Ashika Monthly Insight Flip July 2016

July, 2016 

FDI 

Window of Opportunity 

• Market Overview • Monthly Insight Performance • Stock Picks • Valuation at a Glance 

• Foreign Direct Investment • Sector Outlook-Logistic • Economy Review • Mutual Fund Overview 

• Technical View • Market Diary • Commodities Monthly Round up • World Economic Calendar 

Godrej Properties Ltd. | Capital First Ltd. 

Aarti Industries Ltd. | Steel Strips Wheels Ltd.

JUNE 2016 

Inside this issue 

01 Market 

Overview 

19 Foreign Direct 

Investment 

(FDI) 

44 Technical 

View 

08 

at a 

04 Stock Picks 17 Valuation Monthly 

• Godrej Properties Ltd. 

Glance 

Insight 

• Capital First Ltd. 

49 Market Diary 

50 Commodity 

52 World 

• Aarti Industries Ltd. 

Performance 

• Steel Strips Wheels Ltd. 

27 Sector 

Outlook 

33 Economy 

Review 

41 Mutual Fund 

Overview 

Monthly 

Economic 

Round up 

Event Calender 

Name Designation Email ID Contact No. 

Paras Bothra VP Equity Research paras@ashikagroup.com +91 22 6611 1704 

Krishna Kumar Agarwal Equity Research Analyst krishna.a@ashikagroup.com +91 33 4036 0646 

Partha Mazumder Equity Research Analyst partha.m@ashikagroup.com +91 33 4036 0647 

Arijit Malakar Equity Research Analyst amalakar@ashikagroup.com +91 33 4036 0644 

Chanchal Bachhawat, CFA Equity Research Analyst chanchal.bachhawat@ashikagroup.com +91 22 6611 1712 

Tirthankar Das Technical & Derivative Analyst tirthankar.d@ashikagroup.com +91 33 4036 0645 

SEBI Registration No. INH000000206 

Disclosure 

The Research Analysts and /or Ashika Stock Broking 

Limited do hereby certify that all the views expressed in 

this research report accurately reflect their views about 

the subject issuer(s) or securities. Moreover, they also 

certify the followings:- 

• The Research Analyst or Ashika Stock Broking Limited or 

his/its Associates or his/its relative, has any financial 

interest in the subject company (ies) covered in this report. 

Yes 

• The Research Analyst or Ashika Stock Broking Limited or 

his/its Associates or his/its relative, have actual/beneficial 

ownership of 1% or more in the subject company, at the 

end of the month immediately preceding the date of the 

publication of the research report. No 

• The Research Analyst or Ashika Stock Broking Limited 

or his/its Associates or his/its relatives has any material 

conflict of interest at the time of publication of the 

research report. No 


or his/its Associates have received any compensation or 

compensation for investment banking or merchant 

banking or brokerage services or for product other than 

for investment banking or merchant banking or brokerage 

services from the companies covered in this report in the 

past 12 months. No 


or his/its Associates have managed or co managed in the 

previous 12 months any private or public offering of 

securities for the company (ies) covered in this report. No 


or his/its Associates have received any compensation or 

other benefits from the company (ies) covered in this 

report or any third party in connection with the Research 

Report. No 

• The Research Analyst has served as an officer, director 

or employee of the company (ies) covered in the research 

report. No 


has been engaged in Market making activity of the 

company (ies) covered in the research report. No 

Disclaimer 

This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ashika Stock Broking Ltd. is 

not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or 

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should not be relied upon such. Ashika Stock Broking Ltd. or any of its affiliates or employees shall not be in anyway responsible for any loss or damage that may arise to any 

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particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

FDI - WINDOW OF OPPORTUNITY 

The stock markets around the world were jolted by the 

sudden exit of UK from European Union (EU), the event 

popularly coined as ‘Brexit’. While the global markets 

expected Britons to vote to ‘remain’ in the EU, the 

outcome came in as a surprise. This is after the British 

Prime Minister urged his countrymen to remain in EU. 

However, post the adverse outcome, he wished to step 

down as the Prime Minister of the nation, respecting the 

decision and silencing the murmurs for a second 

referendum. According to experts, the outcome comes at 

an inopportune time when the prime minister had been 

re-elected with a strong mandate and the ruling party 

won with absolute majority, thus providing stability to the 

government. Now, the successor to the present prime 

minister has to see through the whole unfortunate EU 

leaving episode. The pound had to take the beating while 

the dollar strengthened relatively as well as on buying 

demand as investors flocked to safe haven. The 

strengthening dollar as well as the Brexit issue is a major 

hindrance for the Fed to raise rates and might actually 

pause to let the whole episode percolate down without 

ruffling too many feathers. However, experts around the 

world are on a wait and watch mode with regards to the 

unforeseen events and risks it poses after the actual 

aftermath of the event. Majority of them have opined that 

the recession and the extent in EU will not spread like a 

wild fire just as the case in 2008 since it is not 

emanating from the same root causes. Nevertheless, it is a 

big impediment to the global stability and if the views of 

prominent experts are to be trusted, this is actually an 

opportunity for the Asian economies and foreign investors 

might be seen flocking in the short term. The Britons 

exited the EU as the campaign led by former London 

mayor, Boris Johnson, and UK’s right-wing populist 

political party, the UK Independence Party (UKIP) 

highlighted the opportunity costs for staying in EU. One 

of the reasons was migration within EU and rising 

inequality. While in reality the inequality has actually 

come down in the recent years as highlighted by an 

article in Live mint (titled It isn’t inequality that led to 

Brexit). Morgan Stanley has in fact raised its probability of 

a global recession in the next 12 months to 40 percent, up 

from 30 percent before. The notion or rationale has been 

the negative impact of political uncertainty on risk assets. 

According to Morgan Stanley, the event will likely spread 

to the impending US elections to be held in early 

November and further to general elections to be held in 

the Netherlands next year, presidential election in France 

(late April and early May) and national elections in 

Germany (late September). 

In the domestic markets, vastly people are keenly 

following the latest update on monsoon with utmost 

interest. Monsoon, the mega event of the year has left half 

of the country unsatiated so far although the latest 

updates suggest heightened advancement. The sentiment 

was captured by low bond yields on an expectation of 

reduction in interest rates led by bumper crop production 

this year. After the initial above average forecasts by the 

forecasting agencies – IMD and Skymet, the monsoon has 

so far clocked deficit of 13% as of 28th June. The deficit 

has narrowed from 17% (as of 23rd June, 2016) and 23% 

deficit on 16th June. The percentage points are calculated 

by comparing the expected centimeters of rainfall with the 

Long Period Average (LPA) of past 50 years. While the LPA 

is 89 cms, IMD expects a total of 94 cm of rainfall this 

monsoon. The monsoon however arrived in Kerala a week 

later than its normal onset date of 1st June, but is 

believed to have rapidly advanced over peninsular Indian 

states. As of 28th June, 49% of the country had received 

normal rainfall, 17% had received excess rainfall and 34% 

had got deficient or scanty rain. In the southern peninsula 

rainfall has been 16% above average and in north-west 

India it has been 2% more than normal. However, central 

India, east and north-east India have seen a deficit of 23% 

and 26%, respectively. Clearly, when the first estimates 

are for 106% of the long-period average (LPA), the 

monsoon is expected to have spread across whole of India 

by end of June. Besides, this year the dreaded El Nino is 

1

JULY 2016 

MARKET OVERVIEW 

seen disappearing and La Nina is seen developing. 

According to an analysis by Deutsche Bank, there is a 

strong positive correlation between La Nina and India’s 

key macro/rural indicators. Agri GDP in La Nina years grew 

at an average 7.8% YoY as against an average of 2.3% 

YoY in non La Nina years. According to the analysis, 

broader economic indicators like—GDP, private 

consumption and investments growth also exhibit similar 

trends in La Nina years, averaging 8.9%/7.4%/10.4% YoY 

growth—significantly higher than average growth of 

5.8%/5.2%/7.2% respectively in non La Nina years. 

Considering that ~50% of the country’s workforce 

depends on agriculture for a living and over half of India’s 

farmland lacks assured irrigation, monsoon is of 

paramount importance. Besides, the food inflation has 

failed to be tamed over the last two years mainly on 

account of two failed monsoons barring the issues with 

hoarders or middlemen. 

The Government also recently unleashed latest set of 

reforms probably to alleviate attention from the stepping 

down of Raghuram Rajan from RBI governor’s post 

effective September. In the second tranche of reforms of 

the country’s Foreign Direct Investment (FDI) rules in less 

than a year, the government has announced further 

relaxation in the norms for nine sectors, including civil 

aviation, pharmaceutical, defence, food products, single 

brand retail trading, animal husbandry, broadcasting 

carriage services private security agencies and 

establishment of office. This is the second major reform 

after the last radical changes announced in November 

2015. Prime Minister Narendra Modi tweeted: “In two 

years, Govt. brings major FDI policy reforms in several key 

sectors. India is now the most open economy in the world 

for FDI; most sectors under automatic approval route.” He 

added: “Today’s FDI reforms will give a boost to 

employment, job creation & benefit the economy.” In 

defence, the government has dropped the condition of 

access to ‘state-of-the-art’ technology for allowing foreign 

investment beyond 49 per cent, which is permitted 

through the government approval route, in cases resulting 

in access to modern technology in the country or for 

other reasons to be recorded. In civil aviation, the rules 

now allow 100 per cent FDI under the automatic route in 

brownfield airport projects as opposed to 74 per cent at 

present. In scheduled air transport service/ domestic 

scheduled passenger airline and regional air transport 

service, the FDI limit has been raised to 100 per cent, with 

FDI beyond 49 per cent through the government approval 

route. In the pharmaceutical sector, where FDI in 

brownfield (existing) projects was allowed only through the 

government approval route, the Centre has now decided to 

permit up to 74 per cent FDI under the automatic route. 

For greenfield (new) projects, 100 per cent FDI through the 

automatic route is already allowed. In food processing, it 

has been decided to permit 100 per cent FDI under the 

government approval route for trading, including through 

e-commerce, in respect of food products manufactured or 

produced in India. This is in line with the Budget 

announcement made by the Finance Minister. In the 

broadcasting sector, a decision has been taken to allow 

100 per cent FDI through the automatic route for 

teleports, direct to home, cable networks, Headend-in-the 

Sky Broadcasting Service as well as mobile TV. In singlebrand 

retail, the government has tweaked the rules to 

exempt investors from the mandatory domestic sourcing of 

30 per cent inputs, by extending it to all entities for three 

years and for a further five years for retailers selling 

products with ‘state-of-art’ and ‘cutting-edge’ technology. 

The requirement of ‘controlled conditions’ for 100 per cent 

FDI in animal husbandry under the automatic route has 

been dropped. In private security agencies, the FDI limit 

has been enhanced from 49 per cent to 74 per cent, with 

49 per cent under the automatic route and higher under 

government approval. These reforms if accepted will help 

in attracting strong foreign funds apart from creation of 

employment and boosting GDP. However, there are 

impediments towards the path and it will not be easy 

since any notification issued by the government can be 

challenged in either House of Parliament within 30 days of 

the Cabinet clearing it. So, anyways it will require 

permission from members of either House of Parliament 

for implementation. 

Markets seem to be building strong expectation of a better 

than expected earnings for the forthcoming earnings 

season. However, on the contrary corporation tax for 

1QFY17 (April 1 to June 18) witnessed tepid growth of 2% 

yoy at Rs 55,000 crore, portraying a sluggish economic 

recovery. Poor corporation tax collection growth reflects 

persistently weak profitability and output for corporate 

amid sluggish demand in the economy. On the other hand, 

2


direct tax collection during 1QFY17 posted a 22% growth 

at Rs 1.2 lakh crore led by buoyant growth in personal 

income tax because of change in the advance tax 

collection rules. Personal income tax witnessed a growth 

of 48% yoy at Rs 64,000 crore on account of the new 

rules which require non-corporate to pay 15% advance 

tax by June 18, against 30% by September 15. Of the 

total direct tax collection, Rs 52,000 crore came from 

advance taxes, of which personal income tax stood at Rs 

6,000 crore. Post change in income tax compliance, 

individuals have to estimate income tax payable for full 

financial year and have to pay 15% of that in Q1, or else 

pay 1% interest for each month of delay. Overall advance 

tax collections in the 1QFY17, which are expected to be 

about 15% of the full year tax liability, reported 18% 

yoy growth. Corporation tax growth during the first 

quarter was unusual low which hints that all the macro 

factors are still not well with the corporate side of 

economy and corporate profitability numbers are yet to 

pick up. Other macro indicators also do not reflect bright 

picture with Industrial production index contracted by 

0.8% in April, largely due to 3.1% yoy decline in 

manufacturing sector. However, such grim performance 

from macro indicators do not support the strong GDP 

growth of 7.6% which the country posted during FY16 

and the numbers have come under scanner for disconnect 

with other economic indicators. Further, government 

expects GDP for the current financial year would be in 

the range between 7.75% which indicates that 

economists and the government might not be in same 

page. The government has targeted direct tax collections 

at Rs 8.47 lakh crore for FY17 which would be 15% high 

over actual mop up in previous financial year. Corporation 

tax is targeted to grow 8.8% to Rs 4.93 lakh crore over 

revised estimate (RE) of 4.52 lakh core in FY16. Personal 

income tax, on the other hand is budgeted to rise over 

20% at Rs 3.53 lakh crore over RE of Rs 2.99 lakh crore 

during FY16. 

The larger saving grace could rest with better than normal 

monsoon thus boosting Agri and thus overall GDP and 

boost rural consumption. Moreover, the recommendations 

of the 7th Pay Commission also got the Cabinet nod and 

will provide a fillip towards consumption in the economy. 

T h e c a b i n e t a l s o a p p rove d t h e M o d e l S h o p & 

Establishment Act, which enables states to choose to keep 

shops and other such establishments open 24x7 all 

through the year. The move, which is likely to prove highly 

beneficial for restaurants, malls, movie theatres and other 

entertainment entities and help to garner higher taxes for 

the government. The Cabinet also cleared the new mining 

policy thus boosting mineral exploration by private 

companies, unlike earlier, by allowing them to bid for 

mineral blocks. The intent is again growing strong and the 

government seems to be pushing the pedal for gas 

reforms. The monsoon session which would start on July 

18 and conclude on August 12 is expected to be keenly 

watched and would be an eventful one considering that 

the government will try to push for the all important GST 

bill to get passed. The government seems to be garnering 

support from other regional parties for GST and there is a 

strong consensus estimate and chance for passing of the 

same in the monsoon session itself. However, there could 

also be debate with regards to the recently announced FDI 

reforms. In all, there are 11 pending bills in the Lok Sabha 

and 45 bills in the Rajya Sabha. The government aims to 

pass atleast 25 bills in the monsoon session itself and 

thus promises to be packed with action and higher 

productivity. 

Paras Bothra 

Vice President - Equity Research 

Email - paras@ashikagroup.com 

Phone : 022 6611 1704 

3


MONTHLY INSIGHT PERFORMANCE 

Over the years, Ashika Research based on its rigorous and 

continuous analysis on fundamental basis, has 

recommended stocks and consistently achieved the target 

price recommended. Since January 2012 we have 

recommended 198 stocks out of which 153 has achieved 

target. Hit Ratio stands at 77%. Out of these 80 stocks 

have given a return of more than 100%. During this 

period the Nifty has given a return of 56% and a return 

of 75% from its peak. 

T h e s t o c k s re co m m e n d e d by u s s u c h a s Ce ra 

Sanitaryware, Symphony, Srikalahasti Pipes, Aurobindo 

Pharma, Shree cement, MRF, Britannia, Can Fin Homes, 

Pidilite Ind, Torrent Pharma, Wim Plast, Deccan Cements, 

Axiscades Engg, Lupin, Maruti Suzuki, Glenmark Pharma, 

Kaveri Seeds, Havels India, Himatsingka Seide, HPCL, UPL, 

Indusind Bank, Gujarat Gas, Relaxo Footwears, Zensar 

Tech, Berger Paints, Hexaware Ltd., Dabur, PI Industries, 

Bajaj Finserv, Sharda Motor, Emami, Zydus Wellness, Bharti 

InfraTel, Cummins India, Godrej Consumer, Adani Ports, 

L&T, Finolex Ind., Escorts, Pidilite, Prism Cement, Pidilite 

Ind., MRF Ltd., Dr Reddy, Berger Paints India, BPCL, Divis 

Lab, Ashok Leyland, V-Guard Ind., Tatamotor - DVR, Gulshan 

Polyols, IFB Industries, Zee Entertainment, Motherson Sumi, 

Castrol India, Rallis India, Info Edge (India), LIC Housing Fin, 

AIA Engineering, SKS Microfinance, Indian Bank, Dr. Reddy 

Lab, Uflex, Axis Bank, Dabur India, City Union Bank, FDC 

Ltd., Multibase India, Tata Motors, IPCA Lab and Magma 

Fincorp have generated exceptional returns (more than 

100% returns) for our investors. A few of them have 

generated returns in excess 200% for our investors. 

We have selected stocks across large cap and mid cap 

companies and across variety of sectors. For the period 

analyzed, the stocks recommended by us have 

outperformed their respective sectoral indices. 

Success Rate 

Return Classification 

19% 

27% 

4% 

54 

Stocks 

80 

Stocks 

77% 

14% 

27 

Stocks 

40% 

19% 

37 

Stocks 

Target Achieved Exit/Booked Calls Open 

Total Call: 198 

More than 100% Return 

50-25% Return 

100-50% Return 

Less than 25% Return 

4


Recommended Stocks 

28/06/2016) 

Jun-16 Dabur India FMCG 290 335 15.5% 320.0 10.3% 313.0 

Godrej Consumer Prod FMCG 1481 1750 18.2% 1583.9 6.9% 1528.8 

Glenmark Pharma Pharma 851 985 15.7% 865.8 1.7% 784.7 

Tata Power Co Power 73 85 16.4% 77.4 6.0% 72.0 

May-16 Mahindra & Mahindra Auto 1330 1550 16.5% 1414.0 6.3% 1408.6 

PI Industries Paints & Chemical 635 760 19.7% 730.9 15.1% 712.3 

DCM Shriram Paints & Chemical 157 195 24.2% 219.1 39.6% 213.8 Target Achieved 

Apr-16 ACC Cement 1370 1580 15.3% 1614.0 17.8% 1598.4 Target Achieved 

Whirlpool India Home Appl. 680 810 19.1% 823.5 21.1% 807.0 Target Achieved 

VA Tech Wabag Water Treatment 518 690 33.2% 645.0 24.5% 585.7 

Mar-16 NTPC Power 126 148 17.5% 155.0 23.0% 148.0 Target Achieved 

Marico FMCG 236 280 18.6% 269.3 14.1% 256.4 

Feb-16 HDFC Banking & Finance 1180 1400 18.6% 1268.4 7.5% 1228.9 

HCL Tech IT 866 1020 17.8% 877.0 1.3% 713.2 

Hero MotoCorp Auto 2562 2820 10.1% 3211.2 25.3% 3020.4 Target Achieved 

Jan-16 Pidilite Ind. Paints & Chemical 551 656 19.1% 724.8 31.5% 707.5 Target Achieved 

Indraprastha Gas Oil & Gas 525 624 18.9% 633.0 20.6% 613.9 Target Achieved 

SH Kelkar Personal Prod. 250 310 24.0% 275.8 10.3% 213.8 

Texmaco Rail Engg. & Const. 151 183 21.2% 154.9 2.5% 94.3 

Dec-15 Wabco India Auto 6280 7200 14.6% 6450.0 2.7% 5684.5 

Sanofi India Pharma 4300 5060 17.7% 4525.0 5.2% 4251.1 

Garware Wall Ropes Textiles 388 488 25.8% 436.5 12.5% 359.9 

Nov-15 Inox Wind Power 397 500 25.9% 411.4 3.6% 230.9 

Sterlite Tech Electrical Equip. 72 107 50.1% 85.6 19.7% 85.6 

GP Petroleums Oil & Gas 67 156 132.8% 90.2 34.6% 60.0 

HCC Construction 26 43 65.4% 28.3 8.8% 19.8 

Oct-15 Castrol India Oil & Gas 433 510 17.8% 474.4 9.5% 374.6 

Zee Ent. Media 390 464 19.0% 466.4 19.6% 436.9 Target Achieved 

Syngene Int Pharma 321 385 19.9% 436.0 35.8% 403.4 Target Achieved 

Sep-15 Berger India Paints & Chemical 208 247 18.8% 301.9 45.1% 275.7 Target Achieved 

Ceat Tyre 1080 1245 15.3% 1319.9 22.2% 814.3 Target Achieved 

Aug-15 Cummins India Electrical Equip. 962 1130 17.5% 1247.7 29.7% 810.7 Target Achieved 

Greenply Ind. Plywood 187 225 20.1% 263.5 40.9% 250.8 Target Achieved 

TIME Technoplast Plastic Prod. 66 81 22.7% 69.9 5.9% 49.1 

SQS India BFSI IT 680 863 26.9% 1291.0 89.9% 988.7 Target Achieved 

Jul-15 Asian Paints Paints & Chemical 760 883 16.2% 1037.5 36.5% 980.2 Target Achieved 

Idea Cellular Telecom 179 209 16.8% 186.5 4.2% 104.4 

Gruh Finance Banking & Finance 261 322 23.4% 289.0 10.7% 282.2 

Jun-15 Maruti Suzuki Auto 3774 4367 15.7% 4790.0 26.9% 4078.7 Target Achieved 

Whirlpool India Home Appl. 760 879 15.7% 847.0 11.4% 807.0 Target Achieved 

May-15 Sun pharma Pharma 925 1220 31.9% 1010.0 9.2% 765.1 

Tata Motors Auto 515 615 19.4% 533.8 3.7% 440.4 

Ultratech Cement 2680 3300 23.1% 3454.9 28.9% 3400.8 Target Achieved 

Tata Global FMCG 141 174 23.4% 150.5 6.7% 127.9 

Apr-15 Abbott India Pharma 4020 4680 16.4% 6177.7 53.7% 4488.0 Target Achieved 

Strides Arcolab Pharma 1153 1340 16.2% 1414.0 22.6% 1090.3 Target Achieved 

Elantas Beck India Chemical 1130 1320 16.8% 1605.0 42.0% 1452.1 Target Achieved 

Mar-15 MCX Finance 1177 1552 31.9% 1289.9 9.6% 999.5 

BEML Electrical Equip. 978 1200 22.7% 1612.0 64.8% 840.0 Target Achieved 

Rolta IT 191 250 30.9% 196.8 3.0% 62.9 Exit 

Feb-15 SML Isuzu Auto 979 1222 24.8% 1671.0 70.7% 1144.6 Target Achieved 

HBL Power Battery 34.9 55 57.6% 64.5 84.8% 33.8 Target Achieved 

Mangalam Cement Cement 321 432 34.6% 324.5 1.1% 304.8 Exit 

Amrutanjan Health Pharma 449 650 44.8% 564.9 25.8% 412.7 

Jan-15 Torrent Pharm Pharma 1096 1338 22.1% 1718.4 56.8% 1343.4 Target Achieved 

Emami FMCG 783 924 18.0% 1365.0 74.3% 1097.9 Target Achieved 

Dewan Housing Finance 199 240 20.9% 284.6 43.4% 202.1 Target Achieved 

KPIT Tech IT 200 263 31.5% 232.4 16.2% 179.3 Exit 

Dec-14 Bajaj Corp Personal Prod. 327 385 17.7% 522.0 59.6% 385.0 Target Achieved 

Alstom India Electrical Equip. 586 725 23.7% 877.0 49.7% 610.0 Target Achieved 

Transport Corp Transportation 284 354 24.6% 348.5 22.7% 307.3 Target Achieved 

Multibase India Rubber Prod. 164 300 82.9% 342.5 108.8% 260.6 Target Achieved 

Albert David Pharma 256 363 41.8% 404.3 57.9% 306.5 Target Achieved 

Nov-14 ONGC Oil & Gas 395 516 30.6% 412.5 4.4% 211.4 

Cadila Helthcare Pharma 277 320 15.6% 453.3 63.8% 321.0 Target Achieved 

Karur Vysys Banks 541 700 29.4% 619.0 14.4% 499.9 

JK Lakshmi Cement Cement 348 396 13.8% 429.9 23.5% 387.6 Target Achieved 

5


MONTHLY INSIGHT PERFORMANCE 


Diwali Ashok Leyland Auto 44 65 46.2% 112.9 154.0% 99.0 Target Achieved 

Pick Karur Vysys Banks 540 700 29.6% 619.0 14.6% 499.9 

SKS Microfinance Finance 317 412 30.0% 710.0 124.0% 695.1 Target Achieved 

NOCIL Chemical 43 60 38.4% 64.5 48.8% 52.0 Target Achieved 

Oct-14 Kesoram Industries Diversified 117 176 50.4% 148.6 27.0% 129.2 Exit 

Akzo Nobel Paints & Chemical 1240 1460 17.7% 1614.0 30.2% 1506.4 Target Achieved 

IFB Industries Household Appl. 295 380 28.8% 700.0 137.3% 330.9 Target Achieved 

Munjal Auto Auto Parts 102 155 52.0% 134.0 31.4% 78.3 

Sep-14 Tata Motors Auto 527 598 13.5% 612.4 16.2% 440.4 Target Achieved 

Timken India Industrial Prod. 447 545 21.9% 669.0 49.7% 536.7 Target Achieved 

KEC International Electrical Equip. 102 130 27.5% 164.8 61.6% 139.4 Target Achieved 

