Market Outlook

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Sharekhan
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Product Review (March)

Second level
&
Third level
Fourth level
Fifth level
Market Outlook (April)
4/2/2016

Fundamental
Research
Offerings
Top Picks folio
Second level
Stock
Ideas/Viewpoints
Third
level
Fourth
level
Wealth
Creator
Fifth level
4/2/2016

Second
level
Sharekhans
Third level
Top Picks folio
Fourth level
Anall-weather
balanced portfolio
Fifth level
4/2/2016
Top Picks folio
A well-balanced portfolio of thoroughly researched

10-12 companies
Prefers sustainable business model, focuses on nearterm triggers without losing sight of long-term wealth
creation
Sharekhans
Top Picks folio
Careful selection of stocks to

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text styles
adjusted returns in quick time
Key objectives
Second level
deliver superior risk
To maximise shareholders returns with minimum risk

and outperform the benchmark indices
Third level
How is our
portfolio different?
Only thoroughly researched and fundamentally strong

Fourth level stocks included, no place for market rumored, lousy or
grapevine stocks
Fifth level
Delivered superior returns consistently across equity
cycles since inception
We religiously
follow the process
4/2/2016
Actively tracked and reviewed every month without

exception; generally in initial days of the month
Explains all changes/revisions in the folio for better
understanding of investors
Superior returns across cycles

(on absolute as well as relative basis)
Beating the benchmark indices consistently (absolute

returns; not annualised)
Sharekhan
(Top Picks)
CY2009
-1.9%
13.9%
63.6%
12.4%
35.1%
-20.5%
16.8%
116.1%
Since Inception (Jan

2009)
413.4%
CY2016
CY2014
Sensex
Nifty
CNX MIDCAP
550
500
-3.0%
-2.6%
-4.8%
-5.1%
-4.1%
6.5%
400
29.9%
30.9%
55.1%
350
8.5%
6.4%
-5.6%
450
CY2013
Second26.2%
level29.0%
CY2012
-21.7%
Third-21.2%
level
11.5%
12.9%
CY2011
CY2010
250
36.0%
200
-25.0%
150
11.5%
Fourth
76.1% level
72.0%
Fifth153.8%
level
152.5%
300
114.0%
100
Sharekhan
Sensex
Nifty
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
CY2015
600
252.0%
Consistent outperformance (absolute returns; not annualised)

1 mth
Top Picks
Sensex
Nifty
CNX MIDCAP
3 mth
6 mth
1 year
3 year
5 year
12.5%
-1.9%
-3.3%
0.0%
120.8%
128.1%
10.2%
12.2%
10.3%
-3.0%
-2.6%
-4.8%
-3.1%
-2.6%
-1.8%
-9.4%
-8.9%
-1.9%
34.7%
35.8%
72.3%
30.8%
33.3%
54.6%
Note: The returns are based on the assumption that at the beginning of each month an equal amount was invested in each stock of the Top Picks basket
4/2/2016
Low volatility, High returns

CMP*
Ashok Leyland
Bajaj Finance
Britannia Industries
Havells
HDFC Bank
Hindustan Unilever
IndusInd Bank
Maruti Suzuki
Relaxo Footwear
Reliance Industries
TCS
(Rs)
FY15
FY16E
109
135.7
27.8
6929
38.8
31.5
2676
59.2
37.6
322
43.0
40.3
1071
26.3
21.5
870
48.4
44.0
968
28.6
24.9
3719
30.3
21.6
364
42.3
32.8
1045
13.0
Fourth
level12.1
2516
25.1
20.4
FY17E
19.7
24.5
31.0
34.3
17.8
37.4
19.4
17.2
25.1
10.6
18.4
FY15
4.6
20.3
53.3
20.6
19.4
102.8
18.2
16.6
23.4
10.8
33.7
FY16E
19.9
19.5
55.9
20.0
18.7
100.3
16.4
20.2
22.2
10.6
32.9
FY17E
25.5
19.2
47.5
21.0
19.5
103.4
15.9
21.5
21.8
10.9
29.7
Price
target
(Rs)#
120
**
3650.0
360.0
1260.0
980.0
1108
4800
**
1200.0
2750
Zee Entertainment
386
30.4
19.0
19.2
20.9
470
Name
PER (x)
RoE (%)

Second level
Third level
Fifth
level
44.9
38.3
Upside
22%
(%)
11%
36%
12%
18%
13%
15%
29%
15%
9%
*CMP as on 31st M arch, 2016 # Price target for next 6-12 months
Easy to follow with revision done at the beginning of the month (usually changes in 1 to 2 stocks); for
simplicity, we assume equal weightage in each stock to calculate monthly performance.
Please note the returns shown do not include transaction cost.
4/2/2016
Top Picks for March 2016

Market bounced back in March 2016
After the drubbing in the first two months of 2016, the Indian equity market bounced back with
vengeance on the back of a fiscally prudent Union Budget (that increased the scope of further
monetary easing by the Reserve Bank of India [RBI]) and normalisation of conditions globally in
March. In an uncertain global environment, the dovish signals from the US Federal Reserve (Fed)
provided much-needed relief to the financial markets globally.
Fortunately, Consequently, the benchmark indices at home registered a double-digit gain

