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Edelweiss Investment Research
Shobana Krishnan
Economist
Sahil Kapoor
Chief Market Strategist
India Strategy
FIRING ON ALL CYLINDERS
August 2017
2
Global Economic Cycle Entering Strongest Phase
An economy enters the strongest phase of growth when stocks, bonds and commodities rally. We believe that India is at the cusp of entering this phase.
Emerging Markets (EM) outperform when capital chases growth rather than safety. Uncertainty
triggers capital flight to safety while stable growth brings capital to EMs.
Three distinct cylinders power Indian economy
− International trade (Exports)
− Consumption
− Investments in fixed assets
Two of these three cylinder are now firing
− Consumption and Exports are boosting economic growth. Particularly, consumption has
displayed sharp recovery after the cash crunch in early 2017
− Investments are seeing only a government supported recovery which is inadequate but effective
for a few sectors like railways, roads and power T&D.
3
Low Inflation, Earnings Are Key
Currently stocks markets are driven by
− Low Inflation- Periods of low inflation are rewarded by high returns
− Profitability
− Increase in Financial Savings
Market Valuations appears expensive but only optically
− Companies which are witnessing earnings growth are the ones which are appreciating in price
− Price to Earnings multiples of Indian stocks have expanded to 18x. The next leg of uptick is
expected to be driven by revival in earnings.
− Nifty is likely to touch 11,500 in CY18 based on blended EPS growth of 15-20% over the next one
year. Nifty EPS FY17/18 – 535/645.
4
Global Economic Cycle Entering Strongest Phase As Demand Picks Up
India in transition from stage 2 to stage 3
US in Stage 3,
expected to enter stage 4
Stocks Commodities Commodities Bonds
Bonds Stocks
Bonds Stocks
Commodities
Expansion
Contraction
Bonds Stocks Bonds
Commodities Stocks
Bonds
Commodities Stocks
Commodities
Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6
Business
Cycle
Biggest Bull Markets in Stocks Happen During Stage 3 & 4
Stock Market
• Economic cycle can be classified into 6 stages. Stock market leads the economic cycle.
• Stocks, Bonds and commodities all rally in the strongest phase of growth.
We believe that India is at the cusp of entering this phase and full blown bull market is yet to play out.
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3
4
5
6
7
8
9
10
0
1
2
3
4
5
6
7
8
9
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1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
S&P GSCI Commodity Index / US S&P 500 Index
Global Financial
Crisis
Dot Com Bubble
Chinese slowdown
Commodity Prices Could Be The Next Demand Surge Indicator
Oil crisis
1973/1974
Gulf Crisis
Median 4.1
• Commodity prices, especially metal prices have displayed emergence of bull markets. Since metal prices are a
good proxy for demand, we believe this indicates a surge in growth prospects.
Commodity prices are at an extreme. Since pendulum always swings back to the mean, we believe its time. This
could happen only if demand led growth sustains.
Source: Bloomberg, Edelweiss Investment Research, Edelweiss Research
0.01
0.015
0.02
0.025
0.03
0.035
0.04
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17
iShares MSCI Emerging Markets ETF / S&P 500 Index
Indian Rupee crash.
Twin deficits trouble
Commodity price peak,
EU Sovereign Debt Crises
Crude Oil prices crash
Chinese economy
begins to slowdown
Stimulus by China, Brazil,
India
Quantitative
Easing QE1
QE2
Global
commodity bull
trend
US Housing boom
US Housing crash,
mortgage
defaults
Bear sterns
bailout
QE3
Base metals bottom, EM
balance sheets strengthen
Lehman default
Emerging Markets Outperform
What Happens When World Chases Growth? EMs Outperform
Source: Bloomberg, Edelweiss Investment Research, Edelweiss Research
7
Exports – Boost From Global Tailwind
Trade Consumption Investment
Growth Engine
India Macro Landscape – Key Drivers Getting Aligned…….