Indoco Remedies Pharma 256 327 27.7% 412.2 61.0% 272.2 Target Achieved 

Ingersoll-Rand Industrial Prod. 649 785 21.0% 1124.4 73.3% 640.5 Target Achieved 

Aug-14 Bodal Chemicals Chemical 60 94 56.7% 111.8 86.3% 107.1 Exit 

Som Distilleries Breweries & Dist. 211 269 27.5% 246.0 16.6% 164.7 

Sharda Motor Auto Parts 391 536 37.1% 1190.0 204.3% 825.6 Target Achieved 

Axiscades Engg IT 106 138 30.2% 396.2 273.8% 250.1 Target Achieved 

Visaka Industries Cement Prod. 119 173 45.4% 188.8 58.7% 152.7 Target Achieved 

Deccan Cements Cement 270 408 51.1% 1028.9 281.1% 979.3 Target Achieved 

Gulshan Polyols Chemical 177 274 54.8% 430.0 142.9% 343.0 Target Achieved 

Jul-14 Mahindra Lifespace Real Estate 560 710 26.8% 664.4 18.6% 455.0 

V-Guard Ind. Industrial Prod. 593 746 25.8% 1470.0 147.9% 1360.4 Target Achieved 

Astra Microwaves Defence 142 186 31.0% 166.4 17.2% 121.9 

Himatsingka Seide Textile 74 95 28.4% 251.0 239.2% 226.5 Target Achieved 

Mangalam Cement Cement 221 285 29.0% 351.0 58.8% 304.8 Target Achieved 

Jun-14 Coal India Coal 392 500 27.6% 447.1 14.1% 313.3 Target Achieved 

Container Corporation Logistics 1180 1500 27.1% 1947.7 65.1% 1381.3 Target Achieved 

Balmer Lawrie Logistics 473 700 48.0% 682.0 44.2% 589.8 

Can Fin Homes Housing Finance 305 450 47.5% 1324.8 334.4% 1171.1 Target Achieved 

Srikalahasti Pipes Iron & Steel Prod. 46 70 52.2% 349.0 658.7% 248.3 Target Achieved 

May-14 Bank of Baroda Banking 164.4 201.6 22.6% 228.9 39.2% 154.4 Target Achieved 

AIA Engineering Industrial Prod. 606 726 19.8% 1364.2 125.1% 974.7 Target Achieved 

MOIL Ltd. Metals & Mining 255 341 33.7% 341.7 34.0% 234.4 Target Achieved 

Wim Plast Plastic Prod. 620 800 29.0% 2499.0 303.1% 1992.8 Target Achieved 

Apr-14 Engineers India Engg. & Const. 224 270 20.5% 331.7 48.1% 203.2 Target Achieved 

Gujarat Gas Gas 263 305 16.0% 862.4 227.9% 556.9 Target Achieved 

City Union Bank Banking 52.8 69 30.7% 112.3 112.6% 109.3 Target Achieved 

Relaxo Footwears Footwear 297 390 31.3% 960.1 223.3% 495.3 Target Achieved 

Mar-14 Motherson Sumi Auto Ancillary 232 285 22.8% 540.8 133.1% 278.1 Target Achieved 

PI Industries Agrichem 252 315 25.0% 787.2 212.4% 712.3 Target Achieved 

VA Tech Wabag Water Treatment 323 383 18.6% 972.5 201.6% 585.7 Target Achieved 

Feb-14 Bharti InfraTel Telecom - Infra 171 213 24.6% 499.7 192.2% 338.6 Target Achieved 

UPL Fertilizer 187 251 34.2% 617.0 229.9% 546.2 Target Achieved 

Finolex Ind. Pipes 155 185 19.4% 427.0 175.5% 416.2 Target Achieved 

Jan-14 NIIT Tech IT 355 500 40.8% 631.0 77.7% 489.4 Target Achieved 

Zensar Tech IT 349 500 43.3% 1121.0 221.2% 962.2 Target Achieved 

Bajaj Finserv Banking 726 850 17.1% 2247.0 209.5% 2196.1 Target Achieved 

FDC Ltd. Pharma 130 170 30.8% 274.4 111.0% 182.0 Target Achieved 

Dec-13 MRF Ltd. Tyre 17350 19430 12.0% 46399.0 167.4% 32941.9 Target Achieved 

Info Edge (India) Web Services 446 550 23.3% 1015.0 127.6% 807.1 Target Achieved 

Indian Bank Banking 101 120 18.8% 224.3 122.0% 140.9 Target Achieved 

Symphony Cons. Durable 405 500 23.5% 3275.0 708.6% 2486.2 Target Achieved 

Nov-13 Pidilite Ind. Paints & Chemical 266 350 31.6% 724.8 172.5% 707.5 Target Achieved 

Aurobindo Pharma Pharma 216 297 37.5% 1535.0 610.6% 730.1 Target Achieved 

Kaveri Seeds Agri Prod. 305 580 90.4% 1075.5 253.1% 443.3 Target Achieved 

Speciality Restaurant Restaurants 124 198 59.7% 218.6 76.3% 93.7 Target Achieved 

Oct-13 Britannia FMCG 759 845 11.3% 3434.2 352.5% 2748.2 Target Achieved 

Glenmark Pharma Pharma 520 610 17.3% 1262.9 142.9% 784.7 Target Achieved 

Ultratech Cement Cement 1808 2045 13.1% 3454.9 91.1% 3400.8 Target Achieved 

Sep-13 L&T Engg. & Const. 705 810 14.9% 1893.8 168.6% 1474.1 Target Achieved 

Tech M IT 344 374 8.7% 700.9 103.9% 501.0 Target Achieved 

Indusind Bank Banking & Finance 344 470 36.6% 1132.5 229.2% 1084.7 Target Achieved 

Escorts Auto 82 108 32.5% 224.4 175.3% 219.2 Target Achieved 

Aug-13 Hexaware Ltd. IT 107 130 21.5% 335.8 213.8% 226.9 Target Achieved 

Godrej Consumer FMCG 815 950 16.6% 1583.9 94.3% 1528.8 Target Achieved 

Torrent Pharma Pharma 421 475 12.8% 1718.4 308.2% 1343.4 Target Achieved 

6



Jul-13 TCS Ltd IT 1460 1640 12.3% 2839.7 94.5% 2464.0 Target Achieved 

Dabur India FMCG 150 170 13.3% 320.0 113.3% 313.0 Target Achieved 

Rallis India Chemical 130 148 13.8% 298.7 129.7% 219.8 Target Achieved 

Jun-13 Hero MotoCorp Auto 1736 2020 16.4% 3270.0 88.4% 3020.4 Target Achieved 

Divis Lab Pharma 977 1120 14.6% 2484.7 154.3% 1107.2 Target Achieved 

Corporation Bank Banking & Finance 77 92 19.8% 86.0 12.0% 41.4 Booked 

May-13 Maruti Suzuki Auto 1673 1920 14.8% 4790.0 186.3% 4078.7 Target Achieved 

Dr. Reddy Lab Pharma 1991 2280 14.5% 4386.6 120.3% 3273.1 Target Achieved 

BPCL Oil & Gas 405 460 13.6% 1054.1 160.3% 1051.7 Target Achieved 

Kotak Mahindra Bank Banking & Finance 415 510 22.9% 778.9 87.6% 743.3 Target Achieved 

Apr-13 L&T Engg. & Const. 683 915 34.0% 1893.8 177.3% 1474.1 Target Achieved 

Pidilite Chemical 264 300 13.6% 724.8 174.5% 707.5 Target Achieved 


Mar-13 ITC FMCG 291 352 21.0% 410.0 40.9% 368.5 Target Achieved 

Berger Paints Chemical 95 116 21.6% 301.9 217.8% 275.7 Target Achieved 

LIC Housing Fin Banking & Finance 232 284 22.4% 524.0 125.8% 497.7 Target Achieved 

Zee Entertainment Media & Ent. 215 265 23.3% 466.4 116.9% 436.9 Target Achieved 

Feb-13 Axis Bank Banking & Finance 301 397.8 32.2% 654.9 117.6% 514.0 Target Achieved 

Tata Motors Auto 298 379 27.2% 612.4 105.5% 440.4 Target Achieved 

Cairn India Oil & Gas 324 410 26.5% 386.0 19.1% 134.1 Booked 

Petronet LNG Oil & Gas 152 200 31.6% 293.1 92.8% 284.3 Target Achieved 

Jan-13 Adani Ports Others 135 180 33.3% 374.8 177.6% 202.9 Target Achieved 

J & K Bank Banking & Finance 130 167 28.2% 195.5 50.0% 68.5 Target Achieved 

Dec-12 Zee Entertainment Media & Ent 198 235 18.7% 466.4 135.6% 436.9 Target Achieved 

Indusind Bank Banking & Finance 416 500 20.2% 1132.5 172.2% 1084.7 Target Achieved 

Nov-12 IPCA Lab Pharma 450 545 21.1% 906.9 101.5% 488.0 Target Achieved 

L&T Finance Banking & Finance 55 85 54.5% 97.1 76.5% 77.5 Target Achieved 

Zydus Wellness FMCG 445 560 25.8% 1128.9 153.7% 783.3 Target Achieved 

Oct-12 Sun TV Media & Ent. 357 446 24.9% 494.9 38.6% 355.4 Target Achieved 

Allahabad Bank Banking & Finance 147 180 22.4% 191.1 30.0% 68.3 Target Achieved 

Shoppers stop Others 393 465 18.3% 624.4 58.9% 364.5 Target Achieved 

Sep-12 Dish TV Media & Ent. 68 92 35.3% 121.7 78.9% 93.6 Target Achieved 

Havels India Cons. Durables 111 127.6 15.0% 378.4 240.9% 357.6 Target Achieved 

Aug-12 Lupin Pharma 570 672 17.9% 2129.0 273.5% 1544.7 Target Achieved 

Bajaj Finserv Banking & Finance 730 877 20.1% 2247.0 207.8% 2196.1 Target Achieved 

Jul-12 Uflex Others 112 145 29.5% 244.9 118.6% 228.0 Target Achieved 

Cummins India Engg. & Const. 438 513 17.1% 1247.7 184.9% 810.7 Target Achieved 

Exide Inds Others 135 165 22.2% 205.2 52.0% 166.8 Target Achieved 

Engineers India Engg. & Const. 200 280 40.0% 305.0 52.5% 203.2 Target Achieved 

Jun-12 Glenmark Pharma Pharma 350 410 17.1% 1262.9 260.8% 784.7 Target Achieved 


Cera Sanitaryware Cons. Durables 248 340 37.1% 2960.9 1093.9% 2336.1 Target Achieved 

HPCL Oil & Gas 300 365 21.7% 997.9 232.6% 993.8 Target Achieved 

May-12 Emami FMCG 457 535 17.1% 1365.0 198.7% 1097.9 Target Achieved 

Berger Paints India Chemical 114 141 23.7% 301.9 164.8% 275.7 Target Achieved 

Graphite India Others 92 110 19.6% 126.4 37.4% 79.9 Target Achieved 

Rainbow papers Others 66 85 28.8% 94.4 43.0% 4.6 Target Achieved 

Apr-12 Tatamotor - DVR Auto 158 200 26.6% 391.4 147.7% 287.6 Target Achieved 

Pidilite Ind Chemical 172 210 22.1% 724.8 321.4% 707.5 Target Achieved 

Mar-12 Magma Fincorp Banking & Finance 70 ACCu 141.0 101.4% 104.8 Target Achieved 

Torrent Power Power 222 290 30.6% 252.9 13.9% 175.2 Booked 

Feb-12 Castrol India Oil & Gas 236 ACCU 544.0 130.5% 374.6 Target Achieved 

Prism Cement Cement 48.75 ACCU 133.5 173.7% 98.3 Target Achieved 

MRF Auto 9767 ACCU 46399.0 375.1% 32941.9 Target Achieved 

Shoppers Stop Others 340 ACCU 624.4 83.6% 364.5 Target Achieved 

Allahabad Bank Banking & Finance 200 ACCU 211.3 5.7% 68.3 Target Achieved 

Zydus Wellness FMCG 382 ACCU 1128.9 195.5% 783.3 Target Achieved 

MRPL Oil & Gas 71 ACCU 83.2 17.2% 65.6 Target Achieved 

Akzo Nobal Cons. Durables 857 ACCU 1614.0 88.3% 1506.4 Target Achieved 

Maruti Suzuki Auto 1320 ACCU 4790.0 262.9% 4078.7 Target Achieved 

M & M Auto 749 ACCU 1442.1 92.5% 1408.6 Target Achieved 

Feb-12 Tata Power Power 115 120 4.3% 117.6 2.2% 72.0 Target Achieved 

Dr Reddy Pharma 1642 1795 9.3% 4386.6 167.1% 3273.1 Target Achieved 

Jan-12 Shree cement Cement 2100 ACCU 14548.0 592.8% 14212.8 Target Achieved 

Dabur FMCG 102 125 22.5% 320.0 213.7% 313.0 Target Achieved 

7


STOCK PICKS 

Godrej Properties Ltd 

CMP: Rs 365 

Rating: BUY Target: Rs 415 

Company Information 

Sector 

Real Estate 

Price (Rs.) 336 

Rating 

Buy 

Target 415 

Time Frame 

12-18 months 

BSE Code 533150 

NSE Code 

GodrejProp 

Bloomberg Code 

GPL IN 

Market Cap (Rs. Cr) 7910 

Outstanding shares(Cr) 21.6 

Free Float (%) 29.12 

52-wk Hi/Lo (Rs) 375/239.4 

NSE 1yr volume 49252693 

Face Value (Rs.) 5 

BVPS (Rs.) 100.26 

400 

300 

200 

100 

0 

Jun-15 

Source: Bloomberg 

Jul-15 

Godrej Properties share price 

Aug-15 

Sep-15 

Oct-15 

Nov-15 

Dec-15 

Jan-16 

Feb-16 

Mar-16 

Apr-16 

May-16 

Share holding pattern as on Mar 2016 (%) 

Jun-16 

Company Profile 

Godrej Properties Limited (GPL) is an India-based real 

estate company (headquartered in Mumbai) and is a 

subsidiary of Godrej Group. The company has projects in 

approximately 12 cities and it is involved in the 

development of residential and commercial real estate. Its 

residential portfolio consists of accommodations of varying 

sizes. The commercial portfolio includes building office 

space catering to blue-chip Indian and international 

companies, IT parks catering to the requirements of IT/ITES 

companies and retail space. Godrej Properties has been 

expanding its footprints at a fast pace and has sold real 

estate worth US $ 2.1 bn over the last four years. 

The real estate prices have been stagnating over the last 

two years on slowing consumer demand, rising inventory 

levels and delay in fast-tracking of project approvals. On 

the contrary, Godrej Properties have been performing 

relatively well thanks to the attractive positioning of its 50 

projects across 12 cities. From the graph below, GPL has 

clearly outperformed the BSE Realty Index since its IPO 

listing by giving around +28% returns versus -68% return 

of BSE Realty Index. This clearly highlights the strength of 

the company’s performance despite weak market 

conditions in the realty market. 

Others 

11.6 

Promoters 

46.5 

DII 

5.6 

FII 

36.4 

Particulars (in Rs. Cr.) FY14 FY15 FY16 FY17E 

Revenue 1179.2 1843.1 2504.5 2844.5 

Growth (%) 0.0 56.3% 36% 14% 

EBIDTA 276.8 247.2 335.4 541.3 

EBIDTAMargin(%) 23.5% 13.4% 13.4% 19% 

Net profit 159.4 190.9 231.1 324.7 

Net Profit Margin (%) 13.5% 10.35% 9.2% 11.4% 

EPS(Rs) 8.62 9.58 10.97 15.37 

Consensus Estimate: Bloomberg 

GPL benefits from attractive positioning of its projects 

across the country enabling it to outperform its peers: The 

outperformance of GPL with respect to its peers has been 

due to its prudent management of financial investments 

8


and right selection of projects across different cities. The 

company has benefitted largely due to its positioning of 

projects mostly across tier 1 cities -Mumbai, Bengaluru, 

NCR region, Kolkata, Hyderabad and Chennai comprising 

~80% of the total projects. This has helped the company 

to withstand the slowdown in the real estate markets. 

GPL recorded the highest booking value in FY16: In FY16, 

Godrej Properties recorded a robust top line growth of 

42% YoY at Rs 2,728 cr. However, Net profit was higher 

by only 21% YoY at Rs 231cr mainly driven by cost 

escalation on some old projects and a slightly adverse 

Cities 

Mumbai 

New Project Launches in FY16 

Projects 

Godrej Prime, Godrej Vihaa, Godrej Sky,The 

Trees- Residential Phase 1 

Gurgaon Godrej Icon, Godrej 101 

Chennai 

Bangalore 

Mumbai 

Godrej Azure 

Godrej Avenues 

New Phase Launches in FY16 

The Trees Residential Phase 2, Godrej 

Platinum 

Ahmedabad Godrej Garden City 

Nagpur 

Chennai 

Pune 

Godrej Anandam 

Godrej Palm Grove 

Godrej Prana, Godrej Infinity 

In Mumbai, ‘The Trees’ project in Vikhroli in residential 

space and Godrej BKC project in commercial space have 

been the most successful ones by GPL. The company has 

sold 150 out of 230 flats of ‘The Trees’ project under 

phase 2 project and phase 2 project achieved 9% higher 

pricing than Phase 1 project. Under the ongoing Vikhroli’s 

‘The Trees’ project, the company plans to extend the 

project and launch 4th tower of platinum project, phase 3 

of residential, 2nd office tower and also a hospitality & 

retail component. This project has been quite successful 

for the company as phase 2 achieved higher pricing this 

year. Godrej BKC is also ahead of schedule and is 

expected to fetch more Rs 1500 cr in the coming 

quarters, according to the management. The company is 

now extending its footprints into Noida and Gurgaon too. 

GPL’s capital light model gives it a competitive edge: 

According to the management, GPL’s business model has 

been capital light. It invests up to a maximum of 20% of 

sales mix. The company recorded 88% YoY growth in its 

bookings and booking value stood at Rs 5,038 cr, the 

highest quoted value by any listed real estate player in 

FY16. The company delivered 6 million sq. ft. in FY16, a 

growth of 71% over the previous year. This is a milestone 

achievement by the company. GPL’s cash collection also 

went up by 60% to Rs3200 cr. GPL’s launch of projects at 

prime locations, effective marketing strategy and timely 

delivery of its projects has been the company’s strength. 

Below are the companies’ detailed projects and phase 

launches over the next two years: 

Cities 

Bangalore 

New Project Launches in FY17 

Projects 

Godrej Eternity 

NCR Sector 150 – Noida; Godrej Platinum – 

Okhla 

Mumbai 

Pune 

Chennai 

Mumbai 

Ghodbunder Road – Thane, Godrej Park 

New Phase Launches in FY17 

Godrej Infinity, Godrej Prana 

Godrej Azure, Godrej Palm Grove 

Godrej Vihaa, The Trees, Godrej Platinum, 

Godrej City 

Ahmedabad Godrej Garden City 

Nagpur 

Godrej Anandam 

investment in land value and has a profit/revenue sharing 

model. The company also takes a fee income and 

promotes if the projects are doing well. This not only 

hedges the company on the downside if projects gets 

stalled or have less profit but also gives them a benefit in 

the form of promotes if the projects are doing well. 

GPL’s declining borrowing costs and termination of 

dividends payments for expansion plans augurs well: GPL’s 

average borrowing cost has come down by 112bps YoY to 

10.06%. The company has also held back dividends this 

year as it aims to reinvest in its high return business in 

order to maximize the shareholder value in the long run. 

The recent change in government’s rule on dividend 

taxation also led to this call for holding back dividends. 

Recently passed Realty Bill will benefit the organized 

players like GPL: The recently passed Realty Bill will boost 

the investors’ confidence on account of higher 

transparency, greater cash flow predictability, faster project 

9


STOCK PICKS 

approvals and shrinkage of black money activities. The 

key highlights of the bill are: 

(i) Smaller projects with an area>=500 sq feet or with 

eight flats will have to be registered with the 

regulatory authority as compared to the previous rule 

of >1000 sq feet or 12 flats 

(ii) Builders will have to deposit at least 70% of the 

sale proceeds, including land cost, in an escrow 

account to meet construction cost for faster project 

execution 

(iii) Developers will be penalized for delaying projects by 

paying the same interest as the buyers.This rule will 

enable the developers to fast track their projects in 

order to avoid interest payments. 

(iv) Builders will be liable for structural defects for five 

years, instead of two years suggested earlier 

(v) Regulatory authorities will have to dispose of 

complaints within 60 days. 

However, the above rules will hurt the smaller builders as 

they will face liquidity crunch due to higher regulatory 

environment. Nevertheless, large organized players will 

benefit from the disadvantages faced by the smaller 

players, thereby leading to higher market share in the real 

estate sector. We expect GPL to also benefit from the 

Realty Bill and also gain market share gradually. 

In addition to the Realty Bill passed earlier this year, the 

government also recently relaxed rules on Real Estate 

Investment Trusts (REITs) by allowing them to invest more 

in under-construction projects. Sebi removed restrictions 

on special purpose vehicles (SPVs) to invest in other SPV 

holding the assets and rationalized unit holders’ consent 

on related party transactions. This relaxation along with 

the Realty Bill will bring transparency and in turn attract 

foreign investors likely. According to a recent report by 

global property consultant JLL- “Japan and China could 

come knocking to the Indian real estate market in 2016”. 

Recently, China’s prominent developer- Dalian Wanda 

Group signed a memorandum of understanding (MoU) 

earlier this year with the Haryana government to develop 

‘Wanda Industrial New City’ and has committed an 

investment of $10 bn over a period of 10 years. 

Gezhouba, another prominent Chinese construction 

company, has agreed to invest Rs 10,000 crore in 

irrigation projects in Telangana state. Thus, with India’s 

growth story remaining intact while China experiencing a 

slowdown in its economy, the Chinese developers are 

pouring funds into the real estate sector. Also, with 

governments’ focus to improve infrastructural projects and 

promote ‘Housing for All by 2022’, there might be an 

uptick in the real estate sector going forward. 

Godrej Properties Ltd (GPL) has been outperforming with 

respect to its peers despite an overall slowdown in real 

estate markets over the last two years. GPL has achieved a 

record 88% growth in its bookings this fiscal and the 

company’s cash collections also went up by 60%. The 

company recorded a top line growth of 40% in 2016 

which is quite exceptional w.r.t its peers. GPL’s launch of 

projects at prime locations, effective marketing strategy 

and timely delivery of its projects has been the company’s 

strength. The company has benefitted largely due to its 

positioning of projects mostly across tier 1 cities -Mumbai, 

Bengaluru, NCR region, Kolkata, Hyderabad and Chennai 

comprise ~80% of the total projects 

The management also held back dividend as it aims to 

reinvest in its high growth business and maximize 

shareholder value creation. The management gradually 

aims to achieve around 20% return on capital employed. 

GPL’s capital light business model gives it a competitive 

edge- the company invests a maximum of 20% on land 

and follows revenue/profit sharing model. It also earns an 

extra fee income and promotes if the project sales are 

carried out better. 

