India Top Picks 5 June 2014

This is not a research report and has not been produced by a research unit.
Important disclosures can be found in the

Disclosures Appendix.
1

Standard Chartered Securities
India Top Picks equity strategy

Equities | 5 June 2014

Markets in a consolidation phase for now
We have added Tata Steel (TATA IN) to our Top Picks this
month.
The uncertainty surrounding the general election ended with a
decisive mandate in favour of National Democratic Alliance
(NDA). The markets rallied with key benchmark indices Sensex
and Nifty touching their all time high levels.
This is the first time after the 1984 Lok Sabha elections that any
single party has secured absolute majority. We believe markets
have entered a consolidation phase and are awaiting major
announcements from government before further gains can be
seen. Initial indications are that the forthcoming budget may
throw some positive surprises. Foreign investment inflows remain
robust and the month of May witnessed USD 2.4bn of inflows,
showing confidence in the India growth story.
We remain optimistic and suggest investors with long term
horizon consider staying invested and underweight investors use
any dip to consider accumulating additional equity exposure. The
key to further upside will be the budget, to be presented in July,
which is expected to outline the new governments broad macro
policy framework, particularly its reform agenda.
Of the stocks we highlight, we believe Bharti (BHARTI IN) has
the most favourable technicals. We would advocate investors
consider adding to this name at current levels, where
appropriate.

Contents
Markets in a consolidation phase 1
India Top Picks 2
India Top Picks Review 2
Will history repeat itself 5
Technical Commentary 6
India Top Picks Results Update 17
Sector Performance & Valuations 18
Important Information 20

Mitesh Dalal
Chief Investment Strategist

Nishit Sheregar
Investment Strategist

Shishir Narsinghani
Associate Strategist

Soumen Das
Senior Quantitative Strategist
India Top Picks (Refer to appendix for a summary of the rationale behind each stocks selection)
Ticker Name Sector
Stock
Price
Consensus
Rating
12m
Fwd P/E
12m
Fwd P/B Div Yield
Div
Payout% TR 1M% TR YTD% YTD% USD
TR
ITD%INR
LPC IN Lupin Ltd Healthcare 922.0 4.6 18.8 4.6 0.8 13.6 -8.7% 1.9% 6.4% 0.9%
CIPLA IN Cipla Ltd Healthcare 387.2 3.7 19.2 2.7 0.5 0.0 -3.7% -3.4% 0.9% 28.3%
LT IN Larsen & Toubro Industrials 1646.0 4.2 26.9 3.7 0.7 21.9 30.3% 53.8% 60.7% 93.7%
TECHM IN Tech Mahindra Technology 1895.9 4.5 13.4 3.5 0.3 5.0 3.2% 3.2% 7.8% 91.4%
HCLT IN HCL Technologies Technology 1382.8 4.5 13.8 3.9 1.2 20.7 -2.9% 10.1% 15.1% 10.5%
MSIL IN Maruti Suzuki Discretionary 2324.3 4.1 20.4 2.9 0.3 9.8 23.4% 31.8% 37.7% 67.1%
TTMT IN Tata Motors Ltd Discretionary 420.8 4.6 7.7 1.8 0.5 6.4 1.4% 11.8% 16.8% 17.6%
RIL IN Reliance Industries Energy 1082.2 4.1 12.9 1.5 0.9 12.4 17.6% 22.0% 27.4% 48.8%
ICICIBC IN ICICI Bank Financials 1464.2 4.5 - - 1.4 24.1 16.9% 33.3% 39.2% 70.8%
AXSB IN Axis Bank Financials 1900.9 4.3 11.0 1.9 0.9 17.5 24.2% 46.3% 52.8% 47.1%
BHARTI IN Bharti Airtel Telecom Svs 361.6 4.4 25.7 2.2 0.3 16.7 11.1% 9.5% 14.4% 7.8%
ITC IN ITC Ltd Staples 336.7 4.6 25.1 8.5 1.8 54.5 -1.1% 4.6% 9.3% 53.5%
TPWR IN Tata Power Co Utilities 106.1 4.0 16.6 1.8 1.0 - 32.3% 20.3% 25.7% 24.5%

TATA IN Tata Steel Ltd Materials 492.9 3.8 11.0 1.2 1.6 - 26.4% 16.2% 0.0% -

Source: Bloomberg, Standard Chartered, data as of 02 June 2014

India Top Picks
Here, we highlight our Top Picks in India on a sector
Technicals section on pages 7-14 highlights select stocks with
Our key sector calls over the next 12 months
Industrials (OW) We are positive on the sector on the expected revival of economic growth, fast tracking of stalled projects
and expected policy reforms after the formation of the new government.
Utilities (OW) Resolution of stranded assets in the power sector, faster signing of
greater imported fuel
restructuring of distribution companies
Energy (OW) The Oil & Gas sector has witnessed creeping reforms (diesel price hikes leading to lower losses) and
higher gas prices which should

India Top Picks Review
We have added Tata Steel (TATA IN) to our list of
month.

