SBI Cards and Payment Services continues to face earnings pressure despite improving asset quality trends, prompting Morgan Stanley to cut its price target and lower earnings estimates. In a post-results note, Morgan Stanley reduced its price target on SBI Cards to Rs 665 from Rs 700, implying a 15% downside from current levels, while maintaining an Underweight rating. The brokerage said adjusted profit missed expectations, driven primarily by weaker pre-provision operating profit (PPOP).

Even after recent corrections, SBI Cards trades at 18x FY28 earnings and 2.9x price-to-book, which Morgan Stanley views as expensive relative to peers, especially given deteriorating growth and return metrics.

PPOP Weakness Drives Estimate Cuts

Adjusted PAT for the quarter fell short of both Morgan Stanley’s estimates and Street expectations, with PPOP coming in around 2% below forecasts, even after adjusting for one-time labour code-related costs. While a Rs 70 crore provision write-back provided some relief, underlying operating momentum remained soft.

Morgan Stanley said the weakness in PPOP is now clearly emerging and is likely to result in deep consensus earnings cuts, particularly for FY27-FY28. The brokerage has cut its own EPS estimates by 6% for FY27 and 5% for FY28, driven largely by lower revenue and PPOP assumptions.

Slower Growth, Lower Guidance

Receivables declined 4% quarter-on-quarter, and management refrained from providing near-term growth guidance, a shift from its earlier outlook of 10-12% growth for FY26. Morgan Stanley now forecasts 5% receivables growth for FY26 and 10% for FY27, citing moderation in revolver balances and cautious customer spending.

Net interest margin (NIM) is expected to face downward pressure as the share of higher-yielding revolver balances declines. While management expects cost of funds to remain stable, the brokerage believes yield compression could weigh on profitability.

Asset Quality Improves, But Not Enough

On the positive side, stressed asset formation and credit costs came in below expectations. Stage 2 assets fell 30 basis points QoQ to 3.9%, while gross stage 3 assets remained broadly stable at 2.86%. Management indicated that credit costs could have been lower had it released provisions, but chose not to do so ahead of an expected ECL model refresh in the March quarter.

Despite these improvements, Morgan Stanley remains cautious, noting that better asset quality alone is unlikely to offset structural pressures from slower growth and margin compression.

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Bengaluru:

India is likely to soon overtake China as the most influential in a key emerging markets index, pulling in more foreign funds and adding fuel to a stock market rally that, though already among the best globally, is “only past the halfway mark”, Morgan Stanley said.

India’s weightage in the MSCI emerging markets index rose to 19.8% after a rejig in August, closing in on China’s 24.2%. India’s weightage has steadily increased from 9.2% in December 2020, while China’s has dropped from 39.1%.

“A rising weight essentially means more absolute foreign flows,” analysts led by Ridham Desai said in a note on Wednesday.

“In the context of India being underweight in the average emerging markets portfolio, this is even better for foreign portfolio flows.”

Foreign portfolio investors (FPIs) have bought shares worth 531.78 billion rupees ($6.33 billion) so far in 2024, and have remained net buyers since June, bolstered by policy continuity after the country’s elections and an imminent start to global interest rate cuts.

So far, the sustained inflows from domestic institutional investors, mutual funds and retail traders have helped power the benchmark Nifty 50 to record highs. Its 16% jump this year is more than most other markets, including China.

Mr Desai expects the rally to continue as fiscal consolidation allows private borrowing and spending to fuel the next leg of earnings growth and as higher FII inflows will keep liquidity in surplus, lending resilience.

“We think we are only past the halfway mark in the current bull market. A bull market peak for India is possibly still in the future and the weight in the EM index could have some more distance to travel before it peaks.”

Morgan Stanley retained India as its top pick among emerging markets and second favourite, behind Japan, in the Indo-Pacific region.

Among stocks, it prefers cyclicals over defensives and large-caps over small-caps. And among sectors, it is ‘overweight’ on financials, technology, consumer discretionary and industrials, and is ‘underweight’ on others. ($1 = 83.9690 Indian rupees)
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Bengaluru:

India is likely to soon overtake China as the most influential in a key emerging markets index, pulling in more foreign funds and adding fuel to a stock market rally that, though already among the best globally, is “only past the halfway mark”, Morgan Stanley said.

India’s weightage in the MSCI emerging markets index rose to 19.8% after a rejig in August, closing in on China’s 24.2%. India’s weightage has steadily increased from 9.2% in December 2020, while China’s has dropped from 39.1%.

