
-1
Oct-07
18.0
10 Yr Avg (x)
21
Dec-06
Cement EV/EBDITA (x)
45
Dec-16
Cement sector trades at 10.7x (25% premium) on

EV/EBIDTA basis.
85
30
Oct-07
Prices in east are likely to be subdued in

December due to volume push by companies like
Holcim and Lafarge to meet year-end targets.
10 Yr Avg (x)
Cement P/E (x)
39
Dec-06
All-India average realization is down by INR5/bag

MoM in December due to price declines across
regions. Price decline across regions is
~INR2-6/bag due to demand weakness. Also,
price hikes in select regions have been rolled back
due to poor demand.
Sector Performance
MoM: -5% | CY16: +17%
Prem/Disc (%)
11
21
28
3
-13
24
26

Current
10 Yr Avg
59
36
62
28
-20
-40
-39
-44
1
10
56
21
51
14
23
Current
2.9
2.0
1.3
1.3
0.9
5.6
3.5
PB (x)
10 Yr Avg
2.9
2.7
1.2
1.3
0.9
3.8
2.9
Prem/Disc (%)
1
-25
16
-4
-3
49
19

Current
10 Yr Avg
20
8
-17
0
-45
-57
-49
-52
-62
-65
130
39
42
8
Consumer: Trades at P/E of 33.7x, 16% premium to long-term average

36
10 Yr Avg (x)
22
Raw material prices are inching up YoY. This, coupled with

subdued sales, is likely to affect margins in 3QFY17.
10.0
Company
Asian Paints
Britannia Inds.
Colgate-Palm.
Dabur India
Emami
GlaxoSmith C H L
Godrej Consumer
Hind. Unilever
ITC
Jyothy Lab.
Marico
Nestle India
P & G Hygiene
Page Industries
Pidilite Inds.
Radico Khaitan
United Breweries
United Spirits
Current
40.5
36.4
34.8
33.9
32.9
28.8
36.0
38.0
26.3
41.3
37.6
44.0
46.0
46.3
33.0
16.9
50.9
47.1
10 Yr Avg (x)
Prem/Disc (%)
34
38
18
22
33
17
35
22
7
25
44
20
42
57
28
-32
-35
-35
Dec-16
Feb-16
Jun-14
Apr-15
Oct-12
Aug-13
Dec-11
Apr-10
Feb-11
480
12.5
Jun-09
Aug-08
Oct-07
-10
Dec-06
Dec-16
Apr-15
Feb-16
Jun-14
Oct-12
Aug-13
Feb-11
Dec-11
Jun-09
Apr-10
Oct-07
Dec-06
Consumer P/B (x)
15.0
380
9.5
10.0
7.5
261
280
310
180

Current
10 Yr Avg
148
77
123
55
114
73
108
63
102
45
77
45
121
56
133
82
61
44
153
93
131
53
170
115
183
90
184
73
103
51
4
45
212
358
189
322
24
Current
12.2
12.9
20.6
8.8
10.1
6.7
7.5
29.2
6.9
6.4
11.5
16.0
12.3
19.8
7.8
1.4
7.8
10.6
PB (x)
10 Yr Avg
10.1
10.6
25.8
9.1
8.8
7.1
7.2
27.7
6.8
3.2
8.2
23.0
9.3
13.7
6.4
2.6
9.3
11.6
Prem/Disc (%)
20
21
-20
-4
15
-6
5
5
1
98
40
-30
32
44
23
-45
-16
-9
Feb-16

Current
10 Yr Avg
399
275
427
293
743
854
258
238
312
224
173
163
207
164
1092
923
182
153
163
20
369
202
553
749
402
244
708
407
220
136
-42
-5
218
243
334
330
Dec-16
Jun-14
Apr-15
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
80
Dec-06
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
PE (x)
10 Yr Avg
30.2
26.4
29.6
27.9
24.8
24.7
26.6
31.0
24.5
32.9
26.1
36.7
32.4
29.5
25.8
24.7
78.1
72.0
107
72
29
15
5.0
MoM: +1% | CY16: +3%
107
68
Consumer companies have started to see signs of recovery in

