January 2016 - investmentz.co.ininvestmentz.co.in/emailer/Market_Pulse_Jan-2016.pdf · Margin % PAT EPS(Rs. ... catalyzers, and clutches. IFB’s product range in-cludes fine blanked

ACMIIL MARKET PULSE- January 2016 1

January 2016


Dear Investors,

MARKET PULSE, the monthly from ACMIIL, aims to provide insightful perspectives on all aspects of the market, the equity, debt, derivatives, forex, commodities and money markets.

Discerning and intuitive comments from the analyst teams of each of these segments aim to enlighten our clients on the developments in these segments and their impact on the respective markets. For instance, stock picks from the equity team would help investors zero down on stocks that have attractive valuations and good earnings potential. The team’s sharp observations and opinions based on in-depth research on the debt markets provide would our clients a thorough understanding of the money markets.

Further, technical perspectives on the futures, forex, and commodities markets would assist our clients to identify the opportune moments to enter and exit the markets and help them derive benefits from a falling as well as rising market with the right research information at the right time.

MARKET PULSE aims to capture the market in all its hues and colors and provides a range of information that helps in making wise investment decisions.

Regards,Research Team ACMIIL


Contents

Special Report

Derivative Report

Overall Outlook

Debt Market Report

5

12

4

14

Technical View

6

15

20

January 2016

Mutual Fund

Retail Research Call Performance Report

Event Calendar 21

16

Equity SIP Performance

Equity Report

18


OVERALL OUTLOOKReviewThe Indian markets were under pressure in the early days of December led by weak cues from the global market. A lower-than-expected stimulus package announced by ECB in its policy meeting coupled with a possible rate hike by US Fed kept the markets in negative territory. The ECB cut its deposit rate further by 10 basis points to a fresh low of -0.3%, down from -0.2%. Index heavyweights also dragged the market lower as stocks such as ITC, ONGC, ICICI Bank, L&T, and M&M slipped deep into the red in early December led by stock-specific and sector-specific triggers. Stock of ciga-rette major ITC declined after a committee on tax rates under goods and services tax (GST) headed by the Chief Eco-nomic Adviser Dr. Arvind Subramanian recommended a steep 40% tax on tobacco and tobacco products in its report. Continued soft crude prices kept the ONGC stock under check. The Nifty hit a 13-1/2-week closing low on December 11 and fell below this after bank stocks fell across the board reacting to the Reserve Bank of India Governor Raghuram Rajan’s comments on bad loans. News that the National Green Tribunal urged no new diesel vehicle registrations in Delhi to curb air pollution painted a bleak picture for Auto stocks. M&M corrected sharply on bleak prospects for both its core segments, tractors and auto. Meanwhile, uncertainty on clearance of the GST bill in the Parliament’s winter session kept the markets volatile.

However, the markets staged smart recovery in the second half of the month largely due to bargain hunting, after the Federal Reserve lived up to expectations, calling for a 25 basis point hike on December 16, 2015. The federal funds target range was stuck in the 0.00-0.25% range for seven years. The markets already discounted the impact. There was some stability in crude oil prices following decline in US oil inventory, which provided support to the markets. However, some select mid-cap stocks faced profit taking in the second half of the month owing to quarterly and annual book clo-sure for December ending by DIIs and FIIs respectively. Further, short covering in many stocks close to the December F&O expiry kept the momentum on the positive note amid low volatility due to lower participation from FIIs as they were on holiday for Christmas and New Year. Nevertheless, there was a good buying spree from FIIs on the F&O expiry day as the indices closed the month on a positive note.

OutlookGoing Forward we expect Indian markets to be volatile on back of Chinese economy which is affecting Global markets. However we think India is still preferred as a better investment destination compared with other emerging economies. Now December quarterly results about to begin from mid-January, some more volatility can be expected. Guidance from IT companies such as HCL Tech, Tech Mahindra and TCS, which is on the lower side, is perhaps an early indicator of this. Furthermore, there is fear among global investors owing to uncertainty over crude production or uptick in demand.


SPECIAL REPORT

Q3FY16 earning estimatesBloomberg Est (Q3 FY16 Consolidated) Rs in cr.

Company Name Sales Sales growth %

EBIDTA EBIDTA Margin %

PAT EPS(Rs.Unit)

