ICICI Securities Ltd.

| Retail MF Research



Equity Markets
Update
Domestic equity markets continued to scale new highs and crossed
26000 levels on the S&P BSE Sensex and 7700 levels on the CNX Nifty
on optimism the new government will take concrete policy action to
improve economic growth
The Union Budget, unarguably the most anticipated in recent times,
highlighted the structural reforms including increase in FDI in defence &
insurance, private sector participation in railways, indication at GST
rollout, commitment to no retrospective taxation and tax induced
benefits to select sectors such as power, manufacturing, REITs and
soaps for infrastructure development among others
Execution is key to the pace of improvement in the economy in terms of
the various infrastructure projects getting implemented on the ground.
History and the policy announcement so far in the short tenure of the
BJP led government has infused confidence among investors with
respect to execution and the resultant improvement in corporate
earnings, going forward
Overall, the Budget has amply addressed the strategic need to improve
the investment climate by emphasising on measures to create a
framework for low & stable inflation, setting fiscal deficit on a
sustainable path through tax and expenditure reforms and setting up a
broad based inclusive growth framework for a sustainable market
economy
Foreign institutional investors continue to be major drivers for the
markets as they bought equities worth more than | 70000 crore in the
calendar year 2014 so far
Outlook
The Union Budget has provided a road map for economic revival by
channelising domestic savings into long term infrastructure
development. The Budget focused on the long term picture rather than
resorting to big bang announcements
The Union Budget is impressive as it has been able to provide a
meaningful fillip to growth while keeping fiscal prudence in mind
History and policy announcements so far in the short tenure of the BJP
led government has infused confidence among investors with respect
to the execution and the resultant improvement in expected corporate
earnings, going forward. Execution is key to the pace of improvement in
the economy in terms of various infrastructure projects getting
implemented on the ground
Overall, the Budget has amply addressed the strategic need to improve
the investment climate by emphasising on measures to create a
framework for low & stable inflation, setting fiscal deficit on a
sustainable path through tax, expenditure reforms and setting up a
broad based inclusive growth framework for a sustainable market
economy
We are bullish on domestic oriented sectors like automobiles, cement,
capital goods, power, infrastructure, metals, oil & gas and banks.
Defensive sectors like FMCG, pharma and IT could lag broader markets
Although headline indices are already up around 22% since the start of
the year discounting the positive impact of the election outcome to a
certain extent, the structural medium term story has improved
significantly. Therefore, investors should use any dips in the markets to
accumulate

CNX Nifty: Rally continues post elections
5000
5500
6000
6500
7000
7500
8000
J
u
n
-
1
3
J
u
l
-
1
3
A
u
g
-
1
3
S
e
p
-
1
3
O
c
t
-
1
3
N
o
v
-
1
3
D
e
c
-
1
3
J
a
n
-
1
4
F
e
b
-
1
4
M
a
r
-
1
4
A
p
r
-
1
4
M
a
y
-
1
4
J
u
n
-
1
4

Source: Bloomberg, ICICIdirect.com Research
Small caps rally on better growth prospects
3
.
1
2
.
4
1
.
6
1
.
6
1
.
1
0
1
1
2
2
3
3
4
BSE Small
Cap
BSE
Midcap
BSE 500 BSE
Sensex
BSE 100
R
e
t
u
r
n

(
%
)

Source: Bloomberg, ICICIdirect.com Research
Returns : 1M (June 18- July 18, 2014)
Sectors where policy log jam was the hurdle rallied
9
.
0
4
.
9
4
.
7
4
.
7
1
.
6
1
.
2
1
.
1
0
.
8
0
.
7
-
4
.
1
-
6
.
5
-
1
.
1
-10
-5
0
5
10
H
e
a
l
t
h
c
a
r
e
A
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t
o
I
T

C
o
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.
D
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r
a
S
e
n
s
e
x
F
M
C
G
B
a
n
k
i
n
g
C
a
p
.
G
o
o
d
s
M
e
t
a
l
R
e
a
l
i
t
y
P
S
U
O
i
l

&
G
a
s
R
e
t
u
r
n

(
%
)

Source: Bloomberg, ICICIdirect.com Research
Returns : 1M (June 18- July 18, 2014)
Analysts name
Sachin Jain
sachin.ja@icicisecurities.com

Sheetal Ashar
sheetal.ashar@icicisecurites.com