In India, household penetration of bulk of discretionary products is low. This means with growing per-capita income, most of the categories could continue to see sustained growth for many years. This includes automobiles, healthcare, insurance, consumer durables etc. High long-term growth in DCF models translate to high PE multiple, the brokerage added.<\/p>\n
Average India ROE is higher than those of other major countries. This is true across sectors like automobiles, consumer staples, insurance, hospitals and even banks. <\/p>\n
“For sectors like automobiles, the reinvestment rate and working capital requirements are much lower in India. Banks average ROA is around 1.2% in India vs 0.7% in China. For consumer companies, ROE is significantly higher due to pricing power and distribution strength,” HSBC noted.<\/p>\n
The brokerage further shared, that some of these moats may deteriorate. For instance, reinvestment rate for autos is increasing and distribution moat of FMCG is challenged now with quick commerce.<\/p>\n
HSBC highlighted, “We have seen event that China-a shares command higher valuations than H shares due to higher domestic ownership. Impact of domestic investors becomes stark considering the low free float of Indian stocks. Average free float in India is still only 44% compared to 67% for peers.”<\/p>\n
Valuations factor in earnings potential of an asset’s cost of equality. Of multiple factors, COE is dependent on the sovereign rating of a country. “For India, we believe the perceived risk is lower due to multiple reasons. India has rarely been impacted by a sharp macro crisis, unlike many other large economies,” it added.<\/p>\n","protected":false},"excerpt":{"rendered":"In India, household penetration of bulk of discretionary products is low. This means with growing per-capita income, most…\n","protected":false},"author":2,"featured_media":98031,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46,28646,111,3526],"class_list":["post-98030","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-economy","tag-hsbc","tag-indian-stock-market","tag-market"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/98030","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=98030"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/98030\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/98031"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=98030"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=98030"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=98030"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}