Sharkhan Valueguide 2016

Value
Guide
January 2016
For Private Circulation only
www.sharekhan.com
Not
just
local
anymore
Intelligent Investing
Regular Features
Products & Services
Traders Edge
Market Outlook
Stock Ideas
Stock Updates
Sharekhan Special
Viewpoints
Report Card
Earnings Guide
PMS
Top Equity Picks
Wealth Creator
MF Picks
Advisory
Technical view
Commodities and Currencies
F&O Insights
January 2016
Sharekhan ValueGuide
CONTENTS
EQUITY
From Sharekhans Desk

Not just local anymore
If 2015 disappointed
in terms of a slower
pace of economic
recovery
and
corporate earnings
growth in India, 2016
has begun on a
disquieting note
largely due to global
issues. Interestingly, the biggest global concern related to
interest rates hikes in the USA has been quickly absorbed by
the financial markets globally.
06
RESEARCH BASED EQUITY PRODUCTS

Market Outlook
Top Picks Basket
Wealth Creator Portfolio
PMS DESK
07
13
17
ProPrime - Diversified Equity 40

ProTech - Index
Futures Fund
41
ProTech - Trailing Stops
42
45
Top SIP Fund Picks
46
18
19 REGULAR FEATURES
27 Report Card
28 Earnings Guide
TECHNICALS
Nifty
DERIVATIVES
30 View
31
ADVISORY DESK
MID Trades
COMMODITY
43 Derivative Ideas
43
FUNDAMENTALS
Crude Oil
Gold
Silver
Copper
Lead
32
33
33
33
33
33
34
35
35
35
TECHNICALS
Gold
Silver
Crude Oil
36 Copper
36 Jeera
36 Soya bean
37
37
37
FUNDAMENTALS
USD-INR
EUR-INR
38
38
GBP-INR
JPY-INR
38
38
TECHNICALS
USD-INR
EUR-INR
39 GBP-INR
39 JPY-INR
39
39
Zinc
Nickel
Castor seed
Chana
Soya bean
4
I
CURRENCY
MUTUAL FUNDS DESK

Top MF Picks (equity)
FUNDAMENTALS
Stock Idea
Stock Updates
Sharekhan Special
Viewpoints
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disclaimer
Compliance Officer: Ms. Namita Amod Godbole; Tel: 022-6115000; e-mail: compliance@sharekhan.com Contact: myaccount@sharekhan.com
January 2016
REPORT CARD
EQUITY
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON DECEMBER 03, 2015)

COMPANY
CURRENT PRICE AS ON PRICE

RECO
03-DEC-15
TARGET
52 WEEK
HIGH
LOW
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
1M
RELATIVE TO SENSEX
3M
6M
12M
AUTOMOBILES
Apollo Tyres
Ashok Leyland
Bajaj Auto
Gabriel Industries
Hero MotoCorp NEW
M&M
Maruti Suzuki
Rico Auto Industries
TVS Motor
BSE Auto Index
BANKS & FINANCE
Allahabad Bank
Andhra Bank
Axis (UTI) Bank
Bajaj Finance
Bajaj Finserv
Bank of Baroda
Bank of India
Capital First
Corp Bank
Federal Bank
HDFC
HDFC Bank
ICICI Bank
IDBI Bank
LIC Housing Finance
PTC India Financial Services
Punjab National Bank
SBI
Union Bank of India
Yes Bank
BSE Bank Index
CONSUMER GOODS
Britannia NEW
GSK Consumers
Godrej Consumer Products
Hindustan Unilever
ITC
Jyothy Laboratories
Marico
Zydus Wellness
BSE FMCG Index
IT / IT SERVICES
Firstsource Solution
HCL Technologies
Infosys
Persistent Systems
Tata Consultancy Services
Wipro
BSE IT Index
CAPITAL GOODS / POWER
Bharat Heavy Electricals
CESC
Crompton Greaves
Finolex Cable
Greaves Cotton
Kalpataru Power Transmission
PTC India
Skipper NEW
Thermax
Triveni Turbine
Va Tech Wabag NEW
V-Guard Industries
January 2016
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Reduce
155.8
92.0
2483.4
95.5
2637.8
1242.5
4580.7
46.9
287.0
18295.3
201.0
105.0
2750.0
105.0
3250.0
1450.0
5400.0
58.0
250.0
249.8
145.1
99.7
56.0
2656.0 1912.5
106.8
72.0
3022.0 2251.3
1442.1 1092.2
4790.0 3360.0
61.2
34.3
322.3
201.0
20386.4 16689.5
0.1
2.7
0.5
9.3
-1.5
-6.8
-2.6
3.3
0.9
-2.5
-20.6
-1.7
4.6
10.4
1.8
-3.0
2.9
-0.4
24.4
1.3
-8.9
25.8
-2.3
27.2
-1.3
-6.4
13.0
12.3
8.2
-4.8
-29.3
65.0
3.8
2.6
-13.5
2.1
32.8
14.9
7.6
-2.2
1.0
3.7
1.4
10.3
-0.6
-5.9
-1.7
4.3
1.8
-1.6
-15.9
4.0
10.7
16.8
7.7
2.6
8.9
5.4
31.6
7.2
0.6
38.9
7.9
40.5
8.9
3.4
24.8
24.0
19.5
5.1
-25.9
72.9
8.8
7.5
-9.4
7.0
39.1
20.3
12.8
2.4
Hold
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Buy
buy
Buy
Buy
Reduce
Buy
Buy
Hold
Buy
Buy
Buy
68.2
63.8
438.4
6052.5
1959.5
151.2
114.7
416.4
42.6
55.8
1216.7
1070.5
255.6
84.9
489.7
39.7
112.8
220.7
144.7
705.8
18943.9
90.0
84.0
652.0
6500.0
2050.0
195.0
148.0
485.0
48.0
75.0
1400.0
1260.0
400.0
76.0
558.0
62.0
156.0
324.0
185.0
930.0
132.5
64.1
96.5
58.5
655.4
407.0
6189.9 3394.6
2160.0 1208.2
228.9
137.2
306.0
108.6
464.8
321.0
78.9
39.8
79.8
52.2
1402.3 1093.2
1128.0
932.0
393.4
243.0
95.7
52.3
526.0
389.3
73.2
37.1
219.0
104.3
336.0
209.0
253.5
129.8
910.0
590.0
23903.8 18009.1
-6.9
-4.5
-6.5
12.1
-3.5
-10.9
-7.4
12.3
1.0
-3.4
3.2
0.8
-4.3
-9.2
9.1
1.4
-18.5
-10.1
-13.2
-4.9
-3.1
-12.1
-8.0
-14.9
18.2
8.8
-19.3
-19.5
11.9
-5.0
-15.8
-4.4
-1.7
-11.5
2.5
4.1
-13.0
-19.9
-9.7
-22.4
-5.3
-6.9
-24.2
-9.9
-25.7
10.2
12.9
-2.9
-36.4
4.0
-17.5
-29.6
-7.3
-1.5
-20.6
28.4
13.5
-9.0
-23.8
-19.9
-13.0
-19.1
-13.2
-44.4
-27.2
-13.0
78.9
57.8
-28.2
-59.7
19.4
-33.7
-23.5
11.0
14.1
-26.8
16.6
12.7
-38.8
-46.0
-26.8
-33.5
-7.8
-10.4
-6.1
-3.6
-5.6
13.1
-2.7
-10.1
-6.5
13.3
1.9
-2.6
4.2
1.7
-3.5
-8.3
10.1
2.3
-17.8
-9.2
-12.4
-4.0
-2.2
-7.0
-2.7
-10.0
25.1
15.1
-14.6
-14.8
18.4
0.6
-10.9
1.1
4.0
-6.4
8.4
10.2
-8.0
-15.2
-4.4
-17.9
0.2
-1.4
-16.3
-0.4
-17.9
21.6
24.6
7.2
-29.8
14.9
-8.9
-22.3
2.3
8.8
-12.4
41.9
25.3
0.5
-15.9
-11.6
-3.9
-10.6
-4.1
-41.7
-23.8
-8.9
87.4
65.3
-24.8
-57.8
25.1
-30.5
-19.9
16.2
19.5
-23.3
22.1
18.1
-35.9
-43.4
-23.3
-30.3
-3.5
-6.2
Buy
Buy
Buy
Hold
Buy
Buy
Hold
Buy
2972.6
6496.4
1329.8
859.0
325.1
307.4
225.3
858.1
7829.0
3650.0
6750.0
1460.0
900.0
370.0
360.0
240.0
990.0
1846.3
5467.1
944.1
769.0
294.0
236.0
157.6
770.1
7277.5
2.2
14.0
8.3
3.4
-6.2
-1.9
7.0
4.4
-1.7
-7.8
10.3
-1.1
2.5
-8.1
-3.4
13.4
4.1
-3.8
8.3
7.4
7.9
-8.4
-1.0
2.6
3.1
-4.1
-1.9
60.4
15.9
37.8
10.9
-10.7
19.4
39.7
11.4
2.4
3.2
15.0
9.3
4.4
-5.4
-1.0
7.9
5.4
-0.9
-2.4
16.8
4.6
8.5
-2.7
2.2
20.0
10.2
1.8
19.6
18.6
19.1
1.2
9.3
13.3
13.9
5.9
8.3
68.0
21.4
44.4
16.1
-6.5
25.1
46.3
16.7
7.2
Buy
Buy
Buy
Buy
Buy
Hold
42.2
846.0
1078.9
647.2
2369.6
557.7
10872.2
52.0
980.0
1240.0
820.0
2850.0
660.0
45.9
24.2
1058.5
746.4
1219.8
932.6
953.8
573.7
2812.1 2315.3
677.6
512.5
11927.5 10124.5
3.2
0.6
1.9
-3.1
2.3
-2.5
1.2
55.9
-0.9
-6.5
-0.6
-11.6
-7.4
-5.9
40.2
-12.3
9.7
4.0
-9.2
2.2
3.2
26.8
11.7
12.1
-24.4
-1.1
3.9
6.5
4.1
1.6
2.9
-2.2
3.2
-1.6
2.2
64.9
4.9
-1.1
5.1
-6.5
-2.0
-0.4
54.8
-3.1
21.2
14.8
0.3
12.8
13.9
32.8
17.0
17.4
-20.8
3.6
8.9
11.5
Hold
Hold
Hold
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Buy
165.2
522.6
190.0
250.7
142.2
252.4
66.8
191.8
883.0
109.0
680.3
932.8
220.0
580.0
**
310.0
160.0
325.0
90.0
210.0
955.0
135.0
850.0
1155.0
-1.6
-7.4
-0.3
4.8
-4.1
-4.7
7.3
30.3
-1.9
3.7
-2.5
0.8
-16.2
-8.0
10.2
10.6
11.2
-2.9
7.6
25.5
1.3
-4.1
0.4
1.6
-36.1
-8.1
11.1
-0.6
7.8
-3.2
-1.5
24.2
-16.4
-7.1
-15.3
5.8
-36.2
-22.5
8.0
0.9
-0.2
14.4
-23.8
85.2
-14.1
0.9
-12.9
-13.0
-0.7
-6.5
0.7
5.7
-3.3
-3.8
8.3
31.5
-1.0
4.6
-1.6
1.7
-11.4
-2.7
16.6
17.0
17.6
2.8
13.8
32.8
7.2
1.5
6.2
7.5
-29.4
1.5
22.6
9.8
19.0
6.9
8.8
37.2
-7.7
2.6
-6.5
16.8
-33.2
-18.8
13.1
5.6
4.6
19.8
-20.2
94.0
-10.0
5.7
-8.7
-8.9
3435.0
6800.0
1459.0
981.0
410.0
342.0
234.3
1130.3
8382.8
300.0
751.7
203.8
306.5
162.6
291.8
102.0
219.9
1318.0
151.8
972.5
1166.0
153.0
452.0
145.3
213.0
112.6
197.6
50.1
105.2
827.0
90.0
615.0
800.0
EQUITY
REPORT CARD
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON DECEMBER 03, 2015)

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

52 WEEK
RECO
03-DEC-15
TARGET
HIGH
LOW
1965.0
2332.4 1691.4
13973.1
18814.2 13343.1
132.1
76.6
197.1
7.9
1200.0
20.0
2587.5
1142.7
RELATIVE TO SENSEX
1M
3M
6M
12M
6.1
10.7
5.8
1.6
-2.7
-7.0
-14.5
-5.0
-0.8
8.1
4.1
-6.2
-7.7
9.0
0.1
1.1
Hold
Buy
Buy
Hold
Buy
Reduce
737.7
92.0
257.9
12.0
1256.0
30.5
2725.9
1343.2
752.0
175.0
300.0
26.0
1630.0
**
769.2
224.0
275.9
29.5
1893.8
40.8
3456.8
1894.0
129.2
-32.0
6.3
8.0
-31.2
18.7
-18.2
-5.2
360.9
-46.6
8.0
-53.5
-16.9
-19.3
-9.5
-10.3
0.1
9.1
5.0
-5.3
-6.8
10.0
1.0
2.0
34.2
1.0
6.1
8.5
-15.8
22.6
-2.7
2.1
153.1
-24.9
17.4
19.3
-24.0
31.1
-9.7
4.6
382.8
-44.1
13.1
-51.3
-13.0
-15.4
-5.2
-6.0
Hold
Buy
Hold
399.0
995.3
206.0
9459.3
400.0
1100.0
345.0
592.0
1067.9
343.8
10408.1
341.1
796.5
197.2
8243.3
1.3
6.9
-14.1
4.4
-10.1
14.9
-8.5
8.0
-9.1
1.6
-29.1
-2.4
-22.0
24.8
-37.3
4.6
2.3
7.9
-13.3
5.4
-4.9
21.6
-3.2
14.3
0.3
12.2
-21.7
7.8
-18.3
30.8
-34.3
9.6
Buy
Buy
Buy
Hold
Hold
Hold
Buy
Buy
Hold
844.3
645.7
320.8
1149.7
930.6
732.0
1795.2
799.1
1448.4
16640.8
973.0
795.0
396.0
1150.0
1065.0
779.0
2207.0
885.0
1741.0
891.5
752.9
454.4
1242.4
1262.9
888.0
2129.0
1200.8
1720.0
18842.7
465.0
571.3
285.0
786.0
702.6
591.3
1364.6
704.0
1030.1
15345.7
7.5
1.0
-18.4
0.7
-5.0
-7.4
-2.9
4.8
-3.1
0.4
14.9
-1.8
-24.6
0.0
-14.2
-1.9
-15.4
-12.7
-8.1
-9.4
19.9
0.0
-11.8
20.4
-10.8
2.8
-8.3
-9.6
9.3
-1.8
60.1
6.4
-2.8
37.2
25.9
-1.7
26.1
-1.7
28.6
16.3
8.5
1.9
-17.7
1.6
-4.1
-6.6
-2.0
5.8
-2.2
1.3
21.6
3.9
-20.3
5.8
-9.2
3.8
-10.5
-7.6
-2.7
-4.1
32.4
10.5
-2.6
33.0
-1.5
13.5
1.3
-0.2
20.7
8.5
67.7
11.5
1.8
43.7
31.9
3.0
32.1
2.9
34.7
21.8
Buy
Buy
Hold
Buy
3657.3
389.2
11059.3
2749.2
4475.0
450.0
11800.0
3750.0
4024.9
405.5
13360.0
3399.0
3301.0
270.0
8860.0
2530.8
-1.8
3.7
2.8
-4.6
1.4
14.3
-8.8
-1.2
3.1
15.8
3.5
-11.6
8.8
22.0
26.3
2.7
-0.9
4.6
3.7
-3.7
7.3
21.0
-3.4
4.6
13.9
27.9
14.3
-2.3
13.9
27.8
32.3
7.6
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Buy
Hold
Buy
172.4
238.2
235.9
832.9
346.2
2140.3
384.0
419.0
500.9
142.3
204.4
396.4
422.0
240.0
300.0
307.0
1000.0
400.0
2480.0
600.0
450.0
635.0
145.0
265.0
450.0
470.0
262.0
344.0
276.3
962.7
424.5
2342.7
495.0
555.5
615.0
218.8
256.9
430.4
440.7
137.0
200.1
145.0
697.1
232.0
1624.1
302.2
360.1
302.6
114.0
156.1
240.2
299.5
-8.8
2.8
-5.0
-5.6
9.9
9.7
1.2
2.5
2.1
13.8
-1.7
0.8
7.0
1.6
12.8
-4.9
2.2
23.7
1.0
-6.8
-5.3
-7.0
-11.4
-0.3
34.8
6.1
-12.1
-2.2
32.3
-4.6
18.2
4.7
-15.0
-12.5
-1.3
0.3
-13.7
57.0
14.0
10.9
-16.8
35.8
-2.8
34.1
15.1
-0.4
-16.4
52.6
-24.0
26.3
29.0
15.8
-7.9
3.7
-4.1
-4.8
10.9
10.7
2.2
3.4
3.0
14.9
-0.8
1.7
7.9
7.5
19.3
0.6
8.1
31.0
6.9
-1.4
0.3
-1.6
-6.3
5.5
42.6
12.2
-2.9
8.0
46.1
5.4
30.5
15.6
-6.2
-3.4
8.9
10.8
-4.7
73.4
25.8
16.1
-12.8
42.2
1.8
40.4
20.6
4.3
-12.5
59.8
-20.4
32.3
35.1
21.2
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Hold
Hold
Buy
2159.9
1660.2
326.8
1370.1
313.5
517.5
656.1
540.5
689.0
433.9
10491.5
6630.8
13429.4
2500.0
1950.0
380.0
1450.0
385.0
648.0
800.0
625.0
700.0
550.0
2344.9
1747.8
452.5
1416.9
459.4
586.0
787.2
806.3
746.8
576.4
11764.8
7428.1
14237.6
1516.0
1242.9
304.2
947.0
302.2
381.1
480.0
501.4
520.0
315.3
9931.9
6286.7
12133.8
8.7
-4.3
0.3
10.4
0.2
-5.2
7.9
-4.2
5.4
5.8
0.3
0.4
2.5
1.4
4.3
-7.6
13.9
-5.7
-0.7
5.3
-18.4
9.5
-4.6
-2.8
-3.0
1.5
15.4
12.2
-25.2
20.7
-5.5
-0.9
0.6
-6.7
2.8
-19.9
-5.5
-5.6
1.6
34.6
18.2
-8.5
44.5
-5.9
33.2
26.0
-18.8
18.9
36.0
0.4
0.5
11.1
9.7
-3.4
1.2
11.4
1.1
-4.3
8.9
-3.3
6.4
6.8
1.2
1.3
3.4
7.3
10.4
-2.3
20.5
-0.3
5.0
11.5
-13.7
15.8
0.9
2.8
2.7
7.4
27.5
23.9
-17.4
33.3
4.3
9.5
11.1
3.1
13.5
-11.5
4.3
4.2
12.2
41.0
23.8
-4.2
51.4
-1.5
39.5
32.0
-14.9
24.6
42.5
5.2
5.3
16.4
In Top Picks basket
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
5.1
4.6
-4.2
-3.0
-3.6
-12.1
-22.6
-9.3
26.8
-4.6
0.3
2.5
-20.5
15.9
-8.1
-3.5
** Price target under review
January 2016
from sharekhans desk
FROM SHAREKHANS DESK
January 2016
Not just local anymore

If 2015 disappointed in terms of a slower pace of economic recovery and corporate earnings
growth in India, 2016 has begun on a disquieting note largely due to global issues. Interestingly,
the biggest global concern related to interest rates hikes in the USA has been quickly absorbed
by the financial markets globally. However, it is the Chinese wall of worries that is pulling
down the world today.
Whether the Chinese economy is moving towards a hard-landing or if the policy makers would
manage a more gradual and systematic slowdown of the Chinese economy is a question that
has been debated extensively and is emerging as a major cause for uncertainty today. And
rightly so, after all China is the second largest economy and has contributed substantially to
the global economic growth in the past couple of decades or so. Consequently, a hard landing
in China would pull down the global economic recovery and also significantly affect the
commodity and currency markets. So when China sneezes, the equity markets globally catch
cold!
The global situation has ramifications for India too. A global slowdown affects India
economically in terms of the export-import trade. And mind you, over 50% revenues of the
index companies (aggregate of the Sensex companies; like information technology service,
pharmaceutical and automobile companies among others) depends upon the overseas markets
while some of the others, like metals and oil & gas companies, are global commodity-driven
businesses.
In addition, the foreign fund inflows are also affected by the rising risk aversion globally. India
depends on portfolio inflows in equity and debt markets along with foreign direct investments
to meet its internal growth resources. So an uncertain global environment and inadequate
foreign inflows could further delay the economic recovery and the revival of the investment
cycle in India.
On the brighter side, there are several local factors that inspire confidence in our own economy
and that should keep our market afloat. India is not only among the few economies that are
showing a strong growth but is also expected by the World Bank to become the fastest growing
economy in the next three years. The World Bank projects India would grow at a faster pace of
7.8% in the next financial year itself. So what will drive this growth?
The World Bank believes the situation in India has improved over the past few months with the
Indian government taking several reform measures including state electricity board reforms
and the move to liberalise foreign direct investment in as many as 15 sectors including agriculture,
manufacturing and defence. Even though the Goods and Services Tax Bill hangs fire in the
Rajya Sabha several other reforms have been announced to boost the economy and more reforms
including a new bankruptcy law to protect investors and lenders are in the pipeline. The Made
in India campaign of the government is designed to give a push to the manufacturing sector.
While these schemes of the government will boost investment, the implementation of the Seventh
Pay Commissions recommendations for government employees and pensioners, and the One
rank, one pension scheme for the defence employees and pensioners in this year will boost
consumption.
So the situation is much better locally. The global scenario is uncertain and unpredictable. But
thats what has led to a reset of market expectations and a considerable correction in the
quality large-cap stocks. Consequently, our research team believes that the market could
positively surprise this year. Please refer to our Market Outlook report, Turning around slowly
but surely on page 7.
We wish you a happy new year ahead!
EQUITY
MARKET OUTLOOK
FUNDAMENTALS
MARKET OUTLOOK
DECEMBER 23, 2015
Turning around slowly but surely

2015: Recovery modest and reforms in limbo locally; uncertainty
globally: Contrary to the Streets expectations, 2015 has generated
negative returns on the benchmark indices in India. In spite of the
favourable impact of falling prices of commodities, especially crude,
on Indias macros in terms of easing pressure on the trade and current
account deficits, the equity market was bogged down by weak
corporate earnings, parliamentary logjam and uncertainty related to
a shift in the monetary policy stance in the USA. But more
importantly, expectations were running high and the Street was
factoring in a rather fast recovery in the economic and business cycles.
policy stance in most major economies and regions would remain

accomodative. From Indias perspective, it is relatively better
placed within the emerging market (EM) economies. But the
overweight positions of the foreign institutional investors on India
make the market susceptible to a risk aversion-driven bout of
selling.
Valuations comfortable, expect better returns in 2016: The equity
market has gone through a multi-month phase of time and price
correction; and the Streets expectations have mellowed down
considerably. The biggest global uncertainty related to the
beginning of a rate hike cycle in the USA is also behind us now.
The markets valuations are comfortable with the S&P BSE Sensex
trading at close to 14.5x price/earnings (P/E; based on FY2017
consensus earnings estimate) factoring in a significant cut in the
earnings estimates and the slew of negative news flow.
2016: Economic recovery to gain strength...: There are signs of an

improving growth trend in manufacturing and industrial activity
(an average growth of 5.1% in the year till date [YTD]) and select
sectors. The green shoots are expected to crystalise into more visible
trends over 2016 (gross domestic product [GDP] growth pegged at
about 8%), given focused government capital spending and
consumption boost after the implementation of the Seventh Pay
Commissions recommendations (additional annual income of
Rs2.0-2.5 trillion in hands of 25 million state and central government
employees). Additionally, the consumption demand could also be
aided by a revival of rural consumption backed by better farm output
after two consecutive years of sub-normal rainfall.
3 CsConsumption, Capital, Cyclical: Besides bottom-up picks,

the three broad investment pockets are: (a) urban discretionary
consumption companies; (b) government capital spending plays,
eg road, railways, power T&D and defence; and (c) cyclicals
(private banks, NBFCs, auto makers). We continue to avoid global
cyclicals (eg oil & gas, metals) and public sector banks at this
stage.
...to reflect in corporate earnings: For a good part of 2015 the

corporate earnings growth was subdued largely due to a sluggish
performance by the export-led global commodity sectors and a
sub-optimal pick-up in the domestic economy. This resulted in a
10-12% downgrade in Sensex consensus earnings estimates for
FY2016 and FY2017. On the brighter side, the Sensex earnings
(ex global cyclical companies) have shown a decent improvement
over the past couple of quarters. Moreover, the credit rating
upgrades beating downgrades by 3.2 times for smaller companies
(with revenues of $20-100 million) reflect a broad-based
improvement in the financial health of corporates. Going ahead,
as the lower interest rates and lower input prices feed into the
financials of firms, the earnings growth will improve for the
domestic demand-driven companies.
Key risk: (a) Global risks: Economic recovery may falter in the USA,
China may devalue its currency and geo-political issues; and (b)
domestic risks: a higher fiscal deficit and continued parliamentary logjam
SENSEX ONE-YEAR FORWARD P/E BAND
Global trends to remain mixed; India relatively better placed but

over-ownership is a potential risk: The global economy is unlikely
to post a major recovery in 2016 and the trends are likely to remain
mixed. Notwithstanding the rate hikes in the USA, the monetary
Source: Bloomberg, Sharekhan Research
January 2016
MARKET OUTLOOK
EQUITY
Economy firming up, growth to accelerate in 2016
FUNDAMENTALS
levels by January 2017. The Wholesale Price Index inflation has

remained in negative zone for 13 months in a row, suggesting the
demand is weaker at the wholesale level. A sluggish monsoon has
affected select food articles in recent months but the core inflation
is broadly under control (below 5% ). The RBI has reduced the
repo rates by 125 basis points (BPS) in 2015 and the consensus
expectation is of a cut of 50-75 BPS in 2015. This together with an
effective transmission of the rate cuts (marginal cost based pricing
of loans) will shape a favourable interest rate scenario and may
rejuvenate investment activity in the country.
After a patchy growth over the past couple of years, the Indian
economy seems to be coming on track with green shoots visible
across sectors. Apart from a GDP growth of 7.4% (as per the new
series in Q2FY2016), the other economic indicators like the Index
of Industrial Production (IIP) growth are showing an improving
trend (IIP has averaged at 4.8% in the fiscal so far). A weak demand
environment has been a concern though a healthy growth in the
recently concluded festive season suggests an uptick in private
expenditure which along with government spending will support
growth in the coming quarters.
and stimulate consumption which is already showing signs of

an upturn
GDP, IIP GROWTH IMPROVING
Consumer sentiment especially in the urban areas is showing signs

of a steady turnaround as indicated by the recent festive season
sales that were the best in three to four years. Passenger cars, twowheelers and other retail products (jewellery, apparels, paints) have
seen a strong offtake in the past couple of months. The other
economic indicators like a double-digit growth in airline travel and
rising hotel occupancy suggest a change in consumer sentiment. A
multi-year high inflation and a slower economic growth had dented
consumption which is getting a boost from the falling inflation and
interest rates. Going ahead, the implementation of the Seventh Pay
Commissions recommendations will be a significant driver of
consumption as it will increase the income of millions of state and
central government employees which, in turn, will stimulate
growth.However, rural consumption remains weak due to two
consecutive years of sub-optimal rains and may lag the recovery cycle.
Source: CSO, Bloomberg
Even as some key legislations (the land acquisition bill, the Goods
and Services Tax [GST] Bill) are stuck in the Parliament, the
government has taken executive measures like de-clogging of road
projects, addressing the issues of the power distribution companies,
and raising spending on railways, irrigation etc. Over the next two
to three years, multiple factors like lower inflation, a drop in interest
rates, a steady pick-up in consumer demand and a likely resumption
of capital expenditure (capex) by the private sector will be the key
contributors to the economys growth.
TRENDS IN MARUTI SALES (NOS), POST-SIXTH PAY COMMISSION HIKE
Further rate cuts to bring down cost of capital

Compared with 2014 the Consumer Price Index inflation has
declined significantly in 2015 (average at 4.7% in FY2016 so far)
and the Reserve Bank of India (RBI) plans to bring it down to 4.8%
Source: SIAM
*Apart from pay hikes, low base supported volume growth FY2010-11
INTEREST RATES DOWN TRENDING
Governments infra spending to aid long-term growth

Given the fiscal comfort due to falling crude oil prices, the
government has stepped up spending particularly in the
infrastructure segment (roads, railways) the after-effects of which
are likely to be spread over 2016. It is worthwhile to note that the
gross value-added growth over the past couple of quarters has
averaged at 7.3% and been contributed by a pick-up in government
spending. To point a few, the road project awards by the National
Highways Authority of India (NHAI), and higher investment outlays
in the Indian Railways and defence sectors indicate significant
investments in the economy. The state governments will account for
a major portion of the infrastructure spending, as they get a higher
Source: RBI, Bloomberg
January 2016
EQUITY
MARKET OUTLOOK
FUNDAMENTALS
allocation based on the Finance Commissions recommendation, and

this will build the foundation of a sustainable growth.
the underground water levels have fallen following two years of

drought. Presently, it looks like a revival in the rural economy and
consumption may be slow in 2016 (but would be better than in
2015) and may lag urban consumption.
NHAI ROAD PROJECT AWARDS GAINING PACE
WEAK MONSOON AFFECTS AGRICULTURE INCOME
Source: NHAI, Ministry of Road and Transport
Addressal of infra issues holds the key, private capex to pick up

with lag
Source: data.gov.in
Pace of reforms a concern, Union Budget will be keenly watched
Addressal of the bottlenecks in the infrastructure sector has been

the key challenge in recent years. The government has taken several
initiatives in the energy sector especially in coal and oil & gas sectors.
In the road sector too policies have been formulated to expedite the
ongoing projects as well as increase construction and projects awards
all of which will have a positive impact from FY2017 onwards. In
order to address the issue of stalled projects the prime minister,
senior ministers and bureaucrats are working to put these projects
on track and positive outcomes are emerging. In the power sector,
the government has announced the Uday scheme to revive state
distribution companies and tackle the perennial power sector issues.
Notwithstanding the government measures, private investment will
follow with some lag, given the present macro situation and high
debt levels of corporates.
Key economic reforms like the GST bill have been stuck in the
Parliament as the ruling National Democratic Alliance lacks the
required numbers in the upper house of the Parliament (Rajya Sabha)
to get the reforms passed. While the government is lying low after
LOK SABHA COMPOSITION
GROWTH IN GOVERNMENT CONSUMPTION
Source: loksabha.nic.in
RAJYA SABHA COMPOSITION
Source: Planning commission
Rural economy in distress

