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Product Review (Oct) & Market Outlook (Nov)

Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

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Page 1: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Product Review (Oct)

&

Market Outlook (Nov)

Page 2: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

• Top Picks folio

• Stock Ideas/Viewpoints

• Wealth Creator

Fundamental Research Offerings

Page 3: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Sharekhan’s Top Picks folio An all-weather balanced portfolio

Page 4: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Top Picks folio

Sharekhan’s Top Picks folio

• A well-balanced portfolio of thoroughly researched 10-12 companies • Prefers sustainable business model, focuses on near-term triggers without losing sight of long-term wealth creation

Key objectives

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

How is our portfolio different?

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

We religiously follow the process

• Actively tracked and reviewed every month without exception; generally in initial days of the month • Explains all changes/revisions in the folio for better understanding of investors

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Superior returns across Market Cycles (on absolute as well as relative basis)

Beating the benchmark indices consistently (absolute returns in %; not annualised)

Sharekhan

(Top Picks) Sensex Nifty CNX MIDCAP

YTD CY2017 49.1 24.8 26.5 36.5

CY2016 8.8 1.8 3.2 7.1

CY2015 13.9 -5.1 -4.1 6.5

CY2014 63.6 29.9 30.9 55.1

CY2013 12.4 8.5 6.4 -5.6

CY2012 35.1 26.2 29.0 36.0

CY2011 -20.5 -21.2 -21.7 -25.0

CY2010 16.8 11.5 12.9 11.5

CY2009 116.1 76.1 72.0 114.0

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

1 mth 3 mth 6 mth 1 year 3 year 5 year

Top Picks 3.8 2.8 17.3 32.4 95.2 263.4

Sensex 6.3 2.3 11.1 12.2 18.9 78.5

Nifty 6.0 2.8 11.3 13.5 24.6 83.4

CNX MIDCAP 9.1 5.8 8.3 16.4 65.4 151.7

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

Cumulative returns (since April 2009)

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Sharekhan Top Picks Sensex Nifty

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Well Balance Portfolio

Name CMP* PER (x) RoE (%) Price Upside

(Rs) FY17 FY18E FY19E FY17 FY18E FY19E target (Rs)#

(%)

Bajaj Finserv 5,024 35.4 - - 15.4 - - 6,050 20%

Bharat Electronics 185 26.8 23.4 20.8 14.9 15.7 16.1 220 19%

HDFC Bank 1,807 26.2 21.5 17.7 18.7 19.9 20.7 2,100 16%

IndusInd Bank 1,625 33.7 26.3 20.5 16.2 16.5 18.2 2,000 23%

Jubilant FoodWorks 1,634 74.3 55.8 45.6 9.2 15.9 18.2 1,914 17%

KEC International 293 24.7 17.1 13.5 21.2 24.3 24.9 330 13%

Maruti Suzuki 8,217 33.8 28.7 23.9 21.0 20.7 20.5 9,265 13%

Power Grid Corp 213 15.0 12.6 10.7 13.8 14.4 15.1 240 13%

Reliance Industries 941 18.7 17.7 14.2 11.2 10.5 11.7 ** -

Sundram Fasteners 516 31.9 26.6 23.1 27.6 27.4 26.2 ** -

UPL Limited 799 22.3 19.7 15.9 27.2 25.0 25.4 980 23%

ZEE Entertainment 542 42.7 39.3 29.9 18.3 17.4 19.5 610 13%

*CMP as on 31st October 2017 # Price target for next 6-12 months, ## Price and target adjusted for 1:1 bonus issue

Easy to follow with revision done at the beginning of the month (usually changes in 2 stocks on an average); for simplicity, we recommend equal weightage in each stock and assume the same to calculate monthly performance. Please note the returns shown do not include transaction cost.

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Top Picks performance for October 2017 Sharekhan’s top picks basket – lagged tad behind broader indices; made three changes in the portfolio

The markets continued to climb the wall of worries and scaled new highs during the month. The sentiments were boosted by a slew of positive announcements by the government, which included the infusion of a huge dose of capital into ailing public-sector banks to help them clean up their books. Moreover, the government announced an ambitious capex program to develop the road network under the ‘Bharatmala’ project. Consequently, the benchmark indices appreciated by 6% during the quarter. Given the unexpected rally in psu banks and rebalancing of allocations within the banking sector by institutional investors has led to private sector banks underperformance during the month. Consequently, the Top Picks basket lagged behind with gains of 4% last month. However, we see no reason to make any revisions and retain our faith in the structural growth story of leading private sector banks.

Made three changes in the portfolio

We are introducing Bajaj Finserv in place of LIC Housing Finance this month. Bajaj Finserv offers exposure to the fast-growing retail lending business of Bajaj Finance as well as insurance business of the Bajaj Group. More importantly, the stock is available at a more reasonable price now. The other two changes suggested in the portfolio are: introduction of Bharat Electronics and Jubilant Foodworks in place of ITC and Godrej Industries. Both changes are driven by robust Q2 performance and an improving growth outlook for the suggested two companies.

Page 8: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Stock Ideas / Viewpoints Make an informed decision

Page 9: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Sharekhan's Stock Ideas

Key objectives

• Identify right stocks across sectors through bottom-up approach • Focus on generating absolute returns with a time frame of 6-12 months and a favourable risk-reward ratio

Focussed approach

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

Risk and reward

• 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 • This also allows investors to churn their portfolio by switching from one stock to another to optimise the overall return

Track record

• Our last 27 Stock Ideas generated 138% returns on an aggregate basis. • Some of the blockbuster Stock Ideas: Bajaj Finance (up 911%), TVS Motor (up 688%), Gabriel India (up 503%) Finolex Cables (up 417%), & Supreme Industries (up 168%)

Page 10: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Top 10 Stock Ideas delivered strong returns

-In last 43 months, we have initiated 27 new stock idea which have given average returns of 138% per new idea.

*CMP as on Oct 31, 2017

Company Reco. Initiation Date Initiation Price

(Rs) CMP* (Rs) Returns (%)

Bajaj Finance Buy 21-May-14 178 1,800 911

TVS Motor Company Buy 30-Apr-14 92 725 688

Gabriel India Buy 16-Apr-14 33 197 503

Finolex Cables Buy 22-Apr-14 119 616 417

Supreme Industries Buy 09-Jan-14 420 1126 168

LIC Housing Finance Buy 28-Mar-14 232 599 158

Rico Auto Industries Buy 29-Oct-14 39 99 154

Skipper Buy 19-Jan-15 112 243 117

Century Plyboards Buy 27-Nov-14 151 283 87

Firstsource Solutions Buy 03-Feb-14 24 44 82

Page 11: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Viewpoint

Page 12: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Sharekhan's Viewpoints

Key objectives

• The idea is to arm investors with knowledge to help you take informed decisions in the market • 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

Page 13: Product Review (Oct) Market Outlook (Nov) - · PDF fileViewpoints performance snapshot ... (after Amul), having one-third ... The company is focusing to grow cheese sales in tier II

Viewpoints performance snapshot

Total number of calls generated 291

Number of closed calls 158

Number of calls in profit 134

Number of calls in loss 22

No Profit No Loss 2

Converted to stock ideas 8

Success ratio 89.8%

Aggregate return 25%

Top 15 calls return 93%

# "Star Cement" Recommended price adjusted after reverse merger with " Star Ferro & Cement Ltd "

Date of initiation

Viewpoint Reco Price

Date of closure

Closure price

Total Returns

(%)

25-Sep-14 Indo Count Industries 172 16-Feb-15 422 145.3

13-Jun-14 Dhanuka Agritech 380 19-May-17 831 118.7

26-Mar-14 FIEM Industries 409 07-Jan-15 886 116.6

25-Jun-14 JK Tyre 64 23-Dec-14 138 115.4

16-Oct-14 Dhanuka Agritech 428 19-May-17 831 94.2

04-Jan-17 Insecticides India 502 13-Sep-17 952 89.6

01-Sep-14 Salzer Electronics 136 11-Mar-15 257 89

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

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

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

09-Aug-16 Star Cement 72# 09-Aug-17 123 70.6

09-Feb-17 Insecticides India 563 13-Sep-17 952 69.1

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Viewpoint closed in Oct2017

Date of release Date of closure Viewpoint Reco. Price Call closure

price Abs Returns (%)

08-Jun-16 13-Oct-17 Bharti Infratel 376 450 20

03-Aug-16 13-Oct-17 Bharti Infratel 395 450 14

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New Initiation – Parag Milk Foods Ltd

• Parag Milk Foods Limited (Parag) generated 65% of its revenue from value-added products in FY2017, highest amongst peers. Going forward, it is projected to increase further to ~70%, as the company is focusing to grow this revenue stream at the highest rate to drive profitability.

