Tracking a global selloff, the Indian stock markets have lost about 5 per cent since August and are nearly 9 per cent lower so far in 2015.

Domestic stock markets are expected to more than regain recent lost ground over the coming year, a Reuters poll found, but analysts trimmed their outlook for the second time in six months in a reflection of the slow pace of reforms and global headwinds.

Tracking a global selloff, the Indian stock markets have lost about 5 per cent since August and are nearly 9 per cent lower so far in 2015, hurt also by the government’s inability to pass key bills on tax and land acquisition reforms.

Still, Monday’s poll taken over the past week showed the Sensex is likely to recover and rise to 27,500 by end-June 2016, an increase of 10 per cent from Friday’s close but is almost exactly where it started this year.

Similar polls in September and June had foreseen the index higher by mid-2016, compared with the latest consensus.

The index is then forecast to rise to 29,900 by the end of 2016. That will be close to the record high of 30,024.74 hit on March 4 this year.

The BSE Sensex was among the world’s best performers in 2014, rising almost 30 per cent after Prime Minister Narendra Modi took office on promises of reforms to boost growth.

But the government’s inability to make a lot of headway and expectations the US Federal Reserve will start raising rates this week have seen investors dump emerging market assets, including Indian shares.

Foreign investors sold a net $1.7 billion in Indian shares and debt in November, pushing the currency lower. The Indian rupee hit a more than two-year low against the greenback on Friday.

Still, with expectations a goods and services tax and land acquisition bills will be passed into law, analyst see a fillip to the economy and stocks over the coming year.

A Fed rate hike would also reduce market uncertainty after investors agonized over US monetary policy all year.

“Our markets (Indian shares) should start doing better from next year, with impact on the economy by the measures taken by the government and a clear trajectory from the Fed,” said Neeraj Dewan, director at Quantum Securities Private Limited.

Reserve Bank of India Governor Raghuram Rajan said on Friday the central bank was ready for “any eventuality” from the Fed meeting this week.

India’s stock market has generally outperformed other emerging markets over the past two years.

Economic growth in Asia’s third largest economy picked up in July-September, outpacing China on improving domestic demand and manufacturing activity.

That acceleration helped persuade the RBI to keep rates unchanged last month after it had lowered the repo rate by 125 basis points this year, including a larger-than-expected 50 basis point cut in September.

Net inflows of the foreign portfolio investments dipped below $3 billion so far and this can make 2015 the worst year for Indian equities in terms of the overseas inflows since 2011, when FPIs pulled out Rs 2,714 crore from the stock markets.

A favourite of foreign investors for many years, Indian equities seem to have lost the plot this year as the net inflows of the so-called ‘hot money’ or foreign portfolio investments dipped below $3 billion.

This marks a sharp decline from an average $20 billion invested by the Foreign Portfolio Investors (FPIs) into Indian stocks in each of the last three years.

In contrast, the debt market kept overseas institutional investors captivated with its relatively steadier return promise and attracted net inflows in the excess of Rs 50,000 crore (well above $8 billion) this year.

With a couple of weeks still left before curtains are drawn on 2015, the experts believe the final tally for the equities may be even worse as foreign investors have lately been on a selling spree.

This can make 2015 the worst year for Indian equities in terms of the overseas inflows since 2011, when FPIs pulled out Rs 2,714 crore from the stock markets. Nonetheless, going by the current trend, it is likely that 2015 would be remembered as the fourth consecutive year of net FPI inflows into stocks.

Fears of a global slowdown and an imminent interest rate hike by the US Federal Reserve have spooked foreign investors away from riskier assets, while the delay in implementation of major economic reforms could also have made the Indian markets less attractive for them, analysts said.

“FPIs have been pulling out money in 2015 on account of a double impact with the markets consolidating and the US dollar gaining strength, thereby a higher negative portfolio,” investment planning platform 5nance.com Founder and CEO Dinesh Rohira said.

Echoing similar views, Geojit BNP Paribas Research Head Alex Mathew said: “A slowdown in FPI investments is mainly on account of slew of global and domestic factors like concerns over the rate hike by the US Federal Reserve and subdued quarterly numbers (of corporate earnings) among others.”

However, analysts believe a reversal of trend in the year ahead on expectation of a conducive investment environment.

“The year 2016 is expected to see a reversal with the FPIs coming back as the currency and market conditions both are expected to be conducive for their investments with a net average returns of over 15 per cent,” Rohira said.