ASIAN PAINTS 3991 -7% 670 17% 428 4.59

BHARTI AIRTEL 23503 1% 7936 34% 1354 3.38

BHARTI INFRATEL 3005 1% 1282 43% 498 2.66

BIOCON 774 7% 175 23% 106 5.40

DABUR INDIA 2146 -2% 353 16% 284 1.63

DLF 2059 -9% 779 38% 132 0.82

DR REDDY’S LABS 3632 10% 802 22% 544 33.25

EICHER MOTORS 3080 0% 486 16% 267 98.06

GODREJ CONSUMER 2206 2% 369 17% 247 7.25

HCL TECH 9384 8% 2297 24% 1821 12.80

IDEA CELLULAR 7956 9% 2640 33% 789 2.24

INFOSYS 13763 14% 3890 28% 3147 13.73

LARSEN & TOUBRO 23041 2% 2717 12% 1138 12.38

LUPIN 3377 -6% 900 27% 576 12.69

MINDTREE 918 27% 180 20% 132 16.89

PERSISTENT SYS 493 10% 109 22% 76 9.51

PIDILITE INDS 1230 7% 195 16% 129 2.55

TATA CONSULTANCY 24533 11% 7048 29% 5455 28.10

TATA STEEL LTD 34839 -17% 3219 9% 162 2.72

TECH MAHINDRA LT 5720 16% 1171 20% 799 8.62

VEDANTA 19292 -15% 5861 30% 1415 4.57

VOLTAS 1114 -5% 74 7% 59 1.78

WIPRO 11999 4% 2627 22% 2149 8.85Soruce: Bloomberg


EQUITY REPORT

Investment Idea

Company Background IFB Industries Limited (IFB) is engaged in the business of manufacturing and trading of home appliances and fine blanking components. The company operates through two segments, engineering and home appliance products. The company’s engineering segment is engaged in the manufacturing of diverse parts and accessories for motor vehicles such as breaks, gearboxes, axles road wheels, suspension shock absorbers, radiators, silencers, exhaust pipes, catalyzers, and clutches. IFB’s product range in-cludes fine blanked components, tools, and related machine tools such as strengthen-ers, decoilers, and strip loaders. IFB is into the manufacture of microwave ovens and fully automatic washing machines. The company has excellent facilities for tool design and tool making enabling it to meet the expectations of automobile manufacturers in In-dia and some overseas customers, by supplying high quality fine blanking components on schedule. The company’s customers include Maruti Udyog, Ford India, Fiat India, Toyota Kirloskar Motors, Lucas TVS, Brakes India, Autoliv India, Rane TRW, and IFB Automotive.

Product Portfolio:

Source: Company filling

Investment Rationale Brand recognition and market share Strong brand recognition and word-of-mouth publicity helps IFB maintain mar-ket share in the front load washing machine segment. According to GfK’s data for June 15, IFB has around 39% in value and volume share in front load wash-ing machines, ahead of LG India’s 32.6%.

Large Channel to reach large customer baseIFB distributes its products through its wide Pan-India network. Multi brand stores are a very important concept for IFB. They help the company achieve most of its revenue (65% of its total volume). IFB exclusive stores are another key channel for the company, since these stores showcase IFB’s full range of products. Further, these stores help the customer to understand IFB’s products much better in terms of look and feel. IFB’s exclusive stores are divided in two categories, which contribute ~15% to sales and IFB’s website along with other e-commerce sites, which contributed ~6% of sales volume as Q2FY16. In the coming days, IFB’s top line may receive a boost by the company’s expan-sion through the owned and company operated (CoCo) store with a dedicated

IFB Industries

ACCUMULATE

Key Data

DATE 05/01/2016

CMP 475

Target 575

Sector Household Appliances

BSE Code 505726

NSE Code IFBIND

EPS (March 2015) 6.9

Face Value (Rs.) 10

Market Cap (Cr) 1944

52 week High/Low (Rs) 389/746

Source:BSE

Shareholding pattern (Sept 2015)

%

Promoters 74.96

FII 1.8

DII 6.41

Others 16.83

Total 100

Source:BSE

Stock performance

707580859095

100105110

Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

IFB Industries Sensex

Source:Ace equity


direct retail team. We believe the strategic expansion, word-of mouth publicity, and brand recognition would help IFB to increase the customer base from current 4 million users.

Leader in fine blankingIFB is one of India’s top fine blanking companies founded in 1974 in collaboration with Heinrich Schimd AD of Swit-zerland. Latest technology and timely delivery of orders have helped IFB in enjoying a leadership position in the fine blanking segment. Further, it is sub-divided in two-wheeler and four-wheeler automotive segments. IFB manufactures products such as gear transmission, gear shift selector, and interlock in the four-wheeler segment. It manufactures face comp, gear, and came plate sprocket for the two-wheeler segment. The particular segment contributes nearly 19% to IFB’s total volume during FY14-15. The company is aggressively building a portfolio order book and is expanding capacities. Revival in the four-wheeler segment and focus on increasing the customer base, both in auto and non-auto segments, would lead to increase top line for the fine blanking division.

Lowest selling and distribution to sales ratio

Source: Ace equity

IFB’s selling and distribution expenses for the last five years average accounted for only 5.7% to net sales whereas its peers such as Godrej Consumer Products Ltd and Panasonic Appliances India Company Ltd spent more than 15% during the same period. Having the lowest selling and distribution expenses makes enough room to increase S&D expenses further which ultimately helps IFB to create and spread brand awareness among new and old customers.

New launches to increase revenue in the coming year From the past few quarters, IFB is focusing more on new launches along with margin improvement. In 2014-15, the company has started production of a wide range front load washing machines, equipped with the latest technology. IFB is aiming to tap market share of ~10-12% in this segment in the next two years. The company has launched a modular kitchen in Q3FY16, which is in line with company’s product launch strategies.

Q2 FY16 financial highlights

In Q2FY16, IFB industries registered de-growth of 25% YoY in net operating profit to Rs. 93 million as against Rs. 154 million. This was mainly due to changes in depreciation, resulting in higher depreciation expenses compared with Q2FY15.

IFB is maintaining its growth rate at 18% in the top line to Rs. 3627 million compare with Rs. 3064 million led by robust growth in fine blanking business and appliances.

Margin too eroded by 330 bps to 5.9% from 9.2% due to increase in investment in sales force across the region. We believe investment in sales force and IFB stores would help increase market share and improve margin.

EQUITY REPORT

S&D expenses to sales ( avg.FY11 to 15)

18.69%

15.34%

8.31%5.72%

0%2%4%6%8%

10%12%14%16%18%20%

GodrejConsumer

Products Ltd.

PanasonicAppliances India

Company Ltd.

Whirlpool OfIndia Ltd.

IFB IndustriesLtd.