• Parag’s portfolio of value-added products is very rich, consisting of cheese and paneer (Go brand), ghee (Gowardhan brand), recently launched whey protein powder (under Avvatar brand) and milk-based fruit drink (under Slurp brand). Parag sells only low fat, cow milk products, targeting health-conscious people. Parag is the second largest player in the cheese market (after Amul), having one-third share of the market. The company is focusing to grow cheese sales in tier II and III cities, where penetration level of cheese is very low. The ghee market in India is highly unorganised, forming 88% of the total market, thus providing huge growth potential to organised players.

• One common thread amongst all the value-added product categories of Parag is that the addressable market is humongous and growth rates are strong, driven by either low penetration or presence of the substantial unorganised sector. The company is focusing to increase its distribution reach to 3.5 lakh retail outlets over the next couple of years from the present 2 lakh retail outlets.

• Going forward, profitability improvement should be sustained with new product launches driving revenue growth and elevated marketing spend to promote new product launches getting absorbed over higher revenue base. We initiate coverage with a positive view on the stock, having 20% return potential.

Reco Price– Rs 256 CMP – Rs 270 View: Positive

Particulars (Rs cr) FY16 FY17 FY18E FY19E

Net Sales 1645 1731 1956 2223

EBITDA margin (%) 9 6.3 8.1 9.4

PAT 48 38 48.7 79.2

EPS 6.9 4.5 5.8 9.4

ROE(%) 13.3 5.8 6.4 8.8

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New Initiation – Godrej Agrovet Ltd

• Godrej Agrovet Ltd (GAVL) was incorporated in 1991 with a focus on growing businesses such animal feed, crop protection, oil palm, dairy, and poultry & processed foods. Animal feed business is its largest business which contributes more than ~53% in revenues and ~36% in PBIT in FY17.

• It is present across various growing businesses such animal feed, crop protection, oil palm, dairy, and poultry, thereby hedging the risk of slowdown in a particular segment. Synergies across diverse businesses aided in achieving strong growth and operating efficiency, and competitive edge over other players, which resulted in revenue and PAT reporting CAGR of 16% and 22%, respectively, over FY2013-FY2017.

• India’s pesticide consumption is the lowest globally at 1kg per hectare (China and U.S. consumption is 13kg/hectare and 12 kg/hectare, respectively). This provides an opportunity for companies such as GAVL to expand their base in the domestic market. GAVL manufactures products catering to the entire crop lifecycle. GAVL acquired Astec Lifesciences to enhance its product portfolio and cater more to international geographies. GAVL’s crop protection business has grown strongly at a CAGR of 36% over FY2013-FY2017 and has PBIT margin of about 22%.

• Despite a diversified business, GAVL has managed its working capital cycle in the range of 35-50 days, which is lower as compared to 75-100 days working capital cycle for agrochemicals companies. The net debt/ equity is at a comfortable position of 0.6x and further reduction in debt through IPO proceeds would almost make it a debt-free company. The company has strong return ratios, with RoE and RoCE standing at about 29.1% and 14.9%, respectively, in FY2017.

• Strong parentage and lean balance sheet, GAVL has a strong potential to achieve strong earnings growth in the coming years. Such a de-risked business model is available at 27.5x its FY2019E earnings, which is at a discount to the nearest peer such as Avanti Feeds, which is trading at 30x its FY2019E earnings. We have a positive view on the stock with a potential upside of 15-18% from current levels.

Reco Price– Rs 596 CMP – Rs 576 View: Positive

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

Net sales 3750.2 4911 5510 6172 6951

EBITDA margin (%) 7.9 8.9 9.4 9.8 10.3

PAT 261.1 274.4 321.5 398.5 481.6

EPS 10.3 13.6 16.8 20.8 25.1

RoE (%) 27.8 29.1 24.9 23.1 23.4

PER (x) 55.5 42.1 34.1 27.5 22.8

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New Initiation - GNA Axles

• GNA Axles Limited (GNA) is one of India’s leading rear axle shafts manufacturer and supplier to almost all segments of on-highway vehicles (LCV, MCV, HCV and buses) and off-highway vehicles. The company also manufactures solid and hollow spindles used in assembling the axles for various vehicles and equipment.

• The OEM outlook for GNA’s clients in both the domestic and export markets has improved substantially in the past six to eight months. Surge in CV and tractor volumes on account of improved economic growth post GST and increased farm incomes and higher MSP are expected to drive demand. In addition, export markets for rear axle shafts which form about 40% of topline, are likely to maintain healthy CAGR of 6% over CY2016-CY2020.

• GNA is broadening its product profile by developing shafts for the SUV segment. GNA is investing Rs.50 crore for the SUV project and has already commenced construction of a new plant. Given its long-standing relationship with OEMs, GNA is confident of securing supplies for the SUV space. GNA is aiming to commence commercial production in FY2020 and we have assumed about Rs.40 crore in revenue in FY2020.

• GNA has lined up capex of Rs.80 crore in FY2018 towards new plant and machinery. FY2018 is expected to be a peak capex year for GNA. Increased capacity utilisation coupled with tapering capex cycle would improve the company’s asset turnover ratio from 1.5x in FY2018 to 1.8x in FY2020.

• we expect GNA to outpace the automotive industry’s growth, reporting a robust 18% topline CAGR over FY2017-FY2019. Further, reduced interest expenses will lead to net profit improving at a 26% CAGR over the next two years . We Initiate Viewpoint Coverage with a Positive view.

Reco Price– Rs 363 CMP – Rs 380 View: Positive

Particulars (Rs. Cr.) FY15 FY16 FY17 FY18E FY19E

Net sales 425.9 508.5 513.4 594.9 713.9

EBITDA margin (%) 13.2 16.2 15.7 15.6 15.8

PAT 15 26 29.6 40.7 46.5

EPS 7 12.1 13.8 19 21.7

RoE (%) 13.3 18.8 10 12.2 12.4

PER (x) 52 30 26.3 19.1 16.8

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New Initiation – BSE Ltd

• BSE Limited, the premier stock exchange in India, is a compelling play on the multi-year trend of shift in household savings towards financial assets in general and a booming equity markets in particular.

• BSE has taken the lead to diversify its business model by exploring new business platforms like Star MF platform (for mutual fund distributors) and International exchange (INX; derivative products across asset classes) over the last couple of years. BSE’s small & medium enterprises (SME) platform should provide a steady annual source of listing revenue as well as growth in turnover on BSE once SME companies migrate to the main board of BSE.

• It has also invested in technology and its transaction time is now as low as 6 microseconds, fastest in the world from as high as 300 milliseconds. This seems to have brought many market participants back to the exchange resulting in increase in BSE’s revenue across streams. At FY’17 end, BSE’s spend behind technology stood at 20.4% of consolidated operational income. Over the recent past, the BSE management has utilized their pricing power across revenue streams and hiked transaction fees/charges resulting into narrowing the gap with competing exchanges in terms of transaction charges.

• Discerning marketing strategies of utilizing its pricing power from existing revenue streams as well as well planned management action of widening its revenue streams drives us to initiate on the stock with positive outlook. We expect 18-20% upside potential from this stock over next 6 to 9 months.

* Fall in EBITDA margin is due to incurring of expenses on INX operations without generating income in first year of operations

* *Fall in EPS due to stake sale of 26% in CDSL; thus it is not a subsidiary anymore though BSE still dominant stake holders in CDSL

Reco Price– Rs 970 CMP – Rs 990 View: Positive

Particulars (Rs cr) FY16 FY17 FY18E FY19

Total Revenue 424.8 517.3 429.5 480.9 EBITDA margin (%) 15.8 18.8 4.6* 16.3

PAT 179.4 241.5 186.9 249.8

EPS (Rs) 33.4 44.9 34.7** 46.4

PER 29 21.6 27.9 20.9

ROE(%) 7.1 9.1 7 9

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Jubilant Foodworks – Upgrade to Positive

• Jubilant Foodworks (JFL), largest food service company in India, shifted its focus to customer satisfaction from store additions to improve its store fundamentals over the long run. With refreshment of Menu and improvement in the quality of the product the company gained good traction and posted a same-store-sales growth (SSG) of 5.5% in Q2FY2018 (6.5% in Q1FY2018) as against SSG decline in earlier quarters.

• JFL has undertaken various initiatives including implementation Six Sigma and other statistical techniques to deliver significant cost benefits to the business. Some of the key projects includes improvement in sales through online ordering and reduce the employee cost. It is also focusing on reducing losses of Dunkin Donuts by closing non profitable stores and introducing value product portfolio to improve the store sales in the coming quarters. Thus we expect JFL’s standalone OPM to improve to ~14% in FY2020 from 9.7% in FY2017.

