Product Review (June ’18)

&
Market Outlook (July’18)
Fundamental Research Offerings
• Top Picks folio

• Stock Ideas/Viewpoints
Sharekhan’s Top Picks folio
An all-weather balanced portfolio
Top Picks folio
• A well-balanced portfolio of thoroughly researched 10-12 companies
Sharekhan’s • Prefers sustainable business model, focuses on near-term triggers without losing sight
Top Picks folio of long-term wealth creation

• Careful selection of stocks to deliver superior risk adjusted returns and outperform benchmark
Key objectives indices
• To maximise shareholders’ returns with minimum risk and outperform the benchmark indices

• Only thoroughly researched and fundamentally strong stocks included, no place for market
How is our rumoured, lousy or grapevine stocks
portfolio different? • Delivered superior returns consistently across equity cycles since inception

• Actively tracked and reviewed every month without exception; generally in initial days of the
We religiously follow the month
process • Explains all changes/revisions in the folio for better understanding of investors
Superior returns across Market Cycles
(on absolute as well as relative basis)
Beating the benchmark indices consistently (absolute
Cumulative returns (since April 2009)
returns in %; not annualised)
Sharekhan
Sensex Nifty CNX MIDCAP 1000
(Top Picks)
900
YTD CY2018 1.9 3.9 1.8 -14.0 800
CY2017 700
58.0 28.0 29.0 47.3
600
CY2016 8.8 1.8 3.2 7.1 500
CY2015 13.9 -5.1 -4.1 6.5 400
300
CY2014 63.6 29.9 30.9 55.1
200
CY2013 12.4 8.5 6.4 -5.6 100
CY2012 35.1 26.2 29.0 36.0 0

39911
39999
40087
40175
40263
40351
40439
40527
40615
40703
40791
40879
40967
41055
41143
41231
41319
41407
41495
41583
41671
41759
41847
41935
42023
42111
42199
42287
42375
42463
42551
42639
42727
42815
42903
42991
43079
43167
43255
CY2011 -20.5 -21.2 -21.7 -25.0
CY2010 16.8 11.5 12.9 11.5 Sharekhan Sensex Nifty CNX MIDCAP 100
CY2009 116.1 76.1 72.0 114.0

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

1 mth 3 mth 6 mth 1 year 3 year 5 year
Top Picks 1.4 5.4 1.9 18.4 77.9 259.4
Sensex 0.3 7.5 3.9 14.7 26.2 80.2
Nifty -0.2 5.9 1.8 12.8 27.3 81.5
CNX MIDCAP -3.8 -3.1 -14.0 2.6 37.4 142.1
Note: The returns are based on the assumption that at the beginning of each month an equal amount was invested in each stock of the Top
Picks basket
Stock Ideas / Viewpoints
Make an informed decision
Sharekhan's Stock Ideas
• Identify right stocks across sectors through bottom-up approach
Key objectives • Focus on generating absolute returns with a time frame of 6-12 months and a favorable
risk-reward ratio

• Closely tracked stocks with regular interaction with companies’ management to stay abreast of
the business outlook
Focussed approach • Regular updates and news with view on stocks through Investor’s Eye and also Fundamental
News & Analysis (FNA)

• We put great emphasis on investor’s risk and reward, so in line with the upside potential of a
stock and the associated risks, we review our rating regularly
Risk and reward • This also allows investors to churn their portfolio by switching from one stock to another to
optimise the overall return

• Our last 28 Stock Ideas generated 115% returns on an aggregate basis.

Track record • Some of the blockbuster Stock Ideas: Bajaj Finance (up 1190%), TVS Motor (up 500%), Finolex
Cables (up 389%), Gabriel India (up 319%) & Firstsource Solutions (up 193%)
Top 10 Stock Ideas delivered strong returns
Initiation CMP*
Company Reco. Initiation Date Returns (%)
Price (Rs) (Rs)
Bajaj Finance Buy 21-May-14 178 2297 1190
TVS Motor Company Buy 30-Apr-14 92 552 500
Finolex Cables Buy 22-Apr-14 119 582 389
Gabriel India Buy 16-Apr-14 33 137 319
Firstsource Solutions Buy 03-Feb-14 24 70 193
Supreme Industries Buy 09-Jan-14 420 1128 169
Britannia Industries Ltd. Buy 27-Aug-15 2886 6196 115
LIC Housing Finance Buy 28-Mar-14 232 468 102
KEC International Buy 14-Mar-17 169 335 98
Rico Auto Industries Buy 29-Oct-14 39 67 71

*CMP as on June 29, 2018

-In last 51 months, we have initiated 28 new stock idea which have given average
returns of 115% per new idea.
Viewpoint
Sharekhan's Viewpoints

• The idea is to arm investors with knowledge to help you take informed
decisions in the market
Key objectives
• Focus on generating absolute returns of 20-25% in a short time

Focused approach
• Stocks with strong business fundamentals and adequate understanding
through management interaction/meeting

• Regular updates and news flow on stocks through updates and also FNA
Viewpoints performance snapshot
Total Total number of calls generated 430
Date of Reco Date of Closure
Viewpoint Returns
initiation Price closure price
(%)
Number of closed calls 198
14-Oct-15 Veto Switchgear 75 17-Jan-18 245 226.7
25-Sep-14 Indo Count Industries 172 16-Feb-15 422 145.3 Number of calls in profit 170
13-Jun-14 Dhanuka Agritech 380 19-May-17 831 118.7
26-Mar-14 FIEM Industries 409 07-Jan-15 886 116.6 Number of calls in loss 25
25-Jun-14 JK Tyre 64 23-Dec-14 138 115.4
16-Oct-14 Dhanuka Agritech 428 19-May-17 831 94.2 No Profit No Loss 3
04-Jan-17 Insecticides India 502 13-Sep-17 952 89.6
01-Sep-14 Salzer Electronics 136 11-Mar-15 257 89 Converted to stock ideas 15
14-Aug-14 Force Motors 687 23-Sep-14 1,281 86.5
05-Feb-14 Power Finance Corporation 146 22-Aug-14 269 84.2 Success ratio 93%
19-Mar-14 JK Lakshmi Cement 97 23-May-14 178 83.5
25-Aug-14 Marico Kaya 488 26-Nov-14 876 79.5 Aggregate return 24%
29-Jun-16 Chambal Fertilizer 69 19-Jun-17 121 75.4
03-Sep-14 Gulf Oil Lubricants 313 16-Dec-14 541 72.8 Top 15 calls return 103%
23-May-14 Ashoka Buildcon 145 04-Jan-18 248 71.0
Viewpoint closed in June 2018