EQUITY REPORT Financial Highlights

Standalone (Rs. in cr.) Q2FY16 Q2FY15 YoY% Q1FY16 QoQ% FY15 FY14 YoY%

Total Sales 367.95 313.57 17% 352.00 5% 1261.50 1020.79 24%

Total Expenditure 346.27 284.64 22% 330.04 5% 1174.13 974.85 20%

EBITDA 21.68 28.93 -25% 21.96 -1% 87.37 45.94 90%

Depreciation 11.87 9.13 30% 11.43 4% 40.64 22.59 80%

EBIT 9.81 19.80 -50% 10.53 -7% 46.73 23.35 100%

Other Income 1.56 2.86 -45% 3.42 -54% 15.08 8.17 85%

Interest 0.67 0.46 46% 0.41 63% 2.54 2.19 16%

PBT 10.70 22.20 -52% 13.54 -21% 59.27 29.33 102%

Exceptional Item 0.00 0.00 - 0.00 - 0.00 0.00 -

PBT after Exp Item 10.70 22.20 -52% 13.54 -21% 59.27 29.33 102%

Tax 1.38 6.79 -80% 3.00 -54% 9.54 7.73 23%

PAT 9.32 15.41 -40% 10.54 -12% 49.73 21.60 130%

BPS BPS BPS

EPS (Rs. Unit) 2.30 3.80 -150.3 2.60 -30.1 12.27 5.33 694.2

EBIDTA Margin % 5.89 9.23 -333.4 6.2 -34.7 6.93 4.50 242.5

PAT Margin % 2.50 4.90 -240.00 3.00 -50.00 3.90 2.10 180.00

Source: Ace equity

ValuationIndia is expected to become the fifth largest consumer durables market in world. Urban markets account for a major share (65%) of total revenue in the consumer durables sector in India. IFB’s constant improvement and launch of new products across the segment would help improve top line and bottom line. The management is also confident to achieve EBIDTA margin of 9-10% in coming years. At CMP of Rs 475, IFB is trading at 18x of FY18E EPS Rs 26. We conserva-tively provide 22x to its FY18E EPS to arrive at a price target of Rs 575, with potential upside of 20%. We recommend to ACCUMULATE the stock.


EQUITY REPORT

Company Background Vinati Organics Ltd (VOL) is a specialty chemical company producing aromatics, mono-mers, polymers, and other speciality products. The company manufactures Isobutyl-ene (IB), Isobutyl Benzene (IBB*), and acrylamido tertiary-butyl sulfonic acid (ATBS**). With superior technology and strategic capacity expansion plans, VOL has become the world’s largest manufacturer of both 2-acrylamido-2-methylpropane Sulphonic acid and IBB. VOL has earned the distinction of being the only backward integrated specialty chemical company in the world. In June 2010, the company successfully started pro-ducing Isobutylene (IB), one of the key components used to manufacture 2-Acrylamido-2-methylpropane sulphonic acid. Apart from being used internally, IB is also sold to agrochemical and antioxidant industry. The company is catering to 25 countries includ-ing prime markets such as United States, Europe, and Asia. During FY15, 68% of the company’s revenue accrued from exports. VOL has some of the world’s largest manu-facturing companies in their client list including BASF, Dow Chemicals, Nalco Company (USA), AkzoNobel, SNF Floerger, Ciba, and Clariant Chemicals.

Product Portfolio:

Product Applications

"2-acrylamido 2-methylapropane sulphonic acid (ATBS)"

Water treatment chemicals

Emulsions for paint and paper coat-ings

Adhesives

Textiles auxiliaries and acrylic fibre

Detergents and cleaners

Oil field and mining chemicals

Construction chemicals

"Iso Butyl Benzene (IBB) (ATBS)"

Pharmaceutical industry

Perfume industry

Speciality solvent

"Isobutylene (IB) (ATBS)"

Butyl rubbers

Antioxidants

Fragrances and perfumes

Insecticides and pesticides

Personal care

MonomersSource: Ace Equity, ACMIIL Research

Investment Rationale New product to boost the toplineCompany is expanding its product profile by introducing new products, which is likely to start delivering by FY17. Some of them are isobutylene derivatives and find their uses in the perfume industry. Further, the company has recently signed a tripartite agreement with an American and Japanese company, which is for a customised product and that is expected to add up to Rs 45 crore to revenue, going forward. Moreover, the company is producing one more verti-cally integrated product, which is an intermediate. This would add to revenue substantially by FY17. Overall, about Rs 150-200 crore in the next two years will come from new products.

Vinati Organics ltd.

ACCUMULATE

Key Data

DATE 31/12/2015

CMP 468.5

Target 540

Sector Speciality Chemicals

BSE Code 524200

NSE Code VINATIORGA

EPS (March 2015) 22.44

Face Value (Rs.) 2

Market Cap (Cr) 2423

52 week High/Low (Rs) 668/370

Source:BSE

Shareholding pattern (as on Sept 2015)

%

Promoters 72.31

FII 1.08

DII 6.93

Others 19.68

Total 100

Source:BSE

Investment Idea

ACCUMULATE

Source:Ace equity


EQUITY REPORT

Source: Company Filing, ACMIIL Research

Margin to remain healthy led by new productsThe company’s EBITDA margin has remained in the range of 21-25% during FY10-FY15. VOL’s contracts safeguard the company against exchange fluctuations and crude price impact. Hence, VOL has guided to steady EBIDTA margin at ~23-25% levels over the next 2-3 years. The company’s market leader position allows it to pass on the volatility in raw material prices. VOL have some of the world’s largest manufacturing companies in their client list including BASF, Dow Chemicals, Nalco Company (USA), AkzoNobel, SNF Floerger, Ciba, and Clariant Chemicals. Furthermore, the new products lined up are from the high margin segment, which would eventually boost the blended margin of the company. We expect 200-300 bps improvement in EBITDA margin in FY18E to 26.3% from current (FY15) 23%.

