Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Road map for the Indian Bullion Industry for the next 10 years Sept 12, 2014 1 Global macro scenario 2 Global economy reviving, but traction continues to remain weaker than the previous cycle DM real GDP, relative to pre-recession peak 115 1990s; Peak at 1990Q4 2000s; Peak at 2008Q1 110 105 100 t-6 t-4 t-2 t t+2 t+4 t+6 t+8 t+10 t+12 t+14 t+16 t+18 t+20 t+22 t+24 95 Fragile Recovery process 90 Note: The point labeled “t” on the horizontal axis corresponds to the pre-recession peak quarter for each cycle Source: OECD database, KMBL 3 Stabilizing global growth a positive for India’s external demand IMF Growth Projections 2012 3.5 1.4 2.8 (0.7) 0.3 1.4 5.1 6.7 World Advanced economies US Euro area UK Japan EM economies EM Asia 2013 3.2 1.3 1.9 (0.4) 1.7 1.5 4.7 6.6 2014 3.4 1.8 1.7 1.1 3.2 1.6 4.6 6.4 2015 4.0 2.4 3.0 1.5 2.7 1.1 5.2 6.7 India Exports %YoY,3m m a 3m lag (LHS) ISM export orders,3m m a (RHS) 80 75 70 60 65 60 40 55 20 50 45 0 40 35 (20) 30 Source::CEIC, IMF, Kotak Economic Research 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 25 2000 (40) 4 Commodity prices: US$ firmness to depress $ price of commodities 340 CRY Index 86 85 84 83 82 81 80 79 78 77 76 DXY Index, RHS 330 320 310 300 290 280 270 Jul-14 May-14 Mar-14 Jan-14 Nov-13 Sep-13 Jul-13 May-13 Mar-13 Jan-13 Nov-12 Sep-12 Jul-12 May-12 Mar-12 Jan-12 260 CRY Index CRY Index Question remains – If ECB goes in for a QE, what implications will this have on global commodity prices? 400 350 300 250 Source: Bloomberg, Kotak Mahindra Bank Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 200 5 India: macro data hints that worst is over 6 Source: Bloomberg, D&B, Kotak Economic Research Jul-14 Passenger Vehicle May-14 Total Automobile Sales Dec-10 Commercial Vehicle 7 Sep-14 Jun-14 Dec-13 Mar-14 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Jun-11 Sep-11 Mar-11 190 Mar-14 44 Jun-10 46 Sep-10 130 Jan-14 48 Mar-10 140 Sep-09 50 Dec-09 150 Nov-13 52 Sep-13 160 Dec-08 170 54 Mar-09 Jun-09 56 Jul-13 58 Sep-08 Jun-08 Jul-14 May-14 Mar-14 PMI Composite May-13 Mar-13 Jan-13 Nov-12 Jan-14 Nov-13 Sep-13 PMI Services Sep-12 %yoy,3mma Jul-12 Jul-13 May-13 Mar-13 Jan-13 PMI Manufacturing May-12 25 20 15 10 5 0 (5) (10) (15) (20) (25) (30) Mar-12 Jan-12 Nov-12 Index,sa, 3mma Sep-12 Jul-12 May-12 60 Mar-12 Jan-12 Lead indicators as well as some real sector indicators point up 180 Business Optimism Index (3QMA) 120 110 100 CAD has corrected meaningfully…. CAD/GDP Average USD-INR (RHS) 0 65 (1) 60 (2) (3) 55 (4) 50 (5) 45 (6) Volume of gold imports (tons, LHS) 1,100 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Dec-09 Sep-09 Jun-09 Mar-09 Dec-08 Sep-08 Jun-08 40 Mar-08 (7) 60 Value of gold imports (US$ bn, RHS) 50 900 40 700 30 500 20 300 10 Source::CEIC, Kotak Economic Research 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 0 2001 100 8 Source: CEIC, SEBI, Kotak Economic Research; Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Foreign Portfolio Investment (US$bn) Jun-12 FII equity net inflows Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 US$ mn Mar-10 Dec-09 Sep-09 Jun-09 Mar-09 Dec-08 Sep-08 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 7,000 Jun-08 Mar-08 Foreign capital flows have improved, rewarding stable politics FII debt net inflows 5,000 3,000 1,000 (1,000) (3,000) (5,000) (7,000) Average USD-INR (RHS) 65 17 12 60 7 55 2 50 (3) 45 (8) 40 9 Funding of CAD: Capital flows heavily biased towards FII … (US$bn) FDI FII Banking capital - NRI deposits Short-term credit ECBs Others Capital account FY11 9 30 5 3 11 13 (6) 62 FY12 22 17 16 12 7 10 (5) 68 FY13 20 27 17 15 22 8 (4) 89 FY14 22 5 25 39 (5) 12 (10) 49 FY15E 25 25 8 10 0 8 (9) 57 Source: CEIC, Kotak Mahindra Bank estimates Government policy traction to crucially determine pace of other flows, such as FDI Biggest risk: Global issues (1) Geopolitical and implications on oil and commodity prices (2) Fed stance on interest rates – carry trades unwinding 10 India : Next 5-10 years 11 Policy steps Outlined agenda of the government looks strong – making India a manufacturing hub etc. Some steps in the right direction Streamlining decision making by abolishing GoM; strengthening PMO Speeding up environmental clearances Pushing for greater accountability (less government, more governance) National policies to bring about a resurrection of manufacturing sector Labour laws Land acquisition Infrastructure issues and skilling of work-force 12 India’s manufacturing sector needs to gain importance in policy space Share of manufacturing sector (% of GDP) Thailand Korea China Malaysia Indonesia Philippines Singapore Japan Sri Lanka Mexico Brazil India South Africa India’s manufacturing is one of the worst in the EME space 10 15 20 25 30 35 Employment distribution (%) 120 Manufacturing Agriculture Services 100 80 India’s manufacturing contributes only ~12% of employment 60 40 20 0 China Germany Japan Russia Brazil Thailand US India UK 13 Source: WDI, CEIC, Planning Commission, KMBL Key to boosting manufacturing exports – efficiency of the sector rather than currency dynamics India 60 China Indonesia Korea Thailand Manufacturing Exports as a % of GDP 50 India’s manufacturing exports have remained stagnant for more than a decade 40 30 20 10 65 Exports (%yoy,3mma) USD-INR (3M lead, RHS) 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 0 Reverse order 37 55 42 45 35 47 25 15 52 Exports weaken even as INR depreciates sharply! 