Investment Startegy

INVESTMENT
STRATEGY REPORT
2019
INVESTMENT
STRATEGY REPORT
2019
Vivek Ranjan Misra

040 - 3321 6296
vivekr.misra@karvy.com
Karvy Stock Broking Research

is available on
Thomson Reuters &
Bloomberg (Code: KRVY<GO>)
INDEX
Wealth Maximizer Table......................................................... 1
Value Invest Table................................................................... 1
Dividend Maximizer Table...................................................... 1
Market Outlook................................................................... 2-3
An Interview with Our CEO, Rajiv Singh............................ 4-6
2019 – A Year of Economic Optimism in India...................... 7
Equity Market - 2019 Outlook...........................................8-14
Sector Outlook................................................................. 15-18
Automobiles.................................................................................. 15
Capital Goods & Infrastructure................................................ 16
Metals and Mining.................................................................. 16-17
IT Sector......................................................................................... 18
Indian Economic Outlook................................................ 19-21
The Global Economic Outlook.........................................22-26
Wealth Maximizer ................................................................. 27
Bharti Infratel Ltd.................................................................. 28-29
HCL Technologies Ltd.......................................................... 30-31
Hindustan Unilever Ltd........................................................ 32-33
ICICI Bank................................................................................34-35
Larsen & Toubro Ltd............................................................. 36-37
Oil & Natural Gas Corp Ltd................................................. 38-39
State Bank of India Ltd.........................................................40-41
Tata Motors Ltd.....................................................................42-43
UPL Ltd.................................................................................... 44-45
Yes Bank Ltd...........................................................................46-47
Value Invest...........................................................................49
Bajaj Electricals Ltd............................................................... 50-51
Finolex Cables Ltd................................................................. 52-53
Jain Irrigation Systems Ltd.................................................54-55
K.P.R. Mill Ltd..........................................................................56-57
Menon Bearings Ltd.............................................................58-59
Relaxo Footwears Ltd.......................................................... 60-61
Sunteck Realty Ltd................................................................ 62-63
Take Solutions Ltd.................................................................64-65
The Phoenix Mills Ltd............................................................ 66-67
Visaka Industries Ltd............................................................68-69
Dividend Maximizer...............................................................71
Dividend Maximizer Outlook.....................................................72
Bajaj Corp Ltd...............................................................................73
Bharat Heavy Electricals Ltd.................................................... 74
Bharti Infratel Ltd........................................................................ 75
Graphite India Ltd........................................................................76
Hero Motocorp Ltd......................................................................77
Indiabulls Housing Finance Ltd.................................................78
Indian Oil Corp Ltd.......................................................................79
JK Tyre & Industries Ltd............................................................. 80
Multi Commodity Exchange of India Ltd............................... 81
Vedanta Ltd...................................................................................82
Disclaimer.............................................................................. 83
WEALTH MAXIMIZER
Market Cap CMP* Target Price
Company Name NSE Symbol Sector Upside (%)
(Rs. Bn.) (Rs.) (Rs.)
Bharti Infratel Ltd INFRATEL Telecom 486 263 308 17
HCL Technologies Ltd HCLTECH IT 1335 958 1167 22
Hindustan Unilever Ltd HINDUNILVR FMCG 3944 1822 2138 17
ICICI Bank Ltd ICICIBANK Banking 2323 361 440 22
Larsen & Toubro Ltd LT Infrastructure 2018 1439 1700 18
Oil & Natural Gas Corp Ltd ONGC Oil & gas 1931 151 210 39
State Bank of India Ltd SBIN Banking 2631 295 347 18
Tata Motors Ltd TATAMOTORS Automotive 540 171 259 51
UPL Ltd UPL Chemicals 386 758 1004 32
Yes Bank Ltd YESBANK Banking 420 181 410 127
VALUE INVEST
Market Cap CMP* Target Price
Company Name NSE Symbol Sector Upside (%)
(Rs. Bn.) Rs.) (Rs.)
Bajaj Electricals Ltd BAJAJELEC Electrical Equipment 51 497 670 35
Finolex Cables Ltd FINCABLES Electrical Equipment 70 459 600 31
Jain Irrigation Systems Ltd JISLJALEQS Farm Machinery & Equipment 35 69 101 46
K.P.R. Mill Ltd KPRMILL Textiles 41 565 716 27
Menon Bearings Ltd MENONBE Auto Ancillary 4 79 120 52
Relaxo Footwears Ltd RELAXO Footwear 88 732 911 24
Sunteck Realty Ltd SUNTECK Real Estate 51 348 497 43
Take Solutions Ltd TAKE IT 22 148 226 53
The Phoenix Mills Ltd PHOENIXLTD Real Estate 85 557 735 32
Visaka Industries Ltd VISAKAIND Construction Materials 7 426 750 76
DIVIDEND MAXIMIZER
Company Name NSE Symbol Sector Market Cap CMP* D.P.S# D.P#
(Rs. Bn.) (Rs.) (Rs.) (%)
Bajaj Corp Ltd BAJAJCORP Consumer Staples 53 360 13.4 77.9
Bharat Heavy Electricals Ltd BHEL Industrial Electrical Equipment 265 72 2.3 54.0
Bharti Infratel Ltd INFRATEL Telecom 486 263 11.2 89.3
Graphite India Ltd GRAPHITE Electrical Equipment 151 770 56.7 31.8
Hero MotoCorp Ltd HEROMOTOCO Automotive 624 3123 109.9 58.0
Indiabulls Housing Finance Ltd IBULHSGFIN NBFC 362 849 48.8 41.2
Indian Oil Corp Ltd IOC Oil & Gas 1342 138 8.1 43.0
JK Tyre & Industries Ltd JKTYRE Auto Ancillary 24 104 3.8 17.7
Multi Commodity Exchange of India Ltd MCX Financial Services 37 733 29.4 90.6
Vedanta Ltd VEDL Metals & Mining 741 199 14.0 44.5
*As on Dec 28, 2018, M.Cap: Market Cap, DPS: Dividend Per Share, D.P: Dividend Payout, # Bloomberg Estimates
1 KARVY INVESTMENT STRATEGY REPORT 2019

MARKET
OUTLOOK
Heading into 2019, we are in the midst of a debate about the prospects of the world
economy and whether a global recession is looming. While data certainly points to a
slowdown in growth, the Indian economy is resilient and we find ourselves relatively
optimistic.
The US yield curve has flattened and the spread between the 10 year yield and 2 year
yield is 19 bps, a negative spread (or an inverted yield curve) usually points to a recession
ahead. However, more than US, data from other parts of the global economy are weak.
Caixin Manufacturing PMI for China for December 2018 dropped below 50 (came in at
Vivek Ranjan Misra 49.7) the first contraction since May 2017. Similarly, the Eurozone flash PMI dipped to 51.4
Head of Fundamental Research
in December 2018 from 51.8 in November, the slowest pace of expansion since February
2016. Exports from Germany, the largest economy in the Eurozone were down 0.9% in
the recent quarter, while the imports have risen by 1.3%, Germany’s economy grew by
1.1% YoY for the third quarter 2018, last quarter Japanese economy declined by 0.6%.
However, not all is bad, in the US, consumer confidence is near an 18 year high, whereas
unemployment rate at 3.7% is at a 40 year low. This indicates that consumption will be
resilient as wages are likely to rise on account of a tight labor market. While the Chinese
economy is facing a period of weakness, continuation of the trade wars is a risk. However,
China has eased both monetary and fiscal policy. China has plenty of policy tools at its
disposal to counteract a slowdown; its FX reserves are USD 3.1 trillion, which gives it
flexibility in managing a slowdown.
Indian economy remains resilient. IMF forecasts growth for FY2019-20 to be 7.4%, which
is a strong number. What makes us optimistic about equities is that growth drivers are
changing from private consumption to investment in Q2FY2018-19; Gross Fixed Capital
Formation (GFCF) increased by 12.5% YoY recording the third consecutive quarter of
double digit growth.
This has implications for the equity markets, as corporate earnings are more dependent
on growth in capex. Earnings growth has been the missing part of the story for Indian
stocks and good corporate earnings growth should boost stocks. While liquidity in money
markets is a risk, we believe RBI is in a position to manage this risk.
Exhibit: Sensex
50000
40000
30000
20000
10000
0
2010
2000
2011
2001
2014
2004
2015
2016
2018
2005
2006
2009
2008
2013
2017
2012
2003
2007
2002
Source: Bloomberg, Karvy Research

Exhibit: Performance of Indian equities relative to peers
120
110
100
90
80
Jun-18
Jun-18
Feb-18
Feb-18
Sep-18
Sep-18
Oct-18
Oct-18
Mar-18
Mar-18
Jul-18
Jul-18
Jul-18
Dec-18
Dec-18
Dec-18
Nov-18
Nov-18
Aug-18
Aug-18
Jan-18
Jan-18
Jan-18
Apr-18
Apr-18
May-18
May-18
EM EM Asia AP x JP All country
The resignation of the Governor of RBI was a negative development but quick appointment
of a new Governor helped, going forward the RBI may be less hawkish with regards to
monetary policy.
The major event risk for Indian markets is on account of elections. Unlike 2014, the political
outcome appears unclear. Due to an uncertain political outlook, 2019 may shape up to a
tale of two halves, equities moving sideways ahead of the elections. If the elections lead
to a formation of a stable, business friendly government, Nifty may end the year 2019 at
14,000.
Given this, we favour cyclical sectors, we prefer Banks, Capital Goods. Also growth should
boost Consumption Discretionary and Autos. State owned banks could be a dark horse
in 2019, on account of peak in NPL cycle, recovery of NPL’s via IBC and low valuations. A
broad based economic recovery will be supportive.
We believe that over the coming quarters, large caps are likely to do better. Mid and small
caps are likely to underperform until their valuations become attractive. We believe that
after mid 2019, with decent time correction, conditions may be favourable for mid and
small caps to perform well.

AN INTERVIEW WITH OUR CEO,
RAJIV SINGH
Q) What are the lessons for investors from 2018?
Firstly, volatility in markets has increased; over the last few years, volatility has been low
on account of the low interest rates, especially in the US, as the interest rate cycle has
turned, volatility regime is now normalizing. CBOE VIX often called the fear gauge was
unusually low; 11% at the start of 2018, this has increased significantly since then and
stands at 25%. Similarly, India VIX which bottomed at 12.7% at the start of 2018, is up
2.7x and is currently at 34%. Higher volatility is not necessarily negative; we can witness
sharper moves in either direction.
Rajiv Singh
CEO - Broking Business, KSBL
The second lesson is with regard to risk- geopolitical risk has risen; a couple of examples
come to mind, the first is the emergence of trade wars between the world’s two largest
economies, the US and China. A few days back, the market believed that there had been
a truce, but recent events like the arrest of Huawei’s CFO in Canada means this is still a
risk. Secondly, the threat of sanctions on Iran had led to a sharp escalation in oil price,
threatening to derail the global economy, thankfully the world stepped back from the
brink of this event.
Thirdly, themes that worked last year may not work this year. In 2017, Small and Midcaps
were a big theme, and the BSE Mid and Small cap index returns were a handsome 54%
outperforming Sensex which gave a 27% return. This theme disappointed in 2018, BSE
Mid and Small cap index declined by 20%, whereas Sensex increased by 5.9%. The lesson
is to constantly reevaluate the investment themes and be ready to make changes to your
portfolio.
Fourthly, watch out for changes in regulatory and tax regime, the (re)introduction of
Long Term Capital Gains tax in the budget for FY2018-19 is a negative for investors. While
at the time of introduction in February 2018, this was widely anticipated, investors who
bought equities at the beginning of the Bull Run certainly didn’t factor this in.
Fifthly, watch out for the global economy-during the 2008 global financial crisis, India
was impacted largely on account of the financial channel rather than the direct economic
impact. India has a current account deficit (2.9% of GDP in July-September 2008 quarter),
this deficit needs to be funded by capital inflows which make India vulnerable to direction
of global capital flows. Similarly, events outside India- rise in oil prices, strengthening of
the US dollar led to a 14% correction in Nifty between August and October 2018. Global
capital flows have a major impact on Indian asset markets. As we head into 2019, fears
of a global recession have risen, and while we believe a recession is unlikely in 2019, the
global economy may be slowing down. In the coming quarters, investors need to keep a
keen eye for economic data from China, Europe, Japan and US.
Q) What is your outlook for equity markets in 2019?

We believe that 2019 may be a year of two halves-the equity market is likely to move
sideways due to the overhang of the General Elections.

Election of a stable, business friendly government can provide the next trigger to equities.
As we enter 2019, there are a number of risks, as well as positive triggers. On the whole,
we believe the positives outweigh the negatives.
While the macro outlook for India has deteriorated somewhat, but still remains strong;
growth for FY2019-20 is expected to be 7.4%. Importantly, we believe growth will be led
by Capex. Gross Fixed Capital Formation (GFCF) increased by 12.5% YoY during Q2FY19,
the third consecutive quarter of double digit growth. This is important for equity markets
as it will boost corporate earnings which can sustain the next rally in equities. In the past
few years, corporate earnings growth has been poor and a turnaround in the earnings
cycle can sustain the next rally in equities. According to the recently released RBI’s
financial stability report, gross non-performing assets (NPA) of banks decreased from
11.5% in March 2018 to 10.8% in September 2018 and are expected to further decline to
10.3% by March 2019. This is positive for the economy and markets. Our target for Nifty
for December 2019 is 14,000.
Q) What are the risks for equities in 2019?

Domestically, the main risk is of an unfavourable election outcome. If an unstable coalition
were to come into power later this year, Nifty may decline to 9,000. The second risk is
on account of monetary conditions. Liquidity has tightened, and interest rate cycle has
reversed, not only in India but worldwide. Domestically this has impacted NBFCs and if
this impacts the flow of credit, it is a negative for markets. The US is tightening by two
means, firstly by raising interest rates, and secondly by reducing the size of its balance
sheet by USD 50 bn (quantitative tightening) a month. Tightening of monetary conditions
is among the reasons that have led IMF to downgrade world GDP growth forecast for
2019 to 3.7% from 3.9% earlier.
Much of the risks for 2019 are global in nature, many investors are fearful of a recession
in the global economy. Many attribute the decline in equities (US equities were down 19%
last week) to an imminent recession.
The yield curve (difference between 10 year and 2 year government treasury yield) in the
US has flattened trading at a spread of 19 bps, this has also heightened fears. Inversion
(when the spread is negative) is an indicator of a recession, but the yield curve, is yet
to turn negative. More than the US, data from China is worrying; Caixin Manufacturing
PMI dropped to 49.7 (below 50 implies contraction) and China is taking steps to counter
the slowdown by loosening policy. Similarly, data from Europe and Japan also point to
weakening. We believe that the world economy is set to slow, but we are not on the cusp
of a recession yet.
Downturn in equities is typically preceded by euphoria- right now caution abounds; it
is said that to make a bull market you need to climb a wall of worry. There are a lot of
worries around and the bull market may still have legs.
Q) Which sectors are the best bets for 2019?

We favour sectors that are geared to a recovery in capex cycle namely Banks, Capital
Goods. Banks should benefit from the increase in demand for credit as economic activity
picks up and Capital Goods should benefit from an increase in orders on account of

capex. An increase in economic activity should boost employment prospects and thus
discretionary consumption. We like Autos and Discretionary Consumption stocks. State
owned banks could be a dark horse in 2019 on account of peak in NPL cycle, recovery of
NPL’s via IBC and low valuations. A broad based economic recovery will be supportive.
Q) What about Crude- is it a risk for India as we head into 2019?

Global crude oil prices have been witnessing a roller coaster ride and have been quite
volatile for some time now. The price of crude oil plummeted from a high of ~$115/bbl in
mid-2014 to a low of ~$28/bbl in January 2016 and to $54-55/bbl now.
Prices of crude oil play a significant role in an economy and India’s growth story revolves
around the import of crude oil which amounts to nearly 30% of the total imports. India’s
macro-economic factors such as inflation, fiscal deficit and current account deficit have
improved many notches over the last couple of years, mainly due to falling crude oil prices.
A bit of background - The price of the Indian basket of crude oil crashed from US$ 113 per
barrel in May 2014 to US$ 50 in January 2015 and remained subdued. But oil prices surged
to $86 a barrel in November 2018, faster than expected as the Venezuelan economic
crisis and threats of sanctions on Iran led to a bigger production cut than intended and
targeted by OPEC and non-OPEC members.
However, in the last few weeks, oil prices have retreated on news that the US crude
production may rise and on expectations of weak demand growth. Despite the supply
cuts agreed by OPEC+, oil prices have remained subdued.
A $10 per barrel increase in the price of oil reduces growth by 0.2-0.3 percentage points,
increases WPI inflation by about 1.7 percentage points and worsens the current account
deficit by about $9-10 billion dollars according to Economic Survey 2018.A fall in crude
prices is thus positive for Indian economy as it will help boost economic growth. Politically,
this will also be helpful for the current government in the upcoming elections.
Q) What are your thoughts about the long term prospects for Indian economy?
According to IMF, India is likely to be the world’s fifth largest economy in 2019, with a size
of USD 2.95 trillion. Earlier in the year, the Indian government said that India is likely to
double its GDP by 2025 to cross $5 trillion.
The drivers of economic growth are well known, namely favourable demographics, a rising
middle class, as well as impact of economic reforms. There are a few hurdles though.
Firstly, India needs to carry out a number of difficult economic reforms, especially in the
areas of labor, agriculture, land. Secondly, it needs to cut red tape in order to boost ease of
doing business. Thirdly, privatization of PSUs is necessary and lastly, it needs to carry out
further fiscal consolidation. In addition to these, there are a number of long term issues
that need attention - the quality of workforce is not as high as it was in Asian “miracle
economies” due to lack of quality education in government schools. Healthcare needs
attention; lack of quality infrastructure in government hospitals is a big problem; The
issue of malnourishment needs to be tackled, 38% of the Indian children aged between
0-5 are malnourished, resulting in a definite and irreversible damage to their physical and
mental capabilities. The labor force participation rate remains low, especially of women
(27% according to estimates) needs to improve and government needs to adopt policies
to encourage their higher participation rate.

2019 – A YEAR OF ECONOMIC
OPTIMISM IN INDIA
With the start of the New Year 2019, the equity market may lay focus on some important
economic events like Bank recapitalisation, populist measure if any in the Interim Budget,
farm loan waiver effects, GST collection trends, progress under the insolvency code
and interest rate trajectory. Based on the outcome of the recent State Elections and the
General Elections due in the first half of calendar 2019, the government is likely to focus
more on the rural and agriculture sector. Creation of jobs at an accelerated pace could
be one more focus area.
The market participants will watch out for earnings upgrade for companies following
Dr. Ravi Singh normalisation of economic conditions on account of GST modifications ahead of the
Head of Technical Research General Elections. While confidence about earnings growth is rising, the outcome of
General Elections will give a final direction to the Indian equity markets. The more stable
and sound the formation of the new government, the more stable and strong would be
the Indian markets performance and vice versa.
The PSU Bank recapitalisation along with the Bharatmala and Housing for All initiatives
by the government has multi-fold implications and can materially revive the capex
cycle with potential acceleration in housing, railways and defence, ultimately having a
multiplier impact on GDP. With the General Elections due in May 2019, government has
refocused on growth going by its recent actions of fuel tax cuts, changing import duty
on agri commodities, GST rate rationalisation, higher MSP hikes and bank recapitalisation
plan. Though coupled with near-term pain of higher fiscal deficit, these initiatives may
put India on an accelerated growth trajectory from FY19 onwards.
However, the biggest area of concerns would be the worsening of the macro factors like
delay in resumption of GDP growth, ongoing global trade wars, unexpected impulses of
the US government and sustained interest rate rise in developed economies. Liquidity
in the markets continues to be good especially from the domestic investors. FIIs could
reevaluate investing in India in a big way since the inflation is under control and the
economic growth is satisfactory.
The calendar year 2018 has been a marginal year for investors with the Nifty giving
3% return. Investors would do well to moderate their expectations for index returns in
calendar year 2019. We expect Nifty to face resistance around 11750 levels followed by
12000 levels for the year ahead. On the lower side, we expect 10000 levels as support
followed by 9000 levels in extreme cases. Banking, Pharma, OMCs, Cement and Infra are
some sectors to watch out for in 2019.

EQUITY MARKET - 2019
OUTLOOK
In 2018, Nifty returns were 3.2%, disappointing investors after a 28.6% return in CY2017.
However, over the last 5 years, investors have earned 11.3% in price returns.
Exhibit: Nifty Returns

100%
80%
60%
75.8%
31.4%
71.9%
28.6%
27.7%
40%
17.9%
54.8%
10.7%
39.8%
3.0%
36.3%
6.8%
3.3%
3.2%
20%
0%
-4.1%
-51.8%
-20%
-16.2%
2011 -24.6%
2000 -20.6%
-40%
-60%
2010
2001
2014
2004
2015
2016
2018
2005
2006
2009
2008
2013
2017
2012
2003
2007
2002
We believe that despite some slowdown in economic momentum, investors should look
forward to decent returns from equities.
Caution sets the stage for returns

It is said that to make a bull market, you have to climb a wall of worry. Indian equities
have been in the midst of a bull market for a while. We still don’t see unfettered optimism
that would worry us. In fact entering 2019, we find investors getting cautious. This gives
weight to our theory that the bull market still has legs.
Cautions relating to the following, which we will examine in detail later in the text.
Fears of a global economic recession
Caution regarding evolution of Indian economy over the next two years
Political uncertainty
Concerns regarding interest rates and financial system
We believe these are valid concerns, and while data indicates a slowdown ahead, we
believe we are not on the cusp of a recession.
Significantly the euphoria (“this time it is different”) that precedes a major downturn in
equities is missing, in fact, caution abounds. We believe that caution going into 2019 is in
contrast to the optimism at the beginning of 2018.
Drivers for 2019

In terms of drivers of equities for 2019, we believe the following are important questions
which we will try to answer.

