ValueGuide May2016 ins - SharekhanWealth Creator Portfolio 13 GBP-INR 33 JPY-INR 33 USD-INR 33 EUR-INR 33 REGISTRATION DETAILS Regd Add: Sharekhan Limited, 10th Floor, Beta Building,

May 2016 Sharekhan ValueGuide2

REGULAR FEATURESReport Card 3Earnings Guide 37

Two thousand sixteenbegan with globalfactors like a slowingChina, plunging crudeoil prices and interestrate hikes in the USAgiving rise to volatilityacross the globe. However, over the past few months thesituation has changed materially on all three fronts with Chinashowing better than expected economic data points which haveresulted in a smart rally in steel, crude oil and some other majorcommodities. In another part of the globe, the US FederalReserve seems to be hinting at a fairly long pause in the interestrate hike as the economic recovery remains weaker thanexpected in the largest economy of the world.

TECHNICALSNifty 25

Stock Updates 14

Viewpoints 23

From Sharekhan’s Desk EQUITY

05

Riding the global tideFUNDAMENTALS

DERIVATIVESView 26

TECHNICALS

Crude Oil 27Gold 28Silver 28Copper 28Lead 28

FUNDAMENTALSZinc 28Nickel 29Chana 30Jeera 30Soya bean 30

Gold 31Silver 31Crude Oil 31

Copper 32Jeera 32Soya bean 32

TECHNICALS

FUNDAMENTALS

USD-INR 34EUR-INR 34

GBP-INR 34JPY-INR 34

disclaimerDISCLAIMER: “This document has been prepared by Sharekhan Ltd. (SHAREKHAN) and is intended for use only by the person or entity to which it is addressed to. This document may contain confidential and/or privileged material and is not forany type of circulation and any review, retransmission, or any other use is strictly prohibited. This document is subject to changes without prior notice. This document does not constitute an offer to sell or solicitation for the purchase or sale ofany financial instrument or as an official confirmation of any transaction. Though disseminated to all customers who are due to receive the same, not all customers may receive this report at the same time. SHAREKHAN will not treat recipientsas customers by virtue of their receiving this report. The information contained herein is obtained from publicly available data or other sources believed to be reliable and SHAREKHAN has not independently verified the accuracy andcompleteness of the said data and hence it should not be relied upon as such. While we would endeavour to update the information herein on a reasonable basis, SHAREKHAN, its subsidiaries and associated companies, their directors andemployees (“SHAREKHAN and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance, or other reasons that may prevent SHAREKHAN and affiliates from doing so. This documentis prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipients of this report should also be aware that past performance is not necessarily a guide to future performanceand value of investments can go down as well. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigations as he deems necessary to arrive at an independent evaluationof an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such an investment. The investment discussed orviews expressed may not be suitable for all investors. We do not undertake to advise you as to any change of our views. Affiliates of SHAREKHAN may have issued other reports that are inconsistent with and reach different conclusion from theinformation presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,publication, availability or use would be contrary to law, regulation or which would subject SHAREKHAN and affiliates to any registration or licencing requirement within such jurisdiction. The securities described herein may or may not be eligiblefor sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Either SHAREKHAN or its affiliates or its directors oremployees/representatives/clients or their relatives may have position(s), make market, act as principal or engage in transactions of purchase or sell of securities, from time to time or may be materially interested in any of the securities or relatedsecurities referred to in this report and they may have used the information set forth herein before publication. SHAREKHAN may from time to time solicit from, or perform investment banking, or other services for, any company mentioned herein.Without limiting any of the foregoing, in no event shall SHAREKHAN, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. The analyst certifies thatall of the views expressed in this document accurately reflect his or her personal views about the subject company or companies and its or their securities and do not necessarily reflect those of SHAREKHAN. Further, no part of the analyst’scompensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this document.”Please refer the Risk Disclosure Document issued by SEBI and go through the Rights and Obligations and Do’s and Dont’s issued by Stock Exchanges and Depositories before trading on the Stock Exchanges. Please refer disclaimer for Terms of Use.

Compliance Officer: Ms. Namita Amod Godbole; Tel: 022-6115000; e-mail: [email protected] • Contact: [email protected]

COMMODITY

CURRENCY

MUTUAL FUNDS DESK

Top MF Picks (equity) 35

Top SIP Fund Picks 36

RESEARCH BASED EQUITY PRODUCTS

Market Outlook 06Top Picks Basket 09Wealth Creator Portfolio 13

GBP-INR 33JPY-INR 33

USD-INR 33EUR-INR 33

REGISTRATION DETAILS Regd Add: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station,Kanjurmarg (East), Mumbai – 400042, Maharashtra. Tel: 022 - 61150000. Fax: 67481899; E-mail: [email protected]; Website: www.sharekhan.com;CIN: U99999MH1995PLC087498. Sharekhan Ltd.: SEBI Regn. Nos. BSE- INB/INF011073351 ; CD-INE011073351; NSE– INB/INF231073330; CD-INE231073330; MSEI-INB/INF261073333 ; CD-INE261073330; DP-NSDL-IN-DP-NSDL-233-2003 ; CDSL-IN-DP-CDSL-271-2004 ; PMS-INP000000662; Mutual Fund-ARN 20669 ; Commoditytrading through Sharekhan Commodities Pvt. Ltd.: MCX-10080 ; (MCX/TCM/CORP/0425) ; NCDEX-00132 ; (NCDEX/TCM/CORP/0142) ; NCDEX SPOT-NCDEXSPOT/116/CO/11/20626; For any complaints email at [email protected] ; Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevantexchanges and Do’s & Don’ts by MCX & NCDEX and the T & C on www.sharekhan.com before investing.

CONTENTS

Sharekhan ValueGuide May 20163

REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON MAY 06, 2016)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 06-MAY-16 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

AUTOMOBILES

Apollo Tyres Buy 158.8 201.0 223.4 127.1 -6.4 16.4 -2.1 -3.2 -10.1 8.5 -0.8 0.6Ashok Leyland Buy 104.2 120.0 112.9 64.0 -2.1 18.8 17.8 53.6 -6.0 10.7 19.3 59.6Bajaj Auto Hold 2435.2 2600.0 2656.0 2092.4 5.8 8.7 7.2 24.1 1.6 1.3 8.6 29.0Gabriel Industries Buy 88.8 105.0 101.9 72.0 -0.3 7.2 3.2 13.8 -4.3 -0.1 4.5 18.2Hero MotoCorp Hold 2890.3 3000.0 3172.0 2257.2 1.0 15.7 14.2 31.2 -3.0 7.8 15.7 36.4M&M Buy 1330.8 1406.0 1442.1 1091.3 9.5 14.1 8.0 15.4 5.2 6.3 9.4 19.9Maruti Suzuki Buy 3819.0 4700.0 4790.0 3193.3 12.1 5.2 -16.9 7.2 7.7 -2.0 -15.8 11.4Rico Auto Industries Buy 36.0 47.0 61.2 27.7 -3.6 0.3 -18.2 -10.6 -7.4 -6.5 -17.1 -7.1TVS Motor Reduce 300.5 250.0 340.9 201.0 -3.7 5.9 4.9 37.8 -7.5 -1.3 6.2 43.2BSE Auto Index 18272.5 19936.1 15385.1 6.3 14.0 0.9 2.2 2.1 6.3 2.1 6.2BANKS & FINANCE

Allahabad Bank Reduce 54.2 44.0 110.0 39.4 2.4 8.0 -29.5 -43.6 -1.6 0.7 -28.6 -41.4Andhra Bank Hold 50.9 54.0 82.0 41.8 -0.2 1.4 -24.6 -29.3 -4.1 -5.5 -23.6 -26.5Axis (UTI) Bank Buy 461.5 590.0 613.5 366.7 13.2 19.3 2.6 -11.1 8.7 11.2 3.9 -7.6Bajaj Finance Buy 7264.5 ** 7532.7 4115.7 3.4 12.4 38.4 70.9 -0.7 4.7 40.2 77.6Bajaj Finserv Buy 1873.2 2290.0 2160.0 1405.3 7.4 5.5 -4.0 32.2 3.2 -1.7 -2.8 37.4Bank of Baroda Buy 150.6 180.0 216.3 109.4 8.4 24.8 -9.5 9.3 4.1 16.3 -8.4 13.6Bank of India Reduce 86.6 80.0 214.1 80.1 -2.1 -6.8 -33.2 -53.2 -6.0 -13.2 -32.4 -51.4Capital First Buy 469.5 485.0 481.5 321.0 12.3 18.0 27.3 20.6 7.9 10.0 29.0 25.4Corp Bank Reduce 37.8 30.0 61.8 30.8 -1.4 -1.0 -10.0 -29.9 -5.3 -7.8 -8.8 -27.1Federal Bank Buy 48.2 60.0 79.8 41.4 14.3 10.5 -9.0 -23.7 9.7 3.0 -7.8 -20.8HDFC Buy 1167.8 1380.0 1372.4 1011.5 11.5 4.0 1.4 2.8 7.1 -3.0 2.6 6.8HDFC Bank Buy 1119.7 1300.0 1145.0 928.0 7.7 11.2 7.2 17.1 3.5 3.7 8.6 21.7ICICI Bank Hold 218.6 250.0 325.8 180.8 1.8 7.6 -14.4 -27.7 -2.2 0.3 -13.3 -24.9IDBI Bank Reduce 67.8 58.0 95.7 47.3 3.1 24.5 -18.3 2.4 -0.9 16.1 -17.2 6.4LIC Housing Finance Buy 450.2 558.0 526.0 388.7 -3.0 9.1 -2.8 12.7 -6.8 1.6 -1.6 17.1PTC India Financial Services Buy 38.2 55.0 60.7 29.7 11.6 7.0 -18.6 -24.7 7.2 -0.3 -17.5 -21.8Punjab National Bank Hold 80.7 102.0 180.6 69.3 1.5 -5.7 -38.8 -41.8 -2.5 -12.1 -38.0 -39.6SBI Hold 184.4 ** 305.0 148.3 3.1 13.0 -23.3 -27.1 -1.0 5.3 -22.3 -24.2Union Bank of India Hold 117.5 132.0 222.7 104.0 -2.9 -5.7 -25.3 -5.1 -6.7 -12.1 -24.3 -1.4Yes Bank Buy 910.2 1050.0 958.0 590.0 11.4 26.7 24.2 15.7 7.0 18.1 25.8 20.3BSE Bank Index 18540.1 22068.7 15224.3 7.3 12.6 -2.3 -5.9 3.1 5.0 -1.0 -2.2CONSUMER GOODS

Britannia Buy 2817.3 3650.0 3435.0 2209.2 4.7 1.1 -7.6 28.4 0.6 -5.8 -6.4 33.4Emami Buy 1045.1 1250.0 1367.9 896.8 13.7 2.3 2.4 20.1 9.2 -4.7 3.7 24.8GSK Consumers Buy 5873.7 6750.0 6800.0 5366.5 -2.3 0.5 0.3 -7.4 -6.1 -6.3 1.6 -3.7Godrej Consumer Products Buy 1323.8 1550.0 1459.0 1037.0 -2.0 9.1 -0.1 25.0 -5.9 1.7 1.1 29.9Hindustan Unilever Buy 853.4 980.0 944.0 765.4 -0.6 2.3 5.3 -3.8 -4.5 -4.6 6.7 0.0ITC Buy 317.7 375.0 359.8 268.0 1.1 4.0 -5.3 1.1 -2.9 -3.1 -4.1 5.0Jyothy Laboratories Buy 299.5 360.0 342.0 236.0 2.4 9.4 2.0 28.8 -1.7 2.0 3.3 33.9Marico^ Hold 245.2 270.0 269.9 182.7 -1.9 7.8 23.6 35.9 -5.8 0.5 25.2 41.2Zydus Wellness Buy 750.0 915.0 1025.0 632.0 3.7 5.3 -7.0 -20.4 -0.4 -1.9 -5.8 -17.3BSE FMCG Index 7620.0 8256.1 6782.2 1.4 4.4 -3.1 0.9 -2.6 -2.7 -1.8 4.9IT / IT SERVICES

Firstsource Soluation Buy 40.3 52.0 45.9 24.2 25.0 24.6 28.6 38.7 20.0 16.1 30.2 44.1HCL Technologies Buy 722.6 950.0 1047.5 716.3 -12.7 -10.3 -17.0 -20.0 -16.1 -16.4 -15.9 -16.8Infosys Buy 1181.5 1430.0 1267.9 932.6 2.9 8.3 5.7 25.4 -1.2 0.9 7.0 30.4Persistent Systems Buy 725.3 820.0 817.6 562.5 -0.9 16.4 11.4 5.1 -4.8 8.5 12.9 9.2Tata Consultancy Services Buy 2473.4 2750.0 2770.0 2115.0 3.3 10.1 1.9 1.0 -0.8 2.7 3.2 5.0Wipro Hold 533.1 650.0 613.3 507.9 -1.9 0.5 -2.9 1.9 -5.8 -6.3 -1.7 5.9BSE IT Index 11042.5 11927.5 10044.6 1.2 5.6 -0.1 8.0 -2.8 -1.6 1.2 12.2CAPITAL GOODS / POWER

Bharat Heavy Electricals Hold 126.8 ** 290.0 90.2 3.6 -3.2 -31.0 -44.8 -0.5 -9.7 -30.2 -42.7CESC Buy 542.4 580.0 624.3 404.6 13.8 27.3 2.4 3.8 9.3 18.6 3.7 7.9Crompton Greaves Hold 58.6 60.0 70.5 39.2 18.0 34.5 2.4 4.5 13.4 25.4 3.8 8.6Finolex Cable Buy 275.6 310.0 305.0 201.0 -0.4 24.6 16.8 8.5 -4.4 16.2 18.3 12.7Greaves Cotton Buy 131.5 160.0 162.6 112.6 9.0 14.5 6.0 6.9 4.7 6.8 7.4 11.1Kalpataru Power Transmission Buy 203.0 265.0 291.8 160.0 1.3 19.0 -16.0 -6.1 -2.7 11.0 -14.9 -2.4PTC India Buy 62.4 90.0 75.0 50.1 2.4 -2.1 -1.2 -3.4 -1.6 -8.7 0.1 0.4Skipper Buy 139.5 190.0 219.9 116.0 -2.4 -5.5 -6.3 -3.4 -6.3 -11.9 -5.1 0.4Thermax Hold 739.3 900.0 1148.0 715.0 1.2 -5.9 -11.8 -22.1 -2.8 -12.3 -10.7 -19.0Triveni Turbine Buy 108.9 130.0 133.2 87.5 10.3 11.5 -0.7 -5.3 5.9 3.9 0.6 -1.6Va Tech Wabag Buy 563.1 650.0 834.0 408.8 5.8 0.3 -13.6 -17.6 1.7 -6.5 -12.5 -14.3

NEW

NEW

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REPORT CARDEQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON MAY 06, 2016)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 06-MAY-16 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

In Top Picks basket ** Price target under review

NEW

NEW

NEW

NEW

V-Guard Industries Buy 1265.2 1350.0 1299.6 780.0 31.0 35.2 36.0 27.5 25.8 26.1 37.8 32.5BSE Power Index 1835.8 2137.9 1559.4 3.4 8.8 0.3 -6.9 -0.7 1.4 1.6 -3.3BSE Capital Goods Index 13150.7 18814.2 10934.9 4.7 10.7 -7.1 -16.6 0.6 3.2 -6.0 -13.3INFRASTRUCTURE / REAL ESTATE

Gayatri Projects Buy 531.2 730.0 769.2 153.0 -8.6 -12.4 -19.5 243.6 -12.2 -18.3 -18.5 257.1ITNL Buy 73.7 125.0 164.8 64.0 -6.9 -1.7 -17.8 -53.6 -10.6 -8.4 -16.7 -51.8IRB Infra Buy 209.2 300.0 272.2 197.1 0.5 -2.4 -8.3 -1.8 -3.5 -9.1 -7.2 2.1Jaiprakash Associates Hold 7.0 ** 19.9 6.4 -13.8 -13.8 -42.7 -64.2 -17.2 -19.6 -42.0 -62.8Larsen & Toubro Buy 1260.5 1405.0 1888.0 1016.1 8.6 16.2 -4.7 -18.3 4.3 8.3 -3.5 -15.1CNX Infra Index 2603.4 3430.2 2204.1 5.7 11.1 -3.0 -14.0 1.6 3.6 -1.7 -10.6BSE Real estate Index 1334.1 1630.1 1000.1 9.2 18.3 3.9 -13.3 4.9 10.3 5.2 -9.9OIL & GAS

Oil India Hold 328.6 360.0 504.0 300.4 4.7 -2.1 -14.8 -26.5 0.5 -8.8 -13.8 -23.6Reliance Ind Buy 969.0 1250.0 1089.8 818.0 -5.1 3.7 3.3 11.6 -8.9 -3.3 4.7 16.0Selan Exploration Technology Hold 190.0 345.0 334.1 148.7 9.9 13.8 -18.4 -22.2 5.6 6.1 -17.4 -19.2BSE Oil and gas Index 9236.7 10349.3 7987.3 2.2 6.8 3.6 3.5 -1.8 -0.5 4.9 7.5PHARMACEUTICALS

Aurobindo Pharma Buy 799.8 819.0 891.5 582.0 7.7 10.0 -4.5 27.5 3.4 2.6 -3.3 32.5Cipla Hold 537.4 581.0 748.0 494.6 6.4 -3.5 -17.1 -17.8 2.2 -10.0 -16.1 -14.6Cadila Healthcare Hold 318.0 352.0 454.4 295.0 -0.4 -1.5 -22.3 -3.7 -4.3 -8.2 -21.3 0.1Divi's Labs Buy 1022.2 1150.0 1242.4 855.0 3.6 2.6 -6.9 24.4 -0.5 -4.3 -5.7 29.3Glenmark Pharmaceuticals Hold 820.6 905.0 1262.9 671.1 9.0 13.6 -13.3 0.1 4.7 5.9 -12.2 4.0Ipca Laboratories Hold 475.6 702.0 888.0 461.0 -5.2 -27.1 -34.2 -24.5 -8.9 -32.1 -33.3 -21.5Lupin Hold 1586.9 1758.0 2129.0 1280.0 4.2 -15.8 -14.1 -9.0 0.1 -21.5 -13.0 -5.4Sun Pharmaceutical Industries Buy 804.4 945.0 1010.1 704.0 -0.8 -5.7 6.4 -14.1 -4.7 -12.1 7.7 -10.7Torrent Pharma Buy 1393.2 1741.0 1699.8 1151.3 -3.3 7.6 -7.9 19.8 -7.2 0.3 -6.7 24.5BSE Health Care Index 15363.4 18842.7 14418.9 1.5 -2.4 -7.6 -4.2 -2.5 -9.1 -6.4 -0.4BUILDING MATERIALS

Grasim Buy 4112.1 4705.0 4178.9 3233.0 3.8 21.7 13.3 19.0 -0.3 13.4 14.7 23.6The Ramco Cements Hold 473.0 520.0 515.4 287.9 13.0 34.9 37.5 72.2 8.6 25.7 39.2 79.0Shree Cement Hold 12620.2 ** 13360.0 9350.0 4.9 24.8 9.1 26.8 0.8 16.3 10.5 31.8UltraTech Cement Hold 3099.9 3580.0 3454.9 2579.0 0.2 14.4 14.9 17.7 -3.7 6.7 16.4 22.3DISCRETIONARY CONSUMPTION

Century Plyboards (India) Buy 189.7 215.0 219.4 135.5 10.0 29.7 4.8 8.3 5.7 20.9 6.1 12.5Cox and Kings Buy 171.7 300.0 317.0 140.1 -1.5 -11.8 -31.1 -41.4 -5.4 -17.8 -30.2 -39.1Inox Leisure Buy 198.6 285.0 276.3 145.0 -3.0 0.2 -13.8 29.7 -6.8 -6.6 -12.7 34.8Info Edge (India) Buy 721.1 1000.0 938.0 688.1 -8.9 -6.7 -1.5 -1.6 -12.5 -13.0 -0.2 2.3KDDL Buy 167.9 365.0 408.5 164.0 -12.0 -26.2 -38.2 -45.2 -15.5 -31.2 -37.4 -43.0KKCL Buy 1779.7 2480.0 2320.0 1603.3 3.2 -6.4 -14.4 -17.2 -0.9 -12.8 -13.3 -14.0Orbit Exports Buy 250.4 450.0 495.0 232.0 4.7 -24.3 -31.1 -27.5 0.5 -29.5 -30.2 -24.7Raymond Hold 467.6 500.0 518.9 350.0 18.7 20.2 14.7 12.2 14.1 12.1 16.1 16.6Relaxo Footwear Buy 490.8 600.0 615.0 357.7 8.9 20.7 -1.6 45.8 4.6 12.5 -0.3 51.6Speciality Restaurants Hold 88.9 130.0 182.6 80.0 3.2 -6.1 -23.8 -45.6 -0.9 -12.5 -22.8 -43.5Thomas Cook India Buy 181.4 255.0 256.9 165.7 -0.5 -8.3 -12.3 -21.1 -4.5 -14.5 -11.1 -18.0Wonderla Holidays Buy 383.6 450.0 430.4 240.2 1.7 2.1 14.4 46.2 -2.4 -4.8 15.9 52.0Zee Entertainment Enterprises Buy 403.1 470.0 440.7 299.5 8.1 8.0 7.6 36.8 3.8 0.7 9.0 42.2DIVERSIFIED / MISCELLANEOUS

Aditya Birla Nuvo Buy 846.0 1200.0 1108.4 684.3 2.8 5.1 -8.1 -1.5 -1.3 -2.0 -6.9 2.4Bajaj Holdings Buy 1434.6 1950.0 1747.8 1265.0 -1.5 2.4 -12.0 14.8 -5.4 -4.5 -10.9 19.3Bharti Airtel Hold 359.1 425.0 452.5 282.3 9.6 17.5 9.4 -7.3 5.3 9.5 10.8 -3.7Bharat Electronics Buy 1142.2 1450.0 1416.9 984.0 -1.3 -4.7 -10.5 12.2 -5.2 -11.2 -9.4 16.7Gateway Distriparks Hold 281.1 315.0 399.7 205.6 5.8 4.6 -12.1 -16.8 1.7 -2.5 -11.0 -13.5Max Financial Buy 362.3 418.0 466.6 302.8 8.1 2.4 -11.9 10.0 3.8 -4.5 -10.8 14.3PI Industries Buy 626.9 800.0 758.9 495.4 7.2 -5.0 -1.1 -3.9 2.9 -11.4 0.2 -0.1Ratnamani Metals and Tubes Hold 491.1 510.0 700.0 387.0 1.4 10.5 -18.1 -22.0 -2.6 3.0 -17.1 -18.9Supreme Industries Hold 813.6 820.0 835.0 520.0 4.2 12.5 32.2 25.7 0.1 4.8 33.9 30.7UPL Buy 592.9 605.0 608.0 342.0 27.7 50.4 27.4 17.0 22.6 40.2 29.1 21.6BSE500 Index 10271.9 11438.2 9012.0 4.0 8.1 -0.2 -0.8 -0.1 0.8 1.1 3.1CNX500 INDEX 6504.6 7233.8 5717.0 4.1 8.2 -0.1 -0.4 -0.1 0.9 1.2 3.5CNXMCAP INDEX 13001.9 14237.6 11190.4 2.8 8.8 1.5 6.9 -1.3 1.4 2.8 11.1


FROM SHAREKHAN’S DESK

from

sha

rekh

an’s

des

k Riding the global tide

Two thousand sixteen began with global factors like a slowing China, plunging crude oil prices

and interest rate hikes in the USA giving rise to volatility across the globe. However, over the

past few months the situation has changed materially on all three fronts with China showing

better than expected economic data points which have resulted in a smart rally in steel, crude

oil and some other major commodities. In another part of the globe, the US Federal Reserve

seems to be hinting at a fairly long pause in the interest rate hike as the economic recovery

remains weaker than expected in the largest economy of the world.

Easing of the key concerns has also led to a reversal in fortunes of equity markets globally in

the past couple of months. Most global markets are hovering near their 52-week high level

with some exceptions like China and Japan. The rally has been extraordinarily sharp in countries

rich in natural resources, like Brazil, Australia and Russia, to celebrate the sharp bounce in the

prices of commodities.

In India too, the benchmark index, the Nifty, has rallied by close to 1,000 points from its low

of 6850 seen earlier in the year. A prudent union budget, further easing of the monetary policy

by the Reserve Bank of India and an initial forecast of good monsoon rains this year have

added to the positive sentiment. The quarterly earnings season has also not been disappointing

so far. In fact, positive earnings surprises have outpaced disappoints in this season.

However, global uncertainties remain the key risk to equities in general. Central banks across

the world are struggling to support an economic revival despite all the unconventional measures

taken by them. The latest move has been to experiment with negative interest rates to prop up

economies and stimulate consumption. In the last few years, the central banks have failed to

achieve the desired results by keeping the interest rates close to zero and infusing liquidity

through several rounds of quantitative easing.

Our Research team has dealt in detail with the earnings conundrum in India and the risk

related to global uncertainties in the Market Outlook report titled “Winds of change” on page

7. Though the team does not expect any material re-rating of valuation multiples in the near

term, the view is quite constructive in the medium to long term. Moreover, there are always

stock-specific opportunities available to investors.

We, at Sharekhan, would continue to churn winning investment ideas, and research and portfolio

products for investors. Our Top Picks basket of select stocks has outperformed the benchmark

indices across market cycles in each of the past seven years. In addition, we offer a host of other

research, advisory and managed products.


Winds of change

MARKET OUTLOOK MAY 09, 2016

Earnings conundrum: An earnings growth revival has remained

elusive so far in India. Improving macros (in the form of lower

interest rates, easing inflation, stable local currency etc) have failed

to reflect in corporate results despite the great optimism that was

built in the consensus estimate after the majority mandate to a party

with pro-development and investor-friendly credentials in the last

general election.

Two sides to it: In addition to the Street’s over-optimism, the

corporate results show the impact of structural changes initiated

by the government and certain unexpected events, such as a collapse

of commodities on renewed global slowdown which has affected

global commodity companies and exporters; two consecutive years

of drought that has hurt demand and put rural India under stress;

and aggressive clean-up of the balance sheet of banks at behest of

the Reserve Bank of India (RBI) which has affected headline earnings

due to their fairly high weightage in stock market indices.

Easing pressure on earnings: Thankfully, most of the concerns over

the unexpected events are easing. First, commodity prices have

bounced back from the brink (crude, steel, gold have risen by 40-

60% each from their lows seen early this year) to touch a level that

is manageable (for upstream oil companies, steel manufacturers

etc). Second, the demand outlook has improved considerably, given

the expectations of a good monsoon this year and higher disposable

incomes in urban areas due to the implementation of Seventh Pay

Commission salary hikes for over 20 million government employees

and pensioners. Lastly, banks have taken aggressive steps to identify

troubled accounts in a bid to clean up their balance sheets in line

with the guidelines of the RBI and this has resulted in a spike in

their provisioning requirements, thereby advancing the pain but

also getting done with it.