5 (5) 57 (15) 62 (25) 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 (35) 14 Source: CEIC, KMBL Bane for manufacturing: Labor - not competitive enough with widening skill gap 1,600 GDP per worker (‘000s, US$) Labor productivity (X=1970) India ('000 US$) China US 93.3 1,200 Japan 63.9 Korea 800 57.7 Thailand 15.3 400 China 12.4 India 0 1970 1980 1990 2000 12 10 2010 Demand 8.3 0 20 40 60 80 100 Supply Gap of skilled workforce widening 10.5 -61% [Annual skilled workers DD/SS (mn) ] 8 -53% 6 4.1 3.9 4 1.8 2 0 2012 2025 15 Source: WEF, Asian Productivity Organization (APO) productivity database; BCG Agriculture is another area that needs to be revitalized – both from the growth and inflation perspectives Agri & allied activities GDP growth (%yoy) 12.0 10.0 Planned Agri growth (%yoy) Average 2.8% Average 3.4% 8.0 The sector has been largely ignored by the policymakers in 2000s and still depends on monsoon vagaries 6.0 4.0 2.0 0.0 (2.0) (4.0) 13.0 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 (6.0) Agri capital form ation (% of total capital form ation) 12.0 Capital investment in agriculture remains low at 2.3% of GDP and 8% of total investments 11.0 10.0 9.0 8.0 7.0 Source: MOSPI, Kotak Mahindra Bank 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 6.0 16 Savings dip – household segment sees the maximum erosion 38 Gross Domestic Total Savings (% of GDP) 36 34 32 30 28 26 24 22 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 20 Gross Savings as a % of GDP 10 26.0 Corporate Public Household (RHS) 8 25.0 6 24.0 4 23.0 2 22.0 (4) Source: RBI, CEIC 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 (2) 2000 0 21.0 20.0 17 Financial savings erosion is large as real returns to savings are low Household total savings (LHS) HH financial savings (RHS) HH physical savings (RHS) 26 % o f G D P 25 % o f GD P 15.5 14.5 13.5 24 12.5 23 11.5 10.5 22 9.5 21 8.5 2011 2012 2012 2010 2009 2008 2007 2006 2005 2011 % 11 2004 2003 2002 2001 7.5 2000 20 Real deposit ratebased) (CPI based) Real deposit rate (CPI 9 7 5 3 1 (1) (3) (5) (7) (9) Source: RBI, CEIC 2013 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 (11) 18 India : : Monetising Gold Reserves • • • • • • 25000 tonnes of Gold above ground Recycling Processing Trade Structuring Gold-backed financial products Gold imports in 2024 …. !!! THANK YOU 20 Disclaimer • • • • In the preparation of the material contained in this document, Kotak Mahindra Bank Ltd. (Kotak Bank), has used information that is publicly available, including information developed inhouse. Some of the material used in the document may have been obtained from members/persons other than the Kotak Bank and/or its affiliates and which may have been made available to Kotak Bank and/or its affiliates. Information gathered & material used in this document is believed to be from reliable sources. Kotak Bank however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. Kotak Bank and/or any affiliate of Kotak Bank does not in any way through this material solicit any offer for purchase, sale or any financial transaction/commodities/products of any financial instrument dealt in this material. All recipients of this material should before dealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice. We have included statements/opinions/recommendations in this document which contain words or phrases such as "will", "expect" "should" and similar expressions or variations of such expressions, that are "forward looking statements". Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Kotak Bank (including its affiliates) and any of its officers directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/ are liable for any decision taken on the basis of this material. The investments discussed in this material may not be suitable for all investors. Any person subscribing to or investing in any product/financial instruments should do so on the basis of and after verifying the terms attached to such product/financial instrument. Financial products and instruments are subject to market risks and yields may fluctuate depending on various factors affecting capital/debt markets. Please note that past performance of the financial products and instruments does not necessarily indicate the future prospects and performance thereof. Such past performance mayor may not be sustained in future. Kotak Bank (including its affiliates) or its officers, directors, personnel and employees, including persons involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in, and buy or sell the securities mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation in the financial instruments/products/commodities discussed herein or act as advisor or lender/borrower in respect of such securities/financial instruments/products/commodities or have other potential conflict of interest with respect to any recommendation and related information and opinions. The said persons may have acted upon and/or in a manner contradictory with the information contained here. No part of this material may be duplicated in whole or in part in any form and or redistributed without the prior written consent of Kotak Bank. This material is strictly confidential to the recipient and should not be reproduced or disseminated to anyone else. 21