• With negative working capital, JFL’s balance sheet remained lean in the environment of slowing SSGs and sustained store additions. Further with improvement in the profitability the return ratio will see up-swing with RoE and RoCE standing at 18.7% and 26.1% in FY2020 as against 9.2% and 12.3% in FY2017.

• With re-defined strategy, JFL’s revenues and earnings are expected to grow at CAGR of 12% and 47% respectively over FY2017-20. Any sustained improvement in the SSG would remain the key trigger for the stock in the near term. We have a positive view on the stock with 16-18% upside from the current levels.

• Key risk: Any slowdown in the discretionary environment or any significant increase in tax on restaurants would act as a key risk to our earnings estimates.

Reco Price– Rs 1622 CMP – Rs 1642 View: Positive

Particulars FY2016 FY2017 FY2018E FY2019E FY2020E

Net Sales 2410.2 2546.1 2904 3151.7 3466

OPM(%) 11.3 9.7 12.6 13.9 14.3

PAT 106.6 75.8 145.4 193.5 235.8

EPS (Rs.) 16.2 11.5 22 29.3 35.8

P/E(x) 100.1 141.2 73.6 55.3 45.4

EV/EBIDTA (x) 38.7 42.7 28.4 23.8 20.8

RoE(%) 14.3 9.2 15.9 18.2 18.7

RoCE(%) 19.5 12.3 21.7 25.1 26.1

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Natco - Upgrade to Positive

• Natco Pharma’s (Natco) marketing partner, Mylan Inc., received the much-awaited USFDA approval for gCopaxone 20mg and 40mg, used in the treatment of patients with relapsing forms of multiple sclerosis (MS). Copaxone branded sales for 20mg dose is ~$700 million and for 40mg dose is ~$3.64 billion for 12 months ending 31st July 2017.

• Natco launched gCopaxone in US and hence, we have revised our sales estimates for FY2018/FY2019 by 5%/11% and profit estimates by 21.5%/18.4%, respectively We feel Natco may report sales of $360million from Copaxone over two and half years (H2FY2018 to FY2020) and margins would be substantially higher in it. There could be further upside to our estimates if Natco (along with Mylan partnership) gets six-month exclusivity period for Copaxone. Dr. Reddy’s (November 2017 target action date for 20mg product), Pfizer, Biocon and Synthon are other filers of Copaxone.

• At Rs.954, the stock is currently trading at 20x FY2019E earnings and 16.3x FY2020E earnings. We upgrade our rating from Neutral to Positive as Natco will have first-mover advantage, and approval proves its ability to develop complex products. We expect Natco’s sales and profitability to grow at a three-year CAGR of 34% and 45%, respectively, over FY2018-FY2020. Hence, we expect 18-20% upside over the next six months.

• Key risks: Any delay in product approvals from the USFDA, increased number of players getting approvals for similar drug and any negative outcome of the USFDA inspection of plants could impact future revenue and profitability of the company significantly.

Reco Price– Rs 954 CMP – Rs 967 View: Positive

Particulars FY2015 FY2016 FY2017 FY2018E FY2019E

Total Sales 825.3 1080.1 2065 2703.7 3080.5

Reported PAT 134.6 157.1 486 731.2 829.6

EPS (Rs) 8.1 9 27.9 41.9 47.5

PER (x) 96.5 105.6 34.2 22.7 20

RONW (%) 15.9 12.1 29.5 30.7 25.8

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Bajaj Corp – Upgrade to Positive

• Bajaj Corp Limited’s (Bajaj Corp) sales volume growth recovered to 5% after lull performance in the past seven quarters. Recovery in volume growth was driven by improvement in urban demand, while rural demand is yet to pick up.

• Q2FY2018 was the first quarter (after several quarters of lull performances) that saw strong improvement of 6.5% in volume growth of Almond Drop Hair Oil brand, largely driven by improvement in urban demand and low base of corresponding quarter last year. With a redefined distribution strategy and higher media spends, Nomarks is gaining good traction in the domestic market. The brand's revenue stood at Rs.6.4 crore in Q2FY2018 as against Rs.6 crore in Q1FY2018 (Rs.6.5 crore in Q2FY2017). Sales of Nomarks cream grew by 48% during the quarter.

• We expect volume growth to recover from Q3FY2018 on account of improving urban demand and expected improvement in rural demand. However Canteen Stores Department (CSD) sales (contributes 5% to revenue) will take longer time to recover. Further, the company is focusing on enhancing its direct distribution reach to mitigate the impact of inactive wholesalers (dependence on wholesale channel has reduced to 40% from 50% earlier).

• We have fine-tuned our earnings estimates to factor in better volume growth and lower OPM due to higher advertisement spends. Improvement in light hair oil category demand, new product addition and sustained enhancement in direct distribution reach would be key revenue and earning drivers for the company in the near to medium term. We have revised our view to Positive from Neutral, with 10-12% upside from current levels.

• Key risk: Any significant drop in sales volume on account of unforeseen events (such as demonetisation/change in industry policy) would act as key risk to our earnings estimates in the near to medium term.

Reco Price– Rs 415 CMP – Rs 464 View: Positive

Particulars FY2015 FY2016 FY2017 FY2018E FY2019E

Net Sales 821.4 799.7 796.9 837.1 940.1

Reported PAT 173.4 196.4 218.2 238.6 271.9 Reported EPS (Rs.) 11.8 13.3 14.8 16.2 18.4

OPM (%) 29.1 34.2 33.1 32.8 33.4

PE(X) 35.2 31.1 28 25.6 22.5

RoE (%) 41.6 47.9 47.2 45.7 47

RoCE (%) 52.5 60.2 58.8 57.4 59.8

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L&T Finance Holding – Upgrade to Positive

• L&T Finance Holding (LTFH) has posted good set of numbers for Q2FY18. Net interest income grew 16.4% y-o-y as the loan book expanded by 18.8% y-o-y and net interest margins stayed steady (NIM; calc). Consequently, the net profit was higher than estimates, growing 45.2% y-o-y to Rs. 360 crore.

• Despite GST and demonetisation related challenges, LTFH’s loan book grew by an attractive 18.8% y-o-y. The focused book expanded by 23.2% y-o-y, while the de-focused book declined 47.5% y-o-y and now forms only 2.8% of the overall portfolio. We believe the management’s guidance of an over 20% growth in the loan book in the next few years is achievable.

• In Q2FY18, the gross non-performing asset (GNPA) ratio increased marginally by 9 bps to 5.80% as against 5.71% q-o-q (90 DPD) while the net NPA ratio remained stable on a sequential basis at 3.31%. Asset quality within the rural segment improved as GNPA ratio declined from 11.35% to 10.90% QoQ while Housing finance book also reported improving GNPA ratio (0.83% versus 0.94% QoQ). However the wholesale lending book saw rise in NPAs (GNPA up to 4.79% from 4.32% QoQ).

• LTFH has been successfully implementing its new strategy to grow in select segments, by improving upon other parameters such as costs, risk management and use of technology to provide better services, thereby forming a complete product suite for the customer that results in sustainable growth. The management also looks to focus on “variability of earnings” in its long-term objectives, in which they could make accelerated provisions to create a buffer that could be used in case of sudden shocks and thus avoiding volatility in earnings.

• We have introduced FY20 estimates, upgraded our view from Neutral to Positive and expect a 13-15% upside in the stock.

Reco Price– Rs 199 CMP – Rs 201 View: Positive

Rs Cr FY16 FY17 FY18E FY19E FY20E NII 2,693 3,034 3,852 4,442 5,156

Growth % 15 13 27 15 16 PAT 857 1042 1305 1552 1892

Growth % 21 22 25 19 22 EPS 3.79 5.21 7.43 8.84 10.77

BVPS 40 44 49 54 60 PE (x) 52.5 38.2 26.8 22.5 31.2

PBV (x) 5.6 6.1 5.2 4.6 4.2

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Re-iterate - Tata Motors DVR

• Tata Motors DVR (differential voting rights) shares are currently trading at a steep 43% discount to Tata Motors ordinary equity shares. The discounting is higher than the historical average of 35%. The recent discounting is the steepest since May 2013, when discounting levels had reached the 45-50% mark.

