Ashika Monthly Insight August 2016

krishna615

August, 2016

Market Overview

Monthly Insight Performance

Stock Picks:

Valuation at a Glance

Discretionary Spending

Sector Outlook-Information Technology

Economy Review

Economy Chart Book

Mutual Fund Overview

Technical View

Market Diary

Commodities Monthly Round up

World Economic Calendar

STRONG

ON

CONSUMPTION

Indian Oil Corporation Ltd. | LIC Housing Finance Ltd.

The Federal Bank Ltd | Unichem Laboratories Ltd.


AUGUST 2016

Inside this issue

01 Market

Overview

20 Discretionary

Spending

48 Mutual Fund

Overview

04 Monthly

Insight

Performance

26 Sector

Outlook

52 Technical

View

17 Valuation at a

09Stock Picks

Glance

• Indian Oil Corporation Ltd.

• LIC Housing Finance ltd.

• The Federal Bank Ltd.

• Unichem Laboratories Ltd.

31 38

Economy

Economy

Review

Chart

Book

58 Market Diary

59 Commodity

Monthly

Round up

62 World

Economic

Event Calender


STRONG ON CONSUMPTION

Strong influx of global funds since the month of March

has lifted Indian markets to record high levels. However,

as always the rally is at risk if the liquidity dries up or

the corporate earnings falter cold turkey. Foreign

institutional investors (FII) have poured in so far Rs

~41,300 crore since March till date. The markets have

been building positive consensus over GST while the

corporate results so far includes more hits than misses.

Of 40 odd BSE 100 companies that have declared results

so far, more than 50% of them bettered market

expectations. Similarly, majority of the Nifty companies

that have released their earnings have also bettered

street expectations. Although, there could be a silver

lining since meaningful margin expansion despite offer

robust volume growth, one time other income, could be

savior in most cases. However, strong surge in volume

and revenue growth is still to be witnessed meaningfully

for instance in cement sector whose price increase has

led to meaningful bottomline expansion despite of

healthy volume growth. As for the IT sector, automation,

lower margins and transformation of the business model

towards more value added work like cloud computing,

big data analytics, IOT etc. impending on the growth.

Nevertheless, most market experts expect meaningful

recovery in the second half of the year. As far as the GST

is concerned, the ruling government seemed to have

strategically given more importance to the regional

parties than the main opposition – Congress. Besides, the

BJP has also given the Congress importance being the

original proponents of the GST. The central government is

keen that a consensus emerges on the bill and that it

gets tabled and passed in the ongoing monsoon session

of Parliament, which is scheduled to end on 12 August.

Senior ministers of the ruling NDA met key opposition

leaders—including those from the Congress, the Left

parties and prominent regional parties—over the passage

of the constitutional amendment bill that will start the

roll-out of the GST. On 27th July 2016, the Union cabinet

accepted some of the recommendations given by a Rajya

Sabha select committee, including doing away with the

contentious 1% additional levy on supply of goods, one

of the Congress party’s three demands, and proposing full

compensation to states for five years for any revenue loss

arising from the transition to GST. However, the

government did not concede to two of the Congress’s key

demands to cap the GST rate at 18% and to include a

provision for a dispute resolution panel in the bill. Both

these demands are strongly opposed by the state

governments as well. However, finance minister Arun

Jaitley has maintained that making these changes is

neither feasible nor practical. The good news is that most

parties other than the Congress and the Left have already

assured the government of their support for the GST bill.

The passage of the crucial bill however still remains at the

mercy of the Congress which has 60 MPs in the Rajya

Sabha.

The other factor is monsoon which has already been

discounted by the markets but the actual outcome as and

how it spreads will provide fillip to consumption

particularly rural consumption which has remained muted

for the last two years. No wonder, the consumption based

stocks have already rallied in anticipation. India

Meteorological Department (IMD) on 28th July 2016 said

rainfall was 4% below the long-period average (the

average of rainfall over the past 50 years) for the country

as a whole. Only the southern peninsula, east and northeast

India recorded above-normal rainfall. Regions in

1


AUGUST 2016

MARKET OVERVIEW

Assam and Meghalaya saw extremely heavy rainfall at the

beginning of the week. According to media articles, in

the initial part of August, central, north-west and

peninsular regions will receive normal to above-normal

rainfall. The east will receive below-normal rainfall, IMD

said. So far, 80% of the country’s area has received

normal to excess rainfall and 20% has received deficient

rains. Saurashtra and Gujarat are facing the highest

rainfall deficit in the country of 57% and 43% from the

long-period average, respectively. The coming week is

expected to hold good news. The other major boost

towards consumption is from Pay commission recently

implemented by government. The share of discretionary

spending over necessities has been increasing since

1995. Basic spends on needs such as food and clothing

is not increasing in the same proportion keeping parity

with increase in income and prosperity. However,

discretionary spending has been showing exceptional

growth. Discretionary spending share in total household

consumption during 1995 stood at 39% which grew to

52% in 2005. Over the time it is expected that value

would migrate from basic spends categories to

discretionary spend categories and discretionary

spending share would move to 70% of total household

consumption by 2025. In this context, a best fitted

example is need for personal transport where two

wheelers now become the basic spend, whereas cars are

the discretionary spend. Rise in discretionary spending

should be backed by steady increase in per capita

income. India’s per capita income grew at modest pace

of 2.8% CAGR between FY10-FY14 and as per report of

Euromonitor it is expected to grow at a CAGR of 8.6%

during the period between 2015-2016. The report also

stated that the Indian median income per household is

set to increase by 89.8% in real terms to reach USD

10,073 (in constant 2014 prices) by 2030. Such growth

in income would transfer the consumer spending of

Indian middle class from “bottom of the pyramid” market

towards a greater and more sophisticated level. The rise

in discretionary spending would be primarily driven by

middle class people. A report from Credit Suisse “Global

Wealth Report 2015” stated that there are 664 million

adults belonging to the global middle class in 2015, or

14% of the adult population, where India has 23.6 million

adults who qualified as middle class in 2015, thus

representing about 3% of the global middle class. India

added 6.7 million adults to the middle class over these

15 years, and middle-class wealth rose by USD 1.2 trillion

and it accounts about 22.6% of the country’s wealth. The

wealth of middle class had grown exponentially between

2000 to 2007, which went up from USD 2,040 to USD

5,100. Hit by global economic crisis the wealth per

middle class adult plunged by 26% after which it settled

at USD 5,300 in 2010. It continued to fall due to adverse

exchange rates and was estimated at USD 4,352 in 2015.

Government has given big bonanza to central government

employees by approving 7th pay commission which

according to India Ratings & Research will boost

consumption in the economy by Rs 45,110 crore (0.3% of

GDP) and increase savings by Rs 30,710 crore (0.2% of

GDP). Incremental disposable income would lead to rise in

discretionary spending which in turn would drive the

demand for passenger vehicles, housing, consumer

durable products, apparels, etc. Good monsoon during this

fiscal is also raising hopes of improvement in farm income

which remained depressed in last two years on account of

scanty rainfall. A report of Goldman Sachs stated that if

the rural economy grows by one percentage point, it

could potentially boost overall gross domestic product

(GDP) growth by up to 70 basis points over two quarters.

Further, government has shown their strong commitment

in spurring the rural income by increasing budgetary

allocation towards agricultural & rural development during

FY17 budget. Government has increased budgetary

allocation to the ministry of Agriculture and Farmers

welfare by ~94% YoY to ~Rs 445 billion and ~25% YoY

increase in total Plan rural spending at Rs 878 billion

during FY17. Such massive budgetary allocation towards

2


STRONG ON CONSUMPTION

rural development would augment farm productivity and

rural income which in turn promote more discretionary

spending.

Globally, the bank of Japan announced an extra dose of

monetary stimulus and said it would buy ¥6 trillion

worth of exchange-traded funds annually, up from ¥3.3

trillion previously, in an attempt to stoke inflation and

growth by pumping money into the economy. It said it

would leave its asset-purchase target at ¥80 trillion a

year. Besides, the BOJ also left a key interest rate on

bank reserves unchanged at minus 0.1%. However, US

Fed at its recent policy meet has raised expectations of a

rate hike in 2016 sometime in September. The US central

bank cited significant improvement and policy makers

think the U.S. has at long last reached the promised land

of full employment. However, a recovery in the US

employment and as well as economy is positively

accepted by the investors across emerging markets since

it lifts emerging economies particularly in the long run. As

for India is concerned, the reduction in inflation over the

past two years together with exit of hawkish RBI governor

raises hopes of further rate cuts in the offing. However,

only reducing inflation and therefore interest rates in the

economy would hardly raise capacities and fuel back

demand in the key sectors and that is what the

government needs to remind itself.

3


AUGUST 2016

MARKET OVERVIEW

150,000

100,000

FII Investments (Rs. Cr.)

100,000

80,000

60,000

DII Investments (Rs. Cr.)

50,000

40,000

20,000

0

0

-20,000

-50,000

-40,000

-100,000

-60,000

-80,000

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

2012-13

2014-15

2016-17**

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17**

Paras Bothra

Vice President - Equity Research

Email - paras@ashikagroup.com

Phone : 022 6611 1704

4


STRONG ON CONSUMPTION

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 202 stocks out of which 159 has achieved

target. Hit Ratio stands at 79%. Out of these 88 stocks

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

period the Nifty has given a return of 66% 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, Shree Cement, Srikalahasti Pipes,

Aurobindo Pharma, MRF, Britannia, Can Fin Homes, Pidilite

Ind., HPCL, Deccan Cements, Torrent Pharma, Wim Plast,

Himatsingka Seide, Bajaj Finserv, Axiscades Engg, Lupin,

Maruti Suzuki, Glenmark Pharma, Kaveri Seeds, Havels

India, Indusind Bank, Berger Paints, UPL, Gujarat Gas,

Escorts, Relaxo Footwears, Zensar Tech, Hexaware Ltd.,

Dabur India, PI Industries, Finolex Ind., Sharda Motor, VA

Tech Wabag, Godrej Consumer, Emami, Zydus Wellness,

Bharti InfraTel, BPCL, Cummins India, Adani Ports, L&T, V-

Guard Ind., Prism Cement, Dr. Reddy Lab, Divis Lab, Ashok

Leyland, Zee Entertainment, City Union Bank, Tatamotor -

DVR, Gulshan Polyols, IFB Industries, Motherson Sumi, LIC

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

Engineering, SKS Microfinance, Indian Bank, Uflex, Axis

Bank, FDC Ltd., Multibase India, Tata Motors, Ultratech

Cement, Tech M, IPCA Lab, Magma Fincorp, Petronet LNG,

M & M, TCS Ltd and Hero MotoCorp 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

17%

24%

4%

49

Stocks

84

Stocks

79%

15%

31

Stocks

42%

19%

38

Stocks

Target Achieved Exit/Booked Calls Open

Total Call: 202

More than 100% Return

50-25% Return

100-50% Return

Less than 25% Return

5


AUGUST 2016

MONTHLY INSIGHT PERFORMANCE

Recommended Stocks

28/07/2016)

Jul-16 Godrej Properties Construction 365 415 13.7% 384.3 5.3% 364.6

Capital First Banking & Finance 557 650 16.7% 797.4 43.2% 747.4 Target Achieved

Aarti Industries Chemical 520 620 19.2% 569.0 9.4% 557.3

Steel Strips Wheels Auto 456 578 26.8% 552.0 21.1% 514.4

Jun-16 Dabur India FMCG 290 335 15.5% 320.0 10.3% 307.6

Godrej Consumer Prod FMCG 1481 1750 18.2% 1678.5 13.3% 1635.3

Glenmark Pharma Pharma 851 985 15.7% 872.0 2.5% 851.5

Tata Power Co Power 73 85 16.4% 77.4 6.0% 70.7

May-16 Mahindra & Mahindra Auto 1330 1550 16.5% 1485.2 11.7% 1452.5

PI Industries Paints & Chemical 635 760 19.7% 787.0 23.9% 752.7 Target Achieved

DCM Shriram Paints & Chemical 157 195 24.2% 239.0 52.2% 228.0 Target Achieved

Apr-16 ACC Cement 1370 1580 15.3% 1718.0 25.4% 1685.1 Target Achieved

Whirlpool India Home Appl. 680 810 19.1% 888.8 30.7% 844.8 Target Achieved

VA Tech Wabag Water Treatment 518 690 33.2% 645.0 24.5% 581.6

Mar-16 NTPC Power 126 148 17.5% 160.4 27.3% 158.6 Target Achieved

Marico FMCG 236 280 18.6% 289.4 22.6% 283.3 Target Achieved

Feb-16 HDFC Banking & Finance 1180 1400 18.6% 1410.0 19.5% 1402.2 Target Achieved

HCL Tech IT 866 1020 17.8% 877.0 1.3% 750.8

Hero MotoCorp Auto 2562 2820 10.1% 3307.0 29.1% 3197.3 Target Achieved

Jan-16 Pidilite Ind. Paints & Chemical 551 656 19.1% 758.0 37.6% 751.6 Target Achieved

Indraprastha Gas Oil & Gas 525 624 18.9% 649.7 23.8% 636.3 Target Achieved

SH Kelkar Personal Prod. 250 310 24.0% 275.8 10.3% 253.2

Texmaco Rail Engg. & Const. 151 183 21.2% 154.9 2.5% 105.9

Dec-15 Wabco India Auto 6280 7200 14.6% 6450.0 2.7% 6088.2

Sanofi India Pharma 4300 5060 17.7% 4768.0 10.9% 4587.6

Garware Wall Ropes Textiles 388 488 25.8% 460.0 18.6% 451.0

Nov-15 Inox Wind Power 397 500 25.9% 411.4 3.6% 223.6

Sterlite Tech Electrical Equip. 72 107 50.1% 108.6 51.8% 89.0 Target Achieved

GP Petroleums Oil & Gas 67 156 132.8% 90.2 34.6% 58.9

HCC Construction 26 43 65.4% 28.3 8.8% 23.5

Oct-15 Castrol India Oil & Gas 433 510 17.8% 474.4 9.5% 436.0

Zee Ent. Media 390 464 19.0% 494.0 26.7% 484.9 Target Achieved

Syngene Int Pharma 321 385 19.9% 458.6 42.9% 416.9 Target Achieved

Sep-15 Berger India Paints & Chemical 208 247 18.8% 301.9 45.1% 243.3 Target Achieved

Ceat Tyre 1080 1245 15.3% 1319.9 22.2% 881.8 Target Achieved

Aug-15 Cummins India Electrical Equip. 962 1130 17.5% 1247.7 29.7% 885.6 Target Achieved

Greenply Ind. Plywood 187 225 20.1% 297.5 59.1% 258.9 Target Achieved

TIME Technoplast Plastic Prod. 66 81 22.7% 69.9 5.9% 60.3

SQS India BFSI IT 680 863 26.9% 1291.0 89.9% 946.0 Target Achieved

Jul-15 Asian Paints Paints & Chemical 760 883 16.2% 1153.8 51.8% 1128.0 Target Achieved

Idea Cellular Telecom 179 209 16.8% 186.5 4.2% 105.1

Gruh Finance Banking & Finance 261 322 23.4% 306.4 17.4% 295.5

Jun-15 Maruti Suzuki Auto 3774 4367 15.7% 4790.0 26.9% 4763.5 Target Achieved

Whirlpool India Home Appl. 760 879 15.7% 888.8 16.9% 844.8 Target Achieved

May-15 Sun pharma Pharma 925 1220 31.9% 1010.0 9.2% 825.5

Tata Motors Auto 515 615 19.4% 533.8 3.7% 506.9

Ultratech Cement 2680 3300 23.1% 3714.9 38.6% 3678.8 Target Achieved

Tata Global FMCG 141 174 23.4% 150.5 6.7% 140.2

Apr-15 Abbott India Pharma 4020 4680 16.4% 6177.7 53.7% 4626.9 Target Achieved

Strides Arcolab Pharma 1153 1340 16.2% 1414.0 22.6% 1137.8 Target Achieved

Elantas Beck India Chemical 1130 1320 16.8% 1605.0 42.0% 1701.1 Target Achieved

Mar-15 MCX Finance 1177 1552 31.9% 1289.9 9.6% 1070.0

BEML Electrical Equip. 978 1200 22.7% 1612.0 64.8% 1004.1 Target Achieved

Rolta IT 191 250 30.9% 196.8 3.0% 66.5 Exit

6


STRONG ON CONSUMPTION

28/07/2016)

Feb-15 SML Isuzu Auto 979 1222 24.8% 1671.0 70.7% 1255.4 Target Achieved

HBL Power Battery 34.9 55 57.6% 64.5 84.8% 36.6 Target Achieved

Mangalam Cement Cement 321 432 34.6% 324.5 1.1% 298.2 Exit

Amrutanjan Health Pharma 449 650 44.8% 564.9 25.8% 469.2

Jan-15 Torrent Pharm Pharma 1096 1338 22.1% 1718.4 56.8% 1437.0 Target Achieved

Emami FMCG 783 924 18.0% 1365.0 74.3% 1126.4 Target Achieved

Dewan Housing Finance 199 240 20.9% 284.6 43.4% 223.8 Target Achieved

KPIT Tech IT 200 263 31.5% 232.4 16.2% 138.0 Exit

Dec-14 Bajaj Corp Personal Prod. 327 385 17.7% 522.0 59.6% 396.5 Target Achieved

Alstom India Electrical Equip. 586 725 23.7% 877.0 49.7% 626.8 Target Achieved

Transport Corp Transportation 284 354 24.6% 380.0 33.8% 373.4 Target Achieved

Multibase India Rubber Prod. 164 300 82.9% 342.5 108.8% 276.0 Target Achieved

Albert David Pharma 256 363 41.8% 404.3 57.9% 312.8 Target Achieved

Nov-14 ONGC Oil & Gas 395 516 30.6% 412.5 4.4% 221.4

Cadila Helthcare Pharma 277 320 15.6% 453.3 63.8% 361.8 Target Achieved

Karur Vysys Banks 541 700 29.4% 619.0 14.4% 482.1

JK Lakshmi Cement Cement 348 396 13.8% 429.9 23.5% 423.9 Target Achieved

Diwali Ashok Leyland Auto 44 65 46.2% 112.9 154.0% 94.1 Target Achieved

Pick Karur Vysys Banks 540 700 29.6% 619.0 14.6% 482.1

SKS Microfinance Finance 317 412 30.0% 710.0 124.0% #N/A Target Achieved

NOCIL Chemical 43 60 38.4% 64.5 48.8% 57.1 Target Achieved

Oct-14 Kesoram Industries Diversified 117 176 50.4% 152.9 30.6% 145.8 Exit

Akzo Nobel Paints & Chemical 1240 1460 17.7% 1639.0 32.2% 1616.1 Target Achieved

IFB Industries Household Appl. 295 380 28.8% 700.0 137.3% 377.2 Target Achieved

Munjal Auto Auto Parts 102 155 52.0% 134.0 31.4% 83.6

Sep-14 Tata Motors Auto 527 598 13.5% 612.4 16.2% 506.9 Target Achieved

Timken India Industrial Prod. 447 545 21.9% 669.0 49.7% 594.9 Target Achieved

KEC International Electrical Equip. 102 130 27.5% 164.8 61.6% 143.6 Target Achieved