Date of Call closure Abs Returns

Date of release Viewpoint Reco. Price
closure price (%)
29-Mar-17 22-Jun-18 Godrej Industries Limited 503 605 20
*23-May-17 22-Jun-18 Godrej Industries Limited 562 605 8
*14-Aug-17 22-Jun-18 Godrej Industries Limited 583 605 4
*25-Sep-17 22-Jun-18 Godrej Industries Limited 578 605 5
*20-Nov-17 22-Jun-18 Godrej Industries Limited 570 605 6

* Godrej Industries Limited was re-iterated with positive view for multiple times at various price points.
New Initiation – Prataap Snacks
Reco Price– Rs 1189 CMP – Rs 1137 View: Positive

• Prataap Snacks (Prataap) has emerged as a value play in the snacking business with varied offerings (50 SKUs with varied
flavors/varieties) in categories such as potato chips, rings and extruded snacks under the price band of Rs. 5/Rs. 10 in the domestic
market. However, with five production hubs to cater to various regions, increased distribution reach (reach expanded by 2.5x in the past
four years) and shift from unorganised to organised players would help Prataap in improving its market share (especially gaining share
from regional brands).
• The company reported revenue CAGR of 23.5% to Rs. 1,023.1 crore over FY2014-FY2018. Growth was largely driven by a ~32%
CAGR in the namkeen category (~14% of overall sales) and ~37% growth in the puff and rings category (~40% of overall sales).
• The recently launched Yum Pie – sweet snacking product – is expected to be the trump card for the company. Another key driver would
be expanding its base in the southern market through differentiated offerings (it is selling Chulbule extruded snacks at a preferred pack
size of Rs. 2 and Rs. 3 in south India). We expect revenue of the company to report a 16% CAGR over FY2018-FY2020.
• OPM of the company improved to 8.4% in FY2018 (from 4.7% in FY2017), largely on account of 394 BPS improvement in gross margin
on account of favourable input cost due to long-term buying of low-cost inventory, better product mix and rationalisation of trade margins.
• Balance sheet of the company remained lean with debt:equity ratio standing below 0.1x. . In view of the emerging play in the snacking
space and strong growth prospects, we initiate viewpoint on Prataap with a Positive rating and upside of 16-18% from current levels.
Particulars FY2016 FY2017 FY2018 FY2019E FY2020E
Net Sales (Rs cr) 757.20 898.10 1,037.70 1,228.50 1,430.90
Operating profit (Rs cr) 56.5 42.2 86.9 97.5 119.1
Adjusted PAT (Rs cr) 33.2 19.6 44.2 53.3 70.1
EPS (Rs.) 14.1 8.4 18.8 22.7 29.9
OPM(%) 7.5 4.7 8.4 7.9 8.3
PE(X) 83.4 141.1 62.6 51.9 39.5
EV/EBIDTA (X) 6.9 12.6 29.7 25.8 20.6
ROE(%) 16.3 8.6 11.7 9.8 11.5
ROCE(%) 15.8 6.3 14.9 13.2 15.7
Re-iterate – JK Tyre & Industries
Reco Price– Rs 132 CMP – Rs 122 View: Positive

• Jk Tyre & Industries (JKT) is one of the leading tyre manufacturers engaged in the manufacturing of radial & bias tyres, catering to the
passenger vehicles (PV), commercial vehicle (CV) and 2 wheeler(2W) segments. JKT is present in the OEM, Replacement as well as
Exports segments and is a market leader in the Truck & Bus Radial tyres.
• JKT is expanding its truck and bus radial capacity at the Cavendish plant to tap the increasing radialisation trend in the CV space.
Penetration of radial tyres reached about 50% in the domestic CV market and is expected to rise further. Given the decline in imports of
Chinese tyres , pick up in OEM demand and improving fleet operator profitability, the demand is expected to remain buoyant from the
CV OEM’s. This is beneficial for JKT which has a strong presence in the CV segment.
• JKT has received new OEM orders in the 2W segment and is aiming to sell 54 lakh tyres in FY2019 as against 31.5 lakh tyres in
FY2018. driven by e strong demand from the auto OEM’s we expect JKT to report 18% topline growth in FY2019 as against estimated
industry growth of 12-13%.
• JKT’s margins are expected to retrack to 13% by FY2020 from the lows of 8.9% as of FY2018 on the back of a pick up in lucrative
aftermarket sales, operating leverage on account of a strong topline growth, improving utilization of the Cavendish plant.
• With Cavendish operations now running efficiently, reduced threat of Chinese imports and transitory issues of GST behind, JKT is
expected to report much better performance in FY2019. We expect JKT to report net profit of Rs. 403 crore in FY2019 as against Rs. 66
crore reported in FY2018. We retain our positive view on the stock with a 12-5% upside from the current levels.

Particulars (Rs. Cr.) FY16 FY17 FY18 FY19E FY20E

Net sales 6,898.2 7,689.4 8,272.1 9,761.1 11,030.0
EBITDA margin (%) 16.2 14.7 8.9 12.4 13.0
PAT 467.3 375.4 66.0 403.0 571.5
EPS 20.6 16.6 2.9 17.8 25.2
RoE (%) 26.7 19.1 3.3 16.9 19.4
PER (x) 6.4 8.0 45.3 7.4 5.2
Re-iterate – Jubilant Foodworks
Reco Price– Rs 1395 CMP – Rs 1387 View: Positive

• The stock price of Jubilant Foodworks Limited (JFL) has moved by 10% in the past one and a half months in the backdrop of
sustained strong operating performance.
• We expect further upside of 10-12% with double-digit growth in same-store-sales (SSSG) and margin expansion (due to reduction in
Dunkin Donuts losses) would continue in the coming quarters.
• We expect JFL to start FY2019 on a positive note by reporting strong performance in Q1FY2019. We expect revenue to grow by
~17% in Q1FY2019, largely driven by double-digit SSSG. Double-digit growth in SSSG and reducing losses of DD (likely to be 200-
300 BPS) will help the company to post about 365 BPS improvement in OPM in Q1FY2019.
• Induction of Mr. Ranjeet Kohli (ex-Coco Cola, VP, West Zone) as Head, Operations, augurs well for the company from near to
medium-term perspective.