Will FII inflows resume into Indian equities: 2018 witnessed net FII outflows of Rs. 335 bn
(or USD 6.4 bn), this was the first year of outflows since 2008. The graph below shows
that FII flows have a strong correlation with returns.
Exhibit: FII Inflows and Nifty Returns

1500 90%
1000 60%
500 30%
0 0%
-500 -30%
-1000 -60%
2010
2000
2011
2001
2014
2004
2015
2016
2018
2005
2006
2009
2008
2013
2017
2012
2003
2007
2002
FII Inflow (Rs. bn)- (LHS) Nifty returns %- (RHS)
Source: Bloomberg, SEBI, Karvy Research
Besides global risk aversion, a number of elements can be the deciding factors for global
assets allocation - firstly, last year the attraction of US assets was high, we believe this
factor will wane going into 2019. In Q3 2018, S&P 500 earnings grew by 28%, for CY2018,
the EPS growth estimate is 20%, this largely reflects the boost to earnings growth on
account of tax cuts as well as better than expected financial performance. For CY2019,
expected EPS growth estimate is 8%, for emerging markets, consensus EPS growth
estimate is 7.4%. Indian earnings are expected to perform better, with EPS for Nifty
expected to grow by 22% for FY2019-20.
In the past 5 years, earnings growth has been disappointing, but we believe that factors
are in place for a recovery in corporate earnings, which we will detail in a later section.
This factor should make Indian equities more attractive.
Currency is also an important factor; strengthening of the US dollar, largely as US assets
were more attractive caused emerging market equities to decline. US Dollar is expected to
weaken as we head into CY2019, with Futures indicating US Dollar Index to decline by 2%.
This should be supportive of Indian equities. Rupee has a positive correlation with the
equity market and the relationship is statistically significant. This implies that equities
benefit when the Rupee appreciates and equity market outlook gets clouded when
the Rupee depreciates. Currency is not the only factor that impacts markets but other
factors too can outweigh the impact of the Rupee wherein during periods of turmoil in
currency markets, the relationship can be more significant.
Exhibit: Sensex returns vs Rupee

20.00%
15.00%
10.00%
5.00%
USD INR YoY %
0.00%
-5.00%
-10.00%
-15.00%
-20.00%
-25.00%
-100.0% -50.0% 0.0% 50.0% 100.0% 150.0%
Sensex YoY %

We believe that while INR is still overvalued considering the Real Effective Exchange Rate
despite having depreciated against the USD, this is largely as over the last five years where other
currencies have depreciated more against the USD. We believe that excluding a significant rally
in oil prices, there are few reasons for the INR to perform poorly against the USD.
Exhibit: India Real Effective Exchange Rate

110
105
100
95
90
85
80
Jan-10
Jan-96
Jan-99
Jan-00
Jan-11
Jan-98
Jan-01
Jan-97
Jan-14
Jan-04
Jan-15
Jan-16
Jan-05
Jan-18
Jan-06
Jan-09
Jan-08
Jan-13
Jan-17
Jan-12
Jan-03
Jan-07
Jan-02
Jan-94
Jan-95
INR REER Average
Source: BIS, Karvy Research
The one drag may be valuations which do reduce the attraction of Indian equities while
growth and likely direction of currency movement makes Indian equities attractive. In
our assessment, FII flows are likely to return to India. Also, India remains one of the few
markets where growth is likely to hold up in 2019, making it more attractive.
Can Domestic institutions counterweigh FIIs: FIIs have had a significantly higher impact
on the direction of the market than domestic institutions, however, incrementally their
influence on the markets has increased.
Exhibit: FII vs DII inflows

1370
1,331
1060
1,293
1,113
1,094
750
974
908
843
278
262
717
440
676
184
188
529
371
130
-180
-37
-569
-568
-214
-735
-303
-490 -342
-800
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
FII Inflow (Rs. bn) DII Inflow (Rs. bn)
Source: Bloomberg, SEBI, Karvy Research
Exhibit: Cumulative FII vs DII flows since 2007

8000
7000 FII flows Domestic flows
6000
5000
4000
3000
2000
1000
0
Sep-17
Sep-12
Sep-07
Jul-18
Nov-16
Dec-18
Jul-08
Jul-13
Jun-11
Dec-08
Dec-13
Jan-16
Jun-16
Apr-17
May-09
Apr-12
Apr-07
Mar-10
Oct-14
Feb-18
Feb-08
Feb-13
Aug-10
Nov-11
Oct-09
Mar-15
Jan-11
Aug-15
May-14
-1000

We believe this represents a long term structural change, as capital market instruments
represent a small part of savings for Indian households, but has increased in the last couple
of years. Also, overall investment in equities by households is still low by international
standards.
Exhibit: Household financial savings invested in capital markets

12%
10%
8%
6%
4%
2%
0%
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
-2%
Source: RBI, Karvy Research
Exhibit: Investment of savings of households in Equities

50%
48%
40% 44%
37%
30%
20%
20%
10% 15%
10%
6%
0%
India UK Japan Korea Singapore US Hong Kong
India is witnessing a significant demographic shift, where the dependency ratio (proportion
of working age population to total population) has not only become favourable, but the
trend is expected to continue for more than a couple of decades. Thus, we believe that
domestic institutions as well as direct investment in equities are rising representing a
structural change.
Exhibit: Working age population (%)

55%
53%
51%
49%
47%
45%
2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
India World
Source: World Bank, Karvy Research

In the short term, high volatility in equities may be a dampener, and inflows to equities
from domestic investors may suffer. Nevertheless, this makes Indian equities less reliant
on FII. In fact we believe this is the reason why Indian equities have been resilient in 2018,
outperforming peers.
Exhibit: Performance of Indian equities vs peers (in USD)

180
160
140
120
100
Relative to EM Relative to AP x JP
Relative to EM Asia Relative to AC World
80
Feb-16
Feb-18
Feb-17
Nov-14
Aug-14
Nov-15
Nov-16
Aug-15
Aug-16
Nov-18
Aug-18
Nov-13
Aug-13
Nov-17
Aug-17
May-14
May-15
Feb-14
May-16
May-18
Feb-15
May-17
Will high valuations be a drag: Indian equities are trading at high valuation levels by
historical standards, currently at 19.4x 12 month forward PE ratio. This is high and is the
one factor that worries us.
Exhibit: 12 month forward PER of Sensex

24
20
16
12
8
Jun-16
Jun-18
Jun-06
Jun-09
Jun-08
Jun-13
Jun-17
Jun-12
Jun-07
Dec-10
Dec-11
Dec-14
Dec-15
Jun-10
Dec-16
Dec-18
Dec-05
Dec-06
Dec-09
Jun-11
Dec-08
Dec-13
Dec-17
Dec-12
Dec-07
Jun-14
Jun-15
Jun-05
12 Month forward PER Average -1 SD +1 SD
India has traded at a premium to peers, and continues to do so. Valuations have a
significant impact on returns as can be seen by this graph.
Exhibit: 12 month forward PER of Sensex vs subsequent performance

24 -100%
20
-50%
16
12 0%
8
50%
4
0 100%
Nov-16
Nov-06
Nov-09
Nov-08
Nov-13
Nov-17
Nov-12
Nov-07
May-16
May-06
May-09
May-08
May-13
May-17
May-12
May-07
Nov-10
Nov-11
Nov-14
Nov-15
Nov-05
May-10
May-11
May-14
May-15
May-05
12 month forward PER (LHS) One year subsequent return % (RHS) (Inverted scale)

However, there are a few mitigating factors which may help overcome the negative
forces on account of valuation:
yy Low bond yields in India implies higher valuation multiples. These may persist on
account of increased financial savings of Indian households, fiscal consolidation,
lower inflation than historical trend and increased FII flows to debt market on account
of high real interest rates in India
yy Earnings cycle - we believe that after a number of years of disappointing growth,
corporate earnings are in the early stages of a recovery
Also, the premium to emerging markets is a bit higher than the past but Indian markets
are at a significant premium to Asia Pacific excl Japan.
Exhibit: 12 month forward PER of MSCI India vs Emerging markets

2.2
2.0
1.8
1.6
1.4
1.2
1.0
0.8
Jun-17
Jun-12
Jun-07
Feb-09
Sep-18
Sep-08
Sep-13
Aug-11
Jul-14
Mar-16
Dec-14
Jul-09
Dec-09
May-10
Aug-16
Nov-17
Nov-12
Nov-07
Oct-10
Jan-17
Apr-18
Jan-12
May-15
Feb-14
Jan-07
Apr-08
Apr-13
Mar-11
Oct-15
India relative to EM Average
Exhibit: 12 month forward PER of MSCI India vs Asia Pacific ex Japan

2.0
1.8
1.6
1.4
1.2
1.0
0.8
Sep-18
Sep-08
Sep-13
Jul-09
Dec-09
Aug-16
Nov-17
Nov-12
Nov-07
Oct-10
Jan-17
Apr-18
Jan-12
Feb-14
Jan-07
Apr-08
Apr-13
Jun-17
Jun-12
Jun-07
Mar-11
Feb-09
Oct-15
Aug-11
Jul-14
Mar-16
Dec-14
May-10
May-15
India relative to AP x JP Average
Exhibit: 12 month forward PER

2018 performance (%) Now Beginning of 2018 Recent peak
EM (16.6) 11.3 12.7 13.6
USA (6.2) 15.4 18.3 18.7
India 3.2 19.6 21 22

Elections- the next trigger for equities: In our report “Elections: the next trigger for equities”
we have highlighted that for Indian asset markets, the major trigger will be the upcoming
General Elections. We expect some nervousness in markets ahead of the elections. We
wouldn’t extrapolate the results to General Elections as the Indian electorate can vote
differently in State Elections and General Elections. We believe markets will welcome
continuity in the form of a NDA (led by BJP) regaining power at the centre.
Though it is still early, opinion polls (which also indicated a loss for BJP in State Elections)
indicate that NDA (led by BJP) is likely to regain power with a reduced number of seats.
This scenario would be welcomed by markets.
If this were to be the outcome of the elections, we would expect an acceleration in
economic reforms. Also infra spending by the government is likely to pick up.
Exhibit: Sensex - General Elections

Elections Year (%) 6 M before Zero Day + 1 Week 6 M after 6 M Prior to 6 M later
1996 20.8 0.7 (3.6) (17.3) (0.1)
1998 (8.0) 2.7 (0.6) (19.6) (24.3)
1999 31.9 (0.2) 7.1 (1.9) 36.3
2004 8.3 0.8 (8.7) 17.6 20.5
2009 29.7 17.3 (2.6) 19.1 81.5
2014 17.2 0.9 2.4 15.1 37.5
Exhibit: MSCI India relative to EM - General Elections

Elections Year 6 M before Zero Day + 1 Week 6 M after 6 M Prior to 6 M later
1996 4.2 1.1 (3.9) (15.7) (12.9)
1998 5.9 2.7 (3.9) 24.2 33.5
1999 18.5 (1.0) 6.1 (1.7) 20.1
2004 4.7 2.1 (7.6) (0.8) 0.6
2009 (1.6) 18.1 (3.4) (3.4) 8.9
2014 19.0 0.6 2.8 13.2 37.6
Earnings pickup: Earnings have grown at 4% from FY2013-14 to FY2017-18, and have been
the missing puzzle for Indian equities. The reason we believe is quite simple - it is on
account of lack of capex. This may be about to change, as we describe later in the Indian
economic update.
This should help in the recovery of corporate earnings, especially in sectors that are
geared for capex - namely capital goods and banks.

SECTOR
OUTLOOK
AUTOMOBILES
The auto industry is nearing the next down cycle. However, as the industry is shifting
towards improvisation in technology and comfort, we think that there is more scope for
expansion. The major push is expected to come from higher infra spending both in rural
and urban areas. With major OEMs investing in capacity addition, product development
via new launches among various automotive segments indicate that demand is still
around. We expect buying to increase after elections and just before BS VI norms are
implemented. Also, better execution of Minimum Support Prices will act as a catalyst
for rural demand pick up. Among all categories of vehicles, Commercial Vehicles
(CV) reported 31% YoY growth during YTD FY19 owing to higher industrial activity and
3-wheeler sales grew by 25% YoY followed by 10% growth in 2-wheeler due to higher
personal consumption. On the flip side, passenger vehicles reported 5% growth lower
than the average 2-year growth of 8.5%. This is due to delayed festive demand and
increase in car prices.
Implementation of BS VI: Post 2020, only BS VI complaint vehicles can be sold in the
market. Many OEMs have already introduced such models. With this, the price difference
between petrol and diesel variants will increase. Currently, the price difference between
petrol and diesel vehicles could be between Rs. 1 Lakh and Rs. 1.5 Lakh. Post BS VI, diesel
vehicles may cost Rs. 2 to 2.5 Lakh more than that of petrol vehicles. MSIL (Maruti Suzuki
India ltd) is manufacturing both Euro-V and Euro-VI (BS V & BS VI) variants and to be BS VI
compliant, certain components like Diesel Particular Filter, Selective Catalytic Reduction
need to be added because of which the overall cost of the vehicle is expected to go up.
With this, we think that the demand for diesel cars may slow down and as an indication
to this, Maruti Suzuki is expected to re-organize its diesel engine assembly plant in
Gurugram.
The future of electric vehicles: In the electric vehicle space, we are still at the initial phase
of development where the country requires capital investment for battery charging
infrastructure and streamline procurement of lithium ion. Dominant OEMs such as TATA
Motors, Mahindra & Mahindra have already introduced electric vehicles and even MSIL is
pacing faster by setting up its own lithium ion factory in Gujarat. Therefore, incentivising
hybrid and electric vehicles could be the need of the hour if they are to be promoted
faster. We think that there is more to happen in the EV segment in terms of innovation
and design.
Effect on Auto Ancillary businesses as electric vehicles increase: Most of the car ancillaries
will continue to exist except for certain engine components (though there is a lot of
time for that to happen). Furthermore, as safety regulations are being implemented,
demand for sensors, airbags, IoT (controllers), clusters, etc. may subsequently increase
as components per vehicle go up. At this onset, most auto ancillary companies have
technological collaboration with global makers for technical expertise. We think that
ancillaries with high product diversification especially in the new-gen technology will
benefit largely from this shift.

CAPITAL GOODS & INFRASTRUCTURE
Q2FY19 has been a real surprise for the investors with ~19% earnings growth in capital
goods index aided by some positive performances from L&T, BEL and Graphite India.
Post the earnings season, profits for CG index is revised upwards by ~3.4% for FY19E
and 1.0% for FY20E in view of reviving optimism in the sector. Companies like L&T,
Siemens, ABB, Kalpataru have reported a strong growth in order book. Further to add,
recent management commentary signaled a sense of positivity in near to medium term
aided by multiple government initiatives providing the necessary levers for sustained
growth. Industry is also of the positive view about the outlook for domestic sales as
underlying demand remains positive due to investments by the government in creating
infrastructure.
Of late, the sector witnessed a sluggish performance due to high interest cost, land
acquisition issues, over capacity in certain segments like power generation; however, it is
showing signs of recovery. Gross fixed capital formation in terms of GDP at Q2 of 2018-
19 was estimated at 32.3% compared to 30.8% in Q2 2017-18. The investment by both
government and private sector has picked up as new projects have been announced.
The industry capacity utilisation has increased to 73.8% in Q1FY19 from 71.2% in Q1FY18.
The IIP-based capital goods index was strong during the April-October period at 8.7%
compared to 0.7% in the corresponding period of previous financial year indicating a
decent performance in FY19 & 20.
On construction front, while the government has been taking efforts ranging from
increased budgetary allocations to higher road project awarding, funding has been an
issue. Of the 64 HAM projects awarded till now in 2018, around 30 projects have not
achieved financial closure yet. Among the ones that received FC, some projects have
exceeded the stipulated time line of 5 months to achieve FC indicating the issues from
bank’s perspective. The pace of road construction also slowed down in H1FY19 as issues
related to land acquisition cropped up. Under HAM, bank funding is available once 80% of
land is acquired. Further to add to the woes, existing developers have their hands full with
significant orders indicating a lower participation in new orders. However, we expect the
execution levels to maintain the current momentum.
In our view, an improving business cycle should bode well for the capital goods sector.
Though stable government at centre post elections is likely to boost the capital cycle,
firm oil prices and continued liquidity crunch may pose risk in near to medium term.
METALS AND MINING

The demand and supply of metals and mining are directly linked to the health of economies.
A growing economy requires them to stimulate industrial, construction and agriculture
sectors. However, metals and mining, being global commodities, the performance of an
individual economy (unless it is China which is believed to be the largest consumer and
producer of metals and mining) will hardly have an impact as it is the performance of
global economies especially economies producing and consuming them the most which
will drive demand and supply of these metals. In the latest World Economic Outlook, the
IMF said that India would grow at 7.3% in FY19E and 7.4% in FY20E. At the global level, the
growth will be at FY17 level of 3.7%. China is forecasted to grow at 6.2% in FY19E.

India produces 95 minerals - 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic
minerals, 3 atomic minerals and 55 minor minerals (including building and other minerals).
The government of India has taken initiatives as provided below to give a big push to
metals and mining sector;
yy Under the Mines and Minerals (Development and Regulation) Act of 1957, FDI upto
100% under automatic route is allowed for the mining and exploration of metal and
non- metal ores including diamond, gold, silver and precious ores, while FDI upto 100%
under government route is allowed for mining and mineral separation of titanium
bearing minerals and its ores.
yy FDI caps in the mining and exploration of metal and non-metal ores have been
increased to 100 per cent under the automatic route.
yy The Government of India aims at raising its steel production capacity to 300 million
tonnes (MT) by 2030-31.
Infrastructure projects across all sectors ranging from road, airports, shipping, power,
logistics and telecom continue to provide lucrative business opportunities for steel. Steel
consumption for housing construction is also likely to rise due to the “Housing For All”
initiative which aims to build around 12 million units in urban areas over next three years
and 10 million units in rural areas by 2019. Rise in infrastructural activities will give rise
for demand of minerals like, coking coal, iron ore, manganese ore, zinc, aluminium, etc.
Aluminium production is forecasted to grow to 3.33 million metric tonnes by FY20.
Domestic automobiles sales increased at 7.01% CAGR between FY13-18 with 24.97 million
vehicles sold in FY18. The passenger vehicle sales in India crossed 3.2 million units in FY18
and is further expected increase to 10 million units by FY20. The country’s key strengths
such as a large domestic consumption base, a cost competitive value chain (that includes
low design, testing and validation costs, frugal engineering capabilities and low labor
costs) and strategic geographical location shall help in developing the country as a world
class automotive manufacturing base. Also, higher manufacturing of auto grade steel
shall help in import substitution, pushing demand for domestic steel.
The rise in production of electric vehicles (EVs) could lead to significant changes for
the mining industry, as demand for minerals such as lithium, cobalt, manganese ore
and nickel, used in the production of EVs rises. According to Statista, global demand
for lithium stands at 252,653 tonnes of lithium carbonate equivalent in 2018, but this will
increase to 422,614 tonnes by 2025, as the metal is a key component in batteries that
power electric vehicles.
There is significant scope for new mining capacities in iron ore, bauxite and coal as there
are considerable opportunities for future discoveries of sub- surface deposits.
On the supply side, elevated prices, lower imports (mainly in the US and Europe) and
increased supply from China may prove to be troublesome to metals and mining sector.
In the current scenario, where steel demand is slowing down in China and exports to the
US are restricted, Chinese exports may seek to re-enter a growing Indian market directly
or indirectly. Uncertainty about the impact of lingering US and China trade tensions, rising
interest rates, and the relative strength of the US dollar will influence future prices. India
has real fear of turning into a dumping ground for imported steel from South Korea and
Japan with whom it has Free Trade Agreement as a consequence of the US imposition of
25% duty. The government of India on its part, having introduced Minimum Import Price,
priority in domestic steel procurement and other such measures are expected to protect
the interest of domestic manufacturers.

IT SECTOR
Growth momentum to continue
During 2018, BSE IT index returned 25% versus 2% returned by Nifty. We believe that this
outperformance was driven by a) favourable USDINR movement – a fall of nearly 10% YTD
(Rs. 63.7 to Rs. 70 and INR touched an all-time low of Rs. 74.4) b) announcement of large
deal wins by big IT companies c) revival of BFSI in the US and positive commentary on
client spending d) better valuation on a relative basis and e) many large institutions were
underweight in the sector at the beginning of the year. However, we believe that in 2019,
IT index may not outperform broader index on such a magnitude. We believe that at best
it can mimic the performance by broader indices.
In 2018, IT companies’ growth was driven by a combination of USDINR and in case of
some companies like HCLT and TCS, due to ramping up of large deals announced in
the past. In 2019, we believe USDINR will remain stable. We don’t expect INR to make
fresh lows as was the case during 2018. Hence, we don’t expect USDINR to contribute
in a big way to IT companies’ growth. However, in 2019 growth is going to be driven by
ramping up of large deals announced during H1 FY19. TCS announced large deals worth
$5 billion between Jan 2018 and September 2018. HCLT announced 5 large deals. Wipro
announced its largest ever deal worth $1.5 bn with Alight HR Services India. Commentary
from Infy and TechM was encouraging.
However, we believe that IT services companies would find it hard to get hold of the
talent they require, specifically in the areas of new technologies like Artificial Intelligence
(AI) and Machine Learning (ML). Accenture in its Q1FY19 concall has highlighted that it
is becoming difficult to find the right talent in these new age technologies. Similarly,
Infosys indicated that it is looking to invest for a partial stake or buyout firms with the
right talent pool in the areas of newer technologies as it is finding it hard to recruit talent
with capabilities in the new technologies like AI and ML.

INDIAN ECONOMIC
OUTLOOK
The sharp rise in oil prices which had raised concerns about widening trade deficit and
the need for preemptive rate hikes due to INR depreciation has quite settled for now.
However, the stress still remains on the fiscal front owing to the upcoming elections.
Also, sluggish export growth signals a caution to the current account position.
During Q2FY19, the Indian economy grew at 7.1% vs. the consensus estimate of 7.4%.
During Q1FY19, GDP grew at 8.2% YoY. This indicates growth is on track to roughly meet
the RBI estimate of 7.4% growth for the entire fiscal year considering that November saw
activity in manufacturing and services sector pick up. The Gross Fixed Capital Formation
(GFCF) increased by 12.5% YoY during Q2FY19 as compared to 6.1% during Q2FY18.
We expect capex spending to lead growth on the back of higher capacity utilisation
which recorded 73.8% in Q1FY19 vs. 71.2% in Q1FY18. Bank credit growth accelerated
in September 2018 where private sector banks recorded more than 20% growth. The
credit-deposit (C-D) ratio at the all-India level improved to 76.4% in September 2018
as compared to 75.6% in the previous quarter. Therefore, we expect this GDP growth
momentum to keep pace on the back of higher personal consumption indicated by
increasing bank credit. Risks to the outlook are largely on account of external sector, the
lagged impact of currency depreciation and uncertain political outlook.
Exhibit: GDP Growth YoY (%)

15
12
0
Dec-…
Sep-00
Sep-18
Sep-06
Sep-09
Sep-12
Sep-03
Jun-10
Jun-98
Dec-08
Dec-17
Jun-01
Dec-02
Jun-04
Jun-16
Jun-13
Mar-99
Jun-07
Mar-11
Sep-15
Mar-14
Dec-99
Dec-11
Dec-14
Mar-05
Mar-08
Mar-17
Mar-02
Exhibit: Capacity utilisation (%)

76% 74%
73%
74%
73%
72%
72%
71.9%
74.0%
72.0%
74.6%
75.2%
70%
73.8%
72.9%
71.0%
74.1%
71.8%
71.2%
71.2%
72%
68% 71%
Q2FY16
Q2FY18
Q3FY16
Q3FY18
Q2FY17
Q3FY17
Q4FY16
Q4FY18
Q4FY17
Q1FY19
Q1FY18
Q1FY17
Capacity Utilization 4-quarter average

Exhibit: IIP and 3M Moving Avg
10
Jun-16
Jun-18
Jun-17
Feb-16
Feb-18
Feb-17
Oct-16
Oct-18
Oct-17
Dec-14
Aug-14
Dec-15
Dec-16
Aug-15
Aug-16
Aug-18
Dec-17
Aug-17
Apr-15
Apr-16
Jun-15
Apr-18
Apr-17
Feb-15
Oct-14
Oct-15
-2
IIP (%) 3M Moving Avg IIP (%)
Source: MOSPI, Karvy Research
With escalating US-China trade tensions, the World Trade Organization (WTO) expects
global trade growth to slowdown which is likely to dampen oil prices yet be maintained
due to the intervention of the OPEC. If oil prices remain at bay, Indian economy will
certainly benefit as the subsidy burden could be minimized.
With New RBI Governor comes a new mandate: After Mr. Urjit Patel resigned citing
personal reasons, Mr. Shaktikanta Das has been appointed as the 25th RBI Governor.
While the rest of the Monetary Policy Committee remains unchanged, change in
leadership means a change in stance to “neutral” from “calibrated tightening” cannot
be ruled out. Also the RBI is likely to focus on liquidity and resolving PSU bank issues.
We believe this indicates that the RBI may keep repo rates unchanged for a couple of
quarters. While outlook for inflation has softened (RBI projects 3.8-4.2% in H1FY2019-20,
but with an upward bias), with crude oil prices declining to USD 61 per barrel and food
deflating. However, a reversal in food deflation is a risk to inflation outlook, given that
core inflation is at ~5.7%; thus, the probability of cut in policy rate is low.
The lower inflation projection largely reflects low food inflation as well as lower oil prices.
However, we believe that the inflation risks are still on the horizon, core inflation (CPI
inflation after stripping out food and energy) remains sticky at 6.2% in October 2018.
Inflationary risks cannot be neglected when capacity utilisation is rising, coming in at
76.1% for Q2FY2018-19, PMI for November was 54 a 11-month high. Robust growth and a
closing output gap further increases inflationary risks.
Exhibit: CPI and Core CPI

10.0
7.5
5.0
2.5
0.0
May-14
May-15
May-16
May-17
May-18
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Sep-14
Nov-14
Sep-15
Nov-15
Sep-16
Nov-16
Sep-17
Nov-17
Sep-18
Nov-18
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
CPI (%) Core CPI (%)

Source: MOSPI, Karvy Research

RBI to continue to inject liquidity through OMO Purchases: The total injection of durable
liquidity for the month of December 2018 will be Rs. 500 bn. Going forward, RBI has
decided to conduct purchase of Government Securities under Open Market Operations
(OMOs) for an aggregate amount of Rs. 500 bn in the month of January 2019. The
operations will be conducted through five auctions of Rs. 100 bn each.
The exact calibration of the quantum of OMO would depend on sustained changes in
the behavior of currency in circulation, the magnitude of sterilization operations for RBI’s
forex operations and other relevant factors.
Credit growth of SCBs improved by 13% YoY in September 2018 driven primarily by
private sector banks which grew at 22.5% YoY. The asset quality of banks improved as
the GNPA ratio of SCBs (Scheduled Commercial Banks) decreased from 11.5% in March
2018 to 10.8% in September 2018. Going forward, the RBI expects this to continue and
estimates GNPA ratio of SCBs to further decline to 10.3% in March 2019. The stressed
advances ratio is gradually converging to the GNPA ratio following the withdrawal of
various restructuring schemes. Therefore, increasing credit growth coupled with
declining provision ratio is expected to lead to higher economic growth.