Current Top Picks:
Tata Steel Ltd (TATA IN)
Tata Steel is a major beneficiary of a likely
steel sector dynamics driven by low long steel inventory
stable demand due to limited new capacity addition from major
players.
Improving demand in European markets
Odisha mining ban (contributes c.50% of
production) by Supreme Court are key trigge
Ongoing capital expenditure at the Odisha plant will keep the
balance sheet under pressure, but near term earnings momentum
should outweigh balance sheet concerns.
Valuations: The stock is trading at 1.2x P/B
historical P/B of 2.0x.
Risks: Increasing competition from China
pricing and margins.
Equity strategy India Top Picks

on a sector-agnostic basis. For a brief view on each individual stock, refer to page
highlights select stocks with favourable technical views on a 1-3 months basis.
We are positive on the sector on the expected revival of economic growth, fast tracking of stalled projects
and expected policy reforms after the formation of the new government.
Resolution of stranded assets in the power sector, faster signing of Fuel Supply
imported fuel-price pass-through, increase in gas supply in the medium term and financial
tribution companies can lend further support to the sector
The Oil & Gas sector has witnessed creeping reforms (diesel price hikes leading to lower losses) and
which should lead to an increase in sector capex and productivity in the next 1
to our list of Top Picks this
likely turnaround in the India
driven by low long steel inventory and
stable demand due to limited new capacity addition from major
European markets and the lifting of the
Odisha mining ban (contributes c.50% of companys total iron ore
key triggers.
Ongoing capital expenditure at the Odisha plant will keep the
balance sheet under pressure, but near term earnings momentum
should outweigh balance sheet concerns.
1.2x P/B versus the 10-year
Increasing competition from China could put pressure on
Stock
Tata Steel TATA IN

Tata Steels topline showing traction from
and international business
Sales growth y/y
Source: Bloomberg, Standard Chartered

India Top Picks | 05 June 2014
2
view on each individual stock, refer to page 16. The
3 months basis.
We are positive on the sector on the expected revival of economic growth, fast tracking of stalled projects
Fuel Supply Agreements (FSA),
in gas supply in the medium term and financial
pport to the sector.
The Oil & Gas sector has witnessed creeping reforms (diesel price hikes leading to lower losses) and
lead to an increase in sector capex and productivity in the next 1-2 years.
Ticker View
Tata Steel TATA IN Add

s topline showing traction from domestic
and international business
Standard Chartered

Larsen & Toubro (LT IN)
We retain our confidence on LT, likely to be one of
beneficiaries of a recovery in infrastructure capex, and relaxation
in government policies in defence, power and infrastructure
Growth in LTs new order book growth of
conviction on a likely recovery of capex cycle. International
business (c.33% contribution to total sales) should
to drive healthy topline.
Robust Q4FY14 results, up 69% y/y
guidance for consolidated order inflow of 20% y/y and margins
maintained at +/- 100 bps are the key positives.
Valuations: The stock is trading at 4x P/B versus
of 5.4x.
Risks: Delay in implementing reforms by the new government

Lupin (LPC IN)
Lupins India business (contributes c.22% of total revenue)
weak spot, as sales grew by c.2% y/y
growth. Overall margins remain robust.
US and Europe formulation sales (including IP)
contributing 47% to overall sales.
On a positive note, the management continue
new launches in FY15. Further, investors can expect Lupin to
grow inorganically, as the company is looking at acquisitions
Valuations: The stock is trading at attractive levels at
P/E, below the 10-year average of 34.6x.
Risks: Continued slowdown in domestic business due to increase in
competition intensity.

likely to be one of the biggest
infrastructure capex, and relaxation
in government policies in defence, power and infrastructure.
of 15% y/y, reiterates our
recovery of capex cycle. International
% contribution to total sales) should also continue
y/y, strong management
guidance for consolidated order inflow of 20% y/y and margins
100 bps are the key positives.
versus its 10-year average
elay in implementing reforms by the new government.
(contributes c.22% of total revenue) is one
grew by c.2% y/y, pulling down overall
(including IP) grew by 28.2%y/y
On a positive note, the management continues to guide for 15-20
Further, investors can expect Lupin to
grow inorganically, as the company is looking at acquisitions.
The stock is trading at attractive levels at 18.8x forward
siness due to increase in
LT a likely beneficiary
rebound
LT Business segmentation