Particulars (Rs. Cr.) FY16 FY17 FY18E FY19E FY20E

Net Sales 2,410 2,546 2,980 3,346 3,738
OPM (%) 11.3 9.7 15 16.1 17.1
PAT 106.6 75.8 206.4 270.4 336.9
*EPS (Rs.) 8.1 5.7 15.6 20.5 25.5
P/E(x) 173.6 244.4 89.7 68.5 55
EV/EBIDTA (x) 67.7 74.6 40.5 33 27.3
RoE (%) 14.3 9.2 21.8 23.4 23.9
RoCE (%) 19.5 12.3 31 33.9 34.8
* Diluted EPS adjusting for Bonus issue
Re-iterate – Varun Beverages Ltd
Reco Price– Rs 755 CMP – Rs 753 View: Positive
• Varun Beverages (VBL) has given strong returns of 47% since initiation of viewpoint. Management is confident of maintaining double-digit
revenue growth over the next two years and expects margins to gradually improve (likely to remain flat in CY2018 due to consolidation of
acquired territories). We have fine-tuned our earnings estimates for CY2018 and CY2019 to factor in incremental volumes from Zimbabwe
territory and high volumes in the domestic business. Hence, there is further scope of 10-12% return from current levels.
• In CY2018, VBL is expected to post strong double digit revenue growth driven by increased scale of business in existing territories, higher
business from new territories acquired during Q1CY2018, international business gaining momentum and expansion in product portfolio.
Though there would be margin pressure due to the acquisition of new territories, increased scale in business from existing territories and
operating efficiencies would mitigate the margin pressure. Management expects to maintain OPM at around 21%.
• During H1FY18, VBL commissioned its greenfield plants at Zimbabwe and Nepal. The initial response in Zimbabwe has been encouraging
and the company has already achieved its internal full-year sales target of 4 mn cases in just four months of operations. Generally,
October-December period is seasonally strong for business in Zimbabwe, where most sales take place, and the company is ready to tap
on this opportunity. Nepal business is also growing in double digits and is expected to attain scale going ahead. Sri Lanka and Morocco
are the two countries where the company is facing some headwinds, however, both the operations are currently EBITDA positive and are
expected to be PAT positive in CY2019. Margins for Sri Lanka, Morocco and Zimbabwe currently stand at ~10% and are further expected
to rise in the near future.
• VBL is expected to achieve double-digit revenue growth in the coming years. On the balance sheet front, there will not be any increase in
debt as the recent acquisition of territories and commissioning of new facility in Zimbabwe is done through internal accrual.
Particulars (Rs. Cr.) CY16 CY17 CY18E CY19E
Net sales 3861.2 4003.4 5489.0 6494.6
EBITDA margin (%) 20.6 20.9 21.0 22.4
PAT 48.2 214.1 337.5 514.2
EPS 2.5 11.6 18.5 28.1
RoCE (%) 15.7 13.6 16.1 20.9
PER (x) 300.1 64.8 40.8 26.9
Re-iterate – Suven Life sciences
Reco Price– Rs229 CMP – Rs 208 View: Positive
• On November 28, 2016, we had re-initiated a viewpoint on Suven Life Science (Suven) at a price of Rs. 175 (expecting 15-20%
returns), as we felt that the correction in pharma stocks then gave a good entry point, a s w e w ere confident of timely
monetisation of key opportunities. The stock has since then given 34.3% returns till date. We reiterate our positive stance on
the stock and expect further 18-20% upside over six months.
• CRAMS business to gain traction: Overall revenue visibility for Suven is improving as we see increased number of clinical projects in
Phase-I, which will further lead to improved Phase-II and III pipeline over the next 2-3 years. Hence, we expect CRAMs to start gaining
traction (management has guided for 10-15% growth in base CRAMs business along with Rs. 90 crore-100 crore sale from
commercialised products). We expect revenue CAGR to be 17% and net profit CAGR to be 27% over FY2018-FY2021E.
• R&D spends to peak out in FY2019; High potential of out-licensing deal: Two molecules of Suven, namely SUVN-502 and SUVN-
3031, are currently in mid-stage trials, i.e. SUVN-502 will complete its PH-II trials by mid CY2019 and SUVN-3031 will commence Ph-II in
CY2019. As per management, we feel R&D spend will be at its peak in FY2019 and will be flat thereon. This will help improve margins
and earnings, leading to improvement in return ratios. Further, management is looking for out-licensing partner for SUVN-502
(depending on the success of clinical trials) and will not incur further cost for studies on its own.
• Prudent policy of expensing R&D through P&L, sturdy balance-sheet: Suven follows a prudent policy of writing off R&D expenses in
the year of occurrence. In addition, it has not resorted to borrowings to invest in R&D development. The company utilised its strong cash
and bank balance of Rs. 300 crore for capex and innovation, which limits the financial risk. The company plans to do a capex of Rs. 150
crore, spread over 18 months.
• Key risk - Success/failure of SUVN 502 molecule is upside/downside risk respectively.
Particulars FY18 FY19E FY20E FY21E
Net sales (Rs.cr) 649 748 866 1,033
PAT (Rs. Cr) 123.7 150.1 192.8 252.6
EPS (Rs.) 9.7 11.8 15.1 19.8
RoE (%) 16.1 16.4 17.4 18.5
PER (x) 23.7 19.5 15.2 11.6
Re-iterate – KNR Constructions
Reco Price– Rs 240 CMP – Rs 216 View: Positive

• KNR clarifies on rumours circulating on social media: The stock of KNR Construction has corrected ~20% since our last
viewpoint dated May 31, 2018. The overall construction sector has witnessed correction of 15-20% in over a fortnight. The recent
correction can be attributed to the expected seasonal lull in general tendering and construction activity in the road sector during the
onset of the monsoon season. Additionally, KNR has been affected by rumours circulating in social media that the promoters of the
company have taken large interest-free loan from the company. Management has clarified that promoters had in fact extended
unsecured loan to the company at 8.45% p.a. to repay the term loan outstanding in one of its SPVs. Further, there are no loans and
advances given by the company to promoters.
• On a strong footing operationally: KNR had aptly revived its order book position (3.3x its FY2018 revenue), bagging five HAM
projects worth Rs. 5,611 crore, thereby giving strong visibility over the next two years. Further, management is targeting Rs. 2,500
crore order intake during FY2019. The company is also looking for a partner in the newly bagged HAM projects, which can limit
equity capital commitment, and is looking to monetise its two BOT projects. As we had highlighted earlier, the recently bagged
projects will take time for financial closure and are expected to contribute to revenue from Q4FY2019, which may affect H2FY2019
earnings. However, partnering in HAM projects and receipt of EPC projects during FY2019 will be key positive triggers for the stock.
• Reiterate Positive view: KNR is expected to be one of the major beneficiaries of the government’s increasing focus on investment
in the road sector. KNR has shown strong execution capabilities along with efficient capital management over the years. We believe
the recent correction provides an opportunity for investors to enter into the s tock. Hence, we maintain our Positive view on the stock
with an upside potential of 35-40%.
Particulars (Rs. Cr.) FY16 FY17 FY18 FY19E FY20E
Net sales 902.5 1,541.1 1,931.7 2,178.8 2,426.2
EBITDA margin (%) 16.9 14.9 20.0 17.2 17.7
PAT 105.6 168.1 272.1 217.6 245.1
EPS 7.5 12.0 19.3 15.5 17.4
RoE (%) 16.2 20.6 26.5 17.2 16.5
PER (x) 32.0 20.1 12.4 15.5 13.8
Re-iterate – Kotak Mahindra Bank
Reco Price– Rs 1335 CMP – Rs 1342 View: Positive

