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ValueGuide

October 2018

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CONTENTS

From the Editor’s Desk EQUITY


To say the least, FUNDAMENTALS
Indian stock markets Stock Idea 08 REGULAR FEATURES
had a rough ride Stock Update 10 Report Card 04
in September. A Sector Update 17 Earnings Guide 29
plummeting rupee,
rising crude oil prices TECHNICALS DERIVATIVES
led to fear of fiscal Nifty 18 View 19
slippages and the
crisis at IL&FS caused markets to tank.... ADVISORY DESK DERIVATIVES
06 MID Trades 26 Derivatives Ideas 26

RESEARCH-BASED EQUITY PRODUCTS


CURRENCY
Top Picks Performance 07 FUNDAMENTALS
USD-INR 20 GBP-INR 20
EUR-INR 20 JPY-INR 20
TECHNICALS
PMS DESK
USD-INR 21 GBP-INR 21
ProPrime - Prime Picks 22
EUR-INR 21 JPY-INR 21
ProPrime - Diversified Equity 23
ProTech - Index Futures Fund 24 MUTUAL FUND DESK
ProTech - Trailing Stops 25 Top MF Picks (equity) 27
Top SIP Fund Picks 28

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October
June 2017
2018
3 Sharekhan ValueGuide
REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON OCTOBER 03, 2018)


CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX
COMPANY
RECO 03-OCT-18 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M
Automobiles
Apollo Tyres Buy 206 280 307 198 -17.7 -17.2 -27.1 -14.7 -12.4 -18.9 -32.9 -26.2
Ashok Leyland Buy 119 165 168 105 -10.7 -6.3 -17.9 -0.9 -5.0 -8.2 -24.4 -14.2
Bajaj Auto Hold 2731 2905 3473 2604 -1.5 -2.6 -0.2 -11.9 4.9 -4.6 -8.2 -23.7
Gabriel India Buy 120 175 208 116 -14.7 -9.6 -22.6 -37.3 -9.2 -11.4 -28.8 -45.8
Hero MotoCorp Hold 2914 3375 3895 2790 -10.1 -14.5 -19.2 -21.4 -4.4 -16.2 -25.6 -31.9
M&M Buy 792 1075 993 628 -16.5 -10.7 3.6 26.2 -11.1 -12.5 -4.6 9.3
Maruti Suzuki Buy 7246 10500 10000 7024 -18.6 -18.6 -19.0 -7.3 -13.4 -20.2 -25.5 -19.8
Rico Auto Industries Buy 68 101 111 64 -19.2 0.8 -18.7 -26.4 -14.0 -1.2 -25.2 -36.3
TVS Motor Buy 538 670 795 507 -4.8 -4.0 -16.9 -17.2 1.3 -6.0 -23.6 -28.3
BSE Auto Index 21012 27031 20485 -14.3 -11.8 -14.5 -12.9 -8.7 -13.6 -21.3 -24.6
Banks & Finance
Axis Bank Hold 572 625 678 448 -9.4 11.9 14.1 12.3 -3.6 9.6 5.0 -2.8
Bajaj Finance Buy 2232 2725 2995 1511 -18.1 -3.7 21.9 19.7 -12.8 -5.6 12.2 3.6
Bajaj Finserv Buy 5753 7834 7200 4444 -13.5 -2.2 6.9 8.1 -8.0 -4.2 -1.6 -6.5
Bank of Baroda Buy 103 ** 207 95 -31.9 -8.6 -28.9 -24.8 -27.5 -10.4 -34.6 -34.9
Bank of India Reduce 81 ** 217 73 -19.1 -7.3 -25.2 -41.5 -13.9 -9.2 -31.1 -49.4
Capital First Buy 504 750 902 474 -22.5 -2.7 -21.3 -31.0 -17.5 -4.6 -27.6 -40.3
Federal Bank Hold 70 84 128 67 -13.1 -14.8 -22.4 -36.9 -7.5 -16.5 -28.6 -45.4
HDFC Buy 1798 2454 2053 1638 -7.6 -3.6 -0.7 3.1 -1.6 -5.5 -8.7 -10.8
HDFC Bank Buy 2031 2470 2220 1685 -2.1 -1.9 6.7 13.0 4.2 -3.9 -1.9 -2.2
ICICI Bank Hold 304 325 366 255 -9.1 11.8 13.0 9.6 -3.3 9.6 3.9 -5.1
LIC Housing Finance Hold 412 600 675 393 -20.8 -11.7 -24.7 -35.0 -15.6 -13.5 -30.7 -43.7
Max Financial Buy 393 550 611 367 -12.4 -7.3 -15.5 -34.6 -6.8 -9.2 -22.2 -43.4
PTC India Financial Services Hold 15 21 44 14 -24.2 -3.7 -38.9 -59.5 -19.3 -5.6 -43.8 -64.9
Punjab National Bank Reduce 65 ** 232 58 -25.1 -16.2 -32.3 -50.1 -20.3 -17.9 -37.7 -56.8
SBI Buy 272 340 352 232 -11.3 5.5 8.5 8.1 -5.6 3.4 -0.2 -6.4
Union Bank of India Reduce 69 ** 196 63 -24.0 -15.1 -29.3 -45.9 -19.2 -16.8 -34.9 -53.2
Yes Bank Hold 213 280 404 165 -37.3 -36.9 -31.5 -38.9 -33.2 -38.1 -37.0 -47.1
BSE Bank Index 27835 32150 26418 -11.3 -4.3 2.0 3.2 -5.6 -6.2 -6.2 -10.7
Consumer goods
Britannia Buy 5739 7260 6944 4302 -12.6 -7.3 13.0 32.8 -7.0 -9.2 4.0 14.9
Emami Buy 495 647 714 475 -14.5 -5.3 -8.8 -7.6 -9.0 -7.2 -16.1 -20.0
GSK Consumer Hold 6723 7137 7850 4861 -11.7 6.2 13.3 34.7 -6.0 4.0 4.2 16.6
Godrej Consumer Products Buy 765 1100 979 600 -19.9 -8.0 4.7 21.6 -14.7 -9.9 -3.7 5.2
Hindustan Unilever Buy 1619 1900 1809 1179 -4.7 -1.5 21.0 38.4 1.4 -3.5 11.3 19.8
ITC Buy 295 347 323 250 -5.7 11.2 16.4 15.1 0.3 9.0 7.1 -0.4
Jyothy Laboratories Buy 195 265 249 162 -8.1 -18.4 0.2 -1.7 -2.2 -20.0 -7.8 -14.9
Marico Buy 327 385 388 284 -9.4 -4.0 0.7 7.7 -3.5 -5.9 -7.4 -6.8
Zydus Wellness Buy 1374 1935 1980 871 -21.6 4.2 11.5 53.9 -16.5 2.1 2.6 33.2
BSE FMCG Index 11423 12850 9919 -8.6 2.1 10.5 17.1 -2.7 0.1 1.6 1.4
IT / IT services
Firstsource Soluation Hold 62 75 84 36 -18.2 -7.7 10.7 53.2 -13.0 -9.5 1.9 32.6
HCL Technologies Buy 1091 1215 1125 825 4.0 16.6 13.1 24.7 10.7 14.3 4.0 8.0
Infosys# Buy 729 840 755 445 1.6 7.6 30.9 67.6 8.1 5.5 20.4 45.0
Persistent Systems Buy 740 950 915 629 -11.6 -8.1 10.2 13.0 -5.9 -9.9 1.4 -2.2
Tata Consultancy Services Buy 2163 2400 2276 1212 5.4 15.6 50.1 79.4 12.1 13.3 38.1 55.3
Wipro Buy 328 390 339 254 6.2 25.0 15.4 16.1 13.1 22.5 6.1 0.5
BSE IT Index 15651 16088 9966 1.3 10.6 29.6 59.5 7.8 8.4 19.2 38.1
Capital goods / Power
CESC Buy 862 1165 1190 801 -15.4 -3.3 -14.3 -12.5 -9.9 -5.2 -21.1 -24.3
CG Power & Ind. Solutions Hold 45 70 99 43 -23.5 -22.3 -44.3 -43.0 -18.5 -23.8 -48.7 -50.6
Finolex Cable Buy 507 710 758 482 -7.4 -10.1 -27.1 -6.1 -1.4 -11.9 -32.9 -18.7
Greaves Cotton Hold 130 157 165 112 -15.5 -1.8 9.4 0.8 -10.1 -3.7 0.7 -12.8
Kalpataru Power Transmission Buy 319 465 536 305 -12.8 -17.1 -33.4 -12.0 -7.2 -18.8 -38.7 -23.8
KEC International Buy 276 400 443 263 -10.4 -16.5 -30.8 -10.3 -4.6 -18.2 -36.3 -22.4
PTC India Hold 72 95 128 66 -13.9 2.8 -18.5 -38.6 -8.4 0.8 -25.0 -46.8

October 2018 4 Sharekhan ValueGuide


EQUITY FUNDAMENTALS REPORT CARD
STOCK IDEAS STANDING (AS ON OCTOBER 03, 2018)
CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX
COMPANY
RECO 03-OCT-18 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M
Thermax Hold 935 1240 1375 892 -7.9 -10.0 -17.4 0.5 -2.0 -11.8 -24.0 -13.0
Triveni Turbine Hold 107 130 147 92 -7.8 -5.9 7.4 -15.8 -1.9 -7.8 -1.2 -27.2
V-Guard Industries Buy 173 245 255 165 -21.0 -9.9 -25.1 -6.5 -15.9 -11.7 -31.0 -19.0
Va Tech Wabag Buy 288 465 650 271 -25.5 -22.7 -41.1 -50.9 -20.7 -24.3 -45.8 -57.5
BSE Power Index 1955 2450 1877 -6.7 3.1 -9.6 -9.1 -0.7 1.1 -16.8 -21.3
BSE Capital Goods Index 17033 20883 16520 -10.0 -0.8 -9.1 0.5 -4.2 -2.8 -16.4 -13.0
Infrastructure / Real estate
Gayatri Projects Hold 192 221 231 150 -5.3 17.1 -8.1 6.9 0.8 14.7 -15.5 -7.5
IRB Infra Buy 138 270 286 131 -26.8 -32.8 -42.2 -32.6 -22.1 -34.2 -46.8 -41.7
Jaiprakash Associates Hold 7 ** 27 6 -39.6 -54.6 -65.0 -61.0 -35.7 -55.5 -67.8 -66.2
Larsen & Toubro Buy 1245 1655 1470 1123 -8.6 0.8 -5.2 11.1 -2.7 -1.2 -12.8 -3.8
NBCC Buy 58 90 146 55 -20.3 -18.5 -44.7 -45.4 -15.2 -20.2 -49.2 -52.7
Sadbhav Engineering Buy 220 410 440 199 -21.9 -20.3 -44.0 -26.0 -16.9 -21.9 -48.5 -36.0
CNX Infra Index 2933 3749 2898 -10.1 -3.0 -12.9 -7.8 -4.3 -5.0 -19.8 -20.2
BSE Real estate Index 1678 2828 1631 -20.5 -18.0 -25.2 -18.6 -15.4 -19.6 -31.2 -29.6
Oil & gas
Oil India Hold 220 225 259 199 4.6 6.3 0.2 -2.5 11.3 4.1 -7.8 -15.6
Petronet LNG Buy 222 280 276 202 -6.6 4.1 -2.6 -3.1 -0.6 2.1 -10.4 -16.1
Reliance Ind Buy 1205 1465 1329 796 -2.0 24.1 34.8 51.9 4.4 21.6 24.0 31.5
Selan Exploration Technology Hold 235 250 278 174 -6.1 15.9 16.7 33.3 0.0 13.6 7.4 15.4
BSE Oil and gas Index 14886 16727 13232 -0.2 9.8 2.4 2.1 6.2 7.6 -5.8 -11.6
Pharmaceuticals
Aurobindo Pharma Buy 772 895 827 527 10.2 23.1 30.0 9.6 17.3 20.6 19.7 -5.2
Cadila Healthcare Buy 394 450 515 333 -2.9 2.8 0.9 -16.1 3.4 0.7 -7.2 -27.4
Cipla Buy 655 720 678 507 0.8 2.7 15.3 13.6 7.3 0.6 6.1 -1.7
Divi's Labs Buy 1309 1670 1426 850 1.7 21.5 18.9 54.2 8.3 19.1 9.4 33.5
Glenmark Pharmaceuticals  Hold 626 780 712 484 -5.4 6.6 14.2 5.2 0.7 4.4 5.1 -9.0
Lupin Reduce 898 ** 1090 724 -4.1 0.0 14.6 -11.5 2.1 -2.0 5.4 -23.4
Sun Pharmaceutical Industries Buy 621 765 679 435 -5.1 8.6 22.1 23.9 1.0 6.4 12.4 7.2
Torrent Pharma Buy 1649 2000 1873 1204 -9.6 14.0 28.2 33.6 -3.8 11.7 18.0 15.7
BSE Health Care Index 15003 16497 12606 -5.8 6.1 11.1 11.3 0.3 3.9 2.2 -3.7
Building materials
Grasim Buy 970 1360 1300 914 -9.0 -1.1 -10.4 -15.9 -3.2 -3.1 -17.5 -27.2
Shree Cement Hold 16632 18910 19849 14980 -12.7 4.3 0.1 -10.3 -7.1 2.2 -7.9 -22.3
The Ramco Cements Hold 637 754 879 615 -6.2 -9.1 -14.9 -7.8 -0.2 -10.9 -21.7 -20.2
UltraTech Cement Buy 3860 4585 4600 3563 -11.7 3.2 -2.0 -0.6 -6.1 1.2 -9.9 -14.0
Discretionary consumption
Arvind Buy 317 500 479 306 -20.8 -18.4 -21.0 -13.1 -15.7 -20.1 -27.3 -24.8
Century Plyboards (India) Buy 178 320 364 170 -19.5 -28.3 -45.2 -29.1 -14.3 -29.7 -49.6 -38.7
Info Edge (India) Hold 1393 1800 1698 1012 -16.1 19.2 13.3 29.7 -10.7 16.8 4.3 12.3
Inox Leisure Buy 226 320 326 190 -9.0 -10.8 -17.6 -1.4 -3.1 -12.6 -24.2 -14.6
KKCL Hold 1317 1770 2200 1258 -12.1 -2.2 -13.4 -19.2 -6.4 -4.1 -20.3 -30.1
Orbit Exports Hold 139 177 190 107 -2.3 3.0 -10.4 -5.0 4.0 0.9 -17.6 -17.7
Relaxo Footwear Buy 712 913 874 501 -15.6 1.3 7.3 37.1 -10.1 -0.7 -1.3 18.7
Thomas Cook India Hold 214 275 303 197 -14.9 -22.2 -22.6 -14.8 -9.4 -23.8 -28.8 -26.3
Wonderla Holidays Hold 286 395 425 275 -8.0 -10.4 -20.7 -19.7 -2.1 -12.2 -27.1 -30.5
Zee Entertainment Buy 438 560 619 415 -12.4 -19.2 -24.3 -15.7 -6.7 -20.8 -30.4 -27.0
Diversified / Miscellaneous
Bajaj Holdings Buy 3006 3844 3250 2451 -1.1 5.2 16.2 5.6 5.3 3.1 6.9 -8.6
Bharat Electronics Buy 83 103 193 74 -25.8 -22.1 -43.0 -48.3 -21.1 -23.7 -47.5 -55.2
Bharti Airtel Buy 318 480 565 302 -17.0 -13.5 -20.3 -16.1 -11.7 -15.3 -26.7 -27.4
Gateway Distriparks Buy 145 220 275 137 -22.3 -16.8 -20.1 -36.0 -17.3 -18.4 -26.5 -44.6
PI Industries Hold 710 837 1035 690 -7.7 -6.3 -21.5 -5.2 -1.7 -8.2 -27.8 -17.9
Ratnamani Metals and Tubes Buy 849 1150 1217 823 -4.0 -6.5 -3.7 -1.6 2.2 -8.3 -11.4 -14.8
Supreme Industries Buy 966 1420 1490 949 -17.9 -13.3 -18.4 -11.3 -12.6 -15.0 -24.9 -23.2
UPL Buy 643 735 850 537 -10.8 3.2 -15.0 -18.3 -5.1 1.2 -21.8 -29.2
BSE500 Index 14365 15938 13716 -8.7 -0.6 0.7 6.0 -2.8 -2.6 -7.4 -8.3
CNX500 INDEX 9057 10050 8658 -8.7 -0.6 0.6 5.8 -2.8 -2.6 -7.5 -8.4
CNXMCAP INDEX 17086 21841 16682 -13.9 -5.8 -10.8 -5.2 -8.4 -7.7 -17.9 -17.9
# Reco price adjusted for bonus ** Price under review

October 2018 5 Sharekhan ValueGuide


From the Editor’s Desk
From the Editor’s Desk Turned on its head!

To say the least, Indian stock markets had a rough ride in September. A plummeting rupee,
rising crude oil prices led to fear of fiscal slippages and the crisis at IL&FS caused markets to
tank. Global uncertainty only added to the weak sentiments. The decline of 6-6.5% in the Nifty
and Sensex does not fully reflect the carnage in the broader markets and losses in some of the
index stocks.

What’s more concerning for investors has been the nervousness in money markets post the
IL&FS crisis. Bond yields, especially in the shorter end of yield curve, spiked up. This created
uncertainty in non-banking financial companies’ (NBFCs) ability to raise funds at a reasonable
coupon rate.

The government and the Reserve Bank of India (RBI) haven’t been idle watchers though. The
government has slashed its borrowing target for the second half of FY2019 to Rs. 2.74 lakh
crore from Rs. 2.88 lakh crore while the RBI injected nearly Rs. 200 billion through open market
operations (OMOs). The central bank has announced further OMOs of Rs. 360 billion in October
that should help calm down the money markets.

Amid growing macro concerns, one silver-lining is the expected healthy revival in corporate
earnings. After muted growth for past five years, earnings growth is set to grow in the high
double-digits this year. Also, the expected peaking out of asset quality issues in the banking
sector could also work in favour of aggregate earnings growth.

The emerging scenario is completely opposite to situation last year. Strong macros and weak
micros (corporate earnings) is turning into a scenario of weakening macro variables and stronger
micros. The scenario has turned on its head. The transition along with global uncertainties is
resulting in a readjustment in debt and equity markets. Accordingly, equity investors also need
to tweak their portfolios.

Finally, markets do test conviction. That’s the reason why many tend to book permanent loss in
a temporary correction while others use temporary correction for permanent wealth creation.
The choice is entirely in your hands.

October 2018 6 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Sharekhan Top Picks

Top Picks 28 September, 2018


Performance of Top Picks for September 2018
Macro headwinds are blowing away markets, globally. The was limited to 6.5-7% largely due to strength in index constituents
situation in India is accentuated due to our dependence on crude such as IT heavyweights and Reliance Industries. Among the Top
oil imports and the flurry of negative news in the banking and Picks also, pressure was evident in interest rate-sensitive stocks
money markets. This essentially puts the pace of economic and the portfolio was down by close to 10% in the same period.
recovery at risk as interest rates could head up further and a Thankfully, the Reserve Bank of India (RBI) is taking steps to calm
liquidity crunch in the money markets could limit financiers’ the money market by infusing funds and creating special liquidity
ability to lend. facilities for debt mutual funds. Moreover, the focus would shift
Given the rising uncertainties, the CNX Midcap 100 index declined to companies’ Q2 results, going ahead. A revival in corporate
by 13.9% the last month, while the damage in Nifty and Sensex earnings is a key cushion for the equity markets.