Is it the beginning of the end of downgrade cycle? After two years

of earnings disappointments, we could be at the beginning of the

end of the earnings downgrade cycle. That’s because the Street’s

expectations have been reset now to more conservative levels along

with the easing of the pressures on the earnings (as mentioned

above). Also, the low base effect will come into play following two

years of a muted earnings growth, one-time items like high

provisioning by banks and mark-down of assets by global

commodity companies and companies with high overseas exposure.

However, we expect the earnings growth to improve by H2 of

FY2017.

MARKET OUTLOOKEQUITY FUNDAMENTALS

SENSEX’ PE (ON ONE-YEAR FORWARD EARNINGS ESTIMATE; BLOOMBERGCONSENSUS)

Source: Bloomberg, Sharekhan Research

Risk – global uncertainties prevail: Globally, the situation remains

uncertain with most of the developed economies failing to show

any concrete and sustainable improvement in their economy despite

unconventional and aggressive monetary policy measures including

negative policy interest rates in more than half a dozen countries.

Added sources of volatility could be the approaching referendum

in the UK to decide the possible exit of Britain from the European

Union (Britain’s exit threatens the existing structure of the European

Union), mixed economic data from China and the rising rhetoric

against outsourcing in the USA in the run-up to a presidential

election.

Limited scope for significant re-rating in the near term: With the

Sensex’ valuation multiple of 15.5x one-year forward earnings now

nearly at a premium to the average long-term multiple, there is

little scope for any material re-rating of the Indian equity market

from these levels. Moreover, the uncomfortable political discourse

domestically and global uncertainties limit the upside from the

current levels in the near term. However, we remain constructive

on the domestic equity market over the medium term (12-24 months)

largely due to our growing confidence that India Inc’s earnings

growth will revive in the coming quarters.

Sector preference: We prefer private sector banks; companies from

sectors such as non-banking finance companies (NBFC),

automobiles, consumer goods (select staple and discretionary

spending companies including urban and rural focused players) and

information technology (IT) services; and select capital goods and

pharmaceutical companies.


EQUITY FUNDAMENTALSMARKET OUTLOOK

Q4FY2016 – so far, so goodWe were able to spot the initial signs of a revival in corporateearnings in Q4FY2016 and the revival was seen across the board.The Sensex companies posted a 10.2% rise year on year (YoY) intheir earnings in the last quarter of FY2016. Though the same wasachieved on a lower base, the performance was ahead of estimates.The Q4FY2016 results clearly reflect that the consensus estimate isturning conservative after several quarters of a disappointingfinancial performance.

SENSEX’ PERFORMANCE AGAINST EMERGING MARKETS

These measures are quite positive and shall lead to a sustainableeconomic recovery in the coming years. However, the same havecaused some pain in the near term by slowing down demand incertain pockets of the economy and delaying the recovery ofindustrial activity.

In addition, the Q4FY2016 corporate results were also adverselyaffected by two years of a drought, a sudden collapse of commodityprices and an aggressive clean-up of balance sheets by banks atbehest of the RBI. The collapse of commodity prices driven by fearsof a global slowdown severely dented the financial performance ofglobal commodity companies and exporters. The situation wasaggravated by two consecutive years of drought which resulted inextreme stress in the rural regions. Lastly, the aggressive clean-upof balance sheets pushed some banks to losses due to high provisionsmade against the assets gone bad and their fairly high weightage instock market indices

Thankfully, most of the concerns over the unexpected events areeasing. First, commodity prices have bounced back from the brink(crude, steel, gold have risen by 40-60% each from their lows seenearly this year) to touch a level that is manageable (for upstream oilcompanies, steel manufacturers etc). Second, the demand outlookhas improved considerably, given the expectations of a goodmonsoon this year and higher disposable incomes in urban areasdue to the implementation of Seventh Pay Commission salary hikesfor over 20 million government employees and pensioners. Lastly,banks have taken aggressive steps to identify troubled accounts ina bid to clean up their balance sheets in line with the guidelines ofthe RBI and this has resulted in a spike in their provisioningrequirements, thereby advancing the pain but also getting done withit. The government is also determined to spend more on roads,

EARNINGS GROWTH FOR Q4FY2016 AS PER LATEST AVAILABLE

Earnings – hopes pinned on FY2017After a lacklustre show in the past two years and easing of theconcerns that had pulled down the headline earnings growth, hopesof an earnings revival are pinned on FY2017.

The last quarter’s weak corporate results can be attributed partiallyto the structural initiatives taken by the government to curtail blackmoney, plug subsidy leakages and rein in inflationary pressures.

Issues Impact on earnings of last two years Improving outlookEARNINGS—EASING OF CONCERNS TO SUPPORT A REVIVAL OF GROWTH IN EARNINGS

Commodity collapse Earnings of global commodity companies like oil & gas, metal andenergy companies took a hit

A smart bounce in commodity prices from abysmal levels toprovide some cushion to global commodity companies

Drought (demand hurt especially in rural areas) Two years of drought dented the earnings of companies focused onrural demand; the increasing focus on black money also dented theoverall consumption and demand

Good monsoon forecast to ease rural stress plus the SeventhPay Commission pay hikes to boost urban demand

Clean-up of bank balance sheets Pushed by the RBI banks had to identify troubled accountsaggressively and make provisions for loans gone bad and potentialbad loans in order to clean up their balance sheets

Preponement of NPA to help banks come off the sticky situationfaster than expected; though challenges remain in terms ofrecapitalisation of banks to support economic growth in future

CONSENSUS EARNINGS ESTIMATES OF SENSEX COMPANIES (AS PERBLOOMBERG)


Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

MARKET OUTLOOKEQUITY FUNDAMENTALS

EASING INTEREST RATES AND LIQUIDITY CONDITIONS

railways and rural infrastructure which will have a spill-over effecton the core sectors, like steel and cement among others.

FAVOURABLE MICRO SCENARIO

INFLATION IN COMFORTABLE ZONE

Valuations – not cheap anymoreWith the Sensex’ valuation multiple of 15.5x one-year forwardearnings now nearly at a premium to the average long-term multiple,there is little scope for any material re-rating of the Indian equitymarket from these levels. Moreover, the uncomfortable politicaldiscourse domestically and global uncertainties limit the upside fromthe current levels in the near term. However, we remain constructiveon the domestic equity market over the medium term (12-24 months)largely due to our growing confidence that India Inc’s earningsgrowth will revive in the coming quarters.

Sector preference: We prefer private sector banks; companies fromsectors such as NBFC, automobiles, consumer goods (select stapleand discretionary spending companies including urban and ruralfocused players) and IT services; and select capital goods andpharmaceutical companies.

STABLE INR VS USD

PULL-BACK IN COMMODITY PRICES

SENSEX’ PE (ON ONE-YEAR FORWARD EARNINGS ESTIMATE; BLOOMBERGCONSENSUS)

Source: Bloomberg


Sharekhan Top PicksSHAREKHAN TOP PICKS

After a sharp recovery in March, the Indian equity markets took abreather to consolidate at higher levels. The benchmark indices,Nifty and Sensex, ended with marginal gains of 1.0-1.5% each inApril. The buoyancy was better in the broader market with gainsof 3.5% in the CNX Midcap 100 index. Comparatively, theSharekhan Top Picks (folio of select picks) comfortablyoutperformed the indices with gains of 5% in the same period.

Along with consistent outperformance by the private sector banks(HDFC Bank and IndusInd Bank), the outperformance ofSharekhan Top Picks was driven by a surge in Relaxo Footwear(its perseverance despite many months of underperformance ispaying off now). Within the portfolio, the quarterly results offour companies have been announced till now. The financial

*CMP as on April 29, 2016 # Price target for next 6-12 months ** Under review

NAME CMP* PER ROE (%) PRICE UPSIDE(RS) FY15 FY16E FY17E FY15 FY16E FY17E TARGET (RS)# (%)

Ashok Leyland 107 133.3 27.3 19.4 4.6 19.9 25.5 120 13

Bajaj Finance 6,832 38.2 31.0 24.2 20.3 19.5 19.2 ** -

Bharat Electronics 1,183 25.8 20.8 18.6 13.7 13.4 13.1 1,450 23

Britannia Industries 2,855 63.2 40.2 33.0 53.3 55.9 47.5 3,650 28

Havells 333 44.5 41.7 35.5 20.6 20.0 21.0 360 8

HDFC Bank 1,133 27.8 23.3 19.2 19.4 18.3 19.2 1,300 15

HUL 867 48.3 43.9 37.3 102.8 100.3 103.4 980 13

IndusInd Bank 1,049 31.0 27.3 20.8 18.2 16.1 15.8 ** -

Maruti Suzuki 3,795 30.9 25.1 20.4 15.7 17.0 18.2 4,700 24

Relaxo Footwear 491 57.1 44.2 33.9 23.4 22.2 21.8 600 22

Reliance Industries 983 12.3 10.6 10.4 10.8 11.2 10.5 1,250 27

TCS 2,530 25.2 20.5 18.6 33.7 32.9 29.5 2,750 9

ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES) % CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCEAPRIL 2009Sharekhan Sensex Nifty CNX

(Top Picks) MIDCAP

CY2016 3.0 -2.0 -1.2 -1.5

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 72.0 114.0Since inception 439.1 155.0 157.4 264.2(Jan 2009)

CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED) (%)1 month 3 months 6 months 1 year 3 years 5 years

Top Picks 5.0 9.0 1.2 8.0 118.3 145.1

Sensex 1.0 3.0 -3.9 -5.3 31.1 38.5

Nifty 1.4 3.8 -2.7 -4.1 31.7 41.9

CNX Mid-cap 3.5 5.8 -0.3 4.0 68.8 63.4

Please 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

EQUITY FUNDAMENTALS SHAREKHAN TOP PICKS

performance is encouraging for Maruti, Reliance Industries, HDFCBank and IndusInd Bank whereas Tata Consultancy Services’results were a tad below expectations.

This month, we are making one change in the portfolio. We aretaking profits in Zee Entertainment Enterprises Ltd (ZEEL; gainsof over 20% since we added it more than a year ago) to makeplace for Bharat Electronics Ltd (BEL). We continue to like ZEELwhich is our preferred pick in the media space. However, webelieve that BEL could provide superior returns in the mediumterm due to the government’s focus on the indigenous defenceequipment space (under ‘Make in India’ initiative) along withcomfortable valuations.


EQUITY FUNDAMENTALSSHAREKHAN TOP PICKS

NAME CMP PER ROE (%) PRICE UPSIDE(RS) FY15 FY16E FY17E FY15 FY16E FY17E TARGET (RS) (%)

ASHOK LEYLAND 107 133.3 27.3 19.4 4.6 19.9 25.5 120 13

Remarks: Ashok Leyland Ltd (ALL) is the second largest commercial vehicle (CV) manufacturer in India with a market share of 30% in the heavytruck segment and an even higher share of 43% in the bus segment.

The medium and heavy commercial vehicle (MHCV) volumes were under pressure over the past two years but have witnessed asustained recovery and has been growing in double digits over the past few quarters. We expect the MHCV volumes to remain buoyantover FY2016-17 driven by a pick-up in the economic cycle, improved operator profitability, new launches and phase-wise implementationof the Bharat Stage IV norms across the country leading to pre-buying.

ALL has a strong presence in exports market and continues to expand to newer geographies. The company expects the exportscontribution to be around 25% of the revenues over the next three to five years from the current level of 10%. Additionally, ALL’sdefence business is expected to get a leg-up due to the government’s focus on indigenous manufacturing of defence products andforeign direct investment (FDI) in the sector.

ALL’s operating profit margin has recovered from the lows on the back of a reduction in discounts and price hikes taken by thecompany. Its margins are expected to expand further, given the operating leverage. With buoyant operating cash flows and no significantcapital expenditure planned, we expect the balance sheet to get de-leveraged and the return ratios to improve.

BAJAJ FINANCE 6,832 38.2 31.0 24.2 20.3 19.5 19.2 ** -

Remarks: Bajaj Finance Ltd (BFL) is among the most diversified non-banking financial companies (financing of mortgages, consumer durables,SME, rural etc) having a strong distribution network (512 branches). We believe, a strong growth in customer additions, its uniquecross-sell and up-sell capabilities, and robust growth from newer products (rural finance, lifestyle finance etc) should drive a growth ofover 25% in the assets under management.

Despite a strong growth in loans, the asset quality remains among the best in the system (gross non-performing assets of 1.69%based on 150-day past due [DPD] basis) which along with conservative provisioning adds to the comfort. BFL has already madeprovisions based on 90-DPD basis, ahead of the Reserve Bank of India (RBI)’s timeline.

We expect BFL’s earnings to grow at a compounded annual growth rate of 26% over FY2015-17 resulting in a return on asset (RoA)and return on equity (RoE) of 3.2% and 19.2% respectively. While we have been positive on BFL’s business model and strongearnings performance, we also have a Buy rating on BFL.

BHARAT ELECTRONICS 1,183 25.8 20.8 18.6 13.7 13.4 13.1 1,450 23

Remarks: Bharat Electronics Ltd (BEL) has got four licences since 2004 in the radar and wafers segments where the company enjoys a monopolyposition. Further, the company has a market opportunity size of Rs70,000 crore over the next seven to eight years in its area ofexpertise.

BEL is planning to invest Rs1,500 crore over the next three years under its “Make In India” expansion and modernisation strategy. Thecompany will also be increasing its R&D spends to 10% of the total turnover (currently at 8%).

BEL will be focusing on exports, offsets and buyer nominated equipments. The likely increased private sector participation has led BELto diversify into areas of homeland security, smart cards, smart city elements and solar power plants which have tremendous growthpotential with better operating profit margins.

BEL remains our preferred pick in the defence sector on account of its strong manufacturing and R&D base. It has already started toreap the benefits of indigenisation of the defence procurement with 44% Y-o-Y jump in its order book which stood at Rs32,333 crore atthe end of Q3FY2016 (order intake of Rs12,000 crore in Q3FY2016). We have maintained our Buy rating on the stock.

BRITANNIA INDUSTRIES 2,855 63.2 40.2 33.0 53.3 55.9 47.5 3,650 28

Remarks: Britannia Industries (Britannia) is the second largest player in the Indian biscuit market with about 30% market share. It has chalkedout an aggressive growth strategy to sustain the double-digit volume growth in the biscuit segment by enhancing its product portfolio.It is also striving to expand to the other categories, such as dairy (market size of Rs75,000 crore) and adjacent snacking categories(market size of Rs30,000 crore).

It is likely to maintain a 14-15% revenue growth rate with the volume growth standing at 10-11% (largely driven by both enhanceddistribution reach and product portfolio). The operating profit margin is expected to remain in the range of 14-15% on the back ofbenign input cost and operating efficiency.

The company has a strong balance sheet with the free cash flow consistently improving over the past few years. Its return ratios haveimproved over the past few years and remained strong in the upward of 50%.

Under a new leadership, Britannia has been able to leverage and monetise its strong brand and position in the biscuit and snacksegments. We believe that the company can sustain its higher than industry growth rates with an improving distribution reach, entryinto newer categories and focus on cost efficiency. We have a Buy rating on the stock with a price target of Rs3,650.



HAVELLS 333 44.5 41.7 35.5 20.6 20.0 21.0 360 8

Remarks: Havells is a leading electrical equipment and appliance manufacturer in India. The poor performance of Sylvania (acquired in 2007)dragged the balance sheet of the company for a long time; however now Havells is going to divest Sylvania. We believe the deal willnot only strengthen its balance sheet but also add value to the bottom line and lift the return ratios. Therefore, the current overhang willgo away and reflect positively on its financials. In terms of quality, the management’s focus on domestic business is expected toincrease.

Apart from consolidating its leadership position in the existing products through product innovation and better features, it is alsoexpanding its product portfolio and making efforts to dwell deeper in the distribution channel by directly connecting with retail andelectrician networks (on the lines of Asian Paints and Astral Poly Technik). Further, consistent free cash flow generation, a high cashconversion (reported profit to cash flow) record and a consistent high dividend pay-out speak for the management quality. Superiorreturn ratios and a debt-free balance sheet indicate the quality of business too. Post-divestment of Sylvania, we believe the returnratios are poised to improve further.

We believe Havells is a deserving high quality stocks, backed by a strong track record of its management and impressive financials.Going forward, the extraordinary efforts like direct involvement with electricians and retailers will give it competitive advantage andhelp it to consolidate its leadership position in India. Though currently the domestic business is moving at a modest pace, mirroringconsumer demand, we expect urban consumption to rise in future and Havells is well positioned to captalise on it. Moreover, theSylvania divestment would help it to shake off the past overhang and reflect positively on its return ratios as well as valuations.

HDFC BANK 1,133 27.8 23.3 19.2 19.4 18.3 19.2 1,300 15

Remarks: HDFC Bank has a strong presence in the retail segment (~50% of the book) and therefore it has been able to maintain a strong growthin loans even as industry-wise credit growth remains tepid. Going ahead, with a recovery in the economy and improving sentiment inconsumer sector, the loan growth will improve further which will drive the profitability.

With a current account and savings account (CASA) ratio of over 40% and a high proportion of retail deposits, the cost of fundsremains among the lowest in the system and helps to maintain higher net interest margin (NIM). In addition, the bank’s loan growth isled by high yielding products, such as personal loans, vehicle loans, credit card, mortgages etc which has a positive impact on the NIM.

The bank maintains impeccable asset quality and its NPA ratios are among the lowest in the system. Given the bank’s stringent creditappraisal procedures and insignificant exposure to troubled sectors, it is expected to maintain robust asset quality.

HDFC Bank is well poised to tap the growth opportunities going ahead due to strong capital ratios, healthy asset quality and steadyrevival in consumer spending. The bank is likely to maintain a healthy RoE of 19-20% and RoA of 1.8% on a sustainable basis.Therefore, we expect the valuation premium that it enjoys as compared with the other private banks to sustain.

HUL 867 48.3 43.9 37.3 102.8 100.3 103.4 980 13

Remarks: Hindustan Unilever Ltd (HUL) is India’s largest FMCG company with strong presence in personal care, home care and packaged foodsegments in India. The company is a market leader in the personal wash, detergent and shampoo segments in India.

Despite subdued demand environment, HUL’s volume growth stood at 6% in M9FY2016 as against 4.5% volume growth in M9FY2015on the back of relevant pricing actions and higher promotional spends.

With expected improvement in the rural economy and better urban demand (due to the implementation of the Seventh Pay Commissionand lower inflation), we expect HUL’s volume growth trajectory to improve by 6-8% (from the current level of 4-6%) in the near tomedium term. This along with sustained innovation in the portfolio, we expect HUL’s earnings to grow at a CAGR of 15% over FY2015-18.

With negative working capital and strong cash generation ability, the company has a strong balance sheet amongst its peers. Also,return ratios continue to remain high (RoE and RoCE remained above 100%).

In view of improved earnings visibility, strong cash generation ability and higher return ratios we have a Buy recommendation on thestock with a price target of Rs980. The stock is currently trading at 32x its FY2018E EPS of Rs27.2.

INDUSIND BANK 1,049 31.0 27.3 20.8 18.2 16.1 15.8 ** -

Remarks: IndusInd Bank is among the fastest growing banks (a 26% CAGR growth over FY12-16) having a loan book of Rs88,000 crore and 811branches across the country. About 25% of the bank’s book pertains to vehicle finance, which is a high-yielding category and isshowing signs of recovery.

Given the aggressive measures taken by the management, the deposit profile has improved considerably (a CASA ratio of 35%).Going ahead, the bank would follow a differentiated branch expansion strategy (a 5% branch market share in identified centers) thatwould help ensure healthy savings accounts and retail deposit growth.

Despite a weak economic growth and a higher proportion of vehicle finance book the bank has maintained its asset quality. With totalstressed loans (restructured loans + gross NPAs) forming just 1.4% of the book, the bank’s asset quality is among the best in the system.

A likely revival in the economy will further fuel growth in the consumer finance division and strong capital ratios will support the growthplans. Given the strong loan growth, high RoAs and healthy asset quality, the stock should continue to trade at premium valuation. Wehave a positive outlook on the stock.

EQUITY FUNDAMENTALS SHAREKHAN TOP PICKS



MARUTI SUZUKI 3,795 30.9 25.1 20.4 15.7 17.0 18.2 4,700 24

Remarks: Maruti Suzuki India (Maruti) is India’s largest passenger vehicle manufacturer with a strong 45% market share. The company has beenable to gain market share over the last two years on the back of its diverse product portfolio, a large distribution network with anincreased focus on the rural markets and a shift in consumer preference to petrol models from diesel models.

The recently launched premium hatchback, ie Baleno, has received a positive response which will help the company expand its marketshare in the segment. Also, the company recently entered the compact utility vehicle space with the launch of Vitara Brezza and hasreceived encouraging response. Further, the company also plans to enter into the light commercial vehicle segment which wouldfurther boost topline.

The company is poised to reap the benefits of an increase in discretionary spending from the Seventh Pay Commission pay-out. Thecommencement of first phase of Gujarat plant with a 2.5 lakh capacity is scheduled in early Q4FY2017. The management plans todouble its existing sales and premium distribution network (“NEXA”) in order to achieve its target of doubling domestic volumes overthe next five years.

RELAXO FOOTWEAR 491 57.1 44.2 33.9 23.4 22.2 21.8 600 22

Remarks: Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mind-recallbrands, viz, Hawaii, Sparx, Flite and Schoolmate. In the last quarter it also added another brand, Bahamas, to its product portfolio.

Relaxo has a proactive approach towards both brand building and creating capacities. To build its brand and create pull, like FMCGplayers it continues to rope Bollywood celebrities and this creates an aspirational quotient for its brands. On the one hand, thecompany is creating strong consumer centric aspiration for the consumers; on the other hand, it is keeping its eye on quality and thusdoes not believe in outsourcing. It is in the process of building capacity for future. Despite the current capacity (180 million pieces perannuam) that would take care of growth in the next three years, the company has bought a 15-acre land at Bhiwadi to built additionalcapacity to serve the future requirements.

Relaxo’s strong presence in the lucrative mid priced footwear segment (through its top-of-the-mind-recall brands like Hawaii, Flite andSparx) along with its integrated manufacturing set-up, lean working capital requirement and vigilant management puts it in a sweetspot to cash in on the strong growth opportunity unfolding in the footwear category due to a shift from unbranded to branded products.We thus maintain our Buy rating on the stock.

RELIANCE INDUSTRIES 983 12.3 10.6 10.4 10.8 11.2 10.5 1,250 27

Remarks: Reliance Industries Ltd (RIL) has a strong presence in the refining, petrochemical and upstream exploration businesses. The refining

division of the company is the highest contributor to its earnings and is operating efficiently with a better gross refining margin (GRM)

compared with its peers in the domestic market due to the ability of its plant to refine more of heavier crude. Currently, with soft crude

oil prices RIL is likely to enjoy high GRM in the near to medium term. The exploration business remains weak due to low production in

the Krishna-Godavari-D6 (KG-D6) field and weak pricing of global fuel prices. However, capital employed and profit contribution from

the exploration business is low.

Moreover, the upcoming incremental capacities in the petrochemical and refinery businesses are going to drive the future earnings

growth substantially as the downstream businesses are on the driving seat and contributing the lion’s share of the profitability and cash

flow.

After a strong GRM in FY2016, we expect the margin to remain healthy for FY2017 and drive a strong bottom- line performance. The stock

is available at an attractive valuation considering the size, strong balance sheet and cash flow generating ability of the company.

TCS 2,530 25.2 20.5 18.6 33.7 32.9 29.5 2,750 9

Remarks: Tata Consultancy Services (TCS) pioneered the IT services outsourcing business from India and is the largest IT services firm in the

country. It is a leader in most service offerings and has further consolidated its position as a full-service provider by delivering a robust

financial and operational performance consistently over the years.

The consistency and predictability of its earnings performance has put the company at the top of its league. TCS’s management

expects the digital revenues to grow much faster in the coming years; for the third quarter of FY2016 the digital revenues grew by 4%

QoQ and formed 13.7% of the total revenues (13.3% in Q2FY2016). Further, the management expects Q4FY2016 to be better than

Q3FY2016. Diligenta is expected to bottom out in Q4FY2016 while Japan’s softness (integration issues related to the Mitsubishi

acquisition) is expected to continue for a few more quarters.

We remain positive on TCS, given its strong positioning, scale advantage and head-start in the digital technologies space (the highest

among the top Indian IT companies), which justify the valuation premium for TCS over the others.

EQUITY FUNDAMENTALSSHAREKHAN TOP PICKS


WEALTH CREATOR PORTFOLIOEQUITY FUNDAMENTALS

Wealth Creator portfolioWEALTH CREATOR PORTFOLIO APRIL 29, 2016.

COMPARATIVE RETURNSParticulars Returns (as on April 29, 2016)

Since inception (August 21, 2014)

Wealth Creator folio (weighted average returns) 3.60%

- Large-cap (64%) 3.70%

- Mid-cap (36%) 3.50%

Sensex -2.90%

Nifty -0.50%

CNX Mid-cap 18.00%

UPDATE ON WEALTH CREATOR PORTFOLIOSr No Scrip Weights Reco price (Rs) Price target (Rs) Potential upside 29-Apr-2016 March-19

Large-caps (64% weightage; 8% each)

1 Axis Bank 8% 472 1210 156.20%

2 Larsen & Toubro 8% 1254 3400 171.10%

3 Maruti Suzuki 8% 3795 8750 130.60%

4 Cummins 8% 886 1708 92.80%

5 IndusInd Bank 8% 1049 1600 52.50%

6 Sun Pharmaceuticals 8% 811 1650 103.40%

7 Tata Consultancy Services 8% 2530 5100 101.60%

8 Tata Motors DVR 8% 298 675 126.70%

Mid-caps (36% weightage; 4% each)

9 PTC India Financials 4% 39 102 161.50%

10 V-Guard Ltd 4% 954 2100 120.10%

11 Gateway Distripark 4% 279 710 154.40%

12 IRB Infra 4% 214 550 128.20%

13 Network 18 Media 4% 41 105 156.10%

14 Gabriel India 4% 90 200 121.50%

15 Century Plyboard 4% 183 440 140.00%

16 Triveni Turbine 4% 108 265 146.10%

17 Dhanuka Agritech 4% 599 1150 92.10%

Objective: To build a balanced and actively managed portfolio ofquality companies that will help create meaningful wealth forinvestors in the multi-year rally expected in the Indian equity market.

In addition to some bottom-up picks, the portfolio contains stocksidentified based on three key themes:

Policy push: Stocks from sectors benefiting from improvementin the policy environment

Early gainers: Beneficiaries of an economic recovery (stocks fromauto, banking & financial services, logistic sectors)

Evergreen: Steady performers that provide stable and consistentreturns including urban consumption plays

Portfolio performance reviewSharekhan’s Wealth Creator portfolio continues to outperformthe broader indices with 3.6% returns (on an weighted averagebasis) as against a 0-3% decline in the broader indices.

No change was suggested in the folio in April 2016. Prices as onApril 29, 2016.

