ValueGuide Jul2016

Value
Guide
July 2016
For Private Circulation only
www.sharekhan.com
Sun shines on markets this monsoon

Intelligent Investing
Regular Features
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Stock Updates
Sector Updates
Viewpoints
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Earnings Guide
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Top Picks
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MF Picks
Advisory
Technical view
Commodities and Currencies
F&O Insights
July 2016
Sharekhan ValueGuide
CONTENTS
EQUITY
From Sharekhans Desk

FUNDAMENTALS
June was going to be

a tough month. The
unexpected outcome
of UK referendum
resulting in Brexit
from the European
Union (EU) made the
investment climate all the more unfavourable for equities.
However, the equity markets across the globe seem to have
taken the Brexit shock in their stride quite remarkably baring
06
a sharp knee-jerk reaction on the day of the event.
Stock Updates
Sector Updates
Viewpoints
15 REGULAR FEATURES
23 Report Card
24 Earnings Guide
TECHNICALS
Nifty
DERIVATIVES
26 View
27
ADVISORY DESK
MID Trades
40 Derivative Ideas
40
FUNDAMENTALS
Crude Oil
Gold
Silver
Copper
Lead
28
29
29
29
29
Zinc
Nickel
Cotton
Jeera
Soya bean
29
30
31
31
31
TECHNICALS
Gold
Silver
Crude Oil
32 Copper
32 Jeera
32 Soya bean
33
33
33
FUNDAMENTALS
USD-INR
EUR-INR
34
34
GBP-INR
JPY-INR
34
34
TECHNICALS
USD-INR
EUR-INR
35 GBP-INR
35 JPY-INR
35
35
COMMODITY
RESEARCH BASED EQUITY PRODUCTS

Market Outlook
Top Picks Basket
Wealth Creator Portfolio
PMS DESK
7
10
14
WealthOptimizer PMS
36
ProPrime - Diversified Equity 37
ProTech - Index
Futures Fund
38
ProTech - Trailing Stops
39
CURRENCY
MUTUAL FUNDS DESK

Top MF Picks (equity)
42
Top SIP Fund Picks
43
4
I
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July 2016
REPORT CARD
EQUITY
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON JULY 05, 2016)

COMPANY
CURRENT PRICE AS ON PRICE

RECO
05-JULY-16 TARGET
52 WEEK
HIGH
LOW
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
1M
RELATIVE TO SENSEX
3M
6M
12M
AUTOMOBILES
Apollo Tyres
Ashok Leyland
Bajaj Auto
Gabriel India
Hero MotoCorp
M&M
Maruti Suzuki
Rico Auto Industries
TVS Motor
BSE Auto Index
BANKS & FINANCE
Allahabad Bank
Axis (UTI) Bank
Bajaj Finance
Bajaj Finserv
Bank of Baroda
Bank of India
Capital First
Corp Bank
Federal Bank
HDFC
HDFC Bank
ICICI Bank
IDBI Bank
LIC Housing Finance
PTC India Financial Services
Punjab National Bank
SBI
Union Bank of India
Yes Bank
BSE Bank Index
CONSUMER GOODS
Britannia NEW
Emami NEW
GSK Consumers
Godrej Consumer Products
Hindustan Unilever
ITC
Jyothy Laboratories
Marico
Zydus Wellness
BSE FMCG Index
IT / IT SERVICES
Firstsource Solution
HCL Technologies
Infosys
Persistent Systems
Tata Consultancy Services
Wipro
BSE IT Index
CAPITAL GOODS / POWER
Bharat Heavy Electricals
CESC
Crompton Greaves
Finolex Cable
Greaves Cotton
Kalpataru Power Transmission
PTC India
Skipper
Thermax
Triven Turbine NEW
Va Tech Wabag
V-Guard Industries
July 2016
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Buy
Reduce
156.2
92.3
2612.2
94.0
3111.1
1459.7
4173.4
40.4
306.4
19686.3
180.0
120.0
**
105.0
**
1580.0
4700.0
47.0
250.0
223.4
127.1
112.9
70.8
2720.0 2133.2
102.5
75.0
3226.0 2257.2
1484.0 1091.3
4790.0 3193.3
61.2
27.7
340.9
201.0
19990.8 15385.1
-1.9
-12.4
-1.1
10.9
-0.9
5.7
0.1
19.4
1.8
0.3
-10.7
-13.0
9.8
10.9
4.5
20.1
19.3
10.5
-4.6
12.1
1.0
1.9
10.3
9.7
24.9
21.7
-3.0
-7.1
8.7
13.5
-14.6
27.6
4.5
31.5
22.8
11.6
4.9
-0.2
11.7
4.3
-2.9
-13.3
-2.2
9.7
-1.9
4.6
-1.0
18.1
0.7
-0.8
-19.5
-21.5
-1.0
0.0
-5.7
8.3
7.6
-0.4
-14.0
1.1
-8.6
-7.9
-0.2
-0.8
13.0
10.0
-12.2
-16.0
-1.7
2.6
-12.9
30.1
6.6
34.1
25.2
13.8
7.0
1.8
13.9
6.4
Reduce
Buy
Hold
Buy
Buy
Reduce
Buy
Reduce
Buy
Buy
Buy
Hold
Reduce
Buy
Buy
Hold
Buy
Hold
Buy
76.7
539.7
8170.0
2314.7
159.5
110.4
616.8
44.8
59.0
1260.7
1165.6
245.1
76.8
498.8
40.0
114.0
223.5
134.6
1126.4
20647.4
44.0
590.0
**
**
180.0
75.0
625.0
30.0
60.0
1380.0
1312.0
250.0
58.0
558.0
55.0
125.0
251.0
**
1200.0
99.4
39.4
613.5
366.7
8281.9 4677.1
2399.7 1551.3
216.3
109.4
188.3
78.4
630.9
321.0
56.4
30.8
79.4
41.4
1372.4 1011.5
1195.0
928.0
321.0
180.8
95.7
47.3
526.0
388.7
52.3
29.7
180.6
69.3
291.9
148.3
222.7
104.0
1140.3
590.0
22068.7 15224.3
46.4
2.4
5.3
23.8
8.8
27.8
8.4
27.8
5.9
3.1
1.8
-1.6
13.8
5.0
11.9
50.5
4.7
14.4
4.3
1.5
43.4
28.3
15.9
31.7
10.3
20.5
45.8
14.9
40.4
20.5
13.2
13.5
10.7
7.2
14.6
44.3
22.5
8.1
34.4
18.3
18.9
33.7
32.9
20.7
13.4
0.4
52.2
8.8
14.3
9.7
13.2
1.3
-3.6
2.5
3.7
11.2
6.4
-0.5
65.4
14.3
-14.7
-5.9
46.6
31.9
2.9
-39.1
49.3
-13.4
-22.0
-2.3
10.0
-20.0
16.0
12.3
-9.7
-19.5
-18.3
-18.5
30.3
-3.0
44.8
1.3
4.2
22.5
7.6
26.4
7.3
26.4
4.8
2.0
0.7
-2.7
12.6
3.8
10.7
48.8
3.6
13.2
3.2
0.4
29.3
15.7
4.6
18.8
-0.5
8.7
31.4
3.7
26.6
8.7
2.1
2.3
-0.2
-3.4
3.4
30.1
10.5
-2.5
21.2
6.7
7.5
21.0
20.3
9.2
2.6
-9.2
37.7
-1.6
3.4
-0.8
2.4
-8.4
-12.8
-7.3
-6.2
0.6
-3.8
-10.0
49.6
3.4
-13.0
-4.0
49.5
34.5
5.0
-37.9
52.3
-11.7
-20.4
-0.4
12.2
-18.4
18.3
14.6
-7.9
-17.9
-16.7
-16.9
32.9
-1.1
Buy
Buy
Buy
Hold
Buy
Buy
Buy
Hold
Buy
2836.3
1125.7
6187.4
1661.8
890.2
243.6
303.7
271.8
793.4
8485.1
3550.0
1250.0
6650.0
**
980.0
280.0
360.0
**
915.0
2505.1
901.0
5366.5
1118.8
765.4
177.7
252.1
189.3
632.0
6782.2
0.5
6.7
7.9
5.6
3.5
2.1
3.7
5.1
2.9
3.3
4.0
17.9
4.6
20.9
8.0
18.7
0.5
8.7
8.8
14.2
-4.7
13.2
-5.2
29.8
13.2
22.5
-0.9
21.4
-6.4
15.0
1.3
-12.3
-0.4
34.9
1.3
19.5
2.4
24.2
-12.2
10.3
-0.6
5.5
6.8
4.5
2.4
1.0
2.5
3.9
1.7
2.2
-6.2
6.3
-5.6
9.0
-2.6
7.1
-9.4
-1.9
-1.9
3.0
-13.8
2.4
-14.3
17.4
2.4
10.8
-10.4
9.8
-15.3
4.1
3.3
-10.6
1.6
37.6
3.3
21.9
4.4
26.6
-10.4
12.5
Hold
Buy
Buy
Buy
Buy
Hold
48.9
738.4
1175.5
690.0
2485.3
565.0
11175.4
**
950.0
1430.0
820.0
2750.0
650.0
50.5
24.2
1006.0
706.4
1279.3
932.6
798.0
562.5
2770.0 2115.0
613.3
507.9
11927.5 10044.6
4.6
-1.3
-6.9
-7.8
-7.7
3.7
-5.1
45.0
-12.7
-0.9
-7.6
-0.6
1.4
-0.6
21.2
-11.7
11.5
8.3
3.8
2.7
4.3
51.9
-21.4
20.5
6.8
-5.5
3.2
6.3
3.4
-2.4
-7.9
-8.8
-8.7
2.5
-6.1
30.8
-21.3
-10.6
-16.7
-10.4
-8.5
-10.4
9.6
-20.2
0.8
-2.0
-6.1
-7.1
-5.7
54.9
-19.8
22.9
9.0
-3.7
5.3
8.4
Reduce
Hold
Reduce
Hold
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Buy
139.4
604.5
74.0
372.7
137.9
256.7
78.6
157.5
851.4
122.1
593.3
1417.9
115.0
**
65.0
390.0
160.0
290.0
90.0
190.0
**
130.0
650.0
1585.0
17.3
10.2
2.9
4.7
-0.9
2.3
10.9
13.4
11.1
9.6
-2.9
6.3
17.4
29.6
43.6
32.8
8.1
30.6
31.7
11.9
18.2
24.0
11.7
53.4
-9.0
27.4
14.7
47.4
3.3
8.8
22.3
-13.2
2.2
16.6
-10.5
54.2
-45.8
10.1
20.2
43.9
10.3
1.1
15.5
-6.4
-13.5
4.3
-23.9
58.0
16.0
9.0
1.8
3.5
-1.9
1.2
9.7
12.2
9.9
8.4
-3.9
5.2
5.8
16.9
29.5
19.8
-2.5
17.8
18.7
0.9
6.6
11.8
0.7
38.4
-17.7
15.2
3.7
33.3
-6.6
-1.6
10.6
-21.5
-7.5
5.5
-19.0
39.5
-44.7
12.2
22.6
46.8
12.5
3.2
17.8
-4.5
-11.8
6.4
-22.4
61.1
3435.0
1367.9
6800.0
1672.0
944.0
259.8
342.0
274.0
965.0
8686.3
290.0
624.3
76.9
380.8
162.6
291.8
82.9
219.9
1148.0
133.2
801.8
1470.0
90.2
404.6
39.2
201.0
112.6
160.0
50.1
116.0
690.0
87.5
408.8
780.0
EQUITY
REPORT CARD
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON JULY 05, 2016)

COMPANY
BSE Power Index
BSE Capital Goods Index
INFRASTRUCTURE / REAL ESTATE
Gayatri Projects
IL&FS Transportation
IRB Infra
Jaiprakash Associates
Larsen & Toubro
CNX Infra Index
BSE Real estate Index
OIL & GAS
Oil India
Reliance Ind
Selan Exploration Technology
BSE Oil and gas Index
PHARMACEUTICALS
Aurobindo Pharma
Cipla
Cadila Healthcare
Divi's Labs
Glenmark Pharmaceuticals
Lupin
Sun Pharmaceutical Industries
Torrent Pharma
BSE Health Care Index
BUILDING MATERIALS
Grasim
The Ramco Cements
Shree Cement
UltraTech Cement
DISCRETIONARY CONSUMPTION
Century Plyboards (India)
Cox and Kings
Inox Leisure NEW
Info Edge (India) NEW
KDDL
KKCL
Orbit Exports NEW
Raymond
Relaxo Footwear
Speciality Restaurants
Thomas Cook India
Wonderla Holidays
Zee Entertainment Enterprises
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
Bajaj Holdings
Bharti Airtel
Bharat Electronics
Gateway Distriparks
Max Financial
PI Industries NEW
Ratnamani Metals and Tubes
Supreme Industries
UPL
BSE500 Index
CNX500 INDEX
CNXMCAP INDEX
CURRENT PRICE AS ON PRICE

52 WEEK
RECO
05-JULY-16 TARGET
HIGH
LOW
2003.7
2137.9 1559.4
15431.3
18814.2 10934.9
330.9
64.0
195.3
5.3
1016.1
2204.1
1000.1
Buy
Buy
Buy
Hold
Buy
649.3
81.5
218.0
11.6
1576.1
2909.5
1566.4
730.0
110.0
300.0
**
**
769.2
152.0
272.2
14.9
1888.0
3430.2
1599.1
11.2
15.1
0.8
115.2
4.5
4.3
8.4
Hold
Buy
Hold
374.3
993.1
213.4
10095.0
400.0
1250.0
345.0
474.9
1089.8
302.0
10349.3
300.4
818.0
148.7
7987.3
4.6
3.4
1.5
7.7
Buy
Hold
Hold
Hold
Buy
Hold
Buy
Hold
771.0
507.0
334.2
1139.1
824.9
1562.9
774.5
1398.7
15791.5
885.0
581.0
400.0
1260.0
1096.0
1850.0
945.0
1525.0
891.5
748.0
454.4
1242.4
1262.9
2129.0
966.0
1699.8
18842.7
582.0
457.5
295.0
917.8
671.1
1280.0
704.0
1175.1
14418.9
Buy
Hold
Hold
Hold
4537.9
570.1
14882.1
3375.2
5195.0
**
**
3580.0
4697.8
589.0
15859.0
3600.0
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Buy
207.3
173.4
247.4
850.5
200.3
1814.1
250.3
460.2
490.5
97.3
223.7
399.1
462.0
215.0
250.0
285.0
1000.0
230.0
2360.0
375.0
520.0
575.0
115.0
255.0
450.0
470.0
Buy
Buy
Hold
Buy
Hold
Hold
Buy
Hold
Hold
Buy
1273.1
1620.4
365.9
1274.7
313.9
508.5
710.1
521.3
898.6
546.3
11140.3
7051.0
14122.9
1435.0
2100.0
425.0
1450.0
315.0
535.0
800.0
600.0
908.0
660.0
14.5
5.4
-1.4
47.0
31.4
16.4
28.1
1M
5.3
3.7
RELATIVE TO SENSEX
3M
6M
12M
2.3
-3.3
1.2
9.0
3.7
-12.5
-9.7
-9.2
-7.4
8.6
28.9
10.4
22.5
91.3
-40.7
-6.4
1.7
-13.3
-12.1
9.9
10.0
13.8
-0.3
112.8
3.3
3.2
7.2
3.2
-4.9
-11.1
32.5
18.5
5.0
15.5
-18.3
-17.8
-16.2
-1.8
16.6
-0.2
10.8
95.1
-39.5
-4.6
3.7
-11.6
-10.4
12.1
15.8
-4.8
21.9
11.2
-3.0
-1.5
8.6
7.9
-13.5
-0.5
-25.2
2.6
3.5
2.3
0.4
6.5
4.4
-14.1
9.9
0.3
-12.2
-10.9
-1.8
-2.4
-11.8
1.5
-23.7
4.7
-1.0
9.8
7.5
-2.2
7.5
15.4
5.3
1.7
6.5
1.4
1.6
7.4
10.8
7.1
9.7
-4.1
1.0
5.2
-9.2
-19.3
12.9
0.7
-5.5
-3.6
-0.7
0.9
-1.3
5.6
-20.2
-5.3
20.0
-19.3
-12.9
-11.8
8.5
-5.4
-2.1
8.6
6.3
-3.3
6.3
14.1
4.2
0.6
5.3
-8.6
-8.4
-3.1
-0.1
-3.4
-1.1
-13.5
-8.9
-5.1
-17.8
-27.0
2.1
-8.9
-14.5
-12.8
-10.2
-8.8
-10.7
7.7
-18.6
-3.4
22.4
-17.7
-11.2
-10.1
10.7
-3.5
3233.0
291.0
9350.0
2579.0
5.2
7.7
10.5
1.7
16.4
36.5
25.7
8.1
27.9
48.9
41.4
27.1
28.0
66.5
41.5
7.6
4.0
6.5
9.3
0.6
5.0
23.1
13.3
-2.5
15.7
34.7
27.9
15.0
30.6
69.8
44.3
9.7
219.4
317.0
276.3
938.0
367.0
2320.0
495.0
518.9
615.0
172.4
234.9
430.4
469.8
135.5
140.1
170.0
688.1
162.0
1603.3
207.1
350.0
357.7
80.0
165.0
245.0
346.7
25.7
11.8
17.2
6.9
2.6
2.9
12.4
-3.8
4.4
15.6
22.9
1.0
-3.2
21.5
-3.4
21.3
10.9
5.8
3.5
-0.4
16.3
-3.5
15.6
18.7
5.4
16.5
24.0
-28.9
4.1
4.0
-40.8
-14.8
-32.5
12.9
-3.9
-24.9
10.7
5.0
7.8
6.4
-36.3
38.0
-3.6
-31.1
-8.3
-42.8
-8.8
-13.4
-30.7
-6.5
55.3
22.6
24.3
10.6
15.9
5.7
1.5
1.7
11.2
-4.8
3.3
14.3
21.6
-0.1
-4.3
9.6
-12.8
9.4
0.0
-4.6
-6.7
-10.2
4.9
-13.0
4.2
7.0
-5.0
5.1
12.2
-35.7
-5.8
-5.9
-46.4
-23.0
-39.0
2.1
-13.1
-32.1
0.1
-5.0
-2.5
8.5
-35.0
40.8
-1.7
-29.8
-6.5
-41.7
-7.0
-11.7
-29.4
-4.7
58.4
25.0
1300.0
1747.8
452.5
1416.9
378.4
564.7
739.9
700.0
1004.0
617.0
11438.2
7233.8
14237.6
684.3
1310.0
282.3
984.0
205.6
302.8
495.4
387.0
520.0
342.0
9012.0
5717.0
11190.4
19.9
4.3
4.1
4.3
2.1
24.9
3.0
6.8
-2.1
-6.8
2.7
2.7
5.8
51.2
12.4
9.7
10.2
17.9
42.9
25.6
20.2
14.8
20.8
11.8
11.9
11.0
19.5
-1.3
12.7
-1.6
0.7
25.0
3.5
2.4
29.7
34.0
10.2
10.3
8.3
40.3
11.1
-15.4
11.2
-5.2
24.2
6.6
-7.4
34.1
2.1
1.4
1.5
6.5
18.6
3.2
2.9
3.2
1.0
23.5
1.9
5.7
-3.2
-7.8
1.5
1.5
4.6
36.4
1.4
-1.1
-0.6
6.3
28.9
13.3
8.4
3.5
9.0
0.8
0.9
0.1
8.1
-10.7
2.0
-11.0
-8.9
13.1
-6.3
-7.4
17.3
21.2
-0.3
-0.2
-2.0
43.1
13.3
-13.7
13.4
-3.3
26.6
8.7
-5.5
36.8
4.1
3.4
3.5
8.6
In Top Picks basket
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
6.4
13.4
6.9
-0.8
4.8
20.9
14.7
-14.2
** Price target under review
July 2016
from sharekhans desk
FROM SHAREKHANS DESK
July 2016

June was going to be a tough month. The unexpected outcome of UK referendum resulting in
Brexit from the European Union (EU) made the investment climate all the more unfavourable
for equities. However, the equity markets across the globe seem to have taken the Brexit
shock in their stride quite remarkably baring a sharp knee-jerk reaction on the day of the event.
Back home also, the Rexit and Brexit jitters failed to reverse the markets uptrend. The
benchmark Indian stock indices continued to rise, with much better activity in the broader
markets (B group stocks). Even the Indian Rupee has stabilised post the sharp reaction to
Brexit initially.
The calm attitude of investors seems to stem from the reaction of major central banks. The
leading central banks of the world are expected to keep the liquidity tap open to support the
global economy and ease risk aversion. More importantly, the US Federal Reserve is not expected
to move ahead with incremental policy rate hikes now. In fact, a section of media is speculating
a possible liquidity infusion through a fresh quantitative easing (QE) program by the Fed. On
the other hand, the entire process of UKs exit from the EU could take a couple of years.
Therefore, there would be enough time for the global financial markets to adjust to the changing
situation. We keep our fingers crossed!
Domestically, the sentiments have been further boosted by the onset of the south-west monsoon,
growing possibility of GST Bills passage (and more follow-up reforms) and the early signs of
recovery in corporate earnings.
The progress of the monsoon has been slightly delayed and the rainfall has been a tad deficient
so far in June. But, the silver lining in the dark cloud is that the overall monsoon season is
expected to be better this year after two back-to-back drought years. If indeed monsoon turns
out to be as anticipated, the rural consumption is likely to improve in the next few quarters.
The parliaments monsoon session also assumes significance. The GST Bill will once again be in
focus. The government is hopeful of the passage of the GST Bill in the monsoon session. The
NDA does have slightly better numbers in the Rajya Sabha following the recent election in the
Upper House. There are also indications that a number of regional parties have broken ranks
with the Congress on the issue and are willing to extend their support to the GST Bill. Still, it
will not be a walk-in-a-park for the government to secure the passage of the GST Bill. The
Constitution (One Hundred and Twenty Second Amendment) Bill 2014 (better known as the
GST Bill) was moved in the Rajya Sabha in August 2015 after being passed in the Lok Sabha.
Corporate earnings for the April-June quarter will start trickling in shortly and it will be
interesting to see if the improvement seen in Q4FY2016 results is sustained or not. Hopefully,
the consumer demand will have likely revived amid better prospects for monsoon and higher
disposable income from the implementation of the Seventh Pay Commission recommendations.
According to the RBIs bi-annual Financial Stability Report (FSR), the performance of the
corporate sector improved in the past year as the number of leveraged companies fell and the
amount of debt in companies' books also declined.
On the other hand, banks earnings, especially that of the public sector banks (PSB), will be
very keenly examined amid ongoing worries about asset quality stress. A significant part of the
restructured loans were classified as Non Performing Assets (NPAs) in the last two quarters.
With the government looking to be slowly but surely getting into a groove from policy-making
standpoint, the markets are likely to reflect the overall optimism. If things start to fall into place
from the domestic macro-economic perspective, the retail investors should take full advantage
of it and pursue long-term investment in equities. We at Sharekhan are always more than happy
to help our investors to build wealth and meet their long-term financial objectives.
EQUITY
MARKET OUTLOOK
FUNDAMENTALS
MARKET OUTLOOK
JULY 07, 2016
Resilience or exuberance
Climbing wall of worries: Contrary to expectations, the benchmark
indices have done fairly well to tide over the uncertainties created
by two recent events - Rexit and Brexit. Notwithstanding the
knee-jerk reaction post the unexpected developments in the UK
(that threatens the future of European Union and global economic
growth), the equity markets globally recovered quickly on hopes of
more liberal stance by central banks (US Federal Reserve is likely
to postpone hike in interest rates). Moreover, the eventual divorce
of the UK with the EU is likely to take couple of years to formalise,
and therefore, gives enough time for the markets to adjust to the
changing environment.
banks, NBFCs) have performed much better than the benchmark

indices, whereas the global economy linked sectors like metals,
energy, IT services etc have lagged considerably. The movement
has largely been in line with our expectations and recommendations
given in our previous market outlook reports. We do not expect
the trend to change materially over the next 6-12 months, although
we do see certain pockets like fertilisers, agri inputs and other rural
demand led sectors to relatively outperform the indices and other
sectors. In terms of indices, we believe that further re-rating would
require better-than-expected uptick in corporate results in
Q1FY2017 and some further progress on the reforms front. In the
meantime, the benchmark indices could consolidate around the
current level with leadership from select sectors (as indicated above)
and increased activity in the broader markets.
Nifty at 8300 again; but better placed now: Nifty has regained the
8300 level mark after a gap of close to 18 months, since it first
scaled the 8300 mark. During this period, the domestic macro
situation has improved considerably with the current account deficit
(CAD) and inflation under tight control, the policy rates are down
by 150BPS (10-year bond yield is down by 85BPS), and corporate
earnings set to grow at a healthy rate post three years of sluggishness.
The domestic consumption demand is set to pick up on the back of
a good monsoon and higher disposable income in urban areas as a
result of the implementation of the Seventh Pay Commission pay
hikes to millions of government employees. At the same time, the
valuations are largely at the same level (20x based on last 12 months
earnings of Nifty/Sensex companies) and much more comfortable
on one-year forward earnings estimates.
SENSEX PE (ON ONE-YEAR FORWARD EARNINGS ESTIMATE; BLOOMBERG

CONSENSUS)
Domestic liquidity situation and policy reforms in forefront now:

In the coming months, the Reserve Bank of Indias (RBI) focus would
be on managing liquidity at a comfortable level to enable
transmission of lower policy rates to borrowers/end users. The RBI
is using the open market operations (OMO; buying government
bonds to infuse liquidity in the financial system). It has already
pumped in close to Rs80,000 crore and another Rs75,000 crore of
OMO would be taken up to meet liquidity needs arising from
collections from tax amnesty scheme (roughly Rs50,000-Rs75,000
crore) and the FCNR outflows from September (redemption of
foreign currency bonds issued in September/October 2013). On the
other hand, the expectations of possible passing of the GST Bill in
parliament are running high now (especially post recent
announcement of hike in FDI limits across various sectors).
Source: Bloomberg
Nifty crosses 8300 again!