THE GLOBAL ECONOMIC
OUTLOOK
Near inversion of the US yield curve as well as a sharp 19% decline from all time high for
the S&P 500 has heightened fears of a recession These fears are not restricted to the US
alone, data indicates that Chinese growth may be slowing down significantly and Japan
& Europe (especially Germany) are also showing signs of fatigue.
Exhibit: US yield curve (10 year yield - 2 year yield)

4.0
3.0 19 bps
2.0
1.0
0.0
-1.0
-2.0
-3.0
1976
2010
1978
2000
1986
1988
1996
1998
2014
1982
1992
2004
2016
2018
2006
2008
2012
2002
1980
1990
1984
1994
According to the NBER, the longest business cycle expansion in the US lasted for 120
months starting from March 1991 to March 2001. The current cycle, the second longest
expansion in history began in June 2009 and questions about how long the business
cycle expansion will last are natural.
Exhibit: US post World War II Economic Cycle

Peak Trough Peak month Trough month Duration, peak Duration, Duration, peak to Duration, trough
month month number number to trough trough to peak peak to trough
Feb-45 Oct-45 1742 1750 8 80 93 88
Nov-48 Oct-49 1787 1798 11 37 45 48
Jul-53 May-54 1843 1853 10 45 56 55
Aug-57 Apr-58 1892 1900 8 39 49 47
Apr-60 Feb-61 1924 1934 10 24 32 34
Dec-69 Nov-70 2040 2051 11 106 116 117
Nov-73 Mar-75 2087 2103 16 36 47 52
Jan-80 Jul-80 2161 2167 6 58 74 64
Jul-81 Nov-82 2179 2195 16 12 18 28
Jul-90 Mar-91 2287 2295 8 92 108 100
Mar-01 Nov-01 2415 2423 8 120 128 128
Dec-07 Jun-09 2496 2514 18 73 81 91
1945-2009 (11 cycles) 11 58 69 70
Source: NBER, Karvy Research

To boost slowing growth, China announced a fiscal stimulus program on 21st December;
this comes on top of a reduction in the Reserve Requirement Ratio to 13.5% for
smaller banks and 15.5% for large commercial lenders. Since April this year, the China
Caixin Manufacturing PMI has reduced from levels higher than 51 to a reading of 50.2
for November, indicating a slowdown in overall manufacturing activity. The business
confidence numbers have also seen a continuous decline from 51.9 in May to 50 in
November 2018.
Exhibit: China Reserve Requirement Ratio (RRR)

25
20
15
10
2016
2018
2006
2009
2008
2013
2017
2012
2003
2007
2002
1990
1991
1994
2010
2000
2011
1995
1996
1999
2001
1998
1993
2014
1997
1992
2004
2015
2005
Source: PBOC, Bloomberg, Karvy Research
A Bloomberg survey indicates that economists foresee a 15% probability of a recession

in China in the next 12 months. Industrial profits in China declined in November this year,
the first decline since December 2015. China contributes the most to global growth, and
with a debt to GDP ratio of 265%, the problems in China are structural in nature.
Exhibit: China Industrial profits YoY%

40
30
20
10
-10
Nov-11
Nov-14
Nov-15
Nov-16
Nov-18
Nov-13
Nov-17
Nov-12
Adding to these data points from China, data coming in from the US is also troublesome.
While the 38% drop in oil prices reflects a glut in supply, a slowdown cannot be
overlooked. The International Energy Agency forecasts oil demand growth of 1.4 million
barrels per day, after an estimated increase of 1.3 mbpd. The manufacturing PMI in the US
has declined from 56.5 in April to 53.8 in December, we are likely to witness deceleration
in growth rates.
Tax cuts approved by the US last year have acted as a fiscal stimulus not only for the
US but the entire world. Last quarter, the US economy grew by 3.5% QoQ seasonally
adjusted annualized rate. The US economy is expected to slowdown to 2.6% growth in
2019 and 1.9% in 2020. The slowdown largely reflects the fading of the fiscal stimulus

provided by the tax cuts. It is important to note that many economists believe that US
economic trend growth rate has declined and is closer to 2.0%. Thus, 2019 would still
witness growth above trends.
Some policies from the US government have been unhelpful- trade wars between the US
and China can be harmful for growth, the Chinese economy may slowdown significantly
if trade slows down, which will have implications, especially for Asia as China may resort
to a competitive devaluation. In an extreme scenario, China can retaliate by selling its
holdings of US treasuries. In addition, domestic developments in the US are concerning.
The shutdown of the government over a showdown between President Trump and the
legislature has soured sentiment. Democrats’ control of the Congress is also leading to
fears that the President will find it difficult to get proposals through.
Since 2009, the US Fed had been pumping liquidity into the financial system. But now, as
the Fed opines that the US economy has strengthened, it has been reducing the size of its
balance sheet by USD 50 billion per month. US Fed Chairman has stated that the current
reduction program of the Fed balance sheet will continue and proceed as planned. This is
in addition to tightening via increasing policy rates. A recession has been preceded by an
inversion of the yield curve, but right now, 10 year yield is higher than the 2 year yield by
19 bps. The last two recessions were triggered by rate tightening, but we believe US rates
currently are at lower end of the “neutral” rate. Recessions have occurred one to two years
after the yield curve inverted.
While the US Federal Reserve has indicated that it is likely to increase rates twice in 2019
and once in 2020, money markets indicate that 1) there is a split between no or one
rate rise in 2019 2) there will be a rate cut in 2020. Thus money markets are pricing in a
recession in 2020.
Exhibit: FOMC Dot Plot and money market implied rates

3.5
3.0 3.13
2.5
2.88
2.56
2.45
2.40
2.41
2.38
2.38
2.0
2.24
1.5
1.0
0.5
0.0
2018 2019 2020
FOMC Dots Median Fed Funds Futures - Latest Value OIS - Latest Value
Source: US Federal Reserve, Bloomberg, Karvy Research
With the liquidity moving out of the system and with other fundamentals deteriorating,
fears are rising, CBOE VIX or the “fear gauge” has increased to 25%. In India as well, in the
recent past, we have seen that the VIX index has doubled over last few months (in India)
and has risen almost 300% (in US) since the beginning of 2018.
Concerns from the Eurozone include weak exports from Germany (down 0.9%) in the
recent quarter, while the imports have risen by 1.3%, the Germany’s economy grew by 1.1%
YoY for the third quarter 2018. The Flash Composite PMI index (Services + Manufacturing)
fell to 52.2 for December from 52.3 in the month of November, recording a 4 year low. For
December 2018, Manufacturing PMI fell to 51.5, a 33 month low.

Exhibit: VIX
90
80
70
60
50
40
30
20
10
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: CBOE, Bloomberg, Karvy Research
Exhibit: India VIX

90
80
70
60
50
40
30
20
10
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: NSE, Bloomberg, Karvy Research
OECD leading indicators certainly indicate a slowdown in the pace of economic growth,
however the data is not consistent with the narrative of a recession.
Exhibit: OECD Leading Indicators

103 India Major 5 Asia OECD Total
101
99
97
95
2010
2010
2000
2000
2011
1996
1999
2001
1998
2014
1997
2004
2015
2015
2016
2018
2005
2005
2006
2009
2008
2013
2017
2012
2003
2007
2002
1995
1995
Source: OECD, Karvy Research
Another risk to the world arises from the possibility of a disorderly Brexit, the probability of which has increased
recently. While the long term economic impact is limited to a large extent to the UK and EU, and an orderly Brexit
would be a minor blip for the rest of the world, Britain exiting from the EU without a transition deal would have a
global impact, especially in the area of financial services.
The Japanese economy hasn’t been in the best of shapes lately, with the Bank of Japan’s Governor Mr. Kuroda
highlighting the risks to the outlook of Japan’s economy and his readiness to infuse more liquidity if needed. At 19,
the Tankan survey indicates continued weakness, last quarter Japanese economy declined by 0.6%. He has also
implicitly said that banks have room to cut interest rates, increase buying of assets and also can accelerate the
pace of printing money.

Exhibit: Tankan Survey
(Diffusion index, % points) Manufacturing
70
60 Large Enterprises
50 Medium-sized Enterprises Forecast
40 Small Enterprises
30
20
10
0
-10
-20
-30
-40
-50
-60
-70
-80
18
CY 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Source: Bank of Japan, Karvy Research
However, while growth is slowing down; we are far from the cusp of a recession. In the Bar Analysis grid of US,
currently 11 out of 19 economic indicators are pointing to positive economic growth though eight indicators are
negative. In the US, consumer confidence is near an 18 year high, whereas unemployment rate at 3.7% is at a 40
year low. This indicates that consumption will be resilient as wages are likely to rise on account of a tight labor
market. China has plenty of policy tools at its disposal to counteract a slowdown; its FX reserves are USD 3.1 trillion,
which gives it flexibility.
According to the IMF, India is among the few large economies where growth is resilient. IMF forecasts growth for
FY2019-20 to be 7.4%, which is a strong number. What we find more encouraging is that the driver of growth is
changing, increasingly led by capex. Gross Fixed Capital Formation (GFCF) increased by 12.5% YoY during Q2FY19;
the third consecutive quarter of double digit growth.
Exhibit: IMF economic forecasts

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Brazil 3.0 0.5 (3.5) (3.5) 1.0 1.4 2.4 2.3 2.2 2.2 2.2
China 7.8 7.3 6.9 6.7 6.9 6.6 6.2 6.2 6.0 5.8 5.6
India 6.4 7.4 8.2 7.1 6.7 7.3 7.4 7.7 7.7 7.7 7.7
Indonesia 5.6 5.0 4.9 5.0 5.1 5.1 5.1 5.2 5.3 5.3 5.4
Japan 2.0 0.4 1.4 1.0 1.7 1.1 0.9 0.3 0.7 0.5 0.5
United Kingdom 2.0 2.9 2.3 1.8 1.7 1.4 1.5 1.5 1.6 1.6 1.6
United States 1.8 2.5 2.9 1.6 2.2 2.9 2.5 1.8 1.7 1.5 1.4
World (PPP) 3.5 3.6 3.5 3.3 3.7 3.7 3.7 3.7 3.6 3.6 3.6
Advanced economies 1.4 2.1 2.3 1.7 2.3 2.4 2.1 1.7 1.7 1.5 1.5
Euro area (0.2) 1.4 2.1 1.9 2.4 2.0 1.9 1.7 1.6 1.5 1.4
Emerging market &

5.1 4.7 4.3 4.4 4.7 4.7 4.7 4.9 4.9 4.8 4.8
developing economies
World
2.6 2.8 2.8 2.5 3.2 3.2 3.1 2.9 2.9 2.8 2.8
(market exchange rate)
Source: IMF Global Economic Outlook October 2018, Karvy Research, * For India refers to fiscal year
What does this mean for equities- if the global economy was tipping into a recession, a bear market is a natural
outcome. However, our analysis indicates that while we are experiencing a deceleration in growth prospects, a
recession is not on the horizon yet. Withdrawal of liquidity and a slowdown in growth prospects mean valuations
need to adjust lower. Also the dispersion in stock returns has been low on account of accommodative policies;
stock picking will become more important for portfolios in the coming months.
Lastly, we need to keep a keen eye on economic data, especially from China in the coming months.

WEALTH
MAXIMIZER
LARGE CAP STOCKS
BHARTI INFRATEL LTD
Bloomberg Code: BHIN IN
Company’s Intent to Diversify Business Tends to be a

Positive Move
New Revenue Streams: Considering the rapid increase of data services
through expansion of 3G / 4G network and infrastructure expansion across
cities, we expect a likely surge in demand for small cells, fiberised backhaul,
Recommendation (Rs.)
WiFi and In-building Solutions (IBS) which are new revenue opportunities
for tower companies. These will also be key to the ‘Smart Cities’ - ‘Digital CMP (as on Dec 28, 2018) 263
India’ project which is one of the biggest focus areas of the Government Target Price 308
of India. Development of ‘Smart Cities’ is a key initiative under the ‘Digital
Upside(%) 17
India’ Program and the Government has already announced the creation of
100 ‘Smart Cities’. During the year, Bharti Infratel has been implementing Stock information
the Bhopal Smart City project while the company’s Joint Venture with Indus
Mkt Cap (Rs.Bn/US$ Bn) 486.4 / 7.0
won the bids for Smart city project of Vadodara and New Delhi Municipal
Corporation area. For both the Companies, these projects will open a new 52-wk High/Low (Rs.) 384 / 242
avenue of business. 3M Avg.daily value (Rs. Mn) 649.4
Low Rural Penetration Levels: Indian telecom market has a huge untapped Beta (x) 0.3
potential in the rural areas. With wireless rural tele-density still at 58.7% (as
Sensex/Nifty 36077 / 10860
of Mar 31, 2018, Source – TRAI), there is significant headroom for growth in
voice services currently and in data services over time in these untapped O/S Shares(mn) 1849.6
areas. The high cost of providing services and the ability to quickly deploy Face Value (Rs.) 10.0
state of the art networks will translate into growth opportunities for the
Company. Already, Bharti Infratel has a wide footprint in the Category B and Shareholding Pattern (%)
C circles enabling the expansion of networks in rural markets. Promoters 53.5
Expect healthy gross tenancy additions ahead: Management indicated that FIIs 42.3
gross tenancy addition trend may be weak for some time but it is expected DIIs 3.0
to bounce back on account of aggressive 4G rollouts from incumbents. As
Others 1.2
per management, they do not foresee any threat for gross tenancy additions
despite Jio’s continued preference to build some of the sites on its own.
5G Incremental Opportunities: The company has stated that they have Stock Performance (%)
already started deploying small cell in top 2 metros and this would be a
1M 3M 6M 12M
scalable model for the company as data usage will be elevated when 5G will
be deployed. Absolute 1 0 (12) (29)
Valuation and Risks: At CMP of 263, BHIN is trading at a P/E 21x FY20E EPS. Relative to Sensex 0 0 (14) (33)
The consensus has valued the stock at P/E of 24.5x FY20E EPS, arriving at a Source: Bloomberg
target price of Rs. 308 with an upside potential of 17%.
Valuation Summary Relative Performance*
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E 120
Net Sales 55583 60874 66212 146656 158457 105
EBITDA 24883 28251 31865 59153 62577

90
EBITDA Margin (%) 44.77 46.42 48.12 40.3 39.5
75
Adj. Net Profit 22474 27470 24937 23255 24068
EPS (Rs.) 11.9 14.7 13.5 12.8 12.5 60

Jun-18
Feb-18
Sep-18
Oct-18
Mar-18
Jul-18
Dec-18
Nov-18
Aug-18
Dec-17
Jan-18
Apr-18
May-18
RoE (%) 12.8 16.3 15.4 14.3 14.5
PE (x)* 32.2 22.1 24.9 21.0 21.0 BHIN Sensex
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price Source: Bloomberg; *Index 100

Company Background
Bharti Infratel is a provider of tower and related infrastructure and on a consolidated basis, the company
is one of the largest tower infrastructure providers in India, based on the number of towers that Bharti
Infratel owns and operates and the number of towers owned or operated by Indus, that are represented
by Bharti Infratel’s 42% equity interest in Indus ,which was created as a Joint Venture among Bharti Infratel,
Vodafone and Aditya Birla Telecom to hive off the Towers business in 15 telecom circles.
The company is a pioneer in the tower infrastructure sharing concept in India with over 39,000+ towers
across 18 states, and 11 Telecom circles, with some of them in the remotest and tough terrains. The
company has also pioneered the concept of environment friendly Towers or ‘GreenTowers’ and energy
efficient methods for maintenance of these towers. Infratel has helped Telecom operators maximize their
reach in a short period of time. Infratel is a domain within Airtel and is responsible for managing the tower
infrastructure of Airtel’s wireless business. Bharti Infratel is created as an independent tower company
to provide compelling capex saving opportunities to telecom service providers, while optimally utilising
Airtel’s large tower base.
INFRATEL: Technical View
The stock price made an all time low of 126 in June’13, wherein from it witnessed stupendous rise
towards 499.65 made in the start of Aug’15. After clocking an all time high, stock entered into a
deep correction mode, which extended in time also. From the highs, prices made a swing low of
281.75 in the start of Mar’17, wherein from price rebounded towards its all time high and where
it found resistance and again entered into a correction mode; in the last correction prices failed
to protect its previous swing low of 281.75 and moved lower. Technically, prices have a typical
behavior of respecting double bottoms and bouncing back; in the recent past, stock has made a
double bottom near 244 levels and attempted to recover, exhibiting possibility of prices to regain
strength in sessions to come. On the weekly momentum setup, 14-pd RSI was consolidating below
40-levels from last couple of months, but in the recent pullback indicator attempted to move above
consolidation zone, which indicates prices may recover from lower levels. Going forward, stock
has important support near 230-240 levels, followed by 180-200 levels. On the higher side, stock is
likely to find immediate resistance near 290-300 levels, followed by 325-330 moving above which
stock may move towards 380-400 mark.

HCL TECHNOLOGIES LTD
Bloomberg Code: HCLT IN
Relative Underperformance Gives Confidence

Price reaction overdone: After HCL Technologies (HCLT) announced $1.8 bn
deal to acquire 8 software products from IBM, the largest ever deal by an Indian
IT company, markets expressed concerns about the rationale behind the deal and
punished the stock. We believe that these 8 products with a market size of $110
bn will bring in great synergies in the form of $625mn in incremental revenues in Recommendation (Rs.)
12 months after completion of the deal (mid-2019) and addition of more clients. CMP (as on Dec 28, 2018) 958
Moreover, we believe that relative underperformance of HCLT (returned just 5%
Target Price 1167
YTD vs average YTD return of 23% recorded by Big Five IT firms and 25% YTD return
posted by BSE IT Index over the same period) prices in all the risks in the deal. Upside(%) 22
Large deal wins to support organic growth: Concerns surrounding organic Stock information
growth rate seem to be faded with the announcement of four mega deals from
Mkt Cap (Rs.Bn/US$ Bn) 1334.6 / 19.1
Broadcom, Nokia, P&G and Barclays. Organic growth rate for H1 FY19 at 7%-8%
was better than expected and we believe that HCLT might close FY19 with an 52-wk High/Low (Rs.) 1125 / 875
organic growth rate of 7%-8%, much better than 5% guided by the management. 3M Avg.daily value (Rs. Mn) 2270.0
Mode 3 achieves scale as Mode 2 gains traction: One of the four large deals Beta (x) 0.7
announced recently was based on professional services related to cyber security Sensex/Nifty 36077 / 10860
and DevOps. We believe that this is proof of HCLT’s capabilities and its past
O/S Shares(mn) 1392.6
investments would further enhance its Mode 2 revenues, thanks to its recent deals
announced, we believe Mode 3 will gain traction. Face Value (Rs.) 2.0
Key Catalysts for earnings re-rating in place: We believe regaining organic Shareholding Pattern (%)
growth momentum and scaling up of products and platforms business are Promoters 60.2
key catalysts for rerating of the earnings and subsequently the stock. We
believe that the ongoing large deal momentum and maturing of IBM’s IP FIIs 28.0
partnerships are giving visibility for the same. In the coming year, we expect DIIs 8.1
HCLT’s stock price to be re-rated given the rerating of earnings. Others 3.7
Valuation and Risks: We remain positive on the stock given its relative
underperformance, upside risks to core organic growth and its potential to
Stock Performance (%)
increase Mode 2 and Mode 3 revenues. We reiterate our buy on HCLT and
value it on a consensus FY20E PE of 14.5x with a target price of Rs. 1167, an 1M 3M 6M 12M
upside of 22%. Absolute (8) (12) 5 9
Relative to Sensex (9) (12) 2 2
Source: Bloomberg
Net Sales 408082 475675 505690 601610 673306 120
EBITDA 87547 103844 112460 141197 157100

110
EBITDA Margin (%) 21.5 21.8 22.2 23.5 23.3
100
Adj. Net Profit 73188 86063 87210 101408 109762
90
EPS (Rs.) 51.9 60.1 61.4 73.7 80.2
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) - 28.3 25.2 25.8 24.3
PE (x)* 15.5 14.5 15.6 13.0 11.9 HCLT Sensex

Company Background
HCL Technologies is India’s fourth largest IT services company. HCL Technologies helps global enterprise
transform their businesses for the digital age through integrated portfolio of products, solutions and
services and IP. HCLT’s products are built around digital, IoT, AI, automation, infrastructure management
and engineering services. HCLT offers these services through a global network of R&D labs, innovation
labs, and delivery centers spread across 39 countries.
HCLT serves as a leading enterprise across key industries including 250 of the Fortune 500 companies and
650 of the Fortune 2000 companies. HCLT offers integrated portfolio of products solutions and services
and IP through Mode 1-2-3 strategy built around Digital, IoT, Cloud, Automation, Cybersecurity, Analytics,
Infrastructure management and Engineering Services to help enterprises reimagine their businesses for
the digital age.
HCLT has been the Top Employer in the UK for the past 12 consecutive years. HCL’s DRYiCE COPA
(Cognitive Orchestrated Process Autonomics) platform that applies AI to drive enterprise-wide process
automation and orchestration won the Best Innovation in RPA at AI Summit in San Francisco in 2017.
HCLTECH: Technical View
HCLTECH has witnessed a stellar rally from the low of 654 levels till it clocked its life time high of
1125 levels on 25th September, 2018. Thereafter, the rally took pause, on account of profit taking;
price corrected and made a low of 930.70 levels. Currently, the stock is consolidating in a range of
930-980 levels forming a base before its next rally. Among the indicators and oscillators, the 14-day
RSI is trading above its 9-day signal line on daily chart and poised with bullish bias, indicating that
stock is likely to continue its outperformance in the coming month as well. Among other leading
indicators, parabolic SAR (Stop & Reverse) is trading below the current price on monthly chart,
suggesting an uptrend in the counter. The MACD is trading above the signal line in buy territory on
monthly chart, indicating positive momentum in the stock on medium to long term perspective.
On the downside, stock has an immediate support around its 52 week low of 850 levels, followed
by 760-750 levels. While on the higher side stock may find immediate resistance near 1050-1060
levels, followed by 1125-1150 levels. From the above observation, technically the stock has potential
to surge higher towards its life time high and eventually in an uncharted territory in the coming
months.