Lupin margins continue to expand
India business
EBITDA margins

3
beneficiary of infrastructure capex
LT Business segmentation

continue to expand despite slowing

Standard Chartered

ITC Ltd. (ITC IN)
ITC Ltd. announced an in-line set of earnings for
healthy top line growth and strong EBIT margin
hikes.
Net sales, EBITDA and Profit after Tax grew 12%
18% y/y, respectively. While price hikes dented volum
margins grew by a strong 21% y/y.
FMCG segment reported a profit for the first time in FY14.
net sales grew a strong 19.2% on capacity expansion and price
increases. Agri business and Hotel segments
performers.
Strong performance in a weak environment reinforces ITCs
earnings growth resilience. We expect demand for staples to
recover only in FY16 and a poor monsoon could worsen demand
further. Hence, within staples, ITC is best placed to deliver mid
high-teens EPS growth.
Valuations: At 25.2x forward P/E, the stock is trading at attractive
levels versus its historical 10-year average P/E
Risks: Declining cigarette volume (4th fourth successive quarter) and
falling paper margin (the lowest in nine years)

CIPLA Ltd. (CIPLA IN)
Ciplas net profit declined 6% y/y, domestic sales rose 19.3% y/y
and exports of formulations rose 30% y/y
Higher spend on R&D is likely to build a strong pipeline in the US
and other global markets.
We continue to be positive, as the inhaler franchise
launches in US and Europe should drive sustainable growth over
the longer term.
Valuations: The stock is trading at 19.1x 12m forward
10-year average of 24.5x.
Risks: Further increase in R&D expenditure could dent margins.

line set of earnings for 4QFY14, with
strong EBIT margin growth led by price
grew 12% y/y, 18%y/y and
. While price hikes dented volumes, the
FMCG segment reported a profit for the first time in FY14. Paper
net sales grew a strong 19.2% on capacity expansion and price
egments were moderate
Strong performance in a weak environment reinforces ITCs
earnings growth resilience. We expect demand for staples to
recover only in FY16 and a poor monsoon could worsen demand
further. Hence, within staples, ITC is best placed to deliver mid- to
he stock is trading at attractive
P/E of 27.4x.
Declining cigarette volume (4th fourth successive quarter) and
years).
net profit declined 6% y/y, domestic sales rose 19.3% y/y
and exports of formulations rose 30% y/y
to build a strong pipeline in the US
inhaler franchise and new
should drive sustainable growth over
x 12m forward P/E versus the
xpenditure could dent margins.

ITC
Profit before Interest and tax

CIPLA EBITDA margins
Ciplas EBITDA Margin (%)
Source: Bloomberg, Company
4
rofit before Interest and tax margin

CIPLA EBITDA margins
Margin (%)

Source: Bloomberg, Company

Will the History repeat itself ?
All eyes are on Prime Minister Mr. Narendra Modi. If past experience
(1984 decisive mandate) is to be given weight, then
indeed rosy. Meanwhile, under the leadership of Mr. Modi, Gujarats
economic performance outperformed the rest of the country
2000 and investors anticipate the repeat in his
larger canvas.
Narendra Modi, the Prime Minister of India, is guided by the principle
of Collective efforts, inclusive growth where each and every person
an important stakeholder.
Believing that the progress of states is crucia
development, the Prime Minister has designed the
1. Build confidence in bureaucracy
2. Welcome innovative ideas & babus to be given freedom to work
3. Education, Health, Water. Energy & roads will be priority
4. Transparency in the government. E-auction to be promoted
5. System will be placed for inter-ministerial issues
6. People-oriented system to be in placed in government machinery
7. Addressing concerns relating to economy
8. Infrastructure and investment reforms
9. Implement policy in a time-bound manner
10. Stability and sustain ability in government policy

Will the History repeat itself ?
All eyes are on Prime Minister Mr. Narendra Modi. If past experience
(1984 decisive mandate) is to be given weight, then the outlook is
nder the leadership of Mr. Modi, Gujarats
the rest of the country since
in his performance trait on a
is guided by the principle
of Collective efforts, inclusive growth where each and every person is
Believing that the progress of states is crucial for the country's
has designed the ten point vision:-
2. Welcome innovative ideas & babus to be given freedom to work
3. Education, Health, Water. Energy & roads will be priority
auction to be promoted
ministerial issues
oriented system to be in placed in government machinery

government policy.
In 1984, Sensex rallied decisively over next 5 years
after the new government got absolute majority

Can past performance be
GDP CAGR growth (%) since 1960

0
100
200
300
400
500
600
700
800
900
J
u
n
-
8
0
N
o
v
-
8
0
A
p
r
-
8
1
S
e
p
-
8
1
F
e
b
-
8
2
J
u
l
-
8
2
D
e
c
-
8
2
M
a
y
-
8
3
5
rallied decisively over next 5 years
after the new government got absolute majority

Can past performance be benchmark for future
CAGR growth (%) since 1960

245.3
792.2
M
a
y
-
8
3
O
c
t
-
8
3
M
a
r
-
8
4
A
u
g
-
8
4
J
a
n
-
8
5
J
u
n
-
8
5
N
o
v
-
8
5
A
p
r
-
8
6
S
e
p
-
8
6
F
e
b
-
8
7
J
u
l
-
8
7
D
e
c
-
8
7
M
a
y
-
8
8
O
c
t
-
8
8
M
a
r
-
8
9
A
u
g
-
8
9
J
a
n
-
9
0