8
-2%
0%
2%
4%
6%
8%
10%
12%
-2%
0%
2%
4%
6%
8%
10%
12%
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
3M
MA
, % Y
-o-Y
3M
MA
, % Y
-o-Y
World Industrial Production DM Industrial Production EM Industrial Production
9
DM & EM Are Witnessing Synchronous Growth After A Decade
DM
recovered,
but not EM
Both DM and
EM recovering
simultaneously
Source: CPB Netherlands, Edelweiss Investment Research, Edelweiss Research
Synchronous Global Growth To Boost Global Trade, Indian Exports
10
EM Exports Have Outpaced Advanced Economies EM Volume Growth Outpacing $ Value Growth
Source:: CPB Netherlands, Edelweiss Investment Research
Global Growth Leading to Trade Revival
Source:: CPB Netherlands, St. Louis Fred, Edelweiss Investment Research
7%
6%
-15%
-10%
-5%
0%
5%
10%
May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17
EM Values, Volumes and Dollar Index
Trade-weighted Dollar Index (yoy) EM Volumes- 3MMA (yoy)
EM Values- 3MMA (yoy)
• Exports have picked up globally. Emerging markets exports growth (in $ value terms) have outpaced that of
developed markets.
• Last 2 months have witnessed slowdown in EM exports growth. Closer look reveal that EM exports in volumes
continue to grow despite tapering in values.
Volume Growth in exports indicate fluctuations in prices continue to influence exports value more than any
worthwhile slowdown in demand
0%
6%
-15%
-10%
-5%
0%
5%
10%
May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17
Exports Value , % 3MMA Growth
Global DM EM
12
Indian Exports Have Been Growing Barring Base Effects Strong Rupee has been the major deterrent
Source:: CPB Netherlands, Edelweiss Investment Research Source:: BIS, Edelweiss Investment Research
4.7%
4.0%
3.6%
2.8%
1.9%
-1.6%
-3.2%
-3.9%
Turkey
Poland
India
Korea
Malaysia
Indonesia
Brazil
China
Indian Rupee Has Appreciated The Most on REER Basis
(Since Jan’17)
-16% -18% -19%
-8%
-2% -1%
6%
18%
10%
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
y-o
-y
Exports (% y-o-y)
Exports (% y-o-y)
• India’s exports continued to grow for ninth consecutive month. Though the growth has been slower in past 2 months
• This can be attributed partly to GST transition and partly due to INR appreciation.
• INR continues to appreciate due to strong fundamentals and sky high real interest rates
Exports growth has held up despite facing pressure from strong rupee. We expect exports to continue to remain
healthy with global industrial activity reviving.
Indian Exports Growing Despite A Strong Rupee…
13
• Non Petroleum Oil and Lubricants (POL) have seen robust growth. Of which, Engineering goods have led the Non-
POL exports growth.
Global growth , Anti-dumping on Chinese steel products and extensive support from government have aided
Non-POL exports.
Non POL Exports Growth Driven By Engineering Goods Composition of Engineering Goods
Source:: CMIE, Edelweiss Investment Research Source:: EEPC
8%
-4%
3%
-4%
-5% 3% 2%
18%
11%
-6% -18%
-26%
-12%
-4% -2%
14%
38%
19%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
Jun-15 Sep-15 Dec-15 Apr-16 Jun-16 Sep-16 Dec-16 Apr-17 Jun-17
% y
-o-y
Composition of Non-POL Exports
Agri Products Textiles (ex RMG) RMG
Eng. Goods Gems & jewellery Non-POL -RHS
Auto and Auto
Components
including Aircraft
and shipboard
35%
Iron and Steel and
Products made of
Iron and Steel
23%
Industrial
Machinery
including Electrical
Machinery
22%
Non-Ferrous Metals
and Products of
Non-Ferrous Metals
12%
Other
9%
Largest Component of Exports Growing Strongly
14
Consumption – The Core Growth Driver
15
Consumption is Core To Global Growth
DM : Consumption was key to Expansion EM : Witnessing Revival in Consumption
Source: Consumption led Expansion by Kharroubi and Kohlschen (2017), BIS
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2011-12 2012-13 2013-14 2014-15 2015-16
(%)
Contribution to Growth, % points
Investment Consumption GDP growth, %
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
Ju
l-1
6
Au
g-1
6
Se
p-1
6
Oc
t-1
6
No
v-1
6
De
c-1
6
Ja
n-1
7
Fe
b-1
7
Ma
r-1
7
Ap
r-1
7
Ma
y-1
7
Retail Sales (yoy,%)
Brazil Russia South Africa India
Consumption proxy by retail sales (y-o-y). For India, Consumption proxy by 2 wheeler and PV sales
• There has been broad based recovery in consumption across both EM and DM
• Commodity driven economies like Brazil and Russia which had consumption plunging have also seen growth in
consumption expenditure.