Indoco Remedies Pharma 256 327 27.7% 412.2 61.0% 322.6 Target Achieved

Ingersoll-Rand Industrial Prod. 649 785 21.0% 1124.4 73.3% 775.3 Target Achieved

Aug-14 Bodal Chemicals Chemical 60 94 56.7% 111.8 86.3% 109.8 Exit

Som Distilleries Breweries & Dist. 211 269 27.5% 246.0 16.6% 160.9

Sharda Motor Auto Parts 391 536 37.1% 1190.0 204.3% 1010.0 Target Achieved

Axiscades Engg IT 106 138 30.2% 396.2 273.8% 234.6 Target Achieved

Visaka Industries Cement Prod. 119 173 45.4% 188.8 58.7% 164.6 Target Achieved

Deccan Cements Cement 270 408 51.1% 1108.5 310.5% 975.4 Target Achieved

Gulshan Polyols Chemical 177 274 54.8% 430.0 142.9% 363.2 Target Achieved

Jul-14 Mahindra Lifespace Real Estate 560 710 26.8% 664.4 18.6% 457.6

V-Guard Ind. Industrial Prod. 593 746 25.8% 1639.0 176.4% 1615.0 Target Achieved

Astra Microwaves Defence 142 186 31.0% 166.4 17.2% 129.3

Himatsingka Seide Textile 74 95 28.4% 297.0 301.4% 268.8 Target Achieved

Mangalam Cement Cement 221 285 29.0% 351.0 58.8% 298.2 Target Achieved

Jun-14 Coal India Coal 392 500 27.6% 447.1 14.1% 330.0 Target Achieved

Container Corporation Logistics 1180 1500 27.1% 1947.7 65.1% 1470.0 Target Achieved

Balmer Lawrie Logistics 473 700 48.0% 682.0 44.2% 628.6

Can Fin Homes Housing Finance 305 450 47.5% 1324.8 334.4% 1323.1 Target Achieved

Srikalahasti Pipes Iron & Steel Prod. 46 70 52.2% 349.0 658.7% 326.9 Target Achieved

May-14 Bank of Baroda Banking 164.4 201.6 22.6% 228.9 39.2% 154.5 Target Achieved

AIA Engineering Industrial Prod. 606 726 19.8% 1364.2 125.1% 1028.1 Target Achieved

MOIL Ltd. Metals & Mining 255 341 33.7% 341.7 34.0% 247.2 Target Achieved

Wim Plast Plastic Prod. 620 800 29.0% 2499.0 303.1% 2530.3 Target Achieved

Apr-14 Engineers India Engg. & Const. 224 270 20.5% 331.7 48.1% 225.3 Target Achieved

Gujarat Gas Gas 263 305 16.0% 862.4 227.9% 574.5 Target Achieved

City Union Bank Banking 52.8 69 30.7% 130.8 147.7% 129.8 Target Achieved

Relaxo Footwears Footwear 297 390 31.3% 960.1 223.3% 489.9 Target Achieved

7


AUGUST 2016

MONTHLY INSIGHT PERFORMANCE

28/07/2016)

Mar-14 Motherson Sumi Auto Ancillary 232 285 22.8% 540.8 133.1% 328.1 Target Achieved

PI Industries Agrichem 252 315 25.0% 787.2 212.4% 752.7 Target Achieved

VA Tech Wabag Water Treatment 323 383 18.6% 972.5 201.6% 581.6 Target Achieved

Feb-14 Bharti InfraTel Telecom - Infra 171 213 24.6% 499.7 192.2% 400.0 Target Achieved

UPL Fertilizer 187 251 34.2% 617.0 229.9% 610.1 Target Achieved

Finolex Ind. Pipes 155 185 19.4% 483.6 212.0% 470.0 Target Achieved

Jan-14 NIIT Tech IT 355 500 40.8% 631.0 77.7% 467.5 Target Achieved

Zensar Tech IT 349 500 43.3% 1121.0 221.2% 1054.5 Target Achieved

Bajaj Finserv Banking 726 850 17.1% 2775.0 282.2% 2665.1 Target Achieved

FDC Ltd. Pharma 130 170 30.8% 274.4 111.0% 191.5 Target Achieved

Dec-13 MRF Tyre 17350 19430 12.0% 46399.0 167.4% 34053.9 Target Achieved

Info Edge (India) Web Services 446 550 23.3% 1015.0 127.6% 823.5 Target Achieved

Indian Bank Banking 101 120 18.8% 224.3 122.0% 155.1 Target Achieved

Symphony Cons. Durable 405 500 23.5% 3275.0 708.6% 2412.5 Target Achieved

Nov-13 Pidilite Ind. Paints & Chemical 266 350 31.6% 758.0 185.0% 751.6 Target Achieved

Aurobindo Pharma Pharma 216 297 37.5% 1535.0 610.6% 779.3 Target Achieved

Kaveri Seeds Agri Prod. 305 580 90.4% 1075.5 253.1% 391.3 Target Achieved

Speciality Restaurant Restaurants 124 198 59.7% 218.6 76.3% 92.9 Target Achieved

Oct-13 Britannia FMCG 759 845 11.3% 3434.2 352.5% 2865.3 Target Achieved

Glenmark Pharma Pharma 520 610 17.3% 1262.9 142.9% 851.5 Target Achieved

Ultratech Cement Cement 1808 2045 13.1% 3714.9 105.5% 3678.8 Target Achieved

Sep-13 L&T Engg. & Const. 705 810 14.9% 1893.8 168.6% 1577.3 Target Achieved

Tech M IT 344 374 8.7% 700.9 103.9% 485.6 Target Achieved

Indusind Bank Banking & Finance 344 470 36.6% 1192.0 246.5% 1168.3 Target Achieved

Escorts Auto 82 108 32.5% 267.0 227.6% 259.5 Target Achieved

Aug-13 Hexaware Ltd. IT 107 130 21.5% 335.8 213.8% 229.9 Target Achieved

Godrej Consumer FMCG 815 950 16.6% 1678.5 106.0% 1635.3 Target Achieved

Torrent Pharma Pharma 421 475 12.8% 1718.4 308.2% 1437.0 Target Achieved

Jul-13 TCS Ltd IT 1460 1640 12.3% 2839.7 94.5% 2619.3 Target Achieved

Dabur India FMCG 150 170 13.3% 320.0 113.3% 307.6 Target Achieved

Rallis India Chemical 130 148 13.8% 298.7 129.7% 220.7 Target Achieved

Jun-13 Hero MotoCorp Auto 1736 2020 16.4% 3307.0 90.5% 3197.3 Target Achieved

Divis Lab Pharma 977 1120 14.6% 2484.7 154.3% 1195.5 Target Achieved

Corporation Bank Banking & Finance 77 92 19.8% 86.0 12.0% 42.4 Booked

May-13 Maruti Suzuki Auto 1673 1920 14.8% 4790.0 186.3% 4763.5 Target Achieved

Dr. Reddy Lab Pharma 1991 2280 14.5% 4386.6 120.3% 2959.8 Target Achieved

BPCL Oil & Gas 405 460 13.6% 1156.0 185.4% 583.8 Target Achieved

Kotak Mahindra Bank Banking & Finance 415 510 22.9% 778.9 87.6% 750.4 Target Achieved

Apr-13 L&T Engg. & Const. 683 915 34.0% 1893.8 177.3% 1577.3 Target Achieved

Pidilite Ind. Chemical 264 300 13.6% 758.0 187.1% 751.6 Target Achieved

Godrej Consumer FMCG 778 910 17.0% 1678.5 115.7% 1635.3 Target Achieved

Mar-13 ITC FMCG 291 352 21.0% 410.0 40.9% 254.3 Target Achieved

Berger Paints Chemical 95 116 21.6% 326.0 243.2% 243.3 Target Achieved

LIC Housing Fin Banking & Finance 232 284 22.4% 537.9 131.9% 514.1 Target Achieved

Zee Entertainment Media & Ent. 215 265 23.3% 494.0 129.8% 484.9 Target Achieved

Feb-13 Axis Bank Banking & Finance 301 397.8 32.2% 654.9 117.6% 543.9 Target Achieved

Tata Motors Auto 298 379 27.2% 612.4 105.5% 506.9 Target Achieved

Cairn India Oil & Gas 324 410 26.5% 386.0 19.1% 194.7 Booked

Petronet LNG Oil & Gas 152 200 31.6% 303.0 99.3% 297.3 Target Achieved

Jan-13 Adani Ports Others 135 180 33.3% 374.8 177.6% 225.3 Target Achieved

J & K Bank Banking & Finance 130 167 28.2% 195.5 50.0% 68.1 Target Achieved

Dec-12 Zee Entertainment Media & Ent 198 235 18.7% 494.0 149.5% 484.9 Target Achieved

Indusind Bank Banking & Finance 416 500 20.2% 1192.0 186.5% 1168.3 Target Achieved

Nov-12 IPCA Lab Pharma 450 545 21.1% 906.9 101.5% 493.4 Target Achieved

L&T Finance Banking & Finance 55 85 54.5% 97.1 76.5% 87.7 Target Achieved

Zydus Wellness FMCG 445 560 25.8% 1128.9 153.7% 792.0 Target Achieved

8


STRONG ON CONSUMPTION

28/07/2016)

Oct-12 Sun TV Media & Ent. 357 446 24.9% 494.9 38.6% 447.2 Target Achieved

Allahabad Bank Banking & Finance 147 180 22.4% 191.1 30.0% 78.4 Target Achieved

Shoppers stop Others 393 465 18.3% 624.4 58.9% 379.4 Target Achieved

Sep-12 Dish TV Media & Ent. 68 92 35.3% 121.7 78.9% 93.9 Target Achieved

Havels India Cons. Durables 111 127.6 15.0% 387.0 248.6% 380.5 Target Achieved

Aug-12 Lupin Pharma 570 672 17.9% 2129.0 273.5% 1705.0 Target Achieved

Bajaj Finserv Banking & Finance 730 877 20.1% 2775.0 280.1% 2665.1 Target Achieved

Jul-12 Uflex Others 112 145 29.5% 244.9 118.6% 246.8 Target Achieved

Cummins India Engg. & Const. 438 513 17.1% 1247.7 184.9% 885.6 Target Achieved

Exide Inds Others 135 165 22.2% 205.2 52.0% 176.7 Target Achieved

Engineers India Engg. & Const. 200 280 40.0% 305.0 52.5% 225.3 Target Achieved

Jun-12 Glenmark Pharma Pharma 350 410 17.1% 1262.9 260.8% 851.5 Target Achieved

Godrej Consumer FMCG 558 675 21.0% 1678.5 200.8% 1635.3 Target Achieved

Cera Sanitaryware Cons. Durables 248 340 37.1% 2960.9 1093.9% 2401.5 Target Achieved

HPCL Oil & Gas 300 365 21.7% 1253.3 317.8% 1229.4 Target Achieved

May-12 Emami FMCG 457 535 17.1% 1365.0 198.7% 1126.4 Target Achieved

Berger Paints Chemical 114 141 23.7% 326.0 186.0% 243.3 Target Achieved

Graphite India Others 92 110 19.6% 126.4 37.4% 78.6 Target Achieved

Rainbow papers Others 66 85 28.8% 94.4 43.0% 3.2 Target Achieved

Apr-12 Tatamotor - DVR Auto 158 200 26.6% 391.4 147.7% 327.8 Target Achieved

Pidilite Ind. Chemical 172 210 22.1% 724.8 321.4% 751.6 Target Achieved

Mar-12 Magma Fincorp Banking & Finance 70 ACCu 141.0 101.4% 105.5 Target Achieved

Torrent Power Power 222 290 30.6% 252.9 13.9% 173.7 Booked

Feb-12 Castrol India Oil & Gas 236 ACCU 544.0 130.5% 436.0 Target Achieved

Prism Cement Cement 48.75 ACCU 133.5 173.7% 110.6 Target Achieved

MRF Auto 9767 ACCU 46399.0 375.1% 34053.9 Target Achieved

Shoppers Stop Others 340 ACCU 624.4 83.6% 379.4 Target Achieved

Allahabad Bank Banking & Finance 200 ACCU 211.3 5.7% 78.4 Target Achieved

Zydus Wellness FMCG 382 ACCU 1128.9 195.5% 792.0 Target Achieved

MRPL Oil & Gas 71 ACCU 83.2 17.2% 81.5 Target Achieved

Akzo Nobal Cons. Durables 857 ACCU 1614.0 88.3% 1616.1 Target Achieved

Maruti Suzuki Auto 1320 ACCU 4790.0 262.9% 4763.5 Target Achieved

M & M Auto 749 ACCU 1485.2 98.3% 1452.5 Target Achieved

Feb-12 Tata Power Power 115 120 4.3% 117.6 2.2% 70.7 Target Achieved

Dr. Reddy Lab Pharma 1642 1795 9.3% 4386.6 167.1% 2959.8 Target Achieved

Jan-12 Shree Cement Cement 2100 ACCU 16499.0 685.7% 16287.6 Target Achieved

Dabur India FMCG 102 125 22.5% 320.0 213.7% 307.6 Target Achieved

9


AUGUST 2016

STOCK PICKS

Indian Oil Corporation Ltd.

CMP: Rs 543

Rating: BUY Target: Rs 620

Company Information

BSE Code 530965

NSE Code

Bloomberg Code

ISIN

IOC

IOCL IN

INE242A01010

Market Cap (Rs. Cr) 131934

Outstanding shares(Cr) 242.8

52-wk Hi/Lo (Rs.) 549.9 / 344.9

Avg. daily volume (1yr. on NSE) 1,788,109

Face Value(Rs.) 10

Book Value 313.0

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Share holding pattern as on June 2016 (%)

Others

24.8

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

Net Sales 449506.8 355926.6 374790.7 430259.8

Growth (%) (8.0) (20.8) 5.3 14.8

EBITDA 10534.0 23196.7 26610.1 28827.4

EBITDA Margin (%) 2.3 6.5 7.1 6.7

Net profit 3753.5 10301.8 13117.7 13768.3

Net Profit Margin (%) 0.8 2.9 3.5 3.2

EPS (Rs) 20.2 46.2 54.0 56.7

Consensus Estimate: Bloomberg

IOCL vs. Nifty

Dec-15

DII

12.4

Jan-16

Feb-16

FII

4.5

Mar-16

Apr-16

Promoters

58.3

May-16

Jun-16

Jul-16

Investment Rationale

Paradip refinery to ramp up margin

In order to ramp up the refining capacity, Indian Oil

Corporation Ltd. (IOCL) has recently started part of its 15

million tonnes per annum (mtpa) paradip refinery. It is

expected that it will be fully in FY17 and operational

benefits will be seen in FY18. Currently IOCL has six

refineries with a total capacity of 54.20 million tonnes. It

also has subsidiary refineries with 11.50 million tonnes

capacity. Paradip has taken its refining capacity to 80.7

million tonnes. Paradip refinery will enable IOCL to process

low-cost and heavier types of crude oil as well due to its

close proximity to the Paradip port will reduce fuel losses

for the company. This refinery is also equipped to produce

low-emission BS-IV-compliant motor fuel enabling IOCL to

benefit from earlier adoption of this standard in the

country. Due to the high-end technology being deployed,

the company expects the refinery to offer very high

margins to the tune of $6-7 a barrel over the average

refining margin $10-12 earned by IOCL at present. IOCL’s

management believes its blended/consolidated GRMs

would improve by $2-3 a barrel after commissioning of the

Paradip refinery.

Capex guidance

The management spend Rs. 14300 cr in FY16 for Capex,

the management also highlighted that expected capex for

FY17 would be Rs. 15300 cr, with the bulk of the

spending across marketing (Rs. 5100 cr) and refining (Rs.

4000 cr), with petro chem at Rs. 1700 cr (Polypropylene

project at Paradip). The company stated that total spends

on the refining segment over the next 5-6 years would be

Rs. 40000 cr, with Rs. 11500 cr spent on BS-6 (Euro-6)

upgrades, and Rs. 20000 cr spent on upgrades and

capacity enhancements at existing refineries (Gujarat,

Mathura, Panipat). Furthermore, with an effectuated

~16MTPA increase in capacity across Panipat (5MTPA),

Koyali (4.3MTPA), Matura (3MTPA), Barauni (3MTPA) and

Haldia (0.5MTPA) over the next five years will help in

increasing profits. Capex guidance does not include the

potential acquisition of stakes in E&P assets in Russia.

10


STRONG ON CONSUMPTION

Expansion to meet growing demand

IOCL will invest Rs 40,000 crore to expand its refining

capacity to over 100 million tonnes by 2022 as the

nation’s largest oil firm takes the lead to add capacity to

meet India’s rising energy needs. Recently International

Energy Agency’s World Energy Outlook has projected 4

per cent CAGR growth in India’s fuel demand to 348 MT

by 2030, from 184 MT in 2015-16. BP projects demand

to be 335 MT while EIA has pegged it at 294 MT, which

translates into a CAGR of 3 per cent. All the projections

clearly show that the demand will grow and IOCL is in the

right path to expand its refining capacity to 104.55 mt by

2022 from the current 80.7 mt per annum with an

investment of about Rs 40,000 crore.

Decline in subsidy burden, Improvement in cash flows

IOCL’s concern over the cash flows, due to subsidy

burden, has started to reduce. The decline in under

recoveries has been on the back of fall in crude oil

prices, diesel deregulation and direct benefit transfer

scheme implementation for LPG. The company is

confident that irrespective of the crude oil prices, the IPPlinked

prices for MS and HSD will be adhered to by the

government. Currently only kerosene and LPG prices are

under the regulatory regime and the government decision

to cap its sharing of kerosene subsidy at Rs. 12/litre and

LPG at Rs. 18/kg and the rest by oil PSUs is a welcome

move for OMCs. This adherence is expected to help the

company to sustain cash flows for the expected capex

plans and will maintain greater transparency in earnings.

Recent developments




IOCL has rejected an offer to buy a stake in a project

of the financially-stressed Nagarjuna Oil Refinery and

help to resurrect it, arguing that the project’s

technical configuration and financial burden were an

obstacle, according to company executives and

officials.

State Bank of India, country largest commercial bank

entered into an MoU with IOCL to engage IOCL Kisan

Seva Kendras (KSK) as Business Correspondents (BCs)

of SBI. The MoU is an initiative as part of the

financial inclusion programme of SBI.

The government is set to start consultations for an

ambitious plan to merge 13 state oil firms to create a

giant corporation whose revenue dwarfs global energy

major Chevron which competes with US conglomerate

General Electric in the Fortune-500 ranking.





Key Risks




The Union government is in favour of merging

Chennai Petroleum Corporation Ltd (CPCL) with its

parent, IOCL to bring the standalone refinery under

one umbrella

IOCL-owned Gujarat refinery will supply Bharat Stage

(BS)-IV compliant diesel from January 2017, a senior

official has said.

IOCL is in talks to buy debt-laden Gujarat State

Petroleum Corp’s (GPSC) stake in the underconstruction

Rs 4,500 crore Mundra LNG import

terminal in Gujarat.

IOCL, Oil India (OIL) and Bharat PetroResources (BPRL)

will pay Russia’s Rosneft $3.3 billion for buying equity

stakes in the latter’s two oil and gas projects in

September.

Increase in crude prices or INR depreciation will

increase under recovery.

Lower GRMs and higher inventory/forex losses could

be negative for IOCL.

Delays in Paradip refinery ramp up could adversely

impact its business growth.

Valuation

The Paradip refinery, once commissioned, will add to IOCL’s

refining margins given its high complexity, which should

aid earnings through volume growth and better blended

GRMs, while earnings remain more diversified with stable

co n t r i b u t i o n s f ro m t h e p i p e l i n e s e g m e n t , a n d

petrochemicals. Among OMCs, IOCL’s refineries are better

in terms of complexity and on average have generated

higher refining margins. With decline in under recoveries

on the back of fall in crude oil prices, diesel deregulation

and direct benefit transfer scheme implementation for LPG,

it is expected to help the company to improve its cash

flows thereby reduce its debt which will help the company

to lower its interest cost and improve its profitability and

returns. Robust domestic product demand growth and a

range bound crude price environment should aid the

marketing segment, a gradual expansion in margins is thus

expected to come through as well. In order to meet India’s

rising energy needs, IOCL is in the right path to expand its

refining capacity to over 100 MT by 2022 with an

investment of about Rs 40,000 crore. At current price, the

stock is trading at P/E multiple of 9.4x of FY18E EPS. We

advise our investors to BUY the stock with target price of

Rs. 620, valuing at P/E multiple of 10.9x FY18E EPS.