Market leader in core productsVinati is market leader in all its three core products. For IBB and ATBS, it is a global leader with ~65% and ~45% mar-ket share respectively whereas for IB, VOL is domestic leader with ~70% market share. Going forward, IBB and ATBS market is likely to grow at ~6% and ~8% CAGR during FY16-FY18E respectively while IB market is continue to grow at more than 10% CAGR during the same period. IB, being used for internal consumption by the company as a raw material is adding most of the new capacity addition. Currently, it has IB capacity of 12,000TPA, which is expected to increase to 15,000TPA by FY17 end.

A debt-free company by FY17Total debt of the company as on 31 March’13 stands at Rs 135 cr, which has came down substantially to Rs 26.23 cr in H1FY16. Going forward, with healthy cash generation, we expect VOL to be debt-free by FY17. This will ultimately improve the bottom line of the company leading to better return ratios.

Source: Source: Ace Equity, ACMIIL Research

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EQUITY REPORT

Expecting a global market recovery Revenue from overseas market of Vinati was 68% as on FY15 when total revenue increased by 11% YoY. However, in H1FY16, the company has reported de-growth in the top line due to slowdown in speciality chemical industry globally. After healthy growth in 2014 and early 2015, the speciality chemical industry faced lack of demand due to overall eco-nomic slowdown due to heightened geopolitical uncertainty, recession in Brazil, Japan, and many European nations, as well as slowdowns in China, the Euro Area, and other nations. The manufacturing sector, which represents the primary customer base for chemistry, entered into a soft period with particular weakness in Europe and East Asia. However, the global industrial cycle is beginning to turn upwards led by the US, UK, and other nations. With household deleveraging over further improvements in the employment situation, lower oil prices fostering discretionary incomes, asset prices moving higher, consumers are starting to spend again. Despite a global slowdown, VOL has managed to maintain its EBITDA margin. Going forward, with recovery expected in the global chemical industry, we believe that VOL would report better results in the coming quarters.

ValuationVOL being one of the largest suppliers of IBB and ATBS globally is slated to garner the recovery in global speciality chemical well. We expect the top line of the company to grow at CAGR of 11.5% during FY15-18E to Rs 920 cr. Looking at the higher than peers ROE and ROCE, we expect the stock to perform well in coming years. At the CMP of Rs 468, stock is trading at 17x of FY18E earnings. Valuing the stock at 19.5x of FY18E earnings, we arrive at target of Rs 540. Hence, we recommend to ACCUMULATE the stock for long term.

Financial HighlightsStandalone (Rs. in cr.) Q2FY16 Q2FY15 YoY% Q1FY16 QoQ% FY15 FY14 YoY%

Total Sales 162.90 196.39 -17% 154.61 5% 771.73 696.13 11%

Total Expenditure 110.52 149.76 -26% 111.34 -1% 579.96 543.25 7%

EBITDA 52.38 46.63 12% 43.26 21% 191.77 152.89 25%

Depreciation 4.62 4.45 4% 4.56 1% 17.66 15.32 15%

EBIT 47.76 42.19 13% 38.71 23% 174.11 137.57 27%

Other Income 1.56 2.10 -26% 9.91 -84% 9.14 9.17 0%

Interest 2.22 1.69 32% 1.36 64% 9.76 18.15 -46%

PBT 47.10 42.59 11% 47.26 0% 173.50 128.59 35%

PBT after Exp Item 47.10 42.59 11% 47.26 0% 173.50 128.59 35%

Tax 16.03 14.16 13% 16.22 -1% 57.70 42.44 36%

PAT 31.07 28.43 9% 31.04 0% 115.79 86.15 34%

EPS (Rs. unit) 6.02 5.51 9% 6.02 0% 22.44 16.70

EBITDA Margin % 32.2 23.7 841 bps 28.0 417 bps 24.8 22.0 288 bps

PAT Margin % 19.1 14.5 459 bps 20.1 -100 bps 15.0 12.4 263 bps

Source: Ace Equity, ACMIIL Research

Note:

* IBB, a specialty organic intermediary, is used as a raw material for the manufacture of Ibuprofen, an anti-inflammatory analgesic

bulk drug. VOL has become a reliable supplier for leading producers of Ibuprofen globally with purity level of 99.8% as against the

prevailing international standards of 99.5%.

** A specialty monomer, 2-acrylamido-2-methylpropane Sulphonic acid, finds several applications in oil-field recovery, water treat-

ment, acrylic fibre manufacturing, adhesives, personal care products, medical hydrogel, mining industry, coatings, and as dispersing

and flocculating agents.


TECHNICAL VIEW

Nifty formed double bottom - 8200 hurdleNifty

Nifty Weekly Chart

Last Last month, we observed that the index took support near its previous low and registered a strong bounce back from 38.2% retracement support. With this bounce back, the index formed a Piercing line Candlestick Pattern as high-lighted in the above chart. This pattern suggests a bullish reversal in the short term. On the monthly scale, it has formed a Hammer Candlestick Pattern, which suggests bullish reversal. Thus, 7540 will act as strong base for the index.

The index is making a lower high formation on the weekly scale, suggesting weakness for the medium term. The 38.2% retracement of current fall is placed at 8143 and trend line resistance is placed at 8180. The 50% retracement is placed at 8330 and previous lower high is also placed at 8336, which will act as a strong hurdle.

Oscillators: Stochastic indicates a bullish crossover from the oversold zone, suggesting a bounce back in the short term. RSI is showing recovery. Further, MACD shows bearish crossover, indicating weakness.

For January, the levels of 7740 and 7540 should act as support. On the upside, 8180 and 8330 should act as a strong hurdle.

Chart as on 31st Dec, 2015


TECHNICAL VIEW Bank Nifty

Bank Nifty Weekly Chart

Last month, we observed that the index took support near 38.2% of long-term retracement and saw recovery from the oversold zone. The index is making a Lower High formation on the weekly scale, suggesting weakness. Moreover, the index had already formed an Inverted Cup and Handle pattern in early September, which indicates that the downside can continue in the medium term.