Consumption which had slowed post demonetization is slowly picking up in India as reflected in 2 wheeler and
passenger vehicle sales
16
Consumption : Wage Growth Key For DM While Ems Driven By Low Inflation!
Source: ILO, Edelweiss Investment Research Source: IMF, Edelweiss Investment Research
0
2
4
6
8
10
12
14
16
18
Brazil China India Indonesia Mexico Russia South
Africa
%, y
-o-y
EM Headline Inflation (%, y-o-y)
2015 2016 2017 Mid Point Inflation Target Range
0.6 0.7
-0.9
0.5 0.9
-0.3
0.2 0.4 0.5
1.7 2.0
8.5
9.5
6.7
4.1
6.0 5.4
6.6 6.0
3.9
2.5
3.5 3.0
3.5
1.6 1.7
2.7 1.8
2.7 2.6
1.9 2.0
2.7
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(E)
Annual Average Real Wage Growth (%)
G-20- Developed G-20 -Emerging Total G-20
• Because people spend less of food & energy as a percentage of their income, wage growth increases
consumption in Developed Economies.
In Emerging Markets lower inflation enables savings from lower food & energy. These savings flow through to
discretionary consumption. Ergo lower inflation means additional consumption and stronger economic growth in
EMs
Inflation around the central bank
target rate fosters confidence
among businesses and investors
17
Accelerating Consumption Would Fire up Investments
Investment to GDP ratio has hit a decade low of 29% for India in FY17.
Consumption expenditure has been growing at faster pace. This is a classic consumption leads investments
recovery.
Consumption growth continues to be the backbone of India’s growth narrative
Source: MOSPI, Edelweiss Investment Research
Consumption Growth outpaced GDP Growth in FY17
7.1
8.7
4
5
6
7
8
9
10
11
FY05 FY07 FY09 FY11 FY13 FY15 FY17
%, y
-o-y
Real Consumption Expenditure and Real GDP Growth
GDP (y-o-y) Private Consumption (y-o-y)
18
Investment – The Growth Accelerator
19
Investment Revival Follows Consumption Uptick
Kharroubi and Kohlschen(2017), BIS in their research have proven that consumption led growth is systemically
weaker than Investment led growth for advanced economies. GDP as well as components of GDP, both display higher growth when driven by investment as against
consumption. The growth gap between both the approaches widen over a three year period. Therefore a revival in investments
over the next few quarters is essential.
Can consumption led growth lay foundation for investment led growth?
Source: Consumption led Expansion by Kharroubi and Kohlschen (2017), BIS
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
GDP Growth Private
Consumption
Public
Consumption
Investment Net exports
(%)
One year window
Non-consumption-led growth Consumption led growth
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
GDP Growth Private
Consumption
Public
Consumption
Investment Net exports
(%)
Three year window
Non-consumption-led growth Consumption led growth
Composition of GDP growth under consumption and non-consumption-led growth for Developed Economies, 1991-2016
20
Investments Pick Up Once Consumption Exhausts Capacities
Composition of India’s growth during the same period
Investment to GDP ratio has hit a decade low of 29% for India in FY17.
Pick up in consumption is generally followed by rise in investment as displayed in advanced economies in 2003-08
and also in India.
We believe that India’s strong consumption story will drive in investment as witnessed from 2003-08 and earlier
episodes
Source: Consumption led Expansion by Kharroubi and Kohlschen (2017), BIS
Source: CMIE, Edelweiss Investment Research
0.3
1.0 1.1
1.2 1.2
1.0
1.4 1.3 1.3 1.1
1.5
2.8
2.4
3.1 3.0
2002-03 2003-04 2004-05 2005-06 2006-07
Contribution to GDP Growth in Developed Economies , %
Investment Consumption GDP growth, %
Consumption pickup is followed by Investment rise as seen from 2003-07
1.7
3.5 2.9
4.9 4.8 5.2
-0.1
2.5
6.6
4.7 4.2
5.2
3.9
7.9 7.9
9.3 9.3 9.8
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Consumption Investment GDP Growth, %
Base Effects
21
• Corporate leverage is one of the biggest hurdles to capex cycle.
• Access to capital markets for funds have helped corporate deleverage. Easing Monetary cycle has also helped in
reducing Debt to Equity ratio and improvement in profitability.