Nifty surged past 8300 mark after a gap of 18 months (it had
surpassed 8300 for the first time in late October 2014). What has
changed since then? And why it is important to look at it given the
general pessimism and caution emerging due to global headwinds?
Key observations:
Its all local; global-linked sectors underperform: The Nifty is flat
but robust gains have been witnessed in the Bank Nifty, FMCG
Index, Media Index, Auto Index (largely interest rate sensitive and
consumer stocks) and also broader market (CNX Midcap and CNX
SmallCap indices registered 7.5-13.5%). The domestic demand could
improve further on account of various factors like implementation
of 7th Pay Commission hikes and increased government spending
towards the rural sector. Further, monsoon forecast from various
Consumer and rate-sensitive domestic plays likely to sustain

leadership: In the past 18 months, consumer-centric (staples and
discretionary; FMCG, media) and rate sensitive sectors (auto, private
July 2016
MARKET OUTLOOK
EQUITY
agencies has been good. This could further ramp up rural incomes
and consequently overall rural demand. Hence, sectors like FMCG,
Auto and Consumer Durables could continue to perform well despite
global headwinds. Global economy linked sectors like Energy, Metals
and IT underperformed during the period. Prices of base metals and
steel have been on a decline, which has led to the underperformance
of metal companies. Lower crude oil prices have been the primary
reason for the sub-par performance of energy companies. The IT
sector has been going through a big transition phase with increasing
investments in digital technology keeping margins in check and
resulting in volatility in earnings.
FUNDAMENTALS
volume of oil imports and any reversal in the commodity cycle could
create a negative impact.
CURRENT ACCOUNT DEFICIT (AS % OF GDP)
PERFORMANCE OF VARIOUS SECTORAL INDICES
Source: Bloomberg, MOSPI
INFLATION RATE (%)
Source: Bloomberg
And rightly so; policy rate down by 150BPS; 10-year yield down
by 85BPS: In the period, the RBI has reduced the repo rates by
150BPS that has led to 85BPS decline in the 10-year bond yield.
The transmission is more visible in short-term rates that have come
down by 100-120BPS in the same period. Despite 150BPS rate cut
by the RBI, the banks have not passed on the complete benefit to
consumers, as overall funding costs have not declined at the same
pace. However, banks now have started to move towards the MCLR
regime (Marginal Cost of Funding), which could lead to faster
transmission of policy rates. This could keep the overall interest
rate environment benign.
Source: Bloomberg
Inflation (consumer inflation; CPI) has been largely stable in 4-6%

range. A low base effect and agri-inflation (two years of drought
and weak rabi crop) are likely to limit further rate cuts to 25BPS
(some section of market expect 50BPS cut) in policy rates. Liquidity
management is key to monetary policy transmission into the banking
system from here on.
SOFTENING INTEREST RATE SCENARIO
Early signs of revival in economy: The leading economic indicators

like diesel consumption and auto sales volumes, along with decent
corporate results in Q4FY2016 point to tentative signs of revival in
economic activity. However, the external environment (global
demand and trade) could limit the economic upswing and pose a
risk. Indias core sector output has shown decent growth (except
for steel and oil segment; externally linked). However, sectors like
Electricity, Cement and Fertilisers have shown improvement in the
overall production.
AUTOMOBILE SALES (000)
Source: Bloomberg, RBI
CAD under control but inflation inches up and could limit further
rate cuts: The Current Account Deficit (CAD) has been under control
(0.1% for Q4FY2016 and 1.1% for FY2016) helped by low crude
oil prices, decline in gold imports and relatively better FDI inflows.
With new FDI reforms, the government has paved the way for more
foreign investment inflows by increasing FDI limits in sectors like
Pharma, Civil Aviation, Defence, E-commerce etc. According to
the RBIs latest Financial Stability Report (FSR), the external sector
position remains strong, as indicators like CAD, BoP, Forex Reserves
and remittances have shown improvement. However, increasing
July 2016
Source: Sharekhan, Company Research
EQUITY
MARKET OUTLOOK
FUNDAMENTALS
of global risks. At the same time, the possibility of US interest rate

hikes has reduced considerably now. The extent of Brexit impact is
still uncertain. It could potentially put the UK into recession and
make recovery process difficult for already struggling Eurozone
economies. Also, possibility of other exits from EU cannot be ruled
out, which could have a significant impact on global trade. Asian
and emerging markets (EM) have shown an under-performance,
which could be a result of fund outflows due to global uncertainty.
However, Russian markets have performed well on account of
recovery in oil prices from extreme lows while its currency
depreciation has also been halted to some extent.
DIESEL CONSUMPTION (000 METRIC TONNE)
Seventh Pay Commission award Relatively lower hikes but

nonetheless provides much needed stimulus
Source: Sharekhan, Company Research
The central government has decided to implement the Seventh Pay

Commissions (VII CPC) recommendations on wages and pension.
But it is yet to implement hikes in allowances. Without the
allowances, the hike works out to 14.3%, but including the 63%
jump in allowances it works out to 23.5% increase in average
salaries.
Valuation: Comfortable despite better earnings outlook: On the

basis of last 12 months earnings, the Nifty/Sensex trade at close to
20 times the aggregate earnings (net profit) of companies in the
benchmark indices, which is exactly in line with the situation 18
months back. Thus, the markets have largely adjusted to downgrade
in earnings estimates. On one-year forward basis, the PE multiples
stand at around 17 times, which is better than October 2014, but
are building in a robust recovery in corporate earnings in FY2017/
FY2018.
COMPARATIVE % GROWTH IN MINIMUM PAY BETWEEN EARLIER PAY COMM.

REPORTS
SENSEX PE (BASED ON ONE-YEAR FORWARD EARNINGS ESTIMATES;

BLOOMBERG CONSENSUS)
Source: Seventh pay commission report
Quantum of payouts: As of now, it would mean an additional annual

payout of $11 billion (close to Rs72,800 crore) plus arears of $1.8
billion (around Rs12,000 crore) to be given to 11 million central
government employees (including public sector units and railways)
and pensioners. The same hikes would get implemented to around
9 million state government employees eventually.
Source: Bloomberg
Global environment remains uncertain: In October 2014, the

Chinese slowdown and interest rate hikes in the US created
uncertainty in the global markets. This time around, Brexit has
led to fears of possible disruption in Europe, adding to the long list
Substantial changes in government wages: On an average, the

government employees would earn close to Rs83,000 per annum
more. Including the hike in allowances, the average hike would
work out to Rs1,40,000 per annum for each employee. More
importantly, the salary of employees getting more than Rs1,00,000
per month would go up 127% and over Rs50,000 per month by
66% post the implementation.
GLOBAL MARKET PERFORMANCE SINCE OCTOBER 2014
Higher disposable incomes would boost demand for cars, consumer

durables, leisure, building materials (paints, plywood) and
consumer/retail finance.
Sharekhan Limited, its analyst or dependant(s) of the analyst might
be holding or having a postition in the companies mentioned in the article.
Source: Bloomberg
July 2016
EQUITY
SHAREKHAN TOP PICKS
FUNDAMENTALS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

Meanwhile, the Sharekhan Top Picks basket of select stocks
performed better than the benchmark indices, with a return of
2.6% (without taking into account the dividends). It was an allround performance, barring Ashok Leyland (which
underperformed due to weak May volumes). However, we
continue to have a positive view on Ashok Leyland due to the
current robust demand environment for commercial vehicles.
June saw volatility return to the domestic equity markets.

However, the benchmark indices (BSE Sensex and NSE Nifty)
managed to end the month with marginal gains of 1.2-1.6%
each despite two big negative developments in the form of
Rexit and Brexit. The Reserve Bank of India Governor Dr
Raghuram Rajans decision not to accept another term and move
back to academia after weeks of speculation jolted the markets
and the growing voices highlighting the need for extension of
his term. Globally, the outcome of the referendum on the UKs
membership of the European Union (EU) sent tremors across
the global financial markets. It also raises some doubts about
the future of EU as an economic bloc and its repercussions on
the global economy. The UK too could face economic uncertainty
after the so-called Brexit event.
We suggest only one change this month. Book profit in Havells

and replace it with Astral Poly, a leading player in the polymer
pipes segment. We expect the demand for PVC pipes to improve
and Astral Poly to be one of the key beneficiaries if the Goods
& Services Tax Bill is cleared in the monsoon session of the
parliament.
CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED)

1 month
3 months
(%)
6 months
1 year
3 years
5 years
146.8
Top Picks
2.6
10.0
7.9
9.7
121.5
Sensex
1.2
6.4
3.3
-3.8
37.4
43.8
Nifty
1.6
7.1
4.4
-2.0
39.8
47.8
CNX MIDCAP 100
3.9
8.3
3.1
4.3
83.9
65.7
ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)

CONSISTENT TRACK RECORD FOR OVER 7 YEARS
(TOP PICKS VS BENCHMARK
INDICES)
Sharekhan
(Top Picks)
YTD CY2016
Sensex
Nifty
CNX
MIDCAP
7.9
3.3
4.4
3.1
CY2015
13.9
-5.1
-4.1
6.5
CY2014
63.6
29.9
30.9
55.1
CY2013
12.4
8.5
6.4
-5.6
CY2012
35.1
26.2
29.0
36.0
CY2011
-20.5
-21.2
-21.7
-25.0
CY2010
16.8
11.5
12.9
11.5
CY2009
116.1
76.1
72.0
114.0
CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

APRIL 2009
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
NAME
Ashok Leyland
CMP*
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
99
25.3
18.6
14.7
19.9
24.5
28.2
120
22
471
54.9
35.6
27.4
13.0
16.8
18.0
540
15
Bajaj Finance
7,980
33.4
27.3
21.7
20.9
19.3
20.5
**
--
Bharat Electronics
1,268
22.3
20.5
17.3
20.9
18.0
18.3
1,450
14
Britannia Industries
2,760
40.7
32.9
27.1
54.1
48.9
44.5
3,550
29
653
30.4
25.8
21.0
22.4
22.3
22.7
780
20
1,255
25.8
21.4
17.5
18.3
18.9
20.0
1,300
899
47.0
40.1
33.4
103.7
114.2
110.4
980
IndusInd Bank
1,111
28.9
22.1
18.6
16.1
15.8
16.4
**
--
Maruti Suzuki
Astral Poly Technik
Dhanuka Agritech
HDFC Bank
HUL
4,185
27.7
22.5
17.7
17.0
18.2
19.9
4,700
12
Relaxo
500
50.0
38.5
29.4
20.8
20.5
23.7
575
15
Reliance Industries
969
10.5
10.3
8.8
11.2
10.5
11.0
1,250
29
*CMP as on June 30, 2016 # Price target for next 6-12 months
July 2016
** Under review
10
EQUITY
NAME
ASHOK LEYLAND
FUNDAMENTALS
SHAREKHAN TOP PICKS
CMP
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
99
25.3
18.6
14.7
19.9
24.5
28.2
120
22
Remarks: Ashok Leyland (ALL) is the second largest commercial vehicle (CV) manufacturer in India with a market share of 30% in the heavy
truck segment and an even higher share of 45% in the bus segment.
The medium and heavy commercial vehicle (MHCV) volume has shown double-digit growth over the last two years, led by improved
profitability of fleet operators and huge pent-up demand on a low base (due to earlier slowdown). We expect MHCV volume to remain
buoyant over FY2016-2017, driven by a gradual pick-up in the economic cycle, heightened road construction activity, new vehicle
launches and phase-wise implementation of the Bharat Stage IV norms across the country (leading to pre-buying).
ALL also has a strong presence in the overseas markets and continues to expand into newer geographies. The company expects
exports contribution to be around 25% of revenues over the next 3-5 years as against the current level of 10%. Additionally, ALLs
defence business is expected to get a leg-up due to the governments focus on indigenous manufacturing of defence products and
higher foreign direct investment (FDI) in the defence sector.
ALLs operating profit margin (OPM) has recovered from the lows on the back of operating leverage benefits and price hikes. Its OPM
is expected to expand further, given the sustained demand momentum. We expect ALLs balance sheet to get de-leveraged and the
return ratios to improve on the back of buoyant operating cash flows and minimal capex.
ASTRAL POLY TECHNIK
471
54.9
35.6
27.4
13.0
16.8
18.0
540
15
Remarks: Astral Poly Technik (Astral) is the leading player in the chlorinated polyvinyl chloride (CPVC; can hold both hot and cold temperature)
pipes market. It has also successfully created a unique brand in CPVC pipes segment through celebrity endorsements. Also, Astral
was the first one to directly connect with the plumbers to create awareness about their advanced piping systems.
Astral registered a CAGR of 40%+ in revenues as well as earnings over FY2005-2016, thanks to high-quality products and its innovative
marketing.
To attain the next leap of growth, Astral acquired two companies in the sealants and adhesives space in FY2015 - Seal IT Services
(operating in the UK) and Resinova Chemie (operating in India), respectively. With these acquisitions, Astral has widened its product
offerings, geographical presence and the distribution network. In FY2016, the company successfully synergised its existing pipes
operations with the two acquisitions, and now looks poised to grab a larger share of the construction material business in India.
Astral is likely to benefit from the governments schemes like Housing for all by 2022, development of 100 Smart Cities, Swacch
Bharat Abhiyan, which will drive growth for the piping and adhesives segments. We are expecting a CAGR of 28% and 44% in
revenue and earnings, respectively over FY2016-2018E amid expectations of a good monsoon and implementation of the 7th Pay
Commission recommendations.
BAJAJ FINANCE
7,980
33.4
27.3
21.7
20.9
19.3
20.5
**
--
Remarks: Bajaj Finance (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 that a strong growth in customer additions, its unique
cross-sell and up-sell capabilities and robust growth from newer products (rural finance, lifestyle finance etc) should drive a growth of
over 25% in the assets under management (AUM).
Despite strong loan growth, the asset quality remains among the best in the industry [gross non-performing assets (NPA) of 1.2% on
150-day past due (DPD) basis), which along with conservative provisioning adds to the comfort. BFL has already made provisions
based on the 90-DPD rule, ahead of the Reserve Bank of Indias (RBI) official timeline.
We expect BFLs earnings to grow at a compounded annual growth rate (CAGR) of 24% over FY2016-2018, resulting in return on
asset (RoA) and return on equity (RoE) of ~ 3.0% and ~20%, respectively. We have been positive on BFLs business model and strong
earnings performance. We have a Buy rating on BFL.
BHARAT ELECTRONICS
1,268
22.3
20.5
17.3
20.9
18.0
18.3
1,450
14
Remarks: Bharat Electronics (BEL) has received four licences since 2004 in the radar and wafers segments, where the company enjoys a
monopoly position. Further, the company can capitalize on a market opportunity size of Rs70,000 crore over the next 7-8 years in its
area of expertise.
BEL is planning to invest Rs1,500 crore over the next three years under its Make In India expansion and modernisation strategy. The
company 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 equipment. The likely increase in the private sector participation has
prompted BEL to diversify into areas of homeland security, smart cards, smart city elements and solar power plants, which have
tremendous growth potential, along with better operating profit margins.
BEL remains our preferred pick for defence play on account of its strong manufacturing and R&D base. Further, on the operational
front, good cost control, growing indigenisation and discipline in working capital management (improved in FY2016) and improving
export order book will aid earnings growth over FY2016-2018 (13.7% CAGR). We reiterate Buy with an unchanged price target (PT) of
Rs1,450.
11
July 2016
EQUITY
SHAREKHAN TOP PICKS

NAME
BRITANNIA INDUSTRIES
FUNDAMENTALS
CMP
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
2,760
40.7
32.9
27.1
54.1
48.9
44.5
3,550
29
Remarks: Britannia Industries (Britannia) is the second largest player in the Indian biscuit market with about 30% market share. It has chalked
out 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 into 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, underpinned by volume a growth of 10-11% (largely driven by enhanced distribution
reach and wider product portfolio). The OPM is expected to remain in the range of 14-15% on the back of benign input cost inflation
and better operating efficiency.
The company has a strong balance sheet with the free cash flow consistently improving over the past few years. Its return ratios have
also improved over the past few years and remained strong (upwards of 50%).
Under a new leadership, Britannia has been able to leverage and monetise its strong brand equity and leading market position in the
biscuit and snack segments. We believe that Britannia can sustain its fasterthan-industry growth rates owing to an improving distribution
reach, entry into newer categories and focus on cost efficiency. We have a Buy rating with a PT of Rs3,550.
DHANUKA AGRITECH
653
30.4
25.8
21.0
22.4
22.3
22.7
780
20
Remarks: Dhanuka Agritech (Dhanuka) is the second largest pan-India agrochemicals formulations company, with over three decades of experience
and a vast reach of 10 million farmers across India. The companys strong product portfolio of 80+ brands is marketed into the deepest
rural interiors with a distribution network of over 8,600 direct dealers (selling to 80,000+ retailers), providing it a distinctive edge over
competition.
Dhanuka launched 11 new products during FY2015-2016, which are expected to scale up significantly [especially Sempra (herbicide
for sugarcane and maize) and Cover (insecticide for paddy, sugarcane, pulses, soyabean)], as the country revives from below-normal
rainfall over the past teo years.
The company will be launching two new molecules under 9(3) registration (exclusive products) each year over the next 2-3 years,
along with 3-4 molecules under 9(4) each year, which is expected to propel its earnings momentum over FY2016-2018E.
Dhanuka has placed itself in a commanding position with strong product launches, increased capacity and deep rural penetration. We
expect its revenues to grow at a CAGR of 20% over FY2016-2018E. Dhanuka is likely to generate strong free cash flows (Rs200 crore
during FY2017-2018) and maintain high return ratios (above 20%) on the back of prudent expansion strategy and minimal capex.
HDFC BANK
1,255
25.8
21.4
17.5
18.3
18.9
20.0
1,300
Remarks: HDFC Bank has a strong presence in the retail segment (~50% of loan book), and therefore, it has been able to maintain a strong
growth in loans even as industry-wise credit growth remains tepid. Going ahead, with a recovery in the economy and improving
consumer sentiment, the banks loan growth will accelerate further, in turn driving the profitability.
Backed by a current account & savings account (CASA) ratio of over 40% and a high proportion of retail deposits, the banks cost of
funds remains among the lowest in the system, helping it to maintain higher net interest margin (NIM). In addition, the banks loan
growth is led by high-yielding products, such as personal loans, vehicle loans, credit cards, mortgages etc, which has a positive impact
on the NIM.
HDFC Bank maintains an impeccable asset quality and its NPA ratios are among the lowest in the industry. Given the banks stringent
credit appraisal procedures and insignificant exposure to troubled sectors, it is expected to maintain a robust asset quality.
HDFC Bank is well poised to tap the growth opportunities going ahead due to strong capital ratios, healthy asset quality and steady
revival 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 it to sustain the valuation premium that it enjoys vis--vis other private banks.
HUL
899
47.0
40.1
33.4
103.7
114.2
110.4
980
Remarks: Hindustan Unilever (HUL) is Indias largest FMCG company with strong presence in personal care, home care and packaged food
segments in India. The company is a market leader in the personal wash, detergent and shampoo segments in India.
Despite subdued demand environment, HULs volume growth stood at 6% in FY2016, up from 4% in FY2015 on the back of relevant
pricing actions and higher promotional spends.

We expect HULs volume growth trajectory to improve by 6-8% (from the current level of 4-6%) in the near to medium term, spurred by
the expected improvement in rural demand (in view of forecast of a better monsoon) and better urban demand (due to implementation
of 7th Pay Commission award and lower inflation). We expect HULs earnings to grow at a CAGR of 15% over FY2015-2018 owing to
higher volume growth and sustained product innovation.
With negative working capital and strong cash generation ability, the company has a strong balance sheet among its FMCG peers.
Also, return ratios continue to remain high (RoE and RoCE above 100% each).
Given the improved earnings visibility, strong cash flows and higher return ratios, we have maintained a Buy recommendation with a
PT of Rs980.
July 2016
12
EQUITY
NAME
INDUSIND BANK
FUNDAMENTALS
SHAREKHAN TOP PICKS
CMP
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
1,111
28.9
22.1
18.6
16.1
15.8
16.4
**
--
Remarks: IndusInd Bank is among the fastest growing banks (26% CAGR over FY2012-2016), having a loan book of Rs88,419 crore and 811
branches across the country. About 25% of the banks loan book comprises of vehicle finance, which is a high-yielding category and is
showing signs of recovery.
Given the aggressive measures taken by the management, the deposit profile has improved considerably (CASA ratio of 35%). Going
ahead, the bank would follow a differentiated branch expansion strategy (5% branch market share in identified centers) that would help
in ensuring healthy savings accounts and retail deposit growth.
IndusInd Bank has maintained its asset quality despite sluggish economic growth and higher proportion of vehicle finance in its loan
book. The banks asset quality is among the best in the industry, with total stressed loans (restructured loans + gross NPAs) forming
just 1.4% of the loan book.
A likely revival in the economy will further fuel growth in the consumer finance division and strong capital ratios will support future
growth plans. The stock should continue to trade at a premium valuation, underpinned by strong loan growth, high RoAs and healthy
asset quality. We have a positive outlook on IndusInd Bank.
MARUTI SUZUKI
4,185
27.7
22.5
17.7
17.0
18.2
19.9
4,700
12
Remarks: Maruti Suzuki India (Maruti) is Indias largest passenger vehicle (PV) manufacturer with a strong 47% market share. The company has
been able to gain market share over the last two years due to new product launches, vast distribution network (with an increased focus
on the rural markets) and a shift in consumer preference to petrol models from diesel models.
The recently launched premium hatchback Baleno has received a strong response, which will help Maruti to expand its market share
in the segment. Also, the company recently entered the compact sports utility vehicle (SUV) space with the launch of Vitara Brezza and
has received an encouraging response. Both the new products command a waiting period of 3-6 months each. Further, Maruti plans
to enter into the light commercial vehicle (LCV) segment which would further boost its topline.
Maruti is poised to reap the benefits of an increase in discretionary spending from the 7th Pay Commission pay-out. The commencement
of the first phase of the Gujarat plant with a 2.5 lakh capacity is scheduled in early FY2018. The management plans to double its sales
and premium distribution network (NEXA) in order to achieve its target of doubling the domestic volumes over the next five years.
RELAXO
500
50.0
38.5
29.4
20.8
20.5
23.7
575
15
Remarks: Relaxo Footwear (Relaxo) is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mindrecall brands, viz Hawaii, Sparx, Flite and Schoolmate. In Q4FY2016, Relaxo also added another brand called Bahamas to its product
portfolio.
Relaxo has a pro-active approach towards both, brand-building and capacity creation. It continues to rope in Bollywood celebrities to
build its brand and create a pull like FMCG players. This also bolsters the aspirational quotient of its brands. Even as the company is
creating strong consumer-centric and aspirational brands, it is not compromising on quality (Relaxodoes not believe in outsourcing).
Relaxo is in the process of building capacity for the future. Despite the current capacity (180 million pieces per annum to securegrowth
in the next three years), the company has bought a 15-acre land at Bhiwadi, Rajasthan to build additional capacity keeping in mind the
future demand.
A trong presence in the lucrative mid-priced footwear segment (through its leading brands like Hawaii, Flite and Sparx), integrated
manufacturing set-up, lean working capital requirement and a vigilant management put Relaxo in a sweet spot to cash in on the strong
growth opportunity unfolding in the footwear category (due to a shift from unbranded to branded products). We maintain our Buy rating
on Relaxo.
RELIANCE INDUSTRIES
969
10.5
10.3
8.8
11.2
10.5
11.0
1,250
29
Remarks: Reliance Industries (RIL) has a strong presence in refining, petrochemicals and upstream oil & gas exploration businesses. The
refining division is the highest contributor to its earnings. RIL is operating the refining division efficiently with a gross refining margin
(GRM) much higher vis--vis its peers in the domestic market due to its ability to refine more of heavier crude. RIL is likely to enjoy high
GRMs in the near to medium term in view of the softer crude oil prices. The exploration business remains weak due to low production
in the Krishna-Godavari-D6 (KG-D6) field and weak pricing of global fuel products.The capital employed and profit contribution of the
exploration business is also relatively low.
Moreover, the upcoming incremental capacities in the petrochemicals and refinery businesses would drive future earnings growth
substantially, as the downstream businesses are in the driving seat and contributing a lions share to the companys profitability and
cash flows.
We expect GRMs to remain healthy while new capacities would boost overall margins and profit performance. RIL is available at an
attractive valuation considering its size, strong balance sheet and healthy cash flows.
13
July 2016
EQUITY
WEALTH CREATOR PORTFOLIO
WEALTH CREATOR PORTFOLIO
FUNDAMENTALS
JUNE 30, 2016
Wealth Creator portfolio

Portfolio performance review
Objective: To build a balanced and actively managed portfolio of

quality companies that will help create meaningful wealth for
investors in the multi-year rally expected in the Indian equity market.
In addition to some bottom-up picks, the portfolio contains stocks
identified based on three key themes:
Policy push: Stocks from sectors benefiting from improvement

in the policy environment
Early gainers: Beneficiaries of an economic recovery (stocks from

auto, banking & financial services, logistic sectors)
Evergreen: Steady performers that provide stable and consistent

returns including urban consumption plays
Sharekhans wealth creator portfolio continues to outperform

broader indices with 9.8% returns (weighted average basis) as
against 2.4-5.0% increase in Sensex/Nifty.
No change was suggested in the folio in June 2016. Prices as on

June 30, 2016.
COMPARATIVE RETURNS
Particulars
Returns (as on June 30, 2016)

Since inception (August 21, 2014)
Wealth Creator folio (weighted average returns)
9.8%
- Large-cap (64%)
7.2%
- Mid-cap (36%)
14.5%
Sensex
2.4%
Nifty
5.0%
CNX Mid-cap
UPDATE ON WEALTH CREATOR PORTFOLIO
Sr No
Scrip
23.6%
Weights
Reco price (Rs)

30-June-2016
Price target (Rs)

March-19
Potential upside
126.8%
Large-caps (64% weightage)

1
Axis Bank
533
1210
Larsen & Toubro
1496
3800
154%
Maruti Suzuki
4185
8750
109.1%
Britannia
2757
5400
95.9%
IndusInd Bank
1111
1600
44.1%
Sun Pharmaceuticals
764
1650
116.1%
Tata Consultancy Services
2551
5100
99.9%
Tata Motors DVR
292
675
131.3%
PTC India Financials
38
112
195.5%
10
V-Guard Ltd
1408
2100
49.2%
11
Gateway Distripark
311
810
160.5%
12
IRB Infra
213
650
204.8%
13
Network 18 Media
44
135
204.4%
14
Gabriel India
94
200
113.7%
15
Century Plyboard
196
440
124%
16
Triveni Turbine
120
265
121.7%
17
Dhanuka Agritech
654
1150
75.9%
Mid-caps (36% weightage; 4% each)
* 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
July 2016
14
EQUITY
STOCK UPDATE
FUNDAMENTALS
ADITYA BIRLA NUVO

BUY
CMP: RS1,220
JUNE 30, 2016
Maintain Buy with a revised price target of Rs1,435
COMPANY DETAILS
Price target:
Rs1,435
Market cap:
Rs15,886 cr
52-week high/low:
Rs1,250/685
NSE volume (No of shares):
1.4 lakh
BSE code:
500303
NSE code:
ABIRLANUVO
Aditya Birla Nuvo (ABNL) has appreciated by 46% over the last three months, with the
stock spurting by 22% in the last 45 days alone. Despite the strong rally, we believe the
company represents significant value on account of its strong position in the financial
services vertical and re-rating potential. Therefore, we maintain our Buy rating with a
revised price target (PT) of Rs1,435.
Sharekhan code:
ABIRLANUVO
KEY POINTS
Free float (No of shares):
5.6 cr
Re-rating in the financial services, insurance businesses: ABNL's financial services vertical
houses a full bouquet of financial businesses, ranging from Insurance, Asset
Management, NBFC (lending), Housing Finance to Wealth Management. The company
enjoys significant market share, with top five positioning in each of the businesses.
Recently, there has been a big consolidation in the life insurance industry. The recent
Max India- HDFC Life merger has happened at 2.8x FY2018 Embedded Value (EV),
which is at a significant premium to our ascribed valuation of 2.5x FY2015 EV for
ABNL's insurance business. Therefore, we believe that there is a significant re-rating
potential for the company's insurance business. Further, the company's NBFC business
also calls for a higher multiple than what we presently ascribe [we have ascribed 1.8x
FY2016 price to book value (P/B)] versus the 3-4x FY2016 P/B multiple of its peers.
Maintain Buy with a revised PT of Rs1,435: We believe that ABNL has a balanced
bouquet of businesses, combining steady businesses (which throw cash consistently
and have leadership position in their respective markets, viz insulator, fertilisers, textiles,
insurance and asset management) with a growing presence in high-growth segments.
We maintain our Buy rating. Our new PT for ABNL is Rs1,435.
SHAREHOLDING PATTERN
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
13.3
42.6
21.4
47.1
Relative to Sensex
12.2
32.0
17.2
49.7
Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article.
For detailed report, please visit the Research section of our website, sharekhan.com.
ASHOK LEYLAND
BUY
CMP: RS100
JUNE 22, 2016
Recent correction provides attractive entry point;
Maintain Buy
COMPANY DETAILS
Price target:
Rs120
Market cap:
Rs28,402 cr
52-week high/low:
Rs112/68
1.0 cr
BSE code:
500477
NSE code:
ASHOKLEY
Sharekhan code:
ASHOKLEY
141.21 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-4.0
3.7
10.7
50.4
Relative to Sensex
-7.6
-4.4
6.4
49.3