“A rising weight essentially means more absolute foreign flows,” analysts led by Ridham Desai said in a note on Wednesday.

“In the context of India being underweight in the average emerging markets portfolio, this is even better for foreign portfolio flows.”

Foreign portfolio investors (FPIs) have bought shares worth 531.78 billion rupees ($6.33 billion) so far in 2024, and have remained net buyers since June, bolstered by policy continuity after the country’s elections and an imminent start to global interest rate cuts.

So far, the sustained inflows from domestic institutional investors, mutual funds and retail traders have helped power the benchmark Nifty 50 to record highs. Its 16% jump this year is more than most other markets, including China.

Mr Desai expects the rally to continue as fiscal consolidation allows private borrowing and spending to fuel the next leg of earnings growth and as higher FII inflows will keep liquidity in surplus, lending resilience.

“We think we are only past the halfway mark in the current bull market. A bull market peak for India is possibly still in the future and the weight in the EM index could have some more distance to travel before it peaks.”

Morgan Stanley retained India as its top pick among emerging markets and second favourite, behind Japan, in the Indo-Pacific region.

Among stocks, it prefers cyclicals over defensives and large-caps over small-caps. And among sectors, it is ‘overweight’ on financials, technology, consumer discretionary and industrials, and is ‘underweight’ on others. ($1 = 83.9690 Indian rupees)
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

Global investment bank and financial company Morgan Stanley has stated that the PM Gati Shakti scheme has succeeded in giving a new fillip to India’s infrastructure development and multi-modal connectivity across highways, railways and ports that has spurred economic growth.

According to the report, India has scaled up its infrastructure strongly over the last decade, with higher investment that is also better targeted and potentially more productive.

“We expect India’s infrastructure investment to steadily increase from 5.3 per cent of GDP in FY24 to 6.5 per cent of GDP by FY29. Indeed, this implies that infrastructure investments are expected to register a strong 15.3 per cent CAGR, resulting in cumulative spending of USD 1.45 trillion over the next five years. In our view this will help to lift the investment rate, leading to a sustained period of high productive growth.”

Interestingly, the report also states that “contrary to popular perception, India’s physical infrastructure scale already compares favourably to China’s when viewed in the context of GDP differential.”

The report cites the World Bank’s Logistics Index Report, 2023, which records that the average Container Dwell Time in Indian ports was three days compared to four days for countries like the UAE and South Africa, seven days for the USA, and 10 days for Germany.

Indian Ports “turnaround time” has reached 0.9 days, which is better than the USA (1.5 days), Australia (1.7 days), Singapore (1.0 days), etc. 6. In F24, ports overall cargo growth was 7 per cent, with 53 per cent of cargo handled by major ports (government-owned).

Prime Minister Narendra Modi launched the PM Gati Shakti National master plan for infrastructure development in October 2021. It brings 16 ministries including Railways and Highways together on a digital platform for integrated planning and coordinated implementation of multi-modal connectivity projects. It is conceived as a transformative approach for economic growth and sustainable development with roads, railways, airports, ports, mass transport, waterways and logistics infrastructure constituting “7 engines ” to pull the economy forward in unison.

According to the Morgan Stanley Report, initiatives under PM Gati Shakti are yielding results. Under the PM Gati Shakti scheme so far, cumulatively 101 projects worth Rs 60,900 crore have been identified for implementation in the ports and shipping sectors.

As of April 2023, 26 projects, worth Rs 8,900 crore have been completed, 42 projects worth Rs 15,340 crore are under development, and 33 projects worth Rs 36,640 crore are under implementation.

The Ministry of Ports, Shipping, and Waterways (MoPSW) is also implementing a comprehensive port connectivity plan in coordination with the highways and railways ministries.

The Morgan Stanley report says under the Sagarmala programme, 220 projects worth Rs 1.12 lakh crore have been completed and 231 projects worth Rs 2.21 lakh crore are under implementation while 351 projects worth Rs 2.07 lakh crore are at the evaluation stage.

Similarly, National Waterways are also being developed as a more efficient and environment-friendly means of transport for both cargo and passengers.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

Global investment bank and financial company Morgan Stanley has stated that the PM Gati Shakti scheme has succeeded in giving a new fillip to India’s infrastructure development and multi-modal connectivity across highways, railways and ports that has spurred economic growth.

According to the report, India has scaled up its infrastructure strongly over the last decade, with higher investment that is also better targeted and potentially more productive.

