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From The MDs Desk

Major events will keep the market volatile with negative bias
The Federal Reserve kept the rates unchanged with some strong commentary to hike the rates in December as better
performance of US economy.The comments made by The Fed Chairperson, Janet Yellen pushed the US currency up in the
international market and Dollex made the high of 97. Incidentally, our market could not go beyond the 200 DMA of 8180 and
corrected from the same levels. It broke the important level of 100 DMA of 8170. The market closed near to 50 DMA of 8015
which provides strong support to the market.
The market is eagerly waiting for the Bihar election outcome which may provide short term trigger of either side.However,
this impact will be short lived and earnings will be key focus for the market.
India Inc's revenues and profits are now moving in opposite directions due to combination of poor demand and a collapse in
global commodity prices. For 622 companies whose Q2 numbers are availabe till 2nd Nov., net sales were down 4.4 per cent
on a year-on-year (YoY) basis (second lowest in eight years), while adjusted net profit was up 7.7 per cent, growing at the
fastest pace in the last four quarters.
The result season is in full swing. Banking giant ICICI Bank, Pharma giant Dr. Reddys Lab and Power sector giant NTPC
performed well in Q1FY16 but disappointed Q2FY16.The poor performance along with future visbility of low order book of
L&T creates distance between analyst expectation and ground realty.
The recent statement by Finance Minister about the challenging international atmosphere and resultant uncertainty for
Indian export are also a cause of concern.
Consistent selling by FIIs in cash market will keep the market nervous in near term. Technically, any fall below 8000 may
trigger further fall. An investor having cash on hand will be able to take the benefits at the time of volatility. Considering the
above factors, it is advisable to remain cautious in short term.

Kamlesh Jhaveri ( MD )
Jhaveri Securities Ltd.

www.jhaveritrade.com

Patience will Pay

Issue Theme

India is favorite but global investors become choosy on slow earning recovery
Global investors still prefer India among other EM as MSCI India Index is trading at a 37% premium to the Emerging Market
(EM) Index against the five-year average of 34% as fund managers bet that India may be in a position to stay recover quickly
even if the region's economic conditions deteriorate further. On comparative basis, India's relatively better macroeconomic
position and continue to command premium valuations. For Example : India's inflation is at 3.9% against 15.6% in Russia,
9.9% in Brazil, 7.7% in Turkey and 7.1% in Indonesia. Similarly, the current account deficit to GDP ratio stands at a
contracted 1.2% in India compared with 2.1% for Indonesia, 6.1% for Turkey.
After pulling out `23,000 Cr. in August and September from Indian stocks, they have underperformed their emerging market
peers in October as global investors have been hesitate to bring money back as stock valuations are still at elevated levels
and corporate earnings are yet to show signs of any recovery. FIIs have poured $1.02 billion (` 6,650 Cr. ) in Indian stocks
upto the last week of October. This is the third highest among the emerging markets after Taiwan and Brazil.
According to UBS research, Bulk of the selling for this year has expected to finish in UBSs base case research. For YTD,
we actually saw outflows exceeding the 2008 outflows for emerging markets as a whole. This is why the market corrected so
sharply. India was not spared as well but inflows will continue albeit slower on relatively better macros.

Weak top line, better operating profit in Q2 so far

Indian companies that have reported earnings for the September quarter so far have shown almost no growth in net sales
from a year ago, making it the worst quarter for top line growth in at least six-and- a-half years. However, lower commodity
prices have helped push up margins, giving some relief to firms who continue to face weak demand.

Bihar elections result outcome and market

National Democratic Alliance's (NDA) loss in the Bihar state election is unlikely impact the medium term economic outlook in
India but NDAs loss in an important state of Bihar will complicate politics in coming time. There is strong possibility that
current results have negative impact on upcoming elections and Bihar defeat could prove a fatal blow to the BJPs campaign
for the 2016. The upcoming elections are West Bengal in early 2016, Uttar Pradesh in 2017, Tamilnadu-Kerala-Assam in
early 2016. As far as market is concerned, since last three to four months, market is hovering in the narrow range because
lack of positive triggers. In other words, the domestic market has wiped out its entire gain made in CY2015 and awaits fresh
triggers to move higher because negative aspect in Bihar Election fail to provide strong up move.

Global growth concerns continue to overhang, Chinas stability is still concern for market
China's central bank cut interest rates for the sixth time in less than a year to jump start growth in its struggling economy.
China became very aggressive since 2008-09 financial crisis, as growth looks set to slip to a 25-year low this year of under
7%.