• KMB is amongst a handful few banks which has been able to maintain strong asset quality, in sharp contrast to majority of banking
peers which are fraught with challenges. Kotak is well‐positioned to capture incremental market share in the advances market. The
market remains positive on improving rural demand, which should be benefiting the CV segment, thereby providing a boost to
Kotak’s vehicle finance business.
• We find KMB’s Advances growth of 28%, PAT growth of 25% and Networth growth of 32% 5-year CAGR performance better than
most industry peers. KMB has been benefitted from higher technological penetration in the economy, which has now allowed it to
de-couple its business growth from physical on-grounds presence.
• Kotak Mahindra is into various other financial services via its subsidiaries. Kotak Mahindra prime (vehicle financing) posted a 14.5%
YoY growth in PAT with healthy asset quality (Net NPA 0.37%) , we believe with CV cycle on the uptrend the growth momentum
would continue. Life insurance business has also been showing good traction with total premium growth of 28.3% YoY, in which
individual regular NBP grew by 30% YoY during FY18. It also has a balanced mix of Traditional products and ULIP. Kotak
Securities also posted robust 47% growth in Net profits for FY18.
• We maintain our positive view on the stock

Particulars FY16 FY17 FY18 FY19E FY20E

NII 6,900 8,126 9,532 12,673 15,607
Growth % 63.4 17.8 17.3 33 23.2
PAT 2090 3412 4084 5228 6645
Growth % 12 63.2 19.7 28 27.1
EPS 11 17.9 21.4 27.4 34.9
BVPS 125.8 145 196.8 223.1 256.6
PE 98.5 60.4 50.4 39.4 31
PBV 8.6 7.5 5.5 4.8 4.2
Re-iterate – RBL Bank
Reco Price– Rs 545 CMP – Rs 553 View: Positive

• We find that several margin levers are firming up in place for RBL Bank. Transforming its business, it is seeing strong and improving
traction in the non-wholesale segment, especially on the assets side, we believe is a positive development for margins outlook.
Even within the wholesale banking segment, RBL Bank saw improved growth in relatively higher margin segment of mid-corporate
banking over the past year (36% YoY in F18).
• RBL Bank (RBL) has been among the fastest growing private sector banks in the past 5-6 years, with advances CAGR of 54.6%
over FY2011-FY2018. Initially the bank has restricted its growth to a few geographies, but now it is focusing to expand into newer
markets. The bank despite having considerable exposure to micro loans has been able to maintain healthy asset quality indicating
strong underwriting skills.
• RBL has invested significantly to improve and upgrade its processes, risk management systems, digital technology, branch
expansion and human capital. Hence, while the bank’s cost-to-income ratio has remained high, these technology investments have
helped customer acquisition and retention. With scale economies kicking in, we expect C/I to moderate in coming years, which in
turn would also help improve RoA and RoE.
• We have a positive view on the stock
Rs Cr FY15 FY16 FY17 FY18 FY19E FY20E
NII 557 820 1,221 1,766 2,334 3,116
Growth % 63% 47% 49% 45% 32% 34%
PAT 207.7 292.9 446.1 635.1 815.2 1045
Growth % 123% 41% 52% 42% 28% 28%
EPS 7.1 9 11.9 15.1 19.4 24.9
BVPS 76 92 115.6 159.3 176.1 197.7
P/E (x) 77 60.4 45.8 36 28.1 21.9
P/BV (x) 7.2 5.9 4.7 3.4 3.1 2.8
Re-iterate – McLeod Russel India
Reco Price– Rs 145 CMP – Rs 150 View: Positive

• During FY2018, the consolidated revenue of McLeod grew by 9.9% y-o-y to Rs2,055.3 crore led by 7% increase in the sales volume and a
~3% increase in the sales realisation. The operating margins improved by 100BPS y-o-y to 6.9%. The strong improvement in the OPM
was mainly on account higher profitability in the international operations. The other income grew significantly in FY2018 driven by higher
dividend income. Thus, the adjusted PAT stood at Rs206.6crore in FY2018 as against the reported PAT of Rs59.9crore in FY2017.
• In FY2018, the domestic sales volume stood flat at 71mn kg while the sales realisation grew by ~9% to Rs167.3 per kg. The domestic
revenues grew by 9.6% y-o-y to Rs1,181 crore during the same period. The exports quantity grew by 30.0% y-o-y to 20mn kg. The
standalone OPM stood at ~2% due to the impact of higher employee cost. The international operations of Uganda and Rwanda witnessed
a sharp improvement in the EBIDTA margins in FY2018.
• Tea production in Kenya was down by 33 million kg in CY2017 due to unfavorable weather conditions. The global production for CY2017
was lower by 20 million kg during the same period. However the tea production in Kenya increased by 19% over the period of Jan-March
2018. Improving demand led to a surge in tea prices by Rs20 per Kg at the beginning of the domestic auction.
• McLeod management is planning to sell 8-10 tea estates in India and fetch about Rs400-500cr. The management is of the view that
production of tea from own estates is proportionately high and should be lower by 8-10 mn kg to improve operating efficiencies. The hat
funds raised through the sale of tea estates will largely be utilised for debt reduction and for buy back of 47.6 lakh equity shares at a price
not exceeding Rs. 210 per share. The remaining proceeds will be utilised for venturing into the packet tea business.
• The higher sales volume and stable tea realisation would aid McLeod to post a decent operating performance in FY2019. We maintain our
positive view on the stock with potential upside of 20-22% from the current level.