(ranging from 10% to12%) in the last month. The Sharekhan Top Picks basket also performed
marginally ahead of the indices and appreciated by 12.5% in the same period.
Second level
Third level
Made two changes in the basket
Fourth level
Keeping in mind the eventful
month
ahead (that will see the RBIs policy review meeting, initial
Fifth
level
monsoon forecast, the Feds meet and the Q4 earnings season), we are making two changes in
the portfolio. First, we are taking profits in Yes Bank (which has appreciated by over 25% in one
month alone) and replacing it with HDFC Bank. Second, we are introducing Hindustan Unilever
as a play on the revival in rural earnings (owing to enhanced rural spending by the government
and expectations of a better monsoon) in place of Godrej Consumer Products (which moved up
by over 15% in the last month).
4/2/2016

Second
level
Stock Ideas/Viewpoints
Third level
Make an informed decision
Fourth level
Fifth level
4/2/2016
Sharekhan's Stock Ideas

Identify right
stocksstyle
across sectors
title
through bottom-up approach
Key objectives
Focus on generating absolute returns

with a time frame of 6-12 months and a
favorable risk-reward ratio

Second level
Third level
Fourth level
Fifth level
Closely tracked stocks with regular

interaction
with
companies
management to stay abreast of the
business outlook
Regular updates and news with view on

stocks through Investors Eye and also
Fundamental News & Analysis (FNA)
Focussed approach
4/2/2016
Sharekhan's Stock Ideas

We put great emphasis on investors risk
style
and reward, title
so in line
with the upside
potential of a stock and the associated
risks, we review our rating regularly
Risk and reward

textalsostyles
This
allows investors to churn their
portfolio by switching from one stock to
another to optimise the overall return
Second level
Third level
Fourth level
Fifth level
Track record
4/2/2016
Our last 24 Stock Ideas generated 42%

returns on an aggregate basis.
Some of the blockbuster Stock Ideas of

2015: Bajaj Finance (up 289%), TVS
Motors (up 251%), Gabriel India (up
174%), Finolex Cables (up 136%) and
LIC Housing Finance(up 111%)
10
Top 10 Stock Ideas delivered 2x returns

Initiation
Price
(Rs)
CMP*
(Rs)
Returns
(%)
Company
Reco.
Initiation
Date
Bajaj Finance
TVS Motor Company
Buy
Buy
21-May-14
30-Apr-14
1780
92
6929.2
322.7
289
251
Gabriel India
Buy
16-Apr-14
32.7
89.6
174
280.4
136

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to edit Master
text styles
Finolex Cables
Buy
22-Apr-14
119
Second level
LIC Housing Finance
Buy
28-Mar-14
232
490.4
111
Supreme Industries
Buy
9-Jan-14
420
738.3
76
Firstsource Solutions
Buy
3-Feb-14
24
33.7
40
29-May-14
27
34.0
26
Third level
Fourth level
Buy
Fifth level
PTC India Financial Services

Wonderla Holiday Ltd
Buy
29-Oct-15
315
388.7
23
Skippers
Buy
19-Jan-15
112
133.6
19
*CMP as on March 31st , 2016
14 out of 24 stocks initiated in last 27 months have generated positive return, an aggregate
return of 42% (top ten ideas have generated aggregate return of 200%)
4/2/2016
11

Stock Idea
Second level
Third level
New Initiation
Fourth level
Fifth level
4/2/2016
12
Emami
Reco Buy
Reco price Rs961
CMP Rs931
Price target Rs 1250
Emami is one of the largest players in the domestic FMCG market with a strong presence in the under-penetrated categories
such as cooling oil, antiseptic cream, balm and mens fairness cream (it enjoys more than a 60% market share in each
category). The Zandu range of healthcare products has grown strongly at a CAGR of 26% over the past five years. Kesh
King hair oil is expected to contribute Rs300 crore in FY2017 and add on to the consolidated OPM of Emami (likely to stand
at 26-27% over the next two years).
With business likely to normalise in the coming quarters, we expect cash flows to improve in the coming years (cash from
operations to grow at a CAGR of 15%). Thus, the management aims to reduce debt (net debt Rs600 crore) over the next two
years.
The desire to become a large FMCG player by riding on a portfolio of differentiated brands and improving reach in various
geographies will help Emami to achieve above 17% CAGR earnings growth over the three years. The stock is currently trading
at 27x FY2018E adjusted earnings. We initiate coverage on the stock with a Buy recommendation and a price target of
Rs1,250 (valuing the stock at 35x FY2018E earnings).
Second level
Third level
Key risk: Any increase in competition in some of the niche categories such as cooling oil and antiseptic cream would act as a key
risk to the revenue growth estimate. Emamis margins are susceptible to volatility in input prices.
Fourth level
Fifth level FY2014
Particulars
Net Sales
Adjusted PAT
EPS (Rs.)
OPM(%)
PE(X)
RoE(%)
RoCE(%)
4/2/2016
1820.8
350.4
15.4
24.2
62.3
41.0
44.7
FY2015
FY2016E
FY2017E
FY2018E
2217.2
484.8
21.4
24.4
45.0
44.8
53.7
2638.4
547.4
24.1
25.5
39.8
42.0
39.5
3183.2
630.1
27.8
26.6
34.6
42.9
38.3
3811.4
808.8
35.6
27.2
27.0
46.7
47.0
13
Sharekhan's Viewpoints
Key objectives
The idea is to arm investors with

