January 2024
India Strategy
BSE Sensex: 72,240
Nifty-50: 21,731
Nifty-50: Eight years of positive
returns
29
YoY return (%)
Getting in the Groove!!!!
Eighth consecutive year of positive returns for Nifty-50

24
20
12
15

2023
2021
2020
2019
2018
2017
2016
2022
4
3
3
India’s ascent…: In CY23, the Indian markets remained resilient and strong amid weak
global macros, rising interest rates, and geopolitical uncertainties that kept global
markets volatile and jittery. The Nifty-50 clocked eight successive years of positive
returns. The benchmark index hit an all-time high in Dec’23 and surged 20% YoY in
CY23 (vs. only 4% growth in CY22).
…navigating the murky waters | multiple levers at play: While multi-year high interest
rates, geopolitical tensions, volatility in crude oil prices, slowing growth, and
recessionary environment in developed markets remained the key concerns during the
year, India’s strong economic growth, healthy corporate earnings, moderate inflation,
waning crude oil prices, reinforced FII and DII inflows, and strong retail participation
propelled the Indian markets to greater heights.
As good as it gets!
FED continues to
pause its rate hike
spree. This dovish
stance brings cheer
to the global markets
FII flows turn
positive with
inflows of
USD21.2b in CY23
(vs. outflows of
USD17b in CY22)
DIIs post the second
highest inflow of
USD22.3b in CY23
(vs. USD32.2b
inflows in CY22)
The uptrend in the Indian equity market was driven by robust macro and micro
factors, alleviating concerns on political continuity, and expectation of improving
liquidity going ahead.
 Strong macros: Indian economic indicators remain strong as real GDP has grown
faster than expected in the last three quarters, registering 7.7% YoY growth in
1HFY24. Moreover, inflation is in a comfortable range and the RBI has raised its
GDP growth projections for FY25, underpinning the continued momentum in the
economy.
 Federal Reserve (FED) interest rates near its peak: As the US inflation continues
to ebb and the FED maintains the benchmark rates for the third consecutive
time, the likelihood of a rate cut remains high in 1HCY24. This could drive
liquidity towards global markets, as evidenced by the rally in global equity
markets during Nov-Dec’23.
 FII flows rebound while DII flows remain strong: Resilient domestic inflows of
USD22.3b in CY23, with monthly SIP inflows of ~USD2b/month (hitting new
highs), easily cushioned the major shocks caused by global volatility and
uncertainties in the past two years. FII flows bounced back during the year. FIIs
turned buyers with inflows of USD21.2b in CY23 vs. outflows of USD17b in CY22.
 Solid corporate earnings: The Nifty-50 delivered a 30% earnings growth in
1HFY24. High-frequency data (GST collections, auto monthly numbers, power
demand, PMI data, et al.) indicates that earnings momentum will continue to
remain intact in 2HFY24. The sectors that underperformed on the earnings front
for the past several years, such as Automobiles, Real Estate, Capital Goods,
Infrastructure, Industrials, Utilities, Hotels, and PSUs have also made a strong
comeback. The pick-up in government capex and the growth in order books
provided a fresh boost to the sectors such as Railways, Defense, Capital Goods
and Utilities.
Gautam Duggad – Research Analyst (Gautam.Duggad@MotilalOswal.com)
Deven Mistry – Research Analyst (Deven@MotilalOswal.com) / Aanshul Agarawal (Aanshul.Agarawal@Motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
India Strategy: Getting in the Groove!!!!

India’s contribution
to the world market
cap at an all-time
high of 3.8%
India remains the
best performing
market in
5/10/15/20 years (in
local currency
terms)
CY23 in retrospect




A healthy year for
Fund raising with
India Inc. raising
INR1.2t
Expectations of a political continuity: The recent outcome of the state elections
in four states, which overwhelmingly favored the incumbent BJP government,
has increased market confidence in the current administration and political
continuity after the 2024 general elections.

Most global economies end higher in CY23: Barring China (-14%), most of the
key global markets such as Brazil (+33%), Taiwan (+27%), Germany (+24%), US
S&P500 (+24%), France (+20%), Russia (+20%), Japan (+19%), India (+19%),
Korea (+16%), UK (+9%) and MSCI EM (+7%) gained in CY23 in USD terms. MSCI
India (+19%) outperformed MSCI EM (+7%) in CY23 as well.