The 50 EMA is placed at around 17372, which should act as resistance point, followed by 17730 where the trend line hurdle is placed. On the lower side, 16190 will act as a strong support for the index in the short term.

Oscillators: Stochastic is showing bullish crossover, which indicates some relief in the short term whereas RSI and MACD suggest weakness.

For January, levels of 16190 and 15760 should act as support. On the upside, 17180 and 17750 will act as strong points.

Chart as on 31st December, 2015


DERIVATIVE REPORT

INDEX OUTLOOK

JAN SERIES VIEW This month, we expect the broader range for Nifty to be in the range of 7700-8200.

Sectors to Watch out in Jan Series • Banking • Pharma• Auto• Metals Nifty & Bank Nifty OverviewNifty saw rollover of 75% compared with 68% in the previous month. The rollover was above compared with the 3-month average (68%).Market-wide rolls were at 82% vs. 3-month average of 82%.

Bank NiftyThe index saw rolls of 71% compared with the 3-month average (71%).

Derivative IndicatorsImplied volatility closed at 14.51% against 16.34% of the previous month while historical volatility closed at 14.51 vs. 15.98% of the previous month. Any rise in implied volatility indicates volatile range movement in the index. Another leading derivative indicator, the Nifty PCR, opened on a negative note note this month at 0.77 against last month’s 0.83. On theNifty options activity front, it is evident that maximum addition of open interest on the call options front exists at the strikeprices of 8000 and 8200 (with nearly 52.92 and 60.25 lac shares outstanding), indicating that these levels will act as the resistance zone on the upside. On the put options front, maximum addition of open interest is at the strike prices of 7700 and 7500 (with nearly 43.60 and 52.25 lacs shares outstanding), indicating stronger support zone on the downside.

Strong Rollovers Seen in Infra, Media, Telecom & Pharma Whereas Low Rollovers Seen in Auto, Technology, & Oil-gas .

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DEBT MARKETIndia’s IIP growth stood at a 5-yr high at 9.80% in Oct 2015 compared with 3.80% in the previous month. The surge was mainly due to low base effect, as Oct 2014 witnessed an IIP contraction of 2.70%.

CPI inflation stood at 5.41% in Nov 2015 compared with 5% in Oct 2015. The November figure was at a 14-month high. WPI inflation stood at -1.90% in Nov 2015 as against -3.81% in the previous month.

In the FOMC meet concluded on Dec 16, 2015, the Federal Reserve hiked its benchmark Fed Funds target rate by 25 bps to 0.25-0.50% . In the forward guidance, Fed Chairwoman, Yellen said that the future action on interest rate will be gradual and will remain dependent on many parameters apart from labour and inflation.

RBI has slashed the trading limits for banks and PDs in the ‘When Issues’ market for short positions to 5% from 10%. RBI has now permitted other entities such as mutual funds, insurance companies, pension funds, NBFCs, and urban co-operative banks to take long positions in the ‘When Issues’ market.

RBI has mandated banks to bring down their SLR by 0.25% every quarter from 21.50% currently to 20.50% of NDTL by Mar 2017. Further, RBI has announced a reduction in the HTM limit on SLR securities by 50 bps to 21.50% from the fortnight beginning Jan 09, 2016, post that the HTM limit will be aligned with the proposed cut in the SLR.

RBI announced the calendar for T-Bills auction worth Rs 189,000 Cr for the quarter Jan-Mar 2016. It includes auction of 91 Day T-Bills of Rs 111,000 Cr, 182 Day T-Bill of Rs 36,000 Cr, and 364 Day T-Bills of Rs 42,000 Cr.

As on Dec 31 T-Bill CD

1m 7.06% 7.25%

3m 7.14% 7.35%

6m 7.20% 7.56%

1yr 7.22% 7.68%

As on Dec 31 G-Sec Corp bond

3yr 7.46% 8.22%

5yr 7.68% 8.32%

10yr 7.75% 8.37%

15yr 7.95% 8.38%

99

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DEBT MARKET REPORT


MUTUAL FUND

THE POWER OF MUTUAL FUND SIPBackground

Equity markets do not give a “linear” returns stream since the nature of “equity” is that it is a risk-asset and returns are a function of various factors.

Some of these factors are: financial performance of companies, growth in the real economy, inflation and other macro-economic factors, inflow/outflow of money into the equity markets from FIIs (Foreign institutional investors) and other institutions, global factors, sentiment amongst the retail investors, movements in the derivatives segment and many more…

Hence “Returns” from “Equity” is a function of many defined and undefined factors.

ResearchThis approach was originally researched and statistically tested on the Dow Jones index by Lucile Tomlinson and pub-lished in her book “Practical formulas to successful investing” (1953). She tested the series of data from 1929 to 1953 (this period witnessed the worst stock market crash and recession in the history in the world)

She studied the movement of equity stocks through the index for a sample of 23 ten-year periods between 1929 and 1952

The first 10 year period ended in 1929 and the last 10 year period ending in 1952

The average profit at the end of these 23 ten-year periods was 21.5% not including any dividends. She con-cluded thatthere is no other formula of ultimate success.

This study is accepted as the most conclusive evidence of this formula.

Another important study was done by Morning star research.

In this study,they considered an investment of 12000$ in the S&P 500 index at beginning of September 1929 (time of the great depression – worst stock market crash in history)

10 years later the investment value was only 7223 $

But on the other hand, they also considered an investment of 100$ every single month from September 1929.

10 years later (august 1939) the investment value was 15571 $

This study proves the power of disciplined buying – even in the face of the great depression and the worst bear market of all times.