• Deleveraging takes place in two stages- In the first stage, the “flow” of borrowing falls, GDP growth is weak, and
the debt-to-GDP ratio actually rises . This continues until new borrowing has fallen enough. In the second stage,
new borrowing stops falling, GDP growth rises, and the debt-to-GDP ratio starts to fall
We believe that we are at the end of the first stage of deleveraging. Private investments will pick up as profitability
rises and capacity utilization improves.
Debt/Equity of BSE 500 (ex Financials) lowest in last 5 years Operating Leverage and Borrowing Cost reflecting in higher
EBIDTA
85
96 94
96
93
79
FY12 FY13 FY14 FY15 FY16 FY17
BSE 500 (Ex Financials) Debt/Equity Ratio (x100)
India Investment Cycle : BS Strength Beginning To Come Back
15%
8.5%
1%
9%
28%
12%
7% 6%
0%
5%
10%
15%
20%
25%
30%
FY14 FY15 FY16 FY17
BSE 500 (Ex Financials) Interest Expenses and EBIDTA
EBIDTA (% y-o-y) Interest expenses (% y-o-y)
22
• Public Capex which had stagnated between 2012-15 has been picking up. Higher Spending in roads and railway
sector driving public capex.
• Spending on roads and railways is at 3x of 2015 levels. Construction equipment sector is also started to grow again
indicating revival.
Higher public capex on infrastructure, efficient execution and reduction in interest costs to crowd in private
investments .
Public Capex beginning to gain traction after slowing down between FY12-15
Source:: Budget Documents, Edelweiss Investment Research
15
35 33 32 35
39
24
52
44
58 65
71
10 16 18 18 19 21
50
103
94
107
118
130
FY07 FY12 FY15 FY16 FY17 FY18E
Capex, In US$ Bn
Electricity Transport Irrigation & Water Supply Total
Public Capex to lead the Recovery In Investment Cycle
23
Markets – Forward, Higher, Stronger ……
24
Supply Side Anchored Inflation To Keep Rates, Policy Response Stable
Supply Side Reforms Are Key For Breaking Inflationary Spiral
Food Production Continues To Rise
10
15
20
25
200
250
300
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Production (Million Tonnes)
Foodgrain Pulses-RH
-3
0
3
6
9
12
15
18
Ja
n-1
2
Ju
n-1
2
No
v-1
2
Ap
r-1
3
Se
p-1
3
Fe
b-1
4
Ju
l-1
4
De
c-1
4
Ma
y-1
5
Oc
t-1
5
Ma
r-1
6
Au
g-1
6
Ja
n-1
7
Ju
n-1
7
%, y
-o-y
CPI , Core CPI & Major Heads (YoY, % Chg)
CPI Food and beverages
Fuel & light Core - CPI Ex Food and Fuel
Inflation has plunged to an all time tow to 1.54% (y-o-
y) in June. Core inflation which is usually sticky, also lowered to
3.5%.
Disinflation in food dynamics has been the major
contributor to lower inflation.
Supply-side de- bottlenecking, softening commodity prices, lower inflationary expectations have further pulled inflation down.
0
5000
10000
15000
20000
25000
30000
35000
0%
5%
10%
15%
20%
25%
Ju
n-9
0
Ju
n-9
1
Ju
n-9
2
Ju
n-9
3
Ju
n-9
4
Ju
n-9
5
Ju
n-9
6
Ju
n-9
7
Ju
n-9
8
Ju
n-9
9
Ju
n-0
0
Ju
n-0
1
Ju
n-0
2
Ju
n-0
3
Ju
n-0
4
Ju
n-0
5
Ju
n-0
6
Ju
n-0
7
Ju
n-0
8
Ju
n-0
9
Ju
n-1
0
Ju
n-1
1
Ju
n-1
2
Ju
n-1
3
Ju
n-1
4
Ju
n-1
5
Ju
n-1
6
Ju
n-1
7
Se
nse
x In
de
x
Cp
i %
ch
g (
yo
y)
CPI Industrail Workers Sensex India
Sensex 7 times
Sensex 0.6 times
Lower inflation is rewarded by markets. Big Sensex Uptrends coincide with periods of stable inflation.