knowledge to help you take informed
decisions in the market

Second level
Focus on generating absolute returns of

20-25% in a short time
Third level
Fourth level
Fifth level
Focussed approach
4/2/2016
Stocks
with
strong
business
fundamentals
and
adequate
understanding through management
interaction/meeting
Regular updates and news flow on

stocks through updates and also FNA
14

Second levelViewpoint
Third level
Fourth level
Fifth level
4/2/2016
15
Viewpoints closed with strong returns

Date of
initiation
Closure
price
Total
Returns
(%)
16-Feb-15
422.0
145.3
409.0
7-Jan-15
886.0
116.6
64.1
23-Dec-14
138.0
115.4
Reco
Price
Date of
closure
Indo Count Industries
172.0
26-Mar-14
FIEM Industries
25-Jun-14
JK Tyre
25-Sep-14
Viewpoint
Out of 115 Viewpoint reports

initiated in the last 24
months, about 69 calls were
closed with the average
return of 32.7%
1-Sep-14
Salzer Electronics
136.0
11-Mar-15
257.0
89.0
14-Aug-14
Force Motors
687.0
23-Sep-14
1,281.0
86.5
22-Aug-14
269.0
84.2
23-May-14
Third97.0
level
178.0
83.5
876.0
79.5
5-Feb-14
Second level
19-Mar-14
JK Lakshmi Cement
25-Aug-14
Marico Kaya
3-Sep-14
Gulf Oil Lubricants
541.0
72.8
14-Mar-14
Arvind
241.0
68.5
24-Sep-14
TCPL Packaging
255.0
13-Nov-14
425.0
66.7
28-Mar-14
MRPL
45.0
21-May-14
75.0
66.7
12-Dec-14
Welspun India
340.0
4-Jun-15
545.0
60.3
24-Jan-14
Bharti Infratel
172.0
15-Jul-14
262.0
52.3
14-May-14
Tata Communications
290.0
29-Jul-15
439.0
51.4
PFC
4/2/2016
146.0
488.0
26-Nov-14
Fourth level
313.0
16-Dec-14
Fifth
level
143.0
30-Jul-14
Top
15
call
closures
generated aggregate return of
about 82.6%
16
New Initiation: Trident Ltd

Reco Price R 51
CMP Rs51
View: Positive
Trident is the flagship company of the Trident Group. The company operates in two major business segments: textile and paper with
its manufacturing facilities located in Punjab and Madhya Pradesh. Tridents customer base spans over 100 countries across 6
continents and comprises of global retail brands .
Trident by virtue of being present in the terry towel segment, with an annual capacity to manufacture 90,000 tonne, is now entering
the lucrative bed linen space with a capacity of 42.5 million meter. It is well placed to encash on its strong global home textile
opportunity for Indian players.
Driven by the improving volume growth in the terry towel segment (which is currently running at 60% utilisation level), coupled with
added revenue from the newly commissioned bed linen plant (the plant is already commissioned and trial runs are going on), we
expect the company to post 10.7%, 15.0% and 52.0% growth in revenues, operating profit and net earnings respectively over FY201517.

Second level
We believe that Trident with (a) strong earnings growth potential (CAGR of 52% over FY2015-17); (b) steady cash flow generation
(average cash flow generation of Rs350 crore annually over the next two years); (c) improving product mix from mere terry towels to
bed linen and targeting domestic market; (d) strengthening balance sheet, is available at an attractive valuation of 9.5x its FY2017E
earnings and hence is likely to offer decent 20-25% upside from the current levels, make us positive on the stock.
Third level
Fourth level
Key risk: (1) Weak demand for
theFifth
newly entered
levelbed linen segment
Particulars
Net sales (Rs. Cr)
Operating profit margin (%)
Net earnings
EPS
RoCE (%)
RoE (%)
Debt/equity (x)
PER (x)
4/2/2016
FY14
3,869
19
197
3.81
13.2
24.1
1.7
13.1
(2) High debt.
FY15
3,755
19
118
2.32
8.2
9.9
1.5
21.6
FY16E
3,771
20
207
4.07
7.4
13.3
2
12.3
FY17E
4,598
20
272
5.35
7.1
15.1
1.7
9.3
17

Wealth
Second level
Creator
Third level
Generating
meaningful
wealth in a multi-year rally
Fourth
level
Fifth level
www.sharekhan.com
4/2/2016
18
Sharekhan's Wealth Creator

A well balanced
portfolio
of 16-17 quality
title
style
companies to create meaningful wealth
Sharekhans Wealth
Creator portfolio
in multi-year rally in the Indian stock

market

Second level
Capturing the long-term triggers over a

period of 3-4 years
Third level
Fourth level
Fifth level
Focussed approach
4/2/2016
Careful selection of quality stocks

against a backdrop of reviving macro
environment and improving
policy
reforms
It is actively tracked and reviewed
every month; timely changes/revisions
are made to the portfolio and
communicated to the investors
19
Wealth Creator: ahead of broader indices