ConclusionHence, World over the most time tested and statistically proven approach is to “Invest regularly a fixed sum of money every month” using an automatic investment plan.

Benefits of MF-SIP(mutual fund systematic investment plan)

1.Beats inflation

In the long term the equity market indices (represented by BSE Sensex from 1979 –index=100 and NSE Nifty from 1995 index=1000) have given a long-term average of 15% to16% p.a. annualized returns.

Compare this with the long-term average 6.5% to 7.5% inflation rate in India and it is clear that the potential returns from equity as an asset class can far outpace inflation.

2. Tax-free As per the current income tax law, if you invest in equity stocks or an equity oriented mutual fund and sell your invest-ment after 1 year, then the capital gains(if any) are not subject to any tax. Also the dividends received from equity stocks or equity oriented mutual funds are tax-free.

Hence, investing inequity mutual funds- SIP and holding each SIP installment for more than 1 year makes your returns tax-free.

In the long term (take 15 to 50 year time frame) it means that all the gains that you will make will be fully tax-free!


MUTUAL FUND

3.Transparent All mutual fund open-ended schemes declare daily NAVs(net asset value) and monthly portfolios hence you will know exactly the value of your investment as well as the underlying stocks in your portfolio.

4. AffordableThe minimum investment amount is Rs 500 per month and there is no upper limit on the maximum investment amount. You can invest as per you monthly savings available.5. FlexibleHaving registered for a mutual fund – SIP, you can also invest additional amounts whenever you receive an unexpected Lump-sum amount from any source.

6. LiquidYou can sell back the units of your fund at the daily NAV(net asset value) and get your money back into your bank ac-count in 2 to 3 working days.

In case you sell before 1 year of holding, then there may be an exit load charged by the fund house. There may also be a STT(securities transaction tax) charged.

And finally

7. TINA factor

What is TINA?

(T=There I = is N=no A=alternative) investment product or instrument available

Which has all the 6 benefits?

So, where will you invest if you ignore equity mutual fund –SIP?

Now, Let us take an example of the “Power of MF-SIP”

Example: Amit Sharma age 23 years has just started working. He saves and invests Rs15000 every month in a system-atic investment plan. He does not withdraw that money ever till he retires from work.

As he grows older, his salary also grows but he invests the same Rs15000 every month. (Ideally he should increase the amount since his salary has increased)

He just keeps investing regularly in MF–SIP with full discipline and commitment

Assuming he gets a return of 12% p.a. what do you think is the money he is earning?

Well, let’s check.

After 30 years (his age is 53 years) his money grows to Rs 5.24 crores!

After 35 years (his age is 58 years) his money grows to Rs 9.64 crores! AND

After 40 years (his age is 63 years) his money grows to Rs 17.64 crores !

Disclaimer:Mutual Fund returns are market linked. Please read scheme offer document carefully before investing. Returns of 12% p.a. given in this article are a hypothetical example for the purpose of illustration only and not a guarantee.Mutual Fund – SIP (Systematic invest-ment plan) is a scientifically proven technique. It does not guarantee any fixed return.


EQUITY SIP PERFORMANCE

Aggressive Portfolio

Sr. No. Scrip Name Sector Weight Acc.

