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Nilgiri

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Top global brokerage firm Morgan Stanley on Thursday upgraded Indian stocks to overweight rating and ranked India as the No. 1 market in its basket of Asian emerging markets ex-Japan.

Beating the likes of Korea and UAE, India jumped 5 places in Morgan Stanley's list on the back of a structural uptrend, secular leadership and relative valuations being less extreme than in October.


"India now becomes our core OW market within APxJ/EM with 12mf P/E and trailing P/B standing at +1.4 S.D and +0.6 S.D. above historical average as a premium to pay for higher growth opportunities. Valuation premiums to EM and China have moderated significantly from last October's high and started to spike up again," Morgan Stanley said in its report.

Multipolar world trends are supporting FDI and portfolio flows, with India adding a reform and macro-stability agenda that underpins a strong capex and profit outlook, it said, adding that a secular trend is seen toward sustained superior USD EPS growth versus EM over the cycle, with a young demographic profile supporting equity inflows.

Morgan Stanley's India economics team says the country's macro indicators remain resilient and the economy is on track to achieve the 6.2% GDP forecast.


"12mf EPS is trending higher in a structural manner, supported by a favorable demographics trend, improvement in labor productivity and a multipolar world dynamic that drive up service exports and meaningfully higher FDI," the analysts said.


The brokerage has downgraded China, in the meantime, to equalweight saying that the domestic demand has failed to recover convincingly in the post-Covid environment.


"Considering Indian equities and China equities as a pair in USD terms and using the MSCI Indices as the benchmark, the beginning of a new era of Indian outperformance compared to China appears to be dawning," it said, explaining why it upgraded India to overweight and downgraded China to equalweight.

On Dalal Street, MS is overweight financials, consumer discretionary and industrials. Maruti Suzuki and L&T have been added to its focus list with target prices of Rs 9,716.8 and Rs 2,666.7, respectively.

While Maruti is expected to benefit from a higher per-capita income in India as well as market share expansion and improving product mix, capex play L&T enjoys economies of scale and also compares favorably vs. peers in terms of order inflow growth, diversified order book, improving execution and revenue growth, lower margin volatility, well-managed working capital.

L&T's core valuations are trading near the long-term average, whereas its EPC peers are trading at ~20% premium to the long-term averages, it said.

Two other Indian stocks in its Asia Pacific ex-Japan Focus List are Hindustan Aeronautics and ICICI Bank.

On the back of a record inflow of around Rs 1.5 lakh crore in FY24 and an encouraging June quarter earnings season, Indian stocks have touched record high levels.
 

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Capital accumulation and enhancement in physical and digital infrastructure will drive and sustain Indian economy to average 6.7% growth between FY24 and FY31 and double the size of the economy to $6.7 trillion within the next eight years, S&P Global Ratings stated in its report released on Thursday.

S&P stated that India can capitalise on this moment when the world faces unprecedented transition and uncertainty. It forecasted India’s per capita GDP to increase to $4,500 by FY31. It further pointed that geopolitics can provide potential tailwinds for India’s growth efforts.


“The macro challenge for India in the upcoming decade is to turn traditionally uneven growth into a high and stable trend,” noted Paul Gruenwald, Global chief economist S&P Global Ratings.

“We expect the Indian private sector to gradually increase investments given healthy corporate balance sheets,” S&P Global said, further pointing that growth from productivity contribution will be higher due to the “creation of physical and digital infrastructure in conjunction with efficiency-enhancing reforms.”

The global rating agency expects capital to contribute 53% of India’s average GDP growth, with productivity driving 30% of GDP growth.


Experts noted that India needed to do more in terms of labour force participation federalism and lifting private investment in manufacturing to create conditions for sustained growth.


“India’s path to becoming a more influential global actor will be determined by how effectively it can manage its federalism balancing act and mobilize the participation of grassroots interests,” said Deepa Kumar, Head of Asia-Pacific Country Risk, S&P Global Market Intelligence.




Labour market reforms could help sustain long-term growth, S&P noted, highlighting that average value added per manufacturing employee in India at $8,036 was less than half of Thailand’s and nearly a fourth of Malaysia’s. S&P said that India had the potential to increase its share of global manufacturing exports.

S&P cited the example of the expansion of India’s export industry for telecom equipment, including smartphones, which hit $11.8 billion in FY23.