Equity strategy India Top Picks | 05 June 2014

6

Technical Commentary
Below, we present the technical views for our India Top Picks. The stocks are given a rating of 1-5, with 1 being the most
favourable and 5 being the least favourable on a 1-3 months basis. This is from a pure technical standpoint and may run contrary
to the fundamental views we hold of the stocks within the portfolio, which is on a 12-month basis.
India Top Picks Technical rating
Name Ticker Sector Rating
HCL Tech HCLT IN IT 1
Tech Mahindra TECHM IN IT 1
Bharti BHARTI IN Telecom 1
Larsen & Toubro LT IN Industrials 2
Axis Bank AXSB IN Financials 2
Tata Power TPWR IN Utilities 2
Lupin LPC IN Healthcare 2
Cipla CIPLA IN Healthcare 2
ICICI Bank ICICIBC IN Financials 2
Tata Steel TATA IN Materials 3
Maruti Suzuki Ltd MSIL IN Discretionary 3
Tata Motors TTMT IN Discretionary 3
Reliance RIL IN Energy 3
ITC ITC IN Staples 3

Source: Standard Chartered, Metastock
Views as of 02 June 2014


7

Technical Commentary (contd)

BSE SENSEX After
the strong rally, we
expect the Sensex to
consolidate within a
range of 23500
25000 in the month of
June 2014, but with a
positive bias.
However, we would
remain bullish from a
medium to long term
perspective. Our long
term target for the
Sensex is 28000. The
long term uptrend is
likely to remain intact
as long as the Sensex
maintains the long
term support line at
21000.

Weekly Chart
Source: Metastock, Standard Chartered, data as on 02 June 2014

Lupin (LPC IN) The
stock should retain its
positive momentum as
long as it can hold the
support at INR 900.
The stock may touch
INR 1,100 in the
medium term.

Weekly Chart _______ 100 EMA _______ 200 EMA


8


Cipla (CIPLA IN)
The stock once again
found support at INR
370 and pulled back
from the support level.
The stock may face
resistance at INR410
and above that
INR425. The medium-
term uptrend should
remain intact as long
as the stock holds key
support at INR 355.

Weekly Chart

Larsen & Toubro (LT
IN) We remain
positive in the longer
term. However, we
expect correction from
the current level in the
short term as the stock
is trading near key
resistance line at INR
1600. Support is at
1,400.

Weekly Chart _______ 50 EMA _______ 100 EMA _______ 200 EMA


9


Tech Mahindra
(TECHM IN) The
stock is likely to move
higher from the current
level and it may touch
INR2050 in the near
term. Key support is at
INR1700.

Weekly Chart _______ 50 EMA

HCL Tech (HCLT IN)
The stock is likely to
maintain its positive
momentum as long as
it holds the support at
INR 1,340. We expect
the stock to
range of INR 1,300-
1,500 in the near term.
Weekly Chart _______ 50EMA _______ 100 EMA


10


Maruti Suzuki (MSIL
IN) The stock
continues to trade
within an upward
channel. The medium-
term uptrend is
expected to remain
intact as long as it
holds support at INR
1,500.

Weekly Chart

Tata Motors (TTMT
IN) The stock
continues to trade
within an upward
channel. Currently, the
stock is trading near
the upper band of the
channel at INR 430.
We expect the stock to
range of INR 380-430
in the near term.

Daily Chart
Source: Metastock, Standard Chartered, data as on 02 June 2014 _______ 100 EMA _______ 200 EMA


11


Reliance Industries
(RIL IN) The stock
has moved up sharply
and faces resistance
near key resistance at
INR1160. It is likely to
trade within a broad
range of INR 960-1160
in the near term.

ICICI Bank (ICICIBC
IN) The stock has
given positive
breakout. The
medium-term uptrend
should remain intact
as long as the stock
trades above the key
support at INR 1,250.
Long term target is
INR 2000.



12


Axis Bank (AXSB IN)
The stock has given
positive breakout. The
medium-term uptrend
is expected to remain
intact as long as the
stock trades above the
key support at INR
1,600. However, we
expect a correction or
consolidation in the
near term before
resuming its positive
momentum.

Weekly Chart

Bharti Airtel (BHARTI
IN) The stock is
trading near multi-year
key resistance at
INR370. The stock is
expected to continue
consolidating within
INR 290-370 in the
near term before
resuming its uptrend.

Weekly Chart _______ 50 EMA _______ 100EMA


13


ITC (ITC IN) The
stock continues to
range of INR 309-360.
The medium-term
uptrend would remain
intact as long as the
stock stays above INR
309.