Markets to Head Higher As Long Disinflationary Phase Commences
25
26
Earnings and Valuations
Stocks with +ve returns,
55%, 50%
Stocks with -ve returns, -
21%, -61% -80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
-40% -20% 0% 20% 40% 60% 80%
Market Cap Change P
AT
Ch
an
ge
Bubble size = Cumulative market cap for
gaining and losing shares
Universe : 1500 NSE listed companies
Contrary to the popular belief that all stocks have been rallying, only companies which have displayed higher
profitability have seen higher market capitalization gains
Only Profitability Being Rewarded In This Bull Run
27
5
8
11
14
17
20
23
26
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
1 year forward P/E Highest P/E Lowest P/E
1.5
2.0
2.5
3.0
3.5
Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17
Nifty 1 year forward P/B 4 Yr moving average
+1 SD -1 SD
0%
30%
60%
90%
120%
Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17
Nifty 1yr forward P/B Premium over MSCI Index 4 year moving average +1 SD -1 SD
0%
20%
40%
60%
80%
Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17
Nifty 1yr fwd P/E Premium over MSCI Index
4 year moving average
+1 SD
-1 SD
Nifty 1yr Fwd PE at 18, A Premium of ~10% over 5yr Avg Nifty 1yr Fwd PB Nearing This Decade High
Nifty 1yr Fwd PE Premium Over MSCI Index Near Average Nifty 1yr Fwd PB Premium Over MSCI Index is Below Average
Nifty Valuations Rich, But Not So Much Against Peers
28
4
5
6
7
8
9
10
11
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17
% c
hg
Nifty Earnings Yield Bond Yields Adjusted for Taxation
*Bond yields are adjusted for 15% avg tax rate9
A comparison of Nifty’s earning yield v/s the 10 year government bond yield shows that equities are still attractive as compared to debt instruments and we should expect continued to shift in the allocation of funds from debt to equity to continue.
Equity Earnings Yield Is Still Attractive Relative To Bonds*
29
30
Financialization of Savings – Increasing Search For Financial Assets
Source: Google Trends, Edelweiss Investment Research
Google Trends Word Sentiment Shows Rising Interest in Fin Assets
0
20
40
60
80
100
120
Au
g-1
2
Oc
t-1
2
De
c-1
2
Fe
b-1
3
Ap
r-1
3
Ju
n-1
3
Au
g-1
3
Oc
t-1
3
De
c-1
3
Fe
b-1
4
Ap
r-1
4
Ju
n-1
4
Au
g-1
4
Oc
t-1
4
De
c-1
4
Fe
b-1
5
Ap
r-1
5
Ju
n-1
5
Au
g-1
5
Oc
t-1
5
De
c-1
5
Fe
b-1
6
Ap
r-1
6
Ju
n-1
6
Au
g-1
6
Oc
t-1
6
De
c-1
6
Fe
b-1
7
Ap
r-1
7
Ju
n-1
7
Word Search on Google*
Systematic Investment Plan Mutual Funds Nifty50
3,153
4,778
2800
3300
3800
4300
4800
5300
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
(IN
R C
r)
Monthly Flows in Equities through SIP (INR Crore) +49% yoy
0
12
5 7
16
2
16
12
17
6
2
8 10
20 17
13
23
10
3
11
7 6
23
-2
16 15
-15
-10
-5
0
5
10
15
20
25
-15
-10
-5
0
5
10
15
20
25
Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14 Sep-15 Jun-16 Mar-17
USD
Billio
n
USD
Billio
n
Foreign Investment Flows Rise
Net FDI Net FPI FDI+FII
27,158
-20,000
-10,000
0
10,000
20,000
30,000
40,000
Dec-09 Jun-11 Dec-12 Jun-14 Dec-15 Jun-17
Mutual Fund Net Equity Investments (INR Crores)
Mutual Fund Net Equity Investments (INR Crores) 4 Per Mov Avg
Financialization of savings and improved market
performance has led to consistent DII Inflows. Additionally , FII inflows have been robust with strong
FII.
SIPs +49%, MFs Equity Purchases +53%, Foreign Inflows Nearing Peak
31
19%
69%
36% 37%
13%
-23%
-1%
20%
-18%
67%
-15% -16%
3%
72%
11%
36% 40%
55%
-52%
76%
18%
-25%
28%
7%
31%
-4%
3%
21%
-31%
-11%
-46%
-27%
-16% -19%
-34% -27%
-36%
-19%
-39%
-32%
-24%
-17% -22%
-13%
-31%
-14%
-65%
-17% -11%
-27%
-15% -17%
-7%
-17% -12%
-2%
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Nifty 50 Index - Intra-year Declines and Calendar Year Returns
Average intra-year decline in Nifty has been 23%, annual returns are positive in 20 of 28 years
Source: NSE, Edelweiss Investment Research
A drawdown is the peak-to-trough decline during a specific recorded period.