QtyAvg. Price

Total Invest-ment

Basket Qty

Price as on 31st

Dec 2015

Total Value

Portfolio Beta

Return

% Return

Wt. Return

1 Tata Motors Ltd Automobile 13.98% 93 383.76 35690.13 1.00 391.30 391.30 0.20 0.02 0.27%

2 ICICI Bank Banking 17.49% 171 261.10 44647.85 2.00 261.35 522.70 0.26 0.00 0.02%

3 LIC Housing Finance Ltd NBFC 7.52% 61 314.92 19209.84 1.00 510.05 510.05 0.11 0.62 4.66%

ADD VEDL Diversified 1.70% 30 144.39 4331.60 2.00 90.40 180.80 0.02 -0.37 -0.63%

5 Ambuja Cement Ltd Cement 5.04% 67 192.16 12874.58 2.00 203.05 406.10 0.06 0.06 0.29%

6 ONGC Ltd Oil & Gas 5.24% 43 374.15 13379.45 2.00 241.75 483.50 0.07 -0.35 -1.85%

7 Aditya Birla Nuvo Ltd Diversified 22.20% 38 1491.50 56676.93 1.00 2,167.15 2167.15 0.30 0.45 10.06%

8 Adani Ports Port & Logistics 1.81% 18 256.79 4622.30 2.00 260.90 521.80 0.03 0.02 0.03%

9 BHEL Capital Goods 1.33% 18 189.15 3404.75 2.00 169.15 338.30 0.02 -0.11 -0.14%

10 Tata Steel Ltd Metals & Mining 6.59% 51 329.84 16821.99 2.00 259.80 519.60 0.09 -0.21 -1.40%

11 Sun Pharmaceuticals Inds. Ltd

Pharmaceuticals 14.03% 55 651.42 35828.33 1.00 820.15 820.15 0.13 0.26 3.64%

12 AXIS Bank Banking 3.05% 18 433.00 7793.95 2.00 449.10 898.20 0.04 0.04 0.11%

EXIT Return from Exited Stocks

15.92%

Total 100.00% 255281.72 7759.65 1.33 30.97%

*Note: Returns since inceptionBenchmark Index Return : 10.93%

Moderate Portfolio


QtyAvg. Price

Total Invest-ment

Basket Qty

Price as on 31st

Dec 2015

Total Value

Portfolio Beta

Return

% Return

Wt. Return

1 HDFC Bank Banking 12.38% 43 844.81 36283.89 1.00 1,082.15 1082.15 0.11 0.28 3.48%

2 M&M Financial Services Ltd NBFC 4.74% 55 254.66 13896.09 2.00 242.15 484.30 0.04 -0.05 -0.23%

3 VEDL Diversified 0.92% 20 135.65 2693.00 2.00 90.40 180.80 0.01 -0.33 -0.31%

4 Ambuja Cement Ltd Cement 4.39% 66 196.07 12874.58 2.00 203.05 406.10 0.05 0.04 0.16%

5 ITC Ltd FMCG 8.21% 74 327.04 24052.93 2.00 327.80 655.60 0.04 0.00 0.02%

6 TCS Ltd IT services 28.81% 37 2283.62 84456.95 1.00 2,436.85 2436.85 0.16 0.07 1.93%

7 Zee Entertainment Ent. Ltd Media 6.60% 66 294.02 19339.10 2.00 437.25 874.50 0.05 0.49 3.21%

8 Hindalco Inds. Ltd Metals & Mining 3.11% 80 115.96 9116.42 3.00 84.75 254.25 0.05 -0.27 -0.84%

9 Reliance Inds. Ltd Oil & Gas 11.69% 37 927.22 34270.25 1.00 1,014.60 1014.60 0.13 0.09 1.10%

10 Biocon Ltd Pharmaceuticals 8.77% 66 390.67 25717.96 2.00 518.10 1036.20 0.08 0.33 2.86%

11 Bharti Airtel Ltd Telecom 10.38% 91 336.27 30418.73 2.00 340.40 680.80 0.06 0.01 0.13%

EXIT Return from Exited Stocks 13.19%

Total 100.00% 293119.90 9106.15 0.79 24.70% *Note: Returns since inception

Benchmark Index Return : 10.93%


EQUITY SIP PERFORMANCE

Defensive Portfolio


QtyAvg. Price

Total In-vestment

Basket Qty

Price as on 31st Dec

2015

Total Value

Portfolio Beta

Return

% Re-turn

Wt. Return

1 Glenmark Pharma Pharmaceuticals 3.42% 8 1139.08 9096.65 1.00 921.90 921.90 0.02 -0.19 -0.65%

2 HDFC Bank Banking 13.31% 41 865.46 35401.70 1.00 1,082.15 1082.15 0.11 0.25 3.33%

3 Cummins India Ltd Capital Goods 9.93% 35 756.48 26406.95 1.00 1,030.30 1030.30 0.07 0.36 3.59%

4 Dabur India Ltd FMCG 8.95% 120 202.33 23799.75 2.00 276.95 553.90 0.04 0.37 3.30%

5 Tech Mahindra IT services 1.79% 8 595.83 4750.60 1.00 521.65 521.65 0.01 -0.12 -0.22%

6 TCS Ltd IT services 31.69% 35 2410.23 84288.15 1.00 2,436.85 2436.85 0.17 0.01 0.35%

7 Hind. Unilever FMCG 2.90% 8 965.43 7707.45 1.00 862.75 862.75 0.01 -0.11 -0.31%

8 Oil India Oil & Gas 1.26% 8 419.78 3342.25 1.00 383.00 383.00 0.01 -0.09 -0.11%

9 Lupin Ltd Pharmaceuticals 17.92% 35 1364.17 47676.10 1.00 1,837.25 1837.25 0.11 0.35 6.22%

10 Bharti Airtel Ltd Telecom 8.84% 65 364.89 23522.85 1.00 340.40 340.40 0.05 -0.07 -0.59%

EXIT Return from Exited Stocks

34.90%

Total 100.00% 265992.45 9970.15 0.60 49.81%


Mid Cap Portfolio


QtyAvg. Price

Total In-vestment

Basket Qty

Price as on 31st Dec

2015

Total Value

Portfolio Beta

Return

% Re-turn

Wt. Return

1 Motherson Sumi Sys-tems Ltd

Auto Ancillaries 8.64% 59 223.86 13207.71 2.00 293.15 586.30 0.08 0.31 2.68%

3 Kalpataru Power Power Transmis-sion

3.58% 27 202.49 5467.30 3.00 256.45 769.35 0.05 0.27 0.95%

4 Va Tech Wabag Ltd Capital Goods 26.37% 66 610.53 40295.20 1.00 687.75 687.75 0.28 0.13 3.34%

5 PFS NBFC 2.08% 90 35.30 3177.10 10.00 40.40 404.00 0.04 0.14 0.30%

6 Gateway Distriparks Logistic 6.39% 28 348.68 9763.10 2.00 323.25 646.50 0.06 -0.07 -0.47%

7 Aia Engineering Ltd Capital Goods 15.42% 24 981.46 23555.10 1.00 892.65 892.65 0.12 -0.09 -1.39%

8 Apollo Tyre Auto Ancillaries 2.66% 27 150.34 4059.15 3.00 156.20 468.60 0.04 0.04 0.10%

9 Ipca Laboratories Ltd Pharmaceuticals 14.12% 28 770.38 21570.75 1.00 741.90 741.90 0.07 -0.04 -0.52%

10 JK Cement Ltd Cement 11.26% 33 521.18 17199.10 1.00 577.05 577.05 0.14 0.11 1.21%

11 DHFL NBFC 4.68% 36 198.43 7143.65 4.00 235.25 941.00 0.06 0.19 0.87%

12 Majesco Ltd* IT 4.82% 20 368.05 7360.90 2.00 643.45 1286.90 0.04 0.75 3.60%

Exit Return from Exited Stocks

39.18%

Total 100.00% 152799.06 8002.00 0.97 49.84%



RETAIL RESEARCH CALL PERFORMANCE