Top performers: India’s outperformance moderated vs. global peers in CY23 as
global markets recover from the CY22 lows. Despite moderation, India remains
the top performer in local currency terms and one of the top three performers
in USD terms in the last 20 years. The Nifty-50 posted a CAGR of 16%/15%/13%/
14%/13% (in local currency terms) and CAGR of 11%/11%/10%/10%/10% (in
USD terms) in the 3-yr/5-yr/10-yr/15-yr/20-yr periods.
A year of all-round gains!: The year witnessed broad-based growth with all
indices and sectors delivering positive returns. Both Nifty Midcap 100 (+47%YoY)
and Nifty Smallcap 100 (+56% YoY) outperformed the benchmark by a wide
margin of 27% and 36%, respectively. The recovery of underperforming sectors
from the past decade (such as Real Estate, Capital Goods, PSUs, Industrials,
Defense, etc.), despite not being a major contributor to the large-cap indices, led
the rally in the broader markets. This propelled the mid- and small-cap indices to
new highs. The top gainers in the sectoral space were: Real Estate
(+81%), Capital Goods (+67%), Autos (+48%), Infra (+39%), Healthcare (+34%),
Utilities (+33%), PSU Bank (+32%), Energy (+29%), FMCG (+29%), Technology
(+24%), Metals (+19%), and Private Bank (+14%).
Performance scorecard: The breadth was majorly positive in CY23, with 48 of
the Nifty-50 stocks closing higher. Tata Motors (+101%), Bajaj Auto (+88%),
NTPC (+87%), L&T (+69%), and Coal India (+67%) were the top performers.
Conversely, Adani Enterprises (-26%), and UPL (-18%) were the only laggards.
Domestic fundraising buoyant: Primary market activity picked up in CY23 with a
total equity fund raise of INR1.2t (vs. INR885b in CY22). However, fundraising
through IPOs moderated to INR571b (vs. INR613b in CY22). QIPs at INR483b (vs.
INR117b in CY22) accounted for the entire incremental funds raised during the
year.
“Are the valuations high?” – The never-ending dilemma!


January 2024
Resilience personified: India remains the fastest-growing country among the
top 10 global economies. The strong post-pandemic recovery and resilient
performance amid global headwinds demonstrate the inherent strength of the
economy.
Ample growth drivers in place: Strong growth, prudent policy reforms,
government’s focus on infrastructure and capex, healthy corporate books,
comfortable forex reserves, and lower commodity cost inflation could protect
India from any external shocks and position it to outpace other countries in the
coming decade.
2
India Strategy: Getting in the Groove!!!!
Buoyant corporate earnings: Nifty-50’s EPS CAGR of 16% over FY19-24E (to
INR996 in FY24E) was in line with index CAGR of 15% during the last five years
(ending Dec’23).
Valuations and view: After the sharp rebound, the Nifty now trades at a 12month forward P/E of 19.6x, near its LPA of 20.2x (3% discount); however, it is at
15% discount to the Sep’21 high. Further, the market capitalization-to-GDP ratio
is at 124% (we expect nominal GDP to increase 8.2%/10.1% YoY in FY24/FY25).
As CY23 was marked by multi-year high interest rates, concerns about banking
crises in the US and Europe, and geopolitical uncertainties, CY24 is likely to bring
some moderation in these issues, especially on the interest rate front. With
global liquidity tightening nearing its end, a healthy domestic macro and micro
environment, strong domestic and retail participation, and expected political
continuity post- 2024 General Elections, bode well for policy momentum in
India. Further, the country is currently experiencing the highest growth among
major economies. Hence, despite fair valuations, the above factors augur well
with potential for further upside. We anticipate continued optimism in the
market and maintain a positive outlook and overweight stance on sectors such
as BFSI, Industrials, Real Estate, Auto and Consumer Discretionary.
TOP IDEAS: Among large-caps, we like Coal India, ITC, SBI, L&T, HCL Tech, Titan,
Ultratech Cement and M&M. Among mid-caps, we are bullish on Ashok Leyland,
Godrej Properties, Angel One, Metro Brand, Global Health, PNB Housing,
Kirloskar Oil Engine, and Lemon Tree.



Exhibit 1: Eight consecutive years of positive returns for the first time in history!