Consistent outperformance (absolute returns; not annualised) (%)


(%) 1 month 3 months 6 months 1 year 3 years 5 years
Top Picks -10.9 -7.5 -0.8 5.7 59.7 237.5
Sensex -6.3 2.3 9.9 15.9 38.3 84.9
Nifty -6.4 2.0 8.1 12.2 38.2 88.8
CNX MIDCAP 100 -13.9 -5.6 -8.5 -4.4 32.2 142.0
As on September 28, 2018

Absolute returns (Top Picks Vs Benchmark indices) (%)


Top Picks Sensex Nifty CNX Midcap 100
YTD CY2018 -5.7 6.3 3.9 -18.8
CY2017 58.0 28.0 29.0 47.3
CY2016 8.8 1.8 3.2 7.1
CY2015 13.9 -5.1 -4.1 6.5
CY2014 63.6 29.9 30.9 55.1
CY2013 12.4 8.5 6.4 -5.6
CY2012 35.1 26.2 29.0 36.0
CY2011 -20.5 -21.2 -21.7 -25.0
CY2010 16.8 11.5 12.9 11.5
CY2009 116.1 76.1 72.0 114.0
Please 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

Constantly beating Nifty and Sensex (cumulative returns since April 2009)
1100

1000

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100
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Feb-10
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Jan-12

Aug-12
Nov-12

Jun-13
Sep-13
Dec-13

Jul-14

Jan-15

Aug-15
Nov-15

Jun-16
Sep-16
Jan-17

Jul-17
Nov-17

Sep-18
Oct-09

Oct-11

Oct-14

Sharekhan Sensex Nifty

October 2018 7 Sharekhan ValueGuide


STOCK IDEA EQUITY FUNDAMENTALS

Report Recommendation Reco Price Target/ Upside (%)


Date Company
Type Latest Chg Price (Rs.) Latest Chg
Sep 03, 2018 Mastek Viewpoint POSITIVE New Initiation 539 23-25 -

Summary
• Initiate our viewpoint coverage on Mastek with a Positive stance and expect 23-25% upside over the next 8-12 months, given
improving growth visibility along with reasonable valuation.
• Expect revenue/net profit to report a CAGR of 19%/24%, respectively, over FY2018-FY2020E.
• Focus on increasing wallet share from U.K. government deals and scouting for acquisitions in the digital commerce space to
increase revenue contribution from the U.S.
• Healthy balance sheet: RoE and cash conversion rate (CFO/EBITDA) are expected to improve going ahead; ~36% of market
cap in cash and investments.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Mastek-Sept03_18.pdf

Sep 06, 2018 NIIT Ltd Viewpoint POSITIVE New Initiation 97 23-25 -

Summary
• Initiate our viewpoint coverage on NIIT Limited (NIIT) with a Positive stance and expect 23-25% upside over the next 8-12
months.
• Even assigning NIL value to its SNC and SLG businesses, the enterprise value of CLG business (~Rs. 900 crore) is twice the
adjusted market cap of NIIT (considering 40% holding discount to its investments in NIIT Technologies Limited, value arrives at
Rs. 433 crore).
• Expect CLG business to grow at a 19.5% CAGR over FY2018-FY2020, led by recent large deal wins and huge headroom for
growth.
• NIIT’s strategic decision of exiting capital-intensive businesses and loss-making operations is expected to improve liquidity and
return ratios of the business.

Read report - https://www.sharekhan.com/MediaGalary/Equity/NIIT-Sept06_18.pdf

Sep 11, 2018 Mahanagar Gas Limited Viewpoint POSITIVE New Initiation 833 18-20 -

Summary
• Mahanagar Gas Limited’s (MGL) volume growth is expected to get a boost from better CNG economics vs. petrol in Mumbai.
Thus, we model a 7% volume CAGR for MGL over FY2018-FY2020E.
• Any regulatory push to use CNG in public transport services, ramp-up of CGD business in Raigad district and likely wining of
new geographical areas in the recent bidding round for CGD auctions could act as key catalysts for long-term volume growth.
• We expect EBITDA margin to remain healthy at Rs. 8-8.3/scm over FY2019E-FY2020E but witness slight moderation from peak
margins of Rs. 8.6/scm in Q1FY2019, given depreciation of Indian rupee and likely higher domestic gas prices for H2FY2019.
• MGL’s steep valuation gap of 33% to IGL on FY2020E PE basis is expected to narrow down with the recent revival in volume
growth, industry-leading margins and RoE of ~23-24%. Thus, we initiate our viewpoint on MGL with a Positive view and 18-20%
upside potential.

Read report - https://www.sharekhan.com/MediaGalary/Equity/MahangarGas-Sept11_18.pdf

October 2018 8 Sharekhan ValueGuide


EQUITY FUNDAMENTALS STOCK IDEA

Report Recommendation Reco Price Target/ Upside (%)


Date Company
Type Latest Chg Price (Rs.) Latest Chg
Sep 12, 2018 Aarti Industries Viewpoint POSITIVE New Initiation 1,305 20-22 -

Summary
• We have a Positive view on the stock of Aarti Industries with a potential upside of 20-22%.
• Significant growth prospects in sight over FY2018-FY2020E led by expansion and diversification plans coupled with concerns
over supplies from China.
• Margin profile are expected to improve by 50-175 bps and return ratios are expected to improve by 200-375 bps during the
same period.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Aarti_Ind-Sept12_18.pdf

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

October 2018 9 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Sep 03, 2018 Ashok Leyland Stock Update BUY  133 165 

Summary
• We upgrade our recommendation on Ashok Leyland Limited (ALL) to Buy from Hold earlier with a PT of Rs. 165.
• Axle load norms did not impact new truck demand as MHCV industry grew in robust double digits in July and August 2018.
• MHCV strong growth momentum to continue with industry expected to report ~20% growth in FY2019.
• ALL to report strong earnings growth in FY2019 with improved demand outlook.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Ashok_Ley-Sept03_18.pdf

Sep 04, 2018 Info Edge (India) Stock Update HOLD  1,659 1,800 

Summary
• We have revised upwards the SOTP-based price target (PT) for Info Edge to Rs. 1,800 on account of upgrade in earnings
estimates and improving valuation of investee companies.
• The 22% run-up in the stock price in the past one month limits any material upside in the near term, maintain Hold rating
• Core businesses are expected to fire all cylinders going ahead with improving demand environment.
• Reinvestment in PolicyBazaar is the next engine for the value creation of the company.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Info_Edge-Sept04_18.pdf

Sep 04, 2018 Zydus Wellness Stock Update BUY  1,758 1,935 

Summary
• The stock price of Zydus Wellness Limited (ZWL) has moved by 28% in the past two months, in-line with strong surge in the
FMCG basket.
• Though the current valuation of 36x is higher than its historical average, it is relative lower to some of the mid and large-cap
FMCG stocks
• ZWL has one of the strongest balance sheets in the FMCG space, with negative working capital and strong cash balance of
over Rs. 400 crore.
• In view of the strong balance sheet, double-digit earnings growth visibility and discounted valuations to mid and large FMCG
stocks, we maintain our Buy recommendation on the stock with an upgraded PT of Rs. 1,935.

Read report -https://www.sharekhan.com/MediaGalary/Equity/Zydus-Sept04_18.pdf

Sep 05, 2018 Sun Pharmaceutical Industries Stock Update BUY  663 765 

Summary
• We continue to maintain our Buy recommendation on the stock with upward revised PT of Rs 765.
• We have increased our sales estimates owing to factors such as a favourable currency, a healthy growth in domestic business,
strong outlook for its US business and operating leverage.
• The strong track record of Sun Pharma to turn around acquired assets and its ability to maintain growth across key geographies
is encouraging.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Sun_Pharma-Sept05_18.pdf

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ŠŠ Note: The arrow indicates change in call and price target, if any, vis-à-vis the previous report

October 2018 10 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Sep 06, 2018 Aurobindo Pharma Stock Update BUY  760 895 

Summary
• Acquiring the Sandoz businesses is likely to add potential sales of $900 million for Aurobindo.
• We expect Aurobindo to report sales and earnings CAGR of 30% over FY2018-FY2021E, once the deal starts contributing to
earnings.
• We maintain our Buy rating and raise the PT to Rs 895, valuing stock at 12x FY2020E earnings.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Aurobindo_Pharma-Sept06_18.pdf

Sep 06, 2018 Balkrishna Industries Stock Update BOOK OUT  1,176 1,176 -

Summary
• We close our call and recommend Book Out on stock of Balkrishna Industries (BKT).
• Recent massive capex of Rs 1,700 cr announced has raised concerns; elevated debt and depreciation level to impact earnings.
• Premium valuations not sustainable as USP of low cost manufacturing base under threat.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Balkrishna-Sept06_18.pdf

Sep 07, 2018 Zee Entertainment Enterprises Stock Update BUY  469 560 

Summary
• Zee Entertainment stock has suffered due to concerns on ramp up in investments in digital platform and the potential risk to
broadcasters from shift of advertisement pie to digital platform.
• Some of the concerns related to higher investments are valid and accordingly we are reducing EPS estimates by 3%/7% in
FY2019E/FY2020E. Even after the estimate cut the adjusted net profits to grow at healthy 19% CAGR over FY2018-FY2020E.
• The pace of shift of ads pie to digital platform is debatable but could negatively impact valuation multiples. Thus, we are
retaining Buy on the stock with revised price target of Rs560.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Zee-Sept07_18.pdf

Sep 10, 2018 Glenmark Pharmaceuticals Stock Update HOLD  686 780 

Summary
• Glenmark Pharmaceuticals (Glenmark) has received market authorisation in Germany for its generic version of Seretide
Accuhaler.
• Although earnings contribution from Glenmark’s complex generics/specialty/NBE pipeline is still two-three years away, we
expect significant visibility to emerge over the next 12-18 months.
• We maintain our Hold recommendation on the stock with a price target (PT) of Rs. 780.

Read report - https://www.sharekhan.com/MediaGalary/Equity/InvestorsEye-Sept10_18.pdf

October 2018 11 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Sep 11, 2018 Hindustan Unilever Stock Update BUY  1,591 1,900 

Summary
• HUL has corrected by ~12% from its recent high, factoring all the negatives hovering around in view of rupee depreciating
against dollar and rising crude prices.
• The impact of rupee depreciation is limited to 2.5% of overall sales (including royalty payment of 1.8% of sales), which is lesser
in comparison to other consumer goods companies, which have higher exposure to currency fluctuation.
• We have marginally revised downwards our earnings estimates by 3.5% and 3%, respectively, for FY2019 and FY2020.
• The recent correction provides a good entry opportunity. Hence, we maintain our Buy recommendation on the stock with a
revised PT of Rs. 1,900.

Read report - https://www.sharekhan.com/MediaGalary/Equity/HUL-Sept11_18.pdf

Sep 11, 2018 HCL Technologies Stock Update BUY  1,083 1,215 

Summary
• We maintain our Buy rating on the stock of HCL Technologies with a revised PT of Rs. 1,215 given the earnings upgrade on
account of rupee tailwind.
• The buyback plan (that kicks off on September 18, 2018) would result in accretion in EPS and lead to improvement of the return
ratios.
• Organic growth prospects are expected to improve going ahead on account of ramp-up of deals won earlier (with record high
orders in Q3FY2018/Q1FY2019) and large deal wins in new services.

Read report - https://www.sharekhan.com/MediaGalary/Equity/HCLTech-Sept11_18.pdf

Sep 14, 2018 Infosys Stock Update BUY  735 840 

Summary
• We maintain our Buy rating on Infosys with a revised PT of Rs. 840, rupee reset led to earnings upgrade.
• Growth engines are firing with improving industry tailwinds, which resulted in accelerated deals wins, auguring well for revenue
visibility.
• Expect acceleration of revenue growth, led by ramp-up deals, healthy deal pipeline and anticipated acceleration in the BFS
space.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Infosys-Sept14_18.pdf

Sep 14, 2018 Mahindra & Mahindra Stock Update BUY  951 1,075 

Summary
• We retain Buy recommendation on M&M with a revised PT of Rs 1075. M&M remains our preferred pick in the auto segment.
• M&M has lined up 3 new product launches in FY2019 in the UV segment and eyes for markets share re-gains. We are factoring
in at-least 3-4% market share regains in the segment.
• The LCV segment is poised for strong double-digit volume growth in FY2019 as clarity emerges around new axle load norms
for CV’s.
• Tractor outlook robust given the uptick in the rural economy.

Read report - https://www.sharekhan.com/MediaGalary/Equity/MnM-Sept14_18.pdf

October 2018 12 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Sep 17, 2018 Divis Laboratories Stock Update BUY  1,364 1,670 

Summary
• We have upgraded sales and earnings estimates (FY2020E and FY2021E) for Divis Laboratories Limited (Divis) by 2-3% each
due to rupee depreciation, which has benefitted exporting pharma companies.
• We believe there is immense scope for better-than-expected growth and re-rating of valuation multiples going ahead.
• We maintain our Buy recommendation with an upward revised PT of Rs. 1,670.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Divis_Lab-Sept17_18.pdf

Sep 18, 2018 Federal Bank Stock Update HOLD  75 84 

Summary
• Federal Bank has 32% of its advances and has 48% of its branches situated in Kerala. Management expects bad loans from
Kerala to go up by 20-30% due to the recent floods in the region.
• However, players such as Federal Bank may see an uptick in deposit flows as relief aid money pours in for relief and rehabilitation.
• Due to the recent Kerala floods, we believe the next 1-2 quarters may see a likely rise in NPAs for the bank.
• We downgrade our recommendation on Federal Bank to Hold with a revised PT of Rs. 84.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Federal_Bank-Sept18_18.pdf

Sep 18, 2018 Bank of Baroda Stock Update BUY  113 Under Review -

Summary
• The proposed merger of Bank of Baroda (BoB) with Vijaya Bank and Dena Bank to create India’s third largest bank.
• Positives: BoB gains branch network and diversified reach; capital/asset quality of the merged entity remains in line.
• Negative: Pending merger completion, capital-raising plans of BoB to be delayed; near-term asset quality volatility probable.
• We retain our Buy rating, but keep PT under review pending the announcement of the swap ratio.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BoB-Sept18_18.pdf

Sep 19, 2018 Tata Consultancy Services Stock Update BUY  2,077 2,400 

Summary
• We maintain our Buy rating on TCS with a revised PT of Rs. 2,400, led by earnings upgrade (rupee reset) and rollover of target
multiple to average FY2020/FY2021E earnings.
• TCS is on track to achieve double-digit CC revenue growth in FY2019, given large deal ramp-ups, improving economy in
developed markets and rupee depreciation.
• TCS is expected to deliver strong growth rates among its peers with revenue and earnings CAGRs of 13% and 14%, respectively,
over FY2018-FY2021E.

Read report - https://www.sharekhan.com/MediaGalary/Equity/TCS-Sept19_18.pdf

October 2018 13 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Sep 19, 2018 Reliance Nippon Asset Management Company Viewpoint NEUTRAL  190 5-8 

Summary
• Regulatory changes in TER for equity-oriented mutual funds will likely impact profitability of players.
• TER slabs now favour smaller AMCs, and this could lead to some loss of market share by large AMCs.
• Reliance Nippon Asset Management Company’s (RNAM) margins as well as near-term revenue growth likely to be affected in
absence of a dedicated banking channel, its large size and increasingly performance-oriented market.
• We have a Neutral view on the stock and expect it to have 5-8% upside potential.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Reliance_NAM-Sept19_18.pdf

Sep 21, 2018 Yes Bank Stock Update HOLD  227 280 

Summary
• The RBI has curtailed the tenor of Yes Bank CEO, Mr. Rana Kapoor, and has allowed him to continue only till January 31, 2019.
• We believe Mr. Kapoor’s absence will impact the bank’s outlook in the medium term.
• We expect capital-raising plans of Yes Bank to be delayed and/or face the brunt of lower valuations.
• We downgrade our rating to Hold with a revised PT of Rs. 280.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Yes-Bank-Sept21_18.pdf

Sep 21, 2018 MOIL Viewpoint POSITIVE  178 15-18 

Summary
• Robust manganese ore production growth guidance of 15% for FY2019 and recent recovery in manganese ore price bodes well
for earnings growth (expect 21% CAGR over FY2018-FY2020E).
• Aggressive long term production target of 2mtpa by 2021, 2.5mtpa by 2025 and 3mtpa by 2030 from 1.2 mtpa in FY2018 is
supported by huge demand and supply gap in the domestic manganese ore market.
• We maintain our Positive view on MOIL and expect 15-18% upside from current levels given attractive valuation, strong earnings
growth and robust balance sheet.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Moil-Sept21_18.pdf

Sep 24, 2018 KNR Constructions Limited Viewpoint POSITIVE  198 18-20 

Summary
• The road sector is facing lull in project awards for H1FY2019 led by drying up of bank funding and land acquisition delays.
Consequently, FY2019 is likely to be lower on execution for the sector.
• Along with sector-related headwinds, rising funding cost has also added to correction in construction stocks (including KNR).
• However, we see the correction as an accumulation opportunity with one of the best managed road construction companies
(healthy balance sheet, high margins and return ratios) available at reasonable valuation now. We reiterate our Positive stance
with upside potential of 18-20% from here.

Read report - https://www.sharekhan.com/MediaGalary/Equity/KNRConst-Sept24_18.pdf

October 2018 14 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Sep 25, 2018 Marico Stock Update BUY  333 385 

Summary
• Copra prices have corrected by ~30% from their high; OPM to improve by 400-500 BPS in H2FY2019.
• Kerala floods to have some impact on sales volume in Q2FY2019, but high realisation in Parachute rigid packs and falling copra
prices to aid in strong bottom-line growth in Q2FY2019.
• Rupee depreciation against USD will not have much impact on earnings as the company is naturally hedged with foreign
currency earnings higher than expenses.
• Upgraded earnings estimates for FY2019 and FY2020 by 3.7% and 2.5%, respectively; maintain Buy with upgraded PT of Rs.
385.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Marico-Sept25_18.pdf

Sep 25, 2018 Wipro Stock Update BUY  330 390 

Summary
• We upgrade our rating on Wipro to Buy from Hold with a revised PT of Rs. 390, led by earnings upgrade and rollover of target
multiple to average FY2020/FY2021E EPS.
• The recent large deal win of $1.5 billion+ from Alight Solutions along with improving deal win momentum provide visibility in
growth pick-up.
• Restructuring activities and the gradual receding impact of customer-specific issues are expected to improve margins in the
coming years.
• With signs of growth pick-up and margin improvement led by rupee tailwind and restructuring initiatives, Wipro looks like an
attractive bet on the valuation front.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Wipro-Sept25_18.pdf

Sep 26, 2018 Bharat Electronics Stock Update BUY  84 103 

Summary
• Upgrade our recommendation on Bharat Electronics Limited (BEL) to Buy with a revised PT of Rs. 103; stock valuation looks
reasonable post the steep correction and positive management commentary.
• Policy changes to impact overall PBIT margin by 100 BPS as against 250 BPS anticipated earlier, limited impact on profitability
beyond FY2020E.
• We have increased our target multiple marginally to 15x from 14x earlier, though it is still 500 BPS lower than pre-policy target
multiple of 20x, thus adequately factoring new normal margin trajectory.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BEL_Sept26_18.pdf

Sep 26, 2018 Mastek Viewpoint POSITIVE  521 27-29 

Summary
• We maintain our Positive stance on Mastek and expect 27-29% upside from current levels, given improving growth visibility
along with reasonable valuation.
• Management expects to double the company’s revenue over the next three years, led by organic and inorganic initiatives.
• Focus on increasing wallet share from U.K. government and healthy traction for digital technologies amongst U.S. retailers
expected to drive revenue going ahead.
• Healthy balance sheet: RoE and cash conversion rate (CFO/EBITDA) are expected to improve going ahead; ~37% of market cap
in cash and investments.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Mastek-Sept26_18.pdf

October 2018 15 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Sep 27, 2018 Apollo Tyres Stock Update BUY  222 280 

Summary
• Apollo is set to clock a strong 17% CAGR in topline over FY2018 to FY2020 on robust domestic demand and capacity ramp up
in Europe.
• Ability to take price hikes amid rising raw material costs to sustain margins at 11.5-12%.
• With 26% earnings CAGR over next two years, Apollo is likely to be fastest growing tyre company. Apollo remains our preferred
pick in the tyre space.
• Sharp correction of 24% in past two months offers good entry point. We retain Buy rating on the stock with revised PT of Rs.
280.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Apollo_Sept27_18.pdf

Sep 28, 2018 Relaxo Footwear Stock Update BUY  733 913 

Summary
• Increased presence in South India and consumer shift from mass to mid-range product segment would help Relaxo Footwears
(Relaxo) report strong double-digit revenue growth.
• Rising rubber prices to put pressure on margins in the coming quarters; increased contribution from premium products and
gradual price hikes (in-line with competitive action) to support margins in FY2020 (marginally reduced estimates by 4.2%/2.7%
for FY2019/FY2020 to factor in higher rubber prices).
• Relaxo’s stock price has corrected from its high by ~13%, in-line with correction in broader indices.
• The stock remains our preferred pick in the discretionary space due to double-digit earnings visibility in the near term. We
maintain our Buy rating with an unchanged PT of Rs.913.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Relaxo_Sept28_18.pdf

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

October 2018 16 Sharekhan ValueGuide


EQUITY FUNDAMENTALS SECTOR UPDATE

Sector View
Date Sector Report Type
Latest Chg
Sep 03, 2018 Automobiles Sector Update POSITIVE 

Summary
• August 2018 volume growth moderated as The Kerala floods and high base in August 2017 due to an early start to festive
season impacted the automotive sales. Passenger vehicle sales were flat while two-wheelers grew by a meager 4%.
• Commercial vehicle sales, stayed strong growing 27% as demand from consumption-led companies and a rise in infrastructure
spends boosted volumes. Emergence of clarity on axle load norms also boded well for CVs.
• Preferred picks – Maruti Suzuki, M&M, Escorts.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Automobiles-Sept03_18.pdf

ŠŠ Upgrade  ŠŠ No change  ŠŠ Downgrade 


ŠŠ Note: The arrow indicates change in call and price target, if any, vis-à-vis the previous report

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

October 2018 17 Sharekhan ValueGuide


TREND & VIEW EQUITY TECHNICALS

Bears take charge


Daily view
Nifty Daily
 On the daily chart, the index is forming lower top lower bottom 3.0
2.5
KST (-4.05370) 3.0
2.5

pattern and is trading below the daily moving averages,


2.0 2.0
1.5 1.5
1.0 1.0
0.5 0.5
0.0 0.0
-0.5 -0.5
-1.0 -1.0

indicating downtrend in the short term. -1.5


-2.0
-2.5
-3.0
-3.5
-4.0
-1.5
-2.0
-2.5
-3.0
-3.5
-4.0
-4.5 -4.5
12050 12050

 In addition, the index has closed below the rising trend line,
(III)
12000
11950
11900
11850
12000
11950
11900
11850

thereby indicating that the downtrend is likely to continue in


11800 11800
11750 11750
11700 11700
11650 11650
11600 11600

the forthcoming trading sessions. 11550


11500
11450
11400
11550
11500
11450
11400
11350 11350
11300 11300

 On the way down, the index can drift lower towards 10250 – 11250
11200
11150
11100
11250
11200
11150
11100

10016 in the near term.