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


STOCK UPDATEEQUITY FUNDAMENTALS

Business growth remains healthy; asset qualitystable; PT revised to Rs590

COMPANY DETAILS

Price target: Rs590

Market cap: Rs114,511 cr

52-week high/low: Rs613/367

NSE volume (No of shares): 106.6 lakh

BSE code: 532215

NSE code: AXISBANK

Sharekhan code: AXISBANK

Free float (No of shares): 167.4 cr

(%) 1m 3m 6m 12m

Absolute 7.4 11.7 -10.6 -10.2

Relative to Sensex 6.0 6.1 -4.8 -5.5

PRICE PERFORMANCE

BUY CMP: RS480 APRIL 26, 2016AXIS BANK

KEY POINTSAxis Bank reported a strong 19.8% growth in net interest income (NII) for Q4FY2016owing to 20.5% jump in the advances and expansion in net interest margin (up 16BPSYoY and 18BPS QoQ). The non-interest income growth was flat as treasury profitdeclined by 65.4% YoY, however the retail fee income showed a growth of 15.1%YoY. Provisions for Q4FY2016 surged by 64.6% YoY owing to Rs300-crore contingentprovisions made during the quarter.For Q4FY2016 the advances grew by 20.5% YoY owing to a strong growth in retailadvances (23.8% YoY) and corporate advances (21.7% YoY). Growth in the retailadvances was mainly driven by a higher growth in personal loans and credit cards. Theasset quality remained largely stable as GNPAs were stable (down 1BPS QoQ to 1.67%).Slippages during the quarter were lower on a sequential basis (Rs1,474 crore versusRs2,082 crore QoQ). The bank invoked SDR in four accounts worth Rs205 crore andundertook 5:25 refinancing in one account amounting to Rs130 crore. Accounts worthRs400 crore slipped from restructured category to NPAs during Q4FY2016. The bankhas created a watch list of stressed accounts amounting to Rs22,600 crore which, itfeels, could slip into NPAs over the next two years.Axis Bank delivered a better than expected performance during the quarter and has allthe ingredients to grasp opportunities during an economic revival. Liability franchiseeof the bank remains strong (CASA at 47%) while it is well capitalised to sustain ahealthy loan book growth. We have rolled over our valuations to FY2018 leading to arevised price target of Rs590. We have valued the bank at 2.0x its FY2018E BV andmaintained our Buy rating on the stock.

SHAREHOLDING PATTERN

Sharekhan Limited, its analyst or dependant(s) of the analyst might beholding or having a postition in the companies mentioned in the article.

For detailed report, please visit the Research section of our website, sharekhan.com.

Robust performance; maintain Hold withprice target revised to Rs425

COMPANY DETAILS

Price target: Rs425




BSE code: 532454

NSE code: BHARTIARTL

Sharekhan code: BHARTIARTL


(%) 1m 3m 6m 12m

Absolute 0.2 20.7 0.0 -9.6

Relative to Sensex -1.1 14.7 6.5 -4.9

PRICE PERFORMANCE

HOLD CMP: RS372 APRIL 28, 2016BHARTI AIRTEL

KEY POINTSQ4FY2016 result snapshot; strong performance, operating profit jumps 8.1% QoQ:Bharti Airtel (Bharti) posted a strong show, with consolidated operating profit growthof 8.1% QoQ, led by a strong 3.6% Q-o-Q growth in the revenue. The solid voicevolume (+6% QoQ) and data volume (+9.6% QoQ) aided the top line growth whilemargins across segments were on an expansionary mode, with the Indian mobile marginsat 39.9%). A low tax for the quarter negated the effect of higher interest and depreciationcosts, resulting in a 15.5% Q-o-Q growth in the earnings. Adjusting for the exceptionals,the net earnings grew by 4% QoQ.

Outlook and view: Bharti’s robust performance (industry-leading volume growth andmargins), along with an improving African trajectory validate our thesis of improvingexecution from Bharti. Further, after the recent spectrum deals with Videocon andAircel, Bharti has enhanced its pool of both 3G and 4G spectrums, making it lessvulnerable to the competitive intensity in the upcoming auction. Thus, Bharti continuesto be our preferred pick in the sector, but the imminent risk in the form of the launchof Reliance Jio and the uncertainty over its pricing and market strategy make us retainour Hold rating on the stock. In this note, we have introduced our FY2018 estimatesand maintained our FY2017 EBITDA estimates. We expect Bharti to post 9.9% and10.6% revenue and EBITDA CAGR respectively over FY2016-18. With the forwardrolling of the multiple to FY2018, our price target stands revised to Rs425 (valued at6.2x its FY2018E EV/EBITDA).


Sharekhan Limited, its analyst or dependant(s) of the analyst might beholding or having a postition in the companies mentioned in the article. For detailed report, please visit the Research section of our website, sharekhan.com.


STOCK UPDATE EQUITY FUNDAMENTALS

SON acquisition to strengthen African business;maintain Buy with PT revised to Rs1,550

COMPANY DETAILS

Price target: Rs1,550


52-week high/low: Rs1,457/1,024


BSE code: 532424

NSE code: GODREJCP

Sharekhan code: GODREJCP


(%) 1m 3m 6m 12m

Absolute 16.8 8.5 14 33.5

Relative to Sensex 5.7 10.8 17 45.1

PRICE PERFORMANCE

BUY CMP: RS1,420 APRIL 4, 2016GODREJ CONSUMER PRODUCTS

KEY POINTSEvent: GCPL entered into an agreement to acquire rights to 100% stake in Strength ofNature (SON), LLC (located in the USA), which provides wet hair care in the USA forthe women of African descent. The key rational behind the acquisition was to expandthe base in growing African hair care market ($2.3 billion market) and presence in theUSA will help accelerate innovation with new products and better R&D (complementingAfrican market). The funding of acquisition will be done through low-cost foreigndebt with repayment schedule of five years (substantial debt will be repaid between the3rd and 5th year). GCPL expects the acquired company to be earnings accretive fromyear one of consolidation.Earnings accretive from year one of consolidation: SON has registered revenues ofRs630 crore in CY2015 and has OPM of 22%. On the back of our rough cut calculationswith assumption of 12% increase in revenues and the OPM of 20%. The acquisition islikely to add 3-4% to GCPL’s consolidated bottom line in FY2017 and FY2018.Maintain Buy with revised PT of Rs1,550: GCPL’s management is confident that SON’sbetter cash flows would be sufficient enough to repay the debt (as a substantial portionof debt will be repaid in the later part of repayment schedule). With the acquisitionlikely to be earnings accretive from year one of consolidation, we expect GCPL earningsto be above 20% over the next two years. Hence, in view of a strong focus on growingbusiness opportunities in the domestic and international markets and better earningsvisibility, we have maintained our Buy recommendation on the stock with a revisedprice target of Rs1,550.




Below expectations; maintain Buy withPT revised to Rs950

COMPANY DETAILS

Price target: Rs950


52-week high/low: Rs1,047/785


BSE code: 532281

NSE code: HCLTECH

Sharekhan code: HCLTECH


(%) 1m 3m 6m 12m

Absolute 3.4 1.5 -0.2 -4.0

Relative to Sensex 2.0 -3.6 6.3 0.9

PRICE PERFORMANCE

BUY CMP: RS800 APRIL 28, 2016HCL TECHNOLOGIES

KEY POINTSRevenues slower than expected: For Q3FY2016, HCL Tech has reported a weakerthan expected revenue growth of 1.3% QoQ at $1,587.2 million on a reported basisand a 1.7% Q-o-Q growth on a constant-currency (CC) basis (a weaker growth rateon lower base as compared with Infosys [1.9%] and TCS [2.1%]). The lower thanexpected revenue growth was attributed to some project closures in the BFSI space andsome slow ramp-ups.

Margins fall short of estimates: The EBIT margins for Q3FY2016 fell short ofexpectations. Importantly, the management has stopped providing margin guidancefor FY2017, owing to integration margin headwinds from Volvo (Q1FY2017) andGeometric (end of FY2017).

Maintain Buy with a revised price target of Rs950: The increasing complexity of dealengagement will result in a volatile earnings performance in FY2017. Further, a lack ofconviction in management commentary on the organic growth front and absence ofmargin guidance will affect the stock’s performance in the near term. After the near-term hiccups and volatility, we expect the margin performance to start showing animprovement with deals reaching a steady state (also reflected in revenue growth),which will be the most important re-rating trigger for HCL Tech. We have maintainedour Buy rating on the stock with a revised price target of Rs950.





Operating performance remains strong; loangrowth fastens; PT revised to Rs1,300

COMPANY DETAILS



52-week high/low: Rs1127 / 929


BSE code: 500180

NSE code: HDFCBANK

Sharekhan code: HDFCBANK


(%) 1m 3m 6m 12m

Absolute 4.4 6.7 -0.4 9.6


PRICE PERFORMANCE

BUY CMP: RS1,092 APRIL 22, 2016HDFC BANK

KEY POINTSConsistency in profitability: For Q4FY2016, HDFC Bank has reported a 20.2% Y-o-Y growth in net profit driven by a strong growth in the net interest income (up 24.0%YoY). Advances during the quarter surged by 27.1% YoY while the net interest marginstood at similar levels. The non-interest income for Q4FY2016 was up by 11.8% YoYdue to a decline in the treasury and forex incomes. But the fee income reported ahealthy growth of 18.4% YoY.Loan book gathers pace, asset quality remains stable: During Q4FY2016, HDFC Bankreported a loan book growth of 27.1% YoY driven by a 24.8% Y-o-Y growth incorporate advances and a 29.7% Y-o-Y growth in the retail segment. Within the retailsegment, personal loans, credit cards and mortgage loans showed a healthy growth of44.1%, 27.0% and 32.0% YoY respectively. Advances in the corporate segment weremainly driven by working capital and medium-term capital loans. The asset qualityremained stable and showed a marginal improvement of 3BPS QoQ as gross NPAs forQ4FY2016 stood at 0.94%. Slippages for the quarter were around 1.5% of the advances.The restructured book stood at similar levels, at 0.1% of the advances.Valuation and outlook: HDFC Bank has maintained its superior performance despite achallenging environment. We believe that an improving economic scenario and fallinginterest rate cycle would help the bank to maintain its growth momentum as the bankis well capitalised to grasp this opportunity. We expect its earnings to grow at a CAGRof 22.2% during FY2016-18 resulting in an RoA of 1.9%. We have revised our pricetarget to Rs1,300 by valuing the stock at 3.4x its FY2018E BV. We have maintainedour Buy rating on the stock.




In-line quarter, strong guidance; maintain BuyCOMPANY DETAILS



52-week high/low: Rs1,267/933


BSE code: 500209

NSE code: INFY

Sharekhan code: INFY


(%) 1m 3m 6m 12m

Absolute 2.6 8.2 7.6 7.3

Relative to Sensex -1.4 4.6 12.2 19.7

PRICE PERFORMANCE

BUY CMP: RS1,239 APRIL 18, 2016INFOSYS

KEY POINTSIn-line performance; strong deal wins: For four quarters in a row, Infosys has delivereda strong performance. For Q4FY2016, it delivered a sequential growth of 1.9% (it sawin Q4 the highest sequential growth in 24 quarters; Q4 is a seasonally weak quarter) inrevenues on a CC basis, driven by a 2.4% volume growth and a 1.1% pricing fall. Ona reported basis, the revenues were up by 1.6% QoQ to $2,446 million. The EBITmargin for the quarter was up by 60BPS QoQ to 25.7% on the back of improvedutilisation including trainees, lower sub-contracting expenses and rupee depreciation,partially offset by a pricing drop. Despite a lower other income and a higher taxprovisioning, the net income for the quarter grew by 3.8% QoQ to Rs3,597 crore.Infosys signed six large deals with a total contract value of $757 million during thequarter and two deals of $470 million not yet committed.Strong guidance to lead industry in FY2017: The management has provided a revenuegrowth guidance of 11.5-13.5% (on CC basis) for FY2017, ahead of NASSCOM’sIndian IT industry growth guidance of 10-12% for FY2017, which implies a CQGR of3.3-4.1%. The management maintained its OPM guidance of 24-26% for FY2017 andexpects a gradual elevation in OPM, up to 30% by 2020 through automation, innovationand operational excellence.On a growth acceleration mode, retain Buy: Given the growth acceleration in the recentquarter and strong revenue visibility led by an improvement in win rate, the growthrevival strategy is working well under Dr Vishal Sikka. The market-share gain withsome pricing discipline coupled with an improvement in win rate and strong deal pipelineprovide confidence with regard to demand visibility. We have maintained our Buyrating on the stock with an unchanged price target of Rs1,430.






Missed on operating parameters,maintain Buy with revised PT of Rs285

COMPANY DETAILS

Price target: Rs285




BSE code: 532706

NSE code: INOXLEISUR

Sharekhan code: INOXLEISUR


(%) 1m 3m 6m 12m

Absolute 6.8 -3.7 -14.5 27.2

Relative to Sensex 5.3 -8.5 -8.9 33.8

PRICE PERFORMANCE

BUY CMP: RS212 APRIL 27, 2016INOX LEISURE

KEY POINTSIn-line revenue performance, missed margin expectations: For Q4FY2016 ILL hasreported a revenue growth of 31.8% at Rs286.9 crore, driven by a strong GBOCrevenue growth of 41.7% YoY and F&B growth of 52.3% YoY. Further, the footfallsincreased by 36.9% YoY during the quarter. However, ILL reported a lower thanexpected performance on the margin front at 5.2% in Q4FY2016, up 42BPS YoY. Thedecline in the margins on a sequential basis was primarily due to an increase in theentertainment tax rate as the entertainment tax exemption for six properties expiredduring the quarter, the entertainment tax rate spiked for four properties in the Delhiregion and the other expenses increased (up 28.7% YoY).Operating metrics lack improvement: (1) ILL added three new properties during thequarter and seven new screens, taking the total number of properties to 107 with 420screens and 108,931 seats. The lower than expected addition was on account of someregulatory issues. (2) The ATP increased by 5.7% YoY to Rs167, the food & beveragesSPH increased by 9.4% YoY to Rs58 while the occupancy rate grew by 300 BPS YoYat 23% and fell by 500BPS sequentially. (3) The advertising revenue per screen declinedby 13% YoY to 0.49 million on account of a weaker quarter and a price hike duringthe fag end of the third quarter of FY2016.Maintain Buy with revised PT of Rs285: ILL has missed expectations of an improvementin the operating parameters like advertisement revenues and screen addition. However,with its strong brand and extended reach ILL is also well poised to leverage theopportunity in India’s under penetrated multiplex sector and growing spending ofmoviegoers. We maintain our Buy rating on ILL with a revised price target of Rs285.




Stable operating performance, maintain BuyCOMPANY DETAILS

Price target: Rs558




BSE code: 500253

NSE code: LICHSGFIN

Sharekhan code: LICHSGFIN


(%) 1m 3m 6m 12m

Absolute 4.0 -1.8 1.2 5.1


PRICE PERFORMANCE

BUY CMP: RS468 APRIL 20, 2016LIC HOUSING FINANCE

KEY POINTSLIC Housing Finance Ltd (LICHFL) posted a steady set of numbers for Q4FY2016 asthe net interest income (NII) grew by 26.4% YoY (in line with estimates) owing to a15.5% growth in the loan book and an expansion of the net interest margin (up 24BPSYoY and 13BPS QoQ). The non-interest income was up by 13.1% YoY. The company’sPAT reported an uptick of 18.5% and stood at Rs448.0 crore, the growth in profitabilitywas marginally lower due to a 264% Y-o-Y surge in provisions (on a low base) andhigher operating expenditure.During Q4FY2016, the loan book grew by 15.5% YoY driven by a 15.2% growth inthe individual growth segment and a 26.0% growth in the developer segment. Thenon-core business reported a robust growth of 121% (a lower book size) while themortgage loan book growth moderated down to 10.0% YoY owing to a higherprepayment rate of 11.9%. Disbursements during the quarter showed a strong uptickof 33.0% YoY as a result of a growth of 31.7% and 64.9% in the individual anddeveloper segments respectively.LICHFL maintained its steady performance during the quarter. Though an intenselycompetitive environment (especially in mortgages) has led to a slower loan book growth,the company has been able to maintain decent profitability by focusing on marginaccretive segment. We expect that expansion in margins and pick-up in mortgagebusiness due to an improving economic situation, the government’s focus on the housingsector and a lower interest rate regime would drive the growth. We expect the earningsto grow by 20.0% during FY2017 resulting in an RoA of 1.5%. We have maintainedour Buy rating on the stock with an unchanged price target of Rs558.





Positives priced in; downgraded to Hold withrevised PT of Rs270

COMPANY DETAILS

Price target: Rs270




BSE code: 531642

NSE code: MARICO

Sharekhan code: MARICO


(%) 1m 3m 6m 12m

Absolute 5.6 19.1 29.5 27.4

Relative to Sensex 3.0 13.4 36.2 34.2

PRICE PERFORMANCE

HOLD CMP: RS258 APRIL 29, 2016MARICO

KEY POINTSVolume growth momentum sustains in Q4: Marico posted a strong operatingperformance in Q4FY2016 with revenues growing by 7% (driven by 10.5% volumegrowth) and the operating profit growing by 27% (driven by a 630-BPS improvementin the gross profit margin).The Indian business’ volume growth stood at 8.5% withParachute coconut oil registering a 6% volume growth, Saffola edible oil registering a13% volume growth and value-added hair oil portfolio registering an 11% volumegrowth during the quarter. The OPM improved by 260BPS YoY to 16.6% and theoperating profit grew by 27% to Rs216.6 crore. The adjusted PAT grew by 19% YoYto Rs130.7 crore during the quarter.Near-term outlook –- volume growth to sustain at 8-10%; margins to improve inH1FY2017: With prospects of monsoon improving this year, Marico expects thedomestic consumption environment to improve in the second half of FY2017. Webelieve the Indian business’ volume growth would sustain in the range of 8-10% in thecoming quarters. The international business’ revenues are expected to grow in therange of 14-16% in the coming years. With copra prices remaining lower on a Y-o-Ybasis and no major upsurge in the other raw material prices, the margin improvementis expected to sustain in the coming quarters.Positives priced in; downgraded to Hold: We have broadly maintained our earningsestimates for FY2017 and FY2018. The current valuation of 33x its FY2018E earningsfactors in all the positives. Hence, in view of a limited upside, we have downgraded ourrating on the stock from Buy to Hold with a revised price target of Rs270.




Margins surprise positively; maintain Buy withrevised PT of Rs4,700

COMPANY DETAILS





BSE code: 532500

NSE code: MARUTI

Sharekhan code: MARUTI


(%) 1m 3m 6m 12m

Absolute -0.2 -8.7 -14.9 5.9

Relative to Sensex -1.6 -13.2 -9.3 11.4

PRICE PERFORMANCE

BUY CMP: RS3,869 APRIL 26, 2016MARUTI SUZUKI INDIA

KEY POINTSMSIL springs margin surprise in Q4FY2016: Maruti Suzuki India Ltd (MSIL) surprisedthe Street by reporting a strong operating performance in Q4FY2016. Contrary to theStreet’s expectations of sequentially similar margins, due to the currency impact andsubdued volumes, MSIL surprised positively by reporting a 100-BPS margin expansionsequentially. With discount reduction on the back of strong demand for new productscoupled with cost-control measures, the company posted better than anticipated margins.MSIL to continue to outgrow industry in FY2017: MSIL is aiming to outpace theindustry growth in FY2017 on the back of a strong demand for the recent launches(Baleno and Vitara Brezza), launches in the new segment (Ignis) and further expansionof the distribution network particularly in rural areas. MSIL would also be a beneficiaryof the consumer shift towards the petrol segment (MSIL’s 70% volumes are petroldriven as against the industry average of 55%).Maintain Buy: MSIL has demonstrated a robust margin performance despite achallenging passenger vehicle industry and currency woes. We expect MSIL to outpacethe passenger vehicle industry in FY2017 on the back of sustained strong demand forrecent launches and strong product pipeline. Also, MSIL’s yen exposure is likely toreduce given the increased localisation initiatives and royalty on future models whichwould be denominated in Indian Rupee. Also, we expect the discounting/vehicle totread down given the increased proportion of new launches. Further, MSIL has guidedfor a lower tax rate going ahead under the new IFRS rules. We have marginally raisedour estimates by about 6% for both FY2017 and FY2018. We have maintained ourBuy rating on the stock with a revised price target of Rs4,700.






Strong performance, brand investment to continue;upgrade to Buy with PT revised to Rs500

COMPANY DETAILS

Price target: Rs500




BSE code: 500330

NSE code: RAYMOND

Sharekhan code: RAYMOND


(%) 1m 3m 6m 12m

Absolute 6.7 3.5 -6.7 -4.2

Relative to Sensex 4.0 -1.4 -1.9 0.9

PRICE PERFORMANCE

BUY CMP: RS420 APRIL 29, 2016RAYMOND

KEY POINTSStrong Q4FY2016 performance: Raymond’s consolidated revenue grew by 7.9% YoYaided by a robust double-digit growth from the branded apparel (+14.7% YoY) andthe garment (+44.7% YoY) business. The textiles and the denim business clocked asingle-digit (+7.1 and 5.2% YoY respectively) revenue growth. Aided by a robust revenueperformance and improved sales mix in the textile portfolio (textiles business saw amargin expansion of 310 basis points [BPS] YoY), the consolidated operating profitgrew by a strong 70% YoY. The strong operational performance percolated to theadjusted earnings, which more than doubled from Rs19.7 crore in Q4FY2015 to Rs56.2crore in Q4FY2016.Outlook and valuation: We believe that Raymond’s efforts towards stepping up itsbrands and distribution network augur well for creating a profitable branded play inthe next few quarters once the investment starts yielding results along with animprovement in the macro environment. Thus, we continue to like the medium- tolong-term brand franchisee of Raymond, along with a strong brand play. Raymond’sstock also has embedded real estate value (122 acre land parcel in the heart of Thane)which makes us positive on the company. In this note, we have introduced our FY2018Eearnings, and now expect Raymond to post a 26% earnings CAGR over FY2016-18.Thus, in the wake of improving fundamentals and increased aggression of themanagement, we have upgraded our rating on the stock from Hold to Buy with arevised price target of Rs500 (core business valued at 12x its FY2018E EPS + 50%value of land parcel). Further, any development on the unlocking front, throughdivestment of non-core assets (engineering & tools), would be positive for the company.




Strong petchem margin supports earnings growth;PT revised up to Rs1,250

COMPANY DETAILS





BSE code: 500325

NSE code: RELIANCE

Sharekhan code: RELIANCE


(%) 1m 3m 6m 12m

Absolute 0.4 6.9 10.1 21.4

Relative to Sensex -2.0 -1.4 15.6 27.8

PRICE PERFORMANCE

BUY CMP: RS1,040 APRIL 22, 2016RELIANCE INDUSTRIES

KEY POINTSIn-line performance with sustained healthy margin: Reliance Industries reported anotherquarter of strong margin for both the refining and the petro-chemical segment. In linewith our estimate, the operating performance was strong with a Y-o-Y growth of 24%and a sequential growth of 4%. Also, its profit after tax (PAT) grew by 14% YoY andremained elevated like the last quarter at Rs7,320 crore.Robust downstream performance but upstream slips: RIL achieved a GRM of $10.8per barrel in this quarter, a premium of $3.1 per barrel over the benchmark SingaporeGRM. Backed by strong product deltas (resulting in 12% better realisation), low absoluteproduct prices and better volume in polyester chain, the petchem business witnessed astrong margin at 14% in Q4FY2016. The upstream business (oil & gas) turned weakerwith abysmally low margin as the domestic upstream business was affected by stagnatingoutput and weak realisation. On the retail business, the growth momentum continued(PBIT grew by 26% YoY and but declined 11% QoQ).Valuation—reiterate Buy with revised price target of Rs1,250: Given the recentimprovement in crude oil prices, the benchmark GRM is expected to cool off slightly inshort term but RIL should maintain a healthy premium over that. Further, large capitalexpenditure (capex) in downstream business is likely to yield positive result from theend of FY2017. Further clarity on Reliance Jio services and initial response to thatwould be the near-term trigger for the stock. We have introduced FY2018 earningsestimate in this report and revised our price target to Rs1,250 by rolling over ourmultiple to FY2018E earnings. We have retained our Buy rating on the stock.





Piping business rebounds; PT revised to Rs820COMPANY DETAILS

Price target: Rs820



NSE volume (No of shares): 50,564

BSE code: 509930

NSE code: SUPREMEIND

Sharekhan code: SUPREMEIND


(%) 1m 3m 6m 12m

Absolute 3.6 12.8 25.4 9.5


PRICE PERFORMANCE

HOLD CMP: RS799 APRIL 21, 2016SUPREME INDUSTRIES

KEY POINTSA mixed bag: For Q3FY2016, Supreme Industries Ltd (SIL) reported a strong 19%volume growth on the back of a rebound in the plastic piping business, but a decline inthe realisation led to a moderate 11% growth in consolidated revenue (excluding realestate business revenue for Q3FY2015). However, its OPM (excluding real estatebusiness) jumped by 433BPS to 17.9% due to higher revenue contribution of value-added products. The significant fall in interest cost led the adjusted PAT to grow by10.4% (excluding the share of profit from associates Rs16.2 crore). The company haswritten off Rs7.7 crore of expense incurred for the discontinued business of compositepipes manufacturing for oil and gas exploration.

Robust offtake in piping segment: Its plastic piping segment (contributes >50% ofrevenue) saw a strong 26% Y-o-Y volume growth in Q3, while its packaging andindustrial segments witnessed a sluggish offtake. The company guided for a 12-15% ofvolume growth for FY2017 and a capex of Rs250 crore which is likely to be financedinternally and via suppliers’ credit. The company also plans to be free of debt by FY2019using the expected proceeds of Rs130-150 crore from its real estate business.

Earnings marginally upgraded; maintain Hold: We have marginally upgraded ourearnings estimates by 1.5-2% mainly to accommodate the lower interest cost. Theexpected investment uptick in infrastructure development schemes particularly inhousing construction, sanitation and irrigation are likely to keep the demand buoyantfor SIL’s products. At the current levels, the stock is trading at a P/E of 26.5x itsFY2017E earnings. We are revising our price target to Rs820 (target multiple of 20xon the FY2018E earnings). We maintain Hold.