Returns (%) (as on 31st March 2016)
Since inception
(Aug 21, 2014)
Wealth Creator Folio (weighted

returns) text
Click to average
edit Master
- Large cap (64%)
Second- Mid
level
cap (36%)
styles0.4%
0.3%
0.5%
Third level
FourthSensex
level
Nifty
Fifth level
CNX Midcap
-3.9%
-1.9%
14.1%
Sharekhans wealth creator portfolio continues to outperform broader indices with

0.4% returns (weighted average basis) as against 2-4% decline in the broader
indices.
No changes made this month.
4/2/2016
20
Wealth Creator Folio

Sr No
1
2
3
4
5
6
7
8
Scrip
Weights
(%)
LargeCaps (64% weightage)
Axis Bank
8%
Larsen & Toubro
8%
Maruti Suzuki
8%
Cummins
8%
IndusInd Bank
8%
Sun Pharmaceuticals
8%
Tata Consultancy Services
8%
Tata Motors DVR
8%
Price as on
31-Mar-16
Target Price
Mar-19
Potential Upside
(%)
445
1216
3719
842
968
819
2516
289
1210
3800
8750
1708
1600
1650
5100
675
172.2%
212.4%
135.3%
102.8%
65.4%
101.4%
102.7%
133.8%
34
876
280
232
44
90
170
96
581
112
2100
810
650
135
200
440
265
1150
231.9%
139.7%
189.3%
179.8%
206.8%
122.2%
158.3%
176.0%
98.1%

Second level
Third
level
Midcaps (36% weightage; 4% each)
PTC India Financials
Fourth level 4%
V-Guard Ltd
4%
Fifth level 4%
Gateway Distripark
IRB Infra
4%
Network 18 Media
4%
Gabriel India
4%
Century Plyboard
4%
Triveni Turbine
4%
Dhanuka Agritech
4%
9
10
11
12
13
14
15
16
17
* Pls note we see scope for upward revision in target price (3-year) of some of the stock depending on the
extent of economic recovery and will keep updating on the same.
4/2/2016
21

Advisory Offerings
PowerPortfolio
Second level
Alpha
Third
level Delivery Picks
Fourth level
Actionable
Ideas
Fifth level
4/2/2016
22

Second level
Third level
Think Investment
Think Portfolio
Fourth level
Fifth level
4/2/2016
23
Key features
Best 10 stocks of the day
Long only Balanced and concentrated Portfolio
Quality Companies backed by In-depth research
Second level
Third
level and monitored
Actively
managed
Fourth level
Fifth level
Centralised advice
and
execution under
Fully invested at all times

No lock-in
4/2/2016
24
Objective
Create
wealth
for customers
the power
Click
to edit
Masterthrough
title style
of equity
Outperform Nifty Index by investing in quality
stocks for long term
Second level
Third level
Fourth level
Fifth level
4/2/2016
25
Power Portfolio - Performance

Nifty
No of
Total Active
Portfolio
OP/UP
Return
Outperforming
Portfolios
Click to Return
edit Master
text
styles
(%)
(%)
(%)
Portfolios
Second level
198 Third level

1.75
2.07
-0.32
81
Fourth level
Fifth level
Performance as on 30th March 2016
4/2/2016
26
Power Portfolio - Performance

TOP FIVE
Client
Start Date Portfolio Return(%) Nifty (%) Outperformance (%)
4.83%
CLIENT 1 26-05-2015
-3.83%
-8.66%
CLIENT 2 21-07-2015
-6.33%
-10.73%
4.40%
Click
to edit Master
styles
CLIENT
3 30-09-2015
0.03% text -4.20%
4.23%
CLIENT 4 12-02-2015
11.36%
9.07%
2.29%
Second level 1.79%
CLIENT 5 18-03-2016
0.14%
1.65%
Third level
Client
CLIENT 1
CLIENT 2
CLIENT 3
CLIENT 4
CLIENT 5
4/2/2016
Fourth level
BOTTOM FIVE
Fifth
level Return(%) Nifty (%) Outperformance (%)
Start Date
Portfolio
26-11-2015
-8.89%
-3.41%
-5.48%
23-12-2015
-8.42%
-3.18%
-5.24%
18-12-2015
-6.95%
-1.89%
-5.06%
16-02-2016
3.31%
8.03%
-4.72%
21-12-2015
-7.51%
-2.81%
-4.70%
27
Power Portfolio # Offering

Min Ticket Size
(At time of Investment)
300000style
Click to edit MasterRs.title
Top Up facility
Rs. 100000 & in multiples of same

Brokerage
Delivery 0.50% + Stat cost
AccountOpening
Charges
Third level
Rs. 499 (Annual)
Second level
Fourth level
Fifth level
1% of Corpus + Service Tax