Particulars (Rs. Cr.) FY16 FY17 FY18E FY19E FY20E

Net sales 1900.1 1870.8 2055.3 2256.6 2514.3
EBITDA margin (%) 7.6 5.9 6.9 7.2 8.4
PAT 35.0 65.8 217.9 93.1 109.7
EPS 4.2 8.0 23.6 10.1 11.9
RoE (%) 1.8 3.4 10.6 4.2 4.8
PER (x) 34.1 18.2 6.1 14.4 12.2
Products Under IA
Top Picks Folio
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 Top Picks Folio
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Key features

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SCRIP NAME TARGET UPSIDE (%)
JSWSTEEL 411 32%
ZEEL 680 25%
ULTRACEMCO 4,750 26%
YESBANK 415 23%
HDFCBANK 2,470 19%
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TCS 2,100 12%
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Centralised Execution of Trades

Recommended Trades(New Portfolio/Switch stocks) will be mailed

/SMSed to the client

“The confirmation needs to be given only by the customer”

Client can place & execute order just by Confirming from his email
or replying code (Given in SMS) via registered mobile number to
our Number(Provided in SMS).
 Power Portfolio – Performance

Portfolio Return Nifty Return OP/UP No of Outperforming Outperforming Portfolios

(%) (%) (%) Portfolios (%)

25.88 16.91 8.97 1861 70.49

 Power Portfolio – Performance

TOP FIVE
Client Start Date Portfolio Return(%) Nifty (%) Outperformance (%)
Client 1 2016-03-18 87.65 39.97 47.68
Client 2 2016-03-22 82.97 35.84 47.13
Client 3 2016-03-21 84.71 37.63 47.08
Client 4 2016-03-16 88.85 42.00 46.85
Client 5 2016-03-21 82.36 35.54 46.82

BOTTOM FIVE
Client Start Date Portfolio Return(%) Nifty (%) Outperformance (%)
Client 1 2016-04-26 22.59 31.09 -8.50
Client 2 2017-07-11 -0.77 6.74 -7.51
Client 3 2017-04-20 6.86 14.30 -7.44
Client 4 2017-04-19 7.15 14.54 -7.39
Client 5 2017-07-11 0.14 6.74 -6.60
IA products # Offering (Top Picks & Powerportfolio)
Min Ticket Size
Rs. 500,000
From 1st Jan 2018

Top Up facility Rs. 100000 & in multiples of same

Brokerage Delivery 0.50% + Stat cost

Account Opening Charges Rs. 499 (Annual)

1% of Corpus + GST (18%)

AMC ( Upfront & Annual)
Wealthtiger Investment Advisors Pvt. Ltd

Profit Sharing NIL

 DISCLAIMER
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Advisory Offerings

Segment Product Corpus Clients

Cash Alpha Delivery Picks 3 lac Short Term traders

Cash Actionable Ideas - Investors

Options Derivative Calls 1 Lac Option traders

Options+Fut Derivative Idea 3 lac Strategy + Future traders

Cash + FNO CTFT 3 lac Traders

 Alpha Delivery Picks & Actionable Ideas

1-2 months delivery based Ideas based on Short term triggers

New Alpha (Results/ corporate action/Policy) &/or reported flows. Each Idea
Delivery Picks
will have a Fundamental Rationale/Key Triggers Points

Actionable Ideas focus on generating absolute returns with a

Actionable time frame of 6-12 months and a favorable risk-reward ratio.
Ideas Stocks are closely tracked with regular interaction with
company’s management to stay abreast of the business outlook
Alpha Delivery Picks - Rules
New Alpha Delivery Picks
Ideas based on Stock Ideas, Viewpoints, Stock Update,
Ideas
Market Analysis
Weightage(%) 7
Max -10
Stop Loss (%)
Min -5
Max -20
Profit Potential(%)
Min -10
Time Frame Max - 2 Months
Trail Stop loss 5% trailing Sl on 5% rise in stock price
A) Pre defined / Trail Stop loss is hit
Exit Rules B) Unexpected Event/ News/ Outcome
C) Time frame
Performance Reporting Daily
 Alpha Delivery Picks - Performance June’18
Sr No Scrip Name Buy Date Close Date Buy Price Sell Price Return Call Result
1 Maruti Suzuki 1-Jun-18 19-Jun-2018 8824.90 8876.00 0.58% Profit
2 Bajaj Finance 7-Jun-18 21-Jun-2018 2193.25 2272.00 3.59% Profit
3 L&T 7-Jun-18 21-Jun-2018 1359.35 1290.00 -5.10% Loss
4 Tata Elxsi 13-Jun-18 28-Jun-2018 1283.45 1290.00 0.51% Profit
5 Cholamandalam Finance 20-Jun-18 28-Jun-2018 1639.65 1549.00 -5.53% Loss
6 Kaveri Seeds 21-Jun-18 27-Jun-2018 581.70 547.00 -5.97% Loss
7 RBL Bank 26-Jun-18 Open 561.78 Open

Month Initated Open Calls Profit Booked Loss Booked

June 2018 7 1 3 3
New Alpha Delivery Picks Performance
Financial Year No of Calls Open Calls Profit Booked Loss Booked
CY 2018* 31 1 13 17
CY 2017 81 - 43 38
* 6 Calls were carried from CY17
 Actionable Ideas – Performance June’18
Initiation Booked Profit/Los
Sr No Scrip Name Initiation Date Exit Date P/L
Price Price s (%)

1 Infosys 8-Jun-2018 1251

2 Tata Consultancy Services (TCS) 15-Jun-2018 1792
3 Torrent Pharma 19-Jun-2018 1480
4 Persistent Systems 20-Jun-2018 826
5 Glenmark Pharma 16-May-2016 12-Jun-2018 Loss 869 575 -33.83%
6 Godrej Consumers 31-Jan-2018 3-Jun-2018 Profit 1058 1250 18.15%
7 Hindustan Unilever 15-May-2018 27-Jun-2018 Profit 1505 1650 9.63%
8 Relaxo Footwear 15-May-2018 19-Jun-2018 Profit 696 780 12.07%
9 Bajaj Finance 18-May-2018 26-Jun-2018 Profit 2067 2370 14.66%
10 Zydus Wellness 25-May-2018 15-Jun-2018 Profit 1255 1400 11.55%

Month Initiated Calls Open calls Profit Booked Loss Booked

June-18 4 62 5 1
Actionable Idea Summary
Avg Profit Unrealized Profit /
No of Calls Open Calls Profit Booked Loss Booked Strike Rate
Booked per Idea Loss Per Idea
407 62 293 48 13.68% -7.39% 86%
Derivatives Calls & Derivative Idea

Derivative Calls Derivative Idea

(Future/Strategy)
Rs. 1,00,000 Margin
Rs. 3,00,000 Margin
Derivatives Calls
SEGMENT • OPTIONS only

TYPE • LONG ONLY IDEAS

MARGIN • Rs.1,00,000

AVG. IDEAS PER MONTH • 30-40

MAX OPEN POSITIONS • 3-5

TIME FRAME(MONTHS) • 1-5 Days

TARGET(%) • 50%

STOP LOSS • 20-30%

DRAWDOWN AMOUNT (Rs.) • 30-35% of Invested Capital

Derivative Calls - Performance update

Summary June-18
Initiated Profit Booked Loss Booked Gross Profit/Loss
112 64 48 36007

Derivative Calls Performance

Gross
No of Calls Profit Booked Loss Booked
Financial Year Profit/Loss*

CYFY 2018 540 297 243 129211

CYFY 2017 498 271 227 223184
*Excluding brokerage & other charges
Derivatives Idea – Future
Segment Futures
Type Long & Short
Margin Rs 3,00,000
Avg Ideas per month 20-25
Max Open Positions 3
Time frame 1 day-1 month
Target 2-3%
Stop Loss 1-1.5%
Drawdown Amount 30-35 % of Invested capital
CTFT

 Carry Today for Tomorrow.