Six consecutive year
of positive return
55
36 40
36 37
20
3
3
24
20
4
CY23
CY22
CY21
CY20
CY19
CY18
CY17
CY16
CY15
CY14
CY13
CY10
CY09
-52
CY08
CY07
CY06
CY05
CY03
-25
CY02
CY01
CY00
CY99
CY98
CY97
CY96
CY95
CY94
CY93
CY92
3
12 15
-4
-15 -16
-18
-23
29
7
CY11
-1
31
28
18
11
CY04
13
CY91
CAGR of
13.5%
76
72
67
CY12
69
Eight consecutive year of
positive return
Source: Exhibit data is sourced from Bloomberg, NDSL, SEBI, Capitaline, and MOFSL database
January 2024
3
India Strategy: Getting in the Groove!!!!
Exhibit 2: The journey of the past eight years
2016
(+3%)
IL&FS crisis
blows up
with NBFC
crisis along
with
elevated
volatility
across the
board
GST implemen-tation;
markets
scale new
highs with
strong
domestic
equity inflows
2017
(+29%)
2018
(+3%)
GDP growth
decelerates
notably;
market
rallies
within a
narrow band
(reclaiming
12K level)
2019
(+12%)
2020
(+15%)
Exhibit 3: India’s outperformance moderates in CY23 (in
USD)…
33
24
24
20
20
19
19
A year of
recovery and
heightened
activities on
multiple
fronts
2021
(+24%)
47
2022
(+4%)
Strong
resilience
amid
geopolitical
headwinds
and multiyear high
global
interest
rates
2023
(+20%)
CY23 (in local currency) (%)
28
16
9
India stands
out in the
global arena –
outperforms
significantly
Exhibit 4: …while it performs relatively better in local
currency terms during the year
CY23 (USD term) (%)
27
The year hit by
pandemic-led
volatility and
unpredictability
27
24
22
20
20
19
7
17
7
4
Exhibit 5: India remains the second-best performer in the
last 10 years (%)…
10
10
In 10 years (in USD terms)
3
3
2
1
UK
MSCI EM
France
South Korea
India - Nifty
Germany
Brazil
S&P 500
Taiwan
Exhibit 6: …while it is the best performer in local currency
terms in the previous decade (%)
13
7
4
Japan
-14
Russia MICEX
China (HSCEI)
MSCI EM
UK
South Korea
India - Nifty
Japan
Russia MICEX
France
S&P 500
Germany
Taiwan
Brazil
-14
China (HSCEI)
Flat returns due
to
demonetization
disruption
In 10 years (in Local currency)
10
10
8
7
6
6
6
0
3
1
0
-1
January 2024
China (HSCEI)
MSCI EM
UK
South Korea
Germany
France
Russia MICEX
Japan
Taiwan
S&P 500
Brazil
-6
India - Nifty
-6
China (HSCEI)
Russia MICEX
UK
MSCI EM
South Korea
Brazil
Germany
France
Japan
Taiwan
India - Nifty
S&P 500
-4
4
India Strategy: Getting in the Groove!!!!
Exhibit 7: India’s share in world Mcap at an all-time high of 3.8%
India's Contribution to World Mcap (%)
3.9
3.8
3.3
Average: 2.7%
2.7
2.1
Dec-23
Jul-23
Jan-23
Aug-22
Mar-22
Oct-21
May-21
Dec-20
Jun-20
Jan-20
Aug-19
Mar-19
Oct-18
Apr-18
Nov-17
Jun-17
Jan-17
Aug-16
Feb-16
Sep-15
Apr-15
Nov-14
Jun-14
Dec-13
1.5
Exhibit 8: Global ranking based on Mcap – India vs. others: India’s global ranking improves seven places in the last decade
Country
United States
China
Japan
Hong Kong
India
France
United Kingdom
Canada
Germany
Switzerland
Taiwan
South Korea
Australia
Sweden
Netherlands
United Arab Emirates
Brazil
Denmark
Indonesia
Spain
Mcap Rank
Mcap
CY23
CAGR (%)
Change
CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23 (USD t) Chg (%) 5 Year 10 Year in Rank
1
1
1
1
1
1
1
1
1
1
1
50.7
23
14
9
0
5
2
2
2
2
3
2
2
2
2
2
9.5
-6
12
11
3
2
3
3
3
3
2
3
3
3
3
3
6.2
14
3
3
-1
4
4
4
4
4
4
4
4
4
4
4
4.7
-9
0
3
0
12
10
10
9
8
7
9
8
7
5
5
4.2
26
15
14
7
6
7
6
7
6
6
6
6
6
7
6
3.3
12
8
4
0
3
5
5
5
5
5
5
5
5
6
7
3.1
5
0
-3
-4
7
6
8
6
9
9
7
7
8
8
8
2.9
7
9
3
-1
8
8
7
8
7
8
8
9
9
9
9
2.4
12
4
2
-1
9
9
9
10
10
10
10
11
10
10
10
2.1
10
7
3
-1
14
13
13
13
13
13
13
12
11
12
11
2.1
29
14
8
3
11
12
11
11
11
11
11
10
12
13
12
1.9
19
7
5
-1
10
11
12
12
12
12
12
13
13
11
13
1.7
4
7
2
-3
16
16
14
15
16
15
15
14
14
14
14
1.0
11
9
4
2
17
18
17
17
17
18
16
15
15
15
15
1.0
9
16
10
2
20
20
20
20
20
20
20
20
20
16
16
1.0
14
33
18
4
13
14
16
14
14
14
14
16
17
17
17
0.9
24
1
-1
-4
19
19
18
19
19
19
19
18
16
18
18
0.8
21
17
10
1
18
17
19
18
18
17
18
19
19
20
19
0.8
24
9
8
-1
15
15
15
16
15
16
17
17
18
19
20
0.7
20
3
0
-5
Exhibit 9: Trends in Nifty indices’ performance (%) — Sharp reversions to the mean clearly visible in their annual performance
Nifty50
Year
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
Closing
6,304
8,283
7,946
8,186
10,531
10,863
12,168
13,982
17,354
18,105
21,731
January 2024
Nifty
Midcap
100
5yrs 10yrs Closing
16
13
8,071
10
15
12,584
5
11
13,397
12
8
14,351
12
6
21,134
11
14
17,876
8
9
17,103
12
9
20,843
16
14
30,443
11
12
31,509
15
13
46,182
CAGR (%)
1yr
7
31
-4
3
29
3
12
15
24
4
20
2yrs
17
18
12
-1
15
15
7
13
19
14
12
3yrs
1
21
10
9
8
11
14
10
17
14
16
Nifty
Small cap
100
5yrs 10yrs Closing
17
13
3,403
11
15
5,273
9
13
5,653
19
11
5,781
20
9
9,093
17
17
6,449
6
9
5,835
9
9
7,088
16
17
11,289
8
14
9,731
21
19
15,144
CAGR (%)
1yr
-5
56
6
7
47
-15
-4
22
46
4
47
2yrs
15
22
29
7
26
12
-10
8
33
23
23
3yrs
-3
27
16
21
19
10
6
0
19
23
30
CAGR (%)
1yr
-8
55
7
2
57
-29
-10
21
59
-14
56
2yrs
12
19
29
5
27
6
-20
5
39
17
16
3yrs
-6
25
15
19
20
4
0
-8
21
19
29
5yrs 10yrs
15
9
15
7
10
16
6
20
5
14
14
2
5
5
6
14
15
1
10
19
16
5
India Strategy: Getting in the Groove!!!!
Exhibit 11: Number of years of positive returns over the last
eight years
5
7
(No. of years of positive return)
7
6 6 6 6 6
5 5 5
5
Real Estate
Bank PSU
Capital Goods
Utilities
Telecom
Infra
Metal
Technology
Auto
Bank PVT
Smallcap 100
Finance
20 19 14 13
Consumer
24
8
6
Nifty-50
39 34
33 32 31 29 29
Nifty-50
Midcap 100
Smallcap 100
Real Estate
Capital Goods
Auto
Infra
Healthcare
Utilities
Bank PSU
Telecom
Oil & Gas
Consumer
Technology
Media
Metal
Bank PVT
Finance
20
48
8
Oil & Gas
47 56
8
Midcap 100
67
3
3
Media
CY23 (%, YoY)
81
Healthcare
Exhibit 10: CY23 sectoral indices performance (%)
Exhibit 12: Trends in sectoral performance (%) — Oil & Gas and Financials only sectors to deliver eight consecutive years of
positive returns
Return YoY (%)
CAGR (%)
Sector
Index
CY16
CY17
CY18
CY19
CY20
CY21
CY22
CY23 CY18-CY23
Nifty-50
Nifty
3
29
3
12
15
24
4
20
15
Midcap 100
Nifty Midcap 100
7
47
-15
-4
22
46
4
47
18