In-line revenue performance, margins missed the markCOMPANY DETAILS





BSE code: 532540

NSE code: TCS

Sharekhan code: TCS


(%) 1m 3m 6m 12m

Absolute 6.8 11.1 -2.3 -3.3


PRICE PERFORMANCE

BUY CMP: RS2,522 APRIL 18, 2016TATA CONSULTANCY SERVICES

KEY POINTSIn-line revenues, margins missed the mark: After six back-to-back quarters of revenuemiss, TCS has delivered an in-line revenue performance with a 2.1% Q-o-Q growth ona CC basis (1.5% on a reported basis). The volume growth was at 3.2% while realisationwas down by 1.1% QoQ. On the flip side, the margin performance missed the mark,down 50BPS QoQ. The management has attributed the decline to a service mix changeand business investment. The other income shot up by 29.5% QoQ which helped itbeat estimate at the net income level, as the net income rose by 3.8% QoQ to Rs6341.2crore. During the quarter, the company announced seven large deals and added threeclients in the $100-million revenue bucket.Demand headwinds soften, outlook looks promising: (1) The management indicatedbusiness visibility is improving with demand headwinds softening; (a) the BFSI outlookis promising; (b) North Americas and Continental Europe look strong and the outlookfor even Latin Americas and India has improved; and (c) order wins have improved. (2)Headcount addition for FY2017 will be materially lower than in FY2016, around32,000 trainees will get into the system and lateral hires to lower. (3) The marginoutlook remains at the target band of 26-28%, though the management acknowledgeschallenges in maintaining the margin band in FY2017, largely attributed to incrementalinvestments in the digital space. (4) Epic Systems sued the company for $940 million,wherein the management has denied any wrongdoing, the judge’s verdict will be out inthe next six weeks and then the company will make an appeal in a higher court.Maintain Buy with a price target of Rs2,750: Strong positioning, scale advantage andhead-start in the digital technology space will drive the long-term growth of the company.We have maintained our Buy rating on the stock with an unchanged price target ofRs2,750.




Promoters73.4%

Institutions5.1%

Corporate Bodies0.4%

Foreign16.8%

Public and Others4.2%



Sharp run-up; downgraded to Hold withPT revised to Rs465

COMPANY DETAILS

Price target: Rs465




BSE code: 500260

NSE code: RAMCOCEM

Sharekhan code: RAMCOCEM


(%) 1m 3m 6m 12m

Absolute 21.9 14.4 30.8 39.2


PRICE PERFORMANCE

HOLD CMP: RS439 APRIL 13, 2016THE RAMCO CEMENTS

KEY POINTSThe Ramco Cements has run up by over 20% over the past five to six weeks driven byan improvement in volume sales in Q4 and recovery in cement prices in certain regions(especially north and central India) from the multi-year low levels, boosting overallsentiment for cement stocks. Being a quality player with a strong balance sheet, TheRamco Cements also witnessed a fair share of buying interest in the stock.We expect The Ramco Cements to post a better earnings growth during Q4FY2016 onaccount of a volume boost (low base effect; Q4FY2015 volumes were down 16%YoY). However, our channel check suggests a correction in cement prices for Q4FY2016(down 8% YoY) and April 2016 (down 13% YoY) for the southern region which is acause for concern in the near term.In certain key markets of The Ramco Cements like Telangana, Maharashtra and AndhraPradesh, the demand for cement is getting affected by the scarcity of water for construction.The water levels in the 31 reservoirs in south India stand at just 17% of the storagecapacity while parts of Maharashtra are already whirling under an acute water crisis.Consequently, we see very limited scope of revival in retail cement demand for the aboveregions which can adversely affect the Q1FY2017 earnings for the company.The Ramco Cements has remained our preferred pick in the cement sector due to itsquality management, cost efficiencies and strong balance sheet. However, after therecent appreciation, the stock is trading at an enterprise value of close to 9x its FY2018EEBIDTA. Moreover, we expect south-based players to face pressure in the immediateterm. Thus, we are downgrading our recommendation to Hold with a revised pricetarget of Rs465.




Weakness in cement prices offsets demanduptick and cost efficiencies

COMPANY DETAILS





BSE code: 532538

NSE code: ULTRACEMCO

Sharekhan code: ULTRACEMCO


(%) 1m 3m 6m 12m

Absolute 1.1 21.1 12.7 19.0


PRICE PERFORMANCE

HOLD CMP: RS3,277 APRIL 25, 2016ULTRATECH CEMENT

KEY POINTSFor Q4FY2016, UltraTech Cement (UltraTech) reported a revenue growth of 4.9%YoY to Rs6,435.9 crore on account of capacity additions (6MT added since April2015) and improvement in capacity utilisation (71%), while weak cement price affectedthe blended realisation (down 8.7% YoY). The savings through a lower power andfuel cost (thanks to a decline in pet coke prices and usage of low-cost fuel) was offset bya lower realisation leading to a decline in the blended EBITDA per tonne (down 9.2%YoY to Rs946 per tonne). Further, lower interest expense and tax rate led to an adjustednet income growth of 2.5% YoY.The eastern region has seen a robust growth in infrastructure and housing demandwhile the other regions have seen infrastructure spending only with no majorimprovement in housing and rural demand. The management has guided for a 7-8%demand growth for FY2017 driven by infrastructure spend and a revival in retail demandafter a good monsoon. However, the uncertainty over cement price and increase in theprice of pet coke (trading with an upward bias, the impact may be felt from Q2FY2017onwards) will be the key monitorable for FY2017. However, cost efficiency and baseeffect may lead to better operating performance for UltraTech.The weakness in cement prices over the past couple of months along with weak rural,housing demand and upward price trend in pet coke is likely to pose near-term challengesfor the sector. Though UltraTech remains among our preferred picks in the cementsector, due to its leadership position and healthy balance sheet, we see limited upside toour price target and consequently maintain our Hold recommendation.






Strong performance; PT revised upward to Rs605COMPANY DETAILS

Price target: Rs605




BSE code: 512070

NSE code: UPL

Sharekhan code: UPL


(%) 1m 3m 6m 12m

Absolute 14.5 25.9 9.0 9.6


PRICE PERFORMANCE

BUY CMP: RS538 APRIL 29, 2016UPL

KEY POINTSFor Q4FY2016, UPL posted a strong set of numbers across parameters despite otheragrochemical companies facing a challenging demand environment across the globe.Growth in UPL was driven by strong volume, operating efficiency and marginal priceincrease. The company reported revenue of Rs4,340 crore, a growth of 20% YoY, ledby volume (up 25%) and price (up 1%) growth. However, the negative effect of thecurrency, around 6%, limited the growth for the quarter. The reported net profitimproved by 25% YoY to Rs552 crore which included extraordinary expenses of Rs58crore. Adjusting for that the PAT stood at Rs610 crore, a growth of 33% YoY.In FY2016, UPL’s net debt increased by Rs860 crore to Rs3,230 crore largely on accountof a stake increase in subsidiary registration of new products and rise in debtors. Goingahead, the company has planned a capex of Rs650 crore for expansion of its capacityin technicals (India, France, Colombia) and formulation (India, Rotterdam, Brazil andthe USA). The new capacities will begin operation from FY2018 and become the keygrowth driver. There was a maintenance capex of Rs250 crore in FY2017.The management has maintained its guidance of a 12-15% growth in the revenue andan improvement in the EBIDTA margin (of 60-100BPS) in FY2017. The growth inrevenue will be driven by new launches of innovative products and increase in marketshare. We continue to prefer UPL in the agrochemical space due to its strong growthmomentum and the fact that it is trading at a discount to the other domestic agrochemicalplayers. We have rolled over our target multiple to FY2018E earnings, valuing thecompany around its average price multiple of 13x, and arrived at a price target ofRs605. We reiterate our Buy rating on the stock.



Weak guidance; maintain Hold witha revised PT of Rs650

COMPANY DETAILS

Price target: Rs650




BSE code: 507685

NSE code: WIPRO

Sharekhan code: WIPRO


(%) 1m 3m 6m 12m

Absolute 8.5 8.0 0.8 -4.3


PRICE PERFORMANCE

HOLD CMP: RS601 APRIL 20, 2016WIPRO

KEY POINTSMissed estimates: For Q4FY2016, Wipro’s IT services revenues were in line at $1,882million, up by 2.4% QoQ (2.7% on a CC basis). The EBIT margins fell short of estimatesat 20.1%, owing to higher than expected depreciation expenses. The net income forthe quarter remained muted sequentially at Rs2,235 crore.Weak guidance, announced buy-back at Rs625 per share: For Q1FY2017, the guidedrevenue growth of 1-3% ($1,901-1,939 million) was below expectation, given the factthe HPS will be fully consolidated. The management attributed the weak guidance inthe organic revenues to weakness in the BFSI, energy and utilities, and some projectdeferrals. For Q1FY2017, a higher impact on margins is expected owing to the fullconsolidation of HPS and wage hikes effective from June 1, 2016. It announced a buy-back of up to 4 crore shares at a price of Rs625/share amounting to Rs2,500 crore, thebuy-back process is expected to be complete by June 2016 end.Ambitious target to double revenues by 2020: The management has set an ambitiousgoal to double the revenues to $15 billion and achieve an EBIT margin of 23% by 2020led by; (1) digital revenue acceleration; (2) higher client mining; (3) new market forgrowth; (4) driving non-linearity in revenues; (5) hyper automation; and (6) leveragingpartners’ ecosystems.Maintain Hold with a revised price target of Rs650: We see the target of new CEOAbid Ali Neemuchwala as an uphill task looking at the current growth trajectory. Atthe current levels, the stock trades at reasonable valuations of 14.8x and 13.3x basedon the FY2017 and FY2018 estimates respectively. It seems fairly valued with littleupside. Thus, we have maintained our Hold rating on the stock with a revised pricetarget of Rs650.





Key points

First-mover advantage in plumping solutions: In a short spanof 15 years, Astral Poly Technik (Astral) has emerged as theleading player in the chlorinated polyvinyl chloride (CPVC;can hold both hot and cold temperature) pipes market. It ishailed as the first licencee of Lubrizol of USA (a Warren Buffetcompany) to manufacture and market CPVC pipes in India. Ithas also successfully created a unique brand in pipes throughcelebrity endorsements and was also the first one to directlyconnect with the plumbers to create awareness about theiradvanced piping system. Consequent to its innovativemarketing and high quality products, it registered acompounded annual growth rate (CAGR) of 40%+ in revenuesand earnings over FY2005-15.Recent acquisitions to boost growth momentum: To attainthe next leap of growth, it acquired two companies in thesealants and adhesives space in FY2015, Resinova Chemie(operating in India) and Seal IT Services (operating in the UK).With these acquisitions, the company has widened its productofferings, geographical presence and distribution network. Thecompany intends to use the synergised distribution networkto operate in the Rs10,000-crore market for adhesives andbuilding chemicals. We are expecting its non-pipe businesscontribution to grow from Rs177 crore in FY2015 to more

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding orhaving a postition in the companies mentioned in the article.

Hot growth in pipeline

ASTRAL POLY TECHNIKVIEW: POSITIVE APRIL 13, 2016CMP: RS432

VIEWPOINT


Robust operating performance, healthy growthoutlook, PT revised to Rs1,050

COMPANY DETAILS



52-week high/low: Rs924 / 590


BSE code: 532648

NSE code: YESBANK

Sharekhan code: YESBANK


(%) 1m 3m 6m 12m

Absolute 3.5 29.7 13.9 7.8


PRICE PERFORMANCE

BUY CMP: RS916 APRIL 27, 2016YES BANK

KEY POINTSYes Bank has delivered a strong set of numbers for Q4FY2016 as its net profit was upby 27.4% YoY driven by a healthy net interest income growth of 27.1% and a stablenet interest margin. The non-interest income grew by 36.0% YoY owing to a 74.3%surge in the corporate banking fees. The liability franchisee continued to show animprovement as the CASA ratio was up by 142BPS to 28.1% on a sequential basis.

For Q4FY2016 the bank has reported a slight deterioration in its asset quality as itsGNPAs are up by 10BPS QoQ to 0.76%. Accounts worth around Rs360 crore slippedduring the quarter partly due to the RBI’s asset quality review (AQR). However, thishas been now completely factored in by the bank and hence moving ahead, the outlookremains stable. The bank did not carry out any 5:25 refinancing or SDR during thequarter. It has guided for a credit cost of about 50 to 70BPS for FY2017 which issimilar to the levels of FY2016 (credit cost for FY2016 was 50BPS).

Yes Bank continues to deliver a strong operational and business performance in achallenging environment. Despite a slight deterioration in the asset quality it remainsthe best among the system. We believe the margin expansion and healthy loan bookgrowth would continue to drive the earnings. We expect the earnings to grow at 25.1%CAGR over FY2016-18E which would result in an RoA of 1.9%. We have rolled overour valuations to FY2018E. This has resulted in a new price target of Rs1,050, whichvalues the bank at 2.3x FY2018E BV.




than Rs750 crore by FY2018 with a margin improvement ofmore than 300 basis points (BPS). Pidilite Industries has amonopoly in the adhesive market; hence, we feel that Astralwith its innovative marketing approach and strong distributionnetwork can grab the second place easily.Robust growth expected in the next few years: In the last fewquarters, the company posted a muted earnings growth owingto unprecedented fluctuations in the price of crude oil (whosederivatives are imported from Lubrizol). However, theembedded foreign exchange (forex) risk is now largely mitigatedas the company has started sourcing raw material from thenewly commenced Lubrizol Indian facility. It would reducethe transport cost and forex volatility risk and save ~at least3-4% of the raw material cost. Overall, at the consolidatedlevel, we are expecting a 24% CAGR in revenues and a 38%CAGR in the earnings over FY2015-18. The stock is currentlytrading at 25.4x its FY2018E earnings which is little lowerthan its historic forward trading multiple of 28-30x. Hence,we are expecting a 15-20% upside from the current levels.


Key points

Phoenix Lamps to merge with Suprajit Engineering: The boardof directors of Phoenix Lamps Ltd (PLL) approved the proposalto merge the company with Suprajit Engineering Ltd (SEL).SEL currently holds 61.8% stake in PLL and SEL will acquirethe remaining 38.2% stake from PLL shareholders. The boardhas approved a swap ratio wherein for every five shares heldin PLL, the investor would receive four shares of SEL. Themerger is expected to be completed in the next six monthsafter the shareholders’ and court’s approval. Based on today’sclosing price of Rs106 for PLL and Rs141 for SEL, and giventhe share swap ratio, PLL investors stand to gain 7%.Suprajit Engineering to be a much larger and diversifiedcompany after PLL merger: After the merger of PLL, SEL wouldupgrade from being a single product player (cables) into amore diversified player having multiple offerings. Also, themerger would significantly open up the export opportunityfor SEL given that PLL derives 40% of its revenues fromoverseas business. Further, the merger would enable SEL toimprove the revenue mix (PLL derives 65% of revenues fromthe after-market segment as compared to SEL, which gets 10%revenue from after-market) and significantly increase thecontent/vehicle supplies to the original equipmentmanufacturers as well as the after-market segment.

Core performance robust; marginal slip in asset quality manageable

INDUSIND BANKVIEW: POSITIVE APRIL 21, 2016CMP: RS972

Key points

Strong operating performance: During Q4FY2016, IndusIndBank reported an impressive net interest income (NII) growthof 37.1% YoY (the highest in the past several quarters)supported by healthy 28.5% growth in the loan book and26BPS Y-o-Y improvement in net interest margin (NIM). Thenon-interest income was also healthy with a 30.6% growthon the back of a 27.1% growth in the core fee income and a54.2% growth in the treasury income. The continued growthmomentum in the savings account deposits, despite reductionin interest rate, helped the bank to improve its current accountand savings account (CASA) ratio to 35.2% (up 110BPS YoYand 22BPS QoQ).

Loan book growth remains healthy, asset quality slipsmarginally: During Q4FY2016, the advances jumped by28.5% YoY, driven by a 28.5% growth in the corporatesegment and a 28.6% uptick in the consumer finance loans.The commercial vehicle loans saw a healthy growth of 32.8%YoY (forms 38.6% of consumer finance loans) while the othersegments like loan against property (LAP), credit card businessand car loans showed a robust growth. During the quarter,the asset quality reported a marginal deterioration as gross

VIEWPOINT



Still bright

PHOENIX LAMPSVIEW: POSITIVE APRIL 20, 2016CMP: RS106

VIEWPOINT



VIEWPOINTEQUITY FUNDAMENTALS

non-performing assets (GNPA) increased to 0.87% (up 5BPSQoQ and 6BPS YoY) though it still remains at healthy levels.The restructured advances during the quarter declined to0.53% of the loan book as compared with 0.58% in theprevious quarter. The bank sold loans worth Rs40 crore to anasset reconstruction company (ARC) while it recovered Rs30crore during the quarter.

Outlook: IndusInd Bank has continued to maintain its growthmomentum on the advances front and has shown a continuousimprovement in its liability franchisee by garnering higherCASA deposits. With an improving margin trend, highergrowth in consumer finance division and high yielding vehicleloans, the earnings outlook remains bright. The stock currentlytrades at 2.9x its FY2017E BV which is at a slight premium.However, a better returns ratio (RoA of 1.9%), higher growthprospectus and an asset quality, which is one of the best in itspeer group, support the same. Hence, we have maintained ourpositive view on the stock.

PLL acquisition to lead to synergy; expect SEL earnings togrow at a healthy 26% CAGR after the merger: Given theimprovement in PLL’s financial performance after the mergerdue to manufacturing efficiencies, cross-selling of products bySEL, improved management focus and synergy benefits, SEL’searnings are likely to improve after the merger. We expect SEL’searnings to grow at 26% CAGR over the next two years.We recommend PLL investors to hold the stock at currentlevels: SEL would emerge as a bigger and diversified ancillaryplayer after the merger of PLL. Further, with the 26% earningsgrowth, SEL is likely to outpace the automotive industrygrowth, making it one of the fastest growing ancillarycompanies. Also, based on the current closing rates and theswap ratio recommended, PLL investors would stand to gain.Thus, investors holding on to PLL shares could expect close to20% gains from the current levels over the next six to eightmonths (expect merger to get effective during the period). Wemaintain our positive view on the stock.


The Nifty has reversed from the previous monthly swing highof around 8000, hence until that level is surpassed the short-term trend shall remain negative.The index has support at its uptrend line, which comes near7600. This is the first target and on slipping lower it can fallto 7500 to make the right shoulder of the inverse head-and-shoulders pattern.So the overall trend remains negative in the short term. Hence,any bounce should be utilised as a selling opportunity for thenext leg down. The targets on the lower side are 7600 and7500 levels.Crucial supports for the index will be around 7600 and 7500while crucial resistance will be near 7925 and 8000.

The Nifty has provided a break-out from its downtrend lineresistance but has been unable to surpass the previous swinghigh. Hence, the short-term trend is down. Once thecorrection is over we think the index will again bounce forthe next leg up which will then take it to 8300 levels. Thelevel 8000 is also the 50% retracement of the entire fallfrom 9119 to 6825 levels.

The index shows positive momentum on the weekly chartbut in the short term it may face resistance at higher levels.So until 8000 is taken off or the index doesn’t correct downto 7600 levels, the consolidation will continue.

Crucial supports would be around 7600 and 7500 whereasresistance would be faced around 7925 and 8000 levels.

The Nifty has closed in the positive territory for two monthsin a row which is a sign of reversal. So there is a highprobability that the index may have bottomed out in themedium to long term.

The Nifty has reached an overbought territory and alsoreversed from it. So this month is expected to be a month ofcorrection and consolidation. We expect a retracement ofthe entire move from 6825 to 8000.

This correction could be in wave B/II which indicates oncethe correction or consolidation is over wave C/III up willbegin. The medium-term trend will remain up for the samereason despite a reversal of the short-term trend.

A crucial support will be around 7302 and a crucialresistance will be around 8000.

Daily view on Nifty

Weekly view on Nifty

Monthly view on Nifty

Medium term

In final stages of correction

Trend Trend reversal Support Resistance Target

Down 7923 7600 7923 7600

TREND & VIEW EQUITY TECHNICALS


Derivative View: Buy on every dip

After witnessing a spectacular rally in the March series the Apriland May series started with some selling pressure caused largelydue to unwinding of long positions. However, around 7550-7600levels the Nifty in the April series took support and showed a sharpupside, which was a one-way journey towards the 8000 level. Mostof the upside was backed by a significant number of addition oflong positions as the open interest of the Nifty in the April seriesshot up by more than 29% and with high roll-over of around 73%owing to an increase in the roll-over cost a majority of the positionsgot carried forward to the next series. In absolute terms, the Niftystarted the series with 2.10 crore shares which is quite healthy.Apart from the Nifty, the Bank Nifty also saw a significant numberof longs being built in the last series and both saw high roll-over,indicating a majority of the positions are still intact in the system.

Foreign institutional investors (FIIs) in the initial part of the Aprilseries, were seen unwinding their long positions in index futures.Also, there was not much participation from them in the cash marketdue to which the market struggled in the first half of the series.However, in the second half the FIIs started building a decentnumber of long positions in index futures and also bought morethan Rs4,000 crore of equities in the cash market due to which themarket bounced back sharply and touched 8000 in the April series.

Top 5 stock futures with the highest OI in current series

Top 5 stock options with the highest OI in current series

STOCK OPTIONS (SHAREKHAN SCRIP CODE) OPEN INTEREST (RS CR)

RELIANCE 976.03

ICICIBANK 853.63

SBIN 598.44

TATASTEEL 507.01

MARUTI 476.18

On the Option front, in the May series the 7700 put option strikeprice stood with the highest number of shares in the open interestfollowed by the 7500 strike price. On the other hand, on the callside, the 8000 strike price stood with the highest number of sharesin the open interest followed by the 8100 strike price.

The Volatility Index has been consolidating in the 16-18 band forthe last few series and is now quoting near 16.95. On the otherhand, the put/call ratio (PCR) started the series on a higher side at0.92 vs 0.77 compared with the last series. However, due to sellingin the last few trading sessions, it has now fallen significantly and isat 0.79. The PCR has decreased since the start of the series mainlydue to the writing of call options and based on derivative parameterswith such a low PCR the Nifty is now in an oversold territory.

In view of the above data the market’s momentum remains positive.However, since the open interest of the Nifty is quite heavy and theIV’s are trading at a bottom, a minor correction cannot be ruledout and that is what we have been witnessing since the start of theMay series. An interesting observation is that the recent fall wascaused mainly by the unwinding of long positions. Also, not manyshort positions have been built, neither in the market nor by theFIIs. Hence, we can expect the Nifty to bottom out very soon andresume the positive momentum. We recommend buying on dips inthe May series.

View

ROLL-OVER: MARKET-WIDE VS NIFTY

EQUITY DERIVATIVES MONTHLY VIEW

Roll-over highlights

The benchmark index, the Nifty, started the April series with around2.10 crore shares of open interest compared with 2.04 crore sharesin the last series. In rupee terms, it started the new month withRs16,570 crore vs Rs15,885 crore of open interest in Nifty futureswhile in stock futures it started the series with Rs55,644 crore ofopen interest vs Rs51,189 crore in the previous series. In indexoptions it started the month with Rs81,083 crore of open interestvs Rs80,640 crore in the previous series and in stock options itstarted the month with Rs5,541 crore in open interest vs Rs4,477crore in the previous series.

The roll-overs in the Nifty stood at 73.92%, which was highercompared with the previous month’s roll-over of 62.85%. The

STOCK FUTURES (SHAREKHAN SCRIP CODE) OPEN INTEREST (RS CR)

RELIANCE 3358.52

HDFCBANK 3270.36

ICICIBANK 2110.74

INFY 1899.36

SBIN

market-wide roll-over was also high at 84.64% compared with theprevious month’s roll-over of 80.92%.


MONTHLY VIEW COMMODITY FUNDAMENTALS

Commodities: Precious metals likely to outperform as global macro data disappoint

Key pointsCommodities rally in April on dollar weakness and notion that Chineseeconomy is stabilisingThe dollar fell to an 18-month low before recovering on NFP earnings dataUS April non-farm payroll data fell short of expectations; expected200k, actual 160kUS non-farm payroll data: March payrolls revised lower by 7,000US non-farm payroll data: Unemployment rate steady at 5% as againstexpectations of 4.90%; average hourly earnings at 2.5%, forecast 2.4%Latest forecasts for Fed funds show most expect one hike in 2016;June rate hike possibility shifted to SeptemberUS household borrowings surged in March at the fastest pace sinceNovember 2001 on automobile financing and credit card debtUS real GDP grew by 0.5% QoQ in Q1 2016, forecast +0.7%; this isthe slowest pace in the last two yearsUS ISM Manufacturing PMI fell to 50.80 in April from 51.80 in March;ISM price paid 59 as against the forecast of 52US ISM Services PMI rose to 55.70 in April from 54.50 in March, thehighest since December 2015Reports suggest China unlikely to take large stimulus anytime soonChina’s forex reserves soared in April as sentiment were boosted bystronger yen and euroCaixin China April Manufacturing PMI at 49.4 vs estimate of 49.8;services PMI fell from March; the government’s manufacturing PMIat 50.10 vs forecast of 50.40China’s April Caixin Manufacturing PMI data showed contractionfor the 14 straight monthEuro Zone Composite PMI fell to 53 in April from 53.10 in Marchthis yearUK: Brexit possibility fading away gradually as referendum nearsUK: Brexit concerns drove the economy to almost stagnationUK: Services PMI at the lowest level since February 2013UK: Manufacturing PMI in April fell to the lowest level in three years;forecast 51.20, actual 49.20

Macro-economy

Crude oil: Moves to a higher trading range; seen volatile

Key pointsCrude oil surges on speculation of strong seasonal demand, falling US oil productionRecord OPEC production in April on gains in production in Iran and IraqWildfire in Alberta, Canada has affected production by 1mbpd productionLibyan oil production revival hopes diminishing as infighting continuesOil production disruptions noted in Nigeria, Venezuela and South Sudan tooIran oil exports expected to reach 2.45mbpd this month

Crude oil turned out to be one of the best performers in April 2016. It rallied more than 15% on weakness in the US Dollar (USD),expectations of a strong seasonal demand and hopes that the Organisation of Petroleum Exporting Countries (OPEC) and Russia wouldwork out a production freeze. Even though no freeze was imposed at the Doha meeting, crude oil chugged higher. The next OPECmeeting is on June 2, 2016 and oil producers are expected to discuss production freeze at the meeting. However, given the stand of SaudiArabia that it would not be part of a freezing agreement unless Iran comes to the table, the idea of a freeze looks farfetched. Currently,crude oil is getting some support from a raging fire in Alberta which is affecting oil production. Oil production disruptions have beennoted in Venezuela, South Sudan and Nigeria as well. As the driving season sets in the USA, crude oil is expected to get support from arising gasoline demand. After trading for quite some time in the $30-40 range, crude oil is in a new range of $40-50, though the counteris seen to be volatile as surplus concerns remain.