• Tata Motors’ domestic business (contributing ~20% to the topline) is witnessing improvement in the passenger vehicles and commercial vehicles segments. Recent product launches in the PV segment have resulted in market share improving from 4.9% in Q3FY2016 to 5.7% in FY2017. Further, the commercial vehicle business has gained traction, with the company reporting strong 26% volume growth in Q2FY2018

• Improving capacity utilization coupled with operational efficiencies is expected to significantly boost performance and management is targeting turnaround of domestic operations by FY2019-end. Also forex losses in overseas operations are expected to reverse from Q4FY2018 onwards.

• Tata Motors DVR shares have corrected by 39% in the past nine months compared to 24% correction in ordinary shares. This has resulted in widening of discounting in DVR shares with respect to ordinary shares from 36% in January 2017 to 43% currently. We expect the discounting to narrow and reach the average level of 35% from the current level of 43%, thus providing scope of upside in DVR shares from the current levels.

Reco Price– Rs 240 CMP – Rs 240 View: Positive

Particulars (Rs. Cr.)

FY15 FY16 FY17 FY18E FY19E

Net sales 263,159 273,046 269,693 315,770 370,414

EBITDA margin (%) 14.9 13.4 11 10.6 13.4

PAT 14,109.5 11,579.3 7,454.4 8,980.7 18,233.6

EPS 43.8 34.1 21.9 26.4 53.7

RoE (%) 25.1 14.3 8.5 10.2 18.7

PER (x) 5.5 7 10.9 9.1 4.5

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Re-iterate – Aditya Birla Fashion & Retail Limited

• Aditya Birla Fashion & Retail Limited’s (ABFRL) revenue de-grew 4.3% YoY in Q2FY2018 to Rs. 1,804 crore. GST rollout, its consequent transition issues, and drop in footfalls in July affected the company’s revenue. ABFRL’s gross margins declined 108 bps to 52% owing to increase in input prices and sustained losses in the new businesses. The low revenue and gross margin dragged the company’s OPM by ~365 bps YoY at 5.2%. ABFRL’s bottom line reported loss of Rs. 10 crore in Q2FY2018, as against profit of Rs. 65 crore in Q2FY2017.

• Due to GST rollout, the entire industry observed an EOSS in June which advanced some part of Q2 sales to Q1. Store footfalls dropped sharply post GST, affecting July sales while August showed some recovery. However, September recorded strong sales growth aided by festive season as LTL sales of MFL and Pantaloons stood at 21% and 23% during the month. Revenue of fashion brands (including Forever 21) grew 10%, while that of other businesses (includes innerwear business) grew 52% during the quarter.

• For H2FY2018, we expect better revenue growth led by festive/wedding season. Further, the losses in Forever 21 will reduce in the coming quarters and is expected to break even by end of FY2018. We believe that a break even at EBITDA level in Van Heusen innerwear business is still some time away. Hence, we expect margins to remain subdued in FY2018, followed by an expansion in FY2019.

• We have significantly reduced our earnings estimates for FY2018 and FY2019 to factor in the impact of GST transition on sales performance and slow recovery in the margin expansion. However, the stock has corrected substantially and hence, the downside risk is limited. With the scaling up of Forever 21 and inner wear business, we expect strong revenue growth momentum to sustain and a gradual improvement in the margins over the medium term. We maintain our positive view on the stock with an upside of 10-12% from the current level.

Reco Price– Rs 153 CMP – Rs 156 View: Positive

Particulars (Rs. Cr.) FY15 FY16 FY17 FY18E FY19E

Net sales 1851 6060 6603 7418 8902

Operating Profit 72.7 396.8 437.5 445.1 623.1

OPM (%) 3.9 6.5 6.6 6 7

PAT -228.1 -104.1 53.5 61.7 172.2

EPS -24.5 -1.4 0.7 0.8 2.2

RoCE -6.7 3.2 7.7 6.9 9.8

RoE -49.3 -16.6 5.7 6.2 15.6

EV/EBITDA (x) 36.5 34.6 31.9 31.6 22.6

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Re-iterate – Crompton Greaves Consumer Electricals Ltd

• For 2QFY2018, Crompton Greaves Consumer Electricals Ltd. (Crompton Greaves) reported significant growth (after adjusting for excise duty impact) of 16% YoY in its net sales to Rs.960 crore. Net sales growth was essentially driven by volume growth amidst a challenging market environment (muted housing growth and disruption due to GST implementation). operating profit rose by 33% YoY to Rs.135 crore, with OPM expanding by 247BPS to 14.0%, adjusting for ESOP charge of Rs.14 crore. Adjusted PAT increased significantly by 47% YoY to Rs.85 crore.

• Disciplined approach towards marketing spends and sustained cost-reduction efforts along with premiumisation of product portfolio should continue to drive profitability higher. Advertising and promotional spend was deliberately curtailed to virtually NIL during the quarter, primarily due to prevailing uncertainty in consumer markets post GST implementation.

• Consistent efforts to premiumise its product portfolio, particularly in the fans category, are resulting into market share gains for the company. Over the past one year share of revenue from premium fans increased to 18% of the total fan segment in Q2FY2018 vs. 7% in Q2FY2017. Similarly, in LED lights business, market share at retail level has nearly doubled over the past 12 months.

• Strong return ratios and inorganic growth potential with management actively considering acquisition of synergistic business should continue to fetch premium valuation to its earnings. The company’s strategy is to expand its product offerings (fans, pumps and appliances) to pan- India level through a new distribution model. Further, management would like to expand and increase the touch points to increase the company’s distribution channel. Hence, we reiterate our positive stance and expect the stock to generate 8-10% returns from current levels.

Reco Price– Rs 218 CMP – Rs 220 View: Positive

Particulars (Rs cr) FY16 FY17 FY18E FY19E

Net Sales 1812 3976 4481 5026

EBITDA Margin (%) 11.6 12.3 11.8 11.7

PAT 105.2 290.7 307.4 347.4

EPS 1.7 4.6 4.9 5.5

ROE (%) 92.7 75.7 46.9 38.4

P/E 129.9 47 44.4 39.3

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Re-iterate - Exide Industries

• Exide Industries (Exide) is a leading manufacturer of lead acid batteries in India with a presence in automotive, industrial and marine segment. has technological collaborations with Shin Kobe and Furukuwa of Japan, Oldham of UK and East Penn Manufacturing of the US.

• A favorable base benefit in 2HFY2018 (due to demonetisation in 2HFY2017) for two-wheelers and CVs along with a slew of planned new launches in the PV space will likely drive auto OEM demand. Further, successful GST roll out, well-penetrated distribution network of Exide and launch of Dynex brand of batteries are likely to aid market share gains in the aftermarket segment.

• Industrial OEM segment (comprising power, UPS, telecom and railways) is likely to witness strong growth backed by recent policy measures, which would boost infrastructure investments. We expect the above triggers to result in a 13% revenue CAGR over FY2017-FY2019.

• Exide’s Q2FY2018 margins at 12.5% were amongst the lowest impacted by higher lead prices. Going ahead given the strong brand image and leadership position, we believe Exide will resort to price hikes to pass on increased costs. Hence, we expect margins of Exide to gradually improve and reach 14% levels, which has been the historical average in the past five to six years.

• Exide is focusing on improving the performance of the insurance business and has invested around Rs.1,500 crore. Management is looking out for a partner/tie-up for the insurance business to further accelerate growth. This could be a key development to watch for.

• Given the robust top line growth in both the automotive and industrial segments and margin improvement on account of likely price hikes, we expect earnings to return to the growth path and expect double digit earnings growth in the next five to six quarters. We retain our Positive view on the stock.

Reco Price– Rs 206 CMP – Rs 209 View: Positive

Particulars (Rs. Cr.) FY15 FY16 FY17 FY18E FY19E

Net sales 6865.5 6809 7628 8696 9653

EBITDA margin (%) 13.2 14.8 14.2 13.8 14.6

PAT 545.9 622.8 693.6 720.1 847

EPS 6.4 7.3 8.2 8.5 10

Core RoE (%) 20 19.5 18.5 17.3 17.8

PER (x) 32.1 28.1 25.2 24.3 20.7

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Re-iterate – GIC Housing Finance

• The overall operating performance of GIC Housing Finance was satisfactory with net interest income (NII) growing by 26.5% YoY to Rs93.3 crore while the non interest income was up by 9.0% YoY. Healthy growth in NII was fueled by strong 17.1% YoY growth in the advances book and 69BPS YoY increase in the Net interest margin (down 21BPS sequentially). The net profit increased by 22.1% YoY to Rs42.0 crore and was in line with our estimates.

• During Q2FY18, GIC Housing Finance (GICHF) reported an overall advances growth of 17.1% YoY driven by 17.9% YoY uptick in the individual housing loan portfolio (87.1% of total loans). Within the Individual loan category, loans to self-employed segment increased by 28.8% YoY while salaried and LAP books posted a growth of 14.2% YoY and 11.6% YoY.