Weekly Chart

Tata Power (TPWR
IN) After a
consolidation, the
stock has given
positive breakout at
INR 95. Looking at the
current momentum,
the stock may touch
INR 120, where it may
face strong resistance.
Support is at INR 90.



14

Tata Steel (TATA IN)
The stock is trading
near key resistance at
INR480. The stock is
likely to correct from
the current level.
However, it may trade
within a range of INR
390 480. Support is
at INR 415.



15

India Top Picks Performance & Valuations

India Top Picks performance and valuations (local currency)
Ticker Name Sector
Stock
Price
Consensus
Rating
12m
Fwd P/E
12m
Fwd P/B Div Yield
Div
Payout% TR 1M% TR YTD% YTD% USD
TR
ITD%INR
LPC IN Lupin Ltd Healthcare 922.0 4.6 18.8 4.6 0.8 13.6 -8.7% 1.9% 6.4% 0.9%
CIPLA IN Cipla Ltd Healthcare 387.2 3.7 19.2 2.7 0.5 0.0 -3.7% -3.4% 0.9% 28.3%
LT IN Larsen & Toubro Industrials 1646.0 4.2 26.9 3.7 0.7 21.9 30.3% 53.8% 60.7% 93.7%
TECHM IN Tech Mahindra Technology 1895.9 4.5 13.4 3.5 0.3 5.0 3.2% 3.2% 7.8% 91.4%
HCLT IN HCL Technologies Technology 1382.8 4.5 13.8 3.9 1.2 20.7 -2.9% 10.1% 15.1% 10.5%
MSIL IN Maruti Suzuki Discretionary 2324.3 4.1 20.4 2.9 0.3 9.8 23.4% 31.8% 37.7% 67.1%
TTMT IN Tata Motors Ltd Discretionary 420.8 4.6 7.7 1.8 0.5 6.4 1.4% 11.8% 16.8% 17.6%
RIL IN Reliance Industries Energy 1082.2 4.1 12.9 1.5 0.9 12.4 17.6% 22.0% 27.4% 48.8%
ICICIBC IN ICICI Bank Financials 1464.2 4.5 - - 1.4 24.1 16.9% 33.3% 39.2% 70.8%
AXSB IN Axis Bank Financials 1900.9 4.3 11.0 1.9 0.9 17.5 24.2% 46.3% 52.8% 47.1%
BHARTI IN Bharti Airtel Telecom Svs 361.6 4.4 25.7 2.2 0.3 16.7 11.1% 9.5% 14.4% 7.8%
ITC IN ITC Ltd Staples 336.7 4.6 25.1 8.5 1.8 54.5 -1.1% 4.6% 9.3% 53.5%
TPWR IN Tata Power Co Utilities 106.1 4.0 16.6 1.8 1.0 - 32.3% 20.3% 25.7% 24.5%
TATA IN Tata Steel Ltd Materials 492.9 3.8 11.0 1.2 1.6 - 26.4% 16.2% 0.0% -

As of 02 June 2014


16

India Top Picks Stock Rationale

India Top Picks stock rationales
Company Ticker Sector Conviction
Lupin LPC IN Healthcare Strong growth in markets like US, Europe, South Africa in API business and entry
into high growth markets like Mexico and acquiring technology research
capabilities will help propel future growth.
Cipla CIPLA IN Healthcare Company expects future revenue growth to be led by respiratory launches in EU
markets and better than market growth in the domestic market.
Larsen & Toubro LT IN Industrials Beneficiary of re-rating in industrial sector. Further, focus on railways, renewable
and power could be future revenue drivers.
Tech Mahindra TECHM IN Technology Valuations attractive as trading at a significant discount to peers and have room to
expand given better revenue and EPS growth profile.
HCL Technologies HCLT IN Technology The fear of strong INR impacting the earnings is overstated and a seasonally
strong period ahead is positive for potential news-flow/outperformance.
Maruti Suzuki MSIL IN Discretionary Improvement in consumer sentiment and cementing of leadership position with
new launches are key positives.
Reliance Industries RIL IN Energy Clarity on gas price hike should lead to a revival of E&P investments and further
improve margin outlook.
ICICI Bank ICICIBC IN Financials The fast track of reforms in power and infrastructure sectors will reduce the risk of
recovery.
AXIS Bank AXSB IN Financials Large exposure to power, infrastructure and SME portfolio, the risk to which will
reduce with the improving macro economy and revival of the capex cycle.
Bharti Airtel BHARTI IN Telecom Svs Potential divesture of African tower business will help de-lever the balance sheet.
African business remains sluggish with a sequential revenue decline.
ITC ITC IN Staples Strong earnings growth in the weak environment coupled with the first time profit in
FMCG business are the key drivers.
Tata Motors TTMT IN Discretionary Capacity expansion at Solihull and the Chinas JV launch along with JLRs healthy
product line coupled with the strong demand for Range Rover and Range Rover
Sport should drive volume growth.
Tata Power TPWR IN Utilities Improved regulatory environment and reduced risk of receivables especially in
distribution business along with the completion of the Arutmin stake sale are the
positive triggers.
Tata Steel TATA IN Materials Improving demand in domestic and European markets and the lifting of the Odisha
mining ban by Supreme Court are key triggers