Two consecutive years of weak rainfall, and unseasonal rains and
floods in select regions have affected the agriculture output of the
country. Further, the marginal hike in minimum support prices and
falling rural wages have affected the income levels in rural areas.
As we move to 2016, the monsoon remains a key factor, given that
Source: rajyasabha.nic.in
January 2016
MARKET OUTLOOK
EQUITY
FUNDAMENTALS
and PSBs due to a global slowdown. However, the intensity of the

earnings downgrade may slow down, given a likely upturn in the
economy as is already visible in certain pockets. Therefore, the
consensus earnings growth estimate for the Sensex companies has
been toned down to 6-8% for FY2016. But the same is expected to
improve to 17-18% in FY2017. The analysis of the results of the
BSE-100 companies suggests that financial service, automobile and
consumer goods companies will drive the bulk of the improvement
in the earnings.
its Bihar debacle, consolidation of the opposition parties and the

disruption of the winter session of the Parliament over petty issues
have affected the other bills also (real estate bill, bankruptcy bill
etc). However, the government has taken several measures at the
executive level (reforms for the power distribution companies,
increase in foreign direct investment [FDI] in 15 sectors, energy
reforms etc) which will continue in future also. Going ahead, the
Union Budget will be a significant event which is expected to
continue the policies that seek to boost manufacturing, skill
development, infrastructure etc.
SENSEX CONSENSUS EARNINGS (EPS) ESTIMATE
Corporate earnings to report a notable improvement in 2016

compared with 2015
The earnings expectations were belied in 2015 due to global issues
(a slump in commodity prices, currency volatility), and a sub-optimal
GDP growth and weak monsoon rains on the domestic front. As a
result, the consensus earnings estimate for the Sensex had been
downgraded by 10-12%. Going ahead, as the RBIs rate cuts and
lower input prices feed into the financials of the corporates, the
earnings growth will improve. Given a weak global economy and
volatility in the currency markets, export-led sectors may continue
to be a drag, though the domestic demand-driven sectors are already
showing signs of an improvement. The Sensex earnings (ex global
cyclical companies) have shown a decent improvement over the
past couple of quarters.
Source: Bloomberg
SENSEX EARNINGS GROWTH EX GLOBAL CYCLICALS
Fed raises rates but its not the end of the road
Sticking to its script the US Federal Reserve (Fed) raised the interest
rates by 25BPS suggesting confidence in the recovery of the US
economy. However, the World Bank, the International Monetary
Fund and other multi-lateral institutions have downgraded the
growth estimate of the global economy to 3.0-3.3%, largely due to
a subdued growth in the developed economies and head winds in
the EM economies (Russia, Brazil, China etc). A gradual tightening
by the Fed will result in outflows from the EMs but the net addition
to the global liquidity from the monetary easing by the other major
central banks (Peoples Bank of China, Bank of Japan, European
Central Bank etc) would prevent any disruption.
Date
Source: Bloomberg
S&P 500 Advance

from first hike (%)
Time to market
Top (months)
Fed Funds rate

range (tightning)
Rising upgrades/downgrades ratio (mid-sized firms) is a positive

sign
14-08-77
41.1
41
6.00% - 20.00%
16-12-86
34.7
6.00% - 7.25%
The banking sector (especially the public sector banks [PSBs]) saw
a sharp rise in non-performing assets during the 2014-15 period
which led to a reduction in their earnings estimates. Lately,
incremental stressed loan formation has shown some moderation
though some large corporate groups remain under watch. A leading
credit rating agency (CRISIL) suggests that the ratio of upgrades to
downgrades is ~3.2x for the medium-sized firms (with revenues in
the range of $20-100 million) for 2015 which is a meaningful
improvement. While this might just be one of the trends but an
improving economy and declining interest rates would improve the
debt servicing ability of firms and contribute to their earnings.
29-03-88
41.9
28
6.50% - 9.75%
30-06-99
11.3
4.75% - 6.50%
30-06-04
37.2
40
1.00% - 5.25
16-12-15
Average
?
33.25
?
25
0.25% - ??
Source: media reports
India remains attractive to foreign investors despite rate hike in

the USA
India is the fastest growing economy among the larger economies.
The other macro variables are also stable. On the external front,
the current account deficit may remain under control (at about
1.5% of the GDP) led by substantial savings on crude oil (global
crude prices are down) leading to a contraction in the overall
Earnings downgrade cycle easing

Two thousand and fifteen saw a significant downgrade in the
earnings estimates of sectors like metals, industrials, technology
January 2016
10
EQUITY
MARKET OUTLOOK
FUNDAMENTALS
merchandise trade deficit. The government has vowed to achieve

its fiscal deficit target despite a higher outlay for infrastructure
spending. On the other hand, efforts to improve the business climate,
increased FDI limit across sectors and healthy capital markets would
attract long-term foreign flows.
From REER perspective, the INR is overvalued by more than 10%

against a basket of 36 currencies. Also, further devaluation of the
Chinese currency can have repercussions for the financial markets
including India. However, barring near-term issues the strong macro
fundamentals of the its economy will help India to stand out among
the other EMs.
FOREIGN FUND INFLOWS (RS CR)
Equities: Better placed to outperform other asset classes

The stock market is likely to end 2015 with negative returns
(compared with a 30% return in 2015) largely due to sluggishness
in corporate earnings and volatility in global commodity and
currency markets. However, the visibility of a recovery in the
domestic economy and a revival in corporate earnings in 2016 are
significantly better compared with the scene in early 2015. In view
of three fundamental factors, namely the reform push, declining
interest rates and channelisation of savings from physical to financial
assets, equities as an asset class is likely to outperform the other
asset classes in 2015.
Physical assets: Real estate and gold face several head winds
Policy push: Policy initiatives taken to curtail black money (like
Benami Property Act etc) would restrict the demand for real
estate and gold.
Source: Bloomberg
FDI FLOWS
Positive real interest rate: As compared with a negative real

interest rate (inflation higher than deposit rate), the real interest
rate is positive now. Traditionally, it results in money moving
to financial assets from physical assets.
Strong dollar: Globally, bullions and commodities are weak
due to the strengthening of the dollar with an improving growth
outlook for the US economy and a rising probability of interest
rate hikes in the USA.
Fixed/Term deposits: Repo rates already lowered by 125150BPS; further pressure expected as the RBIs monetary stance
remains accommodative.
Source: Bloomberg
On the other hand, equities tend to perform well in an economic

recovery cycle and the initial phase of such a cycle seems to
have started.
Rupee outlook to be shaped by global events

The Indian Rupee (INR) remained firm amid sharp volatility in
global currencies though it may depreciate in the short term owing
to a rise in demand for the dollar after the rate hike in the USA.
MUTUAL FUND AUM (RS '00CR)
RUPEES PERFORMANCE AGAINST EM CURRENCIES
Source: AMFI
Source: Bloomberg
11
January 2016
MARKET OUTLOOK
EQUITY
Valuations in comfort zone after correction
FUNDAMENTALS
SENSEX PREMIUM CLOSE TO ITS LONG-TERM MEAN
The correction in the benchmark indices (down about 7% in YTD)

following a decline in earnings growth over the past over four
quarters has built in most of the known risks and therefore appears
reasonable. On the other hand, the broader market has delivered
positive returns (the BSE Mid-cap Index is up 4.6% in 2015) and
domestic flows into equities (as evident from the assets under
management [AUM] of mutual funds) have increased. Given the
increasing visibility of corporate earnings and economic recovery,
investors can use the current weakness in the market to build a
portfolio for the long term.
SENSEX P/E BAND
Source: Bloomberg
Investment theme is 3 Cs: Urban Consumption, government

Capital spending and domestic Cyclicals
As explained above, urban consumption clearly seems to be turning
the corner and may lead the recovery cycle in India. The government
is on a spending spree and is expanding the Make in India
programme. The results of the will be more visbible from 2016
onwards. These factors may benefit select industrials, energy and
defence players. The domestic economy is on the cusp of a recovery,
and private banks and select auto players could benefit from a
revival. We also recommend bottom-up picks and selective exposure
to information technology service and pharmaceutical companies.
We continue to avoid global cyclical companies (eg commodity and
metal companies) and PSBs at this stage.
Source: Bloomberg, Sharekhan Research
Relative valuation too appears reasonable

KEY THEMES
Despite the global volatility India has stayed resilient, thanks to the
strength of its economy. However, the premium it has enjoyed
traditionally over the other EMs has narrowed significantly and is
close to 22%. This suggests that the valuations of the benchmark
indices are reasonable even on a relative basis.
Urban consumption
Leisure, media & entertainment, consumer brand plays
Government spending
Roads, railways, power T&D along with defence
Economic recovery
Cyclicals like financials (private banks, NBFCs), autos and

select industrials
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
January 2016
12
EQUITY
FUNDAMENTALS
SHAREKHAN TOP PICKS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

the last-day sell-off in Cadila (down by 15%) after the issue of a
warning letter by the USFDA for two of its manufacturing facilities.
Consequently, the Top Picks basket is marginally positive (0.1%)
since our last revision and its performance is in line with that of the
Sensex (up 0.1%) and the Nifty (down 0.1%). Among the
constituents of the basket, Bajaj Finance, Zee Entertainment
Enterprises and Godrej Consumer Products posted healthy returns
in the last month.
This month, we are making only one change in the Top Picks
portfolio. We are replacing Cadila with Havells India. We continue
to be positive on the long-term prospects of Cadila but the stock
could languish in the near term. On the other hand, Havells India
is set to chalk out an aggressive domestic growth story (partially
aided by its inorganic initiatives) on the back of cash inflows from
the sale of its loss-making Sylvania to leverage on the expected
sustained improvement in the urban discretionary consumption.
Two thousand and fifteen seems to have been a difficult year for
equity investors going by the negative returns posted by the
benchmark indices, the Nifty and the Sensex, and the mid singledigit returns shown by the CNX Mid-cap Index. However, there
are numerous stocks in the broader market that have given
superlative returns in the past one year. The divergent trend
highlights the importance of careful stock selection as a tried and
tested formula to generate superior returns in equities.
Even our Top Picks basket has comfortably outperformed the indices
by delivering gains of close to 14% in the past 12 months in spite
of the two mishaps in the pharmaceutical sector (Dr Reddys
Laboratories and Cadila Healthcare [Cadilla]) recently. We had to
book losses in these stocks due to an unfortunate and unexpected
regulatory risk arising from a spike in US Food and Drug
Administration (USFDA) activism.
In the last month, the baskets outperformance was wiped off with
CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED)
1 month
3 months
(%)
6 months
1 year
3 years
5 years
124.9
Top Picks
0.1
-1.4
1.6
13.9
109.4
Sensex
-0.1
-0.1
-6.8
-5.1
33.7
33.0
Nifty
0.1
0.0
-6.1
-4.1
33.6
35.1
CNX Mid-cap
1.1
3.2
1.2
6.5
55.9
59.1
ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)

Sharekhan
(Top Picks)
Sensex
Nifty
CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

APRIL 2009
CNX
MIDCAP
CY2015
13.9
-5.1
-4.1
6.5
CY2014
63.6
29.9
30.9
55.1
CY2013
12.4
8.5
6.4
-5.6
CY2012
35.1
26.2
29.0
36.0
CY2011
-20.5
-21.2
-21.7
-25.0
CY2010
16.8
11.5
12.9
11.5
CY2009
116.1
76.1
72.0
114.0
Since inception
(Jan 2009)
423.2
160.2
160.6
269.8
Please note the returns are based on the assumption that at the beginning of each month an equal amount was invested in each stock of the Top Picks basket
NAME
Ashok Leyland
CMP*
(RS)
FY15
PER
FY16E
FY17E
FY15
ROE (%)
FY16E
FY17E
PRICE
TARGET (RS)#
UPSIDE
(%)
20
88
106.7
25.1
16.0
4.9
18.3
24.8
105
Bajaj Finance
6,044
33.8
27.4
21.4
20.3
19.5
19.2
6,500
Britannia Industries
2,968
65.7
41.7
34.4
53.3
55.9
47.5
3,650
23
GCPL
1,324
48.9
39.5
32.1
24.6
25.7
25.8
1,460
10
305
40.6
38.1
32.4
20.6
20.0
21.0
370
21
15
Havells
IndusInd Bank
Maruti Suzuki
Relaxo Footwear
Reliance Industries
966
28.6
23.0
18.2
19.2
20.5
21.5
1,108
4,623
37.6
25.3
19.7
16.6
21.3
22.8
5,400
17
508
59.1
45.8
33.9
23.4
22.1
22.3
635
25
9
1,010
12.6
12.9
10.8
10.8
9.7
10.5
1,100
SBI
225
12.8
9.4
7.1
10.6
13.2
15.7
**
TCS
2,436
24.3
19.9
17.8
33.7
32.7
29.7
3,000
23
437
50.9
44.2
35.2
19.0
18.8
20.6
470
Zee Entertainment
*CMP as on December 31, 2015 # Price target for next 6-12 months
** Under review
13
January 2016
EQUITY
SHAREKHAN TOP PICKS

NAME
CMP
(RS)
ASHOK LEYLAND
88
FY15
106.7
PER
FY16E
25.1
FY17E
FY15
ROE (%)
FY16E
FY17E
16.0
4.9
18.3
24.8
FUNDAMENTALS
PRICE
TARGET (RS)
105
UPSIDE
(%)
20
Remarks: Ashok Leyland Ltd (ALL) is the second largest commercial vehicle (CV) manufacturer in India with a market share of 27% in the heavy
truck segment and an even higher share of about 40% in the bus segment.
The medium and heavy commercial vehicle (MHCV) volumes were under pressure over the past two years but have witnessed a
sustained recovery and been growing in double digits over the past few quarters. We expect the MHCV volumes to remain buoyant
over FY2016-17 driven by a pick-up in the economic cycle, improved operator profitability and phase-wise implementation of the
Bharat Stage IV norms across the country leading to pre-buying.
The management is also concentrating on verticals other than CVs to de-risk the business model. It has a strong presence in exports
and continues to expand to newer geographies. Additionally, ALLs defence business is expected to get a leg-up due to the governments
focus on indigenous manufacture of defence products and FDI in the sector.
ALLs operating profit margin has recovered from the lows on the back of a reduction in discounts and price hikes taken by the
company. Its margins are expected to expand further, given the operating leverage. With buoyant operating cash flows and no significant
capital expenditure planned, we expect the balance sheet to get de-leveraged and the return ratios to improve.
BAJAJ FINANCE
6,044
33.8
27.4
21.4
20.3
19.5
19.2
6,500
Remarks: Bajaj Finance Ltd (BFL) is among the most diversified NBFCs (financing of mortgages, consumer durables, SME, rural etc) having a
strong distribution network ( 512 branches). We believe a strong growth in customer additions, its unique cross-sell and up-sell
capabilities, and robust growth from newer products (rural finance, lifestyle finance etc) should drive a growth of over 25% in the AUMs.
Despite a strong growth in loans, the asset quality remains among the best in the system (gross NPAs of 1.69% based on 150-day past
due [DPD] basis) which along with conservative provisioning adds to the comfort. BFL has already made provisions based on 90-DPD
basis, ahead of the Reserve Bank of India (RBI)s timeline.
We expect BFLs earnings to grow at a compounded annual growth rate of 28% over FY15-17 resulting in a return on asset (RoA) and
return on equity (RoE) of 3.2% and 19.2% respectively. While we have been positive on BFLs business model and strong earnings
performance; We have a Buy rating on BFL with a price target of Rs6,500.
BRITANNIA INDUSTRIES
2,968
65.7
41.7
34.4
53.3
55.9
47.5
3,650
23
Remarks: Britannia Industries (Britannia) is the second largest player in the Indian biscuit market with about 30% market share. It has chalked
out an aggressive growth strategy to sustain the double-digit volume growth in the biscuit segment by enhancing its product portfolio.
It is also striving to expand to the other categories such as dairy (market size Rs75,000) and adjacent snacking categories (market size
Rs30,000 crore).
It is likely to maintain a 14-15% revenue growth rate with the volume growth standing at 10-11% (largely driven by enhanced both
distribution reach and product portfolio). The operating profit margin is expected to remain in the range of 14-15% on the back of
benign input cost and operating efficiency.
The company has a strong balance sheet with the free cash flow consistently improving over the past few years. Its return ratios have
improved over the past few years and remained strong in the upward of 50%.
Under a new leadership, Britannia has been able to leverage and monetise its strong brand and position in the biscuit and snack
segments. We believe that the company can sustain its higher than industry growth rates with an improving distribution reach, entry
into newer categories and focus on cost efficiency. We recommend a Buy on the stock with a price target of Rs3,650.
GODREJ CONSUMERS
1,324
48.9
39.5
32.1
24.6
25.7
25.8
1,460
10
Remarks: Godrej Consumer Products Ltd (GCPL) is one of the largest FMCG companies in India with a strong portfolio of brands catering to the
matured and fast growing categories in the domestic market. With a slew of acquisitions in markets such as Africa, Latin America and
Indonesia, it has expanded its base globally (about 40% of its revenues come from the international market.
GCPL's domestic business is performing well in a weak demand environment (grew by 9% in Q2FY2016). The key reason for a better
performance is a presence in the under-penetrated categories such as hair color and mosquito repellent, sustained innovation in the
portfolio and expansion in distribution reach. On the other hand, the business in Africa is in a consolidation phase while the Indonesian
business is standing tall in a favourable demand environment.
Benign input prices would continue to boost its profitability and help GCPL to take adequate promotional actions and do higher brand
investment in a weak demand environment.

GCPL's long-term growth prospects remain intact and we expect its earnings to grow at a CAGR of above 20% over the next two to
three years. Thus, better growth prospects and strong earning visibility make it one of the better picks in the mid-cap FMCG space. We
maintain our Buy recommendation on the stock.
January 2016
14
EQUITY
FUNDAMENTALS
NAME
CMP
(RS)
HAVELLS
305
FY15
40.6
SHAREKHAN TOP PICKS

PER
FY16E
38.1
FY17E
FY15
ROE (%)
FY16E
FY17E
32.4
20.6
20.0
21.0
PRICE
TARGET (RS)
UPSIDE
(%)
370
21
Remarks: Havells is a leading electrical equipment and appliance manufacturer in India. The poor performance of Sylvania (acquired in 2007) dragged
the balance sheet of the company for a long time; however now Havells is going to divest Sylvania. Therefore, the current overhang will go
away and reflect positively on the consolidated results. We believe the deal will not only strengthen its balance sheet but also add value to the
bottom line and lift the return ratios. In terms of quality, the managements focus on domestic business is expected to increase.
Apart from consolidating its leadership position in the existing products through product innovation and better features, it is also
expanding its product portfolio and making efforts to dwell deeper in the distribution channel by directly connecting with retail and
electrician networks (on the lines of Asian Paints and Astral Poly Technik). Further, consistent free cash flow generation, a high cash
conversion (reported profit to cash flow) record and a consistent high dividend pay-out speak for the management quality. Superior
return ratios and a debt-free balance sheet indicate the quality of business too. Post-divestment of Sylvania, we believe the return
ratios are poised to improve further.
We believe Havells is a deserving high quality stocks, backed by a strong track record of its management and impressive financials.
Going forward, the extraordinary efforts like direct involvement with electricians and retailers will give it competitive advantage and
help it to consolidate its leadership position in India. Though currently the domestic business is moving at a modest pace, mirroring
consumer demand, we expect urban consumption to rise in future and Havells is well positioned to captalise on it. Moreover, the
Sylvania divestment would help it to shake off the past overhang and reflect positively on its return ratios as well as valuations.
INDUSIND BANK
966
28.6
23.0
18.2
19.2
20.5
21.5
1,108
15
Remarks: IndusInd Bank is among the fastest growing banks (a 27% CAGR growth over FY10-15) having a loan book of Rs68,700 crore and 811
branches across the country. About 25% of the banks book pertains to vehicle finance, which is a high-yielding category and is
showing signs of recovery.
Given the aggressive measures taken by the management, the deposit profile has improved considerably (a CASA ratio of 34%).
Going ahead, the bank would follow a differentiated branch expansion strategy (a 5% branch market share in identified centers) that
would help ensure healthy savings accounts and retail deposit growth.
Despite a weak economic growth and a higher proportion of vehicle finance book the bank has maintained its asset quality. With total
stressed loans (restructured loans + gross NPAs) forming just 1.4% of the book, the banks asset quality is among the best in the system.
A likely revival in the economy will further fuel growth in the consumer finance division and strong capital ratios will support the growth
plans. The stock is trading at 3.3x its FY17E book value (not factoring in the QIP issue). Given the strong loan growth, high RoAs and
healthy asset quality, the stock should continue to trade at premium valuation. We have a positive outlook on the stock.
MARUTI SUZUKI
4,623
37.6
25.3
19.7
16.6
21.3
22.8
5,400
17
Remarks: Maruti Suzuki India Ltd (Maruti) is Indias largest passenger vehicle manufacturer with a strong 45% market share.The company has
been able to gain market share over the last two years on the back of its diverse product portfolio, a large distribution network with an
increased focus on the rural markets and a shift in consumer preference to petrol models from diesel models.
The recently launched premium hatchback, ie Baleno, has received a positive response which will help the company expand its market
share in the segment. Further, the company has a pipeline of new launches over the next few years, the most important being the entry
into the compact utility vehicle and light commercial vehicle segments.
The company is poised to reap the benefits of an increase in discretionary spending from the Seventh Pay Commission pay-out.
The management plans to double its existing sales and distribution network in order to achieve its target of doubling domestic volumes
over the next five years.
The profitability continues to remain high on the back of soft commodity prices, depreciation of the Japanese Yen and high operating
leverage.
RELAXO FOOTWEAR
508
59.1
45.8
33.9
23.4
22.1
22.3
635
25
Remarks: Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mind-recall
brands, viz, Hawaii, Sparx, Flite and Schoolmate. In the last quarter it also added another brand, Bahamas, to its product portfolio.
Relaxo has a proactive approach towards both brand building and creating capacities. To build its brand and create pull, like FMCG
players it continues to rope Bollywood celebrities and this creates an aspirational quotient for its brands. On the one hand, the
company is creating strong consumer centric aspiration for the consumers; on the other hand, it is keeping its eye on quality and thus
does not believe in outsourcing. It is in the process of building capacity for future. Despite the current capacity (180 million pieces per
annuam) that would take care of growth in the next three years, the company has bought a 15-acre land at Bhiwadi to built additional
capacity to serve the future requirements.
Relaxos strong presence in the lucrative mid priced footwear segment (through its top-of-the-mind-recall brands like Hawaii, Flite and
Sparx) along with its integrated manufacturing set-up, lean working capital requirement and vigilant management puts it in a sweet
spot to cash in on the strong growth opportunity unfolding in the footwear category due to a shift from unbranded to branded products.
We thus maintain our Buy rating on the stock. We also roll over our multiple from FY2017 estimate to FY2018 estimate (valuing the
stock at 33x FY2018E) with a price target of Rs635.
15
January 2016
EQUITY
SHAREKHAN TOP PICKS

NAME
CMP
(RS)
RELIANCE INDUSTRIES
1,010
FY15
12.6
PER
FY16E
12.9
FY17E
FY15
ROE (%)
FY16E
FY17E
10.8
10.8
9.7
10.5
FUNDAMENTALS
PRICE
TARGET (RS)
1,100
UPSIDE
(%)
Remarks: Reliance Industries Ltd (RIL) has a strong presence in the refining, petrochemical and upstream exploration businesses. The refining
division of the company is the highest contributor to its earnings and is operating efficiently with a better gross refining margin (GRM)
compared with its peers in the domestic market due to the ability of its plant to refine more of heavier crude. The exploration business
remains weak due to low production in the Krishna-Godavari-D6 (KG-D6) field and weak pricing of global fuel prices. However, capital
employed and profit contribution from the exploration business is low.
Moreover, the upcoming incremental capacities in the petrochemical and refinery businesses are going to drive the future earnings
growth substantially as the downstream businesses are on the driving seat and contributing the lions share of the profitability and cash
flow.
After a strong GRM in H1FY2016, we expect the margin to remain healthy for the whole year and drive a strong bottom line performance.
The stock is available at an attractive valuation considering the size, strong balance sheet and cash flow generating ability of the
company.
225
SBI
12.8
9.4
7.1
10.6
13.2
15.7
**
Remarks: SBI is India's largest bank in terms of most comparable parameters such as assets size, branch network (18,000 branches) and
customer base. The bank has a market share of ~18% and along with its associate banks it commands a market share of over 25% in
the banking system. Therefore, with a revival in the investment cycle and pick-up in consumption the bank is likely to benefit significantly
in terms of loan growth and profitability.
SBIs asset quality is relatively better compared with the other public sector banks (PSBs; its stressed loans stand at ~8.5% vs ~13.5%
of the other PSBs) and has been showing improving trends in the past few quarters. While the pressure on the asset quality may
continue in the near term, a higher tier-1 CAR (9.6%) and an improving operating performance remain comforting factors.
Going ahead, SBI will look to merge its associate banks which will give an unmatched hold in the domestic banking sector and boost
economies of scale. In addition, the likely monetisation of the insurance and other subsidiaries will strengthen the capital position of
the bank. The bank may also benefit from the governments plans to infuse capital into the PSBs. SBI is a better pick among the
government-owned banks and is reasonably valued at the current levels.
2,436
TCS
24.3
19.9
17.8
33.7
32.7
29.7
3,000
23
Remarks: TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in most
service offerings and has further consolidated its position as a full-service provider by delivering a robust financial and operational
performance consistently over the years.
The consistency and predictability of its earnings performance has put the company at the top of its league. TCSs management
remains positive on the digital technologies space, which grew by 10.7% QoQ, forms 13.3% of the revenues as compared with 12.5%
in Q1FY2016. The management remains confident about the growth trajectory of the digital space for the coming years. Given the
usual seasonal weakness in H2, it expects a soft revenue growth in the next two quarters. Further, it expects weakness in Diligenta
(insurance) and Japan (integration issues related to the Mitsubishi acquisition) to continue for few more quarters.
We remain positive on TCS, given its strong positioning, scale advantage and head start in the digital technologies space (the highest
among the top Indian IT companies), which justify the valuation premium for TCS over the others.
ZEE ENTERTAINMENT
437
50.9
44.2
35.2
19.0
18.8
20.6
470
Remarks: Among the key stakeholders of the domestic TV industry, we expect the broadcasters to be the prime beneficiary of the mandatory
digitisation process initiated by the government. The broadcasters would benefit from higher subscription revenues at the least incremental
capex as the subscriber declaration improves in the cable industry.
The management maintains that the advertisement spending will continue to grow in double digits going ahead and ZEEL will be able
to outperform the same. The growth in the advertisement spending will be driven by an improvement in the macro-economic factors
and the fact the ZEEL is well placed to capture the emerging opportunities being a leader in terms of market share.
ZEEL continues to outperform the broadcasting advertising market. We expect the momentum to continue with an improvement in the
macro economy. The management indicated the strong momentum in the advertisement revenue growth would continue led by market
share gains and improvement in spending from segments like FMCG, e-commerce, consumer durables and telecom companies.
Subscription revenues are also expected to benefit from the run-up phases III and IV of the digitisation process (to be more visible in
FY2017 and FY2018). We continue to see ZEEL as the prime beneficiary of the macro revival and digitisation.
January 2016
16
EQUITY
FUNDAMENTALS
WEALTH CREATOR PORTFOLIO
WEALTH CREATOR PORTFOLIO
XXX XX,
2015
Wealth Creator portfolio

Objective: To build a balanced and actively managed portfolio of
quality companies that will help create meaningful wealth for
investors in the multi-year rally expected in the Indian equity market.
Portfolio performance review
In addition to some bottom-up picks, the portfolio contains stocks

identified based on three key themes:
Policy push: Stocks from sectors benefiting from improvement

in the policy environment
Wealth Creator folio has appreciated by 9.5% (weighted average

returns) since its inception comprehensively beating the returns
from the benchmark indices.
No changes/revisions suggested in the folio in the month of
December 2015. Prices as on December 31, 2015.
Early gainers: Beneficiaries of an economic recovery (stocks from

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

returns including urban consumption plays
COMPARATIVE RETURNS
Particulars
Returns (as on on December 31, 2015)

Since inception (August 21, 2014)
Wealth Creator folio (weighted average returns)
9.5
- Large-cap (64%)
9.0
- Mid-cap (36%)
10.3
Sensex
-0.9
Nifty
0.7
CNX Mid-cap
UPDATE ON WEALTH CREATOR PORTFOLIO
Sr No
Scrip
19.8
Weights
Reco price (Rs)

31-Dec-2015
Price target (Rs)

March-18
Potential upside
Large-caps (64% weightage; 8% each))