GPL’s strategy of scaling up new launch activity, its shift in 

project mix towards higher profitable structures will be 

yielding positive results. We expect the pre-sales and cash 

flows to see a significant scale-up over the next two years 

driven by the marquee location of its assets especially the 

Vikhroli project in Mumbai. The recently passed Realty Bill 

will also benefit this organized player as smaller builders 

will face cash crunch from higher regulatory costs.Overall, 

we believe GPL is well-placed to deliver strong earnings 

growth over the next two to three years. At current price, 

the stock is trading at P/E multiple of 17.6x of FY18E EPS. 

We advise our investors to BUY the stock with target price 

of Rs. 415, valuing at P/E multiple of 25x FY18E EPS. 

Historically, GPL’s 5 year average P/E is 32x. So, if even we 

take a conservative multiple of 25x times for FY18, it is 

implying a target price of Rs 415. Thus, we would 

recommend our investors to accumulate the stock on 

cheap valuations and higher growth prospects. 

10


Capital First Ltd. 

CMP: Rs 557 




NSE Code 


ISIN 

CAPF 

CAFL 

INE688I01017 



52-wk Hi/Lo (Rs.) 584.4 / 321 

Avg. daily volume (1yr. on NSE) 115,608 

Face Value(Rs.) 10 

Book Value 172.5 

150 

140 

130 

120 

110 

100 

90 

80 

70 

60 

50 

Jun-15 

Jul-15 

Aug-15 

Sep-15 

Oct-15 

CAFL vs. Nifty 

Nov-15 

Dec-15 


Particulars (in Rs. Cr.) FY15 FY16 FY17E FY18E 

Net interest Income 536 818 1,145 1,469 

NIM (%) 5.5 6.7 6.8 7.0 

Operating Profit 272 489 706 919 

PAT 114 167 249 340 

EPS (Rs) 12.5 18.3 27.3 37.3 

BV (Rs) 172 185 210 242 

GNPA (%) 0.7 1.1 1.3 1.4 

Jan-16 

Consensus Estimate: Ashika Research 

Feb-16 

Mar-16 

Apr-16 

May-16 

Volume('000)RHS CAFL Nifty 

Others 

17.6 

DII 

9.9 

FII 

7.3 

Promoters 

65.2 

1200 

1000 

800 

600 

400 

200 

0 

Company Overview 

Capital First Ltd (CAFL), erstwhile Future Capital Holdings is 

one of the fastest growing NBFCs in the country which has 

successfully created a niche position in MSME financing, a 

huge potential market but largely underpenetrated. Future 

Capital Holdings was acquired by leading global private 

equity player, Warburg Pincus, from Future Group in Sept 

2012. It is managed by Mr.V.Vaidyanathan (ex employee of 

ICICI) and also has 14% stake (including options) in the 

company. CAFL provides Loan against Property (LAP) for 

MSMEs having an average ticket size of Rs 96 lakh. The 

other segments are two-wheeler loans having average 

ticket size of Rs 44,000 and loans for consumer durables 

with average ticket size of Rs 30,000. As of FY16, the 

company has a total AUM of Rs 160bn (retail AUM of Rs 

138bn) with strong distribution network across India 

spanning over 222 towns and has employee strength of 

1412. 

Investment Rationale 

Retail focused business model 

Over the past six years, Capital First has transformed itself 

from being a wholesale lending NBFC to a strong retail 

lender. Mr. V. Vaidyanathan, chairman of the company has 

also been instrumental in revamping the company’s 

business model and strategically exited the broking 

business back in FY14 and gold loan business in FY15. In 

the early days, the company used to provide wholesale 

loans to corporates, primarily loans to real estate 

developers, against the security of underlying assets. 

However, understanding the inherent risks and lumpy 

nature, management changed focus for good. CAFL has 

thereby emerged as a significant player in the retail 

finance space with retail loan book standing at INR 138 

bn. The retail business forms 85% of loan book now 

compared to 10% in FY10. Of the total loan book, SME 

financing comprises of ~69%, consumer durable financing 

is 7-8% while two wheeler loans accounts for another 8%. 

The balance is wholesale book (largely builder financing) 

accounting for 15-16%. Between FY10-16, under Mr. V. 

Vaidyanathan, total AUM grew at a CAGR of 61% (from Rs 

9,347 mn to Rs 1,60,408 mn) while retail AUM grew at a 

staggering 129% CAGR during the same period. 

MSME Segment to drive growth 

The MSME (micro, small and medium enterprises) sector in 

India contributes 37.5% to gross domestic product (GDP) 

and provides employment to 111.4 million persons while 

accounts for more than 40% of India’s exports. This sector 

has often been ignored by the conventional banking 

industry and been considered risky and distressed. 

11


STOCK PICKS 

However, contrary to the general belief, the MSME sector 

has exhibited strong growth story for both financial year 

2013-14 and 2014-15. This is in stark contrast to the 

5800 odd listed players which have struggled to keep 

their business afloat and honour interest payments. 

According to RBI’s latest available data for non-Govt. nonfinancial 

Pvt. Ltd. Companies, growth rates in sales, 

operating profit and profit after tax have grown at 12%, 

16.6% and 12.3% respectively for FY15. While operating 

profit margin as well as the return on equity both 

improved from 8.7% in FY14 to 9.1% in FY15. There is 

ample scope of quality credit disbursement in the 

segment. CAFL, with its relatively small and growing loan 

book, operating in a niche segment with a differentiated 

and a technologically driven model is expected to 

continue to ride the growth story. 

Change in borrowing mix to lift margins further 

Net interest margins (NIM) improved from 5.5% in FY15 

to 6.7% in FY16 led by strong growth in high yielding 

consumer durable and two-wheeler loans. In a downward 

interest rate cycle, these two segments will aid margins 

since both follows fixed interest regime. CAFL earns 

~16% yield on advances while cost of funds averages 

~9% mark. The strategy of the management to reduce 

bank borrowings and increase low-cost non-convertible 

debentures or NCDs/commercial papers or CPs will 

reduce cost of funds for the company and aid margins. 

CAFL has long-term credit rating of AA+ for bank facilities, 

NCDs and subordinated debt thus helping to raise funds 

at competitive rates. The company still primarily relies on 

bank loans as main source of funds (~66%) followed by 

NCD (14%). However, the bank borrowings have come 

down from 75% in FY14 to 66% as of FY16. Besides, 

CAFL also has a well-matched asset-liablity management 

thus protecting the NIMs further. 

Strong Asset Quality 

Despite a strong growth in AUM, the company never 

compromised on asset quality. CAFL follows prudent risk 

management practices across diversified products lines 

thus ensuring lower delinquencies over the years. The 

company has a differentiated appraisal methodology 

which also takes into account cash flows of client, credit 

bureau and reference checks and also softer aspects like 

age, whether self employed or salaried, type of industry 

one works for, number of dependents, marital status, has 

a credit card or not, has a home loan or not etc while 

deciding on loan sanctions. As a result the company has a 

high loan rejection rate and at the same time enjoys 

healthy asset quality. During Q2FY16, the company has 

also moved to 150 days classification for NPAs. The asset 

quality has improved substantially over the last 6 years 

from gross NPA of 5.3% and net NPA of 3.8% at the end 

of FY10 to 1.07% Gross NPA and 0.55% net NPA as on 

FY16. 

Superior Financial Performance 

CAFL has depicted strong financial performance over the 

years with net interest income (NII) registering a CAGR of 

48% between FY13 and FY16 while operating profit and 

PAT also clocking CAGR of 88% and 38% during the same 

period respectively. The notable improvement in cost to 

income ratio from 78% in FY13 to 51% in FY16 has 

contributed to increase in bottomline. What’s notable is 

that the provisions have also increased at a CAGR of 

121% between that same period. Higher fee income 

(CAGR of 62%) has also helped in posting superior 

financial performance. The return on assets (ROA) has 

improved from 0.9% in FY13 to 1.2% as of FY16 while 

return on networth (RONW) also improved from 6.6% in 

FY13 to 9.8% in FY16. CFL also has a strong capital 

adequacy ratio at 19.81% as of FY16. The cost to income 

ratio for the company was higher in earlier periods on 

account of higher spending on technology. However, with 

the spending mostly over, the return ratios are expected to 

improve further. 

Key Risks 

• Slowdown in credit offtake 

• Higher competition in LAP segment 

• Increase in interest rates 

Valuation 

Capital First Limited (CAFL), erstwhile Future Capital 

Holdings is one of the fastest growing NBFCs in the 

country which has successfully created a niche position in 

MSME financing, a huge potential market but largely 

underpenetrated. The MSME (micro, small and medium 

enterprises) sector in India contributes 37.5% to gross 

domestic product (GDP) and provides employment to 

111.4 million persons while accounts for more than 40% 

of India’s exports. This segment is relatively untapped or 

neglected by the conventional lending institutions and 

thus provides a huge opportunity for CAFL. Besides, the 

improved financial performance by the MSME players 

improves their ability to service loans contrary to the listed 

players. Moreover, the stringent risk management practices 

adopted by CAFL management further help it to keep 

delinquencies low thus the reason for sound asset quality. 

The company depicted strong growth in AUM, NII and PAT 

and not compromising on asset quality and maintaining 

stringent provisioning norms. The cost to income ratio for 

CAFL was higher in earlier periods on account of higher 

spending on technology. However, with the spending mostly 

over, the return ratios are expected to improve further. 

Besides, the change in borrowing mix to reduce high cost 

bank borrowings and focus on fixed loan segments will 

improve margins from here on. At the CMP of Rs 557, the 

scrip trades at P/BV of 2.34x FY18E BV and investors are 

advised to BUY for a target of Rs 650. 

12


Aarti Industries Ltd. 

CMP: Rs 520 




NSE Code 

AARTIIND 


ARTO 

ISIN 

INE769A01020 



52-wk Hi/Lo (Rs.) 587 / 315.2 



Book Value 121.6 

190 

170 

150 

130 

110 

90 

70 

50 

Jun-15 

Jul-15 

Aug-15 

Sep-15 

AARTIIND vs. Nifty 

Oct-15 

Nov-15 

Dec-15 



Net Sales 2908.0 2779.6 3305.0 3817.2 

Growth (%) 10.5 (4.4) 18.9 15.5 

EBITDA 465.7 572.3 687.4 790.2 

EBITDA Margin (%) 16.0 20.6 20.8 20.7 

Net profit 203.2 256.9 317.3 374.1 

Net Profit Margin (%) 7.0 9.2 9.6 9.8 

EPS (Rs) 23.2 30.8 38.1 44.9 

Jan-16 

Feb-16 

Mar-16 

Consensus Estimate: Bloomberg, Ashika Research 

Apr-16 

May-16 

Volume('000)RHS AARTIIND Nifty 

Others 

29.5 

DII 

12.4 

FII 

3.3 

Promoters 

54.8 

900 

800 

700 

600 

500 

400 

300 

200 

100 

0 

Company Overview 

Aarti Industries Ltd (AIL) is one of the largest producers of 

Benzene-based basic and intermediate chemicals in India 

and manufactures 125 products with chemistry of 

benzene, aniline, sulphuric acid, toluene and methanol. AIL 

is one of the leading global suppliers of dyes, pigments, 

agrochemicals, pharmaceuticals and rubber chemicals. The 

company has three reportable segments - Speciality 

Chemicals, Pharmaceuticals and Home & Personal Care 

Chemicals. Aarti has 16 manufacturing units spread across 

Gujarat & Maharashtra and a strong Research & 

Development with sophisticated instruments & pool of 

scientists. Aarti has customers spread across the globe in 

60 countries with major presence in USA, Europe, Japan & 

India. 


Capacity Expansion to boost growth 

Over the next three years Aarti is undertaking a capex of 

~Rs 500 crore to expand capacities across benzene, 

toluene and ethylene, and nitro toluene based value 

chains. Ongoing expansion projects of the company that 

are likely to be commenced in FY17 are Calcium Chloride 

Unit at Jhagadia, Ethylation Facility at Dahej, Nitration Unit 

at Jhagadia (NitroToulene & Downstreams) and NCB 

Expansion at Vapi. These capacities are planned to 

capitalize on opportunities emerging from growing enduser 

markets, capacity shut downs in developed markets 

and reduced global supplies from China and firm off-take 

commitments from global agrochemical majors for 

exclusive supply. With the help of these enhanced 

capacities and adding several value added products in its 

portfolio, it is expected that in the coming years both 

topline and bottomline of the company will improve. Apart 

from this, Aarti is also in the process of setting up a multi 

purpose specialty chemicals complex at Jhagadia to 

manufacture a range of high end polymers and 

engineering plastics that are used in the automobile 

industry. This project will add value growth from FY18. 

Demerger plan 

Pharma and personal care ingredient manufacturing are 

non core to Aarti’s specialty chemicals operation and are 

relatively low efficient/profitable operations. Hence, in 

order to focus more on value added specialty chemicals, 

Aarti is likely to demerge these businesses which will 

unlock value. Previously it was expected that the demerger 

13


STOCK PICKS 

plan will be executed in FY17 but now demerger plan has 

been postponed due to certain financial parameters. RoCE 

of Pharma and home and personal care segment are still 

low and it will be difficult to sustain on standalone basis. 

It is expected that the demerger will happen in one or 

two years time as the company want to focus on its core 

business and when it will happen it will unlock value for 

its shareholders and will be a long term trigger for the 

company. 

Benefit from Chinese slowdown 

Aarti has established itself as one of the lowest cost 

manufacturers of benzene derivatives globally, which can 

be evidenced from the fact that 10% of its exports are 

towards China which is the lowest cost base of the world. 

Aarti is well set to make the most of the opportunity of a 

slowdown in Chinese exports which is led by plant shut 

downs due to a stricter environment policy from 1st 

January 2015 and rising manufacturing cost led by 

enhanced compliance requirements leading to additional 

investments into Effluent Treatment Plant (ETP). 

Additionally, its on going and timely capacity expansion 

will help it to use the enhanced export opportunity. 

Leading global player 

Aarti is one of the largest producers of benzene 

derivatives in India as this is the prime focused specialty 

chemicals segment of the company and overtime the 

co m p a n y h a s e m e r g e d a s o n e o f t h e l e a d i n g 

manufacturers globally. Its global market share in this 

segment is 25-40% in various products. In speciality 

chemicals, Agro chemicals leading target industry (30%) 

followed by polymers (27%), pigments (19%), dyes (5%). 

Globally, Aarti has the 3rd largest capacity in chlorination, 

2nd largest in ammonolysis and hydrogenation, and 4th 

largest in nitration. Aarti’s continued focus on process 

development, plant automation/upgradation, and quality 

standards made it the lowest cost product of benzene 

derivatives in the world. Additionally, AIL enjoys cost 

competitiveness through backward and forward 

integration and commercial viability of byproducts. All 

these help the company to maintain its global leadership 

position and also help in building/maintaining a strong 

base of marquee clients across end user industries. 

Focus on high margin products to drive value growth 

AIL’s continuous focus is to move up the value chain for 

high margin products. For this AIL is foraying in to toluene 

chemistry by exhibiting nitro toluene & derivatives and 

Ethylation unit at Dahej SEZ. The proposed products are 

the high margin product which will help AIL to improve 

its margin. Moreover with these proposed unit AIL will 

manufacture more value added products which will place 

the company across the value chain of the product under 

speciality chemical. Aarti’s margins could further look up 

particularly due to supplies to its existing network of 

customers. With increasing focus on downstream products, 

the revenue mix is likely to improve towards more value 

added products that will lead to value growth for Aarti. 

Key Risks 

• AIL’s passes on the cost changes with one quarter lag 

to customers, any increase in Benzene prices may 

lead to lower earnings temporarily. 

• Environment regulations in India are becoming 

stringent and there are risks of further tightening of 

these laws. 

• High shale gas prices in US may imply long-term risks 

of reducing profits due to higher production of 

ethylene-based products. 

Valuation 

Aarti Industries Ltd (AIL) is one of the largest producers of 

Benzene-based basic and intermediate chemicals in India 

and global leader in various products. The ongoing 

capacity expansion taken up by the company under 

different segment will help the company to improve its 

product portfolio and will also help the company to foray 

into high margin value added products. The management 

has reiterated its volume led revenues CAGR guidance of 

15%-20% over next 3-4 years while the PAT CAGR is 

expected to be in the range of 20%-24% over the same 

period. The company has guided for capex plans of Rs. 

450-500cr in FY17E for capacity augmentation. The 

demerger plan of Pharma and personal care division has 

been currently postponed but as and when it will happen 

it will be a long term trigger for the company as the 

management of the company want to focus only on the 

core business. Chinese slowdown in supply of speciality 

chemical is also positive for AIL as it has one of the low 

cost production facility and is better placed to make the 

most of the opportunity. Going ahead global leadership 

position, capacity expansion plan, going into high margin 

segment and china slowdown will the major triggers for 

the company. Further as and when the demerger plan will 

be executed, it will further rerate the company. At current 

price, the stock is trading at P/E multiple of 11.58x of 

FY18E EPS. We advise our investors to BUY the stock with 

target price of Rs. 620, valuing at P/E multiple of 13.8x 

FY18E EPS. 

14


Steel Strips Wheels Ltd. 

CMP: Rs 456 




NSE Code 

SSWL 


SSW 

ISIN 

INE802C01017 



52-wk Hi/Lo (Rs.) 467.7 / 272 



Book Value (Rs) 271.3 

180 

160 

140 

120 

100 

80 

60 

40 

20 

0 

Jun-15 

Jul-15 

Aug-15 

Sep-15 

Oct-15 



Net Sales 1,152.7 1,181.9 1,329.6 1,500.9 

Growth (%) 8.4% 2.5% 12.5% 12.9% 

EBITDA 107.6 145.3 163.5 193.6 

EBITDA Margin (%) 9.3% 12.3% 12.3% 12.9% 

Net profit 39.4 61.2 70.5 84.0 

Net Profit Margin (%) 3.4% 5.2% 5.30% 5.60% 

EPS (Rs) 25.9 40.1 46.2 55.1 

Source: Ashika Research & Capitaline 

SSWL vs. Nifty 

Nov-15 

Dec-15 

Jan-16 

Feb-16 

Mar-16 

Apr-16 

May-16 

Volume('000)RHS SSWL Nifty 

Others 

40.3 

FII 

0.2 

DII 

0.4 

Promoters 

59.2 

500 

450 

400 

350 

300 

250 

200 

150 

100 

50 

0 

Company overview 

Steel Strips Wheels ltd. (SSWL) is a Chandigarh based 

company, engaged in designing, manufacturing and 

marketing of Steel Wheel Rims for Passenger cars, Utility 

vehicles, 2/ 3 wheelers, Tractors, Light/ Heavy commercial 

vehicles and OTRs (over the roads). Company has 

manufacturing capacity of 16.6 million units and 

manufacturing plants are strategically located at Punjab 

(Dappar), Tamil Nadu (Oragadam, Chennai) and Jharkhand 

(Jamshedpur). Some strategic investors invest in SSWL 

including Tata Steel Ltd, India with 8.26% stake followed 

by Sumitomo Metal Industries, Japan 5.59%, GS Global, 

South Korea 2.48% and Kalink, South Korea- 1.30%. 


Healthy market share in steel wheel segment 

SSWL holds strong market share in domestic steel wheel 

market with 50% share in passenger car segment, 40% in 

commercial vehicle, 38% in tractor and 70% in OTR. In 

total sales volume of 13.17 million units during FY16, 

passenger car segment accounts 61.6% of volume 

followed by two/three wheeler 21.6%, tractor 6.5% and 

truck/OTR 10.2%. Thus, passenger car segment is the 

largest contributor of sales volume and company holds 

healthy market share in the segment. Further, the 

expectation is that the sales of passenger car would get 

traction from good monsoon across the country and will be 

benefited from seventh pay commission. Gradual pick up 

in industrial activities would also lead to higher 

commercial vehicle sales which had shown muted growth 

in last few years amid slowdown in domestic economic 

activities. During FY16, company had posted 6% volume 

growth as compared with FY15, though the volume growth 

was robust during Q4FY16 (up by 11% yoy), owing to 

higher export order and strong momentum in auto sales 

led by higher commercial vehicle & tractor sales. Steady 

growth in auto sector on the backdrop of above normal 

monsoon, rising disposable income, benefits of seventh 

pay commission and industrial activities pick up would 

drive the growth for SSWL. 

Expansion to boost growth 

To boost growth, company has always done expansion. 

During 2010, SSWL has total installed capacity of 10 

million wheels, which company has increased to 16.6 

million and has planned to expand it further. In order to 

enter into growing alloy wheel market, SSWL has planned 

to set up manufacturing unit in Gujarat for an investment 

of USD 50 million. Company has tied up with Korea based 

alloy wheel company Kalink to set up an alloy wheel plant 

15


STOCK PICKS 

in Gujarat with an initial manufacturing capacity of 1.5 

million alloy wheel rims. Kalink Co. has invested USD 

2million by subscribing equity shares in SSWL at Rs 640/- 

per shares through preferential allotment basis. Currently, 

alloy wheel market is growing at double digit CAGR and 

has 24% market share in passenger vehicle segment. 

Management expects that alloy wheel market share would 

increase to 35% by FY20. Increasing demand for alloy 

wheels led the shift happening from Steel Wheel Rims to 

Alloy wheels across all variants of passenger vehicle. 

During the year, SSWL has set up specially designed Hot 

Rolling Mill in Jharkhand, which has resulted in 

substantial savings in raw material purchase cost as SSWL 

used to source it from outside. Besides, company has also 

set up modern high tech steel process unit with monthly 

processing capacity of 20,000 tonne steel. Apart from 

captive consumption it will be undertaking steel 

processing for companies like Tata Steel ltd. and JSW 

Steel ltd. SSWL is likely to commence commercial 

manufacturing of alloy wheel by June 2017 & this will 

boost revenue & margin growth in coming years. 

Strong client base 

SSWL is enjoying strong relationship with most of the 

passenger vehicle OEMs in India and with the launch of 

alloy wheels it will be an additional offering to existing 

relationship. Company has a proven track record and its 

products are well accepted by OEM’s across the globe 

and SSWL has demonstrated flawless quality history. 

Company caters to marquee clients including TATA, Ashok 

Leyland, Daimler, MAN, VE Commercial vehicles, Swaraj 

Mazda, JCB, Mahindra Earthmaster, Escorts, L&T, Beml, 

Putzmeister, John Deere, Eicher, ACE, Suzuki, Piaggio, 

Honda, Scooters India ltd, hmt, Hyundai, Nissan, BMW, 

Renault, Mahindra, Jaguar, Land Rover, Volkswagen, Maruti 

Suzuki, Mahindra, Renault Nissan, Ssangyong and Dacia. 

SSWL is also a supplier to global OEMs & delivers to 

countries like Japan, Germany, UK, Brazil, Italy etc. with 

export contributing about 12% of total revenue. Strong 

client base ensures sustainable revenue growth for the 

company. 

Improving utilization rate 

Company has witnessed higher level of utilization across 

all facilities in last few years. The average utilization rate 

has improved from 56% in FY14 to 79% during FY16 led 

by higher utilization in CV and two/three wheeler 

segment. The savings utilization from is substantial in 

case of Jamshedpur facility from 37% in FY14 to 82% 

which is specifically for CV wheels. Also, revenue 

contribution from CV sales has increased from 15% in 

FY14 to 35% in FY16. Such increase in the sales of high 

margin products like CV wheels & tractor wheels has 

boosted the EBITDA margin which has improved from 

9.7% during FY14 to 12.3% in FY16. Company also enjoys 

strong pricing power, thus any increase & decline in raw 

material prices (steel) can easily be passed on the OEMs. 

Increasing capacity utilization rate on the backdrop of 

improving demand for cars/commercial vehicles would lead 

EBITDA margin expansion. 

Key Risk 

• Company is entering into new product segment i.e. 

alloy wheel which manufacturing is different from 

steel wheel rims, thus any delay in commercialization 

of the plant could derail the company’s long term 

growth plan. 

• Company derives around 12% of revenue from 

export, thus any volatility in currency and political 

instability in overseas markets could pose risk to 

SSWL’s financial metrics. 

Valuation 

SSWL is the leading steel wheel rim manufacturer in India 

c a t e r i n g t o d o m e s t i c a n d g l o b a l O E M s . I t h a s 

manufacturing capacity of 16.6 million units which 

company intends to increase it by 1.5 million by FY18. 

Though the new capacity addition will be alloy wheel rim 

which will be a new product for the company. Increasing 

demand for alloy wheel will lead the company to set up 

separate alloy wheel plant at strategic location in Gujarat. 