May 2016 sales blip due to elections in South; expect double-digit growth to resume
from June: Ashok Leyland's (ALL) MHCV sales grew by just 8% in May 2016 as
against double-digit growth clocked in the last two years. Also, ALL's May 2016 MHCV
sales came in sharply below expectations. However, the sales moderation in May 2016
was a temporary blip and was impacted by elections in South India. Typically, MHCV
sales tend to moderate during elections due to slowdown in the grant of new permits.
South India is the biggest market for ALL, contributing about 38% to its MHCV
volumes. We expect the company's sales to bounce back in June 2016 and more than
offset the loss in May 2016. ALL volumes are likely to grow by 31% YoY to 9,000
units in June 2016.
MHCV outlook robust; expect 15% CAGR over FY2016-2018: The MHCV industry
is in an uptrend, reporting 23% CAGR over FY2014-2016. Despite the healthy doubledigit growth in the last two years, MHCV industry volume is still 11% below the predowncycle level witnessed in FY2012. Further, favourable macro-economic factors
and traction in the overall manufacturing activity are likely to help drive double-digit
growth in MHCV volume over the next two years. ALL is a leading player in the
MHCV segment and would be a prime beneficiary of the expected uptick in MHCV
demand.
Earnings visibility strong; recent stock price correction good buying opportunity: ALL's
revenue is expected to witness 17% CAGR over FY2016-2018. Also, margins are likely
to improve due to the advantage of operating leverage. The stock has corrected by
about 12% in the last two months, which provides an attractive entry point in our
view. We reiterate Buy rating with a price target (PT) of Rs120.
15
July 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
BHARTI AIRTEL
HOLD
CMP: RS364
JUNE 23, 2016
Our preferred telecom pick; Maintain Hold
COMPANY DETAILS
Price target:
Rs425
Market cap:
Rs145,505 cr
52-week high/low:
Rs452/282
NSE volume (No of shares) :
45.2 lakh
BSE code:
532454
NSE code:
BHARTIARTL
Sharekhan code:
BHARTIARTL
137.4 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
6.2
3.5
12.3
-14.0
Relative to Sensex
-0.2
-2.6
6.5
-12.2

Bharti capitalising on delay in Reliance Jio launch: Bharti Airtel's pan-India 4G presence
(post spectrum acquisition from Aircel and Videocon), increased aggression on network
improvement, enhanced consumer education efforts via a transparent system (started
first open network system) and higher capex are all steps in the right direction. These
steps are aimed at capturing sizeable data customers and become a formidable 4G
incumbent before the rival Reliance Jio enters the market. We believe that the delay in
Reliance Jio's 4G launch (earlier Reliance Jio was expected to launch 4G by Dec'15; it
has been delayed by a year) has proved to be a boon for incumbents like Bharti to
enhance its first-mover advantage in the 4G data segment.
Nigeria currency depreciation to impact African business: Post Naira's free float, the
currency has deprecated by 42-45% (currently trading at 281 per dollar). We expect
the sharp fall in Naira to impact Bharti's consolidated EBITDA by 2-2.5% in FY2017
owing to 7% exposure on consolidated EBITDA. However, improved EBITDA estimates
for its India business negate the impact of Naira decline on the company's earnings.
We largely maintain our EBITDA estimates for FY2017 and FY2018.
Maintain Hold with a price target of Rs425: Bharti's robust performance (industryleading volume growth) and higher margins (also best in industry) validate our hypothesis
of improving execution. Also, Bhartit's current valuation is compelling at 5.5x FY2018
EV/EBITDA, making it our preferred pick in the telecom sector. But, the impending
risks in the form of Reliance Jio's 4G launch and pricing strategy, along with
apprehension of aggressive bidding in the upcoming auction make us retain our Hold
rating with an unchanged price target of Rs425.
CAPITAL FIRST
BUY
Price target:
Rs625
Market cap:
Rs4,961 cr
CMP: RS543
JUNE 13, 2016
Improving business dynamics; Maintain buy with
revised PT of Rs625
52-week high/low:
Rs578/321
KEY POINTS
1.2 lakh
BSE code:
532938
NSE code:
CAPF
Sharekhan code:
CAPF
3.18 cr
Capital First (CAPF) operates in a niche and less competitive Small & Medium
Enterprises (SME) finance market (61% of AUM), Two-Wheeler loans (8-9% of AUM)
and Consumer Durables finance (~10% of AUM), which together comprise ~80% of
its overall loan book. Armed with a differentiated and technologically-driven business
model, CAPF is likely to maintain its strong growth trajectory going forward. Also,
these segments traditionally enjoy higher yields vis-a-vis the existing wholesale lending
book - increasing scope for improvement in its margins.
Though the Return on Equity (RoE) is presently depressed, we believe that CAPF will
maintain the trend of steadily improving its RoE, as its dependence on the low-yielding
wholesale business decreases. While the Gross Non-Performing Assets (GNPA) are
comfortable at ~1% (150 dpd), the management has indicated that even if the company
migrates to the 90-dpd norm, there will be only ~100BPS addition to NPAs, which is
largely a positive.
The CAPF management has indicated that the traction in client addition has been
positive and it is now catering to a ~25% market (of total NBFC-funded Consumer
Durables segment), up from ~20% in FY2015. However, the total NBFC finance to
the Consumer Durables segment is only ~15%, with ~40% consumer purchases still
happening on a cash basis.
Going forward, CAPF should continue with a strong operating performance. Being a
niche player in SME and retail loans, we expect the asset growth momentum to continue
due to a favourable base effect and strong asset quality. We have rolled over our estimates
to FY2018 and value CAPF at 2.7x FY2018E adjusted book value (ABV), leading to a
revised price target (PT) of Rs625. We maintain our Buy rating on the stock.
COMPANY DETAILS
PRICE PERFORMANCE
(%)
Absolute
Relative to Sensex
1m
3m
6m
12m
12.9
44.7
48.5
51.9
8.9
32.9
39.8
50.8

July 2016
16
EQUITY
STOCK UPDATE
FUNDAMENTALS
DIVIS LABORATORIES
HOLD
CMP: RS1,125
JUNE 15, 2016
Limited upside, downgrade to Hold with revised PT
of Rs1,260
COMPANY DETAILS
Price target:
Rs1,260
Market cap:
Rs29,863 cr
52-week high/low:
Rs1,242/878
3.6 lakh
BSE code:
532488
NSE code:
DIVISLAB
Sharekhan code:
DIVISLAB
12.7 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
4.0
12.9
0.7
29.8
Relative to Sensex
0.1
5.0
-5.2
28.0

Strong Q4FY2016 performance: During Q4FY2016, Divi's Laboratories (Divi's)

reported a strong growth of 34% YoY in reveune at Rs1,093 crore (spill-over effect
from Q3FY2016 due to deferred sales). Its operating profit grew by 19.5% YoY to
Rs398 crore. Operating profit margin (OPM) declined by 442BPS to 36.3% on account
of 670BPS YoY decline in gross margin to 56.9%. Profit for the quarter grew by 23%
YoY to Rs322 crore. Decline in gross margin was due to change in product mix toward
low-cost generics and API's.
FY2016 guidance achieved: FY2016 consolidated revenue stood at Rs3,776 crore, up
21% YoY, while OPM stood at 37.4%. The management had guided for FY2016
revenue growth of 15-20% and EBIDTA margin of 37%. The company's capacity
expansion plans at Kakinada and Vizag facilities will address medium-term capacity
needs and support growth over FY2017-2018E.
Long-term prospects remain intact: The management has altered the FY2017 revenue
growth guidance to 14-15% (vs. 18-20%) as the Kakinada expansion has been delayed.
However, OPM will be maintained in the range of 37-38%. Once the Rs750 crore
capex materialises, sales growth for FY2018 onwards can go back to the higher
trajectory. The management expects the Kakinada SEZ to boost growth; reaffirming
20% YoY revenue growth from FY2018 onwards.
Downgrade to Hold with revised PT of Rs1,260: The management has guided for a
14-15% revenue growth in FY2017, factoring in some delay in execution in new projects.
We have maintained FY2017 earnings and revised upward our FY2018 earnings by
5% (due to lower tax rate of 23% vs. 26%). Due to limited upside, we downgrade our
rating to Hold with a revised price target of Rs1,260 (valuing Divi's at 22x FY2018
earnings).
HINDUSTAN UNILEVER
BUY
CMP: RS875
JUNE 15, 2016
FY2016 Annual Report review
COMPANY DETAILS
Price target:
Rs980
Market cap:
Rs189,125 cr
52-week high/low:
Rs944/765
14.2 lakh
BSE code:
500696
NSE code:
HINDUNILVR
Sharekhan code:
HINDUNILVR
71.0 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
5.1
2.7
6.3
9.3
Relative to Sensex
1.1
-4.5
0.2
7.8

Price deflation, muted volumes affect revenue; Benign input costs aid margin expansion:
Hindustan Unilever (HUL) registered a mixed performance in FY2016, with revenues
growing by just 4% year-on-year (YoY) and operating profit growing by 13% YoY.
The underlying volume growth in the domestic consumer business stood at 6% YoY in
FY2016, which is broadly in line with 5% YoY volume growth attained in FY2015.
Negative working capital; return ratios remain strong: HUL's operating cash cycle
continues to remain negative and stood at a negative 13 days in FY2016. The return
ratios continue to be robust, with Return on Equity (RoE) and Return on Capital
Employed (RoCE) at ~104% and 143.6%, respectively (as against 102.8% and 147.1%,
respectively in FY2015). The dividend payout improved and remained strong at 93%
as against 87% in FY2015.
Cash generation from operations grows by 14%; Capex stood at Rs800 crore: HUL's
cash generation from operations grew by 14% YoY to Rs5901.9 crore on the back of
better working capital management. The company did a capex of close to Rs800 crore
in FY2016, which was funded through internal accruals.
Better monsoon might improve growth prospects; Retain Buy: HUL is one of the largest
FMCG companies in India with an impressive distribution reach in the urban as well as
the rural markets. With the south-west monsoon expected to be better this year, HUL's
volume growth might improve to 6-8% from the current levels of 4-6% (rural India
contributes about 50% to HUL's total revenue). The company is expected to post
decent earnings growth in the coming years, driven by its strong brand portfolio
(straddling the entire consumer pyramid) and sustained focus on product innovation.
The stock is currently trading at 32.6x FY2018E earnings of Rs26.8. We maintain Buy
recommendation with a price target of Rs980.
17
July 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
KDDL
BUY
CMP: RS169
JUNE 1, 2016
Maintain Buy; PT revised to Rs230
COMPANY DETAILS
Price target:
Rs230
Market cap:
Rs171 cr
52-week high/low:
Rs367/162
BSE volume (No of shares):
0.15 lakh
BSE code:
532054
Sharekhan code:
KAMLADLS
0.5 cr
KEY POINTS
Weak Q4FY2016, Ethos bears the brunt of PAN disclosure: KDDL's consolidated
revenue in Q4FY2016 stood flat at Rs108.1 crore (+0.6% YoY), affected by lower
revenue at Ethos, which grew by 2.8% YoY (as against the quarterly growth rate of
20-22% YoY). The consolidated operating profit declined by 68% YoY from Rs10
crore in Q4FY2015 to Rs3.2 crore in Q4FY2016. This sharp deterioration in the
operating performance was on account of Ethos, which witnessed a double whammy
in terms of lower revenue (on account of new regulation requiring PAN disclosure over
Rs2-lakh transaction) and higher cost.
Challenging near-term environment compels us to reduce estimate: A weak Q4FY2016

performance, likely competitive environment resulting in weak sales for another 2-3
quarters and pressure on Ethos margins (owing to high discounting, increased IT and
marketing spends) have prompted us to reduce our estimates for FY2017 and FY2018.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-8.5
-11.7
-43.1
-51.2
-12.5
-24.3
-44.7
-50.0
Relative to Sensex

Maintain Buy; revise price target to Rs230: We continue to remain positive on Ethos'
medium-term growth potential and expect the unique combination of online-offline
omni-channel strategy to drive revenue, resulting in operating leverage and thereby
margin expansion. Thus, we have maintained our Buy rating , but the risk in the form
of likely weak near-term performance for Ethos and the company's capex requirement
in the near future may lead to equity dilution, which made us revise our SOTP-based
price target to Rs230.
MAX FINANCIAL SERVICES

HOLD
CMP: RS500
JUNE 20, 2016
Merger is positive but it is priced in; downgrade to Hold
COMPANY DETAILS
Price target:
Rs535
Market cap:
Rs13,361 cr
52-week high/low:
Rs531/303
3.2 lakh
BSE code:
500271
NSE code:
MFSL
Sharekhan code:
MFSL
18.6 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
24.9
39.7
19.0
23.5
Relative to Sensex
20.3
28.8
14.3
22.6

July 2016
HDFC Standard Life Insurance Company and Max Life Insurance Company (MLI)
have announced that they are planning to merge their respective life insurance businesses.
The move, if fructifies, will create India's biggest private life insurer. Being the first
major consolidation move in the insurance industry, this may be a precursor to other
such developments going forward.
If the merger goes through, it will create the biggest private life insurer in India with a
12.4% market share. In a two-stage deal, MLI will first merge with its parent company
Max Financial Services (MFSL). Currently, MFSL owns 68.01% shareholding in MLI
while Japan's Mitsui Sumitomo Insurance owns ~25%, and another 5.99% is held by
Axis Bank.
We find the management quality of MLI being one of the best in the industry. Also, the
merged entity can derive significant synergies (from a very prominent brand), cost
efficiencies, faster growth etc. However, we believe that at the CMP of Rs500, MLI's
valuation of 2.8x FY18E P/EV largely factors in the positives and we see limited upside
(MLI is up ~15% since the announcement and ~35% in last one month). We downgrade
our rating to Hold with a price target (PT) of Rs535 (considering Rs226 crore
proportional cash with MLI). However, we believe that if the merger goes through,
significant synergy benefits can further unlock value in the stock. Therefore, we remain
positive on MLI from the long-term perspective.
Axis Bank is the key bancassurance partner for MLI, which may change with HDFC
Standard Life coming into the picture. However, we believe that chances of Axis Bank's
exit are low since (1) Axis Bank has ~6% stake in MLI, and (2) Axis Bank is deriving
great benefits from the relationship with MLI, as it earns ~Rs500 crore fee income
annually by selling MLI life insurance policies.
18
EQUITY
STOCK UPDATE
FUNDAMENTALS
PUNJAB NATIONAL BANK

HOLD
CMP: RS104
JUNE 28, 2016
Asset stress priced in; recovery and structural
rebalancing to lead growth
COMPANY DETAILS
Price target:
Rs125
Market cap:
Rs20,372 cr
52-week high/low:
Rs181/69
98.8 lakh
BSE code:
532461
NSE code:
PNB
Sharekhan code:
PNB
74.4 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
42.5
20.9
-14.7
-25.8
Relative to Sensex
35.9
15.4
-17.3
-23.2

Asset quality stress was visible across the banking sector in FY2016. Punjab National
Bank's (PNB) Gross Non Performing Assets (GNPA) almost doubled to 12.90% in
FY2016 from 6.55% in FY2015. Net Non Performing Assets (NNPA) stood at 8.61%
in FY2016 as against 4.06% in FY2015. While the asset quality was largely impacted
by the Reserve Bank of India's (RBI) Asset Quality Review (AQR), the overall economic
slowdown and two back-to-back droughts also played their part in exacerbating the
NPA problem.
While the asset quality issue remains a near-term pain point, PNB has maintained the
key strength of a public sector bank (PSB) ie, strong and sustainable low-cost liability
franchise. Hence, PNB's CASA proportion (to domestic deposits) has improved to
41.63% in FY2016 from 40.57% in FY2015. We believe that continued build-up in
the CASA franchise and reduced dependence on high-cost deposits should help PNB
maintain its funding cost.
We are sanguine about the fact that PNB's recent performance has been on the weaker
side, with low RoE profile (negative in FY2016) and elevated stress levels (reflected in
stock price correcting 42% from its 52-week highs).Going forward, a better recovery
performance will be a key monitorable. State Bank of India (SBI) and Bank of Baroda
(BOB) remain our preferred picks in the PSB space. However, considering reasonable
valuation of 0.9x FY2018E APBV, we maintain Hold on PNB with a revised PT of
Rs125.
RAYMOND
HOLD
CMP: RS473
JUNE 6, 2016
Investment mode continues; put to Hold with
revised PT of Rs520
COMPANY DETAILS
Price target:
Rs520
Market cap:
Rs1,062 cr
52-week high/low:
Rs519/351
0.6 lakh
BSE code:
500330
NSE code:
RAYMOND
Sharekhan code:
RAYMOND
3.6 cr
We attended the investors' meet of Raymond. The following are the key takeaways.
KEY POINTS
PRICE PERFORMANCE
(%)
Absolute
Relative to Sensex
1m
3m
6m
12.5
19.2
14.1
12m
9.8
7.7
2.1
11.0
12.5

Effort toward driving strong growth in the branded apparel portfolio: Raymond aims
to make its portfolio of brands (viz Park Avenue, Raymond Apparel, ColorPlus and
Parx) leaders of the branded apparel market and expects the segment to grow 1.5-2x
the market growth rate. In its ongoing effort to attain higher growth, the company has
drawn up a four-pronged strategy (a) product innovation (b) increased branding &
marketing spend (c) aggressive store renovation and (d) enhanced distribution reach.
The company aims to reach a sizeable scale and become a leading player in the next
three years.
Outlook & valuation: We believe that Raymond's ongoing efforts toward scaling up
its brands and distribution network complement its initiatives toward creating a
profitable branded play in the next few quarters (once the investments start yielding
results and the domestic macro environment improves). For FY2017, it has earmarked
a capex of Rs250 crore. Thus, we continue to like the medium-term to long-term
prospects for the company's brands. Further, Raymond's stock has an embedded real
estate value (125-acre land parcel in the heart of Thane that the company intends to
monetise) and continues to give us confidence on the medium-term outlook. But, the
limited near-term upside has prompted us to revise our rating to Hold with a price
target of Rs520 (SOTP-based valuation at 13x core business + 50% discount for the
land bank). However, any development on the value unlocking front through divestment
of non-core assets (engineering & tools business) would be positive.
19
July 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
SUN PHARMACEUTICAL INDUSTRIES

BUY
CMP: RS774
JUNE 27, 2016
Buyback a non-event; Halol inspection and its
outcome will be near term trigger
COMPANY DETAILS
Price target:
Rs945
Market cap:
Rs186,279 cr
52-week high/low:
Rs965/706
30.4 lakh
BSE code:
524715
NSE code:
SUNPHARMA
Sharekhan code:
SUNPHARMA
108 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-2.3
-10.8
-4.6
-13.1
Relative to Sensex
-6.8
-14.9
-7.4
-10.0

Buyback Update: Sun Pharmaceutical Industries (Sun Pharma) has announced buyback
of 75 lakh shares at a price of Rs900 each through the tender route, with the promoters
intending to participate in it. The buyback is valued at Rs675 crore ($100 million) and
accounts for 0.3% of the company's outstanding equity capital. We feel that the company
is utilising its surplus cash efficiently by rewarding the shareholders through share
buyback and dividend.
Improvement in operating performance of base business will act as key trigger: We feel
that stability and improvement in the company's base business, along with margin
expansion, will be crucial from the valuation viewpoint. However, Sun Pharma's base
business is likely to face some pressure in the near term (H1FY2017) due to pricing
pressure in the US, Halol plant issues and the ongoing Ranbaxy integration. We expect
the Q1FY2017 numbers to be better due to continuing exclusivity sales from Gleevec
for full three months.
Stable long-term outlook: Remedial efforts at Halol are on track and the management
expects the USFDA to re-inspect the plant. We also believe that Sun Pharma will take
one or two quarters more to complete its Ranbaxy integration. Therefore, we could see
some improvement in its operations and profitability from H2FY2017 onwards.
Maintain Buy rating with PT of Rs945: Positive outcome of the Halol plant inspection
by the USFDA, along with improvement in the base business and in-line Ranbaxy
integration will lift the overall performance. We maintain our Buy rating with an
unchanged price target of Rs945.
Key downside risk is delay in outcome of the USFDA's Halol plant inspection/escalation
of warning letter to import alert.
SUPREME INDUSTRIES
HOLD
CMP: RS878
JUNE 24, 2016
Growth outlook intact; Price target revised to Rs908
COMPANY DETAILS
Price target:
Rs908
Market cap:
Rs11,148 cr
52-week high/low:
Rs1,000/540
65,910
BSE code:
509930
NSE code:
SUPREMEIND
Sharekhan code:
SUPREMEIND
6.4 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-1.0
11.3
32.6
34.1
Relative to Sensex
-6.9
4.8
25.7
36.8

July 2016
Capitalising on opportunities in pipe sector: In its latest annual report (FY2016), Supreme
Industries' (Supreme) management sounded very upbeat on the emerging growth
opportunities in the construction sector. This would augur well for its plastic pipes
business (53% of total revenue). To capitalise on these opportunities, the company has
envisaged a capex plan of over Rs150 crore in FY2017 for the introduction of new
products and expansion of its geographical reach.
Going aggressive on furniture business: In FY2016, the furniture business' operating
margins improved to 17%, mainly led by a better marketing strategy and greater focus
on premium products. Supreme aspires to be the largest manufacturer of plastic furniture
in India by 2020.
Return ratios to further improve with low gearing levels: The company repaid ~Rs279
crore of borrowings in M9FY2016*, taking the debt-to-equity (DE) ratio to an alltime low of 0.17x. This debt reduction was supported by healthy cash flow generation,
decline in raw material prices and better working capital management. Supreme is
likely to fund its proposed capex through internal accruals and suppliers' credit. As a
result, the company is likely to become debt-free in the next few years, which would
further boost its return ratios.
Robust growth trajectory, PT revised to Rs908: We have fine-tuned our estimates mainly
to incorporate the annual report details. We expect an adjusted CAGR of 24% in revenue
and 36.6% in earnings over M9FY2016-FY2018 on a low base. Enthused by Supreme's
robust growth trajectory, we are revising our target multiple to 22x on its FY2018E
earnings. Accordingly, we are revising the price target to Rs908. Maintain Hold.
20
EQUITY
STOCK UPDATE
FUNDAMENTALS
THOMAS COOK (INDIA)

BUY
CMP: RS215
JUNE 23, 2016
Value unlocking from Quess Corp IPO;
re-iterate our positive stance
COMPANY DETAILS
Price target:
Rs255
Market cap:
Rs7,862 cr
52-week high/low:
Rs241/166
1.8 lakh
BSE code:
500413
NSE code:
THOMASCOOK
Sharekhan code:
THOMASCOOK
11.8 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
17.1
8.8
1.1
-11.1
Relative to Sensex
10.1
2.4
-4.2
-9.2

Value unlocking via Quess Corp IPO: Thomas Cook (India)'s (TCIL) subsidiary Quess
Corp is listing its equity shares on the bourses through an initial public offering (IPO)
in the price band of Rs310-317 per share. The impending value unlocking in QCL was
a key trigger for TCIL stock price rising in the recent past. The QCL IPO would result
in 10% stake dilution for TCIL to about 63% (from the current holding of 69.5%).
QCL will largely utilise the funds raised from the IPO for working capital requirements
and inorganic growth initiatives.
Reiterate positive stance on TCIL; QCL's business valued in line with our expectation:
We re-iterate our positive view on TCIL, as we foresee better growth prospects in its
key business verticals of HR service management and travel & tourism (due to acquisition
of Kuoni's India and Hong Kong business). TCIL's management is expected to achieve
better earnings growth in the coming years. Further, the business value of QCL is
broadly in-line with our expectations and has already been factored in our price target
(PT) of Rs255. Thus, we maintain our Buy recommendation on TCIL with the unchanged
PT. TCIL's stock is current trading at 12.5x FY2018 EV/EBIDTA.
UPL
BUY
CMP: RS567
JUNE 17, 2016
Annual report review; Maintain Buy
with revised PT of Rs660
COMPANY DETAILS
Price target:
Rs660
Market cap:
Rs24,301 cr
52-week high/low:
Rs617/342
0.03 lakh
BSE code:
512070
NSE code:
UPL
Sharekhan code:
UPL
30.1 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
0.2
34.7
39.6
12m
14.8
Relative to Sensex
-4.8
23.1
31.3
12.7

In FY2016, the global agrochemicals market encountered its most challenging year
due to drought conditions, weak commodity prices, volatile currencies, depressed cash
flows of farmers and deferred purchases of agrochemicals by farmers. As a result, the
global agrochemicals market contracted on a year-on-year (YoY) basis in FY2016.
The company's topline growth was largely driven by improvement in realisations, launch
of strategic products and strong growth in key markets. Branded generics account for
~80% of UPL's total revenue. The company's innovation rate (measures revenue
contribution of products launched during the last five years) was 14% at the close of
FY2016, up 9% YoY.
UPL's FY2016 revenue growth of 10% YoY was mainly driven by the good performance
of Latin America (up by 25% YoY) and North America (up by 10% YoY). The
company's operating profit margin (OPM) for the year improved by 88BPS YoY to
20.4%. Strong margin and lower tax rate supported growth in earnings, which grew
by 13.5% YoY to Rs1,298 crore. The proposed merger of UPL with Advanta (regulatory
approvals pending) will enhance the company's value in the coming years and save cost
worth ~$14 million post the merger.
In FY2016, UPL's debt increased by Rs950 crore to Rs4,237 crore on account of an
increase in its working capital (Rs900 crore), capex (Rs900 crore) and investments
(Rs300 crore) in subsidiary & associates. However, the return ratios continued to be
strong, with return on equity (RoE) at 19.1% and the return on capital employed
(RoCE) at 16%.
21
July 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
V-GUARD INDUSTRIES
BUY
CMP: RS1,370
JUNE 21, 2016
Confluence of positive triggers ahead;
PT raised to Rs1,585
COMPANY DETAILS
Price target:
Rs1,585
Market cap:
Rs4,122 cr
52-week high/low:
Rs1,465/786
38,460
BSE code:
532953
NSE code:
VGUARD
Sharekhan code:
VGUARD
1.0 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
16.5
65.4
48.4
57.7
Relative to Sensex
12.2
52.4
42.6
56.5

In a sweet spot; multiple positive triggers ahead: V-Guard Industries (V-Guard) is

entering into a sweet spot due to the presence of multiple positive triggers that are
expected to boost growth going forward. We believe that a better south-west monsoon
and the Seventh Pay Commission payout will drive consumer spending in FY2017 and
FY2018. Further, improving clarity over the implementation of GST will be another
trigger for V-guard. We believe that the confluence of these multiple triggers would
boost growth in FY2017 and FY2018 following a tepid growth in FY2016.
Improving margin profile: We believe that V-Guard's long-term structural story remains
intact, as the company is moving in the right direction. It aims to become a sizeable panIndia player compared to being a predominantly regional player by adding new products.
In FY2016, the PBT margin of V-Guard's non-South business stood at around 3.5%,
which is expected to expand further to 5-6% over the next 2-3 years. Moreover, with
better scale, the non-South business is likely to get enhanced benefits of operating leverage.
Earnings estimates revised, Price target raised to Rs1,585; retain Buy: We have revised
upward our revenue as well as earnings estimates due to the confluence of positive triggers
that would boost the company's growth. The gradual reduction in the pricing difference
between non-South and South India markets gives us confidence that the company will
sustain higher margins in the future and lead to expansion of P/E multiple. Moreover, a
strong balance sheet, high return ratios (around 25% RoE) and free cash flow visibility
will support higher valuation multiple, in line with industry leader. Therefore, we have
revised our price target to Rs1,585 (30x FY2018) and reiterate Buy.
YES BANK
BUY
CMP: RS1,060
JUNE 16, 2016
Annual report review; well on its growth path;
PT revised to Rs1,200
COMPANY DETAILS
Price target:
Rs1,200
Market cap:
Rs44,644 cr
52-week high/low:
Rs1085/590
37.1 lakh
BSE code:
532648
NSE code:
YESBANK
Sharekhan code:
YESBANK
32.84 cr
KEY POINTS
PRICE PERFORMANCE
(%)
Absolute
Relative to Sensex
1m
3m
6m
12m
13.8
33.3
56.4
34.6
8.1
21.9
47.1
32.1