1
Axis Bank
8%
450
1210
169.2%
Larsen & Toubro
8%
1276
3800
197.9%
Maruti Suzuki
8%
4615
8750
89.6%
Cummins
8%
1028
1708
66.2%
State Bank of India
8%
224
580
158.5%
Sun Pharmaceuticals
8%
820
1650
101.2%
Tata Consultancy Services
8%
2439
5100
109.1%
Tata Motors DVR
8%
290
675
132.9%
PTC India Financials
4%
40
112
177.6%
10
V-Guard
4%
946
2100
122.0%
11
Gateway Distripark
4%
324
810
150.3%
12
IRB Infra
4%
243
650
167.1%
13
Network 18 Media
4%
59
135
130.2%
14
Gabriel India
4%
99
200
102.0%
15
Century Plyboards
4%
170
440
159.0%
16
Triveni Turbines
4%
113
265
134.7%
17
Dhanuka Agritech
4%
512
1150
124.6%
Mid-caps (36% weightage; 4% each)
* Please note we see scope for upward revision in target price (3-year) of some of the stocks depending on the extent of economic recovery and will keep updating on the same
17
January 2016
STOCK IDEA
EQUITY
PI INDUSTRIES
BUY
CMP: RS610
FUNDAMENTALS
DECEMBER 17, 2015
Customised Success Model

KEY POINTS
COMPANY DETAILS
Price target:
Rs800
Market cap:
Rs8,331 cr
52-week high/low:
Rs786/440
NSE volume: (No of shares)
0.1 lakh
BSE code:
523642
NSE code:
PIIND
Sharekhan code:
PIIND
Free float: (No of shares)
5.7 cr
SHAREHOLDING PATTERN
PRICE CHART
Unique business model, prime source of competitive advantage: PI Industries (PI), a leading
agro-chemical company, has a differentiated business model with focus on the fast-growing
custom synthesis and manufacturing (CSM) business, which contributes 60% of its revenues.
Its strong research base and manufacturing practices make it a preferred outsourcing partner
for the global chemical players for their innovative and patented products. Given its track
record and established relations with global players, the company is able to introduce
innovative agro-chemicals (which contribute 40% of the revenues) in the domestic market
through the in-licencing of molecules. It has in its kitty blockbuster products like Nominee
Gold and Osheen in association with MNCs.
Capacity addition to help sustain growth momentum in the CSM business: The CSM
business remains the differentiating force that will help it achieve a higher growth with a
continuous improvement in the margins in the coming years. To sustain the growth
momentum, the company has expanded its manufacturing capacity in Jambusar at a cost
of Rs300 crore and the new capacity would be commissioned in H2FY2016. After the
expansion PI would be able to improve its revenue mix in favour of the relatively highmargin CSM business. The capacity expansion would also have a favourable impact on its
return ratios. On the agro-chemical front, the company is concentrating on a few niche
products which have the ability to become blockbusters in future. It has only 25-30 products
in the market (vs the other agro-chemical companies, which have 80-100 products) and
plans to launch two new products every year which will help it to increase its market share.
Earnings to grow at 24% CAGR over FY2015-18, balance sheet to be deleveraged by FY2017:
The commissioning of the Jambusar facility and the launch of new products in the agrochemical segment will help the company to achieve a revenue CAGR of around 17% and
earnings CAGR of around 24% over FY2015-18. On the other hand, the margins are expected
to improve by 225BPS over the next three years. On the balance sheet front, the company is
expected to become debt-free by FY2017 on account of strong cash flow from operations.
The return ratios, among the best in the industry, will remain strong at RoCE of around 36%
and RoE of around 28%. With a major capex behind it, the company will generate strong
free cash flows, so theres room to increase the dividend pay-out from 15% currently.
A differentiated business model and compounding growth story: PI has a unique business
model, strong relationship with global innovators, good revenue visibility in the CSM
business and a well-spread distribution network, making it a compelling investment case.
PI is one of the few agro-chemical companies that have a unique business model and are an
example to the other chemical companies. On the valuation front, PI continues to attract a
premium valuation over the other agro-chemical companies on account of its unique business
model, strong visibility of earnings, robust balance sheet (to be debt-free by FY2017),
impressive return ratios with strong free cash flows and excellent management. Currently,
PI trades at PE of 23.2x FY2017E and 19.2x FY2018E earnings. We have valued the
company at 25x FY2018E earnings. We initiate coverage on PI with a Buy recommendation
and price target of Rs800.
VALUATIONS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
-3.9
-2.3
-3.9
12m
30.6
Relative
to Sensex
-2.9
-0.7
-0.1
35.2
Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article.
Particulars
Net sales (Rs cr)
EBIDTA (Rs cr)
Adj. PAT (Rs cr)
EBIDTA margin (%)
PAT margin (%)
EPS (Rs)
P/E (x)
RoCE (%)
RoE (%)
Debt/Equity
FY2014
1,595.0
285.6
183.7
17.9
11.5
13.6
44.8
33.1
30.1
0.2
FY2015
1,939.7
369.9
224.8
19.1
11.6
16.7
36.6
34.7
28.3
0.2
FY2016E
2,225.0
449.8
286.9
20.2
12.9
21.3
28.7
33.9
28.2
0.1
*FY2015 includes consolidation of Satyam Cineplexes, which will affect the overall profitability
FY2017E
2,613.4
541.3
354.9
20.7
13.6
26.3
23.2
35.2
27.5
0.0
FY2018E
3,090.1
658.9
428.9
21.3
13.9
31.8
19.2
36.1
26.2
0.0
Source: Company and Sharekhan Research
For detailed report, please visit the Research section of our website, sharekhan.com.
January 2016
18
EQUITY
STOCK UPDATE
FUNDAMENTALS
ADITYA BIRLA NUVO
BUY
CMP: RS2,073
DECEMBER 4, 2015
Sun Life ups its stake in Birla Sun Life Insurance;
maintain Buy
COMPANY DETAILS
Price target:
Rs2,500
Market cap:
Rs26,971 cr
52 week high/low:
Rs1,519/2,340
NSE volume (no. of shares):
1.4 lakh
BSE code:
500303
NSE code:
ABIRLANUVO
Sharekhan code:
ABIRLANUVO
Free float (no. of shares):
5.6 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
2.3
6.5
19.7
12m
19.4
Relative to Sensex
4.2
4.3
26.0
28.4

Event update: Sun Life Financial (Sun Life), which partners and holds 26% stake in Aditya
Birla Nuvo Ltd (ABNL)s insurance arm, Birla Sun Life Insurance, has agreed to increase its
stake in the insurance company from 26% to 49% (acquiring additional 23% stake) at an
investment of Rs1,664 crore. ABNL will continue to hold a controlling stake at 51%.
Broad contours of the deal: (a) The deal value of Rs1,664 crore for a 23% stake leads
to valuing the insurance arm at Rs7,235 crore, resulting in 2.2x its FY2015 embedded
value. The deal value is higher than our valuation of the insurance business wherein we
had attached Rs5,500 crore for the insurance business. The increase in stake by Sun
Life testifies the franchisee strength of the business coupled with general attractiveness
of the Indian insurance business. The money raised would be utilised to pay off the
debt and deliver the balance sheet of ABNL.
Maintain Buy with an unchanged price target of Rs2,500: Despite incorporating the
deal (insurance being valued at Rs7,235 crore, higher than our valuation of Rs5,500
crore), we have maintained our price target on the stock of the company as we
downgraded the telecom business (now valued at 7x its FY2017E EV/EBITDA as against
7.5x earlier) due to increasing competitive intensity in the telecom space in the wake of
the impending launch of Reliance Jio and Idea Cellulars aggression towards higher
spending to build its data capability that would have a negative effect on its balance
sheet. Thus, cumulatively our price target remains unchanged at Rs2,500. We have
also maintained our Buy rating on the stock.
AUROBINDO PHARMA
BUY
CMP: RS804
DECEMBER 10, 2015
Strong growth outlook backed by slew of product
approvals; upgrade to Buy
COMPANY DETAILS
Rs973
Market cap:
Rs46,953 cr
52 week high/low:
Rs861/491
16.04 lakh
BSE code:
524804
NSE code:
AUROPHARMA
Sharekhan code:
AUROPHARMA
26.9 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
-1.5
13.7
22.5
12m
43.0
Relative to Sensex
1.3
10.7
27.4
57.1

Event--received approval for key products: Aurobindo Pharma Ltd (APL) received USFDAs
nod for two products: (a) Eptifibatide injection (gIntegrillin); antiplatelet drug (US market
size $137 million; only Teva and Schering have approvals for this product and now APL will
be the third player) which can help APL generate around Rs90-100-crore sales (assuming
10% market share); and (b) Levonorgestrel tablet; OTC-contraceptive in the USA.
Key product approvals and launches to drive earnings: APL received 25 abbreviated new
drug application (ANDA) approvals in the year till date (the highest compared with its peers)
and important launches are scheduled in H2 (Aripiprazole, Memantine, Raloxifene, Integrilin).
Additionally, the management expects a few more big-ticket injectable approvals in H2,
thereby indicating a strong H2FY2016 performance.
EBITDA margins to expand over next 3 years: We expect its operating profit margin to
increase to 25.5% in FY2018 from 21.2% in FY2015, as APL continues to launch niche
products in the USA and as the profitability of the EU and anti-retroviral (ARV) businesses
improves.
Upgraded rating from Hold to Buy with price target of Rs973: At the current market price of
Rs804, APL trades at 23.6x its FY2016E earnings of Rs34, 18.8x its FY2017E earnings of
Rs42.8 and 14.9x its FY2018E earnings of Rs54.1. Going ahead, re-rating is expected to
happen on the back of increasing profitability, improving balance sheet and strong free cash
flow generation. Hence, we have upgraded the rating to Buy with a price target of Rs973,
valuing the stock at 18x its FY2018E earnings of Rs54.6.
Risks: (1) Delay in ANDA approvals and adverse outcome of USFDA inspection of plants; (2)
worsening of pricing environment in EU; and (3) currency fluctuations in both dollar and euro
19
January 2016
STOCK UPDATE
EQUITY
BAJAJ FINANCE
BUY
CMP: RS5,915
DECEMBER 24, 2015
Strong growth to sustain; PT revised to Rs6,500
COMPANY DETAILS
Price target:
Rs6,500
Market cap:
Rs31,723 cr
52 week high/low:
Rs5,932/3,395
0.6 lakh
BSE code:
500034
NSE code:
BAJFINANCE
Sharekhan code:
BAJFINANCE
2.27 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
10.2
17.1
19.0
75.5
Relative to Sensex
10.0
20.1
25.6
84.0
12m

Consumption trends improving: The improving consumption trend remains a key bright
spot in the economy and will drive a recovery going ahead. The retail sales in the festive
season gone by were better than expected suggesting a positive trend. Bajaj Finance is
among the key players to benefit from a strong consumption trend. The companys
overall book grew by 36% in Q2FY2016 with a strong growth coming from segments
like consumer goods, which forms 41% of the AUM. The new products like lifestyle
financing and rural financing are showing strong traction.
Falling interest rates to cushion margins, asset quality stays robust: Around 50% of the
companys borrowings are on a floating rates. Therefore, declining interest rates will ease
the borrowing costs. Going ahead, as the RBI is pushing banks for faster transmission of
rates coupled with higher borrowings from bonds will aid the margins. Despite the strong
growth, BFLs asset quality has remained amongst the best in the system. In terms of
provisioning, the company is ahead of the curve as it has already made provisioning
based on 90-day past due (DPD) basis vs 150 days mandated by the regulator.
Valuations rolled over to FY2018 estimates, maintain Buy: We expect BFL to continue
its strong growth trajectory (27% CAGR in loans over FY2015-18) led by steady
consumer demand, unique cross-selling capabilities and newer product launches. We
have shifted valuations to FY2018E book value (BV; earlier valued at the average of
FY2017E and FY2018E BV) resulting in a revised price target of Rs6,500 (3.4x its
FY2018 BV). We have maintained our Buy rating on the stock.
Key risk: So far the company has demonstrated an exceptional performance on most
counts and therefore any negative surprise on asset quality could affect the valuations.
BRITANNIA INDUSTRIES
BUY
CMP: RS2,969
DECEMBER 1, 2015
Recent correction provides good entry point;
long-term growth prospects intact
COMPANY DETAILS
Price target:
Rs3,650
Market cap:
Rs35,613 cr
52 week high/low:
Rs3,435/1,507
2.0 lakh
BSE code:
500825
NSE code:
BRITANNIA
Sharekhan code:
BRITANNIA
5.9 cr
KEY POINTS
Britannia posted a strong operating performance in H1FY2016 with a double-digit volume
growth and OPM expansion of 400BPS to 14.5%. The management is confident of
maintaining the strong performance in H2FY2016 as well, with volume growth expected to
sustain in the range of 8-10%. The margins are likely to remain strong at around 14% on the
back of benign raw material prices and benefits derived from various cost-saving initiatives.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-9.6
-0.2
15.5
78.3
Relative to Sensex
-7.8
0.0
21.6
92.9

January 2016
FUNDAMENTALS
Britannia is set to relaunch its Tiger brand in the value segment which will not only garner
market share from organised players but also position it to benefit from the eventual
implementation of the GST bill that would potentially lead to a shift in the market share
from the unorganised to organised segment. Also, the company aims to aggressively strengthen
its position in dairy products and snack segment (rusk and cakes). Lastly, the company is
currently servicing 75 countries globally, but the revenues of the international business are
just 6% of the overall revenues. Its aim is to expand the international business revenue
contribution to one-fifth of the overall revenues over the next three to four years, which will
be done through new product launches and distribution expansion in the key international
markets.
The strategies are in place which will help Britannia to maintain the double-digit revenue
growth along with a steady improvement in the OPM. The stock has corrected by 11% in
the last one month which provides a good entry point for investors. Thus, in view of the
strong growth prospects and better upside from the current level, we have maintained our
Buy recommendation on the stock with an unchanged price target of Rs3,650.
20
EQUITY
STOCK UPDATE
FUNDAMENTALS
CESC
HOLD
CMP: RS516
DECEMBER 9, 2015
Unrelated diversification to hurt valuation
multiples; downgrade to Hold
COMPANY DETAILS
Price target:
Rs580
Market cap:
Rs6,874 cr
52 week high/low:
Rs751/452
3.6 lakh
BSE code:
500084
NSE code:
CESC
Sharekhan code:
CESC
6.7 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
3.2
14.5
8.8
-19.4
Relative to Sensex
6.2
11.4
13.2
-11.4

Another investment in unrelated area; to buy IPL team: CESC through one of its stepdown subsidiary, New Rising Promoters Pvt, has won the rights and obligations to operate
the Pune franchisee of the IPL for two years. New Rising Promoters Pvt is a 100%
subsidiary of Crescent Power, in which CESC holds a 51% stake and the remaining is
held by the promoters. The company had invested earlier in unrelated areas like retail
and business process outsourcing (BPO) which was not appreciated by the minority
shareholders even then.
Management indicates zero cash outflow for IPL venture: As per media interactions, the
management has clearly stated that there would be zero financial effect or cash outflow from
CESC for the IPL venture. Also, the reason to acquire IPL rights through CESC step-down
subsidiary could be to use the strength of CESCs balance sheet to meet the bank guarantee
requirements (non-fund-based support) for the transaction. However, we view the unrelated
investments negatively. Therefore, we expect a de-rating of valuation multiples of the stock.
PT revised down and stock put on Hold: Given the bitter experience of most of the IPL
owners in the past, we believe the Street will not appreciate the move. The stock has suffered
on the valuation front in the past on account of venturing into unrelated areas; now owning
IPL team raises further risk. Though the management intends to transfer the IPL venture
from the CESC umbrella by revising the structure over time, we dont think it was prudent
in the first place to bid for an IPL team through a step-down subsidiary of the listed entity,
CESC. Therefore, we have revised down our target multiples and price target to Rs580;
consequently, we have downgraded the recommendation to Hold from Buy.
FEDERAL BANK
BUY
CMP: RS54
COMPANY DETAILS
DECEMBER 16, 2015
Valuations turn reasonable post-correction;

upgraded to Buy
Price target:
Rs75
Market cap:
Rs9,307 cr
52 week high/low:
Rs80/52
40.9 lakh
BSE code:
500469
NSE code:
FEDERALBNK
Sharekhan code:
FEDERALBNK
171.74 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.7
-12.6
-19.0
-23.8
Relative to Sensex
1.2
-10.3
-15.6
-18.3

Inexpensive valuations: The stock of Federal Bank has corrected by around 18% since our last
report (dated October 20, 2015) following a weak set of numbers in Q2FY2016. Presently, the
stock trades at 1.0x FY2017E BV, which is around 17% discount to the five-year mean valuation
(ie 1.2x). While we expect the earnings to witness a significant improvement from FY2017 onwards,
the current valuation increases the comfort and mostly factors in the concerns.
Structural initiatives positive over medium to long term: The bank took several initiatives to
improve the liability base resulting in an increased CASA ratio over the past three years (31.8% vs
27.5% in FY2012). Federal Bank is focused on prudent growth strategy with thrust on retail and
SME sectors which will augur well in the long term. Also, the increased branch expansion in nonhome markets will help to tap more business opportunities.
Asset quality to stabilise, higher tier-1 CAR adds to comfort: The performance of the retail and
SME portfolios has been satisfactory though the corporate portfolio has caused stress. Going
ahead, as the pipeline of stressed account eases, we expect its asset quality to stabilise. A higher
provision coverage (76.6%) coupled with strong capitalisation (tier-1 CAR at 14.1%) as compared
with its peers increases the comfort.
Upgrade to Buy, PT unchanged at Rs75: While Federal Banks FY2016 earnings may be affected
by higher provisioning, we expect RoE and RoA to improve to 13.2% and 1.1% respectively by
FY2017. We believe the structural initiatives taken by the management over the past two to three
years should strengthen the banks performance. We have, therefore, upgraded the rating to Buy
with an unchanged price target of Rs75 (1.4x its FY2017E BV).
Key risk: If the performance of corporate portfolio deteriorates it could affect the asset quality and
earnings.
21
January 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
FIRSTSOURCE SOLUTIONS
BUY
CMP: RS43
DECEMBER 2, 2015
Earnings outperformance to drive re-rating;
PT revised to Rs52
COMPANY DETAILS
Price target:
Rs52
Market cap:
Rs2,906 cr
52 week high/low:
Rs45/25
KEY POINTS
19.43 lakh
On a strong footing to deliver superior earnings in FY2017: Backed by strong deal conversion
BSE code:
532809
NSE code:
FSL
Sharekhan code:
FSL
29.6 cr
(around $500 million worth deals in the pipeline) coupled with the recent lift-out deal win from
a UK commercial bank for a value of $110 million and improved prospects in payer side of the
business, Firstsource Solutions Ltd (FSL) is well poised to deliver strong numbers for FY2017.
The management has indicated at least 8-10% growth for FY2017 on an organic level. Further,
the management is also contemplating inorganic opportunities aggressively, so it will boost the
growth. On the margin side, the management expects the margins to improve in FY2017, led by
the absence of one-off losses in FY2016 due to (1) ramp-downs in the domestic business; (2) US
telco clients, revenue shortfall and losses; and (3) better hedging gains. The management expects
to exit FY2017 with a margin of around 14%. Further, it expects to be comfortably net cash
positive by the end of FY2017 and cash generation to improve in Q3 and Q4FY2016.
Q3FY2016 to be strong quarter: FSL delivered strong numbers for Q2FY2016 after several
quarters of lacklustre earnings. It is likely to deliver another strong quarter for Q3FY2016 with
a top line growth of close to 5%. The margins are also expected to improve QoQ. We expect
FSL to exit Q4FY2016 with a revenue run rate of $135 million, which will set the stage for at
least $540-550 million revenues for FY2017.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
40.1
61.9
45.5
12m
30.3
Relative to Sensex
42.6
58.7
53.1
40.2

BUY
Price target:
Rs1,460
Market cap:
Rs43,248 cr
52 week high/low:
Rs1,457/830
2.03 lakh
BSE code:
532424
NSE code:
GODREJCP
Sharekhan code:
GODREJCP
12.5 cr
CMP: RS1,270
DECEMBER 14, 2015
H2 to remain stable; near-term growth
levers are in place
KEY POINTS
PRICE PERFORMANCE
1m
3m
6m
12m
Absolute
-5.8
5.0
9.6
23.1
Relative to Sensex
-3.2
2.2
14.0
35.2

January 2016
GODREJ CONSUMER PRODUCTS
COMPANY DETAILS
(%)
Maintain Buy with a revised price target of Rs52: In our Stock Update note dated September 16,
2015, we had upgraded our rating from Hold to Buy. We had highlighted that the worst is over
for the company and we expected a gradual re-rating in the stock with an improvement in the
earnings performance from Q2FY2016 onwards. Since then, the stock has delivered close to
60% returns. Now, after our recent conversation with the management, we expect the earnings
momentum to gather steam and FSL to deliver much higher numbers than the current consensus
estimate. We have also increased our earnings estimates for FY2017 and consequently increased
our price target to Rs52. We have maintained our Buy rating on the stock.
H2FY2016 PAT growth to stay ahead of revenue growth: With no change in the demand
environment, the revenue growth will remain in line with the growth in the earlier
quarters. However, the management expects the growth across various domestic
segments to stay ahead of the category growth on the back of a strong product portfolio
and extensive promotional offerings. On the international front, the Latin American
and African businesses will continue to post a double-digit revenue growth and better
margins in H2. Overall, the operating profit margins are expected to remain high due
to a benign input cost. Thus, the PAT growth is expected to stay ahead of the revenue
growth in the coming quarters.
HI and hair colour segments to drive growth in near term: The HI and hair colour businesses
remain the key pillars of growth with low penetration levels in the rural as well as urban
markets. Some of the recent launches by GCPL, such as Good Knight Fast Card (reached
Rs100 crore of revenues in less than one year) and Godrej Expert Crme (became the
highest selling crme colour within 20 months of launch). Both the segments are expected
to grow in the range of 15-18% and drive the overall margins in the near to medium term
(consolidated OPM to stay in the range of 18-18.5% over the next two years).
Better pick in FMCG space; retain Buy: With innovations remaining the core of the
business strategy and focus on enhancing distribution reach from the current 4.5 million
outlets, GCPL is well poised to achieve a revenue and PAT growth of 16% and 22%
respectively over FY2015-18. Thus, we have retained GCPL as one of our top picks in
the mid-cap FMCG space. We have also maintained our Buy recommendation on the
stock with an unchanged price target of Rs1,460.
22
EQUITY
STOCK UPDATE
FUNDAMENTALS
HOUSING DEVELOPMENT FINANCE CORPORATION
BUY
CMP: RS1,171
DECEMBER 8, 2015
Risk-reward turns favourable after recent
correction; upgraded to Buy
COMPANY DETAILS
Price target:
Rs1,400
Market cap:
Rs1,84,869cr
52 week high/low:
Rs1,400/1,062
KEY POINTS
25.6 lakh
Healthy growth in individual loans, signs of revival in non-individual book: According to the
BSE code:
500010
NSE code:
HDFC
Sharekhan code:
HDFC
157.77 cr
management of HDFC, the high-margin non-individual loans (29.1% of loan book) have shown some
signs of recovery over the past couple of quarters (8% YoY). Even as the company remains conservative
on developer loans, it expects growth to be much better over the next three to four quarters. On the
other hand, the individual loans continue to report a healthy growth of 23% (in Q2FY2016) including
the loans sold.
Margin pressure in near term, asset quality to remain stable: Given the reduction in lending rates both
on individual and non-individual loans, the margins have dropped (calculated). While pressure on the
margins persist in the near term the pick-up in non-developer loans and dip in the cost of funds may
support the margins over the next three to four quarters. Due to secured lending and stringent credit
practices, we expect the asset quality and credit cost to remain stable.
Upgraded to Buy as risk-reward ratio turns favourable after recent correction: The stock of HDFC has
corrected by almost 12% since our report dated October 26, 2015, which suggests that the concerns
related to margins have been factored in. In addition, the management commentary suggests that
growth in the non-individual book will be much better over the next three to four quarters which will
support spreads and profitability. We, therefore, have upgraded the rating to Buy (SOTP-based price
target unchanged at Rs1,400). Presently, the stock is trading at 4.6x its FY2017E book value (standalone), which is premium to the other housing finance companies due to its superior operating metrics.
Risk to our call: (1) Further weakening of sentiment in the housing sector; and (2) irrational competition
by financiers could affect earnings growth..
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
-1.7
2.6
-0.4
12m
7.4
Relative to Sensex
1.1
-0.2
3.6
18.0

MARICO
HOLD
CMP: RS462
COMPANY DETAILS
Price target:
Rs480
Market cap:
Rs29,798 cr
52 week high/low:
Rs468/316
6.7 lakh
BSE code:
480010
NSE code:
MARICO
Sharekhan code:
MARICO
26.0 cr
DECEMBER 21, 2015
Positives priced in current valuations; downgraded to

Hold with revised PT of Rs480
KEY POINTS
The copra prices have maintained their declining trend and are down by more than
25% on a Y-o-Y basis which should help Marico to maintain its strong operating
profit margins in H2FY2016. The price cut undertaken in Parachute portfolio should
help the rigid packs volume growth to sustain in the range of 6-8% while Saffola
edible oils volume growth is likely to improve on the back of several initiatives
undertaken in recent times. The management is confident of Saffola edible oil getting
back into double-digit growth trajectory of 15-17% in the next two to three quarters.
The food products (including oats) are expected to contribute Rs200 crore over the
next two years.
On the international front, the Middle East is clocking a good revenue growth while
Egypt is likely to get into the positive growth trajectory due to distribution transition.
Overall, Maricos revenues and earnings are expected to grow at a compounded annual
growth rate of 13% and 20% respectively over FY2015-18.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
8.5
12.8
8.1
39.7
Relative to Sensex
8.4
15.7
14.1
46.4

The company has announced a bonus issue of 1:1 and at ex date of December 22, 2015
the stock is trading at ex bonus.
However, the recent surge of 16% in the stock price has already been factored in the
near term positives. Hence, we recommend a Hold rating on the stock with a rolledover price target of Rs240.
23
January 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
MARUTI SUZUKI INDIA
BUY
CMP: RS4,620
DECEMBER 18, 2015
Gujarat plant receives green signal;
maintain Buy with a revised PT of Rs5,400
COMPANY DETAILS
Price target:
Rs5,400
Market cap:
Rs139,569 cr
52 week high/low:
Rs4,763/3,274
KEY POINTS
3.1 lakh
BSE code:
532500
NSE code:
MARUTI
Sharekhan code:
MARUTI
13.2 cr
Maruti receives minority shareholders approval for the Gujarat plant proposal: Maruti
Suzuki India Ltd (Maruti) has received more than 50% minority shareholders approval
for the proposal of setting up the Gujarat plant as a direct subsidiary of its parent, ie
Suzuki Motor Corporation (SMC). The company received 89.75% votes in favour of
the proposal while 10.25% votes were against it. The shareholders approval was
expected as FIIs with 22% holding were likely to vote in favour of the deal after
international advisory firms had backed it.
SMG to set up the Gujarat plant: Suzuki Motor Gujarat Pvt Ltd (SMG), a 100%
subsidiary of SMC, would set up the Gujarat plant as a contract manufacturer for
Maruti. The sale to Maruti would be on no profit-no loss basis, ie SMG would not
charge a manufacturing margin on the sale. The Gujarat plants construction is already
in process and the plant would be ready by CY2017. The plant would have an initial
capacity of 2.5 lakh vehicles per annum which will be further expandable to 15 lakh
vehicles in six phases. With the cash flow freed, Maruti would be making significant
investment in network expansion.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.6
6.1
22.6
40.4
Relative to Sensex
0.4
7.8
27.5
45.4

Overhang on the stock gone; maintain Buy with a revised PT of Rs5,400: Clarity on the
Gujarat plant and minority shareholders approval were an overhang on the stock which
are now out of the way. The proposal will benefit Maruti as it would boost free cash flows
and return ratios. We have raised our earnings estimate by 3% to factor in the excellent
response to the Baleno and shift in mix in favour of petrol models which will benefit
Maruti. We remain positive on the stock and reiterate our Buy rating with a revised price
target of Rs5,400 (earlier Rs4,950), discounting FY2018E earnings at 20x.
OIL INDIA
HOLD
CMP: RS365
DECEMBER 15, 2015
Crude slide to dent earnings; downgraded to Hold
COMPANY DETAILS
Price target:
Rs400
Market cap:
Rs21,941 cr
KEY POINTS
52 week high/low:
Rs592/342
5.6 lakh
BSE code:
533106
NSE code:
OIL
Sharekhan code:
OIL
19.4 cr
Oil Indias financials to deteriorate on further fall in crude oil prices: The global crude
oil prices have slipped further and touched $35 per barrel, which is closer to the cost of
production for Oil India Ltd (OIL). We believe it is an unprecedented challenge for
OIL, as the company could manage to be barely profitable at operating level with such
low crude level. This could force the company to be selective in production activity in
such an environment. OIL would also have limited surplus to invest in exploration and
monetisation of its oil and gas assets.
Pressure intensified on crude price touching decades low: In the latest meeting of OPEC
the members removed their production ceiling thus putting pressure on oil price. OPEC has
been pumping oil at 31.76mbpd, higher than 30mbpd decided in June 2015. Consequently,
the global Brent crude prices tumbled down further and touched a decade-low level. Given
the supply glut and the unfavourable relation between the crude oil producing economies,
the consensus expects crude oil prices to remain soft in the near future.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.4
-15.8
-20.0
-29.8
Relative to Sensex
1.4
-13.6
-16.6
-24.8