 Popularly known as BTST / STBT.

 CTFT is a Trade, Intraday Traders

have to carry forward for next day either in Cash
segment and/or F&O segment.
CTFT
CTFT
Ideas
Ideas / Calls are based on EOD Momentum Triggers
Risk: Reward Ratio 1:2
After 2:30 PM
Time Of Initiation
Day of Initiation
Any Time after initiation or
Time Of Square Off
Next Trading Day
Time Frame 1 Day
Exposure per Call Rs 1 Lakh in Cash Segment & 1 Lot in F&O Segment
A) Pre defined Target / Stop Loss is hit
Exit Rules
B) Time Frame
Performance Reporting Daily
Target Clients Aggressive & High Risk Traders
CTFT- Offering
Cash Ticket Size Rs. 125000

FNO Ticket Size Rs. 500000

 Max 1 Call in Cash (Long Only)
Calls per Day
 Max 1-3 Calls in FNO (Long / Short)
Coverage Universe *CNX 500 & FNO Stocks*
Trigger Points End Of Day Momentum Stocks
BTST Calls Segment Cash & FNO Segment
Draw Down 25% of the Corpus
 CTFT Performance June’18 (Fut)
Close/ Exit
Sr No Scrip Name Buy/Sell Date Close Date Buy/Sell Reco Price Returns (%) Call Result Gross P/L
Price
1 Indigo June Fut 5/31/2018 6/1/2018 Sell 1197.9 1222.00 -2.01% Loss (14,460.00)
2 M & M Fin June Fut 6/1/2018 6/4/2018 Sell 474.7 473.80 0.19% Profit 1,125.00
3 Yes Bank June Fut 6/4/2018 6/5/2018 Sell 342.85 339.45 0.99% Profit 5,950.00
4 Icici Bank June Fut 6/8/2018 6/11/2018 Sell 288.5 285.45 1.06% Profit 8,387.50
5 Tata Global June Fut 6/11/2018 6/12/2018 Sell 264.65 265.80 -0.43% Loss (2,587.50)
6 BEL June Fut 6/12/2018 6/13/2018 Buy 121.35 119.15 -1.81% Loss (10,890.00)
7 Icici Bank June Fut 6/14/2018 6/15/2018 Sell 286.1 289.00 -1.01% Loss (7,975.00)
8 Berger Paints June Fut 6/15/2018 6/18/2018 Buy 287.5 292.50 1.74% Profit 11,000.00
9 Castrol India June Fut 6/19/2018 6/20/2018 Sell 168.1 169.70 -0.95% Loss (4,480.00)
10 Rel Capital June Fut 6/21/2018 6/22/2018 Sell 415.55 425.00 -2.27% Loss (7,087.50)
11 CESC June Fut 6/25/2018 6/26/2018 Sell 957 963.85 -0.72% Loss (3,767.50)
12 Muthoot Finance June Fut 6/26/2018 6/27/2018 Buy 387.75 393.00 1.35% Profit 7,875.00
13 HCL Tech July Fut 6/28/2018 6/29/2018 Sell 915.35 926.45 -1.21% Loss (7,770.00)

Month Initated Open Calls Profit Booked Loss Booked

June- 2018 12 0 5 8
CTFT Performance
Calendar Year No of Calls Open Calls Profit Booked Loss Booked Profit / Loss Amount
APR-DEC 2017 61 0 34 27 166,842
CY18 44 0 27 17 56602
All Product Call/Alerts Window in TT

Mode of Communication of All Product Calls:

- Trade Tiger Call Alert Window (Pop Up)

- Email from Advisory Team to Branches

Thank You
 Market Outlook
JULY 2018

Sharekhan Fundamental Research

Overview
2018: Not a Jolly Ride anymore
Macro concerns and rising political
uncertainties puts a lid on markets

Q4 Results: Hopes belied again!

Healthy revenue growth but earnings growth
continue to lag

Globally: Rising Risk Aversion

Recent developments indicate possible
phase of time correction; Opportunity in
Valuations

Conclusion
Time to be Selective

Portfolio Strategy
Market’s being selective, rewarding only
quality; Stick to quality
Overview - Market’s being selective, rewarding only quality
The Global developments have made Macro environment difficult for India .

The Key Risks are:

- Rising crude oil prices
- Looming Trade Wars on the horizon
- Rising global uncertainties in terms of EM flows and Forex volatility

However the Domestic Indian economy is displaying Positive signs :

- MSP Price hike – to aid rural / farm income revival and growth
-Healthy GST collections, Healthy forex reserves act as comfort factors
- Pickup in PMI and improved leading indicators like Auto sales growth, Credit growth etc

Portfolio Strategy: Market’s being selective, rewarding only quality

Time to stick to quality ideas, as markets ruthlessly correcting the frothy valuations that lesser
quality stocks enjoyed in FY2018
 01

Macros turn
Unfavourable
 Economy - Macro concerns Emerge
The macro outlook has turned challenging for India. Key Risks:
-Rising crude oil prices
- Fiscal concerns leading to firming up of bond yields; RBI likely to turn hawkish
- Rising global uncertainties

Positive signs:
Healthy GDP growth for Q4 FY18 at 7.7% aided by improving consumer demand.
Buoyant GST collections raises possibility of better than budgeted Fiscal deficit for FY19E
5.0
9.0
8.5 4.6
8.0
4.2
7.5
7.0 3.8
6.5
6.0 3.4
5.5 3.0
5.0 FY14 FY15 FY16 FY17 FY18 FY19BE
Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 FY19E
Actual Fiscal Deficit Budget Estimate
GDP Growth % GVA growth %

Source: Bloomberg, RBI Source: Bloomberg, RBI

Economy - Rising Crude prices will be impact GDP
growth

Rising Oil prices can affect India’s GDP growth rate

If oil goes to $85, India’s GDP can likely be impacted by

0.5 % to 1%.
Economy - However, prices appear to be range bound, for now
Drivers like OPEC-Russia deal to cut oil output,
Production issues in Libya, Venezuelan and the end
of Iran deal led to significant prices rise of Crude Oil

