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Comparative Economic Analysis
Timeline Focus: 2011–2013 vs. Now

The Historical Context: 2011–2013 "Taper Tantrum“.

It took nearly 3 years from November’s 2010 high for Nifty 50 index to conquer both January 2008 high of ~6357 & Nov’10 high of ~6338.

During this period, the Indian economy faced significant internal and external volatility:

  • External Shock: Ben Bernanke (US Fed) hinted at "Tapering" (reducing QE), leading to a global "Taper Tantrum" and possibility of higher interest rates in USA.
  • Capital Flight: Foreign investors pulled $10 billion out of Indian debt and equity in June’13 and July’13 alone.
  • Policy Paralysis on back drop of flat to mid single digit growth in corporate earnings.
  • INR Volatility: The Rupee depreciated from 54 to 69 (~28%) between April’13 to August’13.

Recovery commences September 2013. Triggers:

  • Mr. Raghuram Rajan after taking charge as RBI Governor in Sept’13 immediately, introduced slew of measures like FCNR (B) swap window, raising MSF rates and import duty hike on gold imports (~10%) helped INR appreciate back to 58.
  • It coincided with possibility of regime change at Centre.
Outcome: Market hits new high in Nov’ 13, even though double digit earnings growth for Nifty 50 remained elusive for the following two years.
*Source: CSEC Research.
Similarities and Why “This Time is Different” (The Bull Case)

Similarities: Then vs. Now Anticipation

  • Inflation: Inching upward.
  • CAD: Current Account Deficit likely to deteriorate.
  • Growth: Signs of an economic and corporate earnings slow down visible.
  • Monetary Policy: Interest rates expected to rise.
  • FII Activity: Foreign investors are selling.
  • Currency: INR undergoing fast depreciation.
  • Dollar Demand: Heavy demand from Oil Marketing Companies (OMCs) and importers.

Similarities: Then vs. Now Anticipation

Despite similarities, several structural strengths differentiate the current market:

  • Pro-active Policy Stance: No "policy paralysis" compared to the earlier era.
  • Forex Reserves far stronger and adequate.
  • External imbalances namely trade tariffs and geopolitical situation led supply disruption primarily responsible for economic slow down. Which can reverse very quickly.
  • Corporate Health: Strong balance sheets with low leverage (Debt-to-Equity ~0.8/0.9x vs 1.2x) coupled with higher Return on Equity (ROE’s) at ~17% vs. ~15%.
  • Resilience: India has shown the ability to bounce back to a high-growth trajectory post external shocks, like in 1997 (Asian Financial Crisis), 1998 (LTCM Collapse), 2000 (Dot-com Bubble Burst) and 2008 (Subprime Crisis in US).
*Source: CSEC Research.
Scenario’s : Finding where the Floor Is !

Market Valuation and Nifty 50 Base, Upper and Worst case scenario:

Metric Details Values
Current Nifty View Baseline Range 21,600 to 22,800
FY’26 our EPS estimate for Nifty50 Nifty EPS ~1,230
FY’27 Nifty50 EPS estimate Worst Case assumption : No Growth ~1,230
Nifty50 Base Case (FY’27e) @ 19x PER (Mean) ~22,800
Nifty50 Upper Case (FY’27e) @ 18x PER (Mean -1SD) ~21,600
Nifty50 Worst Case (FY’27e) @ 16x PER ~19,680 (10-12% drop from current level)
  • * 2008 - 2010 has played out in the period Oct’24 to Dec’25.
  • * 2013 is under way. Preventive policy actions firing on all sides.
  • * We believe structural story stands intact, whilst double digit growth maybe be deferred for a year into FY’28.
  • * Major part of damage largely priced in from stock specific perspective, though not ruling out further 5-7% correction.
* Market is forward looking. Price damage happens far earlier than earnings damage vice versa the recovery.
*Source: CSEC Research.
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Cholamandalam Securities Limited Member: BSE, NSE, MSE, NSDL, CDSL
Regd. Office: Chola Crest, C54 – 55 & Super B-4, Thiru-Vi-Ka Industrial Estate, Guindy, Chennai – 600032.
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Cholamandalam Securities Limited (CSEC) is a SEBI registered stock broker and depository participant. CSEC does not provide investment advisory services. Investors are advised to consult an independent financial advisor before taking any investment decisions.

RESEARCH
Dharmesh Kant Head of Equity Research +91-44-40047360 dharmeshkt@chola.murugappa.com
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