11


AUGUST 2016

STOCK PICKS

LIC Housing Finance Ltd.

CMP: Rs 519

Rating: BUY Target: Rs 608

Company Information

BSE Code 500253

NSE Code

Bloomberg Code

ISIN

LICHSGFIN

LICHF IN

INE115A01026

Market Cap (Rs. Cr) 26189

Outstanding shares(Cr) 50.5

52-wk Hi/Lo (Rs.) 537.9 / 388.65

Avg. daily volume (1yr. on NSE) 2,134,835

Face Value(Rs.) 2

Book Value (Rs) 182.6

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

LICHF vs. Nifty

Dec-15

Jan-16

Share holding pattern as on June2016 (%)

Others

22.1

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

Net interest Income 2,236.4 2944.1 3,454.2 4,001.5

NIM (%) 2.2 2.5 2.6 2.6

Operating Profit 2,109.2 2,710.0 3,363.0 3,887.2

PAT 1,386.2 1,660.8 1,981.7 2,329.3

EPS (Rs) 27.5 32.9 39.2 46.2

BV (Rs) 154.8 181.1 213.4 253.6

GNPA (%) 0.7 0.7 0.6 0.6

Feb-16

Consensus Estimate: Ashika Research

Mar-16

Promoters

40.3

DII

37.6

Apr-16

May-16

Jun-16

Jul-16

Investment Rationale

Holding 2nd Position in Housing Finance Sector

LIC Housing Finance Ltd (LICHF) is the second largest

housing finance company in India after HDFC with loan

book size of Rs 1,27,437 crore. Including banks, it is third

after HDFC and SBI with each having 15% market share.

Since FY07, LICHF has been increasing its loan book at an

aggressive pace of 25% CAGR, which is well above the

industry growth of ~15-17%. Keeping pace with the loan

book growth, it has also increased its market share and

almost doubled in last seven years to ~10% currently. The

growth has been primarily led by the individual loan book

(retail book), which accounts for 97% of the total loan

book. Gradually, LICHF has reduced its developer loan

book share from 10% in FY10 to 3% currently in order to

maintain stable asset quality. During 1QFY17, loan book

growth has moderated to 15% yoy as compared with 17%

yoy seen in the past. Moderation in loan growth was due

to single digit (9.2% yoy) increase in individual home loan

segment which accounts 88% of total loan book. While,

LAP book and developer loan book witnessed strong

growth of 122% yoy and 39% yoy respectively. Gradual

improvement in macro economy, rising disposable income

due to 7th pay commission would drive the home loan

sector which would benefit LICHF as it holds 2nd position

in housing finance sector.

NIMs improved during FY16

NIMs of LICHF have declined from 3% level in FY10 to

~2.2% during FY15 and then improved to 2.47% in FY16.

The moderation in NIMs was due to higher disbursement

of dual rate loans (currently account for ~45% of total

loans) since FY09, which have been fixed for a few years

at lower rates and then converted to floating loans at rates

higher by ~100-200 bps later, keeping yields under

pressure. Margins were also impacted due to increased

competition which led LICHF to keep lending rates at one

of the lowest levels in the industry. Further, company has

reduced the share of high yielding developer loans (yields

are higher by 300 bps vs individual loans) from 10% level

to 3%. LICHF's cost of fund remained higher due to

prolonged elevated interest rate scenario. Going ahead, it

12


STRONG ON CONSUMPTION

is expected that conversion of dual rate loans into high

rate floating rates, low cost borrowing through issue of

NCDs and wholesale deposits and gradually increasing of

LAP book would improve NIMs of LICHF from FY16 level.

Strong asset quality

The asset quality of housing finance sector generally

stays benign as major portion of the loan is lend to

individual salaried class people. The gross NPA ratio for

the industry is ~0.8% while LICHF’s Q1FY17 ratio is

below industry levels at 0.59% with absolute GNPA at Rs

757 crore. This is due to bulk of the exposure to the

salaried class (~85% of retail book), better underwriting

standards and lower LTV (loan to value). In the past two

years, it has witnessed some stress in asset quality largely

in the developer loan space. However, management stated

that these accounts are well collateralized with asset

coverage of ~2x wit recovery process is on and resolution

could come in next 2 to 3 quarters. During Q1FY17, the

company made a provision of Rs 92 crore on account of

ageing of old project loan, which had already been classified

as NPAs. As LICHF lend 88% of its loan book to individual

salaried class people, it would be able to maintain strong

asset quality despite slow recovery in economy.

Steady 1QFY17 Result

LICHF has posted steady 1QFY17 result where Net

interest income grew 25% yoy at Rs 825 crore. NIMs

came strong at 2.61%, an increase of 20 bps yoy due to

change in loan mix towards high yielding assets like LAP

and developer loan and low cost of fund. Advance grew

by 15.4% yoy led by 15% yoy growth in individual loan

and 39% yoy growth in developer loan. However PAT

growth was low at 7% yoy at Rs 408 crore, mainly due to

one-time provisions of Rs 92 crore on account of ageing

of old project loan, which had already been classified as

150,000

130,000

110,000

90,000

70,000

50,000

30,000

10,000

Loan book growth

20%

19%

18%

17%

16%

15%

14%

13%

12%

11%

10%

NPAs. Gross NPA ratio during the quarter remained industry

low at 0.59%. Improving domestic macros and revival in loan

market would lead LICHF to report strong quarter going

ahead.

Key Risks



Slowdown in economy could deter asset quality of its

developer loan segment, though its share is low in

overall portfolio.

If the company is unable to borrow low cost of funds

due to elevated interest rate regime, it could put

stress on its net interest margins.

Valuation

LICHF is the second largest Housing finance company after

HDFC with loan book of more than Rs 1 lakh crore and

would be benefited from stable growth in India’s mortgage

market. It has witnessed strong loan book growth over the

years which is above the industry average growth.

However, NIMs have declined since FY10, but LICHF have

been striving to revive that by increasing the share of LAP

and developer loan and borrowing through NCDs and

deposits which would reduce its cost of funds.

Government’s approval of 7th pay commission would yield

positive for housing finance companies as it would

increase the disposable income for government employees

which in turn would boost the housing demand. On asset

quality front, LICHF has done a commendable job by

maintaining it below industry average. We have a positive

view on the stock, given its strong position in housing

finance market, trusted brand name, healthy loan book

growth and superior asset quality. Hence we recommend

our investor to BUY the scrip with target price of Rs 608

from 12-18 months perspective. The scrip is currently

valued at P/Bv multiple of 2.0x on FY18E BVPS Rs 253.6.

FY14

Q1FY15

Q2FY15

Q3FY15

FY15

Q1FY16

Q2FY16

Q3FY16

FY16

Q1FY17

Loans (Rs crs)

Growth (RHS)%

Source: Company data

13


AUGUST 2016

STOCK PICKS

The Federal Bank Ltd.

CMP: Rs 65

Rating: BUY Target: Rs 78

Company Information

BSE Code 500469

NSE Code

Bloomberg Code

ISIN

FEDERALBNK

FB IN

INE171A01029

Market Cap (Rs. Cr) 11143

Outstanding shares(Cr) 171.9

52-wk Hi/Lo (Rs.) 69.7 / 41.35

Avg. daily volume (1yr. on NSE) 5,638,617

Face Value(Rs.) 2

Book Value 46.9

Company Description

Federal Bank Ltd. is a private commercial bank

headquartered at Aluva, Kerala having more than thousand

branches and ATMs spread across 25 States and 5 Union

Territories in India. The Bank was incorporated in 1931 and

became a scheduled commercial bank in 1970. Federal

Bank has a balance sheet size of Rs 938 billion. FED

mainly caters to four segments -Corporate, retail (including

NRI), SME and agriculture. Barring agriculture, which is

present only on the application side, the remaining three

segments contribute to the funding and application side.

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Share holding pattern as on June 2016 (%)

FII

13.9

DII

29.4

Investment Rationale

Strong earnings revival in the offing

Federal Bank’s earnings are set for a strong revival after

53% yoy de-growth in FY16 due to higher provisions. The

bank has opted for elevated provisioning primarily due to

some event-led provision required for food credit to

Government of Punjab, Discom UDAY related and some

backdated AQR related provisioning. The provisions for bad

loans nearly jumped by 6 times to 948 crore in FY16. The

management indicated that worst of asset quality fears are

behind. As of Q1FY17, fresh slippages have declined to Rs

280 crore from Rs 536 crore in Q4FY16 and Rs 317 crore in

Q1FY16. For Q1FY17, there have been no sale to ARCs, no

5:25 Structuring, no SDR and no S4A. Besides, the

management has stated that NPA addition to the tune of Rs

100-200 crore could arise in the coming quarters. Thus,

slippages are expected to moderate from here on and would

provide fillip to profitability on low provisions going ahead.

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

Net interest Income 2380 2504 2,730 3,120

NIM (%) 3.3 3.2 3.1 3.1

Operating Profit 1628 1424 1580 1856

PAT 1006 476 745 965

EPS (Rs) 5.9 2.8 4.3 5.6

BV (Rs) 45.2 48.2 51 55

GNPA (%) 2.0 2.8 3.0 2.7

Source: Ashika Research

Others

56.7

Established retail franchise

Federal bank has built a strong retail franchise over the

years which has been the key driving force of the bank’s

deposits and advances growth over the years. The bank

has grown its credit at a modest pace of 13.9% CAGR in

FY10-16 while deposit growth has always been maintained

better than industry growth rate. The retail loan book

constitutes 29%, wholesale (35%), SME (26%) and Agri

(11%) accounts for the rest. The retail loan book is

primarily constituted by Housing (46%). The retail deposit

ratio is as strong as 98% as of Q1FY17 while the CASA

14


STRONG ON CONSUMPTION

Company Description

Federal Bank Ltd. is a private commercial bank

headquartered at Aluva, Kerala having more than

thousand branches and ATMs spread across 25 States and

5 Union Territories in India. The Bank was incorporated in

1931 and became a scheduled commercial bank in 1970.

Federal Bank has a balance sheet size of Rs 938 billion.

FED mainly caters to four segments -Corporate, retail

(including NRI), SME and agriculture. Barring agriculture,

which is present only on the application side, the

remaining three segments contribute to the funding and

application side.

Investment Rationale

Strong earnings revival in the offing

Federal Bank’s earnings are set for a strong revival after

53% yoy de-growth in FY16 due to higher provisions. The

bank has opted for elevated provisioning primarily due to

some event-led provision required for food credit to

Government of Punjab, Discom UDAY related and some

backdated AQR related provisioning. The provisions for bad

loans nearly jumped by 6 times to 948 crore in FY16. The

management indicated that worst of asset quality fears are

behind. As of Q1FY17, fresh slippages have declined to Rs

280 crore from Rs 536 crore in Q4FY16 and Rs 317 crore

in Q1FY16. For Q1FY17, there have been no sale to ARCs,

no 5:25 Structuring, no SDR and no S4A. Besides, the

management has stated that NPA addition to the tune of Rs

100-200 crore could arise in the coming quarters. Thus,

slippages are expected to moderate from here on and

would provide fillip to profitability on low provisions going

ahead.

Established retail franchise

Federal bank has built a strong retail franchise over the

years which has been the key driving force of the bank’s

deposits and advances growth over the years. The bank

has grown its credit at a modest pace of 13.9% CAGR in

FY10-16 while deposit growth has always been

maintained better than industry growth rate. The retail

loan book constitutes 29%, wholesale (35%), SME (26%)

and Agri (11%) accounts for the rest. The retail loan book

is primarily constituted by Housing (46%). The retail

deposit ratio is as strong as 98% as of Q1FY17 while the

CASA ratio also remains strong at 32.83%. Federal bank

enjoys a strong presence in the state of Kerala with nearly

50% of branches accounting from Kerala. The bank holds

market share of 13.9% in Kerala and there has been

constant effort on the part of the management to improve

pan India presence and also build strong markets in certain

non-south states. However, Federal Bank also has a strong

NRI client base due to its locational advantage in NRI

stronghold south India which is supporting the deposit and

advance momentum. NRE deposits account for 38% of

Federal Bank’s deposit mix. Over the period from FY12-16,

share of total NRI remittances made through Federal bank

increased by 506 bps from 7.49% to 12.55%.

Stable net interest margins

Net Interest income grew at a CAGR of 8% between FY11

& FY16 while the net interest margins have been above

3% mark during this time frame. Strong margins have

been driven by continuously improving CASA ratio from

28.5% in FY13 to 32.5% by FY16, thus resulting in

declining cost of funds. Going ahead, further reduction in

interest rates will help federal bank owe its dependence

on deposits as source of funds (more than 95%).

Asset quality concerns contained

Asset quality over the years has remained stable until the

past three to four quarters incidental with its exposure to

SME and corporate loans. On the asset quality front, post

higher slippages in the last three or four quarters, GNPA

slippages eased at Rs 280 crore in Q1FY17. On a

sequential basis, decline in slippages has seen across

segment with slippages in corporate book at Rs 45 crore

vs. Rs 254 crore in Q4FY16, Slippage in SME book has also

lowered at Rs 134 crore in Q1FY17 vs. Rs 154 crore in

Q4FY16. Besides, Federal bank continues to be

conservative on building its corporate portfolio over the

last three years and continues to stay away from risky

large ticket infrastructure loans.

Healthy Capital Adequacy ratio

Federal Bank has a comfortable capital adequacy ratio of

13.6%, considerably higher than the RBI stipulated 9%.

This reduces risks of dilution in equity in the near future.

Decent return ratios

Over the years, Federal Bank’s return on assets (ROA) have

hovered ~1.3% mark while return on equity (ROE) ~13%

mark until from FY09-15. However, higher provisions have

15


AUGUST 2016

STOCK PICKS

Unichem Laboratories Ltd.

CMP: Rs 285

Rating: BUY Target: Rs 360

Company Information

BSE Code 506690

NSE Code

Bloomberg Code

ISIN

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

Consensus Estimate : Bloomberg, Ashika Research

UNICHEMLAB

UL IN

INE351A01035

Market Cap (Rs. Cr) 2589

Outstanding shares(Cr) 9.1

52-wk Hi/Lo (Rs.) 334.1 / 188.5

Avg. daily volume (1yr. on NSE) 134,786

Face Value(Rs.) 2

Book Value 105.1

140

130

120

110

100

90

80

70

60

50

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

ULL vs. Nifty

Dec-15

Jan-16

Share holding pattern as on June 2016 (%)

2000

1800

1600

1400

1200

1000

800

600

400

200

Net Sales 1201.8 1334.6 1586.8 1840.7

Growth (%) 6.0 11.0 18.9 16.0

EBITDA 101.4 160.4 215.8 272.4

EBITDA Margin (%) 8.4 12.0 13.6 14.8

Net profit 75.4 110.8 138.1 182.2

Net Profit Margin (%) 6.3 8.3 8.7 9.9

EPS (Rs) 8.3 11.9 15.2 20.1

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Volume('000)RHS ULL Nifty

0

Company Background

Unichem Laboratories Ltd. (ULL) is a Mumbai-based

integrated specialty pharmaceutical company having

sizeable presence in India with a fast-growing presence in

the US market. The Company is engaged in the

manufacture and sale of active pharmaceutical ingredients

(APIs) and formulations. The company has domestic

leadership in niche therapy areas of cardiology, neurology,

orthopaedics and anti infective. By combining strategic

research and in-depth industry knowledge, Unichem aims

to transform itself into a global pharmaceutical drug

company with an increasing focus on cutting-edge research

in domestic as well as in developed markets. With

formulations forming the core of Unichem’s business, the

company also manufactures active pharmaceutical

ingredients (APIs or bulk actives). The Company sells its

products in the United States market through its wholly

owned subsidiary, Unichem Pharmaceuticals (USA) Inc. The

Company operates manufacturing facilities at Ghaziabad,

Roha, Goa, Baddi, Pithampur and Sikkim.

Investment Rationale

Q1FY17 Result Analysis

Unichem Laboratories Ltd. Q1FY17 revenues grew 9.5%

YoY to Rs. 342.0 crore, in line with market estimate, on

account of 12.5% YoY growth in domestic sales to Rs.

221.5 crore and 16.7% growth in export sales to Rs. 97.1

crore. De-growth in API segment (-25% YoY), however,

pulled down the numbers a bit. Its gross margin was a

steady 63%; however, the reported EBITDA margin is at

13.1%, declined 79bps yoy due to higher staff costs and

other expenses (~Rs. 70m provision for the diminution in

value of assets in the Brazilian subsidiary). Adjusting for

this, the EBITDA margin was 15.2%, up 69bps yoy. Net

profit witnessed 11.1% YoY decline to Rs. 25.8 crore

mainly due to higher taxation and lower other income.

Domestic formulations back to normal

Domestic formulation business showcased healthy growth

aided by strong growth witnessed in the acute portfolio

with the help of volume growth, price growth and new

product introduction. Domestic formulations, which

16


STRONG ON CONSUMPTION

constitute ~56% of total revenues, are at the core of

overall performance. The acute, chronic and sub-chronic

ratio (as % of sales) for the company is 36, 58 and 6

respectively. The company’s core business has grown due

to restructuring exercise and inventory rationalisation and

NLEM implementation and the resulting channel

disturbances. Unichem has taken a series of measures

such as brand extensions, tap new markets and OTC

initiatives to enable their pillar brands to grow by double

digits. In the chronic space, company’s entry into latest

products coupled with untapped segments would enable

them to grow in line or higher in this high growth market.

As per the management, 21-22% of the domestic

portfolio is under National List of Essential Medicines

(NLEM), while 2-2.5% of the portfolio is under the FDC’s

banned by the Indian government. All these will not have

much material impact on the company revenue. The

company has improved growth in its matured portfolio

through focused promotional strategy on general

physicians. Therefore it is expected that gradual pickup in

domestic formulation business growth on account of

volume growth in chronic portfolio would aid in

expending gross margins going forward.

Robust growth posted by export formulation

The Company continues to see decent growth across the

g e o g r a p h i e s . T h e U S A S u b s i d i a r y ( U n i c h e m

Pharmaceuticals USA Inc) continues to show a robust

sales growth. Company has tied with large wholesalers

and a retail chain for products launched in US and is

focusing on scaling-up operations for sustained growth

over time. Export formulations, ~28% of total revenues,

have grown at a CAGR of 27% in FY11-16 on the back of

significant investments in the infrastructure to push

exports. New product launches in the US and a ramp-up

in CRAMS for US and EU based customers have

contributed to the growth. Unichem has extended its

operations into South Africa and Brazil and is also looking

to extend into other geographies. The CRAMS business, of

late, has struggled though, with customers postponing or

cancelling the requirements. For the rest of the exports,

the company is looking for US generics traction.

Unichem’s ANDA filings in the US stand at 36 with 21

approvals (including 1 tentative approval) out of which 15

products have been commercialized till date. Management

has identified 8-10 molecules from CNS, CVS & pain

management & oral prefilled syringes to be filed in FY17-

18. With all these launches it is expected to see

incremental exports revenue from US, going ahead.

Capex to boost growth

The strategic decision taken by the company in the recent

past has started paying-off in terms of productivity which

has gone up on a quarter on quarter basis. As a result of

such initiatives, the company sees a double-digit growth in

times ahead. The company has spent about Rs.120 crores

plus of capex for FY16 towards expansion of the Goa, API

side of Pithampur plant and the new site at Kolhapur.

Unichem has indicated Rs. 200 cr. capex in FY17, mainly for

an API plant at Kolhapur and maintenance capex. The

company expects to commercialize the Kolhapur plant by

Q1FY18. This plant will initially cater to RoW and domestic

markets. The company sees similar capital expenditure of

about Rs.150 crores in the next year too. The capex would

go for the second phase of Goa and the Kolhapur API plant.