• GICHF (being in the low ticket size segment) is well placed to tap emerging opportunities in the affordable housing space. Benefits of Financialisation and RERA / GST legislations are expected to increase the thrust on housing (especially Housing for all) which should help GICHF to maintain a steady growth momentum. Improving borrowing mix (diversifying from the more expensive bank loans) with more is also a positive development as it helps manage costs of funds and tenor better. The prevailing low interest rates should help in further improvement in cost of funds which in-turn could provide cushion to margins in a competitive scenario in the housing finance space.

• GICHF trades at a discount to its HFC peers, partly due to its size and a smaller performance history. However, we believe that as the company’s asset quality improves and revenues expand (due to the growing loan book), the company’s return ratios will improve commensurately.

• We maintain our positive view on the stock and expect a 12-15% upside.

Reco Price– Rs 482 CMP – Rs 484 View: Positive

Rs Cr FY15 FY16 FY17 FY18E FY19E

NII 207.4 256.6 312.2 389.2 491.2

Growth % 9.3 23.8 21.6 24.7 26.2

PAT 103 124.5 147.7 186.5 236.9

Growth % 5.5 20.9 18.7 26.2 27

EPS 19.1 23.1 27.4 34.6 44

BVPS 122.6 135.9 155.7 184.4 220.9

PE (x) 25.2 20.8 17.6 13.9 11

PBV (x) 3.9 3.5 3.1 2.6 2.2

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Re-iterate- IndusInd Bank

• During Q2FY18, IndusInd Bank posted a net interest income growth (NII) of 24.7% YoY which was driven by healthy 24.5% YoY growth in the advances and stable net interest margins (NIM). NIM during the quarter remained stable at 4.0% on a sequential basis. The non-interest income increased by 22.4% YoY helped by 22.6% YoY rise in the core fee income while other components like forex, distribution fees, general banking fees etc also reported healthy growth. The net profit during the quarter increased by 25.0% YoY to Rs880.1 crore and was in-line with our estimates.

• IndusInd Bank has witnessed a steep rise of 95% YoY in its savings account deposits owing to increased contribution from the government savings account, maturing of branches and the high quality of acquired clients. The CASA ratio during the quarter jumped by 448 BPS to 42.3% QoQ.

• Gross NPA ratio during Q2FY18 stood at 1.08% versus 1.09% QoQ while net NPA ratio remained steady at 0.44% on a sequential basis. Slippages during the quarter declined to Rs498 crore as against Rs608 in the previous quarter. The restructured book now stands at 0.16% of the loan book versus 0.17% QoQ. During the quarter, advances growth stood at a healthy rate of 24.5% YoY aided by 26.2% uptick in the corporate lending book and 22.0% rise in the consumer finance portfolio.

• IndusInd Bank has been able to maintain with healthy growth rates along with strong asset quality during a phase where credit off-take has been low. We believe IndusInd would sustain and/or improve on its growth momentum as the dust settles on the impact of demonetization and the slight disruption due to GST implementation. The asset quality picture also looks sanguine and lesser stress addition going forward can be expected while improving granularity the liability side provides comfort.

• We maintain our Positive stance and expect a potential 12-15% upside from current levels.

Reco Price– Rs 1742 CMP – Rs 1627 View: Positive

Rs Cr FY15 FY16 FY17 FY18E FY19E

NII 3,420 4,517 6,063 7,986 10,354

Growth % 18.3 32.1 34.2 31.7 29.6

PAT 1,794 2,286 2,868 3,674 4,708

Growth % 27 27 25 28 28

EPS 33.9 38.4 48.2 61.8 79.1

BVPS 193.7 291 340.6 393.9 464.2

PE (x) 51.4 45.3 36.1 28.2 22

PBV (x) 9 6 5.1 4.4 3.8

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Re-iterate - Indian Oil Corporation

• IOCL Q2FY2018 adjusted operating profit of Rs. 7,373 crore was substantially lower than ours and the street’s estimates due to maintenance shutdown of refineries at Mathura, Panipat, Barauni and Koyali. The shutdowns impacted refinery throughput (down 8.1% q-o-q to 16.1 mmt) and led to refining margin of $8/bbl (below our estimate of $8.5/bbl). The operation of the naphtha cracker was also impacted, which led to 43.4% q-o-q decline in petchem EBITDA to Rs. 1,034 crore. Moreover, refining and marketing inventory gain of Rs. 783 crore and Rs. 273 crore, respectively were also lower than expectations and an adverse effect of Rs. 300 crore due to GST implementation further impacted performance. Adjusted PAT at Rs3,696 crore (+18.4% y-o-y; +38.6% q-o-q) was also substantially lower than our estimate due to lower than expected operating profit.

• Core GRM at $6.9/bbl (excluding inventory gain of $1/bbl) was lower than ours as well as the street’s estimates. The normalised GRM (assuming stable oil prices) was higher at $9.1/bbl versus 6.44/bbl in Q1FY2018. Domestic petroleum product sales volume increased 4.1% y-o-y to 18 mmt, but IOCL continues to lose market share in diesel (sales volume growth of 3.4% y-o-y in Q2FY2018 was lower than industry volume growth of 6.6% y-o-y). On a positive note, utilisation rate of the Paradip refinery further improved to 97% in Q2FY2018 versus 88% in Q1FY2018, reporting a profit after tax of Rs. 400 crore.

• We believe that weak Q2FY2018 results were solely because of maintenance shutdowns and the earnings momentum should normalise from Q3FY2018. Moreover, we will keenly watch the profitability of Paradip refinery as it now operates at near full utilisation level.

• We thus reduce our FY2018E EPS to factor lower-than-expected earnings in Q2FY2018 but largely maintain our FY2019E EPS. We expect rebound in earnings momentum for IOCL, given a robust refining margin outlook and mid-single digit growth in the auto fuel sales volume. We thus retain our positive view on IOCL and expect a 10% upside from current level.

Reco Price– Rs 415 CMP – Rs 414 View: Positive

Particulars (Rs. Cr.) FY16 FY17 FY18E FY19E

Net sales 346,045 355,310 404,651 419,214 EBITDA margin (%) 6.8 9.6 9.8 10.7

PAT 14,053 21,973 19,994 24,401

EPS 28.9 45.2 41.2 50.2

RoE (%) 17.5 22.5 18.2 19.8

PER (x) 14.3 9.2 10.1 8.2

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Re-iterate- RBL Bank

• During Q2FY18 RBL Bank (RBL) has posted strong operational performance as the net interest income increased by 38.7% YoY to Rs420.2crore while the non-interest income was up by 42.6% YoY to Rs241.1 crore. Strong growth in the net interest income was driven by healthy loan book traction (up 35.0% YoY) and expansion in the net interest margins (NIM) (up 29BPS YoY to 3.70%). Non-interest income growth was boosted by 117% YoY rise in the distribution fees. The net profit during the quarter was up by 67.6% YoY to Rs150.6 crore and was slightly above our estimates.

• RBL saw its loan book expanding at impressive pace of 35.0% YoY aided by 31.4% YoY growth in the wholesale book while non-wholesale book grew at an even better pace of 40.6% YoY. Within the Wholesale segment Corporate & Institutional Banking (C&IB) grew by (31.2% YoY) and Commercial Banking moved up by 32.0% YoY. The non-wholesale book growth was mostly driven by business and branch banking (up 59.0% YoY)..

• During the quarter the asset quality remained stable as GNPA ratio for the quarter stood at 1.44% as against 1.46% in the previous quarter while the net NPA also declined marginally by 3BPS to 0.78% on a sequential basis. Slippages during the quarter stood at Rs92 crore versus Rs152 crore in the previous quarter.

• RBL has continued to maintain healthy growth momentum though on a relatively smaller book size along with good asset quality despite disruptions due to demonetization and GST. The bank has been expanding its business into newer geographies and has added 50 branches in last one year which has helped it to move from being a regional bank to a more diversified one.

• We maintain our positive stance on the stock and expect a 16% to 18% upside potential.