July 2016
The current account, savings account (CASA) ratio for Yes Bank has been improving
consistently, rising to 28.1% in FY2016 from 23.1% in FY2015. More importantly,
growth in Savings Bank (SB) balances has been outpacing growth in Current Account
(CA) balances for the last few years. This trend augers well for the broad basing of the
bank's deposit cost as well as for the growth of its retail business.
For the past few years, Yes Bank has consciously decided to pursue balance sheet
growth via customer assets (advances plus credit substitutes). While this strategy has
helped it to secure new relationships and build its book, the non-advances credit has
been declining over the last three years. This indicates two things: (1) growing retail/
SME segment book, (2) the bank is now able to secure credit against investments in
corporate bonds.
Yes Bank had ~38% of its advances maturing in less than 12 months as against ~63%
of deposits maturing in under a year. Thus, there should be asset liability mismatch
(ALM) in the one-year+ bucket. However, in view of the current dovish stance of the
RBI, faster deposit re-pricing compared to asset re-pricing may actually help the bank
to sustain or improve margins in the near term.
We find that the progress made by Yes Bank in credit growth, retail business and
CASA is positive for the long-term profitability and sustainability. We believe that
while banking industry's asset quality woes may persist in the near term, Yes Bank, by
virtue of its size and business mix has been able to perform better than its peers. With
a favourable ALM profile, Yes Bank may be able to squeeze margin benefits in the near
term. At 2.3x FY2018E ABV, we find valuation attractive and maintain our Buy rating
on the stock with a revised price target (PT) of Rs1,200.
22
EQUITY
SECTOR UPDATE
FUNDAMENTALS
IT
JULY 07, 2016

Q1FY2017 IT earnings preview
Q1FY2017 result expectations
Outlook
Seasonally strong quarter: Strong seasonality, coupled with the
Sentiment weak owing to macro overhang: After an in-line
impact of cross-currency tailwinds (10-40BPS) will drive the
January-March quarter, the April to June quarter is expected
reported USD revenue performance for the April to June quarter.
to be a good quarter on account of strong seasonality. However,
For the quarter under review, we expect a constant-currency
the sectors investment sentiment has weakened in the recent
(CC) growth in the range of negative 0.2% to 5.4%. However,
months, owing to the negative impact of Brexit, fragile demand
the Indian Rupees appreciation against USD (~1% QoQ) will
and cautious pricing commentary from top-tier IT companies.
affect revenue growth in rupee terms. On an organic basis, the
Additionally, election rhetoric in the US ahead of the presidential
growth will be led by Infosys (4.2%), followed by Tata
election will restrict the stocks outperformance in the near term.
Consultancy Services (TCS; 3.2%), HCL Technologies [HCL

Tech; 5.4% (including inorganic Volvo IT); organic growth at
Overall, we expect that the growth should pick up pace in the
2.2%], Wipro [2.2% (including inorganic HPS); organic growth
coming years, with higher incremental spending in the digital
at 0.2%], and Tech Mahindra (a negative growth of 0.2%). On
space, coupled with stabilisation in growth deceleration in
a reported basis, growth will be in the range of 0.1-5.6%. On
Insurance and Energy. Nevertheless, we maintain our thesis that
the margins front, we expect decline in margins (10-180BPS)
the industry is in a transition phase (it is building and adding
on a sequential basis owing to wage hikes, consolidation of
capabilities for newer technologies in the digital space). Also,
acquisitions (Wipro, HCL Tech and Tech Mahindra), visa costs
the industry is revamping the execution process and operations
and rupee appreciation.
in the traditional services space (which is gradually getting

commoditised). This transition phase will take some time (may
Key issues to watch out for would be: (1) Management
be 2-3 years) and would result in volatility in earnings in the
commentary on Brexit (business impact), impact on deal closures
near-to-medium term.
& renewals besides impact on other geographies (2) Demand
Valuation
visibility in FY2017E and outlook on different verticals (Infosys
We remain selective in the IT sector and expect the demand
in recent investors meet has highlighted headwinds in Retail,
environment to gradually pick up pace in FY2017 and FY2018.
Healthcare and Insurance verticals) (3) Commentary on digital
However, clarity on business impact from Brexit and
space, specifically deal wins and outlook (all the companies are
commentary on demand improvement will be key to stock
positive on the deal flows and outlook) (4) Commentary on the
performance in the near-to-medium term. We keep our estimates
troubled verticals like Energy, Utilities and Telecommunications;
for FY2017/2018E unchanged and will revise the same post the
(5) Commentary on margins and pricing (more pressure in
Q1FY17E earnings.
pricing are evident in deal renewals given that the legacy services
are under pricing pressure) and (6) Infosys is likely to keep its
Preferred picks: Infosys, TCS and HCL Tech (in large-cap space)
guidance unchanged at 11.5-13.5% YoY growth on CC basis
and Persistent Systems (in mid-cap space).
for FY2017.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or
having a postition in the companies mentioned in the article.
23
July 2016
EQUITY
VIEWPOINT
FUNDAMENTALS
LLOYD ELECTRIC & ENGINEERING
VIEWPOINT
CMP: RS243
VIEW: BOOK OUT
JUNE 1, 2016
Unexpected margin concerns emerge; book out
Key points
has manufacturing capabilities for heat exchangers). We also

expect the company to continue to spend a sizeable amount
on marketing of its CD products (~10% of CD revenue/ Rs51
crore spent in FY2016). Also, the company has indicated that
it is unlikely to hedge its forex risk exposure with derivative
products. As a result, the company will remain exposed to
forex fluctuation risk since it imports 54% of its raw material
requirement.
Margin pressure aggravates in Q4FY2016: In Q4FY16, Lloyd

Electric and Engineering (LEEL) has shown a strong 60% yearon-year (YoY) growth in the consumer durables (CD)
segment's revenue, driven by products like ACs, washing
machines (WM) and LED TVs. However, margins of the CD
segment fell by 586 basis points (BPS) on an annual basis to
7.8% for the quarter. This fall was mainly on account of higher
marketing costs, huge discounts (amid aggressive competitive
intensity), warranty provisions (driven by a warranty extension
to five years) and forex loss (owing to imports of raw material
across segment). Its overseas subsidiaries have posted a
cumulative loss of Rs14.1 crore for FY2016 due to ongoing
demand slowdown across the world.
No respite visible in near future due to increased focus on
low-margin products: The management has indicated that it
would be increasingly focusing on WM and LED TV products
for growth in the CD segment. However, these products bring
in lower margins as compared to ACs (where the company
Book out amid margin concerns: Apart from the concerns on

the competitive pricing pressure (leading AC players appeared
to better manage competition in Q4FY2016), we are also
perturbed about the huge losses posted by its subsidiaries. Most
of these subsidiaries are located in Europe, which is facing
sluggish demand environment. Hence, we recommend investors
to book out from the stock in view of the muted growth
outlook.
Risk to our call: A better-than-expected uptick in the urban

discretionary demand and operating performance.
NATCO PHARMA
VIEWPOINT
CMP: RS517
VIEW: POSITIVE
JUNE 8, 2016
Strong product pipeline to drive exponential growth
Key points
Strong product pipeline supports robust growth outlook: Natco

Pharma (Natco) has filed 39 Abbreviated New Drug
Applications (ANDAs) and has secured 16 approvals, including
two tentative approvals as of March 2016. Around 23 ANDAs
are awaiting approval, including 16 Para IVs (exclusivity sales
opportunity). The Para IVs include nine potential FTFs (Firstto-File) opportunities. The management expects 3-5 new
launches over the next 18 months, which would substantially
boost organic growth prospects in the existing base business
over the next couple of years.
New product launches (gSovaldi + Harvoni) to boost domestic
business: Natco launched the first generic version of gSovaldi
in India and Nepal (March 2015) under the brand HEPCINAT.
The drug is used to treat chronic Hepatitis C. It has also
launched a combination drug Harvoni. Currently, gSovaldi
and Harvoni combined contribute annually Rs170-200 crore
to the company's total revenue. The two launches will help
boost the company's domestic revenue over the next 2-3 years.
The company has guided for Rs4.8-5 billion of Hep C sales
from its own brand and Rs650-700 million from institutional
sales. This will make it one of the most successful formulations
launches in the Indian market.
July 2016
USFDA Inspection Update: Natco received '8' 483 observations

from the USFDA following the recent inspection of its
formulations facility at Mehboobnagar, Hyderabad. This is
the company's only USFDA-approved formulations facility.
Five of the observations seem to be of procedural nature,
suggesting gaps in certain existing SOPs / practices. Three of
the observations pertain to data entry mistakes. Natco has
already responded to the USFDA and awaits EIR, which should
come anytime. The company has indicated that delay in
approvals is not linked to 483 observations. Very recently, the
company received a tentative approval for Sorafenib 200mg
tablets (gNexavar) from the same facility.
Positive view with better upside: We have a positive view due
to the company's clear focus, visibility in sales growth over
the next 2-3 years and improving profitability. We see a
potential upside of 18-20% over the next six months.
Risk: Any delay in approvals from the USFDA and negative
outcome of the USFDA inspection of plants could impact future
sales and profitability.
24
EQUITY
VIEWPOINT
FUNDAMENTALS
PHOENIX LAMPS
CMP: RS137
VIEW: BOOK PROFIT
Merger benefits priced in; book profit
VIEWPOINT
JUNE 21, 2016
Key points
Handsome gains; stock appreciates by 30%: Since our

viewpoint dated April 20, 2016, the stock of Phoenix Lamps
(PLL) has delivered handsome returns of 30%. The stock has
significantly out-performed the benchmark auto indices - the
BSE Auto index and the CNX Auto index (which are up 5%
and 6%, respectively since April 20, 2016).
PLL merger with Suprajit Engineering; recent appreciation in

Suprajit stock factors in merger benefits: The Board of
Directors of PLL has approved a proposal to merge the
company with Suprajit Engineering (SEL). Currently, SEL holds
a 61.8% stake in PLL and plans to acquire the remaining
38.2% stake at a later date. The Board of PLL has approved a
stock swap ratio, whereby shareholders would receive four
shares of SEL for every five shares held in PLL. The merger is
likely to be completed over the next 3-4 months. The
performance of PLL improved after it became SEL's subsidiary
last year (reported profit growth of 17% in FY2016). PLL has
started to regain market share and consumers on the back of
the SEL management's efforts to improve product quality and
operating efficiency. Also, improved customer confidence post

the acquisition by a large auto ancillary player (SEL) has
boosted PLL's performance. Further, SEL is likely to emerge
as a much larger and diversified company post the merger with
PLL due to the enhanced product portfolio, wider customer
base and cross-selling opportunity resulting in enhanced
content per vehicle. Also, the combined entity would have
synergistic benefits post the merger. Post the announcement
of the merger, and the consequent synergy benefits, SEL's stock
has appreciated by ~35% (largely factoring in the merger
benefits). SEL's stock is currently trading at 20.4x FY2018
earnings, which is at the higher end of its historical valuation
band.
Positives priced in; Book profit: The improvement in the

financial performance of PLL and the expected synergy benefits
from the merger are largely reflected in SEL's stock price. Thus,
we see limited upside for PLL shareholders and advise them to
book profit at current levels.
TCPL PACKAGING
VIEWPOINT
CMP: RS762
VIEW: BOOK PROFIT
JUNE 29, 2016
Positives priced in; book profit (38% gains in four weeks)
Key points
TCPL Packaging's (TCPL) stock price has run-up by 38% in

the past one month on the back of strong operating
performance in FY2016 and improving growth prospects for
the paper packaging industry in the long run. FY2016 revenues
grew by 19% year-on-year (YoY) (largely driven by strong
double-digit volume growth) while the operating profit
expanded by 23% YoY. Being one of the largest packaging
players, TCPL would achieve strong double-digit revenue
growth (largely volume driven) in the near to medium term
on the back of improvement in consumer demand, growing eretailing business and emergence of new players in the FMCG
sector.
In addition to operating efficiencies, improvement in working

capital will remain a key focus area for TCPL in the coming
years. With no major capex planned, TCPL would also see
improvement in cash flows and strong return ratios in the
coming years.
However, the recent sharp run-up in TCPL's stock price (38%

since our viewpoint on May 23, 2016) has priced in all the
above positives. We believe that the current valuation of TCPL
at 10x FY2018 earnings is fair, capping any significant upside
from the current level. Hence, we recommend our investors to
take home handsome gains within a short span and wait for a
better point to re-enter the stock.
25
July 2016
EQUITY
TREND & VIEW
TECHNICALS
Nifty in a bull market

Daily view on Nifty
The Nifty is in a trading channel. The upper channel target

comes to around 8440
The move from the bottom ie 6825 is an impulse. Given that

the Index has seen a sharp move in the past few trading sessions,
some correction cannot be ruled out
The 20 DSMA and 40 DEMA will now act as a strong support

in the short term. Every dip should be seen as a buying
opportunity
The momentum indicators on the daily charts are in the buy

mode, thus confirming the upward breakout
Crucial supports for Nifty will be around 8150 and 8000 while
crucial resistance will be near 8440 and 8550.
Weekly view on Nifty

The Nifty has provided a breakout from an inverse head &

shoulders pattern, which has a target of 9120. The Index has
achieved our conservative target of 8336
After breaking out from the inverse head & shoulders pattern,
the index has re-tested the breakout point and has started to
move higher
The Index is likely to move towards 8650, which is the weekly

swing high
The momentum indicators on the weekly chart are also in the

buy mode, thus confirming the upward breakout
Crucial support would be around 8000 whereas resistance

would be around 8650.
Monthly view on Nifty

The Nifty has provided a long downward sloping channel,

which indicates the shift in trend from bearish to bullish. Now,
the Index seems to have come out of the bear trend and has
entered into a bull trend
However, for the July series it has a resistance at 8650 levels.

Only above 8650 we can hope for higher levels. Else, we can
see some profit booking from those levels which will lead to
some consolidation
As per the Elliott wave theory, after breaking the high of 8295,
the Nifty has confirmed a 5-wave impulse move from 6825.
This is either wave (3) of wave III or wave I of higher degree. If
this is wave (3) of wave III, then the bull run may continue for
some time. If this is wave I of higher degree, then some
meaningful correction cannot be ruled out. However, the Nifty
has made a medium-term to long-term bottom till doesnt break
below 6825. Every dip should be seen as a buying opportunity
A crucial support will be around 8000 and 7700 and a crucial

resistance will be around 8650.
Medium term
Trend
Up
July 2016
Trend reversal
Support
Resistance
Target
7927
7927
8654
8654
26
EQUITY
MONTHLY VIEW
DERIVATIVES
Derivative View: Post 8500 expect sharp short covering

The NSE Nifty started the June F&O series on a positive note and
thereon it traded in a narrow range between 8200 and 8300 levels.
However, towards the end of the expiry, the Nifty witnessed a sharp
fall in the wake of the negative outcome of 'BREXIT' (which was
in line with other world indices). The fall was mainly backed by
long unwinding. Also, before the 'BREXIT' event, market
participants (especially FIIs) had unloaded many of their long bets.
However, in the last few trading sessions of the June series, the
market showed resilience at lower levels ~7950-8000 and bounced
back sharply - giving no chance for the bears to cover their short
positions. Most of the upside was backed by decent amount of
addition of long positions, with open interest of Nifty shooting up
by more than 10% in the last few trading sessions. With high rollover
of ~77%, majority of this position have got carried forward to the
next F&O series.
Rollover in Nifty futures was on the higher side at 77.74% compared

to the previous month's rollover of 72.82%.Market-wide rollover
was decent enough at 83.33% compared to its previous month's
rollover of 84.48%.
Top 5 stock futures with the highest OI in current series

STOCK FUTURES (SHAREKHAN SCRIP CODE)
In the initial part of the June F&O series, the FIIs were seen
unwinding their long positions in Index futures. However, they
continued to be net buyers in the cash segment due to which the
markets continued to advance in the first half of the series. However,
in the second half (especially post BREXIT), they started building
decent amount of long positions in Index futures despite. As a result,
markets bounced back sharply from 7950-8000 levels and closed
the June series around 8300.
OPEN INTEREST (RS CR)
HDFCBANK
3504.27
RELIANCE
2091.26
SBIN
1833.09
SUNPHARMA
1572.10
AXISBANK
1227.30
Top 5 stock options with the highest OI in current series

STOCK OPTIONS (SHAREKHAN SCRIP CODE)
SBIN
ROLL-OVER: MARKET-WIDE VS NIFTY
OPEN INTEREST (RS CR)
1038.43
RELIANCE
600.18
ASHOKLEY
489.47
LT
476.96
TATAMOTORS
474.41
View
On the options front, 8200 PE stands with the highest number of
shares in open interest (OI) in the July series followed by the 8000
strike price. On the call side, 8500 CE stands with the highest
number of shares in open interest (OI) followed by the 8700 strike
price.
Roll-over highlights
PCR started this series at 0.94. However, volatility cooled off
significantly as it settled around 16.00 after touching a two-month
high of ~19-20 post the BREXIT event. We expect the market to
retain the positive momentum with high rollover of long positions,
especially by the FIIs (which carried forward most of their long
bets from June to July series).Going forward, the level of 8500 can
be targeted in the coming trading session.
The benchmark Nifty futures started the July F&O series with an
open interest of 1.96 crore shares compared to 2.04 crore shares in
the last F&O series. In rupee terms, the new month kicked off with
an open interest of Rs16,303 crore in Nifty futures v/s Rs16,450
crore in the preceding series. Open interest in stock futures stood at
Rs59,900 crore v/s Rs58,048 crore in the June series. In Index
options, the the series started with an open interest of Rs88,837
crore v/s Rs85,148 crore in the previous series. Open interest in
stock options was at Rs6,715 crore at the start of the july series v/s
Rs5,905 crore in the June series.
27
July 2016
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Commodities: Rise sharply after "Brexit" on stimulus speculations

Macro-economy
Key points
Britain exits European Union in a landmark referendum defying market
expectations
Risk assets fall sharply after exit only to rally strongly on stimulus
expectations
The US Fed seen delaying the rate hikes until 2019
Markets expecting Bank of England to cut rates to zero to cushion the
economy
People's Bank of China says that it would pursue dynamic monetary policies
ECB lowers buffer reserve requirements for the banks
US yields crash to record new lows as the Markets expect the US Fed to
postpone rate hike
Panic withdrawals seen from UK property funds in the aftermath of Brexit
Bullions outperform on safe haven demand; Yen rallies while Pound tumbles
Pound tumbles below 1.30 against the US Dollar for the first time since
1985.
China's Yuan crashes to record low against a basket of major currencies
European banks stoking risk concerns on funding problems and nonperforming loans
Italian banks seen most vulnerable due to bad debt problems compounded
by Brexit
Many major banks have sizeable exposure to UK commercial real estates
China asserts its claims over South China Sea; warns of "price to pay"
China's manufacturing contracted yet again in June as per Caixin data
US June ISM services data surges to the highest level since November 2015,
however services sector confidence at the lowest level since 2009.
S&P downgrades UK AAA credit rating; Australia's AAA credit rating at
risk of a downgrade
US factory orders decline for the 19th month in a row
The odds of the US entering a recession in the nest twelve months rising
US manufacturing ISM rises to 16-month highs, however construction
spending declining
Rating agency S&P sees risk to the US growth in the wake of "Brexit"
Rating agency S&P downgrades European Union from AA+ To AA
COMMODITY PRICES IN JUNE 2016 (IN $)

Commodity
High
Low
Close
Copper
4,865
4,483
4,845
MoM chg %
3.73
Zinc
2,116
1,893
2,105
9.46
Lead
1,795
1,662
1,788
5.18
Nickel
9,550
8,790
9,445
11.97
Gold
1,358
1,206
1,321.9
8.77
Silver
18.7
15.8
18.7
17.0
Crude oil
52.3
45.8
48.5
-1.9
MONTHLY CHANGE IN DOE CRUDE STOCKS (MAY-JUNE 2016)

Crude oil
Dist.
Gasoline
Change in (kbls)
(10495)
890
379
June 24, 2016 (kbls)
526573
150513
238998
-1.95
0.59
0.16
Change in (%)
Refinary utlisation rate was 93% in the last week of June 2016
MONTHLY CHANGE IN SHFE STOCKS (MAY-JUNE 2016)

Copper
Lead
Zinc
Nickel
Change (in tonne)
-65977
4938
-15252
1923
June 23, 2016
155235
31783
215305
98414
Change (in %)
-29.83
18.39
-6.62
1.99
MONTHLY CHANGE IN LME STOCKS (MAY-JUNE 2016)

Copper
Lead
Zinc
Nickel
39805
-250
62475
-22428
June 30, 2016
191525
185225
443175
379338
Change (in %)
26.24
-0.13
16.41
-5.58
Change (in tonne)
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil: Seen falling on Brexit concerns and rising count of US oil rigs
Key points
US oil rig count rises as crude oil price recovers
Oil market balancing seen delayed due to Brexit impact
Chinas Strategic Petroleum Reserve capacity seen to its limit
Nigerian oil output rises in June on repair of damaged infrastructure
US oil supplies remain near 87-year high level
The Norwegian Oil & Gas Association workers can go on strike; near-term impact muted
Signs of pick-up in the US oil & gas industry visible
Libyan oil production remains at 15% of its pre-war level
Crude oil
CMP: $45.30
Crude oil prices settled slightly lower last month due to Brexit concerns and stronger US Dollar. The count of the US oil rigs has started
rising, as the recovering oil prices give ample incentive to some oil producers to restart their oil production facilities. The oil market has
also been trying to gauge the impact of Britain exiting the European Union (EU).On one hand, the economic impact of "Brexit" is
negative for the global economy, as well as for oil demand. On the other hand, investors are hoping that the worlds major central banks
and governments would take adequate steps to contain the negative impact of Brexit. The ongoing tussle between these two themes is
giving rise to a volatile trading environment. Some of the temporary supply concerns like outages in Canada due to wild fire have been
addressed. However, Nigerian and Libyan oil supply is still a source of concern due to continuous attacks by the militants and lingering
internal conflicts. In one of the negative developments, reports say that China might reduce its requirements for Strategic Petroleum
Reserve (SPR), as the nation might be nearing its storage capacity limit. Crude oil is seen moving towards $42 a barrel.
July 2016
28
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Bullions: Seen supported on Brexit concerns and slowing global growth

Key points
Bullions rally sharply as Brexit leads to demand for safe haven assets
Silver rises to 21-month high as it plays catch-up with gold
WGC: Chinas gold demand to rise in 2016
Gold prices rise 25% in Q2CY2016
Former Fed cief Alan Greenspan urges return to gold standard
Silver up nearly 50% this year
US silver demand from mint is up 40% this year
Silver ETF inflows so far this year at record level; US silver coin sales nearing record high
Gold
CMP: $1,358
Gold rallied sharply in the wake of Brexit, as it attracted safe haven demand. Japanese Yen also rallied along with gold for the same reason. Brexit
is also stoking political concerns. There is a possibility that this event can lead to an accelerated rise in the extremist politics in Europe. Also, many
other nations can start looking at the option of leaving the European Union (EU), as the prevailing economic malaise is giving rise to dissent and
dissatisfaction among people struggling under severe austerity measures in a low growth environment. Now, investors reckon that the US Federal
Reserve would delay the rate hikes. The US bond market sees a rate hike only in 2019. Other major central banks like the Bank of Japan (BOJ),
the European Central Bank (ECB), the Bank of England (BOE) and the People's Bank of China (PBOC) are expected to be lenient with their
monetary policies so as to contain the adverse economic impact of Brexit. It is to be noted that the global economic scenario is quite fragile. A case
in point is China's growth slipping below 7%. Some economists see the US economy slipping back into a recession within a year. The US treasury
yields have fallen to record lows. The present economic scenario of low growth and negative/ xtremely low interest rates is quite supportive for
the yellow metal. On the flip side, since gold has risen quite sharply from $1,046 (December 03, 2015), some correction cannot be ruled out. The
global central banks aggressively easing their monetary policies can hurt safe haven demand to some extent, as risk assets would wet investors
appetite once again. Nonetheless, gold will be well supported at lower levels. We expect the yellow metal to trade between $1,300 and $1,400 in
near term. We advise clients to always have some exposure to gold in their portfolio as insurance against the current uncertain and volatile times.
Silver
CMP: $19.70
Silver dutifully followed gold sharply higher. In fact, silver outperformed gold as possibility of aggressive monetary easing by the major central
banks gave rise to expectations of a pick-up in inflation. The gold/silver ratio fell to 64.20 on July 4. Silver is likely to trade in the range of $18.50$21 in the near term.
Base metals defy weak fundamentals, rally on prospects of stimulus from major central banks
Key points
ICSG-Refined copper market for Q12016 was in production surplus of 42,000 tonne against a surplus of 143,000 tonne in the same period

of 2015
Economic Intelligence Unit's (EIU) July edition - Global copper consumption to expand by 2% in 2016-2017 against contraction of 0.8%
in 2015
ILZSG- Refined lead market balance in surplus of 11,300 tonne in April 2016 against a surplus of 14,100 tonne in March 2016
EIU - World refined lead consumption to expand by average 2.3% in 2016 (previously 2.9%) against contraction of 3.1% in 2015
ILZSG- Refined zinc market balance in deficit of 2,500 tonne in April 2016 against a deficit of 20,400 tonne in March 2016
China's CRU analyst: China's refined zinc output could drop by 6% in 2016 to 5.65mn tonne (mt) due to supply shortage of mined
concentrate
EIU: Refined nickel consumption to rise 5.1% to 1.88 mt tonne(earlier 1.98 mt), revised lower due to sharp downward revision in 2015
consumption estimate to 1.79 mt tonneby WBMS
Copper
CMP Rs335/kg (August 2016 contract)
MCX copper ended June with modest gains of 4.65% at Rs327/kg, helped by a sentiment based rally amid growing prospects of further
monetary easing by major global central banks and near zero probability of rate hike by the US Federal Reserve in 2016 post UK's surprise vote
to leave the European Union (EU). Copper stocks at LME warehouses jumped 26% to 191,525 tonne in June from 151,725 tonne at May end.
Stocks at the Shanghai exchange fell by 26% to 161,897 tonne from 221,212 tonne in same period. China's may refined copper imports declined
by over 6% to 319,255 tonne from 341,677 tonne in April 2016. The Global Economic Outlook needs to be reviewed in view of Britain's
impending exit from the EU and the consequent political-cum-economical turmoil in Europe. We expect current central banks induced frenzy to
fizzle out at higher levels. We expect copper to trade in the range of Rs354/kg - Rs312/kg.
Lead
CMP Rs125/kg (July 2016 contract)
MCX lead ended June 5.7% higher at Rs120.25/kg from Rs113.70 in May, led by the prospects of further monetary easing by major central banks.
Lead inventories on LME remained steady at 185,225 tonne by June-end versus 185,475 tonne in May. However, stocks in Shanghai rose by over
20% to 32,417 tonne compared to 26,845 tonne in May 2016. EIU estimates China's lead consumption to grow modest 0.5% in 2016 on weak
battery demand from the E-cycle sector and rising environmental concerns (supporting lithium-based batteries). At the same time, renewed policy
measures to support the Chinese economy with a combination of fiscal and monetary measures and heightened electric car battery demand would
support prices at lower levels. In view of the current mixed fundamentals, we expect lead to trade in a range of Rs131/kg - Rs115/kg.
29
July 2016
MONTHLY VIEW
COMMODITY
Zinc
FUNDAMENTALS
MCX zinc ended June with stellar gains of 10% at Rs142.10/kg, driven by expectations of deficit balance, concerted supply cuts in China and
broad rally in industrial metals. Zinc stocks on LME rose by over 16% to 443,175 tonne at June-end from 380,700 tonne in May. However,
stocks in Shanghai fell by 9% to 206,094 tonne from 230,557 tonne in May. EIU estimates the global refined zinc consumption to grow 1.8%
in 2016 as against a growth of meagre 0.3% in 2015, while China's zinc consumption is expected to grow 4.5% after expanding 1.3% in 2015.
We too remain bullish on zinc, but we see current price outdoing the deficit story. We expect zinc to meet selling pressure at higher levels of
Rs148/kg while Rs127/kg will be a supportive area.
Nickel
MCX nickel turned out to be the best performer among the base metals, gaining 12% closing June at Rs636.70/kg against Rs568.70/kg, fueled
by the prospects of potential threat to supplies from the Philippines and workers' strike jitters in Columbia's South 32 mine over wage issues.
Nickel inventories in Shanghai rose by 3% to 99,273 tonne from 96,491 tonne in May-end. However inventories on LME fell by over 5% to
379,338 tonne from 401,766 tonne. Although prices have managed to bounce off the supports, we expect huge visible inventory of ~25% of
annual consumption on exchanges to weigh on rallies. We expect nickel to trade in a range of Rs760/kg - Rs630/kg in the near term.
CMP as on July 08, 2016
Events watch: Major economic events in July 2016