Passenger vehicle segment accounts 61% of its sales 

volume and there are near term triggers for passenger 

vehicle sector such as expectation of good monsoon and 

higher disposable income on account of seventh pay 

commission benefit. Further, company has witnessed 

improvement in utilization rate mainly in CV segment, 

which indicates recovery in domestic macros. On financial 

front, company has shown steady performance with 5% 

revenue CAGR in past 3 years. However, EBITDA and PAT 

had outpaced the revenue growth by growing at a CAGR of 

18% and 58% respectively. SSWL has maintained healthy 

balance sheet with gearing ratio at 1.3x during FY16, 

supported by strong operating cash flows. Given its 

healthy market share, ability to scale its operation and 

strong client base, we are optimistic about company’s long 

term growth story. Improving margin with better utilization, 

improving ROE and ROCE, new capacity expansion and 

market leader on the steel wheel segment will ensure 

steady wealth creation for investors. Hence, we 

recommend our investors to BUY the scrip for a target 

price of Rs 578 from 12-15 months investment 

perspective. Currently, the scrip is valued at P/E multiple 

of 8.2x on its FY18E EPS. 

16


FY17 FY18 FY17 FY18 FY16 P/O FY16 FY16 

1 ACC 1598.4 30015.9 32.2 23.0 3.6 7.1 14.0 17.0 54.3 1.1 

2 Adani Ports 202.9 42019.6 15.1 14.1 3.2 23.9 17.4 1.1 9.8 0.5 

3 Ambuja Cements 251.9 39092.3 31.3 24.3 3.8 7.9 13.2 2.8 53.8 1.1 

4 Apollo Hospitals 1319.2 18352.7 44.0 33.6 5.3 10.0 13.4 6.0 25.2 0.5 

5 Ashok Leyland 99.0 28159.9 21.1 N/A 5.6 22.5 N/A 1.0 25.3 1.0 

6 Asian Paints 980.2 94020.6 45.1 38.4 16.8 33.4 33.6 7.5 41.7 0.8 

7 Aurobindo Pharma 730.1 42723.2 17.0 14.3 6.1 32.5 26.9 2.5 7.4 0.3 

8 Axis Bank 514.0 122679.4 12.1 8.6 2.3 17.0 21.3 5.0 14.3 1.0 

9 Bajaj Auto 2624.4 75941.5 18.5 16.5 5.8 31.3 29.1 50.0 57.3 1.9 

10 Bajaj Finserv 2196.1 34946.9 15.8 12.9 2.6 15.1 15.2 1.8 1.5 0.1 

11 Bajaj Holdings 1585.4 17643.9 N/A N/A 1.2 15.8 N/A 32.5 17.8 2.1 

12 Bank of Baroda 154.4 35576.2 N/A N/A 0.8 -12.0 N/A 0.0 N/A 0.0 

13 Bank of India 99.9 9331.0 N/A N/A 0.2 -18.8 N/A 0.0 N/A 0.0 

14 Bharat Forge 740.6 17239.6 22.3 17.9 4.8 18.6 20.7 7.5 22.8 1.0 

15 Bharti Airtel 357.1 142747.2 25.6 20.9 2.2 8.6 9.1 2.2 17.1 N/A 

16 Bharti Infratel 338.6 64211.7 23.4 20.4 3.5 13.5 17.3 3.0 23.9 0.9 

17 BHEL 119.0 29114.2 55.8 16.8 0.9 -2.7 4.9 1.2 19.5 1.0 

18 Bosch 21523.4 67581.1 N/A N/A 8.2 15.9 N/A N/A N/A N/A 

19 BPCL 1051.7 76046.8 10.4 9.5 2.7 31.6 22.3 22.5 33.8 2.1 

20 Britannia Industries 2748.2 32971.2 34.8 29.1 18.6 53.5 42.1 16.0 27.9 0.6 

21 Cairn India 134.1 25141.9 15.6 11.5 0.5 -17.5 4.1 3.0 N/A 2.2 

22 Canara Bank 215.1 11679.7 N/A N/A 0.3 9.1 N/A 10.5 18.9 4.9 

23 Cipla 497.4 39965.5 22.8 18.6 3.4 13.3 15.2 2.0 13.6 0.4 

24 Coal India 313.3 197891.7 12.7 11.5 5.8 38.4 45.4 27.4 121.2 8.7 

25 Colgate-Palmolive 898.3 24431.1 N/A N/A 24.0 64.4 N/A 10.0 47.2 1.1 

26 Container Corp. 1381.3 26930.8 28.7 24.2 3.4 10.1 12.2 13.4 24.8 1.0 

27 Cummins India 810.7 22472.6 N/A N/A 6.7 23.6 N/A 14.0 49.4 1.7 

28 Dabur India 313.0 55061.1 38.2 33.3 13.2 33.3 30.4 2.3 31.6 0.7 

29 Divis Lab. 1107.2 29392.7 23.2 19.4 6.9 28.6 28.2 10.0 31.2 0.9 

30 Dr Reddy’s Lab. 3273.1 55818.7 23.2 19.4 4.4 17.6 18.1 20.0 14.6 0.6 

31 Eicher Motors 19166.4 52058.1 31.8 24.9 15.0 31.3 37.0 100.0 25.1 0.5 

32 Exide Industries 166.8 14178.0 17.9 16.0 3.3 17.5 17.0 2.4 28.6 1.4 

33 Federal Bank 56.0 9621.8 N/A N/A 1.2 6.2 N/A 1.1 17.8 2.0 

34 GAIL 376.9 47808.9 14.0 11.1 1.4 6.5 10.9 6.0 24.1 1.6 

35 GlaxoSmith Consumer 5876.5 24713.7 N/A N/A 10.1 30.1 N/A 55.0 39.6 N/A 

36 Glaxosmithk Pharma. 3503.9 29678.7 52.7 49.0 17.5 21.4 34.6 N/A N/A N/A 

37 Glenmark Pharma. 784.7 22139.5 16.3 14.7 5.2 19.3 23.4 2.0 11.4 0.3 

38 Godrej Consumer 1528.8 52060.8 38.3 33.0 10.2 23.8 23.2 5.8 17.5 0.4 

39 Grasim Industries 4459.0 41623.7 13.5 10.8 1.6 9.6 12.6 18.0 9.5 0.4 

40 HCL Technologies 713.2 100615.1 12.8 11.3 3.6 28.8 25.6 22.0 42.2 N/A 

41 HDFC 1228.9 194284.8 16.1 13.4 3.8 21.2 21.9 17.0 26.4 N/A 

42 HDFC Bank 1167.0 295441.6 20.9 N/A 4.0 18.6 N/A 9.5 18.8 0.8 

43 Hero MotoCorp 3020.4 60313.6 N/A N/A 7.6 42.7 N/A 60.0 50.7 2.0 

44 Hindalco Industries 118.1 24377.2 13.1 9.2 0.6 0.7 6.5 1.0 24.2 0.8 

45 Hindustan Unilever 887.8 192130.9 40.8 35.2 48.4 102.1 132.4 16.0 84.8 1.8 

46 HPCL 993.8 33651.1 8.4 8.3 1.9 31.5 19.3 24.5 55.4 2.5 

47 ICICI Bank 233.2 135621.5 10.6 8.1 1.4 11.4 15.5 5.0 28.6 2.1 

17


VALUATION AT A GLANCE 

48 Idea Cellular 104.4 37574.4 21.3 18.5 1.5 12.6 7.3 0.6 6.8 N/A 

49 Indiabulls Housing Fin. 665.4 28038.1 9.7 8.0 2.6 27.1 26.6 45.0 80.9 6.8 

50 Indian Oil Corporation 435.0 105603.8 8.4 7.7 1.4 15.5 15.4 6.6 34.2 1.5 

51 IndusInd Bank 1085.9 64700.8 N/A N/A 3.7 N/A N/A 4.5 12.8 N/A 

52 Infosys 1159.2 266250.3 17.5 15.4 4.3 23.2 23.7 24.3 40.7 N/A 

53 ITC 368.5 296539.6 26.6 23.7 8.7 30.2 30.6 6.5 69.0 1.8 

54 JSW Steel 1426.5 34481.6 12.8 10.8 1.7 -3.4 12.5 11.0 15.1 0.8 

55 Kotak Mahindra Bank 743.3 136405.3 29.7 23.5 4.1 12.5 15.6 0.5 2.7 0.1 

56 Larsen & Toubro 1474.1 137382.6 24.7 20.5 3.1 12.0 13.0 16.3 31.7 1.1 

57 LIC Housing Finance 497.7 25114.6 10.8 8.4 2.7 19.5 N/A 5.0 18.1 1.0 

58 Lupin 1544.7 69641.2 23.6 20.1 6.3 22.9 22.7 7.5 14.0 0.5 

59 M & M Financial 310.6 17663.0 16.6 13.0 2.7 12.4 17.1 4.0 29.5 1.3 

60 Mahindra & Mahindra 1408.6 87487.1 19.1 15.3 2.9 11.8 14.0 12.0 23.8 0.9 

61 Marico 256.4 33080.0 38.9 33.2 15.8 37.0 36.6 1.3 28.1 0.5 

62 Maruti Suzuki 4078.7 123209.4 20.6 17.5 4.4 18.0 20.3 25.0 19.8 0.6 

63 Motherson Sumi 278.1 36785.5 21.9 17.2 8.7 33.7 34.5 2.0 30.7 0.7 

64 MRF 32941.9 13971.1 N/A N/A 2.0 22.2 N/A 50.0 2.3 0.2 

65 NMDC 91.6 36316.8 12.9 11.9 1.2 9.5 9.2 8.6 53.4 9.3 

66 NTPC 148.0 122032.9 12.4 11.0 1.4 11.9 11.1 2.5 20.6 1.7 

67 Oil India 346.1 20802.3 9.8 8.1 0.9 9.1 10.9 20.0 46.1 5.8 

68 ONGC 211.4 180820.3 10.9 8.8 1.0 7.7 10.1 9.5 44.3 4.5 

69 Oracle Financial Serv. 3425.0 29076.2 21.4 18.3 7.9 32.7 31.9 665.0 471.9 19.4 

70 Petronet LNG 284.3 21322.5 N/A N/A 3.3 15.3 N/A 2.0 17.0 0.7 

71 Power Finance Corp. 163.7 21602.5 N/A N/A 0.6 18.1 N/A 9.1 20.0 5.6 

72 Power Grid Corp. 155.5 81325.1 10.6 9.1 1.9 14.8 17.4 2.0 22.2 1.3 

73 Punjab National Bank 104.3 20480.3 N/A N/A 0.5 -8.8 N/A 0.0 N/A 0.0 

74 Reliance Capital 386.3 9757.9 9.1 7.9 0.7 8.0 7.4 9.0 22.7 2.3 

75 Reliance Comm. 48.3 12021.8 17.6 12.7 0.3 1.8 2.7 0.0 0.0 N/A 

76 Reliance Industries 957.8 310561.3 11.0 9.4 1.3 12.0 11.4 10.0 12.5 1.0 

77 Reliance Infrastructure 523.1 13755.7 6.2 6.0 0.5 7.2 7.3 8.0 11.7 1.5 

78 Rural Electrification 166.1 16396.8 N/A N/A 0.6 21.1 N/A 10.7 19.8 6.4 

79 Shriram Transport Fin. 1153.0 26158.4 16.0 12.6 2.6 12.2 16.1 10.0 22.1 0.9 

80 Siemens 1293.4 46060.6 64.7 52.0 9.0 N/A 14.1 6.0 30.1 0.5 

81 State Bank of India 215.9 167598.4 11.8 9.0 0.9 6.6 9.4 2.6 16.5 N/A 

82 Steel Authority of India 42.9 17718.1 691.9 13.6 0.4 -9.5 3.3 2.0 38.3 4.7 

83 Sun Pharma. 765.1 184136.2 26.0 21.6 5.9 16.5 20.7 3.0 15.9 0.4 

84 Sundaram Finance 1466.0 16287.8 N/A N/A 3.9 14.7 N/A 10.5 20.3 0.7 

85 Tata Chemicals 422.4 10759.6 10.8 9.8 1.7 13.2 15.6 10.0 53.4 2.4 

86 TCS 2464.0 485503.6 18.3 16.4 7.4 41.9 30.9 43.5 35.3 1.8 

87 Tata Global 127.9 8069.0 18.6 16.4 1.4 5.8 8.1 2.3 57.3 1.8 

88 Tata Motors 440.4 141773.7 9.4 8.1 1.9 16.1 17.7 0.0 0.0 0.0 

89 Tata Power 72.0 19473.3 14.1 11.7 1.4 6.5 10.2 1.3 783.1 1.8 

90 Tata Steel 311.5 30253.4 19.8 10.2 1.0 -9.8 9.1 8.0 N/A N/A 

91 Tech Mahindra 501.0 48637.4 13.6 11.9 3.4 23.4 21.1 6.0 21.9 N/A 

92 Titan Company 389.9 34614.8 40.6 33.6 9.9 21.0 23.2 2.2 28.3 0.6 

93 UltraTech Cement 3400.8 93330.8 29.8 22.7 4.4 11.4 15.4 9.5 11.4 0.3 

94 United Breweries 732.7 19371.6 50.8 41.2 9.2 14.9 17.6 1.0 10.3 0.1 

95 United Spirits 2419.4 35159.9 63.1 42.1 19.7 79.1 32.3 0.0 0.0 0.0 

96 UPL 546.2 23408.2 14.5 12.4 3.4 20.5 20.6 5.0 16.5 0.9 

97 Vedanta 123.2 36510.2 12.0 7.4 0.8 -18.9 9.6 3.5 N/A 2.8 

98 Wipro 542.4 134011.5 14.1 12.7 2.9 20.3 18.8 6.0 16.6 N/A 

99 Yes Bank 1069.9 45042.6 N/A N/A 3.3 19.9 N/A 10.0 16.6 0.9 

100 Zee Entertainment 436.9 41962.0 33.7 27.3 10.0 22.7 23.4 2.3 24.5 0.5 

#N/A: Not Available 

Source: Bloomberg Consensus as on June 27, 2016 

18


FOREIGN 

DIRECT 

INVESTMENT 

Government Open Floodgates for FDI 

The Union Government has radically liberalized the 

Foreign Direct Investment (FDI) regime, with the objective 

of providing major impetus to employment and job 

creation in India. The decision was taken at a high-level 

meeting chaired by Prime Minister Narendra Modi. This is 

the second major reform after the last radical changes 

announced in November 2015. In November, the 

government eased norms for overseas investment in 15 

sectors. Now most of the sectors would be under 

automatic route, except a small negative list. The 

government will also soon bring out a small negative list 

of sectors that will spell out some caps and conditions 

attached to foreign investments. With these changes, 

India is now the most open economy in the world for FDI. 

India has been rated as number 1 FDI Investment 

Destination by several International Agencies. 

In last two years, Government has brought major FDI 

policy reforms in a number of sectors viz. Defence, 

Construction Development, Insurance, Pension Sector, 

Broadcasting Sector, Tea, Coffee, Rubber, Cardamom, Palm 

Oil Tree and Olive Oil Tree Plantations, Single Brand Retail 

Trading, Manufacturing Sector, Limited Liability 

Partnerships, Civil Aviation, Credit Information Companies, 

S a t e l l i t e s - e s t a b l i s h m e n t /o p e ration a n d A ss e t 

Reconstruction Companies. Measures undertaken by the 

Government have resulted in increased FDI inflows at US$ 

55.46 billion in financial year 2015-16, as against US$ 

36.04 billion during the financial year 2013-14. Net FDI 

inflows stood at $36 billion in FY16 compared with $32.6 

billion in FY15. This is the highest ever FDI inflow for a 

particular financial year. However, it is felt that the 

country has potential to attract far more foreign 

investment which can be achieved by further liberalizing 

and simplifying the FDI regime. 

In the second tranche of reforms of the country’s FDI 

rules in less than a year, the government has opened the 

floodgates for FDI by easing the terms for nine sectors, 

including civil aviation, pharmaceutical, defence, food 

products, single brand retail trading, animal husbandry, 

broadcasting carriage services, private security agencies 

and establishment of office, branding it as a gateway for 

job creation and Make in India. Accordingly the 

Government has decided to introduce a number of 

amendments in the FDI Policy. Changes introduced in the 

policy include increase in sectoral caps, bringing more 

activities under automatic route and easing of 

conditionalities for foreign investment. These amendments 

seek to further simplify the regulations governing FDI in 

the country and make India an attractive destination for 

foreign investors. 

Prime Minister Narendra Modi tweeted: “In two years, Govt. 

brings major FDI policy reforms in several key sectors. India 

now the most open economy in the world for FDI; most 

sectors under automatic approval route.” He added: “Today’s 

FDI reforms will give a boost to employment, job creation & 

benefit the economy.” 

Commerce and industry minister Nirmala Sitharaman, “The 

twin objective is to attract more foreign investments to 

promote India as a manufacturing hub and to create jobs”. 

Commerce and industry minister Nirmala Sitharaman, 

however, rejected assumptions that the government 

decided to announce so many FDI policy reforms in one 

go to divert public attention from RBI governor Raghuram 

Rajan’s decision to not continue at the central bank after 

his current tenure ends on September 4. The reforms are a 

result of months of deliberations among various 

departments and are not announced in a hurry to divert 

attention, she affirmed. 

C h a n d r a j i t B a n e r j e e C I I D i re c t o r G e n e r a l s a i d 

“Liberalisation of the FDI regulations reflects the 

government’s commitment to reforms and openness, and 

reassures investors that ease of doing business remains a 

high priority”. “Taken together, the FDI rules announced 

today will attract big new investments across key sectors 

s u c h a s fo o d p r o ce ss i n g , d e fe n c e p r o d u c t i o n , 

19


FOREIGN DIRECT INVESTMENT 

pharmaceuticals and civil aviation, among others, thereby 

adding to growth and employment”. 

FICCI Secretary General A Didar Singh said: “The Modi 

administration through these moves has once again 

highlighted that reform is a continuous process in order 

to capitalise on the potential India offers.” Singh felt that 

“there is no doubt that India today is the most preferred 

investment destination in the world. While the attraction 

of our market is known to all, there is now even more 

reason for global investors to commit themselves for 

making and doing business in India”. 

Assocham Secretary General D S Rawat said the decision 

will help in bringing investment and advanced technology 

into the defence sector, potentially leading to inflow of 

capital and setting up of entities of original equipment 

manufacturers (OEMs) and their suppliers through 

technology transfer. 

Girish Vanvari, head of the tax practice at KPMG in India, 

said the government’s move to ease the FDI regime was 

well-timed. “It actually opens up the country to the global 

world. The liberalization of limits in defence, brownfield 

pharma, airports, private security services, food processing 

etc can be game changers and be a huge source of 

employment creation. The move to prescribe a small 

negative list for FDI with most sectors under the automatic 

route is a big mindset shift”. 

Changes in FDI Policy 

Sector Proposed FDI regime Existing FDI regime Implication 

Defence 

Aviation 

Pharmaceuticals 

Food Products 

B r o a d c a s t , C a b l e 

networks, Direct to 

home (DTH), Headendin-the-sky 

(HITS) 

• Condition of access to ‘stateof-art’ 

technology scrapped 

for FDI beyond 49% under 

government approval route 

. 

• 100% FDI (up to 49% via 

automatic route) in scheduled 

passenger airlines by nonairline 

foreign investor; 

• for foreign airlines the cap 

remain at 49%; 

• 100% FDI under automatic 

route in brownfield airports. 

• 74% FDI through automatic 

route in brownfield pharma 

p r o j e c t , b e y o n d w h i c h 

g ove r n m e n t a p p rov a l i s 

required 

• 100% FDI under government 

approval route 

• 1 0 0 % F D I a l l owe d v i a 

automate route 

• 49% for foreign entities 

under automatic route 

and beyond 49% on 

government approval on 

a case-by-case basis 

subject to access to 

s t a t e - o f - t h e - a r t 

technology. . 

• 49% FDI (automatic) in 

scheduled passenger 

airlines;· 

• 74% FDI (automatic) in 

b row n f i e l d a i r p o r t s . 

. 

• 100% FDI in brownfield 

t h ro u g h gove r n m e n t 

approval 

• 51% in single brand 

retail and 100% FDI in 

the cash-and-carry or 

wholesale business were 

permitted via automate 

route 

· 100% FDI allowed, only 

4 9 % a l l o w e d v i a 

automate route 

• Making entry of foreign firms less 

complicated 

• Foreign defence firms can set up 

manufacturing facilities in India· 

Russian firm Kalashnikov looking for 

Indian partners; 

• Swedish firm Saab may raise stake 

from 49% in existing JV with a local 

partner. 

• Local airlines can attract more capital 

• A foreign airline can join hand with a 

foreign non-airline investor to 

completely buy into a domestic 

a i r l i n e . . 

• More private equity deals in pharma 

as new regulation clears uncertainty 

over FIPB approvals. 

• Easier merger & acquisitions of 

domestic companies by Big Pharma 

companies. 

• Easier for Wal-Mart, Marks and 

Spencer and Tesco, among others, to 

set up food manufacturing and foodonly 

retail bases in India. 

• More investment opportunities 

• No FDI expected till cross-media 

ownership cap removed 

Single Brand Retail 

Trading 

• Waiver of 30% local sourcing 

rule for 3 years and a relaxed 

sourcing regime for another 5 

years for entities having 

state-of-art technology 

• Entities having state-ofart 

technology can be 

exempted from sourcing 

rule 

• Players like Apple can start sourcing 

locally only from fourth year of 

setting up own retail outlets 

Source : DIPP, PIB, FIPB 

20


Defence 

In a major policy change, the Centre has made it simpler 

for foreign defence firms to invest in India. The Centre 

has removed the phrase “state-of-art” and replaced it with 

“modern technology” and “other reasons” in the amended 

version. In this regard, the following changes have interalia 

been brought in the FDI policy on this sector: 

i. Foreign investment beyond 49% has now been 

permitted through government approval route, in 

cases resulting in access to modern technology in 

the country or for other reasons to be recorded. The 

condition of access to ‘state-of-art’ technology in the 

country has been done away with. 

ii. FDI limit for defence sector has also been made 

applicable to Manufacturing of Small Arms and 

Ammunitions covered under Arms Act 1959. 

The government’s decision to allow defence FDI up to 

100% without the access to technology clause is 

expected to result in a surge of interest on part of the 

foreign vendors. Global players from Israel, Russia and 

European companies are expected to make a beeline to 

India for setting up their plants in India. Recently, while 

talking to Indian media in New Delhi, Jan Widerstrom, 

Saab India’s chairman, made it clear that the Swedish 

defence major is looking at more than 49% FDI in 

defence in the joint venture that will make Gripen in 

India. 

According to Puneet Kaura, MD and CEO, Samtel Avionics, 

“100% FDI in defence is the second good initiative in 

this quarter for the defence industry from government 

after announcement of Defence Procurement Policy. This 

shows the government’s commitment towards defence 

manufacturing within the country and creating more jobs 

for youth of the country”. 

Welcoming the government’s decision, Dhiraj Mathur, 

partner — aerospace and defence, PwC India, “Defence is 

extremely technology driven and OEMs invest huge sums 

of money generating technology and IP. The fact that 

there was no control permitted earlier was a major issue 

that was quoted for not investing in India. That obstacle 

has now been removed and coupled with the major 

simplification in the DPP, OEMs should respond positively 

and proactively to these path breaking reforms.” 

Amber Dubey, Partner & India head of Aerospace and 

Defence at KPMG says, “We may see its positive impact 

over the next 6-12 months. This decision will now bring in 

real investments provided the defence ministry also 

speeds up the procurement process and issues big ticket 

orders. “ “Easy terms like ‘modern technology’ and ‘other 

reasons’ will allow most leading defence companies to 

come in unhindered. All defence technologies are ‘modern’ 

by their nature.” “Defence OEMs can now focus on actual 

research, design and manufacturing than wasting time on 

legal and regulatory issues. If MoD rejigs its defence 

procurement policies and insists on platform level 

manufacturing in India, India could become a global 

aerospace and defence hub instead of just being a 

supplier of parts and assembler of imported kits,” he adds. 

Civil aviation 

i. The extant FDI policy on Airports permits 100% FDI 

under automatic route in Greenfield Projects and 

74% FDI in Brownfield Projects under automatic 

route. FDI beyond 74% for Brownfield Projects is 

under government route. 

ii. With a view to aid in modernization of the existing 

airports to establish a high standard and help to ease 

the pressure on the existing airports, it has been 

decided to permit 100% FDI under automatic route in 

Brownfield Airport projects. 

iii. As per the present FDI policy, foreign investment up 

to 49% is allowed under automatic route in 

Scheduled Air Transport Service/ Domestic Scheduled 

Passenger Airline and regional Air Transport Service. It 

has now been decided to raise this limit to 100%, 

with FDI up to 49% permitted under automatic route 

and FDI beyond 49% through Government approval. 