Mathew also said the next year will be better than 2015 in terms of FPIs investment in capital markets, especially equities.

Another analyst V Srivatsa, EVP and Fund Manager at UTI MF said: “Overseas investment in Indian market will depend on their sentiment for the emerging markets. Besides, reform measures like GST will have a positive impact on the inflow.”

As the year draws to an end, FPIs purchased stocks worth Rs 11.22 lakh crore but sold shares to the tune of Rs 11.07 lakh crore, resulting into net inflows of Rs 15,136 crore (USD 2.8 billion) for 2015.

Despite poorer inflows this year, FPIs’ cumulative net investments into the Indian equity markets, since being allowed over two decades ago in November 1992, has now reached close to Rs 8 lakh crore.

The cumulative figure for debt securities has also grown to Rs 3.15 lakh crore — taking the total for both debt and equities to Rs 11.13 lakh crore ($224 billion).

The capital poured in by the FPIs is often been called ‘hot money’ because of its unpredictability, but these overseas entities have still been among the most important drivers of Indian stock markets.

The experts are confident about an uptrend in investment in the stock markets next year.

In 2014, foreign investors had made a staggering investment of over Rs 97,000 crore into equities. Besides, FPIs made a net infusion of Rs 1.13 lakh crore and Rs 1.28 lakh crore into equity markets during 2013 and 2012, respectively. Prior to that, FPIs had pulled out money from the stock markets in 2011.

During the last decade, FPIs had witnessed an outflows only in 2011 and 2008.

In terms of sectors, FPIs remained highly overweight on financial and continued to be underweight on IT in the total portfolio.

FPIs had begun the year on a positive note and pumped in over Rs 48,000 in just four months till April in equities owing to several factors like positive investor sentiment driven by several reform measures announced by the government, expectations of more announcements in the Union Budget, easing inflation and rate cuts by RBI.

Thereafter, overseas investors had pulled out funds in the succeeding two months (May-June) on worries over imposition of 20 per cent minimum alternate tax on capital gains by them and rise in global crude oil prices. However, they had reversed the outflow trend in July and had invested capital in the stock market.

FPIs, once again, turned net sellers of equities in August and offloaded bagful of stocks and momentum continued in September too on fears of an economic slowdown in China.

In fact, FPIs had pulled out Rs 17,524 crore in August, making it the highest net outflow by FPIs in a single month since 1997.

In October, the Indian stock markets saw positive flows from FPIs, while again they took out money in November and the sell-off continued in this month too.

TCS share price fell as much as 2.19 per cent in the early trade on Monday after the IT major on Friday said due to floods in Chennai it may face ‘material impact’ which in turn will affect the current quarter revenues.

TCS share price fell as much as 2.19 per cent in the early trade on Monday after the IT major on Friday (post market hours) said due to floods in Chennai the company may face ‘material impact’ which in turn will affect the current quarter revenues.

Chennai is one of the company’s largest delivery locations, with over 65,000 employees. In a release, the company said, “Other than mission critical activities, the normal business functioning of our facilities in the city had to be halted all week since December 1 due to extreme weather conditions and subsequent flooding.”

At 9.54 am, shares of Tata Consultancy Services (TCS) were down 1.16 per cent at Rs 2,359.60. The scrip opened at Rs 2344.90 and had touched a high and low of Rs 2,364.70 and Rs 2,335, respectively, in trade so far. Sensex was down 86.23 points, or 0.34 per cent, at 24958.20.

The October-December quarter is usually a weak quarter for the Indian IT players. The Mumbai-based firm said a majority of facilities in Chennai, where the company has over 65,000 employees, have opened for normal business from December 7 but attendance remains lower than normal.

On Chennai floods, TCS in a release said, “This is expected to have a material impact on the company’s revenue in the seasonally weak third quarter ending December 31, 2015.”

In the past one year, TCS share price slid 4.22 per cent to Rs 2387.25 on December 11. BSE Sensex slid 9.26 per cent during the same period.

For the quarter ended September 2015, TCS posted a consolidated net profit of Rs 6084.66 crore, up 16.02 per cent, against Rs 5244.28 crore in the corresponding quarter a year. The IT major registered 7.05 per cent jump in net profit on quarter-on-quarter basis.

Stocks of TCS will be in focus as the company is expected to face material impact due floods in Chennai, which will hit its revenue in the current quarter.