Region
Event
Survey
Actual
Prior
01-07-2016
Date
US
ISM manufacturing
51.3
53.2
51.3
Better than expected data is supportive for base metals and crude oil; however Brexit
fallout to limit the gains
Impact
01-07-2016
China
Caixin China PMI mfg
49.2
48.6
49.20%
China's manufacturing continues to contract. The data signals continued slowdown in China,
which is a concern for the demand for industrial commodities. The anticipation of more stimulus
is supporting industrial metals; however overall, it doesnt bode well for industrial commodities
01-07-2016
China
non-manufacturing PMI
53.71
53.10%
Supportive for industrial commodities; however for China, manufacturing sector PMI is
more important
01-07-2016
EC
Markit Eurozone manufacturing
52.6
52.8
52.6
Data topping forecast helpful for industrial commodities and Euro; however Brexit implications
continue to weigh
01-07-2016
EC
Sentix Investor Confidence
1.7
9.9
Positive for Euro, but US Dollar remains stronger against GBP and Euro in the wake of
Brexit as the ECB and the Bank of England (BOE) are seen easing further to contain the
negative impact of Brexit
05-07-2016
US
Durables ex transport
-0.30%
-0.30%
-0.30%
Data in line with forecast; thus, no major reaction seen; though it signals weaker demand
for base metals
05-07-2016
EC
Markit Eurozone Services PMI
52.4
52.8
52.4
Somewhat supportive for Euro and industrial commodities
06-07-2016
US
ISM non-manufacturing composite
53.3
56.5
52.9
On the face of it, the data is quite positive for the US economy; however Markit services
data at odds with this data. So, one has to take the ISM data with a pinch of salt
06-07-2016
US
FOMC meeting minutes
07-07-2016
US
ADP employment change
160K
07-08-2016
US
Change in non-farm payrolls
180K
The minutes revealed that the Fed was concerned about disappointing non-farm payroll
report for May. Now that Brexit has come as a black swan event, the Fed is likely to delay
incremental rate hikes, which is positive for the bullion counters
172K
173K
The data topping forecast is positive for the US Dollar. More so as it is quite a decent
number compared with the non-farm payroll (NFP) job change of merely 38K in May; however
ADP data for the last month was way off from the actual NFP figure, so markets would wait
for NFP report before showing any reactions
38K
The data for May was utterly disappointing. The ADP data suggests that it could be one-off
data; so, the data matching forecast would be positive for the US Dollar. Industrial
commodities would initially fall as the markets have been expecting the Fed to delay rate
hikes because of soft data and Brexit
07-08-2016
US
Average hourly earnings m-o-m
0.20%
0.20%
The US Dollar strengthens and then the bullion counters would fall if the data tops the forecast
14/07/2016
US
PPI ex food and energy m-o-m
0.10%
0.30%
The room for the US Fed to keep rates low would be limited if inflation reading starts rising.
In that case, commodities would decline
13/07/2016
China
Trade balance
$46.3 B
$49.90B
Both imports and exports figures need to be analyzed so as to look at the demand in both
China and other part of the world. Industrial commodities would rise if demand looks healthy
15/07/2016
US
U. of Michigan Sentiment
93.50%
93.50%
A decline in sentiment would spell downbeat sentiments about consumer spending, which
would be positive for the bullion and negative for industrial commodities
15/07/2016
China
Industrial production y-o-y
5.90%
6%
China's slowdown is a major concern for the global economy and the markets. Data falling
short of expectations would be negative for the industrial commodities and somewhat positive
for gold
15/07/2016
China
GDP y-o-y
6.60%
6.70%
China's GDP growth rate has fallen to the lowest level in the last 25 years. Disappointing
data would be bearish for the base metals and crude oil, while gold can gain on safe haven
demand as wider markets could fall
19/07/2016
US
Housing starts
1170K
1164K
Better than expected data to lend support to the industrial commodities and the US Dollar
27/07/2016
US
FOMC rate decision
0.50%
0.50%
No change expected in the policy rate; however markets would be looking forward to the
stance of the US Fed after Brexit. The Fed is expected to delay further rate hikes; thus a
confirmation of the same would be positive for gold and silver. The US Dollar would fall in
that case
29/07/2016
Japan
BoJ monetary policy statement
July 2016
Markets are looking forward to further support from the central banks after the unexpected
Brexit event; however BoJ standing pat would weigh on the markets
30
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Monsoon deficit for June narrows to 6%

News highlights
Price performance
Commodity
Kharif sowing down 22.7% to 215.87 lakh hectare v/s 279.27

lakh hectare last year
NCDEX curbs trading in chana futures, disallows fresh buying

and selling
Chana
Jun 30,
2016 (Rs)
May 31,
2016 (Rs)
July
8,035
6,127
31.14
Cotton (MCX)
July
20,320
18,370
10.62
Vegetable oil imports fall 25% in May to 10.24 lakh tonne

from 13.72 lakh tonne YoY
Cottonseed oilcake
July
2,548
2,357
8.10
Dhaniya
July
7,261
6,890
5.38
Sugarcane arrears plunge as mills clear 92% cane dues to farmers
Guargum
July
5,690
5,320
6.95
India's cotton imports to increase on tight supplies and demand

from textile industry
Rabi pulses procurement touches 68,000 tonne
India offers to buy tur dal from Mozambique at MSP, plus cost
Kharif crop sowing in India
Crop
(Figs in lakh hectares)
Area sown in
2016-17
Area sown in
2015-16
Change
%
Rice
47.77
47.62
0.31
Pulses
19.85
22.25
-10.79
Coarse Cereals
37.15
43.72
-15.03
Oilseeds
28.71
54.24
-47.07
Sugarcane
44.38
43.68
1.60
7.43
7.6
-2.24
Jute & Mesta

Cotton
Total
30.59
60.16
-49.15
215.87
279.27
-22.70
% Change
Guarseed
July
3,219
3,148
2.26
Jeera
July
18,040
16,495
9.37
Maize
July
1,554
1,406
10.53
Ref Soy Oil
July
637.45
656.95
(2.97)
RM Seed
July
4,770
4,503
5.93
Soyabean
July
3,740
3,880
(3.61)
Sugar
July
3,585
3,555
0.84
Turmeric
July
8,292
7,972
4.01
Wheat
July
1,764
1,708
3.28
Prices gained 9.37% MoM to Rs18,040 per quintal from Rs16,495

last month.
Jeera may trade with a positive bias. Continued demand from
domestic and overseas markets may further support prices. Declining
arrivals may also support prices. However, demand may decline at
a higher prices. Also, above-average southwest monsoon in the jeera
belt may pressurise prices, as it will improve the soil fertility for sowing.
Cotton
Soya bean
Cotton July futures contract on MCX was one of the biggest gainers in the agri commodities basket in June. Prices gained a whopping 10.62% month-on-month (MoM) to Rs20,320 per bale (1
bale = 170 kgs) from Rs18,370 last month. Prices are currently
trading at the highest levels in 25 months. Prices have gained largely
due to lower sowing of cotton in view of the delayed start of the
southwest monsoon. Tight supplies due to lower production last
year also supported prices. As at June-end, cotton sowing across
the country stood 49.2% lower at 30.59 lakh hectares compared
to 60.16 lakh hectares during the corresponding period of last year.
Soya bean July futures witnessed some recovery in the early part of
June, as delayed monsoon onset raised concerns about sowing of
the crop. Also, tight supplies and positive overseas markets lifted it
to a high of Rs4,011. Higher soya bean prices on CBOT (due to
lower-than-expected planting), besides concerns over crop in Argentina also supported prices.
However, with gradual improvement in southwest monsoon
progress and commencement of sowing, prices again declined from
higher levels. Weak demand for soya meal exports added to the
downside pressure. Though the sowing has been delayed slightly
due to slow start of monsoon, it is expected to pick up in the coming weeks. Prices made a low of Rs3,707 toward the end of June
and closed 3.61% lower MoM at Rs3,740 compared with Rs3,880
in the previous month. According to SEA of India, soya meal exports from India declined 92.77% to 1,015 tonne in May 2016
from 14,046 tonne in May 2015.
The overall trend for cotton is expected to remain positive, as lower

area under cultivation may continue to support prices. Declining
arrivals may also support prices. However, pick-up in monsoon
may lead to increase in sowing activities, which may cap sharp
gains. Some weakness in the overseas markets may also pressurise
prices at higher levels.
Jeera
We expect soybean (July) prices to remain weak due to huge FED

stocks. However, the new crop contracts (October'16 onwards)
may gain on the back of cues from lower acreage. Improvement in
rains, weak soya meal exports and expectations of a pick-up in
sowing may cap the upside.
Jeera July futures bounced back in June on the back of revival in

demand from the domestic as well as overseas markets. Prices
touched a new 13-month high of Rs18,425. Arrivals of the new
crop have also tapered off, as the peak arrival season is over.
Expectations of lower output also helped push the prices higher.
Expiry
31
July 2016
TREND & VIEW
COMMODITY
TECHNICALS
Gold: Bullish outlook

In February, gold had broken out from a large Ending Diagonal

pattern. Post the breakout, it formed an impulse on the upside
and witnessed a short-term correction, which halted near the
end of May. Since the beginning of June, the yellow metal has
started another multi-month impulse on the upside, which is
breaking up into lower degree waves.
KST (3.85227)
5
0
1460
1450
1440
1430
1420
1410
1400
1390
1380
1370
1360
1350
1340
1330
1320
1310
1300
1290
1280
1270
1260
1250
1240
1230
1220
1210
1200
1190
1180
1170
1160
1150
1140
1130
1120
1110
1100
1090
1080
1070
1060
1050
1040
1030
161.8%
100.0%
61.8%
The recent short-term correction was arrested near the key

DMAs, which has brought in fresh buying interest.
Consequently, gold has resumed its rally. The levels of $1367
and $1438 will be the short-term and medium-term targets,
respectively. The level of $1300 will act as a crucial support on
a closing basis.
View
Reversal
Supports
Resistances
Target
$1300
$1320/$1305
$1358/$1400,
$1438
0.0%
ember
Up
December
2016
Febr uar y
March
April
May
June
July
Augus t
Silver: Sharp rally

Silver had broken out from a multi-month falling trendline in

April. It formed an impulse on the upside and entered a
correction mode. The fall completed at $15.77 where it
encountered multiple supports. Silver has started a fresh move
on the upside, which is also unfolding in an impulsive manner.
KST (8.63629)
5
0
-5
SILVER [CASH] ( 18.7740, 19.9000, 18.6750, 19.7370, +1.04700)
22.5
22.0
21.5
21.0
20.5
20.0
On the way up, the white metal has crossed the equality target
and is extending on the upside. Daily and weekly momentum
indicators are in a bullish mode.
19.5
19.0
18.5
0.0%
18.0
17.5
23.6%
The level of $22.05 will be the key level to watch on the upside
from a short-term to medium-term perspective. On the flip side,
the level of $18 will act as a crucial support.
17.0
38.2%
16.5
50.0%
61.8%
16.0
78.6%
15.5
15.0
100.0%
View
Up
Reversal
Supports
Resistances
Target
$18
$18.67/$18.17
$21.10/$21.75
$22.05
14.5
14.0
13.5
tober
Novem ber
Decem ber
2016
February
March
April
May
June
July
August
Crude oil: Distribution underway

NYMEX crude oil rallied nicely in February andMarch. After

touching a high of $42.49, it witnessed a short-term correction,
which found support near the junction of 40 DEMA, daily lower
Bollinger Band and the 38.2% retracement mark.
KST (-0.16646)
15
10
5
0
-5
-10
LIGHT CRUDE CONTINUOUS 1000 BARRELS [NYMEX] ( 48.3800, 49.3000, 47.9000, 48.9900, +0.66000)
54
53
52
51
50
49
48
47
Crude oil resumed its ascent once again and crossed the high of
$50.92. However, it couldn't sustain at higher levels and has
retreated from there. It has broken a crucial rising trendline
and has entered a correction mode.
46
45
44
43
42
41
40
39
38
37
36
Structurally, it seems to have formed a distribution triangle.

The levels of $45.83 and $44.11 will be the key levels to watch
on the downside. On the other hand, $50 -$51.67 will act as a
key resistance zone.
35
34
33
32
31
30
29
28
27
26
25
16
View
Down
July 2016
Reversal
Supports
Resistances
Target
$51.67
$46.31/$45.50
$50.45/$51.54
$45.83$44.11
32
22
29
7
March
14
21
28
4
Apr il
11
18
25
2
May
16
23
31
6
J une
13
20
27
4
July
11
18
25
1
8
Augus t
COMMODITY
TREND & VIEW
TECHNICALS
Copper: Getting hot

In june, COMEX copper had taken support near the 78.6%

retracement of the previous rally. Since then, copper is moving
up. It is forming higher tops and higher bottoms on the daily
chart.
KST (4.86358)
5
0
-5
HG COPPER CONTINUOUS 25000 LBS [COMEX] ( 2.20150, 2.23750, 2.16350, 2.21700, +0.02150)
2.45
2.40
Last week, the red metal crossed the key WMAs. The weekly
momentum indicator has triggered a fresh buy signal, whereas
the daily momentum indicator is already in bullish mode.
2.35
0.0%
2.30
2.25
23.6%
2.20
38.2%
Thus, copper can continue to move higher. The levels of $2.3235

and $2.40 will be the key levels to watch on the upside. On the
other hand, $2.12-$2.10 will act as a key support zone.
2.15
50.0%
2.10
61.8%
2.05
78.6%
2.00
1.95
100.0%
View
Up
Reversal
Supports
Resistances
Target
$2.10
$2.16/$2.13
$2.30/$2.38
$2.32
$2.40
1.90
16
ber
23 30 7
14
December
21 29
11
2016
19 25
1
8
16 22
February
29 7
Mar ch
14
21 28
4
11
Apr il
18
25
2
9
May
16
23
31 6
June
13
20
27
4
July
11
18
25
1
8
Augus
Jeera: Bears take charge

NCDEX jeera was moving up in a channelised manner since

the beginning of February. It formed a channel within a channel.
It entered a correction mode from the upper ends of both the
channels.
KST (4.89077)
5
0
-5
JEERA QUINTAL - 1 MONTH (18,125.00, 18,125.00, 17,490.00, 17,530.00, -510.000)
19000
18500
18000
Near the end of May, it cracked below the lower end of the
larger channel. However, the bears could not push the price
significantly down. In fact, the bulls took the charge back and
pushed the price higher again.
17500
17000
16500
16000
15500
The commodity advanced in a channelised manner. Recently,

the price has broken down from the channel. The daily
momentum indicator has triggered a bearish crossover.
0.0%
15000
23.6%
14500
38.2%
50.0%
14000
61.8%
Thus, jeera seems set for a correction again. Rs16,230 will be

the target from a short-term to medium-term perspective. On
the other hand, Rs18,125-18,425 will act as a key resistance zone.
View
Reversal
Supports
Resistances
Target
Down.
Rs18,425
Rs17,346/17,015
Rs18,000/18,125
Rs16,230
13500
100.0%
13000
12500
7
14
Dec ember
21
4
11
2016
18
25
1
8
February
15
22
29
8
Marc h
14
21
4
April
11
25
2
May
16
23
30
6
June
13
20
27
4
July
11
18
Soyabean: Rolling down

NCDEX soyabean formed a triangular pattern and broke out

on the upside in March. After that breakout, the commodity
advanced in a channelised manner.
KST (-2.07832)
5
0
SOYBEAN QUINTAL - 1 MONTH (3,717.00, 3,769.00, 3,713.00, 3,721.00, -19.0000)
4450
4400
4350
However, near the end of April, it broke the lower end of the
channel and entered a correction mode. The commodity tumbled
toward the medium-term rising trendline, where it consolidated
for a few days.
4300
4250
4200
4150
4100
4050
4000
3950
The consolidation has broken out on the downside and the

commodity has breached the trendline as well. Thus, soybean
looks poised to test the low of Rs3,585. On the flip side, Rs3,820
will act as a key resistance on a closing basis.
3900
3850
3800
3750
3700
3650
3600
3550
3500
3450
View
Reversal
Supports
Resistances
Target
Down
Rs3,820
Rs3,660/3,607
Rs3,770/3,800
Rs3,585
3400
3350
2
9
November
33
23 30 7
14
December
21
4
11
2016
18
25 1
8
15
February
22
29 8
March
14
21
4
11
April
25
2
9
May
16
23
30 6
June
13
20
27
4
July
11
18
25
1
8
Augus
July 2016
MONTHLY VIEW
CURRENCY
FUNDAMENTALS
Currencies: Pound plunges on Brexit vote

Key points
RBI kept its policy rates unchanged; Repo rate at 6.5% and CRR at
4%
India's industrial output fell 0.8% in April after a 0.3% rise in March
India's CPI rose to 5.76% in May from 5.47% in April
India WPI climbed to 0.79% in May from 0.34% in April
June 2016 contract price movement
CURRENCY LEVELS IN JUNE 2016 (IN RS)

Currency
High
Low
Close
Monthly chg (%)
USDINR
68.22
66.55
67.95
1.36%
EURINR
76.92
74.04
75.34
0.55%
GBPINR
100.49
89.62
90.77
-7.64%
JPYINR
68.11
60.30
66.38
8.40%
June 2016 contract price movement
USD-INR
CMP: RS67.38 (spot)
The Indian Rupee depreciated by 1.36% against the US Dollar last month, as market sentiments were hurt after Britain decided to leave the
European Union (EU) through a public referendum. Further, a stronger Dollar and downbeat macro-economic data added downside pressure.
FII's net outflows weighed on the Indian Rupee. FII's net sold Indian stocks and bonds worth Rs2,507.36 crore in May. Rise in inflation dented
expectations of a rate cut by the Reserve Bank of India (RBI).
Outlook: The Indian Rupee is expected to trade with a negative bias on the back of a stronger Dollar and concern about FII outflows (amid
uncertainty over the fallout of Brexit and RBI Governor Raghuram Rajan's decision to not opt for a second term). Investors are moving towards
safe haven assets and pulling back from riskier assets, as market sentiment is weak after Brexit led to concerns of fresh global economic slowdown. As per the latest REER reading (provisional; Rs110.23), the Rupee is overvalued by more than 10%. Expected trading range in the near
term is Rs66.20 - 68.80.
EUR-INR
CMP: Rs75.00 (spot)
The Euro depreciated by 0.22% on the back of a stronger Dollar and downbeat economic data. Further, investors fear that the European Central
Bank (ECB) may add more monetary stimulus, as Britain's decision to leave the EU could dampen growth across the Eurozone. ECB President
Mario Draghi says that euro area growth could decline by as much as 0.5% cumulatively for the next three years.
Outlook: The Euro is expected to trade with a negative bias on expectations of further monetary easing by the ECB to revive economic growth.
Further, a stronger Dollar and weak economic data from the Eurozone will add more downside pressure. Traders will remain cautious ahead of
speeches from major central bankers (to get an idea about future monetary stance) and ECB monetary policy meeting. Expected trading range in
the near term is Rs72.90 - 76.20.
GBP-INR
CMP: Rs89.28 (spot)
The Pound depreciated by 8.09% against the Dollar. It fell to a 31-year low, as the UK decided to leave the EU. More than 51% people across the
UK voted to leave the EU. Traders fear wider constitutional issues if the Northern Island or Scotland decide to break away from UK. Further,
rating agency S&P has downgraded UK's sovereign credit rating. EU leaders have told Britain to act quickly to resolve political and economic
gridlock after the IMF warned that uncertainty over 'Brexit' could put pressure on the already sluggish global economy.
Outlook: The pound is expected to trade with a negative bias on the back of expectations of weak economic data from UK and dovish statements
from the Bank of England (BOE) Governor Mark Carney. A series of downbeat economic data has led to the fears that the British economy is
losing momentum. Market sentiments have been rattled due to the negative outcome of the UK referendum. Some market participants fear that
Britain's impending exit from the EU may prompt Scotland to leave UK. Investors will remain cautious ahead of the BOE monetary policy
meeting. Expected trading range in the near term is Rs86.50 - 91.90.
JPY-INR
CMP: Rs66.00 (spot)
The Yen appreciated by 6.71% as demand for safe haven assets increased in the wake of Britain's decision to leave the EU. Investors are worried
that the so-called 'Brexit' may impact emerging market (EM) economies. However, sharp gains were capped on expectations that the Bank of
Japan (BOJ) may intervene to halt the Japanese currency's rise.
Outlook: The Yen is expected to trade with a positive bias as the demand for safe haven assets may increase on lingering worries about the state
of the global economy. Market sentiments remained fragile after Britain voted to leave the EU. However, sharp gains may be prevented due to a
stronger Dollar and downbeat Japanese economic data. Traders fear that the BOJ may ease its monetary policy further to revive economic
growth. Further, markets foresee the BOJ intervening in the foreign exchange markets to halt any sharp rise in the Yen, as it hurts Japan's exportcentric economy. Expected trading range in the near term is Rs64.0 - 68.20.
CMP as on July 07, 2016
July 2016
34
CURRENCY
TECHNICALS
TREND & VIEW
EUR-INR: Scope for upside
USD-INR: Potential to extend the rally

USDINR had crossed the all-time high of Rs68.80 and touched

a new high of Rs68.89. However, it couldn't sustain at higher
levels and retreated sharply.
The fall found support near a crucial swing low as well as near
the lower end of a medium-term rising channel. It formed an
accumulation triangle near those supports and started rallying.
The rally is breaking up into lower degree waves. The overall
structure suggests that there is scope for extension of the ascent.
Key levels to watch on the upside will be Rs68.30-68.90. On
the other hand, Rs66.75-66.44 will act as a key support zone
on a closing basis.
MAC D
- IN D I A N
R U P E E ( 6 7 .4 9 8 7 , 6 7 . 5 0 4 3 , 6 7 . 1 4 0 0 , 6 7 .1 7 9 8 , - 0 . 3 1 3 7 0 )
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
1 0 0.0 %
7 8 .6 %
6 1 .8 %
5 0 .0 %
3 8 .2 %
2 3 .6 %
0 .0 %
N o ve m b e r
D e ce m b e r
2 01 6
F e b ru a ry
M a rc h

0 .4
0 .3
( 0 .1 3 3 1 4 )
0
0
0
-0
-0
-0
U S D IN R
EURINR has been oscillating around its key DMAs for the last
several weeks. On either side, the move is being capped by daily
upper and lower Bollinger Bands.
Last month, it made an attempt to cross the upper Bollinger
Band. However, it couldn't sustain at higher levels and fell back
towards the lower Bollinger Band.
A medium-term rising trendline is also there to provide support.
Thus, unless the level of Rs73.94 is breached on a closing basis,
EURINR can bounce back once again. The leels of Rs 76.91
and Rs77.50 will be the targets to watch on the upside.
A p ri l
Ma y
J un e
Ju ly
M A C D (-0 . 1 19 5 7 )
9
9
9
9
9
9
9
9
8
8
8
8
8
8
8
8
8
8
7
7
7
7
7
7
7
7
7
7
6
6
6
6
6
6
6
6
6
6
5
5
5
5
5
5
5
5
0 .0
-0 . 5
E U R IN R ( 7 4 . 9 3 8 0 , 7 5 . 1 5 4 0 , 7 4 .6 1 2 0 , 7 4 . 8 0 5 0 , - 0 .1 4 0 0 0 )
.7
.6
.5
.4
.3
.2
.1
.0
.9
.8
.7
.6
.5
.4
.3
.2
.1
.0
.9
.8
.7
.6
.5
.4
.3
.2
.1
.0
.9
.8
.7
.6
.5
.4
.3
.2
.1
.0
.9
.8
.7
.6
.5
.4
.3
.2
7 8 .5
7 8 .0
7 7 .5
7 7 .0
7 6 .5
7 6 .0
7 5 .5
7 5 .0
7 4 .5
7 4 .0
7 3 .5
7 3 .0
7 2 .5
7 2 .0
7 1 .5
7 1 .0
7 0 .5
7 0 .0
6 9 .5
6 9 .0
6 8 .5
6 8 .0
6 7 .5
Au g u s t
Au g u s t
S e p te m b e r
O c to b e r
N o ve m b e r
D e ce m b e r
20 1 6
F e b ru a ry
M ar c h
A p ri l
Ma y
J u ne
Ju ly
A u g u st
JPY-INR: Extending higher
GBP-INR:Nose dive
7 9 .5
7 9 .0
Ju ly
1 .0
0 .5
.2
.1
.0
.1
.2
.3
In the case of GBPINR, the bounce that had started from the
April low retraced 61.8% of the entire previous fall ie Rs105.5493.34.
Near the key Fibonacci level, the bears rushed to push the price
down. Consequently, the currency pair witnessed a vertical fall.
On the way down, it broke multiple supports. The daily and
the weekly momentum indicators have turned bearish. Thus,
the currency pair is likely to extend the fall. Subsequent level to
watch on the downside will be Rs86.10. On the other hand,
any minor degree bounce is likely to face resistance near Rs91.36
with a major resistance expected at Rs93.34.
MAC D
(-1 . 6 38 0 8 )
1
0
0
-0
-1
-1
G B P I N R ( 8 9 . 8 2 7 0 , 9 0 .0 9 7 0 , 8 8 . 9 4 0 0 , 8 9 . 0 8 7 0 , - 0 . 7 4 0 0 1 )
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1 0 0 .0 %
7 8 .6 %
6 1 .8 %
5 0 .0 %
3 8 .2 %
2 3 .6 %
0 .0 %
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
8
8
8
8
8
JPYINR is in an uptrend from a short-term as well as mediumterm perspective. Last week, the key DMAs acted as a
springboard from where the price surged significantly higher.
The price tested the upper end of the medium-term rising
channel. From there, the currency pair has come down to retest
the multiple trendline supports.
Momentum indicators on various timeframes are in a bullish
mode. Thus, JPYINR can start the next leg up from the current
level.
The range of Rs68.14-68.40 will be the key area to watch going
ahead. On the other hand, Rs64.13 will act as a key support.