January 2016
Unprecedented uncertainty; downgraded from Buy to Hold: Given crude oil prices seesaw with the cost of production, OIL is likely to find it challenging to remain
operationally profitable in case crude oil slips further. Moreover, the benchmark
international natural gas prices are also declining, which would lead to a cut in natural
gas price in April 2016. Given the situation, we cut our earnings estimate for FY2017
by 17% after factoring in the average US crude oil price of $42. We also run a sensitivity
analysis to understand the potential effect of the same on OILs earnings. Therefore,
we are downgrading the stock to Hold with a revised price target of Rs400.
24
EQUITY
STOCK UPDATE
FUNDAMENTALS
RICO AUTO INDUSTRIES
BUY
CMP: RS42
DECEMBER 9, 2015
Maintain Buy with unchanged PT of Rs58
COMPANY DETAILS
Price target:
Rs58
Market cap:
Rs565 cr
52 week high/low:
Rs64/36
7.7 lakh
BSE code:
520008
NSE code:
RICOAUTO
Sharekhan code:
RICOAUTO
67.5 cr
KEY POINTS
Media carrying reports of excise department notice to Rico: As per a recently published
media report, the excise department has sent a notice to Rico Auto Industries (Rico) and
other auto ancillary players pertaining to excise duty applicable on retrospective price
increases taken on the contracts with original equipment manufacturers (OEMs). Auto
ancillary players enter into contracts with OEMs for supply of parts and the pricing is
linked to commodity prices which are reset at periodic intervals. The excise department
has also imposed an additional interest and penalty of 18%. In an interaction with us,
the management stated that it is yet to receive any such notice from the excise department.
Notices are part of routine operations; no significant effect expected: From our
understanding, such notices are part of routine operations for companies. Companies
have an option of appealing against the notice to the Custom Excise and Service Tax
Appellate Tribunal. In case of an unfavourable response, they can take further legal
recourse. In case Rico receives such a notice it would not affect the daily operations of
the company. Further, the impact on the financials, if any, would not be immediate
and is expected to be minimal.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
6.0
6.0
20.6
12m
1.0
Relative to Sensex
9.1
3.2
25.5
11.0

Maintain Buy with unchanged price target of Rs58: We have maintained our earnings
estimates for FY2016-17. Rico has reported a marked improvement in its operating
performance over the last couple of quarters driven by the managements focus to
improve efficiency and restructuring of the loss-making entities. The interest expense
has also dropped significantly as the company de-leveraged its balance sheet from the
proceeds of the FCC Rico stake sale. We remain positive on the stock with a Buy rating
and an unchanged price target of Rs58..
SUN PHARMACEUTICAL INDUSTRIES
BUY
CMP: RS754
Halol receives warning letter;

PT downgraded to Rs885
COMPANY DETAILS
Price target:
Rs885
Market cap:
Rs181,672 cr
52 week high/low:
Rs1,201/706
39.2 lakh
BSE code:
524715
NSE code:
SUNPHARMA
Sharekhan code:
SUNPHARMA
109 cr
DECEMBER 21, 2015
KEY POINTS
Event--USFDA nod for 180-day exclusivity for generic Gleevec: Sun Pharmaceutical
Industries (Sun Pharma) has received the final approval from the USFDA to market
gGleevec with 180-day exclusivity for the US market. Currently, the product has a
market size of $2.5 billion in the USA. Gleevec is used to treat chronic myeloid leukemia
(cancer). Under the terms of settlement agreement with Novartis, the Sun Pharma
subsidiary is permitted to launch its version of generic Gleevec in the USA on February
1, 2016. The commercial launch of this product is scheduled on February 1, 2016.
Impact; factored in our estimates: According to our estimates, we have already factored
the incremental revenues of around $650 million from Gleevec to Sun Pharma, spread
over FY2016 ($80 million in two months of exclusivity), FY2017 ($400 million from
four months of exclusivity and eight months of non-exclusivity) and FY2018 (around
$170-180 million). The estimates are based on significant price erosion of 60-75%
over the period after the six-month exclusivity period.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
4.8
-12.4
-7.4
-2.4
Relative to Sensex
4.7
-10.2
-2.2
2.3

Retain Buy with price target of Rs950: We view this development as very positive as it
is a new approval for the blockbuster drug given by the USFDA after the issues raised
at its Halol plant. Also, the outcome of Halol plant inspection is due anytime since its
been almost a year the site received 483s observations; the Halol plant resolution
could act as the next big trigger for the stock. We have maintained our Buy rating on
the stock with an unchanged price target of Rs950.
25
January 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
SUPREME INDUSTRIES
HOLD
CMP: RS642
DECEMBER 11, 2015
Falling input cost raises near-term concerns but
improves volume growth outlook
COMPANY DETAILS
Price target:
Rs700
Market cap:
Rs8,153 cr
52 week high/low:
Rs745/540
KEY POINTS
50,790
BSE code:
509930
NSE code:
SUPREMEIND
Sharekhan code:
SUPREMEIND
6.4 cr
Fall in polymer prices to hurt Q2 performance: Supreme Industries is expected to witness

a muted growth in Q2FY2016 revenue (similar to Q1FY2016) due to a further decline
in major polymer prices in the first two months of Q2FY2016. Polymers have seen a
fall of 2-8% in prices over the past two months on a sequential basis (16-30% on a
yearly basis). Moreover, the declining raw material price could also result in inventory
loss (provisions to bring down the value of inventory), thereby affecting the performance
in the coming quarters.
Improving volume growth outlook: The volume offtake is expected to be robust as the
benign pricing environment is slightly tilting the plastic industry in favour of the
organised players as the unorganised players using scrap/recycled polymers arent
witnessing a corresponding fall in input prices. Led by a robust demand in PVC piping
business, we are expecting an overall volume growth of 15-16% YoY in Q2FY2016
and the nine-month period of FY2016.
Estimates fine-tuned: To factor in the effect of a declining pricing environment and the
changes in its accounting year-end from June to March from the current fiscal, we are
revising our earnings estimates for FY2016 and FY2017. We are also introducing our
FY2018 estimates in this note and rolling over the price target on the average earnings
of FY2017 and FY2018.
Retain Hold: Overall, we expect the revenues and earnings to grow at an adjusted
CAGR of 16% and 17% respectively over FY2015-18. While we remain positive on its
long-term structural story, looking at the near-term headwinds, we retain our rating to
Hold with an unchanged price target of Rs700 (target multiple of 20x).
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
6.3
13.5
0.6
12m
6.3
Relative to Sensex
9.3
10.5
4.7
16.8

TATA CONSULTANCY SERVICES
BUY
CMP: RS2,377
DECEMBER 14, 2015
Chennai deluge adds to growth concerns;
maintain Buy with PT revised to Rs2,850
COMPANY DETAILS
Price target:
Rs2,850
Market cap:
Rs465,590 cr
52 week high/low:
Rs2,810/2,317
11.07 lakh
BSE code:
532540
NSE code:
TCS
Sharekhan code:
TCS
51.2 cr
KEY POINTS
Material impact on Q3FY2016 earnings, owing to Chennai flood: Tata Consultancy Services
(TCS) management has announced that owing to the recent floods in Chennai, there will be a
material effect on the revenue growth in Q3FY2016. Chennai has one of the largest facilities of
TCS in India with over 65,000 headcounts. Due to the flood situation all work had been halted for
a week from December 1, 2015. Though the company resumed its normal business operations
from December 7, 2015, yet owing to the flood the attendance rates were lower than normal as
employees were still recovering from the floods aftermath. With around 20% of TCS total
headcounts getting affected for one week, there will be some effect on the Q3FY2016 revenue
numbers. The third quarter is seasonally weak with lower numbers of working days and furloughs.
Directionally lower exit rate (Q4 growth) results in earnings downgrade for FY2017: For TCS,
FY2016 is likely to be a soft year, owing to several factors: (1) slow ramp-up in retail vertical and
continued softness in Diligenta (insurance) business; and (2) lower growth in Latin Americas with
region affected by collapse of commodity prices. These reasons could pull down the consolidated
revenues by $20-25 million in FY2016 without accounting for a further dent from the Chennai
deluge situation. Thus, we estimate the constant-currency growth in high single digits only in
FY2016 and subsequently also affect revenue and earnings for FY2017.
Maintain Buy with a revised PT of Rs2,850: We have revised down our dollar revenue estimates
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-7.4
-8.5
-9.6
-8.6
Relative to Sensex
-4.8
-10.9
-5.9
0.4

January 2016
for FY2016 and FY2017 but the overall earnings effect was partially negated by the currency
reset to Rs65.5 and Rs65 for FY2016 and FY2017 vs Rs64.5 and Rs64 earlier respectively. The
earnings downgrade was to the tune of 1.2% each for FY2016 and FY2017. We remain positive
on TCS, given its strong positioning, scale advantage and head start in the digital technologies
space (the highest among the top Indian IT companies). But the revenue growth convergence
with Infosys will affect the premium valuation of TCS (already seen de-rating, trades at 17.6x its
FY2017E earnings). We have introduced our FY2018E earnings in this note, revised down our
price target
to Rs2,850
and
maintained
our Buysection
ratingofon
stock.
For detailed
report,
please
visit the Research
ourthe
website,
sharekhan.com.
26
EQUITY
STOCK UPDATE
FUNDAMENTALS
V-GUARD INDUSTRIES
BUY
CMP: RS930
DECEMBER 10, 2015
Inorganic expansion and better product folio
key growth drivers
COMPANY DETAILS
Price target:
Rs1,155
Market cap:
Rs2,787 cr
52 week high/low:
Rs1,197/810
KEY POINTS
9.5 lakh
BSE code:
532953
NSE code:
VGUARD
Sharekhan code:
VGUARD
1.0 cr
Scouting for acquisition and expansion to deepen non-south presence: After successfully
expanding its non-south base, V-Guard Industries (V-Guard) is looking out for inorganic
opportunities to expedite its expansion in regions other than south. Along with a better
geographical reach, the idea is also to look at enhancing its product portfolios especially
in the home & kitchen appliances segment. The managements preferred acquisition
target is around Rs100-200 crore; however given a meaningful and attractive
opportunity, it can also go for an acquisition of Rs400-500 crore.
Virtually debt-free and sustained cash flow to support inorganic ambition: V-Guard
aims to be debt-free by the end of the year (currently total debt of around Rs30 crore)
backed by sustainable cash flows. Therefore, acquisition in the range of Rs100-200
crore could be comfortably done by the company by adding debt on books. However,
if the acquisition target expands to Rs400-500 crore, then we believe its debt-equity
ratio will be relatively on the higher side and may require some equity dilution.
Acquisition valuation to be watched out; retain Buy: Though the proposal to expand
through the inorganic route by leveraging its balance sheet is a step in the right direction,
it is essential that the acquisitions are done at reasonable valuations. The management
sees equity dilution as expensive. Therefore, acquisitions through debt would be the
most preferred route. We believe it would be prudent to strike a right balance of debt
without much stress on the balance sheet and to bring value by expanding product
folio to make the inorganic growth plan fruitful. We have retained our Buy
recommendation on the stock with an unchanged price target of Rs1,155.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
5.2
2.3
6.2
-17.2
Relative to Sensex
8.2
-0.4
10.5
-9.0

SHAREKHAN SPECIAL
Q3FY2016 earnings preview
JANUARY 08, 2016
Earnings growth to improve gradually: Compared with the declining

earnings growth over the past four quarters, the Q3FY2016 earnings
for the Sensex companies may grow at 2.5% on an aggregate basis.
However, excluding the global cyclicals (Tata Motors and metal
companies) the earnings growth is expected to be decent at 8.2%
(vs 6.8% in Q2FY2016 and 5.7% in Q1FY2016), suggesting a
better trend in the domestic demand-based sectors. In addition, a
lower base in Q3FY2015 (due to inventory losses, currency impact,
one-offs) could favour the earnings over the next couple of quarters.
The sectors like energy and private banks, and Reliance Industries
Ltd (RIL) are expected to report a double-digit growth whereas
power and global-demand based sectors like metals may drag the
overall earnings outlook.
due to weakness in commodity prices (metal companies, RIL etc).
EBITDA margins to expand, revenue growth to remain weak: In

line with the trend seen in the past few quarters the operating profit
margin (OPM) may show an improvement on a year-on-year (Y-oY) basis due to a lower input cost. For the Sensex companies we
expect the EBITDA margin (ex bank and energy companies) to
expand by ~100 basis points (BPS) year on year (YoY; 60BPS quarter
on quarter [QoQ]) to 18.8 % levels. The export-oriented sectors
may continue to witness margin pressures. The revenue growth
may remain in negative zone (down 1.5% on an aggregate basis)
Valuation: Even after a spate of earnings downgrades over the past

eight to nine months, the Sensex is trading at 14.5x FY2017E
earnings (marginally lower than the long-term average) which is
reasonable. On a relative basis too, the valuations are comfortable
as Indias valuation premium over MSCI Emerging Market Index
is is close to its mean.
Outlook: Though the overall earnings of the Sensex companies is

expected to be tepid in FY2016 also (similar to the trend in FY2015),
the consensus is still pinning hopes on a material revival in the
growth rates in FY2017. According to Bloomberg, the consensus
estimate for Sensex earnings growth stands at 19% for FY2017.
Though there is a risk of further downgrade in the FY2017 earnings
estimates (especially if the global situation deteriorates), we believe
that a double-digit earnings growth is achievable on the back of a
consumption stimulus (Seventh Pay Commission hikes + One rank,
one pension scheme), revival of agriculture output (after two
consecutive years of drought) and public spending in certain pockets
of the infrastructure segment.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or
having a postition in the companies mentioned in the article.
27
January 2016
VIEWPOINT
ZEE LEARN
VIEW: EXIT
EQUITY
CMP: RS42.7
Exit with a gain of 19%
FUNDAMENTALS
VIEWPOINT
DECEMBER 3, 2015
Key points
Earnings performance lagging our expectations: Our investment

rationale for the stock of Zee Learn Ltd (ZLL) was based on the
possibilities of a sustainable turnaround and growth potential
in the ZLL bottom line in the next three years. However, looking
at the recent quarterly performance, the numbers were way
below our expectations. For Q2FY2016, though the revenues
were higher by 35% YoY at Rs30.7 crore, OPM was down by
460BPS and net profit was down by 5% YoY to Rs1.08 crore.
23-25% in the next five years); (3) cost rationalisation in the

loss-making vocational training segment (ZICA and ZIMA) and
also lower emphasis on Brain Cafe (strategic JV with Gakken
Education Co) will see losses minimise in FY2016-17. However,
looking at the quarterly performance in recent times, we expect
a delay in the earnings acceleration over FY2016-17.
Expect delay in earnings acceleration: Our investment rationale

was based on the managements four-point plan to improve its
bottom line performance: (1) ZLLs investment in pre-school
segment (70% of revenues, expect OPM to improve to 40% in
the next five years); (2) significant number of K-12 school
properties are maturing (18% of revenues, expect OPM to touch
Exit with 19% gains from our recommended price: We had

initiated our Viewpoint report on ZLL on July 7, 2014 with a
positive view at a price level of Rs36. Given the delay in earnings
acceleration and that the company is lagging our growth
expectations, we recommend investors to exit from the stock at
the current price level of Rs42.7 with a gain of 19% from our
initiation level.
NOCIL
VIEWPOINT
CMP: RS62
VIEW: BOOK PROFIT
DECEMBER 16, 2015
Fairly valued post-recent appreciation; Book profit with gains of 25.5%
Key points
Handsome gain, stock appreciated by 25.5%: Since our

Viewpoint on July 10, 2015, the stock of NOCIL has appreciated
by 25.5% in the last five months in spite of the volatility in the
equity markets. Thus, the stock has handsomely outperformed
the benchmark indices.
Fairly valued for a commodity player: Our positive stance was

based on improving outlook for rubber chemicals business after
anti-dumping duty. Also, the company is expected to benefit
from its timely expansion at Dahej to manufacture intermediate
products. The effect of the positive factors is clearly visible in
the strong earnings growth reported in Q2 and H1 of the current

fiscal. However, after the appreciation, the stock trades at close
to 12x its FY2017E earnings which is not cheap for its
commoditised business. Thus, we see limited upside in near term
and recommend booking profit at the current level.
Key risk: Further improvement in margins from the current level

of 17% reported in H1FY2016 could result in a higher than
expected growth in the earnings and subsequent re-rating of the
stock.
January 2016
28
EQUITY
VIEWPOINT
FUNDAMENTALS
HAVELLS
VIEW: POSITIVE
CMP: RS308
Sylvania gone; lights on
VIEWPOINT
DECEMBER 18, 2015
Key points
Sylvania pain eliminated; divestment to strengthen balance sheet

and improve margins: Havells has proposed to divest 80% stake
in Sylvania (the subsidiary was a major pain point for Havells)
and Havells Exim. Therefore, the overhang will go away. Thus,
we expect the overall financials of the company to improve.
The deal will not only strengthen its balance sheet, but also add
value to the bottom line and lift the return ratios.
Best play on domestic electrical and appliances space: Havells is

a leader in the domestic market in most of its product categories
(switchgear, cables, fans and lighting & fixtures) as well as is
expanding its product portfolio (air cooler) especially in the
appliances space. Along with its wide distribution network and
strong brand recall, the company is making efforts to dwell
deeper in the distribution channel by directly connecting with
retail and electricians networks.
High quality business; reflecting in impressive financials: Havells

in our view is one of the deserving high quality names. Apart
from the track record of scaling up and brand building, the
quality of its management is also reflected in its financials. We
like it for consistently generating free cash flow and paying high
dividend.
View and valuation-deserves a quality premium: The stock is

trading at 30x FY2017 earnings. Havells is a deserving high
quality stock, backed by a strong management and impressive
financials. Though currently the domestic business is moving at
a modest pace, we expect urban consumption to rise in future
and Havells is well positioned to captalise on it. Moreover, the
Sylvania divestment would help to get over the past overhang
and reflect positively on the return ratios and valuations.
Therefore, we expect 15-20% returns from this stock in the
next six to nine months.
ROSSELL INDIA
VIEWPOINT
CMP: RS162
VIEW: BOOK PROFIT
DECEMBER 30, 2015
Risk-reward ratio unfavourable after recent appreciation; Book profit
Key points
Handsome gains; stock appreciated by 25%: Since our Viewpoint

on April 13, 2015, the stock of Rossell India has posted
handsome returns of 25% in the last nine months. In a volatile
market environment, the stock has outperformed the major
indices.
Declining tea supply from Kenya positive for Indian tea

producers: The drought in Kenya (the largest tea exporter
globally) has affected the tea production in the country which
has led to an increase in the Kenyan tea prices. The increase in
Kenyan tea prices should fetch better realisation for Indian tea
producers in the upcoming tea season (starting from MarchApril 2016), as domestic tea prices are expected to move up in
line with international tea prices. Also, the tea exports from
India are expected to increase due to the short supply from the
Kenyan market. Rossell India (tea contributes 85% of the
consolidated revenues) will be one of the key beneficiaries of
rising tea prices in the domestic and international markets, as it
will help to improve the profitability of the tea business in the

backdrop of stable tea production in FY2017. However, in the
event of a significant Y-o-Y decline in tea production in India,
the likely benefits of higher tea prices would get moderated.
?
Defence and QSR businesses still in nascent stage: Though we

remain positive on the value creation in its defence and quickservice restaurant (QSR) businesses, it would take a few years
before these start contributing meaningfully to the consolidated
earnings. Moreover, these businesses could require infusion of
funds to scale up to a viable scale in the near term.
Near-term positive priced in; Book profit: The expected

improvements in the performance of the tea business (in FY2017)
and positives from the emerging footprints of defence and
hospitality space have been factored in the recent run-up in
Rossell Indias stock price. Thus, we see limited upside and advise
investors to Book profit at the current level.
29
January 2016
EQUITY
TREND & VIEW
TECHNICALS
In the final stages of correction

Daily view on Nifty
The Nifty seems to have completed its pull-back in wave x of

wave z down and now wave y of wave z down has ensued
which will inch towards our minimum target of 7322 levels
initially, ie the lower end of the falling channel.
9200
9100
9000
8900
8800
8700
8600
8500
The index has broken its crucial support level of 7539, which
was formed in September 2014 and December 2015. This
confirms the formation of lower tops and lower bottoms.
Hence, the downtrend shall continue.
8400
8300
8200
8100
8000
7900
7800
7700
7600
The daily momentum indicator has given a negative cross-over.
Crucial supports for the index will be around 7322 and 7100
while crucial resistance will be near 7675 and 7832.
7500
7400
7300
KST ( -1.93596)
-5
March
April
May
June
July
August
September
October
November
Dec em ber
2016
Weekly view on Nifty
The Nifty has reversed from the previous swing high of 7979
and broken its previous swing low of 7539, thereby confirming
the downtrend in the medium term. The index has been falling
in a downward sloping channel and until the series of lower
tops and lower bottoms is reversed the trend will remain bearish.
9200
9100
9000
8900
8800
8700
8600
8500
8400
8300
8200
The index is in its wave Z down. So whenever the wave gets

over it will lead to a big bull run again which will take off its
all-time high. Hence, one should not panic and exit from the
long-term portfolio.
8100
8000
7900
7800
7700
7600
7500
7400
The mid-caps and small-caps continue to outperform which

continuously indicates that the breadth of the market is quite
strong. This also indicates that the long-term bull run is intact.
7300
7200
KST (-3.44122)
5
A crucial support would be around 7100 and resistance would

be around 7979.
-5
er
2015
February March
April
May
June
July
August
September
November
2016
February
March
Monthly view on Nifty
On the monthly chart the index has broken the crucial

Hammer candlestick pattern, which is quite a negative sign
in the short term. However, as mentioned above this is the last
leg down following which we will see a fresh uptrend. Hence,
one shouldnt exit from the portfolio holdings.
The Nifty has been falling for one year now and negative news
or the panic happens at the end of the trend and not at the
beginning of any trend. However, the lower tops and lower
bottoms continue on the monthly chart. Hence, fresh
investments should not be made till we this trend reverses.
The wave Z may continue till 7100, which is the 50%
retracement of the entire rise from 5100 to 9119 levels and
thats the maximum downside risk in the index as of now.
Hence, for the final 5% down move one should wait for the
right time to enter instead of panicking. On the higher side,
8336 is a crucial resistance above which a channel will be
confirmed and that will be the final confirmation of the up
move. The short-term traders can continue to take advantage
of the volatility. A crucial support will be around 7100 and a
crucial resistance will be around 8336.
January 2016
10000
9500
0.0%
9000
8500
23.6%
8000
38.2%
7500
50.0%
7000
61.8%
6500
6000
5500
100.0%
5000
4500
KST ( -1.08899)
J A S O N D 2011
A M
J A S O
D 2012
A MJ J A S O
D 2013
A MJ J A S O
D 2014
40
35
30
25
20
15
10
5
0
-5
-10
A MJ J A S ON
2015
A MJ J A S ON
2016
A MJ J A S ON
Medium term
30
Trend
Trend reversal
Support
Resistance
Target
Down
7973
7100
7973
7100
EQUITY
MONTHLY VIEW
DERIVATIVES
Derivative View: Negative trend continues

market-wide roll-over stood at 83.41%, which is in line with the
previous months roll-over of 83.63%.
The December series witnessed significant selling pressure in the

first half of the month due to some major events that were scheduled
during the series. This led to high scepticism amongst market
participants. However, in the second half and after the rate hike by
the US Federal Reserve it showed resilience at lower levels of 7500
and slowly and steadily inched higher, resulting in a positive close
on a monthly basis. Overall, the index saw a good amount of short
build-up throughout the December series with a high roll-over of
around 75% in the Nifty with a very low roll-over cost. Hence, we
feel a majority of the short positions were carried forward to the
January series also.
Top 5 stock futures with the highest OI in current series

STOCK FUTURES (SHAREKHAN SCRIP CODE)
Foreign institutional investors (FIIs) have constantly selling in the

cash market for the last few series, mainly due to weak results from
the Indian corporates and a delay in getting the Goods and Services
Tax Bill passed in the Rajya Sabha which has made the FIIs quite
uncomfortable and raised doubts on the capability of the existing
government.
OPEN INTEREST (RS CR)
RELIANCE
2831.64
HDFCBANK
2211.85
SBIN
1908.25
AXISBANK
1747.59
LT
1643.62
Top 5 stock options with the highest OI in current series

STOCK OPTIONS (SHAREKHAN SCRIP CODE)
In the derivative segment, since the start of the January series the
FIIs participation has majorly been through index options as they
have already bought more than 7,000 crore of index options and a
majority of these are on the put side.
ROLL-OVER: MARKET-WIDE VS NIFTY
OPEN INTEREST (RS CR)
RELINFRA
672.48
SBIN
653.15
RELIANCE
458.32
TATASTEEL
431.75
TATAMOTORS
387.20
View
On the options front, in the January series the position is constantly
shifting from the higher strike price to the lower strike price which
is a negative sign for the market going forward. As of now on the
put side, the 7500 strike price stands with the highest number of
shares in open interest (OI) followed by the 7400 strike price. On
the call side, the 8000 strike price stands with the highest number
of shares in OI followed by the 7900 strike price.
The Volatility Index (India VIX) has seen a sharp jump from 13
levels to around 18 currently since the start of the January series.
The observation was interesting on the put-call ratio front. After
starting this series with a very low PCR of 0.77 and despite the
market going down since the start of the January series, we have
seen a sharp jump in the PCR to around 0.85 which is an unusual
scenario. The rise was mainly due to the buying of put options and
that too by the stronger market participants. In view of the above
data, the high roll-over of short positions and the simultaneous
buying of put options by the stronger hands, we feel the Nifty would
find it difficult to sustain at the higher levels. On the lower side,
below 7500 the Nifty could drift towards the next support level at
around 7400 in the coming trading session. Any bounce before
that level should be used to create short positions.
Roll-over highlights
The benchmark index, Nifty, started the January series with more
or less the same number of shares at around 1.95 crore shares
compared with the last series. In rupee terms, it started the new
month with open interest of Rs15,533 crore in Nifty futures vs
Rs15,436 crore in the previous series; Rs60,874 crore in stock
futures vs Rs58,530 crore in the previous series; Rs70,354 crore in
index options vs Rs77,170 crore in the previous series; and Rs5,369
crore in stock options vs Rs4,712 crore in the previous series.
The roll-overs in Nifty stood at 74.89%, which was higher compared
with the previous month (68.63%), indicating a majority of the
short positions built in the last series got carried forward. The
31
January 2016
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Commodities: Industrial commodities vulnerable on China concerns, US rate hike

Macro-economy
Key points
Chinas equities index falls 12% as the new year begins
Chinas PBOC devalues yuan by 1.42% as it fixes the reference rate
lower for eight days in a row; yuan devalued to the weakest level since
March 2011
Chinas Caixin PMI of services for December fell to its lowest in 17 months
Chinas Caixin manufacturing data shows contraction for the 10th
month in a row
China factory gauge signals a fifth month of contraction
Weaker yuan, poor macro data and end of sales ban trigger sell-off in
Chinese equities
China plans larger infrastructure fund in 2016
Global growth will be disappointing in 2016 on US rate hike and
China slowdown: IMF's Lagarde
Industrial commodities fall in new year as bullions rally on China concerns
Yen and bullion complex rally as wider market falls on China concerns
US December non-farm pay-rolls beat the forecast (200k); actual
(292k); however earnings trail the forecast
Markit UK Services PMI cools in December as confidence falls to 3year low on British exit possibility; hiring and business expectations
get affected
UK Markit Manufacturing PMI below forecast (52.7) in December vs
actual (51.9)
Euro zone economic growth likely picked up in the last quarter of 2015
North Korea says it successfully tested first hydrogen bomb; experts
doubt the claim though
Pressure on the European Central Bank as the euro zone inflation
averaged at zero in 2015
Saudi Arabia cuts diplomatic ties with Iran after violent protests over
the execution of a Shiite cleric
A measure of 20 developing nation exchange rates depreciated 15% in
2015, the steepest slide since 1997; emerging market currencies vulnerable
Bank of Japan keeps monetary policy unchanged
COMMODITY PRICES IN DECEMBER 2015 (IN $)

Commodity
High
Low
Close
Copper
4,750.0
4,513.0
4,705.0
MoM chg %
2.6
Zinc
1,636.0
1,474.0
1,609.0
2.9
Lead
1,801.0
1,604.0
1,793.0
8.9
Nickel
9,140.0
8,440.0
8,820.0
-0.9
Gold
1,088.9
1,046.4
1,061.1
-0.3
Silver
15.7
13.7
13.9
-1.6
Crude oil
43.5
35.4
37.0
-10.5
MONTHLY CHANGE IN DOE CRUDE STOCKS (NOV-DEC 2015)

Crude oil
Change in (kbls)
25th December (kbls)
Change in (%)
Dist.
Gasoline
-2015
8695
4553
487409
153110
221420
-0.41
6.02
2.10
Refinary utlization rate was 92.60% in the last week of December 2015
MONTHLY CHANGE IN SHFE STOCKS (NOV-DEC 2015)

Copper
Change (in tonne)
31st December 2015
Change (in %)
Lead
Zinc
Nickel
-9298
-1156
31492
9627
177854
12074
200428
48339
-4.97
-8.74
18.64
24.87
MONTHLY CHANGE IN LME STOCKS (NOV-DEC 2015)

Change (in tonne)
31st December 2015
Change (in %)
Copper
Lead
Zinc
Nickel
-8150
63325
-78200
32934
236225
191650
464400
441294
-3.34
49.35
-14.41
8.06
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil: Downward bias on China concerns and surplus

Key points
Crude oil plunges on supply glut, China fears
Irans relationship with Saudi Arab deteriorates on execution of Shia cleric Sheikh Nimr Baqr al-Nimr
Crude oil falls to 12-year low amid China concerns
US gasoline demand fell in holiday season in December 2015
Irans rift with Saudi Arabia could affect foreign investment
Saudi Arab considers IPO of worlds biggest producer Aramco
OPEC crude oil plunges below $30 for first time since 2004
Saudi Arabia slashes its oil prices for oil prices
China, worlds biggest commodity consumer, may buy 8% more oil from overseas in 2016: Bloomberg Survey
Crude oil
CMP: $33.64
Crude oil prices plunged by over 10% in December 2015 on a persistent glut in the market, concerns about Chinas economy and surge
in the fuel stockpiles in the USA. Although the US crude oil inventories fell 0.41% in the last month, the inventories of distillates and
gasoline rose by 6.02% and 2.10% respectively. The counter has had the worst ever start in a year as oil fell another 12% in the first
four trading days of 2016. China cut the yuan-dollar reference rates for eight consecutive days taking the yuan down 1.42% in that
period. Irans relations with Saudi Arab went sour on the latter beheading the cleric Sheikh Nimr al-Nimr, an outspoken opponent of
the ruling Al Saudi family. However, crude oil failed to get any support from this incident. Chinas equity market is tumbling. Crude
oil bulls would need a colder than normal winter and flaring of geo-political tensions in the Middle-East to find a firm ground to stand
on and take control, or else oil can fall lower to $20. The expected range in the near term is $30-37.
January 2016
32
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Bullion: Gaining ground in January as wider markets fall