Crude oil CMP: CMP $44.66

COMMODITY PRICES IN APRIL 2016 (IN $)

Commodity High Low Close MoM chg %

Copper 5091 4631 5050 4.19

Zinc 1958 1742 1938 6.66

Lead 1814 1680 1805 5.87

Nickel 9585 8245 9445 11.25

Gold 1296.85 1209.05 1293.53 4.93

Silver 17.96 14.79 17.84 15.54

Crude oil 46.78 36.57 45.92 15.52

MONTHLY CHANGE IN SHFE STOCKS (MAR-APR 2016)

Copper Lead Zinc Nickel

Change (in Tonne) -74005 1159 -14771 10838

29 April 2016 311894 20778 259549 83887

Change (in %) -19.18 5.91 -5.38 14.84

MONTHLY CHANGE IN DOE CRUDE STOCKS (MAR-APR 2016)

Crude oil Dist. Gasoline

Change in (kbls) 8560 -4206 -765

29 Apr 2016 (kbls) 543394 156979 241795

Change in (%) 1.60 -2.61 -0.32

Refinary utlization rate was 89.70% in the last week of April 2016

MONTHLY CHANGE IN LME STOCKS (MAR-APR 2016)

Copper Lead Zinc Nickel

Change (in Tonne) 4750 19050 -31275 -14214

29 April 2016 149500 175025 404275 417438

Change (in ) 3.28 12.21 -7.18 -3.29

Note—LME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)


Gold CMP: $1,288 (spot)

Bullion: Likely to do well on possibility of a delayed rate hike in the USA

Silver caught up with gold rallying by nearly 16% in April. Rallying base metals and crude oil boosted the metal, which surged onexpectations of improving industrial demand. However, with global data showing weakness, gold is likely to outperform silver. Thewhite metal is likely to trade between $16.90 and $18.50.

Base metals post modest recovery on rallies in oil and expansive monetary stimulus boostKey points

In its April update IMF revised the global growth outlook downwards by 0.2% to 3.2% from 3.4% in January 2016ICSG: Refined copper market was in apparent production surplus of 56k ton in January 2016 against 15k ton in January 2015EIU: Global copper consumption to expand by 1.8% in 2016, down from previous forecast of 3.2%ILZSG: Refined lead market sees a surplus of 44,100 ton in February 2016 against a deficit of 9,500 ton in January 2016Bloomberg: World refined lead demand declined 8.3% to 10.1mt in 2015, surplus of 63,000 ton was the highest in three years in 2015ILZSG: Refined zinc metal in surplus of 48,400 ton in February 2016, total surplus in January-February 2016 at 66,000 ton against130,000 ton in the same period of 2015EIU: Refined zinc output to contract by 0.1% against expectations of a 3.3% rise in 2015 on production cutbacks in refined as well asconcentrate marketsBloomberg: Almost 70% of nickel producers globally losing money on operating cash basis, a quarter of nickel miners battling to survive inthe current routNickel stocks on LME fell 3.30% to 417,438 ton while on Shanghai the same rose by 15% to 83,887 ton from 73,049 ton

MCX copper ended April slightly higher at Rs334.20/kg, up 4%, helped by a recovery in crude oil prices and expansive policies adopted by majorcentral banks globally (zero or negative interest rates). Stocks on Shanghai Futures Exchange (SHFE) fell by 19% to 311,894 ton in April from385,899 ton in March end this year while stocks on the London Metal Exchange (LME) rose 3.3% to 149,500 ton in the same period. China’srefined copper imports grew by 40% to 458,068 ton in March over the previous month. Simultaneously, inventories in bonded warehouses rose2% from March to 520,000 ton in April for co-lateral financing on weak domestic demand. In view of the weak demand and a mild downtick inthe US and Chinese Purchasing Managers Index (PMI) data, we believe that copper will remain under pressure. We expect copper to trade atRs345-303/kg on the MCX.Lead CMP: Rs116.50/kg (May 2016 contract)

MCX lead ended April at Rs119.20/kg, up almost 5.50%, tracking the overall gain in metals. Lead inventories on the SHFE rose to 20,778 ton,up 6%, while stocks on the LME rose by 12% to 175,025 ton in April this year. As per Economic Intelligence Unit (EIU), the global demand forrefined lead is expected to grow at 2.9% in 2016-17 over a contraction of 8.3% in 2015. Refine Lead faces challenges on account of environmen-tal concerns as demand for lithium-based batteries is on the rise. Also, in China a 4% consumption tax on lead acidic batteries while exemptionto the other alternative sources is expected weigh on lead premiums. Destocking by the Chinese battery sector and the first contraction in 16years in China’s e-bike battery demand would further weigh on the demand. We expect lead to trade in the range of Rs124/kg to Rs108/kg.

Gold rose sharply in April 2016 as bulls did not show any sign of a let-up to the best start of the year since 2006. Of all the factors, gold pricesare being dictated mainly by the USD, which fell to an 18-month low in May this year. The possibility of a June rate hike in the USA is almost nilafter weaker than expected April US non-farm payroll data. Most investors now expect the US Federal Reserve (Fed) to hike rates just once inSeptember only. The market would be focused on the coming referendum in the UK on June 23, 2016. While investment demand for the metalis good, the physical demand is somewhat weak on high prices. The purchasing managers’ indices of the major economies have mostly trailed theforecast while the US gross domestic product (GDP) data has disappointed. The Japanese Yen (JPY) can rally further as the Fed turns dovish. Inthe current scenario, the yellow metal is likely to trade between $1,230 and $1,350, though it would require some other major development ora very weak dollar to hit the mark of $1,350. The direction remains up.

Key pointsChina’s gold consumption fell 3.91% in Q1 2016 on weak economyGFMS-Silver Institute report: Silver demand at a record high in 2015; the metal was in the third straight year of deficitGFMS-Silver Institute report: Silver deficit in 2015 was 60% higher than in 2014GFMS-Silver Institute report: Silver jewellery fabrication and photovoltaic applications demand up, while industrial, photography andsoldering demand lower in 2015ANZ: India’s gold demand might not pick up until November on fewer wedding datesIndia’s gold imports slumped for the third month in a row in April on high pricesCommercial traders hold a record long position while non-commercial traders record short positions in silverWeaker global macro-economic indicators likely to favour bullion counters

Zinc CMP: Rs124/kg (May 2016 contract)

MCX zinc ended April at Rs129/kg, posting gains of 9% supported by expectations of a deficit balance in 2016 on account of mine closures,supply cuts and a gradual fall in inventories. Zinc inventories on LME fell by 7.20% to 404,275 ton while that on SHFE fell by 5.40% to 259,459ton. The EIU expects global refined zinc demand to grow by 3% in 2016-17 over the 0.7% rise seen in 2015 but the recent introduction of anti-

MONTHLY VIEWCOMMODITY FUNDAMENTALS

Silver CMP: $17.47 (spot)

Copper CMP: Rs328/kg (June 2016 contract)


Nickel CMP: Rs600/kg (May 2016 contract)

MCX nickel ended April at Rs628.60/kg posting stellar gains of 14% helped by value grabs at lower levels. The EIU estimates global nickeldemand at 1.97mt in 2016, 2% above the estimated 2015 levels. However, almost 500k ton of inventories in exchanges constituting 25% of theannual demand coupled with the possibility of hidden stocks would weigh on any meaningful rally in the prices. We expect nickel to trade underpressure in the range of Rs660/kg to Rs550/kg unless there are any meaningful supply cuts.

Events watch: Major economic events in May 2016

CMP as on May 06, 2016

Date Region Event Survey Actual Prior Impact05/01/2016 China Manufacturing PMI 50.3 50.1 50.2 Data falling short of expectations bearish for the base metals and crude oil; bullions can rally on deteriorating

global economic indicators

05/02/2016 USA ISM Manufacturing 51.4 50.8 51.8 Bearish for industrial commodities and the dollar; positive for bullions

05/02/2016 USA Construction spending MoM 0.50% 0.30% -0.50% The US data mostly continue to fall short of forecast -- bearish for the dollar and industrial commodities;the development is positive for bullions

05/03/2016 China Caixin China PMI Manufacturing 49.8 49.4 49.7 The indicator shows that China's manufacturing sector contracted for the 14th straight month; the datastoked concerns that China's economy is really slowing down; as China has ruled out any big stimulus inthe near term, the indicator is bearish for the base metals and crude oil; bullions can advance as the Fedmight go slow on a rate hike

05/04/2016 Euro Zone Markit Eurozone Services PMI 53.2 53.1 53.2 Bearish for the euro and industrial commodities

05/04/2016 Euro Zone Markit Eurozone Composite PMI 53 53 53 Data in-line with the forecast; so, no major reaction seen but the Euro Zone economy remains anaemic

05/04/2016 Euro Zone Retail sales MoM -0.10% -0.50% 0.20% The figure is bearish for the euro and industrial commodities

05/04/2016 USA Trade balance -$41.2b -$40.4b -$47.1b Data positive for the dollar but since other data lag expectations, the effect would be muted.

05/04/2016 USA ISM Non-Manufacturing Composite 54.8 55.7 54.5 services sector still a bright spot for the US economy; going ahead, economists expect the sector tocontinue to improve further on consumer spending; in that case, it is a good sign for the dollar andindustrial commodities

05/04/2016 USA Durable goods orders 0.80% 0.80% 0.80% Data in-line with the forecast, so no major reaction seen

05/06/2016 USA Change in non-farm pay-rolls 200k 160k 215k The US NFP data disappointed as fewer than expected jobs were added; also, the household surveyshowed that employment actually fell; the only positive point is that the hourly earnings rose YoY; still, theoverall picture remains bearish for the dollar as rate hike expectations have shifted to September now; thereport is negative for industrial commodities and positive for bullions

05/06/2016 USA Unemployment rate 4.90% 5.00% 5.00% Negative for the dollar and positive for bullions

05/08/2016 China Exports YoY 0.00% -1.80% 11.50% The data showed that the global economy is slowing down which is weighing on China's exports; with amajor stimulus ruled out, the figure is bearish for the base metals and crude oil; gold and yen can benefitfrom safe haven demand

05/08/2016 China Imports YoY -4.00% -10.90% -7.60% The indicator shows the nation's domestic demand is weaker than expected which is bearish for the basemetals and crude oil; gold and yen are likely to benefit from safe haven demand

05/09/2016 Euro Zone Sentix Investor Confidence 6 -- 5.7 A better than expected figure would be positive for the euro and commodities in general, especially industrialcommodities

05/10/2016 China CPI YoY 2.30% -- 2.30% Data lagging the forecast would be bearish for industrial commodities as it would indicate the economylacks strength

13/05/2016 USA Retail sales advance MoM 0.80% -- -0.30% Better than expected data would be positive for the dollar and industrial commodities; bullion counterswould fall on dollar strength

13/05/2016 Euro Zone GDP SA YoY 1.60% -- 1.60% Data lagging the forecast would weigh on industrial commodities and the euro; the bullion counters wouldoutperform

14/05/2016 China Industrial production YoY 6.50% -- 6.80% Data lagging the forecast would be bearish for industrial commodities as it would indicate the economylacks strength

14/05/2016 China Retail sales YoY 10.60% -- 10.50% Data lagging the forecast would be bearish for industrial commodities as it would indicate the economylacks strength

17/05/2016 USA Housing starts 1120k -- 1089k The housing sector is still a source of strength for the US economy; data topping the forecast would bodewell for the base metals like copper and aluminium; precious metals would fall on dollar strength

17/05/2016 USA CPI ex food and energy YoY -- -- 2.20% A higher than expected inflation reading would be positive for the dollar as it would increase the possibilityof a rate hike by the Fed; in such a scenario, commodities would fall

17/05/2016 USA Industrial production MoM 0.20% -- -0.60% Better than expected data would be positive for the dollar and industrial commodities; bullion counterswould fall on dollar strength

18/05/2016 Euro Zone CPI MoM -- -- 1.20% Subdued data would push the euro lower as it would increase the possibility of further easing by the ECB

27/05/2016 USA GDP annualised QoQ -- -- 0.50% The US GDP disappointed in Q1 but the services sector is doing well; better than expected data would bepositive for the dollar and industrial commodities but negative for the precious metals

MONTHLY VIEW COMMODITY FUNDAMENTALS

dumping measures on Chinese zinc coated steel exports could affect the Chinese zinc demand. Nevertheless, concerted efforts by Chinese produc-ers along with global suppliers like Glencore and Nrystar could support zinc’s premium over the other metals in 2016. We expect zinc to trade inthe range of Rs131/kg to Rs114/kg.


IMD forecasts normal to above normal rains for 2016

News highlights

Food inflation increases to 3.73% in March 2016

Central government teams to monitor drought situation acrossthe country

El Nino in final phase, monsoon-friendly La Nina likely to setin by September 2016

Centre asks states to put stock holding limits on all pulses tocurb rising prices of pulses

Centre directs state governments to impose stock limits on sugar

India likely to become net importer of sugar in 2016-17

CACP for increase in oil seeds MSP by up to Rs100/quintal

55 lakh tonne pulses imported between April 2015 and February2016

Price performanceCommodity Expiry Apr 29, March 31,

2016 (Rs) 2016 (Rs) % Change

Chana May 5520 4597 20.08

Cotton seed oil cake May 2296 2276 0.88

Dhaniya May 7184 7066 1.67

Guargum May 6060 5500 10.18

Guar seed May 3384 3236 4.57

Jeera May 17415 15805 10.19

Maize May 1235 1210 2.07

Ref soya oil May 647.9 642.5 0.84

RM seed May 4397 4202 4.64

Soya bean May 3927 4065 (3.39)

Sugar May 3339 3636 (8.17)

Turmeric May 8368 8180 2.30

Wheat May 1629 1593 2.26Chana

Chana May futures were the largest gainer in the agri-commoditiesbasket in April 2016. Chana prices gained a whopping 20.08%month on month to Rs5,520 per quintal from Rs4,597 in theprevious month. Prices gained largely due to lower than expectedarrival of chana crop coupled with a lower output of other pulses.A good demand from millers and purchase by stockists alsosupported the prices. Procurement activities by the government tocreate buffer stocks also supported the prices. However, thegovernment is taking action to curb the rising prices. It has askedthe state governments to impose stock limits and take action againstany hoarding. The exchange has also raised margins significantlyon the long side.Chana is expected to remain higher in the coming days. The demandfrom millers and procurement by the government may also supportthe prices. However, arrival pressure of the new crop may cap sharpgains and pressurise prices at higher levels.

Jeera

Jeera May futures traded on a bullish note in April this year, takingcues from a good export demand for the new crop coupled with agood demand from stockists. The prices gained significantly by10.19% month on month to Rs17,415 per quintal from Rs15,805per quintal in the previous month. However, higher outputexpectations capped sharp gains. Jeera exports between April andDecember 2015 declined by 46% to 67,300 tonne compared with1,24,686 tonne during the corresponding period of the last year.Going forward, jeera is expected to continue to trade higher. Goodexport demand ahead of Ramadan coupled with demand for good

MONTHLY VIEWCOMMODITY FUNDAMENTALS

quality crop from the domestic buyers may also support the prices.However, arrival pressure of the new crop may cap sharp upsideand pressurise the prices at higher levels.

Soya bean

Soya bean May futures opened higher and gained sharply in thefirst part of the month taking cues from the higher prices in thebenchmark CBOT soya bean prices. Lower arrivals in the domesticmarket due to lower production in 2015-16 also supported theprices. Prices in the global markets gained due to good demand forUS soya meal from China. Lower output forecast from Argentinaalso lent support to the global soya bean prices. Prices of futuresrose to the highest levels in 11 months and made a new contracthigh of Rs4,324. However, the prices declined sharply towards theend of the month. Prices declined due to weak soya meal exportsfrom India on account of uncompetitive prices. The prices declined3.39% month on month to Rs3,927 from Rs4,065 in the previousmonth.According to SEA of India, soya meal exports from India declined89.26% to 70,820 tonne in FY2016 compared with 659,593 tonnein FY2015. Going forward, soya bean may trade on a mixed note.Weak soya meal exports from India coupled with lower soya beanofftake may keep the prices under downside pressure. The IndiaMeteorological Department’s forecast of a normal to above normalmonsoon may add to the downside pressure. However, lowersupplies in the domestic market and rising global soya bean pricesmay lend support to the prices.


COMMODITY TECHNICALSTREND & VIEW

Gold: A bullish stance

Gold broke out from a large ending diagonal pattern in Februarythis year. From there it rallied nicely till $1,282.

For several weeks the yellow metal was trading in a range whichtook the form of a triangular pattern.

The pattern broke out on the upside in the penultimate weekand retested the break-out line in the last week.

The daily momentum indicator is in sync with the price break-out. The level $1,306 is an immediate hurdle on the upside.

Overall, $1,380 and $1,480 will be the targets for the short tomedium term. The level of $1,246 will act as a crucial supporton a closing basis.

Silver: Scope for bulls

Silver formed an impulse on the upside which got over at $15.95in February this year. Since then it has been trading in a broadrange. In terms of wave structure, the price action has formed arunning flat pattern.

From there the white metal started rallying once again. It hasbroken out from a multi-month falling trend line.

With the recent rally silver achieved the equality target on theupside. Structurally, it can form a minor degree correction totest the 20-day moving average (DMA; $16.93), which can betaken as a buying opportunity.

The short-term target will be $18.48 whereas the medium-termtarget is $22. On the other hand, $16.37 will act as a crucialsupport on a closing basis.

View Reversal Supports Resistances Target

Up $16.37 $16.93/$16.72 $18.00/$20 $18.48/$22

NYMEX crude oil rallied nicely in Feb and March this year.From a high of $42.49 it formed a short-term correction whichfound support near the junction of 40-day exponential movingaverage (DEMA), the daily lower Bollinger Band and the 38.2%retracement mark.

Near those supports bulls rushed in to provide support.Consequently, the oil started another rally and crossed the highof $42.49.

Crude oil has reached the 78.6% retracement of the previousfall. The subsequent level on the upside will be $48.36 and$50.92. On the other hand, $41.06 will act as a key support

Crude oil: Upside potential


Up $1,246 $1,268/ $1,306/ $1,380/$1,250 $1,345 $1,480


Up $41.06 $42.50/$41.30 $46.78/$48.36 $48.36/$50.92

O cto b e r N o ve m b e r D e c e m b e r 2 0 1 6 F e b ru a ry M a rc h Ap r il Ma y J u n e J

1 0 2 0

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5KS T (2 .6 5 3 1 5 )

b e r N o ve m b e r D e ce m b e r 2 0 1 6 F e b ru a r y M a rc h Ap ri l M a y J u n e J

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S IL VER [C AS H ] (1 7 .3 3 1 0 , 1 7 .5 9 5 0 , 1 7 .1 9 0 0 , 1 7 .4 5 2 0 , + 0 .1 2 6 0 0 )

-5

0

5K ST ( 4 .3 0 5 0 0 )

te m b e r O c to b e r N o ve m b e r D e c e m b e r 2 0 1 6 F e b ru a r y Ma r ch Ap r i l Ma y J u n e

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L IG H T C R U D E C O N T IN U O U S 1 0 0 0 B AR R E L S [N YM EX] (4 4 .5 2 0 0 , 4 5 .3 4 0 0 , 4 3 .5 4 0 0 , 4 4 .6 6 0 0 , + 0 .3 4 0 0 0 )

-1 0

0

1 0K ST ( 4 .1 2 6 7 0 )


Copper: Cracking down

COMEX copper faced resistance near the junction of the 40-week exponential moving average (WEMA) and the weeklyupper Bollinger Band in March this year.

From a high of $2.3235 the red metal tumbled significantly.However, from 61.8% retracement level of the previous risecopper bounced back.

It moved up only to face resistance near the previous high. Thus,the red metal tumbled in the last week.

The $2.12-2.10 level is an immediate support zone below which$2.00 and $1.935 will be the targets. On the flip side, $2.25will act as a crucial hurdle.

Jeera: Fall on the cards

NCDEX jeera has been moving up in a channelised mannersince the beginning of February this year. It has formed a channelwithin a channel.

The move that started from the March low reached near a crucialresistance zone. This leg achieved 161.8% of the equality targetand retraced 78.6% of the previous fall.

It also halted near the upper end of both the channels. Thus,the agri-commodity has entered a correction mode. It is aboutto break the lower end of the inner rising channel.

Once the key support of Rs16,590 breaks, Rs16,076-15,800will be the key area on the downside. On the higher side,Rs17,300 will act as a crucial resistance on a closing basis.

Soyabean: Rolling down

For several weeks NCDEX soya bean was oscillating about thekey DMAs. In terms of price patterns, the agri-commodityformed a triangular pattern, which broke out on the upside inMarch this year.

After breaking out the commodity started marching towardsnorth in a channelised manner. However, near the end of April itbroke the lower end of the channel and entered a correction mode.

The fall is breaking up into lower degree waves. Once the keysupport zone of Rs3,910-3,880 breaks, the target on thedownside will be Rs3,770.

The daily momentum indicator is in line with the price action.On the other hand, Rs4,062 will act as a crucial resistance on aclosing basis.


Down $2.25 $2.10/$2.06 $2.19/$2.21 $2.00/

$1.935


Down Rs17,300 Rs16,590/ Rs17,140/ Rs16,076/Rs16,000 Rs17,290 Rs15,800


Down Rs4,062 Rs3,910/ Rs4,000/ Rs3,770Rs3,852 Rs4,034

TREND & VIEWCOMMODITY TECHNICALS

b e r

1 6 2 3 3 0 7 1 4

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H G C O P P ER C O N T IN U O U S 2 5 0 0 0 L B S [C O ME X] (2 .1 4 4 0 0 , 2 .1 7 0 0 0 , 2 .1 3 5 5 0 , 2 .1 5 4 0 0 , + 0 .0 0 0 0 0 )

-0 .0 5

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MAC D (0 .0 0 2 7 9 )

Ap r il M a y Ju n e J u l y Au g u s t S e p te m b e r N o ve m b e r 2 0 1 6 F e b r u a r y Ma r ch Ap r il M a y

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3 0

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e J u l y A u g u s t S e p te m b e r O cto b e r N o ve m b e r D e ce m b e r 2 0 1 6 F e b ru a r y M a r ch A p ri l Ma y Ju n e

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4 4 5 0S O YB E AN Q U IN T AL - 1 M O N T H (3 ,9 2 9 .0 0 , 3 ,9 5 0 .0 0 , 3 ,9 1 8 .0 0 , 3 ,9 3 4 .0 0 , - 2 7 .0 0 0 0 )

-5

0

5

1 0K ST ( -3 .2 2 4 4 8 )


Currencies: Yen advances as BoJ keeps its monetary policy steadyKey points

RBI cuts repo rate by 25BPS to 6.5% and increased reverse reporate by 25BPS to 6%India’s CPI eased to 4.83% in March and industrial productiongrew by 2.0% in February this yearChina’s GDP grew by 6.7% in Q1 2016, slower than the previousquarter’s 6.8% growthGlobal oil producers failed to agree on an output freeze

CURRENCY LEVELS IN APRIL 2016 (IN RS)

Currency High Low Close Monthly chg (%)

USD-INR 66.8475 66.0712 66.4525 -0.11

EUR-INR 76.2272 74.6933 75.143 0.78

GBP-INR 97.2247 93.4067 97.004 2.08

JPY-INR 61.79 58.83 59.66 1.86

USD-INR CMP: Rs66.50 (spot)

GBP-INR CMP: Rs96.43 (spot)

JPY-INR CMP:RS61.96 (spot)The yen appreciated by 5.5% against the dollar as Bank of Japan kept its monetary policy unchanged. Investors had expected additional easingfrom the central bank. Further, weakness in the dollar supported the yen. The demand for safe haven increased on rise in risk aversion in thedomestic market and worries over the global economic health.Outlook: The yen is expected to gain strength as demand for safe haven may go up on weak market sentiment, volatility in crude oil prices andescalating geo-political tensions. Due to weak global market sentiment Japanese investors are selling securities abroad. However, sharp gains maybe prevented as investors worry that a strong yen may hurt Japan’s export industry and push Bank of Japan to provide more monetary stimulus.The expected trading range in the near term is 60.20-64.30.

April 2016 contract price movement April 2016 contract price movement

The euro appreciated by 0.66% against the dollar on weakness in the greenback. Further, the European Central Bank kept its monetary policyunchanged. However, further gains were capped as the central bank pledged to add more stimulus if required. European Central Bank PresidentMario Draghi vowed to use all tools if needed. He said that the risks to the euro zone economy remain “tilted to the downside” and warned thatinflation could turn negative again in the coming months.Outlook: The euro is expected to trade with a positive bias on weakness in the dollar. The euro’s status as a funding currency because of lowinterest rates in the euro zone may strengthen as money flows back to where it was funded from during risk times. However, sharp gains may beprevented on divergence in monetary policies globally. The Fed signalled a rate hike in June whereas the European Central Bank at its latestmeeting signalled further easing, if required. International lenders have not yet approved the disbursement of new loans to Athens. The expectedtrading range in the near term is 74.7-78.0.

EUR-INR CMP: Rs76.10(spot)

CMP as on May 05, 2016

The pound appreciated by 1.76% on weakness in the dollar and on rise in hopes that Britain will remain in the European Union. Optimistic pollson Britain’s referendum supported the pound. Further, the Bank of England at its monetary policy meeting kept its policy untouched; andpolicymakers voted unanimously to keep rates unchanged at 0.5%.Outlook: The pound is expected to trade with a negative bias on account of weak global market sentiment and downbeat economic data from theUK. Weak economic data from the UK will lead to fears among investors that the economy is losing momentum. Activity in manufacturing,services and construction sectors is slowing down. The market will remain careful ahead of the polls and campaigns for Britain to stay in or leavethe European Union. The expected trading range in the near term is 94.10-98.60.

MONTHLY VIEW CURRENCY FUNDAMENTALS

The Indian Rupee (INR) appreciated by 0.11% against the dollar in the previous month on the back of a rise in risk appetite in the domesticmarket and weakness in the dollar. The greenback showed weakness on downbeat economic data from the USA and as the US Federal Reserveleft policy rates unchanged. Continued inflow of foreign institutional investor (FII) funds into local shares and upbeat macro-economic datasupported the rupee. The FIIs net bought stocks worth more than Rs8,400 crore in April this year. However, further gains were prevented amidworries over global economic growth. India’s trade gap narrowed in FY2016 but worries over exports linger.Outlook: The INR is expected to trade with a negative bias on the back of a rise in risk aversion in global markets. Investors are moving towardssafe haven and pulling back from riskier assets as market sentiment is hurt after downbeat manufacturing data from the USA, the UK and Chinaleading to concerns over the global economic health. As per the latest REER reading (provisional; 111.61), the rupee is overvalued by more than10%. However, a sharp fall in the rupee may be prevented on the back of weakness in the dollar and as the India Meteorological Department hasforecast above normal rainfall for this year. The expected trading range in the near term is 65.50-67.80.


Currency View Reversal Supports Resistances Target

USD-INR Up 66.00 66.38/66.08 67.13/67.50 67.47-67.80

GBP-INR Up 94.70 95.55/95.12 96.87/97.56 97.80-98.99

EUR-INR Up 74.95 75.46/75.00 76.61/77.00 77.63

JYP-INR Up 60.3000 61.08/60.60 62.62/63.50 63.13-63.92

JPY-INR: Climbing up

The JPY-INR recently found support near the junction of thedaily lower Bollinger Band, the key DMAs and a medium-termrising trend line.

From there it has started a fresh rally, which is sub-dividinginto lower degree waves. The 61.8% retracement mark and theupper end of the multi-month rising channel, ie 63.13 and 63.92,will be the subsequent levels to watch out for.

The bullish potential remains intact as long as the rising trendline, ie 60.30, holds on a closing basis.