Conclusion
We believe that market is eagerly waiting for earning recovery as Q2 also disappointed on earning front and many
companies has missed analysts consensus estimates. Indian companies revenues and profits are now moving in opposite
directions because of combination of poor demand ( impacting top line) and a collapse in global commodity prices (benefit to
profit). However, we are mildly positive for H2FY16. Global growth concerns along with interest rate hike in US is a near term
worry for the market. We firmly believe that green shoots are already started in our economy as some macro indicators are
positive yet they are not encouraging and consistent. As far as current phase of market is concern, bottom up approach will
work better and only patience investors will be rewarded in long term.

www.jhaveritrade.com

Diwali Picks

Diwali Picks

Note: Book your profit between target levels | Investment Horizon 9 - 12 months
We will review these stocks at the end of March 2016.

www.jhaveritrade.com

INDIAN

PAINT

Indian Paint Industry: Near term weakness, long

term outlook positive

INDUSTRY

The industry is broadly divided into two sectors organized and unorganized which contribute around 65% and 35% of
revenues respectively.
Organized players are available in both categories ( Decorative + Industrial paints ) but unorganized and regional players
are mainly engaged in decorative paints with distemper in low value range.
New products, fresh technologies, improved properties and innovative distribution channels - have all been introduced by
organized sector.
The unorganized segment has about 2,000 players, mostly small-scale units. According to industry group Assocham, the
Indian paint industry is likely to see a 20% compounded annual growth rate (CAGR) over the next two years to reach a level
of Rs 62000 Cr. in FY 2016. The high CAGR growth rate expectation is due to increasing demand from retail consumers on
rapid urbanization and the developing rural market.
The decorative paint market can be sub-segmented into emulsions, enamel paints, distemper and cement paints. The
industrial paint market covers sub-segments such as automotive coating, protective and high- performance coating,
powder coating, coil coating and marine coating. Currently, decorative paints account for the bulk of the Indian paints market
by volume as well as value at about 75%, unlike developed countries where non-decorative is the dominant segment.
Current, Indias Per capita consumption of paint is 2.57 Kg. which is very low as compared to developed country, so there is
huge scope for development of Indian paint industry. According to industry estimates Per capita consumption of paint is
likely to reached at `4 Kg in FY16E.
16

14.50

14
12
Kilograms

Sector Update

Overview
Indian paint consists of two segments : (A) Decorative or Architecture segment ( Market share ~70% of the total
requirement ) (B) Industrial segment (Market share ~30% of the total requirement ). This ratio is reverse as far as global
scenario is concerned.

11.80

12.00

Australia

Japan

10.00

10
8
6
4

2.57

2.80

India

SE Asia

4.00

4.20

China

East
Europe

5.00

2
0
Middle
East

Central
Europe

North
America

Source: Company, JSL

Cost Structure
Paint Industry being one of raw material intensive and the raw material cost accounts for about 50-60% of the total cost of
production and thus the profitability and EBITDA Margin of the companies have directly co related with raw material cost.

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INDIAN

PAINT
INDUSTRY

Indian Paint Industry

In manufacture of paint there are more than 275 raw materials both crude based and non crude based are consumed.

There is scarcity of Anatase grade TD domestically which has to be imported and price is always fluctuates due to global
demand and supply gap.
Crude Oil Movement
There are various crude based raw martial used in the paint manufacturing and which have direct co related with crude oil
prices. So any fluctuation in the Brent crude oil has directly impact on the raw material purchase price of the industry players
either positive or negative.

Raw material cost fell significantly on lower crude prices

Raw Material Cost as % of Sales

Advertising Exp as % of Sales

Source: Company Data

www.jhaveritrade.com

Sector Update

Lower availability of Key raw material and Currency Fluctuation

Tititanium dioxide (TiO2) , which accounts for 30% of total raw material requirement, is one of the most important raw
material in paint producing. Titanium Dioxide, a mineral-based material, is classified under two varieties, such as Rutile
grade and Anatase grade.

INDIAN

PAINT
INDUSTRY

Indian Paint Industry

Sector Update

Industry Growth Drivers

(A) Decorative or Architecture segment growth drivers
Growth rate is expected to reach at 8.5-9% in 12th Five year plane
As there is a strong correlation between country's GDP and growth of paint industry, current GDP growth rate is decade low
but paint industrys growth is far better. In 12th plane government is expect 8.5-9% growth rate which will boost to grow
paint industry further from Current level. The dual advantage is due for paint industry in coming years.
Gross National Disposable Income (GNDI) and PFCE continue to rise
Consumers discretionary spends and paint industry's future has correlated with each other. GNDI (per capita) has
experienced a growth of 15% CAGR from FY10-FY13. This number is expected to increase in 12th five year plan. Private
final consumption expenditure expected to improve in FY17E and FY18E at as ratio to GDP. Discretionary spends as % of
total individual income earned stood at 27% in 2003 which increased to 32% in 2013 because consumer preference shifted
from basic necessity.
Rising Urbanization
Urbanization is the most important element for growth of this industry. Currently, India has 70% of its population living in rural
areas. With rising urbanization, more people will have exposure to modern products and brands.
Housing shortage
Housing gap is the difference between the total requirements and supply of houses, which indicate number of additional
houses that would be required. India is constantly facing housing shortage as compared to its demand. Housing shortage
will be expected to reduce due to : (A) Government's thrust on various social schemes (B) High disbursement by banks (C)
High disposable income (D) Strong focus on affordable housing segment
Shifting towards Value Added Products : Increase the scope for the Industry
Over the years, paint industry has experienced a shift from normal distemper paints to value added products. Unorganized
players are largely associated with the distemper paints but key industry players are constantly focusing on the high margin
VAP. This includes exterior and interior emulsion paints, water-based as opposed to solvent-based, paints and have better
properties such as wash ability, dirt resistance, heat resistance, resistance to fungi and algae and look better.