“We expect India’s infrastructure investment to steadily increase from 5.3 per cent of GDP in FY24 to 6.5 per cent of GDP by FY29. Indeed, this implies that infrastructure investments are expected to register a strong 15.3 per cent CAGR, resulting in cumulative spending of USD 1.45 trillion over the next five years. In our view this will help to lift the investment rate, leading to a sustained period of high productive growth.”

Interestingly, the report also states that “contrary to popular perception, India’s physical infrastructure scale already compares favourably to China’s when viewed in the context of GDP differential.”

The report cites the World Bank’s Logistics Index Report, 2023, which records that the average Container Dwell Time in Indian ports was three days compared to four days for countries like the UAE and South Africa, seven days for the USA, and 10 days for Germany.

Indian Ports “turnaround time” has reached 0.9 days, which is better than the USA (1.5 days), Australia (1.7 days), Singapore (1.0 days), etc. 6. In F24, ports overall cargo growth was 7 per cent, with 53 per cent of cargo handled by major ports (government-owned).

Prime Minister Narendra Modi launched the PM Gati Shakti National master plan for infrastructure development in October 2021. It brings 16 ministries including Railways and Highways together on a digital platform for integrated planning and coordinated implementation of multi-modal connectivity projects. It is conceived as a transformative approach for economic growth and sustainable development with roads, railways, airports, ports, mass transport, waterways and logistics infrastructure constituting “7 engines ” to pull the economy forward in unison.

According to the Morgan Stanley Report, initiatives under PM Gati Shakti are yielding results. Under the PM Gati Shakti scheme so far, cumulatively 101 projects worth Rs 60,900 crore have been identified for implementation in the ports and shipping sectors.

As of April 2023, 26 projects, worth Rs 8,900 crore have been completed, 42 projects worth Rs 15,340 crore are under development, and 33 projects worth Rs 36,640 crore are under implementation.

The Ministry of Ports, Shipping, and Waterways (MoPSW) is also implementing a comprehensive port connectivity plan in coordination with the highways and railways ministries.

The Morgan Stanley report says under the Sagarmala programme, 220 projects worth Rs 1.12 lakh crore have been completed and 231 projects worth Rs 2.21 lakh crore are under implementation while 351 projects worth Rs 2.07 lakh crore are at the evaluation stage.

Similarly, National Waterways are also being developed as a more efficient and environment-friendly means of transport for both cargo and passengers.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

Morgan Stanley is firm on India’s growth outlook, given the support it is getting from domestic demand. Citing high-frequency data, the global investment banking firm said it remains constructive on the growth outlook.

Against that backdrop, it expects India’s GDP growth to be at 6.8% in the current financial year 2024-25 and 6.5% in 2025-26.

On the macro side, it anticipates headline inflation to remain supported by favourable base effects. It projected inflation to be around 5% in the second quarter, before moderating to 4.1% year-on-year in the second half of 2024.

For the next financial year, it expects retail inflation to average at 4.5%.

Similarly, the current account deficit will likely remain benign, supported by strength in service exports, and within the policymakers’ comfort zone at 1-1.5% of GDP in 2025-26.

On monetary policy, it expects policy rates to remain steady at 6.5%.

“This is on the back of a shallower and deferred rate cut cycle for the Fed on the global front and improving productivity growth, a rising investment rate and inflation tracking above the target of 4% on the domestic front,” it explained.

Inflation remains the main concern for the Reserve Bank of India’s monetary policy committee members before it goes ahead and loosens its stance on key interest rates. As per the minutes of the latest monetary policy meeting released on Friday, there have been several mentions of uncertainties around inflation. Going ahead, food price uncertainties would continue to weigh on the inflation outlook, it said.

Pressure on food prices has been interrupting the ongoing disinflation process in India, posing challenges for the final descent of the inflation trajectory to the 4% target.

The RBI is currently focused on bringing down inflation to a 4% target on a durable basis.

Retail inflation in India is in RBI’s 2-6% comfort level but is above the ideal 4% scenario. In March, it was 4.85%. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well.

Meanwhile, along anticipated lines, RBI kept the policy repo rate unchanged at 6.5% earlier this month, the seventh time in a row. The repo rate is the rate of interest at which the RBI lends to other banks.

Barring the latest pauses, the RBI raised the repo rate by 250 basis points cumulatively to 6.5% since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demands in the economy, helping the inflation rate decline.

India’s economy grew 7.2% in 2022-23 and 8.7% in 2021-22, respectively. As per the second advance estimates, real gross domestic product (GDP) expanded at 7.6% in 2023-24 on the back of a buoyant domestic demand.

India is set to remain the fastest-growing among major economies in 2024, according to the International Monetary Fund’s latest World Economic Outlook.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)