.0
.5
.0
.5
.0
.5
M A C D ( 0 .9 9 2 8 2 )
1 .0
0 .5
0 .0
7. 0
6. 5
6. 0
5. 5
5. 0
4. 5
4. 0
3. 5
3. 0
2. 5
2. 0
1. 5
1. 0
0. 5
0. 0
9 .5
9 .0
8 .5
8 .0
7 .5
7 .0
6 .5
6 .0
5 .5
5 .0
4 .5
4 .0
3 .5
3 .0
2 .5
2 .0
1 .5
1 .0
0 .5
0 .0
9 .5
9 .0
8 .5
8 .0
7 .5
J P Y IN R
( 6 5 . 3 2 3 4 , 6 5 . 8 0 8 0 , 6 5 .2 5 4 1 , 6 5 . 5 1 5 7 , + 0 .1 9 7 3 0 )
6 9 .5
6 9 .0
6 8 .5
6 8 .0
6 7 .5
6 7 .0
6 6 .5
6 6 .0
6 5 .5
6 5 .0
6 4 .5
6 4 .0
6 3 .5
6 3 .0
6 2 .5
6 2 .0
6 1 .5
6 1 .0
6 0 .5
6 0 .0
5 9 .5
5 9 .0
5 8 .5
5 8 .0
5 7 .5
5 7 .0
5 6 .5
5 6 .0
5 5 .5
5 5 .0
8 7 .0
8 6 .5
5 4 .5
5 4 .0
8 6 .0
8 5 .5
un e
J u ly
Au gu s t
S ep 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 01 6
F e b ru a ry
M a rc h
A p r il
May
Ju n e
Ju ly
2 1
A u g us
2 8
4
2 01 6
1 1
1 8
2 5
1
8
F e b ru a ry
1 5
2 2
2 9
7
M a rc h
1 4
2 1
2 8
4
Ap r il
1 1
1 8
2 5
2
Ma y
1 6
2 3
3 0
6
J u n e
1 3
Currency
View
Reversal
Supports
Resistances
Target
USD-INR
Up
66.44
66.89/66.75
67.84/68.21
68.30-68.90
GBP-INR
Down
93.34
88.25/87.00
91.36/92.50
86.10
EUR-INR
Up
73.94
74.40/74.00
75.55/76.53
76.91-77.50
JYP-INR
Up
64.1300
65.00/64.27
66.97/67.70
68.14-68.40
35
2 0
2 7
4
J u ly
1 1
July 2016
PMS
WEALTHOPTIMIZER
DESK
WEALTHOPTIMIZER PMS
The Indian equity market presents an excellent opportunity for the long-term investors. Sharekhan offers you solutions to meet your
financial objectives. WealthOptimizer is a portfolio management product that involves enhancing wealth over the long term. The goal is
to not only outperform the market but also generate superior returns.
Strategy
To invest in the most undervalued stocks of growing companies on the basis of reported financial performance
How the product works
Fundamental analysis is performed on more than 5,000 companies
Stocks with sound fundamentals are picked, subject to strategy conditions
Top 10 stocks are selected each day based on the maximum scope to grow
No particular sector forms more than 20% of the clients portfolio
Fundamentals of stocks held are reviewed every quarter based on quarterly results
Automated decision making system for transparent and disciplined investing
Key product specifications
Minimum investment amount: Rs25 lakh
Recommended investment duration: Two years or more
Phone: 022-6750 2152 / 2261 / 2363 / 2104
E-mail: pms@sharekhan.com
Disclaimer: Product is offered by Sharekhan Ltd (Registered Portfolio Manager with SEBI Regn. Nos. INP000000662 CIN No. U99999MH1995PLC087498) and having registered office at 10th Floor,
Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai -400042, Maharashtra. Tel: 022-61150000. Email: igc@sharekhan.com,
pms@sharekhan.com. This information does not purport to be an invitation or an offer for services, client is required to take independent advise before opting for any service. Securities investments are
subject to market and other risks and client should refer to the risk disclosure document carefully. Past performance is no indication of future results. Future performance may vary. Detailed disclaimers and
risk disclosure document is available on our website www.sharekhan.com, please acquaint yourself with these before investing.
July 2016
36
PMS
DESK
PMS FUNDS
Portfolio Management Service

We are pleased to introduce you to Sharekhans Portfolio
Management Service (PMS) in which we completely manage
your investment portfolio so that you stop worrying about
the market volatility and focus your energy on things that
you like to do!
We have the following strategies on offer:
We have a wide range of strategies that you can choose from.

Our strategies are based on fundamental research and technical analysis.
ProPrime
(based on fundamental research)
Diversified Equity
ProTech (based on technical analysis)

Index Futures Fund
Trailing Stops
PROPRIME - DIVERSIFIED EQUITY

Product performance
as on June 30, 2016
OVERVIEW
The ProPrimeDiversified Equity PMS strategy is suitable for long-term investors
looking to create an equity portfolio through disciplined investments that will lead to a
growth in the portfolios value with medium to high risk.
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough

fundamental research.
Investments are made primarily in the Nifty Fifty or the BSE 100 scrips.
Attempts to have an exposure of minimum of 70% in the Nifty Fifty stocks and
that of minimum of 90% in the BSE 100 stocks.
Endeavours to create a core portfolio of blue-chip companies with a proven track

record and have partial exposure to quality companies in the mid-cap space.
(In %)
Scheme
S&P CNX 500
1 Month
2.3
2.6
3 Month
6.5
8.2
6 Month
-0.9
3.8
1 Year
2.2
1.2
Best Month
36.3
34.4
Worst Month
-23.4
-27.2
Best Quarter
60.3
51.2
Worst Quarter
-30.5
-28.6
Disclaimer: Returns are based on a clients

returns since inception and may be different from
those depicted in the risk disclosure document.
Top 10 stocks
PRICING
Minimum investment of Rs25 lakh
Charges
Apollo Tyres
Axis Bank
Federal Bank
2% per annum; AMC fee charged every quarter
IndusInd Bank
0.5% brokerage
Hero MotoCorp
20% profit sharing after the 12% hurdle is crossed at the end of
every fiscal
ICICI Bank
IL&FS Transport Networks
Lupin
Reliance Industries
Sun Pharmaceutical Industries
FUND OBJECTIVE
A good return on money through long-term investing in quality companies
37
July 2016
PMS FUNDS
PMS
DESK
PROTECH - INDEX FUTURES FUND

OVERVIEW
The ProTechIndex Futures Fund PMS strategy is suitable for long-term investors
who desire to profit from both bullish and bearish market conditions. The strategy
involves going long (buying) or going short (selling without holding) on Nifty futures
by predicting the market direction based on a back-tested automated model.
(In %)
Scheme
Sensex
Nifty
The strategy has the potential to generate profits irrespective of the market
direction by going long or short on Nifty futures.
1 Month
-5.79
1.24
1.56
3 Months
-17.73
6.54
7.10
An automated basic back-testing model is used to predict the market direction

for the Nifty which then decides the strategy to be deployed in terms of going
long or short.
Fy 15-16
11.28
-9.36
-8.86
Fy 14-15
-3.41
24.89
26.65
Fy 13-14
8.79
18.85
17.98
Fy 12-13
3.65
8.23
7.31
Fy 11-12
13.10
-10.50
-9.20
Fy 10-11
9.20
10.90
11.10
14.70
80.50
73.80
143.88
166.68
174.28
INVESTMENT STRATEGY
Product performance
as on June 30, 2016
The portfolio is not leveraged, ie its exposure never exceeds its value.
PRICING
Fy 09-10
Charges
Since Inception*
AMC fees:
0%
Brokerage:
0.05%
Profit sharing:
Flat 20% charged on a quarterly basis
Best Month
28.90
28.26
28.07
Worst Month
-17.10
-23.89
-26.41
Best Quarter
33.30
49.29
42.04
Worst Quarter
-17.73
-24.98
-24.53
*01-Feb-2006
FUND MANAGERS VIEW

The index futures fund has had two terrible months on account of long range-bound
moves or lack of trend. This usually results in multiple long/short signals in the same
range that end up losing money. Historically, this represents accumulation or
distribution of ranges that are followed by a strong trend which usually recovers all
the losses. However, we are close to a 20% drawdown which is our maximum for
the fund and it has caused some concern among investors.

Investments in
Nifty Index
Based on our past experience, we are confident that a trend would develop in the
market and we would recover from here. Moves that are not more than a week up
and then 3 weeks sideways should stop soon. Our market view is that we are in a
countertrend up move and when the market reverses trend, we should see gains from
the sell side of the trade.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
July 2016
38
PMS
DESK
PMS FUNDS
PROTECH - TRAILING STOPS

OVERVIEW
Our ProTechTrailing Stops PMS strategy is ideal for Traders and Investors looking for Regular Income from trading and desire to make profits in both bullish and
bearish market conditions. It is designed to payout book profits on monthly basis.*
It is also for those investors who are looking for better income than Fixed Income
or Deposits. This strategy involves going Long (buying) or Short (selling without
holding) on stock futures.
(In %)
* Terms and conditions apply
INVESTMENT STRATEGY
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls.
A risk model has been developed for stock portfolio allocation that reduces the
risk and portfolio volatility through staggered building of positions.
Product performance
as on June 30, 2016
It is non-leveragedthe exposure will never exceed the value of the portfolio.
Scheme
Sensex
Nifty
1 Month
0.36
1.24
1.56
3 Months
-0.26
6.54
7.10
Fy 15-16
-0.56
-9.36
-8.86
Fy 14-15
-3.69
24.89
26.65
Fy 13-14
-1.06
18.85
17.98
Fy 12-13
14.89
8.23
7.31
Fy 11-12
29.00
-6.10
-4.60
40.07
45.72
49.30
Fy 10-11
Fy 09-10
Since Inception*
PRICING
Best Month
9.10
11.25
12.43
Worst Month
-5.09
-8.93
-9.28
Charges
Best Quarter
9.90
13.52
13.53
AMC fees:
0%
Worst Quarter
-8.20
-12.69
-12.47
Brokerage:
0.05%
*09th May 2011
Profit sharing:
Flat 20% charged on a quarterly basis

FUND MANAGERS VIEW

Trailing stops have seen a marginal gain this month as we changed our portfolio
management strategy for the fund. The strategy change involves using an active
positions sizing model to build positions in line with our market view and our stock
specific trends to minimise losses and maximise gains. Our existing strategy of small
trades in and out for a few days has been applied for months and while it averted
significant losses it also did not generate any gains causing a time loss.
Investments in
Nifty Index
Stock futures
We are confident that this new strategy being implemented directly by the fund
manager will help in generating positive yields which is actually the object of the
fund. Our market view is that we are in a countertrend up move and when the
market reverses trend, we should see gains from the sell side of the trade.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
39
July 2016
MONTHLY PERFORMANCE
ADVISORY
DESK
Advisory Products and Services

The Advisory Desk is a central desk consisting of a Mumbai-based
expert team that runs various sample model portfolios (for illustrative
purposes only) for clients of all profiles, be they traders or investors.
These products are different from Sharekhans research-based
technical and fundamental offerings as these essentially try to capture
the trading opportunities in stocks where momentum is expected
before or after some event including the announcement of results or
where some news/event is probable.
Advisory products are ideal for those who do not have time to either
monitor the market tick by tick or shift through pages of research for
data or pour over complex charts to catch a trend. However, all
these products require perfect discipline and money management.
For investors
PORTFOLIO DOCTOR
It is a service under which the Portfolio Doctor reviews an existing portfolio based on various parameters and suggests
changes to improve its performance. To avail of this service please write to the Portfolio Doctor at
portfoliodoctor@sharekhan.com.
NEW ALPHA DELIVERY PICKS

This is a long only, cash market delivery product where stock
ideas will be rolled out based on short-term triggers with proper
fundamental rationale. Recently we revised certain features of
Alpha Delivery Picks to incorporate ideas from both the Fundamental research desk and the Market analysis team. The time
frame of the stock ideas in New Alpha Delivery Picks will be a
maximum of two months. Stop loss will be 5-10% and profit
potential will be 10-20%. We will report the old series performance data separately. For more details please write to us at
alphapicks@sharekhan.com.
For traders
SHAREKHANS PRE-MARKET ACTION
These ideas are put out in Sharekhans Pre-market Action report
along with stop loss and targets valid for a day. There is a market
watch list of stocks with positive and negative bias for intra-day
traders. For more details please write to us at
premarket@sharekhan.com.
New Alpha Delivery Picks Rules

Ideas
Ideas based on Stock Ideas,

Viewpoints, Stock Updates,
Market analysis
Weightage (%)
Stop Loss (%)
Maximum 10, minimum 5
Profit Potential (%)
Maximum 20, minimum 10
Time Frame
Maximum 2 months
Trail Stop loss
5% trailing Stop loss on 5%

rise in stock price
Exit Rules
A) Pre defined / Trail stop loss

is hit
B) Unexpected event/news/
outcome
MID DERIVATIVE CALLS

These calls are based on the analysis of open interest, implied volatility and put-call ratio in the derivative market. It is a leveraged product and ideal for aggressive traders. These calls have pre-defined stop
loss, targets, time frame and quantity to execute. For details of the
product please write to us at derivative@sharekhan.com.
C) Time frame
Performance
Reporting
Daily
Report Card
MID performance*
Product
Month
No. of calls
Open
Profit booked
Stop loss hit
Strike rate (%)
July 2016
MID Derivative Calls performance*

Ticket size (Rs)
New Alpha Delivery Picks

June 2016
FY2017
4
8
1
1
3
2
4
33
43
Month
No. of calls
40
100,000
June 2016
FY2017
16
55
Profit booked
30
Stop loss hit

Strike rate (%)
8
50
25
55
41
July 2016
MUTUAL FUNDS
MF PICKS
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)
DESK
JUNE 08 , 2016
Data as on June 01, 2016
Scheme name
Large-cap funds
SBI Bluechip Fund
Birla Sun Life Frontline Equity Fund
Reliance Top 200 Fund
Kotak 50
UTI Top 100 Fund
Indices
BSE Sensex
Mid-cap funds
DSP BlackRock Micro Cap Fund
Reliance Small Cap Fund
Franklin India Smaller Companies Fund
Mirae Asset Emerging Bluechip Fund
HDFC Mid-Cap Opportunities Fund
Indices
BSE MID CAP
Multi-cap funds
ICICI Prudential Value Discovery Fund
L&T India Value Fund
SBI Magnum Multi Cap Fund
Franklin India Prima Plus
Kotak Select Focus Fund
Indices
BSE 500
Tax-saving funds
Axis Long Term Equity Fund
Birla Sun Life Tax Relief 96
Franklin India Taxshield
BNP Paribas Long Term Equity Fund
DSP BlackRock Tax Saver Fund
Indices
Nifty 500
Thematic funds
ICICI Prudential Exports and Other Services Fund
Franklin Build India Fund
Kotak Infrastructure & Economic Reform Fund
Sundaram Rural India Fund
Birla Sun Life India GenNext Fund
Indices
Nifty 50
Balanced funds
HDFC Balanced Fund
L&T India Prudence Fund
Tata Balanced Fund
SBI Magnum Balanced Fund
Franklin India Balanced Fund
Indices
Crisil Balanced Fund Index
Star
rating

NAV (Rs)
Absolute
6 months
Returns (%)
Compounded annualised
1 year
3 years
5 years
Since inception
29.7
165.0
22.9
174.7
48.2
5.3
3.6
-3.2
2.2
1.4
5.6
1.2
-5.2
0.7
-3.1
21.0
18.3
18.1
16.2
15.5
15.7
13.5
12.1
11.4
11.1
11.2
22.6
9.8
19.9
12.1
26,713.9
2.1
-4.1
10.6
7.5
16.0
44.9
25.9
41.7
32.0
38.4
4.3
-5.5
5.3
1.6
1.5
11.6
7.9
7.9
7.9
2.2
42.4
40.0
35.5
34.0
28.9
24.1
21.4
23.7
23.0
19.2
18.2
18.2
14.7
21.8
16.2
11,332.3
2.3
5.8
21.0
10.2
21.2
113.9
24.9
34.4
454.6
23.3
-1.3
-1.9
4.1
3.2
1.3
-1.5
3.9
5.8
2.1
1.6
27.9
27.5
23.0
22.6
21.5
18.1
17.9
14.7
15.4
14.9
22.9
15.3
12.3
19.2
13.4
10,771.4
1.5
-2.2
13.1
8.2
14.7
31.1
22.0
433.8
29.6
33.2
3.0
2.1
2.7
0.7
2.3
1.2
2.4
1.7
-1.4
3.5
26.5
24.0
22.3
21.5
21.3
19.9
14.9
15.5
16.0
14.5
19.3
10.0
24.6
11.0
13.6
6,815.5
1.5
-2.0
13.3
8.6
9.2
44.3
29.2
15.4
29.5
55.8
-6.3
1.0
4.0
10.5
5.1
0.4
-1.4
0.3
15.1
1.9
31.2
30.1
23.3
22.4
19.2
20.9
20.3
11.0
14.2
17.8
15.2
17.2
5.4
11.3
17.2
8,180.0
2.8
-3.0
10.9
7.9
13.9
111.2
19.9
170.2
97.9
93.9
2.6
0.2
1.1
1.5
3.4
3.0
2.7
0.0
3.1
3.2
21.2
20.3
19.7
19.2
18.7
14.3
14.4
15.4
14.6
13.9
16.5
13.8
16.4
16.2
14.5
--
3.5
1.3
10.2
8.6
12.5
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan
first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest
that you get in touch with our Mutual Fund Advisor before investing in the best funds.
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.
July 2016
42
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP SIP FUND PICKS
JUNE 08 , 2016
Data as on June 01, 2016
Investment period
Total amount invested (Rs)
Funds would have grown to (Rs)
NAV
1 year
12,000
Present
Avg. annual
value (Rs)
return (%)
Present
value (Rs)
3 years
36,000
Avg. annual
return (%)
5 years
60,000
Present Avg. annual
value (Rs)
return (%)
Large-cap funds
SBI Bluechip Fund
30
12,685
6.2
46,835
9.4
96,362
10.1
Birla Sun Life Frontline Equity Fund
165
12,506
4.6
44,059
7.2
89,701
8.5
Kotak 50
175
12,435
3.9
43,937
7.1
85,728
7.5
Franklin India Bluechip
364
12,576
5.2
43,775
6.9
84,457
7.2
29
12,386
3.5
42,439
5.8
84,547
7.2
26,714
12,315
2.86
39,368
3.11
75,293
4.7
DSP BlackRock Micro Cap Fund
45
12,925
8.4
60,161
19.2
130,687
17.1
Franklin India Smaller Companies Fund
42
12,874
7.9
54,452
15.2
124,719
16.0
SBI Magnum Midcap Fund
64
12,834
7.6
54,338
15.1
121,478
15.4
Mirae Asset Emerging Bluechip Fund
32
12,561
5.1
53,643
14.6
118,736
14.9
UTI Mid Cap Fund
80
12,301
2.7
51,859
13.3
113,697
13.9
11,332
12,544
4.9
47,344
9.8
90,491
8.7
ICICI Prudential Focused Bluechip Equity Fund

BSE Sensex
Mid-cap funds
BSE Midcap
Multi-cap funds
L&T India Value Fund
25
12,182
1.6
49,423
11.5
105,234
12.1
ICICI Prudential Value Discovery Fund
114
12,239
2.2
48,227
10.5
103,771
11.8
Franklin India Prima Plus
455
12,510
4.6
47,078
9.6
95,802
10.0
Kotak Select Focus Fund
23
12,360
3.3
45,845
8.6
94,157
9.6
BNP Paribas Dividend Yield Fund
35
12,190
1.7
44,603
7.6
90,065
8.6
10,771
12,340
3.1
41,402
4.9
79,122
5.8
BSE 500
Tax-saving funds
Axis Long Term Equity Fund
31
12,378
3.4
48,196
10.5
105,078
12.1
Birla Sun Life Tax Relief 96
22
12,428
3.9
47,538
10.0
98,225
10.5
434
12,467
4.2
46,710
9.3
94,930
9.8
Franklin India Taxshield

Reliance Tax Saver (ELSS) Fund
44
12,093
0.8
45,944
8.7
95,904
10.0
BNP Paribas Long Term Equity Fund
30
12,204
1.8
45,213
8.1
93,371
9.4
8,180
12401
3.6
40,112
3.8
76,501
5.1
Nifty 50
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan
first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest
that you get in touch with our Mutual Fund Advisor before investing in the best funds.
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.
43
July 2016
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Sharekhan Earnings Guide

Company
CMP
(Rs)
Prices as on June 02, 2016

Sales
Net profit
FY17E
FY18E
EPS
(%) EPS
growth
FY16 FY17E FY18E FY17E FY18E FY17E
FY18E
Div
yield
(Rs) (%)
FY16
FY17E
FY18E FY18/FY16
-2%
7.5
9.5
7.8
13.0
14.5
12.4
13.3
2.0
31%
23.7
17.4
13.8
25.2
29.5
24.5
28.2
1.0
1.0
20.7
19.7
17.4
39.0
39.3
27.5
27.6
50.0
1.9
0.5
FY16
FY17E
FY18E
FY16
156.2
11,793.0
13,087.8
14,592.7
1,045.2
837.8
1,013.9
20.7
16.5
19.9
92.3
18,821.6
22,006.4
25,621.0
1,112.7
1,497.8
1,917.2
3.9
5.3
6.7
2,612.2
22,687.6
24,434.1
27,805.0
3,652.4
3,840.7
4,349.3
126.3
132.8
150.4
9%
PE (x)
RoCE (%)
RoNW (%)
DPS
AUTOMOBILES
Apollo Tyres
Ashok Leyland
Bajaj Auto
Gabriel Industries
1.3
94.0
1,438.2
1,593.7
1,789.8
75.8
83.8
100.1
5.3
5.8
7.0
15%
17.7
16.2
13.4
26.2
27.4
20.0
20.9
0.5
Hero MotoCorp
3,111.1
28,599.3
31,667.5
35,868.8
3,132.4
3,218.7
3,514.5
156.9
161.2
176.0
6%
19.8
19.3
17.7
48.6
46.4
35.1
33.0
40.0
1.3
M&M
1,459.7
38,856.6
45,883.2
52,478.1
3,291.9
3,870.1
4,807.2
53.0
62.3
77.4
21%
27.5
23.4
18.9
19.0
20.8
15.7
17.1
12.0
0.8
Maruti Suzuki
4,173.4
57,746.2
68,110.6
78,843.9
4,571.0
5,623.0
7,133.0
151.3
186.1
236.1
25%
27.6
22.4
17.7
24.4
26.7
18.2
19.9
25.0
0.6
40.4
1,007.0
1,111.8
1,245.0
34.0
41.6
57.2
2.5
3.1
4.2
30%
16.1
13.0
9.6
11.3
13.9
8.2
10.4
0.5
1.2
306.4
11,243.9
13,088.8
15,456.5
437.8
574.2
765.3
9.2
12.1
16.1
32%
33.3
25.3
19.0
24.1
29.5
25.3
28.8
2.5
0.8
0.0
Rico Auto Industries