(B) Industrial Paint ( Coatings ) growth drivers

Out of total requirement of industrial paints , 50% is fulfilled by Automotive segment . So there is strong linked between
Automotive segment growth and industrial paints. The remaining 30% is linked with infrastructure development growth and
this includes powder coatings (Furniture, automotives, information technology, appliances), Marine coating, Coil coatings,
architectural market and general industry purpose.

www.jhaveritrade.com

INDIAN

PAINT
INDUSTRY

Indian Paint Industry

hold on. Unseasonal rains impacted the summer crop in the country, especially in the north and western parts of the country.
This has reduced the rural purchasing power.
Commercial real estate demand is on the recovery path in certain micro markets. But the residential real estate market
continues to remain sluggish and, thus, no major recovery in demand is seen for new painting and coating in the medium
term.
However, the reduction in repainting cycle, customer preference for multi colors for different parts of the dwelling units and
premium products are expected to provide support for the repainting segment in large cities. The approaching festival
season might also see demand showing sequential improvement.

RM prices continue to remain weak

The average price of pentaerythritol remained flat . The monthly average price of Tio2 anatase and rutile stood lower by 17%
to ` 125 per kg and 18% to ` 155 per kg, respectively, in August 2015 over a year ago. The price of Tio2 anatase was flat and
that of tutile lower to ` 155 per kg (from ` 170 per kg) in August 2015 over July 2015.Other RM like xylene was down 24% and
Pan was down by 18% YoY.

Outlook
The demand for decorative paints, though currently weak, is expected to pick on the onset of the festival season. Given the
lower base of H2 of FY2015, there will be growth in H2 of FY 2016. While the demand for the auto refinish segment continues
to do well, industrial demand including from auto manufacturers is yet to recover as revival of stalled projects and pick-up in
industrial activity are yet to happen at the ground level.
Hence, the recovery in the industrial and protective coating demand is some time away. Relatively higher realizations,
despite partial roll-back of prices, product mix as well as benign raw material prices are expected to improve the profitability
of paint manufacturers. We have positive outlook on Berger Paints.
P/E
(x)

P/BV
(x)

Dividend Yield
(%)

CAGR
Net Sales
3 Yrs (%)

CAGR
Operating Profit
3 Yrs (%)

CAGR
Adjusted Net Profit
3 Yrs (%)

Asian Paints

52.61

17.37

0.71

14.41

13.79

13.8

Berger Paints

53.87

12.15

0.57

13.61

17.86

13.19

Kansai Nerolac

54.53

8.68

0.54

11.01

8.87

8.76

Akzo Nobel

36.6

7.03

1.45

8.33

4.68

3.99

Company Name

www.jhaveritrade.com

Sector Update

Current demand Scenario is weak, long term growth story positive

Rural demand, the driver of growth for decorative paints, has turned sluggish currently, while urban demand continues to

Go for EQU

ITY SIP

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Call Jhaveri Securities Ltd....Your Growth Partner

Natco Pharma Ltd.

Company Analysis

Company Basics

Accumulate

CMP : ` 2469

TGT : ` 3183

ROI : 29%

BSE ID
524816
Investment Rationale
NSE Symbol
NATCOPHARM
Group
A
Company Overview
EQUITY (` in Cr.)
Natco Pharma was established in 1981 in Hyderabad with a single unit and 20
34.83
MKT.CAP(` in Cr.)
employees. At present Natco Pharma has five manufacturing facilities spread across
8921.90
India with dedicated modern research laboratories and more than 3200 employees.
The Company invested Rs. 129.29 Crores in research spending during the five years
leading to 2013-14. Research spending as a proportion of net revenues from operations
Financial Basics
was a significant 6.53% in 2013-14. NATCO Pharma exports both APIs and
10.00
FV (`)
Finished Dosage Forms that comply with International standards to various markets
40.25
EPS (`) (TTM)
across the globe. Exports contribute about 50% of the companys total revenue.
63.63
P/E (x) (TTM)
7.52
P/BV (x) (TTM)
Global Pharmaceutical Industry
1.1454
BETA
Global spending on medicines is forecast to reach nearly US$1.3 trillion by 2018, an
18.98
RONW (%)
increase of about 30% over the 2013 level.

Share Holding Pattern

Holder's Name

% Holding

Foreign

21.26

Institutions

5.90

Promoters

51.29

Govt. Holding

0.00

Public & Others

18.94

Non Promoter
Corp. Hold.

2.61

Valuations
Currently, NATCO is trading at
`2469. We recommend
Accumulate with target price of `
3183, valuing stock 48xFY17E EPS
of ` 66.32.The stock currently trades
at 53.71 x of FY16E and 38.37x of
FY17E.