11050 11050
11000 11000
10950 10950
10900 10900
10850 10850
10800 10800

 On the way up, 10675 – 10845 will act as crucial resistance. 10750
10700
10650
10600
10750
10700
10650
10600
10550 10550
10500 10500

 Any bounce towards the resistance level shall be considered 10450


10400
10350
10300
10450
10400
10350
10300

as a selling opportunity.
10250 10250
10200 10200
10150 10150
10100 10100
10050 10050
10000 10000

 The momentum indicator on the daily chart is bearish.


9950 9950
9900 9900
9850 9850
9800 9800

12 19 26 5 12 19 26 2 9 16 23 30 7 14 21 28 4 11 18 25 2 9 16 23 30 6 13 20 27 3 10 17 24 1 8 15

 Crucial support for the index will be at 10250 and 10016, while
March April May June July Augus t Septem ber October

crucial resistance will be at 10675 and 10845.

Weekly view
Nifty weekly
 The index overlapped the swing high of 10929 formed in 7 KST (-0.47396) 7
6 6

May, thereby negating the current rise as impulse up move. 5


4
3
2
5
4
3
2
1 1

 The medium-term trend has turned bearish as the index has -1


-2
-3
0 0
-1
-2
-3

closed below the rising channel and has broken below 40 12000
11950
11900
11850
11800
(B)
12000
11950
11900
11850
11800

Week Moving Average (WMA).


11750 11750
11700 11700
11650 11650
11600 11600
11550 11550
11500 11500
11450 11450
11400 11400

 From Elliot wave perspective, the index is forming an 11350


11300
11250
11200
11150
(III)
11350
11300
11250
11200
11150
11100 11100

expanded flat pattern in Wave (IV), which should drag the 11050
11000
10950
10900
10850
11050
11000
10950
10900
10850
10800 10800

index lower towards 9952 in the medium term. 10750


10700
10650
10600
10550
10750
10700
10650
10600
10550
10500 10500
10450 10450

 Since the index is currently in wave (C) of (IV), it is likely to


10400 10400
10350 10350
10300 10300
10250 10250
10200 10200
10150 10150
10100 10100

drift lower without any major pullback. 10050


10000
9950
9900
9850
(A)
10050
10000
9950
9900
9850
9800 9800
9750 9750

 On the way up, 10845 – 11036 will act as crucial resistance


9700 9700
9650 9650
9600 9600
9550 9550
9500 9500
9450 9450

level.
9400 9400
9350 9350
9300 9300
9250 9250
(I) 9200
9150
9200
9150
9100 9100

 The momentum indicator on the weekly chart is bearish. 24 1 8 15


September
22 29 6 13 19
October
27 3 10 17
November
24 1 8 15
December
22 29 5 12
2018
19 25 2 9
February
16 23 1 9
March
16 23 28 6
April
13 20 27 4
May
11 18 25 1
June
8 15 22 29 6
July
13 20 27 3 10 17
August
24 31 7 14 21
September
28 4 11 18
October
25 1 8 15
November
22 29 6 13 20
December

 Crucial support will be at 10016 and 9952, whereas crucial


resistance will be at 10845 and 11036.
(II)

Monthly view
Nifty Monthly
 The index broke above the upper end of the rising channel 50
KST (9.38577)
50

for a brief while, but could not sustain above it and witnessed
40 40
30 30
20 20
10 10

a correction thereafter.
0 0
-10 -10
-20 -20
-30 -30
-40 -40

 The index has formed a ‘bearish engulfing’ candlestick 12000

11500 (III)
12000

11500

pattern. 11000

10500
11000

10500

10000 10000
(IV)

 From the Elliot wave perspective, the index is in Wave (IV) of 9500

9000
` (I) 9500

9000

8500 8500

(5) of larger degree Wave (3) 8000

7500 (II)
8000

7500

7000 7000

 Therefore, in the medium term, the index is expected to drift 6500

6000
^
^ a 6500

6000

lower towards 9952. 5500

5000 _
5500

5000

4500 4500

_
 The momentum indicator on the monthly chart is bearish. 4000

3500
4000

3500

3000 3000

 Crucial support will be at 9952, whereas crucial resistance 2500

2000
2500

2000

1500 1500

will be at 11350. 1000

500
1000

500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Trend Trend reversal Support Resistance Target


Down 11350 9952 11350 9952

October 2018 18 Sharekhan ValueGuide


EQUITY DERIVATIVES MONTHLY VIEW

Negative trend continues

Nifty started September series on a Negative note and Top five stock futures with the highest open interest in the current
move one sided in the Southward direction making new series are:

low everyday and registered month-on-month loss of OPEN INTEREST


FUTURES
(Rs. Cr)
over 6%. Further in this series Index heavyweights mainly
INFY 5,179.34
Banking & Financials counters showed significant amount RELIANCE 4,865.74
of selling pressure, due to which on Month-on-Month basis HDFCBANK 4,353.60
BankNifty also lost more then 10%. On the Open Interest HDFC 3,617.24
front Nifty is started the October series on a very lighter SUNPHARMA 3,095.90
note with only 1.72 cr shares vs 2.42 cr shares in Open
Top five stock options with the highest open interest in the current
Interest. Rollover also was bit on the lower side at 62.57% series are:
indicating skepticism amongst the market participants still
OPEN INTEREST
OPTIONS
persist. (Rs. Cr)
RELIANCE 2,107.20
MARKET WIDE VS NIFTY ROLLOVER ACTIVITY: MARUTI 1,760.62
Nifty Market Wide AXISBANK 1,211.09
100.00%
TCS 1,101.90
90.00%

80.00%
YESBANK 939.71
70.00%

60.00%
View for October series:
50.00%
86.45%

86.42%
85.72%
86.71%

84.71%

85%

40.00%
72.32%

73.19%

On the options front in the October series the activity is


68.73%

63.28%
62.34%

66%

30.00%

20.00% quite scattered in Call and Put Option both. Nifty 11000
10.00%
CE followed by 11500 is highest in terms of Open Interest.
0.00%

While on the Put Side 10500 & 10700 PE is highest in Open


May

Apr

Mar

Dec
Jan
Feb

Interest.
Rollover highlights-
Put Call Ratio (PCR) have been trading 1.40-1.50 most of
• Nifty Futures began the October series with 1.72 crore the part of the September series and also touched the low
vs 2.42 crore shares in open interest. of 1.05. In October series also it started on the lower side
• The October series started with Rs. 106,686 crore at 1.35. While on the other hand volatility index has been
versus Rs.128,029 crore in stock futures, Rs. 18,929 continuously inching higher, currently at sub 19 levels and
crore versus Rs. 28,427 crore in Nifty futures and Rs. Nifty starting the new series on a lighter note at around
121,709 crore versus Rs. 129,976 crore in index options 1.72 crore shares. Hence seeing the above data and after
and Rs.12,512 crore versus 16,562 crore in stock seeing the sharp fall Nifty is now in the oversold zone
options. thus we feel that there might be some pull back in it of
• The October rollover was at 62.51% versus 68.37%. around 200 points but broader trend in the market remains
negative and going forward Nifty could come till 10000-
• Market wide rollover was 86.96% versus 88.66%.
10200 levels before October expiry.

October 2018 19 Sharekhan ValueGuide


MONTHLY VIEW CURRENCY FUNDAMENTALS

Currencies: Rupee continued to slip and made new record low of 72.96 on surge in oil prices
Key points
CURRENCY LEVELS IN SEP (IN RS.)
 India CPI inflation eased to 3.69% y-o-y in August 2018
compared to 4.17% y-o-y in July 2018 Currency High Low Close % Monthly Change

 Industrial production grew by 6.6% y-o-y in July 2018 as USDINR 72.97 70.73 72.49 2.11
compared to 7.0% y-o-y in June 2018 EURINR 85.77 82.05 83.96 1.53
 Trade deficit widened to $17.4 billion in August 2018 from GBPINR 96.07 91.28 94.60 2.56
$12.7 billion in August 2017
JPYINR 65.49 63.62 64.01 -0.06
 The US Federal Reserve raised interest rates by 25 bps to
2-2.25%
Spot INR Movement in September Spot INR Movement in September
USDINR JPYINR EURINR GBPINR
65.3
73 86 96
65.1
95.5
85.5
64.9
95
72.5
85
64.7
94.5

64.5 84.5 94
72
64.3 93.5
84

64.1 93
83.5
71.5 92.5
63.9

83
63.7 92

71 63.5 82.5 91.5

25-Sep-18
05-Sep-18

09-Sep-18

15-Sep-18

19-Sep-18

21-Sep-18

27-Sep-18
07-Sep-18

11-Sep-18

23-Sep-18
17-Sep-18
03-Sep-18

13-Sep-18
25-Sep-18
05-Sep-18

09-Sep-18

15-Sep-18

19-Sep-18

21-Sep-18

27-Sep-18
07-Sep-18

11-Sep-18

23-Sep-18
17-Sep-18
03-Sep-18

13-Sep-18

USD-INR: CMP Rs. 73.73


The Indian Rupee depreciated by 2.11% in September on account of a strong US Dollar and worries over fiscal slippages. Further, market fears that
rising crude oil prices will lead to inflationary pressures and widen the current account deficit. Crude oil prices surged ahead of the upcoming US
sanctions on Iran. Market sentiments remained gloomy on ongoing tensions over global trade war. Investors remained disappointed with government
measures to curb further fall in currency. Month-end dollar demand from oil importers added downside pressure.
Outlook: The Indian Rupee is expected to trade with a negative bias amid strong dollar and rising crude oil prices. Demand for dollar is going up on
solid economic data from the US and as the Federal Reserve raised interest rates by 25 bps. As per real effective exchange rate (REER), based on a
basket of currencies of 36 trading partners, the rupee is overvalued. Traders will remain cautious ahead of economic data from India and the Reserve
Bank of India’s (RBI) monetary policy meet on October 5. The rupee may get some support if the RBI permits a special dollar swap window with some
state-run fuel retailers or come up with other options to check the currency’s fall. The pair is expected to trade at Rs. 72.50-74.50.

EUR-INR: CMP Rs. 84.60


The Euro appreciated marginally by 0.02% in September. In the early trading session, the euro advanced to 1.18 levels on a hawkish statement by the
European Central Bank (ECB) President, Mario Draghi, and as the ECB kept its interest rates unchanged, hinting at monetary tightening later this year.
However, in the latter part of the month, the euro corrected from its high as Italy set its budget deficit target at 2.4% of GDP for the next three years.
Market fears that Italy may mismanage its fiscal situation.
Outlook: The Euro is expected to trade with a negative bias on strong dollar. Further, traders will remain cautious ahead of ECB’s monetary policy
meeting outcome. If the ECB signals monetary tightening sooner than expected, then we may see a bounceback in the Euro. Traders are worried over
Italy’s budget and Brexit uncertainty. The currency pair is expected to trade at Rs. 82.60– 85.80.

GBP-INR: CMP Rs. (95.35)


The British Pound appreciated by 0.55% in September on optimism that UK may crack deal with European Union ahead of Brexit deadline. Further,
the Bank of England kept its monetary policy unchanged and signalled gradual monetary tightening. Governor Mark Carney upgraded his view on the
economy.
Outlook: The British Pound is expected to trade with a negative bias amid a strong US Dollar and uncertainty on Brexit. Further, traders will remain
cautious ahead of Prime Minister Theresa May’s Conservative Party’s Annual Conference. Market fears that Theresa May’s leadership could face
another challenge. Traders will remain careful ahead of economic data from the UK. The currency pair is expected to trade at Rs. 93.60-96.80 in the
near term.

JPY-INR: CMP Rs. (64.50)


The Japanese Yen depreciated by 2.40% in September on account of strong dollar and divergence in monetary policy. The Bank of Japan kept its
deposit rates unchanged at -0.10% and promised to maintain low rates for an extended period, whereas the US Federal Reserve increased its interest
rates by 25 bps in its policy meeting. However, a sharp downside was prevented as safe-haven demand improved on worries over trade tensions
between the US and its major trading partners.
Outlook: The Yen is expected to trade with a negative bias on account of strong US Dollar and divergence in monetary policy. Traders will remain
cautious ahead of Bank of Japan’s monetary policy meeting outcome. However, a sharp fall may be prevented as demand for a safe haven may
improve amid rise in geopolitical tensions and worries over a global trade war. The currency pair is expected to trade at Rs. 62.70-65.70.
CMP as on October 04, 2018

October 2018 20 Sharekhan ValueGuide


CURRENCY TECHNICALS TREND & VIEW

USD-INR - Stretching higher EUR-INR - Crossing hurdles


IThe USDINR pair ended in the green for the sixth The EURINR pair had formed a base near the junction of 40
week exponential moving average and the weekly lower
consecutive month in September. The monthly Bollinger
Bollinger Band in August. Thereon, the currency pair is
Bands have been in expansion mode and the currency witnessing a sharp upmove. On the way up, EURINR has
pair is stretching higher along with the upper band. On surpassed the 61.8% retracement mark, which it could not
the way up, the currency pair hit the upper channel line, do in April.
where it consolidated for few sessions and has started EURINR has also crossed the upper end of the medium-
term and short-term rising channel. It is now targeting the
rising recently. The weekly as well as monthly momentum
78.6% retracement mark and the upper end of a steeper
indicators are bullish. rising channel.
KST (4.30731)
KST (5.16746) 10
5
5

0 0

-5
USDINR - INDIAN RUPEE (72.6000, 73.4250, 72.6000, 73.3400, +0.84000) 75.5
75.0
74.5 EURINR (84.1510, 84.9900, 83.8870, 84.1650, +0.00700) 95
74.0 94
73.5 93
178.6%
100.0% 92
73.0
72.5 91
161.8%
72.0 90
71.5 89
71.0 88
70.5 87
78.6%
70.0 86
69.5 85

0.0% 100.0% 69.0 84


68.5 83
68.0 61.8% 82
67.5 81
67.0 80
61.8%
23.6% 66.5 50.0% 79
50.0% 66.0 78
38.2% 65.5
77
38.2% 65.0
38.2% 76
23.6% 64.5
75
64.0
50.0% 74
63.5
0.0% 73
63.0
62.5 23.6% 72
61.8%
62.0 71

61.5 70

61.0 69
60.5 68
60.0
67
59.5
66
59.0 0.0%
65
58.5
100.0% 64
58.0
57.5 63
2013 2014 2015 2016 2017 2018 2019
S O D 2014 A M J J A S O N D 2015 A M J J A S O N 2016 A M J A S O D 2017 A M J A S O N 2018 A M J J A S O N 2019 A M J

GBP- Marching north JPY-INR - Bullish outlook


IThe GBPINR pair moved up sharply in September as a The JPYINR pair completed an impulse on the upside over
follow through of the ‘bullish outside bar’ formed in August. July-September and entered a short-term correction mode.
The monthly moving averages along with the lower end of It tapped at the 78.6% retracement mark from where the
the falling channel had acted as crucial supports. minor degree correction set in. Nevertheless, the overall
Thereon, the currency pair started a fresh leg on the trend continues to be positive and the short-term dip
upside and crossed the upper channel line in August. The can be considered as a buying opportunity. Structurally,
currency pair has reached the 61.8% retracement mark and the pair can once again head towards the key Fibonacci
is heading towards the upper end of the rising channel. retracement with potential to stretch higher.

MACD (0.93025)
KST (3.82076) 2.0
1.5
1.0
0
0.5
0.0
-5 -0.5
-1.0

GBPINR (94.4600, 95.5850, 94.3440, 94.8870, +0.43400) 108


JPYINR (63.7587, 64.5974, 63.6021, 64.0300, +0.27130)
107 69.5
106 69.0
100.0%
105 68.5
0.0% 100.0% 68.0
104
103 67.5
102 67.0
101 66.5
78.6% 100 66.0
99 78.6% 65.5
98 65.0
97 64.5
23.6% 96 64.0
61.8%
95 61.8% 63.5
94 63.0
93 62.5
50.0% 92 50.0% 62.0
38.2% 91 61.5

90 61.0

38.2% 38.2% 60.5


89
88 60.0

50.0% 59.5
87
59.0
86 23.6%
23.6% 58.5
85
58.0
84
57.5
61.8% 83
57.0
82
56.5
81
0.0% 56.0
80
55.5
0.0% 79
55.0
78
78.6% 54.5
77
M A M J J A S O N D 2017 M A M J J A S O N D 2018 M A M J J A S O N D 2019
M J J A S O N D 2016 M A M J J A S O N D 2017 M A M J J A S O N D 2018 M A M J J A S O N D 2019 M A M

Currency View Reversal Supports Resistances Target


USD-INR Up 72.30 72.98/72.60 74/74.50 75.00
GBP-INR Up 93.00 94.22/93.64 96.12/97 98.00
EUR-INR Up 83.00 83.84/83.34 85.62/86.40 87.30
JYP-INR Up 62.74 63.60/63.10 65.13/66.10 65.5-66.80

October 2018 21 Sharekhan ValueGuide


PMS FUNDS PMS DESK

Portfolio Management Services


We are pleased to introduce you to Sharekhan Portfolio We have the following strategies on offer:
Management Services (PMS) in which we completely
manage your investment portfolio so that you stop worrying ProPrime (based on fundamental research)
n Prime Picks
about the market volatility and focus your energy on things
n Diversified Equity
that you like to do!
We have a wide range of strategies that you can choose ProTech (based on technical analysis)
from. Our strategies are based on fundamental research n Index Futures Fund n Trailing Stops
and technical analysis.