HINDUSTAN UNILEVER LTD
Bloomberg Code: HUVR IN
Horlicks Proves to be a Drink of Health for the Health

Food Drinks Business
HUL’s acquisition of GSK Consumer garners valuation of the entity at
Rs. 317 Bn. HUL, implies a leadership in the domestic HFD (Health Food
Drinks) business along with soaps and detergent category. Given the low
penetration in the HFD category i.e. 14% in rural market and 24% in overall
domestic market, there is ample opportunity for growth which will be aided CMP (as on Dec 28, 2018) 1822
by HUL’s strong direct distribution network (3x GSK Consumer’s). HUL’s Target Price 2138
volume increased more than its peers, such as Dabur, Marico, BCL, etc. Post-
Upside(%) 17
merger GSK Consumer will hold 5.7% in HUL with a lock in period of one year.
GSK Consumer would supposedly liquidate its shares to finance the Novartis Stock information
acquisition. Synergy from the acquisition will lower HUL’s operational
Mkt Cap (Rs.Bn/US$ Bn) 3944.1 / 56.4
expenditure, employee costs, A&P spends, and procurement costs.
52-wk High/Low (Rs.) 1871 / 1281
Intimidating presence in premium detergents space: Channel checks have
suggested that the market share has increased for HUL in the premium 3M Avg.daily value (Rs. Mn) 2853.1
detergents space. HUL’s dominance reflects the company’s solid execution Beta (x) 0.8
and market development efforts as well.
Valuation and Risks: We believe HFD portfolio growth will accelerate, given O/S Shares(mn) 2164.6
its strong direct distribution and portfolio innovation. In addition, significant
Face Value (Rs.) 1.0
cost savings are expected in FY21E, after all synergies from the deal factor in.
To consider all benefits of the acquisition, we have assigned HUL a P/E of 54x Shareholding Pattern (%)
to arrive at a TP of Rs. 2138 reflecting an upside potential of 17%.
Promoters 67.2
FIIs 12.1
DIIs 7.3
Others 13.4
1M 3M 6M 12M
Absolute 5 13 14 35
Relative to Sensex 4 14 10 26
Source: Bloomberg

Net Sales 323670 347810 393652 444298 506764 130
EBITDA 63400 74990 88372 103644 120773 120
EBITDA Margin (%) 19.6 21.6 22.4 23.3 23.8 110
Adj. Net Profit 44760 52140 62070 72976 85800 100
EPS (Rs.) 20.7 24.1 28.7 33.6 39.6 90

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 66.5 74.7 82.4 90.1 90.7
PE (x)* 44.0 55.4 63.1 53.6 46.0 HUVR Sensex

Company Background
Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer Goods company with a
heritage of over 80 years in India. In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati
Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited
(1935). These three companies merged to form HUL in November 1956; HUL offered 10% of its equity to
the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 67.25% equity
in the company. The rest of the shareholding is distributed among about 3 lakh individual shareholders
and financial institutions. With over 35 brands spanning 20 distinct categories such as soaps, detergents,
shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and
water purifiers, the Company is a part of the everyday life of millions of consumers across India. Its
portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely,
Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr,
Kissan, Kwality Wall’s and Pureit.
HINDUNILVR: Technical View
HINDUNILVR is in uptrend and making higher highs and higher lows on weekly charts. The historical
price action in the stock reflects that, any meaningful dip in the stock may attract market participants
which will help stock to resume its up move. Currently, the stock is trading near its all time high and
seen profit bookings from its all time high levels of 1869.50 levels which has placed the stock to the
low of 1741.25 levels. Thereafter, the stock has bounced from the said lower levels with supportive
volume formation on daily charts which suggests that the strong hands are accumulating the stock
at higher levels. Prior to that, the stock has seen sharp cut from the high of 1808 levels which has
placed the stock near its 200 DEMA on daily charts. The bounce from the 200 DEMA has seen
supportive volume formation which again reflects uptrend in the stock will remain intact. The stock
is trading above all its major moving averages on daily charts which indicates strength in the stock.
On technical setup, the 14 period RSI is pointing northwards indicates strength in the stock. The
parabolic SAR is trading below the price on weekly charts which indicates uptrend in the stock will
remain intact.

ICICI BANK LIMITED
Bloomberg Code: ICICIBC IN
Recovery and Stability at the Core

The performance continues to underlie the traction in recovery & stability in the
core operating metrics. Headline loan growth numbers showed improvement as
the quarter saw lesser drag from stressed book and the healthy part continues
to grow. Margins showed sharp sequential uptick (14 bps QoQ) aided by multiple
factors and the outlook remains positive. Core fee income growth too held on to Recommendation (Rs.)
the improved growth trajectory. CMP (as on Dec 28, 2018) 361
Loan Growth: The loan book (Rs. 5.5 trillion) growth for the quarter was healthy Target Price 440
and broadly in line with the expectation at 5.5%/12.8% QoQ/YoY. The same was
Upside(%) 22
well diversified across the segments: Retail (5.0%/20.5% QoQ/YoY, 57.3% of
loan mix), SME (5.8%/21.8% QoQ/YoY, 4.6% of loan mix), Domestic Corporate Stock information
(5.2%/5.3% QoQ/YoY, 25.4% of loan mix), and Overseas (7.1%/-4.0% QoQ/YoY,
Mkt Cap (Rs.Bn/US$ Bn) 2323.4 / 33.2
12.7% of loan mix). The growth in overseas is more optical as the same reflects
the positive impact of rupee depreciation. The growth in retail was diversified 52-wk High/Low (Rs.) 375 / 257
largely across the products and gives us confidence on the hold on asset quality at 3M Avg.daily value (Rs. Mn) 8010.3
the granular level. While the headline loan growth in the domestic corporate was Beta (x) 1.4
muted at 5.3% YoY, the underlying growth in the non-stress book was healthy at
~15%. With big ticket resolutions expected over 2HFY19E, we expect the headline
reading on domestic corporate to remain weak. We have revised our FY19E/FY20E O/S Shares(mn) 6440.4
growth estimates by 13.4%/18.0% (earlier 10.8%/16.7%). Face Value (Rs.) 1.0
Stable Asset quality: The headline asset quality ratios GNPA/NNPA/Coverage
Shareholding Pattern (%)
improved to 8.54%/3.65%/59.5% vs 8.81%/4.19%/54.8% in Q2FY19. The retail
slippages were at ~Rs. 8 bn vs ~Rs. 11 bn in Q2FY19, which continue to inspire Promoters 0.0
confidence. Of the ~Rs. 24 bn corporate slippage (Rs. 29 bn in Q2FY19), Rs. 13.0 bn FIIs 45.3
were due to impact of exchange rate movement. The quarter also held a positive
DIIs 44.2
surprise on ~Rs. 18 bn of a steel account upgrade from the bank’s stress list. Further
the bank’s exposure to IL&FS is limited at ~Rs. 9.0 bn. We expect credit costs to be Others 14.5
at 3.1%/0.9% in FY19E/FY20E.
Valuation and Risks: We maintain “BUY” on the stock with target price at Stock Performance (%)
Rs. 440 valuing subsidiaries at Rs. 101 per share and core banking book at 2.3x
1M 3M 6M 12M
FY20E P/B.
Absolute 0 18 33 14
Relative to Sensex (1) 19 29 7
Source: Bloomberg
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E Relative Performance*
120
Net Interest Income 212240 217373 230258 271994 328055
Net Profit 97263 98011 67774 40575 149645 110
EPS (Rs.) 15.0 15.0 11.0 6.0 23.0 100

BVPS (Rs.) 140 156 164 169 188
90
P/E (x)* 20.7 20.6 29.9 49.9 13.5
80
P/BV (x)* 1.7 1.5 1.4 1.4 1.2
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 11.4 10.3 6.6 3.8 13.1
RoA (%) 1.6 1.4 0.9 0.5 1.5 ICICIBC Sensex

Company Background
ICICI Bank Limited provides banking and financial services in India and internationally. It operates through
Retail Banking, Wholesale Banking, Treasury, Other Banking, Life Insurance, General Insurance and other
segments. It provides home, car, two wheeler, personal, gold and commercial business loans as well as loans
against securities and loans for new entities. In addition, the bank offers life, health, travel, car, two wheeler,
home, and student medical insurance products; pockets wallet; fixed income products; investment products
such as mutual funds, gold monetization schemes and initial public offerings as well as other online investment
services. It also provides farmer finance, tractor loans, and micro-banking services as well as other services to
agro-traders and processors and agro corporate. Further, it provides portfolio management, trade,
foreign exchange, locker, private and NRI banking and cash management services; family wealth and
demat accounts; commercial banking, investment banking, capital markets and custodial, project and
technology finance and institutional banking services as well as internet, mobile and phone banking
services.
ICICIBANK: Technical View
ICICIBANK is one of the preferred counters from the Banking sector as the stock is in secular
uptrend, making higher highs and higher lows on all chart frames. In the calendar year 2018, the
stock has generated over 15% of returns and has outperformed its broader index Nifty Bank and
even Nifty 50 for the same time frame. On daily chart, the stock is placed above all its major moving
averages indicating inherent strength in the counter and even it is trading near to its all time high
levels. As far as technical setup is concerned, the 14 period RSI is placed in a comfort zone of 60-
63 levels on weekly chart suggesting further potential in the counter. On oscillator front, the stock
is placed above the mean of the Bollinger band and is heading towards the upper band on weekly
chart frame affirming the bullish view in the counter; even the ADX is clearly indicating that the
stock is gaining strength of its current up move. Hence, investors with medium to long term time
horizon can start accumulating the stock in small quantities on every dip towards the immediate
support zone of 340 levels for the immediate upside of 375 levels, which is also its all time high
breaching which the stock might surge further in the uncharted territory towards 408-410 levels
as per price extension on technical chart.

LARSEN & TOUBRO LTD
Bloomberg Code: LT IN
Eight Decades of Leading the Change

Robust order book, traction in infrastructure segment: L&T’s outstanding
order book at the end of Sep 2018 stood at Rs. 2812 Bn (9% growth Vs H1FY18)
from diversified sectors while the order inflow for Q2FY19 stood at Rs. 419
Bn (46% growth Vs Q2FY18). Order inflow is mainly due to strong tendering
activity in domestic market. Although the private sector investment remains Recommendation (Rs.)
subdued, public sector continues to drive the order inflow. Infrastructure CMP (as on Dec 28, 2018) 1439
segment constitutes for 77.6% of the order book and 54.8% of its new order
inflow during Q2FY19. Current outstanding order book is dominated by Target Price 1700
domestic orders with 78% contribution followed by Middle East with 13%. Upside(%) 18
Financial performance: Robust order book reflects its proven leadership in the Stock information
infrastructure & engineering segments and gives revenue visibility. While the
Mkt Cap (Rs.Bn/US$ Bn) 2018.0 / 28.9
consensus estimates a slowdown in ordering activity due to the scheduled
general elections, they remain optimistic about the execution momentum. 52-wk High/Low (Rs.) 1470 / 1183
Consensus estimates revenue CAGR of 14% & earnings CAGR of 18% during 3M Avg.daily value (Rs. Mn) 3407.0
FY18-20E along with a healthy EBITDA margin of ~12% by FY20E.
Beta (x) 1.1
Five-year strategic plan ‘Lakshya’ in place: LT has put in place its five-year
strategic plan “Lakshya’, which focuses on doubling sales to Rs. 2 tn by
FY21, improving margins (ex-services) from 10% in FY16 to 11.2% in FY21, O/S Shares(mn) 1401.9
value unlocking either by listing the asset or by divesting non-core assets, Face Value (Rs.) 2.0
improving RoE’s from 12% in FY16 to 18% in FY21 and bringing down working
capital from 24% in FY16 to 18% by FY21. Successful implementation of the Shareholding Pattern (%)
strategic plan should ensure healthy operational growth for LT. Promoters 0.0
Buyback: L&T announced a share buyback of up to 6 crore equity shares at a FIIs 18.9
maximum price of Rs.1500/ share for aggregate amount of Rs. 9000 crore.
DIIs 38.3
Metro: Entire corridor 1 of the Hyderabad metro became operational and the
Others 42.8
company is planning to open another stage of the metro in FY19, taking the
total operations to 56 km.
Valuation and Risks: L&T’s diversified exposure to various sectors/ Stock Performance (%)
geographies coupled with its excellent execution capabilities 1M 3M 6M 12M
across sectors and its balance sheet strength compared to other
Absolute 3 13 17 15
peers in the sector has resulted in strong order book build up.
The consensus values the company at 23.5x for a target price of Relative to Sensex 2 14 13 8
Rs. 1700, representing an upside potential of 18%. Delay in capex cycle Source: Bloomberg
recovery & order execution may pose threat to the call.
Net Sales 1000328 1076365 1179081 1377648 1551471

110
EBITDA 104571 110732 195911 166052 191154
EBITDA Margin (%) 10.5 10.3 16.6 12.1 12.3 100

Adj. Net Profit 41933 60287 87892 88390 100842
90
EPS (Rs.) 29.9 43.0 62.6 63.3 72.4
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 9.9 12.9 13.9 15.0 15.6
PE (x)* 29.0 31.5 28.0 22.7 19.9 LT Sensex

Company Background
L&T is a $18 bn technology, engineering, construction, projects, manufacturing and financial services
conglomerate with global operations. L&T is one of Asia’s largest vertically integrated E&C Companies
and is India’s largest Engineering & Construction Company. L&T has an excellent track record of executing
the most complex projects in diverse sectors like infrastructure, oil & gas, defence, power and others
making it the most preferred partner resulting in repeat orders from the clients. L&T has strong presence
in Infrastructure, Power, Metallurgical-material handling, Heavy Engineering, Electrical & Automation,
Hydrocarbon, Development projects, IT, Financial services and others. It undertakes developmental
projects like Buildings & Factories, Transportation infrastructure, Heavy Civil Infrastructure, Power, water
& renewable energy, Ship Building, Defence, Machinery & Industrial products. L&T, through its subsidiaries,
associates and JVs operates in Financial services, Infotech, Infrastructure, Hydrocarbon, Manufacturing,
fabrication and other Services, etc.
LT: Technical View
LT has witnessed a stellar rally from the low of 645.50 levels till it clocked its life time high of 1459.70
levels on 21st December 2018. Adding to that, the stock is trading well above its 21/50/100/200
DEMA with positive price structure indicating the positive momentum in the stock is likely to
continue in the coming month also. Among the indicators and oscillators front, 14 periods RSI is
pointing northwards and poised with bullish bias, clearly indicating the bullish trend in the stock
is likely to continue and the counter is expected to head higher in the near to medium term. The
parabolic SAR (Stop & Reverse) is comfortably trading below the price on daily as well as on weekly
chart, which reflects buying will remain intact in the counter. The MACD is trading above the signal
line in buy territory on weekly chart, suggesting strength in up move. The immediate support for
the stock is placed around 1340-1300 levels followed by 1180-1150 levels, while on the higher side,
the stock may face resistance near 1600-1650 levels followed by 1850-1900 levels. From the above
observations, it is evident that stock is likely to surge higher and outperform its peers in the near
to medium term perspective.

OIL & NATURAL GAS CORP LTD
Bloomberg Code: ONGC IN
Impressive Performance
Oil and Natural Gas Corporation in FY18 recorded standalone revenue of
Rs. 850041 Mn, up 9% over FY17 on the back of impressive production and
sales performances. Crude oil production on standalone basis increased to
22.31 MMT recording flattish growth of 0.3%. Natural gas production rose to
23.48 BCM registering an impressive growth of 6%. Domestic hydrocarbon Recommendation (Rs.)
volumes at 50.05 MMtoe registered 3% growth. Production of value added CMP (as on Dec 28, 2018) 151
products at 3.39 MMT increased 4.6% over FY17. The company realized $
Target Price 210
7.33/barrel for crude oil sold in domestic market.
Upside(%) 39
Better Business Synergy: The acquisition of majority stake (51.11%) in
Hindustan Petroleum Corporation Limited provides synergy in terms of Stock information
low crude procurement cost for both HPCL and Mangalore refinery &
Mkt Cap (Rs.Bn/US$ Bn) 1931.4 / 27.6
Petrochemicals Limited (71.63% owned by ONGC and 16.96% by HPCL). In
event of decline in crude oil price, ONGC upstream margin could be offset 52-wk High/Low (Rs.) 213 / 135
by an increase in refining margin of HPCL. Thus, acquisitions of these entities 3M Avg.daily value (Rs. Mn) 1781.9
help protect margins of each other thereby neutralizing erratic movements
Beta (x) 0.9
in crude price.
Upcoming Gas Projects: The company completed 17 projects during last 4
years contributing over 6 MMtoe of oil & gas supplies. Ramp-up in gas output O/S Shares(mn) 12833.2
is expected from key projects such as KG-DWN-98/2, Daman and Vashishta Face Value (Rs.) 5.0
fields whereas Western Offshore redevelopment projects will add to oil
production. Shareholding Pattern (%)
Promoters 67.5
Transparent Pricing: ONGC’s crude subsidy burden has significantly eased
following downstream sector reforms. Domestic gas price is now linked FIIs 5.8
to prices in international hubs (US Henry Hub, UK NBP, Alberta and Russia), DIIs 13.3
which is revised every 6 months. We believe, ONGC will continue to benefit
Others 13.4
from benign subsidy environment and its net realization will now closely track
oil price.
Valuation and Risks: Synergies in ONGC’s upstream and downstream Stock Performance (%)
business with the acquisitions of HPCL and MRPL will prove to be value 1M 3M 6M 12M
unlocking and ensure not only retention of margin but also enhancement of
the same for the company. Consensus valuation for the company is PE 8.2x Absolute 5 (15) (2) (22)
of FY20E EPS for the target price of Rs. 210 with upside potential of 39%. Relative to Sensex 4 (15) (5) (27)
Source: Bloomberg
110
Net Sales 1348162 3232749 3598789 4136673 4213822
100
EBITDA 405143 529583 574770 785366 796468
90
EBITDA Margin (%) 30.1 16.4 16 19 18.9
80
Adj. Net Profit 180600 240823 223602 324041 330703
70
EPS (Rs.) 9.4 18.8 17.4 24.9 25.7
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 6.8 12.5 11.1 14.8 13.7
PE (x)* 21.4 11.4 10.3 6.0 5.8 ONGC Sensex

Company Background
Oil and Natural Gas Corporation with ‘Maharatna’ status, is World’s No. 1 Exploration & Production company
and ranks 11 among global energy majors. In Forbes Global 2000 list 2018, ONGC ranked 3rd largest in
India and 246th worldwide. ONGC group companies comprises of ONGC Videsh Limited (having 41 oil
and gas projects in 20 countries), Hindustan Petroleum Corporation Limited (having 15000 retail outlets
and pipeline network of 3370 kms), Manglaore Refinery & Petrochemicals Limited, ONGC Petro additions
Limited (OPaL) and ONGC Mangalore Petrochemicals Limited (OMPL). ONGC is the fully integrated oil
and gas company in India, operating along the entire hydrocarbon. The company has established 8.70
billion tonnes of hydrocarbon reserves. The company holds the largest share of hydrocarbon acreages in
India (61% in Petroleum Exploration Licence (PEL) Areas & 81% in Mining Lease (ML) Areas). The company
produces over 1.26 million barrels of oil equivalent per day, contributing around 70% of India’s domestic
production. Of this 75% of crude oil produced is Light & Sweet.
ONGC: Technical View
ONGC has bounced well after finding support around 134 levels. The immediate trend in the stock
reflects lower lows and lower highs on daily charts. Prior to that, the stock has seen sharp fall from
its swing high of 212.85 levels which has dragged the stock to the low of 134.75 levels. The fall in the
stock has placed the stock below all its major moving averages and trading well below the same.
The recent bounce in the stock from the support of 134 levels and sustainability above this level will
be a fresh trigger for the stock which indicates near term bottom in the stock is placed and stock
is expected to resume its up move in medium term. The historical price action in the stock also
reflects that any meaningful dip in the stock may attract market participants which will help the
stock resume its upward movement. On technical setup, the 14 period RSI is pointing northwards
indicates strength in the stock. The immediate support is placed around 134 levels and below that
is 120 levels. Whereas, the resistance is placed around 165 levels and above that at 185 levels.

STATE BANK OF INDIA LTD
Bloomberg Code: SBIN IN
SBI: On the Road to Recovery

Improvement in profitability: SBI reported positive earnings for Q2FY19.
SBI reported PAT of Rs. 9.4 bn after three consecutive quarters of losses
on back of Rs. 15.6 bn gains from stake sale in SBI General Insurance and
merchant acquiring business. Domestic NIM increased 29 bps YoY to 2.88%
in Q2FY19. Global NIMs expanded to 2.73% in this quarter. On sequential Recommendation (Rs.)
basis, net advances increased to 8.5%. Deposits growth came at 7% YoY CMP (as on Dec 28, 2018) 295
at Rs. 28.07 lakh cr, increased by 2.2% sequentially. NII grew 12.5% YoY to
Target Price 347
Rs. 20906 cr led by loan growth.
Upside(%) 18
Reduction in slippages: The GNPAs improved as it got lowered 74 bps
sequentially to 9.95%. i.e. it lowered approx. 3.3% QoQ to approx. Rs 2.06 tn. Stock information
This downtrend is likely to continue. This GNPA was due to lower slippages
Mkt Cap (Rs.Bn/US$ Bn) 2631.0 / 37.6
(Rs. 109 bn), even though there was a sharp drop in overall reductions
(Rs. 178 bn, down by ~28%). Across segments, slippages were lower but 52-wk High/Low (Rs.) 335 / 232
SME slippages doubled QoQ (Rs. 38.3 bn) despite the bank availing the 3M Avg.daily value (Rs. Mn) 6738.0
RBI dispensation of Rs 5.1 bn. Corporate slippages lowered quarterly to Beta (x) 1.5
Rs. 31.9 bn (-14% QoQ) incl. slippages of ~Rs. 23.9 bn from the watch list.
Growth in various financial vectors: Management commented that advance
growth will be at 10% YoY in FY19E. NIM may reach to 3% as per management’s
comment. Domestic credit growth was at 11% YoY. Retail credit increased by Face Value (Rs.) 1.0
14.3% YoY to Rs. 5.79 lakh crores in Q2FY19. Home loans grew by 14.26% YoY
to Rs. 3.14 lakh crore. Advances to large corporates increased by 14% YoY to
Rs. 7.45 lakh crore. Promoters 58.9
Valuation and Risks: SBI with its focus on reducing NPAs and fresh slippages FIIs 11.2
augur well in the long term. We value the stock at 1.3x FY20 BVPS with a “BUY” DIIs 22.3
rating for a target price of Rs. 347. Risks are IL&FS exposure and slippages Others 7.6
outside the watch list.
1M 3M 6M 12M
Absolute 4 11 15 (4)
Relative to Sensex 3 11 11 (10)
Source: Bloomberg
Net Sales 775929 813367 823828 928742 1045000 110
100
EBITDA 122246 2412 (45563) 92244 276531
90
EBITDA Margin (%) 15.9 0.3 (5.3) 11.1 28.5
80
Adj. Net Profit 232.6 272.4 258.0 241.5 262.7
70
EPS (Rs.) 12.2 946.4 0.0 24.5 9.5
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 0.8 1.0 0.9 1.1 1.0
PE (x)* 0.5 0.4 (0.2) 0.3 0.7 SBIN Sensex

Company Background
State Bank of India is India’s largest bank offering personal banking, agricultural banking, corporate banking
and NRI banking with a consolidated balance sheet close to Rs. 36.2 lakh crore (Rs. 36.2 Tn). SBI employs
over 264,041 employees and operates through a network of 22414 branches and has one of the largest
ATM networks in the world with 59541 ATMs including Cash Deposit Machines and Recyclers serving over
424 Mn customers. SBI, along with its merged subsidiaries provides various services like deposits, retail
loans for Home, Automobile, Education, other Personal and Corporate loans. SBI has various non-banking
subsidiaries: SBI Life Insurance Company, SBI Capital Markets, SBI Funds Management and SBI Cards &
Payments.
SBIN: Technical View
SBIN has gained more than 11% during the third quarter of 2019 Financial Year and is one of the
stocks in Bank Nifty index which has gained for the month of December 2018. The stock is currently
trading well above its all major moving averages like 50, 100, and 200 days moving averages. Even
on the weekly charts also, the stock is trading well above its all major moving averages, confirming
the uptrend. However, on a broader trend, the stock is stuck in the range of 245-325 levels over
last few quarters. The overall chart structure of the stock indicates that though the stock is stuck
in the broader range, the volumes, momentum and magnitude suggest the bulls are having strong
grip on the counter. The stock has good support around Rs. 255-250 levels below which the next
levels of meaningful support lie around Rs. 230-225 levels. As far as the technical setup of the
stock is concerned, the ADX is clearly indicating that the stock is gaining strength of its current up
move and a similar picture is being painted by the RSI which is trading around 57 on weekly charts.
Investors with a medium term horizon can start accumulating the stock in bits and parts with a
provision to add more on dips towards 250 levels and may hold with a stop loss placed below Rs.
230 on a closing basis for potential upside technical targets of Rs. 330-350 in the next few quarters.