USD-INR: Base formation

The USD-INR crossed the all-time high of 68.80 and made anew high of 68.89 in February 2016. However, it couldn’tsustain in the higher territory and reacted sharply.The fall has taken support near a crucial swing low as well asnear the lower end of a medium-term rising channel. It seemsto be forming an accumulation triangle near those supports.The short-term momentum indicator has triggered a bullishcross-over. Thus, the currency pair can attempt a decent bounce.The key levels for the bounce will be 67.47-67.80. The bullishpotential remains intact as long as the level of 66 holds on aclosing basis.

EUR-INR: Upside potential

After a sharp fall in February this year, the EUR-INR foundsupport near a medium-term rising trend line. From there theEUR-INR moved up swiftly. However, for the last few weeksthe currency pair has been trading in a sideways manner.It found support near another rising trend line and from thereit has started the next leg up. However, this leg is sub-dividinginto lower degree waves.On the upside, the EUR-INR can test the falling trend line fromthe previous swing high, which is near 77.63. The dailymomentum indicator has triggered a bullish cross-over. On theflip side, 74.95 will act as a crucial support.

GBP-INR: Opportunity for bulls

From a high of 105.54 the GBP-INR entered a correction mode.The fall retraced 78.6% of the previous rise and unfolded in achannelised manner. The price reached near the lower end ofthe channel.In terms of price pattern, it formed an ending diagonal, whichbroke out on the upside. Recently from the upper end of thechannel and the price has formed a minor degree correction tillthe key daily moving averages (DMAs) which can be taken as abuying opportunity.From a short-term perspective, 97.80-97.93 will be the key area.Beyond that the weekly upper Bollinger Band, ie 98.99, will bethe level to watch out for. On the other hand, 94.70 will act asa key support on a closing basis.

TREND & VIEWCURRENCY TECHNICALS

e r O c t o b e r N o v e m b e r D e c e m b e r 2 0 1 6 F e b r u a r y M a r c h A p r i l M a y J u n e

6 5 . 0

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U S D I N R - I N D I A N R U P E E ( 6 6 . 5 9 1 5 , 6 6 . 7 9 0 1 , 6 6 . 3 8 5 0 , 6 6 . 7 4 1 7 , + 0 . 1 5 1 4 0 )

- 0 . 3- 0 . 2- 0 . 10 . 00 . 10 . 20 . 30 . 4M A C D ( - 0 . 0 1 9 9 2 )

r c h A p r i l M a y J u n e J u l y A u g u s t S e p te m b e r N o v e m b e r 2 0 1 6 F e b r u a r y M a r c h A p r i l M a y J u n e

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9 7 . 5

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MUTUAL FUNDS DESK MF PICKS

Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhanfirst understand the individual’s investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggestthat you get in touch with our Mutual Fund Advisor before investing in the best funds.

SHAREKHAN’S TOP MUTUAL FUND PICKS (EQUITY) APRIL 07, 2016Data as on April 01, 2016

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

Scheme name Star NAV (Rs) Returns (%)rating Absolute Compounded annualised

6 months 1 year 3 years 5 years Since inceptionLarge-cap funds

SBI Bluechip Fund 27.8 -0.1 -3.1 19.8 13.8 10.6

Birla Sun Life Frontline Equity Fund - Reg - 155.5 -1.8 -6.0 17.8 11.6 22.4

ICICI Prudential Focused Bluechip Equity Fund - Ret 27.5 -2.4 -7.5 15.8 10.3 13.7

Kotak 50 - Reg 165.3 -3.1 -5.7 15.6 9.7 24.0

Tata Large Cap Fund - Reg 156.2 -2.6 -6.3 14.8 10.0 21.8

Indices

BSE Sensex 25,269.6 -3.6 -10.6 10.2 5.4 15.9

Mid-cap funds

Franklin India Smaller Companies Fund 38.4 -0.3 -1.8 33.9 21.7 14.1

Mirae Asset Emerging Bluechip Fund 29.8 -2.3 0.1 32.5 22.4 21.0

Canara Robeco Emerging Equities 56.7 -6.5 -4.4 31.9 20.6 17.0

HDFC Mid-Cap Opportunities Fund 36.4 -2.7 -2.3 27.9 19.1 15.9

Principal Emerging Bluechip Fund 65.0 -3.2 -6.8 27.6 17.4 28.8

Indices

BSE MID CAP 10,642.3 -1.6 -1.0 19.6 8.8 20.9

Multi-cap funds

Birla Sun Life Pure Value Fund 37.8 0.0 -1.4 30.4 17.9 18.0

L&T India Value Fund 24.0 -2.6 -0.3 27.3 16.4 15.1

ICICI Prudential Value Discovery Fund 109.2 -2.8 -5.8 26.4 17.6 22.8

SBI Magnum Multi Cap Fund 32.5 0.5 -0.2 22.5 13.0 11.9

Franklin India Prima Plus 431.1 -1.6 -3.7 21.7 13.9 19.1

Indices

BSE 500 10,179.6 -3.2 -9.0 12.6 6.4 14.5

Tax-saving funds

Axis Long Term Equity Fund 29.2 -4.8 -7.2 27.1 18.6 18.6

Birla Sun Life Tax Relief 96 20.9 -1.4 -4.8 23.8 13.2 9.6

Franklin India Taxshield 411.1 -2.3 -4.5 21.3 14.0 24.5

DSP BlackRock Tax Saver Fund 31.2 -1.0 -3.9 21.0 12.9 13.2

IDFC Tax Advantage (ELSS) Fund - Reg 36.2 -4.3 -11.3 19.6 12.7 19.4

Indices

Nifty 500 6,445.5 -3.1 -8.7 13.0 6.8 9.0

Thematic funds

ICICI Prudential Exports and Other Services Fund 43.4 -8.8 -3.9 30.4 19.5 15.2

Franklin Build India Fund 27.5 -2.0 -7.7 28.9 18.2 16.6

Birla Sun Life Special Situations Fund 16.2 -7.8 -9.8 20.7 10.5 6.1

Sundaram Rural India Fund - Reg 26.1 2.6 3.2 19.4 11.8 10.2

L&T India Special Situations Fund 33.1 -6.0 -8.6 17.8 12.0 12.9

Indices

Nifty 50 7,713.05 -3.0 -10.1 10.6 5.8 13.8

Balanced funds

L&T India Prudence Fund 19.3 -1.6 0.1 21.1 13.4 13.6

HDFC Balanced Fund 106.4 -1.1 -1.9 20.4 14.1 16.4

SBI Magnum Balanced Fund 94.8 0.5 -1.2 20.1 13.4 16.2

Franklin India Balanced Fund 90.1 -0.5 -1.2 19.3 12.8 14.4

Reliance RSF - Balanced 39.5 -0.7 -0.3 18.2 12.4 13.5

Indices

Crisil Balanced Fund Index -- -0.5 -3.8 10.3 7.1 12.3


MUTUAL FUNDS DESK

SHAREKHAN’S TOP SIP FUND PICKS APRIL 07, 2016

MF PICKS

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhanfirst understand the individual’s investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggestthat you get in touch with our Mutual Fund Advisor before investing in the best funds.

Data as on April 01, 2016

Investment period 1 year 3 years 5 yearsTotal amount invested (Rs) 12,000 36,000 60,000Funds would have grown to (Rs) NAV Present Avg. annual Present Avg. annual Present Avg. annual

value (Rs) return (%) value (Rs) return (%) value (Rs) return (%)

Large-cap funds

SBI Bluechip Fund 28 11,948.6 -0.5 45,224.6 8.1 92,088.4 9.1

Birla Sun Life Frontline Equity Fund - Reg 155 11,779.4 -2.0 42,711.1 6.0 86,127.1 7.6

Kotak 50 - Reg 165 11,756.8 -2.2 42,591.0 5.9 82,336.4 6.6

Franklin India Bluechip 343 11,871.3 -1.2 42,292.1 5.7 80,916.9 6.3

Tata Large Cap Fund - Reg 156 11,741.4 -2.4 41,128.1 4.7 79,916.6 6.0

BSE Sensex 25,269.6 11,538.1 -4.2 37,871.6 1.8 71,970.5 3.8

Multi-cap funds

Birla Sun Life Pure Value Fund 38 11,962.7 -0.3 50,839.9 12.6 106,598.0 12.4

ICICI Prudential Value Discovery Fund 109 11,707.3 -2.7 48,290.7 10.6 101,993.2 11.4

SBI Magnum Multi Cap Fund 33 12,069.9 0.6 47,355.6 9.9 94,712.9 9.7

Franklin India Prima Plus 431 11,900.5 -0.9 46,220.2 8.9 92,801.8 9.3

HDFC Capital Builder Fund 194 11,822.0 -1.6 44,050.8 7.2 87,772.1 8.0

BSE 500 10,179.6 11,596.6 -3.7 39,940.8 3.6 75,631.7 4.8

Mid-cap funds

DSP BlackRock Micro Cap Fund - Reg 41 11,991.8 -0.1 58,392.2 18.0 122,887.9 15.7

Franklin India Smaller Companies Fund 38 11,975.4 -0.2 52,912.9 14.1 118,288.5 14.8

Mirae Asset Emerging Bluechip Fund 30 11,849.0 -1.4 52,593.9 13.9 114,096.5 14.0

Kotak Midcap Fund - Reg 52 12,026.2 0.2 50,048.3 12.0 99,932.1 10.9

HDFC Mid-Cap Opportunities Fund 36 11,796.7 -1.9 49,146.8 11.3 102,945.3 11.6

BSE Midcap 10,642.3 11,889.6 -1.0 45,895.0 8.7 86,130.4 7.6

Tax-saving funds

Axis Long Term Equity Fund 29 11,596.7 -3.7 47,120.5 9.7 101,252.6 11.2

Birla Sun Life Tax Relief 96 21 11,818.0 -1.7 46,820.7 9.4 95,092.6 9.8

Franklin India Taxshield 411 11,843.5 -1.4 45,820.3 8.6 91,943.9 9.1

DSP BlackRock Tax Saver Fund 31 11,883.5 -1.1 44,850.7 7.8 90,901.6 8.8

L&T Tax Advantage Fund 36 11,643.9 -3.2 42,573.2 5.9 82,861.5 6.8

Nifty 50 7,713.1 11,602.0 -3.6 38,475.8 2.3 72,934.6 4.0


Prices as on May 06, 2016

FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY17/FY15 FY15 FY16E FY17E FY16E FY17E FY16E FY17E (Rs)

EQUITY FUNDAMENTALSEARNINGS GUIDE

Sharekhan Earnings Guide

Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated ^^ FY2015 earnings numbers are on reported basis, including the one-time impact of bonus for employees to the tune of Rs2,627.9 crore

AUTOMOBILES

Apollo Tyres 158.8 12,785.2 11,983.4 12,768.5 1,058.9 1,107.1 1,099.7 20.8 21.7 21.6 2% 7.6 7.3 7.4 21.1 15.9 18.4 15.7 2.0 1.3

Ashok Leyland 104.2 13,562.2 19,031.9 22,689.2 233.9 1,110.8 1,563.9 0.8 3.9 5.5 160% 126.7 26.7 18.8 20.6 25.8 19.9 25.5 0.5 0.4

Bajaj Auto 2,435.2 21,612.0 22,527.0 25,554.6 3,100.1 3,728.4 4,126.9 107.2 128.9 142.7 15% 22.7 18.9 17.1 43.0 40.2 30.6 29.2 50.0 2.1

Gabriel Industries 88.8 1,444.1 1,415.2 1,568.2 60.6 69.2 84.8 4.2 4.8 5.9 18% 21.0 18.4 15.0 25.0 26.7 18.9 20.4 1.1 1.2

Hero MotoCorp 2,890.3 27,585.0 28,599.3 31,667.5 2,540.7 3,132.4 3,218.7 127.2 156.9 161.2 13% 22.7 18.4 17.9 56.1 48.6 39.9 35.1 60.0 2.1

M&M 1,330.8 37,468.3 38,870.5 45,839.9 3,423.3 3,356.7 4,401.2 55.1 54.0 70.9 13% 24.2 24.6 18.8 17.2 19.0 12.6 14.2 12.0 0.9

Maruti Suzuki 3,819.0 49,970.6 57,746.0 68,110.6 3,711.2 4,571.0 5,623.0 122.9 151.3 186.1 23% 31.1 25.2 20.5 23.6 24.4 17.0 18.2 25.0 0.7

Rico Auto Industries 36.0 1,346.3 1,003.9 1,156.8 (6.9) 34.7 46.2 -0.1 2.6 3.4 - 13.8 10.6 10.8 12.5 7.6 9.1 3.0 8.3

TVS Motor 300.5 10,068.9 11,243.9 13,088.8 356.5 437.8 574.2 7.5 9.2 12.1 27% 40.1 32.7 24.8 20.1 24.1 22.8 25.3 1.9 0.6

BANKS & FINANCE

Allahabad Bank 54.2 8,173.9 8,003.0 8,592.7 620.9 (102.5) 743.9 10.9 -1.8 13.0 9% 5.0 - 4.2 - - - 5.8 1.6 3.0

Andhra Bank 50.9 6,037.5 6,730.1 7,218.5 638.4 525.0 752.4 10.6 8.0 11.5 4% 4.8 6.3 4.4 - - 5.0 6.8 2.0 3.9

Axis (UTI) Bank 461.5 22,589.2 26,204.4 30,442.4 7,355.9 8,223.7 9,438.7 31.0 34.5 39.6 13% 14.9 13.4 11.6 - - 16.8 16.5 4.6 1.0

Bajaj Finance 7,264.5 2,871.7 3,705.9 4,698.1 893.6 1,173.6 1,505.1 178.7 220.3 282.5 26% 40.6 33.0 25.7 - - 19.5 19.2 18.1 0.2

Bajaj Finserv 1,873.2 7,587.0 - - 1,689.8 - - 106.2 - - - 17.6 - - - - 0.0 0.0 1.8 0.1

Bank of Baroda 150.6 17,589.2 16,654.0 18,847.3 3,398.4 (1,792.3) 2,033.2 15.3 -7.8 8.8 -24% 9.8 - 17.1 - - - 5.0 3.2 2.1

Bank of India 86.6 15,576.7 15,324.4 17,342.7 1,708.9 (3,396.1) 1,144.5 25.7 -42.8 14.4 -25% 3.4 - 6.0 - - - 3.7 5.1 5.9

Capital First 469.5 501.4 695.5 865.8 110.7 167.5 235.0 12.2 18.4 25.8 46% 38.6 25.5 18.2 - - 10.2 13.1 2.2 0.5

Corp Bank 37.8 5,552.8 6,132.2 6,683.9 584.0 (940.3) 298.3 7.0 -9.5 3.0 -34% 5.4 - 12.6 - - - 2.8 1.4 3.7

Federal Bank 48.2 3,258.7 3,290.6 3,684.7 1,004.9 475.8 744.4 5.9 2.8 4.3 -14% 8.2 17.4 11.1 - - 6.0 8.8 1.1 2.3

HDFC 1,167.8 7,630.7 8,387.5 9,356.6 5,990.1 7,093.1 7,694.9 38.0 44.9 48.7 13% 30.7 26.0 24.0 - - 20.8 20.0 13.0 1.1

HDFC Bank 1,119.7 31,392.0 38,343.2 45,700.4 10,215.9 12,296.2 14,953.6 40.8 48.6 59.1 20% 27.5 23.0 18.9 - - 18.3 19.2 8.0 0.7

ICICI Bank 218.6 31,215.7 36,547.1 39,070.1 11,175.4 9,726.3 11,233.1 19.3 16.7 19.3 0% 11.3 13.1 11.3 - - 11.4 12.3 5.0 2.3

IDBI Bank 67.8 9,755.5 9,144.5 10,320.2 873.4 (2,762.6) 564.6 5.4 -14.5 3.0 -26% 12.4 - 22.8 - - - 2.3 0.7 1.1

LIC Housing Finance 450.2 2,236.4 2,944.1 3,323.3 1,386.2 1,660.8 1,992.6 27.5 32.9 39.5 20% 16.4 13.7 11.4 - - 19.6 20.1 5.0 1.1

PTC India Fin. Serv. 38.2 340.7 424.2 536.5 160.9 394.1 327.4 4.4 10.0 8.3 38% 8.7 3.8 4.6 - - 25.1 18.1 1.0 2.6

Punjab National Bank 80.7 22,446.3 22,925.8 25,382.7 3,061.6 889.5 2,746.5 16.5 4.5 14.8 -5% 4.9 17.8 5.4 - - 2.2 6.4 3.3 4.1

SBI 184.4 77,591.1 81,288.6 89,388.4 13,101.6 10,824.0 13,584.1 17.5 14.5 18.2 2% 10.5 12.7 10.1 - - 8.2 9.6 3.5 1.9

Union Bank of India 117.5 11,966.9 12,034.4 12,663.6 1,781.6 1,494.9 1,796.1 28.0 23.5 28.2 0% 4.2 5.0 4.2 - - 7.4 8.3 6.0 5.1

Yes Bank 910.2 5,534.3 7,278.9 8,937.7 2,005.4 2,539.5 3,121.7 48.7 60.4 74.2 23% 18.7 15.1 12.3 - - 19.9 20.8 9.1 1.0

CONSUMER GOODS

Britannia 2,817.3 7,858.4 8,836.0 10,312.3 542.5 853.2 1,036.2 45.2 71.1 86.4 38% 62.3 39.6 32.6 51.9 45.6 55.9 47.5 16.0 0.6

Emami 1,045.1 2,217.2 2,623.8 3,121.6 484.8 526.9 617.3 21.4 23.2 27.2 13% 48.8 45.0 38.4 40.7 38.7 40.0 40.8 7.0 0.7

GSK Consumers* 5,873.7 4,136.4 4,317.6 4,668.9 583.6 719.7 796.1 138.8 171.1 189.3 17% 42.3 34.3 31.0 47.0 43.6 31.0 28.7 55.0 0.9

GCPL 1,323.8 8,242.2 8,957.2 10,401.2 923.8 1,140.3 1,347.3 27.1 33.5 39.6 21% 48.8 39.5 33.4 21.2 22.3 25.1 24.7 5.8 0.4

Hindustan Unilever 853.4 31,199.7 32,482.7 36,063.7 3,886.5 4,143.4 4,843.8 18.0 19.1 22.4 12% 47.4 44.7 38.1 143.6 153.1 103.7 114.2 16.0 1.9

ITC 317.7 36,507.4 37,824.4 42,700.0 9,607.7 10,148.3 11,402.8 12.0 12.7 14.2 9% 26.5 25.0 22.4 38.1 37.2 30.8 29.9 6.3 2.0

Jyothy Laboratories 299.5 1,514.8 1,644.0 1,941.3 123.1 164.7 190.6 6.7 8.9 10.3 24% 44.7 33.7 29.1 14.8 21.1 19.9 20.5 4.0 1.3

Marico^ 245.2 5,733.0 6,132.0 6,669.4 573.5 709.4 851.3 4.4 5.5 6.6 22% 55.2 44.6 36.9 46.0 47.5 36.2 35.9 3.8 1.5

Zydus Wellness 750.0 415.2 431.5 487.1 98.7 102.6 118.2 25.3 26.3 30.3 9% 29.6 28.5 24.8 24.9 24.4 23.2 22.6 6.0 0.8

IT / IT SERVICESFirstsource Solution 40.3 3,034.6 3,232.6 3,660.8 234.3 264.4 336.2 3.5 3.9 5.0 20% 11.5 10.3 8.1 11.4 12.9 11.9 13.3 0.0 0.0

HCL Technologies*** 722.6 37,062.0 31,136.0 47,022.3 7,255.0 5,669.0 8,000.9 51.6 40.3 56.9 5% 14.0 17.9 12.7 26.6 32.3 21.7 26.1 30.0 2.0

Infosys 1,181.5 53,319.0 62,441.0 70,896.3 12,331.0 13,492.0 15,435.2 53.9 59.0 67.5 12% 21.9 20.0 17.5 34.7 36.0 25.1 25.8 73.0 1.9

Persistent Systems 725.3 1,891.3 2,312.3 2,947.6 290.6 297.4 337.4 36.3 37.2 42.2 8% 20.0 19.5 17.2 25.8 25.7 19.6 19.2 14.0 1.7

TCS^^ 2,473.4 94,648.4 1,08,646.2 1,21,665.6 19,648.4 24,215.2 26,617.1 100.3 123.6 135.9 16% 24.7 20.0 18.2 42.2 37.5 32.9 29.5 75.0 3.3

Wipro 533.1 46,954.5 51,244.0 58,129.2 8,652.8 8,892.2 9,907.4 35.3 36.2 40.5 7% 15.1 14.7 13.2 16.8 17.8 19.4 19.3 10.0 2.2

CAPITAL GOODS / POWER

BHEL 126.8 29,542.0 25,919.0 29,394.0 1,419.9 (1,184.0) (1,170.0) 5.8 -4.8 -4.8 - 21.8 - - - - - - 1.2 0.9

CESC 542.4 6,189.0 6,628.3 7,149.0 698.0 704.3 765.2 52.4 52.9 57.4 5% 10.4 10.3 9.4 7.2 7.3 8.4 8.6 9.0 1.7

Crompton Greaves 58.6 7,837.0 8,058.0 8,735.0 471.0 465.0 517.0 11.7 7.4 8.2 -16% 5.0 7.9 7.1 6.0 7.0 0.0 3.0 1.2 2.0

Finolex Cable 275.6 2,449.1 2,435.0 2,701.0 175.8 214.0 228.0 11.5 14.0 14.9 14% 24.0 19.7 18.5 21.8 20.0 21.2 20.1 1.8 0.7

Greaves Cotton^ 131.5 1,692.2 1,616.2 1,732.2 127.7 174.0 189.8 5.2 7.1 7.8 22% 25.1 18.5 16.9 30.2 30.0 20.3 20.7 4.5 3.4

Kalpataru Power 203.0 4,422.3 4,108.0 4,657.0 165.6 177.0 203.0 10.8 11.5 13.2 11% 18.8 17.6 15.4 13.2 13.6 8.3 8.8 1.5 0.7

PTC India 62.4 13,081.7 11,903.0 12,610.0 189.3 199.0 214.0 6.4 6.7 7.2 6% 9.7 9.3 8.7 10.5 11.3 7.2 7.4 2.2 3.5

Company CMP Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%) DPS Div(Rs) growth yield

(%)


FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY17/FY15 FY15 FY16E FY17E FY16E FY17E FY16E FY17E (Rs)

EQUITY FUNDAMENTALS EARNINGS GUIDE

^Marico post bonus 1:1 **June-ended financial year till FY2015, FY2016 consists of only 9 months * Inox Leisure FY2015 includes consolidation of Satyam Cineplexes, which will affect the overall profitability

Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers #We have annualised these ratios to make them comparable

Divis Labs post 1:1 bonus BEL post Bonus: 2: 1 *** June ended Cadila Healthcare post stock split from Rs5 to Rs1

Company CMP Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%) DPS Div(Rs) growth yield

(%)Skipper 139.5 1,312.8 1,519.0 1,752.0 61.4 76.6 93.9 6.0 7.5 9.2 24% 23.2 18.6 15.2 26.9 23.5 21.9 21.3 1.5 1.1

Thermax 739.3 4,697.4 4,445.0 4,662.0 335.7 321.0 356.0 28.2 27.0 29.9 3% 26.2 27.4 24.7 20.3 20.4 13.6 13.7 7.0 0.9

Triveni Turbine 108.9 650.8 859.5 1,063.8 93.3 122.3 152.9 2.8 3.7 4.6 28% 38.9 29.4 23.7 59.9 50.5 42.3 35.8 1.1 1.0

Va Tech Wabag 563.1 2,435.2 2,656.0 3,098.0 110.1 111.0 138.5 20.3 20.5 25.5 12% 27.7 27.5 22.1 18.7 19.8 11.8 13.3 4.0 0.7

V-Guard Industries 1,265.2 1,746.0 1,862.0 2,100.0 70.6 111.7 129.7 23.5 37.1 43.1 35% 53.8 34.1 29.4 37.2 35.9 26.4 25.1 4.5 0.4

INFRASTRUCTURE / REAL ESTATE

Gayatri Projects 531.2 1,601.1 1,764.1 2,375.7 25.0 44.4 97.5 8.3 12.5 27.5 82% 64.3 42.4 19.3 8.1 11.0 6.0 11.5 2.0 0.4

ITNL 73.7 6,320.7 7,312.5 8,613.3 308.8 168.3 513.6 12.5 5.1 15.6 12% 5.9 14.4 4.7 8.2 9.5 2.8 7.7 4.0 5.4

IRB Infra 209.2 3,847.5 4,892.9 5,721.5 542.9 633.3 859.5 15.4 18.0 24.5 26% 13.5 11.6 8.6 11.5 14.9 13.8 16.6 4.0 1.9

Jaiprakash Asso 7.0 10,854.3 13,905.8 15,220.7 (867.3) (93.2) 115.2 -4.1 -0.4 0.5 - - - 12.8 6.6 7.3 - 0.9 0.0 0.0

Larsen & Toubro 1,260.5 57,017.4 58,314.0 64,153.0 4,699.0 4,168.0 4,771.0 50.7 44.8 51.3 1% 24.9 28.1 24.6 11.9 12.4 10.8 11.4 16.3 1.3

OIL & GAS

Oil India 328.6 9,748.0 9,639.0 8,591.0 2,510.0 2,130.0 1,612.0 41.8 35.4 26.8 -20% 7.9 9.3 12.3 11.1 8.4 9.7 7.1 20.0 6.1

Reliance Ind 969.0 375,435.0 276,544.0 308,545.0 23,566.0 27,207.0 27,848.0 79.9 92.3 94.5 9% 12.1 10.5 10.3 8.9 8.5 11.2 10.5 10.5 1.1

Selan Exploration 190.0 79.3 74.2 110.9 28.3 26.3 39.1 17.3 16.0 23.8 17% 11.0 11.9 8.0 11.2 15.3 9.1 12.6 5.0 2.6

PHARMACEUTICALS

Aurobindo Pharma 799.8 12,120.5 14,066.2 16,400.9 1,635.4 2,004.5 2,520.1 28.0 34.3 43.2 24% 28.6 23.3 18.5 28.9 31.6 32.8 30.4 3.4 0.4

Cipla 537.4 11,345.4 13,916.5 17,699.8 1,180.8 1,783.9 2,333.0 14.7 22.2 29.1 41% 36.5 24.2 18.5 18.5 20.7 15.2 16.9 2.0 0.4

Cadila Healthcare 318.0 8,651.3 10,475.0 12,352.4 1,150.6 1,535.0 1,959.0 11.3 15.0 19.0 30% 28.1 21.2 16.7 28.1 32.5 28.3 27.9 2.4 0.8

Divi's Labs 1,022.2 3,114.9 3,571.6 4,256.1 865.5 1,040.0 1,228.4 32.6 39.2 46.3 19% 31.4 26.1 22.1 33.0 33.5 27.0 26.7 10.0 1.0

Glenmark Pharma 820.6 6,644.8 7,303.3 9,540.8 774.5 798.6 1,564.3 28.5 28.3 55.4 39% 28.7 29.0 14.8 18.1 26.9 21.4 30.0 2.0 0.2