For NRIs, 100% FDI will continue to be allowed under 

automatic route. However, foreign airlines would 

continue to be allowed to invest in capital of Indian 

companies operating scheduled and non-scheduled 

air-transport services up to the limit of 49% of their 

paid up capital and subject to the laid down 

conditions in the existing policy. 

The Centre has decided to allow 100 per cent FDI in 

domestic airlines, but the catch is that foreign airlines can 

hold only up to 49 per cent in such ventures and the 

balance can be held by a foreign body that is not an 

airline. The decision means the likes of Emirates and Qatar 

Airways can tie up with sovereign, private equity or hedge 

21



funds to own and operate airlines in India — the airline 

can hold 49 per cent and the fund, 51 per cent. Earlier, 

the FDI both from airlines and foreign portfolio investors 

was restricted to 49 per cent. The existing conditions to 

get a licence to operate an airline in India will remain and 

will be vetted by the Directorate General of Civil Aviation. 

The foreign portfolio holding in Jet Airways is 4.61 per 

cent, SpiceJet, 3.03 per cent, and IndiGo, 6.1 per cent. At 

AirAsia India and Vistara, foreign airlines already own 49 

per cent; therefore additional investment can come only 

through foreign funds. Among domestic airlines, the Rahul 

Bhatia-controlled Interglobe Enterprises holds close to 

43% in IndiGo, Ajay Singh has a 60% stake in SpiceJet 

and Naresh Goyal holds 51% in Jet Airways. While Tata 

Sons holds 51% in both Vistara Airlines and AirAsia India, 

GoAir is wholly owned by the Wadia Group. 

Commenting on the new FDI policy for airlines, Amber 

Dubey, partner and India head of aerospace and defence 

at KPMG in India, said: “Though equity holding of foreign 

airlines is still limited to 49%, a foreign airline can join 

hands with its sovereign fund or private investors and set 

up a 100% foreign-owned airline in India.” “The likely 

increase in competition will bring down prices and 

enhance air penetration in India, both international and 

domestic. Indian carriers can now look for enhanced 

valuations in case they wish to raise funds or go for 

partial or complete divestment,” he added. 

Calling the new norms a “bit tricky”, Amrit Pandurangi, 

senior director, Deloitte Touche Tohmatsu India, said, 

“Foreign airline investment is restricted to 49% and FDI 

investment in this sector has been opened up to 100%, 

so if the beyond the portion of the equity is by a related 

entity, then that needs to be tested.” 

Pharmaceutical 

“The extant FDI policy on pharmaceutical sector provides 

for 100% FDI under automatic route in greenfield pharma 

and FDI up to 100% under government approval in 

brownfield pharma. With the objective of promoting the 

development of this sector, it has been decided to permit 

up to 74% FDI under automatic route in brownfield 

pharmaceuticals and government approval route beyond 

74% will continue” Govt. Official Statement. 

The decision has finally ended a six-year long uncertainty 

over regulations on mergers and acquisitions in the sector 

viewed as critical for supplies of affordable medicines. The 

pharma sector is expected to grow by 20 per cent on 

account of relaxed foreign direct investment (FDI) norms 

and a separate ministry to focus on the sunrise sector is 

on the anvil, Chemical and Fertiliser Minister Ananth Kumar 

said. There is huge potential in the sunrise sector and 

more investments would boost prospects of growth, he 

added. 

Currently one of the major issue among the pharma sector 

is drug price controls which has put a question mark on 

growth and profitability in the domestic market. At present, 

the pharma department is looking after the drug price 

regulation while various other facets like licencing is with 

Health Ministry, promotion of industry with Commerce 

Ministry and research with Science and Technology 

Ministry. In order to bring about all these things together 

under pharma ministry, proposal to the Cabinet Secretary 

as well as to the Prime Minister has been made which will 

simplify things for pharma sector. 

According to industry experts, approving FDI in the 

pharmaceutical industry will trigger mergers and 

acquisitions of domestic pharmaceutical companies, 

affecting domestic generic drug manufacturers. MNCs 

would try to enhance their market share in the Indian 

market by taking over smaller firms and targeting even 

bigger ones. Since the cost of manufacturing was cheaper 

in India, MNCs would capitalise on this situation. 

“The pharmaceutical sector has been witnessing 

heightened activity in recent years and this change should 

help in reducing the timelines for deals involving FDI of 

less than 74 per cent equity stake,” said Kalpesh Maroo, 

Partner at consultancy firm BMR & Associates LLP. 

DS Rawat, Secretary General of industry body Assocham 

said “FDI will favourably impact the Indian pharmaceutical 

industry by providing access to more capital/funds for 

investing in research and development, which in turn leads 

to the creation of more IPR”. 

Kiran Mazumdar Shaw, Chairperson and Managing Director 

of Biocon, said the move has been long awaited. 

“Automatic approval route for FDI in pharmaceutical is a 

welcome and long awaited policy announcement for a 

sector that is highly capital intensive,” she tweeted from 

her official Twitter handle. 

22


Food Products 

The government made it easier for Walmart, Marks and 

Spencer and Tesco, among others, to set up food 

manufacturing and food-only retail bases in India, by 

throwing the door wide open for multinational food 

companies and allowing 100 per cent FDI in the sector. 

The government statement said: “It has now been decided 

to permit 100 per cent FDI under government approval 

route for trading, including through e-commerce, in 

respect of food products manufactured or produced in 

India.” 

Until now, there were restrictions on multi-brand retailing, 

though 51 per cent in single brand retail and 100 per 

cent FDI in the cash-and-carry or wholesale business were 

permitted. 

The announcement follows an in-principle decision taken 

earlier in line with Finance Minister Arun Jaitley’s Budget 

proposal for 2016-17, wherein he announced that “100 

per cent FDI will be allowed through the FIPB route in 

marketing of food products produced and manufactured 

in India.” However, the policy guidelines being prepared 

by the Commerce Ministry hold the key to foreign 

companies’ entry into the sector at a time when the 

Centre plans to create 42 mega food parks across the 

country by 2019. The move would require infrastructure 

creation for processing, preservation and storage of food 

and to reduce wastage, especially of fruits and 

vegetables. 

Food Processing Minister Harsimrat Badal had said that 

FDI in the sector would “lead to creation of swadeshi 

(indigenous) infrastructure with videshi (foreign) money”. 

FDI in the food processing sector could cross USD 1 

billion in the next two years, helped by reforms in FDI 

space and streamlining of regulations by food safety 

regulator FSSAI, he added. 

Walmart’s India arm hailed the decision. “This far-reaching 

reform will benefit farmers, give an impetus to the food 

processing industry and create vast employment 

opportunities,” Rajneesh Kumar, Senior Vice-President & 

Head - Corporate Affairs, Walmart India, said. “We will 

study the policy document when the government finalises 

and issues it.” 

“Companies like Walmart and Tesco may look to embrace 

this new policy through a special purpose legal entity for 

trading in specific product category,” said Amarjeet Singh, 

partner–tax, KPMG in India. 

Lalit Malik, chief financial officer of Dabur India, said: “100 

per cent FDI is a welcome step and it will be beneficial for 

the industry. It will go a long way in expanding the e- 

commerce network in India.” 

Sreedhar Prasad, Partner – e-commerce, KPMG in India, 

said: “This initiative could bring in investments in food 

infrastructure in India by the global players and provides 

for a platform to them to sell those products manufactured 

in India. Further, this could enable some of the existing e- 

commerce players to attract FDI in the food category, 

where they are selling only products manufactured or 

produced in India.” 

Broadcasting Carriage Services 

FDI policy on Broadcasting carriage services has also been 

amended. New sectoral caps and entry routes are as under: 

Sector / Activity 

(1) Teleports (setting up of uplinking 

HUBs/Teleports) ~ 

(2) Direct to Home (DTH) ~ 

(3) Cable Networks (Multi System operators 

(MSOs) operating at National or State or 

District level and undertaking upgradation of 

networks towards digitalization and 

addressability) ~ 

(4) Mobile TV~ 

(5) Headend-in-the Sky Broadcasting Service 

(HITS) 

Cable Networks (Other MSOs not undertaking 

upgradation of networks towards digitalization 

and addressability and Local Cable Operators 

(LCOs)) 

New Cap 

and Route 

100% 

Automatic 

Infusion of fresh foreign investment, beyond 49% in a 

company not seeking license/permission from sectoral 

Ministry, resulting in change in the ownership pattern or 

transfer of stake by existing investor to new foreign 

investor, will require FIPB approval 

The move brings relief to the cable industry which has 

been struggling with the process of digitisation of cable 

TV. According to industry estimates, 61 million TV 

households come under phase 4 of digitisation of cable 

23



TV. Of this about 40%, that is nearly 25 million 

households, are already digitised through DTH services 

provided by Doordarshan and other players, including 

Tata Sky and Dish TV. So, around 40 million TV 

households are yet to go through the process of 

digitisation. While in case of phase 3, of the 40 million 

TV households which were to be digitised, 10 million 

homes are still left. According to a study by ratings 

agency Crisil, DTH operators need to invest around 

Rs.13,700 crore over the implementation period, while for 

multi-system operators (MSO), the capital expenditure 

required is about Rs. 8,300 crore. 

The government had raised the foreign investment limit 

for DTH, cable networks and HITS to 100% from 74% in 

November 2015, noting that only 49% FDI was allowed 

through the automatic route. For 100% FDI, companies 

were required to seek FIPB approval. There are seven DTH 

operators, two HITS operators, 700 multi-system operators 

(MSOs) and 60,000 cable operators in the country, 

according to the Telecom Regulatory Authority of India 

(Trai). In the new policy, the government also said that 

fresh foreign investment beyond 49% in a company 

which is not seeking licence or permission from the 

sectoral ministry will require FIPB approval if there is a 

change in the ownership pattern or a transfer of stake 

from existing investors to new foreign investors. 

The move will allow the cash-strapped cable industry to 

get foreign investors who will help MSOs expand in rural 

markets. Phase 4 market essentially includes rural India, 

for which fibre optics lines need to be laid down. In 

addition to implementation of new set-top boxes, some of 

the old boxes are required to be replaced by highdefinition 

set-top boxes. 

W h i l e c a b l e i n d u s t r y executive s we l co m e d t h e 

announcement, DTH firms and HITS operators said that it 

will provide no additional benefit and is premature. “The 

HITS industry has not even touched the previous 74% 

FDI limit, let alone 100% and automatic route,” said a 

senior official at Hinduja Ventures Ltd. 

Harit Nagpal, managing director and chief executive 

officer at Tata Sky Ltd, agreed, saying 100% FDI via the 

automatic route is meaningless and will not lead to an 

i n c r e a s e F D I i n f l o w s . H e e m p h a s i ze d t h a t t h e 

government’s 20% cap on cross-media holding is 

blocking the inflow of foreign funds. “Two years ago, Trai 

had recommended removal of this cap which has not 

been approved,” he said. 

Zee group’s DTH firm Dish TV India Ltd said that the 

government’s statement was not clear and that the 

company will wait for the detailed report before 

commenting on the changes. 

Single Brand Retail Trading 

Taking into account its Make in India initiative aimed at 

promoting manufacturing, the government sought to 

streamline the waiver from local sourcing norms under 

single-brand retail to companies with state-of-the-art and 

cutting edge technology. 

In single-brand retail, the government has tweaked the 

rules to exempt investors from the mandatory domestic 

sourcing of 30 per cent inputs, by extending it to all 

entities for three years and for a further five years for 

retailers selling products with ‘state-of-art’ and ‘cuttingedge’ 

technology. 

Under earlier rules for single brand retail, companies 

opening wholly-owned stores in India were required to 

comply with the local sourcing norms of 30% within five 

years of their first store opening. Meanwhile, the relaxation 

of the single brand retail policy in September 2012 has 

seen furniture retailer Ikea, fashion retailer Hennes and 

Mauritz AB (H&M), sportswear retailer Adidas AG and Swiss 

watch retailer Swatch SA to come to India through this 

route. 

Apple Inc. which were hopeful of getting a complete 

relaxation of sourcing norms on the grounds that they are 

a “state-of-the-art” and “cutting-edge technology” 

company, it is a change in the opposite direction. Amoung 

the other companies, Chinese smartphone maker LeEco 

and Xiaomi, is expected to benefitted from current FDI rule 

as they had applied for retail FDI and now hopeful that its 

application will get fast-track approval. 

“The government appears to have tightened the sourcing 

norms for single brand trading in products having “state of 

the art” and “cutting edge” technology. While the language 

is not too clear, it appears that the entities engaged in 

trading of such products would now need to comply with 

the sourcing norms over a period of 8 years (3 plus 5) as 

against an earlier norm where the government had the 

option to completely waiving the sourcing norms for such 

entities. If this is indeed the case, this move would 

24


adversely impact the fate of several companies especially 

in the technology space, that were hoping for a complete 

waiver on the grounds that the products proposed to be 

sold involved state of the art technology,” said Kalpesh 

Maroo, partner, BMR & Associates LLP. 

Animal Husbandry 

As per FDI Policy 2016, FDI in Animal Husbandry 

(including breeding of dogs), Pisciculture, Aquaculture and 

Apiculture is allowed 100% under Automatic Route under 

controlled conditions. It has been decided to do away 

with this requirement of ‘controlled conditions’ for FDI in 

these activities. 

Controlled conditions for these sectors included 

aquariums and hatcheries where eggs are artificially 

hatched and incubated in an enclosed environment with 

artificial climate control. After the relaxation, foreign 

companies can invest up to 100 per cent in companies 

engaged in breeding of fishes outside hatcheries and 

aquariums. 

45,000 

40,000 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

FDI Inflows (USD Mn) 

2000-01 

2001-02 

2002-03 

2003-04 

2004-05 

2005-06 

2006-07 

2007-08 

2008-09 

2009-10 

2010-11 

2011-12 

2012-13 

2013-14 

2014-15 

2015-16 

140 

120 

100 

80 

60 

40 

20 

0 

-20 

-40 

-60 

In USD mn % growth (in USD) Source: DIPP 

Private Security Agencies 

The extant policy permits 49% FDI under government 

approval route in Private Security Agencies. FDI up to 

49% is now permitted under automatic route in this 

sector and FDI beyond 49% and up to 74% would be 

permitted with government approval route. 

Earlier, only 49% of FDI through government route was 

allowed. 

Establishment of branch office, liaison office or project 

office 

For establishment of branch office, liaison office or 

project office or any other place of business in India if 

the principal business of the applicant is Defence, 

Telecom, Private Security or Information and Broadcasting, 

it has been decided that approval of Reserve Bank of 

India or separate security clearance would not be 

r e q u i r e d i n c a s e s w h e r e F I P B a p p r o v a l o r 

license/permission by the concerned Ministry/Regulator 

has already been granted. 

25



Share of top investing countries FDI equity inflows in India 

(USD in million) Cumulative Inflows (April ‘00 - March ‘16) % of total Inflows 

Mauritius 95,910 33% 

Singapore 45,880 16% 

U.K. 23,108 8% 

Japan 20,966 7% 

U.S.A. 17,943 6% 

Netherlands 17,314 6% 

Germany 8,629 3% 

Cyprus 8,552 3% 

France 5,111 2% 

UAE 4,030 1% 

Total FDI Inflow 288,634 

Source: DIPP 

Sectors attracting highest FDI equity inflows in India 

(USD in million) Cumulative Inflows (April ‘00 - March ‘16) % of total Inflows 

Services Sector 50,792 18% 

Construction Development 24,188 8% 

Computer Software & Hardware 21,018 7% 

Telecommunications 18,382 6% 

Automobile Industry 15,065 5% 

Drugs & Pharmaceuticals 13,849 5% 

Chemicals (Other Than Fertilizers) 11,900 4% 

Trading 11,872 4% 

Power 10,476 4% 

Hotel & Tourism 9,227 3% 

Total FDI Inflow 288,634 

Source: DIPP 

26


Logistic - Reforms on cards 

India under the leadership of Mr. Narendra Modi has 

made some notable developments which lacked in 

previous government’s regime. NDA government recently 

completed two years in the power and during the period 

they have announced and implemented lot of key reforms 

in important sectors in order to revive the country’s 

economic growth. However, in some cases government 

missed the expectation for not implementing the reforms 

by passing the important legislative bills in parliament. 

Key bills like GST, Land bill, Mining and Labour bill are 

pending for the parliamentary approval for which 

government needs support in Rajaya Sabha. Though, the 

expectation is high that most notable GST bill will be 

passed in monsoon session and government would be 

able to implement the bill from April 2017. GST 

implementation is important for all sectors as it would 

simplify country’s complex indirect tax structure and 

would provide uniform tax rate across the country, thus 

would reduce paper works & save time and would 

contribute to India’s GDP. Since, NDA government came 

into power, they are committed to develop country’s 

ailing infrastructure which in turn would propel GDP 

growth. In infrastructure, government’s focus is on 

developing road & highways, logistic, construction, power, 

etc. Logistic and warehousing is an important 

infrastructure which India needs to develop in order to 

boost economic growth. Still India is at initial stage of 

development in logistic sector and has long way to catch 

up with most of the advanced economies. Logistic is the 

mainstay of the economy, given an efficient, cost 

effective flow of goods on which other commercial and 

manufacturing sectors depend. Due to inadequate 

infrastructure, India’s logistic cost is comparatively higher 

than other developed countries. Logistics cost in India is 

estimated at ~13-14% of the GDP. This compares to ~8% 

of the GDP for US and 18% of the GDP for China. 

Logistic sector constitutes a mix of transport, warehousing 

and other related services and freight is transported 

mainly through roadways, railways, coastal and pipelines. 

Freight also constitutes of domestic and EXIM (export & 

import) trade, where costal is considered to be cheapest 

means of transport (25-30 paise per km/per tonne), 

compared to Rs 2.50 for road and Rs 1.5 for rail transport. 

As per Assocham, Indian freight transport market is 

expected to grow at a CAGR of 13.35% to reach at USD 

307 billion by 2020 driven by the growth in the 

manufacturing, retail, FMCG and e-commerce sectors. Over 

the past 2-3 years, logistic sector has been in limelight 

due to emergence of long term themes and expectations 

of the pickup in volume growth from revival in domestic 

macros and other government initiatives like Make in India, 

construction of Dedicated Freight Corridor (DFC), port 

development and investment in road infrastructure, rollout 

of GST and exponential growth in the e-commerce 

segment. 

Logistic infrastructure needs to develop in India to 

catch up global standard 

Logistic sector in India is still at a nascent stage as 

compared to global standard. The sector is highly 

fragmented and dominated by unorganized players 

especially the road logistic segment. Inadequate 

infrastructure had made logistic cost high in India which is 

estimated at ~13-14% of GDP. This compares to ~8% of 

the GDP for US and 18% of the GDP for China. The 

logistic industry suffers from systemic inefficiencies and a 

number of challenges to growth including lack of good 

infrastructure, high handling costs, procedural delays and 

pilferages, thus resulting in higher-than normal logistics 

costs for the domestic logistic companies. Further, there 

have been long standing reforms pending like abolition of 

state wise taxes, creation of modern warehousing facilities 

and streamlining of customs formalities. Indian logistic 

sector is highly fragmented and unorganized, hence the 

issues like limited capital to scale up the business, low 

credibility and non-standard process persists in the sector. 

Infrastructure issues loom on every logistic segment like 

none of India’s major port can routinely handle ships 

above 6000 TEUs (twenty equivalent units) and as a result 

27


SECTOR OUTLOOK 

Colombo, Dubai and Singapore transship the containers, 

roads are congested and railways have capacity 

constraint. When compared with the international trade 

logistics networks, the Indian logistics network lags on all 

aspects, be it infrastructure, customs or quality of services 

thus, the outcome is high cost, uncertainty in time and 

low reliability. India ranks at 54 in the World Bank’s, 

Logistics Performance Index, 2014, out of 160 countries, 

behind South Africa, Chile, Panama, Vietnam and 

Indonesia. China ranks at number nine immediately 

behind Switzerland while Germany leads the index. 

Government has planned to establish India as a global 

manufacturing hub through the program of “Make in 

India” and that requires quality logistic infrastructure. 

“Make in India” would require more connectivity to 

international trade logistic network, so that exporters can 

move, store and deliver goods faster and cheaper which 

is the only way to retain their competitive advantage 

globally. The cost of trading whether by sea, land and air, 

play a critical role in determining the price of the end 

product, hence poor logistic infrastructure would always 

heighten the peril of higher inflation. According to 

Mckinsey study, inefficiencies in logistic infrastructure add 

an extra cost to the Indian economy by USD 45 billion, 

about 4.3% of the GDP every year. Moreover the report 

has highlighted the issue that by 2020 freight traffic 

demand in India would grow by 2.5 times thus putting 

further stress on India’s infrastructure. Thus the scope of 

growth in logistic space is very wide and there are 

number of logistics companies who have been operating 

across several segments in order to provide integrated 

solution to the customers. In order to increase the 

competitiveness, certain logistic companies have 

developed expertise in selected segments of supply chain 

such as transportation, dry ports, warehousing, express 

distribution and non-vessel operating common carrier 

(NVOCC). Many corporate are now outsourcing the logistic 

activities to third party in order to improve cost efficiency 

& delivery performance and to concentrate on their core 

business. Hence with right policies in place, there are 

immense opportunities for logistic companies to grow 

their business by multifold in coming years. 

Sector to benefit from domestic economy revival 

Improving Q4FY16 results of corporate and gradual 

revival in industrial activities reflected in IIP data, hints 

early sign of economic recovery. Logistic sector has strong 

correlation with the economic growth, thus any sign of 

green shoots in economy would drive the growth for the 

sector. One leg of the freight movement belongs to the 

primary economy which involves bulk movement of raw 

materials (locally sourced and imported) domestically to 

production centers. The other leg of country’s freight 

movement comes from the secondary economy servicing 

the manufactured products. The contribution of the 

secondary freight to GDP is greater as the freight is 

handled and shipped multiple times and also moves 

through networks of terminals and distribution centers. The 

recovery in domestic manufacturing sector and 

improvement in consumption trend would drive higher 

movement in goods which would lead the growth in 

logistic companies. Further, Government’s “Make in India” 

initiative, which aims to make India a global hub for 

manufacturing, innovation and design, can yield success 

only if logistics infrastructure in India is developed. There 

are tractions in the Indian economy as the global 

commodity prices are benign amid economic slowdown in 

China and other major consuming nations. Being the net 

importer of commodity, India is one of the beneficiaries of 

lower commodity prices and is also insulated from global 

economic turmoil to some extent. Further, expectation of 

above normal monsoon in the current year after two 

consecutive drought years would boost rural consumption 

which is one of the major driving factors of country’s GDP 

growth. Good monsoon is also expected to cool down the 

inflation which has just started to head up, thus would 

provide room for central bank to reduce the interest rate 

in order to propel the growth. 

GDP growth on QoQ (%) 

8.0% 

7.0% 

6.0% 

5.0% 

4.0% 

3.0% 

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 

2012-13 2013-14 2014-15 2015-16 

Source: RBI 

28


Cargo growth vs GDP growth (%) 

Source: Industry Report 

Infrastructure creation and roll out of DFC would 

benefit the sector 

Government is aiming to launch the multimodal freight 

movement in India through mix of Rail, Road, Inland 

waterways and costal connectivity. NDA government is 

keen in building infrastructure and the key upcoming 

projects include construction of Dedicated Freight 

Corridor (DFC), Sagarmala & Costal shipping, New 

container Port Infrastructure, Port connectivity by Rail and 

Road and Inland waterways. Government has targeted to 

reduce logistic cost to 10% of GDP by 2020 from the 

current levels of 14% of GDP (compared to less than 

10% in developed countries), thus emphasizing on 

developing the basic logistic infrastructure. The higher 

c o s t o f l o g i s t i c s h a s a d v e r s e i m p a c t o n t h e 

competitiveness and profitability of the Indian 

manufacturing industry. India’s ranking on the World 

Bank’s International Logistics Performance Index (LPI) 

slipped from 39th in 2007 to 54th in 2014 (among 160 

countries featured). The Index measures logistics 

competitiveness of a country across 6 parameters i.e. 