Consequently, India’s crude basket has risen 80

75
sharply from the Average of FY17 and poses a risk 70
to balance of trade. Rough estimates suggest a 65
USD10/barrel rise in crude can add to 40-50 bps in 60

current account deficit (CAD) and close to 50 bps 55

50
to inflation.
45
40
35
However, following USA’s tough stand on Oil Prices, 30

Jun-2017

Jun-2018
Feb-2017

Feb-2018
Aug-2016

Apr-2017

Jul-2017
Aug-2017

Apr-2018
Dec-2016

Dec-2017
Sep-2016
Oct-2016
Nov-2016

Jan-2017

Mar-2017

Sep-2017
Oct-2017
Nov-2017

Jan-2018

Mar-2018
May-2017

May-2018
players are re-aligning their stand. OPEC and Russia
have already announced that they were willing to raise
output while shale oil is also looking positive again Indian Crude Basket Price ($/barrell) Avg of FY17

This indicates that for the near term, crude oil

prices may be range bound
Source: PPAC
 Crucial GST collections have a lot riding on them
A lot depends on the GST collections for FY19E; Since the government had done ~55% of the budgeted
Low collections poses risk of higher than budgeted fiscal deficit in the first two months of FY19E, earnings
fiscal deficit, paucity in necessary Fiscal spending performance will be key
etc.
Buoyant GST collections augurs well and will help in Govt
Encouraging GST collections- Total tax collection achieving better than budgeted Fiscal deficit in FY19E
is up almost 60% over the same time period. GST
has added 3.4 million new tax payers.
Buoyancy in GST Collection is need of the hour GST Collection becoming increasingly important
120,000 100%
90% 15 13
23
100,000 33
80% 13 14
70% 7
80,000 4
15 21 11
60% 14
60,000 50% 11
21
40% 23 23
40,000 23
30%
20,000 20% 34 28 29 27
10%
-
0%
May-18
Aug-17

Sep-17

Feb-18

Apr-18
Jul-17

Nov-17

Dec-17
Oct-17

Jan-18

Mar-18

Jun-18

FY15 FY18BE FY18RE FY19BE

Corporate Income Excise Services Customs GST
GST collection Rs Cr
 Rising Bond yields reflect macro concerns
9.5
9.0
India’s Bond Yields have spiked, spurred by the 8.5
Fiscal deficit concerns 8.0
7.5
Indian yields rise finds reflection in global markets too 7.0
6.5

RBI Rate hike in the offing: RBI in its Monetary Policy 6.0

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18
Review is expected to take a hawkish stance. Anticipating
the move, leasing banks (SBI, PNB, ICICI Bank, HDFC India Govt 10 Year Gsec Yield
Ltd) have already raised their MCLR
3.5

3.0

2.5
Impact on Financials: A hawkish stance will have an 2.0
impact on Financials and will be negative.
1.5

1.0

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18
US Govt 10 Year Gsec Yield

Source: Bloomberg
 Global: Trade wars, Political uncertainties weigh on EM’s currencies
Markets were concerned not only about the demand
weakness in emerging markets but factors like Yuan INR Ruble SA. Rand BRL
impending trade war rumblings, currency fluctuations 0%
etc too weigh in on investor sentiments -2%
-4%
Political uncertainties in Germany, Brexit issues and -6%
issues with other European economies would continue -8%
to be dampeners -10%
-12%
Nuclear talks derailment in US-North Korea and US- -14%
Iran talks also add to dampening of Investor sentiment -16%
-18%
As a result, most EM currencies, including INR
EM Currencies performance for 3 Months
have traded weak of late

Source: Bloomberg
But high frequency economic
data-points show encouraging
trend
Picking up pace – data points encouraging!
Leading Indicators points towards a economy picking up pace ; indicates that latent demand is strong and
economy to revive as transition impact of GST implementation & demonetization of high value currency
notes eases out.

01 Auto Sales growth positive; : Double digit growth in passenger (11-12%) and
commercial vehicles (over 20%); growth coming from smaller towns

02 Petrol/Diesal consumption grew ~7-8% YoY in FY18; demand rising for 7th
straight month

03 Airlines passenger traffic: Double digit (16-20%) growth continues in

the past 3 months
04 Hotel Occupancy rates touch 80% in metro cities -- highest in a decade

05 Electricity generation: Uninterrupted growth of 5-8% in the

past 4 months

More importantly, the government has taken several steps to boost economy.
Corporate Profits: Q4
disappoints; await
meaningful revival
 02

Awaiting Revival in
Earnings Growth
Q4 FY18 Earnings: Hopes belied once again…
•The 4QFY18 earnings season exhibited a mixed picture, with healthy performance from the
Auto, Consumer Goods, (Retail oriented) Pvt. Banks etc sectors, performing well on top-line
as well as margins front.

•However, the PSU bank and Private banks (corporate facing) saw miss on the PAT front,
which was due to a significant jump in slippages and provisions, exacerbated by the change
in the RBI guidelines on NPA dispensations.

•Capital Goods and Capex driven goods saw indifferent quarter.

•Commentary on rural consumption trends continue to be improving. Expectations of Normal

monsoons, rural demand recovery, can be key triggers going forward.

•Hopes for a long-awaited earnings recovery in FY19 stay intact. Benefitting from low base,
we believe H1 should be much better for Q1 FY19E
Earnings Revival: Demand Recovery + Normalization on a low base
•Projection of a normal monsoon in CY2018, pickup in investment cycle, industrial capex
and improving demand are key positives

•Earnings growth to normalize in some heavyweight sectors viz. banks (especially private
banks), Telecom, Energy (high crude oil realisations) and auto (two-wheelers and farm
equipment) ; Uptrend to continue in consumer goods, metals and other commodity stocks.

•Revival in Earnings growth depends on :

Pickup in consumer demand (both urban & rural) as GST impact fades and the government
takes policy measures taken to ease rural stress
Improvement in exports (revival in global economic growth outlook) and
Normalisation of earnings across key sectors from a low base.
Earning revival: Demand Recovery
base
Low base formed in banks (huge
01
provisions for bad loans) and
commodity stocks; the same likely to
reverse in FY2019/2020.
+ Normalization on a low
Plus as impact of Demon & GST fades, and
02 spurred by healthy monsoons, the consumer
demand is expected to be strong; would
reflect in financials of auto, media and other
consumer disc stocks.

Contribution to
Net Profit growth (%) Net Profit growth (%) growth in FY19/FY17

Sensex Sectors FY18A FY19E FY20E

Auto 22.9% 30.6% 10.9%
Banks 1.1% 48.9% 26.9%
Consumer 10.8% 15.3% 6.4%
IT 1.4% 7.2% 15.9%
Power & Capital Goods 8.3% 18.1% 9.3%
Energy 1.3% 43.1% 4.0%
Miscellaneus 107.4% 21.0% 26.7%
 Earnings - Rural, Infra spending , low base to aid recovery
•Earnings recovery likely to be driven by economy Corp earnings as % of GDP are expected to
pick up post fading of demo/GST effect as well as 8.0 improve
Investment push by the Govt.
Corp earnings as
•Improving Infra spending to lead growth: Q3 6.0
% of GDP
FY18 Gross fixed capital formation (GFCF), grew at expected to
improve
a robust 12% in the third quarter, up from the 6.92% 4.0
growth seen in the previous quarter.