Ipca Laboratories 475.6 3,142.0 3,004.0 3,481.0 254.0 142.0 423.0 19.8 11.3 33.5 30% 24.0 42.1 14.2 8.0 16.9 7.9 16.9 1.0 0.2

Lupin 1,586.9 12,599.7 14,206.3 16,675.7 2,403.2 2,625.4 3,234.9 53.5 58.3 71.9 16% 29.7 27.2 22.1 30.6 30.4 22.9 22.3 7.5 0.5

Sun Pharma 804.4 27,286.5 27,804.0 35,413.0 4,778.4 5,573.3 7,695.7 23.1 23.1 32.0 18% 34.9 34.8 25.1 21.4 25.8 17.9 20.4 0.0 0.0

Torrent Pharma 1,393.2 4,585.0 6,680.7 6,804.7 751.0 1,426.8 1,312.8 44.4 84.3 77.6 32% 31.4 16.5 18.0 39.0 32.7 43.5 28.1 11.3 0.8

BUILDING MATERIALS

Grasim 4,112.1 32,433.4 35,624.7 41,756.5 1,752.9 2,346.7 3,037.0 190.9 251.4 325.3 31% 21.5 16.4 12.6 12.7 14.2 9.1 10.3 22.5 0.5

The Ramco Cements 473.0 3,743.0 3,646.0 4,106.0 236.0 445.0 528.0 9.9 18.7 22.2 50% 47.8 25.3 21.3 8.5 9.2 15.6 16.0 1.5 0.3

Shree Cement** 12,620.2 6,454.0 5,568.3 10,225.7 462.0 381.1 1,185.8 133.1 109.4 340.3 60% 94.8 115.4 37.1 9.4 19.3 10.2 17.9 22.0 0.2

UltraTech Cement 3,099.9 22,653.7 23,841.0 27,354.0 2,061.9 2,205.0 2,778.0 75.3 80.5 101.4 16% 41.2 38.5 30.6 13.3 15.8 10.6 11.9 9.0 0.3

DISCRETIONARY CONSUMPTION

Century Plyboards (I) 189.7 1,588.0 1,721.0 1,940.0 149.0 173.0 197.0 6.7 7.8 8.9 15% 28.3 24.3 21.3 22.8 21.2 37.0 30.3 2.0 1.1

Cox and Kings 171.7 2,569.1 2,429.0 2,789.5 399.8 284.2 388.8 23.6 16.8 23.0 -1% 7.3 10.2 7.5 10.0 11.4 13.0 14.9 1.0 0.6

Inox Leisure 198.6 1016.8* 1,332.7 1,589.7 20* 77.5 91.9 2.2 8.4 10.0 122% 90.2 26.8 18.4 11.1 14.0 10.3 10.9 0.0 0.0

Info Edge (India) 721.1 611.6 711.8 832.1 164.7 144.7 204.3 13.7 12.0 16.9 11% 52.6 60.1 42.7 11.9 14.9 8.1 10.4 2.5 0.3

KDDL 167.9 411.7 453.0 536.2 8.3 13.8 19.6 8.2 13.7 19.4 54% 20.5 12.3 8.7 14.6 15.4 13.3 17.9 2.0 1.2

KKCL 1,779.7 405.1 433.7 499.5 66.3 68.2 92.0 53.7 55.3 74.6 18% 33.1 32.2 23.9 27.5 29.6 20.0 24.0 22.0 1.2

Orbit Exports 250.4 158.0 155.0 180.0 27.9 26.7 31.3 19.4 18.6 21.8 6% 12.9 13.5 11.5 20.9 17.7 25.4 24.6 4.5 1.8

Raymond 467.6 5,352.0 5,621.0 6,028.0 115.8 140.6 196.5 18.9 20.3 23.1 11% 24.7 23.0 20.2 10.9 10.9 7.9 8.4 3.0 0.6

Relaxo Footwear 490.8 1,472.8 1,765.4 2,153.5 103.1 133.3 173.4 8.6 11.1 14.5 30% 57.1 44.2 33.8 26.0 27.0 22.1 21.8 0.5 0.1

Speciality Restaurants 88.9 299.4 325.6 385.5 9.5 4.8 14.3 2.0 1.0 3.1 24% 44.4 88.9 28.7 2.2 6.3 1.6 4.6 1.0 1.1

Thomas Cook India 181.4 3244.3# 3,965.4 4,723.3 112.3 82.9 190.6 2.8 1.7 3.9 18% 64.8 106.7 46.5 10.6 16.5 6.1 13.1 0.5 0.3

Wonderla Holidays 383.6 181.9 212.9 312.5 50.6 56.1 74.1 9.0 9.9 13.1 21% 42.6 38.7 29.3 22.0 27.4 15.6 19.3 1.5 0.4

Zee Entertainment 403.1 4,883.7 5,858.5 6,909.4 977.5 1,097.8 1,379.5 8.6 10.1 12.7 22% 46.9 39.9 31.7 24.1 26.9 19.2 20.9 2.0 0.5

DIVERSIFIED / MISCELLANEOUS

Aditya Birla Nuvo 846.0 10,260.1 11,425.6 - 584.2 639.3 - 44.9 49.2 - - 18.8 17.2 - 8.9 - 7.1 - 7.0 0.8

Bajaj Holdings 1,434.6 523.9 - - 2,028.7 - - 182.3 - - - 7.9 - - - - - - 32.5 2.3

Bharti Airtel 359.1 92,039.0 96,619.0 10,600.0 5,883.0 4,775.0 6,429.0 14.7 11.9 16.1 5% 24.4 30.2 22.3 12.5 13.7 4.5 9.9 3.9 1.1

Bharat Electronics 1,142.2 6,775.9 7,508.2 8,849.7 1,100.6 1,367.3 1,529.7 45.9 57.0 63.7 18% 24.9 20.0 17.9 17.2 18.4 13.5 14.4 9.2 0.8

Gateway Distriparks 281.1 1,105.0 1,046.1 1,166.1 187.8 123.6 139.8 17.3 11.4 12.9 -14% 16.3 24.7 21.9 12.9 14.6 13.2 14.4 7.0 2.5

Max Financial 362.3 14,815.0 - - 279.6 - - 10.5 - - - 34.5 - - - - - - 5.0 1.4

PI Industries 626.9 1,939.7 2,225.0 2,613.4 224.8 286.9 354.9 16.7 21.3 26.3 25% 37.5 29.4 23.8 33.9 35.2 28.2 27.5 2.5 0.4

Ratnamani Metals 491.1 1,675.6 1,572.0 1,781.0 172.5 141.3 170.3 37.0 30.3 36.5 -1% 13.3 16.2 13.5 20.2 21.4 14.6 15.5 5.5 1.1

Supreme Industries** 813.6 4,255.2 2,974.8 5,197.5 311.7 212.2 421.3 24.5 16.7 33.2 16% 33.1 48.7 24.5 22.4 33.5 17.5 26.5 7.5 0.9

UPL 592.9 12,090.5 13,301.5 14,994.1 1,334.0 1,438.9 1,620.6 31.1 33.6 37.8 10% 19.1 17.6 15.7 16.5 18.2 19.1 20.3 5.0 0.8


Remarks

Automobiles

Apollo Tyres Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share in India. The operatingmargins for the company are expected to sustain at higher levels over the next 1-2 quarters due to subdued rawmaterial prices. The company will be investing $600mn over the next three years to set up a greenfield facility inHungary and Rs4,000 crore to expand capacity at Chennai facility. The expanded capacities are likely to come onstream by 2017-18. Also the recent foray in the 2 wheeler tyres strengthens Apollo Tyres presence across all the keyautomobile segments. Initially, the company shall source the two-wheeler tyres externally but going ahead it plans tomanufacture in-house once sales momentum picks up. We maintain our Buy recommendation on the stock with aprice target of Rs201.

Ashok Leyland Ashok Leyland, the second largest CV manufacturer in India, is a pure CV play. The MHCV have witnessed asustained recovery and have been growing in double digits over the past few quarters. We expect MHCV volumesto remain buoyant over FY16-17 driven by a pick-up in the economic cycle, improved operator profitability,expectations of a normal monsoon and phase-wise implementation of Bharat Stage IV norms across the countryleading to pre-buying. Also, recent focus on defence sector would boost the top line, albeit in the long term. Thecompany has managed to take price hikes which along with the higher operating leverage has propped up themargins. We have a Buy recommendation on the stock with a price target of Rs120.

Bajaj Auto Bajaj Auto’s domestic motorcycle volumes have been under pressure over the last couple of years largely due toissues in the executive segment However, the launch of CT100 and refreshed Platina has given a much neededvolume push while the newly launched Pulsar variants and Avenger would help consolidate its leadership in thepremium and luxury motorcycle segments. The macro-economic issues in the key export markets including Nigeriahave affected the dispatches to these countries and the impact is likely to be felt for the next one to two quarters.However, the underlying demand in these export markets is intact and shall bounce back with a revival in theavailability of dollars. The launch of its quadricycle, RE60, has been delayed by legal issues and the matter isexpected to be sorted soon and will be a trigger for re-rating of the stock. The new model launches and newpermit issues in the three-wheeler space shall act as key triggers for the company in the short term.

Gabriel India Gabriel is one of India’s leading manufacturers of shock absorbers and front forks with a diversified customerbase. While the demand scenario is expected to remain muted in FY2016, we expect a revival in growth, partly inFY2017 and 2018 on the back of a likely revival in motorcycle demand, ramp-up in supplies to Honda Motorcycleand Scooter’s new plant in Gujarat and to the new models of both Maruti Suzuki and M&M. In the near term thestock performance would be influenced by the recovery in the two-wheeler markets and a likely positive rub-offfrom the implementation of the recommendations of the Seventh Pay Commission and expectations of a normalmonsoon in 2016. Therefore, we continue with our Buy rating on the stock with a price target of Rs105.

Hero MotoCorp HMCL is the largest two-wheeler manufacturer in the world with sales of over 6.6 mn vehicles in FY16 and adomestic market share of 39%. We expect the two-wheeler industry to grow at 10-12% CAGR over the next fiveyears driven by increased penetration levels in rural areas and replacement demand. HMCL is expected to maintainits leadership position in the industry. With the launch of two new models (in the scooter segment. Further,massive capex plans implemented by the company in the past including production from Gujarat plant are likelyto commence operations in H1FY2017 which shall ramp up the production levels. However HMCL’s margins arelikely to reduce by around 100BPS to 14.5% for FY2017 due to increased R&D expenses, commodity priceincreases and higher marketing and advertising expenses. We have downgraded our rating on the stock from Buyto Hold with a revised price target of Rs3,000.

M&M M&M is a leading maker of tractors and UVs in India. We expect demand for the automobile segment to pick upwith an improvement in customer sentiment. Additionally, new launches especially in the compact UV space willdrive volume growth. After growing in strong double digits, the tractor demand was under pressure in FY15-16due to weak monsoon. However, with the expectation of normal rainfall we expect the tractor segment to recoverand report a strong growth in FY17. We remain positive on the stock, given its leadership position in the domestictractor and UV segments as well as the value derived from its subsidiaries across business segments. We maintainour Buy rating on the stock with a price target of Rs1,406.

Maruti Suzuki Maruti Suzuki is India’s largest passenger vehicle maker with a strong 46% market share. It has been able to gainmarket share over the last two years on the back of a diverse product portfolio, a large distribution network withan increased focus on rural markets and a shift in consumer preference to petrol models from diesel. It is poised toreap the benefits from the increased discretionary spending from the Seventh Pay Commission pay-out. Therecently launched premium hatchback, Baleno and Compact SUV Vitara Brezza have received a positive responsewhich will help the company expand market share in the segment. Further, the company has a pipeline of newlaunches over the next few years, with the most important being the entry into the compact utility vehicle andlight commercial vehicle segments. The management plans to double its existing sales and distribution network inorder to achieve its target of doubling domestic volumes over the next five years. MSIL’s yen exposure is expectedto reduce with a higher localisation level while the royalty on future models shall be INR denominated, thusshielding the OPM’s partly. We remain positive on the stock with a price target of Rs4,700.



Remarks


Rico Auto Inds. Rico is one of the largest producers of high-pressure non-ferrous die castings for the auto sector. It has recentlydivested its 50% stake in a joint venture with FCC Co., Japan for Rs495 crore. The significant cash flow (nearlyequivalent to current market cap) is expected to be a game changer for the company and has enabled it to deleverageits balance sheet. Additionally, a lower interest burden will result in a growth in the earnings and free cash flow. Thecompany expects a revenue growth of 15% in the coming years and exports to cross Rs250 crores in FY2016.Further, Hero MotoCorp’s (biggest client contributing 32% of revenues) new products especially in the scootersegment will add up to the revenues of Rico Auto. We maintain our Buy recommendation on the stock with a pricetarget of Rs47.

TVS Motor TVS Motor is the fourth largest two-wheeler manufacturer in the country with a strong presence in the scootersegment. The scooter segment has surpassed the growth in the motorcycle segment over the past couple of years andcurrently contributes 30% of the total two-wheeler volumes. With the launch of the Jupiter, the refreshed Wego andthe new Scooty Zest, the company has balanced its scooter portfolio and witnessed incremental volumes. On themotorcycle front, two new launches in January 2016 (Apache RTR and Victor) have generated higher volumes forthe company. In addition, launches in H2FY17 in the premium segment in collaboration with BMW would aidmarket share gains. Exports remain challenging due to currency headwinds and are likely to stabilise over the nexttwo to three quarters. The OPM is likely to remain under pressure as the marketing and brand promotion expenseswould remain elevated. Further, increased competition would lead to pricing pressure which would also restrictmargin improvement. We maintain our Reduce rating on the stock with a price target of Rs250.

Banks & FinanceAllahabad Bank With a wide network of over 3,000 branches spread across India, Allahabad Bank enjoys a stronghold in north and east

India. But it has reported a rise in NPAs resulting in deterioration of its asset quality. Higher proportion of stressedloans and low tier-I CAR remain the key concerns of the bank.

Andhra Bank Andhra Bank, with a wide network of over 2,200 branches across the country, has a strong presence in southIndia especially in Andhra Pradesh. The bank’s lending in retail SME credit segment has resulted in relativelyhigher margins vs peer banks. However, the concerns on the asset quality front have emanated from the corporatesector exposures.

Axis Bank Axis Bank is the third largest private sectors bank, continues to grow faster than the industry and has diversifiedits book in favour of the retail segment (~40% of loans in retail segment). The bank’s liability profile has improvedsignificantly which would help to sustain the margins at healthy levels. We expect the earnings growth to remainreasonably strong driven by a healthy operating performance. While asset quality pressures have emerged as painpoints due to infrastructure and steel exposures, we expect the stress to persist in near term.

Bajaj Finance Bajaj Finance, owned by Bajaj Finserv, is one of the most diversified and leading NBFCs in the country. It hasassets spread across products, viz loans for consumer durables, two- and three-wheelers, loans to small and mediumenterprises (SMEs), mortgage loans and commercial loans. Despite a strong growth in loans, the asset quality andprovisioning remain among the best in the system. Given the strong growth rate, high margins and return ratios,it deserves to trade at a premium to the other NBFCs

Bajaj Finserv Bajaj Finserv is a financial conglomerate having presence in financing business (vehicle finance, consumer financeand distribution) and is among the top players in the life insurance and general insurance segments. Its consumerfinance (Bajaj Finance) and general insurance businesses continue to report a robust performance while the lifeinsurance business is showing signs of a pick-up after being affected by a change in regulations.

Bank of Baroda Bank of Baroda is among the top public sector banks (PSBs) having a sizeable overseas presence (over 100 officesin 24 countries) and a strong network of over 5,000 branches across the country. It has a stronghold in westernand eastern India. Its performance metrics remain better than that of the other PSBs and asset quality has deterioratedin line with the RBI’s directive to clean the balance sheet.

Bank of India Bank of India has a network of over 4,800 branches, spread across the country and abroad, along with a diversifiedproduct and services portfolio, and steadily growing assets. The operating performance and earnings have erodedsignificantly due to margin deterioration and sharp rise in NPAs. Given the rise in the number of incrementalstressed loans and the relatively weaker capital position, its valuations may remain subdued.

Capital First Capital First (erstwhile Future Capital Holdings) has been acquired by global private equity firm, Warburg Pincus(a 72% stake). The present management has taken several initiatives to tap the high-growth retail product segments,like gold loans, loan against property and loan against shares. It has a strong CAR and sound asset quality. Itsloan book is expected to sustain a 25-30% growth in the next three years. As a result of several initiatives taken,the operating leverage will play out and may lead to significant pick-up in profitability over medium term.

Corp Bank Corporation Bank is a mid-sized PSB having a relatively higher presence in south India. It is predominantlyexposed to the corporate segment, which constitutes about 45% of its book. Due to a higher dependence on thewholesale business and a low CASA ratio, it lags its peers in terms of operational performance. Also, the rise inNPAs could keep provisioning high and weaken earnings performance.

Federal Bank Federal Bank is among the better performing old private sector banks in India with a strong presence in southIndia, especially Kerala. Under the new management, the bank has taken several initiatives, which would improvethe quality of its earnings and asset book. The asset quality has shown stress in the past few quarters, though weexpect a gradual improvement in the NPAs and the operating performance to pick up gradually. The valuationsseems attractive over the medium to long term.


Remarks


HDFC HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. Ithas interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries aregrowing faster than HDFC, the value contributed by them would be significantly higher going forward. Due to adominant market share and consistent return ratios, it should continue to command a premium over the otherNBFCs. Any unlocking of value from its insurance business will be positive for the stock.

HDFC Bank HDFC Bank is among the top performing banks in the country having deep roots in the retail segments. Despitethe general slowdown in the credit growth, the bank continues to report a strong growth in advances from retailproducts. Its relatively high margins (compared with its peers), strong branch network and better asset qualitymake HDFC Bank a safe bet and there is scope for expansion in the valuations.

ICICI Bank ICICI Bank is India’s largest private sector bank with a network of over 3,800 branches in India and a presence inaround 18 countries. The bank has made inroads into retail loans (~45% of the book) and significantly improvedits liability franchisee. The operating profit improved significantly though its exposure to some troubled sectors(infrastructure, steel etc) has increased pressure on the asset quality. However, a healthy growth in the operatingincome and proceeds from monetisation of the stake in subsidiaries will help to deal with the NPA challenges.

IDBI Bank IDBI Bank is one of leading PSBs of India in terms of size of asset, though it is largely present in the corporatelending space. It is gradually working towards improving its liability base and expanding the retail book which islikely to reflect in the form of better margins and return ratios. However, due to huge asset quality pressure, lowtier-I CAR and slower business growth, the stock is likely to underperform in the near term.

LIC Housing LICHFL is the third largest mortgage financier (including banks) in India with a market share of 11% and loanbook of over Rs1,00,000 crore. It is promoted by Life Insurance Corporation of India, which is among the mosttrusted brand in the country. With over 200 branches, 1,241 direct sales agents, 6,535 home loan agents and 782customer relationship associates, the company has among the strongest distribution structures in India to supportbusiness expansion. Going ahead, a revival in the economy and moderation in the borrowing rates could be thekey triggers for the stock. Therefore, considering stable RoE of ~20%, sound asset quality and healthy growthoutlook, the company’s fundamentals are strong.

PNB Punjab National Bank has one of the best liability mixes in the banking space, with low-cost deposits constitutingaround 40% of its total deposits. This helps it to maintain one of the highest margins among PSBs. However, inview of the weakness in the economy and relatively higher exposure to troubled sectors, the asset quality stress hasincreased and NPA issues will persist over next few quarters.

PFS PTC India Financial Services, owned by PTC India, is focused on providing financial solutions to projects in the energyvalue chain. Given the robust lending opportunities in the renewable energy segment and the likely reforms in thethermal power segment, the loan growth is expected to remain strong over the next two to three years. The proceedsfrom exits in investments would add to the profitability. The asset quality despite some deterioration is manageable.

SBI State Bank of India is the largest bank of India with loan assets of over Rs14 lakh crore. The successful merger ofthe associate banks and value unlocking from insurance business could provide further upside for the bank. Whilethe bank is favourably placed in terms of liability base and the operating profit is also better than peers; the assetquality has emerged as a key pain point which will affect the earnings growth.

Union Bank Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become thelargest retail, MSME bank. Hence, it has ramped up its manpower and infrastructure to ramp up retail, SMElending. The bank’s asset quality challenges have come to fore (mainly from the corporate portfolio) whereas lowtier-1 CAR also remains an area of concern.

Yes Bank Yes Bank, a new generation private bank, started its operations in November 2004 and has emerged as amongthe top performing banks. It follows a unique business model based on knowledge banking, which offers productdepth and a sustainable competitive edge over established banking players. The bank is suitably poised to ridethe recovery in the economy and the retail deposit franchise is showing a sharp improvement which will supportthe margins in the medium to long term.

Consumer goodsBritannia Britannia is the second largest player in the Indian biscuit market with about 30% market share. Under a new

leadership, Britannia has been able to leverage and monetise its strong brand and position in the biscuit and snacksegments. The company can sustain its higher than industry growth rates with an improving distribution reach, entryinto newer categories and focus on cost efficiency. We recommend a Buy on the stock with a price target of Rs3,650.

Emami Emami is one of the largest players in the domestic FMCG market with a strong presence in the under-penetratedcategories such as cooling oil, antiseptic cream, balm and men’s fairness cream. The recently acquired “Kesh King”brand improves the product and margin profiles of the company. The desire to become a large FMCG player by ridingon a portfolio of differentiated brands and improving reach in various geographies will help Emami to achieve agrowth of over 17% CAGR over the next two to three years. We recommend a Buy on the stock.

GSK Consumer GSK Consumer Healthcare is a leading player in the MFD segment with a close to 70% share in the domestic market.Judicious new launches and brand extensions, and the expansion of its distribution reach have helped it to stay aheadof the competition and maintain its pricing power over the years. In a bid to de-risk its business model, it has expandedits product portfolio by entering into new categories such as biscuits and oats in the recent years. With cash balanceof more than Rs2,000 crore the company can invest in growth initiatives as well as reward its investors with a healthydividend payment. We recommend Buy on the stock.


Remarks


GCPL Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide marketsegments in India. The recent acquisitions, ie Strength of Nature, Darling Group, Tura, Megasari and LatinAmerican companies, have helped the company to expand its geographic footprint and improve growth prospects.We believe the decent sales volume growth in the domestic business coupled with a strong growth in the Indonesian,African and Argentine businesses would help it to achieve an 18% top line growth and a 26% bottom line growth(CAGR) over FY15-17.

HUL Hindustan Unilever is India’s largest FMCG Company. With moderate inflation, improving sentiments in theurban market and expectations of a better monsoon, HUL’s volume growth in the domestic business is expectedto improve in the coming years. Also, new product launches and entry into new categories will drive the performanceof the company in future. With improving business fundamentals the downside risk in the stock price is limited.Hence, we recommend a Buy on the stock. In the long term, it will be one of the key beneficiaries of the Indianconsumerism story.

ITC ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, tostrengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses someof which are at a nascent stage. The quantum of excise duty of 10% declared in the Union budget 2016-17 wasmuch lower than in the earlier years. This should help in stabilising cigarette sales volume in the coming years. Thecurrent valuation makes ITC one of the cheapest stocks in the large-cap FMCG space.

Jyothy Labs Jyothy Laboratories is the market leader in the fabric whitener segment in India. With the successful integration ofHenkel and the induction of a new management team led by S Raghunanadan, it is transforming itself from a one-brand wonder to an aggressive FMCG player. We expect its top line to grow at a CAGR of 15%. A stable OPMand lower interest cost would aid the PAT to grow at 26% CAGR over FY15-17.

Marico Marico is among India’s leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footingin the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of newproduct categories (especially in the beauty and wellness space) and growth through acquisitions. While the domesticproduct portfolio is likely to achieve a steady growth in volumes, the international business is yet to gain momentum.Marico has been our preferred pick in the FMCG sector and we remain positive on its long-term growth story.

Zydus Wellness Zydus Wellness is bearing the brunt of a limited product portfolio of three brands (Nutralite, Sugar Free andEveryuth) that cater to a niche category. The company would benefit from a lower input cost, improving urbanconsumer sentiment and a new distribution system in FY17. Thus, we expect a better operating performance fromit in FY17.

IT/IT servicesFirstsource Firstsource Solutions is a specialized BPO service provider. The management expects to deliver a 6.5-7.0% Q-o-Q

growth in Q4FY16 with an OPM in the upward of 13%. Also, it expects to deliver at least $550mn in revenues(excluding ISGN acquisition) and margin improvement of 50-70BPS at the operating level in FY17. The health ofits balance sheet is improving gradually as the company is gradually reducing its debt burden through internalaccruals. The company expects to be comfortably net cash positive by the end of FY17 and have a total debt of$85 million by the end of FY17. We expect the earnings momentum to gather steam and FSL to deliver muchhigher numbers than the current consensus estimate.

HCL Tech HCL Technologies is a global technology company. Its management indicates that the demand environment lookspromising with an increase in market share coupled with a significant increase in the deal funnel. However, theincreasing complexity of IMS engagement has led to a delay in project ramp-ups in the IMS business (accounts for35% of its revenues). Nevertheless, the management has made investments in digital technologies and Internet ofthings (IOT), and already won a few deals in the space. (25% of total deals wins in FY2015 comes from digitalspace). However, the margins are expected to remain under pressure in the medium term owing to integrationmargins headwinds from Volvo (Q1FY17) and Geometric (end of FY17). We remain positive on the company inview of its order wins, healthy pipeline of deals and superior earnings visibility, notwithstanding some near-termsoftness in the IMS vertical owing to some projects delays.

Infosys Infosys is India's premier IT and IT-enabled Services Company that provides business consulting, technology,engineering and outsourcing services. For FY17, the management has provided a revenue growth guidance of 11.5-13.5% (on CC basis), ahead of NASSCOM’s Indian IT industry growth guidance of 10-12% for FY17, which impliesa CQGR of 3.3-4.1%. It has also given a promising aspiration target for 2020 of achieving $20bn in revenues and30% in margin. Under the leadership of Vishal Sikka, the company is doing the right thing by investing in the digitalspace (both organic and inorganic), improving client engagement through design thinking, and automating andinnovating for future growth prospects. We remain positive on the company’s growth prospects for the coming years.

Persistent Persistent Systems has proven expertise and a strong presence in newer technologies, strength to improve its IPbase and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies. Looking atthe strong growth in enterprise revenue, whose contribution to the revenues has increased to 26.0% in Q4FY16 asagainst 24.1% a year ago, PSL’s enterprise digital transformation strategy is shaping up well. Further, led by therecent acquisitions of two units of US-based cloud software firm, Citrix Systems, a pick-up in the IP-led revenueswith the acquisition of newer products and recent alliance with IBM to build IoT solutions for IBM’s Watsonplatform, we expect the revenue momentum to accelerate in FY17 and the margins are likely to remain stable onthe back of the initiatives taken by the company.