Key Risks




Stringent quality norms from international regulators

Expanded span of price control in India

Volatility in currency

Valuation

Domestic formulations business is expected to improve on

account of pick up in domestic business backed by volume

growth of chronic portfolio. Expors formulations

improvement in on the cards on account of enhanced

focus in the US market on the back of incremental US

filings and subsequent launches. Expansion in EM’s such

as South Africa to drive growth momentum. Further, the

quicker-than-expected turnaround of its international

subsidiaries in the UK and Brazil would provide some

upside to margin and profit. The foray in OTC segment

(unienzyme) in the domestic market augurs well to grow in

the nonprescription space. Further it is expected that

operating margins to improve in future on account of

increase in gross margins from US, generating superior

margin mix and enhanced product mix. With strong traction

in the US markets, focus to enter in new geographies,

increased business driven by volume growth and continued

dominance of key products of Unichem depicts the growth

path of the company in times ahead. At CMP the company is

trading at an attractive valuation at 14.4x of consolidated

FY18E EPS. We recommended a ‘BUY’ on the stock with a

target price of Rs. 360 (appreciation of about 25%) valuing

at a P/E of 18x FY18E EPS with the medium to long term

investment horizon.

17


AUGUST 2016

VALUATION AT A GLANCE

FY17 FY18 FY17 FY18 FY16 P/O FY16 FY16

1 ACC 1685.1 31644.0 33.9 24.1 3.8 7.1 14.2 17.0 54.3 1.0

2 Adani Ports 225.3 46648.2 16.7 15.6 3.5 23.9 17.4 1.1 7.9 0.5

3 Ambuja Cements 271.6 42141.8 32.4 25.2 4.1 7.9 12.8 2.8 53.8 1.0

4 Apollo Hospitals 1348.0 18753.4 45.7 34.6 5.4 10.0 13.4 6.0 25.2 0.4

5 Ashok Leyland 94.1 26779.7 18.1 N/A 5.4 22.5 N/A 1.0 25.3 1.0

6 Asian Paints 1128.0 108197.5 50.9 43.3 19.3 33.4 33.8 7.5 41.7 0.7

7 Aurobindo Pharma 779.3 45602.3 18.4 15.4 6.5 32.5 27.0 2.5 7.4 0.3

8 Axis Bank 543.9 129803.8 13.2 9.4 2.4 17.0 20.5 5.0 14.3 0.9

9 Bajaj Auto 2660.5 76986.1 18.5 16.5 5.9 31.3 29.3 55.0 42.1 2.1

10 Bajaj Finserv 2665.1 42409.3 19.4 15.8 3.1 15.1 15.2 1.8 1.5 0.1

11 Bajaj Holdings 1800.0 20032.3 N/A N/A 1.3 15.8 N/A 32.5 16.0 1.8

12 Bank of Baroda 154.5 35599.3 N/A N/A 0.8 -12.0 N/A 0.0 N/A 0.0

13 Bank of India 110.7 10335.1 N/A N/A 0.3 -18.8 N/A 0.0 N/A 0.0

14 Bharat Forge 749.5 17447.9 23.1 18.5 4.9 18.5 20.5 7.5 26.8 1.0

15 Bharti Airtel 371.9 148663.3 26.8 21.3 2.3 8.3 9.1 1.4 9.9 N/A

16 Bharti Infratel 400.0 75866.7 27.5 24.3 4.1 13.5 17.5 3.0 24.0 0.8

17 BHEL 149.5 36579.4 65.2 21.7 1.1 -2.7 4.8 1.2 19.5 0.8

18 Bosch 24636.4 77355.4 N/A N/A 9.3 14.9 N/A 85.0 21.4 0.3

19 BPCL 583.8 84427.3 11.7 10.6 3.0 31.6 22.7 11.3 33.8 1.9

20 Britannia Industries 2865.3 34376.7 36.4 30.2 19.4 53.5 42.4 20.0 29.8 0.7

21 Cairn India 194.7 36503.6 21.9 16.5 0.7 -17.5 4.2 3.0 N/A 1.5

22 Canara Bank 258.1 14011.9 N/A N/A 0.4 -8.0 N/A 0.0 N/A 0.0

23 Cipla 520.7 41837.8 24.7 19.6 3.5 13.3 15.2 2.0 13.6 0.4

24 Coal India 330.0 208408.4 13.5 12.2 6.1 38.4 45.9 27.4 121.2 8.3

25 Colgate-Palmolive 931.4 25332.7 N/A N/A 24.8 64.4 N/A 10.0 47.2 1.1

26 Container Corp. 1470.0 28661.2 30.8 25.3 3.6 10.1 12.5 13.4 24.8 0.9

27 Cummins India 885.6 24547.4 31.3 26.4 7.4 23.6 25.0 14.0 52.9 1.6

28 Dabur India 307.6 54111.2 37.7 33.0 13.0 33.3 29.9 2.3 31.6 0.7

29 Divis Lab. 1195.5 31736.8 25.4 21.3 7.4 28.6 28.3 10.0 31.2 0.8

30 Dr Reddy’s Lab. 2959.8 50475.6 26.4 19.4 3.9 16.7 17.0 20.0 17.0 0.7

31 Eicher Motors 21099.8 57309.6 34.9 27.4 16.5 N/A 36.9 100.0 25.1 0.5

32 Exide Industries 176.7 15019.5 19.0 16.8 3.5 17.5 17.0 2.4 28.6 1.4

18


STRONG ON CONSUMPTION

FY17 FY18 FY17 FY18 FY16 P/O FY16 FY16

33 Federal Bank 64.8 11133.8 N/A N/A 1.4 6.2 N/A 0.7 24.8 1.1

34 GAIL 383.8 48684.2 14.2 11.5 1.4 6.5 10.7 6.0 24.1 1.6

35 GlaxoSmith Consumer 6353.4 26719.6 N/A N/A 10.9 30.1 N/A 70.0 42.9 N/A

36 Glaxosmithk Pharma. 3346.5 28345.9 56.2 50.8 16.7 21.4 32.7 50.0 112.4 1.5

37 Glenmark Pharma. 851.5 24024.4 17.7 15.9 5.6 19.3 23.5 2.0 8.0 0.2

38 Godrej Consumer 1635.3 55687.5 40.9 35.1 10.9 23.8 23.3 5.8 17.5 0.4

39 Grasim Industries 4837.7 45158.3 14.4 11.6 1.7 9.6 12.5 18.0 9.5 0.4

40 HCL Technologies 750.8 105919.6 13.4 12.0 3.8 28.8 25.4 22.0 42.2 N/A

41 HDFC 1402.2 221675.0 N/A N/A N/A N/A N/A 17.0 26.4 N/A

42 HDFC Bank 1248.5 316075.3 N/A N/A 4.2 18.6 N/A 9.5 18.8 0.8

43 Hero MotoCorp 3197.3 63846.1 N/A N/A 8.0 42.7 N/A 60.0 50.7 1.9

44 Hindalco Industries 134.3 27722.4 14.7 10.4 0.7 0.7 6.6 1.0 24.2 0.7

45 Hindustan Unilever 909.4 196816.5 42.4 36.8 49.5 102.1 121.5 16.0 84.8 1.8

46 HPCL 1229.4 41630.8 9.9 9.8 2.4 31.5 19.8 24.5 55.4 2.0

47 ICICI Bank 272.0 158220.3 12.4 9.4 1.7 11.4 15.5 5.0 28.6 1.8

48 Idea Cellular 105.1 37826.4 21.5 18.1 1.5 12.6 7.2 0.6 6.8 N/A

49 Indiabulls Housing Fin. 770.5 32466.7 11.2 9.3 3.0 27.1 26.9 45.0 80.9 5.8

50 Indian Oil Corporation 532.3 129239.9 9.9 9.0 1.7 15.5 15.6 6.6 34.2 1.2

51 IndusInd Bank 1168.3 69610.5 N/A N/A 4.0 N/A N/A 4.5 12.8 N/A

52 Infosys 1077.5 247495.8 16.7 14.9 4.0 24.1 23.3 24.3 40.7 N/A

53 ITC 254.3 306960.7 28.1 23.7 9.0 30.2 30.1 4.3 69.0 1.7

54 JSW Steel 1684.4 40714.5 13.4 11.2 1.9 -3.7 13.8 7.5 N/A 0.4

55 Kotak Mahindra Bank 750.4 137699.1 29.2 23.2 4.1 12.5 15.1 0.5 2.7 0.1

56 Larsen & Toubro 1577.3 147001.0 26.4 21.7 3.3 12.0 13.1 18.3 33.4 1.2

57 LIC Housing Finance 514.1 25944.7 N/A 8.8 2.8 19.5 N/A 5.0 18.1 1.0

58 Lupin 1705.0 76865.9 26.2 22.1 7.0 22.9 22.9 7.5 14.9 0.4

59 M & M Financial 321.1 18260.2 17.6 13.6 2.8 12.4 17.0 4.0 29.5 1.2

60 Mahindra & Mahindra 1452.5 90213.7 19.9 15.5 3.0 11.8 14.0 12.0 23.2 0.8

61 Marico 283.3 36550.5 42.9 36.7 17.4 37.0 36.8 4.3 75.7 1.5

62 Maruti Suzuki 4763.5 143895.8 23.6 20.3 5.2 18.0 19.9 25.0 19.8 0.5

63 Motherson Sumi 328.1 43399.2 25.9 20.4 10.2 33.7 34.1 2.0 30.7 0.6

64 MRF 34053.9 14442.7 N/A N/A 2.1 N/A N/A N/A N/A N/A

65 NMDC 103.3 40935.7 14.5 13.4 1.4 9.5 9.2 11.0 146.9 10.7

66 NTPC 158.6 130773.1 13.5 11.8 1.5 11.9 11.1 2.5 20.6 1.6

19


AUGUST 2016

VALUATION AT A GLANCE

67 Oil India 370.3 22260.1 10.6 8.8 1.0 9.1 10.4 20.0 46.1 5.4

68 ONGC 221.4 189375.8 11.4 9.2 1.0 7.7 10.1 9.5 44.3 4.3

69 Oracle Financial Serv. 3724.0 31614.5 22.9 20.0 8.6 32.7 32.2 665.0 471.9 17.9

70 Petronet LNG 297.3 22297.5 N/A N/A 3.5 15.3 N/A 2.0 17.0 0.7

71 Power Finance Corp. 219.3 28948.5 N/A N/A 0.8 18.1 N/A 9.1 20.0 4.1

72 Power Grid Corp. 176.2 92180.6 11.9 10.2 2.1 14.8 17.5 2.0 22.2 1.1

73 Punjab National Bank 129.0 25320.6 N/A N/A 0.6 -8.8 N/A 0.0 N/A 0.0

74 Reliance Capital 439.3 11098.2 10.4 9.0 0.8 8.0 7.4 9.0 22.7 2.0

75 Reliance Comm. 51.4 12793.4 19.2 13.8 0.3 1.8 2.6 0.0 0.0 N/A

76 Reliance Industries 1026.4 332788.3 11.7 10.1 1.4 12.0 11.3 10.0 12.5 1.0

77 Reliance Infrastructure 573.9 15091.7 6.8 6.5 0.5 7.2 7.3 8.0 11.7 1.4

78 Rural Electrification 212.1 20944.0 N/A N/A 0.7 21.1 N/A 10.7 19.8 5.0

79 Shriram Transport Fin. 1232.9 27971.2 17.2 13.4 2.7 12.2 16.1 10.0 19.2 0.8

80 Siemens 1313.0 46758.6 66.7 52.6 9.1 24.7 14.1 6.0 30.1 0.5

81 State Bank of India 231.0 179320.2 12.5 9.6 1.0 6.6 9.5 2.6 16.5 N/A

82 Steel Authority of India 47.4 19556.0 N/A 18.0 0.5 -9.5 3.9 2.0 38.3 4.2

83 Sun Pharma. 825.5 198660.6 28.4 23.4 6.3 16.5 20.7 3.0 15.9 0.4

84 Sundaram Finance 1533.8 17040.6 N/A N/A 4.1 14.7 N/A 11.0 21.0 0.7

85 Tata Chemicals 466.7 11889.5 11.9 10.8 1.9 13.2 15.6 10.0 32.7 2.1

86 TCS 2619.3 516104.3 19.4 17.6 7.0 38.1 31.0 43.5 35.3 1.7

87 Tata Global 140.2 8845.3 20.6 18.3 1.5 5.8 8.1 2.3 43.6 1.6

88 Tata Motors 506.9 163003.2 10.8 9.2 2.1 16.1 17.8 0.2 0.6 0.0

89 Tata Power 70.7 19121.7 13.8 11.3 1.3 5.8 10.3 1.3 783.1 1.8

90 Tata Steel 349.9 33978.0 18.7 10.2 1.2 -10.2 10.1 8.0 N/A N/A

91 Tech Mahindra 485.6 47137.5 13.1 11.4 3.3 23.4 21.0 6.0 37.2 N/A

92 Titan Company 426.6 37873.0 44.5 36.8 10.9 21.0 23.4 2.2 28.3 0.5

93 UltraTech Cement 3678.8 100958.8 31.1 24.0 4.8 11.4 15.7 9.5 11.4 0.3

94 United Breweries 822.3 21740.7 57.0 46.2 10.3 14.9 17.6 1.0 10.3 0.1

95 United Spirits 2531.9 36794.8 69.3 46.2 20.6 79.1 31.0 0.0 0.0 0.0

96 UPL 610.1 26149.1 16.2 13.9 3.9 20.5 20.8 5.0 16.5 0.8

97 Vedanta 169.5 50251.6 13.1 8.6 1.1 -18.9 11.1 3.5 N/A 2.1

98 Wipro 553.8 136828.1 15.3 13.8 2.8 19.1 17.9 6.0 16.6 N/A

99 Yes Bank 1223.5 51509.1 N/A N/A 3.7 19.9 N/A 10.0 16.6 0.8

100 Zee Entertainment 484.9 46567.4 37.0 29.8 11.0 22.7 24.0 2.3 24.5 0.5

#N/A: Not Available

Source: Bloomberg Consensus as on July 27, 2016

FY17 FY18 FY17 FY18 FY16 P/O FY16 FY16

20


STRONG ON CONSUMPTION

DISCRETIONARY SPENDING

Discretionary spending has strong correlation with the

economic development as the individuals trends to spend

more when his disposable income increase. Individual’s

priority is to fulfill its basic needs and after that any

residual incremental income is used to spend/invest in

purchasing homes, cars, luxury items and precious metals

based on their discretion. Government’s fiscal stimulus to

spur economic growth by way of recommending and

approving 7th Pay commission (PC) should increase the

demand for owning cars, homes and luxury items. The

increase in public sector wages and pensions should

boost urban discretionary demand, particularly for

durables such as automobiles and smaller-ticket items

like clothing and footwear and recreation services.

However, the impact of 6th PC had been robust owing to

higher percentage hike in wages and salary and 3 years

arrears as compared to 3 months arrears approved in 7th

PC. Implementation of the sixth pay commission led to a

rise in consumption expenditure on automobiles of more

than 20% the following year, compared with 7.4% yoy in

the year prior. Taking cues from previous pay commission,

it boosted consumer discretionary demand, pushed up

CPI inflation and increased the government’s fiscal

burden. Providing fiscal stimulus by ohiking wages of

central government employee also distrted the fiscal

balances of the government. For example, 6th PC, which

w a s i m p l e m e n t e d i n F Y 0 9 , raised t h e ce n t ral

government’s wage and pension bill from 2.0% of GDP in

FY08 to 2.7% in FY09 and further elevated to 3.3% in

FY10. Its impact was felt for two years as the government

staggered the payment of arrears accumulated owing to

its delayed implementation. Combined with a slowdown

in tax revenue caused by the global financial crisis, this

pushed up the fiscal deficit from 2.5% of GDP in FY08 to

over 6% in the subsequent two years. There was a similar

impact during the implementation of the Fifth Pay

Commission. Therefore the pay hikes should provide a

boost to growth, partly offsetting the growing downside

risks from slower global demand and still-weak private

sector investment. This year monsoon would play a big

role in spurting consumer demand after two consecutive

year of drought. Well spread monsoon across the country

would increase the productivity of rural areas, resulting in

improvement in purchasing power of rural people. The

demand for passenger vehicles, two wheelers, tractors,

home appliances and consumer staples are directly

correlated with the progress of monsoon during this year.

Implementation of GST from next financial year would

unlock the economic value which is concealed due to

current complexity of indirect tax structure. GST bill which

is seeking passage in Rajya Sabha would play a vital role

in economic growth as it would simplify the current

complex indirect tax structure and bring the unorganized

sector under tax purview. The Centre has been pushing

hard to build a consensus on the legislation so that it can

finally be passed in the ongoing monsoon session of

Parliament. Eventually, the implementation of GST would

create a uniform tax rate which could support the growth

of consumer demand going ahead. 7th Pay commission,

good monsoon, effect of GST and rising middle class are

the main catalysts that would drive the discretionary

spending, resulting in strong demand for Auto, Real estate,

Consumer durable goods and Retail Finance sectors.

Rising middle class income will give discretionary

spending power to people

India accounts for 3% of the global middle class with 23.6

million people. A report from Credit Suisse “Global Wealth

Report 2015” stated that there are 664 million adults

belonging to the global middle class in 2015, or 14% of

the adult population, where India has 23.6 million adults

who qualified as middle class in 2015. The growth of

wealth has been the fastest in India (second only to China)

over 15 years (2000-2015). India added 6.7 million adults

to the middle class over these 15 years, and middle-class

21


AUGUST 2016

DESCRETIONARY SPENDING

wealth rose by USD 1.2 trillion. The middle class in India has a 22.6% share (USD 780 billion or Rs 5,070,000 crore) of

the country’s wealth, while sections above the middle class (higher middle-class) share about 64% of the wealth. It has

been noticed that income per middle class adult in India has more than doubled from USD 2,040 (Rs 97,104) in 2000 to

USD 5,100 (Rs 205,020) in 2007. However, the growth of middle class in India was hit by global economic crisis in 2008

and plunged by 26%, after it bounced back to USD 5,300 (Rs 241,150) in 2010. It continued to fall due to adverse

exchange rates and was estimated at USD 4,352 (Rs 282,880) in 2015. In India, middle class wealth is dominated by real

assets, which account for about 86% of estimated household assets. Globally, the share of middle-class wealth has fallen

since 2008, except in China, over the period 2000 to 2015. Further according to the Euromonitor, the Indian average

income per household is set to increase by 89.8% in real terms to reach USD 10,073 (in constant 2014 prices) by 2030.

Such growth in income would transfer the consumer spending of Indian middle class from “bottom of the pyramid”

market towards a greater and more sophisticated level. Increase in per capita income would drive discretionary spending

which share in total household spending is expected to rise from 52% in 2005 to 70% in 2025 (as per Motilal Oswal

report). Rising middle classes would spur the demand for consumer durable goods, automobiles, real assets and consumer

loans.

Source : IMF, World Bank, Tech Sci Research

Source : Global Wealth report

Source : Global Wealth report

22


STRONG ON CONSUMPTION

Source: Motilal Oswal Presentation; Note: Discretionary items include Health

care, Education & Recreation, Communication, Transportation, Personal

products & services, Housing & Utilities and Food, beverages & Tobacco

7th Pay commission to boost consumer demand

Government approved a 16% increase in pay and 23.6%

hike in pensions for central government employees, in

line with the seventh pay commission’s recommendations.

However, government refrained from approving 63%

increase in allowances. The 7th PC will affect 4.7 million

central government employees and 5.3 million pensioners

and it will be implemented from January 1, 2016. 7th PC

payout will be favorable for consumption though its

impact on aggregate demand would be less than 6th PC.