Key points
Chinas growth concerns and plunging equities supporting the complex
US gold jewellery imports reach seven-year high in October 2015
The US-centric view of gold would not continue indefinitely: World Gold Council
Chinas Shanghai Gold Exchange plans to introduce a yuan-denominated gold pricing mechanism to facilitate regional market trading
Gold prices fall 11% in 2015
Gold recycling continues to fall, mine production likely to level off: WGC
Chinas PBoC bought 19 tonne of gold in December 2015
American Eagle gold bullion coin sales 52.81% higher in 2015 than in 2014
American Eagle silver bullion coins set a new all-time record for sales
Gold
CMP: $1,097 (spot)
Gold price was slightly lower in December 2015 as the metal fell for the third year in a row. In 2015 it fell nearly 11%. However, gold has started
the New Year on a positive note as bulls took charge helped by the carnage in the risk assets that has increased the safe haven appeal of gold. A
sharp decline of 12% in Chinas equities in 2016 has sent a shock wave through the financial world. Global equities markets have tumbled like
the proverbial nine pins. A meltdown in risk assets is giving rise to speculation that this alarming weakness in the markets would force the US
Federal Reserve (Fed) to go slow on rate hike, thus helping the bullion complex rise. Gold faces a stiff resistance in the $1,135- $1,140 zone. On
the downside, looking at the shaky financial markets, the metal is likely to find a support at $1,080 in the near term. However, the overall outlook
is bearish and we look for a test of $950-970 support area eventually.
Silver
CMP: $14.02 (spot)
Given the weakness in the base metals and crude oil, silver is vulnerable as it is used as an industrial metal too. However, in a positive
development, Indias silver imports would probably set a new record in 2015 due to a rapid change in consumer preferences in jewellery.
We look for a range of $13.60-14.70 in the near term.
Base metals: Lead holds ground amongst base metals pack in 2015 as others crash
Key points
ICSG-Copper surplus of 122,000 tonne in the January-September period versus a deficit of 375,000 tonne in the same period of 2014
Nine large Chinese copper smelters pledge to cut a minimum of 350k tonne output in 2016
ILZSG: Lead market refined metal balance in surplus of 22k tonne in the January-October 2015 period against a surplus of 6k tonne in the
corresponding period in 2014
Lead inventories rose sharply in LME in December 2015 from 128,325 tonne in November end to 191,650 tonne by the year end, a rise of
almost 50%
ILZSG: Zinc production surplus balance widened to 213k tonne in the January-October 2015 period against a deficit of 242k tonne in the
same period in 2014
Nrystar, the worlds largest zinc smelter, cut production by 100,000 tonne, would cut more up to 400,000 tonne if prices remain depressed
Zinc inventories on LME fell 15% to 464,400 tonne by year end against 545,375 tonne at the start of the month
Nickel remains in vicious circle as producers refrain from production cuts despite sharply lower prices
Nickel stockpile continues upward journey with Shanghai stocks increasing by almost 35% to 38,712 tonne; stocks on LME rise by 10% to
441,294 tonne from 408,360 tonne in November 2015 end
Copper
CMP: Rs304/kg (February 2016 contract)
MCX copper gained 5% in December 2015, ending the month at Rs315/kg, after posting the highest losses of 10% in November 2015. It ended 2015 with
losses of 21% as a slowdown in Chinese demand and a weak global economic outlook led to a surplus in metal balance. As per ICSG, the world refined
copper production is estimated to increase by around 1.5% (230,000 tonne) in the January-September period of 2015. Chinas November copper imports
grew to 358,727 tonne, up by almost 5% over 343,473 tonne in October 2015. Large smelters in China have pledged to store metal in warehouse rather
than sell in spot markets, even requesting the government to stockpile copper in order to support the prices. We expect copper price to remain subdued
unless we see some developments on the production cut front. Copper is likely to attract selling on rallies near Rs328/kg with Rs286/kg as the objective in
the near term.
Lead
CMP: Rs111.50/kg (January 2016 contract)
Lead continues to stand tall amidst commodity rout, the only metal to end 2015 on a slightly positive note at Rs118.05, while on a monthly basis it posted
gains of 8.4%, strongly bouncing from its strong levels of Rs108/kg. Lead inventories rose sharply during mid December 2015, rising by almost 50% on a
monthly basis at 191,650 tonne. However, even cancelled warrants rose simultaneously. Thus, we believe this is more of warehouse shifting and even
probability of hidden stocks in the markets cannot be ruled out. We expect lead to trade in the range of Rs104/kg and Rs119/kg.
Zinc
CMP: Rs101/kg (January 2016 contract)
Zinc ended 2015 on a weaker note losing its premium over the other metals at Rs106.35, down by almost 23% as weak steel demand turned a deficit story
into a surplus balance. Glencore has slashed Chinese zinc 2016 premiums to $110-125 per tonne from $130-160/tonne on a lower demand forecast. Zinc
33
January 2016
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
inventories on the London Metal Exchange (LME) have come down by 15% to 464,400 tonne at the end of December 2015 from 545,375 tonne at the start
of the month. However, Shanghai zinc inventories rose by 17% to 198,849 tonne from 168,936 tonne. Production cut news by Glencore was overshadowed by the news of Vedanta raising output. Some more supply cuts are needed for the price to recover; we expect zinc to trade in the range of Rs94/kg on
the lower side and Rs110/kg on the higher side.
Nickel
CMP: Rs565/kg (January 2016 contract)
Nickel turned out the worst performer of 2015 amongst the metal pack losing almost 38% on the back of weak demand for refined nickel from
China and a lack of production cut in the counter. As per reports, almost 60% of the global nickel production is operating cash negative below
$10,000 per tonne. Eleven Chinese NPI producers have pledged to cut their production by 20% in 2016. Nickel stocks continue to rise: stocks on
the LME have risen by 7.50% to 441,294 tonne while Shanghai stocks have risen to 45,187 tonne, up 17%. We expect some production squeeze
soon in nickel markets which could give a much needed boost to the prices. We expect nickel to remain attractive on dips to Rs550/kg area for
a medium-term target of Rs760/kg.
CMP as on January 08, 2016
Events watch: Major economic events in January 2016

Region
Event
04/01/2016
Date
China
Caixin Manufacturing PMI
Survey
Actual
Prior
48.9
48.2
48.6
The data showed that the manufacturing sector continued to contract for the 10th month in a row; also, the
data fell short of forecast; overall, it is a bearish development for the industrial commodities
04/01/2016
USA
06/01/2016
ISM Manufacturing PMI
49
48.2
48.6
The manufacturing sector contracted in the USA too; it is again a negative development for the industrial
commodities
USA
ISM Non-Manufacturing PMI
56
55.3
55.9
The data fell short of forecast; it is somewhat bearish for the dollar and industrial commodities; it is to be
noted that the services sector constitutes nearly two-third of the US economy, thus it is a key indicator of
the health of the US economy
07/01/2016
USA
FOMC meeting minutes
The minutes showed that hiking the rate was a close call and concerns regarding subdued inflation linger;
the stress was on a gradual lift-off and adjusting of the policies as per requirement; overall, somewhat
bearish for the dollar and bullish for bullions
08/01/2016
USA
Average hourly earnings MoM
0.20%
0.0%
0.20%
08/01/2016
USA
Non-farm employment change
200k
292k
211k
09/01/2016
China
CPI YoY
1.60%
1.6%
1.50%
13/01/2016
China
Trade balance
347.00b
--
343.10b
It is a crucial piece of data to gauge the health of both China and the global economy; the data has been
showing weakness in both the economies for quite some time; a fall in China's imports and exports would
be bearish for the industrial commodities; bullion complex is likely to edge higher on the possibility of the
US Fed going less hawkish
15/01/2016
USA
Core retail sales MoM
0.30%
--
0.40%
Better than expected data would be positive for the dollar and industrial commodities; bullions would fall
on rate hike prospects
15/01/2016
USA
Prelim UoM consumer sentiment
93
--
92.6
A pick-up in consumer sentiment is to be construed as positive for the US economy, thus positive for the
dollar; industrial commodities would get a boost from the data while bullions would fall
19/01/2016
China
GDP QoQ, YoY
6.90%
--
6.90%
It is becoming increasingly clear that Chinese authorities would struggle to maintain a growth of 7%, which
is a cause for concern for the markets; data trailing the forecast would weigh on the industrial commodities
Bullion can rise on safe haven demand
19/01/2016
China
Industrial production YoY
6.10%
--
6.20%
Better than expected data would bode well for the industrial commodities
19/01/2016
Europe
German ZEW Economic sentiment
--
--
16.1
It is a key economic indicator; data topping the forecast would be positive for the euro and the industrial
commodities
20/01/2016
USA
Core CPI MoM
--
--
0.20%
Better than expected data would be bullish for the dollar as the concerns of subdued inflation would be
assuaged to some extent; it would increase the chances of a faster pace of rate hike; bullion complex
would fall
20/01/2016
USA
Housing starts
--
--
1173k
Housing is a key component of the US economy; better than expected data would be positive for the base
metals like copper and aluminium; dollar to strengthen and bullions to fall
21/01/2016
Europe
German Flash Manufacturing PMI
--
--
53.2
Stronger manufacturing data would be positive for the industrial commodities like base metals and crude
oil; euro would benefit
21/01/2016
Europe
Minimum bid rate
--
--
0.05%
No change expected but the markets would be focused on the press conference so as to get clues if the
ECB would ease further; a hawkish ECB is positive for the euro but bearish for the industrial commodities
and wider markets
21/01/2016
USA
Philly Fed Manufacturing Index
--
--
-5.9
It is a crucial economic indicator of manufacturing sector; better than expected data would be supportive
for the base metals and crude oil; bullions would fall
25/01/2016
Europe
German Ifo Business Climate
--
--
108.7
28/01/2016
USA
FOMC statement
--
--
--
Markets would be looking forward to the clues regarding the pace of the rate hike; a hawkish Fed would be
negative for the bullion complex as the dollar would rally
28/01/2016
USA
Federal funds rate
0.25%
--
0.25%
No change expected; the focus would be on the statement as market players look forward to the pace of
the rate hike
28/01/2016
USA
Core durable goods orders MoM
--
--
-0.10%
Data topping the forecast would be positive for the industrial metals and the dollar while bullions would
fall; but the indicator has been showing weakness for the past many months
29/01/2016
USA
Advance GDP QoQ
--
--
2.00%
Data trailing the forecast would weigh on the dollar as the Fed would be probably going slow on rate hike
in that case; the dollar would fall and the bullion complex would get a boost
January 2016
34
Impact
Bearish for industrial commodites and $; supportive for bullion.

Somewhat supportive for industrial commodites; overall a mixed job report
Data inline with forcast; still deflation concerns linger. Bearish for industrial commodities
Better than expected number would be positive for the euro and the base metals
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Warm winter likely to pull down rabi crop yield this year
Rabi crop sowing in India (figs in lakh hectares)
News highlights
Sowing of rabi crops stands 4.7% lower at 54.11 million ha
Sugar production between October and December up 6.5% at

79.85 lakh tonne
CAI slashes cotton production by 5.7% to 36.2 million bales
Indias onion production likely at record 20.6 million tonne
Crop
Area sown in 2015-16
Area sown in 2014-15
Wheat
271.46
293.16
Pulses
128.24
131.33
Coarse cereals
55.19
50.97
Oil seeds
71.47
76.11
Rice
14.77
16.05
Total
541.12
567.63
Castor seed
Castor seed January futures largely remained under downside pressure in December. The prices have declined on account of huge
carry-over stocks of the previous year coupled with higher acreage
and expectations of a higher output. Expectations that the new
crop would arrive earlier than normal added to the downside pressure. Castor seed acreage till the end of kharif season sowing operations stood 8.4% higher year on year at 1.11 million ha compared with 1.02 million ha in the last year. The prices declined
from Rs3,889 per quintal in early December 2015 to a new contract low of Rs3,444 in the second week of the month. However,
the prices bounced back sharply from the lower levels and made a
high of Rs3,894 in the third week of December on short coverings
and good castor oil export demand. However, the prices again retreated from higher levels towards end of the month and settled
4.96% lower month on month at Rs3,740. The prices may remain
weak as ample supplies and higher output projections may keep
them under pressure.
Price performance
Commodity
Dec 31,
2015 (Rs)
Nov 30,
2015 (Rs)
% Change
Castorseed
Jan
3740
3935
(4.96)
Chana
Jan
4807
4810
(0.06)
Cotton seed oilcake Jan
2085
1724
20.94
Dhaniya
Jan
7219
10130
(28.74)
Guargum
Jan
6460
6700
(3.58)
Guar seed
Jan
3315
3408
(2.73)
Jeera
Jan
14440
16065
(10.12)
Kapas
Apr
891.00
856.50
4.03
RM Seed
Jan
4289
4897
(12.42)
Sugars
Mar
3215
2844
13.05
Soya bean
Jan
3729
3907
(4.56)
Ref Soy oil
Jan
617.30
619.65
(0.38)
Turmeric
Apr
9780
9762
0.18
Soya bean
Chana
Soya bean December futures on NDCEX remained in the grip of

bears due to weak demand for soya meal because of a disparity
between domestic and global soya meal prices. Also, weak global
soya prices due to huge global supplies on the back of record US
production added to the downside pressure. Prices declined from
Rs3,940 per quintal at the start of the month and made a low of
Rs3,636 in the third week of the month. However, prices recovered
from lower levels on reports that the Philippines has banned imports of GM soya meal, raising hopes that the country would turn
to India for its demand of non-GM soya meal. Prices made a high of
Rs3,885. The prices again retreated from higher levels as global
soya bean prices remain weak as well as there was no fresh demand
from the Philippines. The prices closed 4.56% lower month on month
at Rs3,729 compared with Rs3,907 in the last month. Currently,
sowing operations in Brazil and Argentina are in full swing which
may keep the global prices under pressure. The recent rains in Brazil are also beneficial for the sown crop as these would provide
moisture to the soil.
Chana January futures swung between gains and losses in December 2015. Tight supplies in the physical markets due to low carryover stocks coupled with a forecast of lower kharif pulses output
and lower arrivals helped push up the prices. However, declining
demand at higher levels capped sharp gains. Increased supplies of
various pulses due to government crackdown on hoarders also added
to the downside prices. The government released stocks of the pulses
seized in the raids in the open market bringing a much needed respite. Also, higher chana sowing figures raised hopes of higher output in the coming marketing season. Prices settled marginally lower
0.06% month on month at Rs4,807 compared with Rs4,810 in the
last month. Currently chana sowing is complete at 81.07 lakh ha
as on January 1, 2016, up 1.4% compared with 79.95 lakh ha
during the corresponding period last year. The overall sentiment
remains weak due to weak demand at higher levels and higher acreage. Favourable climatic conditions in the main chana growing regions are also likely to keep the prices under pressure.
Expiry
35
January 2016
TREND & VIEW
COMMODITY
TECHNICALS
Gold: A bullish outlook
Gold has formed a large ending diagonal pattern, which spans

several months.
MAC D (3 .8 0 1 1 9 )
20
10
0
-10
-20
The pattern would mark the end of the correction at least in the
short to medium term.
1320
1310
1300
1290
1280
1270
Near the lower end of the pattern gold formed a base triangle
and broke out on the upside. The short-term momentum
indicator is in bullish mode and is in line with the price structure.
1260
1250
1240
1230
1220
1210
1200
1190
From a short- to medium-term perspective the key levels on the

upside will be $1,150-1,190. On the other hand, the 20-day
moving average (DMA), ie $1,073, will act as a key support on
a closing basis.
1180
1170
1160
1150
1140
1130
1120
1110
1100
1090
1080
1070
View
Reversal
Supports
Resistances
Target
$1,073
$1,088/$1,081
$1,137/$1,182
$1,150/
1060
1050
1040
Up
2015
F e b r u a ry
Ma rch
Ap ri l
Ma y
Ju n e
J u ly
Au g u s t
Se p t e m b e r O c to b e r
N o ve m b e r D e c e m b e r
2016
F e b r ua r y
Ma
1,190
Silver: Bulls warming up
Silver had formed an ending diagonal pattern and broken out on

the upside in the last month. However, the break-out couldnt
lead to a larger upside.
M AC D (-0 .0 6 9 0 7 )
0 .0
-0 . 5
SI L VER [ C AS H ] (1 4 .3 0 0 0 , 1 4 . 3 2 6 0 , 1 3 .8 6 0 0 , 1 3 .9 3 0 0 , - 0 .3 7 0 0 0 )
1 9 .0
After the spike silver formed a correction once again and fell
back towards the low of $13.93. Structurally, silver seems to
have formed a larger ending diagonal pattern. Near the low bulls
are providing support to the commodity. Thus, it seems to be
forming a base near the lower trend line.
1 8 .5
1 8 .0
1 7 .5
1 7 .0
1 6 .5
The short-term momentum indicator is showing a positive

divergence. The level of $13.60 will act as a crucial support on a
closing basis. On the higher side, $14.71-15.30 will be the targets
for the short to medium term.
1 6 .0
1 5 .5
1 5 .0
1 4 .5
1 4 .0
View
Up
Reversal
Supports
Resistances
Target
$13.60
$13.73/$13.63
$14.42/$15.06
$14.71/
15.30
1 3 .5
N o ve m b e r
2015
F e b ru a ry M a rch
Ap ri l
Ma y
Ju n e
J u ly
Au g u s t
Se p te m b e r
N ove m b e r
2016
F e b r u a ry Ma
Crude oil: On slippery ground
NYMEX crude oil has been tumbling down for a while now.
On the occasions of minor degree bounces it has been facing
resistance near the key DMAs.
KS T (-6 .9 2 0 6 7 )
10
5
0
-5
-1 0
L IG H T C R U D E C O N T IN U O U S 1 0 0 0 B AR R E L S [ N YM EX] (3 3 . 3 0 0 0 , 3 4 .3 4 0 0 , 3 2 .6 4 0 0 , 3 3 . 1 6 0 0 , -0 . 1 1 0 0 0 )
65
Recently it faced resistance near the junction of the 40-day

exponential moving average (DEMA) and the daily upper
Bollinger Band. From that resistance zone it has fallen sharply.
In terms of price pattern, the oil has formed a triangular pattern
and broken out on the downside.
60
55
50
45
The short-term and medium-term momentum indicators are in

bearish mode. The key levels on the downside will be $31 and
$29.60. On the flip side, $36.07 will act as a key resistance on
a closing basis.
View
Down
January 2016
Reversal
Supports
Resistances
Target
$36.07
$32/$30.50
$34.53/$35.70
$31/29.60
40
35
30
M a r ch
36
Ap ri l
Ma y
Ju n e
Ju l y
Au g u s t
Se p te m b e r
O c to b e r
N o ve m b e r
D e ce m b e r
2016
F e b ru a r
COMMODITY
TREND & VIEW
TECHNICALS
Copper: Bearish structure
COMEX copper had taken support near the lower end of the
medium-term falling channel and formed a short-term bounce.
KS T (-2 . 2 5 5 8 1 )
5
0
-5
However, it couldnt extend beyond the resistance zone of the

40-DEMA and the daily upper Bollinger Band.
H G C O PP E R C O N T IN U O U S 2 5 0 0 0 L BS [ C O M E X] ( 2 .0 2 2 5 0 , 2 .0 5 1 5 0 , 2 .0 1 1 0 0 , 2 .0 2 2 0 0 , + 0 .0 0 0 0 )
3 .1 5
3 .1 0
3 .0 5
3 .0 0
2 .9 5
2 .9 0
2 .8 5
From there the base metal has started falling once again.
Structurally it has formed a bearish flag pattern and broken out
on the downside.
2 .8 0
2 .7 5
2 .7 0
2 .6 5
2 .6 0
2 .5 5
2 .5 0
2 .4 5
2 .4 0
The subsequent level on the downside will be $1.90. On the higher

side, the 20-DMA ($2.09) will act as a key resistance on a closing
basis.
2 .3 5
2 .3 0
2 .2 5
2 .2 0
2 .1 5
2 .1 0
2 .0 5
2 .0 0
1 .9 5
1 .9 0
1 .8 5
Ap ri l
View
Down
Reversal
Supports
Resistances
Target
$2.09
$1.99/$1.92
$2.05/$2.07
$1.90
Ma y
Ju n e
Ju l y
Au g u s t
Se p t e m b e r
O c to b e r
N o ve m b e r
Dec em ber
2016
F e b ru a r
Jeera: Downward trajectory
NCDEX jeera has been in a down trend over the short term as
well as medium term. From 50% retracement of the previous
fall the agri-commodity is forming the third leg down which is
sub-dividing into lower degree waves.
KS T (-4 .8 4 9 1 3 )
15
10
5
0
-5
JE ER A Q U IN T AL - 1 MO N T H (1 3 ,9 6 5 .0 0 , 1 4 ,0 9 0 .0 0 , 1 3 ,6 4 0 .0 0 , 1 3 ,7 0 0 .0 0 , - 2 8 5 .0 0 0 )
20000
The short-term as well as medium-term momentum indicator is

in line with the price action. The weekly Bollinger Bands have
started expanding after a significant contraction, thus we are
witnessing a sharp down move.
19500
19000
1 0 0 .0 %
18500
18000
17500
6 1 .8 %
17000
5 0 .0 %
16500
Overall, the equality target on the downside will be Rs12,700.

On the other hand, the 20-DMA, ie Rs14,420, will act as a strong
resistance.
3 8 .2 %
16000
2 3 .6 %
15500
15000
14500
0 .0 %
14000
13500
View
Reversal
Supports
Resistances
Target
Down
Rs14,420 Rs13,400/Rs13,000 Rs14,090/Rs14,360
Rs12,700
13000
Ap ri l
Ma y
Ju n e
J u ly
Au g u s t
Se p te m b e r
O cto b e r
N o ve m b e r
D e ce m b e r
2016
Soyabean: Correction underway
NCDEX soya bean had rallied smartly for several weeks.

However, the price hit the hurdle of 78.6% retracement of the
previous fall soon.
A crucial medium-term falling trend line was also nearby. Near

these hurdles bears put up strong resistance.
Thus, the commodity entered a correction mode. The fall is

breaking up into lower degree waves. The daily and weekly
momentum indicators are in bearish mode.
KS T (-1 .7 4 7 9 9 )
SO YB EAN Q U I N T AL - 1 MO N T H (3 ,6 4 2 .0 0 , 3 ,6 7 3 .0 0 , 3 , 6 1 5 . 0 0 , 3 ,6 3 0 .0 0 , -1 0 .0 0 0 0 )
4600
4550
4500
4450
4400
4350
4300
4250
4200
4150
4100
1 0 0 .0 %
7 8 .6 %
0 .0 %
6 1 .8 %
4050
4000
3950
3900
2 3 .6 %
3850
3800
3750
5 0 .0 %
3 8 .2 %
3700
3650
The key levels on the downside will be Rs3,465 and Rs3,430.

On the other hand, Rs3,755 will act as a key resistance on a
closing basis.
3600
5 0 .0 %
3 8 .2 %
10
5
0
-5
3550
3500
6 1 .8 %
3450
3400
2 3 .6 %
3350
3300
7 8 .6 %
3250
3200
3150
3100
0 .0 %
1 0 0 . 0%
3050
3000
View
Down
Reversal
Rs3,755
Supports
Rs3,554/Rs3,500
Resistances
Rs3,700/Rs3,744
2950
Target
2900
2850
Ap ri l
Rs3,465/
3,430
37
Ma y
J une
J u ly
Au g u s t
Se p te m b e r
O c to b e r
N o ve m b e r
D e ce m b e r
2016
F e b ru a ry
January 2016
MONTHLY VIEW
CURRENCY
FUNDAMENTALS
Currencies: Yen advances on escalating geo-political tensions

Key points
Indias CPI rose to 5.41% in November from 5% in October 2015
IIP rose by 9.8% in October from 3.6% in September 2015
Fed raised interest rates by 0.25%
US non-farm employment change improved 211k in November 2015
compared with expectation of 201k
December 2015 contract price movement
CURRENCY LEVELS IN DECEMBER 2015 (IN RS)

Currency
High
Low
Close
Monthly chg (%)
USD-INR
67.13
66.10
66.40
-0.25
EUR-INR
74.16
70.29
72.84
3.13
GBP-INR
101.87
98.10
98.53
-1.85
JPY-INR
55.59
53.86
55.14
1.54
December 2015 contract price movement
USD-INR
CMP: Rs66.84 (spot)
The Indian Rupee (INR) appreciated against the dollar in December of 2015 on the back of likely inflows in local shares. A probable
intervention by the Reserve Bank of India (RBI) in the foreign exchange (forex) market provided stability to the rupee. However, a
sharp gain was prevented as the US Federal Reserve (Fed) raised interest rates by 0.25%. Unfavourable macro-economic data and geopolitical tension added to the downside pressure. The Government of India cut its economic growth forecast to 7.0-7.5% for the
FY2016 in its mid-year review compared with an estimate of over 8% previously.
Outlook: The rupee is expected to trade with a negative bias on the back of a strong dollar, escalating geo-political tensions and a rise in risk aversion in the
domestic market. Higher US rates would make the dollar more attractive as these would boost returns on assets denominated in dollars. The weakening of
Chinas yuan may drag the other Asian currencies lower. The dollar demand from importers would prove negative. As per the latest REER reading (provisional;
112.88), the rupee is overvalued by more than 10%. The expected trading range in the near term is 65.4-68.80.
GBP-INR
CMP: Rs97.74(spot)
The pound depreciated by 2.17% against the dollar in the last month. It extended losses on the back of a strong dollar and a divergence in global
monetary policies. The Bank of England (BoE) indicated that rates may remain lower for a longer time. A majority of the policymakers said low
oil prices and subdued wage growth would keep a lid on inflation. Soft economic data from the UK added to the downside pressure.
Outlook: The pound is likely to trade with a negative bias on a divergence in global monetary policies and weak economic data from the UK. The
Fed raised interest rates by 0.25% whereas the BoE is likely to continue with its loose monetary policy. Data showed that activity in the
manufacturing and service sectors slowed. Market sentiment is hurt on escalating geo-political tensions and worries over a slowdown in China.
The expected trading range in the near term is 95.3-100.5.
EUR-INR
CMP: Rs72.28 (spot)
The euro appreciated by 2.72% against the dollar as the European Central Bank (ECB) left benchmark interest rates unchanged and did not
increase the pace of its EUR60-billion-a-month quantitative easing programme. ECB President Mario Draghi said the bank would also expand its
bond-buying purchase scheme beyond September 2016 until the end of March 2017 or beyond, if necessary. However, a sharp gain was capped
as ECB still worried over inflation and lowered its projections.
Outlook: The euro is expected to trade with a negative bias on the back of a strong dollar and a divergence in global monetary policies. Further, soft economic
data from the euro zone may hurt the euro. Investors fears that lower inflation from the euro zone may push the ECB to add monetary stimulus. The market
fears that falling crude oil prices may put deflationary pressures on countries struggling with lower inflation calling for further easing. However, the euro as a
funding currency because of the euro zones low interest rates may gain strength as money flows back to where it was funded from during risk times. The
expected trading range in the near term is 70.1-74.0.
JPY-INR
CMP: Rs56.65 (spot)
The yen appreciated by 2.37% against the dollar on upbeat gross domestic product data. Bank of Japan kept its monetary stimulus target
unchanged at YEN80 trillion but decided to extend the maturity of the Japanese government bonds it purchases from 10 to 12 years and to set
up a YEN300-billion fund to buy exchange traded funds. Investors thought Bank of Japan fell short of market expectations.
Outlook: The yen is expected to gain strength as the demand for safe haven may go up on a rise in risk aversion in the global markets and escalating geo-political
tensions. The central bank added stimulus package but fell short of market expectations. However, sharp gains may be prevented on the back of a strong dollar
and a divergence in global monetary policies. Investors may worry that a strong yen may hurt its export industry and push the Bank of Japan to provide more
monetary stimulus. The expected trading range in the near term is 54.0-59.0.
CMP as on January 08, 2016
January 2016
38
CURRENCY
TECHNICALS
TREND & VIEW
EUR-INR: Bulls in control
USD-INR: Poised for a rally
The EUR-INR broke out from a medium-term falling trend line

and formed an impulse on the upside.
In the last few sessions it has formed a three-wave correction
and retraced 61.8% of the rally.
From the key Fibonacci level as well as the daily lower Bollinger
Band the EUR-INR seems to have started the next leg up.
For the week gone by it has formed a bullish outside bar on the
weekly chart.
The daily and weekly momentum indicators have started a new
cycle on the upside.
The equality target on the upside will be 75.36 with a reversal
below 71.24.
In December 2015 the USD-INR formed an ending diagonal