Among the major markets, the United States remains the largest, representing over
one-third of the global total, and is expected to grow at a compound annual growth
rate of 5-8% through 2018.
Over the next five years, advances in the therapy areas of oncology, diabetes and
Hepatitis C will be of particular interest and importance.
The surge in cancer drug innovation over recent years will continue and contribute to
a global spending on all oncology drugs, reaching about US$100 billion in 2018, up
from US$65 billion in 2014.

Oncology Driving growth

Spending on oncology medicines globally is expected to grow by over 50% to exceed
US$100 billion in 2018 driven by an increase in cancer incidence of up to 31% by
2020, and rising rates of melanoma and kidney cancers. Absolute growth is expected
to be US$25-45 billion, compared to US$17 billion in the prior five years.
According to estimates from the International Agency for Research on Cancer, there
were 14.1 million new cancer cases in 2012 worldwide, of which 8 million occurred in
economically developing countries, which contains about 82% of the worlds
population. This is the principal reason Natco has selected to focus on this space.

Investment Horizon : 15 to 18 Months

www.jhaveritrade.com

Natco Pharma Ltd.

Indian Pharmaceutical Industry
3500

1400

Domestic ( Rs. in Billion )

1280

3000
1200

989

2500
1178
1500
701

1000
500
0

1694
283
208

901

2008

2014

$ Billion

2000

1000

795

800
600
400
200

2018E

2008

2014

Investment Rational
Leading Oncology player in Indian Pharmaceutical space

2018E
Source: Company

Year ( ` in Cr. )

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

Oncology Revenue

123.8

121.2

148.4

140.2

154.7

195.7

YoY Growth (%)

28%

-2%

22%

-6%

10%

27%
Source: Company

Natco has strong presence in Indian Oncology space with focusing on launching of the generic versions of existing
anticancer medications at a low cost. Natco pioneered the launch of several generic versions of drugs in the domestic
oncology segment and holds a leading market share in their operated portfolios.
Natco marketed 24 products in the Indian market during FY2014-15; its key products (Rs. 100 million brands) comprise
Geftinat, Erlonat, Veenat, Sorafenat and Lenalid. In Oncology space, Natco identifies critical sub segment within the existing
anti cancer therapies available globally and create generic medication by its own expertise.
In FY15, company has launched Sofosbuvir tablets 400 mg. , Xpera to cure leukemia and become the first generic player in
India which launch Trabec for the cure of Solid Tumors. Natcos domestic

Oncology revenue grew from ` 123 Cr. in FY10 to

`195 Cr. in 2015, CAGR growth of 12% . Domestic formulation business grew from ` 154 Cr. in FY14 to ` 194 Cr. in FY15 with
double digit volume growth in existing oncology products, up by 27% YoY .

Natco has strong international presence

US : For US market, Natco has created niche in therapeutic areas and focusing on generic space. The Company has strong
Para IV products pipeline for US market which is expected to commercialize over the next few years in the US Market and
most of them have strong market and revenue visibility such as Copaxone 20 / 40 mg has a market opportunity of $ 2410 Mn
/ $342 Mn. respectively.

www.jhaveritrade.com

Company Analysis

Export ( Rs. in Billion )

Global Spending & Growth on

Pharmaceutical

Company Analysis

Natco Pharma Ltd.

Year ( ` in Cr. )

FY 11

FY 12

FY 13

FY 14

Formulation Exports

50.5

65.6

102.8

165.8

157.9

ANDAS (No.)

FY 15

Source: Company

In FY15, Natcos international formulation revenue stood at `157Cr. on higher volume growth of Lansoprazole,
Ondansetron and Rizatriptan. Natco has filed six ANDAs in FY15, taking the cumulative ANDA filing to 35.
Non-US business : For Non US business, Natco has filed limited high value niche molecules in Brazil and eight new
product in Canada. Natco products reach more than 30 countries globally. Natcos key geographies include Latin American,
Asia Pacific, South East Asia & Middle East. The Companys portfolio comprises niche products manufactured in India and
marketed through its alliance partners worldwide.
Natco is strengthening its position beyond Oncology and has strong R&D exposure
Being a leader in Oncology segment, the Company enjoys a presence in neuro-psychiatry, gastroenterology, Orthopaedic
and anti-asthmatic spaces. Natco extended into the Hepatology/Virology therapeutic space.

Year (` in Cr.)

FY 13

FY 14

FY 15

Investment in
R&D

37.8

40.7

51.7
Source: Company

HEPCINAT : A game changer for Natco

Natco mainly associated with oncology and its related business. In FY15, company has launched HEPCINAT (Sofosbuvir)
in India which makes Natco one of the few companies globally to launch Hepatitis C virus medicines. With the launching of
this medicine, Natco has started to focus on non-oncology therapy segment which spur the growth in India and Rest of
World.
According to WHO, HEPCINAT has robust opportunity for volume growth as India has ~15-20 Mn. people who have HCV
infected people and more than 100 Mn people in developing countries. According to management, this product will
contribute significantly in FY16s top line.

SWOT Analysis
Strengths - Focus on limited but niche opportunities, tie-ups with the MNCs, larger Indian companies to share risks, focus
on oncology in the domestic space, strong balance sheet.
Weakness - Domestic oncology growth still flattish due to institutional focus.
Opportunities - The US generics space.
Threats - Increased USFDA scrutiny across the globe regarding cGMP issues and consolidation in the US pharmacy space.
Delay in getting USFDA approvals. Currency volatility and lumpiness in tender business in Venezuela.