The BSE Sensex and NSE Nifty opened in negative terrain on Monday tracking SGX Nifty and weak global markets ahead on inflation data for November based on the wholesale price index (WPI) and the consumer price index (CPI). At 9.23 am, Sensex was down 118.61 points at 24,925.82. Similarly, Nifty was down 28.15 points at 7,582.30.
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Below are the stocks that are likely to be in focus today:

TCS: Stocks were trading 1.07 per cent down at Rs 2361.60 (around 9.25 am) as the company is expected to face material impact  due floods in Chennai, which will hit its revenue in the current quarter.

Kalyani Forge Ltd: Shares of the company were trading 4.96 per cent up at Rs 277.00(around 9.30 am) after it said that it plans to double turnover to Rs 500 crore in the next 2-3 years by entering a new product range and expansion.

Bhushan Steel: Stocks of the company will be in focus as the National Green Tribunal on Friday ordered the closure of Bhushan Steel and Strips Limited situated in site -4 industrial area of Sahibabad in Uttar Pradesh for 4 weeks declaring it to be a polluting industry.

Cairn India: Stocks of the company were trading 1.79 per cent down at Rs 123.40(9.26 am) as it is set to launch the world’s largest enhanced oil recovery programme, investing about $760 million in the site where its first oil was discovered in the Thar desert of Rajasthan.

Maruti Suzuki: Prime Minister Narendra Modi said that for the “first time” India will export to Japan cars which will be made domestically by Maruti Suzuki as part of the ‘Make in India’ initiative.

Dabur: Seventy seven India-bound containers of Real Juice manufactured by Dabur Nepal, a subsidiary of Dabur India, were seized by Nepal’s anti graft body after receiving complaints about their quality.

IOC: IOC, India’s largest oil firm, will invest Rs 1.75 lakh crore over the next seven years on expanding refinery capacity, building petrochemical plants and laying pipelines, a company official said.

Indian Overseas Bank: State-owned Indian Overseas Bank (IOB) said it proposes to raise up to Rs 1,570 crore at the current market price from the public offer to fund its growth plan.

Hotel Leela Venture: The Competition Commission has given its nod for acquisition of Hotel Leelaventure’s Goa property by the Malaysia-based MetTube.

Infosys: Infosys has joined Amazon’s cloud infrastructure unit Amazon Web Services and a clutch of marquee Silicon Valley leaders including Tesla’s Elon Musk, Peter Thiel, Reid Hoffman, Y Combinator’s Sam Altman and Jessica Livingston to commit a $1 billion investment to OpenAI, a non-profit artificial intelligence research company announced.

Coal India: Opposing an immediate stake sale in Coal India Ltd, foreign investors have told the Finance Ministry that further disinvestment in the coal miner should be put off as the current market valuation is low.

Mahindra & Mahindra: Mahindra & Mahindra has incorporated a subsidiary ‘Airvan 10 Pty Ltd’ for the aerospace industry in Australia.

Vipul Ltd: Realty firm Vipul Ltd has raised Rs 150 crore from DMI Finance Ltd to develop a luxury housing project in Gurgaon.

Bharat Forge organised a meeting with analysts to discuss the company’s business plans. We were impressed by the efforts it has made to scale-up various segments of its business and develop new products to double its standalone revenues over the next five years. FY2016 is likely to be a weak year for the company, led by slowdown in the US truck market and oil & gas industry (~40% of standalone revenues) but new products/verticals will likely result in 16% CAGR (compound annual growth rate) in revenues in the FY2016-18 period. We maintain BUY with a revised target price of R965 (R975 earlier).

Scaling up the technology curve and sowing seeds for robust growth ahead: FY2016 is likely to be a weak year for the company, led by slowdown in the US truck, oil & gas and mining sectors which constitute 40% of Bharat Forge’s standalone revenues. The company is working on developing new products for the existing and new customers to increase its presence across various verticals. A key point to note is that it will be using its existing facilities to develop new products which gives us an idea of their flexible manufacturing practices. The four key areas of growth over the FY2015-18 period are likely to be: (i) 3X increase in passenger car forging revenues, led by new order wins from GM, Ford and Volkswagen, (ii) New order wins in the aviation segment which will likely add incremental $50m in revenues by FY2018, (iii) Import substitution in the Indian railways as GE (locomotive supplier) looks to localise in India and (iv) new transmission components developed for passenger vehicle OEMs where the company was not present earlier. We believe the transmission component business could add incremental $100m in revenues to the company. The company reasserted its guidance to achieve R70 bn in revenues in standalone by FY2018 while we are more conservative and build in R62 bn. We have not factored in opportunities in transmission components in our estimates as yet.