pattern to complete a rally after which it formed a short-term
correction.
The correction retraced 50% of the rally from where the
currency pair started the next leg up.
The daily momentum indicator has triggered a bullish crossover.
Once the high of 67.17 is crossed the currency pair can attempt
the equality target, ie 68.50.
The swing low of 66.08 will act as a key support from a shortto medium-term perspective.
M A C D (0 . 1 0 6 5 7 )
M A C D (0 . 0 8 5 6 9 )
1 .0
0 .5
0 .5
0 .0
0 .0
-0 . 5
E U R IN R ( 7 3 . 1 0 8 0 , 7 3 . 1 2 1 0 , 7 2 . 0 2 6 0 , 7 3 . 0 4 6 0 , - 0 .0 8 2 0 0 )
6 9 .0
U S D IN R - I N D I A N R U P E E ( 6 6 . 8 8 1 1 , 6 6 . 9 2 0 4 , 6 6 . 5 9 0 0 , 6 6 . 8 3 7 2 , - 0 .0 4 4 0 1 )
7 9 .0
7 8 .5
7 8 .0
6 8 .5
7 7 .5
7 7 .0
6 8 .0
7 6 .5
7 6 .0
6 7 .5
7 5 .5
0 .0 %
7 5 .0
6 7 .0
7 4 .5
0 .0 %
2 3 .6 %
7 4 .0
6 6 .5
7 3 .5
2 3 .6 %
3 8 .2 %
6 6 .0
5 0 .0 %
7 3 .0
3 8 .2 %
7 2 .5
5 0 .0 %
6 1 .8 %
7 2 .0
6 1 .8 %
6 5 .5
7 1 .5
7 1 .0
6 5 .0
7 0 .5
1 0 0 .0 %
7 0 .0
1 0 0 .0 %
6 4 .5
6 9 .5
6 9 .0
6 4 .0
6 8 .5
6 8 .0
6 3 .5
6 7 .5
6 7 .0
20
27
3
10
Au g u s t
17
24
31
7
14
S e p te m b e r
21
28
5
12
O cto b e r
19
26
2
9
16
N o ve m b e r
23
30
7
14
D e ce m b e r
21
28
4
2 01 6
11
18
25
1
8
F e b r u a ry
15
22
6 6 .5
27
3
10
Au g u s t
17
24
31
7
14
S e p te m b e r
21
28
5
12
O cto b e r
19
26
2
9
16
N o ve m b e r
23
30
7
14
D ec em ber
21
28
4
2016
11
18
25
1
8
F e b ru a ry
15
22
29
Ma
JPY-INR: A bullish outlook
GBP-INR: Heading towards south
The GBP-INR had surpassed a medium-term falling trend line a

few months back. However, it couldnt sustain in the higher
territory.
From a high of 105.54 the currency pair has entered a correction

mode. The fall is sub-dividing into lower degree waves.
The price has fallen below the crucial daily and weekly moving
averages. The momentum indicators on these time frames are in
bearish mode.
From the high of 0.5735 the JPY-INR entered correction mode in the
last month. Overall, it formed a complex correction from the high
and retraced 61.8% of the previous rise.
It also found support near the key weekly moving averages. From
those multiple supports the currency pair has started a fresh rally.
The short-term as well as medium-term momentum indicators are in
sync with the rally.
Once the swing high of 0.5735 is crossed the equality target will be
0.6000.
The equality target on the downside will be 95.40 with the

potential to tumble till 93.70. A reversal of the bearish view can
be placed above 100.10.
M A C D (0 . 0 0 6 0 7 7 )
0 .0
0 .0
0 .0
-0 . 0
-0 . 0
-0 . 0
K S T (-2 . 2 6 5 0 3 )
10
5
1
0
0
0
1
1
0
5
0
5
0
5
J P Y IN R ( 0 .5 5 0 4 0 , 0 .5 7 0 0 0 , 0 .5 4 9 5 0 , 0 . 5 6 9 0 0 , + 0 . 0 1 8 7 0 )
0 .7 2
-5
0. 0 %
0 .7 1
0 0 .0 %
G B P I N R ( 9 7 . 6 5 5 0 , 9 8 .5 8 8 0 , 9 6 .9 0 8 0 , 9 7 .0 2 8 0 , - 0 . 6 0 8 0 0 )
109
108
107
106
0 .7 0
105
104
0 .6 7
0 .6 9
0 .6 8
0 .6 6
103
102
0 .6 5
101
23 . 6 %
0 .6 4
100
6 1 .8 %
99
0 .6 3
98
0 .6 2
97
38 . 2 %
96
0 .6 1
5 0 .0 %
95
0 .6 0
94
50 . 0 %
0 .5 9
93
3 8 .2 %
92
0 .5 8
91
61 . 8 %
0 .0 %
0 .5 7
90
89
2 3 .6 %
0 .5 6
3 8 .2 %
0 .5 5
86
5 0 .0 %
0 .5 4
85
6 1 .8 %
2 3 .6 %
88
87
0 .5 3
84
7 8 .6 %
83
0 .5 2
82
1 0 0 .0 %
0 .0 %
81
10 0 . 0 %
0 .5 1
0 .5 0
80
79
2 013
20 1 4
Currency
View
USD-INR
Up
2 01 5
201 6
0 .4 9
J
2014
2015
2016
Reversal
Supports
Resistances
Target
66.08
66.41/66.15
67.17/68.00
68.50
GBP-INR
Down
100.10
96.47/95
98.94/99.50
95.40-93.70
EUR-INR
Up
71.24
72.02/71.32
74.14/74.52
75.36
JYP-INR
Up
0.5495
0.5617/0.5500
0.5735/0.5865
0.6000
39
January 2016
PMS FUNDS
PMS
DESK
Portfolio Management Service

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

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

Index Futures Fund
Trailing Stops
PROPRIME - DIVERSIFIED EQUITY

Product performance
as on December 31, 2015
OVERVIEW
The ProPrimeDiversified Equity PMS strategy is suitable for long-term investors
looking to create an equity portfolio through disciplined investments that will lead to a
growth in the portfolios value with medium to high risk.
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough

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

record and have partial exposure to quality companies in the mid-cap space.
(In %)
Scheme
S&P CNX 500
1 month
-1.0
0.6
3 month
3.8
1.2
6 month
3.1
-2.5
1 year
2.8
-0.7
Best month
36.3
34.4
Worst month
-23.4
-27.2
Best quarter
60.3
51.2
Worst quarter
-30.5
-28.6
Disclaimer: Returns are based on a clients

returns since inception and may be different from
those depicted in the risk disclosure document.
Top 10 stocks
PRICING
Minimum investment of Rs25 lakh
Charges
Apollo Tyres
Axis Bank
Federal Bank
2% per annum; AMC fee charged every quarter
IndusInd Bank
0.5% brokerage
Hero MotoCorp
20% profit sharing after the 12% hurdle is crossed at the end of
every fiscal
ICICI Bank
II&Fs Transport Networks
Lupin
Reliance Industries
Sun Pharmaceuticals Industries
FUND OBJECTIVE
A good return on money through long-term investing in quality companies
January 2016
40
PMS
DESK
PMS FUNDS
PROTECH - INDEX FUTURES FUND

OVERVIEW
The ProTechIndex Futures Fund PMS strategy is suitable for long-term investors
who desire to profit from both bullish and bearish market conditions. The strategy
involves going long (buying) or going short (selling without holding) on Nifty futures
by predicting the market direction based on a back-tested automated model.
Product performance
(In %)
INVESTMENT STRATEGY
The strategy has the potential to generate profits irrespective of the market
direction by going long or short on Nifty futures.
An automated basic back-testing model is used to predict the market direction

for the Nifty which then decides the strategy to be deployed in terms of going
long or short.
The portfolio is not leveraged, ie its exposure never exceeds its value.
Scheme
Sensex
Nifty
1 month
2.4
-0.1
0.1
3 months
7.0
-0.1
0.0
FY14-15
-3.4
24.9
26.7
FY13-14
8.8
18.9
18.0
FY12-13
3.7
8.2
7.3
FY11-12
13.1
-10.5
-9.2
FY10-11
9.2
10.9
11.1
FY09-10
14.7
80.5
73.8
174.9
158.0
163.0
Since inception*
Best month
28.9
-23.9
-26.4
Worst month
-17.1
0.0
0.6
Charges
Best quarter
33.3
49.3
42.0
Worst quarter
-11.7
17.3
22.3
PRICING
AMC fees:
0%
Brokerage:
0.05%
Profit sharing:
Flat 20% charged on a quarterly basis
*01-Feb-2006

Investments in
FUND MANAGERS VIEW
Nifty Index
The Index Futures Fund continued to perform with increasing volatility in the market
in December 2015. A gain of 2.43% for the month and that of 7% for the quarter are
good numbers. As long as we continue to see these big moves in the market in both
directions, we should see good return numbers as well. The last couple of signals in
the trading system saw clear positive results and none of the signals went wrong. So
this must be a winning streak.
The market has gone through a prolonged period of low volatility and the numbers
can only expand. We have been waiting for that to happen. We still see a lot of
divergence in the market internals that is keeping the numbers from achieving their
best potential but this is better than it was earlier. We expect the market to move in
both directions and 10% moves in a month should become normal.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
41
January 2016
PMS FUNDS
PMS
DESK
PROTECH - TRAILING STOPS

OVERVIEW
Our ProTechTrailing Stops PMS strategy is ideal for Traders and Investors looking for Regular Income from trading and desire to make profits in both bullish and
bearish market conditions. It is designed to payout book profits on monthly basis.*
It is also for those investors who are looking for better income than Fixed Income
or Deposits. This strategy involves going Long (buying) or Short (selling without
holding) on stock futures.
Product performance
(In %)
* Terms and conditions apply
INVESTMENT STRATEGY
Scheme
Sensex
Nifty
1 month
0.4
-0.1
0.1
3 months
2.5
-0.1
0.0
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls.
FY14-15
-3.7
24.9
26.7
FY13-14
-1.1
18.9
18.0
A risk model has been developed for stock portfolio allocation that reduces the
risk and portfolio volatility through staggered building of positions.
FY12-13
14.9
8.2
7.3
It is non-leveragedthe exposure will never exceed the value of the portfolio.
FY11-12
29.0
-6.1
-4.6
FY10-11
FY09-10
50.9
41.0
43.2
Best month
9.1
11.3
12.4
Worst month
-4.4
-2.0
-1.7
PRICING
Charges
Since inception*
AMC fees:
0%
Best quarter
9.9
-12.7
-12.5
Brokerage:
0.05%
Worst quarter
-8.2
9.2
9.9
Profit sharing:
Flat 20% charged on a quarterly basis
*09th May 2011
FUND MANAGERS VIEW

Trailing Stops also witnessed a positive month though we could have done better.
The markets divergent behaviour has kept us on our toes and even as we attempted
a more aggressive stance, given the heightened volatility of the market, we were
pushed back. We were pushed back because when it comes to stocks, not all were
moving up and down along with the market indices. This kept us from getting the
most out of our trades and we had to keep managing risk at each stage, otherwise
returns would have been higher. This remains unusual compared with the past and
we hope to see this normalise soon.

Investments in
Nifty Index
Stock futures
The market has gone through a prolonged period of low volatility and the numbers
can only expand. We have been waiting for that to happen. We still see a lot of
divergence in the market internals that is keeping the numbers from achieving their
best potential but this is better than it was earlier. We expect the market to move in
both directions and 10% moves in a month should become normal.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
January 2016
42
ADVISORY
MONTHLY PERFORMANCE
DESK
Advisory Products and Services

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

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

Ideas
IdeasIdeas based on Stock

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

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

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

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

New Alpha Delivery Picks
Dec 2015 YTD FY2016
Previous performance
1
1
42
1
1
18
25
43
43
Ticket size (Rs)

Month
100,000
Dec 2015
YTD FY2016
No. of calls
17
191
Profit booked
12
110
Stop loss hit

Strike rate (%)
5
71
81
58
January 2016
January 2016
44
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)
DECEMBER 11, 2015

Data as on December 02, 2015
Scheme name
Large-cap funds
SBI Bluechip Fund
Birla Sun Life Top 100 Fund
Reliance Top 200 Fund
Birla Sun Life Frontline Equity Fund - Reg
Reliance Focused Large Cap Fund
Indices
BSE Sensex
Mid-cap funds
Mirae Asset Emerging Bluechip Fund
SBI Magnum Midcap Fund
L&T Midcap Fund
BNP Paribas Mid Cap Fund
Tata Mid Cap Growth Fund - Reg
Indices
BSE Mid-cap
Multi-cap funds
Birla Sun Life Pure Value Fund
L&T India Value Fund
ICICI Prudential Value Discovery Fund
Franklin India High Growth Companies Fund
SBI Magnum Global Fund 94
Indices
BSE 500
Tax saving funds
Axis Long Term Equity Fund
Birla Sun Life Tax Relief 96
Birla Sun Life Tax Plan
Franklin India Taxshield
BNP Paribas Long Term Equity Fund
Indices
Nifty 500
Thematic funds
ICICI Prudential Exports and Other Services Fund
Franklin Build India Fund
Birla Sun Life India GenNext Fund
L&T Infrastructure Fund
Kotak Infrastructure & Economic Reform Fund - Reg
Indices
Nifty 50
Balanced funds
L&T India Prudence Fund
Star
rating
NAV (Rs)
Absolute
6 months
Returns (%)
Compounded annualised
1 year
3 years
5 years
Since inception
28.2
42.3
23.5
158.8
23.4
1.74
0.37
-0.82
-0.60
0.21
6.34
-0.85
-0.81
-0.23
2.58
19.90
18.47
18.15
17.66
16.22
12.24
11.89
11.40
10.98
9.03
11.15
15.33
10.81
23.18
9.18
26,117.9
-3.9
-8.2
10.5
5.5
16.2
31.48
60.50
90.31
25.37
103.06
8.53
4.37
6.61
6.20
2.03
15.80
15.98
13.06
14.50
11.98
33.09
32.39
29.37
28.52
28.52
22.38
19.19
14.95
18.76
16.77
23.65
18.35
21.46
10.19
11.50
11,097.6
5.9
7.2
17.1
6.6
21.9
39.66
25.28
115.10
29.37
132.22
8.16
7.21
1.18
-0.08
1.07
4.21
13.02
7.54
4.72
10.17
30.71
28.45
27.49
27.15
26.12
16.74
15.69
17.46
15.99
17.61
19.63
17.01
24.13
13.76
15.37
10,595.8
-1.6
-3.0
12.3
6.0
15.0
30.07
21.51
27.16
420.63
29.32
-0.44
2.19
1.88
0.53
-0.18
6.08
9.30
8.38
4.96
5.27
26.70
23.20
22.25
20.94
20.93
18.45
11.51
13.19
13.94
14.42
20.40
10.39
11.51
25.17
11.46
6,699.8
-1.5
-2.8
12.7
6.4
9.3
47.1
28.7
53.0
10.8
14.8
8.4
-1.0
-0.5
0.0
-2.4
12.5
5.3
7.5
6.4
0.3
35.5
29.9
19.7
18.6
18.3
20.4
17.2
15.3
6.2
9.0
16.8
18.4
17.5
1.0
5.2
7,931.4
-3.7
-7.0
10.5
5.7
14.1
19.75
3.64
9.71
20.96
--
15.17
SBI Magnum Balanced Fund
96.06
2.74
7.84
19.89
12.26
16.57
Tata Balanced Fund - Reg
167.93
0.29
7.20
19.55
14.11
16.79
ICICI Prudential Balanced
92.23
1.71
3.04
19.09
14.19
14.81
Franklin India Balanced Fund
90.59
1.38
6.02
18.72
12.46
14.78
--
-0.7
-1.4
10.2
7.0
12.7
Indices
Crisil Balanced Fund Index
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan
first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest
that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
45
January 2016
MF PICKS
MUTUAL FUNDS
SHAREKHANS TOP SIP FUND PICKS
DESK
NOVEMBER 13, 2015

Data as on November 03, 2015
Investment period
Total amount invested (Rs)
Funds would have grown to (Rs)
NAV
1 year
12,000
Present
Avg. annual
value (Rs)
return (%)
Present
value (Rs)
3 years
36,000
Avg. annual
return (%)
5 years
60,000
Present Avg. annual
value (Rs)
return (%)
Large-cap funds
SBI Bluechip Fund
28.2
12,010.6
0.1
48,491.9
10.8
96,813.0
10.2
Reliance Top 200 Fund
23.5
11,732.2
-2.4
47,751.2
10.2
92,982.7
9.3
Birla Sun Life Top 100 Fund

Birla Sun Life Frontline Equity Fund - Reg
Principal Large Cap Fund
BSE Sensex
42.3
11,774.8
-2.0
46,738.3
9.4
92,449.4
9.2
158.8
11,719.8
-2.5
45,942.2
8.7
90,891.9
8.8
45.5
11,725.7
-2.5
44,823.5
7.8
85,239.3
7.4
26,117.9
11,397.8
-5.5
40,380.8
4.0
75,681.7
4.8
39.7
12,384.3
3.5
57,968.6
17.8
116,968.0
14.5
Multi-cap funds
Birla Sun Life Pure Value Fund
L&T India Value Fund
ICICI Prudential Value Discovery Fund
Franklin India High Growth Companies Fund
SBI Magnum Global Fund 94
BSE 500
25.3
12,419.4
3.8
56,490.8
16.7
114,025.4
14.0
115.1
12,077.7
0.7
54,752.1
15.5
112,588.5
13.7
29.4
11,909.6
-0.8
54,350.0
15.2
112,191.1
13.6
132.2
11,902.7
-0.9
53,219.0
14.4
109,492.5
13.0
10,595.8
11,650.0
-3.2
43,101.4
6.4
80,270.3
6.1
31.5
12,584.6
5.3
60,591.7
19.6
127,945.8
16.7
Mid-cap funds
Mirae Asset Emerging Bluechip Fund
L&T Midcap Fund
90.3
12,414.8
3.8
58,739.2
18.3
116,792.0
14.5
103.1
12,078.5
0.7
57,960.9
17.7
116,792.0
14.5
Reliance Mid & Small Cap Fund
34.0
12,347.0
3.2
57,303.0
17.3
113,113.0
13.8
BNP Paribas Mid Cap Fund
25.4
12,414.1
3.8
56,465.5
16.7
119,220.1
15.0
11,097.6
12,320.5
2.9
50,318.6
12.2
91,929.0
9.1
Tata Mid Cap Growth Fund - Reg
BSE Mid-cap
Tax-saving funds
Axis Long Term Equity Fund
30.1
11,769.3
-2.1
52,711.0
14.0
109,954.9
13.1
Birla Sun Life Tax Relief 96
21.5
12,006.6
0.1
51,519.2
13.1
101,207.5
11.2
Franklin India Taxshield
420.6
11,912.3
-0.8
49,767.7
11.8
97,884.9
10.5
ICICI Prudential Long Term Equity Fund
274.4
12,176.9
1.6
49,460.6
11.5
97,742.4
10.4
29.3
11,820.4
-1.6
49,252.6
11.4
98,980.1
10.7
7,931.4
11,418.0
-5.3
40,815.5
4.4
76,367.8
5.0
(Tax Saving)-Reg
BNP Paribas Long Term Equity Fund
Nifty 50
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan
first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest
that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
January 2016
46
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Sharekhan Earnings Guide

Company
CMP
(Rs)
Prices as on January 04, 2016

Sales
FY15
Net profit
FY16E
FY17E
FY15
FY16E
FY17E
EPS
(%) EPS
growth
FY15
FY16E
FY17E FY17/FY15
PE (x)
RoCE (%)
RoNW (%)
DPS
FY15 FY16E FY17E FY16E FY17E FY16E
FY17E
Div
yield
(Rs) (%)
AUTOMOBILES
Apollo Tyres
155.8
12,785.2
11,802.7
13,063.3
1,060.1
1,092.9
1,134.6
20.8
21.5
22.3
3%
7.5
7.3
7.0
21.2
16.9
19.8
17.4
2.0
1.3
92.0
13,562.2
18,698.1
23,084.2
233.9
996.3
1,559.4
0.8
3.5
5.5
158%
112.0
26.3
16.8
21.4
30.3
18.3
24.8
0.5
0.5
2,483.4
21,612.0
23,784.6
27,220.7
3,087.1
3,774.8
4,396.2
106.7
130.4
151.9
19%
23.3
19.0
16.3
46.1
46.5
32.7
32.9
50.0
2.0
95.5
1,444.1
1,489.6
1,745.5
60.6
78.7
104.6
4.2
5.5
7.3
31%
22.6
17.4
13.1
26.7
30.4
22.2
24.7
1.1
1.1
Hero MotoCorp
2,637.8
27,585.3
28,820.2
33,854.1
2,540.7
3,189.4
3,920.5
127.2
159.7
196.3
24%
20.7
16.5
13.4
61.0
59.9
43.7
43.0
60.0
2.3
M&M
1,242.5
37,468.3
40,680.6
48,139.3
3,087.6
3,644.4
4,727.1
52.2
61.6
79.9
24%
23.8
20.2
15.5
16.1
18.8
17.2
19.4
12.0
1.0
Maruti Suzuki
4,580.7
49,970.6
58,232.6
69,966.8
3,711.2
5,392.1
6,844.9
122.9
178.5
226.6
36%
37.3
25.7
20.2
22.2
22.2
18.0
18.0
25.0
0.5
Ashok Leyland
Bajaj Auto
Gabriel Industries
Rico Auto Industries

TVS Motor
46.9
1,346.3
1,076.1
1,234.9
-6.9
33.1
59.4
-0.5
2.4
4.4
-91.8
19.2
10.7
10.4
15.2
7.1
11.6
3.0
6.4
287.0
9,920.1
11,528.5
13,731.5
401.8
496.0
696.1
8.5
10.4
14.7
32%
33.9
27.5
19.6
24.1
30.2
27.4
31.9
1.9
0.7
BANKS & FINANCE

Allahabad Bank
68.2
8,173.9
8,649.8
9,692.6
620.9
866.5
1,261.3
10.9
15.2
22.1
43%
6.3
4.5
3.1
6.7
9.1
1.6
2.4
Andhra Bank
63.8
6,037.5
6,614.0
7,595.0
638.4
984.2
1,243.5
10.6
15.1
19.1
34%
6.0
4.2
3.3
9.3
10.7
2.0
3.1
Axis (UTI) Bank
438.4
22,589.2
26,402.1
31,221.0
7,355.9
Bajaj Finance
6,052.5
2,871.7
3,705.9
4,698.1
893.6
Bajaj Finserv
1,959.5
7,587.0
1,689.8
151.2
17,589.2
18,291.2
20,895.5
3,398.4
Bank of India
114.7
15,576.7
16,010.3
18,140.0
1,708.9
Capital First
416.4
501.4
695.5
865.8
110.7
Corp Bank
42.6
5,552.8
6,267.2
7,071.0
584.0
Bank of Baroda
Federal Bank
8,612.3 10,424.2
31.0
36.3
44.0
19%
14.1
12.1
10.0
17.9
18.6
5.5
1.3
1,505.1
178.7
220.3
282.5
26%
33.9
27.5
21.4
19.5
19.2
18.1
0.3
106.2
18.5
0.0
0.0
1.8
0.1
3,382.6
4,557.0
15.3
15.3
20.5
16%
9.9
9.9
7.4
8.2
10.3
3.2
2.1
-305.5
1,739.7
25.7
-3.9
21.9
-8%
4.5
-29.8
5.2
-0.9
5.1
5.1
4.5
171.4
239.5
12.2
18.8
26.3
47%
34.2
22.1
15.8
10.5
13.3
2.2
0.5
734.3
981.3
7.0
7.4
9.9
19%
6.1
5.8
4.3
6.6
8.0
1.4
3.3
1,173.6
55.8
3,258.7
3,545.8
4,153.2
1,004.9
940.2
1,182.6
5.9
5.5
6.9
8%
9.5
10.2
8.1
11.6
13.2
1.1
2.0
HDFC
1,216.7
7,630.7
8,984.1
10,812.6
5,990.1
6,963.5
8,235.8
38.0
44.2
52.3
17%
32.0
27.5
23.3
19.8
20.6
13.0
1.1
HDFC Bank
1,070.5
31,392.0
37,450.7
45,076.5 10,215.9
12,467.9 15,358.2
40.8
49.7
61.3
23%
26.3
21.5
17.5
18.7
19.8
8.0
0.7
ICICI Bank
255.6
31,215.7
35,218.7
40,280.5 11,175.4
12,725.0 14,794.4
19.3
21.9
25.5
15%
13.3
11.6
10.0
15.1
15.9
5.0
2.0
IDBI Bank
84.9
9,755.5
9,447.6
10,456.9
873.4
868.0
1,135.8
5.4
5.4
7.1
14%
15.6
15.7
12.0
3.5
4.5
0.7
0.9
489.7
2,236.4
2,822.4
3,410.2
1,386.2
1,732.4
2,120.0
27.5
34.3
42.0
24%
17.8
14.3
11.7
20.4
21.2
5.0
1.0
39.7
340.7
424.9
549.9
160.9
378.2
338.0
4.4
9.6
8.6
40%
9.1
4.1
4.6
24.2
18.7
1.0
2.5
Punjab National Bank
112.8
22,446.3
23,608.5
26,708.7
3,061.6
3,477.2
4,542.5
16.5
17.7
24.5
22%
6.8
6.4
4.6
8.4
10.0
3.3
2.9
SBI
220.7
77,591.1
84,516.2
95,684.8 13,101.6
17.5
21.4
26.7
23%
12.6
10.3
8.3
11.9
13.5
3.5
1.6
Union Bank of India
144.7
11,966.9
12,770.0
14,604.2
1,781.6
2,198.3
2,735.1
28.0
34.6
43.0
24%
5.2
4.2
3.4
10.7
12.2
6.0
4.1
Yes Bank
705.8
5,534.3
6,843.2
8,494.8
2,005.4
2,370.0
2,974.9
48.7
57.6
72.3
22%
14.5
12.3
9.8
18.8
20.2
9.1
1.3
Britannia
2,972.6
7,858.4
8,836.0
10,312.3
542.5
853.2
1,036.2
45.2
71.1
86.4
38%
65.8
41.8
34.4
51.9
45.6
55.9
47.5
16.0
0.5
GSK Consumers*
6,496.4
4,136.4
4,327.4
5,046.7
583.6
673.8
800.8
138.8
160.2
190.4
17%
46.8
40.6
34.1
44.2
44.2
29.2
29.2
55.0
0.8
GCPL
1,329.8
8,242.2
9,292.9
11,044.8
923.8
1,140.7
1,403.0
27.1
33.5
41.2
23%
49.1
39.7
32.3
22.5
24.6
25.7
25.8
5.5
0.4
1.7
LIC Housing Finance

PTC India Fin. Ser.
15,997.5 19,953.3
CONSUMER GOODS
Hindustan Unilever
859.0
31,199.7
33,912.4
38,564.1
3,886.5
4,389.7
5,379.5
18.0
20.3
24.9
18%
47.7
42.3
34.5
143.1
147.2
101.7
104.4
15.0
ITC
325.1
36,507.4
39,066.0
44,378.7
9,607.7
10,220.6
11,653.0
12.0
12.8
14.5
10%
27.1
25.4
22.4
39.0
38.0
30.9
30.4
6.3
1.9
Jyothy Laboratories
307.4
1,514.8
1,724.2
2,016.2
123.1
185.3
196.9
6.7
10.0
10.7
26%
45.9
30.7
28.7
15.8
21.4
22.4
20.7
4.0
1.3
Marico^
225.3
5,733.0
6,190.7
7,022.9
573.5
711.3
857.2
4.4
5.5
6.6
22%
50.7
40.9
33.9
43.4
43.7
34.4
33.2
2.5
1.1
Zydus Wellness
858.1
415.2
432.3
497.6
98.7
108.4
129.0
25.3
27.7
33.0
14%
33.9
31.0
26.0
24.3
24.1
26.2
26.1
6.0
0.7
0.0
IT / IT SERVICES
Firstsource Solution
42.2
3,034.6
3,260.5
3,568.2
234.3
273.6
336.1
3.5
4.1
5.0
20%
12.1
10.3
8.4
11.8
12.9
12.3
13.3
0.0
HCL Technologies***
846.0
37,062.0
41,931.9
46,415.3
7,255.0
7,612.9
8,746.0
51.4
54.0
62.0
10%
16.5
15.7
13.6
37.5
36.0
31.1
29.3
22.0
2.6
1,078.9
53,319.0
60,873.1
68,084.5 12,330.0
13,082.3 14,889.8
53.9
57.2
65.1
10%
20.0
18.9
16.6
34.0
34.8
24.4
25.0
59.5
5.5
Infosys
Persistent Systems
647.2
1,891.3
2,207.0
TCS^^
2,369.6
94,648.4
108,817.7
2,524.4
290.6
Wipro
557.7
46,954.5
50,707.4
55,105.1
8,652.8
BHEL
165.2
29,542.0
27,106.0
32,886.0
1,419.9
721.0
1,945.0
5.8
CESC
522.6
6,189.0
6,628.3
7,149.0
698.0
704.3
765.2
52.4
Crompton Greaves
190.0
14,013.0
14,248.0
15,628.0
183.0
134.0
365.0
2.1
Finolex Cable
250.7
2,449.1
2,736.9
3,162.8
175.8
191.9
243.3
Greaves Cotton
142.2
1,692.2
1,668.6
1,800.3
127.7
187.6
210.4
Kalpataru Power
252.4
4,422.3
4,696.0
5,371.0
165.6
194.0
236.0
66.8
13,081.7
13,561.0
14,080.0
189.3
207.0
216.0
6.4
7.0
7.3
7%
10.4
9.5
9.2
11.4
11.4
191.8
1,312.8
1,601.7
1,935.0
61.4
88.9
124.0
6.0
8.7
12.1
42%
32.0
22.1
15.8
28.0
28.0
121,193.6 19,648.4
358.5
36.3
36.5
44.8
11%
17.8
17.7
14.4
26.3
27.6
19.2
20.3
10.0
1.5
23,746.3 26,496.3
291.8
100.3
121.2
135.3
16%
23.6
19.6
17.5
41.5
37.7
32.4
29.5
32.0
1.4
9,305.0 10,498.9
35.3
37.8
42.6
10%
15.8
14.8
13.1
17.6
17.9
20.2
20.0
12.0
2.2
2.9
7.9
17%
28.5
57.0
20.9
3.1
8.2
2.1
5.5
1.2
0.7
52.9
57.4
5%
10.0
9.9
9.1
7.2
7.3
8.4
8.6
9.0
1.7
2.1
5.8
66%
90.5
90.5
32.8
8.0
11.2
3.0
8.7
1.2
0.6
11.5
12.5
15.9
18%
21.8
20.1
15.8
18.9
21.3
19.3
21.7
1.8
0.7
5.2
7.7
8.6
28%
27.2
18.5
16.5
28.9
29.0
21.5
21.5
1.1
0.7
10.8
12.6
15.4
19%
23.4
20.0
16.4
14.4
15.3
9.0
10.1
1.5
0.6
7.5
7.4
2.2
3.3
25.2
26.8
1.5
0.8
CAPITAL GOODS / POWER
PTC India
Skipper
Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated
^^ FY2015 earnings numbers are on reported basis, including the one-time impact of bonus for employees to the tune of Rs2,627.9 crore.
47
January 2016
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Company
CMP
(Rs)
Sales
Thermax
883.0
Triveni Turbine
109.0
650.8
889.5
1,079.8
93.3
129.2
160.7
2.8
3.9
4.9
32%
38.9
27.9
22.2
62.4
51.1
44.1
36.7
1.0
0.9
Va Tech Wabag
680.3
2,435.2
2,869.0
3,448.0
110.1
137.2
181.1
20.3
25.3
33.4
28%
33.5
26.9
20.4
21.2
24.3
14.4
16.8
4.0
0.6
V-Guard Industries
932.8
1,745.9
1,938.0
2,221.0
70.7
96.0
121.0
23.6
32.0
40.2
31%
39.5
29.1
23.2
32.6
34.4
23.2
24.2
4.5
0.5
737.7
1,601.1
1,965.9
2,527.9
25.0
55.9
106.5
8.3
15.8
30.0
91%
89.2
46.7
24.6
9.2
11.8
7.5
12.3
2.0
0.3
92.0
6,320.7
7,456.3
8,599.1
308.8
205.8
512.1
12.5
6.3
15.6
12%
7.3
14.7
5.9
8.2
9.4
3.4
7.7
4.0
4.3
1.6
FY15
4,697.4
FY16E
4,578.0
Net profit
FY17E
5,072.0
FY15
335.7
FY16E
339.0
FY17E
393.0
FY15
28.2
EPS
(%) EPS
growth
FY16E
28.5
FY17E FY17/FY15
32.9
8%
PE (x)
RoCE (%)
RoNW (%)
FY15 FY16E FY17E FY16E FY17E FY16E