Prime Picks
Prime Pics Performance as on
OVERVIEW 30th September,2018
A multi-cap discretionary scheme that aims to outperform the Nifty and BSE 200
Prime Picks
indices across market cycles. The scheme would have two folios, Quality and Alpha,
with a distinct investing style to offer you the benefits of dynamic investing as per their (In %) Strategy Nifty BSE 200

choice of allocation between conservative - Quality - and aggressive - Alpha - folios or 1 Month -9.5 -6.4 -8.1
baskets or stocks. 3 Month 8.7 9.0 9.4

Since Inception -0.9 -0.4 -0.7


INVESTMENT STRATEGY
 Seeks companies with a high standard of management and corporate governance
through in-depth research by experienced in-house fundamental research team

 Aims to leverage on investment opportunities in structural growth sectors through


Quality folio whereas the allocation to more aggressive Alpha folio would add to Top 10 stocks
superior outperformance across market cycles.
Bajaj Finserv
 Maintain judicious mix between Quality and Alpha through dynamic investment
strategy and providing flexibility to investors to make changes to allocations Britannia Industries
between the two folios once every year.
Crompton Greaves Consumer

Godrej Consumer Product

HCL Technologies
PRICING
HDFC Bank
 Minimum investment of Rs. 25 lakh
Maruti Suzuki India
 Charges
Reliance Industries
¾¾ 2% per annum; AMC fee charged every quarter
Sun Pharma
¾¾ 0.5% brokerage
Varun Beverages
¾¾ 20% profit sharing after the 18% hurdle is crossed at the end of every fiscal
(with higher watermark basis)

FUND OBJECTIVE
A good return on money through long-term investing in quality companies

October 2018 22 Sharekhan ValueGuide


PMS DESK PMS FUNDS

DIVERSIFIED EQUITY
Product performance
OVERVIEW as on September 30, 2018
The investment product aims to outperform the benchmark indices with Diversified Equity Performance
relatively lower volatility in the portfolio. (abs returns)
(In %) DE Strategy Nifty 500

1-Month -8.8 -8.8

3-Month -1.4 -0.5

6-Month 3.1 2.3

1-Year 3.7 6.0


INVESTMENT STRATEGY 2-Year 24.2 23.3

 Disciplined investment decisions are taken in specific stocks based on 3-Year 43.8 37.2
thorough fundamental research. 5-Year 140.1 107.6
*Note : Net of Quarterly AMC Fees
 The product seeks to achieve the outperformance through superior
selection of well researched, quality companies to build a well balanced, Disclaimer: Returns are based on a client’s returns since
inception and may be different from those depicted in the risk
diversified portfolio.
disclosure document.

 It is a low-risk, low-chum portfolio with bulk of investment (range of 65-75%)


in Top 100 large-cap companies and the rest invested in well researched,
quality mid-cap companies. Top 10 stocks DE
Bajaj Finserv

Britannia Industries

HDFC Bank
PRICING IndusInd Bank
 Minimum investment of Rs. 25 lakh Infosys
 Charges Kotak Bank

¾¾ 2.5% per annum; AMC fee charged every quarter Larsen & Toubro

¾¾ 0.5% brokerage Maruti Suzuki India

¾¾ 2
 0% profit sharing after the 15% hurdle is crossed at the end of every Reliance Industries
fiscal Sun Pharma

FUND OBJECTIVE
A good return on money through long-term investing in quality companies

October 2018 23 Sharekhan ValueGuide


PMS FUNDS PMS DESK

PROTECH - INDEX FUTURES FUND


Product performance
OVERVIEW
as on September 30, 2018
The ProTech–Index Futures Fund PMS strategy is suitable for long-term investors NT
(In %) Sensex Nifty
who desire to profit from both bullish and bearish market conditions. The strategy Strategy
involves going long (buying) or going short (selling without holding) on Nifty futures by 1 Month 5.13 -6.26 -6.42
predicting the market direction based on a back-tested automated model.
3 Months 7.83 2.27 2.02

Fy 17-18 4.01 10.99 10.25


INVESTMENT STRATEGY Fy 16-17 -14.88 16.88 18.55
 The strategy has the potential to generate profits irrespective of the market
Fy 15-16 11.28 -9.36 -8.86
direction by going long or short on Nifty futures.
 An automated basic back-testing model is used to predict the market direction for Fy 14-15 -3.41 24.89 26.65
the Nifty which then decides the strategy to be deployed in terms of going long Fy 13-14 8.79 18.85 17.98
or short.
Fy 12-13 3.65 8.23 7.31
 The portfolio is not leveraged, ie its exposure never exceeds its value.
Fy 11-12 13.10 -10.50 -9.20

Fy 10-11 9.20 10.90 11.10


PRICING
Fy 09-10 14.70 80.50 73.80
 Minimum investment of Rs. 25 lakh
Since Inception* 180.10 257.82 261.74
 Charges
Best Month 28.90 28.26 28.07
¾¾ AMC fees: 0%
Worst Month -17.10 -23.89 -26.41
¾¾ Brokerage: 0.05%
Best Quarter 33.30 49.29 42.04
¾¾ Profit sharing: Flat 20% charged on a quarterly basis
Worst Quarter -17.73 -24.98 -24.53

*01-Feb-2006

Disclaimer: Returns are based on a client’s


FUND MANAGER’S VIEW returns since inception and may be different
from those depicted in the risk disclosure
document.
The Index futures fund continues to gains relative to Nifty, as rising volatility aided better trade
signals. The gains in September came on the back of a sell signal and so we delivered a positive
5.13% return even when the Nifty was down 6.42%. Quarterly returns too share the same optimism
about our trading system. The returns of the IFF model have been slowly edging up and will
continue to do so if volatility rises.

We anticipate that the low volatility period of 2012-2018 is coming to an end. As that happens, our Investments in
returns will mean revert from the lower end of our long term range. So it is our belief that the worst Nifty Index
is behind us from a product perspective. The model does well when markets are trending, which
is usually the case when volatility rises.

Fund Manager: Rohit Srivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.

October 2018 24 Sharekhan ValueGuide


PMS DESK PMS FUNDS

PROTECH - TRAILING STOPS

OVERVIEW Product performance


Our ProTech–Trailing Stops PMS strategy is ideal for Traders and Investors looking as on September 30, 2018
for Regular Income from trading and desire to make profits in both bullish and bearish TS
market conditions. It is designed to payout book profits on monthly basis.* (In %) Sensex Nifty
Strategy
It is also for those investors who are looking for better income than Fixed Income or 1 Month 16.60 -6.26 -6.42
Deposits. This strategy involves going long (buying) or short (selling without holding)
on stock futures. 3 Months 10.66 2.27 2.02
* Terms and conditions apply
Fy 17-18 -0.53 10.99 10.25

Fy 16-17 3.79 16.88 18.55


INVESTMENT STRATEGY Fy 15-16 -0.56 -9.36 -8.86
 This strategy spots the winning trades based on technical analysis vs time frame- Fy 14-15 -3.69 24.89 26.65
based portfolios, basically the momentum calls.
Fy 13-14 -1.06 18.85 17.98
 A risk model has been developed for stock portfolio allocation that reduces the risk
and portfolio volatility through staggered building of positions. Fy 12-13 14.89 8.23 7.31

 It is non-leveraged—the exposure will never exceed the value of the portfolio. Fy 11-12 29.00 -6.10 -4.60

Fy 10-11

PRICING Fy 09-10
 Minimum investment of Rs. 25 lakh Since Inception* 77.46 95.52 96.91

 Charges Best Month 16.60 11.25 12.43

¾¾ AMC fees: 0% Worst Month -6.49 -8.93 -9.28

Best Quarter 10.66 13.52 13.53


¾¾ Brokerage: 0.05%
Worst Quarter -8.20 -12.69 -12.47
¾¾ Profit sharing: Flat 20% charged on a quarterly basis
*09th May 2011

Disclaimer: Returns are based on a client’s


FUND MANAGER’S VIEW returns since inception and may be different
from those depicted in the risk disclosure
document.
Trailing stops finds aims to opportunities in stocks and so ideally should be able to do better
than an index. However when markets are fractured where some stocks are rising while others
are falling then the top down strategy fails. However, when volatility rises and everything moves
in one direction the result of our trading methods is much better. In 2018, we have seen a clear
Investments in
increase in market volatility and that has resulted in returns picking up. September was an outlier
in particular as compared to the recent past, with a one-month return of 16.60%. This was possible Nifty Index
with our one-sided focus on weak stocks that were crashing from August itself. Most of this trade Stock futures
was on the short side of the market. The rising volatility in the market means that when prices rise,
most stocks rise together and similarly more fall together. This will allow us to take concentrated
directional trades and generate higher returns from the market trend.

Fund Manager: Rohit Srivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.

October 2018 25 Sharekhan ValueGuide


MONTHLY PERFORMANCE ADVISORY DESK

Advisory Products and Services


The Advisory Desk is a central desk
consisting of a Mumbai-based expert Advisory Products & Services
Advisory Products & Services
team that runs various sample model
portfolios for illustrative purposes only
for clients of all profiles, be they traders
or investors.
These products are different from Investor T d
Trader 
Sharekhan research-based technical
and fundamental offerings as these Portfolio Doctor
f li
essentially try to capture the trading MID Derivative  Sharekhan 
opportunities in stocks where Calls Pre Market Action
Pre Market Action
momentum is expected before
or after some event including the Stocks In News Technical view Derivative view
announcement of results or where
some news/event is probable.
Advisory products are ideal for those who do not have time to either monitor the market tick by tick or shift through pages
of research for data or pour over complex charts to catch a trend. However, all these products require perfect discipline
and money management.

For traders

SHAREKHAN PRE-MARKET ACTION


The Pre-market action report gives us information on stocks in the news and the likely effect on prices,
which is valid for a day. It also covers events, technical view & derivative view along with a list of stocks
for traders with positive and negative bias for traders. The report is valid for a day. For more details,
please write to us on advisory@sharekhan.com

MID DERIVATIVE CALLS


These calls are based on the analysis of open interest, implied volatility and put-call ratio in the derivative
market. It is a leveraged product and ideal for aggressive traders. These calls have pre-defined stop loss,
targets, time frame and quantity to execute. For details of the product please write to us at derivative@
sharekhan.com.

Report Card

Derivative Calls
Ticket size (Rs.) 100,000
Month September 2018 CY2018 Apr-Dec 2017
No. of calls 59 724 499
Profit booked 28 382 273
Stop loss hit 31 342 226
Strike rate (%) 47 53 55

October 2018 26 Sharekhan ValueGuide


MUTUAL FUNDS DESK MF PICKS

Sharekhan top mutual fund picks (equity) September 2018


Data as on September 03, 2018
Absolute % Compounded Annualised %
Scheme Name NAV (Rs) (Point to Point) (Point to Point)
6 Months 1 yr 3 yrs 5 yrs Since Inception
Large Cap Funds
ICICI Prudential Bluechip Fund - Growth 43 8.4 13.4 15.4 20.2 15.3
Reliance Large Cap Fund - Growth 35 7.6 14.6 14.8 23.2 12.0
Aditya Birla Sun Life Frontline Equity Fund - Reg - Growth 230 6.8 8.0 13.8 20.6 21.6
SBI Bluechip Fund - Growth 40 5.7 8.6 13.1 22.0 11.7
Kotak Bluechip Fund - Reg - Growth 238 8.1 11.9 12.7 19.9 22.8
Indices
S&P BSE Sensex 38,313 12 20 14 16 16
Large & Mid Cap Fund
IDFC Core Equity Fund - Reg - Growth 47 4.6 9.0 16.9 18.9 12.6
DSP Equity Opportunities Fund - Reg - Growth 226 3.6 7.2 15.9 22.7 18.6
ICICI Prudential Large & Mid Cap Fund - Growth 331 3.5 7.4 14.7 18.2 19.0
Aditya Birla Sun Life Equity Advantage Fund - Growth 436 4.9 2.1 14.5 25.7 18.3
SBI Large & Midcap Fund - Growth 223 4.0 10.4 13.4 23.6 14.7
Indices
S&P BSE Large MidCap 4,764 9.2 14.1 14.5 18.0 12.8
Mid Cap Fund
HDFC Mid-Cap Opportunities Fund - Growth 59 2.9 9.5 16.4 30.1 17.1
DSP Midcap Fund - Reg - Growth 56 0.2 7.6 16.2 30.3 15.8
Kotak Emerging Equity Scheme - Reg - Growth 40 0.4 7.5 15.9 32.3 12.9
Franklin India Prima Fund - Growth 999 1.8 9.1 15.5 29.0 20.4
Aditya Birla Sun Life Mid Cap Fund - Growth 314 -0.4 1.8 13.6 27.7 24.2
Indices
S&P BSE MID CAP 16,805 2.1 7.1 16.7 26.1 20.9
Small Cap Fund
HDFC Small Cap Fund - Growth 46 0.6 21.5 22.0 26.9 15.8
Aditya Birla Sun Life Small Cap Fund - Growth 39 -5.9 3.8 17.6 29.6 12.9
Franklin India Smaller Companies Fund - Growth 58 -4.8 3.9 15.2 31.5 14.9
Kotak Small Cap Fund - Reg - Growth 77 -3.8 4.4 13.7 28.7 16.2
Indices
S&P BSE Small Cap 17,164 -5.0 6.4 16.4 27.0 21.6
Focused Fund
IDFC Focused Equity Fund - Reg - Growth 41 4.0 8.5 17.1 18.3 11.9
SBI Focused Equity Fund - Growth 140 5.4 17.4 16.2 24.2 20.8
Aditya Birla Sun Life Focused Equity Fund - Growth 60 6.4 6.7 13.4 21.0 15.0
Indices
S&P BSE 500 15,738 7.6 13.5 14.9 19.1 15.1
Multi Cap Funds
Aditya Birla Sun Life Equity Fund - Growth 748 5.6 7.8 16.5 26.1 24.0
Kotak Standard Multicap Fund - Reg - Growth 35 8.5 10.4 16.3 24.5 15.1
SBI Magnum Multi Cap Fund - Growth 49 5.1 9.6 15.8 25.2 13.1
ICICI Prudential Multicap Fund - Growth 305 10.6 17.5 15.2 23.2 15.3
DSP Equity Fund - Reg - Growth 40 5.8 10.5 14.7 22.5 13.1
Indices
S&P BSE 500 15,738 7.6 13.5 14.9 19.1 15.1
ELSS
Aditya Birla Sun Life Tax Relief 96 - Growth 34 8.7 18.9 17.1 26.5 12.3
DSP Tax Saver Fund - Growth 48 4.7 6.9 15.2 23.7 14.5
IDFC Tax Advantage (ELSS) Fund - Reg - Growth 59 1.3 10.4 15.0 23.9 20.1
Axis Long Term Equity Fund - Growth 46 12.4 19.4 14.7 27.2 19.2
Franklin India Taxshield - Growth 583 7.0 10.1 12.2 22.5 23.3
Indices
Nifty 500 9,922 7.5 13.3 14.8 19.4 10.3
Thematic/Sector Funds
DSP Natural Resources & New Energy Fund - Reg - Gth 35 -4.4 -0.4 27.0 26.5 12.7
Aditya Birla Sun Life Banking and Financial Services Fund - Reg - Growth 30 13.2 8.5 24.0 -- 26.3
ICICI Prudential Banking and Financial Services Fund - Retail - Growth 63 8.2 4.6 21.3 30.5 20.1
L&T Infrastructure Fund - Reg - Growth 17 -3.3 6.3 18.5 29.4 5.2
Aditya Birla Sun Life India GenNext Fund - Growth 84 7.5 10.9 16.7 24.4 17.7
Indices
Nifty 50 11,582 10.6 16.0 14.0 16.7 14.1
Aggressive Hybrid Fund
ICICI Prudential Equity & Debt Fund - Growth 133 3.7 9.2 13.9 20.4 14.7
Reliance Equity Hybrid Fund - Growth 57 4.1 7.4 13.5 20.9 14.0
DSP Equity & Bond Fund - Growth 153 5.6 8.2 12.6 19.9 15.2
Aditya Birla Sun Life Equity Hybrid 95 Fund - Growth 778 4.5 5.4 12.4 19.6 20.3
SBI Equity Hybrid Fund - Growth 131 5.1 10.8 11.8 19.9 16.0
Indices
CRISIL Hybrid 35+65 - Aggressive Index -- 7.6 10.6 13.2 16.4 14.5
BNP Paribas Equity schemes
Scheme Absolute % (Point Compounded Annualised %
Scheme name Category to Point) (Point to Point)
6 Months 1 yr 3 yrs 5 yrs Since Inception
BNP Paribas Multi Cap Fund - Growth Multi Cap -0.4 2.0 11.7 20.3 12.7
BNP Paribas Mid Cap Fund - Growth Mid Cap -1.8 1.2 10.9 25.6 10.4
BNP Paribas Large Cap Fund - Growth Large Cap 5.7 7.2 10.4 18.6 16.9
BNP Paribas Long Term Equity Fund - Growth ELSS 2.9 4.1 9.5 19.8 11.1
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individual’s investment objectives and risk-
taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds. n
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

October 2018 27 Sharekhan ValueGuide


MF PICKS MUTUAL FUNDS DESK

Sharekhan top sip fund picks September 2018


(*invested on 1st day of every month) Data as on September 03, 2018
SIP INVST (Monthly Rs.1000)* 1 year 3 years 5 Year
Total amount invested 12,000 36,000 60000
Compounded Present Compounded Compounded
Present Present value
Scheme Name NAV annualised value annualised annualised
Value (Rs.) (Rs.)
return (%) (Rs.) return (%) return (%)
Large Cap Fund
Reliance Large Cap Fund - Growth 35 12,924 17.1 46,481 18.2 90,089 16.7
ICICI Prudential Bluechip Fund - Growth 43 12,869 16.1 46,015 17.5 87,601 15.6
Kotak Bluechip Fund - Reg - Growth 238 12,819 15.1 44,184 14.5 84,383 14.0
Aditya Birla Sun Life Frontline Equity Fund - Reg - Growth 230 12,644 11.8 44,157 14.4 85,075 14.4
SBI Bluechip Fund - Growth 40 12,546 10.0 43,540 13.4 86,005 14.8
S&P BSE Sensex 38313 13,314 24.6 46,577 18.4 83,625 13.6
Large & Mid Cap Fund
IDFC Core Equity Fund - Reg - Growth 47 12,518 9.5 45,532 16.7 87,278 15.4
DSP Equity Opportunities Fund - Reg - Growth 226 12,375 6.8 44,834 15.6 89,922 16.7
SBI Large & Midcap Fund - Growth 223 12,513 9.4 44,243 14.6 87,918 15.7
Aditya Birla Sun Life Equity Advantage Fund - Growth 436 12,288 5.2 44,074 14.3 90,413 16.9
ICICI Prudential Large & Mid Cap Fund - Growth 331 12,381 6.9 43,356 13.1 81,911 12.8
S&P BSE Large MidCap 4764 12,975 18.1 45,798 17.1 84,842 14.2
Mid Cap Fund
HDFC Mid-Cap Opportunities Fund - Growth 59 12,305 5.5 45,206 16.2 96,011 19.4
DSP Midcap Fund - Reg - Growth 56 12,142 2.6 44,396 14.8 94,662 18.8
Franklin India Prima Fund - Growth 999 12,309 5.6 44,235 14.6 93,777 18.4
Kotak Emerging Equity Scheme - Reg - Growth 40 12,099 1.8 44,212 14.5 97,414 20.0
Aditya Birla Sun Life Mid Cap Fund - Growth 314 11,962 -0.7 42,938 12.4 90,637 17.0
S&P BSE MID CAP 16,805 12,318 5.8 44,815 15.5 92,077 17.7
Small Cap Fund
HDFC Small Cap Fund - Growth 46 12,463 8.5 49,757 23.3 1,02,280 22.1
SBI Small Cap Fund - Growth 56 12,073 1.3 49,309 22.7 1,16,960 27.8
Reliance Small Cap Fund - Growth 45 12,298 5.4 48,891 22.0 1,12,159 26.0
Aditya Birla Sun Life Small Cap Fund - Growth 39 11,537 -8.2 43,855 13.9 95,716 19.3
Franklin India Smaller Companies Fund - Growth 58 11,679 -5.7 42,644 11.9 93,679 18.4
S&P BSE Small Cap 17,164 11,823 -3.2 44,603 15.2 91,407 17.4
Focused Fund
IDFC Focused Equity Fund - Reg - Growth 41 12,378 6.9 47,499 19.8 87,883 15.7
SBI Focused Equity Fund - Growth 140 12,661 12.1 46,331 18.0 93,116 18.1
Aditya Birla Sun Life Focused Equity Fund - Growth 60 12,594 10.9 43,893 14.0 84,558 14.1
S&P BSE 500 15,738 12,848 15.7 45,809 17.1 85,864 14.7
Multi Cap Funds
ICICI Prudential Multicap Fund - Growth 305 13,186 22.1 46,103 17.6 90,918 17.1
Kotak Standard Multicap Fund - Reg - Growth 35 12,806 14.9 46,074 17.6 92,966 18.1
Aditya Birla Sun Life Equity Fund - Growth 748 12,578 10.6 45,563 16.7 92,383 17.8
DSP Equity Fund - Reg - Growth 40 12,630 11.6 45,269 16.3 87,907 15.7
SBI Magnum Multi Cap Fund - Growth 49 12,514 9.4 44,919 15.7 91,969 17.6
S&P BSE 500 15,738 12,848 15.7 45,809 17.1 85,864 14.7
Tax-saving funds (ELSS)
Aditya Birla Sun Life Tax Relief 96 - Growth 34 12,889 16.4 47,466 19.8 96,630 19.7
Axis Long Term Equity Fund - Growth 46 13,133 21.1 47,268 19.5 95,310 19.1
IDFC Tax Advantage (ELSS) Fund - Reg - Growth 59 12,302 5.5 46,458 18.2 91,818 17.5
DSP Tax Saver Fund - Growth 48 12,459 8.4 44,497 15.0 89,376 16.4
Franklin India Taxshield - Growth 583 12,656 12.0 43,520 13.4 85,859 14.7
Nifty 500 9,922 12,833 15.4 45,676 16.9 85,761 14.7
BNP Paribas Mutual Fund Equity schemes
Compounded Compounded Compounded
Scheme Present Present Present Value
Scheme Name annualised annualised annualised
Category Value (Rs.) Value (Rs.) (Rs.)
return (%) return (%) return (%)
BNP Paribas Large Cap Fund - Growth Large Cap 12,504 9.2 42,867 12.3 81,664 12.7
BNP Paribas Multi Cap Fund - Growth Multi Cap 11,900 -1.8 42,409 11.5 83,385 13.5
BNP Paribas Long Term Equity Fund - Growth ELSS 12,106 1.9 41,754 10.4 80,793 12.2
BNP Paribas Mid Cap Fund - Growth Mid Cap 11,826 -3.1 41,692 10.3 86,837 15.2

Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individual’s investment objectives and risk-
taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.n

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

October 2018 28 Sharekhan ValueGuide


EQUITY FUNDAMENTALS EARNINGS GUIDE

Sharekhan Earnings Guide Prices as on October 03, 2018


Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%)
CMP DPS Div
Company growth
(Rs) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY20/FY18 FY18 FY19E FY20E FY19E FY20E FY19E FY20E Rs. Yld(%)

Automobiles

Apollo Tyres 206 14,840.5 17,492.6 20,459.7 723.9 916.5 1,143.3 12.7 16.0 20.0 25% 16.2 12.9 10.3 8.5 9.6 8.7 9.9 3.0 1.5

Ashok Leyland 119 26,247.9 31,311.9 34,704.3 1,574.8 2,070.4 2,287.5 5.4 7.1 7.8 20% 22.1 16.8 15.3 28.9 27.7 24.2 22.7 2.4 2.0

Bajaj Auto 2,731 25,164.9 28,808.0 32,707.2 4,100.1 4,127.9 4,667.6 141.8 142.7 161.4 7% 19.3 19.1 16.9 28.4 30.4 20.3 21.8 60.0 2.2

Gabriel India 120 1,833.1 2,217.3 2,527.7 94.2 114.6 134.0 6.6 8.0 9.3 19% 18.2 15.1 12.9 26.7 27.1 18.9 19.1 1.4 1.2

Hero MotoCorp 2,914 32,230.5 35,316.5 39,405.6 3,697.4 3,595.6 3,961.9 185.1 180.1 198.4 4% 15.7 16.2 14.7 38.1 37.4 27.1 26.6 95.0 3.3

M&M 792 47,577.4 55,774.9 63,319.7 4,189.6 5,287.4 6,095.5 33.7 42.5 49.0 21% 23.5 18.6 16.2 20.5 21.0 15.6 16.1 7.5 0.9

Maruti Suzuki 7,246 79,763.0 92,146.0 1,05,338.0 7,722.0 9,477.0 11,610.0 255.6 313.7 384.3 23% 28.3 23.1 18.9 26.3 27.4 19.5 20.1 80.0 1.1

Rico Auto Industries 68 1,209.3 1,415.3 1,735.8 65.4 72.3 97.4 4.8 5.3 7.2 22% 14.1 12.8 9.4 12.8 14.6 11.6 13.7 0.8 1.1

TVS Motor 538 15,129.7 18,611.8 22,253.8 662.6 840.7 1,181.9 13.9 17.7 24.9 34% 38.7 30.4 21.6 27.8 32.6 24.5 28.1 2.5 0.5

Banks & Financials

Axis Bank 572 29,584.8 32,830.2 36,744.3 275.7 3,095.1 4,282.8 1.1 12.1 16.7 294% 532.8 47.5 34.3 - - 4.8 6.3 0.0 0.0

Bajaj Finance 2,232 10,241.6 13,927.6 18,805.9 3,569.5 4,779.8 6,398.3 61.9 82.9 111.0 34% 36.1 26.9 20.1 - - 27.2 28.4 3.6 0.2

Bajaj Finserv 5,753 - - - - - - - - - - - - - - - - - 1.8 0.0

Bank of Baroda 103 21,788.9 24,225.0 28,590.0 (2,431.8) 2,696.6 4,790.5 -9.1 10.1 17.9 - - 10.2 5.8 - - 6.0 10.0 1.2 1.2

Bank of India 81 16,209.9 17,821.1 20,953.8 (6,044.0) 221.1 1,624.9 -22.9 1.9 13.7 - - 43.2 5.9 - - 0.7 5.0 0.0 0.0

Capital First 504 2,334.2 3,173.5 4,039.2 297.6 389.4 543.0 33.0 39.3 54.9 29% 15.2 12.8 9.2 - - 14.3 17.3 2.6 0.5

Federal Bank 70 4,875.2 5,633.0 6,899.4 879.0 1,310.9 1,812.1 5.0 6.8 9.4 37% 14.1 10.4 7.5 - - 10.3 13.0 0.8 1.1

HDFC 1,798 17,313.6 16,917.1 19,512.1 12,169.0 10,371.0 11,982.0 72.9 62.1 71.7 -1% 24.7 28.9 25.1 - - 15.5 16.1 16.5 0.9

HDFC Bank 2,031 55,315.2 65,832.5 78,663.8 17,486.7 21,007.6 25,365.0 67.4 81.0 97.7 20% 30.1 25.1 20.8 - - 18.7 19.9 13.0 0.6

ICICI Bank 304 39,442.8 46,318.0 53,932.6 7,242.1 11,537.1 14,347.1 11.3 19.8 24.6 48% 26.9 15.3 12.3 - - 11.0 12.7 0.0 0.0

LIC Housing Finance 412 3,781.2 4,229.5 4,936.5 1,989.5 2,205.5 2,563.8 39.4 43.7 50.8 14% 10.5 9.4 8.1 - - 16.2 16.5 6.8 1.7

Max Financial 393 - - - - - - - - - - - - - - - - - - -

PTC India Financial Services 15 539.9 647.7 775.2 194.6 186.1 209.7 3.0 2.9 3.3 4% 5.0 5.2 4.6 - - 7.1 7.6 1.5 10.0

Punjab National Bank 65 25,367.0 29,382.4 34,230.1 (12,283.8) 3,486.9 4,943.1 -57.7 16.4 23.2 - - 3.9 2.8 - - 9.7 13.5 1.0 1.5

SBI 272 1,14,437.9 1,24,937.1 1,47,228.6 (6,547.0) 17,871.7 23,204.9 -8.2 22.4 29.1 - - 12.1 9.3 - - 9.4 11.3 2.6 1.0

Union Bank of India 69 15,194.8 16,394.4 17,086.8 (1,112.7) 1,956.2 641.5 -16.2 28.5 8.1 - - 2.4 8.4 - - 8.2 2.5 0.0 0.0

Yes Bank 213 12,960.9 16,319.4 20,049.7 4,224.6 5,469.6 6,848.4 18.3 23.8 29.7 27% 11.6 9.0 7.2 - - 19.6 21.0 2.7 1.3

Consumer Goods

Britannia 5,739 9,914.0 11,240.7 12,766.0 1,002.2 1,251.5 1,551.3 83.5 104.3 129.2 24% 68.7 55.0 44.4 47.4 47.4 32.8 32.4 25.0 0.4

Emami 495 2,540.8 2,996.3 3,487.8 503.2 669.8 793.5 11.1 14.8 17.5 26% 44.6 33.5 28.3 37.2 45.7 32.9 37.2 7.0 1.4

GSK Consumer 6,723 4,377.1 4,830.0 5,426.5 700.1 824.8 938.1 166.5 196.1 223.0 16% 40.4 34.3 30.1 33.8 33.6 22.3 22.5 75.0 1.1

Godrej Consumer Products 765 9,937.0 11,462.2 13,252.1 1,493.1 1,780.6 2,151.2 21.9 26.1 31.6 20% 35.0 29.3 24.2 20.3 22.6 25.4 24.7 10.0 1.3

Hindustan Unilever 1,619 35,218.0 39,999.5 45,759.5 5,286.6 6,219.8 7,463.2 24.5 28.8 34.6 19% 66.1 56.2 46.8 102.2 90.1 75.0 65.8 20.0 1.2

ITC 295 40,627.5 45,455.7 51,495.8 10,397.5 12,562.8 14,582.8 8.5 10.3 11.9 18% 34.7 28.7 24.8 30.4 32.8 23.7 25.6 5.2 1.7

Jyothy Laboratories 195 1,763.8 2,052.3 2,319.9 149.3 227.9 267.9 4.3 6.4 7.5 32% 45.3 30.5 25.9 21.3 22.9 18.4 18.5 0.5 0.3

Marico 327 6,333.1 7,438.2 8,568.5 827.7 1,051.5 1,233.3 6.4 8.1 9.6 22% 51.1 40.4 34.1 47.6 48.6 37.8 36.7 4.3 1.3

Zydus Wellness 1,374 503.2 576.7 675.5 136.5 150.0 189.1 34.9 38.4 48.4 18% 39.4 35.8 28.4 23.6 25.4 20.0 21.2 8.0 0.6

IT / IT services

Firstsource Soluation 62 3,535.2 3,906.8 4,372.8 302.5 364.8 425.6 4.4 5.3 6.2 18% 14.1 11.7 10.0 14.4 15.1 14.4 14.5 1.5 2.4

HCL Technologies 1,091 50,570.0 59,291.6 67,126.1 8,780.0 10,048.8 11,264.6 63.1 72.2 80.9 13% 17.3 15.1 13.5 31.3 31.3 25.9 25.7 8.0 0.7

Infosys 729 70,522.0 81,438.1 91,329.8 14,597.0 16,028.5 18,467.4 33.0 36.9 42.5 13% 22.1 19.7 17.1 33.3 36.9 24.6 27.7 43.5 6.0

Persistent Systems 740 3,033.7 3,580.4 4,052.2 323.1 362.1 446.3 40.4 45.3 55.8 18% 18.3 16.3 13.3 21.7 23.8 16.3 18.1 10.0 1.4

Tata Consultancy Services 2,163 1,23,104.0 1,45,254.7 1,63,246.1 25,826.0 31,900.1 35,505.4 67.5 83.3 92.7 17% 32.1 26.0 23.3 43.6 43.9 33.9 33.9 50.0 2.3

Wipro 328 54,487.1 59,012.3 63,892.1 8,006.9 8,935.4 10,134.3 17.1 19.2 22.4 14% 19.2 17.1 14.6 14.8 16.3 16.5 17.5 1.0 0.3

Cap goods / Power

CESC 862 7,982.0 8,563.0 9,403.0 871.0 946.0 1,054.0 65.4 71.0 79.2 10% 13.2 12.1 10.9 5.9 6.2 6.8 7.3 12.0 1.4

CG Power & Ind. Solutions 45 6,188.6 7,070.6 7,969.0 49.2 174.2 269.5 0.8 2.8 4.3 134% 57.0 16.1 10.4 11.4 13.6 6.1 8.8 0.0 0.0

Finolex cable 507 2,815.1 3,230.8 3,694.5 358.2 404.8 456.5 23.4 26.5 29.8 13% 21.7 19.2 17.0 25.0 24.6 33.7 32.7 4.0 0.8

Greaves Cotton 130 1,792.1 1,942.2 2,088.1 154.5 172.5 182.6 6.3 7.1 7.5 9% 20.6 18.3 17.3 25.6 26.4 17.5 18.1 5.5 4.2

Kalpataru Power Transmission 319 5,741.2 6,626.8 7,640.3 322.0 390.0 437.2 21.0 25.4 28.5 17% 15.2 12.6 11.2 19.3 19.2 13.4 13.4 2.0 0.6

KEC International 276 10,058.0 11,611.3 13,318.9 460.4 552.1 641.9 17.9 21.5 25.0 18% 15.4 12.9 11.1 25.8 24.9 25.1 24.1 1.6 0.6

PTC India 72 18,189.0 20,795.0 23,544.0 231.0 254.0 290.0 7.8 8.6 9.8 12% 9.3 8.4 7.4 15.3 15.9 12.4 12.3 4.0 5.5

October 2018 29 Sharekhan ValueGuide


EARNINGS GUIDE EQUITY FUNDAMENTALS

Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%)
CMP DPS Div
Company growth
(Rs) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY20/FY18 FY18 FY19E FY20E FY19E FY20E FY19E FY20E Rs. Yld(%)

Thermax 935 3,867.9 4,521.2 5,221.4 261.8 322.3 369.4 22.0 27.0 31.0 19% 42.5 34.6 30.1 17.7 18.7 12.1 12.8 6.0 0.6

Triveni Turbine 107 751.1 862.0 985.0 96.0 134.0 153.0 2.9 4.1 4.6 26% 36.8 26.1 23.3 40.4 40.7 27.8 28.1 1.2 1.1

V-Guard Industries 173 2,311.8 2,669.3 3,193.8 169.1 202.2 261.6 4.0 4.7 6.1 24% 43.6 36.5 28.2 32.3 34.0 24.2 25.5 0.8 0.5

Va Tech Wabag 288 3,457.0 4,032.0 4,439.0 132.0 199.0 195.0 24.1 36.4 35.6 22% 11.9 7.9 8.1 20.6 20.4 16.4 14.2 4.0 1.4

Infra / Real Estate

Gayatri Projects 192 2,912.3 3,722.8 4,280.5 188.1 230.8 248.5 10.0 12.3 13.3 15% 19.1 15.6 14.5 17.6 17.9 17.8 15.7 0.0 0.0

IRB Infra 138 5,694.1 6,601.5 8,719.8 919.7 1,045.0 1,183.7 26.2 29.7 33.7 13% 5.3 4.6 4.1 16.2 19.7 17.0 16.7 5.0 3.6

Jaiprakash Associates 7 6,049.0 - - (263.6) - - -1.1 - - - - - - - - - - 0.0 0.0

Larsen & Toubro 1,245 1,19,683.2 1,35,378.5 1,48,772.1 7,246.9 9,124.2 10,053.3 51.7 65.1 71.7 18% 24.1 19.1 17.4 8.4 9.1 15.5 15.2 14.0 1.1

NBCC 58 5,905.0 7,686.3 11,198.7 333.6 454.0 657.0 1.9 2.5 3.6 40% 31.1 22.8 15.8 37.5 46.0 23.6 29.2 0.6 1.0

Sadbhav Engineering 220 3,505.1 4,089.2 5,384.9 220.7 259.6 356.3 12.9 15.1 20.8 27% 17.1 14.6 10.6 12.3 13.4 13.0 15.6 1.0 0.5

Oil & gas

Oil India 220 10,656.0 12,896.0 13,087.0 2,668.0 2,646.0 2,641.0 23.5 23.3 23.3 0% 9.4 9.5 9.5 11.4 11.1 9.3 9.0 15.0 6.8

Petronet LNG 222 30,599.0 37,380.0 46,504.0 2,078.0 2,196.0 2,756.0 13.9 14.6 18.4 15% 15.9 15.2 12.0 25.0 28.0 21.1 23.0 4.5 2.0

Reliance Ind 1,205 3,91,677.0 4,53,308.0 4,88,771.0 34,993.0 43,870.0 49,482.0 59.1 74.1 83.6 19% 20.4 16.3 14.4 11.7 11.5 12.7 12.6 6.0 0.5

Selan Exploration Technology 235 76.6 73.2 - 22.1 19.8 - 13.4 12.1 - - 17.4 19.4 - 8.3 - 6.8 0.0 5.0 2.1

Pharmaceuticals

Aurobindo Pharma 772 16,499.8 20,372.2 30,869.6 2,439.6 3,186.5 4,367.2 41.6 54.4 74.5 34% 18.5 14.2 10.4 24.1 26.5 24.1 25.8 2.5 0.3

Cadila Healthcare 394 11,936.5 13,556.0 15,939.0 1,775.9 1,938.1 2,538.0 17.3 18.9 24.8 20% 22.7 20.8 15.9 15.5 17.8 19.0 20.7 3.5 0.9

Cipla 655 15,219.3 17,614.9 21,314.6 1,416.6 1,973.8 2,789.8 17.6 24.5 34.7 40% 37.2 26.7 18.9 14.1 18.2 13.0 16.0 2.0 0.3

Divi's Labs 1,309 3,912.8 4,585.8 5,695.2 877.0 1,219.8 1,559.5 33.0 46.0 58.8 33% 39.6 28.5 22.3 27.6 29.8 21.3 22.9 10.0 0.8

Glenmark Pharmaceuticals  626 9,103.1 9,892.0 11,366.2 738.9 934.9 1,247.5 26.2 33.1 44.2 30% 23.9 18.9 14.2 15.1 17.9 15.5 17.3 2.0 0.3

Lupin 898 15,804.1 16,531.4 18,293.7 1,469.1 1,478.1 1,812.0 32.5 32.7 40.1 11% 27.6 27.5 22.4 9.3 10.6 8.7 9.7 7.5 0.8

Sun Pharmaceutical Industries 621 26,489.5 30,641.0 36,619.6 3,112.1 4,648.4 6,862.3 13.0 19.4 28.6 48% 47.9 32.0 21.7 12.2 15.8 11.0 14.2 3.5 0.6

Torrent Pharma 1,649 5,877.0 8,117.9 9,877.9 728.0 1,097.3 1,471.9 42.8 64.5 86.6 42% 38.5 25.6 19.0 14.3 16.3 19.3 19.9 14.0 0.8

Building Materials

Grasim 970 15,788.5 19,008.8 20,219.0 1,976.0 2,276.7 2,365.5 30.1 34.6 36.0 9% 32.2 28.0 26.9 4.6 4.6 4.9 4.8 6.2 0.6

Shree Cement 16,632 9,833.1 11,917.6 14,210.4 1,349.4 1,432.9 1,965.9 387.3 411.3 564.3 21% 42.9 40.4 29.5 12.7 15.1 15.1 17.9 50.0 0.3

The Ramco Cements 637 4,406.4 5,059.3 5,405.1 539.3 624.8 660.0 22.9 26.5 28.0 11% 27.8 24.0 22.8 10.8 10.7 14.5 13.6 3.0 0.5

UltraTech Cement 3,860 29,790.1 35,929.8 41,207.1 2,348.0 2,801.9 3,647.5 85.7 102.3 133.1 25% 45.0 37.8 29.0 8.4 9.9 10.3 12.1 10.5 0.3

Discretionary

Arvind 317 10,826.1 12,725.2 14,829.7 338.5 613.1 856.9 13.1 23.7 33.2 59% 24.2 13.4 9.5 9.2 11.1 15.1 18.2 2.4 0.8

Century Plyboards (India) 178 2,023.9 2,409.5 2,689.8 173.0 253.3 283.8 7.8 11.4 12.8 28% 22.9 15.6 14.0 19.2 18.7 26.7 23.9 1.0 0.6

Info Edge (India) 1,393 915.5 1,103.6 1,266.8 273.7 330.3 394.2 22.5 27.1 32.3 20% 62.0 51.4 43.1 18.3 19.2 13.8 14.4 5.5 0.4