10

www.jhaveritrade.com

Natco Pharma Ltd.

Natco US / EU Key pipeline

Brand
Fosrenol

API

Therapeutic Use

Status

Lanthanum Carbonate End stage renal disease Para IV/ FTF

Expected Annual Sales

Launch Date (US Mn. $ )

Partner

ANDA Ownership

Lupin

Natco

2016

115

Copaxone 20 Mg.

Glatiramer prefilled

Multiple Sclerosis

Para IV

Mylan

Mylan

Spe-15

2400

Revlimid

Lenalidomide

Multiple Myeloma

Para IV/ FTF

Actavis

Natco

2017

2000

Tamiflue

Oseltamivir

Influenza Infection

Para IV/ FTF

Alvogen

Natco

NA

821

Tykerb

Lapatinib

Anti cancer

Para IV/ FTF

Lupin

Lupin

NA

125

Nuvugil

Armodafinil

Anti-ulcer

Para IV

Activis

Activis

NA

450

Treanda

Bendamustine

Lymphocytic Leukemia

Para IV/ FTF

Breckenridge

Breckenridge

NA

600

Jevtana

Cabazitaxel

prostate cancer

Para IV/ FTF

Breckenridge

Breckenridge

NA

120

Zortress

Everolimus,
Lower Strength

Immune-suppressant

Para IV/ FTF

Breckenridge

Breckenridge

NA

30

Gilenya

Fingolimod

Multiple Scherosis

Para IV/ FTF

NA

Natco

NA

1247

Nexavar

Sorafenib Tosylate

Kidney & Liver Cancer

Para IV/ FTF

Mylan

Mylan

NA

48

EU Pipeline
Glivec

Imatinib

CML

NA

Helm

Activis

2016

4000

Treanda

Bendamustine

Lymphocytic Leukemia

NA

Helm

Helm

NA

860

Source: Company

Conference Call Highlights

The company has given guidance of `1050 - `1100 Cr. of revenue and `150- `160 Cr. in FY16. It has guided for `125`130 Cr. of domestic sales in FY 16.

The company expects its oncology base business to grow at 10 - 12%. It expects new oncology launches by the end of
FY16.
The company expects to earn 28-30% operating margins from Sofosbuvir. The company has started filings for
Sofosbuvir in South American and CIS countries. It expects to start product launches in export markets from FY17;
however the real traction is likely to start from FY18 onwards.

11
8

www.jhaveritrade.com

Company Analysis

USA Pipeline

Natco Pharma Ltd.

Company Analysis

Financial Performance
Consolidated Key Financials (` in Cr.)
Equity Paid Up
Networth
Capital Employed
Total Debt
Gross Block (Excl. Reval. Res.)
Net Working Capital ( Incl. Def. Tax)
Current Assets ( Incl. Def. Tax)
Current Liabilities and Provisions ( Incl. Def. Tax)
Total Assets/Liabilities (excl Reval & W.off)
Gross Sales
Net Sales
Other Income
Value Of Output
Cost of Production
Selling Cost
PBIDT
PBDT
PBIT
PBT
PAT after Minority Interest & P/L Asso.Co.
Adjusted PAT

Key Ratios (Consolidated)

Debt-Equity Ratio (x)
Long Term Debt-Equity Ratio (x)
Current Ratio (x)
Fixed Assets Ratio (x)
Inventory Ratio (x)
Debtors Ratio (x)
Total Asset Turnover Ratio (x)
Interest Cover Ratio (x)
PBIDTM (%)
ROCE (%)
RONW (%)
Debtors Velocity (Days)
Creditors Velocity (Days)

FY 12
31.15
473.64
740.22
258.64
440.33
127.95
292.05
164.1
904.32
530.64
523.73
9.14
525.15
362.68
19.02
118.5
95.46
102.59
79.55
59.61
59.56

FY 13
31.37
533.54
880.55
337.71
726.97
140.36
332.57
192.23
1072.79
668.1
660.52
12.41
682.43
462.63
14.82
150.75
124.44
128.63
102.32
71.87
78.57

FY 14
33.07
725.87
978.44
240.45
819.89
157.43
371.89
214.46
1192.9
744.72
738.89
16.71
754.66
484.76
26.16
196.04
159.42
165.6
128.98
102.73
102.02

FY 15
33.23
846.05
1168.21
311.84
939.98
272.04
484.06
212.02
1380.23
838.23
825.28
14.91
834.45
528.01
37.36
213.17
181.49
165.9
134.22
134.62
143.61

FY 12
0.58
0.37
1.16
1.3
4.99
6.41
0.8
4.45
22.33
15.49
14.12
65
91

FY 13
0.59
0.36
1.06
1.14
5.21
5.95
0.82
5.28
24.12
17.15
14.4
71
90

FY 14
0.46
0.26
1.07
0.96
4.55
5.99
0.79
4.52
26.32
17.82
15.58
58
90

FY 15
0.35
0.18
1.22
0.95
4.18
5.39
0.78
5.24
25.43
15.46
16.57
84
91

12

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Monthly Technical Picks

We have detected a "Descending Top Triangle" chart

pattern formed on Bank of Baroda which is a bearish
signal. The price seems to have reached a top, showing
signs of reversal as it has broken downward after a
period of uncertainty or consolidation. Then well before
the triangle reaches its apex, the price breaks down
below the lower trendline with a noticeable increase in
volume, confirming this bearish pattern as a reversal of
the prior uptrend.