TVS Motor
BANKS & FINANCE

Allahabad Bank
76.7
7,808.6
8,458.0
0.0
-743.3
663.8
0.0
-12.1
10.8
0.0
-6.3
7.1
4.4
0.0
0.0
Axis (UTI) Bank
539.7
26,204.4
30,442.4
35,621.5
8,223.7
9,438.7
11,258.4
34.5
39.6
47.2
17%
15.6
13.6
11.4
16.5
17.2
5.0
0.9
Bajaj Finance
8,170.0
4,029.7
4,973.7
6,210.9
1,278.6
1,563.6
1,969.9
238.8
292.0
367.9
24%
34.2
28.0
22.2
19.3
20.5
25.0
0.3
Bajaj Finserv
2,314.7
9,446.4
1,863.3
117.1
19.8
0.0
0.0
1.8
0.1
159.5
17,738.7
20,063.6
23,133.7 -5,395.6
2,239.0
3,635.4
-23.4
9.7
15.7
16.5
10.1
5.5
8.4
-4.2 -2.6
Bank of India
110.4
15,377.2
17,084.7
19,230.6 -6,089.2
959.5
1,250.0
-74.5
11.7
15.3
9.4
7.2
2.9
3.7
0.0
0.0
Capital First
616.8
818.1
1,087.6
228.1
316.4
18.2
25.0
34.7
38%
33.9
24.7
17.8
12.7
15.8
2.5
0.4
Corp Bank
44.8
5,974.6
Federal Bank
60.0
3,290.6
Bank of Baroda
1,422.2
166.2
6,381.9
0.1
-506.5
214.1
0.0
-5.0
2.1
0.0
21.4
1.9
0.0
0.0
0.0
3,684.7
4,284.5
475.8
744.4
1,017.9
2.8
4.3
5.9
46%
21.7
13.9
10.1
8.8
11.1
0.7
1.2
10,510.5
7,093.1
7,694.9
1.3
HDFC
1,260.7
8,387.5
9,356.6
8,653.5
44.9
48.7
54.7
10%
28.1
25.9
23.0
20.0
20.0
17.0
HDFC Bank
1,165.6
38,343.2
45,488.6
53,993.7 12,296.2
14,812.8 18,163.6
48.6
58.6
71.8
22%
24.0
19.9
16.2
18.9
20.0
9.5
0.8
245.1
36,547.1
39,070.1
45,327.9
11,233.1 13,921.5
16.7
19.3
23.9
20%
14.7
12.7
10.2
12.3
14.2
5.0
2.0
76.8
9,499.7
10,450.9
11,918.9 -3,664.8
498.8
2,944.1
3,323.3
ICICI Bank
IDBI Bank
LIC Housing Fin.
PTC India Fin. Ser.
9,726.3
977.4
1,497.4
-17.8
4.7
7.3
16.2
10.6
3.5
5.2
0.0
0.0
1,992.6
0.0
32.9
39.5
0.0
15.2
12.6
20.1
0.0
5.5
1.1
5.9
7.6
5%
5.7
6.8
5.2
18.0
20.3
1.2
3.0
8.7
17.9
13.1
6.4
4.4
8.5
0.0
0.0
0.0
1,660.8
671.8
391.1
333.0
429.3
7.0
30,725.2 -3,974.4
1,703.3
3,513.4
-20.2
12,490.9 14,925.9
40.0
414.2
527.2
Punjab National Bank
114.0
22,188.8
25,354.1
SBI
223.5
85,040.2
92,817.6
104,429.9
9,950.7
12.8
16.1
19.2
22%
17.4
13.9
11.6
8.4
9.4
2.6
1.1
Union Bank of India
134.6
11,944.8
13,113.4
14,645.1
1,351.6
1,955.0
2,361.9
19.7
28.4
34.4
32%
6.8
4.7
3.9
8.3
9.3
2.0
1.5
1,126.4
7,278.9
8,954.8
11,301.4
2,539.4
3,133.2
4,027.9
60.4
74.5
95.8
26%
18.7
15.1
11.8
20.9
22.6
10.0
0.9
Yes Bank
CONSUMER GOODS
Britannia
2,836.3
8,678.9
10,084.9
11,582.1
813.6
1,006.8
1,223.8
67.8
83.9
102.0
23%
41.8
33.8
27.8
75.0
68.3
48.9
44.5
20.0
0.7
Emami Ltd
1,125.7
2,623.8
3,121.6
3,684.9
526.9
617.3
808.1
23.2
27.2
35.6
24%
48.5
41.4
31.6
38.7
47.5
40.8
44.4
3.0
0.3
GSK Consumers*
6,187.4
4,106.6
4,450.3
4,976.6
683.8
789.7
872.9
162.6
187.7
207.5
13%
38.1
33.0
29.8
45.1
42.7
29.7
28.2
70.0
1.1
Godrej Consumer
1,661.8
8,957.2
10,336.6
12,113.8
1,140.3
1,324.5
1,627.0
33.5
38.9
47.8
19%
49.6
42.7
34.8
22.0
23.9
24.4
24.3
5.8
0.3
4,849.3
5,807.2
19.1
22.4
26.8
18%
46.6
39.7
33.2
153.2
149.4
114.3
110.2
9.5
1.1
10,829.5 12,819.8
8.2
9.0
10.6
14%
29.7
27.1
23.0
40.4
45.0
32.2
35.6
8.5
3.5
0.3
Hindustan Unilever
890.2
32,482.7
36,063.7
40,288.4
4,143.4
ITC
243.6
36,837.4
40,026.2
46,978.0
9,844.8
Jyothy Laboratories
303.7
1,646.6
1,869.4
2,167.4
157.9
181.2
216.9
8.7
10.0
12.0
17%
34.9
30.4
25.3
17.2
21.6
20.1
21.2
1.0
Marico
271.8
6,132.0
6,669.4
7,646.9
709.4
851.3
1,017.6
5.5
6.6
7.9
20%
49.4
41.2
34.4
47.5
45.6
35.9
33.9
3.8
1.4
Zydus Wellness
793.4
431.5
487.1
559.9
102.6
118.2
138.0
26.3
30.3
35.3
16%
30.2
26.2
22.5
22.6
22.2
20.7
20.8
6.5
0.8
IT / IT SERVICES
Firstsource Solution
48.9
3,230.3
3,648.7
3,979.4
265.0
327.3
383.8
3.9
4.9
5.7
20%
12.4
10.0
8.6
12.3
12.5
12.6
13.0
0.0
0.0
HCL Technologies***
738.4
31,136.0
47,022.3
53,192.4
5,669.0
8,000.9
9,195.6
40.3
56.9
65.4
27%
18.3
13.0
11.3
32.3
31.6
26.1
25.3
17.0
2.3
1,175.5
62,441.0
70,896.3
78,679.3 13,492.0
15,435.2 17,225.2
690.0
2,312.3
2,947.6
2,485.3 108,646.2
121,665.6
Infosys
Persistent Systems
TCS
Wipro
3,362.4
297.4
134,932.4 24,215.2
59.0
67.5
75.3
13%
19.9
17.4
15.6
35.1
35.3
25.2
25.4
24.3
2.1
399.3
37.2
42.2
49.9
16%
18.6
16.4
13.8
25.7
26.6
19.2
19.6
8.0
1.2
26,617.1 29,697.2
123.6
135.9
151.6
11%
20.1
18.3
16.4
38.1
35.3
30.0
27.7
43.5
1.8
36.2
40.5
45.1
12%
15.6
14.0
12.5
17.8
17.7
19.3
18.6
12.0
2.1
337.4
565.0
51,244.0
58,129.2
63,397.1
8,892.2
9,907.4
11,104.6
BHEL
139.4
25,138.0
29,240.0
33,308.0
-913.0
-98.0
946.0
-3.7
-0.4
3.9
35.7
4.4
2.8
0.4
0.3
CESC
604.5
6,493.0
7,150.0
7,787.0
707.0
746.5
794.8
53.3
56.3
60.0
6%
11.3
10.7
10.1
7.3
7.4
8.4
8.6
10.0
1.7
74.0
5,272.0
5,828.0
6,206.0
127.0
124.0
230.0
2.0
3.4
3.7
36%
37.0
21.8
20.0
5.7
6.1
4.5
4.6
0.0
0.0
Finolex Cable
372.7
2,461.0
2,682.0
3,036.0
249.0
271.0
302.0
16.3
17.7
19.7
10%
22.9
21.1
18.9
23.3
22.6
23.2
22.8
2.5
0.7
Greaves Cotton^
137.9
1,616.2
1,732.2
1,982.9
174.0
189.8
209.0
7.1
7.8
8.6
10%
19.4
17.7
16.0
30.0
30.4
20.7
20.9
5.5
4.0
Kalpataru Power
256.7
4,365.0
5,376.0
5,927.0
200.0
250.0
278.0
13.0
16.3
18.1
18%
19.7
15.7
14.2
17.1
16.6
10.6
10.7
1.5
0.6
78.6
12,799.0
13,709.0
14,464.0
234.0
244.0
257.0
7.9
8.2
8.7
5%
9.9
9.6
9.0
12.8
12.8
15.2
15.3
2.2
2.8
157.5
1,506.0
1,752.0
2,066.0
83.1
95.1
115.4
8.1
9.3
11.3
18%
19.4
16.9
13.9
24.7
24.2
22.3
22.1
1.3
0.8
CAPITAL GOODS / POWER
Crompton Greaves
PTC India
Skipper
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
44
July 2016
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Company
CMP
(Rs)
FY16
FY17E
FY18E
FY16
FY17E
FY18E
Thermax
851.4
4,352.0
4,066.0
4,328.0
306.0
291.0
319.0
Triven Turbine
122.1
796.3
1,032.4
1,191.8
107.6
147.7
172.2
Va Tech Wabag
593.3
2,549.0
3,020.0
3,577.0
85.6
128.5
1,417.9
1,862.0
2,104.0
2,436.0
111.7
131.4
649.3
1,812.2
2,215.7
2,787.3
58.6
81.5
8,263.8
8,624.0
9,277.9
311.5
218.0
5,130.2
5,744.0
6,333.5
635.8
797.8
11.6
8,793.8
- -3,511.7
1,576.1 102,632.0
115,975.0
V-Guard Industries
Sales
Net profit
EPS
(%) EPS
growth
PE (x)
RoCE (%)
RoNW (%)
FY16
FY17E
FY18E FY18/FY16
25.6
24.4
26.8
2%
33.3
34.9
31.8
16.2
16.7
11.3
11.4
3.3
4.5
5.2
27%
37.4
27.3
23.4
51.8
43.0
36.0
30.3
1.1
0.9
164.1
15.8
23.7
30.2
38%
37.6
25.0
19.6
17.5
19.4
12.5
14.5
4.0
0.7
158.8
37.1
43.7
52.8
19%
38.2
32.4
26.9
36.4
36.1
25.4
25.3
7.0
0.5
75.1
119.7
16.5
21.2
33.8
43%
39.2
30.6
19.2
9.9
11.7
8.9
12.8
2.0
0.3
224.1
324.2
9.5
6.8
9.9
2%
8.6
12.0
8.3
8.6
9.1
3.3
4.7
2.0
2.5
873.7
18.1
22.7
24.9
17%
12.0
9.6
8.8
12.3
14.2
15.5
15.0
4.0
1.8
-14.4
0.0
0.0
5,349.0
6,066.0
50.8
57.4
65.1
13%
31.0
27.5
24.2
7.7
8.3
11.6
12.1
16.3
1.0
2,019.0
2,387.0
42.3
33.6
39.7
-3%
8.8
11.1
9.4
9.9
11.3
8.9
10.1
16.0
4.3
27,848.0 32,483.0
92.3
94.5
110.2
9%
10.8
10.5
9.0
8.5
9.3
10.5
11.0
10.5
1.1
5.0
2.3
FY16 FY17E FY18E FY17E FY18E FY17E
DPS
FY18E
Div
yield
(Rs) (%)
6.0 0.7
INFRASTRUCTURE / REAL ESTATE

Gayatri Projects
ITNL
IRB Infra
Jaiprakash Associates
Larsen & Toubro
128,435.0
4,732.0
10,549.0
2,545.0
OIL & GAS

Oil India
374.3
9,765.0
9,053.0
Reliance Ind
993.1 276,544.0
308,545.0
Selan Exploration
213.4
62.0
78.1
0.0
12.9
20.9
0.0
7.9
12.7
27.0
16.8
9.3
0.0
7.2
Aurobindo Pharma
771.0
13,896.1
16,477.8
19,707.6
2,048.0
2,630.0
3,455.0
35.0
44.9
59.0
30%
22.0
17.2
13.1
29.4
33.1
31.6
30.6
2.5
0.3
Cipla
507.0
13,678.3
16,843.3
19,670.7
1,505.9
1,979.9
2,688.9
19.5
24.6
33.5
31%
26.0
20.6
15.1
14.5
17.4
15.2
17.4
2.0
0.4
Cadila Healthcare
334.2
9,837.6
10,763.2
12,437.1
1,522.6
1,870.5
2,265.9
14.9
18.3
22.1
22%
22.4
18.3
15.1
28.5
31.3
27.2
26.0
3.2
1.0
1,139.1
3,769.0
4,256.1
5,178.5
1,111.9
1,228.4
1,448.7
41.9
46.3
54.6
14%
27.2
24.6
20.9
33.5
34.1
26.7
26.1
10.0
0.9
0.2
356,080.0 27,207.0
PHARMACEUTICALS
Divi's Labs
Glenmark Pharma
824.9
7,650.0
9,615.0
10,101.0
1,068.0
1,453.0
1,546.0
37.8
51.5
54.8
20%
21.8
16.0
15.1
23.8
23.0
25.7
21.7
2.0
1,562.9
14,208.5
17,022.9
20,420.4
2,270.7
3,035.1
3,791.7
50.4
67.4
84.1
29%
31.0
23.2
18.6
22.2
25.6
21.7
21.5
7.5
0.5
774.5
28,269.7
35,638.9
36,757.9
5,401.1
7,317.6
8,122.9
22.4
30.4
33.8
23%
34.6
25.5
22.9
23.5
24.2
19.2
17.9
3.0
0.4
1,398.7
6,529.0
6,762.3
7,276.9
1,862.0
1,165.2
1,290.5
110.0
68.9
76.3
-17%
12.7
20.3
18.3
26.5
24.3
26.5
21.5
35.0
2.5
4,537.9
35,625.0
41,756.0
47,777.0
2,347.0
3,037.0
3,732.0
251.4
325.3
399.8
26%
18.1
13.9
11.4
14.2
16.2
10.3
10.9
18.0
0.4
570.1
3,661.0
4,044.0
4,560.0
517.0
615.0
737.0
21.7
25.8
31.0
20%
26.3
22.1
18.4
11.1
12.1
18.2
18.5
3.0
0.5
14,882.1
5,568.0
8,586.0
10,514.0
474.0
1,106.0
1,431.0
136.2
317.5
410.7
74%
109.3
46.9
36.2
16.0
17.0
16.0
17.0
24.0
0.2
3,375.2
23,841.0
27,354.0
32,193.0
2,205.0
2,778.0
3,559.0
80.5
101.4
129.9
27%
41.9
33.3
26.0
15.8
18.4
11.9
13.4
9.0
0.3
Lupin
Sun Pharma
Torrent Pharma
BUILDING MATERIALS
Grasim
The Ramco Cements
Shree Cement**
UltraTech Cement
DISCRETIONARY
CONSUMPTION
Century Plyboards (I)
207.3
1,664.0
1,925.0
2,192.0
167.0
199.0
230.0
7.5
8.9
10.3
17%
27.6
23.3
20.1
21.8
20.6
30.4
26.5
1.0
0.5
Cox and Kings
173.4
2,351.9
2,345.0
2,680.8
284.9
302.3
426.2
16.8
17.9
25.2
22%
10.3
9.7
6.9
10.3
13.0
13.1
16.5
1.0
0.6
Inox Leisure
247.4
1,332.7
1,589.7
1,910.2
77.5
91.9
124.1
8.4
10.0
13.5
27%
29.3
24.7
18.3
14.0
16.3
10.9
12.8
0.0
0.0
Info Edge (India)
850.5
723.5
854.5
1,024.9
153.0
209.6
261.1
12.7
17.3
21.6
31%
67.2
49.1
39.4
15.5
17.2
10.8
12.0
3.0
0.4
KDDL
200.3
449.8
514.2
605.7
5.3
8.7
16.7
5.2
8.6
16.4
78%
38.5
23.3
12.2
11.1
12.9
10.1
16.5
1.5
0.7
KKCL
1,814.1
457.4
517.0
585.8
68.0
84.9
97.3
55.1
68.9
78.9
20%
32.9
26.3
23.0
28.4
28.8
22.2
22.6
60.0
3.3
Orbit Exports
250.3
150.0
161.0
185.0
23.0
25.2
29.9
16.0
17.6
20.8
14%
15.6
14.2
12.0
15.9
16.6
20.7
20.9
3.8
1.5
Raymond
460.2
5,621.0
6,028.0
6,489.0
115.5
140.6
196.5
20.3
23.1
32.3
26%
22.7
19.9
14.2
10.9
12.4
8.4
10.6
3.0
0.7
Relaxo Footwear
490.5
1,715.4
2,038.4
2,465.6
120.2
155.5
203.9
10.0
13.0
17.0
30%
49.1
37.7
28.9
28.3
28.9
20.5
23.7
0.6
0.1
97.3
321.4
379.9
460.1
0.2
14.7
26.4
0.0
3.1
5.6
31.4
17.4
6.5
11.2
4.7
8.1
1.0
1.0
Thomas Cook India
223.7
4,236.7
5,402.7
6,609.4
50.2
145.8
317.4
0.8
3.0
6.5
185%
279.6
74.6
34.4
14.2
25.0
11.8
22.8
0.4
0.2
Wonderla Holidays
399.1
205.4
296.7
380.3
59.8
73.9
100.9
10.6
13.1
17.9
30%
37.6
30.5
22.3
25.7
31.0
17.5
21.1
0.5
0.1
Zee Entertainment
462.0
5,851.5
6,776.2
8,040.9
1,026.8
1,345.3
1,613.1
9.6
12.5
15.3
27%
48.3
36.8
30.1
26.6
28.5
20.7
21.9
2.3
0.5
6.4
6.5
4.4
4.5
5.0
0.4
25.0
1.5
Speciality Restaurants
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
1,273.1
5,422.6
7,110.5
7,794.1
303.6
370.0
395.2
23.3
28.5
30.4
54.6
44.7
41.9
Bajaj Holdings
1,620.4
469.8
2,265.2
203.5
8.0
365.9
96,619.0
10,600.0
116,770.0
4,775.0
6,429.0
8,114.0
11.9
16.1
20.3
31%
30.7
22.7
18.0
13.5
15.2
9.9
9.5
1.4
0.4
1,274.7
7,295.2
8,465.8
9,898.2
1,364.9
1,486.5
1,763.5
56.9
61.9
73.5
14%
22.4
20.6
17.3
18.0
18.3
13.4
13.7
25.7
2.0
17%
27.6
24.4
20.2
14.6
17.1
14.4
17.0
7.0
2.2
53.7
0.0
0.0
Bharti Airtel
Bharat Electronics
Gateway Distriparks
313.9
1,046.1
1,166.1
1,289.0
123.6
139.8
168.8
11.4
12.9
15.5
Max Financial
508.5
11,711.9
252.7
9.5
PI Industries
710.1
2,096.8
2,495.2
2,984.2
300.0
339.8
409.9
22.2
25.2
30.4
17%
32.0
28.2
23.4
31.3
32.2
26.1
25.2
3.1
0.4
Ratnamani Metals
521.3
1,719.0
1,841.0
2,026.0
162.7
181.0
198.0
34.8
38.7
42.4
10%
15.0
13.5
12.3
22.0
21.2
16.2
15.6
5.5
1.1
Supreme Industries**
898.6
2,974.8
5,030.5
6,084.4
212.2
421.1
524.0
16.7
33.2
41.3
57%
53.8
27.1
21.8
33.8
35.6
26.5
27.2
7.5
0.8
UPL
546.3
13,301.5
14,994.1
16,986.0
1,438.9
1,620.6
1,983.7
33.6
37.8
46.3
17%
16.3
14.5
11.8
18.2
18.7
20.3
20.6
5.0
0.9
^Marico post bonus 1:1

