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A lot of macro factors are falling in place to create the right conditions for the markets to rally in the coming year. Brent crude oil prices have declined ~66% over the last two years to $33 as against ~$99 at the end of CY2013, resulting in significant savings for the government. Led by lower crude prices, the net import bill has reduced at a CAGR of 16% to $115bn in CY2015 as against $192 bn in CY2012, resulting in a steep decline in the current account deficit.

With these savings, the government has also been able to maintain fiscal discipline, despite an increase in infrastructure spending. We are already seeing a strong bid pipeline of `120,000cr from the NHAI and of over Rs. 244,000cr from the defense sector, expected to get tendered over the next 12 months. Accordingly, we expect uptick in government spending to result in private sector capex cycle revival. We believe the revival in the investment cycle will be the key to push the earnings trajectory upwards over the next few years led by the multiplier effect of infrastructure spending.