December. Sales for some companies are back to
pre-demonetization levels. It is not yet completely clear as to
how long the liquidity crunch will last. Thus, categories that are
more discretionary in nature will continue to see delay in
demand. Recovery in the western and southern regions is faster
as they are better banked than other parts of the countries.
Sector Performance
146
33.7
29.1
29
Aug-08
Consumer sector P/E remains above its historical average (16%

premium).
Consumer P/E (x)
43
Healthcare: Recovery delay due to demonetization; worst performer for the month
21
10 Yr Avg (x)
Dec-16
Feb-16
Jun-14
Apr-15
Oct-12
Aug-13
Dec-11
Apr-10
Feb-11
Jun-09
Oct-07
Aug-08
-30
Dec-06
Feb-16
Dec-16
Jun-14
Apr-15
Oct-12
Aug-13
Feb-11
Dec-11
Apr-10
Jun-09
28
30

140
5.8
100
4.1
4.5
3.8
52
60
57
20

Current
10 Yr Avg
-14
-27
80
10
22
10
47
46
-4
19
46
39
171
116
16
82
-28
-29
27
32
24
12
53
41
5
46
10
-19
25
PB (x)
10 Yr Avg
2.6
2.4
4.8
3.5
5.4
3.7
10.7
4.6
1.4
3.0
4.5
4.0
4.9
3.9
Prem/Disc (%)
30
63
2
-10
-28
-9
69
-21
67
-17
-6
21
-24
24
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Feb-11
Dec-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
Dec-16
Apr-15
Current
3.4
4.0
4.9
3.2
3.9
3.3
18.0
3.6
2.4
2.5
4.3
4.8
3.7
4.8
Feb-16
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
-20
Dec-06
Prem/Disc (%)
12
56
6
-4
-23
0
20
-39
-3
-8
6
3
-31
29
Aug-08
Healthcare P/B (x)
7.0
2.0
PE (x)
10 Yr Avg
12.5
18.8
18.8
25.0
20.4
23.8
36.8
31.1
12.1
22.6
19.2
24.1
25.0
13.9
Oct-07
12
MoM: -6% | CY16: -13%
Current
13.9
29.3
19.9
24.0
15.6
23.8
44.2
18.9
11.7
20.7
20.3
24.9
17.1
18.0
19.7
18
3.3
Company
Aurobindo Pharma
Biocon
Cadila Health.
Cipla
Divi's Lab.
Dr Reddy's Labs
Glaxosmit Pharma
Glenmark Pharma.
Granules India
Ipca Labs.
Lupin
Sanofi India
Sun Pharma.Inds.
Torrent Pharma.
60
24
Sector Performance
90
21.8
Aug-08
Long-term outlook for the sector remains strong due

to differentiated US pipeline and high growth in the
domestic market.
10 Yr Avg (x)
30
Oct-07
Sun Pharma trades at a 31% discount to its historical

averages, while GSK Pharma, Biocon, Aurobindo and
Torrent Pharma are trading at a premium to their
averages.
Healthcare P/E (x)
36
Dec-06
Healthcare sector trades at a P/E of 19.7x 10%

discount to historical averages. The sector was the
worst performer for the month with 6% negative
return MoM.

Current
10 Yr Avg
40
-3
62
-10
99
76
30
31
60
100
36
36
637
294
48
70
-4
-48
2
11
75
68
97
48
52
82
96
43
Media: Regulatory uncertainty heightens; recent correction offers good entry point
Media P/B (x)
4.9
4.4
4.2
Current
10.2
14.8
36.8
16.8
25.3
Prem/Disc (%)
-59
-19
-2
-22
5