Customs, Infrastructure, International shipment, Logistics 

competence, Tracking and tracing, and Timeliness. Poor 

road infrastructure, congestion in the Road/Rail network 

and lack of inter-modal transport connectivity increase 

the logistics costs and impact the competitiveness of the 

country. Further, lack of investment in port infrastructure 

and administrative delays impact the efficient evacuation 

of the EXIM traffic at ports. In India ~55% of domestic 

cargo movement has been delivered through roads as road 

cargo movement offers flexibility, convenience, better 

tracking ability and door-to-door services. Over the years, 

rail cargo has lost its share to road owing to lack of 

investment on rail infrastructure. However, with the current 

government’s focus on improving the national road and rail 

networks, the logistics sector will reap the benefit of faster 

and more efficient transportation. NDA government has 

been aiming to revive the railway sector and is striving to 

enhance the market share of Indian railways by eliminating 

capacity bottlenecks which constrain growth and also aim 

to improve the efficiency of operations. Thus the rollout of 

Dedicated Freight Corridors can help to arrest the drop in 

market share for railways in freight segment. The objective 

of DFC would be to create world class infrastructure, 

enhance investment climate by attracting foreign 

investment and to promote the economic development of 

these neighboring regions. DFC would pass through six 

states Uttar Pradesh, NCR of Delhi, Haryana, Rajasthan, 

Gujarat and Maharashtra and is mostly aligned parallel to 

the existing railway tracks. The proposed Industrial corridor 

would improve country’s logistic infrastructure by setting 

nine junction stations following an additional station at 

end terminals at Tughlakabad and Dadri in NCR of Delhi 

and J.N.Port in Navi Mumbai. DMIC (Delhi Mumbai 

Industrial Corridor) has been set up by signing a MOU 

between Ministry of Economy, Trade and Industry (METI) of 

29



Japan and the Ministry of Commerce and Industry (MoCI) 

of India. It is expected that the project would envisage an 

employment growth potential of CAGR 14.87% over five 

years, industrial output growth of CAGR 24.57% and 

exports growth of CAGR 31.95% during the same period. 

T h e r o l l o u t o f D F C w o u l d d r i v e h i g h e r 

efficiency/productivity gains for container terminal 

operations as it will allow higher double-stacking, lesser 

investment in wagons and faster turnaround. The 

commercialization of DFC will augment the capacity by 

allowing a movement of 360 containers per train in 

around 24 hours from JNPT to NCR compared to 90 

containers in around 40-50 hours, at present. Hence, the 

rollout of DFC is one of the major catalysts for logistic 

sector to grow in future. 

India's overall logsitics performance index 

54 

47 46 

39 

2007 2010 2012 2014 

Source: World Bank 

New Proposed Corridors 

New Corridors End stations Distance covered (Km) 

East-West Corridor Kolkata-Mumbai 2,330 

North-South Corridor Delhi-Chennai 2,343 

East Coast Corridor Kharagpur-Vijaywada 1,100 

Southern Corridor Chennai-Goa 899 

Source: Indian Railways 

States influence by DMIC Project 

DMIC 

State 

Source: DMIC 

Area Under 

project 

influence 

Area 

(sq. km) 

Total area 

of 

impacted 

State 

(Sq. km.) 

Percent Total 

Area of 

Respective 

State 

under PIA 

(project 

influence 

area) 

Delhi 1,483 1483 100% 

Haryana 26,410 44,212 60% 

Rajasthan 198,849 342,236 58% 

Gujarat 120,706 196,024 62% 

Maharashtra 56,760 307,713 18% 

UT of Dadra & 

Nagar Haveli 491 491 100% 

UT of Diu & Daman 122 122 100% 

Uttar Pradesh 28,265 238,566 12% 

Madhya Pradesh 2,866 308,144 1% 

Uttaranchal 533 53,566 1% 

Total of All States 

under influence 436,486 1,492,557 29.20% 

54 

39 

Overall rank 

Deterioration across all parameters 

65 

Customs 

2007 2014 

47 

Source: World Bank 

58 

42 40 44 

Infrastructure 

International 

shipments 

31 

52 

Logistics 

quality/competence 

57 

42 

Tracking and tracing 

47 51 

Timeliness 

Implementation of GST would ensure better cost 

effectiveness and improve efficiency 

The entire country is pining hopes on passing the GST in 

parliament which aims to simplify the current indirect tax 

regime by bringing all central and state levies under one 

single head having uniform tax rate. Rollout of GST would 

benefit the logistic sector as it would reduce the tax 

complexity, bring efficiency in cross-state transportation, 

streamlining paperwork for road logistics operators and 

would bring down the transit time and logistics costs. 

Further, GST will permit rationalization of warehousing 

space, as currently corporate generally operate state-level 

warehouses, inventory and distribution centers to avoid 

Central Sales Tax (CST), rather than maximizing on 

operational efficiency. GST will allow companies to move 

30


away from warehouses in different states to create new 

regional warehouses based on operational and logistics 

efficiency and further employing third-party logistics 

companies to manage their overall distribution and supply 

chains. Besides, the rollout of GST would drive 

consolidation of warehousing space across the country, 

improvement in efficiency of road transporters and would 

develop supply chain management. 

Government’s initiatives to boost cargo through 

shipping & railway 

Government has been taking several initiatives to 

increase the cargo transport market share of railway and 

inland water ways. Currently road freight accounts for 

54% of total freight followed by railway (33%) and costal 

shipping (6%). As per government estimates, for the 14 

major routes to North West region, only 38% is moved 

through rail. Freight trains take 2.5 times more than 

passenger train to cover the same distance and thus the 

road still dominates the container movement. The key 

challenges the rail transport face are high turnaround 

time and low speed of freight trains. Government is 

looking to improvise on these challenges by targeting fast 

track implementation of DFCs, increasing the allocation of 

investment, developing Multimodal Logistics Parks and 

Industries and rationalized the rates for DFC. In a move to 

attract import freight traffic including containers, coal and 

iron ore that was diverted to roads, Indian Railways has 

recently withdrawn the 10% Port Congestion Surcharge 

on basic freight which was imposed during November 

2014. The rollback is expected to improve the 

competitiveness of rail freight over the roads. 

Recently Shipping ministry announced that they have 

planned to offer companies an incentive to Rs 1 per 

tonne to transport goods, including food grain, 

automobile, cement and other commodities through 

inland water ways and costal shipping. The ministry 

conveyed that the incentive will be given to industry for 

switching to cleaner transportation like inland water ways 

and costal shipping from railways and roadways. The 

incentive offer would cost government Rs 100-150 crore 

per year as per shipping ministry. Such initiatives from 

government will encourage the freight movement through 

shipping as only 6% of freight transported in India is 

carried by costal shipping as compared to 11% and 24% 

for Germany and China, respectively. A shift from roads 

and railways to costal shipping could lead to emission 

savings of about 3.5% in the freight transport sector. 

Government also suggested for reducing the cost of costal 

shipping by changing cabotage law, under which only 

Indian registered ships are allowed to ply on local routes 

for carrying cargo. As per shipping ministry, the incentive 

would help to increase the transportation of petroleum, oil 

& lubricants, coal, steel and cement by costal shipping 

from 6% to 12% in a span of a decade and result in 

potential savings of Rs 35,000-40,000 crore by optimizing 

export-import freight and domestic cargo. Government has 

set an ambitious target to increase the share of waterways 

transportation from 6% to 10% by 2020 and to reach 

this target, shipping ministry has been taking several 

initiatives such as moving to larger barges and use of 

liquefied natural gas instead of diesel barges and 

dedicated berths, bunkering and storage capacities at 

relevant ports. The shipping ministry also suggested the 

imposition of green taxes on less environmentally friendly 

modes of transport such as roadways which would 

increase freight share of costal shipping due to low cost 

of transportation. Ministry also highlighted some of the 

key competitiveness of shipping transport like 

transportation by waterways cost 25 paisa per km as 

compared with Rs 1.50 and Rs 2.50 for rail and road 

transport and in terms of load capacity one horsepower 

can carry four tonnes of cargo by waterways, while the 

equivalent is 150 kg and 500 kg by road and rail, 

respectively. Thus, government’s thrust to improve logistic 

infrastructure in shipping and rail by taking several 

initiatives would reduce transport cost and would maintain 

benign inflation environment. 

Investment allocation by Indian Railways (Rs in billion) 

8,560 

2,557 

1,539 

225 285 533 

FY91-95 FY96-00 FY01-05 FY06-10 FY11-15 FY16-20 

Source: Indian Railways 

31



Load capacity for various modes of transport (per 1 

4000 

Horse power) (in kg) 

500 

150 

Inland water Rail Road 

Efficiency per litre of fuel consumption (Ton-Km/ltr) 

105 

85 

24 


Cost per ton per km for various modes (Rs.) 

2.5 

1.5 

0.25 


Source: Industry Report 

Uptick in e-commerce business to drive growth 

The surge in e-commerce volumes has been the major 

growth driver for express distribution industry over the 

past few years. The rapid rise in preference for digital 

shopping, increased uses of mobile devices and 

accessibility to technology/internet augur well for the 

growth in the e-commerce industry in India. The 

availability of options like Cash on Delivery and newer 

payment options such as mobile payment wallets, has led 

to substantial jump in deliveries across many markets. 

Rising demand from Tier II, III and smaller towns present a 

major growth prospect for the industry participants. The 

Government’s “Digital India” initiative which aims to bring 

the internet and broadband to remote corners of the 

country would provide the connectivity for e-commerce. 

Government’s recent notification of 100% foreign 

investment in marketplace e-commerce companies, 

including services like warehousing and inventory would 

also provide a fillip to the logistic sector. The e-commerce 

players need to deliver products quickly to their customers 

and one of the most important clientele segments for 

them are in the tier II and tier III cities. Thus, there will be 

significant demand for warehousing and logistic space in 

India. To tap the market, a number of startup companies 

have been able to expand into the smaller centers backed 

by funding from investors. As per Bank of America Merrill 

Lynch, Indian e-commerce sector will surge to USD 220 

billion in value of goods by 2025 from current USD 11 

billion, leaving lot of opportunities for domestic logistic 

companies to tap the market. 

Outlook 

India, lags in logistic infrastructure in the world with 

logistic cost accounts ~14% of annual GDP which is higher 

than other developed nations. Structural reforms are 

needed in Indian logistic sector if it wants to compete with 

other developed and developing nations. Logistic 

infrastructure is directly linked with the overall economic 

development and hence it is imperative to develop and 

enhance the logistic infrastructure. As Indian economy is 

based on consumption, inflation is always a matter of 

concern for the government. Thus proper logistic 

infrastructure to reduce transportation cost would support 

government to contain inflation and boost real GDP 

growth. Government is aware of poor logistic infrastructure 

in the country and has been taking initiatives to address 

the issue. Fast track implementation of DFC project, 

construction of multi modal logistic park, roll back of Port 

Congestion Surcharge on railway freight and incentivizing 

the shipping transport are the notable reforms that 

government has announced towards the development of 

the sector. Further, rollout of GST would be a game 

changer for the sector as it would bring down the transit 

time and logistics costs. Government has allowed 100% 

FDI in market place e-commerce companies, resulting in 

higher demand for warehouses and logistic space. Thus the 

sector provides huge scope of growth for domestic logistic 

firms, given the importance of the sector towards country’s 

economic development. 

32


Monsoon, the mega event of the year has left half of the 

country unsatiated so far with all sects of people still 

looking to quench their thirst. After the initial above 

average forecasts by the forecasting agencies – IMD and 

Skymet, the monsoon has so far clocked deficit of 17% 

as of 23rd June, 2016 albeit lower than 23% deficit 

previous week. The percentage points are calculated by 

comparing the expected centimeters of rainfall with the 

Long Period Average (LPA) of past 50 years. While the LPA 

is 89 cms, IMD expects a total of 94 cm of rainfall this 

monsoon. The monsoon however arrived in Kerala a week 

later than its normal onset date of 1st June, but is 

believed to have rapidly advanced over peninsular Indian 

states. As of 23rd June, north-west India has received 6% 

excess monsoon rainfall, central India has recorded a 38% 

deficit, the peninsula has recorded 15% excess rainfall, 

and east and north-east India have recorded a deficit of 

24%. To sum up, so far, 24% of the country has received 

excess rainfall, 31% has received normal rainfall, and 45% 

deficient and scanty rainfall. Clearly, when the first 

Source: IMD 

33


ECONOMY REVIEW 

Source: IMD 

estimates are for 106% of the long-period average (LPA), 

the monsoon is expected to have spread across whole of 

India by end of June. Considering that ~50% of the 

country’s workforce depends on agriculture for a living 

and over half of India’s farmland lacks assured irrigation, 

monsoon is of paramount importance. Besides, the food 

inflation has failed to be tamed over the last two years 

mainly on account of two failed monsoons barring the 

issues with hoarders or middlemen. Thus, clearly the 

latest set of rainfall figures raises obvious doubts 

regarding the authenticity and the effectiveness of the 

forecasting methods or set of results drawn by IMD and 

as well as Skymet. 

There are various analyses available to understand the 

success of the IMD’s accuracy in forecasting over the 

years. Unfortunately, most of them have come up with 

unpleasant results and the accuracy of forecasting have 

been kept wanting. In fact, an analysis titled “What to 

make of the latest IMD monsoon forecast?” was carried out 

by The Hindu based on 10 years of forecast data. The 

analysis showed that the IMD’s initial April forecast got the 

‘rainfall range’ wrong 70% of the times. This essentially 

means that in 7 out of 10 years, the actual rainfall has 

been outside ± 5% error margin range. On the other hand, 

the revised June-July forecast, often regarded as a more 

accurate monsoon forecast got the ‘rainfall range’ wrong 

60% of the times. Besides, at times when IMD predicts for 

‘below normal’ monsoon, it could often turn out to be 

‘deficient’ or above normal to devastating floods. IMD 

classifies its rainfall forecast into five ‘ranges’ based on the 

34


percentage value of its LPA: deficient (less than 90), 

below normal (90-96), normal (96-104), above normal 

(104-110) and excess (more than 110). While the 

forecasting agency has acquired new technologies from 

time to time, however, the forecasting accuracy has still 

been lagging behind international standards. The recent 

predictions for the last two years and the one for year 

2009, when India experienced severe drought against 

expectation of normal monsoon, clearly narrates the story. 

India needs to badly count on the accuracy on the 

forecasting of IMD especially at a time when India’s food 

grain production have been hit last year and the price of 

the essential food items, mainly pulses have been 

running severely high. The government also had to import 

pulses higher in order to fill up the lag in production. 

Thus clearly the taming inflation statistics could very 

easily go haywire unless the food inflation component in 

CPI is lowered, major risk for India in its lower interest 

path. 

120% IMD April Forecast (%) Actual Rainfall (%) 

100% 

80% 

60% 

40% 

20% 

0% 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

Source: IMD, The Hindu 

120% 

IMD June Forecast (%) Actual Rainfall (%) 

100% 

80% 

60% 

40% 

20% 

0% 

Source: IMD, The Hindu 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

Thus, instead of making RBI looking as scape goat for 

failing to lower the interest rates in the country, the 

policymakers should have addressed the basic structural 

issues like, the huge dependence on monsoon for 

irrigating its arable land. Even today, we look for signs of 

good monsoon for boosting agriculture and filling up of 

the reservoirs. Since the monsoon is yet to pick up pace, 

this has delayed the sowing of rain-fed kharif crops. 

According to media articles, so far, an area of 12.49 million 

hectares has been planted under crops like rice, cotton, 

coarse grains, pulses, oilseeds and cane. This is almost 

24% lower than the 16.4 million hectares planted by this 

time last year. Thus, the figures are dismal and alarming 

both at the same time, however one needs to be patient 

and follow the progress of the monsoon in the next few 

days. Generally, kharif sowing in India continues almost till 

end of July, and seasonal or total area in the June-October 

crop season is ~106.2 million hectares. It is a known fact, 

how much the south-west monsoon is critical to the kharif 

crop season considering over half of India’s farmland lacks 

proper irrigation. Moreover, India receives 80% of its 

annual rainfall during these four months to boost its water 

reservoirs. As per the data from the Ministry of Agriculture, 

the area under rice, the main kharif crop, stands at 1.99 

million hectares so far, compared to 2.19 million hectares 

by this time last year. Pulses have been sown so far in 

0.97 million hectares compared to 1.22 million hectares by 

this time last year, while coarse cereals have been planted 

in 1.76 million hectares, lower than the 1.82 million 

hectares planted by this time last year. Cotton has been 

planted in 1.91 million hectares compared to 3.49 million 

hectares by this time last year. Sugarcane has been 

planted so far in 4.44 million hectares, higher than the 

area of 4.16 million hectares last year. The higher interest 

in sugarcane sowing is probably tracking the higher global 

as well as domestic prices and the latest policies drawn. 

The sown in figures for Oilseeds however depicts dramatic 

fall from the previous year figures. The only hope for 

betterment in the figures rests with the strong monsoon 

estimates by IMD. 

Area sown in million hectare (as of June 24, 2016) 

Crop 

2016-17 2015-16 % Change 

Rice 1.99 2.19 -9.15 

Pulses 0.97 1.22 -20.75 

Coarse Cereals 1.76 1.82 -3.24 

Oilseeds 0.70 2.79 -74.97 

Sugarcane 4.44 4.16 6.73 

Jute & Mesta 0.74 0.76 -2.12 

Cotton 1.91 3.49 -45.31 

Total 12.49 16.41 -23.86 

Source: Ministry of Agriculture 

35



What’s been a matter of great concern is the very fact 

that ground water level remains terribly low in major 

reservoirs across the country. The water levels can only 

be replenished on account of better than expected 

monsoon. As of 23rd June, 2016, live storage available in 

the 91 important reservoirs has fallen to an alarmingly 

low of 15% of their total capacity as compared to 27% 

in the previous year and 20% average of last 10 years. 

As is evident from the graph that the situation has only 

aggravated over the weeks and months and so much that 

the most hydropower plants are running at a small 

fraction of their capacity while one or two thermal plants 

needed to be shut down. Within regions, the situation is 

relatively better at Northern and Central regions while 

Southern and Eastern India witness much depressed 

water levels across the reservoirs. Within Northern 

regions, H.P. and Punjab recorded departure of 31% and 

25% from normal levels while Rajasthan registered 

surplus of 15%. In the East, deficit of 40% was recorded 

in Jharkhand, West Bengal recorded a deficit of 8% while 

surplus of 118% was recorded in Tripura. In the Western 

regions, both Gujarat and Maharashtra reported deficit 

figures of 45% and 71% respectively. In the Central 

regions, U.P. & M.P. registered surplus of 33 % & 91 % 

respectively while Uttarakhand and Chhatisgarh reported 

deficit of 57 % 30 % from the normal figures. In the 

Southern region, barring Kerala all other states reported 

huge departures from normal - AP&TG (-85 %), TG (-44 

%), karnataka (-46 %), Kerala (11 %) and T.N. (-68 %). 

Region wise Water Reservoir Status (as of June 23, 2016) 

Current Status Last Year same period 

10 year Average 

Northern Region 24% 42% 30% 

Eastern Region 16% 28% 17% 

Western Region 9% 21% 21% 

Central Region 20% 29% 15% 

Southern Region 9% 23% 21% 

All India Status 15% 27% 20% 

Even the groundwater levels in India have depleted over 

the years largely on account of using primitive farming 

methods in agriculture and the adverse farming pattern 

which uses water guzzling crops in places which are 

geographically scarce in water supply. Besides, the highly 

skewed nature in terms of incentives is provided for 

cultivation particularly for wheat and paddy. Unfortunately, 

these crops are water intensive and depend heavily on 

ground water for their growth. This creates inefficiency in 

water usage when compared to other countries. According 

to a report titled “Overview of Ground Water in India” by 

Roopal Suhag, PRS Legislative Research, the overall 

contribution of rainfall to the country’s annual ground 

water resource is 68% while the share of other resources, 

such as canal seepage, return flow from irrigation, recharge 

from tanks, ponds and water conservation structures taken 

together is 32%. Because of the increasing population in 

India, the per capita annual availability of water has 

reduced from 1,816 cubic metre in 2001 to 1,544 cubic 

metre in 2011, implying a reduction of 15%. The 

depletion in water levels is largely on account of overuse 

and contamination. According to the report, 89% of 

ground water extracted in India is used in the irrigation 

sector, making it the highest category user in the country. 

This is followed by ground water for domestic use which is 

9% of the extracted groundwater while Industrial use of 

ground water is 2%. The main means of irrigation in the 

country are canals, tanks and wells, including tube-wells. 

Of all these sources, ground water constitutes the largest 

share. Wells, including dug wells, shallow tube-wells and 

deep tube wells provide about 61.6% of water for 

irrigation, followed by canals with 24.5%. 

80 

70 

Storage available (BCM) 

% of storage capacity this yr-RHS 

50 

45 

60 

40 

50 

35 

40 

30 

30 

25 

20 

20 

10 

15 

0 

10 

Jan-07 

Source: CWC 

Jan-14 

Jan-21 

Jan-28 

Feb-02 

Feb-11 

Feb-18 

Feb-25 

Mar-03 

Mar-10 

Mar-17 

Mar-23 

Mar-31 

Apr-07 

Apr-13 

Apr-21 

Apr-28 

May-05 

May-12 

May-19 

May-26 

Jun-02 

Jun-09 

Jun-16 

Jun-23 

36


Average amount of water needed to grow crops in (Cubic Meters / Tonne) 

Brazil India China 

United 

States 

Rice 3,082 2,800 1,321 1,275 

Sugarcane 155 159 117 103 

Wheat 1,616 1,654 690 849 

Cotton 2,777 8,264 1,419 2,535 

Sources: National Water Footprint Account, UNESCO-Institute for 

Water Education, May 2011; PRS 

A realignment of the different regions and cultivation of 

crops should be based on regions which are naturally 

water abundant. Nevertheless, in a country like India, the 

structural reforms are hard to come by and rather happen 

at a snail’s pace. The key element for implementation of 

swift reforms has to be the strong urgency which is 

hardly seen in agriculture sector. Thus, the inter-linkage 

between monsoon, sowing, food production, import, food 

inflation, MSP of crops and its final impact on CPI 

inflation cannot be ignored. However, last year’s food 

production figures have been better than previous year 

(albeit by an iota), despite poor monsoon and drying up 

of reservoirs. Food grain production for 2015-16 crop 

year increased marginally to 252.23 million tonnes, 

according to third advance estimates. Although, food 

production of coarse cereals, rice, oilseeds and sugarcane 

was significantly lower than last year. With the rise in 

population, the per capita demand for food grains is on 

the rise. To cope up with the demand, in the face of 

rising demand, the government has to resort to imports of 

cereals, pulses. However, despite these measures, lack of 

supply side reforms largely leads to higher food price 

inflation and consequently high retail inflation. 

Food production (in million tonnes) 

2015-16 

2014-15 % Change 

Rice 103.36 105.48 -2.01 

Wheat 94.04 86.53 8.68 

Coarse cereals 37.78 42.86 -11.85 

Pulses 17.06 17.15 -0.52 

Oilseeds 25.9 27.5 -5.82 

Sugarcane 346.72 362.33 -4.31 

Total 252.23 252.02 0.08 

Source: Ministry of Agriculture, Economic Times 

For instance, the prices of the key pulses – Tur, and Urad 

have been often blamed for the overall increase in food 

inflation in India. According to Crisil analysis, the price of 

pulses spikes every third year (based on data taken for a 

decade). However, this has a lot to do with the lower 

yield or productivity of the crop which has not made any 

major improvements to keep up with the rising demand. 

The per hectare productivity of pulses in FY14 was just 

764 tonnes which is poor when compared to wheat 

(3,075 tones), rice (2,424 tones) and sugarcane (69,838 

tones). The production of pulses declined both in 2014-15 

and 2015-16, understandably when the monsoon has been 

under deficit for the last two years. One of the reasons 

why the pulses production is so vulnerable to monsoon is 

explained by the poor irrigation coverage for the crop 

which stands abysmally low at 16%. The national average 

irrigation coverage is ~45% and most of the other food 

items are above that threshold mark. For instance, 

irrigation coverage is highest for sugarcane (90%) while 

Wheat and rice also enjoy good irrigation coverage of over 

50%. To make up for the shortfall in production, the 

government has to resort to imports. The imports in 

volumes have been on the rise for the last two years, thus 

the sustained increase in food prices component in both 

WPI and CPI. The imports for 2016-17 have been 

estimated to be lower than previous year figures. The 

notion will probably again be above average monsoon. 