(currently 14.50%)
AMC ( Upfront & Annual)
Wealthtiger Investment Advisors
Pvt. Ltd
Profit Sharing
4/2/2016
Nil
28
Alpha Delivery & Actionable Ideas
Click to
edit delivery
Master
titlebased
style
1-2 months
based ideas
on Short
New Alpha
Delivery
Picks
Click
term triggers (Results/ corporate action/Policy)

&/or reported flows. Each idea will have a
rationale/Key
triggers points .
tofundamental
edit Master
text styles
Second level
ThirdActionable
level
Ideas focus on generating absolute
returns
with a time frame of 6-12 months and a
level
Actionable Fourth
favorable
Fifth levelrisk-reward ratio. Stocks are closely
Ideas
tracked with regular interaction with companies
management to stay abreast of the business
outlook.
4/2/2016
29

New Alpha Delivery Picks

Second level
Third level
Fourth level
Fifth level
4/2/2016
30

About New Alpha Delivery Picks
Delivery based ideas for short term

Second
based on
research level
triggers.
Third level
Fourth
Each idea will
have level
a fundamental
Fifth level
rationale/Key triggers
points .
4/2/2016
31
New Alpha Delivery Picks - Rules

Ideas based on Stock Ideas, Viewpoints,
Ideas
Stock Update, Market Analysis
Weightage(%)
7
Max -10
Stop
Click
Loss to
(%) edit Master text styles
Min -5
Second level
Max -20
Profit Potential(%)
Min -10
Third level
Time Frame
Max - 2 Months
Fourth level
Trail Stop loss Fifth5%

trailing Stop loss on 5% rise in stock price
level
A) Pre defined / Trail Stop loss is hit
Exit Rules
B) Unexpected Event/ News/ Outcome
C) Time frame
Performance Reporting
Daily
4/2/2016
32
New Alpha Delivery Picks - Products Performance
No calls Initiated during month of March

Second level
New Alpha Delivery Performance
Third level
Fourth
level
No of
Calls
Financial Year
Fifth level
3
Open Calls
Profit Booked
Loss Booked
FY 2015 - 2016
4/2/2016
33
Products Performance Actionable Ideas (March 2016)
Sr
No
Company
Emami
Initiation
Date
Exit Date
Comments
Mar-16
CMP
940.15
Initiation
Profit/Loss
Price
Target
(%)
961
Skipper
Click Mar-16
to edit Master text140.30
styles
142
Ashok
Leyland
Target
Achieved
Second
Nov-15 level
Mar-16
105.00
87
1250
-2.17%
190
-1.20%
105
20.69%
Third level
Summary
March-16
Fourth level
Initiated Calls
Profit Booked
Fifth level
2
1
Loss Booked
0
Summary
No of Calls Open Calls
207
4/2/2016
79
Profit Booked
121
Avg Profit Unrealized

Calls Not
Loss Booked
Booked per Profit / Loss Strike Rate
Initiated
Idea
Per Idea
11
17.90%
-12.73%
92%
34
Market Outlook

Second level
Third level
Fourth level
Fifth level
4/2/2016
35
Volatility Rules
After beginning the Year 2016 on somber note; markets have pulled
back from lower levels. However, the near term direction still marred
with uncertainties.
Click to edit
Master text
India underperforms
MSCI EMstyles
(in 2016)
Second level
5%
0%
-5%Third level
-10%
-15%
Fourth level
Fifth level
-20%
MSCI EM Index Returns (%)
4/2/2016
Mar-16
Mar-16
Mar-16
Mar-16
Feb-16
Feb-16
Feb-16
Feb-16
Feb-16
Jan-16
Jan-16
Jan-16
Jan-16
Dec-15
Dec-15
Dec-15
Dec-15
Nov-15
Nov-15
Nov-15
Nov-15
Nov-15
-25%
Sensex Returns (%)
36
Some relief as of now!

Domestic: Decent Budget leading to expectations of policy rate cuts by
RBI; however corporate earnings growth remains weak and key drag on
markets
Globally: Easing of risk aversion and return of FII inflows (after four
months of outflows) on improved sentiments. However, uncertainties and
event riskexits
globally.
Second
level
20000
Third
level
15000
FII flows resumed in March
Fourth level
5000
0 Fifth level
10000
-5000
-10000
-15000
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
-20000
FII Equity Flow (Rs Cr)
4/2/2016
37
Eye on Key Events ahead

DOMESTIC
RBI Monetary policy review (5th April)

IMD
Monsoonto
forecast
for FY17 (mid
Click
edit Master
textApril)
styles
Second level
Q4FY16 Corporate Earnings
Third level
GLOBAL
Fourth level
Fifth level
US Fed FOMC Meet ( 27 April)

Brexit Referendum ( 23 June)
4/2/2016
38
Rate cut: Union Budget leaves scope for RBI

Fiscal Prudence: Union Budget (FY17) has pleasantly surprised as
government maintained tight leash on fiscal deficit despite mobilising
resources for productive areas.
Lower government borrowings: Lower government borrowings and

Click
to edit
Master
styles
innovative
resource
mobilisation
leavestext
sufficient
space for private
sector to borrow without impacting yields.
Second level
Fiscal consolidation on priority