We cut our estimates by 3-5% over FY2016-18 to factor in weakness in the US truck business We have cut our consolidated earnings estimates by 3-5% over the FY2016-18 period led by 10-15% cut in our estimates for the US truck forging business revenues. We have cut our consolidated Ebitda estimates by 4-5% over the same period as the US truck business offers higher margins. We have thus cut our target price to R965 (from R975 earlier) driven by 3-5% cut in our earnings estimates. We have increased the target multiple for the standalone business from 22X to 23X on September 2017 EPS, as we believe the company is well placed to deliver strong revenue growth over the FY2016-20 period.

** The company expects flat revenue growth in FY2016e and reaffirmed its FY2018e revenue guidance of R70 bn: Overall, the company expects revenues to be flat y-o-y in FY2016e as revenue decline in industrial segments (primarily oil & gas and mining) will be offset by the ramp-up in passenger vehicle revenues and growth in the domestic truck business. The company reaffirmed its FY2018e standalone revenue guidance of R70 bn. We expect standalone revenues of around R62 bn in FY2018e as we have not built in revenue opportunity from new transmission components in our estimate.

** US heavy truck industry volumes will decline over the next two years: The company’s guidance points to Europe and US heavy truck volumes declining by 6% y-o-y and 4% y-o-y in CY2016e and CY2017e respectively. US heavy truck volumes will likely decline by 16% in CY2016e and 9% y-o-y in CY2017e while in Europe, heavy truck volumes will increase by 5% y-o-y in CY2016e and 2% y-o-y in CY2017e. The company has received new orders from Paccar and DAF in the US to which it did not supply earlier; hence its market share in the US will likely go up.

** Revenues from the passenger vehicle segment to grow 3X over the next three years: Bharat Forge has received orders from global OEMs including GM, Audi, Daimler, Chrysler, to supply machined forging components for passenger vehicles. This will drive strong revenue growth over the next three years. We expect passenger vehicle revenues to increase to around R10 bn in FY2018e from ~R3 bn in FY2015. Passenger vehicle segment revenues will account for ~15% of revenues in FY2018e as compared to ~5% in FY2015 as per the company.

** Developing capabilities to start manufacturing transmission components: Over the past 18 months, the company has developed transmission components for passenger vehicle OEMs. This is a new opportunity for the company as it does not manufacture transmission components currently. Kalyani Technoforge, a part of the Kalyani Group, acquired the Indian operations of Bodycote, a leader in thermal processing services worldwide in September 2015. Bodycote offers specialised surface treatment processes such as carburising, plasma nitriding, carbonitriding which are used for products such as high precision gears required for transmission and aerospace applications. We estimate transmission components in passenger vehicle forging to be ~$2 bn industry globally. Bharat Forge can incrementally add $100m in revenues in the transmission space by gaining 5% market share in the transmission component space.

** Revenues from aerospace segment will ramp-up in FY2017-18: The company has received orders for aerospace components from four customers. This vertical could scale up to $100m in four to five years. We expect this vertical to be a key growth driver for the non-auto export business in the next two years. We estimate the aviation component business to become a $50m vertical for Bharat Forge by FY2018.
* Defence could be another opportunity over the next five years: Bharat Forge will supply components for artillery systems for the defence industry. It highlighted the likelihood of the defence ministry floating tenders for $5bn in orders for defence systems which need to be supplied over the next
10 years. We estimate forgings to form 25% of these orders. Hence, forging components in the defence industry could be an opportunity worth $1.25 bn over the next 10 years for Bharat Forge which implies an annual opportunity of $125m.
* The company is also developing forging components for sub-sea drilling equipment in which Bharat Forge is not present currently. This will help the company offset the decline in the oil & gas business.
* The company will also supply forging components to GE for locomotives it is developing for the railways. It will also look at servicing Indian Railways’ need for engine parts.
* Hindustan Aeronautics Limited (HAL) imports 85-90% of its requirements of aviation components. Bharat Forge is developing components for HAL to reduce its import content.
* The company expects to become debt free by FY2018 led by strong cash flow generation.