Smallcap 100
Nifty Smallcap 100
2
57
-29
-10
21
59
-14
56
15
Real Estate
Nifty Realty
-4
110
-33
28
5
54
-11
81
25
Capital Goods
S&P BSE Capital Goods
-3
40
-2
-10
11
53
16
67
22
Auto
Nifty Auto
11
31
-23
-11
11
19
15
48
11
Infra
Nifty Infra
-2
34
-13
3
12
36
6
39
15
Healthcare
Nifty Pharma
-14
-6
-8
-9
61
10
-11
34
7
Utilities
S&P BSE Power
2
20
-16
-4
7
69
26
33
17
Bank PSU
Nifty PSU Bank
4
24
-17
-18
-31
44
71
32
10
Telecom
S&P BSE Telecom
-21
49
-41
13
14
43
-4
31
11
Oil & Gas
Nifty Energy
20
39
1
11
6
34
14
29
18
Consumer
Nifty FMCG
3
29
14
-1
13
10
18
29
16
Technology
Nifty IT
-7
12
24
8
55
60
-26
24
19
Media
Nifty Media
-1
33
-26
-30
-9
35
-10
20
-1
Metal
Nifty Metal
45
49
-20
-11
16
70
22
19
17
Bank PVT
Nifty Pvt. Bank
7
41
8
16
-3
5
21
14
14
Finance
Nifty Financial Services
5
41
11
26
4
14
10
13
16
Note: NSE Indices are used for the above sector performance, except Utilities, Capital Goods, and Telecom which are from BSE. NSE Metal
index includes Adani Enterprises.
Exhibit 13: Over the last eight years, mid-caps have delivered six and small-caps have
reported five years of positive returns
Nifty 50
Mid-caps outperform Nifty50 in five out of eight years,
whereas small-caps
outperform in only four
years
47
46
29
7 2
3
CY16
15
12
3
CY17
Nifty Smallcap 100
57
-15
January 2024
Nifty Midcap 100
-29
CY18
-4
22 21
59
24
56
20
4 4
-10
CY19
47
-14
CY20
CY21
CY22
CY23
6
India Strategy: Getting in the Groove!!!!
Exhibit 14: 96% of the stocks deliver positive returns in CY23, the highest in last eight years
Positive breadth %
91
96
84
54
CY17
CY18
70
62
CY19
62
CY20
CY21
CY22
CY23
:
Exhibit 15: 48 of the Nifty-50 constituents deliver positive returns in CY23 (vs. 31 in CY22)
Tata Motors
Bajaj Auto
NTPC
Larsen & Toubro
Coal India
Hero Motocorp
Ultratech Cem
Power Grid Corp
LTI Mindtree
Tata Consumer
Titan Company
HCL Tech
ONGC
ITC
M&M
Dr Reddy’s
BPCL
Nestle
IndusInd Bank
Hindalco
Eicher Motors
Bharti Airtel
Apollo Hosp
Sun Pharma
Tech Mah.
Adani Ports
Britannia
Tata Steel
Grasim Industries
Maruti Suzuki
Wipro
Axis Bank
TCS
SBI Life Ins.
Cipla
JSW Steel
Divis Labs
HDFC Life Ins.
ICICI Bank
Reliance Inds.
Bajaj Finance
Asian Paints
Bajaj Finserv
HDFC Bank
State Bank
Kotak Bank
HUL
Infosys
UPL -18
Adani Ent. -26
69
67
51
51
48
44
42
41
41
40
39
38
37
36
36
31
30
28
28
27
26
25
25
24
24
24
23
20
18
16
16
16
15
14
14
12
12
11
10
9
5
5
4
4
2
101
88
87
CY23 YoY returns
Exhibit 16: 24 of the Nifty-50 companies have delivered positive returns in six out of eight years
24
11
6
2
6
1
8 7 6 5 4 3
Number of years of
positive returns
January 2024
HDFC Bank
Reliance Inds.
7
8
Axis Bank
Asian Paints
Nestle
Titan Co.
Bajaj Fin.
JSW Steel
6 7
Adani Enter | Adani Ports
Eicher Mot | M&M
Bajaj Auto | Infosys
Tech Mah
| Tata Steel
Tata Cons
| Kotak Bank
SBI
| Ultratech C.
Britannia
| HUL
Apollo Hosp. | Divis Labs
ITC
| HCL Tech
TCS
| Bharti Airtel
Bajaj Finserv | ICICI Bank
L&T
| Grasim Ind
5
6
ONGC
Cipla
BPCL
Hero Mot.