Payout this time is likely to be ~1.2% of GDP over 2

years, which would be nearly half of what was realized

under 6th PC. In 6th PC the average pay hike was 60%

and total payout for government was 2.5% of GDP over 2

years. Further, in 7th PC the time arrears are just for 3

months versus 3 years in 6th PC. Higher wages would

drive demand growth for consumer discretionary items

such as automobiles, clothing and footwear. Rise in

automobile growth is considered as an indicator of

economic boom which grew over 20% in FY10 compared

with 7.4% in the year prior to the 6th PC implementation.

Historically, it had been noticed that wage hike by

government stroke higher CPI inflation due to increase in

HRA of government employees and pay rise which boost

discretionary demand. Post the implementation of 6th PC

CPI services inflation rose from 4.4% in FY08 to 7.4%

during FY09. Higher disposable income will find an outlet

through both discretionary categories as well as staples.

This will not only spur the demand, but also give

economic growth a fillip. According to India Ratings &

Research, the pay package will boost consumption in the

economy by Rs 45,110 crore (0.3% of GDP) and increase

savings by Rs 30,710 crore (0.2% of GDP). The report also

estimated that the central government’s net tax revenue

(after sharing with states) will increase by Rs 14,100 crore

(0.09% of GDP) post 7th PC. As per the report the full

impact of the pay hike would be felt in FY18, when bigticket

items get a fillip. For instance, real estate off-take

will kick-off with lag effect. As far as the auto sector is

concerned, government employees and pensioners

accounted for 10-15% of the 2.78 million passenger

vehicles sold in India during FY16 and pay hike can bring

more buyers, resulting in higher demand for passenger

vehicles. The pay commission will put extra money in the

hands of a large section of Indian consumers, thus spurring

the demand for discretionary and aspirational products

which could positively impact consumer durables sector.

Rising demand for consumer durable products, cars and

housing would drive the retail lending growth, thus could

have affirmative impact on banks and NBFCs.

% of GDP

6th PC

7th PC

Source: Industry report

Rural demand to drive discretionary spending on the

backdrop of good monsoon

Rural economy had been depressed in last two years as

two consecutive years of drought have taken a toll on rural

household incomes. But an ‘above normal’ monsoon, as

predicted by India Meteorological Department (IMD), could

boost rural demand which in turn, could have a positive

impact on overall economy. A report by Goldman Sachs

stated that if the rural economy grows by one percentage

point, it could potentially boost overall gross domestic

23


AUGUST 2016

DESCRETIONARY SPENDING

product (GDP) growth by up to 70 basis points over two

quarters. According to the report, the direct impact of an

increase in rural growth is between 45 and 50 bps, the

higher impact would have positive spillover effects

through the urban economy. There are eight indicators to

sense the rural growth which includes two-wheeler &

passenger car sales, household kerosene consumption,

tractor sales, agriculture loans, power demand, yarn

production, agriculture exports and government

expenditure on rural areas. Further, the report also stated

that there is an expectation, consumption to grow steadily

once the proceeds of the Pay Commission and the effects

of good monsoon play out. Higher rural growth could also

cool down headline inflation by 40 bps, due to easing of

supply constraints. Though in the interim period inflation

may edge upwards owing to demand pressures. A good

well spread monsoon across the country would bolster

farm income and boost rural discretionary spending.

Consecutive droughts in a row have also meant that rural

demand has declined significantly, leaving urban demand

and public investment to drive the economy in the

absence of pick-up in private investment. A normal to

above normal monsoon is positive news for rural demand

and for food prices. A bumper crop production would

help to keep the prices of pulses and vegetables under

check which in turn reduce headline inflation and would

encourage RBI to lower down interest rate further, thus

helping to revive the demand in economy. Even,

government is very proactive in boosting rural

consumption thus have increased the budgeted allocation

towards rural areas during FY17 budget. The Union

Budget for FY17 reflected the government’s firm

commitment to substantially boost investment in

Agriculture, Social Sector, Infrastructure and Employment

generation. The government has envisaged of doubling

the farmer’s income in the next five years. To achieve

that, government has increased budgetary allocation to

the ministry of Agriculture and Farmers welfare by ~94%

YoY to ~Rs 445 billion and ~25% YoY increase in total

Plan rural spending at Rs 878 billion during FY17. Such

massive budgetary allocation towards rural development

would augment farms productivity and rural income which

in turn promote more discretionary spending.

Rs. in billion

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16BE

FY17E

Source: Union Budget document

Source: Economic Survey FY 16

GST to discover more rational pricing for consumer

products

GST (Goods & service tax) is the single most powerful tax

reforms that India is going to see. The objective of GST is

to end the regime of multiple taxes on goods and services

and bring them under one rate, which would make the

pricing of the products more rational. The system will

change from the current production-based taxation to

being consumption-based, which would bring uniformity in

taxes across states and is expected to increase efficiency

and compliance in the system. GST will replace all the

indirect taxes including central excise duty, value added

tax, service tax, octroi, luxury tax with a single tax rate. For

manufactured consumer goods, the current tax regime

mean the consumer pays ~ 25-26% more than the cost of

production due to excise duty and value added tax.

24


STRONG ON CONSUMPTION

Experts’ indication of GST rate between 18-22% would

make consumer goods cheaper, thus providing leeway to

consumer to increase their budget of discretionary

spending. As per PWC, in current tax system, production

of goods is taxed and the rates are high. Further, tax on

tax adds to the cost build-up. Thus with the GST

implementation, overall taxes on goods are likely to come

down making them cheaper. Further, GST would also help

in lowering logistic cost and save up to 1.5% of sales in

warehousing costs. These benefits are expected to be

accrued by the companies and will be passed on to the

consumer gradually in order to spur demand for

consumer products.

Jan-14

Source: MOSPI

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Benign inflation and falling interest rates to boost

consumer demand

Elevated consumer price inflation always deters the

consumers’ buying sentiment. High inflation warrants tight

monetary policy, resulted in higher interest rate regime.

Since 2013, consumer based inflation has been

moderating after touching high of 11.2% in November

2013. Central Bank prudent approach to tackle inflation

coupled with slowdown in commodity prices and tepid

global economic growth are the reasons for which the

inflation is going down. Currently, CPI is at 5.77%

reported during June 2016, which is at comfort level of

RBI. As the inflation has been moderating since 2013, RBI

has been acting in sync with lower inflation by reducing

the benchmark interest rates. Nonetheless, most of the

rate cut benefit has not been passed on to end

consumers, thus limiting the broader impact of falling

interest rate. There is an expectation that inflation could

fall further as above normal monsoon predicted by IMD

would increase agricultural output and cut down the

supply shortage. Further fall in inflation would provide

room for RBI to consider the rate cut in coming policy

meets. Falling inflation and interest rates would act as a

blessing for consumer products and retail financing as

demand for these products would start rising.

Higher discretionary spending to benefit the sectors

Rising disposable income would increase discretionary

spending and that would benefit the sectors like auto,

real estate, consumer durable and NBFCs. Recent

government approval of 7th PC and One rank One

10

9

8

7

6

5

4

3

2

1

0

27-Apr-01

Source: RBI

5-Mar-02

30-Oct-02

pension would definitely bring the incremental money flow

for the government employees and pensioners. Historically

noticed that post the pay commission hike, the demand for

discretionary items such as cars, homes, clothes, electronic

products used to rise, though it came as a lag effect.

Expectation of good monsoon in current year also raises

the hopes of good farm productivity which will drive the

rural income. Higher rural income would also provide fillip

to consumer spending as 60% of total population stay in

rural areas. Below are the sectors which could be directly

benefited from rise in discretionary spending.

Auto sector:

7-Mar-03

31-Mar-04

26-Oct-05

25-Jul-06

Repo Rate (%)

30-Mar-07

30-Jul-08

7th PC would play a vital role in increasing

disposable income. Previously, during the 6th PC

government employees spent around 10% of total salary

increase towards purchasing new cars, which had positive

impact on demand for passenger vehicles (PV) and twowheelers.

Implementation of the 6th PC led to a rise in

8-Dec-08

21-Apr-09

2-Jul-10

2-Nov-10

3-May-11

16-Sep-11

29-Jan-13

20-Sep-13

15-Jan-15

29-Sep-15

25


AUGUST 2016

DESCRETIONARY SPENDING

consumption expenditure on automobiles of more than

20% the following year, compared with 7.4% yoy in the

year prior. The penetration of two-wheelers in the

government employee segment is high; therefore, the

passenger vehicle segment will likely be the key

beneficiary of salary increases due to implementation of

7th PC. Expectation of strong rural income on the

backdrop of good monsoon this year would also push the

demand for passenger vehicles and two wheelers.

Real estate: 7th PC will have a positive impact on the

realty sector and provide opportunity to middle class

government employees to own a house with the

increased disposable income. Hike in salary indicates an

increased spending power and better economic growth.

The real estate sector is already reeling under pressure

owing to high unsold inventory across the country and

tepid economic growth. Developers are offering discounts

to get buyers back into the market. 7th Pay Commission’s

is seen as a step that would boost the demand and home

ownership sentiment. Real estate market was a major

beneficiary during last 6th PC cycle but during 7th PC the

growth could be muted due to high prices of properties

as compared two last pay hike in 6th PC and no lump

sum arrears which can be used to make the down

payment to book a house. It has been noticed that realty

prices witnessed sharp appreciation in second half of

decade by increasing 51% between 2009-2015.

Consumer durables: Consumer spending will be on the

rise owing to an increase in government employee

income levels by 23.55% due to 7th PC. According to

CEAMA’s President (Consumer Electronics and Appliances

Manufacturers Association), with the rise in disposable

income and scaling of e-commerce, the consumer durable

industry is expected to grow by 15 % during FY17.

During 6th PC the sales volume of Air conditioners rose

by 27% yoy during 2009 from 4.8% yoy growth in 2008.

Demand for consumer durable products would improve

due to increase in disposable income, which will be due

to 7th PC and higher farm productivity amid good

ongoing monsoon.

Domestic car and two wheeler sales volume rose post 6th PC

Source: SIAM

ACs volume rose sharply post 6th PC

Source: Company data

Source: Industry report

Apparel and footwear volumes witnessed robust growth post 6th PC

Source: Company data

26


STRONG ON CONSUMPTION

Information Technology

The Indian IT industry has been growing in double digits

over the last 5 years, which is more than 2 times higher

than the global IT growth. According to the IBEF estimates,

the IT-BPM sector in India is estimated to expand at a

CAGR of 9.5% to $300bn by 2020. The high growth is

mainly driven by India being the largest sourcing

destination, accounting for approximately 55% of the

$146bn market. India's IT services is cost competitive as

it is ~3-4 times cheaper than the US market, which

continues to be its Unique Selling Proposition (USP) in

the global sourcing market as shown below. However,

India is gaining prominence in intellectual capital space

with several global IT firms setting up their innovation

centers in India and with increased usage of automation.

According to the IBEF, India’s highly qualified talent pool of technical graduates is one of the largest in the world and is

available at a cost saving of 60-70% to source countries. This large pool of qualified skilled workforce has enabled Indian

IT companies to help clients to save $ 200bn in the last five years. India’s IT industry amounts to 12.3% of the global

market, largely due to exports. Export of IT services accounted for 56% of total IT exports from India. The Business

Process Management (BPM) segment accounted for 23.5% of total IT exports during FY15.The IT-BPM sector in India grew

at a Compound Annual Growth rate (CAGR) of 15% over 2010-15, which is 3-4 times higher than the global IT-BPM

spend, and is estimated to expand at a CAGR of 9.5% to $300 billion by 2020.

The Indian IT industry has been growing rapidly in double digits over the last ten years. The contribution of the IT sector

to India’s GDP has increased to a whopping 9.5% in FY15 from 1.2% in FY98, thanks to its cost competitive advantage

and growing population. India’s IT sector is dominated by its exports business with the US economy contributing around

62% of the total exports as shown below, followed by the UK and Europe.

27


AUGUST 2016

SECTOR OUTLOOK

According to National Association of Software and

Services Companies (NASSCOM), the Indian IT sector is

forecasted to grow at a rate of 10%-12% in FY2017 in

constant currency terms. NASSCOM President R

Chandrashekar dismissed the recent dismal performance

of the IT companies and said that the IT sector continues

to enjoy high revenue visibility over the near term.

According to a report by NASSCOM and Zinnov

Management Consulting Pvt Ltd, India is the fourth largest

base for new businesses in the world and home to over

3,100 tech start-ups, is set to increase its base to 11,500

tech start-ups by 2020.India’s internet economy is

expected to touch Rs 10 trillion ($146.72 bn) by 2018,

accounting for 5% of the country’s GDP, according to a

report by the Boston Consulting Group (BCG) and Internet

and Mobile Association of India (IAMAI).

Social, Mobility, Analytics and Cloud (SMAC) are

collectively expected to offer a $1tn opportunity.

According to IBEF, Cloud represents the largest

opportunity under SMAC, increasing at a CAGR of

approximately 30% to around $650-700bn by 2020

followed by social media sector which offers a $250 bn

market opportunity by 2020.Public cloud services revenue

in India is expected to reach $ 838mn in 2015, growing by

33 per cent year-on-year (y-o-y), as per a report by Gartner

Inc. In yet another Gartner report, the public cloud market

alone in the country was estimated to treble to US$ 1.9

billion by 2018 from US$ 638 million in 2014. Increased

penetration of internet (including in rural areas) and rapid

emergence of e-commerce are the main drivers for

continued growth of data centre co-location and hosting

market in India.

Cloud based services to be the key thing going forward:

The public cloud services market in India is projected to

grow 30.4% in 2016 to total $1.26bn and reach $3.5bn by

2020, according to Gartner, Inc. The highest growth will

come from cloud system infrastructure services

(infrastructure as a service [IaaS]), which is projected to

grow 32.5% in 2016, with platform as a service (PaaS)

projected to grow 31.7%.

28


STRONG ON CONSUMPTION

Cloud services are growing due to organizations pursuing a digital business strategy. Among Indian companies, Mind Tree

and Peristent Systems have gained importance among other global IT companies followed by Tech Mahindra, L&T Infotech

and Hexaware Technologies as shown below.

Mind Tree is leading in the digital services category globally

However, recently IT sector performance has been soft

due to delayed client spending mostly due to uncertainty

around two factors:

• The upcoming presidential election in the US will

play a crucial part: India’s export of software services

accounted for $82 bn in the financial year March

2015, according to the Reserve Bank of India. 60%

of the export revenues came from North America.

Recently, America has doubled the fees for certain

categories of H1B and L1 visas to $4,000 and

$4,500 respectively which will adversely affect the

Indian IT companies. Nasscom said the decision’s

financial implications for the Indian technology

sector would be around $400 mn a year. In addition

the US presidential elections’ candidates are Hilary

Clinton and Donald Trump out of which the latter is

not so favorable to outsourcing of employees. He

has been frequently accusing India and China of

taking unfair “advantage of the United States” and

also told “H-1B, whatever it is, I use it but I don’t like

it. I want to scrap all H-1B visas.” IT industry may

face setbacks if Donald Trump wins the elections.

• Brexit may likely cause a delay in consumer

spending: The unexpected and most eventful event of

the UK leaving from the EU finally happened and will

likely have its repercussions over the coming years.

Many clients have delayed their client spending

because of the uncertain impact from this event. If

the UK currency -Pound depreciates further, current IT

contracts, if not re-negotiated, would either become

loss making propositions or would not yield the same

kind of margin. However, this may cause a temporary

setback for Indian IT firms but according to Nasscom

President “in the longer term, Brexit holds

opportunities for India”

Below are the companies whose exposure to the US and

European countries are given below. Tier 2 IT firms like

Persistent Systems and Hexaware derive more than 80%

of the revenues from North America while NIIT Technology

has the highest exposure (35%)to the European markets,

followed by Tech Mahindra which has around 29% of

exposure in Europe. Attrition rate of Infosys and Cyient has

been the highest >=20% off-late.

29


AUGUST 2016

SECTOR OUTLOOK

Companies Attrition Rate Utilisation Rate North America Europe + UK BFSI

Infosys 21.2% 76.5% 62.0% 23.0% 33%

TCS 13.6% 80.9% 53.5% 26.3% 40%

Wipro 16.5% 78.8% 53.5% 25.4% 25%

Mind Tree 16.5% 71.4% 66.7% 23.1% 25%

Cyient 19.9% 73.5% 60.0%


STRONG ON CONSUMPTION

Infosys 24.3 22.9 27.4 27.3 17.7 16.7

TCS 41.9 33.4 28.2 27.7 20.7 19.5

Wipro 20.4 17.9 21.2 20.1 15.3 15.1

HCL

Technology 28.2 26.0 21.5 21.1 14.2 13.5

OFSS 32.7 32.2 43.3 42.4 26.8 22.7

Mind Tree 24.3 22.5 17.6 16.3 16.4 16.1

Cyient 17.4 17.5 13.6 13.9 17.0 14.9

Persistent

Systems 19.5 18.4 17.9 16.1 18.6 17.3

Hexaware 28.8 30.2 16.5 17.0 16.4 14.6

NIIT

Technology 18.9 16.3 17.7 16.9 10.0 10.1

Source: Bloomberg

ROE EBITDA Margin P/E

FY16 FY17E FY16 FY17E FY16 FY17E

IT sector may face bumpy ride in the short term;

Artificial Intelligence (AI), cloud computing and digital

space will continue to experience good demand

According to Nasscom, Indian IT sector is likely to grow by

10%-12% in FY17 on the back of uniform growth and

ongoing demand for digitization. Overall, we expect the IT

sector to continue to perform well although it may be a

bumpy ride due to uncertainty around the upcoming US

elections and Brexit impact. There is one more factor

which needs attention i.e the rising need for automation

of work amid increasing use of technology. Nasscom

President Mr R Chandrashekhar expects 5%-10% of

existing jobs to be automated in the next 10 years.

MrChandrashekhar also pointed out that IT sector hiring

may slow down due to margin pressure by the IT firms as

well as increased automation of jobs. He said that “Hiring

activity in the year before last was 2.20 lakh (new jobs

were created in IT sector). Last year, (FY 2015-16) there

were about two lakh additions. This financial year, we are

expecting it to be on the lower side of that” .But he also

pointed out that while the entry-level coding jobs will see

a cut, the demand for skills in robotics, AI, digital space,

biotech, nanotech, smart technologies, etc will likely

increase. According to the Nasscom-McKinsey study about

60-70% of the existing staff will have to be re-skilled.

But overall, India remains in a sweet spot with respect to

IT sector demand over the coming years owing to its cost

competitiveness feature, although the risk reward ratio is

gradually fading as the visa costs have increased a lot

from before. There is also an increasing demand for IT in

healthcare and agriculture thanks to increasing use of

cloud computing.

Below are the commentary highlights of the management

of the Q2FY16 quarter. Overall, most of the Indian IT

companies expects their margins to remain under pressure

due to delay in client spending and increasing automation

of jobs.

Some of the recent developments in the IT sector are as

follows:






July,2016- Oracle Corp. agreed to pay $9.3 bn in cash

in order to acquire NetSuite a cloud-computing firm at

a 19% premium of $109. NetSuite is among the

leaders in providing such software via subscriptionbased,

on-demand computing, and buying it will help

Oracle compete against SAP SE, the leader in ERP

software, according to Gartner Inc.

June, 2016- Tata Consultancy Services (TCS), (BSE:

532540, NSE: TCS) a leading global IT services,

consulting and business solutions organization, has

announced a global partnership with Randstad Global

IT Solutions, to design and deploy one of the world’s

largest end-to-end public cloud marketplaces for IT

infrastructure services.

April 2016- Persistent Systems (PSYS) has recently

announced an agreement with IBM to work on

Internet of Things (IoT). PSYS will become a strategic

partner to develop IBM Watson IoT stack and also

invest in supporting IBM’s platforms. IoT is an

advanced version of technology which combines

sensors, network, and technology to create software

that gets updated on a real-time basis.