Source: Standard Chartered


17

India Top Picks Results Update

Name Report Date Quarter Results Comments
ITC LTD 05/24/2014 Q4 Meet Cigarette margins remained strong while FMCG businesses reported profit
for the first time in FY 14
LARSEN & TOUBRO 06/02/2014 Q4 Beat EBITDA margin hit 14.4% (up 237bps y/y) due to the write-back of warranty
provisions. Even after adjusting for provisions, margin of 13.2% (up 110bps
y/y)
LUPIN LTD 02/03/2014 Q4 Beat Domestic India business a cause for concern.
TECH MAHINDRA 05/15/2014 Q4 Beat Surprise from headline growth on account of one-off short-term projects
TATA POWER 02/07/2014 Q3 Meet Net loss on account of forex loss in the quarter (in line with estimates
though)
TATA MOTORS 05/30/2014 Q4 Miss Weak operating and economic environment in the standalone business was
more than offset by strong demand for new products, growth in volumes,
richer product mix and richer geographic mix at JLR
CIPLA LTD 02/14/2014 Q4 Miss On consolidated basis the net profit declined 6% and net sales grew 27%
HCL TECH 04/17/2014 Q4 Beat Growth momentum and consistent execution of its strategic plans
RELIANCE INDUSTRIES 04/18/2014 Q4 Meet Record refining profit made up for weak petrochem and other income
ICICI BANK 04/25/2014 Q4 Meet In-line set of earnings for 4Q FY14, with healthy loan growth, stable asset
quality and steady NIMs
AXIS BANK 04/25/2014 Q4 Beat Strong earnings driven by robust loan growth, net interest margin (NIM)
expansion, a strong growth in savings deposits and a revival in fees
MARUTI SUZUKI 04/25/2014 Q4 Miss Lagged expectations on account of cost pressure due to rise in raw material
costs and unfavourable currency
BHARTI AIRTEL 04/29/2014 Q4 Meet Steady India performance again partly offset by a slow Africa
Source: Standard Chartered


18

Sector Performance & Valuations

MSCI India Sectors (USD)
Name Last Price
12m Fwd
P/E
12m Fwd
P/B
EV/
EBITDA
Fwd Div
Yield%
Div
Payout% TR 1M%
TR USD
1M TR YTD%
Consumer Staples 545.4 30.3 9.5 21.1 1.8 49.2 1.6% 3.0% 3.6%
Consumer Discretionary 890.7 11.0 2.8 5.7 1.6 19.6 8.2% 9.7% 16.6%
Energy 1406.0 11.6 1.6 7.2 1.9 22.8 17.7% 19.3% 25.8%
Financials 5794.0 16.0 1.8 - 1.6 21.5 12.8% 14.3% 25.4%
Healthcare 1320.1 19.7 3.7 13.8 1.0 15.6 -5.7% -4.4% 0.8%
Industrials 1294.5 23.4 2.9 9.4 0.9 21.9 29.8% 31.6% 47.3%
Information Technology 970.5 13.8 3.4 10.0 2.2 30.4 -4.5% -3.2% -7.0%
Materials 865.5 13.4 1.3 6.3 1.2 21.1 21.9% 23.6% 23.3%
Telecommunication Svs 28.6 23.7 1.8 6.9 0.5 8.2 9.8% 11.3% 1.5%
Utilities 576.1 12.9 1.3 8.9 2.3 34.4 26.3% 28.0% 25.7%
Index 922.5 15.4 2.3 10.0 1.7 24.9 8.7% 10.1% 13.5%

As of 02 June 2014

India Sector Preferences
Country View Rationale
Healthcare OW Strong domestic franchise, US product pipeline and healthy cash flows to drive valuations.
Industrials OW Re-rating of the sector and earnings upgrades due to higher probability of the faster recovery of the capex cycle.
Information
Technology
OW Fears of sharp earnings impact due to due to stronger INR are overstated, any incremental correction to be selective and
modest as sector valuations are now at par with the broader market.
Consumer
Discretionary
N Demand revival expectation on the back of sentiment improvement to drive volumes. Expected easing of interest rates,
and moderation in inflation could be added trigger.
Energy OW The precedent of regular hikes taken in FY14 has diluted the political risks to a major extent making it easier for the new
government to continue with diesel price hikes.
Financials N Potential macro recovery, removal of roadblocks and eventual revival of the capex cycle will help improve the growth and
margins.
Materials N Sector growth is improving, driven by the long steel inventory and rising growth in western world.
Telecom Svs N Impending entry of Reliance Jio in the voice and data market is a concern. Moderating competition intensity is a positive.
Utilities OW Improving the power sector productivity could be the top priority of the new government.
Consumer
Staples
UW Earnings are at risk as volume and margin pressures intensify amid weak demand and cost inflation. El-nino effect
leading to sub-normal monsoon may dampen sentiments.