Maruti Suz.
Sun Pharm
Hindalco
NTPC
Power Grid
LTI Mind
Wipro
4
5
UPL
Tata Motors
Dr Reddy’s
IndusInd
Bank HDFC
Life Ins. SBI
Life Ins.
3
4
Coal India
32
Number of years of positive returns
7
India Strategy: Getting in the Groove!!!!
Exhibit 17: Only two stocks in Nifty-50 have generated positive returns in all eight years
Reliance Inds.
71
HDFC Bank
55
35
32
22
20
7
19
13
13
11
3
CY16
CY17
CY18
CY19
CY20
12
10
8
CY21
CY22
5
CY23
Exhibit 18: Relative performance (%) – Eight stocks have outperformed the benchmark in six out of eight years
Titan Company
Nestle
Grasim Industries
JSW Steel
Bajaj Finance
Reliance Inds.
Adani Enterprises
CY18
121
69
CY20
15
12
24
41
36
13
3
2
-10
-1
-5
6
8
-5
CY21
11
51
45
-17
-16
-22
-24
23
37
28
17
10
10
17
9
23
17
16
21
CY19
CY22
-26
CY17
48
52
-32
-22
11
19
38
5
11
2
-11
CY16
47
89
36
11
4
0
-9
3
12
37
37
42
55
80
115
134
232
Larsen & Toubro
CY23
Exhibit 19: Relative performance (%) – Coal India and Cipla has underperformed six times in the last eight years
Coal India
Cipla
57
50
47
10
-12
-15
-22
-12
-18
-24
-20
-41
CY16
January 2024
CY17
CY18
-16
CY19
-51
CY20
CY21
-4
-9
CY22
CY23
8
India Strategy: Getting in the Groove!!!!
Exhibit 20: Sharp broad basing seen in CY23 with mid- and small-cap contribution to total market cap rising to an all-time high
in Nov’23
Market cap contribution (%)
63.3
(lowest)
Top 100 companies (LARGE)
80.6
83.0 (high)
18.2
(highest)
101 to 250 companies (MID)
10.8
9.5 (low)
7.2 (low)
18.5
(highest)
251 onwards (SMALL)
Dec-23
Mar-03
Aug-03
Jan-04
Jun-04
Nov-04
Apr-05
Sep-05
Feb-06
Jul-06
Dec-06
May-07
Oct-07
Mar-08
Aug-08
Jan-09
Jun-09
Nov-09
Apr-10
Sep-10
Feb-11
Jul-11
Dec-11
May-12
Oct-12
Mar-13
Aug-13
Jan-14
Jun-14
Nov-14
Apr-15
Sep-15
Feb-16
Jul-16
Dec-16
May-17
Oct-17
Mar-18
Aug-18
Jan-19
Jun-19
Nov-19
Apr-20
Sep-20
Feb-21
Jul-21
Dec-21
May-22
Oct-22
Mar-23
Aug-23
8.6
Note: Dec’23 market cap contribution for Large/Mid/Small stood at 63.9%/17.8%/18.3% respectively
Exhibit 21: Net FII inflows turn positive in CY23
23.4
Net FII (USD b)
2.9
Exhibit 22: DII flows continue to remain strong
32.2
Net DII (USD b)
21.2
22.3
14.2
7.7
14.0
3.8
15.9
12.1
6.0
5.3
CY23
CY22
CY21
CY20
CY19
CY18
CY16
CY17
-5.0
CY23YTD
CY22
-17.0
CY21
CY20
CY19
CY18
CY17
CY16
-4.6
Source: FII flows in CY23YTD is as of 28th Dec’23
Exhibit 23: Trends in trailing 12-month cumulative FII and DII flows
T12 month cummulative FII flows (USDb)
T12 month cummulative DII flows (USDb)
45
22.3
21.2
25
5
-15
January 2024
Dec-23
June-23
Dec-22
June-22
Dec-21
June-21
Dec-20
June-20
Dec-19
Jun-19
Dec-18
Jun-18
Dec-17
Jun-17
Dec-16
-35
9
India Strategy: Getting in the Groove!!!!
