Mar 2019

1
 EQUITY OUTLOOK

Market Overview

The weak growth momentum was reinforced by multiple data releases over the last month –
3QFY19 GDP growth at 6.6% y/y, February auto sales flat across most categories and January IIP
growth at 1.7% y/y. The impact of tight liquidity, agrarian distress and a high base continue to
weigh on aggregate demand, which should continue for a while. The weakness should continue for
another 3-4 months at least and could be exacerbated by a) the public spending cuts in 4QFY19 as
the government tries to meet the fiscal deficit targets and b) the sentiment uncertainty around the
elections.

Source: Thomson Reuters

The RBI cut rates by 25bps in February, citing the persistent undershooting of CPI inflation below
the mandated target of 4%. Inflation has marginally ticked up in January (from -0.33% to 1.99%)
but the space remains open for further cuts. Transmission of these rate cuts, however, remains a
challenge. In the absence of any concrete liquidity infusion to accompany the rate cuts, banks
see no material improvement in their cost of funds and are, therefore, unable to cut lending
rates. The RBI’s recent move to infuse liquidity via swaps should incrementally help. We,
however, expect major easing of interest rates only after April, possibly aided by another rate
cut and further liquidity easing by the RBI in the April policy.

2
 EQUITY OUTLOOK

Source: Thomson Reuters

The stress in the NBFC sector has somewhat eased, with most NBFCs able to meet liquidity
requirements from a combination of markets, bank loans, retail FDs (selectively) and loan
selldowns. The fear of a default has now almost fully receded. The cost of funds, however,
remains elevated and many of the NBFCs (especially housing finance companies) are cutting
back on growth to maintain balance sheet stability. The operating environment for NBFCs
may change if liquidity eases in April, but longer-term funding challenges for NBFCs with
weak asset profiles are likely to persist.
The Election Commission announced the schedule for the Lok Sabha elections on 10 March.
The polls will be held over seven phases from April 11 to May 19, with the final results to be
announced on May 23. The code of conduct has, consequently, become active so all major
policy decisions are on hold till the new government is installed. The government, however,
did push through multiple reform measures over February and March.

Our expectation of a second-half recovery in the economy remains unchanged. Some

enablers are falling into place: a) persistent low inflation creates the space for significant
monetary easing b) the fiscal tightness would ease, at least in 1HFY20 and PSU bank lending
should accelerate after banks came out of PCA since February (and more expected in May
after the 4Q results). As we proceed towards the end of CY19, a favourable base effect is
also likely to kick in.

3
 EQUITY OUTLOOK

Source: Bloomberg

The key risk is oil process. The consensus opinion is that oil should remain range bound over
CY19, but upside risks from geopolitical uncertainty and supply shocks cannot be ruled out. A
spike in oil prices has negative consequences for India’s financial stability, and puts our
assumption of liquidity easing at risk.

Crude Price - USD

90.0
85.0
80.0
75.0
70.0
65.0
60.0
55.0
50.0
03-01-2018 03-04-2018 03-07-2018 03-10-2018 03-01-2019

Source: Bloomberg

Mr. Seshadri Sen

Head of Research, Alchemy Capital Management Pvt Ltd.

4
 PMS PRODUCT PERFORMANCE
Alchemy High Growth
Bright Prospects for a Bright Future

Investment Strategy*: The strategy aims to generate long-term returns by investing in equities across market
capitalizations, but with a strong mid-cap bias.
Fund Manager: A Chartered Accountant by profession, Mr. Amit Nadekar has worked across equity research, corporate
strategy, taxation and audit over the last one and a half decades. He started his career on the sell side, tracking the US
banking & financial sector; later moving on to the corporate side as a part of the Corporate Strategy team at Raymond.
He has been a part of the Alchemy investment team since 2005.
.
Strategy* at a glance:
Category: Equity Diversified
Fund Style: Multi-cap Growth
Type: Open Ended
Launch Date: 8th May, 2002
Benchmark: S&P BSE 500
Min investment: Rs. 25 lacs

Portfolio Action:

There is no significant change in the portfolio during the month.

*The product’s objective and strategy are merely a target and there are no assurance that it would be achieved.
*Please read the Disclosure Document/ Client Agreement for complete details 5
 PMS PRODUCT PERFORMANCE
Alchemy High Growth
Bright Prospects for a Bright Future

Performance as on 28-Feb-2019

Inception Date (8-May-2002)

#Past performance is no assurance for future returns.
#Returns presented are net of fees and expenses.
#The above performance figures are aggregate of all clients; the investor’s actual portfolio may differ.
6
 PMS PRODUCT PERFORMANCE
Alchemy High Growth
Bright Prospects for a Bright Future

TOP SECTORS (%) MARKET CAP ALLOCATION

PERIODIC RETURNS RATIO ANALYSIS

Alchemy Benchmark Alchemy High Benchmark

Period Parameter Growth (Since
High Growth BSE 500
(Since Inception) Inception)
6 Months -13.0% -10.4%
1 Year -8.8% -3.2% Std. Dev. 17.3% 18.4%

2 Years 6.6% 8.0%

3 Years 18.6% 15.4% Sharpe 0.9 0.5
5 Years 18.3% 13.0%
7 Years 17.5% 11.0%
10 Years 19.7% 15.9% Beta 0.8 1
Since Inception* 23.5% 15.8%
As on 28-Feb -2019
*Inception Date (8-May-2002)
Returns less than 1yr: Absolute, greater than 1yr: CAGR
Large cap->26294 Crs, Mid cap-3109 Crs to 26294 Crs, Small cap-<3109 Crs
#Past performance is no assurance for future returns.
#Returns presented are net of fees and expenses.
#The above performance figures are aggregate of all clients; the investor’s actual portfolio may differ.
7
 DISCLAIMER

General Risk factors

All investment products attract various kinds of risks. Please read the relevant Disclosure Document / Client
Agreement carefully before investing.

General Disclaimers

The information and opinions contained in this report/ presentation have been obtained from sources believed to be
reliable, but no representation or warranty, express or implied, is made that such information is accurate or
complete.

Information and opinions contained in the report/ presentation are disseminated for the information of authorized
recipients only, and are not to be relied upon as advisory or authoritative or taken in substitution for the exercise of
due diligence and judgement by any recipient.

The information and opinions are not, and should not be construed as, an offer or solicitation to buy or sell any
securities or make any investments.

Nothing contained herein, including past performance, shall constitute any representation or warranty as to future
performance.

The client is solely responsible for consulting his/her/its own independent advisors as to the legal, tax, accounting
and related matters concerning investments and nothing in this document or in any communication shall constitutes
such advice.

The client is expected to understand the risk factors associated with investment & act on the information solely on
his/her/its own risk. As a condition for providing this information, the client agrees that Alchemy Capital
Management Pvt. Ltd., its Group or affiliates makes no representation and shall have no liability in any way arising to
them or any other entity for any loss or damage, direct or indirect, arising from the use of this information.

This document and its contents are proprietary information of Alchemy Capital Management Pvt. Ltd and may not be
reproduced or otherwise disseminated in whole or in part without the written consent.

Edited by: Sachin Pawar (Ph: +91-22-66171742)

Alchemy Capital Management Pvt. Ltd., B-4, Amerchand Mansion, 16 Madame Cama Road, Mumbai 400 001. Ph:
+91-22-66171700
CIN- U67120MH1999PTC119811, Email ID: contactus@alchemycapital.com 8