HCL Tech has signed seven large deals worth $2bn in

the January-March quarter.

April, 2016- Infosys, a global leader in consulting,

technology, and next-generation services, announced

the launch of Infosys Mana, a platform that brings

machine learning together with the deep knowledge

of an organization, to drive automation and innovation

– enabling businesses to continuously reinvent their

system landscapes.

31


AUGUST 2016

ECONOMIC REVIEW

The state of the banking sector has been a matter of

great concern for all stakeholders involved as much of the

government’s. The government has actually blamed the

RBI for deteriorating financials of banks. RBI governor

Raghuram Rajan had once said that ‘band-aids’ would no

longer work and banks need deep surgery. Band-aids here

were referred to the restructuring of loans on more

lenient terms to the ailing corporate loans which have

already turned non-performing advances (NPA). The asset

quality review (AQR) initiated by the RBI has actually

thrown up unpleasant surprises, however for good. Post

AQR which was initiated in the August-November period

last year, this has resulted in huge losses for the banks

(particularly PSBs) in the December 2015 as well as in

March 2016 quarters. Although, most banks have come

clean and the majority of the provisions have been done

with, nevertheless few of them including private sector

banks continue to throw unpleasant surprises as reported

in the ongoing earning season. The Financial stability

report (FSR) released by RBI last month has actually

highlighted the deep impact to the banking sector.

According to the report, the gross non-performing

advances (GNPAs) rose sharply to 7.6% of gross advances

in March 2016 from 5.1% in September 2015. The spike

in bad loans largely reflects re-classification of restructured

advances to NPAs following an asset quality review (AQR).

Consequently, the overall stressed advances rose only

marginally to 11.5% from 11.3% during the period, due to

a reduction in restructured standard advances ratio from

6.2% in September 2015 to 3.9% in March 2016. What’s

concerning is that according to the stress tests, the bad

loan mess could get uglier if the assumptions of RBI

actually come true. According to the FSR, even at baseline

assumptions, the GNPAs are likely to rise to 8.5% by

March 2017. But if the macroeconomic situation worsens,

the GNPAs could swell to 9.3% by March, to double the

level of GNPAs since September last.

Asset quality of SCBs

32


STRONG ON CONSUMPTION

NNPAs of SCBs

The good news is that the FSR has also highlighted of

improvements in the corporate sector and that the

stressed companies are deleveraging fast and the number

of ‘weak’ companies in the economy is declining. Based on

analysis of 1,800 to 2,600 Non Government Non Financial

(NGNF) listed companies, the FSR report concluded that

the proportion of “leveraged” companies declined sharply

from 19% in March 2015 to 14% in March 2016. The

proportion of “highly leveraged” companies also declined

from 14.2% to 12.9% over the same period. Moreover, the

share of debt of these companies in the total debt also

came down from 23.0% to 19.0%. The analysis also

highlighted improvement in the debt servicing capacity

and leverage of weak companies (interest coverage

ratio


AUGUST 2016

ECONOMIC REVIEW

NGNF listed companies: ‘Weak’ companies – current trend (2013-14 to 2015-16)

Although, the asset quality of the SCBs deteriorated

substantially between Sep 2015 and March 2016,

restructured standard advances ratio also reduced sharply

from 6.2% to 3.9% during the same period. Sharp

reduction in restructured standard advances actually

helped in arresting the deterioration in overall stressed

advances ratio and it rose marginally to 11.5% from

11.3% during the period. A spike in NPAs together with

decline in restructured loans implies that the AQR

mechanism has actually been working. Besides, this also

implies that the restructured loans of yester years which

have been kept as standard with “band-aids” are actually

NPAs. Thus, in the nutshell, marginal increase in overall

stressed advances implies that a substantial portion of

the restructured loans have been shifted to NPAs. PSBs

continued to hold the highest level of stressed advances

ratio at 14.5%, whereas, both private sector banks (PVBs)

and foreign banks (FBs), recorded stressed advances ratio

at 4.5%.

After the implementation of AQR, the banking sector

GNPAs showed a sharp y-o-y increase of 79.7% in March

2016. Large increases were observed across different

bank-groups. From chart (YoY Growth of GNPAs), it is

pretty evident that the rise in NPAs has been very steep

for PSBs followed by PVBs and then FBs. Moreover, from

probability density function, it can be deduced that

increasing proportion of restructured advances are

reckoned as non-performing.

YoY Growth of GNPAs

Sector-wise, the industrial sector showed a decline in the

stressed advances ratio from 19.9% to 19.4% between

September 2015 and March 2016, though the GNPA ratio

of the sector increased sharply to 11.9% from 7.3%.

Further, among the major sub-sectors within the industrial

sector, ‘basic metal and metal products’ accounted for the

highest stressed advances ratio as of March 2016 followed

by ‘construction’ and ‘textiles’. It is notable that the

stressed advances ratio of the ‘infrastructure’ sector

declined to 16.7% from 21.8% between September 2015

and March 2016.

34


STRONG ON CONSUMPTION

Asset quality in major sector (%)

Stressed advances ratios of major sub-sectors within

industry (% of advances of their respective sector)

Annual slippages of major sectors/sub-sectors (as on December 2015) on the other hand show that the textiles industry

had the highest number of standard accounts slipping into the NPA category at 8.8%, followed by the cement industry at

8.0%. In terms of outstanding amounts, the iron and steel industry saw the highest slippages at 7.8% followed by textiles

at 6.4%. While the government and the RBI is together taking various steps to address the issues plaguing the stressed

sectors, the demand environment is still yet to recover. Overall slippage ratio based on amount outstanding was 3.2%.

Annual slippage of standard accounts to NPA category-Sector wise (January to December 2015)

Overall share of large borrowers’ in total loans increased from 56.8% to 58.0% between September 2015 and March

2016. Besides, their share in GNPAs also increased from 83.4% to 86.4% during the same period. The GNPA ratio of large

borrowers increased sharply from 7.0% to 10.6% during September 2015 to March 2016 and the increase was evident

across all bank groups. In this respect, PSBs recorded the highest GNPA ratio at 12.9%. On the other hand, SMA-2 ratio

(SMA-2: Principal or interest payment overdue between 61-90 days) of large borrowers declined across bank-groups

during the same period. On the other hand, the share of standard advances in total funded amount outstanding of large

borrowers declined from 84.1% to 83.2% between September 2015 and March 2016.

35


AUGUST 2016

ECONOMIC REVIEW

Exposure of SCBs to large borrowers

(per cent)

Composition of total funded amount outstanding of large borrowers

Mar-15 Sep-15 Mar-16

i. Standard 86.2 84.1 83.2

ii. Restructured standard 8.4 8.9 6.2

iii. Sub-standard 1.7 2 3.3

iv. Doubtful 3 4.2 6.6

v. Loss 0.7 0.8 0.7

Top 100 borrowers

i. Fund-based amount outstanding to total fund-based amount outstanding of large borrowers 28.1 27.5 27.9

ii. Fund-based amount outstanding to total gross advances of SCBs 18.3 15.6 16.2

iii. GNPAs to total GNPAs of large borrowers 0.8 3.4 22.3

iv. GNPAs to total GNPAs of SCBs 0.7 2.9 19.3

Source: FSR

Share of large borrowers in SCBs’ loan portfolio

Distribution of SCBs based on RoAs (annual)

Needless to say, the profitability of the banks has been

hit hard on account of higher provisions owing to the

rising provisions and loans write off. According to FSR,

bank-wise distribution of RoAs (annual) shows that 21

SCBs with a share of 37% in the total assets of SCBs

recorded negative RoAs during the financial year 2015-

16. Further, seven banks with a share of 5% in the total

assets recorded RoAs in the range of 0 to 0.25%.

The report further states that the risks to the banking

sector have sharply increased since the publication of the

previous FSR in December 2015. A trend analysis of

banking stability indicator (BSI) suggests that stability

conditions in the banking sector which started

d e t e r i o rating i n m i d - 2 0 1 0 h ave n ow wo rsened

significantly. As earlier stated based on different macro

economic scenarios, stress tests were conducted for credit

risk at the system, bank-group and sectoral levels. The

macro stress tests suggest that under the baseline

scenario, the GNPA ratio may rise to 8.5% by March 2017

from 7.6% in March 2016. If the macro scenarios

deteriorate in the future, the GNPA ratio may further

increase to 9.3% by March 2017 under a severe stress

scenario. Under such a severe stress scenario, the system

level CRAR of SCBs may decline to 11.5% by March 2017

from 13.2% as of March 2016.

36


STRONG ON CONSUMPTION

Macroeconomic scenario assumptions (2016-17)

Macro factors Baseline Medium Stress Severe Stress

Growth in GVA at basic price 7.6 5.5 2.9

Gross fiscal deficit to GDP ratio 3.5 4.6 5.9

CPI (combined) inflation 5.1 6.9 9.1

Weighted average lending rate 11.3 11.9 12.6

Merchandise exports to GDP ratio 12.6 11.1 9.3

Current account balance to GDP ratio -1.3 -2.4 -4.8

Note: GVA=Gross value added

Source: FSR, RBI

Projection of system level GNPA ratios and CRAR of SCBs (under various scenarios)

A macro stress test of sectoral credit risk revealed that in a severe stress scenario, among the select seven sectors, iron

and steel industry (which had the highest GNPA ratio at 30.4% as of March 2016) could see its GNPA ratio moving up to

33.6% by March 2017 followed by engineering (from 10.9% to 15.9%) and infrastructure (from 7.1% to 13.4%).

37


AUGUST 2016

ECONOMIC REVIEW

Projected sectoral GNPAs under various scenarios (per cent of advances of their respective sector)

Thus, clearly while the process has been initiated and the

banks are in the process of much needed clean up of the

balance sheets. The corporate from the stressed sectors

like iron & steel, engineering has often been victim of

muted demand and excess capacities thus unable to

service interest payments. Thus, although the FSR

highlights that the corporate de-leveraging has indeed

begun and the final assessment states that even though

the banking sector is going through difficult phase, the

Indian financial sector remains stable. The newly

introduced sustainable structuring of stressed assets (S4A)

scheme expects to address the issues with the stressed

players particularly in the iron & steel sector. However,

the success will also be dependent on the outlook of the

industry apart from the will and management efficiency.

In the face of global challenges plaguing India’s growth

story, continuation of sound domestic policies and

structural reforms remain the key for macroeconomic

stability. Needless to say that the banking sector,

especially public sector banks which account for 70% of

the overall banking in the country needs to be dealt with

more seriousness from the government. Although, the

implementation of bankruptcy code will take time,

nevertheless it is a beginning and a step in the right

decision. However, for the time being the government

needs to continue boosting the investment climate by

committing higher public capex since private capex still

needs time to pick up. Indeed, this is jeopardy for the

government to allocate the crucial budgetary funds given

the implementation of Seventh Pay commission. The only

concern is that with the exit of Mr. Rajan, the sole

proponent of AQR, the whole cleaning process might again

slow down and we might again fall back to the erstwhile

practices of accumulation of bad loans and is a major

setback. The onus thus rests with successor of Rajan as

well as with the government to continue with the banking

reform process since there is a considerable amount of

expenses involved in the exercise. According to the media

reports, Moody’s Investors Service have highlighted in a

note (dated 10 June 2016) that the government will have

to infuse Rs 1.2 lakh crore into state-run banks by 2020 to

bolster their balance sheets and make good the losses

suffered by them. This is way higher than an additional Rs

45,000 crore capital infusion plan envisaged by the

government and is thus a major challenge ahead.

38


STRONG ON CONSUMPTION

ECONOMY CHART BOOK

Monetary Policy Rates

10

9

8

7

6

5

4

3

2

1

0

Repo & Rev.Repo (%)

Repo Rate (%)

Reverse Repo Rate (%)

28

23

18

13

8

3

Statutory Liquidity Ratio (%)

27-Apr-01

05-Mar-02

30-Oct-02

07-Mar-03

31-Mar-04

26-Oct-05

25-Jul-06

30-Mar-07

30-Jul-08

08-Dec-08

21-Apr-09

02-Jul-10

02-Nov-10

03-May-11

16-Sep-11

29-Jan-13

20-Sep-13

15-Jan-15

29-Sep-15

10

9

8

7

6

5

4

3

Cash Reserve Ratio (CRR) (%)

08-Apr-00

29-Jul-00

24-Feb-01

19-May-01

29-Dec-01

16-Nov-02

18-Sep-04

23-Dec-06

17-Feb-07

14-Apr-07

04-Aug-07

26-Apr-08

24-May-08

19-Jul-08

11-Oct-08

08-Nov-08

13-Feb-10

24-Apr-10

10-Mar-12

03-Nov-12

11

10

9

8

7

6

5

4

3

Bank Rate (%)

02-Apr-00

22-Jul-00

17-Feb-01

02-Mar-01

23-Oct-01

29-Oct-02

29-Apr-03

13-Feb-12

17-Apr-12

29-Jan-13

19-Mar-13

03-May-13

15-Jul-13

20-Sep-13

07-Oct-13

29-Oct-13

28-Jan-14

15-Jan-15

04-Mar-15

02-Jun-15

29-Sep-15

05-Apr-16

25-Oct-97

08-Nov-08

07-Nov-09

18-Dec-10

11-Aug-12

14-Jun-14

09-Aug-14

07-Feb-15

02-Apr-16

11

10

9

8

7

6

5

4

3

Marginal Standing Facility (%)

03-May-11

16-Jun-11

26-Jul-11

16-Sep-11

25-Oct-11

17-Apr-12

29-Jan-13

19-Mar-13

03-May-13

15-Jul-13

20-Sep-13

07-Oct-13

29-Oct-13

28-Jan-14

15-Jan-15

04-Mar-15

02-Jun-15

29-Sep-15

05-Apr-16

10.5%

10.0%

9.5%

9.0%

8.5%

8.0%

7.5%

7.0%

SBI Base Rate (%)

01-Jul-10

21-Oct-10

03-Jan-11

14-Feb-11

25-Apr-11

12-May-11

11-Jul-11

13-Aug-11

20-Sep-12

19-Sep-13

19-Sep-13

07-Nov-13

10-Apr-15

08-Jun-15

05-Oct-15

39


AUGUST 2016

ECONOMY CHART BOOK

Liquidity Indicator

13.0

12.0

11.0

10.0

9.0

8.0

7.0

6.0

5.0

4.0

10 Years G-Sec Yield (%)

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

14

India's Government T-Bill (%)

12

10

8

6

4

2

0

T - Bill 364 Days(%)

T - Bill 91 Days(%)

T - Bill 30 Days(%)

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

May-11

Jul-11

Nov-11

Feb-12

May-12

Aug-12

Nov-12

Feb-13

May-13

Aug-13

Nov-13

Feb-14

May-14

Aug-14

Nov-14

Feb-15

May-15

Aug-15

Nov-15

Feb-16

May-16

18

16

Commercial Paper Rate (%)

14

12

10

8

6

4

2

CP 1 Month (%) CP 3 Month (%)

0

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

40


STRONG ON CONSUMPTION

16

India's AAA Corporate Bond Yield (%)

14

12

10

8

6

4

2

10-Year 5-Year 1-Year

0

Jan-02

Apr-02

Aug-02

Dec-02

Apr-03

Aug-03

Dec-03

Mar-04

Jul-04

Nov-04

Mar-05

Jun-05

Oct-05

Feb-06

Jun-06

Oct-06

Feb-07

Jun-07

Sep-07

Jan-08

May-08

Sep-08

Dec-08

May-09

Aug-09

Dec-09

Apr-10

Aug-10

Nov-10

Mar-11

Jul-11

Nov-11

Feb-12

Jun-12

Oct-12

Feb-13

Jun-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

Apr-15

Aug-15

Dec-15

Apr-16

Fund Flow

150,000

100,000

50,000

0

-50,000

-100,000

FII Investments (Rs. Cr.)

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

FDI Inflows (USD Mn)

140

120

100

80

60

40

20

0

-20

-40

-60

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

Inflation

12.0%

WPI Inflation - All Commodities

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

-2.0%

-4.0%

-6.0%

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10

Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

Nov-14

Apr-15

Sep-15

Feb-16

2004-05

2006-07

2008-09

2010-11

2012-13

2014-15

2016-17**

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

In USD mn

% growth (in USD)

10.0

CPI Inflation - Combined (Base - 2012)

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

41


AUGUST 2016

ECONOMY CHART BOOK

Industrial Activities

25%

IIP (YoY)

60

Nikkei India Manufacturing PMI

20%

58

15%

56

10%

54

5%

52

0%

50

-5%

48

-10%

Apr-06

Nov-06

Jun-07

Jan-08

Aug-08

Mar-09

Oct-09

May-10

Dec-10

Jul-11

Mar-12

Oct-12

May-13

Dec-13

Jul-14

Feb-15

Sep-15

Apr-16

46

30%

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

Sectoral IIP (YoY)

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-13

Apr-14

Aug-14

Dec-14

Apr-15

Mining Manufacturing Electricity General

Aug-15

Dec-15

Apr-16

80%

User IIP (YoY)

60%

40%

20%

0%

-20%

-40%

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-13

Apr-14

Aug-14

Dec-14

Apr-15

Aug-15

Dec-15

Apr-16

Basic Goods Capital Goods Intermediate Goods

42


STRONG ON CONSUMPTION

14

Index of Eight Core Industries

12

10

8

6

4

2

0

-2

Apr-05

Nov-05

Jun-06

Jan-07

Aug-07

Mar-08

Oct-08

May-09

Dec-09

Jul-10

Mar-11

Oct-11

May-12

Dec-12

Jul-13

Feb-14

Sep-14

Apr-15

Nov-15

6,000

5,000

4,000

3,000

2,000

1,000

0

Apr-05

Jan-06

Natural Gas

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Production (MCUM)

Jul-13

Apr-14

Jan-15

Oct-15

Growth (%) (RHS)

100.0

80.0

60.0

40.0

20.0

0.0

-20.0

-40.0

80

Coal

70

60

50

40

30

20

10

0

Apr-05

Dec-05

Aug-06

Apr-07

Dec-07

Aug-08

Apr-09

Dec-09

Aug-10

Apr-11

Dec-11

Aug-12

Apr-13

Dec-13

Aug-14

Apr-15

Dec-15

25.0

20.0

15.0

10.0

5.0

0.0

-5.0

-10.0

-15.0

-20.0

-25.0

25,000

Petroleum Refinery Products

20,000

15,000

10,000

5,000

0

Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

Apr-14

Jan-15

Oct-15

50.0

40.0

30.0

20.0

10.0

0.0

-10.0

-20.0

Production (Mn. Tn.)