Exhibit 24: Equity contribution to total inflows moderates in CY23*
Total Net Inflows (INR t)
75
51
-32
19
334
Equity % to total inflows
62
83
38
60
56
4
0.3
0.7
1.8
2.9
2.4
1.5
2.0
1.8
1.9
0.7
3.1
CY13
CY14
CY15
CY16
CY17
CY18
CY19
CY20
CY21
CY22
CY23 as of
Nov'23
Exhibit 25: Domestic MFs’ AUM continues to scale new highs
Equity Incl. ELSS & Index AUM (INR t)
17,354
AUM CAGR 29%
Nifty CAGR 13%
6,304
1.8
CY13
8,283
Nifty Index
7,946
8,186
3.2
4.1
4.7
CY14
CY15
CY16
10,531
10,863
12,168
18,105
22.3
13,982
16.6
13.9
7.7
CY17
7.9
8.1
CY18
CY19
20,133
9.5
CY20
CY21
CY22
CY23 as of Nov
Note: CY23 AUM is as of Nov’23
Exhibit 26: Fund mobilization in public markets (INR b)
Year
CY11
CY12
CY13
CY14
CY15
CY16
CY17
CY18
CY19
CY20
CY21
CY22
CY23
IPOs
61
70
16
15
139
270
760
335
178
313
1,314
613
571
FPOs
81
70
5
0
0
0
150
0
43
OFS
QIPs
35
52
84
321
189
48
598
165
352
805
420
117
483
221
220
47
355
125
207
131
263
214
239
111
188
Total Equity
176
343
391
388
683
443
1,565
631
793
1,483
1,974
885
1,242
Exhibit 27: Domestic fundraising turns buoyant, up 40% YoY
1,974
1,565
683
391
388
CY13
CY14
January 2024
CY15
631
443
CY16
1,483
CY17
CY18
1,242
885
793
CY19
CY20
CY21
CY22
CY23YTD
10
India Strategy: Getting in the Groove!!!!
Exhibit 28: Equity fund raising through IPO and FPO offerings moderates in CY23 (INR b)
IPOs
FPOs
169
37
49
5
15
CY14
68
0
760
0
139
CY15
CY17
47
335
0
178
313
CY18
CY19
CY20
151
121
150
0
270
CY16
0
1314
166
94
63
0
70
16
CY13
241
No of companies
CY21
43
613
0
571
CY22
CY23
Exhibit 29: Equity fund raising through QIP offerings surges in CY23 (INR b)
QIPs
34
No of companies
42
30
26
17
11
41
35
25
14
11
84
321
189
48
598
165
352
805
420
117
483
CY13
CY14
CY15
CY16
CY17
CY18
CY19
CY20
CY21
CY22
CY23
Mid- and small-caps trade at a premium to large-caps






January 2024
Both mid-caps and small-caps made a strong comeback in 2HCY23 and
outperformed large-caps by a wide margin. A healthy, broad-based earnings
recovery following pandemic-related disruptions, along with decreasing
commodity costs and active retail participation, propelled mid-caps and smallcaps to all-time highs.
The recovery of underperforming sectors from the past decade (such as Real
Estate, Capital Goods, PSUs, Industrials, Defense, etc.), despite not being a
major contributor to the large-cap indices, led the rally in the broader markets.
Strong momentum in the economy, a pickup in government-led capex and
infrastructure spending, healthy order books, and a better earnings growth
outlook have led to these sectors recovering from their lows and providing
robust growth visibility.
The top gainers in the sectoral space were: Real Estate (+81%), Capital Goods
(+67%), Autos (+48%), Infra (+39%), Healthcare (+34%), Utilities (+33%), PSU
Bank (+32%), Energy (+29%), FMCG (+29%), Technology (+24%), Metals (+19%)
and Pvt. Bank (+14%).
The 12-month forward P/E for mid-caps is trading at 27.2x, at a 39% premium to
its LPA. Conversely, the 12-month forward P/E for small-caps is trading at 20.9x,
at a 7% premium to its LPA.
Given the positive growth outlook in these sectors, we believe that the
optimism in the broader market will continue.
11
India Strategy: Getting in the Groove!!!!