We have detected a "Symmetrical Continuation Triangle

" chart pattern formed on Bharat Petroleum Corporation
which is a bullish signal. The price has broken upward
out of a consolidation period, suggesting a continuation
of the prior uptrend. A Symmetrical Continuation
Triangle (Bullish) shows two converging trendlines as
prices reach lower highs and higher lows. Then well
before the triangle reaches its apex, the price breaks out
above the upper trendline with a noticeable increase in
volume, confirming the pattern as a continuation of the
prior uptrend.

SELL BTWN 165-170 TGT 140-135 SL 184

BUY BTWN 888 - 905 TGT 970-985 SL 845

DISH TV

HDFC BANK

We have detected a "Top Triangle" chart pattern formed

on Dish TV India which is a bearish signal. The price
seems to have reached a top, showing signs of reversal
as it has broken downward after a period of uncertainty
or consolidation. A Top Triangle shows two converging
trendlines as prices reach lower highs and higher (or
stable) lows. Then well before the triangle reaches its
apex, the price breaks down below the lower trendline
with a noticeable increase in volume, confirming this
bearish pattern as a reversal of the prior uptrend.

We have detected an "Ascending Continuation

Triangle" chart pattern formed on HDFC Bank which is a
bullish signal. The increasingly higher lows and constant
highs within this pattern tell us that buyers are more
aggressive than sellers, confirmed by a breakout
through a resistance level to signal a continuation of the
prior uptrend.

SELL BTWN 97-100

BUY BTWN 1070-1090 TGT 1220-1240 SL 1030

TGT 85-82 SL 107

13

www.jhaveritrade.com

Monthly Technical Picks

BPCL

BANK OF BARODA

Mutual Fund

Diversified Equity Funds A Safer Option

Investors perpetually suffer from the lack of diversification. Diversification provides an edge to the portfolio which maximizes
returns and minimizes risks. While Large Cap funds are considered to be a relatively safe option, the Mid and Small cap
Funds are considered to be comparatively risky and volatile. The classification of these funds depends upon the market
capitalization of the stocks that the fund owns. However, what if along with moderate risks one could also invest in the funds
already diversified? Let us explore Diversified Equity Mutual Funds.

What are Diversified Equity Funds

Diversified equity funds invest across market capitalizations and sectors. Such active diversification ensures the negative
performance of one sector does not affect the entire portfolio and increases the possibility of making a sustainable return.
These funds aim for medium to long term capital appreciation and suitable for investors having moderate risk profile and
investment horizon of at least 3 - 5 years.
The investments of these funds could be vertical in nature where various sectors and a mix of the various market caps are
considered for investments. Diversified Equity funds with vertical investments tend to be more diversified than horizontal
investments as it provides sectoral and market cap diversification and provides better cover against risk. Across the industry
diversified funds are also known as Multicap Funds, Flexi Cap Funds or Large and Midcap Funds.
Having too many Large Cap Funds in your portfolio could stagnate your investments returns. Investing solely in mid and
Small Cap Funds could make your portfolio volatile and risky. Diversified Equity funds are that middle path which allows you
to invest in the all market caps through one fund.

Mutual Fund Category Returns across different periods

Name of the Category

Return
1 Year

Return
3 Year

Return
5 Year

Return
10 Year

Large Cap

15.03%

19.42%

10.79%

14.80%

Mid & Small Cap

28.20%

30.92%

17.47%

18.48%

Large & Mid Cap

21.72%

23.11%

12.59%

17.28%

Diversified Equity Funds

14.12%

21.73%

12.09%

17.66%

Source: Value Research & CRISIL

Benefits of Investing in Diversified Equity Funds

Stability in Bull and Bear Markets:
Diversified Equity Funds comprise of all markets cap stocks. Large cap stocks due to high end market capitalization tend
to be stable in bear markets and show moderate appreciation in bull markets. Mid and small cap stocks respond to
market stimulations. While, they show higher appreciation in bull markets, their depreciation is in sync with the bear
markets. The differences in the performance of these market caps get balanced in the Diversified Equity Funds. In a bear
market the mid and small cap stocks have a tendency to be volatile even if the large cap stocks shows moderate
depreciation, thereby maintaining a steady balance. Due to this stability it allows investors with a varying risk appetite to
park their investments in these funds.

14

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Diversified Equity Funds A Safer Option

A universal Appeal:
The fund has a component to appeal to all kinds of investors: the risk takers, the safe player and the flexible investor. It
also reduces the need to diversify. Hence, as an investor if you like to manage your own portfolio then this reduces your
need to diversify to a certain degree. It provides stability to your portfolio along with a return range of moderate to high.