6.0
Third level
5.7
4.9
5.0
Fourth level
4.1
3.9
Fifth level3.5
4.4
4.0
Govt borrowings lower than expected

6,500
5,500
4,500
3,500
2,500
3.0
1,500
2.0
500
1.0
-500
FY12
FY13
FY14
FY15
FY16BE
FY17BE
FY12
FY13
FY14
FY15
FY16RE FY17BE
Source : India budget FY17
4/2/2016
Gross Borrrow
Net Borrow
Source : India budget FY17
39
Rate Cut: Follow up measures

Cut in small saving rates: To support lower interest rates, the
government moved swiftly to cut small savings rates which further creates
room for monetary easing and transmission to borrowers by banks.
Macro variables favorable: CPI remains under 5% while IIP growth has
been in negative zone.
Second level
Small savings rates
Third level
Fourth level
Fifth level
CPI Inflation trending down

8
6
4
6
2
4
0
-2
2
-4
CPI (%)
4/2/2016
WPI (%)
40
Feb-16
Dec-15
Oct-15
Aug-15
Jun-15
Apr-15
Feb-15
Dec-14
Oct-14
-6
Aug-14
Rate Cut: Expectations reflected in bond yields

Bond markets have rallied (yields down by ~35 bps since budget)
indicates consensus expectation of at least 25 bps cut in repo rates by RBI
A 50 bps cut would be positive surprise and the markets will look for
guidance on extent of rate cuts in remaining part of 2016

Second level
RBI repo rate cuts
G-Sec 10 year yields
Third level
8.50
8.0
Fourth level
Fifth level
8.00
7.50
7.8
7.6
7.00
6.50
4/2/2016
Mar-16
Mar-16
Feb-16
Feb-16
Jan-16
Jan-16
Sep-15
Jun-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
6.00
Jan-16
7.4
10 Year Gsec Bond Yield (%)
41
Monsoon: Fingers crossed!

While government has increased its allocation for rural economy in
budget, the monsoon trends will determine the pace of recovery in rural
sector which is in deep stress due to two back to back droughts.
IMD will release its official forecast around mid-April, though comfort is
coming from the fact that historically there hasnt been drought for 3
consecutive
years
Second
level
Third level
1000
Monsoon trends ( actual)
Fourth level
Fifth level
900
800
2 years of
drought
700
Actual Rainfall in MM
4/2/2016
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
600
Average
42
Q4F results: to look up Sequentially

Weak global scenario ( especially commodities) and sluggishness in
domestic demand may continue to impact corporate earnings in Q4FY16
However, reported earnings growth may be better on sequential basis

due to low base ( several one-offs in Q4FY15) and improvement in certain
Click
to edit Master text styles
pockets
of economy.
Second Sensex
level consensus earnings estimates
2600
2400
Third level
2200
Fourth level
1800
Fifth level
2000
1600
1400
FY16
4/2/2016
FY17
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
1200
FY18
43
Hopes of earnings revival shift to FY2017

Consensus earnings ( Sensex) revised downwards by 18-20% since beginning of
FY16 factoring the global slowdown and sluggish domestic recovery.
Presently, the street is building a decline of ~3% in Sensex earnings for FY2016
and an 18% earnings growth in FY2017. Low base of FY16, govt
spending, consumption pick up, hope of better monsoon could drive FY17 earnings.
Second
level
Earningsex-global
cyclicals
are showing uptick for past few quarters : +tive sign
Third level
Earnings ex global cyclical showing uptick
Fourth level
7%
Fifth level
6%
8%
5%
7.00%
5.50%
4%
4%
3%
2%
1%
0%
Q1FY16
4/2/2016
Q2FY16
Q3FY16
44
Expectations toned down despite better macros

Oct-14
1.33
5.76%
6.70%
61.3
89.00
8.00%
Jan-15
2.50%
5.19%
6.60%
61.8
49.60
7.75%

IIP (3 Month Avg)
Inflation (CPI)
GDP
INR/USD
Crude Oil($/Barrel)
Reporate
Current macros are

much better Vs
2015 ; will get even
better in 2016
Jan-16
3.5
5.61%
7.40%
68.07
33.14
6.75%
Inflation fig with 1 month & IIP 2 month lag
Second level
Third level
Fourth level
Fifth level
9000
8000
7000
6000
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
5000
Correction in past 12
months has wiped out the
forth; however reflection
of better macro in
corporate earnings would
be key to re-rating of
markets
NIFTY
4/2/2016
45
What will drive earnings ??