TATA MOTORS LTD
Bloomberg Code: TTMT IN
To Overcome Near Term Challenges

Despite the near term pressure on margins due to slowdown in luxury
car demand, we think that the management’s focus on improving core
profitability will help recover from the stress. Also, new vehicle launches lined
up during the next 2 years including that of the EV platform is expected to
drive volume growth. Increased focus on the LCV and utility vehicle segment Recommendation (Rs.)
has led TTMT’s domestic market share to improve considerably during CMP (as on Dec 28, 2018) 171
YTDFY19. Though we are not worried about the domestic business but for the
Target Price 259
irregularities in the JLR business. We expect JLR business to get streamlined
during FY20E. Upside(%) 51
JLR business to revive on the back of new launches: JLR’s business was Stock information
impacted by lower volume due to disruption in the Chinese market while other Mkt Cap (Rs.Bn/US$ Bn) 540.1 / 7.7
markets such as UK and Europe have done fairly better. Inventory destocking and
52-wk High/Low (Rs.) 444 / 155
higher discounts led to a decline in the overall profitability. However, new models in
the hybrid segment are expected to be launched under the JLR cap which we think 3M Avg.daily value (Rs. Mn) 3528.8
will be helpful in reviving demand. Beta (x) 1.3
Cost measures to fill the profitability gap: The company has evaluated several Sensex/Nifty 36077 / 10860
measures to maintain operating costs at lower levels where the entire business
will be restructured to achieve higher operating margin. Some of the parameters
include modular architecture, procurement, in-house engineering to simulate Face Value (Rs.) 2.0
product design changes and overall business consolidation. Shareholding Pattern (%)
Valuation and Risks: After the recent correction in the stock, we Promoters 37.3
think that TTMT is available at cheap valuation. We expect steady
FIIs 18.8
recovery in the JLR business and think that cost reduction measures
being taken will work in favour of the company. TATA Motors is valued DIIs 17.2
on SOTP basis based on consensus estimates for a target price of Others 26.7
Rs. 259 having an upside of 51%. However, uncertainties in the JLR business
continue to be the downside risk to our call.
1M 3M 6M 12M
Absolute (2) (24) (35) (59)

Relative to Sensex (3) (23) (37) (62)
Source: Bloomberg
Net Sales 2673201 2639995 2910930 3176151 3490468

90
EBITDA 371520 344314 351842 329936 418515
EBITDA Margin (%) 13.9 13.0 12.1 10.4 12.0 60

Adj. Net Profit 107498 79842 83290 30217 77859
EPS (Rs.) 32.0 23.0 25.7 8.8 22.9 30

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 17.1 10.9 12.3 3.2 7.7
PE (x)* 12.2 19.8 12.7 19.4 7.5 TTMT Sensex

Company Background
Tata Motors Group is an automobile manufacturer with a portfolio that includes a wide range of cars,
sports vehicles, trucks, buses and defence vehicles spread across 175 countries around the globe. TATA
Motor’s Jaguar Land Rover Automotive PLC is the holding company of Jaguar Land Rover Limited, a British
multinational automobile company with its headquarters in Coventry United Kingdom. Models under
the Jaguar series include XF, XJ, F-Pace, XE etc. and models under the Land Rover series are Defender,
Discovery and Range Rover (RR) series having more prominence in the UK, Europe, North American and
Chinese regions.
TATAMOTORS: Technical View
TATAMOTORS is in secular downtrend and is in the cycle of making lower tops and lower bottoms
from the highs of 598.40 levels and is currently trading in a truncated trading zone of 160-180
levels. The stock is placed below all its major moving averages on daily chart. However at current
juncture, the stock is trading in a narrow range having immediate support placed around 150-154
levels, which is also the multiple support for the counter on weekly chart followed by its multiyear
support of 135-140 levels sustaining which the stock is expected to surge higher close to its
immediate resistance of the unfilled gap placed around 205-208 levels. As far as the technical
setup of the stock is concerned, the ADX is clearly indicating that the stock is gaining strength
at current scenario and the bulls are trying to fight hard against the bears. Even the weekly RSI
depicts the same kind of view as it is placed near to the oversold region suggesting the stock to
be bottomed out soon and a reversal in the trend can be witnessed. Tata Motors being one of the
underperformers from the auto sector in the FY18 is expected to perform in FY19. Hence, investors
with medium to long tern time horizon can start accumulating the stock in small quantities on every
dip towards the immediate support zone for the potential upside of 205-208 levels, breaching
which the stock might surge further towards 225-230 levels.

UPL LTD
Bloomberg Code: UPLL IN
Traction in Latin American Business has kept Growth

Stable
Growth in India and LATAM jointly contribute to ~66% of total sales. Products
like Sweep Power, Avancer Glow and Delma received encouraging response
from the farmers in India Business, despite erratic business. H2FY19 is
expected to be encouraging with higher reservoir levels than last year. Recommendation (Rs.)
Except for Argentina, LATAM growth has remained healthy for the recent CMP (as on Dec 28, 2018) 758
quarter at 25.8% YoY. The inventory position in LATAM is below normal with
Target Price 1004
healthy order book, coupled with the benefits accruing from the US-China
trade war. UPL posted stable volume growth of 8% YoY for Q2FY19, driven by Upside(%) 32
robust performance across India, LATAM and Africa. Better realization and
Stock information
favourable currency movement resulted in a 14% YoY growth in net revenue
to Rs 42.5 bn. Management has re-iterated its revenue growth guidance for Mkt Cap (Rs.Bn/US$ Bn) 386.2 / 5.5
FY19E at 10-12%. UPL is well-positioned to post stronger growth in 2HFY19, 52-wk High/Low (Rs.) 830 / 537
driven by better farmer sentiments following the recent MSP hike (which
3M Avg.daily value (Rs. Mn) 1559.4
would increase agri spends by farmers),pick-up in demand amid better
monsoon and healthy performance of the new and existing product portfolio Beta (x) 1.2
in key crops like Cotton, Soybean and Sugar beet. Sensex/Nifty 36077 / 10860
Positive Synergies from UPL-Arysta Life Sciences Acquisition continue: The O/S Shares(mn) 509.3
acquisition will enhance UPL’s position as a global leader in the agricultural Face Value (Rs.) 2.0
solutions. Through this, it intends to find market opportunities in emerging
markets like Asia, Latin America and Europe. The consolidation in the industry Shareholding Pattern (%)
is driven towards giving crop solutions to farmers. UPL has been investing Promoters 27.9
in the same from the last few years to improve their ability to fight climate
FIIs 42.4
change. Globally, Arysta is 4th in seed treatment while being 7th/8th in seed
treatment solutions. Arysta also has an alliance with Japanese manufacturers DIIs 8.6
who have access to several patented and new molecules which would bring Others 21.1
in new value to UPL. Strong backward integration, consolidation in the
agrochemical space with a boost to geographical/ segment/ product mix
would give strong traction to the business and aid profitability. Stock Performance (%)
1M 3M 6M 12M
Valuation and Risks: Factoring in strong backward integration, consolidation
in the agrochemical space with a boost to geographical/ segment/ product Absolute (2) 14 25 (1)
mix and strong traction in LATAM business, at CMP Rs. 758, as per consensus
Relative to Sensex (3) 15 21 (7)
estimates, we recommend ‘BUY’ for a target of Rs. 1004 valuing at 5 year average
Source: Bloomberg
historical PE of 16x on FY21E EPS representing an upside potential of 32%.
Net Sales 160750 171410 194041 273652 289361

100
EBITDA 29850 35050 40017 57542 62786
EBITDA Margin (%) 18.6 20.4 20.6 21.0 21.7 80

Adj. Net Profit 17270 20220 22456 26854 32005
EPS (Rs.) 34.1 39.8 44.9 53.8 62.8 60

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 28.4 23.2 22.5 21.8 21.6
PE (x)* 21.3 18.4 16.7 14.2 12.1 UPLL Sensex

Company Background
United Phosphorous Ltd (UPL) is the largest producer of agrochemicals in India. The company produces
and exports off-patent crop protection products, other industrial chemicals. Incorporated in the year
1969, UPL is among the top five post–patent agrochemical manufacturers in the world and is present
across 123 countries. It offers wide range of products and has developed more than 100 insecticides,
fumigants, rodenticides, fungicides, herbicides, specialty chemicals, industry chemicals and chloroalkaline
products. All the units of UPL are certified under the ISO 9001 for quality assurance, 14001 for Environment
Pollution Control norms and OHSAS 18001 for healthy and safety. UPL also manufactures Caustic
Chlorine, White Phosphorus, Industrial Chemicals and Specialty Chemicals. It also has captive power plant
that has a generating capacity of 48.5 MW i.e. BEIL (Bharuch Enviro Infrastructure). BEIL is engaged in
collection and disposing off solid/hazardous wastes from member industries in the regions. CEL (Chemo
Electronic Laboratory) is part of UPL’s diversification strategy. It is one of the largest manufacturers of
toxic gas detection devices and is the only manufacturer of chemical detector tubes in India. ETL (Enviro
Technology) has a common effluent treatment plant in Gujarat. Recently, it acquired a seed treatment/
solutions company called Arysta Life Sciences in a 4.2 Bn deal.
UPL: Technical View
UPL stock price clocked an all time high of 902.50 in the start of Aug’17, post which it entered into
a correction mode, and continued to drift lower till July 18, almost a year long price correction,
wherein prices retraced its key Golden Fibonacci Ratio by placing a swing low of 537, post which
it witnessed gradual recovery towards 790 levels in last couple of months. Technically, prices
managed to recover from the lows and formed higher-high and higher low in the recent recovery,
also prices moved above its major 200-DEMA (706) and from last two months it is sustaining
above that, also it is holding above its 21 & 50-DEMA which is currently placed near 753 & 733 levels
respectively. On the weekly momentum setup, 14-pd RSI after testing oversold territory, moved
back in bullish territory, and it is also reflected on daily time frame chart where indicator managed
to float above 40-levels from last many sessions, regaining underlying strength in the counter.
Going forward, stock has important support near 700-710 levels, followed by 580-600 levels. On
the higher side, stock is likely to find immediate resistance near 800-830 levels followed by 890-
910 moving above which stock will enter into an uncharted territory towards 960-990 mark.

YES BANK LTD
Bloomberg Code: YES IN
Odds In favour of Yes

The bank’s Q2FY19 performance disappointed on asset quality
notwithstanding the healthy business momentum. The slippages were much
higher than anticipated nevertheless the miss was led by concentrated
exposure and the bank continues to see good possibility of recovery.
Additional disclosure on asset quality pertaining to lower SMA2 accounts Recommendation (Rs.)
(> Rs. 50 mln at 0.15%) and no exposure to IL&FS at the parent level should CMP (as on Dec 28, 2018) 181
somewhat balance out the negative on slippages. Business momentum remained
Target Price 410
healthy with advances led by across the segments. NIMs surprised on the positive
and held stable notwithstanding high consumption. The outperformance on NIMs Upside(%) 127
vis-a-vis retail peers could be explained by much higher proportion of variable book
Stock information
and quite less pressure on retail book. The bank has lowered its branch expansion
targets nevertheless we see past investments sufficing to maintain the granular Mkt Cap (Rs.Bn/US$ Bn) 419.5 / 6.0
momentum in the medium term. Factoring in higher treasury losses, lower loan 52-wk High/Low (Rs.) 404 / 147
growth and a similar performance on divergences as it was last year, we estimate
ROEs to be at ~16%/18% in FY19E/FY20E.
Beta (x) 1.4
Outperformance on margins: The NIMs were stable QoQ at 3.3% notwithstanding
high capital consumption as against our expectation of a sequential decline. We
believe the outperformance as against the retail peers is led by higher proportion O/S Shares(mn) 2312.0
of variable book and less competitive pressure on retail book. Face Value (Rs.) 2.0
Loan growth remains strong: We expect loan growth to remain healthy Shareholding Pattern (%)
(~20/25%) not withstanding capital and transition issue. The loan growth for
Promoters 19.9
the quarter was quite strong at 12%/61% QoQ/ YoY. The same was led by the
business banking, 9.5%/57% QoQ/ YoY and corporate banking, 12.6%/63% FIIs 39.6
QoQ/ YoY. Within the business banking the most granular of the segment, DIIs 22.9
Retail Banking, continues to show the strongest momentum at 14%/102%
Others 17.6
QoQ/ YoY. We expect some pressure on growth because of constrained
capital to be led by corporate banking leading to a positive shift in the loan
book mix towards business banking. We estimate loan growth at 25%/21% Stock Performance (%)
FY19E/FY20E.
1M 3M 6M 12M
Valuation and Risks: We rate “BUY” on the stock with a Target Price of Rs.
Absolute 12 (1) (45) (42)
410 valuing the stock at 2.67x FY20E P/B. We believe that uncertainties about
its top management and asset-quality issues will remain a cloud on the stock Relative to Sensex 11 (1) (46) (46)
price in the near term. Source: Bloomberg
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Relative Performance*
140
Net Interest Income 45667 57973 77371 99294 113656
120
Net Profit 25394 33301 42246 43745 58762
100
EPS (Rs.) 12.0 15.0 18.0 19.0 26.0
80
BVPS (Rs.) 66 97 112 130 154
60
P/E (x)* 16.4 13.6 10.8 10.4 7.8
40
P/BV (x)* 3.0 2.1 1.8 1.5 1.3
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 19.9 18.6 17.7 15.7 18.0
RoA (%) 1.8 1.9 1.7 1.3 1.4 YES Sensex

Company Background
Yes bank is a private bank set-up in 2004. Over the years, the bank’s strong business growth, healthy net
interest margins, stable profitability, healthy capitalization have made it one of the top five private sector
banks in India. It has steadily built a Corporate, Retail & SME banking franchise, with a comprehensive
product suite of Financial Markets, Investment Banking, Corporate Finance, Branch Banking, Business and
Transaction Banking, and Wealth Management business across the country. Its Treasury segment includes
investments and financial market activities such as trading, maintenance of reserve requirements and
resource mobilization. The Corporate/Wholesale Banking includes lending, deposit taking and other
services offered to corporate customers. The Retail Banking includes lending, deposit taking and other
services offered to retail customers. The Other Banking Operations segment includes Para banking
activities, such as third party product distribution and merchant banking among others. Yes bank has
adopted knowledge driven approach to offer financial solutions, which go beyond the traditional realm
of banking.
YESBANK: Technical View
YESBANK witnessed a huge correction from the higher levels of 404 towards 146 levels within a
short time frame of around 4 months. The stock is trading far from the major moving averages and
is trading near the major support area of 150-160 levels and formed a good base around the same
levels from past few weeks. The stock has been in the sideways consolidation mode from past few
weeks and witnessed reasonable volumes indicating strong hands have started accumulating the
stock at current levels after the recent correction. At the current juncture, the stock is indicating a
bullish divergence as seen with its momentum indicators and is looking bullish. The stock is poised
to surge higher towards 280 plus levels with 14 days RSI plotting comfortably around 45-50 levels
suggesting positivity in the counter. On the shorter time frame, the stock will enter into bullish
trajectory once the price breached its immediate resistance level of 195 followed by 205 levels. On
the flip side, the next best support for the counter is placed around 145-150 which may be utilized
as a good accumulating opportunity for the long-term period. On the overall front, we expect
the stock to gradually move northwards in the next few months and may continue to trade with
positive bias. Long-term investors may buy the stock at current levels and accumulate more if the
stock dips towards the support zones.

Wealth Maximizer - Largecap (WM) is an investment product of Karvy Stock Broking
Ltd formulated by our Equity Fundamental & Technical Research, based on Techno-Funda
Analysis. It enlists 10 stocks from the Karvy Large-cap stock universe.
The objective of ‘Wealth Maximizer’ is to deliver superior returns over an extended time
frame. The investment philosophy works on simple but superior fundamental research.
The 10 large cap companies detailed in this product in our opinion, reflect superior
businesses with consistent future cash flows, operating efficiency and growth potential.
We also track short-term price distortions that create long-term value, driven by sound
economic fundamentals of the company. This reflects that stocks that have margin of
safety will converge to their intrinsic value over a period of time and will reflect superior
returns.
This is also a part of managing the overall risk, the objective is to attain higher risk adjusted
returns and deliver consistent outperformance.
The stocks’ performance will be assessed on an ongoing basis and the composition of
the stocks in the product will be altered based on target achievement, changes in the
fundamentals of the stocks, industry position, market performance and broad macro-
economic factors.
The product is being given to the clients in the form of non-binding investment
recommendations so that they can decide to capitalize on the robust fundamentals and
future plans of the company which are being discussed in the report.

VALUE
INVEST
MID CAP STOCKS
BAJAJ ELECTRICALS LTD
Bloomberg Code: BJE IN
Consumer and EPC Business Both on a Strong Footing

Q2FY19 Update: The revenues came in at Rs. 1598 mn growing
by 70.9% YoY beating our expectations. Both the segments have
performed strongly to drive growth. EPC has posted strong growth
of 126.9% YoY majorly driving the huge revenue growth. Consumer
durable segment has shown consistent growth of 25% with major Recommendation (Rs.)
sub-segment growth in fans and appliances. PBT was at Rs. 533 mn showing a CMP (as on Dec 28, 2018) 497
growth of 73.8% and PAT was at Rs. 341 mn for a growth of 79.6%. Considering
Target Price 670
YoY, the margins have shown an improvement but QoQ there is a decline in
margins. The margins declined QoQ due to increase in commodity prices and Upside(%) 35
depreciation of rupee.
Stock information
Consumer Durables: With the implementation of RREP the company was able
to establish a strong distribution network of 180,000 touch points. It is in the
process of bringing new products and expanding its existing product range. 52-wk High/Low (Rs.) 706 / 400
BJE motivates and encourages the distributors by bringing new incentive 3M Avg.daily value (Rs. Mn) 37.7
schemes and training session. It has taken a price hike due to increase in
Beta (x) 1.1
commodity prices and its margin and working capital cycle has improved a
lot. Sensex/Nifty 36077 / 10860
Nirlep Acquisition: Bajaj has expanded its consumer segment portfolio and
has acquired 79.85% of Nirlep appliances which is majorly into the business of Face Value (Rs.) 2.0
non-stick cookware. The management expects the acquisition to be revenue
Stock information
accretion in the coming years. The management expects Nirlep revenues to
grow at CAGR of 30% over the next 3 years. Promoters 62.8
Healthy Order book: The improvement in execution and being selective about FIIs 9.6
projects has helped the company revenue to grow. In order to improve the DIIs 5.3
execution and supply chain, the company has used Theory of Constraints.
Others 22.3
Margins can fall in UP orders due to increase in commodity price and slightly
higher execution cost. Management expects revenue to be around Rs. 40 bn Shareholding Pattern (%)
in FY19. 1M 3M 6M 12M
Valuation and Risks: With a very positive scenario for both consumer Absolute 6 (1) (6) 1
and EPC segment, we expect the revenue to grow at CAGR of 14% during
Relative to Sensex 4 (1) (9) (6)
Fy18-20E and EBITDA margin to improve to 7.0%. We rate “BUY” valuing the
Source: Bloomberg
company at 25x on FY20E EPS for a target price of Rs. 670 representing an
upside potential of 35%.

Net Sales 46267 42983 47164 56860 66270 125

EBITDA 2642 2445 2935 3696 4639
110
EBITDA Margin (%) 5.7 5.7 6.2 6.5 7.0
95
Adj. Net Profit 1103 1093 1730 2023 2720
EPS (Rs.) 10.9 10.8 17.1 20 26.9 80

Jun-18
Feb-18
Sep-18
Oct-18
Mar-18
Jul-18
Dec-18
Nov-18
Aug-18
Dec-17
Jan-18
Apr-18
May-18
RoE (%) 14.6 12.5 18.3 18.2 20.1
PE (x)* 17.4 28.8 29.9 24.8 18.4 BJE Sensex

Company Background
Bajaj Electricals Ltd is a flagship company under Bajaj Group, one of the oldest conglomerates
in India. Bajaj Electricals Ltd, established in 1938, is a pioneer in electrical home appliances, lighting
and luminaries business. Over the last 75 years, it has progressively diversified into turnkey project
contracts involving Power Distribution and Transmission Line Towers (TLT) by establishing a new SBU
(Strategic Business Unit) for Engineering and Projects (E&P). While the power distribution projects are
working on rural electrification, the TLT projects cater to connecting power transmission grids across
India - connecting power generating plants or sub-stations. The company majorly follows asset-light
model as it procures products from the market and sells it under the brand name of Bajaj. In November
2002, the company entered into a technical collaboration and brand licensing agreement with Morphy
Richards, United Kingdom for the sales and marketing of electrical appliances under the brand name of
“Morphy Richards” in India.
BAJAJELEC: Technical View
BAJAJELEC has been trading with bullish bias from past few quarters making higher highs and
higher lows on the weekly charts. The counter has clocked all-time high of 692 in April 2018 and
witnessed a round of correction which dragged the counter towards the lower support area of
450-500 where an unfilled gap is acting as a strong support on the daily charts. At the current
juncture, the stock is trading in the sideways consolidation mode with bullish bias and is on the
verge of breakout above 520-525 levels on the short term charts. On the levels specific data, the
counter is having support around 470 followed by 450 level while resistance is pegged around
525 followed by 580-600 levels where the unfilled gap is placed. The counter is currently trading
in the cluster of moving averages on the daily charts with Bollinger band (20,2) expanding in the
northward direction. We expect the stock to move higher in the coming weeks and may test 560-
580 levels in the medium term perspective with strong supports pegged around 450 level. Medium
to long-term investors may buy the stock from current levels and may accumulate more around
the mentioned supports.