Reco Price– Rs 524 CMP – Rs 524 View: Positive

Rs Cr FY15 FY16 FY17 FY18E FY19E NII 556.9 819.6 1221.3 1799.3 2568

Growth % 63 47 49 47 43

PAT 207.7 292.9 446.1 631.5 870.3

Growth % 123 41 52 42 38

EPS 7.1 9 11.9 15.2 20.9

BVPS 76 92 115.6 118.1 136.3

P/E (x) 74 58.1 44.1 34.5 25

P/BV (x) 6.9 5.7 4.5 4.4 3.8

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Wealth Creator Generating meaningful wealth in a multi-year rally

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Sharekhan's Wealth Creator

Sharekhan’s Wealth Creator portfolio

• A well balanced portfolio of 16-18 quality companies to create meaningful wealth in multi-year rally in the Indian stock market • Capturing the long-term triggers over a period of 3-4 years

Focused approach

• Careful selection of quality stocks against a backdrop of reviving macro environment and improving policy reforms • It is actively tracked and reviewed every month; timely changes/revisions are made to the portfolio and communicated to the investors

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Wealth Creator: Comfortably beats Indices

Returns (%) (as on 31st Oct, 2017) Since inception (Aug 21,

2014)

Wealth Creator Folio (weighted average returns) 50.5

- Large cap (64%) 48.7

- Mid cap (36%) 53.7

Sensex 26.0

Nifty 31.0

• Sharekhan’s Wealth Creator portfolio continues to outperform the broader indices in the month of October 2017 with cumulative weighted average returns of 50.5% as against 26.0%/31.0% return in Sensex/Nifty.

• We have made two changes in the portfolio: We have switched IRB infra with KNR construction in the Infrastructure space. KNR Construction has one of the lean balance sheet and a strong order book. Further we have replaced Triveni turbine with Jubilant Foodworks, as later is expected to post strong improvement in the business fundamentals led by revamped initiatives under the leadership of new CEO – Mr.Pratik Pota.

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Wealth Creator Folio

Sr No Scrip Weights Price as on Target Price Potential Upside

(%) 31-Oct-17 Mar-20 (%) LargeCaps (64% weightage) 1 Axis Bank 8% 523 1110 112.2 2 Larsen & Toubro 8% 1221 2533 107.5 3 Maruti Suzuki 8% 8217 13550 64.9 4 Britannia 8% 4649 8250 77.4 5 IndusInd Bank 8% 1627 2850 75.2 6 Sun Pharmaceuticals 8% 553 975 76.2 7 Tata Consultancy Services 8% 2616 5100 94.9 8 TVS Motors 8% 725 1350 86.1

Midcaps (36% weightage; 4% each)

9 Capital First 4% 756 1485 96.5 10 V-Guard Ltd 4% 215 450 109.7 11 Indian Oil Corporation 4% 414 750 81.0 12 KNR Construction 4% 250 475 90.2 13 Network 18 Media 4% 51 105 105.5 14 Gabriel India 4% 197 365 85.1 15 Century Plyboard 4% 283 485 71.6 16 Jubilant Foodworks 4% 1634 3000 83.6 17 PI Industries 4% 820 1650 101.2

* Pls note we see scope for upward revision in target price (3-year) of some of the stock depending on the extent of economic recovery and will keep updating on the same.

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Think Investment – Think Portfolio

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Key Features Best 10 stocks of the day.

Long only Balanced and Concentrated Portfolio.

Quality Companies backed by In-Depth Research.

Actively Managed and Monitored.

Centralized Advice and Execution. Fully invested at all times. No lock-in

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Sample Portfolio SCRIP NAME TARGET UPSIDE (%)

UPL 980 25%

GODREJAGRO 703 22%

BAJAJHLDNG 3595 22%

INDUSINDBK 2003 22%

POWERGRID 247 17%

BAJAJFINSV 6050 21%

BEL 220 18%

JUBLFOOD 1913 18%

TVSMOTOR 825 16%

TATAMTRDVR 283 16%

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Total Active Portfolios

Portfolio Return

(%)

Nifty Return (%)

OP/UP (%)

No of Outperforming Portfolios

Outperforming Portfolios (%)

2343 27.89 18.75 9.14 1699 72.51

Power Portfolio – Performance as on 30th Oct 2017

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Power Portfolio – Performance as on 30th Oct 2017

Performance as on 30th Oct 2017

TOP FIVE

Client Start Date Portfolio Return(%) Nifty (%) Outperformance (%)

Client 1 2016-03-22 85.29 34.31 50.98

Client 2 2016-03-21 79.86 35.72 44.14

Client 3 2016-03-21 77.84 34.49 43.35

Client 4 2016-03-18 80.37 37.50 42.87

Client 5 2016-03-21 77.71 35.42 42.29

BOTTOM FIVE

Client Start Date Portfolio Return(%) Nifty (%) Outperformance (%)

Client 1 2017-06-27 -2.73 8.96 -11.69

Client 2 2016-04-26 21.46 30.08 -8.62

Client 3 2017-06-29 1.04 9.06 -8.02

Client 4 2017-07-11 -1.86 5.91 -7.77

Client 5 2017-07-04 0.06 7.81 -7.75

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Power Portfolio # Offering Min Ticket Size

(At time of Investment) Rs. 300000

Top Up facility Rs. 100000 & in multiples of same

Brokerage Delivery 0.50% + Stat cost

Account Opening Charges Rs. 499 (Annual)

AMC ( Upfront & Annual) 1% of Corpus + GST (18%)

Wealthtiger Investment Advisors Pvt. Ltd

Profit Sharing NIL

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Advisory Offerings

Segment Product Corpus Clients

Cash Top Picks - Investors

Cash Actionable Ideas - Investors

Cash Alpha Delivery Picks 3 lac Short Term traders

Cash + FNO CTFT 3 lac Traders

Options Derivative Calls 1 Lac Option traders

Options+Fut Derivative Idea 5 lac Strategy + Future traders

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1-2 months delivery based Ideas based on Short term triggers (Results/ corporate action/Policy) &/or reported flows. Each Idea will have a Fundamental Rationale/Key Triggers Points

New Alpha Delivery Picks

Actionable Ideas

Actionable Ideas focus on generating absolute returns with a time frame of 6-12 months and a favorable risk-reward ratio. Stocks are closely tracked with regular interaction with company’s management to stay abreast of the business outlook

Alpha Delivery Picks & Actionable Ideas

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New Alpha Delivery Picks

Ideas Ideas based on Stock Ideas, Viewpoints, Stock Update,

Market Analysis

Weightage(%) 7

Stop Loss (%) Max -10

Min -5

Profit Potential(%) Max -20

Min -10

Time Frame Max - 2 Months

Trail Stop loss 5% trailing Sl on 5% rise in stock price

Exit Rules

A) Pre defined / Trail Stop loss is hit

B) Unexpected Event/ News/ Outcome

C) Time frame

Performance Reporting Daily

Alpha Delivery Picks - Rules

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Alpha Delivery Picks - Performance Oct’17

Month Initated Open Calls Profit Booked Loss Booked Oct - 2017 16 6 9 3

New Alpha Delivery Picks Performance

Financial Year No of Calls Open Calls Profit Booked Loss Booked

FY 2017 – 2018 64 6 34 24 FY 2016 – 2017 100 8 67 25

Sr No Scrip Name Buy Date Close Date Buy Price Sell Price Return Call Result

1 Eros Media 28-Sep-17 9-Oct-17 212.60 234.60 10.35% Profit 2 Coal India 28-Sep-17 10-Oct-17 263.65 284.70 7.98% Profit 3 Federal Bank 4-Oct-17 16-Oct-17 113.00 123.35 9.16% Profit

4 GSPL 4-Oct-17 24-Oct-17 197.40 211.70 7.24% Profit 5 NMDC 4-Oct-17 26-Oct-17 120.10 127.05 5.79% Profit 6 Vedanta Ltd 4-Oct-17 26-Oct-17 320.80 343.90 7.20% Profit

7 Tata Steel 6-Oct-17 30-Oct-17 685.95 714.00 4.09% Profit 8 Ujjivan Financials 9-Oct-17 25-Oct-17 339.25 324.95 -4.22% Loss

9 Arvind Ltd 10-Oct-17 30-Oct-17 391.45 403.00 2.95% Profit 10 HPCL 11-Oct-17 30-Oct-17 456.15 454.60 -0.34% Loss 11 V - Guard 18-Oct-17 25-Oct-17 190.45 190.05 -0.21% Loss

12 GAIL 18-Oct-17 27-Oct-17 437.00 468.20 7.14% Profit

13 Hind Zinc 6-Oct-17 318.80 Open

14 Eros Media 16-Oct-17 219.42 Open 15 Balrampur Chini 18-Oct-17 163.80 Open 16 Godrej Inds 27-Oct-17 578.80 Open

17 GSFC 31-Oct-17 155.15 Open 18 Cadila Health 31-Oct-17 508.40 Open

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Actionable Ideas - Performance Oct’17

Sr No Name Of Company Initiation Date Exit Date Comments Close Price Initiation

Price Target Price

Profit/Loss (%)