Govt. Capital Spending;
Roads, Railways, Rural
Infra
Easing Cost pressure:

Low input prices, lower
interest rates

Second level
Third level
Corporate
Earnings
Fourth level
Fifth level
Low base effect as in FY2016
earnings has already factored
adverse impact of clean up of
banks B/S and impact of falling
commodity prices
4/2/2016
Consumption:
Urban pay hikes
+
Rural better monsoons
46
Incremental reforms could bear fruits

2015 year was about unrealistic expectations which were toned down but
the structural measures undertaken are likely to bear fruits in 2016 &
thereafter
Discom revival : +15 key states have approved the scheme which
potentially can turnaround the ailing power sector.
Second level
Robust growth in Govt Capex to sustain: Spending in

Third
roads, railways,
otherlevel
infra (2.2 trillion budgeted for FY17) will prop GDP
Fourth
levelalso revive private capex
growth 2016 onwards;
could
Fifth level
RBIs activism to improve long term prospect of financial sector: RBIs
stipulation of early cleanup of balance sheet of Banks will make them
ready for next phase of growth. It has also eased capital adequacy norms
which partially addressed capital concerns of PSU Banks
4/2/2016
47
Consumption, Govt spending clearly driving growth

Urban consumption and government spending has emerged a key bright
spots which would drive economic growth in 2016.
Government spending remains (especially in infra sector) key driver for

2016. Normalisation of agri growth post two consecutive droughts & higher
Click
to edit
styles
allocations
in budget
wouldMaster
only add totext
growth.
Second
th pay commision+OROP will hike income of millions
Implementation
of 7level
of govt employees
andlevel
will boost consumption.
Third
Govt spending is supporting GDP growth, (fig in %)
Fourth level
8.0
6.0 Fifth
4.1 level
6.8
6.2
4.9
4.0
1.2
2.0
0.0
-2.0
Q4FY15
Q1FY16
Q2FY16
-4.0
-6.0
-8.0
-10.0
4/2/2016
-7.9
GFCF
Govt consumption
48
7th Pay Commission to drive consumption

~25 mn state/central employees to benefit

11.6
15.0
15.3
11.6 11.0

7.0
Third level
Trend in Marutis sales after 6th Pay Commission implementation
7th pay
Commissions
recommendation
could also boost
spending/
consumption and
help economy
Fourth level
1,250,000
Fifth level
40.0
30.0
1,000,000
20.0
750,000
10.0
500,000
0.0
250,000
-10.0
-20.0
FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12FY13FY14FY15
Passenger Vehicles
4/2/2016
Effect of 6th Pay Commission
YoY growth (%)
49
FY17E
FY16E
Total
FY15
0.0
FY14
Pensioners
(Centre + State)
11.5
1.8
FY13
State govt
employees
11.1 11.5
FY12
Second level
10.0
5.0
FY10
6.0
Central govt
employees
25.0
25.0
20.0
FY09
27.6
FY11
15
29.9
30.0
20
10
35.0
FY08
25
24.6
40.0
35.0
FY07
30
Salary/pension hike a key driver of growth
Spending by states a key enabler for growth

Surprisingly, the states budget spending have gone up significantly and
aggregate spending of states is 65% more than Centre.
Even without factoring for 7th pay hikes the expenditure of states is
moving in double digits ( mainly in agri, infra , energy sectors) which will
give boost to growth
Second
level
Central govt capex to sustain at 1.6-1.7% of GDP, figs in 00 crs
3000
Third level
Fourth level
2000
Fifth level
2500
1500
1000
500
0
FY13
FY14
FY15
FY16RE
FY17 BE
Source : India budget FY17, Bloomberg
4/2/2016
50
Global issues overshadow otherwise

improving
domestic
scenario
Click
to edit Master
text styles
Second level
Third level
Fourth level
Fifth level
4/2/2016
51
Global Pangs Divergent Monetary Policies!

US Federal meeting towards the end of April will be key event as
consensus is building pause in upcoming FOMC and caution on further rate
hikes by US Fed.
On the other hand, Japan, Europe, Canada, Swiss and some other
Click
to edit
Master
texttostyles
developed
countries
have cut
interest rates
negative (unprecedented
move).
Second level
Third level
Such divergent monetary policies
Fourth levelin
are resulting inadjustments
financial markets adding
lot
Fifthtolevel
of uncertainties!!!. However, the
halt in USD appreciation has
lowered the abrupt devaluation
of Chinese currency Yuan.
Performance of key currencies

10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
BRL
RUBLE
ZAR
INR
CNY
EM Currencies performance
4/2/2016
52
ZIRP to NIRP what next!!

Zero Interest Rates to Quantitative Easing and NEGATIVE INTEREST
RATES now!!!
To tackle global debt crisis and deflationary environment, central

bankers
adopted
push interest rates down
Click
tounconventional
edit Masterpolicies
text to
styles
to ZERO and even in negative zone.
Second level
Third level
Too early to take a call on

Fourth
level
effectiveness of
ve rates.
But
clearly the centralbanks
the
Fifthin
level
developed world have nearly
exhausted all options and a
crisis at this stage leaves he
world vulnerable!!
4/2/2016
53
India Better placed relatively

World bank, IMF and other institutions have placed India on top
due to robust macro fundamentals. India also overtaken China in
terms of favorite destinations for FDI
Global
Second level
Interest rate Third levelmixed trends
Economic Growth Fourth level
Subdued
Fifth level
Reform momentum
muted
Financial stability
weak
Capactity utlisation
falling
4/2/2016
India
falling
rising
improving
Strong
rising
54
Click to
edit Master
title style
Valuations
Reasonable
Second level
Third level
Fourth level
Fifth level
4/2/2016
55
Sensex valuation: In a comfortable zone