FINOLEX CABLES LTD
Bloomberg Code: FNXC IN
Volume Impacted But Set to Recover in H2FY19

Q2FY19 Update: Finolex top line grew marginally by 3.8% YoY on the back of
strong performance from communication cables which grew by 14.3%. The
growth was lower due to the tepid performance of the electrical segment.
The electrical segment was impacted due to transport disruption in July and
floods in Kerala which is one of the prominent places for electrical cables
business. The absolute EBITDA has shown a growth of 6.6% with margins at CMP (as on Dec 28, 2018) 459
12.0% showing a decline of 234 bps YoY. Profit for the quarter has declined
Target Price 600
by 6.8% due to a higher incidence of taxation because of expiry of tax
exemption period of Roorkee facility. The net profit margins were lower at Upside(%) 31
13.0% showing a fall of 147 bps. Stock information

Growth in Cables Segment: Communication cables can grow with 20% Mkt Cap (Rs.Bn/US$ Bn) 70.1 / 1.0
sales CAGR over FY18–20E led by government’s investments in Bharat Net,
52-wk High/Low (Rs.) 758 / 402
electrical cables’ growth has been muted over the past five years—2% CAGR
over FY13-18. The electrical cables segment has given a flat performance 3M Avg.daily value (Rs. Mn) 18.7
due to transport issues at its Roorkee facility and floods in Kerala. The EBIT Beta (x) 0.8
margins for electrical cables segment declined by 210 bps due to commodity
prices variation.
Consumer durable business: The new segment mainly comprises of electrical
consumer durables like Fans, Switchgear and Water heaters which the Face Value (Rs.) 2.0
company forayed into last year. The products have been well received by the
market on the back of strong brand name Finolex, with a strong supply chain
system. The revenue from other segment has shown a growth of 28.0% YoY. Promoters 37.3
The management expects higher profitability in the coming quarters. FIIs 6.5
Valuation and Risks: At CMP of Rs. 459, FCL is trading at 16.8x to FY20E DIIs 20.6
EPS. FCL is expected to generate healthy free cash flows over time. Due
Others 35.6
to the recent price correction, we recommend “BUY” rating by valuing the
company at 22x (3 years avg) on FY20E EPS for a target price of Rs. 600 Stock Performance (%)
representing an upside potential of 31%.
1M 3M 6M 12M
Absolute 1 (14) (18) (34)
Source: Bloomberg

Net Sales 24610 26707 28842 32361 36047

100
EBITDA 3390 3714 4223 4854 5407
EBITDA Margin (%) 13.8 13.9 14.6 15.0 15.0

80
Adj. Net Profit 2488 3159 3583 3711 4170
EPS (Rs.) 16.3 20.7 23.4 24.3 27.3 60

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 17.0 16.8 16.3 15.9 15.6
PE (x)* 20.7 25.0 27.7 18.9 16.8 FNXC Sensex

Company Background
Finolex Cables Limited is a manufacturer of electrical and communication cables and copper rods. The
Company’s business segments include Electrical Cables, Communication Cables, Copper Rods and
Others. The Electrical Cables segment includes 1,100 Volts polyvinyl chloride (PVC) insulated cables,
motor winding PVC insulated cables and approximately three core flat cables, automotive/battery
cables and elevator cables. The Communication Cables segment includes jelly filled telephone cables
(JFTCs), local area network cables, coaxial cables, speaker cables, optic fiber cables and closed-circuit
television (CCTV) cable. The Copper rods segment offers continuous cast copper (CCC) rods of over
eight millimeters diameter. The other segment includes Electrical Switches, which include switches,
sockets & regulators. In addition to this also includes lamps, which include retrofit and non-retrofit
compact fluorescent lamps (CFL), as well as T5 Tube Lights fittings and light-emitting diode base
lighting switches.
FINCABLES: Technical View
The stock is in an uptrend and making higher highs and higher lows on monthly charts and made the
all-time high of 744.47 levels in February 2018. The stock has seen profit taking from the lifetime
high which has dragged the stock to the low of 442.80 levels. The stock has corrected around
55% from its previous rally from 197.55 to 744.47 and trading near the support 448 levels which
is 200 EMA on the weekly chart. The stock is trading in the range of 442-477 levels from last one
month. The immediate support is placed around 437 levels which is the 50 EMA moving average on
monthly chart and below that is 406 levels which is 61.80% retracement level of the said rally. The
stock is trading below its 50/200 DEMA moving averages on daily charts suggesting short-term
weakness in the counter. Among the indicators and the oscillators, the 14 period RSI is pointing
northwards after giving positive crossover with signal line. On the higher side, resistance is placed
around 490 levels followed by 530 levels. Hence, we recommend investors with a longer time
horizon to go long in the counter around current levels, average on declines towards 437 levels.

JAIN IRRIGATION SYSTEMS LTD
Bloomberg Code: JI IN
Revenue Growth Visibility

Jain Irrigation Systems Limited is the largest in domestic and 2nd largest in
global Micro Irrigation System business. The company has well-diversified
product portfolio comprising of Hi-tech Agri Input Products (MIS i.e., drip &
sprinkler and Tissue Culture), Plastic Division (PE/PVC Pipes & sheets), Agro
Processing Division (De-hydrated Onions/ Garlic, Spices and Processed Recommendation (Rs.)
Foods) and Other Business Division (Green Energy). The company registered CMP (as on Dec 28, 2018) 69
consolidated revenue of Rs. 79468 Mn (excluding other income and net of
Target Price 101
excise duty) up 17.4% in FY18 on the back of strong growth it registered in
all business segments. The company posted EBITDA growth of 12% and PAT Upside(%) 46
growth of 26% over FY17 on YoY basis.

Stock information
Strong Segmental Performances: The Company recorded growth of 28% in
Hi-tech Agri Input Products Division, 12% in Plastics Division and 0.5% in Agro
Processing Division in FY18 on YoY basis. It continued with good segmental 52-wk High/Low (Rs.) 150 / 55
performance during H1FY19 having registered growth of 21% in Hi-tech Agri 3M Avg.daily value (Rs. Mn) 417.9
Input Products Division, 24% in Plastics Division and 26% in Agro Processing
Beta (x) 1.5
on YoY basis.
Government Irrigation Initiatives to be Growth Stimulator: Central
Government initiatives like adding at least 1 million hectares of land under O/S Shares(mn) 496.4
micro irrigation every year, Building 100 Smart Cities, Housing for All, Swachh Face Value (Rs.) 2.0
Bharat, etc. and resolve of state governments to bring more hectares of land
under irrigations to provide big fillip to MIS and plastic pipes & sheet business. Shareholding Pattern (%)
Fast Growing Agro Processing Business: Food-processing is largely export- Promoters 28.6
oriented. It has some domestic business as well. Much higher level of growth FIIs 30.8
in overseas markets helped the company to register growth of 26% during DIIs 7.2
H1FY19 on YoY basis.
Others 33.3
Overseas Business: The recent acquisitions of Agri Valley Irrigation (AVI) and
Irrigation Design and Construction (IDC) amidst stabilization of economic Stock Performance (%)
and political situations in Turkey, Brazil and Mexico ensures increased order
1M 3M 6M 12M
inflows from these regions.
Absolute 5 13 (13) (46)
Valuation and Risks: We have valued the stock on 1 year forward PE 9.5x of
FY20EPS and have arrived at TP of Rs. 101 with 46% upside potential. Greater Relative to Sensex 4 14 (15) (49)
dependence on government irrigation policy and seasonal nature of business Source: Bloomberg
are potential risks to the call.

Net Sales 63222 67698 79468 90427 102540 100
EBITDA 8183 9402 10554 13233 15979

80
EBITDA Margin (%) 12.9 13.9 13.3 14.6 15.6
60
Adj. Net Profit 487 1762 2213 3764 5470
40
EPS (Rs.) 1.1 3.3 4.3 7.3 10.6
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 1.3 4.3 5.2 8.3 11.1
PE (x)* 57.7 28.5 25.1 9.5 6.5 JI Sensex

Company Background
Jain Irrigation Systems Limited, incorporated in the year 1986 is a Indian multinational company engaged in
the business of Hi-tech Agri Input Products, Plastic Piping & Products Agro Processing and Other Business
divisions (Solar thermal products, solar photovoltaic grid and off-grid products, Bio-gas and Solar Power
generation). The micro irrigation system (MIS) is the flagship product of the company wherein company
offers end-to-end water solution projects. The company has manufacturing plants in 30 locations and
more than 11000 associates worldwide. Such large distribution network has helped company to hold
40% market share in domestic MIS industry and around 20% market share in domestic PVC piping.
Further, the company has in-house R&D to capitalize on opportunities arising in MIS, tissue culture and
agro-processing industries.
JISLJALEQS: Technical View
JISLJALEQS has gained more than 14% during the third quarter of 2019 Financial Year ending 3
quarters of losses. The stock seems to be ending its downtrend as it is finding strong support as
it is nearing its previous swing lows of 55 and witnessed a bounce back from these levels. The
stock is currently trading above its short-term moving averages like 21 and 100 days moving
averages. However, on a broader trend, the stock is stuck in the range of 245-325 levels over last
few quarters. Adding to it, Heiken candlesticks is signaling positive trend on the daily charts as well
as weekly charts reflecting the stock is well placed to move higher in the coming days. 14 periods
RSI is trading at 44.01 above the 9 period averages trading at 41.41 on weekly chart indicating
positive momentum. The stock has good support around Rs. 55-57 levels below which the next
levels of meaningful support lie around Rs. 44-46 levels. As far as the technical setup of the stock
is concerned, the ADX is clearly indicating that the stock is gaining strength of its current up move
on daily charts. Investors with a medium-term horizon can start accumulating the stock in bits
and parts with a provision to add more on dips towards 58-60 levels and may hold with a stop loss
placed below Rs. 55 on a closing basis for potential upside technical targets of Rs.90-95 in the next
few quarters.

K.P.R. MILL LTD
Bloomberg Code: KPR IN
Exports Continue to Improve

Exports excel, capex plans on track: Garment export
business thrives as volumes increased by 15.36% (Rs. 44.5
Mn vs Rs. 37.6 Mn) and the realization by ~6% (Rs. 137.75 vs
Rs. 129.78 in H1FY19). Exports contribution has increased to ~ 43% of consol.
Revenues as of H1FY19 vs ~40% in previous fiscals as more of the yarn and Recommendation (Rs.)
fabric is now being consumed internally for the garment manufacture. With CMP (as on Dec 28, 2018) 565
private consumption (domestic) on the rise, improvement in realization for
Target Price 716
both - yarn & fabric division and garment, we revise our revenues estimates for
FY19E and FY20E upwards by ~9% and 10% and PAT by 2.4% for FY19E and 6% Upside(%) 27
for FY20E. We revise our rating upward to ‘BUY’, with a Target price of Rs. 716.
Stock information
Garment division gets further boost: KPR is also on track to begin
manufacture at its new plant in Ethiopia (capacity of 10 mn units) by Q4FY19.
The plant will provide import duty benefits between 10% and 18% and further 52-wk High/Low (Rs.) 850 / 552
improve competitiveness. The company in principle has an agreement for 3M Avg.daily value (Rs. Mn) 15.1
the manufacture of garments with 2 clients from this unit and is positive
Beta (x) 1.0
of ramping up seed capacity in 6 months. Currently, the export order book
stands at Rs. 6,000 Mn for the garment business. The depreciation of rupee Sensex/Nifty 36077 / 10860
has provided levy for the company to improve bottomline and also pass on O/S Shares(mn) 72.6
the benefits to its clients.
Cotton price outlook: Cotton prices are higher on YoY basis on the
back of rise in MSP (by 28% and 26% for medium and long staple cotton) Shareholding Pattern (%)
and increased import by China. India already garners about 25% Promoters 75.0
cotton sales to China and with continued tariff war scenario between
FIIs 1.7
China and the US is expected to further increase the export percentage
to China. Cotton prices are expected to stabilize at ~Rs. 45,000 to DIIs 14.1
Rs. 46,000 per quintal (vs ~Rs. 40,000 per quintal in the same period last year). Others 9.2
Valuation and Risks: Owing to good numbers in the last few quarters and
expectations of steady performance in FY19E and FY20E, valuations have Stock Performance (%)
remained fairly stable despite the overall correction within the sector and 1M 3M 6M 12M
markets in general. Major trigger for the stock will increase garment revenue Absolute (5) (7) (11) (28)
in the overall mix and improvement in margins on the back of commencement
of Ethiopia plant. We value the stock at 13.2x (5 year average 1yr forward P/E)
on FY20E EPS of Rs. 54.4. Key risks to the call are higher than expected cotton Source: Bloomberg; *Index 100
prices due to global factors and lower growth from US market.

110
Net Sales 26005 28166 30245 34687 37314
100
EBITDA 4696 5633 5753 6466 7181
90
EBITDA Margin (%) 18.1 20.0 19.0 18.6 19.2
80
Adj. Net Profit 2107 2726 2925 3450 4018
70
EPS (Rs.) 28.0 36.3 39.6 46.7 54.4
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 17.1 17.7 19.1 20.4 20.6
PE (x)* 29.7 18.1 14.3 12.1 10.4 KPR Sensex
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price Source: Bloomberg

Company Background
KPR Mill Ltd. is an apparel manufacturing company engaged in the production of yarn, knitted fabric
and readymade garments. It has one of the largest vertically integrated manufacturing capacities in
India, enabling the company to utilize and customize the products as per client specifications. Building
on its maiden business in 1984, the company currently has 0.35 Mn spindles to produce 90,000 MT of
yarn per annum, knitting facility to produce 27,000 MT per annum and garmenting facility to produce
95 Mn pieces per annum (one of the largest garment manufacturers in India). The power requirements
are met through the company owned 66 wind mills and through green power through a Co-gen Cum
Sugar Factory with capacity of 30 MW and 5000 Tons Crushed per Day (TCD).
The board, including Chairman Mr. K.P. Ramasamy and Mr. K.P.D. Sigamani, the Managing Director,
have vast experience in the textile industry, which has aided in the company’s evolution into fabric and
garment segments.
KPRMILL: Technical View
The stock is in a secular uptrend making higher highs and higher lows on the monthly chart. The
stock witnessed a strong rally from the lows of 310 levels registered in February 2016 to the highs
of 878 levels registered in June 2017. The stock formed a double top on the daily charts in January
2018 when the stock re-visited levels near the highs that it had registered previously. As far as the
technical setup of the stock is concerned, the stock has re-traced more than 50% since and is
trading near a confluence of supports. The 200 period exponential moving average on the weekly
chart for the stock is placed around 547 levels and the 50 period exponential moving average on
the monthly chart for the stock is placed around 533 which also coincides with the 61.8% Fibonacci
retracement levels of its previous rally. The stock is currently placed below all the major moving
averages on the daily chart which indicates that the stock may see weakness in the near term.
Hence investors with medium to long-term time horizon can start accumulating the stock on dips
towards the immediate support zone of 533-547 levels and may hold with a stop loss placed below
its swing support placed around 450 levels for the potential upside of 690-700 levels, breaching
which the stock might surge further towards 830-850 levels.

MENON BEARINGS LTD
Bloomberg Code: MEN IN
Expansion Plans & Value Unlock in Aluminum Division

Strong revenue growth, healthy profit margins: Menon enjoys a marquee
list of clientele like TATA, VOLVO, Mahindra & Piaggio and state of the art
manufacturing facilities. Menon undertakes designing, testing, validation
& manufacturing of bearings, bushes & thrust washers for a wide range of
applications. We expect the investments made by the firm in new facilities Recommendation (Rs.)
will start paying off by FY20E. In view of the order book position, customer CMP (as on Dec 28, 2018) 79
demand, we expect revenue CAGR of 16.5% during FY18-20E. We also expect
Target Price 120
EBITDA margins to stabilize around ~26% by FY20E.
Upside(%) 52
Capacity enhancements: Menon has invested Rs. 400 Mn for enhancement
of aluminum division and the facility is expected to be ready by FY20E to Stock information
cater to increased customer demand. With enhanced capacities, Menon is in
good place to de-risk its product mix. Considering the strong clientele & new
contracts, we are of the positive view about Menon’s focus on increasing 52-wk High/Low (Rs.) 127 / 70
the aluminum share from the current levels of ~30%. We also expect the 3M Avg.daily value (Rs. Mn) 2.5
segment to witness a faster growth ahead.
Beta (x) 1.1
Financial position: Net debt/ equity of 0.1x in FY18, net working capital/ sales
at less than 25% and cash per share of Rs. 3.3 indicate its balance sheet
strength to remain debt free while maintaining operational superiority. The O/S Shares(mn) 56.0
company is expected to meet its capex through internal accruals & debt. Face Value (Rs.) 2.0
Historically, Menon Bearings has been recording a healthy profitability &
return ratios; we expect the trend to continue in future with RoE reaching Shareholding Pattern (%)
24.0% & RoCE of 32.5% levels by FY20E. Promoters 70.9
Valuation and Risks: At CMP of Rs. 79, MBL is trading at 15.7x to FY20E FIIs 0.1
EPS. In view of the capacity enhancements, product mix de-risking and DIIs 1.2
healthy profitability margins coupled with superior return ratios, we ascribe
Others 27.7
a multiple of 24.0x to FY20E EPS (5 year average of one year forward PE)
and recommend a “BUY” rating for a target price of Rs. 120 representing
an upside of 52%. We believe that on account of high return on capital at
33.6% over the last 3 years, the company has potential to be re-rated. Threat 1M 3M 6M 12M
of counterfeit products which mainly cater to aftermarket segment (10% of Absolute 4 (5) (9) (18)
Menon revenues) along with slowdown in industrial & automotive segments Relative to Sensex 3 (4) (12) (23)
especially tractor & CV sales may pose risk to the call.
Source: Bloomberg

120
Net Sales 1109 1228 1449 1609 1964
110
EBITDA 286 324 364 425 512
100
EBITDA Margin (%) 25.7 26.4 25.1 26.4 26.1 90
Adj. Net Profit 149 191 211 246 280 80
70
EPS (Rs.) 3.2 3.4 3.8 4.4 5.0
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 28.7 29.8 27.3 26.4 24.8
PE (x)* 15.5 21.4 26.1 17.9 15.7 MEN Sensex

Company Background
Incorporated in 1991 & headquartered at MIDC in Kolhapur, Maharashtra, the company is engaged
in manufacturing automobile components like bushes, bearings, thrust washers, aluminum die cast
and bimetal strips. These products are customized according to the clients’ requirements in various
specifications. Different varieties of bearings supplied by the company include flanged bearings,
tri-metal bearings, copper-bronze & aluminum-tin bearings for crankshafts. The products find
applications in light & heavy commercial vehicles, passenger vehicles, compressors, combustion
engines and electrical appliances such as refrigerators and air conditioners. The company caters to
OEMs, replacement market and the export market. Its products are exported to countries across the
globe such as USA, UK and Middle East.
MENONBE: Technical View
MENONBE has rallied from 19.93 levels in March 2015 to 125.77 levels in January 2018 and corrected
from there to 70.10 levels, which is around 50% Fibonacci retracement level of the said rally and
bounced back to settle above 38.2% Fibonacci retracement levels of the rally indicating the end
of the correction. The stock was in consolidation mode for very long time followed by a strong
breakout with huge jump in volume indicating a fresh leg of rally from these. Adding to it, the
Parabolic SAR and Heiken candlesticks are signaling positive trend on the daily charts as well as
weekly charts reflecting the stock is well placed to move higher in the coming days. 14 periods RSI
is trading at 56.17 above the 9 period averages trading at 44.20 on weekly chart indicating positive
momentum. The stock is trading well above all of its major moving averages on daily as well as
weekly charts indicating strong positive momentum in the counter for all major time frames. On
Bollinger band, weekly chart stock has tested the mean and started to move towards upper bands
indicating positive momentum. At the current levels, investors with a medium-term horizon can
start accumulating the stock in bits and parts with a provision to add more on dips towards 80
levels and may hold with a stop loss placed below Rs. 70 on a closing basis for potential upside
technical targets of Rs. 118-120 in the next few quarters.

RELAXO FOOTWEARS LTD
Bloomberg Code: RLXF IN
Relaxo Continues to Push Forward

Footwear segment has seen various listed players take up dominant share
in the organized space. While Bata and Mirza have focused on value-added
(non-leather) products in recent years and have increased their efforts to
penetrate into the domestic market, the competitive nature of the industry
(largely unorganized and smaller players) has limited the pace of growth. Recommendation (Rs.)
Relaxo – which focuses on providing higher quality than unorganised players CMP (as on Dec 28, 2018) 732
at very competitive prices in the low price region, have managed to widen
Target Price 911
their reach and improve volumes (Relaxo’s volumes have improved 8%, over
FY15-18) , supported by rural India (for its low priced products) and has also Upside(%) 24
gained acceptance in urban India in the “home wear category”.

Stock information
Growth story expected to maintain pace: In the listed space, Relaxo has been
a consistent performer in the last 5 years. Revenue has grown at 14% and an
improvement of operating margins by 458 bps has led to 29% CAGR growth 52-wk High/Low (Rs.) 874 / 550
in PAT over the same period. With best in class return ratios (average RoE 3M Avg.daily value (Rs. Mn) 21.7
of 26.2% and RoCE of 32.6% in the last 5 years) and backed by improving
Beta (x) 0.8
realization and growing customer base, we expect top and bottomline to
grow by 16.3% and 21.1% CAGR over FY18-21E. Sensex/Nifty 36077 / 10860
Focusing on brand building: Channel sales continue to drive major sales growth O/S Shares(mn) 120.4
for Relaxo. The company is also investing heavily towards brand building. Face Value (Rs.) 2.0
Since 2012, the company has focused more on celebrity endorsements and
increasing its retail presence. Currently, Relaxo has 311 retail outlets and Shareholding Pattern (%)
spends about 4.5% of its revenues on advertisements, which is higher than Promoters 74.3
its peers in the listed space. Higher value products such as Sparx are believed FIIs 3.9
to constitute in the range of 10% to the total volumes and the company is
DIIs 2.2
looking to significantly improve the revenue mix in the coming fiscals.
Others 19.6
Valuation and Risks: Consistent performance has led to improvements in
valuations by 4x over the past 5 fiscals. It currently trades at 2 year forward
P/E of 31x. We believe the company warrants premium valuation, given
the continued high growth prospects and the brand building efforts being 1M 3M 6M 12M
undertaken. We value the stock at 38x (a premium to its 5 year average 2 year Absolute (4) 0 6 7
fwd P/E of 30x), on FY21E EPS of 24 and arrive at a target price of Rs. 911. Key Relative to Sensex (5) 0 3 0
risks to the call are difficulties in penetrating into the online category, and
Source: Bloomberg
intensified competition from unorganized players.

Net Sales 15000 17332 16520 19644 22984 120
EBITDA 2006 2399 2309 3021 3482 110
EBITDA Margin (%) 13.4 13.8 14.0 15.4 15.1 100
Adj. Net Profit 1031 1160 1200 1611 1947 90
EPS (Rs.) 8.6 9.7 10.0 13.4 16.2 80

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 31.7 27.4 22.1 23.6 23.1
PE (x)* 37.7 37.7 49.8 48.6 45.3 RLXF Sensex

Company Background
Incorporated in 1984, Relaxo Footwears Ltd. is the largest footwear manufacturer in India, engaged in
the manufacture and trading of footwear and related products. It started off with the manufacture of
Hawaii slippers and subsequently diversified into manufacturing casuals, joggers, school and leather
shoes. Relaxo has the capacity to manufacture over 100 million pairs, per annum. Relaxo’s capacity to
manufacture 300,000 pairs of Hawaii slippers per day is the highest in the footwear industry.
The portfolio of the company includes 5 brands (Relaxo, Flite, Sparx, Bahamas and Schoolmate) and
sells its products mainly through 50,000 retailers, and also has 311 retail outlets to improve brand
visibility. It sold a total of 157 million pairs in FY18, and is estimated to have a market share in the range
of 5% to 6%. Nearly 90% of the revenue is attained from the domestic market.
RELAXO: Technical View
The stock is in a secular uptrend making higher highs and higher lows on the weekly chart. The
stock is placed above all the moving averages on the monthly chart which suggests large scale
accumulation in the counter. The stock has gained nearly 8.50% this calendar year after gaining
more than 68% in the previous calendar year which indicates that the stock is sustaining at higher
levels after a strong rally suggesting that it is one of the preferred picks in the footwear segment
for Medium to Long term investors. As far as the technical setup of the stock is concerned, the
stock is trading near a confluence of supports. The 200 DEMA for the stock is placed around 725
levels and the 50 period exponential moving average on the weekly chart for the stock is placed
around 713. On the momentum oscillator front, the 14 period RSI is placed below the 9 period signal
line on the daily as well as monthly charts which suggests weakness in the stock in the near term.
Hence investors with medium to long-term time horizon can start accumulating the stock on dips
towards its 50 period exponential moving average on the weekly chart which also coincides with
the swing support near 710-715 levels with a provision of adding more on dips towards its 21 period
exponential moving average on the monthly chart placed around 650-655 levels and may hold
with a stop loss placed below its swing support placed around 590 levels for the potential upside
of 860-865 levels.