Source: Standard Chartered; OW: Overweight; N: Neutral: UW: Underweight


19

Definitions
YTD: Year to date.
ITD: Inception to date.
PT: Price Targets (SCB uses an investment horizon of 12 months for
its price targets).
RSI: Relative Strength Index.
Relative Volatility index: A measure of the standard deviation of the
daily price change.
MA: Moving Average.
Basket average performance: Basket average is the un-weighted
performance of the shortlisted stocks
Consensus rating: A rating provided by Bloomberg which reflects the
aggregation of all brokers rating for a particular stock. 1 is a Sell, while
5 is a Strong Buy.
P/E: Price/Earnings ratio. The Trailing P/E refers to 12m of trailing
earnings, while the forward refers to 12m forecast earnings, against
current price.
P/B: Price/Book ratio. The book value refers to total shareholders
equity, while the forward refers to 12m forecast book value, against
current price.
EV/EBITDA: Enterprise value/Earnings Before Interest, Tax and
Depreciation Amortisation.
Earnings revision ratio: Net earnings revision (upgrades -
downgrades) / Total earnings revision (upgrades + downgrades)
ROE and ROA: Return on Equity (book value) and Return on Assets.
Dividend Yield: Dividend paid/ current price.
Net Interest Margin (NIM): Is a measure of difference between the
net interest incomes generated from lending by financial institutions
and the amount of interest paid out to their lenders (for example
deposits).
Beta: Correlation between a stock and the market. Is based on two
years of weekly data, but modified by the assumption that a securitys
beta moves toward the market average over time.
Total return: Capital appreciation + dividend income received.
Short term: Time horizon of 1-4 weeks.
Medium term: Time horizon of 3-6 months.
EMA: Exponential moving average
Investment Strategy Team:
Mitesh Dalal
Chief Investment Strategist

Nishit Sheregar
Investment Strategist

Shishir Narsinghani

Soumen Das
Senior Quantitative Strategist

Ashish Pai
Quantitative Strategist

Errol Crasto
Quantitative Strategist

Priya Iyer


20
Important Information

DISCLOSURE
SCB and/or its affiliates have received compensation for the provision of investment banking or financial advisory services within
the past one year for the following companies: Reliance Industries Ltd, Tata Power Co. Ltd and Bharti Airtel Ltd.
Global Disclaimer:
This document is not research material and it has not been prepared in accordance with legal requirements designed to promote
the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment
research. This document does not necessarily represent the views of every function within the Standard Chartered Bank,
particularly those of the Global Research function.
Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18. The
Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD Standard Chartered Bank is
authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation
Authority.
In Dubai International Financial Centre (DIFC), the attached material is circulated by Standard Chartered Bank DIFC on behalf of
the product and/or Issuer. Standard Chartered Bank DIFC is regulated by the Dubai Financial Services Authority (DFSA) and is
authorised to provide financial products and services to persons who meet the qualifying criteria of a Professional Client under the
DFSA rules. The protection and compensation rights that may generally be available to retail customers in the DIFC or other
jurisdictions will not be afforded to Professional Clients in the DIFC.
Banking activities may be carried out internationally by different Standard Chartered Bank branches, subsidiaries and affiliates
(collectively SCB) according to local regulatory requirements. With respect to any jurisdiction in which there is a SCB entity, this
document is distributed in such jurisdiction by, and is attributable to, such local SCB entity. Recipients in any jurisdiction should
contact the local SCB entity in relation to any matters arising from, or in connection with, this document. Not all products and
services are provided by all SCB entities.
This document is being distributed for general information only and it does not constitute an offer, recommendation, solicitation to
enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial
instruments. This document is for general evaluation only, it does not take into account the specific investment objectives,
financial situation, particular needs of any particular person or class of persons and it has not been prepared for any particular
person or class of persons.
Opinions, projections and estimates are solely those of SCB at the date of this document and subject to change without notice.
Past performance is not indicative of future results and no representation or warranty is made regarding future performance. Any
forecast contained herein as to likely future movements in rates or prices or likely future events or occurrences constitutes an
opinion only and is not indicative of actual future movements in rates or prices or actual future events or occurrences (as the case
may be).
This document has not and will not be registered as a prospectus in any jurisdiction and it is not authorised by any regulatory
authority under any regulations.
SCB makes no representation or warranty of any kind, express, implied or statutory regarding, but not limited to, the accuracy of
this document or the completeness of any information contained or referred to in this document. This document is distributed on
the express understanding that, whilst the information in it is believed to be reliable, it has not been independently verified by us.
SCB accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or
consequential loss or damage) from your use of this document, howsoever arising, and including any loss, damage or expense
arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or
associated services, or due to any unavailability of the document or any part thereof or any contents.
SCB, and/or a connected company, may at any time, to the extent permitted by applicable law and/or regulation, be long or short
any securities, currencies or financial instruments referred to on this document or have a material interest in any such securities or
related investment, or may be the only market maker in relation to such investments, or provide, or have provided advice,
investment banking or other services, to issuers of such investments. Accordingly, SCB, its affiliates and/or subsidiaries may have
a conflict of interest that could affect the objectivity of this document.
This document must not be forwarded or otherwise made available to any other person without the express written consent of
SCB.
Copyright: Standard Chartered Securities (India) Limited 2014. Copyright in all materials, text, articles and information contained
herein is the property of, and may only be reproduced with permission of an authorised signatory of, Standard Chartered
Securities (India) Limited. Copyright in materials created by third parties and the rights under copyright of such parties are hereby
acknowledged. Copyright in all other materials not belonging to third parties and copyright in these materials as a compilation
vests and shall remain at all times copyright of Standard Chartered Securities (India) Limited and should not be reproduced or
used except for business purposes on behalf of Standard Chartered Securities (India) Limited or save with the express prior