**June-ended financial year till FY2015, FY2016 consists of only 9 months
Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers
Divis Labs post 1:1 bonus
BEL post Bonus: 2: 1
*** June ended
45
* Inox Leisure FY2015 includes consolidation of Satyam Cineplexes, which will affect the overall profitability
#We have annualised these ratios to make them comparable
Cadila Healthcare post stock split from Rs5 to Rs1
July 2016
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
Automobiles
Apollo Tyres
Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share in India. The company
will be investing $600mn over the next three years to set up a greenfield facility in Hungary and Rs4,000 crore to
expand capacity at Chennai facility. The expanded capacities are likely to come on stream by 2017-18. Also the
recent foray in the 2 wheeler tyres strengthens Apollo Tyres presence across all the key automobile segments. The
operating margins are likely to dip by 300BPS to 13.6% in FY2017 given the increased raw material prices and
inability to take price hikes. We maintain our Buy recommendation on the stock with a revised price target of Rs180.
Ashok Leyland
Ashok Leyland, the second largest CV manufacturer in India, is a pure CV play. The MHCV have witnessed a
sustained recovery and have been growing in double digits over the past few quarters. We expect MHCV volumes
to remain buoyant over FY16-17 driven by a pick-up in the economic cycle, Mining & Infrastructure projects,
improved operator profitability, expectations of a normal monsoon and phase-wise implementation of Bharat
Stage IV norms across the country leading to pre-buying. Also, recent focus on defence sector would boost the top
line, albeit in the long term. A favorable product mix and an operating leverage will enable the company to
improve its margins. We have a Buy recommendation on the stock with a price target of Rs120.
Bajaj Auto
Bajaj Autos domestic motorcycle volumes have been under pressure over the last couple of years largely due to
issues in the executive segment However, the launch of CT100 and refreshed Platina has given a much needed
volume push while the newly launched Pulsar variants, Avenger and V-series would help consolidate its leadership
in the premium and luxury motorcycle segments. The macro-economic issues (sharp currency depreciation) in the
key export markets including Nigeria have affected the dispatches to these countries and the impact is likely to be
felt for the next one to two quarters. The launch of its quadricycle, RE60, has been delayed by legal issues and the
matter is expected to be sorted soon and will be a trigger for re-rating of the stock. The new permit issues in the
three-wheeler space shall act as key triggers for the company in the short term. Further, margins would also come
under pressure given the increase in the commodity prices, increased marketing expenses and expiry of incentives
at the Pantnagar plant. We maintain a Hold rating on the stock with an unchanged price target of Rs2,600.
Gabriel India
Gabriel is one of Indias leading manufacturers of shock absorbers and front forks with a diversified customer
base. Gabriels revenues are expected to grow at a healthy 12% CAGR due to improved outlook for the twowheeler industry, ramp-up in supplies to Honda Motorcycle and Scooters new plant in Gujarat and to the new
models of both Maruti Suzuki and M&M. In the near term the stock performance would be influenced by the
recovery in the two-wheeler markets and a likely positive rub-off from the implementation of the recommendations
of the Seventh Pay Commission and expectations of a normal monsoon in 2016. Also, the companys efforts to
curb raw material costs driven by value engineering and better sourcing coupled with operating leverage is likely
to lead to margin improvement. 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 a
domestic market share of 39%. We expect the two-wheeler industry to grow at 10-12% CAGR over the next five
years driven by increased penetration levels in rural areas and replacement demand. HMCL is expected to maintain
its leadership position in the industry with new launches in the premium motorcyles and scooters segments.
Further, massive capex plans implemented by the company in the past including production from Gujarat plant
are likely to commence operations in H1FY2017 which shall ramp up the production levels. However HMCLs
margins are likely to reduce by around 100BPS to 14.5% for FY2017 due to increased R&D expenses, commodity
price increases and higher marketing and advertising expenses. We have downgraded our rating on the stock from
Buy to 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 up
with an improvement in customer sentiment. Additionally, new launches especially in the compact UV space will
drive volume growth. After growing in strong double digits, the tractor demand was under pressure in FY15-16
due to weak monsoon. Given the above-normal monsoon forecast for FY2017 (leading to an improved rural
outlook), we have raised our FY2017 tractor volume growth forecast for M&M from 10% YoY earlier to 15%
YoY. We remain positive on the stock, given its leadership position in the domestic tractor and UV segments as
well as the value derived from its subsidiaries across business segments. We maintain our Buy rating on the stock
with a SOTP-based price target of Rs1580.
Maruti Suzuki
Maruti Suzuki is Indias largest passenger vehicle maker with a strong 46% market share. It has been able to gain
market share over the last two years on the back of a diverse product portfolio, a large distribution network with
an increased focus on rural markets and a shift in consumer preference to petrol models from diesel. It is poised to
reap the benefits from the increased discretionary spending from the Seventh Pay Commission pay-out. The
recently launched premium hatchback, Baleno and Compact SUV Vitara Brezza have received a positive response
which will help the company expand market share in the segment. Further, the company has a pipeline of new
launches over the next few years, with the most important being the entry into the compact utility vehicle and
light commercial vehicle segments. The management plans to double its existing sales and distribution network in
order to achieve its target of doubling domestic volumes over the next five years. MSILs yen exposure is expected
to reduce with a higher localisation level while the royalty on future models shall be INR denominated, thus
shielding the OPMs partly. We remain positive on the stock with a price target of Rs4,700.
46
July 2016
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Remarks
Rico is one of the largest producers of high-pressure non-ferrous die castings for the auto sector. It has divested its
50% stake in a joint venture with FCC Co., Japan for Rs495 crore. The significant cash flow (nearly equivalent to
current market cap) is expected to be a game changer for the company and has enabled it to deleverage its balance
sheet. Additionally, a lower interest burden will result in a growth in the earnings and free cash flow. The company
expects a revenue growth of 15% in the coming years. Further, Hero MotoCorps (biggest client contributing 32%
of revenues) new products especially in the scooter segment will add up to the revenues of Rico Auto. While a likely
improved performance from the two-wheeler segment and incremental revenues from the Chennai plant provide
comfort on top-line growth, the hardening of raw material prices are likely to affect the OPM, going forward. We
maintain our Buy recommendation on the stock with a price target of Rs47.
TVS Motor is the fourth largest two-wheeler manufacturer in the country with a strong presence in the scooter
segment. The scooter segment has surpassed the growth in the motorcycle segment over the past couple of years and
currently contributes 30% of the total two-wheeler volumes. With the launch of the Jupiter, the refreshed Wego and
the new Scooty Zest, the company has balanced its scooter portfolio and witnessed incremental volumes. On the
motorcycle front, two new launches in January 2016 (Apache RTR and Victor) have generated higher volumes for
the company. In addition, launches in H2FY17 in the premium segment in collaboration with BMW would aid
market share gains. Exports remain challenging due to currency headwinds and are likely to stabilise over the next
two to three quarters. The OPM is likely to remain under pressure as the marketing and brand promotion expenses
would remain elevated. Further, increased competition would lead to pricing pressure which would also restrict
margin improvement. We maintain our Reduce rating on the stock with a price target of Rs250.
Banks & Finance
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 stressed
loans and low tier-I CAR remain the key concerns of the bank.
Rico Auto Inds.
TVS Motor
Allahabad Bank
Axis Bank
Axis Bank is the third largest private sectors bank, continues to grow faster than the industry and has diversified
its book in favour of the retail segment (~40% of loans in retail segment). The banks liability profile has improved
significantly which would help to sustain the margins at healthy levels. We expect the earnings growth to remain
reasonably strong driven by a healthy operating performance. While asset quality pressures have emerged as pain
points 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 has
assets spread across products, viz loans for consumer durables, two- and three-wheelers, loans to small and medium
enterprises (SMEs), mortgage loans and commercial loans. Despite a strong growth in loans, the asset quality and
provisioning 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 finance
and distribution) and is among the top players in the life insurance and general insurance segments. Its consumer
finance (Bajaj Finance) and general insurance businesses continue to report a robust performance while the life
insurance 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 offices
in 24 countries) and a strong network of over 5,000 branches across the country. It has a stronghold in western
and eastern India. Its performance metrics remain better than that of the other PSBs and asset quality has deteriorated
in line with the RBIs 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 diversified
product and services portfolio, and steadily growing assets. The operating performance and earnings have eroded
significantly due to margin deterioration and sharp rise in NPAs. Given the rise in the number of incremental
stressed loans and the relatively weaker capital position, its valuations may remain subdued.
Capital First
Capital First (erstwhile Future Capital Holdings) had 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. Its
loan 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 predominantly
exposed to the corporate segment, which constitutes about 45% of its book. Due to a higher dependence on the
wholesale business and a low CASA ratio, it lags its peers in terms of operational performance. Also, the rise in
NPAs 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 south
India, especially Kerala. Under the new management, the bank has taken several initiatives, which would improve
the quality of its earnings and asset book. The asset quality has shown stress in the past few quarters, though we
expect a gradual improvement in the NPAs and the operating performance to pick up gradually. The valuations
seems attractive over the medium to long term.
HDFC
HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. It
has interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries are
growing faster than HDFC, the value contributed by them would be significantly higher going forward. Due to a
dominant market share and consistent return ratios, it should continue to command a premium over the other
NBFCs. Any unlocking of value from its insurance business will be positive for the stock.
47
July 2016
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
HDFC Bank
HDFC Bank is among the top performing banks in the country having deep roots in the retail segments. Despite
the general slowdown in the credit growth, the bank continues to report a strong growth in advances from retail
products. Its relatively high margins (compared with its peers), strong branch network and better asset quality
make HDFC Bank a safe bet and there is scope for expansion in the valuations.
ICICI Bank
ICICI Bank is Indias largest private sector bank with a network of over 3,800 branches in India and a presence in
around 18 countries. The bank has made inroads into retail loans (~45% of the book) and significantly improved
its 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 operating
income 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 corporate
lending space. It is gradually working towards improving its liability base and expanding the retail book which is
likely to reflect in the form of better margins and return ratios. However, due to huge asset quality pressure, low
tier-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 loan
book of over Rs1,00,000 crore. It is promoted by Life Insurance Corporation of India, which is among the most
trusted brand in the country. With over 200 branches, 1,241 direct sales agents, 6,535 home loan agents and 782
customer relationship associates, the company has among the strongest distribution structures in India to support
business expansion. Going ahead, a revival in the economy and moderation in the borrowing rates could be the
key triggers for the stock. Therefore, considering stable RoE of ~20%, sound asset quality and healthy growth
outlook, the companys fundamentals are strong.
PNB
Punjab National Bank has one of the best liability mixes in the banking space, with low-cost deposits constituting
around 40% of its total deposits. This helps it to maintain one of the highest margins among PSBs. However, in
view of the weakness in the economy and relatively higher exposure to troubled sectors, the asset quality stress has
increased 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 energy
value chain. Given the robust lending opportunities in the renewable energy segment and the likely reforms in the
thermal power segment, the loan growth is expected to remain strong over the next two to three years. The proceeds
from 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 of
the associate banks and value unlocking from insurance business could provide further upside for the bank. While
the bank is favourably placed in terms of liability base and the operating profit is also better than peers; the asset
quality 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 the
largest retail, MSME bank. Hence, it has ramped up its manpower and infrastructure to ramp up retail, SME
lending. The banks asset quality challenges have come to fore (mainly from the corporate portfolio) whereas low
tier-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 among
the top performing banks. It follows a unique business model based on knowledge banking, which offers product
depth and a sustainable competitive edge over established banking players. The bank is suitably poised to ride
the recovery in the economy and the retail deposit franchise is showing a sharp improvement which will support
the margins in the medium to long term.
Britannia
Emami
GSK Consumer
Consumer goods
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 snack
segments. The company can sustain its higher than industry growth rates with an improving distribution reach, entry
into newer categories and focus on cost efficiency. We recommend a Buy on the stock with a price target of Rs3,550.
Emami is one of the largest players in the domestic FMCG market with a strong presence in the under-penetrated
categories such as cooling oil, antiseptic cream, balm and mens 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 riding
on a portfolio of differentiated brands and improving reach in various geographies will help Emami to achieve a
growth of over 17% CAGR over the next two to three years. We recommend a Buy on the stock.
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 ahead
of the competition and maintain its pricing power over the years. In a bid to de-risk its business model, it has expanded
its product portfolio by entering into new categories such as biscuits and oats in the recent years. With cash balance
of more than Rs2,500 crore the company can invest in growth initiatives as well as reward its investors with a healthy
dividend payment. We recommend Buy on the stock.
48
July 2016
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Remarks
Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide market
segments in India. The recent acquisitions, ie Strength of Nature, Darling Group, Tura, Megasari and Latin
American 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.
Hindustan Unilever is Indias largest FMCG Company. With moderate inflation, improving sentiments in the
urban market and expectations of a better monsoon, HULs volume growth in the domestic business is expected
to improve in the coming years. Also, new product launches and entry into new categories will drive the performance
of 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 Indian
consumerism story.
ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, to
strengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses some
of which are at a nascent stage. The quantum of excise duty of 10% declared in the Union budget 2016-17 was
much lower than in the earlier years. This should help in stabilising cigarette sales volume in the coming years. The
current valuation makes ITC one of the cheapest stocks in the large-cap FMCG space.
GCPL
HUL
ITC
Jyothy Labs
Jyothy Laboratories is the market leader in the fabric whitener segment in India. With the successful integration of
Henkel and the induction of a new management team led by S Raghunanadan, it has transformed 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
OPM and lower interest cost would aid the PAT to grow at 26% CAGR over FY15-17.
Marico
Marico is among Indias leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing
in the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of new
product categories (especially in the beauty and wellness space) and growth through acquisitions. While the domestic
product 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
Firstsource
Zydus Wellness is bearing the brunt of a limited product portfolio of three brands (Nutralite, Sugar Free and
Everyuth) that cater to a niche category. The company would benefit from a lower input cost, improving urban
consumer sentiment and a new distribution system in FY17. Thus, we expect a better operating performance from
it in FY17.
IT/IT services
Firstsource Solutions is a specialized BPO service provider. The management expects to deliver a 10-12% growth
in FY2017. The health of its balance sheet is improving gradually as the company is gradually reducing its debt
burden through internal accruals. 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 higher numbers in the coming years.
HCL Tech
HCL Technologies is a global technology company. Its management indicates that the demand environment looks
promising with an increase in market share coupled with a significant increase in the deal funnel. However, the
increasing complexity of IMS engagement has led to a delay in project ramp-ups in the IMS business (accounts for
35% of its revenues). Nevertheless, the management has made investments in digital technologies and Internet of
things (IOT), and already won a few deals in the space. (25% of total deals wins in FY2015 comes from digital
space). However, the margins are expected to remain under pressure in the medium term owing to integration
margins headwinds from Volvo (Q1FY17) and Geometric (end of FY17). We remain positive on the company in
view of its order wins, healthy pipeline of deals and superior earnings visibility, notwithstanding some near-term
softness 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 11.513.5% (on CC basis), ahead of NASSCOMs Indian IT industry growth guidance of 10-12% for FY17, which implies
a CQGR of 3.3-4.1%. It has also given a promising aspiration target for 2020 of achieving $20bn in revenues and
30% in margin. Under the leadership of Vishal Sikka, the company is doing the right thing by investing in the digital
space (both organic and inorganic), improving client engagement through design thinking, and automating and
innovating for future growth prospects. We remain positive on the companys growth prospects for the coming years.
Persistent
Persistent Systems has proven expertise and a strong presence in newer technologies, strength to improve its IP
base and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies. Looking at
the strong growth in enterprise revenue, whose contribution to the revenues has increased to 26.0% in Q4FY16 as
against 24.1% a year ago, PSLs enterprise digital transformation strategy is shaping up well. Further, led by the
recent acquisitions of two units of US-based cloud software firm, Citrix Systems, a pick-up in the IP-led revenues
with the acquisition of newer products and recent alliance with IBM to build IoT solutions for IBMs Watson
platform, we expect the revenue momentum to accelerate in FY17 and the margins are likely to remain stable on
the 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 largest
IT service firm in the country. Its management expects the digital revenues to grow much faster in the coming
years; these grew by 52.2% YoY to $2.3 billion in FY16. The management noted that headcount addition will be
materially 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
BHEL
Wipro is among the top five IT companies in India but in the last few years it has been lagging the industry in terms
of growth. We believe, owing to weakness in the energy, telecom, and some project deferrals, its unlikely to show
material 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 the
improvement. We see the target of new CEO Abid Ali Neemuchwala as an uphill task looking at the current growth
trajectory. Therefore, we remain sceptical, as anecdotal evidence on Wipro in the last two to three years does not
inspire confidence.
Capital goods/Power
Bharat Heavy Electricals, Indias biggest power equipment manufacturer, has been the prime beneficiary of the multifold increase in the investments made in the domestic power sector over the last few years. However, the order inflow
has been showing signs of slowing down which would remain a major concern for the company. The key challenge
before the company now would be to maintain a robust order inflow and margin amid rising competition and lower
order inflow.
CESC
CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) which
is 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 and
started operating. The losses in the retail business are coming down gradually over the past and it is expected to
break even soon. The BPO subsidiary, FirstSource, is performing well in line with expectations. However, the
recent diversification into unrelated businesses like IPL franchisee would hurt its valuations.
Crompton Greaves Crompton Greaves key businessesindustrial and power systemsare passing through a rough patch and are
potential beneficiaries of the upcoming investment cycle revival. Also, the company is looking to unlock value by
selling its international subsidiaries.
Finolex Cables
Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improving
demand environment in its core business of cables. It is leveraging its brand strength to build a high-margin
consumer product business of fans. We see a healthy earnings growth, return ratios in high teens and superior 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/petrol
engines, power gensets, agro engines, pump sets (engine segment) and construction equipment (infrastructure
equipment segment). The management has taken a strategic call to close and hive off the loss-making infrastructure
equipment division. GCLs growth momentum is expected to pick up and we expect 11% CAGR over FY2016-18
due to a revival in the automotive business and the agri-equipment space. A better economic growth, improved
product mix, forecast of a normal monsoon after two consecutive years of drought coupled with new product
launches are likely to spur revenue growth for GCL. We remain positive on the stock and maintain our Buy rating
with 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 OPM
of the stand-alone business is likely to remain around 10%; however the OPM of JMC Projects (a subsidiary) is
showing 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 trading
market. In the last few years, the company has made substantial investments in areas like power generation
projects and power project financing which will start contributing to its earnings. Long pending receivables was
one of the drags on the companys balance sheet and return ratios; however, the concern has receded after receiving
payment from UPSEB. We retain Buy due to expectations of a healthy volume uptick with an increasing share of
long-term contract business.
Skipper
Skipper is uniquely placed to exploit the growing opportunities in two lucrative segments: power (transmission
tower manufacturing and EPC projects) and water (PVC pipes). It has a comfortable order book of more than
Rs2,500 crore in the transmission business, which looks promising given the huge investments proposal by the
government 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.
Thermax
The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Incs
capex. Thermax group order book stands at around consolidated revenues. However, the company has shown its
ability to maintain a double-digit margin in a tough environment. We retain Hold on the stock due to 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 inflexion
point with a strong ramp-up in the after-market segment and overseas business while the domestic market is
showing distinct signs of a pick-up. The company has also formed a JV with GE for steam turbines of 30-100MW
range which is likely to grow multifold in the next 4-5 years. TTL is virtually a debt-free company with a limited
capex requirement and an efficient working capital cycle, reflected in very healthy return ratios. Further, boosted
by the expected uptick in the domestic capex cycle, the companys earnings are likely to grow by 25%+ per annum
over the next 3-4 years.
V Guard Ind
V-Guard Industries is an established brand in the electrical and household goods space, particularly in south
India. 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 and
is particularly focusing on the tier-II and III cities where there is a lot of pent-up demand for its products.
Va Tech Wabag
Gayatri Proj
VA Tech Wabag (VTW) is one of the worlds leading companies in the water treatment field with eight decades of
plant building experience. Given the rising scarcity of fresh water availability, we expect flow of huge investments
in water segment both globally and domestically. With rising urbanisation and industrialisation in India, we
expect 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 estate
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 Rs10,974 crore, which is 6.1x its FY2016 revenues.
It is also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to private
equity. The company has potential to transform itself into a bigger entity.
IL&FS Trans
IL&FS Transportation Networks is Indias largest player in the BOT road segment with a pan-India presence and
a diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with the
geographical diversification across 12 states reduce the risk to a large extent and provide comfort. Further, a
strong 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 in
the country with all its projects being toll based. It has an integrated business model with an in-house construction
arm which provides a competitive advantage in bidding for the larger projects and captures the entire value from
the BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-free
and it has presence in high-growth corridors which provides healthy cash flow. Thus, it is well poised to benefit
from the huge opportunity in the road development projects on the back of its proven execution capability and the
scale of its operations.
Jaiprakash Asso
Jaiprakash Associates has been facing earnings pressure across business verticals. Further, it is in the process of
concluding its cement asset sale to deleverage its balance sheet. The construction and real estate division has also
been underperforming lately. The current uncertainty in business restructuring and liquidity concerns has led to a
cautious view on the stock.
L&T
Oil India
Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the
domestic infrastructure capex cycle. Further, backed by its sound execution track record and healthy order book, the
company 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 & gas
Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India.
The total proven and probable reserves of the company stand at 52 MMTOE and 121 MMTOE respectively. Its
reserve-replacement ratio is also healthy. It offers a healthy dividend yield and the full benefit of the recent policy
reforms like deregulation of diesel and DBT scheme for LPG consumers are expected to reflect in its 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
Selan Exploration
Reliance Industries has one of the largest and complex refining businesses in India which enjoys a substantially higher
refining margin over the benchmark GRM. Further, its petrochemical business is also highly efficient, where RIL is
expanding capacity. We expect the GRM to remain healthy and the petrochem margin to be maintained in the medium
term on an uptick in the domestic demand. Currently, the decline in gas output from the KG-D6 basin is weighing
on the stock price; however, capex in downstream business (incremental capacity in the petchem business and petcoke
gasification in refining) would be the earnings driver in the coming years. Large investment in Reliance Jio could add
value in long term.
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. Based
on this, we expect it to ramp up production significantly, subject to approval for the new wells. However, weak
global oil prices are likely to be an overhang on the stock in the medium term.
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Pharmaceuticals
Aurobindo 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 revenue
mix are likely to boost the margin, resulting in a faster growth in the earnings as compared with the revenues. It
has recently acquired the commercial operations (revenue size EUR320mn) of Actavis Plc in seven western European
countries and of Natrol in the USA to take on the nutraceutical business, which is a strategic fit.
Cadila
Cadila Healthcares performance in the US generic vertical is likely to improve on the back of new product
approvals. Besides, its consumer business and exports to the emerging markets will help it to achieve a superior
growth. It got DCGI approval for its first NCE called Lipaglyn to treat type-II diabetes; this will add value to its
R&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 these
products are limited competition products.
Cipla
Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on
technology-intensive products in the inhalation and nasal spray segments; (2) established front-end presence in the
key 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 and
lack of clarity on the timeline for the launch of gAdvair in the US market, pending 483 observations at Indore SEZ
and closure of recent acquisition of Invagen and Exelan are growing concerns as these will create operational
pressure for the next two years.
Divis Labs
The management has altered the FY2017 revenue growth guidance to 14-15% (vs. 18-20%), as the Kakinada
expansion has been delayed. However, the OPM will be maintained in the range of 37-38%. Once the Rs750
crore capex materialises, sales growth for FY2018 onwards can go back to the higher trajectory. The management
expects the Kakinada SEZ to boost growth, reaffirming 20% growth from FY2018 onwards.
Glenmark Pharma
The management has given a revenue growth guidance of more than 25% for FY2017 (including Zetia). The
company will report 12-15% base revenue growth in FY2017 and FY2018 each. The management has indicated
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 on
account of launch of new products. Currently, it has three new chemical entities and four new biological entities
in clinical trials, out-licensing potential.
Lupin
The expected ramp-up in the launch of oral contraceptives, ophthalmic products, branded franchise (with addition
of in-licenced product-Alinia, Inspira Chamber VHC and Locoid lotion) in the USA and a robust pipeline of new
launches in the domestic and overseas markets provide strong growth visibility for Lupin. The company has
recently successfully launched Glumetza in the US market (180 days exclusivity) which shall reflect for two
months in Q4FY2016 and in H1FY2017. However, we believe in the near term, the stock may remain rangebound till the USFDA concerns subside, especially since a few observations are repetitive in nature. Moreover, it
is a little worrying that it is the second plant under the USFDA scanner in a short period of time. We remain
focused on the Goa plant and the outcome of the 483s issued there in March 2016 and July 2015, given that it is
a large source of Lupins pipeline and any delay in product approvals could hurt the earnings forecast. Product
approvals 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 acquisition of
Ranbaxy offers an excellent business model for Sun Phaarma. However, the integration process with Ranbaxy is
set to affect the profitability in short term. Also, the USFDAs adverse observation report (Form-483) on its Halol
(Gujarat) facility creates a major overhang. However, the management maintains its aim to achieve a $300-mn
synergy from the merger of Ranbaxy by FY18. With a strong cash balance, it is well positioned to capitalise on the
growth opportunities and inorganic initiatives.
Torrent Pharma
A well-known name in the domestic formulation market, Torrent Pharmaceuticals has been investing in expanding
its international presence. With the investment phase now over, it should start gaining from its international
operations in the USA, Russia and Brazil. Better field force productivity, focus on developed market and stronger
balance sheet would result in a sustainable earnings growth. Company acquired 30 key brands of Elder Pharma
for Rs2,000 crore which is a strategic fit in long run. The company has proposed to raise funds up to Rs10,000
crore through a mix of equity and debt instruments, part of which may be used for inorganic initiatives.
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Building materials
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 to
804,000 tonne) is likely to aid VSF volumes going ahead, though prices may soften in the near term. Further, the merger
of ABCIL and expansion in caustic division are likely to maintain a strong performance in chemical division. On the
cement front, the company expects demand to pick up in the near term while a slow execution of government projects and
surplus inventory remain concern areas.
The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from the capacity addition
carried 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 for
construction. The water levels in the 31 reservoirs in south India stand at just 17% of its storage capacity while parts
of Maharashtra are already whirling under acute water crisis. Consequently, we see very limited scope of revival in
retail cement demand for the above regions which can adversely affect Q1FY17 earnings.
Grasim
The Ramco Cements
Shree Cement
Shree Cements cement grinding capacity has grown to 25.6mtpa which will support its volume growth in the
coming years. It has a power plant with capacity of 612MW for its own consumption and merchant sale which is
expected to support its revenue growth going ahead. Thus, a volume growth of the cement division and the
additional revenue accruing from the sale of surplus power will drive the earnings of the company.
UltraTech Cement
UltraTech Cement is Indias largest cement company with approximately 66.3mtpa cement capacity. The eastern
region has seen a robust growth in infrastructure and housing demand while the other regions have seen infrastructure
spending 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, Q2FY17
onwards may feel the impact) will be the key monitorable for FY17. However, cost efficiency (impact of new
grinding 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 growth
in the sector, Centurys premium positioning and brand equity strength, and the impending GST roll-out would enable
it to post a revenue growth (CAGR) of 16.5% over FY14-17. On the back of a revenue growth and better absorption
of fixed costs, the earnings are likely to grow at a much stronger rate of 25% CAGR over FY14-17. It is a quality
consumer play in a niche growing segment. Its robust return ratios and strong growth potential make us positive on
the stock. We have a Buy rating on it with a price target of Rs215.
Cox & Kings:
Cox & Kings is an integrated player in the tourism & travel industry, with a strong presence in the global leisure
travel segment and the education tourism segment in Europe. It has a 30% market share in the global outbound
tourism market. It is a market leader in education tourism in the UK. The terrorist attacks in Brussel and Paris
earlier this year will have some impact on the business fundamentals. The impact of Brexit would be limited to
currency translation affect in the near term. We retain Buy on the stock with a long-term view as the company is
focusing on strengthening its balance sheet.
Info Edge (India)
Info Edge is Indias premier online classified company in the recruitment, matrimony, real estate, education and
related service sectors. Naukri is a quality play on the improving macro environment and is directly related to the
GDP growth and Internet/mobile penetration. Further, prevailing lower competitive intensity in the real estate
space is positive in terms of profitability. We expect Zomato business growth to extend in the coming years, with
better integration of services and increasing monetisation opportunities. Zomatos revenue will be in the range of
Rs300-350 crore in FY2017, a growth of ~60-95% YoY. Further, the management believes Zomato will break
even at the end of FY2017 as the current cash burn per month falls in the range of $1.6-1.7 million from the earlier
$9 million. Going ahead, other investee ventures, like www.meritnation.com, www.policybazaar.com,
www.mydala.com and www.canvera.com, are also likely to gain from the ongoing e-commerce boom in India.
INOX Leisure
INOX Leisure Ltd (ILL), Indias second largest multiplex operator with 107 properties and 420 screens across 57
cities accounting for about 23% of the multiplex screens in India, is scripting a blockbuster growth story through
a mix of inorganic and organic expansion plan to scale up the total screen count to 688 screens over the next 2430 months. The ILL mega show is supported by an improving content quality in the Indian mainstream and
regional cinema with its movies regularly hitting the Rs100-crore or Rs200-crore box-office collection mark. We
believe ILL with its strong brand and extended reach is well poised to leverage the opportunity in Indias underpenetrated multiplex sector.
KKCL
Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has
created a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is ahead
of its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled with
a 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 strong
presence in the luxury watches retail business through subsidiary, Ethos. The watch business generates steady revenues
and cash flow with minimal capex, as no capacity is likely to come on stream and the utilisation levels are expected
to improve. The high-end retail watch business Ethos provides a strong growth opportunity in terms of revenue
growth via its online venture wherein it generates leads that translate into lower customer acquisition cost and better
fixed cost management that would result in robust margin improvement and strong profit growth. This unique highgrowth potential business along with the steady manufacturing business that generates free cash is attractively priced
currently and offers significant returns over the medium to long term. We put a Buy rating on the stock, valuing it
using the SOTP method to arrive at a price target of Rs230.
Orbit Exports
Orbit Exports (Orbit) is a leading manufacturer and exporter of novelty fabrics exporting its products to over 32
countries. It is a recognised star export house and operates in the niche area of high-end fancy fabrics, which are mainly
used by designers in womens fashion apparels. A strong OPM profile has enabled it to earn higher returns averaging
at 21% in RoCE and at 33% in RoE over the last three years. Given the strong financials, niche capabilities and a
vigilant 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. With
growing incomes, rise in aspirations to lead a luxurious life, greater discretionary spending and favourable
demographics, the segment of branded apparels & fabrics presents a good growth opportunity and Raymond with
its brands and superior distribution set-up is very well geared to encash the same. Any development with regard to
the Thane land in the form of either joint development or disposal would lead to value unlocking and provide
significant cash to the company.
Relaxo Footwear Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four topof-the-mind-recall brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investment
opportunity 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 such
as Mainland China and Sigree. It is a good proxy on the Indian consumption story as several factors such as
demographics, increasing disposable income and the trend of nuclear families are playing in its favour. Given the
slow pace of growth of consumer discretionary spending and pressure on the operating profit margin due to the
addition of new stores, we maintain our Hold rating on the stock.
Thomas Cook (I) Thomas Cook India (TCIL), owned by the legendary value investor Prem Watsa, is an integrated leisure travel and
human service management company in India. The improvement in the domestic and global macro environment
provides a huge growth opportunity in the Indian leisure and travel industry. Quess Corp (its human resource
management business) provides exposure to the fast growing HR, office management and technology solutions
businesses. Moreover, we see a turnaround in the financial performance of Sterling Holidays. The value unlocking
in Quess Corp has happened through IPO, which is broadly in line with our expectations. We maintain Buy with
a price target of Rs255.
Wonderla Holidays
Wonderla Holidays Ltd (WHL) is the largest amusement park company in India with over a decade of successful
and profitable operations. It owns and operates two amusement parks under the brand name Wonderla in Kochi
and Bengaluru, and came up with a third park in Hyderabad in Q1FY2017. With a steady improvement in
footfalls, the Hyderabad park getting operational in Q1FY17, a strong growth in the non-ticket revenues (F&B
and product sales) and an 4-5% increase in the annual ticket price, WHLs revenues are expected to grow at a
CAGR of 30% over FY15-18. Its OPM of 44-45% is better compared with some of the mature international
parks.
Zee Entertainment
Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainment
companies. It has a bouquet of more than 34 channels across Hindi, regional, sports and lifestyle genres. For FY2017,
the management expects that the industry ads revenue growth range of 15-16% and ZEEL will continue to beat the
industry average led by market-share gain. ZEEL continues to outperform the broadcasting advertising market and
expects to continue the momentum with an improvement in the macro economy. The management indicated that the
strong momentum will continue in the ads revenue growth led by higher investments in content along with a focus
on international markets and market-share gains. We continue to see ZEEL as the prime beneficiary of macro revival
and digitisation.
Diversified/Miscellaneous
Aditya Birla Nuvo
We believe that post-demerger of the fashion vertical, Madura and Pantaloons from itself, ABNL will derive significant
value from its financial services business offering investors an opportunity to participate in diversified growth financial
segments like life insurance, asset management and NBFC along with other financial businesses. ABNL continues to
hold a 24% stake in Idea Cellular along with an exposure to the manufacturing vertical. In the wake of strong
competitive headwinds in the telecom sector (emanating from Reliance Jios entry, to high-cost spectrum auctions and
inability of the players to pass on the cost to the customers in the form of higher tariffs), we have adjusted Idea
Cellulars estimates and valuation (now valuing it at 5.8x FY2017 EV/EBITDA, with enhanced debt). This has resulted
in a downward revision of our price target to Rs1,435 per share.
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Bajaj Holdings
Bajaj Holdings & Investment Ltd (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its
manufacturing business was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business consisting of the
wind 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 remain
with BHIL. BHIL is a primary investment company focused on new business opportunities. Given the strategic nature
of BHILs investments (namely BAL and BFL), we have given a holding company discount of 50% to BHILs equity
investments. The liquid investments, and investments in other group companies have been valued at cost. We have
a Buy recommendation on the stock with a price target of Rs2,100.
Bharti Airtel
Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industry
as well as the company focusing on the quality of revenues rather than volume, better times can be expected ahead
for 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 from
the enhanced budgetary outlay for strengthening and modernising the countrys 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 strong
research and manufacturing units across the country. The companys current order book of around Rs21,648 crore
provides 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 cold
chain businesses, Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cow
while its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largest
players in the CFS business and has also evolved as the largest player in the rail freight business as well as the cold
storage business. The proposed capex for a.ll the three segments will strengthen its presence in each of the segments
and 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 and
enjoys among the best operating parameters in the industry. As the insurance sector is showing signs of stabilisation,
the companys favourable product mix and a strong distribution channel will result in a healthy growth in the
premiums and profits.
PI Industries
PI Industries (PI), a leading agro-chemical company, has a differentiated business model with focus on the fastgrowing custom synthesis and manufacturing (CSM) business, which contributes 60% of its revenues. To sustain
the growth momentum, the company has expanded its manufacturing capacity in Jambusar at a cost of Rs300
crore and the new capacity which has commissioned in H2FY2016. The commissioning of the Jambusar facility
and the launch of new products in the agro-chemical segment will help the company to achieve a revenue growth.
On the other hand, the margins are expected to improve over the next three years. PI is one of the few agrochemical companies that have a unique business model and are an example to the other chemical companies.
Ratnamani Metals Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. In spite of the challenging business
environment due to increasing competition, the stock is attractively valued. The management has maintained a strong
outlook 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 capacity
expansion plans, which are largely funded by its robust internal accruals. The company enjoys superior return
ratios with low gearing levels. With diversified products, extensive distribution network, improved capital structure
and government thrusts on better infrastructure, Supreme has emerged as one of the best proxy play on the
increasing use of plastic consumption in India. Hence, we remain positive on the stock.
UPL
A leading global producer of crop protection products, intermediates, specialty chemicals and other industrial
chemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop
protection products and post-harvest activities. A diversified geography and the recent acquisition of DVA Agro
Brazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Its
revenues are likely to grow at 12-15% and EBIDTA margin is expected to remain at 18-20% in FY17. It has also
started to focus on premium products in agro-chemicals and will slowly stop selling commodities and low-margin
products. It has also started to focus on selling premium products and maintaining a strong balance sheet.
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Value

Sun shines on markets this monsoon

Products & Services

From Sharekhans Desk

June was going to be

RESEARCH BASED EQUITY PRODUCTS

MUTUAL FUNDS DESK

Top SIP Fund Picks

STOCK IDEAS STANDING (AS ON JULY 05, 2016)

CURRENT PRICE AS ON PRICE

STOCK IDEAS STANDING (AS ON JULY 05, 2016)

CURRENT PRICE AS ON PRICE

In Top Picks basket

** Price target under review

from sharekhans desk

FROM SHAREKHANS DESK

Sun shines on markets this monsoon

JULY 07, 2016

banks, NBFCs) have performed much better than the benchmark

SENSEX PE (ON ONE-YEAR FORWARD EARNINGS ESTIMATE; BLOOMBERG

Domestic liquidity situation and policy reforms in forefront now:

Nifty crosses 8300 again!

Consumer and rate-sensitive domestic plays likely to sustain

PERFORMANCE OF VARIOUS SECTORAL INDICES

Source: Bloomberg, MOSPI

INFLATION RATE (%)

Inflation (consumer inflation; CPI) has been largely stable in 4-6%

SOFTENING INTEREST RATE SCENARIO

Early signs of revival in economy: The leading economic indicators

Source: Bloomberg, RBI

Source: Sharekhan, Company Research

of global risks. At the same time, the possibility of US interest rate

DIESEL CONSUMPTION (000 METRIC TONNE)

Seventh Pay Commission award Relatively lower hikes but

The central government has decided to implement the Seventh Pay

Valuation: Comfortable despite better earnings outlook: On the

COMPARATIVE % GROWTH IN MINIMUM PAY BETWEEN EARLIER PAY COMM.

SENSEX PE (BASED ON ONE-YEAR FORWARD EARNINGS ESTIMATES;

Source: Seventh pay commission report

Quantum of payouts: As of now, it would mean an additional annual

Global environment remains uncertain: In October 2014, the

Substantial changes in government wages: On an average, the

GLOBAL MARKET PERFORMANCE SINCE OCTOBER 2014

Higher disposable incomes would boost demand for cars, consumer

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

Sharekhan Top Picks

June saw volatility return to the domestic equity markets.

We suggest only one change this month. Book profit in Havells

CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED)

CNX MIDCAP 100

ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)

CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

Astral Poly Technik

SHAREKHAN TOP PICKS

ASTRAL POLY TECHNIK

SHAREKHAN TOP PICKS

pricing actions and higher promotional spends.

SHAREKHAN TOP PICKS

WEALTH CREATOR PORTFOLIO

WEALTH CREATOR PORTFOLIO

JUNE 30, 2016

Wealth Creator portfolio