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TCS Tata Consultancy Services is among the pioneers of the IT services outsourcing business in India and is the largestIT service firm in the country. Its management expects the digital revenues to grow much faster in the comingyears; these grew by 52.2% YoY to $2.3 billion in FY16. The management noted that headcount addition will bematerially lower than in FY16 and dependence on Visas will come down. We remain positive on the company,given its strong positioning, scale advantage and head start in digital technology.

Wipro Wipro is among the top five IT companies in India but in the last few years it has been lagging the industry in termsof growth. We believe, owing to weakness in the energy, telecom, and some project deferrals, it’s unlikely to showmaterial improvement in earnings on an organic basis in FY17. The management has given an ambitious target of$15 billion revenues and 23% margin by 2020, but refrained from giving any timeline to track the roadmap of theimprovement. We see the target of new CEO Abid Ali Neemuchwala as an uphill task looking at the current growthtrajectory. Therefore, we remain sceptical, as anecdotal evidence on Wipro in the last two to three years does notinspire confidence.

Capital goods/PowerBHEL Bharat Heavy Electricals, India’s biggest power equipment manufacturer, has been the prime beneficiary of the multi-

fold increase in the investments made in the domestic power sector over the last few years. However, the order inflowhas been showing signs of slowing down which would remain a major concern for the company. The key challengebefore the company now would be to maintain a robust order inflow and margin amid rising competition and lowerorder inflow. The current order book of around Rs1 lakh crore stands at around 3.4x FY15 sales.

CESC CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) whichis a strong cash generating business. Further, 600MW of regulated generation capacity (to serve Kolkata distribution)has come on stream recently in Haldia. Also its 600MW thermal power project at Chandrapur has signed PPA andstarted operating. The losses in the retail business are coming down gradually over the past and it is expected tobreak even soon. The BPO subsidiary, FirstSource, is performing well in line with expectations. However, therecent diversification into unrelated businesses like IPL franchisee would hurt its valuations.

Crompton Greaves Crompton Greaves’ key businesses—industrial and power systems—are passing through a rough patch and arepotential beneficiaries of the upcoming investment cycle revival. Its consumer product segment is demerged andwill be listed as separate entity soon.

Finolex Cables Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improvingdemand environment in its core business of cables. It is leveraging its brand strength to build a high-marginconsumer product business of fans. However, a derivative exposure and the subsequent overhang are matters ofpast now, leading to a strong case for a re-rating. We see a healthy earnings growth, return ratios in high teens andsuperior cash flow which bode well for the stock. Hence, we remain positive on the stock.

Greaves Cotton Greaves Cotton is a mid-sized and well-diversified engineering company. Its core competencies are in diesel/petrolengines, power gensets, agro engines, pump sets (engine segment) and construction equipment (infrastructureequipment segment). The management has taken a strategic call to close and hive off the loss-making infrastructureequipment division. GCL’s growth momentum is expected to pick up and we expect 11% CAGR over FY2016-18due to a revival in the automotive business and the agri-equipment space. A better economic growth, improvedproduct mix, forecast of a normal monsoon after two consecutive years of drought coupled with new productlaunches are likely to spur revenue growth for GCL. We remain positive on the stock and maintain our Buy ratingwith a price target of Rs160.

Kalpataru Kalpataru Power Transmission is a leading EPC player in the transmission & distribution space in India.Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility. The OPMof the stand-alone business is likely to remain around 10%; however the OPM of JMC Projects (a subsidiary) isshowing signs of improvement. We retain our Buy rating.

PTC India PTC India is a leading power trading company in India with a market share of 35-40% in the short-term tradingmarket. In the last few years, the company has made substantial investments in areas like power generationprojects and power project financing which will start contributing to its earnings. Long pending receivables wasone of the drags on the company’s balance sheet and return ratios; however, the concern has receded after receivingpayment from UPSEB. We retain Buy due to expectations of a healthy volume uptick with an increasing share oflong-term contract business.

Skipper Skipper is uniquely placed to exploit the growing opportunities in two lucrative segments: power (transmissiontower manufacturing and EPC projects) and water (PVC pipes). It has a comfortable order book of more thanRs2,500 crore in the transmission business, which looks promising given the huge investments proposal by thegovernment in the power T&D segment in the next five years. It has expanded the PVC capacity manifold (4x)and aspires to turn a national player from a regional player. After the revamp of its low-margin steel tube businessand due to operating leverage the overall margin may improve substantially in the next two years and boost itsearnings and return ratios.

Thermax The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Inc’scapex. Thermax’ group order book stands at around 2.4x its FY15 consolidated revenues. However, the companyhas shown its ability to maintain a double-digit margin in a tough environment. We retain Hold on the stock dueto its rich valuation.


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Triveni Turbines Triveni Turbines Ltd (TTL) is a market leader in the up to 30MW steam turbine segment. TTL is at an inflexionpoint with a strong ramp-up in the after-market segment and overseas business while the domestic market isshowing distinct signs of a pick-up. The company has also formed a JV with GE for steam turbines of 30-100MWrange which is likely to grow multifold in the next 4-5 years. TTL is virtually a debt-free company with a limitedcapex requirement and an efficient working capital cycle, reflected in very healthy return ratios. Further, boostedby the expected uptick in the domestic capex cycle, the company’s earnings are likely to grow by 25%+ per annumover the next 3-4 years.

V Guard Ind V-Guard Industries is an established brand in the electrical and household goods space, particularly in southIndia. Over the years, it has successfully ramped up its operation and network to become a multi-product company.The company has a strong presence in the south region. It is also aggressively expanding in non-south markets andis particularly focusing on the tier-II and III cities where there is a lot of pent-up demand for its products.

Va Tech Wabag VA Tech Wabag (VTW) is one of the world’s leading companies in the water treatment field with eight decades ofplant building experience. Given the rising scarcity of fresh water availability, we expect flow of huge investmentsin water segment both globally and domestically. With rising urbanisation and industrialisation in India, weexpect substantial investments in this space. Given the large opportunity ahead and inherent strengths of VTW,like professional management, niche technical expertise and global presence.

Infrastructure/Real estateGayatri Proj Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road and

industrial construction businesses. The order book stands at Rs10,380 crore, which is 6.5x its FY15 revenues. Itis also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to privateequity. The company has potential to transform itself into a bigger entity.

IL&FS Trans IL&FS Transportation Networks is India’s largest player in the BOT road segment with a pan-India presence anda diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with thegeographical diversification across 12 states reduce the risk to a large extent and provide comfort. Further, astrong pedigree along with the outsourcing of civil construction activity helps it to scale up its portfolio faster.Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector.

IRB Infra IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator inthe country with all its projects being toll based. It has an integrated business model with an in-house constructionarm which provides a competitive advantage in bidding for the larger projects and captures the entire value fromthe BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-freeand it has presence in high-growth corridors which provides healthy cash flow. Thus, it is well poised to benefitfrom the huge opportunity in the road development projects on the back of its proven execution capability and thescale of its operations.

Jaiprakash Asso Jaiprakash Associates has been facing earnings pressure across business verticals. Further, it is in the process ofconcluding its cement asset sale to deleverage its balance sheet. The construction and real estate division has alsobeen underperforming lately. The current uncertainty in business restructuring and liquidity concerns has led to acautious view on the stock.

L&T Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of thedomestic infrastructure capex cycle. Further, backed by its sound execution track record and healthy order book, thecompany will do well. Monetisation of the non-core businesses and listing of L&T Infotech would unlock value.Measures planned by the company to improve its return ratios augur well. Hence, we remain positive on the stock.

Oil & gasOil India Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India.

The total proven and proven and probable reserves of the company stand at 52 MMTOE and 121 MMTOErespectively. Its reserve-replacement ratio is also healthy. It offers a healthy dividend yield and the full benefit ofthe recent policy reforms like deregulation of diesel and DBT scheme for LPG consumers are expected to reflect inits future earnings and add value. However, weak crude oil prices are going to weigh heavily on the earnings and,in turn, on the stock price for some time.

Reliance Ind Reliance Industries has one of the largest and complex refining businesses in India which enjoys a substantially higherrefining margin over the benchmark GRM. Further, its petrochemical business is also highly efficient, where RIL isexpanding capacity. We expect the GRM to remain healthy and the petrochem margin to be maintained in the mediumterm on an uptick in the domestic demand. Currently, the decline in gas output from the KG-D6 basin is weighingon the stock price; however, capex in downstream business (incremental capacity in the petchem business and petcokegasification in refining) would be the earnings driver in the coming years. Large investment in Reliance Jio could addvalue in long term.

Selan Exploration Selan Exploration Technology is an oil E&P company with five oil fields in the oil-rich Cambay Basin of Gujarat.The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production.Further, it intends to explore its next field, Indrora, which is the most prolific one with significant reserves. Basedon this, we expect it to ramp up production significantly, subject to approval for the new wells. However, weakglobal oil prices are likely to be an overhang on the stock in the medium term.


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PharmaceuticalsAurobindo Pharma Aurobindo Pharma is set to post a healthy growth on the back of a ramp-up in the US and European markets,

thanks to a strong product pipeline built over a period and focus on niche segments like injectibles, hormones,penems and sterile products. The expected increase in the export-led business and a favourable tilt in the revenuemix are likely to boost the margin, resulting in a faster growth in the earnings as compared with the revenues. Ithas recently acquired the commercial operations (revenue size EUR320mn) of Actavis Plc in seven western Europeancountries and of Natrol in the USA to take on the nutraceutical business, which is a strategic fit.

Cadila Cadila Healthcare’s performance in the US generic vertical is likely to improve on the back of new productapprovals. Besides, its consumer business and exports to the emerging markets will help it to achieve a superiorgrowth. It got DCGI approval for its first NCE called Lipaglyn to treat type-II diabetes; this will add value to itsR&D pipeline. Cadila has recently received warning letter for two facilities. The key products like gAsacol HD,gPrevacid, gNexium and gToprol are under process for site transfers and would be future key triggers as theseproducts are limited competition products.

Cipla Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus ontechnology-intensive products in the inhalation and nasal spray segments; (2) established front-end presence in thekey markets like South Africa, USA and Europe; (3) developed an appetite for inorganic expansions; and (4)invested in future growth areas like biosimilars. However, delays in filing of gAdvair, growing competition andlack of clarity on the timeline for the launch of gAdvair in the US market, pending 483 observations at Indore SEZand closure of recent acquisition of Invagen and Exelan are growing concerns as these will create operationalpressure for the next two years.

Divi’s Labs The DSN SEZ facility at Vishakhapatnam that started in June 2011 augurs well for Divi’s Laboratories. Thecompany is likely to see an improvement in economies of scale which will also lead to tax benefits after USFDAapprovals for three additional production blocks. A near debt-free balance sheet and strong cash flow are likely tohelp build a war chest for pursuing strategic investments (biosimilars) and exploit the growth opportunities inniche segments, like oncology and steroids for contraceptives. In order to compensate for the delay in plannedgreenfield facility with an investment of Rs5 billion in the Kakinada special economic zone (SEZ), Divi’s hasinitiated capital expenditure (capex) worth Rs2.5 billion in its export oriented unit in Visakhapatnam. Themanagement expects the Kakinada SEZ to boost growth in FY18, reaffirming that a 20% growth over the nextfew years is likely.

Glenmark Pharma Glenmark Pharmaceuticals exhibited a weaker operating performance during 9MFY16 due to adverse economicscenario in the key emerging markets including Russia and a fewer number of product approvals in the USA. Themanagement had given a revenue growth guidance of 18-20% for FY2016 and an EBITDA guidance of Rs1,750crore, which will be missed on account of currency headwinds in the emerging markets. The company will reporta 10-12% revenue growth in FY2016 with an EBIDTA of Rs1,550-1,600 crore. However, the management hasindicated that for future growth, the key focus areas will be dermatology, contraceptives and complex injectables.The growth would be mainly driven by the USA, EU and India, which are witnessing an exponential growth onaccount of launch of new products. Currently, it has three new chemical entities and four new biological entitiesin clinical trials, out-licensing potential.

Ipca Lab Ipca Laboratories has successfully capitalised on its inherent strength of producing low-cost drugs to tap theexport markets. But, it has recently got an import alert from USFDA for its Ratlam API facility and the formulationfacility at Indore SEZ. While the overhang related to the USFDA ban is unlikely to ease in near term, a respite isexpected from the shipment of two products to the US market, namely hydroxychloroquine sulfate and propranololhydrochloride (exempted from the import ban), and a clearance on its Ratlam facility by the WHO. This will helpthe company to resume a significant portion of the institutional business. The management is confident of improvingthe export performance in the subsequent quarters as HCQS supplies resumed in Q3FY2016 and the anti-malariapromotional business is expected to commence from Q1FY2017. However, the recent warning letter has furtherdelayed the approval timeline of the plants.

Lupin The expected ramp-up in the launch of oral contraceptives, ophthalmic products, branded franchise (with additionof in-licenced product-Alinia, Inspira Chamber VHC and Locoid lotion) in the USA and a robust pipeline of newlaunches in the domestic and overseas markets provide strong growth visibility for Lupin. The company hasrecently successfully launched Glumetza in the US market (180 days’ exclusivity) which shall reflect for twomonths in Q4FY2016 and in H1FY2017. However, we believe in the near term, the stock may remain range-bound till the USFDA concerns subside, especially since a few observations are repetitive in nature. Moreover, itis a little worrying that it is the second plant under the USFDA scanner in a short period of time. We remainfocused on the Goa plant and the outcome of the 483s issued there in March 2016 and July 2015, given that it isa large source of Lupin’s pipeline and any delay in product approvals could hurt the earnings forecast. Productapprovals from this plant would be a monitorable.

Sun Pharma The combination of Sun Pharma, Taro, Dusa Pharma, the generic business of URL Pharma and the recentlyacquired Ranbaxy offers an excellent business model for Sun Phaarma. However, the integration process withRanbaxy is set to affect the profitability in short term. Also, the USFDA’s adverse observation report (Form-483)on its Halol (Gujarat) facility creates a major overhang. However, the management maintains its aim to achieve a$250-mn synergy from the merger of Ranbaxy by FY18. With a strong cash balance, it is well positioned tocapitalise on the growth opportunities and inorganic initiatives.


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Torrent Pharma A well-known name in the domestic formulation market, Torrent Pharmaceuticals has been investing in expandingits international presence. With the investment phase now over, it should start gaining from its internationaloperations in the USA, Russia and Brazil. Better field force productivity, focus on developed market and strongerbalance sheet would result in a sustainable earnings growth. It has recently acquired 30 key brands of ElderPharma for Rs2,000 crore which is a strategic fit in long run. The company has proposed to raise funds up toRs10,000 crore through a mix of equity and debt instruments, part of which may be used for inorganic initiatives.

Building materialsGrasim Grasim is better placed compared with the other large players in the cement space due to its strong balance sheet, comfortable

debt/equity ratio, attractive valuation and diversified business. The full ramp-up of Vilayat plant (increasing capacity to804,000 tonne) is likely to aid VSF volumes going ahead, though prices may soften in the near term. Further, the mergerof ABCIL and expansion in caustic division are likely to maintain a strong performance in chemical division. On thecement front, the company expects demand to pick up in the near term while a slow execution of government projects andsurplus inventory remain concern areas.

The Ramco Cements The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from the capacity additioncarried out ahead of its peers in the southern region. In certain key markets of The Ramco Cements like Telangana,Maharashtra and Andhra Pradesh, the demand for cement is getting affected by the scarcity of available water forconstruction. The water levels in the 31 reservoirs in south India stand at just 17% of its storage capacity while partsof Maharashtra are already whirling under acute water crisis. Consequently, we see very limited scope of revival inretail cement demand for the above regions which can adversely affect Q1FY17 earnings.

Shree Cement Shree Cement’s cement grinding capacity has grown to 18.2mtpa which will support its volume growth in thecoming years. It has a power plant with capacity of 300MW entirely for merchant sale which is expected tosupport its revenue growth going ahead. Thus, a volume growth of the cement division and the additional revenueaccruing from the sale of surplus power will drive the earnings of the company.

UltraTech Cement UltraTech Cement is India’s largest cement company with approximately 66.3mtpa cement capacity. The easternregion has seen a robust growth in infrastructure and housing demand while the other regions have seen infrastructurespending only with no major improvement in housing and rural demand. The management has guided for a 7-8%demand growth for FY17 driven by infrastructure spend and revival in retail demand after a good monsoon.However, the uncertainty over cement price and increase in price of pet coke (trading with upward bias, Q2FY17onwards may feel the impact) will be the key monitorable for FY17. However, cost efficiency (impact of newgrinding and waste heat recovery) and base effect may lead to better operating performance for UltraTech.

Discretionary consumption

Century Plyboards Century Plyboards is a leading player in the organised plywood industry with a market share of 25%. A strong growthin the sector, Century’s premium positioning and brand equity strength, and the impending GST roll-out would enableit to post a revenue growth (CAGR) of 16.5% over FY14-17. On the back of a revenue growth and better absorptionof fixed costs, the earnings are likely to grow at a much stronger rate of 25% CAGR over FY14-17. It is a qualityconsumer play in a niche growing segment. Its robust return ratios and strong growth potential make us positive onthe stock. We have a Buy rating on it with a price target of Rs215.

Cox & Kings: Cox & Kings is an integrated player with a strong presence in the global leisure travel segment and the educationtourism segment in Europe. It has 30% market share in the global outbound tourism market and a market leaderin education tourism in the UK. An improving global macro environment (conducive to travel & tourism industry)and the company’s focus on de-leveraging its balance sheet will help it to achieve a double-digit earnings growthin the medium term. Hence, we recommend a Buy on it with a price target of Rs300.

Info Edge (India) Info Edge is India’s premier online classified company in the recruitment, matrimony, real estate, education andrelated service sectors. Naukri is a quality play on the improving macro environment and is directly related to theGDP growth and Internet/mobile penetration. Thus, it can grow consistently at over 20% for the next few years.We expect Zomato business’ growth to extend in the coming years, with better integration of services and increasingmonetisation opportunities. Zomato’s online ordering services are currently available for around 12,000 restaurantpartners and it expects to take the count to more than 20,000 in FY2016. Going ahead, other investee ventures,like www.meritnation.com, www.policybazaar.com, www.mydala.com and www.canvera.com, are also likely togain from the ongoing e-commerce boom in India.

INOX Leisure INOX Leisure Ltd (ILL), India’s second largest multiplex operator with 107 properties and 420 screens across 57cities accounting for about 23% of the multiplex screens in India, is scripting a blockbuster growth story througha mix of inorganic and organic expansion plan to scale up the total screen count to 688 screens over the next 24-30 months. The ILL mega show is supported by an improving content quality in the Indian mainstream andregional cinema with its movies regularly hitting the Rs100-crore or Rs200-crore box-office collection mark. Webelieve ILL with its strong brand and extended reach is well poised to leverage the opportunity in India’s under-penetrated multiplex sector.

KKCL Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, hascreated a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is aheadof its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled witha robust balance sheet make us positive on the company.


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KKDL KKDL Ltd (erstwhile Kamala Dials and Devices) is present in the watch manufacturing business and has a strongpresence in the luxury watches retail business through subsidiary, Ethos. The watch business generates steady revenuesand cash flow with minimal capex, as no capacity is likely to come on stream and the utilisation levels are expectedto improve. The high-end retail watch business “Ethos” provides a strong growth opportunity in terms of revenuegrowth via its online venture wherein it generates leads that translate into lower customer acquisition cost and betterfixed cost management that would result in robust margin improvement and strong profit growth. This unique high-growth potential business along with the steady manufacturing business that generates free cash is attractively pricedcurrently and offers significant returns over the medium to long term. We put a Buy rating on the stock, valuing itusing the SOTP method to arrive at a price target of Rs365.

Orbit Exports Orbit Exports (Orbit) is a leading manufacturer and exporter of novelty fabrics exporting its products to over 32countries. It is a recognised star export house and operates in the niche area of high-end fancy fabrics, which are mainlyused by designers in women’s fashion apparels. A strong OPM profile has enabled it to earn higher returns averagingat 21% in RoCE and at 33% in RoE over the last three years. Given the strong financials, niche capabilities and avigilant management, Orbit is well poised for a strong earnings growth.

Raymond Raymond is present in the fast-growing discretionary & lifestyle category of branded textiles and apparels. Withgrowing incomes, rise in aspirations to lead a luxurious life, greater discretionary spending and favourabledemographics, the segment of branded apparels & fabrics presents a good growth opportunity and Raymond withits brands and superior distribution set-up is very well geared to encash the same. Any development with regard tothe Thane land in the form of either joint development or disposal would lead to value unlocking and providesignificant cash to the company.

Relaxo Footwear Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mind-recall brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investmentopportunity due to its growing scale, strong brand positioning and healthy financial performance.

Speciality Rest. Speciality Restaurants is a leading player in the fine-dining space with a portfolio of well-established brands suchas Mainland China and Sigree. It is a good proxy on the Indian consumption story as several factors such asdemographics, increasing disposable income and the trend of nuclear families are playing in its favour. Given theslow pace of growth of consumer discretionary spending and pressure on the operating profit margin due to theaddition of new stores, we maintain our Hold rating on the stock.

Thomas Cook (I) Thomas Cook India Ltd (TCIL), owned by the legendary value investor Prem Watsa, is an integrated leisure traveland human service management company in India. The improvement in the domestic and global macro environmentsprovides a huge growth opportunity in the Indian leisure and travel industry. Quess Corp (its human resourcemanagement business) provides exposure to the fast growing HR, office management and technology solutionsbusiness. Moreover, we see a turn-around in the financial performance of Sterling. The recent stock price correctioncoupled with the improving financial health of Sterling Resorts, visibility in Quess Corp business and expansion inthe OPM and earnings, provide an opportunity to re-enter the stock. Hence, we maintain Buy with a price targetof Rs255.

Wonderla Holidays Wonderla Holidays Ltd (WHL) is the largest amusement park company in India with over a decade of successfuland profitable operations. It owns and operates two amusement parks under the brand name Wonderla in Kochiand Bengaluru, and is coming up with a third park in Hyderabad (to be operational by Q1FY17). With a steadyimprovement in footfalls, the Hyderabad park getting operational in Q1FY17, a strong growth in the non-ticketrevenues (F&B and product sales) and an 8-10% increase in the annual ticket price, WHL’s revenues are expectedto grow at a CAGR of 30% over FY15-18. Its OPM of 44-45% is better compared with some of the matureinternational parks.

Zee Entertainment Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainmentcompanies. It has a bouquet of more than 34 channels across Hindi, regional, sports and lifestyle genres. For FY16,the management has indicated that the margin profile will be maintained at around 25%. The management alsoindicates a better operating environment in terms of both advertisement revenues and subscription revenues. On theadvertisement side, the management expects to exceed the industry’s low-teen growth in FY16. The subscriptionrevenue will also benefit from the phases III and IV of the digitisation process (will be more visible in FY17 and FY18).

Diversified/Miscellaneous

Aditya Birla Nuvo We believe that post-demerger of the fashion vertical, Madura and Pantaloons from itself, ABNL will derive significantvalue from its financial services business offering investors an opportunity to participate in diversified growth financialsegments like life insurance, asset management and NBFC along with other financial businesses. ABNL continues tohold a 24% stake in Idea Cellular along with an exposure to the manufacturing vertical. In the wake of strongcompetitive headwinds in the telecom sector (emanating from Reliance Jio’s entry, to high-cost spectrum auctions andinability of the players to pass on the cost to the customers in the form of higher tariffs), we have adjusted IdeaCellular’s estimates and valuation (now valuing it at 5.8x FY2017 EV/EBITDA, with enhanced debt). This has resultedin a downward revision of our price target to Rs1,200 per share.


Bajaj Holdings Bajaj Holdings & Investment Ltd (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby itsmanufacturing business was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business consisting of thewind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and properties,assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing and strategic ones, now remainwith BHIL. BHIL is a primary investment company focused on new business opportunities. It holds more than 30%stake each in BAL and BFS. We have a Buy recommendation on the stock with a price target of Rs1,815.

Bharti Airtel Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industryas well as the company focusing on the quality of revenues rather than volume, better times can be expected aheadfor the sector and hence the company. We remain optimistic about the company.

BEL Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, stands to benefit fromthe enhanced budgetary outlay for strengthening and modernising the country’s security. The “Make in India”initiative of the government will support the earnings growth in the coming years, as it is the only player with strongresearch and manufacturing units across the country. The company’s current order book of around Rs21,648 croreprovides revenue visibility for the next three to four years.

GDL With its dominant presence in the container freight station segment and recent forays into the rail freight and coldchain businesses, Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cowwhile its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largestplayers in the CFS business and has also evolved as the largest player in the rail freight business as well as the coldstorage business. The proposed capex for a.ll the three segments will strengthen its presence in each of the segmentsand increase its pan-India presence.

Max India Max India has demerged into three different entities of which Max Financial Services will hold Max Life Insurance(new Max India will hold Max Healthcare, Max Bupa Health Insurance and Antara businesses). Max Life Insurance(held by Max Financial Services) is among the leading private sector insurers, has gained the critical mass andenjoys among the best operating parameters in the industry. As the insurance sector is showing signs of stabilisation,the company’s favourable product mix and a strong distribution channel will result in a healthy growth in thepremiums and profits.

PI Inudstries PI Industries (PI), a leading agro-chemical company, has a differentiated business model with focus on the fast-growing custom synthesis and manufacturing (CSM) business, which contributes 60% of its revenues. To sustainthe growth momentum, the company has expanded its manufacturing capacity in Jambusar at a cost of Rs300crore and the new capacity would be commissioned in H2FY2016. The commissioning of the Jambusar facilityand the launch of new products in the agro-chemical segment will help the company to achieve a revenue CAGRof around 17% and earnings CAGR of around 24% over FY2015-18. On the other hand, the margins are expectedto improve by 225BPS over the next three years. PI is one of the few agro-chemical companies that have a uniquebusiness model and are an example to the other chemical companies. We have valued the company at 25x FY2018Eearnings. We initiate coverage on PI with a Buy recommendation and price target of Rs800.

Ratnamani Metals Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. In spite of the challenging businessenvironment due to increasing competition, the stock is attractively valued. The management has maintained a strongoutlook on the potential opportunities in the oil & gas sector and inter-connection of the rivers across the country.

Supreme Ind Supreme Industries is a leading manufacturer of plastic products with a significant presence across piping, packaging,industrial and consumer segments. We remain positive on its new launches of value-added products and capacityexpansion plans. However, the recent volatility in the prices of its raw materials (mainly polymers) amid a highlycompetitive environment is likely to limit the growth in the margin in the near term. Hence, while we remainpositive on its long-term structural story, we maintain our Hold rating on the stock.

UPL A leading global producer of crop protection products, intermediates, specialty chemicals and other industrialchemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to cropprotection products and post-harvest activities. A diversified geography and the recent acquisition of DVA AgroBrazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Itsrevenues are likely to grow at 12-15% and EBIDTA margin is expected to remain at 18-20% in FY17. It has alsostarted to focus on premium products in agro-chemicals and will slowly stop selling commodities and low-marginproducts. It has also started to focus on selling premium products and maintaining a strong balance sheet.


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