Ashika Monthly Insight August 2016

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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
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Page 39 and 40: STRONG ON CONSUMPTION Macroeconomic
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STRONG ON CONSUMPTION Ashika Genera
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STRONG ON CONSUMPTION Key takeaways
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STRONG ON CONSUMPTION indicates tha
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STRONG ON CONSUMPTION 10 Year Bond
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STRONG ON CONSUMPTION BEST PERFORME
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STRONG ON CONSUMPTION investors, wh
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STRONG ON CONSUMPTION AUGUST 2016 1
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STRONG ON CONSUMPTION Research Team
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Ashika Monthly Insight August 2016

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