How to pick a Fund

As an investor this is probably one of the most crucial decisions to make. There are too many schemes within a same
category and all of them sound equally appealing. Each either has a high rate of return or promises to deliver so in future. All
of this could be intimidating and confusing. Needless to say there are various factors that have to be taken into account: the
historical performance, the returns generated against the category and the benchmark index. Let us examine the nuances
of these aspects and make this process of selection a little easier for you.
Compare the Fund Returns against the Diversified Fund Category Return and Benchmark: A fund that has been in
market for a considerable period time of time will have a track record of returns over the years. Compare that return to the
returns of the Diversified Equity Mutual Fund Category and the Benchmark associated with the Fund. The category returns
are projected after taking into account an average of returns of all the schemes under that category. For example, if the
return of a Diversified Equity Fund over ten years has been 22% annualised and the category return over the same period
has been 18% annualised then the scheme has outperformed the category returns.
Now, you need to check the performance of the fund against which it has been benchmarked For example, S&P BSE 100,
S&P BSE 200, CNX 200 and CNX 500 etc. Majority of the Diversified Equity Mutual Funds in India are associated to these 4
Benchmarks. If you find that the fund chosen by you have outperformed both The Category Returns and the Benchmark
then you can consider the fund for investing.
Check the consistency of the Chosen Diversified Equity Fund: A Diversified Equity Mutual Funds can consist of large,
mid and small cap stocks in its portfolio. Hence, the fund managers can choose stocks from different sectors and market
caps. As an investor it could be difficult for you to track the sectors or stocks within your chosen fund. Therefore, to check the
consistency of the returns you should look at two things - the historical returns of the fund and the volatility of the selected
fund across different market cycles.

Conclusion
Equity as an asset class is vast and has various categories of investments. Diversified Equity Mutual Funds being one of a
kind where investors need not individually diversify the various investments. It is that kind of equity mutual fund where one
can invest and expect returns ranging from moderate to high and suitable for beginners and moderate risk takers. There are
no iron clad promises in investing. A fund no matter how safe or risky could always surprise you and Diversified Equity Funds
are not an exception. Historically it has been seen that long term investments in Diversified Equity Funds have beaten the
returns of Bank Fixed Deposits, Gold and PPF returns with a decent margin. However, to choose the right fund according to
your risk taking appetite and the time horizon, you should consult your broker or you can contact us directly as well.

15

www.jhaveritrade.com

Mutual Fund

Reduces the Need to Diversify:

It is said that diversification in various asset classes determines the return of the portfolio and not the individual funds.
Investing in Diversified Equity Funds reduces the need to diversify your portfolio as you choose an already diversified
fund depending upon your investing needs and risk taking ability. As an investor if you are looking for stability in your
investments, you could allocate a larger portion of your investments in Diversified Equity Funds and the remaining in
Small and Mid Cap Funds. However, If you are an aggressive investor and ready to take high risk for long term
appreciation then Mid and Small Cap Funds could be ideal investments for you.

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ONLINE

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Anywhere Anytime
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Date
Sun Nov 1
Mon Nov 2

Tue Nov 3

Wed Nov 4

Thu Nov 5

Fri Nov 6

Mon Nov 9
Tue Nov 10

Wed Nov 11

Thu Nov 12

Fri Nov 13

Time in IST Currency

6:30am
CNY
CNY
7:15am
CNY
1:45pm
EUR
8:30pm
USD
USD
USD
12:30am
USD
1:30pm
EUR
8:30pm
USD
USD
All Day
USD
7:15am
CNY
1:45pm
EUR
2:15pm
EUR
2:20pm
EUR
6:45pm
USD
7:00pm
USD
8:15pm
USD
8:30pm
USD
9:00pm
USD
12:30pm
EUR
3:30pm
EUR
6:00pm
USD
7:00pm
USD
USD
USD
9:00pm
USD
12:30pm
EUR
1:15pm
EUR
EUR
7:00pm
USD
USD
USD
12:30pm
EUR
3:00pm
EUR
8:30pm
USD
7:00am
CNY
CNY
1:15pm
EUR
2:30pm
EUR
4:30pm
USD
7:00pm
USD
8:30pm
USD
11:00am
CNY
CNY
CNY
9:00pm
USD
12:30pm
EUR
EUR
1:15pm
EUR
3:30pm
EUR
7:00pm
USD
9:00pm
USD
12:30am
USD
12:30pm
EUR
3:30pm
EUR
7:00pm
USD
USD
USD
USD
8:30pm
USD