Growth (%) (RHS)

Production ('000 Tn)

Growth (%) (RHS)

4,000

Crude Oil

20.0

4,000

Fertilizers

30.0

3,500

3,000

2,500

15.0

10.0

5.0

3,500

3,000

2,500

20.0

10.0

2,000

0.0

2,000

0.0

1,500

1,000

500

-5.0

-10.0

-15.0

1,500

1,000

500

-10.0

-20.0

0

Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

Apr-14

Jan-15

Oct-15

-20.0

0

Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

Apr-14

Jan-15

Oct-15

-30.0

Production ('000 Tn)

Growth (%) (RHS)

Production of ('000 Tn)

Growth (%) (RHS)

43


AUGUST 2016

ECONOMY CHART BOOK

10,000

Steel

25.0

9,000

20.0

8,000

7,000

15.0

6,000

10.0

5,000

5.0

4,000

0.0

3,000

-5.0

2,000

1,000

-10.0

0

-15.0

Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

Apr-14

Jan-15

Oct-15

Production ('000 Tn)

Growth (%) (RHS)

Commodity

2000

1800

1600

1400

1200

1000

800

600

400

200

0

Gold USD per Oz

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

30,000

Cement

25.0

35000

Gold Rs. per 10g

25,000

20.0

30000

15.0

20,000

10.0

15,000

5.0

10,000

0.0

5,000

-5.0

0

-10.0

Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

Apr-14

Jan-15

Oct-15

Production ('000 Tn)

Growth (%) (RHS)

25000

20000

15000

10000

5000

0

Oct-05

Apr-06

Sep-06

Feb-07

Jul-07

Jan-08

Jun-08

Nov-08

May-09

Oct-09

Apr-10

Sep-10

Feb-11

Aug-11

Jan-12

Jun-12

Dec-12

May-13

Nov-13

Jun-14

Dec-14

Jul-15

Jan-16

120,000

100,000

80,000

60,000

40,000

20,000

Electricity

20.0

15.0

10.0

5.0

0.0

160

140

120

100

80

60

40

Brent Crude (USD per Barrel)

0

Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

Apr-14

Jan-15

Oct-15

-5.0

20

0

Generation (Mn KWH)

Growth (%) (RHS)

Jan-95

Jan-97

Jan-99

Jan-01

Jan-03

Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

44


STRONG ON CONSUMPTION

Foreign Trade

35,000

30,000

25,000

20,000

15,000

10,000

5,000

India's Export in Dollar terms

80

60

40

20

0

-20

0

-40

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

Amount (USD Mn)

% Change (RHS)

50,000

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

India's Import in Dollar terms

100

80

60

40

20

0

-20

-40

-60

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

Amount (USD Mn)

% Change (RHS)

FOREX

70.0

65.0

60.0

55.0

50.0

45.0

40.0

35.0

USDINR

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

45


AUGUST 2016

ECONOMY CHART BOOK

Capital Flow

6,000

External Commercial Borrowings (USD Mn.)

5,000

4,000

3,000

2,000

1,000

0

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Nov-11

Mar-12

Jul-12

Nov-12

Mar-13

Jul-13

Nov-13

Mar-14

Jul-14

Nov-14

Mar-15

Jul-15

Nov-15

Mar-16

Monetary Indicator

120,000

100,000

80,000

60,000

40,000

20,000

0

All Scheduled Banks - Aggregate Deposits (Rs. Bn.)

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

Aggregate deposits (Rs. Bn.)

Growth (%) (RHS)

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

All Scheduled Banks - Bank Credit (Rs. Bn.)

40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

Bank Credit (Rs. Bn.)

Growth (%) (RHS)

46


STRONG ON CONSUMPTION

Public Finance Indicators

Service Trend

33.0

32.0

31.0

30.0

29.0

28.0

27.0

26.0

GFCF % of GDPmp

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

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

120000

110000

100000

90000

80000

70000

60000

50000

40000

30000

20000

Indian Rail Freight Traffic

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

Revenue from Freight

Traffic (Rs. Cr.)

Freight Traffic

(Mn Tn) (RHS)

1200

1100

1000

900

800

700

600

500

400

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00

Gross Fiscal Deficit - as % of GDP

Cargo Handled at Airport (IN MT in "000")

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

1970-71

1973-74

1976-77

1979-80

1982-83

1985-86

1988-89

1991-92

1994-95

1997-98

2000-01

2003-04

2006-07

2009-10

2012-13

2015-16

1,068

1,278

1,397

1,551

1,715

1,702

1,962

2,348

2,280

2,191

2,279

2,529

2,704

3.00

2.50

2.00

1.50

1.00

0.50

Subsidies - as % of GDP

Passenger Handled at Airport (million)

0.00

1970-71

1972-73

1974-75

1976-77

1978-79

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

2012-13

2014-15

96.4

FY07

116.9

FY08

108.9

FY09

123.7

FY10

143.4

FY11

162.3

FY12

159.4

FY13

168.9

FY14

190.1

FY15

223.6

FY16

47


Valuation

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0

50

100

150

200

250

300

350

400

450

500

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

Jun-12

Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Nifty

EPS (Rs.)

PE Ratio (x)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0

200

400

600

800

1000

1200

1400

1600

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

Jun-12

Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Sensex

EPS (Rs.)

PE Ratio (x)

AUGUST 2016

ECONOMY CHART BOOK

48


STRONG ON CONSUMPTION

HDFC Equity Fund(G)

Investment Strategy

HDFC Equity Fund is a good investment vehicle for those

who believe in the growth prospects of India and

understand the power of compounding







A predominantly large-cap portfolio with limited

exposure to mid-caps

Preference for strong & growing companies - Strong

companies not only survive, but emerge stronger in

challenging times, reducing permanent losses

Effective diversification of portfolio – The portfolio

has always been diversified across key sectors and

variables across the economy to reduce risk

A long-term approach to investing and a low

portfolio turnover

Long term oriented, disciplined and consistent

approach to investments

Unbroken dividend track record for last 10 years (8-

13% dividend yield.

Dividend per

Unit (Rs.) (A)

NAV (Rs.) Dividend Yield

(Record Date) (B) (%) (A/B)

2012 4 44 9

2013 4 41.4 10

2014 4 43.8 9

2015 5.5 59.8 9

2016 4.5 45.9 10

All dividends are on face value of Rs.10 per unit. After

payment of the dividend, the per Unit NAV falls to the

extent of the payout and statutory levy (if applicable).

There is no assurance or guarantee to Unit holders as to

rate/quantum of dividend distribution or that the

dividends will be paid regularly. NAV is for the Regular

Plan – Dividend Option.

NAV (Rs.) 486.06

Inception Date January 1, 1995

Fund size(in Rs cr) # 15,448.0

Fund Manager Prashant Jain

Entry load

N.A

Exit Load 1.00%

Benchmark

Min Investment

NIFTY 500 Index

Rs.5000

Min SIP Investment Rs. 500

# as on May 30, 2016

Beta 1.26

Standard deviation (%) 20.63

Sharpe Ratio 0.73

Alpha 5.27

R Squared 0.87

Expense ratio (%) 2.05

Portfolio Turnover ratio (%) 33.00

Avg Market cap (Rs in cr) $ 56,839.00

# as on May 30,2016

Important Information

Key Ratios

Top Ten Holdings

Stocks

% of Net assets

State Bank of India 8.7

Infosys Ltd. 7.6

ICICI Bank Ltd. 7.5

Larsen & Tourbo Ltd. 7.5

Maruti Suzuki India Ltd. 4.9

HDFC Bank Ltd. 4.8

Aurobindo Pharma Ltd. 3.6

Tata Steel Ltd. 3.3

BPCL 3.2

Bank of Baroda 3.1

Asset Allocation

Equity Debt Cash & Equiv.

100.17% 0.00% -0.17%

Performance of the Fund

1 month 3 month 6 month 1 year 3 years 5 years Since Inception

Fund (%) 8.1 13.1 21.1 4.2 8 23.4 19.71

NIFTY 500 (%) 7.3 9.2 16.9 4.9 8.5 17.8 —

49


AUGUST 2016

MUTUAL FUND OVERVIEW

Ashika Insight Mutual Fund Recommendation Alpha Generation

Month of

Recom Fund Name Benchmark

NAV on

Recom

Date

NAV on

26/07/2016

Fund

Returns

Since Recom

Benchmark

Returns since

Recom

May-15 SBI Blue Chip Fund S&P BSE 100 27.83 31.56 13.40% 12.72% 0.68%

Jun-15 Kotak Opportunities Fund Nifty 500 82.50 83.21 0.87% 4.89% -4.02%

Jul-15 Franklin India Bluechip Fund S&P BSE Sensex 359.60 363.59 1.11% 0.01% 1.10%

Aug-15 UTI Mid Cap Fund Nifty Free Float

Midcap 100 83.78 81.98 -2.15% 5.48% -7.63%

Sep-15 Birla Sun Life Frontline Equity Fund S&P BSE 200 155.00 164.95 6.42% 11.63% -5.21%

Alpha

Scheme

Oct-15 HDFC Equity Fund Nifty 500 444.74 448.09 0.75% 9.67% -8.92%

Nov-15 ICICI Prudential Focused Bluechip Equity Nifty 50 28.79 29.39 2.08% 7.02% -4.93%

Dec-15 HDFC Top 200 Fund S&P BSE 200 330.81 330.73 -0.02% 8.94% -8.97%

Jan-16 Mirae Asset Emerging Bluechip Fund Nifty Free Float

Midcap 100 31.95 32.92 3.05% 7.75% -4.71%

Feb-16 Franklin India Opportunities Fund S&P BSE 200 51.55 56.76 10.11% 15.19% -5.08%

Mar-16 Birla Sun Life Top 100 Fund Nifty 50 38.34 43.40 13.19% 19.29% -6.10%

Apr-16 HDFC Mid-Cap Opportunities Fund Nifty Free Float

Midcap 100 36.37 39.19 7.74% 14.06% -6.32%

May-16 Birla Sun Life Pure Value Fund S&P BSE 200 39.21 40.15 2.40% 10.87% -8.47%

50


STRONG ON CONSUMPTION

Ashika General Mutual Fund Recommendation - Equity - Categorywise

LARGE CAP FUNDS

Scheme

NAV

AUM

(Rs. Cr)

3M 6M 1Yr 3Yr 5Yr

Since

Inception

Sharpe

Ratio

Benchmark

Exp.

Ratio

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

Scheme

NAV

AUM

(Rs. Cr)

3M 6M 1Yr 3Yr 5Yr

Since

Inception

Sharpe

Ratio

Benchmark

Exp.

Ratio

Franklin - India Prima Fund (G) 690.47 3362 17.1 3.26 4.86 29.43 21 20.54 0.98 Nifty 500 2.31

Motilal Oswal - MOSt 19.92 842 11.9 0.22 0.34 0 0 35.8 0.81 Nifty Free 2.73

Focused Midcap 30 Reg (G) Float 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 Mid Cap 2.37

Midcap Reg (G)

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

SMALL CAP FUNDS

Scheme

NAV

AUM

(Rs. Cr)

3M 6M 1Yr 3Yr 5Yr

Since

Inception

Sharpe

Ratio

Benchmark

Exp.

Ratio

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 Fund Reg (G) 63 1404 20.21 5.32 7.93 34.1 23.91 17.99 1.15 S&P BSE Mid Cap 2.55

Reliance - Small Cap Fund (G) 25.65 1652 16.63 -5.5 7.09 39.07 21.75 17.79 1 S&P BSE Small 2.44

Cap

Sundaram - Smile Fund Reg (G) 67.89 967 20.24 -6.5 -0.51 32.94 17.85 18.5 0.72 S&P BSE Small 2.59

Cap

MULTI CAP FUNDS

Scheme

NAV

AUM

(Rs. Cr)

3M 6M 1Yr 3Yr 5Yr

Since

Inception

Sharpe

Ratio

Benchmark

Exp.

Ratio

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

Discovery Reg (G) 113.03 9925 15.22 -1.24 -1.45 27.7 18.47 22.86 0.83 S&P BSE 500 2.24

Motilal Oswal - MOSt

Focused Multicap 35 Reg (G) 17.45 2982 13.51 1.08 1.14 0 0 30.7 -0.13 Nifty 500 2.41

Franklin - India High

Growth Companies Fund (G) 28.54 3614 16.71 -3.1 -3.31 26 18.17 12.59 0.77 Nifty 500 2.26

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

51


AUGUST 2016

MUTUAL FUND OVERVIEW

BALANCE FUND

Scheme

NAV

AUM

(Rs. Cr)

3M 6M 1Yr 3Yr 5Yr

Since

Inception

Sharpe

Ratio

Benchmark

Exp.

Ratio

ICICI Pru - Balanced

26.61 10128 12.14 1.45 3.99 15.61 14.05 10.79 0.58 Crisil Balanced 2.35

Advantage Fund Reg (G) 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

Fund Aggressive

SBI - M Balanced Fund Reg (G) 96.91 3491 9.94 1.4 1.53 18.76 14.81 16.39 0.84 Crisil Balanced 2.47

Fund Aggressive

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

Fund Reg (G) Fund Aggressive

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

THEMATIC FUNDS

Scheme

NAV

AUM

(Rs. Cr)

3M 6M 1Yr 3Yr 5Yr

Since

Inception

Sharpe

Ratio

Benchmark

Exp.

Ratio

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

Fund Reg (G) 24.61 539 16.36 -3.07 -5.67 18.85 9.75 9.24 0.37 Nifty 50 2.5

ICICI Pru - Banking &Financial

Services Fund Reg (G) 36.62 748 25.8 3.95 -0.03 17.75 16.08 18.2 0.3 S&P BSE Bankex 2.52

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)

3M 6M 1Yr 3Yr 5Yr

Since

Inception

Sharpe

Ratio

Benchmark

Exp.

Ratio

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

Focused Long Term

Fund Reg (G) 11.44 145 8.58 3.47 3.67 0 0 9.86 -1.5 Nifty 500 3.28

52


STRONG ON CONSUMPTION

Key takeaways from July 2016:







IIP surprised positively at 1.2% in May while it

shrunk by 1.3% in the previous month.

CPI inflation accelerated marginally to 5.77% in June

from 5.76% a month ago.

WPI rose to 1.62% in June from 0.79% in May.

IMF slashed India’s 2016-17 growth forecast by 10

basis points (bps) to 7.4 per cent from an earlier

forecast of 7.5 per cent.

Cabinet approved the 7th Pay Commission’s proposal

to raise salaries and pensions for central government

employees

In a bid to boost credit growth in the economy, the

Centre announced a sum of Rs.22,915 crore for

recapitalisation of 13 public sector banks

Classical theory of Technical Analysis

Indian equity market though started the month on a dull

note but rallied at the latter half of the month and ended

with a handsome gain of 4.57%. Volume in the market

too witnessed incremental addition. The broader market

represented by Mid-cap and Small-Cap Index witnessed

sharp rebound absorbing global turmoil which indicates of

strong investors ‘appetite. Hence strong outperformance of

the broader market represents of a larger market

participation and inherent strength in the market.

On the technical front Nifty had been maintaining its

higher high formation in both daily and weekly time frame.

Small consecutive bars at every intervals indicates that

upward momentum in the market is slowing down and

indicates possibility of further price consolidation in

sessions to come, however medium term trend remains

unequivocally upward. Nifty is now struggling to breach

past its previous swing high of 8654 scaled on July 2015.

Inability to breach past the said resistance level would

again drive profit booking activity in the market and might

lead to a decisive correction. To further add Nifty since

March 2016 onward had been on a rising spree laying its

foundation on the upward rising trendline. The elevated

trendline now lays support around 8250. Hence it can be

concluded that downside in the market seems limited and

broader range for the forthcoming month lies amid 8200-

8900. Another interesting observation that need to be

adhered to is the bullish ‘Inverted Head & shoulder’

formation in daily chart since September 2015 and the

July high of 8654 if acknowledged as the neckline of the

assumed pattern then one should brace himself for a

mammoth rally surpassing the previous all time high of

9119.

Multiple price structure can be seen in Nifty as the rally

since Mar 2016 onward had been within the rising channel

formation. The said pattern is heading higher to complete

its fourth leg. The upper panel of the channel line is likely

to initiate resistance around 8800-8820. Hence based on

the present observation it can be concluded that if the

pattern materializes the upside seems limited till 8800-

8850 and then onward intermediate correction can crutch

in though downside seem limited since lower panel of the

elevated channel comes around 8250. The said pattern to

concludes that Nifty might remain rangebound amidst the

broader range of 8250-8750.

53


AUGUST 2016

TECHNICAL OVERVIEW

To sum up according to classical theory of Technical

analysis market seems stretched for the time being and

correction seems due in the market in the overall higher

degree uptrend. In the forthcoming month market is likely

to remain rangebound and new trading range for the

market exist within 8250-8850.

consolidation mode against which the Index had been

slowly dripping towards its mid band. On the daily time

frame immediate support from the said study exist around

8400 while in weekly time frame the mid band exist

around 8050. Present setup indicates that Nifty is in

uptrend and intermediate correction would be temporary

in nature which need to be utilized to enter long

Modern approach in Technical Analysis

The strong rally during the month lead to a reading in

oscillator near to its overbought territory with slight

divergence is also being observed through RSI which calls

for a cautious approach in the market though current

reading of 68 indicates room for further upside remains.

MACD in both daily and weekly time frame has been in a

rising trajectory, highlights the underlying strength in the

ongoing trend and might augur well for the Index. ADX

too seems positive as +DI continues to remain

comfortably above the –DI however ADX line lies below

20 level mark in weekly chart indicating clear uptrend

still need to be explored. To sum up, with divergent view

point market might remain rangebound in the forthcoming

month as well.

Nifty throughout the month had been clinging at the

upper band of the Bollinger band. Now Nifty entered into

Nifty is presently trading above all the crucial moving

averages in both daily and weekly time indicating that

both short term and medium term trend continues to

remain positive. Short and Medium term averages of

20/50/100 had been maintaining a comfortable distance

from its prices, though prices seems stretched but recent

price consolidation has able to drag the averages closer to

its prices indicating strength in the ongoing upmove. To

further add ‘Golden Crossover’ has been initiated in daily

time frame which denotes that short term average of

50dma is cutting the long term average of 200dma from

below, the said formation has a long term bullish

implication for the Indian equity market. In weekly time

frame buy crossover is seen in short term averages of 20

and 50 dma. Hence to sum up, as averages define the

trend in the market it can be concluded that uptrend

remains unabated and gapup region of 8475 followed by

8410 would act as crucial support level for the market.

54


STRONG ON CONSUMPTION

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.

Calculation:

Projected Price- Current Market price = 8800-8600 = 200

Now, time required to complete the target = 200/2 = 100=

3.33~4 months.

Indian VIX

Indian VIX signaled fall in volatility. A close observation

of the Indian VIX reveals that the Index is a mean

reverting one where it is now near to its historical level

of 15-16. On the technical parlance not much inference

can be drawn from the present setup and as the broader

trend continues to remain negative with its consecutive

lower low formation in daily chart. With a steady line up

of crucial event in the forthcoming month like that of the

monsoon session, policy meet by some global central

banks it can be expected that Volatility in the market

might increase in the forthcoming month 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 23.6 degree angle

of inclination, further rally has resulted in to form bullish

channel formation in weekly chart, target of which stands

around 8800, and according to W.D. Gann the said angle

signifies 2 unit of price & 1 unit of time. So the said

target of 8800 might be achieved within 3-4 months.

However the theory of the famous 8-year bear cycle need

to paid equal importance. This theory of 8-year bear cycle

Retracement principle

In order to identify crucial 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.

Hence it can be concluded that Nifty on the downside the

conjoint area of 8000-8050 will work as a strong support

for market, sustaining above which markets are likely to

stay afloat with positive momentum. To further add the

correction since March 2015 onward has been paired and

now the crucial 80% retracement level comes around

8660 which indicates a change of trend for the

intermediate corrective decline.

Future Projection – August 2016

Post February 2016 correction if considered as leg ‘D’ of

Expanding Triangle’ then leg ‘D’ is now unfolding into

double combination correction. The 2nd corrective pattern

is exhibiting sighs of Diametric or Extracting Triangle

patterns and Nifty in order to confirm a ‘Running’ variation,

‘D’ should end below the top of ‘B’ i.e. below 8655. Hence

it can be concluded that Nifty need to surpass the July

2015 high in order to confirm its alternate pattern

according to Elliot wave principle. On the longer term

picture if the rally since March 2009 if considered as a

new impulse wave then presently Index is in the formation

55


AUGUST 2016

TECHNICAL OVERVIEW

stage of 5th wave surpassing the previous high of 9119

and time wise correction with 13-month interval was

crucial i.e. during April 2016 and if the correction does

not get over in about 13 month then it can extend till 21

months.