Current
10 Yr Avg
-37
46
-9
7
126
120
3
26
55
41
26
Current
0.6
2.9
5.1
4.6
7.2
PB (x)
10 Yr Avg
2.1
3.8
2.7
5.4
5.4
Prem/Disc (%)
-70
-24
91
-14
34
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
-30
Jun-09
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
PE (x)
10 Yr Avg
24.9
18.3
37.6
21.5
24.1
101
62
10
1.2
Company
H T Media
Jagran Prakashan
PVR
Sun TV Network
Zee Entertainmen
90
50
2.7
MoM: +1% | CY16: +6%
Feb-11
10 Yr Avg (x)
130
5.7
Sector Performance
-50
Apr-10
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
33
Jun-09
21.7
7.2
32
50
22.7
Aug-08
27
Aug-08
Subscriber-level ARPU improvement in Phase

I/II markets and uptick in Phase III digitization
are the key triggers on the subscription front.
100
Dec-06
Impact of non-discriminatory content pricing

regulation on the media value chain remains a
key monitorable.
37
Oct-07
17
150
Oct-07
Digitization and ad growth revival remain the

key themes in the sector. Broadcasters
superior bargaining power holds them in good
stead to capture the upside.
10 Yr Avg (x)
Media P/E (x)
Dec-06
47
Dec-06
Media sector trades at one-year forward P/E of

21.7x, at a 4% discount to historical average of
22.7x.

Current
10 Yr Avg
-74
-22
19
42
109
-1
88
98
193
98
Metals: Domestic steel prices up ~INR3,000/t MoM

10 Yr Avg (x)
Metals P/E (x)
28
21
15
12.1
14
12.3
6.8
Current
10.5
7.3
9.7
13.9
11.9
13.2
8.1
PE (x)
10 Yr Avg
8.0
8.9
13.9
13.5
17.5
15.8
13.0
18.5
8.3
Prem/Disc (%)
30
-18
-28
-21
-25
-29
-3

Current
10 Yr Avg
-36
-53
-55
-48
-19
-41
-21
-15
3
-27
-8
-24
-19
9
-50
-51
27
Current
2.2
1.2
0.4
1.7
1.2
1.6
0.7
2.9
1.1
Feb-16
Dec-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
-43
-51
-55
PB (x)
10 Yr Avg
1.8
1.7
2.4
1.3
1.5
4.3
1.4
2.6
2.2
Prem/Disc (%)
25
-27
-83
28
-21
-63
-51
14
-49

Current
10 Yr Avg
-11
-35
-50
-38
-83
-10
-32
-52
-53
-45
-34
60
-73
-49
20
-5
-53
-17
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
-80
Feb-11
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
0.0
-30
Apr-10
1.2
Jun-09
1.6
1.3
Company
Hind.Zinc
Hindalco Inds.
Jindal Steel
JSW Steel
Natl. Aluminium
NMDC
SAIL
Tata Steel
Vedanta
Aug-08
-5
2.5
MoM: -5% | CY16: +37%
20
3.8
Sector Performance
Oct-07
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Feb-11
Apr-10
Dec-11
10 Yr Avg (x)
Aug-08
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Jun-09
Metals P/B (x)
5.0
3.0
-24
-75
Oct-07
5.5
Aug-08
Oct-07
Dec-06
7.2
8.0
-30
-45
10.5
-15
Dec-06
Metal Sector EV/EBDITA (x)
13.0
45
Dec-06
Domestic long and flat steel product prices were

up ~INR3,000/t MoM. Iron ore (china cfr) was
unchanged. Coking coal was down ~USD50/t.
Zinc and lead were down from highs.
Oil & Gas: OMCs came out of the woods through increase in fuel prices
18
-24
14
-36
11.7
10
10.8
10 Yr Avg (x)
2.5
1.4
Company
BPCL
CPCL
Cairn India
GAIL (India)
Guj.St.Petronet
HPCL
IOCL
Indraprastha Gas
MRPL
ONGC
Petronet LNG
Reliance Inds.
Current
9.7
7.3
18.9
12.7
13.1
9.1
8.4
21.1
7.1
11.5
14.8
10.2
28
Current
2.4
7.9
0.9
1.6
1.7
1.9
1.6
4.0
1.8
1.3
3.3
1.1
Dec-16
Feb-16
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Apr-15
-43
-51
PB (x)
10 Yr Avg
1.5
2.0
1.1
2.0
1.9
1.0
1.2
2.7
1.8
1.8
2.4
1.6
Prem/Disc (%)
65
295
-18
-21
-14
96
39
46
-3
-29
37
-32
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
-63
Aug-08
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
Prem/Disc (%)
-15
26
35
-6
-5
1
-17
77
-34
1
29
-24