SUNTECK REALTY LTD
Bloomberg Code: SRIN IN
Expanding Product Portfolio; Strong Pre-sales

Sunteck Realty Ltd (SRL) is engaged in the business of developing, designing
and managing high-end and premium residential and commercial properties
predominantly in the Mumbai Metropolitan Region (the “MMR”). In the last
decade, the company has developed a project portfolio of ~30 mn sqft
spread over 25 projects, with ~12 msf to be completed by FY23. SRL has a Recommendation (Rs.)
strong cash flow visibility on back of strong project portfolio in MMR. CMP (as on Dec 28, 2018) 348
Bandra Kurla Complex (BKC) and Oshiwara District Center (ODC) – core
Target Price 497
assets of the company: The company has carved a niche for itself in the
ultra-luxury and luxury segment by differentiating itself in each micro- Upside(%) 43
market through brand positioning with a different product offering. While Stock information
the projects in BKC are residential projects catering to ultimate luxury and
premium customers, ODC project will be a mixed-use development project
with residential, commercial and retail space. A significant amount of 52-wk High/Low (Rs.) 527 / 296
operating cash flow - Rs. 31 bn - is expected to be realized from these two 3M Avg.daily value (Rs. Mn) 93.2
projects over a period of 3-4 years.
Beta (x) 1.0
Consolidated revenue to grow at CAGR 29% over FY18-FY20E: Since last few
quarters, the company has experienced healthy growth in pre-sales and it
delivered ~100% YoY growth in presales in H1FY19 (Rs. 6027 mn pre-sales in O/S Shares(mn) 146.3
H1FY19 as compared to Rs. 2976 mn in H1FY18) due to overwhelming response Face Value (Rs.) 2.0
to first phase of Naigaon project. Going forward, we expect SRL to sustain
its current growth momentum and have forecasted a consolidated revenue Shareholding Pattern (%)
CAGR of 29% over FY18-20E period (Revenue in FY20E). Promoters 66.8
Forayed into mid-income level segment: The company has launched its FIIs 24.5
affordable housing project on 100 acres land parcel at Naigaon, Mumbai.
DIIs 3.4
We believe that the government’s push for affordable housing coupled with
conservative pricing by the company will drive the sales. The company has Others 5.4
already sold ~2000 units worth more than Rs. 600 cr (out of 2476 units)
during the launch of the project in September. Stock Performance (%)
Valuation: We have valued SRL using the NAV method, wherein we have 1M 3M 6M 12M
calculated the value of ongoing projects and unsold inventories from Absolute 0 (13) (4) (17)
completed projects. We have assumed a cap rate of 8% for rental assets and
a discount rate of 13% for residential projects. We estimate a target price of
Source: Bloomberg
Rs. 497/share (post-tax) on FY20E basis.

120
Net Sales 2434 9522 8883 9418 14825
110
EBITDA 239 3481 3720 3876 5655
100
EBITDA Margin (%) 9.8 36.6 41.9 41.1 38.1 90
Adj. Net Profit 206 2202 2233 2450 3777 80
EPS (Rs.) 1.4 15.0 15.3 16.7 25.8 70

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 1.3 12.3 8.5 8.6 11.8
PE (x)* 8.4 22.3 25.4 21.3 13.8 SRIN Sensex

Company Background
SRL is one of the leading real estate development companies of the country with a focus on city-centric
developments well spread-out across Mumbai Metropolitan Region (MMR). The company’s business
focuses on designing, developing and managing premium residential and commercial properties.
The company has carved a niche for itself in the ultra-luxury and luxury segment by differentiating itself
in each micro-market through brand positioning with different product offering, brand partnerships
and having different reputed channel partners for each product.
SRL started the residential development business with its iconic project “Signature Island” in BKC
(Bandra Kurla Complex), Mumbai. The company chose BKC to start its residential foray at a time when
other industry players were focused on making commercial footprints in the area. Post the successful
launch of Signature Island, the company launched two more projects viz. “Signia Isles” & “Signia Pearl”
in BKC.
SUNTECK: Technical View
SUNTECK witnessed a strong up move from the lower levels of 225 towards 500 plus level within a
short time frame of around 16 months. The stock is trading around the major moving averages and
is trading near the major support area of 320-340 levels and formed a good base around the same
from past few weeks. The stock has been in the sideways consolidation mode from past few weeks
and witnessed reasonable volumes indicating strong hands have started accumulating the stock at
current levels after the recent correction. At the current juncture, the stock is looking bullish and
is poised to surge higher towards 400 plus levels with 14 day RSI trading comfortably around 45-
50 levels suggesting positivity in the counter. On the shorter time frame, the stock will enter into
definite bullish trajectory once the price breached its immediate resistance level of 370 followed
by 380 level. On the flip side, the next best support for the counter is placed around 315-320 which
may be utilized as a good accumulating opportunity for the long-term period. On the overall front,
we expect the stock to gradually move northwards in the next few month and may continue to
trade with positive bias. Long-term investors may buy the stock at current levels and accumulate
more if the stock dips towards the support zones.

TAKE SOLUTIONS LTD
Bloomberg Code: TAKE IN
Looks Attractive with Improving Fundamentals

Clinical business to be the growth driver: Take Solutions (TAKE) has been
focusing on Clinical business as total R&D spends is expected to reach
$181 bn by 2022 growing annually at 2.4%. To take advantage of this and to
improve margins, TAKE is leveraging use of technology. It is in the process of
developing OneClinical into platform-as-a-service by adding components of Recommendation (Rs.)
clinical trial business process as part of its digital transformation. It is further CMP (as on Dec 28, 2018) 148
revamping the entire suite of OneClinical platform by adding features like
Target Price 226
use of mathematical models to support site selection, initiation, patient
screening and enrolment modules. It is enhancing the Reporting Module of Upside(%) 53
OneClinical to facilitate ease of understanding.
Stock information
Support generics firms to gain first-to-market advantage: TAKE has end-to-
end bioavailability and bio-equivalence services to fast track client’s first-
to-market strategy. TAKE has thus been helping generics firms with their 52-wk High/Low (Rs.) 307 / 127
state-of-the art facilities in Manipal, Mangalore, Bengaluru and Chennai. The 3M Avg.daily value (Rs. Mn) 44.8
bio-analytical labs set up at Manipal and Bengaluru are regulatory compliant.
Beta (x) 0.7
It enables to develop and validate new methods in 4 weeks. Company has a
huge database of volunteers including of 23000 males and 1000 females. Sensex/Nifty 36077 / 10860
Revenue visibility boosts confidence: During Q2FY19 TAKE reported revenue O/S Shares(mn) 147.9
growth of 39% which is highest in past 6 quarters. We expect TAKE to Face Value (Rs.) 1.0
continue to report higher growth rates going forward and reach historical
levels of ~40% due to strong order book. During end Q2FY19, TAKE’s order Shareholding Pattern (%)
book stood at $228 mn with revenue visibility of 2x-3x of this order book in Promoters 66.8
the future. While the management has guided for organic growth of 23-24%
FIIs 13.8
in USD terms, we believe it has upside risks due to inorganic component.
Moreover, continuous decline in its conversion rate of order book (45% in DIIs 1.6
Q1FY17, 39% for Q1 FY18 and 37% in Q1 FY19) implies increasing proportion of Others 17.8
high value-added offerings and increasing mix of long-term deals providing
growth visibility for longer period. Stock Performance (%)
Valuation and Risks: While we remain optimistic about TAKE’s future 1M 3M 6M 12M
prospects, recent correction gives a good entry opportunity with a target Absolute 10 (3) (35) (8)
price of Rs. 226, based on FY20E EPS of Rs 19.8 and 3 –year historical average
PE of 11.4x. We think regulatory risks and low RoE are key risks to our price
target. Source: Bloomberg

Net Sales 10301 13446 15872 19364 23625 170
EBITDA 2133 2622 3065 3885 4819

140
EBITDA Margin (%) 20.7 19.5 19.3 20.1 20.4
110
Adj. Net Profit 1197 1462 1599 2225 2890
EPS (Rs.) 9.9 11.2 12.2 15.3 19.8 80

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 20.6 18.9 14.3 15.4 16.9
PE (x)* 14.3 11.3 12.1 9.7 7.5 TAKE Sensex

Company Background
Take Solutions (TAKE) delivers domain intensive services in Life Sciences and Supply Chain Management.
In the fast-growing Life Sciences space, TAKE offers clients a unique combination of full-service Clinical,
Regulatory & Safety services, backed by unique technology capabilities. TAKE’s service offerings span
from Clinical trials to regulatory submissions to post-marketing safety, all backed by insights derived
through proprietary industry networks forums. With a team of leading Life Sciences experts, best-in-
class systems and processes, and bespoke, industry-specific technology and analytics, TAKE delivers
successful outcomes for clients. TAKE’s clients include large and small innovator biopharmaceutical
companies as well as generic manufacturers. TAKE’s operations are spread across North America, Asia,
Europe and South America, with Americas contributing 81%, followed by APAC with 12% of revenues
and rest contributed by Europe. Within Life Sciences, Clinical contributes 30%, Consulting and Nets,
12% and Regulatory & PV contributing 58%.
TAKE’s Supply Chain business contributes 10% of revenues. In Supply Chain TAKE focuses on high
margin niches, in engineering services, and supply chain collaboration. TAKE’s IP-led approach enables
its clients to automate supply chain processes, track, trace and control and optimize their processes.
TAKE: Technical View
Since Jun’18, TAKE is correcting from the highs at 308 levels and is currently trading close to its
support zone around 135-140 levels. We expect the stock to witness a round of consolidation in
the near term before taking the fresh leg of an up move, and medium to a long-term investor may
start accumulating the stock from current levels and add more on declines towards 135-140 levels
which are a confluence support of the counter as the stock has witnessed consolidation at the
mentioned levels in the recent past and finding support around that area. On the oscillator front,
the 14 periods RSI is indicating consolidation in the near term and is currently placed around the
oversold region, indicating a pause in the counter. On the weekly chart, the stock is nearing its
upward slope trend line connecting the higher lows since Jul’15 which would act as strong support
at 130 levels. Going ahead key support is placed around 135 levels followed by 125 levels while
resistance is placed around 180 levels followed by 210 levels. In the current scenario, considering
all the data mentioned above, one may go long in the counter on any dip towards the mentioned
support zone.

THE PHOENIX MILLS LTD
Bloomberg Code: PHNX IN
Doubling Portfolio and Increased Consumption at

Existing Malls
As India’s largest mall owners and operators, the Phoenix Mills Limited (PML)
is evolving into a trusted proxy for the consumption trends of India’s urban
middle class. India’s retail infrastructure has come a long way and PML is at
the forefront of creating fully integrated recreational centers on a pan India Recommendation (Rs.)
basis. The company operates 8 malls, close to 6 Mn sqft. in total, across 6 CMP (as on Dec 28, 2018) 557
Tier-1 cities in India.
Target Price 735
Higher Occupancy levels across Malls: According to a JLL report, Occupancy
Upside(%) 32
level in malls across India is hovering around 85%. PML has been consistently
able to maintain occupancy level for all its stabilized malls at more than 90% Stock information
compared to industry standards of 85%. With higher occupancy level, PML
has achieved rental CAGR of 11% over FY13-18. MarketCity Malls at Pune
and Bangalore have achieved a higher rental CAGR of 16% over the same 52-wk High/Low (Rs.) 732 / 489
period. The growth in rentals can also be attributed to PML’s superior mall 3M Avg.daily value (Rs. Mn) 50.4
management skills of churning, relocating and resizing of retailers on a
Beta (x) 0.6
continuous basis.
Retail portfolio to double by FY22-23: PML has ~6msf of rentable area
spread across 8 malls in 6 cities. It has partnered with Canada Pension Plan O/S Shares(mn) 153.3
Investment Board (CPPIB) and has acquired 2 land parcels – one each in Pune Face Value (Rs.) 2.0
and Bengaluru – and an under construction retail asset at Indore. Outside
of the alliance, PML has acquired also an under construction retail asset at Shareholding Pattern (%)
Lucknow and has entered into JV with Bsafal Group to develop a mall in Promoters 62.8
Ahmedabad. These 5 acquisitions will be operational by FY22-23 and has a
FIIs 27.9
retail development potential of ~4.8 msf.
DIIs 4.2
PAT to grow at 23.6% over FY18-20E: PML’s PAT grew at 17% CAGR over
FY14-18. Over FY18-20E, PAT is expected to grow by 23.6% CAGR driven by Others 5.1
1) Revenue growth with 3 year CAGR of 12.2%. 2) Renewals - Major area in
HSP Mumbai (44%) and MarketCity Pune (36%) is coming up for renewal in Stock Performance (%)
next 2 years 3) Improved realizations at MarketCity Mumbai. 1M 3M 6M 12M
Valuation: We have valued PML using the NAV method, wherein we have Absolute (7) 1 (14) (14)
calculated the value of ongoing projects and unsold inventories from Relative to Sensex (8) 2 (17) (19)
completed projects. We have assumed a cap rate of 8% for rental assets and
Source: Bloomberg
a discount rate of 13% for residential projects. We estimate a target price of
Rs. 735/share (post-tax) on FY20E basis.

Net Sales 17795 18246 16198 17816 20680

100
EBITDA 7869 8469 7774 8615 10207
EBITDA Margin (%) 44.2 46.4 48.0 48.4 49.4 85

Adj. Net Profit 1289 1679 2422 2814 3701
EPS (Rs.) 8.4 11.0 15.8 18.4 24.2 70

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 6.4 7.8 8.5 8.2 9.9
PE (x)* 55.4 34.5 37.4 32.9 25.0 PHNX Sensex

Company Background
Phoenix Mills have an operational history of more than 100 years. It started off as a textile manufacturer
and later on reinvented itself as a retail mall developer. PML specializes in the ownership, management
and development of iconic large format retail led mixed-use properties that include shopping,
entertainment, commercial, residential and hospitality assets. All the Phoenix malls enjoy the leadership
position in their respective cities.
The company has a 6msf retail portfolio spread across 8 malls. PML has a presence across Mumbai,
Chennai, Bengaluru, Pune, Lucknow and Bareilly.
During FY13-18, consumption at all its malls has grown at a CAGR of 20%. Rental income during the
same period grew at a CAGR of 15%. During FY18, PML completed stake purchases of private equity
partners across the portfolio and has reached majority stake in key assets.
PHOENIXLTD: Technical View
The stock is in an uptrend and making higher highs and higher lows on monthly charts and made
the all-time high of 723.11 levels in May 2018. The stock has seen profit taking from the life-time high
which has dragged the stock to the low of 489 levels which is around 50% of previous rally from
234.70 to 723.11 levels. The stock has found the buying interest around 489 levels and resumed its
up move. The immediate support is placed around 510 levels and below that is 465 levels which is
the 200 day EMA moving average on weekly chart. The stock is trading below its all major moving
averages on daily charts suggesting short-term weakness in the counter. Among the indicators
and the oscillators, the 14 period RSI is pointing southwards on daily chart and weekly chart as well
after giving negative crossover with signal line. The parabolic SAR is placed above the price on daily
charts as well which indicates weakness in the stock will remain intact in near term. As far as the
long-term moving averages are concerned, the 200 day exponential moving average on weekly
chart is placed around 465 levels and the stock is comfortably trading above it. On the higher side,
resistance is placed around 600 levels followed by 640 levels. Hence we recommend investors
with a longer time horizon to go long in the counter around current levels, average on declines
towards 510 levels.

VISAKA INDUSTRIES LTD
Bloomberg Code: VSKI IN
Improved Capacities & Volumes, Margins to Expand

Diversified product portfolio & enhanced capacities: Visaka enjoys a strong
position in cement asbestos, V-board and yarn business. It has a market
share of 18% in cement asbestos segment while boards and panels segment
enjoys a market share of 26%.
During FY18-19 Visaka has made capex towards enhancing the capacities in
boards & panels segments. Management is positive about the commencement CMP (as on Dec 28, 2018) 426
of operations from H2FY19 onwards at its new plant in Jhajjar, Haryana. The
Target Price 750
facility has a potential of Rs. 650 Mn revenue addition if operated at full
capacities. The facility is expected to improve the profitability margins by Upside(%) 76
75-100 bps due to reduced transportation costs. Also the management Stock information
is expecting its innovative product, ATUM-solar roofing product,
commercialization to start in FY19E and expecting a revenue addition of
Rs. 150 Mn from for FY19E. While we do not account for revenue from the 52-wk High/Low (Rs.) 840 / 360
product, we believe it to be an upside catalyst in near future. 3M Avg.daily value (Rs. Mn) 18.3
Non-Asbestos revenue contribution, improved profitability margins: Current Beta (x) 1.3
revenue mix is in favour of asbestos segment with a 68% contribution;
however, management is focusing on bringing a proper balance due to its
improved profitability from boards & panels segment. Management is of the O/S Shares(mn) 15.9
view to bring about equal balance between asbestos & non-asbestos which Face Value (Rs.) 10.0
will help improve margins in future.
Improvement in working capital: Historically, VIL’s working capital cycle has been Shareholding Pattern (%)
ranging from 100-125 days due to high inventory from asbestos segment due Promoters 41.5
to its products dynamics. Considering the management’s focus to increase the FIIs 3.9
non-asbestos revenue (boards & panels), which enjoys higher margins are
DIIs 0.6
expected to have a dual effect in terms of reduced working capital cycle
along with higher profitability at the consolidated level. We expect the NWC Others 54.0
to reach 95 days by FY20E.
Valuation and Risks: In view of the management’s focus on increasing the
non-asbestos revenue, enhanced capacities and anticipated improvement 1M 3M 6M 12M
in working capital cycle along with reduced transportation costs, we value Absolute (3) (4) (12) (33)
the company at 15x (5 year average of one year forward PE) to FY20E EPS
and recommend a “BUY” rating with a target price of Rs. 750 with an upside
Source: Bloomberg
potential of 76%. Competition from alternate products along with potential
ban on asbestos products may pose a threat to the call.

Net Sales 10049 9606 10123 10960 12145 110
EBITDA 952 1172 1502 1578 1804

90
EBITDA Margin (%) 9.5 12.2 14.8 14.4 14.9
70
Adj. Net Profit 244 428 666 685 803
50
EPS (Rs.) 15.4 26.9 41.9 43.1 50.6
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 7.0 10.9 14.9 13.7 14.1
PE (x)* 6.9 10.0 15.4 9.9 8.5 VSKI Sensex

Company Background
Hyderabad based Visaka Industries Ltd was founded by Dr. G. Vivekanand in 1981. The company has
two main business verticals i.e., Building Products (including cement asbestos and fiber cement boards
like V-Boards and V-Panels) and Synthetic Yarn. The company has 36 depots and more than 6000
dealer outlets pan India to ensure smooth & timely supply of products. The company is the second
largest manufacturer of cement fiber roofing sheet and is the largest player in V-Board business. It is
the market leader in twin Air Jet technology in the textile synthetic yarn business. The company has 11
manufacturing facilities and 13 marketing offices across India.
VISAKAIND: Technical View
The stock is in consolidation mode since its lifetime high of 838 levels clocked in January 2018
and currently found support around 370-390 levels and rallied from there on. The stock is trading
below its 200 - days Simple moving average while is trading above its 200-week simple moving
averages indicating that long-term investors are present at lower levels. We expect the stock to
witness a round of consolidation in the near term before taking the fresh leg of an up move, and
medium to a long-term investor may start accumulating the stock from current levels and add
more on declines towards Rs. 380-400 zone which is a retracement zone of its current swing low
of 367.20 levels to the high of 448 levels. On the oscillator front, the 14 daily periods RSI is indicating
a pause and is placed near the oversold region, while the weekly chart is trading above the 9 period
EMA indicating a bullish bias in the medium term. Going ahead key support is placed around 400
levels followed by 380 levels while resistance is placed around 540 levels followed by 630 levels.

Value Invest - Midcap (VI) is an investment product of Karvy Stock Broking Ltd formulated
by our Equity Fundamental & Technical Research, based on Techno-Funda Analysis. It
enlists 10 stocks from the Karvy Mid-cap stock universe.
The objective of ‘Value Invest - Midcap’ is to deliver superior returns over an extended time
frame. The investment philosophy works on simple but superior fundamental and technical
research.
The 10 midcap companies in this product in our opinion reflects superior businesses with
consistent future cash flows, run competently and have potential for exponential stock
price growth.
We also track short-term price distortions that create long-term value, driven by sound
economic fundamentals of the company. This reflects stocks that have margin of safety
will converge to their intrinsic value over a period of time and will reflect superior returns.
This is also a part of managing the overall risk, the objective is to attain higher risk adjusted
returns and deliver consistent out-performance.
The stock performance will be assessed on an ongoing basis and the composition of
the stocks in the product will be altered based on target achievement, changes in the
fundamentals of the stocks, industry position, market performance and broad macro-
economic factors.
The product is being given to the clients in the form of non-binding investment
recommendations so that they can decide to capitalize on the robust fundamentals and
future plans of the company which is being discussed in the report.

DIVIDEND
MAXIMIZER
DIVIDEND MAXIMIZER
OUTLOOK
In a strong equity market, where stocks have delivered good capital

appreciation (Sensex rose at a 11.2% CAGR over the last 5 years), investors
may not have paid attention to dividends. Taking re-invested dividends into
account, total shareholder returns over the same period were 12.8% CAGR.
This adds up over time; an investment of INR 100 made 20 years ago is
worth Rs. 1160, with reinvested dividends, the value of investment is Rs. 1613.
Investing in stocks with healthy dividend yields and high dividend payouts is a
stable form of investing. In the current economy, where bank fixed deposits
offer interest rates to the tune of 6-7%, investing in stocks with a good
investment yield is a good investment in our view.
Further, the interest on bank fixed deposits is taxable whereas no tax is

payable on dividends until Rs. 10 lakh, leading to a efficient post-tax outcome.
We recommend that investors consider adding high dividend yield stocks
to their portfolio to bring in regular inflows. We offer a list of 10 stocks with
high yields. We have considered stability of dividends as well while looking for
stocks with high forecast dividend yield. We have also taken care to remove
sector bias by adjusting the sector composition to be as close as possible to
the sector composition of BSE 500.
Exhibit: Sensex Price Returns Vs Sensex Total Returns

2000
1500
1000
500
0
Dec-16
Dec-18
Dec-06
Dec-09
Dec-08
Dec-13
Dec-17
Dec-12
Dec-03
Dec-07
Dec-02
Dec-10
Dec-99
Dec-00
Dec-11
Dec-98
Dec-01
Dec-14
Dec-04
Dec-15
Dec-05
Price returns Return with Reinvested dividend
Source: Bloomberg; *Index 100

BAJAJ CORP LTD
Bloomberg Code: BJCOR IN
Bajaj Corp Limited is engaged in the business activity of trading and

manufacturing of cosmetics, toiletries and other personal care products. The
company has leadership position in the hair oil segment. Some of its major
brands are - Almond Drops hair oil (over 60% market share in the light hair oil
market and 2nd largest brand in the overall hair oil segment), Nomarks (3rd
largest anti- marks brand nationally). The company is also into the oral care
RECOMMENDATION (RS.)
products under the brand name Bajaj Black Tooth powder. The brands are
being sold through approximately 7,900 stockists and are available in over CMP (as on Dec 28, 2018) 360
3.92 million retail outlets across the country. Bajaj Corp has nine production Dividend/share 13.4
facilities (including 3rd party operations), to cover footprints across India and
Dividend Payout (%) 77.9
overseas. The company has maintained an average RoE of ~38% in the last 5
years, paid out ~82% of profits as dividend and has 62% of its net worth as STOCK INFORMATION
investments in FY18.
52-wk High/Low (Rs.) 525 / 340
Beta (x) 0.7
Exhibit 1: Dividend/Share
16
12
12.8 13.4
11.5 12.0
11.5 11.5
8 SHAREHOLDING PATTERN (%)
4 6.5 Promoters 66.9
0 FIIs 23.4
FY14 FY15 FY16 FY17 FY18 FY19E FY20E
DIIs 5.7
Others 4.0
Exhibit 2: Dividend Payout (%)
100
STOCK PERFORMANCE (%)
98.3 1M 3M 6M 12M
75 86.5 83.9 83.3
77.7 77.9
50
Absolute 2 (13) (9) (25)
64.4
25
Source: Bloomberg
0

YE Mar (Rs. Mn) FY14 FY15 FY16 FY17 FY18 125
Net Sales 6707 8238 7975 7948 8091 110
EBITDA 1860 2392 2739 2640 2539