21
written consent of an authorised signatory of Standard Chartered Securities (India) Limited. All rights reserved. Standard
Chartered Securities (India) Limited 2014.
Investment Strategy Disclaimer:
This document and/or trading calls are issued by Investment Strategy Team of Standard Chartered Securities (India) Limited, a
registered broker regulated by the Securities and Exchange Board of India. This is not research material and it does not represent
the views of the Standard Chartered Group, particularly those of the Global Research function. This document is not independent
of Standard Chartered Groups own trading strategies or positions. Therefore, it is possible, and you should assume, that Standard
Chartered Group has a material interest in one or more of the financial instruments mentioned herein. Opinions, projections and
estimates are subject to change without notice. This document and/or the trading calls are for information purposes only. It does
not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or
investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that
any such future movements will not exceed those shown in any illustration.
The data, opinions and other information that form the basis of this document and/or the trading calls may be provided by third
parties for SCSI. While all reasonable care has been taken in preparing this document and/or the trading calls, and the information
in it is believed to be reliable, it has not been independently verified by SCSI. Any opinions or views of third parties expressed in
this material are those of the third parties identified, and not of SCSI.
Trading recommendations based on quantitative analysis are based on index / stocks momentum, price movement, trading
volume and other volatility parameters, as opposed to study of macroeconomic scenario and a companys fundamentals and as
such, may not match with India Equity Researchs report / view on a companys fundamentals.
The trading calls and/or contents of this document are not made with regard to the specific investment objectives, financial
situation or the particular needs of any particular person. Any investments discussed may not be suitable for all investors. Past
performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as
rise. You are advised to exercise your own independent judgment (with the advice of your professional advisers as necessary)
with respect to the risks and consequences of any matter contained herein. We expressly disclaim any liability and responsibility
for any losses arising from any uses to which this communications is put and for any errors or omissions in this communications.
This communication is intended for the recipient only and no further distribution of this communication or any part thereof is
permitted.

SEBI Regn No BSE Cash - INB011333334 | SEBI Regn No BSE Derivatives INF011333334 | SEBI Regn No BSE Currency
Derivative : INE011333338 | SEBI Regn No NSE Cash - INB231333338 | SEBI Regn No NSE Derivatives INF231333338 | SEBI
Regn No NSE Currency Derivative : INE231333338 | SEBI Regn No MCX Currency Derivative : INE261333338 | NSDL : DP ID:
IN300360 | SEBI Regn No: IN-DP-NSDL-36-97 | CDSL: DP ID: IN12015800 | SEBI Regn No: IN-DP-CDSL-531-2010 | Mutual
Fund ARN - 0354 | Merchant Banking Regn No - MB / INM000011542 | PMS Regn No - PM / INP000003542 | Corporate Agency
License No: 1545184 | CIN: U65990MH1994PLC079263

Standard Chartered Securities (India) Limited
2nd Floor, 23-25 M. G. Road, Fort, Mumbai 400 001, India.
Telephone Number: 1800 - 209 - 2550.
Fax Number: 022 - 6135 5900
Email: mitesh.thakkar1@sc.com
Website: http://www.standardcharteredtrade.co.in

THIS IS NOT A RESEARCH REPORT AND HAS NOT BEEN PRODUCED BY A RESEARCH UNIT.

India Top Picks 5 June 2014

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

India Top Picks 5 June 2014

Uploaded by

Copyright:

Available Formats

This is not a research report and has not been produced by a research unit.

Important disclosures can be found in the

You might also like