Current
10 Yr Avg
-41
-33
-55
-66
16
-18
-22
-21
-20
-19
-44
-47
-48
-40
30
-30
-56
-37
-29
-34
-9
-33
-37
-22
-40
-39
1.6
1.5
MoM: +2% | CY16: +27%
Aug-08
-27
2.0
Sector Performance
-15
1.0
PE (x)
10 Yr Avg
11.4
5.8
13.9
13.6
13.8
9.1
10.2
11.9
10.8
11.3
11.4
13.4
Dec-06
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
Dec-06
Oil & Gas P/B (x)
3.0
OMCs appear attractive given their inexpensive

valuations, while sharp oil price rise could
benefit upstream companies.
-48
Dec-06
RIL outperformed relatively on the basis of

strong GRM.
-34
-31
-60
OMCs (HPCL, BPCL and IOCL) debunked the

threat of regulation by increasing retail prices
again in mid-December 2016.
-12
Oct-07
Oil prices rose ~10% in Nov-Dec16 due to

production cuts agreed upon by OPEC and
non-OPEC.
10 Yr Avg (x)
Oil & Gas P/E (x)
22
Oct-07
Oil & Gas trades at a P/B of 1.4x (13% discount

to historical average) and a P/E of 10.8x (8%
discount).

Current
10 Yr Avg
-2
-46
222
-26
-64
-60
-36
-27
-32
-29
-24
-65
-33
-56
63
1
-27
-32
-49
-35
33
-12
-55
-39
Retail: Trades above historical average; premium reduces to 2%

175
36.3
17
Retail P/B (x)
Current
51.6
32.7
34.6
Current
7.0
2.6
6.2
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
135
PB (x)
10 Yr Avg
12.9
4.5
9.0
Prem/Disc (%)
-45
-43
-32
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
40
Apr-10
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07

Current
10 Yr Avg
216
367
101
236
112
76
201
130
Jun-09
5.8
29
Oct-07
220
5.0
Prem/Disc (%)
-35
-43
15
Dec-06
Dec-16
Feb-16
Apr-15
Jun-14
310
8.1
8.0
400
Aug-08
11.0
10 Yr Avg (x)
-50
Oct-07
14.0
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Aug-08
Dec-06
Company
Jubilant Food
Shoppers Stop
Titan Inds.
123
25
2.0
PE (x)
10 Yr Avg
79.8
57.3
30.1
106
100
Dec-06
Titan trades at a 15% premium to its historical

average P/E.
34
250
35.4
Oct-07
Jewellery sales are expected to be impacted by

15-16% in 3QFY17. Jubilant Foodworks too
affirmed that sales are back to
pre-demonetization levels.
51
Dec-06
Retail companies were expected to be adversely

affected due to demonetization. The impact
seems to be not that adverse, with Titan stating
that the recovery for Tanishq has been strong
after first week of impact.
10 Yr Avg (x)
Retail P/E (x)
68
Jun-09
Retail sector trades at a P/E of 36.3x, at a 2%

premium to historical average.

Current
10 Yr Avg
188
377
5
66
152
233
Technology: Looking beyond seasonal weakness; best performer for December

35
10
15.0
10 Yr Avg (x)
Company
Cyient
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
MphasiS
NIIT Tech.
TCS
Tech Mahindra
Wipro
Zensar Tech.
Current
11.9
13.4
12.9
15.1
8.3
13.7
9.0
16.7
13.7
12.2
10.7
PE (x)
10 Yr Avg
11.8
14.5
21.1
17.7
10.4
11.9
8.8
17.8
15.5
15.1
6.2
Prem/Disc (%)
1
-8
-39
-15
-20
16
2
-6
-11
-19
73
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
62
50
41