S&P said that Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh will be India’s top 5 growing states over the coming decade, with Maharashtra inching closer to a $1 trillion economy part by 2030.

“Maharashtra GDP is expected to reach $824.51bn and Tamil Nadu is forecast to reach $650.34bn by 2030,” the report pointed.

However, it was critical of the infrastructure hurdles in India’s urban centres and stated that they were detrimental to India’s growth story.

“In India, the world’s most populous nation, the mobility of 1.4 billion people will be defined in line with improvements in infrastructure, investment, innovation, and inclusivity,” the report pointed.

S&P also argued for a need to improve India’s capital markets.

“Deeper domestic financial markets will facilitate more efficient allocation of investment funds and better pricing of resources, easing implementation of national privatisation, innovation, and sustainability agendas,” noted Jose Perez-Gorozpe, Head of Credit Research, Emerging Markets, at S&P Global Ratings in the report.

The report also focused on India’s net zero journey and stated that there was a shortfall in companies conducting adaptation planning as just 40% conducted physical risk assessments and only a third of large companies rated climate strategy as one of the top three material issues.
 

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From iPhones to PCs & EVs, 'Made in China' No More, China-India Manufacturing War Is Coming​

In recent years, fiscal measures adopted by the Modi government to promote domestic manufacturing have increasingly attracted companies like Foxconn and Wistron to shift from China to set up factories in India. We've reported previously that Apple has been accelerating its production and sales strategies in India. Consequently, Apple's suppliers have continuously expanded their manufacturing infrastructure in the country, gradually shifting iPhone production away from China.

 

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@Chocopie @urban mine @Windchime et al.


NEW DELHI -- South Korean conglomerates Hyundai Motor and Samsung Electronics are developing their Indian operations to boost sales in the Middle East and Africa, seeking to harness the deepening economic cooperation between New Delhi and Seoul.

South Korean President Yoon Suk Yeol and Indian Prime Minister Narendra Modi met at the Group of 20 summit in New Delhi over the weekend, agreeing to increase the supply of defense equipment as well as to expand technical cooperation on electric vehicles and semiconductors.

The two countries also agreed to work on building stable, mutually beneficial supply chains by concentrating advanced industries in India.

India's vast population offers an attractive market for South Korea, where exports are the country's economic backbone. India, which is rushing to develop its high-tech industries, also stands to benefit by collaborating with a country rich in semiconductor technology like South Korea.

South Korean manufacturing in India, which began in the late 1990s, is entering a new phase. As the companies boosted production in India, those factories began functioning as export bases to the Middle East and Africa, which are geographically close. The climates and living standards in those regions also share similarities to India's, meaning that products developed for the Indian market are suitable for sale there.

Hyundai Motor India is aiming for a production capacity of 1 million units a year, the company said in August, when it revealed plans to purchase General Motors India's Talegon plant.

With the addition of the GM plant, Hyundai's annual group production capacity when combined with Kia is set to increase to 1.4 million units per year from 1.2 million units in 2022. That will make India the company's second-largest production base after South Korea.


https%253A%252F%252Fcms-image-bucket-production-ap-northeast-1-a7d2.s3.ap-northeast-1.amazonaws.com%252Fimages%252F_aliases%252Farticleimage%252F8%252F9%252F6%252F2%252F46522698-1-eng-GB%252F6fd6d88d.png


The Hyundai group sells around 800,000 units per year in India, meaning an estimated 600,000 units will be exported out of the country.

As the group reorganizes its production in China amid sluggish sales, India is expected to play an even more important part in its global operations.

In 1998, Hyundai set out to cultivate the Indian market with a vehicle factory in the southern city of Chennai, built with its own capital. Through the success of its Santro city car, built with the Indian market in mind, Hyundai gradually gained market share from competitors like Maruti Suzuki.

Combined with Kia, Hyundai's share in the domestic passenger car market stands at 21%, second after Maruti Suzuki's 41%.

Hyundai Mobis, the company's primary supplier, has also built factories near Hyundai's and Kia's Indian plants and is considering building a third. With tier 2 suppliers also setting up shop, a local supply chain built by South Korean companies is steadily forming.

Also looking to boost its Indian operations is Samsung Electronics, which entered India in 1995. Annual production capacity at its smartphone plant in New Delhi suburb Noida has been increased through additional investments announced in 2018 to 120 million units, thought to constitute around 40% of the company's total shipments.