Inter-market analysis

U.S Market: The Dow Jones industrials edged up close to

all-time highs, as investors digested mixed earnings

reports amid lowered expectations for global economic

growth. The International Monetary Fund cut its global

growth forecasts for the next two years, citing uncertainty

over Britain’s looming exit from the European Union. The

recently held Federal Reserve’s Federal Open Market

Committee conference took note of the improved job

scenario and decided not to risk raising rates. The

language too was not hawkish and kept the option open

in future meetings. On the technical front, as we had

been mentioning that a bullish Ascending Triangle was in

the formation stage since April 2016 and hence finally it

provided the necessary breakout during the month. The said

pattern has a bullish implication and projects an upside

target till 19000 in medium term perspective. On the

oscillator front though DJIA is fast approaching overbought

region but it seems that the rally to extend further as rising

channel line formation too projects the same.

Nymex Crude: Oil prices settled at their lowest level in

three months as the prospect of more oil-drilling activities

in the U.S., a glut of petroleum-product supplies and an

expected slowdown in refining activities renewed worries

that inventories of crude will continue to outpace

consumption. Oil prices seems to have peaked and the

present downtrend is likely to continue based on several

technical factors like that of `double top` formation in

daily chart after peaking at around $50 mark followed by

breach of rising trendline. Now the next important support

level for the market exist around $39 which coincides with

the previous swing low of August 2015 and also with the

50% retracement of the entire rise since February 2016.

Lower crude oil prices would impact India’s inflation and

current account deficit and is likely to benefit the Indian

equity market in immediate term.

56


STRONG ON CONSUMPTION

10 Year Bond Yield India:

Bond prices in India have been in an upward trend for

the past few years, thanks to falling yields as the RBI cut

rates and the broad macro economy improved. Bonds in

India are rallying the most since September as revival in

rains spurs optimism that better crop output will help

contain food costs, which have a strong bearing on

inflation. The RBI has injected Rs. 80,010 crore through

open-market purchases on debt since April, boosting cash

supply, while mounting speculation that a successor to

governor Raghuram Rajan will be more aggressive in

cutting interest rates has contributed to bond gains. The

yield on the benchmark 10-year government bond has

fallen from a peak of about 9 percent to 7.2 percent now.

On the technical front bond yield had been in a severe

downtrend since March 2016 onward and now heading

towards it previous swing low of 7.11 percent

Indian Rupee: The currency had been steady rising amidst

the rising channel formation with its consecutive higher

high formation in daily chart and probably heading higher

towards 68-69. Elliot Wave study reveals that prices might

be moving in a complex correction pattern (w-x-y-x-z)

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. Though

Indian rupee has shown remarkable stability in the last

few trading sessions as important global events continued

unabated, the latest being the all important British

referendum to exit the European Union. In the near term,

rupee will continue taking cues from shifts in global risk

appetite as the top central banks are scheduled to hold

policy meet.

Positives:








Bullish ‘Head & Shoulder’ formation since September

2015 indicates Index to surpass the previous all time

high of 9119

Bullish upward rising ‘Channel’ since March 2016

projects short term upside till 8750-8800

Immediate support for Nifty exists at 8400 according

to band Bollinger.

Nifty above all crucial averages with ‘Golden

Crossover’

Medium term trend in the market continues to remain

positive as long as Nifty stays above 8000 according

to retracement principle.

Bullish Ascending Triangle in DJIA projects further

upside in Index till 19000.

Double Top formation in Crude oil might drag the

commodity till $39

Negatives:



Swing high of July 2015 at 8654 acting as crucial

resistance

Elevated upward trendline since March 2016 indicates

crucial support at 8250.



•·

Momentum loosing sheen according to oscillator as

negative divergence can be seen.

India VIX taking support from its historical low level.

Uptrend in Rupee to remain due to rising channel

formation

To sum up Indian equity market shrugged off Brexit

worries and extended its gain throughout the month.

Hopes of good monsoon, clearance of GST bill in the

parliament session majorly lead the recovery in the market.

Further govt. approval of the seventh Central Pay

57


AUGUST 2016

TECHNICAL OVERVIEW

commission offering a bonanza to its 1 crore employees

and pensioners also ignited the fire. The following action

would have minimal impact on inflation and on

government finances as provisions have been made in the

budget. Consumption driven stocks like auto, FMCG and

consumer durables hence found fresh buying interest in

the market. On the domestic macro data front the IIP

surprised positively at 1.2% in the month of May against

expectations of 0.3% contraction. On the inflation front,

both WPI and CPI accelerated for the month of June

coming at 1.62% and 5.77% respectively. Hence it again

retreat hopes of a cut in interest rate by RBI. Comfort

remained in the market as FII remained net buyers though

IMF trims India’s growth forecast by 0.1 percentage point,

India now forecast to expand 7.4% in the two years

compared with the earlier forecast of 7.5% for both,

retaining its tag as the world’s fastest-growing major

economy. Sentiment in the market also got the requisite

support on the back of government capital infusion in the

Public Sector Banks (PSBs) of Rs.22915 crore to meet the

capitalization needs in the current fiscal. Crude continued

to remain range-bound between $45-$50/barrel which is

beneficial from India’s perspective. Too much movement

of crude on both upside and down side could adversely

impact India. The Q1 result season has started on

disappointing note as far as IT sector companies are

concerned while results of other sectors have largely

been in line with estimate. On the global front both Dow

Jones Industrial Average and the S&P 500 closed at life

time highs indicating a risk-on rally is taking shape. It

seems that the global markets have able to overcome the

Britain referendum setback. In the midst of such

pessimism Indian rupee stands tall amongst other

emerging markets and with EU and Japan in with its

negative interest rate regime, positive yield bearing bonds

like US and India continues to draw Institutional interest

amidst slowing world growth. Monsoon session of the

parliament started with high expectation of GST securing

the smooth passage. GST implementation would give the

market a thumps up as it would give a boost of 1-

2percent to the GDP, dramatically altering India’s indirect

tax structure by replacing a string of central and local

levies such as excise, value added tax and octroi into a

single unified tax and stitch together a common national

market. On the technical front during the month of June

market traded with positive bias with its consecutive

higher high formation in both daily and weekly chart, the

broader market as represented by midcap and smallcap

indices witnessed remarkable rally absorbing global

uncertainty. The strong outperformance of the broader

market indicates increased market participation and

inherent strength in the ongoing rally. Change of polarity

was seen after Nifty provided the necessary breakout from

the downward sloping channel in the April 2016 and then

onward Nifty had been in a secular uptrend. Now Nifty is

retorting higher amidst the rising channel line. The dual

pattern buildup has triggered a bullish structural

turnaround with higher peaks and trough. Present structure

projects immediate upside potential till 8750-8800 for the

Index however on the medium term perspective presence

of ‘Inverted Head & Shoulder’ formation indicates ability to

surpass the all time high for Nifty. However July 2015 high

of 8650-8700 will act as crucial trend deciding level for

the market, sustaining above which would recognize as

completion of neckline and breakout from bullish ‘Inverted

Head & Shoulder’ formation. A decisive close above the

immediate hurdle of 8650-8700 will open room for

extension of the current up move towards 8800-8900 in

the coming month. However market will remain volatile in

the near term owing to global uncertainty, technically it

can be explained that it is concluded due to the diverse

viewpoint in RSI in different time frame with negative

divergence hence Nifty might extend its consolidation

within 8400-8900 amid stock specific activity. Other global

peers like DJIA is now at its all time high too supportive of

the present rally while Crude oil prices remains capped

and are now at 2-months low, Indian rupee shows extreme

resilience compared to other emerging peers. Hence it

seems that other correlated market too augurs well for the

sustainability of the upmove in the coming month.

According to Elliot wave perspective Nifty need to sustain

above 8650-8700 in order to recognize as ‘Double

combination correction’ unfolding into ‘Diametric or

Extracting Triangle patterns’. Hence to sum up, a decisive

close above its immediate hurdle of 8650-8700 will open

room for extension of the current up move towards 8800-

8900 in the coming month.

58


STRONG ON CONSUMPTION

BEST PERFORMERS FOR THE MONTH (NIFTY 100) WORST PERFORMERS FOR THE MONTH (NIFTY 100)

27.06.2016 27.07.2016 27.06.2016 27.07.2016

1 CAIRN 134.30 194.30 44.68% 1 DRREDDY 3246.60 2980.20 -8.21%

2 VEDL 122.35 168.45 37.68% 2 INFY 1166.20 1085.35 -6.93%

3 PFC 162.40 220.45 35.75% 3 GLAXO 3490.15 3366.40 -3.55%

4 RECLTD 165.85 214.75 29.48% 4 DABUR 318.90 307.65 -3.53%

5 HINDPETRO 974.30 1244.00 27.68% 5 BEL 1257.60 1219.15 -3.06%

6 IOC 421.05 535.95 27.29% 6 ASHOKLEY 97.35 94.70 -2.72%

7 PNB 104.35 132.80 27.26% 7 TATAPOWER 72.20 71.05 -1.59%

8 BAJFINANCE 7695.60 9793.45 27.26% 8 BHARATFORG 742.40 739.10 -0.44%

9 JSWSTEEL 1386.00 1739.30 25.49% 9 TECHM 504.65 504.25 -0.08%

10 BHEL 119.05 149.00 25.16%

11 HINDZINC 168.20 208.25 23.81%

12 BAJAJFINSV 2181.90 2614.15 19.81%

13 DLF 134.75 160.25 18.92%

14 MOTHERSUMI 272.90 322.20 18.07%

15 IBULHSGFIN 659.30 775.35 17.60%

16 TATASTEEL 310.50 363.05 16.92%

17 ICICIBANK 232.70 270.60 16.29%

18 LUPIN 1479.15 1719.40 16.24%

19 INFRATEL 327.65 380.55 16.15%

20 BOSCHLTD 20930.70 24082.05 15.06%

Source: NSE

Indices Performance 27.06.2016 –27.07.2016

20%

Sector Indices -Monthly Return (%)

15%

10.8% 11.3% 16.1%

10%

7.9% 8.2% 8.5% 8.7%

5%

4.5%

4.9%

5.8%

0%

-5%

-2.3%

-0.2%

IT TECk FMCG CD HC POWER CG AUTO BANKEX REALTY OIL&GAS METAL

Source: BSE

59


AUGUST 2016

COMMODITY MONTHLY ROUND UP

“Look at market fluctuations as your friend rather than your enemy; profit from folly

rather than participate in it.”

- Warren Buffet

COPPER

Metal market is overall signalling that the world economy

is slowly coming out from the bad phase and also proving

to be resilient enough. Over the course of about four

weeks, since the U.K. voted to leave the European Union,

there was a failed coup attempt in Turkey and Donald

Trump bucked the establishment of the Republican Party

to become its presidential nominee. Rather than taking

these events as ominous signs, hedge funds are jumping

into the growth-dependent world of copper. The funds

and other money managers more than tripled their

wagers on price gains. Copper giant China which is the

main driver of copper and also for the world economy,

recorded all time high copper imports in its first half. The

country’s real-estate sector grew faster than the overall

economy in the second quarter. Construction accounts for

about 30 percent of global copper demand.

Copper mining companies and countries are projecting that

copper supply is not going to match up the future demand

speed and some money managers thus predicting a

fascinating rally is around the corner for copper. The huge

import from China is an indication for the money managers

that the country is securing its future demand.

Copper’s use as main input material for constructions, the

metal has earned the nickname Dr. Copper for its status as

an economic bellwether. Copper is best used as a

barometer for emerging markets, such as China. The surge

in the net-long position in NYMEX was a turnaround for

Weekly Chart: Copper COMEX Continuous

60


STRONG ON CONSUMPTION

investors, who were net-short on the metal as recently as

late June. Global copper demand will increase 2.1 percent

this year, up from a gain of 1.4 percent last year

according to Citi Group.

Technical Analysis

Considering weekly chart of COMEX copper, 2008 to

2011 was the bullish phase for the red metal and after

that it’s prolonged down side move, which can be

attributed as long term Correction of the previous bullish

move. In its previous bullish trend which was started from

2003 and continued till 2006, it gave a correction of

78% (Fibonacci Retracement). This time also market

halted at around 78% Fibonacci level and from there we

can assume that market is now ready to give a nice

upside movement. In weekly chart, MACD is also giving

that hint by providing positive divergence with the price.

From the above observations we can conclude that there is

high chance that market already marked the bottom at

$1.9355 (COMEX Continuous) and there is a huge

probability to move higher in coming days. $2.46 will act

as immediate resistance as there was a long term trend

line which was providing resistance to the entire corrective

wave. Our recommendation for copper is to go long with

stop at $2.09 and target being set at $2.45 initially. And if

market able to clear the trend line then long term target

will be set at $2.87.

Other than the wave theory, even price itself forming a

Flag pattern which has bullish significance. The pole length

is $0.36 and the breakout point is around $2.26 for the

continuous contract, so once if there is a breakout Flag

pattern will set the target around minimum $2.50 which

is very close to our previous target horizon of $2.45.

Weekly Chart: USD/JPY Spot

61


AUGUST 2016

COMMODITY MONTHLY ROUND UP

Japanese Yen

Like Gold, Yen has a reputation to be a hedging tool at

the time of asset distress but recently it’s playing havoc

with Japan’s fundamental direction. From January 2016 to

last month i.e. July 2016, the currency appreciated from

120 to 106, that’s more than 11.50 percent and off

course it’s hard to ignore as noise especially for a

country whose economy is driven by exports.

Some traders are pointing out that recent appreciation is

largely because of FED rate hike timing and BREXI.

Disagreement between OPEC members regarding crude

oil production is also playing the card. Even slight

negative news in the market sparks volatility which is

slowly affecting the investment drive of the investors.

Instead of capital appreciation they are now chasing

capital preservation which is hampering Yen’s direction

given its safe-haven element. This in turn is hurting the

price competitiveness of Japanese exports in foreign

markets which is one of the reasons for the fall in

exports. Another reason is the sluggish private

consumption in China and other Asian countries which is

Japan’s major trading partners.

Technical Analysis

June’16 low of 99 is just on 200 Daily Simple Moving

Average where it gave a nice bounce towards 106. So it’s

clear that if the market takes out 99.00, then technically

more strength may infuse to Japanese Yen against US

Dollar. But again after a spectacular rally from 77 level to

125 we can consider it as a corrective wave and that’s

exactly ends near its 50% Fibonacci Retracement level

which is showed in the chart as red line. Again taking the

help of Fibonacci retracement from the high of 125.84 to

low of 99.02, market may retest 50% retracement level

which is at 111.12. Our trading advise for the traders is to

go long in the pair above 108.40 for the target of 111.10

and the stop loss should be at 105 (recent swing low in

the Daily chart).

Weekly RSI is running just above a long term trend line

which is indicating sudden bullish move may emerge in

the market.

62


STRONG ON CONSUMPTION

AUGUST 2016

1

US: ISM Manufacturing

CH: Caixin China PMI Mfg

JN: Nikkei Japan PMI Mfg

IN: Nikkei India PMI Mfg

EC: Markit Eurozone Manufacturing PMI

US: Personal Income

US: Personal Spending

JN: Monetary Base YoY

UK: Markit/CIPS UK Construction PMI

EC: PPI MoM

2

US: MBA Mortgage Applications

US: ADP Employment Change

EC: Markit Eurozone Composite PMI

US: ISM Non-Manf. Composite

IN: Nikkei India PMI Services

3

JN: BoP Current Account Balance

CH: Trade Balance

JN: Trade Balance BoP Basis

JN: Eco Watchers Survey Current

8

CH: CPI YoY

IN: RBI Repurchase Rate

CH: PPI YoY

UK: Industrial Production MoM

US: Wholesale Inventories MoM

9

10

JN: Machine Orders MoM

JN: PPI YoY

US: MBA Mortgage Applications

JN: Tertiary Industry Index MoM

IN: Exports YoY

15

JN: Industrial Production MoM

JN: GDP SA QoQ

US: Empire Manufacturing

IN: Wholesale Prices YoY

UK: Rightmove House Prices MoM

16

US: CPI MoM

UK: CPI YoY

US: Housing Starts

US: Industrial Production MoM

UK: PPI Output NSA MoM

17

UK: Jobless Claims Change

US: MBA Mortgage Applications

UK: ILO Unemployment Rate 3Mths

22

EC: Consumer Confidence

US: Chicago Fed Nat Activity Index

23

US: New Home Sales

US: Richmond Fed Manufact. Index

24

US: MBA Mortgage Applications

JN: Nikkei Japan PMI Mfg

EC: Markit Eurozone Manufacturing PMI

US: Markit US Manufacturing PMI

US: Existing Home Sales

29

UK: Nationwide House PX MoM

US: Personal Income

US: Dallas Fed Manf. Activity

US: PCE Core MoM

30

JN: Jobless Rate

US: Consumer Confidence Index

UK: Mortgage Approvals

EC: Consumer Confidence

EC: Economic Confidence

31

JN: Industrial Production MoM

US: MBA Mortgage Applications

US: ADP Employment Change

US: Chicago Purchasing Manager

EC: CPI Estimate YoY

IN: India, US: United States, EC: European Union, UK: United Kingdom, CH: China, JN: Japan

UK: Bank of England Bank Rate

US: Initial Jobless Claims

US: Durable Goods Orders

US: Factory Orders

UK: BOE Asset Purchase Target

4

11

US: Initial Jobless Claims

US: Import Price Index MoM

US: Continuing Claims

US: Bloomberg Consumer Comfort

UK: RICS House Price Balance

18

US: Initial Jobless Claims

EC: CPI YoY

US: Leading Index

UK: Retail Sales Ex Auto Fuel MoM

US: Philadelphia Fed Business Outlook

25

US: Initial Jobless Claims

US: Durable Goods Orders

US: Continuing Claims

US: Bloomberg Consumer Comfort

US: Cap Goods Orders Nondef Ex Air

US: Change in Nonfarm Payrolls

US: Unemployment Rate

US: Trade Balance

UK: Halifax House Prices MoM

JN: Leading Index CI

5

12

US: U. of Mich. Sentiment

EC: GDP SA QoQ

US: Retail Sales Advance MoM

IN: Industrial Production YoY

US: PPI Final Demand MoM

19

JN: All Industry Activity Index MoM

UK: PSNB ex Banking Groups

26

UK: GDP QoQ

US: GDP Annualized QoQ

US: U. of Mich. Sentiment

JN: Natl CPI YoY

US: Personal Consumption

63


AUGUST 2016

SERVICES AT ACL

Services at Ashika Capital Limited (ACL)

Capital Markets

Fund Raising

Advisory

• Issue Management

• IPO / FPO

• Right Issue

• Qualified Institutional

Placement

• Open Offer

• Takeover

• Buyback

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• Overseas Listing

• Underwriting

• Private Equity

• Venture / Growth Capital

• Pipe

• Debt Syndication

• Project Finance

• Team Loan

• Working Capital Loan

• Acquisition Funding

• Construction Finance

• M & A

• Merger / Acquisition / Disposal

• Management Buy-outs /

Buy-ins

• Leveraged Buy-outs

• Joint Ventures

• Strategic Partnership

• Spin-Offs

• Divestment

• Corporate Restructing

• Capital Restructing

• Finance Restructing

• Business Valuation

• Espo Valuation

• Fairness Opinion

Deals Executed

Credit Facility

Sector

Amount (in Crores)

Location

Construction Finance

Structured Construction Finance

Real Estate

Real Estate - Commercial

and Hospitality

18.00

110.00

Mumbai

Delhi

For Debt Fund Raising:

Mr. Anirudh Sarvaiya - Sr. Manager

ACL - anirudh.s@ashikagroup.com

Ms. Kavita Tejwani - Manager

ACL - kavita.tejwani@ashikagroup.com

For Mergers & Acquisition:

Mr. Mihir Mehta – Sr. Manager

ACL - mihir.m@ashikagroup.com

For Equity Capital Markets:

Mr. Niraj Kothari – AVP

ACL - nirajkothari@ashikagroup.com

For any valuable input or other

discussion & business opportunity

please send a mail to:

Mr. Vaibhav Jain – President

ACL - vaibhav@ashikagroup.com

64


STRONG ON CONSUMPTION

Research Team

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

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• 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

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