1 Selan Exploration 12-Aug-2014 26-Oct-2017 Loss Booked 220 567 220 -61.20%

2 Skipper 17-Mar-2016 27-Oct-2017 Tgt Achieved 240 142 240 69.01% 3 SBI 30-May-2016 26-Oct-2017 Tgt Achieved 350 196 350 78.57%

4 Zydus Wellness 7-Sep-2016 4-Oct-2017 Tgt Achieved 952 885 952 7.57%

5 NBCC India 28-Oct-2016 13-Oct-2017 Tgt Achieved 245 159 245 54.09% 6 Bank Of Baroda 19-May-2017 25-Oct-2017 Loss Booked 157 188 157 -16.49%

7 Reliance Inds 21-Jul-2017 12-Oct-2017 Tgt Achieved 875 764 875 14.53% 8 Relaxo Footwear 8-Aug-2017 30-Oct-2017 Tgt Achieved 560 486 560 15.23% 9 Britannia Inds 10-Aug-2017 18-Oct-2017 Tgt Achieved 4665 4033 4665 15.67%

10 TVS Motors 11-Sep-2017 13-Oct-2017 Tgt Achieved 700 636 700 10.06% 11 V-Guard Inds 15-Sep-2017 25-Oct-2017 Tgt Achieved 215 194 215 10.82%

12 V-Guard Inds 27-Oct-2017 207 227 9.66% 13 Ashok Leyland 4-Oct-2017 122 139 14 Reliance Inds 16-Oct-2017 877 970

15 Bajaj Finance 17-Oct-2017 1889 2050

16 Bajaj Finserv 18-Oct-2017 5356 6050

17 Aurobindo Pharma 18-Oct-2017 763 905 18 HDFC 31-Oct-2017 1705 1900

Month Initiated Calls Profit Booked Loss Booked Oct-2017 7 9 2

Actionable Idea Summary

No of Calls Open Calls Profit Booked Loss Booked Avg Profit Booked

per Idea Unrealized Profit /

Loss Per Idea Strike Rate

341 50 252 37 14.82% -3.84% 87%

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Derivatives Calls & Derivative Idea

Derivative Calls

Rs. 1,00,000 Margin

Derivative Idea (Future/Strategy)

Rs. 3,00,000 Margin

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Derivatives Calls

• OPTIONS only SEGMENT

• LONG ONLY IDEAS TYPE

• Rs.1,00,000 MARGIN

• 30-40 AVG. IDEAS PER MONTH

• 3-5 MAX OPEN POSITIONS

• 1-5 Days TIME FRAME(MONTHS)

• 50% TARGET(%)

• 20-30% STOP LOSS

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

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Derivative Calls - Performance Oct’17

Summary Oct-17

Initated Profit Booked Loss Booked Gross Profit/Loss

75 42 33 57427

Derivative Calls Performance

Financial Year No of Calls Profit Booked Loss Booked

Gross Profit/Loss*

FY 2017 – 2018 344 204 140 276132

*Excluding brokerage & other charges

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Derivatives Idea – Future (Recently Launched)

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

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Derivatives Idea - Strategy

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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.

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CTFT

CTFT

Ideas Ideas / Calls are based on EOD Momentum Triggers

Risk: Reward Ratio 1:2

Time Of Initiation After 2:30 PM

Day of Initiation

Time Of Square Off Any Time after initiation or

Next Trading Day

Time Frame 1 Day

Exposure per Call Rs 1 Lakh in Cash Segment & 1 Lot in F&O Segment

Exit Rules A) Pre defined Target / Stop Loss is hit

B) Time Frame

Performance Reporting Daily

Target Clients Aggressive & High Risk Traders

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CTFT- Offering

Cash Ticket Size Rs. 125000

FNO Ticket Size Rs. 500000

Calls per Day Max 1 Call in Cash (Long Only) 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

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CTFT Performance Oct’17

Month Initated Open Calls Profit Booked Loss Booked Oct-2017 9 0 7 2

CTFT Performance

Financial Year No of Calls Open Calls Profit Booked Loss Booked

Profit / Loss Amount

FY 2017 – 2018 87 - 47 40 123199

Sr No Scrip Name Buy/Sell

Date Close Date

Buy/Sell

Reco Price Close/ Exit

Price Returns (%)

Profit/Loss

Gross P/L

1 NTPC Oct Fut 5-Oct-17 6-Oct-17 Buy 170.8 172.50 1.00% Profit 6,800.00

2 UPL Oct Fut 6-Oct-17 9-Oct-17 Buy 791.45 801.15 1.23% Profit 11,640.00

3 Rel Capital Oct Fut 9-Oct-17 10-Oct-17 Buy 574.6 568.65 -1.04% Loss (8,925.00)

4 Ambuja Cements Oct Fut 13-Oct-17 16-Oct-17 Buy 279.5 281.85 0.84% Profit 5,875.00

5 Castrol India Oct Fut 16-Oct-17 17-Oct-17 Buy 372.85 378.50 1.52% Profit 7,910.00

6 Union Bank Oct Fut 23-Oct-17 24-Oct-17 Buy 126.75 128.55 1.42% Profit 7,200.00

7 IOC Oct Fut 25-Oct-17 26-Oct-17 Buy 416.8 423.40 1.58% Profit 9,900.00

8 Hdfc Bank Nov Fut 30-Oct-17 31-Oct-17 Buy 1812.5 1797.15 -0.85% Loss (7,675.00)

9 Welspun Corp Ltd 26-Oct-17 27-Oct-17 Buy 141.77 147.64 4.14% Profit 4,132.48

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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

Mode of Communication of All Product Calls: - Trade Tiger Call Alert Window (Pop Up) - Email from Advisory Team to Branches

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Market Outlook November 2017

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Overview

Dichotomy – Economy slowdown, weak earnings but rising equity markets!

Markets looking ahead - Recovery in economy and earning; ample liquidity

Valuation -- Not expensive as it appears

Conclusion - Don’t miss the ‘Big Picture’

Key Investment themes

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Markets – Case of glaring ‘Dichotomy’

On one side negatives galore -- economy slows down, weak earnings and bond yield surge

On the other side -- equity markets climb the wall of worries to hit new high level amid all the gloom.

Why? And is it sustainable?

7.9% 7.5%

7.0%

6.1% 5.7%

Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18

GDP

6.20

6.40

6.60

6.80

7.00

Sep

-17

Oct

-17

No

v-1

7

India 10 Year Gsec Yield %

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Equities is about looking ahead

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1. Economic Slowdown – only a transition phase

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Just a “Blip” – data points encouraging!

Below data points do not point towards a crashing economy but indicates that latent demand is strong and economy to revive as transition impact of GST (& other measures) eases out.

- Auto Sales : Double digit growth in passenger (11-12%) and commercial vehicles (over 20%)

- Inland freight traffic: Rail cargo volume growth of 6-8% in the last 3 months

- Airlines passenger traffic: Double digit (16-18%) growth continues in the past 3 months

- Hotel Occupancy rates touches 5 year high of 65% in Q2.

- Electricity generation: Uninterrupted growth of 5-8% in the past 4 months.

More importantly, the government has taken several steps to boost economy.

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Infrastructure Push – Rs7 lakh crore for road construction

• The cabinet approved Rs7 lakh crore road construction plan for 83,677kms over the next five years. The plan comprises Bharatmala Pariyojana (Ph-I) with Rs5.35 lakh crore outlay for 34,800km, NHAI to spend Rs1.57 lakh crore for 48,877km of roads.

Particulars Kms.

Economic corridors 9,000

Inter Corridor and Feeder Route 6,000

National Corridors Efficiency Improvement 5,000

Border Roads and International Connectivity 2,000

Coastal Roads and Port Connectivity 2,000

Greenfield Expressways 800

Balance NHDP works 10,000

Total Bharatmala pariyojana phase-I 34,800

NHAI 48,877

Grand Total 83,677

Particulars Rs lakh crore

Bharatmala pariyojana phase I

Market borrowing 2.09

Private Investment 1.06

Central Fund & ToT model

2.19

Total 5.35

NHAI

Central Road Fund 0.97

Gross Budgetary Support 0.59

Total 1.57

Road development plan by 2022

Funding plan

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Bank Recap: Big boost for PSU Banks & Economy

The government’s PSU Bank (PSB) Recapitalization plan is a key long term positive for the sector as it:

provides adequate Risk capital so that PSBs can clean their balance sheet and

provides crucial Growth capital to aim for credit growth in the near term

Fasten NPA resolution – legroom with banks for make necessary provisions now

Recap Bonds 64% Contribution

from Indradhanush

Plan 9%

Market 27%

Funding breakup of Recapitalisation plan

Unlike earlier, this infusion (~25% of the stressed loans in the system, ~1.3% of GDP) is sufficient to take care of likely capital needs for the next two fiscals (as per estimates)

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Export – Steps taken to support its revival

Weak exports has been one of the biggest pain-point as fallout of GST implementation. Going ahead exports are likely to revive as:

- Government taking measures to ease the pain and provide relief yield results.