Samsung announced in 2019 that it would stop making smartphones in China, instead moving production to Vietnam and India. Driving the decision was rising wages, though flaring tensions between Washington and Beijing have led many other companies to forge supply chains less dependent on China.

Related businesses are continuing to build up operations in India, with Samsung Display investing $700 million in a panel supply facility.
 

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NEW DELHI -- South Korean conglomerates Hyundai Motor and Samsung Electronics are developing their Indian operations to boost sales in the Middle East and Africa, seeking to harness the deepening economic cooperation between New Delhi and Seoul.

South Korean President Yoon Suk Yeol and Indian Prime Minister Narendra Modi met at the Group of 20 summit in New Delhi over the weekend, agreeing to increase the supply of defense equipment as well as to expand technical cooperation on electric vehicles and semiconductors.

The two countries also agreed to work on building stable, mutually beneficial supply chains by concentrating advanced industries in India.

India's vast population offers an attractive market for South Korea, where exports are the country's economic backbone. India, which is rushing to develop its high-tech industries, also stands to benefit by collaborating with a country rich in semiconductor technology like South Korea.

South Korean manufacturing in India, which began in the late 1990s, is entering a new phase. As the companies boosted production in India, those factories began functioning as export bases to the Middle East and Africa, which are geographically close. The climates and living standards in those regions also share similarities to India's, meaning that products developed for the Indian market are suitable for sale there.

Hyundai Motor India is aiming for a production capacity of 1 million units a year, the company said in August, when it revealed plans to purchase General Motors India's Talegon plant.

With the addition of the GM plant, Hyundai's annual group production capacity when combined with Kia is set to increase to 1.4 million units per year from 1.2 million units in 2022. That will make India the company's second-largest production base after South Korea.


https%253A%252F%252Fcms-image-bucket-production-ap-northeast-1-a7d2.s3.ap-northeast-1.amazonaws.com%252Fimages%252F_aliases%252Farticleimage%252F8%252F9%252F6%252F2%252F46522698-1-eng-GB%252F6fd6d88d.png


The Hyundai group sells around 800,000 units per year in India, meaning an estimated 600,000 units will be exported out of the country.

As the group reorganizes its production in China amid sluggish sales, India is expected to play an even more important part in its global operations.

In 1998, Hyundai set out to cultivate the Indian market with a vehicle factory in the southern city of Chennai, built with its own capital. Through the success of its Santro city car, built with the Indian market in mind, Hyundai gradually gained market share from competitors like Maruti Suzuki.

Combined with Kia, Hyundai's share in the domestic passenger car market stands at 21%, second after Maruti Suzuki's 41%.

Hyundai Mobis, the company's primary supplier, has also built factories near Hyundai's and Kia's Indian plants and is considering building a third. With tier 2 suppliers also setting up shop, a local supply chain built by South Korean companies is steadily forming.

Also looking to boost its Indian operations is Samsung Electronics, which entered India in 1995. Annual production capacity at its smartphone plant in New Delhi suburb Noida has been increased through additional investments announced in 2018 to 120 million units, thought to constitute around 40% of the company's total shipments.

Samsung announced in 2019 that it would stop making smartphones in China, instead moving production to Vietnam and India. Driving the decision was rising wages, though flaring tensions between Washington and Beijing have led many other companies to forge supply chains less dependent on China.

Related businesses are continuing to build up operations in India, with Samsung Display investing $700 million in a panel supply facility.
Much needed decoupling from mainland China. Korean smartphones and cars have lost their once big market shares in China to domestic competition (Xiaomi, Oppo, Honor and BYD, SAIC, FAW). Apple and Tesla producing in China and selling their hit-products like hot cakes doesn't help either.

India is a growing future market with huge opportunities for Korean conglomerates. As of now, China is still the biggest trading partner for Korea, we're in search of alternative industrial manufacturings bases in SEA (Vietnam, Indonesia) and the Indian subcontinent.
 

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Here's the first look of the majestic A350 in Air India's new livery at the paint shop in Toulouse

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Indian stocks to buy -

1. Hospitality - infra upgrade and lockdown has made many Indians see value in seeing India.

2. Banking - Indian banks are grossly undervalued

3. Energy
 

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