Current
10 Yr Avg
-27
-31
-18
-15
-21
24
-7
4
-49
-39
-16
-30
-45
-48
3
4
-16
-9
-25
-12
-34
-64
30
Current
2.1
3.2
3.3
3.1
1.4
1.7
1.4
4.9
2.5
2.2
2.2
PB (x)
10 Yr Avg
1.9
3.3
2.6
4.4
2.2
2.2
1.7
6.1
3.9
3.2
1.5
Prem/Disc (%)
15
-3
27
-30
-34
-23
-19
-19
-37
-34
52
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Dec-06
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Dec-16
3.4
Oct-07
2.0
100
4.4
Dec-06
MoM: +3% | CY16: -8%
Aug-08
150
6.0
4.0
200
8.0
Sector Performance
-40
Oct-07
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Technology P/B (x)
-8
-15
10.0
-4
Dec-06
12
Oct-07
All large-cap IT stocks trade at a discount to their

10-year historical average P/E.
17
60
16.4
Aug-08
The support comes from the sector being

shielded from demonetization, INR depreciation
post US elections, and expectations of a better
FY18.
22
Oct-07
Stocks have been holding on to current levels,

despite a seasonally weak 3Q ahead.
10 Yr Avg (x)
Technology P/E (x)
27
Dec-06
Technology sector trades at a P/E of 15x, below its

historical average (9% discount).

Current
10 Yr Avg
-13
-31
29
21
36
-3
27
64
-42
-20
-29
-17
-44
-38
100
125
1
44
-12
20
-8
-45
Telecom: Low EV/EBITDA on the back of Jio freebies leading to weak earnings outlook
50
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-09
Dec-08
Dec-07
Dec-06
Dec-10
Current
24.5
PE (x)
10 Yr Avg
29.9
27.5
Dec-16
Feb-16
Apr-15
Jun-14
Oct-12
Aug-13
Dec-11
Feb-11
Apr-10
Jun-09
-38
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
-55
Aug-08
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07
-5
Dec-16
1.5
Dec-16
5.8
4.0
Aug-08
45
2.8
Dec-06
7.0
Oct-07
95
2.5
8.2
145
0.5
Company
Bharti Airtel
Idea Cellular
Dec-06
10 Yr Avg (x)
4.5
13.0
10.0
-50
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
10
Telecom P/B (x)
68
Dec-06
16.0
27.9
22
6.5
Telecom Sector EV/EBDITA (x)
123
150
8.5
MoM: -6% | CY16: -25%
250
Oct-07
Sector Performance
34
350
36.4
Aug-08
Remain positive on Bharti over long term, given

its strong competitive position. Idea remains a
structural sell, given its weak competitive
footing and stretched balance sheet.
46
Oct-07
Near-term headwinds given uncertain business

outlook and steep earnings correction risk.
10 Yr Avg (x)
Telecom P/E (x)
58
Dec-06
On EV/EBITDA basis, the telecom sector trades

at 5.8x (29% discount to historical average).
Prem/Disc (%)
-18

Current
10 Yr Avg
51
75
61
31
Current
1.7
1.1
PB (x)
10 Yr Avg
3.1
2.4
Prem/Disc (%)
-47
-56

Current
10 Yr Avg
-32
15
-56
-9
Utilities: Exchange prices remain low; Generation up 8% YoY in November

35
2.4
1.5
Prem/Disc (%)
-48
-3
7
-19
-4
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
-31
-35
-40
32
Current
1.4
9.4
1.0
1.3
1.7
PB (x)
10 Yr Avg
1.2
10.6
1.8
1.9
1.7
Prem/Disc (%)
14
-12
-42
-31
4
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Dec-16
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Dec-11
Feb-11
Apr-10
Jun-09
Aug-08
Oct-07