However, a disappointment on that front can easily push 

the prices higher and thus food inflation and adjoining CPI. 

The prices of major pulses – Chickpeas, Lentil, Tur, Urad 

and Moong have all exhibited higher trend almost in line 

with international prices. Besides, the minimum support 

price (MSP) of the list of major pulses also witnessed 

significant appreciation in the last five years. These factors 

will certainly put heavy pressure on the inflation numbers 

unless the production numbers prop up for 2016-17. 

Pulses Production, Trade, and Consumption of India (million tonnes) 

2013-14 2014-15 2015-16 2016-17* 

Production 19.78 17.15 17.06 17.82 

Total Imports 3.65 4.58 5.79 4.67 

Availability 23.43 21.73 22.85 22.49 

Total Exports 0.34 0.22 0.25 0.27 

Total Availability 

for Domestic 

Consumption 23.09 21.51 22.6 22.22 

Source: Ministry of Agriculture, Ashika Research,* estimated figures 

Irrigation cover of top five pulses producing states 

% share in 

pulses 

production 

(2014) 

Madhya Pradesh 26% 938 35.10% 

Maharashtra 16% 796 8.70% 

Rajasthan 13% 589 13.10% 

Uttar Pradesh 9% 742 21.00% 

Andhra Pradesh 8% 928 3.70% 

Total 72% 

Source: Ministry of Agriculture, Economic Times 

Yield 

(kg/hectare) 

% Irrigation 

coverage 

(2012) 

37

38 


ECONOMY REVIEW


As can be witnessed from the table that the MSPs of the 

major pulses have been increased yoy since 2011-12 and 

while 2013-14 and 2014-15 witnessed modest increases, 

2015-16 witnessed significant increase of 6-11% yoy. 

The MSPs for 2016-17 have been announced and by the 

initial prints suggest for an average increase of 8-9% yoy. 

Thus, the simple justification for hike in food prices lies 

in the increased MSPs yoy. In order to silence critics and 

also to incentivise farmers, the Government increased 

MSPs to increase acreage and increasing productivity of 

these crops. Higher impetus towards cultivation of 

leguminous pulses and oilseeds will also have additional 

environmental benefits as these crops are less water 

consuming and help in nitrogen fixation in the soil. 

The MSP of pulses for the last 5 years (Rs./Quintal) 

Pulses 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 

Tur 3200 3850 4300 4350 4625 5050 

Gram 2800 3000 3100 3175 3500 NA 

Moong 3500 4400 4500 4600 4850 5225 

Urad 3300 4300 4300 4350 4625 5000 

Lentil 2800 2900 2950 3075 3400 NA 

Sources: Commission for Agricultural Costs and Prices (CACP) 

What are the primary drivers for creeping inflation in India – 

is actually a topic which economists like to debate. Of 

various parameters considered, one strong candidate has 

been Mahatma Gandhi National Rural Employment 

39



Guarantee Scheme (MGNREGS). However, most economists 

have little proof or conviction to blame this flagship 

programme for the increase in prices in India. Most 

however agreed on the increase in MSPs as the major 

cause for the same, particularly during the UPA 2 era. 

While the present government advocated modest hikes in 

2013-14 and 2014-15, the same was hiked by more than 

modest rates in 2015-16 and further in 2016-17. The 

breakdown of the CPI suggests steep increase in prices of 

pulses & products component averaging at 36% yoy for 

the period Jan-May, 2016. While there have been hue 

and cry with the rising food inflation for the recent 

months, in reality, the story could have been a lot 

different or rather worse had the weight in CPI for the 

component – pulses & products not been set at a 

miniscule 2.38%. This is probably well orchestrated by 

the government considering that it is known fact the 

government will be importing pulses every year and only 

the figures takes higher proportions during the times of 

monsoon deficit. According to an IMF working paper 

(Understanding India’s Food Inflation: The Role of Demand 

and Supply Factors), the authors have opined that over 

past decade India has seen a prolonged period of high 

inflation largely due to persistently-high food inflation. 

According to authors, the acceleration of India’s economic 

growth witnessed during the last ten years, accompanied 

by stagnant agriculture growth, resulted in excess demand 

for food, giving rise to relative food price inflation. 

Furthermore, the excessive buffer stock build-up since 

2007/08 and the lack of a pro-active liquidation policy 

increased average relative food inflation and its volatility. 

The report also said that administered price setting, such 

as through MSPs and supporting policies, will continue to 

pose challenges for monetary policy management in 

India. This is probably the crux of the matter, India never 

had supply side reforms and to bring down food inflation 

on account of concerns from supply side and compensate 

with monetary policy is not justified. Since, capital 

formation in agriculture will be stagnant or decline, we, 

the people of India need to rely on the signs and 

estimates of monsoon and our stock markets and 

investments also shift accordingly. Now, as far as the 

monsoon is concerned, the latest media interactions with 

chief of weather office suggests that although monsoons 

are delayed however it will bring plentiful showers 

towards the latter stages of the season helping farmers. 

What’s the probability of that happening – it is well 

known by now. 

Food and 

beverages 45.9 6.66 5.52 5.27 6.29 7.2 

Cereals and 

products 9.67 2.19 2.18 2.43 2.51 2.59 

Meat and 

fish 3.61 8.23 7.19 7.74 8.23 8.67 

Milk and 

products 6.61 4 3.66 3.33 3.4 3.53 

Oils and 

fats 3.56 6.36 5.33 4.85 5.13 4.83 

Fruits 2.89 -0.24 -0.64 -1.1 1.74 2.64 

Vegetables 6.04 6.39 0.7 0.54 4.98 10.77 

Pulses and 

products 2.38 43.32 38.3 34.15 34.21 31.57 

Sugar and 

confectionery 1.36 -1.72 0.61 3.92 11.18 13.96 

Spices 2.5 10.56 9.87 9.58 9.8 9.72 

Nonalcoholic 

beverages 1.26 4.6 4.24 4.15 4.3 4.11 

Prepared 

meals 5.55 6.79 6.5 6.23 5.89 5.86 

Pan, tobacco 

& intoxicants 2.4 9.03 8.3 8.51 8.04 7.82 

Clothing and 

footwear 7.9 5.71 5.52 5.5 5.56 5.37 

Housing 10.1 5.2 5.33 5.31 5.37 5.35 

Fuel and 

light 6.8 5.32 4.59 3.38 3.03 2.94 

Miscellaneous 

28.3 3.95 4.38 4.01 4.26 3.96 

Household 

goods and 

services 3.8 5.17 4.88 4.95 4.85 4.83 

Health 5.9 5.63 5.25 5.31 5.21 5.1 

Transport & 

comm 8.6 1.55 2.39 0.91 1.82 0.63 

Recreation 

and 

amusement 1.7 4.9 4.79 4.68 4.49 4.39 

Education 4.5 5.51 5.68 5.66 5.54 5.85 

Personal care 

and effects 3.9 3.43 4.77 5.68 5.73 6.14 

Source: CSO 

CPI - Breakdown by components (YoY %) 

Weights Jan-16 Feb-16 Mar-16 Apr-16 

May-16 

40


Birla Sun Life MNC Fund (G) 

What is Birla Sun Life MNC Fund? 

The fund that invests in securities of multinational 

companies in order to achieve long-term growth of capital 

with relatively moderate levels of risk. 

Why Birla Sun Life MNC Fund? 

• Multinational companies come with strong parentage, 

backed by professional management coupled with 

use of latest technology and global experience. 

Therefore such companies provide better growth 

opportunities. 

• Through research-based approach, Birla Sun Life MNC 

Fund identifies multinational companies with longterm 

growth prospects. 

• The fund has shown strong performance through 

downside protection during the bearish phases and 

outperformance during bullish market. 

Investment Objective 

The objective of the scheme is to achieve long-term 

growth of capital at relatively moderate levels of risk by 

making investments in securities of multinational 

companies through a research based investment 

approach. 

This product is suitable for Investor who are seeking: 

1. Long term capital growth 

2. Investments primarily in equity and equity related 

securities of multinational companies (MNCs) 

3. Riskometer-Moderately High 

About Fund Manager: Ajay Garg 

Mr. Ajay Garg is working with the Birla Sun Life Mutual 

Fund since Jan, 2003. Prior to joining Birla Sun Life AMC 

in 2003 he has worked with Birla Sun Life Securities Ltd. 

Ajay is B.E (Electronics) and MBA (Finance). Ajay has over 

20 years of work experience in financial services. 

NAV (Rs.) 586.10 

Inception Date December 27, 1999 

Fund size(in Rs cr) # 3,382.0 

Fund Manager Ajay Garg 

Entry load 

N.A 

Exit Load 1.00% 

Benchmark 

Min Investment 

NIFTY MNC 

Rs.5000 

Min SIP Investment Rs. 1000 

# as on May 30,2016 

Beta 0.87 

Standard deviation (%) 17.54 

Sharpe Ratio 1.36 

Alpha 18.32 

R Squared 75.5 

Expense ratio (%) 2.4 

Portfolio Turnover ratio (%) 8.00 

Avg Market cap (Rs in cr) $ 18,856 

# as on May 30,2016 

Important Information 

Key Ratios 

Top Ten Holdings 

Stocks 

% of Net assets 

Bosch 8.91 

Bayer CropScien 8.22 

Maruti Suzuki 7.18 

Gillette India 7.06 

ICRA 6.94 

GlaxoSmithKline 6.88 

Pfizer 6.05 

Honeywell Autom 5.75 

Kotak Mahindra 4.64 

HUL 4.47 

Asset Allocation 

Equity Debt Cash & Equiv. 

98.98% 0.00% 1.02% 

Performance of the Fund 

1 month 3 month 6 month 1 year 3 years 5 years Since Inception 

Fund (%) 0.04 6.18 0.10 0.73 31.60 22.36 18.40 

NIFTY MNC (%) 1.82 5.53 -2.30 -5.38 18.39 13.49 — 

41


MUTUAL FUND OVERVIEW 

Ashika Insight Mutual Fund Recommendation Alpha Generation 

Month of 

Recom Fund Name Benchmark 

NAV on 

Recom 

Date 

NAV on 

26/06/2016 

Fund 

Returns 

Since Recom 

Benchmark 

Returns since 

Recom 

May-15 SBI Blue Chip Fund S&P BSE 100 27.8 29.6 6.4% 5.0% 1.4% 

Jun-15 Kotak Opportunities Fund Nifty 500 82.5 83.2 0.9% -2.2% 3.1% 

Jul-15 Franklin India Bluechip Fund S&P BSE Sensex 359.6 363.6 1.1% -5.8% 6.9% 

Aug-15 UTI Mid Cap Fund Nifty Free Float 

Midcap 100 83.8 82.0 -2.2% -3.0% 0.9% 

Sep-15 Birla Sun Life Frontline Equity Fund S&P BSE 200 155.0 165.0 6.4% 4.1% 2.3% 

Oct-15 HDFC Equity Fund Nifty 500 444.7 448.1 0.8% 2.2% -1.5% 

Nov-15 ICICI Prudential Focused 

Bluechip Equity Nifty 50 28.8 29.4 2.1% 0.5% 1.5% 

Dec-15 HDFC Top 200 Fund S&P BSE 200 330.8 330.7 0.0% 1.6% -1.6% 

Jan-16 Mirae Asset Emerging Bluechip Fund Nifty Free 

Float Midcap 100 31.9 32.9 3.0% -1.0% 4.0% 

Feb-16 Franklin India Opportunities Fund S&P BSE 200 51.5 56.8 10.1% 7.4% 2.7% 

Mar-16 Birla Sun Life Top 100 Fund Nifty 50 38.3 43.4 13.2% 12.1% 1.1% 

Apr-16 HDFC Mid-Cap Opportunities Fund Nifty Free 

Float Midcap 100 36.4 39.2 7.7% 4.8% 2.9% 

May-16 Birla Sun Life Pure Value Fund S&P BSE 200 39.2 40.2 2.4% 3.4% -1.0% 

Alpha 

cheme 

Ashika General Mutual Fund Recommendation - Equity - Categorywise 

Large Cap Funds 

Scheme 

Scheme 

NAV 

NAV 

AUM 

(Rs. Cr) 

AUM 

(Rs. Cr) 

3M 6M 1Yr 3Yr 5Yr 


Since 

Inception 

Since 

Inception 

Sharpe 

Ratio 

Sharpe 

Ratio 

Benchmark 

SBI - Blue Chip Fund Reg (G) 29.31 4050 15.61 4.29 4.44 20.33 16.16 11.03 0.67 S&P BSE 100 2.32 

Motilal Oswal - MOSt 

Focused 25 Reg (G) 15.15 356 9.2 -2.95 -7.35 15.56 0 14.35 -1.15 Nifty 50 2.87 

Franklin - India 

Bluechip Fund (G) 359.06 6098 15.11 3.69 1.33 15.31 11.46 22.26 0.3 S&P BSE Sensex 2.2 

ICICI Pru - Focused Bluechip 

Equity Fund Reg (G) 28.85 8884 15.49 0.98 -0.79 15.86 12.65 14.13 0.37 Nifty 50 2.16 

Birla SL - Frontline 

Equity Fund Reg (G) 162.95 9434 15.49 3.43 0.72 17.75 13.91 23.27 0.5 S&P BSE 200 2.16 

DSP BlackRock - Focus 

25 Reg Fund (G) 17.03 1123 14.51 -0.26 -2.43 18.49 10.93 9.13 0.45 S&P BSE 200 2.79 

Mid Cap Funds 

Benchmark 

Franklin - India 

Prima Fund (G) 

Motilal Oswal - MOSt 

690.47 

19.92 

3362 

842 

17.1 

11.9 

3.26 

0.22 

4.86 

0.34 

29.43 

0 

21 

0 

20.54 

35.8 

0.98 

0.81 

Nifty 500 

Nifty Free Float 

2.31 

2.73 

Focused Midcap 30 Reg (G) Midcap 100 

HDFC - Mid Cap 37.85 9193 16.85 1.27 1.32 28.44 19.68 16.12 0.94 Nifty Free Float 2.32 

Opportunities Fund (G) Midcap 100 

Sundaram - Select 346.32 2896 18.85 1.06 5.37 29.34 18.9 29.14 0.83 S&P BSE 2.37 

Midcap Reg (G) 

Mid Cap 

UTI - Mid Cap Fund (G) 79.31 2827 15.65 -0.71 0.89 32.58 21.03 18.49 1.09 Nifty Free Float 2.4 

Midcap 100 

Exp. 

Ratio 

Exp. 

Ratio 

42


Small Cap Funds 

Scheme 

NAV 

AUM 

(Rs. Cr) 


Since 

Inception 

Sharpe 

Ratio 

Benchmark 

DSP BlackRock - Micro 

44.11 2004 22.25 4.09 10.85 41.73 24.37 18.05 1.24 S&P BSE Small 2.43 

Cap Fund Reg (G) Cap 

Franklin - India Smaller 41.1 2299 18.95 4.3 7.38 35 24.1 14.59 1.16 Nifty Free Float 2.4 

Companies Fund (G) Midcap 100 

SBI - M MidCap 63 1404 20.21 5.32 7.93 34.1 23.91 17.99 1.15 S&P BSE Mid 2.55 

Fund Reg (G) Cap 

Reliance - Small 25.65 1652 16.63 -5.5 7.09 39.07 21.75 17.79 1 S&P BSE Small 2.44 

Cap Fund (G) Cap 

Sundaram - Smile 67.89 967 20.24 -6.5 -0.51 32.94 17.85 18.5 0.72 S&P BSE Small 2.59 

Fund Reg (G) 

Cap 

Scheme 

NAV 

AUM 

(Rs. Cr) 


Since 

Inception 

Sharpe 

Ratio 

Exp. 

Ratio 

Multi Cap Funds 

Benchmark 

Birla SL - MNC Fund Reg (G) 584.25 2766 12.95 1.33 2.13 31.81 22.98 18.11 1.16 Nifty MNC 2.43 

ICICI Pru - Value 113.03 9925 15.22 -1.24 -1.45 27.7 18.47 22.86 0.83 S&P BSE 500 2.24 

Discovery Reg (G) 

Motilal Oswal - MOSt 17.45 2982 13.51 1.08 1.14 0 0 30.7 -0.13 Nifty 500 2.41 

Focused Multicap 35 Reg (G) 

Franklin - India High Growth 28.54 3614 16.71 -3.1 -3.31 26 18.17 12.59 0.77 Nifty 500 2.26 

Companies Fund (G) 

Birla SL - Adv Fund Reg (G) 295.21 914 16.53 2.8 -0.25 24.6 14.63 17.91 0.71 S&P BSE 200 2.81 

Balance Fund 

Scheme 

ICICI Pru - Balanced 

Advantage Fund Reg (G) 

NAV 

AUM 

(Rs. Cr) 


Since 

Inception 

Sharpe 

Ratio 

Benchmark 

Exp. 

Ratio 

Exp. 

Ratio 

26.61 10128 12.14 1.45 3.99 15.61 14.05 10.79 0.58 Crisil Balanced 2.35 

Fund Aggressive 

HDFC - Prudence Fund (G) 366.95 6992 15.97 -1.87 -0.83 16.39 11.94 18.89 0.36 Crisil Balanced 2.28 


SBI - M Balanced Fund 96.91 3491 9.94 1.4 1.53 18.76 14.81 16.39 0.84 Crisil Balanced 2.47 

Reg (G) 


Birla SL - Balanced 95 576.12 2254 13.67 3.61 3.96 18.37 13.58 21.41 0.65 Crisil Balanced 2.5 

Reg (G) 


Tata - Retirement Savings 20.42 40 12.74 1.47 -1.34 20.06 0 16.64 0.75 Crisil Balanced 3.06 

Fund Moderate (G) Fund Aggressive 

Scheme 

NAV 

AUM 

(Rs. Cr) 


Since 

Inception 

Sharpe 

Ratio 

Thematic Funds 

Benchmark 

UTI - Transportation & 

Logistics (G) 

84.8 564 13.32 -3.9 -2.48 38.1 26.24 20.83 1.2 UTI Transportation 2.74 

& Logistics Index 

Franklin - Build India Fund (G) 28.86 475 18.96 0.39 -0.18 29.64 20.74 16.65 0.81 Nifty 500 2.81 

ICICI Pru - Tech Plan Reg (G) 41.5 380 8.07 1.79 2.75 28.98 17.97 9.09 0.73 S&P BSE IT 2.8 

Birla SL - Infrastructure 24.61 539 16.36 -3.07 -5.67 18.85 9.75 9.24 0.37 Nifty 50 2.5 

Fund Reg (G) 

ICICI Pru - Banking & Financial 36.62 748 25.8 3.95 -0.03 17.75 16.08 18.2 0.3 S&P BSE Bankex 2.52 

Services Fund Reg (G) 

SBI - FMCG Regular (G) 78.11 206 14.79 2.64 10.36 12.86 0 13.73 0.39 S&P BSE FMCG 2.82 

ELSS 

Scheme 

NAV 

AUM 

(Rs. Cr) 


Since 

Inception 

Sharpe 

Ratio 

Benchmark 

Axis - Long Term Equity (G) 30.73 8888 5.53 1.69 -0.36 28.4 19.51 18.75 1.33 S&P BSE 200 #N/A 

Birla SL - Tax Relief 96 

Fund ELSS Reg (G) 22.02 2188 6.53 2.37 2.9 26.08 15.27 9.96 1.12 S&P BSE 200 2.44 

Franklin - India Taxshield (G) 433.7 2146 5.77 4.21 1.9 24.05 15.64 24.68 1.08 Nifty 500 2.46 

ICICI Pru - Long Term 

Equity Fund Reg (G) 276.88 3086 8.05 2.02 4.72 25.18 14.71 21.76 0.98 Nifty 500 2.32 

HDFC - LongTerm 

Advantage Fund (G) 241.05 1148 6.62 5.37 1.45 19.87 11.91 22.8 0.76 S&P BSE Sensex 2.52 

Motilal Oswal - MOSt Focussed 

Long Term Fund Reg (G) 11.44 145 8.58 3.47 3.67 0 0 9.86 -1.5 Nifty 500 3.28 

Exp. 

Ratio 

Exp. 

Ratio 

43


TECHNICAL VIEW 

Key takeaways from June 2016: 

• 

• 

• 

• 

• 

• 

India Meteorological Department (IMD) predicted 

monsoon season rainfall for the country as a whole 

is likely to be 106% of the long period average 

(LPA). 

CPI inflation for the month of May rose to 5.76% 

versus 5.47% (revised) in April. 

CAD narrowed sharply to $0.3 billion (0.1% of GDP) 

in Q4 of 2015-16, lower than $7.1 billion (1.3% of 

GDP) in Q3 of 2015-16. 

Mr. Raghuram Rajan announced his retirement as RBI 

governor as his term ends in September. 

Government opened Foreign Direct Investment in 

nine sectors including defence, aviation, food retail 

and pharmaceuticals. 

Britain voted to leave the European Union in the 

landmark referendum. 

Classical theory of Technical Analysis 

Indian equity market witnessed another rangebound 

trading action during the month and ended almost flat 

with a gain of 0.31%. Volume in the market increased as 

stock specific action was evident. Breadth of the market 

remained equally poised and a tug of war was seen 

amongst the bulls and the bears. FII in the latter half of 

the month changed stance and remained net seller during 

the month. However Small-Cap and Mid-Cap Index 

outperform the broader Index and ended with a decent 

gain in the month. The month proved to be an event 

driven as investors remained cautious with the presence of 

event risk in the form of RBI credit policy, Fed Meet and 

Brexit referendum. Uncertainty in the global front too 

weighed on our domestic market as well. 

On the technical front though Nifty scaled higher 

compared to previous month but witnessed extreme 

volatility within the range of 8050-8300. In the weekly 

chart Nifty formed Long-legged-Doji indicating indecisive 

in the market but for medium term perspective the said 

price action can be termed as consolidation phase and 

gestation period for the market to head higher if it is able 

to sustain above the 7900 level. Now Nifty is struggling to 

breach past the previous swing high of 8335. Inability to 

breach past the said resistance level calls for a ‘Double 

Top’ Bearish pattern in the market which might prove 

extremely negative for the market. On the contrary 

different set of view point can be drawn where the price 

structure since September 2015 onward can be marked 

down as ‘Inverted Head & Shoulder’ formation in daily 

chart. The said pattern if materializes or rather if Index 

breach past its neckline region above 8335-8350 then 

chances remain high that Nifty might scale past its 

previous all time high of 9119. 

Multiple price structure can be seen in Nifty as 

consolidation in prices for the last few trading weeks also 

raised odds of a probable ‘Extracting Triangle’ formation in 

daily chart. The said pattern too has a bullish implication 

and indicates of a possible pullback in the market as 

downside seems limited. The structural base line from the 

pattern or rather Current value of this trend line is placed 

at 7900. Change of trend or corrective decline in the 

market is likely to propel in the market if the psychological 

support level of 7990-8000 is breached. 

To sum up according to classical theory of Technical 

analysis the short term trend in the market in the 

forthcoming month now has changed from positive to 

neutral and would change to negative is the crucial 

support level of 7900 is breached. 

44


Modern approach in Technical Analysis 

On the oscillator front Nifty continues to remain in 

neutral price region in both daily and weekly time frame 

however frequent buy and sell signal in daily time frame 

indicates that market is likely to remain volatile in the 

forthcoming month as well and smooth directional 

movement in the market might be absent. MACD too in 

both daily and weekly time frame has a conflicting 

outcome which further reinstates of a possible rise in 

volatility. Other oscillator like that of ADX indicates of an 

emergence of a clear directional bet in the market where 

both -DI is above the +DI in both the time frame however 

ADX line is trading below the 20 level mark indicating 

absence of a clear trend in the market. Hence to sum up 

in the forthcoming month odds are in favor of the market 

maintaining its flat to negative outlook with volatility 

picking up. 