- Global environment remain favourable for exports: US and Europe economy showing signs of pick up

0

500

1000

1500

2000

2500

0

5000

10000

15000

20000

25000

Oct

-12

Oct

-13

Oct

-14

Oct

-15

Oct

-16

Oct

-17

Copper ($/mt) Nickel ($/mt) Aluminium ($/mt) - RHS

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2. Corporate earnings set for a strong revival

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Q2 FY18 – Results so far

Most of the Q2 FY18 results so far have been in line with estimates

Negative surprise by some Private Sector banks: However, a few Pvt sector Banks like Axis and Yes Bank have reported large asset quality divergence during the Q2, with ICICI Bank awaiting the completion of the RBI audit. This has added to volatility in Bank stocks. However, we believe that the stress addition is already being factored in the market prices.

Some of the Consumer facing companies have reported encouraging Q2 numbers. Management commentary indicates early signs of domestic demand revival.

We don’t expect a large and significant scope for downgrade in the consensus estimates for FY18E & FY19E.

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- Low base formed in banks (huge provisions for bad loans) and commodity stocks; the same likely to reverse in FY2018/2019. - Plus as impact of demon and GST fades the consumer demand would pick up and reflect in financials of auto, media and other consumer disc stocks.

Net Profit growth

(%) Net Profit growth

(%)

Contribution to growth in FY19/FY17

Sensex Sectors FY18E FY19E

Auto 16.7% 40.1% 20.9%

Banks 28.5% 38.6% 34.7%

Consumer 1.9% 24.5% 5.4%

IT -0.2% 8.4% 3.9%

Power & Capital Goods 11.8% 18.4% 7.6%

Energy 11.1% 14.9% 16.0%

Miscellaneous 14.0% 16.0% 11.4%

Earning revival: Eco recovery; stable commodity prices & low base

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Ample liquidity; strong global equities

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Manufacturing PMI’s across regions are trending upwards; manufacturing activities are seeing upturn supported by more visible signs of continued investment recovery.

China’s unprecedented move to curb pollution has resulted in soaring prices of industrial metals, allied products and construction materials.

Manufacturing in the euro-area is growing at its fastest pace since at least 2014. In October, the IMF upgraded its growth outlook for the U.S., the euro area, Japan and China and said the global economy’s performing at its best pace in the last 10 years.

Metals demand in Europe is picking up on the back of rising demand from the construction and automotive sectors.

Global Economic Revival

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0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Nifty 50 SHANGHAI COMPOSITE BRAZIL IBOVESPA INDEX

Emerging Markets Equities YTD returns

Emerging Markets YTD returns

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

DOW JONES INDUS. AVG

HANG SENG INDEX NIKKEI 225 FTSE 100 INDEX CAC 40 INDEX DAX INDEX

Developed Markets Equities YTD returns

Developed Markets YTD returns

46.0

48.0

50.0

52.0

54.0

56.0

58.0

60.0

Jan-2017 Mar-2017 May-2017 Jul-2017 Sep-2017

PMI data

China United States European Union

-1

0

1

2

3

4

5

6

7

8

9

2012 2013 2014 2015 2016 2017E 2018E 2019E

Real GDP % growth (y-o-y)

US European Union China India

Source: Bloomberg

Global Economic Revival

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…….and domestically

Real interest rate positive for two years now; encouraging flow of funds into financial assets (away from gold and real estate) including equities.

MF flows of Rs. 73,352 cr including Rs. 4500 plus Crore monthly through SIPS till date for CY2017; on other hand there is withdrawal form debt funds as further decline in the interest rate could be limited from here.

EPFO/HRDA to increase allocation towards equities.

Expected Flow in Markets this year (Sticky Money) In Crs

SIP 48000 over 4500 Cr Monthly

EPFO 20000 Expected Flow this year

PFRDA 25000 Expected Flow this year

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But there are challenges also • The US Federal Reserve has kept interest rates unchanged as of now, pointing at solid US economic growth

• The US Fed’s comments indicate it is on track to hike rates again in December, may stay course till next Governor assumes charge

• In the backdrop, the FII flows to India and emerging markets (EMs) have weakened

-20000

-10000

0

10000

20000

30000

40000

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

FII Net Inflow in Indian Equities (Rs Cr)

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Valuation

Not so expensive as it appears

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Valuation: Not expensive on P/BV or Mcap/GDP

• Premium PE (price-earnings) multiples is concerning but should not be the only matrix to track for investors.

• On PBV (price-book value) and Mcap-to-GDP the Indian equities are not expensive as yet.

0.8X

1.0X

0.6X

1.0X

0.9X

0.7X

0.6X

0.7X

0.8X

0.7X

0.9X

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

MCap to GDP

0.00

1.00

2.00

3.00

4.00

5.00

No

v-0

7

No

v-0

8

No

v-0

9

No

v-1

0

No

v-1

1

No

v-1

2

No

v-1

3

No

v-1

4

No

v-1

5

No

v-1

6

No

v-1

7

Sensex PBV

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Conclusion

In the near term, the state elections assume importance as it would be litmus test for BJP post the bold reforms undertaken by them.

Globally, the geopolitical issues (Middle East disturbance, US-N Korea rhetoric and growing incidence of terror strikes) could be hurdles ahead.

On the positive side, the market positions are light and there is sense of cautiousness. Moreover, India continues to be an attractive long term growth story for domestic and foreign investors

Thus, the benchmark indices could remain range-bound in the near term. But the overall gains over the next couple of years are likely to be handsome as economy gains from the reforms and corporate earnings bounce back.

Focus on key structural growth themes identified by us to build sustainable long term folio. Also pick and choose from our bottom up midcap picks and trading products to add alpha to your investment portfolio.

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Key Investment Themes

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Financialisation: Household savings moving to financial assets rather than physical assets.

Formalisation: Shift of market share from unorganised to organised players in fragmented segments due to policy to curb cash and parallel economy

Government Capex: Spending on roads/rail/defence and affordable housing project Consumption: Evergreen theme that has given multibaggers regularly

Key Investment Themes

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Financialisation:

- Shift from physical assets to financial assets is likely to be a multi-year trend supported by positive real interest rates (interest rates higher than inflation), crackdown on black money (generally flows to physical assets like gold/real estate) and growing investor awareness.

-Positive rub off effect on Insurance, AMC, NBFC, private sector banks

Formalisation: -Reforms like demon and GST aim to bring informal sector into formal fold; with loss of tax advantage for many MSME the large organised player could see significant market share gains

- Auto anci, Footwear, building products, consumer electrical products etc.

Key Investment Themes

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Government Capex: Govt to spend Rs7 trillion on roads under BharatMala project along with substantial investment in rail/power transmission and water network; housing for all by 2022 would require 24 million new units over next 5 years -Positive rub off effect on Cement, Steel, Paints, Housing finance companies etc

Consumption: It is an evergreen and consistent investment theme that has been a key driver of Indian economy for the past few years. We expect both urban and rural consumer demand to recover on the back of good monsoons and market share gains for organised players in certain segments. - Positive for Auto, staples and certain consumer discretionary stocks

Key Investment Themes

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Thank You

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? Any Q

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The views expressed herein are solely of the analyst, Any review, retransmission, or any other use is prohibited. The information contained herein is from publicly available data or other sources believed to be reliable. Each recipient of this information should make such investigations as it deems necessary to arrive at an independent evaluation of an investment avenue referred to in this web cast and determine the merits and risks of such an investment. Further each recipient of this information may take their own decisions based on their specific investment objectives and financial position and using such independent advisors, as they believe necessary. This information is given in good faith and Sharekhan Ltd makes no representations or warranties, express or implied as to the accuracy or completeness of the information and shall have no liability to you or your representative(s) resulting from use of this information. The investment ideas discussed or views expressed may not be suitable for all investors Analysts and other employees of Sharekhan and Sharekhan may have holdings in the companies mentioned in the webcast. Sharekhan neither makes any representation as to the quality, liquidity or market perception on the securities/market, not does it provide any guarantee whatsoever. The risk arising out of the /participation in any financial instrument will rest fully with you without any form of recourse to Sharekhan. The views are for assistance only and are not intended to be and must not alone be taken as the basis for an investment decision.

Disclaimer