Nifty has experienced lowest decline from its peak in about 2 decades
Nifty Is In A Secular Uptrend With Low Drawdown
32
33
Disclaimer
Edelweiss Broking Limited (“EBL” or “Research Entity”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, depository services and related activities. The business of EBL and its Associates (list available on www.edelweissfin.com) are organized around five broad business groups – Credit including Housing and SME Finance, Commodities, Financial Markets, Asset Management and Life Insurance. Broking services offered by Edelweiss Broking Limited under SEBI Registration No.: INZ000005231; Name of the Compliance Officer: Mr. Brijmohan Bohra, Email ID: [email protected] Corporate Office: Edelweiss House, Off CST Road, Kalina, Mumbai - 400098; Tel. 18001023335/022-42722200/022-40094279 Disclosures under the provisions of SEBI (Research Analysts) Regulations 2014 (Regulations) Edelweiss Broking Limited ("EBL" or "Research Entity") is regulated by the Securities and Exchange Board of India ("SEBI") and is licensed to carry on the business of broking, depository services and related activities. The business of EBL and its associates are organized around five broad business groups – Credit including Housing and SME Finance, Commodities, Financial Markets, Asset Management and Life Insurance. There were no instances of non-compliance by EBL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years. This research report has been prepared and distributed by Edelweiss Broking Limited ("Edelweiss") in the capacity of a Research Analyst as per Regulation 22(1) of SEBI (Research Analysts) Regulations 2014 having SEBI Registration No.INH000000172 This Report has been prepared by Edelweiss Broking Limited in the capacity of a Research Analyst having SEBI Registration No.INH000000172 and distributed as per SEBI (Research Analysts) Regulations 2014. This report does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable. This report is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject EBL and associates / group companies to any registration or licensing requirements within such jurisdiction. The distribution of this report in certain jurisdictions may be restricted by law, and persons in whose possession this report comes, should observe, any such restrictions. The information given in this report is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. EBL reserves the right to make modifications and alterations to this statement as may be required from time to time. EBL or any of its associates / group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. EBL is committed to providing independent and transparent recommendation to its clients. Neither EBL nor any of its associates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including loss of revenue or lost profits that may arise from or in connection with the use of the information. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Past performance is not necessarily a guide to future performance .The disclosures of interest statements incorporated in this report are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The information provided in these reports remains, unless otherwise stated, the copyright of EBL. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright of EBL and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders. EBL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any reason including network (Internet) reasons or snags in the system, break down of the system or any other equipment, server breakdown, maintenance shutdown, breakdown of communication services or inability of the EBL to present the data. In no event shall EBL be liable for any damages, including without limitation direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by the EBL through this report. We offer our research services to clients as well as our prospects. Though this report is disseminated to all the customers simultaneously, not all customers may receive this report at the same time. We will not treat recipients as customers by virtue of their receiving this report. EBL and its associates, officer, directors, and employees, research analyst (including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies), mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company(ies) discussed herein or act as advisor or lender/borrower to such company(ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. EBL may have proprietary long/short position in the above mentioned scrip(s) and therefore should be considered as interested. The views provided herein are general in nature and do not consider risk appetite or investment objective of any particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with EBL. EBL or its associates may have received compensation from the subject company in the past 12 months. EBL or its associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. EBL or its associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EBL or its associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EBL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research analyst or his/her relative or EBL’s associates may have financial interest in the subject company. EBL, its associates, research analyst and his/her relative may have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk. Research analyst has served as an officer, director or employee of subject Company: No EBL has financial interest in the subject companies: No EBL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report. Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No EBL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No Subject company may have been client during twelve months preceding the date of distribution of the research report. There were no instances of non-compliance by EBL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years. A graph of daily closing prices of the securities is also available at www.nseindia.com Analyst Certification: The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Additional Disclaimer for U.S. Persons Edelweiss is not a registered broker – dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Edelweiss is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Edelweiss, including the products and services described herein are not available to or intended for U.S. persons. This report does not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules. Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc. Additional Disclaimer for U.K. Persons The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Additional Disclaimer for Canadian Persons Edelweiss is not a registered adviser or dealer under applicable Canadian securities laws nor has it obtained an exemption from the adviser and/or dealer registration requirements under such law. Accordingly, any brokerage and investment services provided by Edelweiss, including the products and services described herein, are not available to or intended for Canadian persons. This research report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services.