Nifty has breached the short term average of 21dma in 

daily chart but has been maintaining above all the medium 

to long term average of 50/100/200. Medium term 

averages of 50 and 100 have been maintaining a 

comfortable distance from the index. The short term 

average of 20dma would now act as crucial resistance 

level for the market in the forthcoming month which 

further coincides with gapdown area of 8188. Another 

important aspect to note that in technical analysis ‘Golden 

Crossover’ been initiated in daily time frame. ‘Golden 

Crossover’ denotes short term average of 50dma cutting 

the long term average of 200dma from below, the said 

formation would have a long term positive repercussion in 

the Indian equity market. Nifty during the month of May 

2016 bounced from its 50dma in daily chart, hence it can 

be concluded that the short term support for the market 

exist around 7950-60(50dma) 

Nifty is the past month remained confined within the 

Band Bollinger. The range of the study which got 

expanded due to the rally last month now contracted due 

to range bound trading action in the month June. Nifty 

during the month had been taking support from the mid 

band of the Bollinger in daily time frame and was able to 

sustain above it. The upper band of the Bollinger in daily 

time frame stands around 8320 which acted as crucial 

resistance for the market after that 8450 happens to be 

the next resistance level (upper band in weekly time 

frame). On the latter half of the month Nifty breached the 

mid-band in daily chart with a gap-down and now the 

next level of support can be seen from the mid-band in 

weekly time frame at around 7780. 

Indian VIX 

Indian VIX during the month though continues to remain 

still at lower levels however at the later half of the month 

witnessed some amount of traction and increased 

marginally in a crawling fashion. On the technical parlance 

45



the Index continues to honor the upward sloping 

trendline since December 2014 onward. Now Indian VIX 

has been gradually inching higher and probably might be 

in the formation stage of Symmetrical formation. The 

present price structure projects that the Index might scale 

higher till the downward sloping trendline of the pattern 

around 20 odd levels. Hence to sum up volatility in the 

market is likely to pick up in days to come which might 

not augur well for Nifty as an inverse relation seems to 

exist between each other. 

Gann Theory of Time cycle 

The rally since December 2011 onward if considered as 

the beginning of an impulse wave then Nifty presently is 

trading at its 5th wave. Previously impulse wave 1 took 

17 months in the making. Hence forth if wave 5 unfolds 

into an equidistance of wave 1 then the recent rally in 

the market might extend further till the month of June 

2018. Nifty now is trading within the 50 degree angle of 

inclination, further rally has resulted in to form bullish 

channel formation in weekly chart, target of which stands 

around 8450-8500, and according to W.D. Gann the said 

angle signifies 1 unit of price & 1 unit of time. So the 

said target of 8500 might be achieved within 4-5 months. 

However the theory of the famous 8-year bear cycle need 

to paid equal importance. This theory of 8-year bear cycle 

indicates that after every 8 year markets witness a major 

correction which is in the range of 20-60% The theory 

can be aptly applied in Indian markets as well as we 

witnessed a hefty correction in the year 1992 followed by 

a major correction in the year 2000, then in the year 

2008 and now the year 2016 is the next in the eight year 

cycle. 

Retracement principle 

In order to identify trend deciding level for the market 

crucial movement in the market are being identified 

which are as follows. The first being the entire correction 

since January 2008 onward till November 2008, the 

second being the gradual upscale for the Index since 

December 2011 till the high registered in March 2015 

and the last being the corrective decline since March 

2015 till date. Retracement level from all the different 

time frames conjoins around a singular point i.e. around 

8000-8035. Nifty if able to sustain above the said trend 

deciding level then positive biasness in the market is 

likely to remain and the recent slide in Index might be 

acknowledged as temporary in nature. 

Future Projection – July 2016 

Nifty is now in its 3rd super cycle wave after completing 7 

year triangular formation and breaking past it on 

March2014 above 6350.Thereafter, it is following a 7-leg 

(a-b-c-d-e-f-g) triple diametric structure developing since 

Aug 2013. Nifty achieved 2nd X correction in Oct2014 and 

reached c wave towards 9100. Nifty was in its upward 

channel in its triple combination which finished at 9100. 

Henceforth Nifty went into Complex Correctives involving 

“x-waves” which are mostly well channeled. The channeled 

fall from Mar2015 starting as 1st Corrective of a 7-legged 

“Diamond-Shaped Diametric” and the drop in Index till 

7678 marked the end-point of f-leg and if it is indeed a 

diametric then it requires g-leg to hit above 8000 which it 

did in the month of June. Hence since Nifty is trading 

above the crucial 8000 level mark the pattern can be 

confirmed and the study points towards an upside 

potential for the market till 8500-8650. 

Inter-market analysis 

U.S Market: Uncertainty in the global market was reflected 

in DJIA as well where the Index traded within a narrow 

range awaiting outcomes from key events like that of Fed 

Policy meet and the European Union referendum. Currency 

volatility too played a pivotal role in deciding the fate of 

the Index movement. On technical parlance DJIA since 

April 2016 onward had been in the formation stage of 

bullish Ascending Triangle and presently it seems that the 

third leg of the pattern might have ended and heading 

higher to end the fourth leg around 17975-18000. 

However inability to breach the resistance level led to 

draw conclusion that ideally it might have been a bearish 

triple Top formation. Decisive close above the said 

psychological resistance level would be recognized as 

breakout and negate the bearish structure. The Fed held 

46


off on raising interest rates this month, other than dismal 

job report the fear of UK vote to leave the European 

Union the process called ‘Brexit’ hurting the investors 

sentiment and in this process witnessed a wide sell-off in 

stocks and commodities as investor sentiment got hurt 

from the upcoming uncertainty and economic downside. 

Nymex Crude: Crude oil prices presently at a very crucial 

level of $50 which coincides with the previous swing 

high followed by the previously broken uptrendline. 

Breach of $50 mark and sustaining above it proves 

positivity in the commodity however both RSI and ADX 

showing emergence of negativity in crude oil prices. A 

negative divergence can be seen in crude oil prices in 

daily chart which impels trader to wait for confirmation of 

a trend or rather wait till $48 is breached for bearishness 

to return. One of the biggest factors driving the recent 

rally was due to an unexpected supply outage, which 

pushed around 2.5-3 million barrels per day (bpd) of 

crude oil out of the global market. Adding to that, the 

slowdown in US oil output and a weaker dollar 

exacerbated the price strength. Further in the event of a 

Brexit, a risk-off sentiment dented oil prices further. 

demand. Relatively higher bond yield is also due to higher 

fiscal deficit for the current year than what the market had 

expected and gross market borrowing by the government 

is almost unchanged. On the technical front bond yield 

had been in a severe downtrend since March 2016 onward 

however the recent pullback has lead the yield to scale 

higher towards its previous swing high, now at the breach 

of which would witness a change in trend. 

Indian Rupee: Prices had been moving precisely within a 

rising channel formation with its higher high formation 

over the past two years and now it has taken support from 

the lower panel of the trendline and might be heading 

higher towards its upper panel at around 68-69 in medium 

term perspective. Elliot Wave study reveals that prices 

might be moving in a complex correction pattern (w-x-y-xz) 

over the past two years and possibility arises that wave 

z where the currency is presently trading at is an 

extracting triangle. However on the short term perspective 

volatility is likely to prop in and failure to breach the 

support level of 66.50 would continue to maintain its 

uptrend. India’s rupee has been the worst-performing 

major Asian currency this year, and, the government is due 

to repay more than $20 billion in foreign-currency 

deposits to nonresident Indians in coming months. The 

large outflow, to happen over a short time and is expected 

to cause volatility in the rupee market 

10 Year Bond Yield India: RBI will sell up to Rs.10,000 

crore worth of government bonds on Monday to drain 

excess liquidity from the banking system—the first socalled 

open market operation (OMO) this fiscal year. The 

liquidity in the system is in surplus but banks are not in a 

mood to cut loan rates further. Many fear that the OMO 

will lead to a rise in bond yields as supply will outstrip 

Positives: 

• 

• 

• 

• 

• 

Six month old trendline support exists at 7900. 

Mid-band of Bollinger band exists at 7780-7800 

‘Golden Crossover’ in daily chart. 

According to Retracement principle Nifty need to 

sustain above 8000 to maintain uptrend. 

According to Elliot wave Nifty formed 7-legged 

Diametric pattern and heading higher till 8500-8650. 

47



Negatives: 

• 

• 

• 

• 

• 

Bearish ‘Double Top’ formation in daily chart. 

· Oscillators in neutral price territory with sell 

crossover. 

Indian VIX has been gradually inching higher. 

‘Triple Top’ formation in DJIA 

Negative divergence in Crude oil prices 

Uptrend in Rupee to remain due to rising channel 

formation 

To sum up Indian equity market started the month on a 

positive note celebrating two years of Modi government 

and was cherishing the monsoon forecast. Several key 

events were lined up during the month such as Reserve 

Bank of India’s monetary policy meeting and Federal 

Open Market Committee’s (FOMC) meeting, worries over 

rate hike by the Federal Reserve in the US though had 

been haunting the market. On the domestic front though 

RBI kept policy rate unchanged but market drew strength 

from RBI’s accommodative policy action. RBI assured the 

markets that it would infuse liquidity depending on the 

situation. The central bank hinted at progressive lowering 

of average ex ante liquidity deficit in the system to a 

position closer to neutrality. CPI inflation for the month of 

May rose to 5.76% versus 5.47%, CAD narrowed sharply 

to $0.3 billion (0.1% of GDP) in Q4 of 2015-16, 

significantly lower than $7.1 billion (1.3% of GDP) in Q3 

of 2015-16. With the rising CPI inflation, hope of interest 

rate cut gets dimmed in RBI’s next policy meet. 

Meanwhile, Mr. Raghuram Rajan also announced that his 

retirement as RBI governor when his term ends in 

September. In another development, Modi government 

opened its doors to more Foreign Direct Investment in 

nine sectors, including defence, aviation, food retail and 

pharmaceuticals. The expectation of passage of GST in 

this monsoon season in the parliament and the 

government’s move to ease the FDI regime is sure to 

boost the confidence of the market participants and India 

will continue to be the bright spot among its peers. While 

on the global front Fed in its meeting decided to keep 

interest rate unchanged citing poor employment data, the 

future guidance too remain dovish with no major rate 

hike expected in near term. On the Asian front, BOJ too 

maintained status-quo. Now the major anxiety or focus 

shifted to Brexit which posses a major risk for the global 

economy and lead to interest in safety assets i.e. bonds. 

The fight on Brexit or Bremain comes to an end. Britain 

voted to leave the European Union as the results from 

the landmark referendum showed. The outcome sets the 

country on an uncertain path and deals the largest 

setback to European Union. Quitting the European Union 

would also cost Britain access to the European Union’s 

trade barrier-free single market and mean it must seek 

new trade accords with countries around the world. Stock 

markets globally saw a tumble and India was no exception. 

The outcome resulted in fall in currencies, metal and oil 

and simultaneously resulted in appreciation in dollar, yen 

and surge in precious metal prices. Rupee also fell past 68 

against US dollar, India-based companies and sectors that 

have investments and exposure to Britain also felt the 

heat. On the technical front lower top and lower bottom 

which is a Bearish structure according to Dow Theory is in 

place. Nifty during the month though started on a positive 

note but failed to keep the momentum alive and ended 

almost flat with a gain of 0.31%. The previous swing high 

of 8336 proved crucial for the market and was unable to 

breach past the resistance level. Now inability to break the 

resistance led to the conclusion that a possible bearish 

Double top formation might in place for Nifty. Further Nifty 

since March 2016 onward had been advancing following a 

rising trendline which was also breached during the month 

which further validates of negative biasness in the market. 

However one need to remember that since April 2016 

onward Nifty had been moving within an extracting 

triangle and the high of 8294 marked as end of wave e, 

Nifty is still trading above b-d trendline hence possibility 

remains of a possible bounce back. Once index breaches 

the b-d trendline then the fall could be more sharper 

without any large bounce. Current value of this trend line 

or rather possible pullback level for the market exists 

around 7900. Nevertheless, the bearish gap remains 

between 8100-8188 with bears having an upper hand in 

the immediate near-term. Weekly charts display a ‘longlegged 

doji’ candlestick pattern that indicates indecision 

and hence Nifty could trade between the established 

range of 7900-8300 for the next few trading weeks. 

According to Elliot wave perspective Nifty had been 

following the 7-legged Diametric formation and inability to 

sustain above the trend deciding level of 8000 would 

mark as continuation of wave ‘h’ and fear of Index 

breaching the previous swing low of 7678 remains. Other 

global peers like DJIA too are trading weak with its bearish 

‘Triple Top’ while Crude oil price continues to grind around 

the $ 50 mark. Going ahead in the forthcoming month 

though sentiment in the market has turned negative and 

so has the chart structure however the broader range for 

the market still remains amidst 7900-8300. Chances 

remains that Index might witness a pullback at lower 

levels. 

48


BEST PERFORMERS FOR THE MONTH (NIFTY 100) WORST PERFORMERS FOR THE MONTH (NIFTY 100) 

26.05.2016 27.06.2016 26.05.2016 27.06.2016 

1 PNB 74.55 104.35 39.97% 1 INFRATEL 390.15 327.45 -16.07% 

2 HINDALCO 90.30 120.00 32.89% 2 IDEA 113.80 100.30 -11.86% 

3 BAJAJFINSV 1792.15 2166.00 20.86% 3 GLENMARK 865.15 780.10 -9.83% 

4 SBIN 184.15 216.80 17.73% 4 UPL 592.95 543.50 -8.34% 

5 VEDL 104.05 122.00 17.25% 5 IBULHSGFIN 718.95 659.25 -8.30% 

6 HINDPETRO 849.65 975.00 14.75% 6 BHEL 128.60 119.15 -7.35% 

7 AMBUJACEM 224.60 254.05 13.11% 7 ASHOKLEY 104.20 97.10 -6.81% 

8 BANKBARODA 134.85 151.85 12.61% 8 TECHM 542.30 505.90 -6.71% 

9 TATAMOTORS 399.25 447.95 12.20% 9 INFY 1234.15 1165.05 -5.60% 

10 BEL 1124.00 1258.15 11.94% 10 CAIRN 141.20 134.50 -4.75% 

11 BPCL 926.80 1037.00 11.89% 11 TATASTEEL 325.20 309.90 -4.70% 

12 SHREECEM 12946.65 14440.00 11.53% 12 BOSCHLTD 21817.35 20876.60 -4.31% 

13 ADANIPORTS 184.80 203.65 10.20% 13 TORNTPHARM 1382.40 1323.30 -4.28% 

14 COALINDIA 280.85 308.00 9.67% 14 ICICIBANK 241.15 232.20 -3.71% 

15 TATAMTRDVR 269.60 295.55 9.63% 15 SRTRANSFIN 1196.60 1157.00 -3.31% 

16 DABUR 294.40 319.50 8.53% 16 PFC 167.35 162.25 -3.05% 

17 NHPC 22.65 24.40 7.73% 17 APOLLOHOSP 1345.90 1306.00 -2.96% 

18 TITAN 361.90 389.65 7.67% 18 AUROPHARMA 744.55 722.95 -2.90% 

19 RECLTD 155.05 165.50 6.74% 19 ONGC 216.05 210.10 -2.75% 

20 ACC 1504.05 1600.65 6.42% 20 MCDOWELL-N 2464.65 2401.00 -2.58% 

Source: NSE 

Indices Performance 26.05.2016 –27.06.2016 

10% 

Sector Indices - Monthly Return (%) 

8% 

8.1% 

6% 

4% 

2% 

0.6% 

0.8% 

1.2% 

1.5% 

2.3% 

2.8% 

3.2% 3.3% 

0% 

-2% 

-4% 

-3.4% -3.2% -0.8% 

TECk IT CD CG HC FMCG BANKEX POWER REALTY AUTO OIL&GAS METAL 

Source: BSE 

49


COMMODITY MONTHLY ROUND UP 

““The best argument against democracy is a five minute conversation with the average voter”” 

- Winston Churchill 

Copper 

BREXIT: this single word is the momentous not only for 

the financial market, but can be remembered as one of 

the historical even after World War II. Another trickiest 

part of this beings, everybody miscalculated the event 

risk which really turned out to be Nassim Taleb’s real 

Black Swan Event. Other attributes of the event are, free 

fall of the British Pound, political chaos in the United 

Kingdom and last but not the least, the risk of spilling 

over from referendums in other member states of the 

European Union. A Legacy of more than 50 years is now 

over for the UK and for EU. Some experts are saying that 

the event is not as worse as Lehman Collapse for 

financial market but one should remember that London is 

the financial capital fof Europe and also for the world so 

certainly this political risk will have some long lasting 

effect on the markets. The contagion risk will be 

heightened if other nations of UK demand full fledged 

separation. Other than the BREXIT, market is also tensed 

with poll result from Spain where general election is 

going to be held after inconclusive result from last 

December poll. 

Generally copper is treated as a thermometer to measure 

the condition of the world economy and after BREXIT it’s 

really worth watching. Chile, the largest producer of copper 

said that plunging Pound isn’t going to dampen copper 

price, but it’s really hard to believe at least for the short 

term, it has to weather the wound. The London Metal 

Exchange’s three-month copper contract was down 3.2% 

at $4,627 a metric ton in early morning European trade on 

the result day and for the whole session wedged there. 

Ultimately the price is quoted in US Dollar, and if US 

Dollar appreciates then there is a high chance of lower 

prices for copper. So the challenge for copper is its own 

US Dollar sensitiveness. From the supply or demand side 

copper has no relation with BREXIT, but for demand side, it 

depends on China and from supply side it’s Chile which is 

not a part of the EU. 

Technical Analysis 

If we look at the monthly chart of COMEX active copper, 

it’s showing market presently near at 76% retracement 

level. We have drawn the Fibonacci levels from the top of 

$4.695 scored on 2011 to the base at 2008 low of $1.25. 

The market is in sideways as per the monthly chart for the 

last 6 months between $2.00 to $2.25. There is a chance 

that ongoing bearish development may take copper bit on 

the lower side around $1.80-$1.75 level but that may be 

the base for the market. All the monthly oscillator readings 

Weekly Chart : Copper COMEX Continuous 

50

OPTIMISM BUILDING UP 

are on lower side and indicating that this kind of 

situation may last but our recommendation is to wait for 

the market to come around $1.90-80 level where traders 

can take risk in buying position and put a stop at $1.69 

for an immediate target of $2.10. 

In MCX, the picture is the same but a steeper price 

decline like COMEX cannot be pointed out for which we 

must be thankful to depreciation in Indian Rupee against 

the greenback. In case we witness any steep fall in price 

due to fundamental factors, we can do the same thing by 

going long around 295 with a stop at 279 and the target 

will be around 324. Momentum player can take the 

opportunity to short the market below 303 with a stop of 

311 for the target of 295. 

GBP/USD 

The big question for pound traders may have been 

answered, but the outlook for the currency is murkier 

than ever. Sterling dropped 1.9 percent to $1.3422 in the 

very next weekly open after Brexit which is even after 

8% historical plunge on decision day. Sterling suffered a 

record one-day loss on Friday after Britain voted to leave 

the European Union, pushing it to the lowest level since 

1985. Investors face months of uncertainty — the 

mechanics and terms of the U.K.’s exit are yet to be 

determined, and the nation’s political leadership during 

the negotiations is unclear after Prime Minister David 

Cameron announced his resignation. Scotland is agitating 

for independence and the opposition Labour Party has 

been thrown into chaos. The chance of a Brexit has 

dominated pound trading in 2016, and sterling was the 

most visible casualty as the U.K.’s decision to quit the EU. 

Even the separation process turns out to be a lengthy one 

and this anxiety should be discounted by the market. 

Ongoing Prime Minister of UK Mr. Cameron said that his 

successor will trigger Article 50 and that’s may take things 

uglier and lengthier off course. 

Technical Analysis 

Sterling is trading below 2009 Lehman even low of 1.35. 

We are expecting market has to go down a bit near 1.27 in 

coming days. And its hard to imagine Pound below 1.2500 

range. And further more a speedy recovery in Pound 

cannot be expected (again Black Swan event such as 

reversing Referendum is definitely going to change the 

whole picture). In monthly stochastics we have one 

positive diversion with price, but that needs much greater 

time soon to play so we are not taking that into our 

account. A good gap down open below 1.35000 is off 

course a momentum opportunity for the traders and our 

advise will be too short the pair, but to place a stop above 

1.40 and the target will be around 1.2700 in may be 

within August 2016. 

Weekly Chart: GBP/USD Spot 

51


WORLD ECONOMIC EVENT CALENDAR - JULY 2016 


JN: Monetary Base YoY 

UK: Markit/CIPS UK Construction PMI 

EC: PPI MoM 

4 

US: Durable Goods Orders 

US: Factory Orders 

EC: Markit Eurozone Composite PMI 

CH: Caixin China PMI Composite 

IN: Nikkei India PMI Composite 

5 

US: MBA Mortgage Applications 

US: Trade Balance 

US: ISM Non-Manf. Composite 

US: Markit US Composite PMI 

EC: Markit Eurozone Retail PMI 

6 

11 

CH: CPI YoY 

JN: Machine Orders MoM 

12 

JN: PPI YoY 

IN: Industrial Production YoY 

US: Wholesale Inventories MoM 

US: NFIB Small Business Optimism 

IN: CPI YoY 

13 

JN: Industrial Production MoM 


US: Import Price Index MoM 

CH: Trade Balance 

US: Monthly Budget Statement 

18 

UK: Rightmove House Prices MoM UK: CPI YoY 

US: Housing Starts 

UK: PPI Output NSA MoM 

US: Net Long-term TIC Flows 

UK: RPI MoM 

19 

20 

UK: Jobless Claims Change 


UK: ILO Unemployment Rate 3Mths 

UK: Claimant Count Rate 

25 

EC: Consumer Confidence 

JN: Trade Balance 

US: Dallas Fed Manf. Activity 

JN: Leading Index CI 

26 

US: Consumer Confidence Index 

US: New Home Sales 

US: Richmond Fed Manufact. Index 

US: Markit US Composite PMI 

27 

UK: GDP QoQ 

US: FOMC Rate Decision (Upper Bound) 

US: Durable Goods Orders 


US: Pending Home Sales MoM 

IN: India, US: United States, EC: European Union, UK: United Kingdom, CH: China, JN: Japan 

US: Initial Jobless Claims 

UK: Industrial Production MoM 

US: ADP Employment Change 

UK: Halifax House Prices MoM 

US: Bloomberg Consumer Comfort 

7 

14 

UK: Bank of England Bank Rate 


US: PPI Final Demand MoM 

IN: Wholesale Prices YoY 


21 


EC: ECB Main Refinancing Rate 

JN: All Industry Activity Index MoM 

US: Existing Home Sales 

US: Leading Index 

28 


UK: Nationwide House PX MoM 

EC: Consumer Confidence 


EC: Economic Confidence 

JN: Jobless Rate 

US: ISM Manufacturing 

JN: Tokyo CPI Ex-Fresh Food YoY 

CH: Caixin China PMI Mfg 

IN: Nikkei India PMI Mfg 

1 

US: Change in Nonfarm Payrolls 

JN: BoP Current Account Balance 

US: Unemployment Rate 

IN: Exports YoY 

US: Change in Manufact. Payrolls 

8 

15 

EC: CPI YoY 

US: CPI MoM 

CH: GDP YoY 

US: U. of Mich. Sentiment 

US: Retail Sales Advance MoM 

22 

JN: Nikkei Japan PMI Mfg 

EC: Markit Eurozone Manufacturing PMI 

US: Markit US Manufacturing PMI 

EC: Markit Eurozone Composite PMI 

29 

JN: Industrial Production MoM 

JN: Jobless Rate 

US: GDP Annualized QoQ 

US: U. of Mich. Sentiment 

EC: GDP SA QoQ 

52

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Aspire Home Finance Corporation Limited 

Lender (Sanctioned) 

ICICI Bank 

Laxmi Vilas Bank 

Amount (in Crores) 

15.00 

30.00 

For Debt Fund Raising: 

Mr. Anirudh Sarvaiya - Sr. Manager 

ACL - anirudh.s@ashikagroup.com 

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ACL - kavita.tejwani@ashikagroup.com 

For Mergers & Acquisition: 

Mr. Mihir Mehta – Sr. Manager 

ACL - mihir.m@ashikagroup.com 

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For any valuable input or other 

discussion & business opportunity 

please send a mail to: 

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Trinity 

226/1, A.J.C. Bose Road 

7th Floor, Kolkata-700020 

Phone: 033-40102500 

Fax No: 033-22891555 

Email: ashika@ashikagroup.com 

1008, Raheja Centre, 

214, Nariman Point, 10th Floor 

Mumbai-400021 

Phone: 022-66111700 

Fax No: 022-66111710 

Email: mumbai@ashikagroup.com 

www.ashikagroup.com 

SNEHA ARTS • 9830090320

Ashika Monthly Insight Flip July 2016

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