Inox Leisure 226 1,348.0 1,633.0 1,836.0 61.0 105.0 125.0 6.6 11.5 13.7 44% 34.3 19.7 16.5 16.0 17.0 13.6 13.9 0.0 0.0

KKCL 1,317 461.9 502.0 545.5 73.2 82.8 91.6 59.4 67.2 74.3 12% 22.2 19.6 17.7 18.8 19.5 20.0 20.3 33.0 2.5

Orbit Exports 139 136.5 146.0 160.6 25.1 25.6 29.4 9.6 9.8 11.1 8% 14.5 14.2 12.6 20.4 20.2 16.6 16.3 0.0 0.0

Relaxo Footwear 712 1,964.4 2,334.3 2,780.3 161.1 197.8 253.9 13.4 16.5 21.2 26% 53.1 43.1 33.6 28.4 26.0 17.5 19.2 1.0 0.1

Thomas Cook India 214 11,248.3 6,832.8 8,488.7 305.9 177.2 238.9 8.3 4.8 6.5 -12% 25.8 44.7 33.0 3.4 4.3 2.0 2.6 0.4 0.2

Wonderla Holidays 286 270.5 308.4 364.9 38.5 59.5 65.4 6.8 10.5 11.6 31% 42.1 27.3 24.7 10.4 12.5 7.6 8.0 1.0 0.3

Zee Entertainment 438 6,686.0 7,990.0 9,130.0 1,351.0 1,638.0 1,912.0 14.1 17.1 19.9 19% 31.0 25.6 22.0 23.8 24.5 18.7 18.7 2.9 0.7

Diversified / Miscellaneous

Bajaj Holdings 3,006 964.8 - - 3,185.7 - - 286.2 - - - 10.5 - - - - - - 40.0 1.3

Bharat Electronics 83 10,401.0 12,019.0 13,794.0 1,407.0 1,486.0 1,673.0 5.8 6.1 6.9 9% 14.4 13.7 12.1 18.5 21.1 13.3 14.1 2.0 2.4

Bharti Airtel 318 83,687.9 91,240.1 1,04,499.2 1,099.0 679.4 2,570.8 2.7 1.7 6.4 53% 115.9 187.5 49.5 5.6 8.4 0.2 3.1 5.3 1.7

Gateway Distriparks 145 395.5 445.1 497.6 83.2 83.7 84.1 7.6 7.7 7.7 1% 19.0 18.8 18.8 7.4 9.3 8.5 9.2 7.0 4.8

PI Industries 710 2,277.0 2,622.0 3,092.0 367.0 439.0 512.0 26.7 31.9 37.2 18% 26.6 22.3 19.1 25.8 26.1 20.7 20.2 4.0 0.6

Ratnamani Metals and Tubes 849 1,767.0 2,171.0 2,593.0 152.0 204.0 248.0 32.5 43.7 53.1 28% 26.1 19.4 16.0 18.7 20.5 14.7 15.7 6.0 0.7

Supreme Industries 966 4,966.0 5,656.0 6,550.0 397.0 436.0 580.0 31.3 34.3 45.7 21% 30.8 28.2 21.1 30.9 35.2 22.0 24.6 12.0 1.2

UPL 643 17,378.0 19,596.0 22,535.0 2,148.0 2,500.0 2,882.0 42.1 49.0 56.5 16% 15.3 13.1 11.4 21.8 22.4 24.8 23.8 8.0 1.2

Note:
Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers
Aurobindo Pharma post 1:1 bonus Divis Labs post 1:1 bonus Cadila Healthcare post stock split from Rs 5 to Rs 1
Godrej Consumer Products post 1:2 bonus M&M post 1:1 bonus Oil India post 1:2 bonus Infosys post 1:1 bonus
Grasim- Changed reporting to standalone financial numbers

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Remarks
Automobiles
Apollo Tyres  Apollo Tyres Limited (ATL) is the market leader in the truck and bus tyre segments with a 28% market share in
India. The company is present in the Indian and European markets and is witnessing strong demand traction in
both the geographies. Demand from commercial vehicle (CV) OEMs is robust post clarity on axle load norms
as OEMs are not required to modify new trucks. Moreover, CV replacement demand is seeing strong traction
on better freight availability. In addition, levy of import duty on car radial tyres is beneficial for domestic players
such as ATL. European operations are also witnessing robust growth with the Hungary plant capacity ramp up.
Additionally, ATL plans to commence CV tyre manufacturing at Hungary plant, which is expected to reach a
capacity of 1,200 tyres per day by FY2019 end. ATL has taken a price hike of 2-3% to offset cost pressures and
enable it to maintain margins. ATL is our preferred pick in the tyre space. We retain our Buy rating on the stock
and revise our price target to Rs. 280.

Ashok Leyland  Ashok Leyland Limited (ALL), the second largest CV manufacturer in India, is a pure play on CV. The government’s
decision to allow 20-25% hike in axle load capacity is unlikely to impact new truck demand. The MHCV industry
posted strong growth of 19% and 20%, respectively, in July and August 2018 and this is contrary to our expectations
of subdued MHCV demand in the near term. OEMs stated that clarity has emerged on the norms and new trucks
are being sold without any modification. Moreover, as per CV players, overloading was already rampant and
increased load norms merely legalise the existing practice. On account of pick-up in economic growth, increased
infrastructure investment, increased mining and improved fleet operator profitability we expect MHCV demand to
remain strong. Given the strong volume offtake and consequent margin improvement, we expect profit to grow
by 32% y-o-y in FY2019. We upgrade our recommendation to “Buy” with a revised PT of Rs 165.

Bajaj Auto  Bajaj Auto Limited (BAL) is a leading motorcycle and three-wheeler (3W) manufacturer with a significant presence
in export markets. In the domestic market, it is a leader in the premium motorcycle segment. In a surprising
change in strategy, market share gains in the domestic motorcycle space have assumed priority for BAL. The
current strategy aims at re-energising dealer network and improving dealer viability. Management is willing to
sacrifice profitability to achieve this objective. BAL gained about 850 BPS market share in the entry level space to
34% in Q1FY2019 and is aiming to reach about 50% market share in the next two years. BAL made EBIDTA level
loss in the entry segment bikes and as such increasing proportion of entry bikes would exert further pressure on
profitability.. We downgrade our recommendation on the stock from Buy to Hold with a price target of Rs. 2,905.

Gabriel India  Gabriel India Limited (GIL) is one of India’s leading manufacturers of shock absorbers and front forks with a
diversified customer base. GIL is poised to outpace industry growth as it has recently won new orders from
Suzuki Motorcycles India, India Yamaha Motors and a big order from Honda Motorcycles and Scooters India
(HMSI) for the supply of front forks for its largest selling scooter (Activa). In addition, GIL has witnessed strong
recovery in the aftermarket space post demonetisation and GST-related glitches. GIL is targeting to more than
double its aftermarket revenue to Rs. 500 crore by FY2021 as against Rs. 200 crore revenue in FY2018. Further,
GIL is introducing new products and expanding its network reach in the aftermarket space, which would boost
growth. We expect GIL to post a revenue CAGR of 18% over FY2018-FY2020, which is higher than the industry’s
growth. Further, with backward integration (GIL plans to manufacture piston rods in-house) and introduction of
technologically advanced products and improving high-margin aftermarket mix, we expect margins of GIL to
improve. We retain our Buy rating on the stock with a PT of Rs. 175.

Hero MotoCorp  Hero MotoCorp Limited (HMCL) is the largest 2W manufacturer in the world. FY2018 ended on a strong note
with the 2W industry reporting 15% growth. Key growth driver was the rural segment, which as per management
grew by 2-3% higher than the urban markets. Competitive intensity in the 2W industry has intensified with most
players prioritising market share gain over profitability. One of the competitors in the entry motorcycle segment
has resorted to aggressive pricing cuts to gain market share. As the entry segment forms around 75% of overall
sales of HMCL, it is exposed to intense pricing pressures. Further, fiscal incentives at Haridwar plant have expired,
which will likely impact margins going forward. We have cut earnings estimates by 11% and 13% for FY2019 and
FY2020, respectively, and downgrade our recommendation to Hold with a revised PT of Rs. 3,375.

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M&M  M&M is a leading manufacturer of tractors and utility vehicles (UV) in India. FY2019 would be the third consecutive
year of normal monsoons in India, which would be a key driver for continued strong tractor sales momentum.
Further, higher MSPs, good crop growth, higher budgetary allocation for rural areas and farm waivers announced
in certain states would aid tractor volumes growth. Management has revised its guidance for FY2019 upwards
to 12-14% from the earlier guidance of 8-10%. We expect tractor sales to remain buoyant and expect tractor
volumes to report an 11% CAGR over the next two years. In the auto segment, lack of petrol variants and increased
competitive intensity led to market share drop for M&M. In an attempt to regain its market share, M&M is launching
three new products in the UV segment. Of these, two products (Marazzo –MPV to be launched in September
2018 and a compact SUV will be launched post the festive season) are in the newer segments to plug portfolio
gaps. Further, M&M would launch the nine-seater XUV7OO in October 2018. In addition, with clarity emerging
post new axle load norms, the LCV segment’s volumes are set for double-digit growth. FY2019 is likely to be a
bumper year for M&M, as both the automotive and tractor divisions would report double-digit volume growth.
M&M is the best stock in automotive segment to play the rural theme. We retain our Buy rating on the stock with
a revised price target of Rs. 1,075.

Maruti Suzuki  Maruti Suzuki India Limited (MSIL) is India’s largest passenger vehicle (PV) manufacturer. The company reported
a strong 50% market share as of FY2018. MSIL’s recent launches – upgraded Swift and Dzire – have received
an overwhelming response from its customers, which is reflected in waiting period of two weeks to four months.
Despite the commissioning of the first line at Gujarat plant leading to higher production, order book continued to
swell, pointing at a strong brand pull. Further, rural geographies, which account for one-third of total sales grew
strongly by 15% and would drive demand going ahead. Gujarat plant is ramping up with the second line (capacity
of 250,000 units) expected to go on stream by Q1CY2019. We expect MSIL to outgrow the PV industry, reporting
13% growth as against estimated industry growth of about 10%. The company is witnessing cost pressures and
has pointed at price hikes to mitigate cost pressures and maintain margins at current levels. We retain our Buy
rating on the stock with a PT of Rs. 10,500.

Rico Auto  Rico Auto (Rico) is one of the largest producers of high-pressure non-ferrous die castings for the auto sector..
Rico’s order book has strengthened further with Rs. 1,500 crore worth of order wins in Q1FY2019, taking the total
order book to Rs. 4,100 crore. These orders are executable over a project life of about 5-6 yearsand provides
strong growth visibility in the medium term. Moreover, the aftermarket segment is gaining traction gradually, with
revenue crossing Rs. 5 crore in Q1FY2019, and management has targeted revenue worth Rs. 30 crore from the
segment for FY2019. Rico is focusing on the improvement of employee productivity across its manufacturing
plants to enhance profitability. We expect revenue and earnings to report a 20% and 23% CAGR, respectively,
over FY2018-FY2020. We retain our Buy recommendation on the stock with an unchanged PT of Rs. 101.

TVS Motor  TVS Motor (TVSM) is the fourth largest 2W manufacturer in the country with a strong presence in the scooter
segment. Over the past couple of years, the scooter segment’s growth has surpassed that of the motorcycle
segment’s. TVSM is entering new product segments, which will enable it to maintain industry outperformance. After
reporting double-digit growth for Q1FY2019, the strong growth momentum is likely to sustain. Well-progressing
monsoon and higher MSPs are expected to boost rural demand. Moreover, recent launches/refreshes have been
well received and are gaining traction. Exports also are on a strong footing given the surge in crude prices and
increased availability of USD in key export markets. We expect overall volumes to grow by 18% in FY2019. Further
cost-control measures and price hikes would enable margin expansion. We retain our Buy rating on the stock with
a revised PT of Rs. 670.

Banks & Finance


Axis Bank  Axis Bank is the third-largest private sector bank, which continues to grow faster than the industry and has
diversified its book in favour of the retail segment (~40% of loans in the retail segment). The bank’s liability
profile has improved significantly, which would help sustain margins at healthy levels. We expect earnings growth
to remain reasonably strong, driven by healthy operating performance. Though asset quality pressures have
emerged as pain points due to exposure in the infrastructure and steel sectors, we expect the stress to persist in
the near term.

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Bajaj Finance  Bajaj Finance, owned by Bajaj Finserv, is a fast-growing, well-diversified leading NBFC in the country. The company
has assets spread across products, viz. loans for consumer durables, 2Ws and 3Ws, loans to small and medium
enterprises (SME), mortgage loans and commercial loans. Apart from its strong loan growth, asset quality and
provisioning for Bajaj Finance remain among the best in the system. Given the strong growth rate, high margins
and return ratios, its premium valuations within the NBFC space are justified.
Bajaj Finserv  Bajaj Finserv is a financial conglomerate present in the financing business (vehicle finance, consumer finance and
distribution) and is among the top players in the life insurance and general insurance segments. Consumer finance
(Bajaj Finance) and general insurance businesses of the company continue to report a robust performance, while
the life insurance business is showing signs of an uptick, after being affected by a change in regulations.
Bank of Baroda  Bank of India has a network of over 4,800+ branches, spread across the country and abroad, along with a
diversified product and services portfolio, and steadily growing assets. Operating performance and earnings
have being steady despite significant business recalibration. Given the increase in the number of incremental
stressed loans and weaker capital position, valuations of the company may remain subdued.
Bank of India  Bank of India has a network of over 4,700+ branches, spread across the country and abroad, along with a
diversified product and services portfolio, and steadily growing assets. Operating performance and earnings
have eroded significantly due to margin deterioration and a sharp rise in NPAs. Given the rise in the number of
incremental stressed loans and weaker capital position, valuations of the company may remain subdued.
Capital First  Capital First (erstwhile Future Capital Holdings) had been acquired by global private equity firm, Warburg Pincus
(with a 36% stake). The present management has taken several initiatives to tap the high-growth retail product
segments, such as gold loans, loan against property and loan against shares. The company has a strong capital
adequacy ratio (CAR) and sound asset quality. Loan book of the company is expected to sustain 25-30% growth
over the next three years. As a result of several initiatives taken in the recent past, operating leverage will play
out and may lead to significant pick-up in profitability over the medium term.
Federal Bank  Federal Bank is among the better-performing old private sector banks in India with a strong presence in south
India, especially Kerala. Under the new management, the bank has taken several initiatives that will improve the
quality of its earnings and asset book. Asset quality has shown stress in the past few quarters. We, however,
expect a gradual improvement in NPAs and operating performance. Valuations seem attractive over the medium
to long term.
HDFC  HDFC is among the top mortgage lenders in the country providing housing loans to individuals, corporates and
developers. The company has interests in banking, asset management and insurance through its key subsidiaries.
As these subsidiaries are growing faster than HDFC, the value contributed by them would be significantly higher
going forward. Due to a dominant market share and consistent return ratios, the company should continue to
command a premium over other NBFCs.
HDFC Bank  HDFC Bank is among the top performing banks in the country having deep roots in the retail segment. Despite the
general slowdown in credit growth, the bank continues to report strong growth in advances from retail products.
Relatively high margins (compared with its peers), strong branch network and better asset quality make HDFC
Bank a safe bet with a scope for expansion in its valuations.
ICICI Bank  ICICI Bank is India’s largest private sector bank with a network of over 4,850 branches. The bank has made
inroads in to retail loans (~45% of the book) and has significantly improved its liability franchisee. Operating
profit improved significantly, though its exposure to some troubled sectors (such as infrastructure and steel)
led to increased pressure on asset quality. However, healthy growth in operating income and proceeds from
monetisation of its stake in various subsidiaries will help the bank to deal with its NPA challenges.
LIC Housing  LIC Housing Finance is one of the largest mortgage financiers in India with a market share of 11% and loan book
of over Rs. 1,00,000 crore. The company is promoted by Life Insurance Corporation of India, which is among the
most trusted brands in the country. With over 200 branches, 1,241 direct sales agents, 6,535 home loan agents
and 782 customer relationship associates, the company has one of the strongest distribution structures in India
to support business expansion. Though levers for NIM improvement are present, which include impact of lending
rate like (~50 BPS since April 2018) and large proportion of fixed rate borrowing, providing a stable funding cost
in an increasing interest rate scenario, we believe increasing competitive pressures may keep NIM range-bound
with evenly placed probability of NIM expansion.

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Max India  Max India has demerged into three different entities, of which Max Financial Services will hold Max Life Insurance
(new Max IndiWa will hold Max Healthcare, Max Bupa Health Insurance and Antara businesses). Max Life Insurance
(held by Max Financial Services) is among the leading private sector insurers and has gained critical mass and
enjoys the best operating parameters in the industry. As the insurance sector is showing signs of stability, the
company’s favourable product mix and a strong distribution channel will result in healthy growth in premiums and
profits.

PNB  Punjab National Bank (PNB) has strong liability mixes in the banking space, with low-cost deposits constituting
over 44% of its total deposits. This helps the bank maintain one of the highest margins among PSBs. However,
with the recent fraud coming into limelight, we expect the stock to remain under pressure and earnings to be
impacted by higher provisioning.

PFS  PTC India Financial Services, owned by PTC India, is focused on providing financial solutions to projects in the
energy value chain. Given the robust lending opportunities in the renewable energy segment and the likely
reforms in the thermal power segment, loan growth is expected to remain strong over the next 2-3 years.
The proceeds from exits in investments would add to profitability. Asset quality, despite some deterioration, is
manageable.

SBI  State Bank of India (SBI) is the largest bank of India and the successful merger of the associate banks and value
unlocking from the insurance business could provide further upside for the bank. While the bank is favourably
placed in terms of liability base and the operating profit is better than peers, asset quality has emerged as a key
pain point, which will affect earnings growth. PSU bank recapitalisation plan by the government could benefit the
bank to make up for capital requirements to promote growth.

Union Bank of India  Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become the
largest retail and MSME bank. Hence, it has ramped up its manpower and infrastructure to ramp up retail and SME
lending. The bank’s asset quality challenges have come to the fore (mainly from the corporate portfolio), whereas
low tier-1 CAR remains an area of concern.

Yes Bank  Yes Bank, a new generation private bank, started its operations in November 2004 and has emerged as one of
the top performing banks. The bank follows a unique business model based on knowledge banking, which offers
product depth and a sustainable competitive edge over established banking players. The bank is suitably poised
to ride the recovery in the economy and the retail deposit franchise is showing a sharp improvement, which will
support margins in the medium to long term.

Consumer goods
Britannia  Britannia is the second largest player in the Indian biscuit market with ~30% market share. Under a new leadership,
Britannia has been able to leverage and monetise its strong brand and premium positioning in the biscuits and
snacks segments. The company is well placed to sustain its higher-than-industry growth rate with an improving
distribution reach, deep penetration in rural India, enhanced international business, entry into newer categories
and focus on cost efficiency. Management is confident of double-digit growth at standalone level in the coming
quarters, driven by commissioning of new facilities and food park.

Emami  Emami is one of the largest players in the domestic FMCG market with a strong presence in underpenetrated
categories such as cooling oil, antiseptic cream, balm and men’s fairness cream. Kesh King is expected to post
recovery in sales growth as wholesale channels are back in trade (70% of brand sales happen through the wholesale
channel). Further, the company is banking on the healthcare segment to achieve strong growth on account of
expected recovery in Zandu Pancharishta (post the induction of Mr. Amitabh Bachchan as the brand ambassador)
and expects good acceptance towards the newly launched Zandu Diabrishta – 21 (nationally launched). We
expect domestic business volume growth to improve by 10-12% in the coming quarters. Management is confident
of the international business to achieve high-teen revenue growth on account of recovery in performance of
MENAP region and strong growth in SAARC region. The company has taken price hike of 3-4%, which will take
care of increased input prices. However, more focus is on cost efficiencies to maintain OPM at 28% in FY2019.

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GSK Consumer  GSK Consumer Healthcare is a leading player in the malted food drinks (MFD) segment with ~70% share in the
domestic market. Though management is confident of 6-8% volume growth going ahead on account of improving
consumption in rural markets, enhanced distribution reach and good acceptance of premium launches under
the Horlicks brand and lack of clarity on the parent’s decision on the deal (to have a strategic review of nutrition
products, which is likely to unfold by the end of Q3FY2019) would act as key overhang on the stock. Thus, we
maintain our Hold recommendation on the stock.