Country/Event
Manufacturing PMI
Non-Manufacturing PMI
Caixin Manufacturing PMI
Spanish Manufacturing PMI
ISM Manufacturing PMI
Construction Spending m/m
ISM Manufacturing Prices
Loan Officer Survey
Spanish Unemployment Change
Factory Orders m/m
IBD/TIPP Economic Optimism
Total Vehicle Sales
Caixin Services PMI
Spanish Services PMI
Italian Services PMI
French Final Services PMI
ADP Non-Farm Employment Change
Trade Balance
Final Services PMI
ISM Non-Manufacturing PMI
Crude Oil Inventories
German Factory Orders m/m
EU Economic Forecasts
Challenger Job Cuts y/y
Unemployment Claims
Prelim Nonfarm Productivity q/q
Prelim Unit Labor Costs q/q
Natural Gas Storage
German Industrial Production m/m
French Gov Budget Balance
French Trade Balance
Non-Farm Employment Change
Unemployment Rate
Average Hourly Earnings m/m
German Trade Balance
Sentix Investor Confidence
Labor Market Conditions Index m/m
CPI y/y
PPI y/y
French Industrial Production m/m
Italian Industrial Production m/m
NFIB Small Business Index
Import Prices m/m
Wholesale Inventories m/m
Industrial Production y/y
Fixed Asset Investment ytd/y
Retail Sales y/y
Crude Oil Inventories
German Final CPI m/m
German WPI m/m
French Prelim Non-Farm Payrolls q/q
Industrial Production m/m
Unemployment Claims
Natural Gas Storage
Federal Budget Balance
German Prelim GDP q/q
Flash GDP q/q
Core Retail Sales m/m
PPI m/m
Retail Sales m/m
Core PPI m/m
Prelim UoM Consumer Sentiment

Time in IST Currency

3:30pm
EUR
4:30pm
EUR
7:00pm
USD
Tue Nov 17
2:30pm
EUR
3:30pm
EUR
EUR
7:00pm
USD
USD
7:45pm
USD
USD
Wed Nov 18 2:30am
USD
7:00pm
USD
USD
9:00pm
USD
Thu Nov 19 12:30am
USD
2:30pm
EUR
6:00pm
EUR
7:00pm
USD
8:30pm
USD
USD
9:00pm
USD
Fri Nov 20
12:30pm
EUR
1:30pm
EUR
EUR
2:00pm
EUR
EUR
2:30pm
EUR
EUR
Mon Nov 23
8:15pm
USD
8:30pm
USD
Tue Nov 24
12:30pm
EUR
2:30pm
EUR
7:00pm
USD
USD
USD
8:30pm
USD
Wed Nov 25 12:30pm
EUR
2:30pm
EUR
7:00pm
USD
USD
USD
USD
USD
8:30pm
USD
9:00pm
USD
Thu Nov 26
All Day
EUR
2:30pm
EUR
EUR
EUR
7:00pm
USD
Fri Nov 27
12:30pm
EUR
1:15pm
EUR
1:30pm
EUR
4:30pm
EUR
8:30pm
USD
Mon Nov 30
8:15pm
USD
8:30pm
USD

Date

Mon Nov 16

Country/Event
Final CPI y/y
German Buba Monthly Report
Empire State Manufacturing Index
Italian Trade Balance
German ZEW Economic Sentiment
ZEW Economic Sentiment
CPI m/m
Core CPI m/m
Capacity Utilization Rate
Industrial Production m/m
TIC Long-Term Purchases
Building Permits
Housing Starts
Crude Oil Inventories
FOMC Meeting Minutes
Current Account
ECB Monetary Policy Meeting Accounts
Unemployment Claims
Philly Fed Manufacturing Index
Mortgage Delinquencies
Natural Gas Storage
German PPI m/m
French Flash Manufacturing PMI
French Flash Services PMI
German Flash Manufacturing PMI
German Flash Services PMI
Flash Manufacturing PMI
Flash Manufacturing PMI
Flash Services PMI
Existing Home Sales
German Final GDP q/q
German Ifo Business Climate
Prelim GDP q/q
Goods Trade Balance
Prelim GDP Price Index q/q
CB Consumer Confidence
GfK German Consumer Climate
Italian Retail Sales m/m
Core Durable Goods Orders m/m
Core PCE Price Index m/m
Durable Goods Orders m/m
Personal Spending m/m
Personal Income m/m
New Home Sales
Crude Oil Inventories
German Prelim CPI m/m
M3 Money Supply y/y
Italian Monthly Unemployment Rate
Italian Quarterly Unemployment Rate
Unemployment Claims
German Import Prices m/m
French Consumer Spending m/m
Spanish Flash CPI y/y
ECB Financial Stability Review
Revised UoM Consumer Sentiment
Chicago PMI
Pending Home Sales m/m

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DISCLAIMER : Trading and Investment decision taken on your consultation are solely at the discretion of the traders/investors.We are not liable for any loss, which occur as a result of our recommendations. This document has
been prepared on the of publicly available information, internally developed data and other sources believed to be reliable.
NSE:INB/F/E 230823233 BSE: INB/F 010823236 NSDL: IN-DP-NSDL-166-2000, MCX-SX: INE 26082333 AMFI ARN 3524 MCX: TM 29040 / FMC REG NO. MCS / TC / CORP / 0963 MCDEX: TM 00749 / FMC REG NO.
NCDEX / TCM / CORP / 0736 / NSEL TM 10110* Note: Dealing in Commodity Segment through its group company Jhaveri Credits & capital Ltd.
Distributors for IPOs & Mutual Funds. Past performance is not a measure for future returns.