Smallcap PE (x)
Nifty PE (x)
29
Dec-23
Dec-22
Dec-21
Dec-20
Dec-19
Dec-18
Dec-17
0.5
Dec-16
0.9
Dec-15
1.4
Dec-14
Dec-23
Dec-22
Dec-21
Dec-20
Dec-19
Dec-18
Dec-16
Dec-17
3.2
3.1
2.3
1.7
Dec-13
Midcap Avg: 2.1x
Nifty Avg: 2.7x
Dec-23
3.2
2.5
3.2
Nifty PB (x)
Dec-22
3.6
Smallcap PB (x)
Dec-20
Midcap Avg: 2.4x
Nifty Avg: 2.7x
4.1
Dec-19
Nifty PB (x)
Dec-18
3.3
Midcap PB (x)
Exhibit 33: Small-caps vs. Nifty-50: 12-month forward (P/B)
Dec-17
4.1
19.6
Dec-13
Dec-23
Dec-22
Dec-21
Dec-20
Dec-19
Dec-18
Dec-17
Dec-16
5
Dec-15
10
Dec-14
11
Dec-13
16
Exhibit 32: Mid-caps vs. Nifty-50: 12-month forward (P/B)
20.9
17
Dec-16
19.6
Dec-15
22
23
Dec-15
27.2
Nifty PE (x)
Smallcap Avg: 15.6x
Nifty Avg: 20.2x
Dec-14
Midcap Avg: 20.6x
Nifty Avg: 20.2x
Dec-14
28
Midcap PE (x)
Dec-13
34
Exhibit 31: Small-caps vs. Nifty-50: 12-month forward (P/E)
Dec-21
Exhibit 30: Mid-caps vs. Nifty-50: 12-month forward (P/E)
Valuations fair and trading near LPA



January 2024
The valuation of the Nifty-50 has remained at a premium since the beginning of
CY16 until CY21, with the exception of CY20. Additionally, MSCI India continues
to trade at a premium with respect to other emerging markets.
While India continues to perform well in terms of corporate earnings, other
emerging markets continue to struggle. This, along with the factors mentioned
above, continues to foster optimism about the Indian markets. Strong domestic
tailwinds, combined with ongoing record-high retail participation, mitigate the
potential downside risks from external shocks and reinforce the potential for
further upside.
Nifty’s 12-month forward P/E is trading at 19.6x, close to its LPA of 20.2x. This
represents a 3% discount to Nifty’s historical average of 20.2x. Its 12-month
forward P/B stands at 3.2x, representing a 15% premium to the average of 2.7x.
Further upside from hereon will be a function of FED’s stance on interest rates
and continued earnings delivery vs. expectations in the near term.
12
India Strategy: Getting in the Groove!!!!
Exhibit 34: 12-months Forward P/E (x)
Exhibit 35: 12-months Forward P/B (x)
28
3.4
3.0
19.5
Dec-23
Dec-22
Dec-21
Dec-20
Dec-19
Dec-18
Dec-13
Dec-23
Dec-22
Dec-21
Dec-20
Dec-19
Dec-18
Dec-17
Dec-16
1.8
Dec-15
12
Dec-14
2.2
Dec-13
16
Dec-17
2.6
Dec-16
20
10 Year Avg:
2.7x
Dec-15
10 Year Avg:
20.2x
Dec-14
24
3.2
Exhibit 36: Trend in India’s Mcap-to-GDP (%) – at its year-end high
Nominal GDP growth in
FY23/FY24E: 16.1%/8.2%
GFC: Peak of 149% in Dec’07
95
FY24E
FY23
FY22
56
FY21
69
FY20
66
124
103 113
80
FY19
64
79
83
FY18
FY12
FY11
FY10
FY09
FY08
FY07
FY06
56
81
FY17
71
FY16
90
FY15
83
FY14
83
97
FY13
105
Lowest since
the GFC
Average of 80% for the period
Investment in securities market is subject to market risks. Read all the related documents carefully before investing
January 2024
13
India Strategy: Getting in the Groove!!!!
NOTES
January 2024
14
India Strategy: Getting in the Groove!!!!
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take
appropriate measures to make the recommendation consistent with the investment rating legend.
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January 2024
15
India Strategy: Getting in the Groove!!!!
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Registration details of group entities.: Motilal Oswal Financial Services Ltd. (MOFSL): INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412 . AMFI:
ARN .: 146822. IRDA Corporate Agent – CA0579. Motilal Oswal Financial Services Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Insurance, Bond, NCDs and IPO products.
Customer having any query/feedback/ clarification may write to query@motilaloswal.com. In case of grievances for any of the services rendered by Motilal Oswal Financial Services Limited (MOFSL) write to
grievances@motilaloswal.com, for DP to dpgrievances@motilaloswal.com.
January 2024
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