Sensex trades at ~15x one-year forward earnings (FY17 consensus
estimates) which is slight discount to long-term average PE multiple
for Sensex. However even after assuming further downgrades (i-e only
11-12% earnings growth in FY2017; Sensex PE stands at reasonable
level of ~15.5-16x
Sensex one-year forward P/E band

Second level
30.0
Third level
25.0
Fourth level
20.0
Fifth level
15.0
10.0
+1 sd
4/2/2016
PER
Avg PER
Mar-16
Mar-14
Mar-12
Mar-10
Mar-08
5.0
-1 sd
56
Valuation are reasonable, even on relative basis

Given pullouts from emerging markets, China concerns and strengthening
of USD, the EM valuations have come off from highs.
However Sensex premium to EM valuations has dipped below the mean

(avg. of ~20%) despite better fundamentals of the Indian economy

Second level
India vs EM valuations
80%
60%Third level
40%
20%
0%
Fourth level
Fifth level
-20%
Sensex PE premium over EM PE
4/2/2016
Mar-16
Mar-15
Mar-14
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
-40%
Average Premium
57
Equities to outperforms other asset classes

Physical assets Real Estate and Gold hit by several head winds
Policy push: Policy initiatives taken to curtail black money (like

Benami Property Act etc) to restrict demand in real estate and gold.
realtointerest
rates: As text
compared
to negative real
Positive
Click
edit Master
styles
interest rates (inflation higher than deposit rates), the real interest
Second
level
rates are positive
now.
Traditionally, it results in money moving to
financial assets
fromlevel
physical assets .
Third
Fourth level
Fixed/Term Deposits:
Rates already lowered by 125-150 bps;
Fifth level
further pressure expected
as RBI monetary stance remains
accommodative
On the other hand, equities tend to perform well in an economic

recovery cycle which is in the midst of initial phase.
4/2/2016
58
Exceptional returns even with moderated expectations

Sensex Target by 2018-19
Worst text
Case styles
Base Case
Earnings CAGR
15%
18%
Second level
PER(x)
16
18
Third level
FY2020
41530
51,000
Fourth level
Current Sensex
25000
Fifth level 25000
Upside
66%
104%
Average Returns
14%
20%
We are likely to get here
by 2018-19
4/2/2016
59
CONCLUSION
Our Prognosis
Global uncertainties continue to be biggest risk to equities

globally. For India, the continued reducing interest rate cycle and
the revival in consumptions to support corporate earnings and
equities.
Second
level
Over medium
to long
term, the growth outlook is much better for
the economy,
corporate
Third
level earnings and equities.
Fourth level phase has wiped off the speculative
Consolidation/correction
Fifth
level portfolio building opportunity to
froth and offers an
attractive
investors.
Sector preferred: Private banks, NBFCs, Consumer Discretionary,

select auto and IT services, bottom up picks
4/2/2016
60
THANK YOU

Second level
Third level
Fourth level
Fifth level
4/2/2016
61
DISCLAIMER
This document has been prepared by Sharekhan Ltd.(SHAREKHAN) This Document is subject to changes without prior notice and is intended only for
the person or entity to which it is addressed to and may contain confidential and/or privileged material and is not for any type of circulation. Any
review, retransmission, or any other use is prohibited. Kindly note that this document does not constitute an offer or solicitation for the purchase or
sale of any financial instrument or as an official confirmation of any transaction. Though disseminated to all the customers simultaneously, not all
customers may receive this report at the same time. SHAREKHAN will not treat recipients as customers by virtue of their receiving this report.
The information contained herein is from publicly available data or other sources believed to be reliable. While we would endeavour to update the
information herein on reasonable basis, SHAREKHAN, its subsidiaries and associated companies, their directors and employees (SHAREKHAN and
affiliates) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance, or other reasons that may
prevent SHAREKHAN and affiliates from doing so. We do not represent that information contained herein is accurate or complete and it should not be
relied upon as such. This document is prepared for assistance only and is not intended to be and must not alone betaken as the basis for an
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Affiliates of Sharekhan may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this
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Third level
Fourth level
Fifth level
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality,
state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would
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Product Review (March)

Market Outlook (April)

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Top Picks folio

Top Picks folio

A well-balanced portfolio of thoroughly researched

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Careful selection of stocks to

deliver superior risk

To maximise shareholders returns with minimum risk

Only thoroughly researched and fundamentally strong

Actively tracked and reviewed every month without

Superior returns across cycles

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Beating the benchmark indices consistently (absolute

Since Inception (Jan

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Consistent outperformance (absolute returns; not annualised)

Low volatility, High returns

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Top Picks for March 2016

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Fortunately, Consequently, the benchmark indices at home registered a double-digit gain

Made two changes in the basket

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Sharekhan's Stock Ideas

Focus on generating absolute returns

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Closely tracked stocks with regular

Regular updates and news with view on

Sharekhan's Stock Ideas

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Our last 24 Stock Ideas generated 42%

Some of the blockbuster Stock Ideas of

Top 10 Stock Ideas delivered 2x returns

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LIC Housing Finance

PTC India Financial Services

*CMP as on March 31st , 2016

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Reco price Rs961

Price target Rs 1250

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The idea is to arm investors with

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Regular updates and news flow on

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Viewpoints closed with strong returns

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