GCPL  Godrej Consumer Products Limited (GCPL) is a major player in personal wash, hair colour and household insecticide
market segments in India. The recent acquisitions, i.e. Strength of Nature, Darling Group, Tura, Megasari and Latin
American companies, have helped the company expand its geographic footprint and improve growth prospects.
The demand environment is improving with urban and rural markets growing at 13% and 17%, respectively. We
expect revenue of the international business to grow in low double digits in the coming quarters. Management
expects margin expansion to sustain on account of several cost-saving initiatives and better revenue mix in the
coming quarters. Hence, for FY2019, earnings growth will be ahead of sales growth despite higher investments
behind brand and promotional activities.

HUL  Hindustan Unilever Limited (HUL) is India’s largest FMCG company. HUL has begun FY2019 on a strong footing
by registering double-digit volume growth of 12%. We expect strong volume growth momentum to sustain in
the coming quarters because of improving rural demand, sustained new product launches and premiumisation
resulting in better revenue mix. Moreover, GST-led disruption would result in a low base in the coming quarters.
Rising crude prices and a depreciating rupee against dollar (2.5% of overall sales) would slow margin expansion
in the near term. However, price hike taken by HUL on selected portfolio, focus on premiumisation and cost
rationalisation would continue to give strong support to profitability in the near to medium term.. In view of
strong growth prospects in the near term and key beneficiary of better rural demand, we maintain our Buy
recommendation on the stock.

ITC  ITC began the current fiscal on a good note with the cigarette business regaining its positive growth in volumes
and non-cigarette FMCG business maintaining double-digit growth momentum. With no increase in tax rate on
cigarettes in the recent past, we expect sales volume to improve further in the coming quarters. We have factored
in single-digit sales volume growth for FY2019 (in view of no significant price hikes in the near term). Further,
with demand for consumer goods improving in rural India, we expect non-cigarette FMCG business to maintain
double-digit revenue growth momentum in the coming quarters. With room demand likely to exceed room supply,
we expect the hotel business to deliver strong performance in FY2019. PPP business will continue to post better
profitability on account of better revenue mix and benign input cost. With performance of ITC expected to improve
in the coming quarters, we expect the valuation gap to reduce. We maintain our Buy recommendation on the
stock.

Jyothy Labs  Jyothy Laboratories Limited (JLL) is the market leader in the fabric whitener segment in India. Management is
expecting demand to pickup due to improvement in the consumption environment in rural India. The company
has maintained its focus on innovation and is enhancing its distribution. Overall, we expect 10-12% volume growth
in the near term and revenue to grow in mid-teens for FY2019. With crude prices moving up, the company has
started seeing a surge in input cost and is likely to go for price hikes (fabric care category) in the coming quarters.
Thus, OPM is expected to sustain at 15-16% in the near term.

Marico  Marico is among India’s leading FMCG companies. Core brands, Parachute and Saffola, have a strong footing in
the market. Management is confident of achieving steady 8-10% growth in volumes in the domestic business (on
a like-to-like basis). The male grooming and foods portfolios are expected to post strong growth in the coming
quarters. On the international front, Bangladesh will deliver good revenue growth as the macro environment
improves, while the MENA region will continue to grow in double digits. Falling copra prices (dropped ~30%
from its high) augur well for Marico in near to medium, as the company can focus on achieving steady sales
volume growth in the coming quarters. Thus, in view of a minimal downside risk and near-term growth prospects
remaining intact, we maintain our Buy recommendation on the stock.

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Zydus Wellness  Zydus Wellness has a small product portfolio, consisting of just three brands (Nutralite, Sugar Free and Everyuth)
that cater to a niche category. Zydus Wellness has a strong portfolio of leading brands, which are largely placed
in low penetrated categories. Hence, most brands are likely to report double-digit revenue growth in a stable
market environment. Management of Zydus Wellness is confident of maintaining the strong growth momentum
with distribution enhancement and new product launches supported by adequate media activities. We expect
volume growth to sustain in low double digits (10-12%) in FY2019. OPM stood at ~25% in FY2018 and is expected
to improve gradually to 26% in FY2020. Thus, in view of better growth prospects and decent valuations, we have
upgraded the stock to Buy from Hold earlier.

IT/IT services
Firstsource  Firstsource Solutions Limited (FSL) is a specialised BPO service provider. Management has cut down its CC
revenue growth guidance to 7-9% from 9-10% earlier on account of headwinds in top clients (realignment activities
owing to regulatory concerns). FSL demonstrated strong performance on the margin front in Q1FY2019 despite
lower revenue from its top accounts. Management has maintained its margin guidance of 14% for FY2019 given
impressive margin performance of 13.9% in Q1FY2019. We expect earnings to accelerate in FY2019/FY2020E
with improved topline growth, productivity improvement and long-term debt-free status from Q2FY2018, with 17%
earnings CAGR over FY2018-FY2020E.

HCL Tech  HCL Technologies has a leadership position in infrastructure management services (IMS) and engineering and
research and development (ERD) space, which together account for ~60% of the company’s total revenue.
Management has maintained its CC revenue growth guidance (9.5-11.5% y-o-y) and EBIT margin guidance
(19.5- 20.5%) for FY2019, in-line with our expectations. Management believes IMS growth rate on a y-o-y basis
in H1FY2019 and FY2019 would be better, led by ramp-up deals won in Q2FY2018/Q3FY2018 and shifting of
customer spending for building digital enterprise and modernisation of infrastructure. In our view, revenue
momentum from digital offering and IP products along with recovery in IMS business would drive the overall
organic growth rate in the coming quarters. We remain Positive on the company in view of its recent order wins,
accelerated pace of investments in the products segment, traction for its next-gen infra offerings and earnings
visibility with double-digit revenue growth.

Infosys  Infosys is India’s premier IT and ITeS company that provides business consulting, technology, engineering and
outsourcing services. The company expects its pentagon agile digital service architecture would help to address
the client’s digital requirements. Further, management has set a three-year roadmap to achieve growth objectives.
Management has retained its positive outlook on BFSI, led by large deal wins (40% of $1.1 billion TCV from BFS)
during Q1FY2019. The financial vertical is expected to bounce back from Q2FY2019, led by recent deal wins,
healthy deal pipeline and increasing digital spending by insurance clients. Recovery in the financial segment
along with relatively reasonable valuation gives us comfort to remain Positive on Infosys.

Persistent  Persistent Systems has proven expertise, strong presence in newer technologies, strength to improve its IP
base and a decent margin profile, all of which set it apart from other mid-cap IT companies. PSL is focusing on
the development of Internet of Things (IoT) products and platforms, as it sees significant traction from industrial
machinery, SmartCity, healthcare and smart agriculture verticals. The company maintains its digital business growth
outlook for FY2019 despite drop in digital revenue in Q1FY2019. The company expects that its margin would
improve by 100 BPS y-o-y on constant-currency basis in FY2019, led by rupee tailwinds. Further, investments in
sales resources in Europe have started yielding results during Q1FY2019, with incremental revenue of $6 million
from re-seller business and expect the benefits from investments in the re-seller business to continue for the next
few quarters. We continue to see PSL as a good investment bet among mid-cap IT companies, as earnings are
expected to report an 18% CAGR over FY2018-FY2020E and the stock is trading at a discount to most mid-cap IT
companies.

TCS  Tata Consultancy Services is among the pioneers of the IT services outsourcing business in India and is the
largest IT services firm in the country. The company is on track to achieve its target of 10% y-o-y CC revenue
growth in FY2019, led by ramp-ups in large deals won in the recent couple of quarters and recovery in the BFSI
vertical. Management stated that the impact of insourcing has been stabilised. Strong deal wins over the past 2-3
quarters provide good revenue visibility in the medium term. On the margin front, management has maintained

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margin band of 26-28% for FY2019E, led by revenue recovery in BFSI and increasing contribution from the digital
business coupled with benefits from rupee depreciation.

Wipro  Wipro is among the top five IT companies in India. Q2FY2019 CC revenue growth guidance (adjusting for sale of
data centre business) indicates the receding impact of the bankruptcy of two customers that became hurdles for
its revenue growth in the past couple of quarters. Further, we see that the recent large deal win of $1.5 billion+
from Alight Solutions along with improving deal win momentum provides visibility in growth pick-up going ahead.
With initial signs of growth pick-up and anticipated margin improvement, given rupee tailwind and waning impact
of existing headwinds over the next 2-3 quarters, Wipro looks like an attractive bet on the valuation front. After
a series of multiple de-rating for Wipro in the past few years, we now expect scope for re-rating of the stock on
account of better growth visibility.

Capital goods/Power
CESC  CESC is the power distributor in Kolkata and Howrah (backed by 1,225 MW of power generation capacity),
which is a strong cash generating business. Further, 600 MW of regulated generation capacity (to serve Kolkata
distribution) has come on stream recently in Haldia. Moreover, its 600 MW thermal power project at Chandrapur
has signed a PPA and has started operating. Losses in the retail business are coming down gradually over
the past and it is expected to breakeven soon. The BPO subsidiary, Firstsource, is performing well in-line with
expectations. However, the recent diversification into unrelated businesses such as IPL franchisee would hurt
its valuations. CESC has announced the demerger of the business into four verticals namely power distribution,
power generation, retail and IT outsourcing. The restructuring looks beneficial for minority shareholders optically.
However, we await clarity on the financials of the demerged companies.

CG Power & Ind. Solutions  Key businesses of CG Power and Industrial Solutions - industrial and power systems - are going through a rough
patch and are potential beneficiaries of the upcoming investment cycle revival. Moreover, the company is looking
to unlock value by selling its international subsidiaries.

Finolex Cables  Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improving
demand environment in its core business of cables. The company is leveraging its brand strength to build a high-
margin consumer product business. The company has recently launched fans and switch gears. The company
is planning to launch water heaters soon. The addition of new products in its product portfolio could prove to be
the next growth driver. We anticipate healthy earnings growth, return ratios in high teens and superior cash flows,
which bode well for the stock. Therefore, we remain Positive on the stock.

Greaves Cotton  Greaves Cotton Limited (GCL) is a mid-sized and well-diversified engineering company. Core competencies of
the company are in diesel/petrol engines, power gensets, agro engines and pump sets (engine segment). Three-
wheeler (3W) engines that fetch about 40% of revenue for GCL are predominantly diesel and are facing severe
headwinds, which would restrict the growth. We expect 3W business of GCL to report flat revenue in FY2019.
Secondly, the aftermarket segment and agri equipment segment are expected to report a sharp improvement
in growth. Moreover, GCL has forayed into higher kilovolt ampere (KVA) gensets, which would boost revenue.
Overall, we expect the non-auto segment forming about half of GCL’s revenue to grow by 16% in FY2019. GCL is
ramping up its non-auto business to reduce dependence on the automotive business. We retain our Hold rating
on the stock.

Kalpataru  Kalpataru Power Transmission is a leading EPC player in the power transmission and distribution space in India.
Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility. OPM of the
standalone business is likely to remain around 10%, while OPM of JMC Projects (a subsidiary) is showing signs of
improvement. We see some value-unlocking potential from the sale of assets or listing of new business in future.
We remain Positive on the stock.

KEC  KEC International is a Global Power Transmission Infrastructure EPC major. The company is present n the verticals
of power T&D, cables, railways, water, renewable (solar energy) and civil. Globally, the company has powered
infrastructure development in more than 61 countries. KEC is a leader in power transmission EPC projects and has
more than seven decades of experience. Over the years, it has grown through the organic as well as inorganic
route. We retain our Positive outlook on the stock.

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PTC India  PTC India is a leading power trading company in India with a market share of 35-40% in the short-term trading
market. Over the past few years, the company has made substantial investments in areas such as power generation
projects and power project financing, which will start contributing to its earnings. We retain our Positive stance on
expected healthy volume uptick, with an increasing share of long-term contract business.

Thermax  The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Inc’s
capex. Order book of Thermax Group stands around its consolidated revenue. However, the company has shown
an ability to maintain double-digit margins in a tough macroeconomic environment. We retain our Hold rating on
the stock due to its rich valuation.

Triveni Turbines  Triveni Turbines Limited (TTL) is a market leader in 0-30 MW steam turbine segment. TTL is at an inflexion point
with a strong ramp-up in the aftermarket segment and overseas business, while the domestic market is showing
distinct signs of a pickup. The company has also formed a JV with GE for steam turbines of 30-100 MW range,
which is likely to grow multi-fold in the next 4-5 years. TTL is virtually a debt-free company with a limited capex
requirement and an efficient working capital cycle, reflected in very healthy return ratios. Further, boosted by
the expected uptick in the domestic capex cycle, the company’s earnings are likely to report a 26% CAGR over
FY2018-FY2020E.

V-Guard  V-Guard Industries is an established brand in the electrical and household goods space, particularly in south India.
Over the years, it has successfully ramped up its operations and network to become a multi-product company.
The company has a strong presence in the southern region. The company is also aggressively expanding in
non-south markets and is particularly focusing on tier-II and III cities where there is lot of pent-up demand for its
products. We remain Positive on the stock.

Va Tech Wabag  VA Tech Wabag (VTW) is one of the world’s leading companies in the water treatment field with eight decades
of plant-building experience. Given the rising scarcity of fresh water, we expect flow of huge investments in the
water segment, both globally and domestically. With rising urbanisation and industrialisation in India, we expect
substantial investments in this space. Given the large opportunity ahead and inherent strengths of VTW, such as
professional management, niche technical expertise and global presence, we remain Positive on the stock.

Infrastructure/Real estate
Gayatri Projects  Gayatri Projects is a Hyderabad-based infrastructure company with a strong presence in irrigation, road and
industrial construction businesses. Order book of the company stands at Rs. ~12,900 crore, which is 4.2x TTM
revenue. Further, the company expects to sustain 30%+ topline growth over the next 3-4 years with OPM around
16%. The company has completed its power portfolio and plans to unlock value by listing on the Indian bourses.
The company has the potential to transform itself into a bigger entity.

IRB Infra  IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator in
the country with all its projects being toll based. The company has an integrated business model with an in-house
construction arm, which provides a competitive advantage in bidding for larger projects and captures the entire
value from BOT assets. Further, the company has a profitable portfolio as majority of its operational projects have
become debt-free and are present in high-growth corridors, providing it a healthy cash flow. Thus, the company is
well poised to benefit from the huge opportunity in road development projects on account of its proven execution
capabilities and scale of operations.

Jaiprakash Asso  Jaiprakash Associates has been facing earnings pressure across business verticals. The company has just
concluded its cement asset sale worth Rs. 16,000 crore and transferred 1,000 acres worth Rs. 13,000 crore to an
SPV, which will reduce its debt burden. Going ahead, the company will be focusing primarily on EPC business and
balance portfolio of business verticals and would aim to reduce its debt further. The current business restructuring
has led to a cautious view on the stock.

L&T  Larsen & Toubro (L&T), being the largest engineering and construction company in India, is a direct beneficiary of
the domestic infrastructure capex cycle. The company is expected to perform well, backed by its sound execution
track record and healthy order book. Monetisation of the non-core businesses will continue for some time, leaving
scope for further value unlocking. Measures planned by the company to improve its return ratios augur well.
Hence, we remain Positive on the stock.

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NBCC  NBCC (India), a Navratna public sector enterprise, is notified as a Public Works Organisation (PWO), which gives
it a unique eligibility to bag orders on a nominated basis from government departments and PSUs. NBCC has
already amassed a huge order book, which gives it a strong revenue visibility for the next five years. Moreover,
future prospects look much brighter, given the opportunities from multiple areas such as redevelopment of old
government colonies in Delhi, Rajasthan and Odisha, development of government lands, Smart Cities, Housing
for All 2022 and Amrut. We remain Positive on the stock, considering the huge competitive advantage, a unique
business model, high return ratios and healthy cash flows.
Sadbhav Eng  SEL is engaged in 1) EPC business for transport, mining and irrigation sectors and 2) development of roads and
highways on BOT basis through SIPL. SEL has a healthy order book of Rs. 13,713 crore (3.8x its TTM revenue, with
presence in 11 states). The company has robust in-house integrated execution capabilities with qualified human
resource and owned equipment. We expect SEL to benefit from improved order execution, enhanced order
inflows (particularly from the transport segment) and resolution of working capital issues, resulting in a sturdier
balance sheet. Further, improving outlook for the Indian road sector and limited competitive intensity augur well
for SEL since it is present in both, asset creation and EPC verticals.

Oil & Gas


Oil India  Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the northeastern region of India.
The company holds domestic 2P (proved and probable) reserves of 79 mmt for oil and 128 mmtoe for gas.
Reserve-replacement ratio of the company is also healthy. Rising oil price has increased concerns of subsidy
sharing although management does not except any subsidy burden at current oil price of $70-75/bbl. The stock
offers high dividend yield.
Petronet LNG  Petronet LNG is the largest LNG re-gasifier in India with 15 mmt LNG terminal at Dahej and 5 mmt LNG terminal at
Kochi. The company enjoys a competitive edge compared to other LNG import terminals given its low tariff and
long-term contracted volume with use or pay clause. We expect Dahej terminal to operate above 100% utilisation,
given its competitive edge and resolution of pipeline connectivity issues in southern India are expected to
improve utilisation for Kochi terminal. Petronet LNG would be the key beneficiary of rising share of LNG in India’s
overall gas consumption.
Reliance Industries  Reliance Industries has one of the largest and complex refining businesses in India and enjoys a substantially
higher refining margin over the benchmark Singapore Complex GRM. We expect GRM to remain healthy
and petrochem margin to be maintained in the medium term on an uptick in domestic demand. Capex in the
downstream business (incremental capacity in the petchem business and petcoke gasification in refining) would
be the key earnings driver in the coming years. Large investment in Reliance Jio could add value in the long term.
Selan Exploration  Selan Exploration Technology is an oil E&P company with five oil fields in the oil-rich Cambay basin of Gujarat.
Initiatives to monetise oil reserves in its Bakrol and Lohar oil fields will improve production. However, challenges
related to monetisation of its large hydrocarbon reserve base and near-term production ramp-up issues are likely
to be an overhang on the stock in the near to medium term.

Pharmaceuticals
Aurobindo Pharma  Aurobindo Pharma’s recent acquisition of commercial operations and three U.S.-based manufacturing facilities
from Sandoz Inc., for $900 million or Rs. 6,500 crore, is a perfect fit in the company’s growth strategy and
diversification of its U.S. business. The acquired portfolio is a sizeable generic business for key therapy areas and
will allow Aurobindo to expand its product offerings and become one of the leading players in the U.S. generic
dermatology market. The deal also enhances the scale of operations, leading to cost synergies. We expect the
company’s debt:equity ratio to increase from 0.4 in FY2018 to 0.7 in FY2020, as debt of Rs. 6,500 crore will be
added. However, sales of ~Rs. 6,500 crore will be added in FY2020. We expect Aurobindo to report sales and
earnings CAGR of 30% each over FY2018-FY2021E.
Cadila  Management has guided for product approvals of 20+ ANDAs and expects to launch ~50+ products in FY2019
(~35 products have already been approved). Management has guided that launches have commenced in
Q4FY2018 and full benefit of these launches and monetisation of new approvals will likely drive U.S. growth over
FY2019E-FY2020E. In addition, India business is likely to report double-digit growth, adjusting for GST issues.
Biosimilars, specialty products and vaccines are other growth drivers over the next 2-3 years.

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Cipla  Management maintains guidance of double-digit growth in the U.S. and India business despite a challenging
environment on account of new product launches planned for FY2019E and FY2020E (one niche product every
quarter). Cipla has an exhaustive pipeline of inhalers and complex generics, which has a huge market size. These
opportunities will give an escalated growth trend to the revenue of the company and will boost the topline in the
long run. Cipla has also cleared all regulatory hurdles by receiving Establishment Inspection Report (EIR) for key
plants at Goa, Indore and InvaGen.