• Govt has rural focus and is also spending in the 2.0

segment to help revive rural demand from a low

base 0.0

FY19E
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
• Corp earnings/GDP at 3% (compared to peak of
7% plus); reflects potential of growth ahead Corporate Profit as % of GDP

• The consensus is optimistic and estimates stable

GDP performance in FY19E
Economy - Domestic PMI indicates positive macros
Despite hardening of bond yields since past
56
few months the PMI index has been showing 55
positive trends 54
53
52
51
A PMI above 50 indicates expansion in 50
49
activities 48
47
46

Aug-17

Feb-18
Sep-17

Jan-18

May-18
Jul-17

Nov-17

Jun-18
Apr-18
Dec-17

Mar-18
Oct-17
Since past few months PMI has been above
50 and also posting increasing trends
indicating momentum in industrial activities India Nikkei Manufacturing PMI
and thus economy
 Earnings Revival: Surprisingly Strong in US too!
Operating EPS of US companies
more than decade high of 30% in
the Jan-March quarter.

A healthy corporate earnings in US

could mean overall positive
sentiments for equities globally
and better prospects for exports
driven companies.
 Valuation
Not so expensive as it
appears
Valuation: Not expensive on P/BV or MCap/GDP
02 On PBV (price-book value) and MCap-to-GDP the Indian equities are not expensive as yet.

4.0
MCap to GDP

1.0X 1.0X
0.9X 0.9X
3.0 0.8X 0.8X
0.7X 0.7X 0.7X
0.6X 0.6X

2.0

1.0
May-08

May-09

May-10

May-11

May-12

May-13

May-14

May-15

May-16

May-17

May-18
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Sensex PBV
Valuation: Baton for driving markets passes to Earnings growth
•Sensex is trading at ~18x its 1-yr forward earnings levels, and there is limited scope for further PE
expansion.

•However, near term volatility, largely due to macro factors, may be expected

•We believe valuations offer opportunities for stock-picking in attractive and fundamentally strong
businesses.
Sensex’ one-year forward P/E band
20

18

16

14

12

10

Jun-15
Jun-12

Jun-13

Jun-14

Jun-16

Jun-17

Jun-18
Sensex PE Average SD+2 SD-2
 Foreign Investment: Can be volatile!
•In a worrying signal, FPIs are unwilling to bear
currency risks, and are bracing for a continued
Rupee weakness

•Overseas funds have pulled $4.5 billion from the

local debt market since start of 2018, the most in
any year-to-date period in data going back to 1999.
Q2 outflow was the biggest among the major Asian
nations

•The foreign exodus is in contrast from 2017 when

overseas investors plowed $23 billion into Indian
bonds, the most in three years.

•Aside from worries of wider fiscal deficit and

inflation, the local debt markets have been crippled
by a lack of market participants as state-run banks,
the biggest buyers of such securities, lie low due to
losses
“Financialization of savings” in play – Healthy DII inflow
Real interest rate positive for two years now; encouraging flow of funds into financial assets including
01
equities (away from gold and real estate).

EPFO/HRDA are also likely to increase allocation towards equities.

Average monthly MF flows of close to $2.5 billion in CY2017 with SIP flows of close to Rs7,000 crore monthly now.
Annual inflows of $25-30 billion in MF sustainable. It would still amount to less than 5% of annual household savings of
more than $500 billion annually.
03
25000.00
500,000

20000.00
400,000
15000.00
300,000
10000.00
200,000
5000.00
100,000
0.00

Sep-17

Nov-17
Jan-17

Mar-17

Jan-18

Mar-18
Feb-17

May-17

Jun-17

Feb-18
Apr-17

Jul-17

Aug-17

Dec-17
Oct-17
0
FY13 FY14 FY15 FY16 FY17 FY18*

Net Inflows into mutual Funds (Rs Cr) MONTHLY Net inflows/outflow in Equity MFs (Rs Cr)
*Till Jan 2018
 Correction limited to broader Skewed picture within Index DII flows strong; FII turn
market4.0 Cos.
40.00
sellers
150000
5
30.00 120000
0 20.00
90000
10.00
-5 0.00 60000
-10.00 30000
-10 -20.00
0
-30.00
-11.5 -30000
-15 -40.00
-14.5

Infosys

SBI
L&T

Reliance

Hero Moto

Wipro
Asian Paints

Tata Steel
Power Grid

ICICI Bank
HDFC Bank

Bharti Airtel
Kotak Bank

Adani Ports
M&M
-60000

FY19*
FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18
-20
Sensex BSE Mid Cap BSE Small Cap
Returns (%) Since Jan 2018 FII Inflow-outflow (Rs Cr)
Sensex Company wise returns (Jan 2018 to May 2018)

Rate hike after gap of 4.5 years Bond yield firm on inflation Valuation: Not cheap anymore
8.5 9.5concern 20
8.0 9.0
8.5 18
7.5
8.0
7.0 7.5 16
6.5 7.0
14
6.5
6.0
6.0 12
5.5 5.5
5.0 5.0 10
Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18
Dec-14

Dec-15

Dec-16

Dec-17

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18
RBI's Repo Rate % India Govt. 10 year Bond Yield Sensex PE Average SD+2 SD-2

2018- Turning into a year of consolidation post sharp rally in 2017

 PORTFOLIO STRATEGY
Consumption (Staples +Discretionary)
+
Financials
+
IT Services & other exporters
Portfolio Strategy: Consumption Rules + Exporters + Bottom up Picks
Strategy:

Increase exposure to large-cap stocks, and avoid midcap stocks where earnings visiblity,
balance sheet strength is weak. We continue to advice core portfolio of stocks from four
structural investment themes.

We continue to prefer Consumption driven companies, Autos, retail focused NBFCs &
Retail oriented Pvt banks though the valuations are not cheap anymore in some of these
segments.

Also the sustained weakness in Rupee and improving US economy are likely to benefit IT
Services and some of the other exporters to USA (including auto ancillary companies).
Conclusion
01 Expect returns to sober down in 2018

02 However, the earnings growth to revive meaningfully in FY2019 to support markets.

Global economic recovery is supportive but fluctuations in financial markets, Geo-

03 political volatility would result in volatility for India

Key risks are unfavourable macro conditions and possible global trade disruptions
04
As portfolio strategy, we suggest tactical changes suggesting increase in weight on
consumption , retail focused banks/NBFCs and exporters (especially IT Services).
05
Thank You
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