Current
10 Yr Avg
-34
22
-11
-13
2
-10
-28
-15
-31
-32
Dec-06
-65
Dec-06
Current
10.8
14.4
16.6
11.7
11.2
Jun-09
-5
1.8
0.8
PE (x)
10 Yr Avg
20.9
14.9
15.4
14.5
11.7
55
25
1.6
Company
CESC
Coal India
JSW Energy
NTPC
Power Grid Corpn
Dec-06
Feb-16
Apr-15
Jun-14
Aug-13
Oct-12
Feb-11
Apr-10
Dec-11
10 Yr Avg (x)
3.2
MoM: -2% | CY16: +2%
-70
Oct-07
Sector Performance
Jun-09
Utilities P/B (x)
4.0
Dec-16
11.9
-27
-35
Aug-08
14
-11
14.9
Oct-07
20
Aug-08
Short-term power prices averaged INR2.3/kWh,

broadly unchanged MoM. Generation in
November was up 8% YoY. YTD generation is up
5% YoY.
70
26
Oct-07
Coal India and Power Grid trade near historical

average P/B, while NTPC and JSW Energy trade
at a huge discount to historical average P/B.
10 Yr Avg (x)
Utilities P/E (x)
32
Dec-06
Utilities trade at a P/B of 1.5x, at a 20% discount

to historical average.

Current
10 Yr Avg
-45
-56
282
292
-58
-33
-46
-29
-29
-38
Motilal Oswal Securities Limited

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Highlights of December Edition: Best Performers Mom (%)

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Highlights of December Edition: Best Performers Mom (%)

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* Sectors in order of premium /

BEST PERFORMERS MoM (%)

WORST PERFORMERS MoM (%)

Highlights of December edition

Metals , Oil, Cement and Auto were

Telecom, Healthcare and Technology

Strategy: Flat end to an eventful year

Valuation deep dive for the month: Financials

Prices as on Dec 30, 2016

Indian equities: Nifty, sector performance and key valuation metrics

Global equities: Performance and valuation snapshot

Valuations: Nifty/Midcap companies

Sector highlights: Overview and sector valuations

Sector valuations are

Global equities data

Research & Quant Team (Deven@MotilalOswal.com)

Strategy: Flat end to an eventful year

BULLS & BEARS | January 2017

Valuation Deep Dive for the month: Financials

BULLS & BEARS | January 2017

De-rating in recent time in line with deteriorating profitability

RoA dipped on account of lower profitability of corporate lenders

A relaxed monetary policy, low interest rate and improvement in

Private banks sector P/BV is at ~2.3x. It is trading at its 5-year average

The recent exercise of demonetization by the government also had its

Pvt Banks Earning Growth (%)

Valuation Deep Dive for the month: Financials

Trend in NBFC PE (x) one year forward

Trend in NBFC PB v/s Sensex PB one year forward

NBFC P/B (x)

BULLS & BEARS | January 2017

Large untapped opportunity, the lack of presence of banks in rural areas

Indian equities: Nifty ends CY16 with +3% return

Sector valuations: Technology and Oil outperform; Healthcare underperforms

BULLS & BEARS | January 2017

About the product

Indian equities: Nifty ends CY16 with 3% positive return

Telecom (-25%), Healthcare (-13%) and Technology (-8%) were

Metals (+37%), Oil (+27%), Cement (+17%) and Auto (+9%)

Demonetization drags 4QCY16 performance

The year ended on a disappointing note as gains made in

Nifty ended CY16 at 8,186, implying positive return of 3%.

MoM Abs. Performance (%)

BULLS & BEARS | January 2017

Relative to Nifty MoM Performance (%)

BULLS & BEARS | January 2017

Indian equities: Midcaps outperform in CY16; trade near Sensex P/E

Source: MOSL, Bloomberg for Midcap valuation.

Sensex Avg: 17.1x

BULLS & BEARS | January 2017

Midcap Vs Sensex PE Prem/(Disc) (%)

Midcaps trading at 3% premium to Sensex

12-month forward P/E (x)

Nifty Midcap 100 Rebased

Midcaps outperformed large caps by 60% in last five years

Indian equities: Valuations below long-term averages

12-month forward Sensex P/B (x)