95
EBITDA Margin (%) 27.7 29.0 34.3 33.2 31.4
80
Adj. Net Profit 1489 1727 1964 2182 2111
65
EPS (Rs.) 10.1 11.7 13.3 14.8 14.3
Jun-18
Feb-18
Sep-18
Oct-18
Mar-18
Jul-18
Dec-18
Nov-18
Aug-18
Dec-17
Jan-18
Apr-18
May-18
RoE (%) 29.7 34.3 40.5 44.8 42.8
PE (x)* 21.5 39.1 29.0 26.7 33.0 BJCOR Sensex

BHARAT HEAVY ELECTRICALS LTD
Bloomberg Code: BHEL IN
Bharat Heavy Electricals Limited (BHEL) is the largest engineering and

manufacturing enterprise in India in the energy-related/infrastructure
sector. In addition to the power generation equipment, the company’s
products cater to a wide spectrum of customers encompassing various fields
of operation, like Fertilisers & Petrochemicals, Refineries, Oil Exploration and
production, Steel and metals, Cement ,Sugar and Paper Plants, Transportation
and Non-conventional energy sources, etc. The company’s operations are
organised around three business sectors, namely Power, Industry - including CMP (as on Dec 28, 2018) 72
Transmission, Transportation, Telecommunication & Renewable Energy - and Dividend/share 2.3
Overseas Business. This enables BHEL to have a strong customer orientation,
and be sensitive to their needs and respond quickly to the changes in the
market. The company’s products include Power, Air pre-heaters, Boilers, STOCK INFORMATION
Control Relay Panels, Electrostatic Precipitators, Fabric Filters, Gas Turbines,
Hydro Power Plant, Pulverizes, Turbo generators, etc.
52-wk High/Low (Rs.) 108 / 62
Beta (x) 1.2
3
2 2.3
SHAREHOLDING PATTERN (%)
1.9 1.9
1 1.6
Promoters 63.1
0.3 1.1
0.8
0 FIIs 13.6
DIIs 17.8
Others 5.6
136
110 131.7 131.7 1M 3M 6M 12M
84
58 Absolute 8 5 3 (22)
32 19.9 19.3
48.9 54.0 Relative to Sensex 6 6 0 (27)
6
-20 Source: Bloomberg
-14.0

Net Sales 388483 301475 260902 276174 279778

100
EBITDA 45855 25297 (13569) 10570 19701
EBITDA Margin (%) 11.8 8.4 (5.2) 3.8 7.0 80

Adj. Net Profit 35029 14524 (7041) 4573 4412
60
EPS (Rs.) 9.5 4.0 (1.9) 0.8 1.2
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 11.0 4.3 (2.1) 1.4 1.4
PE (x) 13.7 39.7 - 131.3 68.4 BHEL Sensex
Source: Bloomberg, Karvy Research Source: Bloomberg; *Index 100

BHARTI INFRATEL LTD
Bloomberg Code: BHIN IN
Bharti Infratel is a provider of tower and related infrastructure and on a

consolidated basis, the company is one of the largest tower infrastructure
providers in India, based on the number of towers that Bharti Infratel owns
and operates and the number of towers owned or operated by Indus, that
are represented by Bharti Infratel’s 42% equity interest in Indus ,which was
created as a Joint Venture between Bharti Infratel, Vodafone and Aditya Birla
Telecom to hive off the Towers business in 15 telecom circles. The company
is a pioneer in the tower infrastructure sharing concept in India and ia also CMP (as on Dec 28, 2018) 263
a leader with over 39,000+ towers across 18 states, and 11 Telecom circles, Dividend/share 11.2
with some of them in the remotest and tough terrains. The company has also
pioneered the concept of environment friendly Towers or ‘GreenTowers’
and energy efficient methods for maintenance of these towers. Infratel has STOCK INFORMATION
helped Telecom operators maximize their reach in a short period of time.
52-wk High/Low (Rs.) 384 / 242
Beta (x) 0.3
16
16.0 Face Value (Rs.) 10.0
12 14.0
12.0
8 11.0 11.2 SHAREHOLDING PATTERN (%)
4 Promoters 53.5
4.4
3.0
0 FIIs 42.3
DIIs 3.0
Others 1.2
112
104.8 108.8 1M 3M 6M 12M
84 103.7
94.1 89.3
56 Absolute 1 0 (12) (29)
55.0 25.2
28 Relative to Sensex 0 0 (14) (33)
0 Source: Bloomberg

Net Sales 108267 116683 55583 60847 66212

100
EBITDA 44001 50041 24883 28251 31865
EBITDA Margin (%) 40.6 42.9 44.8 46.4 48.1 80
Adj. Net Profit 15179 19924 22474 27470 24937

60
EPS (Rs.) 8.0 10.5 11.9 14.7 13.5
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 8.6 11.4 12.7 16.3 15.4
PE (x)* 25.3 36.5 32.2 22.1 24.9 BHIN Sensex

GRAPHITE INDIA LTD
Bloomberg Code: GRIL IN
Graphite India Limited (GIL) is a Kolkata based company from the K.K.
Bangur Group which came into being in 1960s. It is involved in manufacturing
and selling graphite electrodes. The company has four plants at Durgapur
(West Bengal), Bangalore (Karnataka), Nashik (Maharashtra) and Nurnberg
(Germany). GIL is the leading graphite electrode manufacturer in the RECOMMENDATION (RS.)
domestic market and along with its German subsidiary, Cova, as on date, is
the 3rd largest non-Chinese electrode manufacturer globally with a combined CMP (as on Dec 28, 2018) 770
manufacturing capacity of 98,000 tonnes per annum (tpa). There was strong Dividend/share 56.7
improvement in GIL’s business returns and cash flows in the current financial Dividend Payout (%) 31.8
year as a result of a sharp increase in global graphite electrode (GE) prices.
The increase in GE prices is a result of higher demand for steel production STOCK INFORMATION
through the electric arc furnace (EAF) route. The company’s overall financial Mkt Cap (Rs.Bn/US$ Bn) 150.5 / 2.2
profile continues to remain strong as a result of its highly conservative capital
52-wk High/Low (Rs.) 1127 / 596
structure and strong liquidity profile.
Beta (x) 0.9
Exhibit 1: Dividend/Share O/S Shares(mn) 195.4

64 Face Value (Rs.) 2.0
60.9
48 56.7 SHAREHOLDING PATTERN (%)
32
Promoters 65.2
16
3.5 2.0 2.0 2.0 5.0 FIIs 8.3
0
DIIs 8.1
Source: Bloomberg; *Index 100 Others 18.4
Exhibit 2: Dividend Payout (%) STOCK PERFORMANCE (%)

70
60
66.7
1M 3M 6M 12M
50
55.6 Absolute (17) (9) (4) 13
40 52.2
47.6
30
Relative to Sensex (17) (8) (6) 6
20 30.2 31.8
9.5
10 Source: Bloomberg
0

Net Sales 20093 17107 15323 14678 32660

140
EBITDA 2773 1533 1409 520 14619
EBITDA Margin (%) 13.8 9.0 9.2 3.5 44.8 110
Adj. Net Profit 1299 576 828 705 10320

80
EPS (Rs.) 6.7 3.0 4.2 3.6 52.8
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 7.5 3.3 4.7 3.9 45.0
PE (x) 13.4 28.2 16.9 31.1 13.7 GRIL Sensex

HERO MOTOCORP LTD
Bloomberg Code: HMCL IN
HERO MOTOCORP (HMCL) is a two wheeler manufacturing company based

in New Delhi. It is into manufacturing of motorcycles and scooters and is
promoted by the Munjal Family. Some of its flagship products are Splendor,
Passion and HD Deluxe in the motorcycle segment and Duet, Pleasure and
Glamour in the scooter segment. HMCL has extensive sales and service
network which spans over 6,000 customers touch points across the country RECOMMENDATION (RS.)
which comprise a mix of authorized dealerships, service & parts outlets and CMP (as on Dec 28, 2018) 3123
dealer appointed outlets. Apart from domestic market, the company has
Dividend/share 109.9
been able to spread its presence across 37 countries. Furthermore, a new
plant is being commissioned at Chittoor, AP upon which the installed capacity Dividend Payout (%) 58.0
will be ramped up to ~11 million units in the next two years. The company will STOCK INFORMATION
have 6 manufacturing facilities in India (Incl Chittoor) and a R&D centre at
Jaipur. In addition to this, they have two other facilities at Bangladesh and Mkt Cap (Rs.Bn/US$ Bn) 623.6 / 8.9
Columbia. HERO MotoCorp has more than 50% domestic market share in 52-wk High/Low (Rs.) 3862 / 2648
the motorcycle segment. The company has sold ~5.5 Mn vehicles during Apr- 3M Avg.daily value (Rs. Mn) 1822.8
Nov 2018 recording a growth of 9.3% YoY.
Beta (x) 0.8
109.9
88 100.3
85.0
95.0 SHAREHOLDING PATTERN (%)
66
72.0
44 65.0 60.0 Promoters 34.6
22 FIIs 38.9
0
DIIs 14.8
Source: Bloomberg; *Index 100 Others 11.7

69 STOCK PERFORMANCE (%)
61.7 1M 3M 6M 12M
46 55.2 58.0
50.7 50.3 50.0
45.5 Absolute 4 6 (11) (16)
23
Relative to Sensex 3 7 (14) (21)
0 Source: Bloomberg

Net Sales 251249 273033 284427 285005 322305 110
100
EBITDA 35392 35086 44550 46348 52802
90
EBITDA Margin (%) 14.1 12.9 15.7 16.3 16.4
80
Adj. Net Profit 21027 23647 31602 33771 37972
70
EPS (Rs.) 105.3 118.4 158.2 169.1 190.1
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 39.6 38.9 41.1 35.7 34.7
PE (x)* 21.6 22.3 18.3 17.1 15.2 HMCL Sensex

INDIABULLS HOUSING FINANCE LTD
Bloomberg Code: IHFL IN
Indiabulls Housing Finance Ltd (IBHF) is one of the leading housing finance
companies in India. The company has launched e-home loans, one of its kind
in the home loan industry. It has credit rating of AAA from CRISIL and ICRA,
and is among the very few who enjoy such rating from the rating agencies. It
has pan India presence with a strong hold in tier 1 and tier 2 cities. IBHF is one
of the largest housing finance companies with AUM of more than Rs. 1 tn. By CMP (as on Dec 28, 2018) 849
Q2FY19, IBHF’s borrowings were balanced between debentures & securities Dividend/share 48.8
(54%), bank loans (31%), sell downs (11%) and ECB’s (4%). Its Yield on Assets
(11.36%), Cost of funds (8.12%) and Interest Spreads (3.24%) are industry
leading. In terms of loan asset composition, Mortgage Loans account for STOCK INFORMATION
80% and Corporate Mortgage Loans constitute the rest. During FY18, Return
on Assets (RoA) and Return on Equity (RoE) were 3.3% and 30% respectively.
FY18 Capital Adequacy Ratio (CAR) stood at 20.82% splitting into Tier I of 52-wk High/Low (Rs.) 1440 / 639
15.07% and Tier II of 5.76%. Loan asset quality measured as a percent of 3M Avg.daily value (Rs. Mn) 8332.7
loan assets reached 0.77% and 0.58% at gross and net level respectively by
Beta (x) 1.5
Q2FY19.
40 48.8
45.0
41.0
30
29.0
Promoters 21.7
20 26.0 27.0
10 FIIs 55.2
0 DIIs 14.4
Others 8.7

80
1M 3M 6M 12M
60 75.3
60.4 Absolute 23 (1) (25) (29)
40
47.3 45.3
39.2
43.8 41.2 Relative to Sensex 21 (0) (27) (33)
20
Source: Bloomberg
0

Net Interest Income 20572 22066 30848 43905 64734 110
Net Profit 15642 19011 23447 29064 38474

90
EPS (Rs.) 48.0 55.0 59.8 68.8 90.5
70
BVPS (Rs.) 170.8 186.5 253.8 286.0 314.7
P/E (x) 5.0 10.2 10.9 14.5 13.7 50

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
P/BV (x) 1.4 3.0 2.6 3.5 3.9
RoE (%) 28.7 30.8 27.1 25.5 30.1 IHFL Sensex
RoA (%) 3.7 3.7 3.5 3.2 3.3 Source: Bloomberg; *Index 100

INDIAN OIL CORP LTD
Bloomberg Code: IOCL IN
Indian Oil Corporation Limited, a Maharatna PSU was incorporated in 1959

as Indian Oil Company Limited which was changed to Indian Oil Corporation
Limited in 1964 upon merger of Indian Refineries Limited with the company.
The core business of the company has been refining, transportation and
marketing of petroleum products. Over the years, the company has expanded
its operations across the hydrocarbon value chain – upstream into oil & gas
exploration and production and downstream into petrochemicals, besides CMP (as on Dec 28, 2018) 138
diversifying into natural gas and alternative energy resources. It continues to Dividend/share 8.1
expand its business operations abroad through its overseas establishments
in Sri Lanka, Mauritius, the UAE, Singapore and USA.
Indian Oil corporation has also been pursuing diverse business interests STOCK INFORMATION
through joint ventures with reputed business partners from India and abroad. Mkt Cap (Rs.Bn/US$ Bn) 1342.2 / 19.2
The company has been generous in paying high dividend and maintains high
52-wk High/Low (Rs.) 214 / 105
dividend payout ratios.
Beta (x) 1.1
24
18 21.0
12
SHAREHOLDING PATTERN (%)
6 9.3
Promoters 56.8
2.2 3.5 7.9 8.1
1.7
0
FIIs 6.0
DIIs 11.2
Others 26.1
90
88.1 89.7
1M 3M 6M 12M
60
Absolute 3 (10) (10) (29)
55.6
30 44.7 43.0 Relative to Sensex 2 (10) (13) (34)
29.8 32.4
Source: Bloomberg
0

110
Net Sales 4872595 4481443 3383125 3486904 4125045
100
EBITDA 207996 113168 250511 340425 415976
90
EBITDA Margin (%) 4.3 2.5 7.4 9.8 10.1 80
Adj. Net Profit 70856 49120 120225 198495 221895 70
EPS (Rs.) 7.3 5.1 6.3 10.5 23.4 60

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 10.8 7.2 15.1 20.7 20.5
PE (x) 9.7 18.2 15.5 18.5 7.5 IOCL Sensex

JK TYRE & INDUSTRIES LTD
Bloomberg Code: JKI IN
JK Tyre, part of the JK Organization, is among India’s leading tyre

manufacturers. It is headed by Dr. Raghupati Singhania, Chairman & MD.
The company offers a wide range of products catering to diverse business
segments in the automobile industry. The company operates 12 plants,
including 9 in India and 3 in Mexico. Currently, the total capacity of all its
plants together is ~ 32 Mn tyres per annum. It has a workforce of nearly CMP (as on Dec 28, 2018) 104
300,000 people. Some of the brands of the company include Vikrant, Tornel Dividend/share 3.8
& Challenger which are marketed both in the Indian as well as overseas
markets. The company has more than 900 SKUs (Stock Keeping Units)
catering to various categories of the automobile industry. Around 87% of STOCK INFORMATION
the revenue is derived from India and 13% comes from Mexico. During FY18,
more than 180 products had been launched as compared to 155+ in FY17.
52-wk High/Low (Rs.) 193 / 83
Beta (x) 1.1
Exhibit 1: Dividend/Share O/S Shares(mn) 226.8
4
3 3.8
2.5 2.9 SHAREHOLDING PATTERN (%)

2 2.5 2.5
Promoters 52.5
1 1.5
1.0
FIIs 7.6
0
FY14 FY15 FY16 FY17 FY18 FY19E FY20E DIIs 2.3
Others 37.6

100
1M 3M 6M 12M
80 86.2
60 Absolute 6 7 (14) (29)
40 Relative to Sensex 5 8 (16) (34)

15.1 18.6 17.7
8.3 10.3 12.1
20 Source: Bloomberg
0

Net Sales 75958 73257 68231 74590 81512

110
EBITDA 9175 9308 11166 11324 7371
EBITDA Margin (%) 12.1 12.7 16.4 15.2 9.0 80

Adj. Net Profit 2630 3297 4673 3754 660
EPS (Rs.) 11.6 14.5 20.6 16.6 2.9 50

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 26.3 26.3 29.6 20.2 3.1
PE (x)* 2.8 6.8 3.9 7.8 55.3 JKI Sensex

MULTI COMMODITY EXCHANGE OF INDIA LTD
Bloomberg Code: MCX IN
Multi Commodity Exchange of India (MCX) is the leading commodities

exchange in India based on value of commodity futures contracts traded.
They are a de-mutualised exchange and received permanent recognition
from the Government of India on September 26, 2003 to facilitate nationwide
online trading, clearing and settlement operations of commodities RECOMMENDATION (RS.)
futures transactions. The Indian commodities market in terms of value of CMP (as on Dec 28, 2018) 733
futures traded is estimated at ~Rs. 60 tn out of which MCX has a market
Dividend/share 29.4
share of ~91.4%. The market share of MCX till H1FY19 in key segments are
Precious Metals and Stones-99.58%, Energy-100%, Base Metals-100% and Dividend Payout (%) 90.6
Agri-Commodities 14.47% respectively. Till Q2FY19, MCX has 680 members,
STOCK INFORMATION
53824 authorized persons, 1458909 terminals (including IBT, WT, CTCL) and
has a presence in 1076 cities across India. Mkt Cap (Rs.Bn/US$ Bn) 37.4 / 0.5
52-wk High/Low (Rs.) 958 / 650
Beta (x) 0.9
O/S Shares(mn) 51.0
30
29.4 Face Value (Rs.) 10.0
20
17.0
10 Promoters 0.0
10.0 10.0
6.5 6.5
0 FIIs 28.7
DIIs 39.8
Others 31.5
100
75 90.6
85.7
77.4 79.8 1M 3M 6M 12M
50
Absolute 4 7 1 (22)
25 40.3
33.1 26.1 Relative to Sensex 3 7 (2) (27)
0
Source: Bloomberg

Net Sales 3407 2225 2349 2594 2598

100
EBITDA 1493 877 1618 796 719
EBITDA Margin (%) 43.8 39.4 68.9 30.7 27.7 85

Adj. Net Profit 1532 1258 425 1266 1084
EPS (Rs.) 30.2 24.8 8.4 24.9 21.3 70

Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 13.3 9.9 3.0 9.2 7.9
PE (x) 16.4 45.3 100.1 48.4 31.3 MCX Sensex

VEDANTA LTD
Bloomberg Code: VEDL IN
Vedanta Limited is a globally diversified Vedanta Group Company with low-

cost operations across zinc, copper, lead, aluminium, silver, iron ore, oil & gas
and power. The company business span across India, South Africa, Namibia,
Ireland and Australia. It is the largest private sector oil and gas producer in India
producing 25% of India’s crude oil production. The company operates the
zinc business with 78% market share in India’s zinc market through Hindustan
Zinc Limited (HZL) and Zinc International in South Africa and Namibia. It is
also among top 10 silver producers globally. It has the largest aluminium CMP (as on Dec 28, 2018) 199
capacity of 2.3 MTPA in India and operates through Balco and enjoys 40% Dividend/share 14.0
market share. The company has iron ore mine reserves and resources of 100
MT with life of 20 years and is the largest private sector exporter of iron ore
in India. The company is one of the largest power generators. It generates 9 STOCK INFORMATION
GW diversified power portfolio out of this 3.6 GW power is for commercial
purpose and balance for captive uses.
52-wk High/Low (Rs.) 356 / 190
Beta (x) 1.1
24
18 21.2
19.5
17.5
12 SHAREHOLDING PATTERN (%)
14.0
6 3.3 4.1
3.5
Promoters 50.1
0 FIIs 16.6
DIIs 17.8
Others 15.5
90 STOCK PERFORMANCE (%)
82.8 1M 3M 6M 12M
60 74.9 74.2
Absolute 3 (14) (13) (40)
30 15.1 44.5
0
Source: Bloomberg
-7.8 -8.5
-30 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Net Sales 657333 733641 639201 717210 913720 110
EBITDA 203597 220445 151957 213570 251910

90
EBITDA Margin (%) 31.0 30.0 23.8 29.8 27.6
70
Adj. Net Profit 62985 (156458) (122705) 69580 103420
50
EPS (Rs.) 21.5 (52.8) (41.4) 23.5 28.3
Mar-18
Dec-17
Jul-18
Aug-18
Nov-18
Dec-18
Apr-18
Oct-18
Jan-18
Jun-18
May-18
Feb-18
Sep-18
RoE (%) 13.9 (24.7) (25.1) 13.3 16.7
PE (x) 8.8 - - 11.7 9.8 VEDL Sensex

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INVESTMENT

Vivek Ranjan Misra

Karvy Stock Broking Research

Bharti Infratel Ltd INFRATEL Telecom 486 263 308 17

HCL Technologies Ltd HCLTECH IT 1335 958 1167 22

Hindustan Unilever Ltd HINDUNILVR FMCG 3944 1822 2138 17

ICICI Bank Ltd ICICIBANK Banking 2323 361 440 22

Larsen & Toubro Ltd LT Infrastructure 2018 1439 1700 18

State Bank of India Ltd SBIN Banking 2631 295 347 18

Tata Motors Ltd TATAMOTORS Automotive 540 171 259 51

UPL Ltd UPL Chemicals 386 758 1004 32

Yes Bank Ltd YESBANK Banking 420 181 410 127

Finolex Cables Ltd FINCABLES Electrical Equipment 70 459 600 31

K.P.R. Mill Ltd KPRMILL Textiles 41 565 716 27

Menon Bearings Ltd MENONBE Auto Ancillary 4 79 120 52

Relaxo Footwears Ltd RELAXO Footwear 88 732 911 24

Sunteck Realty Ltd SUNTECK Real Estate 51 348 497 43

Take Solutions Ltd TAKE IT 22 148 226 53

The Phoenix Mills Ltd PHOENIXLTD Real Estate 85 557 735 32

Visaka Industries Ltd VISAKAIND Construction Materials 7 426 750 76

Bharti Infratel Ltd INFRATEL Telecom 486 263 11.2 89.3

Hero MotoCorp Ltd HEROMOTOCO Automotive 624 3123 109.9 58.0

1 KARVY INVESTMENT STRATEGY REPORT 2019

Source: Bloomberg, Karvy Research

2 KARVY INVESTMENT STRATEGY REPORT 2019

Source: Bloomberg, Karvy Research

3 KARVY INVESTMENT STRATEGY REPORT 2019

Q) What is your outlook for equity markets in 2019?

4 KARVY INVESTMENT STRATEGY REPORT 2019

Q) What are the risks for equities in 2019?

Q) Which sectors are the best bets for 2019?

5 KARVY INVESTMENT STRATEGY REPORT 2019

Q) What about Crude- is it a risk for India as we head into 2019?

6 KARVY INVESTMENT STRATEGY REPORT 2019

7 KARVY INVESTMENT STRATEGY REPORT 2019

Exhibit: Nifty Returns

Source: Bloomberg, Karvy Research

Caution sets the stage for returns

Drivers for 2019

8 KARVY INVESTMENT STRATEGY REPORT 2019

Exhibit: FII Inflows and Nifty Returns

Source: Bloomberg, SEBI, Karvy Research

Exhibit: Sensex returns vs Rupee

9 KARVY INVESTMENT STRATEGY REPORT 2019

Exhibit: India Real Effective Exchange Rate

INR REER Average

Source: BIS, Karvy Research

Exhibit: FII vs DII inflows

Source: Bloomberg, SEBI, Karvy Research

Exhibit: Cumulative FII vs DII flows since 2007

Source: Bloomberg, Karvy Research

10 KARVY INVESTMENT STRATEGY REPORT 2019

Exhibit: Household financial savings invested in capital markets

Source: RBI, Karvy Research

Exhibit: Investment of savings of households in Equities

Source: RBI, Karvy Research

Exhibit: Working age population (%)

Source: World Bank, Karvy Research

11 KARVY INVESTMENT STRATEGY REPORT 2019

Exhibit: Performance of Indian equities vs peers (in USD)

Exhibit: 12 month forward PER of Sensex

12 Month forward PER Average -1 SD +1 SD

Source: Bloomberg, Karvy Research