Quick PicksCalls Performance Jan Feb March April May June July Au-

gust Sept Oct Nov Dec

Total calls given 60 56 55 43 45 38 43 16 13 2 2 4

Successful 24 16 27 26 31 25 13 9 9 2 2

Unsuccessful 13 18 21 17 14 13 30 7 4 2 2 2

Succes Rate 65% 42% 56% 60% 69% 66% 30% 56% 69% 0% 100% 50%

MT Medium Risk CallsCalls Activated 14 12 14 11 7 16 7 9 13 3 8 9

Successful 10 8 12 6 4 11 5 4 7 1 7 5

Unsuccessful 4 4 2 5 3 5 2 5 6 2 1 4

Succes Rate 71% 67% 86% 55% 57% 69% 71% 44% 54% 33% 88% 56%

MT High Risk CallsCalls Activated 5 13 19 8 9 14 19 16 32 30 8 11

Successful 3 11 12 3 8 11 14 11 21 23 4 6

Unsuccessful 2 2 7 5 1 3 5 5 11 7 8 5

Succes Rate 60% 85% 63% 38% 89% 79% 74% 69% 66% 77% 50% 55%

Positional Technical Calls Calls Activated 3 7 14 9 14 12 11 13 8 6 5 3

Successful 2 6 7 5 11 7 9 11 4 4 4 2

Unsuccessful 1 1 7 4 3 5 2 2 4 2 1 1

Succes Rate 67% 86% 50% 56% 79% 58% 82% 85% 50% 67% 80% 67%

Smart Delivery TradeCalls Activated - - - - - - - 19 22 16 9 17

Successful - - - - - - - 14 15 11 5 12

Unsuccessful - - - - - - - 5 7 5 4 5

Succes Rate - - - - - - - 74% 68% 69% 56% 71%


EVENT CALENDARJanuary 2016

Economic Event Quarterly Result

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

1 2 3

4 5 6 7• Bajaj Corp Ltd.

8• US

Employment Report

9• Sintex Ltd.

10

11 12• Industrial Production YoY NOV

• Manufacturing Production YoY NOV

• Indusind Bank Ltd.

13 14•WPIInflationYoy Dec •Wpi ManufacturingYoy Dec

15• Gruh

Finance Ltd.• Pipavav

Defence And Offshore Eng

• ZEE Enter-tainment Ent. Ltd.

16• Karnataka

Bank Ltd.

17

18• Asian Paints Ltd

• Ttk Prestige Ltd.

• Mindtree Ltd.

19 20• Axis Bank Ltd. • Tata Sponge Iron

Ltd.

21• EXIDE Indutries

Ltd.

22• Mahindra

Holidays & Resorts India Ltd

23• Persistent Systems Ltd.

24

25• HDFC Bank

Ltd

26• Fed Open

Market Committee Meet for Interest Rate

27• Fed Open Market

Committee Meet for Interest Rate.

28• Dabur India

Ltd. • Mahindra

Lifespace Developers Ltd.

• Info Edge (India) Ltd.

29• Shriram

City Union Finance Ltd.

30 31

•FederalBankLtd.

•InfosysLtd.•Cyient Limited

• Housing Development Finance

• Colgate-Palmolive (India) Ltd

• Godrej Consumer Products Ltd.

• Ht Media Ltd.• United Spirits Ltd


January 2016

Asit C. Mehta Investment Interrmediates Limited, Research Analyst

Equity & Derivative

Akhil Rathi 022 2858 3733

Rohit Sinha 022 2858 3209

Hrishikesh Yedve 022 2858 3740

Kripashankar Maurya 022 2858 3211

Mutual Fund

Prashant Mehta 022 2858 3613

Corporate Fixed Deposit

Manju Makwana 022 6132 5931

Debt Market

Sachin Kathar 022 2858 5959

Information pertaining to Asit C. Mehta Investment Interrmediates Limited (ACMIIL):ACMIIL is a SEBI registered Stock Broker, Merchant Banker and Depository Participant. It is also a AMFI registered Mu-tual Fund Distributor. It does not have any disciplinary history. Its associate/group companies are Asit C. Mehta Com-modity Services Limited, Asit C. Mehta Realty Services Pvt. Ltd, Asit C. Mehta Forex Pvt. Ltd, Nucleus IT Enabled Ser-vices , Asit C. Mehta Financial Services Limited (all providing services other than stock broking and merchant banking). DisclosuresACMIIL/its associates and its Research analysts have no financial interest in the companies covered on the report. AC-MIIL/its associates and Research analysts did not have actual/beneficial ownership of one per cent or more in the com-panies being covered at the end of month immediately preceding the date of publication of the research report. ACMIIL/its associates or Research analysts have no material conflict of interest, have not received any compensation/benefits for any reason (including investment banking/merchant banking or brokerage services) from either the companies con-cerned/third parties with respect to the companies covered in the past 12 months. ACMIIL/its associates and research analysts have neither managed or co-managed any public offering of securities of the companies covered nor engaged in market making activity for the companies being covered. Further, the companies covered neither are/nor were a client during the 12 months preceding the date of the research report. Further, the Research analyst/s covering the companies covered herein have not served as an officer/director or employee of the companies being coveredDisclaimer:

This report is based on information that we consider reliable, but we do not represent that it is accurate or complete and it should not be relied upon such. ACMIIL or any of its affiliates or employees 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 the report. To enhance transparency we have incorporated a Disclosure of Interest Statement in this document. This should however not be treated as endorsement of the views expressed in the report

Retail Research Desk:

+91 22 2858 3733 [email protected]

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Documents

January 2016 - investmentz.co.ininvestmentz.co.in/emailer/Market_Pulse_Jan-2016.pdf · Margin % PAT EPS(Rs. ... catalyzers, and clutches. IFB’s product range in-cludes fine blanked