31.3 31.0 26.8 21.2 22.1 14.3
DPS
FY17E
14.9
Div
yield
(Rs) (%)
7.0 0.8
INFRASTRUCTURE / REAL ESTATE

Gayatri Projects
ITNL
IRB Infra
257.9
3,847.5
4,486.4
5,035.6
542.9
628.3
865.8
15.4
17.9
24.6
26%
16.7
14.4
10.5
11.1
13.5
13.7
16.7
4.0
12.0
10,854.3
13,905.8
15,220.7
-867.3
-93.2
115.2
-4.1
-0.4
0.5
-2.9
-27.4
22.2
6.6
7.3
-0.7
0.9
0.0
0.0
1,256.0
57,017.4
62,265.9
71,453.9
4,699.0
4,320.5
5,254.3
50.7
46.5
56.5
6%
24.8
27.0
22.2
12.5
14.2
11.2
12.5
16.3
1.3
30.5
7,090.3
8,316.6
9,381.7 -1,681.4
-356.0
-268.0
-50.6
-10.7
-8.1
0%
-0.6
-2.8
-3.8
-1.7
2.3
-48.8
-58.3
0.0
0.0
Oil India
399.0
9,748.0
9,652.0
2,560.0
2,382.0
41.8
42.6
39.6
-3%
9.5
9.4
10.1
12.9
11.7
11.6
10.2
20.0
5.0
Reliance Ind
995.3 375,435.0
354,461.0
23,011.0 27,459.0
80.1
78.2
93.3
8%
12.4
12.7
10.7
7.7
8.8
9.7
10.5
10.0
1.0
Selan Exploration
206.0
79.3
Aurobindo Pharma
844.3
12,120.5
13,965.1
Cipla
645.7
11,345.4
14,103.8
Cadila Healthcare
320.8
8,651.3
10,475.0
12,352.4
Jaiprakash Associates
Larsen & Toubro
Punj Lloyd
OIL & GAS
74.2
8,956.0
2,510.0
404,645.9 23,566.0
110.9
28.3
26.3
39.1
17.3
16.0
23.8
17%
11.9
12.9
8.7
11.2
15.3
9.1
12.6
5.0
2.4
16,276.9
1,635.4
1,987.0
2,498.0
28.0
34.0
42.8
24%
30.2
24.8
19.7
28.7
31.4
32.5
30.2
3.4
0.4
19,207.6
1,180.8
1,811.9
2,695.9
14.7
22.6
33.6
51%
43.9
28.6
19.2
18.7
22.8
15.4
19.2
2.0
0.3
1,150.6
1,535.0
1,959.0
11.3
15.0
19.0
30%
28.4
21.4
16.9
28.1
32.5
28.3
27.9
2.4
0.7
PHARMACEUTICALS
Divi's Labs
Glenmark Pharma
Ipca Laboratories
Lupin
Sun Pharma
Torrent Pharma
1,149.7
3,114.9
3,732.8
4,580.9
865.5
1,040.2
1,350.3
32.6
39.2
50.9
12%
35.3
29.3
28.1
32.2
33.5
26.1
27.0
10.0
0.9
930.6
6,644.8
8,068.0
9,806.0
747.0
935.0
1,353.7
27.5
34.5
49.9
35%
33.8
27.0
18.6
18.9
22.6
24.2
26.3
2.0
0.2
732.0
3,142.0
3,337.0
3,931.0
254.0
330.0
538.0
19.8
26.1
42.7
47%
37.0
28.0
17.1
13.9
20.0
14.1
19.8
1.0
0.1
1,795.2
12,599.7
14,206.0
16,887.0
2,403.0
2,655.0
3,341.0
53.5
59.1
74.3
18%
33.6
30.4
24.2
30.8
31.0
23.1
22.8
7.5
0.4
799.1
27,286.5
27,804.0
35,413.0
4,778.4
5,573.3
7,695.7
23.1
23.1
32.0
18%
34.6
34.6
25.0
21.4
25.8
17.9
20.4
0.0
0.0
1,448.4
4,585.0
6,680.7
6,804.7
751.0
1,426.8
1,312.8
44.4
84.3
77.6
32%
32.6
17.2
18.7
39.0
32.7
43.5
28.1
11.3
0.8
3,657.3
32,433.0
34,757.0
41,000.0
1,753.0
1,860.0
2,259.0
190.9
202.5
246.0
14%
19.2
18.1
14.9
11.7
13.5
7.3
7.8
18.0
0.5
389.2
3,743.0
4,155.0
4,871.0
258.0
370.0
463.0
10.8
15.6
19.4
34%
36.0
24.9
20.1
13.2
14.6
7.7
8.4
1.5
0.4
11,059.3
6,454.0
6,134.0
9,687.0
462.0
390.0
1,220.0
133.1
112.0
350.3
62%
83.1
98.7
31.6
10.0
20.0
12.0
19.0
22.0
0.2
2,749.2
22,656.0
24,839.0
29,933.0
2,062.0
2,217.0
3,147.0
75.3
80.9
114.9
24%
36.5
34.0
23.9
12.9
16.8
10.6
13.2
9.0
0.3
1.2
BUILDING MATERIALS
Grasim
The Ramco Cements
Shree Cement**
UltraTech Cement
DISCRETIONARY CONSUMPTION
Century Plyboards (I)
172.4
1,588.0
1,768.0
2,088.0
149.0
180.0
224.0
6.7
8.1
10.1
23%
25.7
21.3
17.1
23.4
23.2
38.1
33.3
2.0
Cox and Kings
238.2
2,569.1
2,456.2
2,798.7
399.8
352.4
477.0
23.6
20.8
28.2
9%
10.1
11.4
8.4
11.3
13.5
15.5
18.3
1.0
0.4
Inox Leisure
235.9
1016.8*
1,373.9
1,651.0
20*
72.6
102.1
2.2
7.9
11.1
125%
107.2
29.9
21.3
12.9
15.6
9.7
12.0
0.0
0.0
Info Edge (India)
832.9
611.6
716.5
833.6
164.7
140.0
203.1
13.7
11.6
16.8
11%
60.8
71.8
49.6
11.1
14.9
7.8
10.3
3.0
0.4
KDDL
346.2
411.7
472.8
574.1
8.7
10.5
12.8
9.5
11.5
14.1
22%
36.4
30.1
24.6
13.3
13.4
16.5
16.4
2.0
0.6
KKCL
2,140.3
405.1
453.2
526.6
66.3
73.8
101.3
53.7
59.8
82.1
24%
39.9
35.8
26.1
29.3
31.5
21.5
26.0
22.0
1.0
Orbit Exports
384.0
158.0
175.0
209.0
27.9
30.8
31.0
19.4
22.8
27.6
19%
19.8
16.8
13.9
20.9
21.9
30.5
29.4
4.5
1.2
Raymond
419.0
5,352.0
5,850.0
6,497.0
115.8
88.3
124.3
18.9
14.4
20.2
3%
22.2
29.1
20.7
10.0
11.2
5.5
7.3
3.0
0.7
Relaxo Footwear
500.9
1,472.8
1,765.4
2,153.5
103.1
133.3
179.9
8.6
11.1
15.0
32%
58.2
45.1
33.4
26.0
27.7
22.1
22.3
0.5
0.1
Speciality Restaurants 142.3
299.4
341.6
430.7
9.5
10.9
28.6
2.0
2.3
6.1
75%
71.2
61.9
23.3
4.8
12.0
3.5
8.9
1.0
0.7
0.2
Thomas Cook India
204.4
3244.3#
3,850.8
4,596.1
112.3
151.0
325.4
2.8
3.6
7.8
67%
73.0
56.8
26.2
20.4
21.8
23.4
25.6
0.5
Wonderla Holidays
396.4
181.9
212.9
312.5
50.6
56.1
74.1
9.0
9.9
13.1
21%
44.0
40.0
30.3
22.0
27.4
15.6
19.3
1.5
0.4
Zee Entertainment
422.0
4,883.7
5,727.5
6,767.1
977.5
1,075.2
1,353.9
8.6
9.9
12.4
20%
49.1
42.6
34.0
23.6
26.4
18.8
20.6
2.6
0.6
0.3
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
2,159.9
10,260.1
11,425.6
584.2
639.3
44.9
49.2
48.1
43.9
8.9
7.1
7.0
Bajaj Holdings
1,660.2
523.9
2,028.7
182.3
9.1
32.5
2.0
326.8
92,039.0
97,293.0
107,143.0
5,883.0
5,211.0
6,712.0
14.7
13.0
16.8
7%
22.2
25.1
19.5
12.3
14.2
5.4
10.2
3.9
1.2
Bharti Airtel
Bharat Electronics
1,370.1
6,775.9
7,742.9
9,312.0
1,100.6
1,324.3
1,598.8
45.9
55.2
66.6
21%
29.9
24.8
20.6
16.4
17.5
12.5
13.3
9.2
0.7
Gateway Distriparks
313.5
1,105.0
1,070.0
1,175.0
187.8
153.0
187.0
17.3
14.1
17.2
0%
18.1
22.2
18.2
14.5
17.2
16.7
20.1
7.0
2.2
Max India
517.5
14,815.0
279.6
10.5
49.3
5.0
1.0
PI Industries
656.1
1,939.7
2,225.0
2,613.4
224.8
286.9
354.9
16.7
21.3
26.3
25%
39.3
30.8
24.9
33.9
35.2
28.2
27.5
2.5
0.4
Ratnamani Metals
540.5
1,675.6
1,685.0
1,922.0
172.5
162.9
200.5
37.0
34.9
42.9
8%
14.6
15.5
12.6
23.3
24.9
16.7
17.7
5.5
1.0
Supreme Industries
689.0
4,255.2
3,354.0
5,239.0
311.7
257.2
396.5
24.5
20.2
31.2
13%
28.1
34.1
22.1
22.0
28.3
18.7
24.2
9.0
1.3
UPL
433.9
12,090.5
13,198.5
15,000.7
1,224.0
1,220.7
1,534.3
28.6
28.5
35.8
12%
15.2
15.2
12.1
15.9
17.6
18.3
19.2
5.0
1.2
^Marico post bonus 1:1

**June-ended financial year till FY2015, FY2016 consists of only 9 months
Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers
Divis Labs post 1:1 bonus
BEL post Bonus: 2: 1
*** June ended
48
* Inox Leisure FY2015 includes consolidation of Satyam Cineplexes, which will affect the overall profitability
#We have annualised these ratios to make them comparable
Cadila Healthcare post stock split from Rs 5 to Rs 1
January 2016
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
Automobiles
Apollo Tyres
Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share. The management is
expecting strong demand traction in the European operations (particularly the summer tyre segment) and is
gaining market share in Europe. Further, the domestic operations would see a pick-up in demand since H2FY15.
The margins may sustain at higher levels due to subdued raw material prices. The company will be investing
$560mn over the next three years to set up a greenfield facility in Hungary and Rs4,000 crore to expand capacity
at Chennai facility. We maintain our Buy recommendation on the stock with a price target of Rs201.
Ashok Leyland
Ashok Leyland, the second largest CV manufacturer in India, is a pure CV play. The MHCV volumes which have
been under pressure over the past two years have witnessed a sustained recovery and been growing in double
digits over the past few quarters. We expect MHCV volumes to remain buoyant over FY16-17 driven by a pickup in the economic cycle, improved operator profitability and phase-wise implementation of Bharat Stage IV
norms across the country leading to pre-buying. The company has managed to take price hikes which along with
the higher operating leverage has propped up the margins. We have a Buy recommendation on the stock with a
price target of Rs105.
Bajaj Auto
Bajaj Autos domestic motorcycle volumes have been under pressure over the last couple of years largely due to
issues in the executive segment and a drop in its market share to an all-time low of 15.2% in Q4FY2015 from
24.5% in FY2013. However, the launch of CT100 and refreshed Platina has given a much needed volume push
while the newly launched Pulsar variants would help consolidate its leadership in the premium motorcycle segment.
After a blip in Q4FY15, exports are getting back on track and are expected to see a strong growth going ahead.
The launch of its quadricycle, RE60, has been delayed by legal issues and the matter is expected to be sorted soon.
The company maintains industry leading EBITDA margins and the rupees depreciation is expected to boost its
profitability as exports contribute 45% of the total revenues.
Gabriel India
Gabriel is one of Indias leading manufacturers of shock absorbers and front forks with a diversified customer
base. While the demand scenario is expected to remain muted in FY2016, we expect a robust growth in FY2017
on the back of a revival in motorcycle demand, ramp-up in supplies to Honda Motorcycle and Scooters new plant
in Gujarat and to the new models of both Maruti Suzuki and M&M. Moreover, with increasing utilisation levels
and higher proportion of revenues from the profitable CV segment, the OPM is expected to expand from 7.0% in
FY14 to 9.2% in FY17. Further, a reduction in debt level would lead to higher return ratios, going forward.
Therefore, we recommend a Buy with a price target of Rs105.
Hero MotoCorp
HMCL is the largest two-wheeler manufacturer in the world with sales of over 6.6mn vehicles in FY15 and a
domestic market share of 42%. We expect the two-wheeler industry to grow at 10-12% CAGR over the next five
years driven by increased penetration levels in rural areas and replacement demand. HMCL is expected to maintain
its leadership position in the industry. It has presence in the fast growing scooter segment with two models. It will
launch a couple of new scooters and double the scooter capacity which would boost its volumes. HMCL has
aggressive plans to increase export contribution to 10% (currently 2%) by 2017. Also, with the Leap program,
which is being implemented currently, the management targets an OPM expansion of 200BPS in the next couple
of years through cost rationalisation. We recommend a Buy with a price target of Rs3,250.
M&M
M&M is a leading maker of tractors and UVs in India. We expect demand for the automobile segment to pick up
with an improvement in customer sentiment. Additionally, new launches especially in the compact UV space will
drive volume growth. After growing in strong double digits, the tractor demand was under pressure in FY15-16
due to weak monsoon rainfall. However, with the expectation of normal rainfall we expect the tractor segment to
recover and report a strong growth in FY17. We remain positive on the stock, given its leadership position in the
domestic tractor and UV segments as well as the value derived from its subsidiaries across business segments.
Maruti Suzuki
Rico Auto Inds.
Maruti Suzuki is Indias largest passenger vehicle maker with a strong 45% market share. It has been able to gain
market share over the last two years on the back of a diverse product portfolio, a large distribution network with
an increased focus on rural markets and a shift in consumer preference to petrol models from diesel. It is poised to
reap the benefits from the increased discretionary spending from the Seventh Pay Commission pay-out. The
recently launched premium hatchback, Baleno, has received a positive response which will help the company
expand market share in the segment. Further, the company has a pipeline of new launches over the next few years,
with the most important being the entry into the compact utility vehicle and light commercial vehicle segments.
The management plans to double its existing sales and distribution network in order to achieve its target of
doubling domestic volumes over the next five years. The profitability remains high due to soft commodity prices,
depreciation of the yen and high operating leverage. We remain positive on the stock with a price target of
Rs5,400.
Rico is one of the largest producers of high-pressure non-ferrous die castings for the auto sector. It has recently
divested its 50% stake in a joint venture with FCC Co., Japan for Rs495 crore. The significant cash flow (nearly
equivalent to current market cap) is expected to be a game changer for the company and enable it to deleverage its
balance sheet and fund future capex. Additionally, a lower interest burden will result in an exponential growth in
the earnings and free cash flow. The company will be commissioning three new plants in the next 12 months and
is poised to benefit from an auto demand revival. We have a Buy recommendation on the stock with a price target
of Rs58.
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TVS Motor
Allahabad Bank
Andhra Bank
Andhra Bank, with a wide network of over 2,200 branches across the country, has a strong presence in south
India especially in Andhra Pradesh. Though it is trading at an attractive valuation, but the concerns on asset
quality front and the political situation within the state could affect its operations. Valuation factors the same.
Axis Bank
Axis Bank is the third largest private sectors bank, continues to grow faster than the industry and is diversifying its
book in favour of the retail segment. The banks liability profile has improved significantly which would help to
sustain the margins at healthy levels. We expect the earnings growth to remain reasonably strong driven by a
healthy operating performance while asset quality pressures will be manageable.
Bajaj Finance
Bajaj Finance, owned by Bajaj Finserv, is one of the most diversified and leading NBFCs in the country. It has
assets spread across products, viz loans for consumer durables, two- and three-wheelers, loans to small and medium
enterprises (SMEs), mortgage loans and commercial loans. Despite a strong growth in loans, the asset quality and
provisioning remain among the best in the system. Given the strong growth rate, high margins and return ratios,
it deserves to trade at a premium to the other NBFCs
Bajaj Finserv
Bajaj Finserv is a financial conglomerate having presence in financing business (vehicle finance, consumer finance
and distribution) and is among the top players in the life insurance and general insurance segments. Its consumer
finance (Bajaj Finance) and general insurance businesses continue to report a robust performance while the life
insurance business is showing signs of a pick-up after being affected by a change in regulations.
Bank of Baroda
Bank of Baroda is among the top public sector banks (PSBs) having a sizeable overseas presence (over 100 offices
in 24 countries) and a strong network of over 5,200 branches across the country. It has a stronghold in western
and eastern India. Its performance metrics remain superior to that of the other PSBs, though the asset quality
trends will be the key monitorable in the near term.
Bank of India
Bank of India has a network of over 4,900 branches, spread across the country and abroad, along with a diversified
product and services portfolio, and steadily growing assets. The operating performance has weakened due to
margin deterioration and sharp rise in NPAs. Given the rise in the number of incremental stressed loans and the
relatively weaker capital position, its valuations may remain subdued.
Capital First
Capital First (erstwhile Future Capital Holdings) has been acquired by global private equity firm, Warburg Pincus
(a 72% stake). The present management has taken several initiatives to tap the high-growth retail product segments,
like gold loans, loan against property and loan against shares. It has a strong CAR and sound asset quality. Its
loan book is expected to sustain a 25-30% growth in the next three years. As a result of several initiatives taken,
the operating leverage will play out and may lead to significant pick-up in profitability over medium term.
Corp Bank
Corporation Bank is a mid-sized PSB having a relatively higher presence in south India. It is predominantly
exposed to the corporate segment, which constitutes about 45% of its book. Due to a higher dependence on the
wholesale business and a low CASA ratio, it lags its peers in terms of operational performance. Also, the rise in
NPAs could keep provisioning high and weaken earnings performance.
Federal Bank
Federal Bank is among the better performing old private sector banks in India with a strong presence in south
India, especially Kerala. Under the new management, the bank has taken several initiatives, which would improve
the quality of its earnings and asset book. The asset quality has consistently improved in the past several quarters
and the operating performance is picking up gradually. The valuations remain attractive over the medium to long term.
HDFC
HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. It
has interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries are
growing faster than HDFC, the value contributed by them would be significantly higher going forward. Due to a
dominant market share and consistent return ratios, it should continue to command a premium over the other
NBFCs. Any unlocking of value from its insurance business will be positive for the stock.
HDFC Bank
ICICI Bank
HDFC Bank is among the top performing banks in the country having deep roots in the retail segments. Despite
the general slowdown in the credit growth, the bank continues to report a strong growth in advances from retail
products. Its relatively high margins (compared with its peers), strong branch network and better asset quality
make HDFC Bank a safe bet and there is scope for expansion in the valuations.
ICICI Bank is Indias largest private sector bank with a network of over 4,000 branches in India and a presence in
around 18 countries. The bank has once again entered an expansionary mode after making a conscious effort to
TVS Motor is the fourth largest two-wheeler manufacturer in the country with a strong presence in the scooter
segment. The scooter segment has grown at a CAGR of 25% over the past five years as opposed to 12% CAGR in
motorcycles and currently contributes 30% of the total two-wheeler volumes. With the launch of the Jupiter in
October 2013, the company has balanced its scooter portfolio and witnessed incremental volumes. Additionally,
new launches such as Star City+, refreshed Wego and new Scooty Zest have helped maintain the growth momentum.
The company will launch two new motorcycles in H1CY16. Exports, especially of three-wheelers, are doing
extremely well. We expect a margin expansion of 180BPS over FY15-17.
Banks & Finance
With a wide network of over 3,100 branches spread across India, Allahabad Bank enjoys a stronghold in north and east
India. But it has reported a rise in slippages resulting in deterioration of its asset quality. Relatively higher proportion of
stressed assets and low tier-I CAR remain concerns, though the low valuation partly factors the same.
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contract its advances book due to asset quality concerns. The operating profit improved significantly and is the
key driver of the earnings growth. The bank offers substantial value unlocking opportunities from the insurance
and securities businesses.
IDBI Bank
IDBI Bank is one of leading PSBs of India, though it is largely present in the corporate lending space. It is gradually
working towards improving its liability base and expanding the retail book which is likely to reflect in the form of
better margins and return ratios. However, due to rising asset quality risks, low tier-I CAR and slower business
growth, the stock is likely to underperform in the near term.
LIC Housing
LICHFL is the third largest mortgage financier (including banks) in India with a market share of 11% and loan
book of over Rs1,00,000 crore. It is promoted by Life Insurance Corporation of India, which is among the most
trusted brand in the country. With over 200 branches, 1,241 direct sales agents, 6,535 home loan agents and 782
customer relationship associates, the company has among the strongest distribution structures in India to support
business expansion. Going ahead, a revival in the economy and moderation in the borrowing rates could be the
key triggers for the stock. Therefore, considering stable RoE of ~20%, sound asset quality and healthy growth
outlook, the companys fundamentals are strong.
PNB
Punjab National Bank has one of the best liability mixes in the banking space, with low-cost deposits constituting
around 40% of its total deposits. This helps it to maintain one of the highest margins among PSBs. However, in
view of the weakness in the economy and relatively higher exposure to troubled sectors, the asset quality stress has
increased and NPA issues will persist over next 2-3 quarters.
PFS
PTC India Financial Services, owned by PTC India, is focused on providing financial solutions to projects in the
energy value chain. Given the robust lending opportunities in the renewable energy segment and the likely reforms
in the thermal power segment, the loan growth is expected to remain strong over the next two to three years. The
proceeds from exits in investments would add to the profitability. The asset quality despite some deterioration
remains among the best in the system.
SBI
State Bank of India is the largest bank of India with loan assets of over Rs12 lakh crore. The loan growth for FY15
was in line with the industry average while the core operating performance was relatively strong. The successful
merger of the associate banks and value unlocking from insurance business could provide further upside for the
bank. While the bank is favourably placed in terms of liability base and the operating profit is also improving, the
asset quality would remain a key monitorable in the near term.
Union Bank
Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become the
largest retail bank. Hence, it has ramped up its manpower and infrastructure to ramp up retail, SME lending.
While the high stressed loans and weak capital ratios remain concerns with the bank, the current valuations are at
steep discount to book value which partly factors the concerns.
Yes Bank
Yes Bank, a new generation private bank, started its operations in November 2004 and has emerged as among
the top performing banks. It follows a unique business model based on knowledge banking, which offers product
depth and a sustainable competitive edge over established banking players. The bank is suitably poised to ride
the recovery in the economy and the retail deposit franchise is showing a sharp improvement which will support
the margins.
Britannia
GSK Consumers
GCPL
HUL
ITC
Consumer goods
Britannia is the second largest player in the Indian biscuit market with about 30% market share. Under a new
leadership, Britannia has been able to leverage and monetise its strong brand and position in the biscuit and snack
segments. The company can sustain its higher than industry growth rates with an improving distribution reach, entry
into newer categories and focus on cost efficiency. We recommend a Buy on the stock with a price target of Rs3,650.
GSK Consumer Healthcare is a leading player in the MFD segment with a close to 70% share in the domestic market.
Judicious new launches and brand extensions, and the expansion of its distribution reach have helped it to stay ahead
of the competition and maintain its pricing power over the years. In a bid to de-risk its business model, it has expanded
its product portfolio by entering into new categories such as biscuits and oats in the recent years. With cash balance
of more than Rs2,000 crore the company can invest in growth initiatives as well as reward its investors with a healthy
dividend payment. We recommend Buy on the stock.
Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide market
segments in India. The recent acquisitions of Darling Group, Tura, Megasari and Latin American companies have
helped the company to expand its geographic footprint. We believe the decent sales volume growth in the domestic
business coupled with a strong growth in the Indonesian, African and Argentine businesses would help it to
achieve an 18% top line growth and a 26% bottom line growth (CAGR) over FY15-17.
Hindustan Unilever is Indias largest FMCG Company. With declining inflation and improving sentiment, HULs
volume growth in the domestic business is expected to improve in the coming years. Also it would be one of the
key beneficiaries of reducing input prices. Though business fundamentals have improved, the valuation remains at
premium levels. Hence we recommend Hold on the stock. In the long term, it will be one of the key beneficiaries
of the Indian consumerism story.
ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, to
strengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses some
of which are at a nascent stage. The fourth consecutive year of a 15%+ hike in excise duty will continue to put
pressure on the cigarette sales volume. However price hikes will maintain the profitability of the cigarette business.
The current valuation makes ITC one of the cheapest stocks in the large-cap FMCG space.
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Jyothy Labs
Jyothy Laboratories is the market leader in the fabric whitener segment in India. With the successful integration of
Henkel and the induction of a new management team led by S Raghunanadan, it is transforming itself from a onebrand wonder to an aggressive FMCG player. We expect its top line to grow at a CAGR of 15%. A stable OPM
and lower interest cost would aid the PAT to grow at 26% CAGR over FY15-17.
Marico
Marico is among Indias leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing
in the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of new
product categories (especially in the beauty and wellness space) and growth through acquisitions. While the domestic
product portfolio is likely to achieve a steady growth in volumes, the international business is yet to gain momentum.
Marico has been our preferred pick in the FMCG sector and we remain positive on its long-term growth story.
Zydus Wellness
Firstsource
Zydus Wellness is bearing the brunt of a limited product portfolio of three brands (Nutralite, Sugar Free and
Everyuth) that cater to a niche category. The company would benefit from a lower input cost, improving urban
consumer sentiment and a new distribution system in FY17. Thus, we expect a better operating performance from
it in FY17.
IT/IT services
Firstsource Solutions is a specialized BPO service provider. The management has indicated that the worst is over
for earnings downgrades and expects to see an improvement in the earnings starting from Q2FY2016. The health
of its balance sheet is improving gradually as the company is gradually reducing its debt burden through internal
accruals. The management maintains a 6-8% revenue growth guidance for FY16. We expect the earnings momentum
to gather steam and FSL to deliver much higher numbers than the current consensus estimate.
HCL Tech
HCL Technologies is a global technology company. Its management indicates that the demand environment looks
promising with an increase in market share coupled with a significant increase in the deal funnel. However, recent
client specific issue and skewed IMS revenues will affect the earnings performance in the near term. Nevertheless,
the management has made investments in digital technologies and Internet of things (IOT), and already won a few
deals in the space. (25% of total deals wins in FY2015 comes from digital space). However, the margins are
expected to remain under pressure in the medium term owing to these investments. We remain positive on the
company in view of its order wins and superior earnings visibility, notwithstanding some near-term softness in the
IMS vertical owing to some projects delays.
Infosys
Infosys is India's premier IT and IT-enabled Services Company that provides business consulting, technology,
engineering and outsourcing services. For FY16, the management has maintained revenue guidance of 10-12% Y-oY growth on a CC basis and increased guidance on a reported basis to 7.2-9.2% from 6-8% earlier, led by lesser impact
of cross-currency headwinds. It has also given a promising aspiration target for 2020 of achieving $20bn in revenues
and 30% in margin. Margins will recover in the next two to three years. For FY16, the management maintained its
margin of 24-25%. Under the leadership of Vishal Sikka, the company is doing the right thing by investing in the digital
space (both organic and inorganic), improving client engagement through design thinking, and automating and
innovating for future growth prospects. We remain positive on the companys growth prospects for the coming years.
Persistent
Persistent Systems has proven expertise and a strong presence in newer technologies, strength to improve its IP
base and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies. Looking at
the strong growth in enterprise revenue, which has delivered a 9% CQGR in the last six quarters, PSLs enterprise
digital transformation strategy is shaping up well. Further, led by the recent acquisitions of Aepona Holdings and
a pick-up in the IP-led revenue in Q4FY2016, we expect the revenue momentum to accelerate in FY17. The
company is also likely to see a gradual improvement in the margins with the tapering off of the SG&A investments
and Aepona Holdings integration.
TCS
Tata Consultancy Services is among the pioneers of the IT services outsourcing business in India and is the largest
IT service firm in the country. Its management aspires to beat the Nasscom growth guidance of 12-14%. Though
the management expects the weakness in the telecom, energy and Diligenta businesses to continue, it expects
clients IT budget to increase modestly in FY16. We remain positive on the company, given its strong positioning,
scale advantage and head start in digital technology.
Wipro
BHEL
Wipro is among the top 5 IT companies in India but in the last few years it has been lagging the industry in terms of
growth. We believe, owing to weakness in the energy and telecom spaces, its unlikely to show material improvement
in earnings on an organic basis in FY16. However, we remain sceptical, as anecdotal evidence on Wipro in the last
two to three years does not inspire confidence.
Capital goods/Power
Bharat Heavy Electricals, Indias biggest power equipment manufacturer, has been the prime beneficiary of the multifold increase in the investments made in the domestic power sector over the last few years. However, the order inflow
has been showing signs of slowing down which would remain a major concern for the company. The key challenge
before the company now would be to maintain a robust order inflow and margin amid rising competition and lower
order inflow. The current order book of around Rs1 lakh crore stands at around 3.4x FY15 sales.
CESC
CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) which
is a strong cash generating business. Further, 600MW of regulated generation capacity (to serve Kolkata distribution)
has come on stream recently in Haldia. However, another 600MW is ready in Chandrapur which is looking for
coal and power purchase linkage. The losses in the retail business are coming down gradually over the past and it
is expected to break even soon. The BPO subsidiary, FirstSource, is performing well in line with expectations.
However, the recent diversification into unrelated businesses like IPL franchisee would hurt its valuations.
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Crompton Greaves Crompton Greaves key businessesindustrial and power systems--are passing through a rough patch and are
potential beneficiaries of the upcoming investment cycle revival. Its consumer product segment is expected to
sustain a high growth and unlock value from a demerger exercise. The troubled international power system
business, which was a major overhang for the stock, is considered for sale. This along with the demerger of the
consumer business could unlock value for shareholders.
Finolex Cables
Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improving
demand environment in its core business of cables. It is leveraging its brand strength to build a high-margin
consumer product business of fans. However, a derivative exposure and the subsequent overhang are matters of
past now, leading to a strong case for a re-rating. We see a healthy earnings growth, return ratios in high teens and
superior cash flow which bode well for the stock. Hence, we remain positive on the stock.
Greaves Cotton
Greaves Cotton is a mid-sized and well-diversified engineering company. Its core competencies are in diesel/petrol
engines, power gensets, agro engines, pump sets (engine segment) and construction equipment (infrastructure
equipment segment). The foray in the mini tractor segment and international markets would open new growth
avenues. The management has taken a strategic call to close and hive off the loss-making divisions. The steps
taken include (1) the closure of the legacy casting unit in Pune; (2) the hive-off of the engineering unit in Germany;
and (3) the closure of operations at the infrastructure division. With the closure of the infrastructure business and
an expected improvement in the engine business, we expect the company to return to its 15%-plus OPM level.
Kalpataru
Kalpataru Power Transmission is a leading EPC player in the transmission & distribution space in India.
Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility (also current
consol order book is 1.4x its FY14 sales). The OPM of the stand-alone business is likely to remain around 10%;
however the OPM of JMC Projects (a subsidiary) is showing signs of improvement. We retain our Buy rating.
PTC India
PTC India is a leading power trading company in India with a market share of 35-40% in the short-term trading
market. In the last few years, the company has made substantial investments in areas like power generation
projects and power project financing which will start contributing to its earnings. Long pending receivables was
one of the drags on the companys balance sheet and return ratios; however, the concern has receded after receiving
payment from UPSEB. We retain Buy due to expectations of a healthy volume uptick with an increasing share of
long-term contract business.
Skipper
Skipper is uniquely placed to exploit the growing opportunities in two lucrative segments: power (transmission
tower manufacturing and EPC projects) and water (PVC pipes). It has a comfortable order book of more than
Rs2,000 crore in the transmission business, which looks promising given the huge investments proposal by the
government in the power T&D segment in the next five years. It plans to expand the PVC capacity manifold (4x)
and aspires to turn a national player from a regional player. After the revamp of its low-margin steel tube business
and due to operating leverage the overall margin may improve substantially in the next two years and boost its
earnings and return ratios. The earnings are poised to surge; hence we are positive on the stock.
Thermax
The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Incs
capex. Thermax group order book stands at around 2.4x its FY15 consolidated revenues. However, the company
has shown its ability to maintain a double-digit margin in a tough environment. We retain Hold on the stock due
to its rich valuation.
Triveni Turbines
Triveni Turbines Ltd (TTL) is a market leader in the up to 30MW steam turbine segment. TTL is at an inflexion
point with a strong ramp-up in the after-market segment and overseas business while the domestic market is
showing distinct signs of a pick-up. The company has also formed a JV with GE for steam turbines of 30-100MW
range which is likely to grow multifold in the next 4-5 years. TTL is virtually a debt-free company with a limited
capex requirement and an efficient working capital cycle, reflected in very healthy return ratios. Further, boosted
by the expected uptick in the domestic capex cycle, the companys earnings are likely to grow by 25%+ per annum
over the next 3-4 years.
V Guard Ind
V-Guard Industries is an established brand in the electrical and household goods space, particularly in south
India. Over the years, it has successfully ramped up its operation and network to become a multi-product company.
It has recently also forayed into regions other than the south and is particularly focusing on the tier-II and III cities
where there is a lot of pent-up demand for its products. We expect a CAGR of over 13% in its earnings over FY1517 and RoE of around 22% during this period.
Va Tech Wabag
Gayatri Proj
VA Tech Wabag (VTW) is one of the worlds leading companies in the water treatment field with eight decades of
plant building experience. Given the rising scarcity of fresh water availability, we expect flow of huge investments
in water segment both globally and domestically. With rising urbanisation and industrialisation in India, we
expect substantial investments in this space. Moreover, we expect the water segment to get substantial focus and
budgetary allocation, with the pro-reform BJP-led government at the centre. Given the large opportunity ahead
and inherent strengths of VTW, like professional management, niche technical expertise and global presence, we
expect the earnings to grow by 28% (CAGR) during FY15-17 and generate RoE of around 15%.
Infrastructure/Real estate
Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road and
industrial construction businesses. The order book stands at Rs5,968 crore, which is 3.7x its FY15 revenues. It is
also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to private equity.
The company has potential to transform itself into a bigger entity.
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IL&FS Trans
IL&FS Transportation Networks is Indias largest player in the BOT road segment with a pan-India presence and
a diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with the
geographical diversification across 12 states reduce the risk to a large extent and provide comfort. Further, a
strong pedigree along with the outsourcing of civil construction activity helps it to scale up its portfolio faster.
Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector.
IRB Infra
IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator in
the country with all its projects being toll based. It has an integrated business model with an in-house construction
arm which provides a competitive advantage in bidding for the larger projects and captures the entire value from
the BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-free
and it has presence in high-growth corridors which provides healthy cash flow. Thus, it is well poised to benefit
from the huge opportunity in the road development projects on the back of its proven execution capability and the
scale of its operations.
Jaiprakash Asso
Jaiprakash Associates, Indias leading cement and construction company, is all set to reap the benefits of Indias
infrastructure spending. The company has also monetised very well the real estate properties of Yamuna Expressway.
The marked improvement in the macro environment has improved accessibility to capital and thus eased the
concerns of liquidity to some extent. However, higher leverage could act as drag on the valuation.
L&T
Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the
domestic infrastructure capex cycle. Further, backed by its sound execution track record and healthy order book, the
company will do well. Monetisation of the non-core businesses and listing of L&T Infotech would unlock value.
Measures planned by the company to improve its return ratios augur well. Hence, we remain positive on the stock.
Punj Lloyd
Punj Lloyd is the second largest EPC player in the country with a global presence. However, since FY09 the
profitability has come under severe pressure due to cost overruns/liquidated damages in some of Simon Carves (a
subsidiary) projects. Thus, it has put Simon Carves under administration. Further, Libyan projects will take another
few quarters to begin execution. Therefore, the successful execution of its projects along with debt reduction and
working capital management will drive its growth as it enjoys a robust order book.
Oil India
Reliance Ind
Selan Exploration
Aurobindo Pharma
Cadila
Oil & gas

Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India.
The total proven and proven and probable reserves of the company stand at 52 MMTOE and 121 MMTOE
respectively. Its reserve-replacement ratio is also healthy. It offers a healthy dividend yield and the full benefit of
the recent policy reforms like deregulation of diesel, gas price revision and DBT scheme for LPG consumers are
expected to reflect in its future earnings and add value. However, weak crude oil prices are going to weigh heavily
on the earnings and, in turn, on the stock price for some time.
Reliance Industries has one of the largest and complex refining businesses in India which enjoys a substantially higher
refining margin over the benchmark GRM. Further, its petrochemical business is also highly efficient, where RIL is
expanding capacity. We expect the GRM to remain healthy and the petrochem margin to be maintained in the medium
term on an uptick in the domestic demand. Currently, the decline in gas output from the KG-D6 basin is weighing
on the stock price; however, capex in downstream business (incremental capacity in the petchem business and petcoke
gasification in refining) would be the earnings driver in the coming years. Large investment in Reliance Jio could add
value in long term.
Selan Exploration Technology is an oil E&P company with five oil fields in the oil-rich Cambay Basin of Gujarat.
The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production.
Further, it intends to explore its next field, Indrora, which is the most prolific one with significant reserves. Based
on this, we expect it to ramp up production significantly, subject to approval for the new wells. However, weak
global oil prices are likely to be an overhang on the stock in the medium term.
Pharmaceuticals
Aurobindo Pharma is set to post a healthy growth on the back of a ramp-up in the US and European markets,
thanks to a strong product pipeline built over a period and focus on niche segments like injectibles, hormones,
penems and sterile products. The expected increase in the export-led business and a favourable tilt in the revenue
mix are likely to boost the margin, resulting in a faster growth in the earnings as compared with the revenues. It
has recently acquired the commercial operations (revenue size EUR320mn) of Actavis Plc in seven western European
countries and of Natrol in the USA to take on the nutraceutical business, which is a strategic fit.
Cadila Healthcares performance in the US generic vertical is likely to improve on the back of new product
approvals. Besides, its consumer business and exports to the emerging markets will help it to achieve a superior
growth. It got DCGI approval for its first NCE called Lipaglyn to treat type-II diabetes; this will add value to its
R&D pipeline. Cadila has recently received warning letter for two facilities. The key products like gAsacol HD,
gPrevacid, gNexium and gToprol are under process for site transfers and would be future key triggers as these
products are limited competition products. For the near term we believe the news is negative for the company
(already factored in the current market price) as the timeline for product approvals could be further delayed.
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Cipla
Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on
technology-intensive products in the inhalation and nasal spray segments; (2) established front-end presence in the
key markets like South Africa, USA and Europe; (3) developed an appetite for inorganic expansions; and (4)
invested in future growth areas like biosimilars. Though the rationalisation of products and creation of front-end
presence in the key markets would hurt earnings in the short term, but the base business would continue to grow
steadily. The growth would be fast-tracked on the back of the launch of combination inhalers in Europe, ramp-up
in generics in the USA and synergy from consolidation.
Divis Labs
The DSN SEZ facility at Vishakhapatnam that started in June 2011 augurs well for Divis Laboratories. The
company is likely to see an improvement in economies of scale which will also lead to tax benefits after USFDA
approvals for three additional production blocks. A near debt-free balance sheet and strong cash flow are likely to
help build a war chest for pursuing strategic investments (biosimilars) and exploit the growth opportunities in
niche segments, like oncology and steroids for contraceptives. The company has planned to set up a new facility at
Vishakhapatnam with an initial investment of Rs500 crore; it will start contributing revenues from H2FY17.
Glenmark Pharma
Glenmark Pharmaceuticals exhibited a weaker operating performance during H1FY16 due to adverse economic
scenario in the key emerging markets including Russia and a fewer number of product approvals in the USA.
However, the management has given a revenue growth guidance of 18-20% for FY16 (vs 11% in FY15) and an
EBITDA guidance of Rs1,750 crore for the same period (vs Rs1,359 crore in FY15; a Y-o-Y growth of 30%). The
growth would be mainly driven by the US and Latin American markets, which are witnessing exponential growth.
The companys focus on innovation augers well as evident from the fact that it received over $200 million as initial
milestone payment on out-licensing of partly developed molecules in a span of nine years. Currently, it has three
new chemical entities and four new biological entities in clinical trials, out-licensing potential.
Ipca Lab
Ipca Laboratories has successfully capitalised on its inherent strength of producing low-cost drugs to tap the
export markets. But, it has recently got an import alert from USFDA for its Ratlam API facility and the formulation
facility at Indore SEZ. While the overhang related to the USFDA ban is unlikely to ease in near term, a respite is
expected from the shipment of two products to the US market, namely hydroxychloroquine sulfate and propranolol
hydrochloride (exempted from the import ban), and a clearance on its Ratlam facility by the WHO. This will help
the company to resume a significant portion of the institutional business. The management has guided for a
moderate growth outlook (revenue growth of 10% and EBIDTA margin of 17-18%) for FY16.
Lupin
The expected ramp-up in the launch of oral contraceptives, ophthalmic products, branded franchise (with addition
of in-licenced product-Alinia, Inspira Chamber VHC and Locoid lotion) in the USA and a robust pipeline of new
launches in the domestic and overseas markets provide strong growth visibility for Lupin. Further, with an expanded
field force and therapy focused marketing division, its formulation business in the domestic market has been
performing better than the industry. The deal with Eli-Lilly to distribute human insulin would open an incremental
revenue stream for Lupin in the Indian market.
Sun Pharma
The combination of Sun Pharma, Taro, Dusa Pharma, the generic business of URL Pharma and the recently
acquired Ranbaxy offers an excellent business model for Sun Phaarma. However, the integration process with
Ranbaxy is set to affect the profitability in short term. Also, the USFDAs adverse observation report (Form-483)
on its Halol (Gujarat) facility creates a major overhang. However, the management maintains its aim to achieve a
$250-mn synergy from the merger of Ranbaxy by FY18. With a strong cash balance, it is well positioned to
capitalise on the growth opportunities and inorganic initiatives.
Torrent Pharma
Grasim
The Ramco Cements
A well-known name in the domestic formulation market, Torrent Pharmaceuticals has been investing in expanding
its international presence. With the investment phase now over, it should start gaining from its international
operations in the USA, Russia and Brazil. Better field force productivity, focus on developed market and stronger
balance sheet would result in a sustainable earnings growth. It has recently acquired 30 key brands of Elder
Pharma for Rs2,000 crore which is a strategic fit in long run. The company has proposed to raise funds up to
Rs10,000 crore through a mix of equity and debt instruments, part of which may be used for inorganic initiatives.
Building materials
Grasim is better placed compared with the other large players in the cement space due to its strong balance sheet, comfortable
debt/equity ratio, attractive valuation and diversified business. The demand for VSF products remains strong in the global
market and Grasim being a leading domestic player is well placed to capture the incremental demand. However, a slowdown
in demand for VSF and cement may affect the near-term earnings. The long-term outlook for the company remains intact.
The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from the capacity addition
carried out ahead of its peers in the southern region. The 3mtpa expansion will provide the much-needed volume
growth in the future. The regional demand remains lacklustre but on account of the improvement in the realisation
due to supply discipline and a likely change in the market mix its profitability will improve (marginally) in FY16.
Shree Cement
Shree Cements cement grinding capacity has grown to 18.2mtpa which will support its volume growth in the
coming years. It has a power plant with capacity of 300MW entirely for merchant sale which is expected to
support its revenue growth going ahead. Thus, a volume growth of the cement division and the additional revenue
accruing from the sale of surplus power will drive the earnings of the company.
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FUNDAMENTALS
EARNINGS GUIDE
Remarks
UltraTech Cement
UltraTech Cement is Indias largest cement company with approximately 62mtpa cement capacity. It has benefited
from an improvement in its market mix. Further, the ramping-up of the new capacity and savings accruing from
the new captive power plants will improve its cost efficiency.
Discretionary consumption
Century Plyboard Century Plyboard is a leading player in the organised plywood industry with a market share of 25%. A strong growth
in the sector, Centurys premium positioning and brand equity strength, and the impending GST roll-out would enable
it to post a revenue growth (CAGR) of 16.5% over FY14-17. On the back of a revenue growth and better absorption
of fixed costs, the earnings are likely to grow at a much stronger rate of 25% CAGR over FY14-17. It is a quality
consumer play in a niche growing segment. Its robust return ratios and strong growth potential make us positive on
the stock. We have a Buy rating on it with a price target of Rs260.
Cox & Kings:
Cox & Kings is an integrated player with a strong presence in the global leisure travel segment and the education
tourism segment in Europe. It has 30% market share in the global outbound tourism market and a market leader
in education tourism in the UK. An improving global macro environment (conducive to travel & tourism industry)
and the companys focus on de-leveraging its balance sheet will help it to achieve a double-digit earnings growth
in the medium term. Hence, we recommend a Buy on it with a price target of Rs300.
Info Edge (India)
Info Edge is Indias premier online classified company in the recruitment, matrimony, real estate, education and
related service sectors. Naukri is a quality play on the improving macro environment and is directly related to the
GDP growth and Internet/mobile penetration. Thus, it can grow consistently at over 20% for the next few years.
We expect Zomato business growth to extend in the coming years, with better integration of services and increasing
monetisation opportunities. Zomatos online ordering services are currently available for around 12,000 restaurant
partners and it expects to take the count to more than 20,000 in FY2016. Going ahead, other investee ventures,
like www.meritnation.com, www.policybazaar.com, www.mydala.com and www.canvera.com, are also likely to
gain from the ongoing e-commerce boom in India.
INOX Leisure
INOX Leisure Ltd (ILL), Indias second largest multiplex operator with 101 properties and 393 screens across 55
cities accounting for about 23% of the multiplex screens in India, is scripting a blockbuster growth story through
a mix of inorganic and organic expansion plan to scale up the total screen count to 565-570 screens over the next
24-30 months. The ILL mega show is supported by an improving content quality in the Indian mainstream and
regional cinema with its movies regularly hitting the Rs100-crore or Rs200-crore box-office collection mark. We
believe ILL with its strong brand and extended reach is well poised to leverage the opportunity in Indias underpenetrated multiplex sector.
KKCL
Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has
created a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is ahead
of its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled with
a robust balance sheet make us positive on the company.
KKDL
KKDL Ltd (erstwhile Kamala Dials and Devices) is present in the watch manufacturing business and has a strong
presence in the luxury watches retail business through subsidiary, Ethos. The watch business generates steady revenues
and cash flow with minimal capex, as no capacity is likely to come on stream and the utilisation levels are expected
to improve. The high-end retail watch business Ethos provides a strong growth opportunity in terms of revenue
growth via its online venture wherein it generates leads that translate into lower customer acquisition cost and better
fixed cost management that would result in robust margin improvement and strong profit growth. This unique highgrowth potential business along with the steady manufacturing business that generates free cash is attractively priced
currently and offers significant returns over the medium to long term. We put a Buy rating on the stock, valuing it
using the SOTP method (the manufacturing vertical is valued at 6x FY17E earnings + the high-end Ethos is valued
at 1.1x FY17E sales) to arrive at a price target of Rs400.
Orbit exports
Orbit Exports (Orbit) is a leading manufacturer and exporter of novelty fabrics exporting its products to over 32
countries. It is a recognised star export house and operates in the niche area of high-end fancy fabrics, which are mainly
used by designers in womens fashion apparels. A strong OPM profile has enabled it to earn higher returns averaging
at 21% in RoCE and at 33% in RoE over the last three years. Given the strong financials, niche capabilities and a
vigilant management, Orbit is well poised for a strong earnings growth. Hence, we expect its top line and bottom line
to grow at a CAGR of 19.6% and 22.8% respectively over FY15-18. Given the robust earnings potential and enviable
return ratios, Orbit is expected to trade at higher multiples. Thus, we expect the stock to get re-rated (in line with its
peers like Kitex Garments). We initiate coverage on Orbit with a Buy rating and value the company at 22x its FY2017E
earnings to arrive at a price target of Rs600.
Raymond
Raymond is present in the fast-growing discretionary & lifestyle category of branded textiles and apparels. With
growing incomes, rise in aspirations to lead a luxurious life, greater discretionary spending and favourable
demographics, the segment of branded apparels & fabrics presents a good growth opportunity and Raymond with
its brands and superior distribution set-up is very well geared to encash the same. Any development with regard to
the Thane land in the form of either joint development or disposal would lead to value unlocking and provide
significant cash to the company.
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January 2016
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EARNINGS GUIDE
FUNDAMENTALS
Remarks
Relaxo Footwear Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four topof-the-mind-recall brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investment
opportunity due to its growing scale, strong brand positioning and healthy financial performance.
Speciality Rest.
Speciality Restaurants is a leading player in the fine-dining space with a portfolio of well-established brands such
as Mainland China and Sigree. It is a good proxy on the Indian consumption story as several factors such as
demographics, increasing disposable income and the trend of nuclear families are playing in its favour. Given the
slow pace of growth of consumer discretionary spending and pressure on the operating profit margin due to the
addition of new stores, we maintain our Hold rating on the stock.
Thomas Cook (I) Thomas Cook India Ltd (TCIL), owned by the legendary value investor Prem Watsa, is an integrated leisure travel
and human service management company in India. The improvement in the domestic and global macro environments
provides a huge growth opportunity in the Indian leisure and travel industry. Quess Corp (its human resource
management business) provides exposure to the fast growing HR, office management and technology solutions
business. Moreover, we see a turn-around in the financial performance of Sterling. The recent stock price correction
coupled with the improving financial health of Sterling Resorts, visibility in Quess Corp business and expansion in
the OPM and earnings, provide an opportunity to re-enter the stock. Hence, we maintain Buy with a price target
of Rs265.
Wonderla Holidays
Wonderla Holidays Ltd (WHL) is the largest amusement park company in India with over a decade of successful
and profitable operations. It owns and operates two amusement parks under the brand name Wonderla in Kochi
and Bengaluru, and is coming up with a third park in Hyderabad (to be operational by Q1FY17). With a steady
improvement in footfalls, the Hyderabad park getting operational in Q1FY17, a strong growth in the non-ticket
revenues (F&B and product sales) and an 8-10% increase in the annual ticket price, WHLs revenues are expected
to grow at a CAGR of 30% over FY15-18. Its OPM of 44-45% is better compared with some of the mature
international parks.
Zee Entertainment
Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainment
companies. It has a bouquet of more than 34 channels across Hindi, regional, sports and lifestyle genres. For FY16,
the management has indicated that the margin profile will be maintained at around 25.7% 25%. The management
also indicates a better operating environment in terms of both advertisement revenues and subscription revenues. On
the advertisement side, the management expects to exceed the industrys low-teen growth in FY16. The subscription
revenue will also benefit from the phases III and IV of the digitisation process (will be more visible in FY17 and FY18).
Diversified/Miscellaneous
Aditya Birla Nuvo We like the strong positioning that Aditya Birla Nuvos businesses enjoy in their respective fields. It is amongst the
top five players in the insurance, asset management and telecom segments (Idea Cellular is the fastest growing telecom
company, third in ranking). Madura Garments, with its marquee brands, and consistent and resilient growth, is a
profitable set-up. In an improving macro-economic environment the company would be well placed to grow.
Bajaj Holdings
Bajaj Holdings & Investment Ltd (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its
manufacturing business was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business consisting of the
wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and properties,
assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing and strategic ones, now remain
with BHIL. BHIL is a primary investment company focused on new business opportunities. It holds more than 30%
stake each in BAL and BFS. We have a Buy recommendation on the stock with a price target of Rs1,815.
Bharti Airtel
Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industry
as well as the company focusing on the quality of revenues rather than volume, better times can be expected ahead
for the sector and hence the company. We remain optimistic about the company.
BEL
Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, stands to benefit from
the enhanced budgetary outlay for strengthening and modernising the countrys security. The Make in India
initiative of the government will support the earnings growth in the coming years, as it is the only player with strong
research and manufacturing units across the country. The companys current order book of around Rs21,648 crore
provides revenue visibility for the next three to four years.
GDL
With its dominant presence in the container freight station segment and recent forays into the rail freight and cold
chain businesses, Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cow
while its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largest
players in the CFS business and has also evolved as the largest player in the rail freight business as well as the cold
storage business. The proposed capex for all the three segments will strengthen its presence in each of the segments
and increase its pan-India presence. We expect its revenues and net profit to grow at 20% and 16% CAGR
respectively over FY13-15.
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January 2016
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Max India
FUNDAMENTALS
EARNINGS GUIDE
Max India is a unique investment opportunity providing direct exposure to two sunrise industries of insurance
and healthcare services. Max New York Life, its life insurance subsidiary, is among the leading private sector
players, has gained the critical mass and enjoys some of the best operating parameters in the industry. As the
insurance sector is showing signs of stablisation, the companys favourable product mix and a strong distribution
channel will result in a healthy growth in the annual premium equivalent. The company has turned profitable on
a consolidated basis and has announced dividend in past couple of years.
Ratnamani Metals Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. In spite of the challenging business
environment due to increasing competition, the stock is attractively valued. The management has maintained a strong
outlook on the potential opportunities in the oil & gas sector and inter-connection of the rivers across the country.
Supreme Ind
Supreme Industries is a leading manufacturer of plastic products with a significant presence across piping, packaging,
industrial and consumer segments. We remain positive on its new launches of value-added products and capacity
expansion plans. However, the recent volatility in the prices of its raw materials (mainly polymers) amid a highly
competitive environment is likely to limit the growth in the margin in the near term. Hence, while we remain
positive on its long-term structural story, we maintain our Hold rating on the stock.
UPL
A leading global producer of crop protection products, intermediates, specialty chemicals and other industrial
chemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop
protection products and post-harvest activities. A diversified geography and the recent acquisition of DVA Agro
Brazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Its
revenues are likely to grow at 12-15% and EBIDTA margin is expected to remain at 18-20% in FY16. It has also
started to focus on premium products in agro-chemicals and will slowly stop selling commodities and low-margin
products. It has also started to focus on selling premium products and maintaining a strong balance sheet.
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Products & Services

From Sharekhans Desk

RESEARCH BASED EQUITY PRODUCTS

ProPrime - Diversified Equity 40

Top SIP Fund Picks

MUTUAL FUNDS DESK

STOCK IDEAS STANDING (AS ON DECEMBER 03, 2015)

CURRENT PRICE AS ON PRICE

STOCK IDEAS STANDING (AS ON DECEMBER 03, 2015)

CURRENT PRICE AS ON PRICE

In Top Picks basket

** Price target under review

from sharekhans desk

FROM SHAREKHANS DESK

Not just local anymore

DECEMBER 23, 2015

Turning around slowly but surely

policy stance in most major economies and regions would remain

2016: Economic recovery to gain strength...: There are signs of an

3 CsConsumption, Capital, Cyclical: Besides bottom-up picks,

...to reflect in corporate earnings: For a good part of 2015 the

SENSEX ONE-YEAR FORWARD P/E BAND

Global trends to remain mixed; India relatively better placed but

Source: Bloomberg, Sharekhan Research

Economy firming up, growth to accelerate in 2016

levels by January 2017. The Wholesale Price Index inflation has

and stimulate consumption which is already showing signs of

GDP, IIP GROWTH IMPROVING

Consumer sentiment especially in the urban areas is showing signs

Source: CSO, Bloomberg

TRENDS IN MARUTI SALES (NOS), POST-SIXTH PAY COMMISSION HIKE

Further rate cuts to bring down cost of capital

INTEREST RATES DOWN TRENDING

Governments infra spending to aid long-term growth

allocation based on the Finance Commissions recommendation, and

the underground water levels have fallen following two years of

NHAI ROAD PROJECT AWARDS GAINING PACE

WEAK MONSOON AFFECTS AGRICULTURE INCOME

Source: NHAI, Ministry of Road and Transport

Addressal of infra issues holds the key, private capex to pick up

Pace of reforms a concern, Union Budget will be keenly watched

Addressal of the bottlenecks in the infrastructure sector has been

GROWTH IN GOVERNMENT CONSUMPTION

RAJYA SABHA COMPOSITION

Source: Planning commission

Rural economy in distress

and PSBs due to a global slowdown. However, the intensity of the

its Bihar debacle, consolidation of the opposition parties and the

SENSEX CONSENSUS EARNINGS (EPS) ESTIMATE

Corporate earnings to report a notable improvement in 2016

SENSEX EARNINGS GROWTH EX GLOBAL CYCLICALS

S&P 500 Advance

Fed Funds rate

Rising upgrades/downgrades ratio (mid-sized firms) is a positive

India remains attractive to foreign investors despite rate hike in

Earnings downgrade cycle easing

merchandise trade deficit. The government has vowed to achieve

From REER perspective, the INR is overvalued by more than 10%

FOREIGN FUND INFLOWS (RS CR)

Equities: Better placed to outperform other asset classes

Positive real interest rate: As compared with a negative real

On the other hand, equities tend to perform well in an economic