Divis Labs  Successful resolution of the import alert and warning letter in a short span of time and successful USFDA
inspection of unit-1 without any observations have ended woes for Divis, assuring regular supplies. In addition,
recent rupee depreciation by 10-11% will benefit exporting pharma companies in terms of better sales realisation
and profitability, leading to upgrade of 2-3% each in our sales and earnings estimates. In addition to rupee
depreciation, there is immense scope for better-than-expected growth and re-rating of valuation multiples
going ahead, as the company stands to benefit from: 1) capacity expansion – two manufacturing blocks to be
commercialised in FY2019; 2) pollution-related issues leading to constraints in supply from China, which open up
opportunities for Divis; and 3) continued weakness in rupee against U.S. dollar.

Glenmark Pharma  Glenmark has received market authorisation in Germany for its generic version of Seretide Accuhaler [Fluticasone/
Salmeterol dry powder inhaler (DPI)]. Glenmark has already launched its generic version of Seretide Accuhaler in
Denmark, Sweden and Norway. This approval affirms Glenmark’s capabilities in the complex inhaler respiratory
products segment. Moreover, recent high-value, limited competition launches (gWelchol and gProtopic),
expected product approvals (gVoltaren and gFinacea) and progress on other complex generic assets (gNuvaring,
gConcerta and respiratory products such as gAdvair Diskus and gFlovent) are key drivers in the medium term.
Although earnings contribution from Glenmark’s complex generics/specialty/NBE pipeline is still two-three years
away, we expect significant visibility to emerge over the next 12-18 months. In addition, all other business verticals
of the company are expected to show significant improvement in the next two-three years.

Lupin  Management has indicated that remediation at two plants under the Warning Letter will be completed in a few
months and, thereafter, USFDA shall be invited for re-inspection. Since there are two facilities under the Warning
Letter, there is a chance that both need resolution for the letter to be lifted. We feel Lupin could face few more
tough quarters as pricing pressure is likely to continue along with risk of competition in key products such as
Minastrin, fortamet and glumetza and delay in key product approvals (25-30% of products are filed from two
facilities under the warning letter). Hence, we expect U.S. business sales recovery to take time and operating
margins for FY2019 to remain at 19-21% depending upon product approval and launch timeline.

Sun Pharma  The strong track record of Sun Pharma to turn around acquired assets and its ability to maintain growth across
key geographies are encouraging. We feel Sun Pharma will benefit from the potential FY2019 commercialisation
of two mid-size lead assets (Xelpros and Elepsia XR) as it will contribute in building its specialty pipeline. Apart
from these two assets, Sun Pharma has other specialty product launches planned already, namely Ilumya (in
Q2FY2019) and OTX-101 (H2FY2019), that are scheduled for a launch in FY2019. Thus, execution of specialty
initiatives will be monitored closely and full benefit of these launches will be witnessed from FY2020. We expect
Sun Pharma’s overall sales/earnings to report an 18.5%/41% CAGR over FY2018-FY2021E.

Torrent Pharma  U.S. sales growth is likely to gain momentum in FY2019 with management planning to file 15-20 ANDAs during
the year and expecting 8-10 product approvals, which it hopes to launch on time. Management expects a couple
of limited competition launches, which could contribute meaningfully. U.S. sales growth will also be supported by
ramp-up of volumes from Dahej facility. EIR for Dahej facility has been received, thereby indicating no regulatory
hurdles for the near term. Management expects the integration of domestic business with its acquired Unichem
business to be complete by the end of FY2019Debt:Equity ratio is likely to improve from 1.5x in FY2018 to 0.5x
by FY2021E (increase in debt was due to Unichem acquisition, this debt will be amortised over seven years). We
expect RoE to improve from 16.2% in FY2018 to 22.2% by FY2021E.

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Building materials
Grasim  Grasim is better placed compared to other large players in the cement space owing to its strong balance
sheet, comfortable debt/equity ratio, attractive valuation and diversified business. Grasim is on a strong growth
trajectory, with ongoing restructuring through trimming down its loss-making businesses (fertiliser and telecom)
and expanding its profit-making divisions (viscose, chemical and cement). Better earnings growth would also
significantly improve return ratios at a consolidated level and trigger rerating of the stock.
The Ramco Cements  The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from capacity addition
carried out ahead of its peers in the southern region. The company is mulling over the expansion of its satellite
grinding capacity from 4 mtpa to 7.1 mtpa at a cost of Rs. 1,095 crore. The expansion aims to strengthen reach
in Andhra Pradesh, West Bengal and North Eastern states. The company has reaped the benefits through cost-
saving measures, besides constantly reducing debt, which has led to improved profitability. In a nutshell, better
volumes, cost efficiencies and reducing leverage have yielded benefits.
Shree Cement  The expansion plan of Shree Cement to reach 40 mtpa by FY2019 (currently 37.5 mtpa) and increasing
geographical footprint in the eastern and southern regions is likely to aid better volume growth going ahead.
Pricing discipline in the cement business should help improve realisations over FY2019 to FY2020. However,
increased cost structure (power and freight cost) affecting operating margins remain key risk to net earnings in
the near term.
UltraTech Cement  UltraTech Cement is India’s largest cement company. The capacity is expected to reach 95.4 mtpa by the end of
FY2019. We expect UltraTech to report industry-leading volume growth on account of timely capacity expansion
(acquisition of Jaypee Group’s cement assets) and likely revival in demand (with the start of affordable housing
projects and enhanced spending on infrastructure development). We expect net earnings growth during FY2019-
FY2020 to be aided by higher volume growth and improving profitability of acquired assets.

Discretionary consumption
Arvind  Arvind is one of India’s leading vertically integrated textile companies with an experience of more than eight
decades in the industry. The company has switched itself into the branded retail space by enhancing its branded
portfolio. Arvind is a licensee for marketing various marquee global brands in India such as Arrow, US Polo,
Tommy Hilfiger, and Calvin Klein. The company also operates specialty retail stores under licensee brands
such as GAP, The Children’s Place, Aeropostale and Sephora. The company is also present in the retail space
through Unlimited and The Arvind stores. Management proposes to demerge its branded, retail and engineering
businesses as both these have matured enough to enhance their growth prospects in the coming years. Moreover,
listing these businesses as separate entities will help create value for the businesses, as separate leadership and
development of best strategies for the business will enhance focus.
Century Plyboards  Century Plyboards is a leading player in the organised plywood industry with a market share of 25%. Strong
growth in the sector, Century’s premium positioning and brand equity strength and benefits from GST would
enable it to report revenue CAGR of 15.2% over FY2018-FY2020E. Earnings are likely to report a 28.1% CAGR
over FY2018-FY2020E on account of revenue growth and better absorption of fixed costs. We believe structural
growth triggers for Century Plyboards are becoming visible due to: 1) GST implementation (expected to result
in a shift of market share to organised players from unorganised players, as they lose cost advantage); 2) the
government’s relentless focus on affordable housing; and 3) scaling up of its MDF unit.
Info Edge (India)  Info Edge is India’s premier online classified company in the recruitment, matrimony, real estate, education
and related service sectors. Naukri.com is a quality play and is directly related to GDP growth and internet/
mobile penetration. With mid-teen growth in billings of the recruitment business, management remains hopeful
that growth in the recruitment business may continue in the coming quarters. On the real-estate front, gradual
recovery in 99acres growth is expected on account of robust growth in 99acres billing in the last three quarters,
settling down of RERA impact, impressive billings growth in the broker segment and lower inventory in large
projects. Further, its investee companies, particularly Zomato and PolicyBazaar, have been progressing well in
their respective businesses. We continue to derive comfort on Info Edge’s business strength, with leading market
share in key businesses. We expect steady revenue momentum in the recruitment business and continued
growth momentum in revenue of 99acres in FY2019.

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INOX Leisure  INOX Leisure Limited (ILL), India’s second largest multiplex operator with 128 properties and 512 screens across
64 cities (accounting for about 20% of the multiplex screens in India), is scripting a blockbustre growth story
through a mix of inorganic and organic expansion plans. The ILL mega show is supported by improving content
quality in the Indian mainstream and regional cinema, with its movies regularly hitting the Rs. 100 crore or Rs. 200
crore box-office collection mark. In regards to the allowing of outside F&B issue, management stated that the
company will take appropriate measures to counter any unfavourable event as neither any law has been passed
in the state assembly nor the High Court has given any direction in this regards. The company also stated that
in its overall F&B income, the proportion of MRP-based F&B is quite small and adheres to all laws pertaining to
selling of packaged food in its multiplexes. We continue to remain Positive on ILL from a long-term perspective,
given its pan-India growth plans, healthy balance sheet (lower financial leverage) and potential benefits from GST
rollout.
KKCL  Kewal Kiran Clothing Limited (KKCL) is a branded apparel play with four brands in its kitty. Killer, its flagship denim
brand, has created a niche in the minds of consumers. Q1FY2019 witnessed robust performance by the company.
However, this performance was on a softer base of Q1FY2018 (where the company had witnessed de-stocking
at distributors’ end prior to GST implementation). During Q1FY2019 as well, the company saw a dip in realisation,
which has been the trend since the past few quarters due to ongoing price discounts offered by online players and
value fashion offerings given by leading brick-and-mortar players. In the forthcoming quarters, we need to keep
a check on volume growth as the company has adopted a new strategy of concentrating on volumes by giving
some leeway to distributors in terms of payment. Management envisages maintaining its margins going ahead
on account of operating leverage. Though KKCL has a strong brand portfolio and is one of the well-managed
companies with stable working capital in comparison to peers in the branded retail space, the key trigger for the
company in the near term would be consistent volume growth. We maintain our Hold recommendation on the
stock.
Orbit Exports  Orbit Exports (Orbit) is a leading manufacturer and exporter of novelty fabrics, exporting its products to over
32 countries. The company is a recognised star export house and operates in the niche area of high-end fancy
fabrics, which are mainly used by designers in women’s fashion apparels. Management indicated that the Latin
American business has started recovering and good performance can be expected in the coming quarters. The
Middle East business is, however, expected to remain under pressure. The high-margin Ribbons & Made-ups
business is expected to grow in strong double digits. Overall, management is confident of growing in mid-to-high
teens in the short to medium term. Further, Orbit has one of the better balance sheets in the textiles industry. We
expect it to improve further in the coming years. However, in view of near-term concerns in export markets, we
maintain our Hold rating on the stock.
Relaxo Footwear  Relaxo Footwear (Relaxo) is present in the fast-growing footwear category, where it caters to customers with its
four top-of- the-mind recall brands, such as Hawaii, Sparx, Flite and Schoolmate. The company has emerged as
an attractive investment opportunity owing to its growing scale, strong brand positioning and healthy financial
performance. Relaxo has a superior portfolio of footwear brands and its relentless focus on driving sales through
the expansion of distribution (especially in South India) and improving the brand presence (through owned
stores) augur well for the company to achieve good growth in the backdrop of better demand environment. Post
GST implementation, quality footwear players with a strong brand have been able to outpace their unorganised
counterparts by leveraging the scale advantage. Under the GST regime, all footwear priced under Rs. 500
attracted 5% GST. However, with recent changes in GST provisions, all footwear priced under Rs. 1,000 will also
attract 5% GST. The company expects to garner 20% of revenue in FY2019 from Rs. 500-1,000 footwear range,
which currently stands at 15%.
Thomas Cook (I)  Thomas Cook India Limited (TCIL), owned by value investor Prem Watsa, is an integrated leisure travel and human
service management company in India. We believe travel and related business will grow in double digits with
gradual improvement in profitability in the near to medium term. Scale-up in the retail segment of the travel-
related financial services (TRFS) business will drive the overall performance of the business in the coming years.
TCIL has de-risked its business model for its vacation ownership (VO) business, with 45% of revenue coming
from selling rooms as hotel rooms. The focus is on scaling up room rental sales to mitigate the impact of slow
membership addition in the VO model. Changes in accounting standards will not have any impact on cash flows
of the VO business. The company has managed to reduce substantial debt on consolidated books through stake
sale in Quess Corp and has reduced pressure on the balance sheet. With expected improvement in the working

October 2018 42 Sharekhan ValueGuide


EQUITY FUNDAMENTALS EARNINGS GUIDE

capital, we expect cash flows to further improve in the coming years. With strategies in place, we expect FY2020
to be operationally much better for TCIL. We maintain our Hold recommendation on the stock.
Wonderla Holidays  Wonderla Holidays Limited (WHL) is the largest amusement park company in India with over a decade of
successful and profitable operations. The company owns and operates two amusement parks under the brand
name Wonderla in Kochi and Bengaluru and came up with a third park in Hyderabad in Q1FY2017. The government
has reduced GST rate on amusement parks to 18% from 28% in February 2018. WHL has passed on the benefits
to customers in the form of cut in ticket prices. With stable ticket prices, FY2019 will be much better for WHL as
footfalls are expected to come back on track. We will keenly monitor the performance of the stock in the coming
quarters. Any significant uptick in footfalls in the coming quarters will act as a key re-rating trigger for the stock.
Hence, we maintain our Hold recommendation on the stock.
Zee Entertainment  Zee Entertainment Enterprises Limited (ZEEL), part of the Essel Group, is one of India’s leading television media
and entertainment companies. The company has a bouquet of more than 40 channels across Hindi, regional,
sports and lifestyle genres. ZEEL continues to outperform the broadcasting advertising market and expects to
continue the momentum with an improvement in macro economy. Taking cognizant from significant investments
in ZEE5 (original content doubling on month-on-month basis since July 2018) and possible breakeven of 3-5 years,
we believe the pressure on operating profitability is likely to continue in FY2019/FY2020. However, we expect
adjusted net profit would grow at a healthy 19% CAGR over FY2018-FY2020E, given its leading viewership shares
among broadcasters and sustenance of profitability (management indicated OPM to remain above 30% despite
investments in ZEE5). ZEEL consistently focuses on its five key pillars to drive its growth. We believe successful
execution of this strategy will have a material impact on sustainable growth going forward. We continue to see
ZEEL as the prime beneficiary of macro revival and digitisation.

Diversified/Miscellaneous
Bajaj Holdings  Bajaj Holdings and Investment Limited (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its
manufacturing business was transferred to the new Bajaj Auto Limited (BAL) and its strategic business consisting
of the wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and
properties, assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing and strategic
ones, now remain with BHIL. BHIL is a primary investment company focusing on new business opportunities.
Given the strategic nature of its investments (namely BAL and BFL), we have given a holding company discount
of 50% to its equity investments. Liquid investments have been valued at cost. The PT for BFS has been raised to
Rs. 7,834 from Rs. 6,725 earlier, given the strong performance in Q1FY2019. The PT of BAL has been slashed from
Rs. 3,526 to Rs. 2,905 post dismal Q1FY2019 results and pressure on profitability due to aggressive pursuance
of market share. Consequently, we arrive at a PT of Rs. 3,844 for BHIL. We maintain our Buy recommendation on
the stock.
BEL  Bharat Electronics Limited, a defence PSU, still remains our preferred pick in the domestic defence sector on
account of its strong manufacturing and R&D capabilities, good cost-control measures, growing indigenisation
and a strong balance sheet with improving return ratios. Further, the company is well positioned to capture
incremental spends by the government on defence through the Make-in-India initiative. BEL has an outstanding
order book of Rs. 50,000 crore, post order intake of Rs. 14,000 crore [including Rs. 9,236 crore long-range
surface-to-air missile (LRSAM) systems]. Post announcement of the unfavourable new defence procurement
policy, the stock has corrected more than 30% in the past one month, though it recovered close to 11% in trade
post favourable commentary in the analyst meet. As major stock de-rating is behind and most negatives have
already been factored in the current lowered target multiple, we upgrade our rating to Buy from Hold earlier with
a revised price target of Rs. 103.
Bharti Airtel  Bharti Airtel (Bharti) is the leader in the Indian mobile telephony space. Management continues to focus sharply
on increasing retail ARPU, enhancing African operations, non-mobile services (enterprise services) and value-
added services (Airtel TV and music) to boost revenue and reduce churn rate. Industry consolidation (three-player
market, with the exit of smaller players) will help Airtel to maintain its leading position in revenue market share
with improving profitability. Going forward, from a long-term perspective, explosive growth in the data segment,
strong network, acquisitions (Tata Tele and Telenor) and reach will help Bharti emerge stronger. We have a Buy
rating on the stock.

October 2018 43 Sharekhan ValueGuide


EARNINGS GUIDE EQUITY FUNDAMENTALS

GDL  With its dominant presence in container freight station (CFS), rail freight and cold chain businesses, Gateway
Distriparks Limited (GDL) has evolved as an integrated logistics player. The CFS business is a cash cow, while its
investments in the rail freight and cold storage businesses have started bearing fruits. The company is one of the
largest players in the CFS business and has evolved as the largest player in the rail freight business as well as the
cold storage business. The proposed capex for all the three segments will strengthen its presence in each of the
segments and increase its pan-India presence going forward.

PI Industries  PI Industries (PI), a leading agro chemical company, has a differentiated business model focusing on the fast-
growing custom synthesis and manufacturing (CSM) business. Management expects domestic revenue to grow
on account of expected normal monsoon coupled with various government initiatives and scaling up of newly
introduced products and further launch of new products (4-5) during the next 12-15 months. In the overseas
market also, management is anticipating pickup in volumes of existing molecules and intends to commercialise
4-5 new molecules, which will drive growth there. The company has increased its spend on R&D activities during
FY2018 (2x FY2017), thereby showing confidence in its molecules under the development stage. Dependence on
China for key raw materials has been on a declining trend, as sourcing from there and managing price volatility
remain key challenges. Management has provided revenue growth guidance of 16-18% and operating margin
of 20-21% for FY2019. Management also stated that de-bottlenecking of capacities will help in achieving better
volume growth. Management continues to maintain its CSM order book, as fresh orders are being added and
revenue booking is happening simultaneously. Improved global environment in agrichem is expected to provide
a boost to CSM execution, which will help in improving export revenue. We maintain our Hold rating on the stock
with a price target of Rs. 8.37, based on 22.5x its FY2020E earnings of Rs. 37.2/share.

Ratnamani Metals  Ratnamani Metals and Tubes Limited (RMTL) is the largest stainless steel tube and pipe manufacturer in India. We
remain positive on RMTL, led by its strong balance sheet, ability to generate superior return ratios and capacity
expansion programmes. Further, overall capex revival in its key industries such as oil and gas coupled with
improving orders from international markets will keep order momentum strong over the next 3-4 years. Given
healthy earnings CAGR of 28% over FY2018-FY2020E, we believe the stock remains a good bet for investment
in the long run. We maintain our Buy rating on the stock with a PT of Rs. 1,150.

Supreme Industries  Supreme Industries is a leading manufacturer of plastic products with a significant presence across the piping,
packaging, industrial and consumer segments. We continue to remain positive on SIL for a long-term perspective,
given the recovery in rural economy and housing sector. The company is also one of the prime beneficiaries
of the unorganised to organised shift in GST regime. Management has revised down overall volume growth
guidance for FY2019 to 10-12% y-o-y from 12-15% earlier, owing to soft demand for PVC pipes in Maharashtra and
lower margins from agri pipes. This revision in volume growth indicates that the company intends to maintain
profitability going ahead. We maintain our Buy rating on the stock and reduce the PT to Rs. 1,420, given higher
volatility in input costs.

UPL  UPL has delivered revenue growth of 11%, led by higher volumes (8% y-o-y) coupled with exchange gain of 3%
and improved blended realisation of 1% y-o-y during 1QFY2019. Latin America registered the highest revenue
growth of 17% y-o-y, whereas India contributed the highest revenue of 30% to overall revenue. Demand outlook
remains strong for India (widespread and timely rainfall in most parts) and LATAM (strong order book in Brazil and
several new registrations received from the other parts) for the near future. Net debt increased during Q1FY2019
due to higher inventory on account of good demand prospects, however the same is expected to normalise
during Q4FY2019. In addition, cash balance on books is expected to come to half post the acquisition of Arysta
in the next 12-15 months. Based on global demand outlook coupled with lower inventory in key geographies,
management is confident of achieving its earlier guidance of revenue growth of 10-12%, with EBITDA growth of
12-15% for FY2019. UPL is better placed to benefit from global recovery in the agri commodity space over the next
2-3 years. We expect the company to post a CAGR of 14% at the revenue level and 16% at EBITDA and PAT level
during FY2018-FY2020 (excluding the recently announced acquisition of Arysta, which is slated to be completed
during December 2018-January 2019). We maintain our Buy rating on the stock with a PT of Rs. 735.

October 2018 44 Sharekhan ValueGuide


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