Value Guide

Value
Guide
September 2015
For Private Circulation only
www.sharekhan.com
UNSEASONAL DISCOUNT
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
September 2015
Sharekhan ValueGuide
CONTENTS
EQUITY
From Sharekhans Desk

Unseasonal discount sale
Last month, equity
markets across the
world went into a
tailspin led by a
plunging Chinese
stock market. The
Chinese stock
market has been
on a downward
spiral this year and plunged by a whopping 39% since June 12,
when its year-old bubble had popped.
06
FUNDAMENTALS
Stock Ideas
Stock Updates
Sharekhan Special
Sector Updates
15
16
27
27
TECHNICALS
Nifty
DERIVATIVES
29 View
30
ADVISORY DESK
MID Trades
43 Derivative Ideas
43
FUNDAMENTALS
Crude Oil
Gold
Silver
Copper
31 Lead
32 Zinc
32
Nickel
32
32
TECHNICALS
Gold
Silver
Crude Oil
34 Copper
34 Aluminium
34 Jeera
35
35
35
Viewpoints
28
REGULAR FEATURES
Report Card
4
Earnings Guide
I
COMMODITY
RESEARCH BASED EQUITY PRODUCTS
Market Outlook
Top Picks Basket
Wealth Creator Portfolio
PMS DESK
07
10
14
ProPrime - Top Equity

39
ProPrime - Diversified Equity 40
ProTech - Index
Futures Fund
41
ProTech - Trailing Stops
42
45
Top SIP Fund Picks
46
33
CURRENCY
MUTUAL FUNDS DESK

Top MF Picks (equity)
32
FUNDAMENTALS
USD-INR
EUR-INR
36
36
GBP-INR
JPY-INR
37
37
TECHNICALS
USD-INR
EUR-INR
38 GBP-INR
38 JPY-INR
38
38
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disclaimer
Compliance Officer: Ms. Namita Amod Godbole; Tel: 022-6115000; e-mail: compliance@sharekhan.com Contact: myaccount@sharekhan.com
September 2015
REPORT CARD
EQUITY
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON SEPTEMBER 04, 2015)

COMPANY
CURRENT PRICE AS ON PRICE

RECO
04-SEP-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
CMC
Firstsource Solution
HCL Technologies
Infosys
Persistent Systems
Tata Consultancy Services
Wipro
BSE IT Index
CAPITAL GOODS / POWER
Bharat Heavy Electricals
CESC
Crompton Greaves
Finolex Cables
Greaves Cotton
Kalpataru Power Transmission
PTC India
Skipper NEW
Thermax
Va Tech Wabag NEW
September 2015
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Reduce
170.2
85.0
2211.0
83.2
2290.9
1110.6
4063.3
45.4
223.2
16983.2
240.0
98.0
2600.0
100.0
3250.0
1550.0
4700.0
58.0
230.0
249.8
154.7
99.7
37.0
2695.0 1912.5
106.8
71.0
3271.8 2251.3
1442.1 1092.2
4692.4 2856.0
63.9
24.2
322.3
200.1
20386.4 16796.6
-21.7
-3.4
-12.0
-7.3
-12.7
-18.6
-7.9
-20.4
-4.3
-12.5
-0.3
28.1
1.7
11.2
-10.1
-6.2
8.4
16.7
-1.3
-6.2
-1.5
18.9
6.3
-6.2
-11.7
-7.4
11.1
20.1
-22.5
-12.8
-11.6
129.1
-2.0
24.1
-18.0
-20.5
41.1
88.2
0.5
-3.3
-12.8
7.5
-2.1
3.1
-2.9
-9.4
2.5
-11.4
6.4
-2.7
5.4
35.5
7.5
17.6
-4.9
-0.9
14.6
23.4
4.3
-0.8
13.7
37.2
22.6
8.2
1.9
6.8
28.2
38.5
-10.6
0.6
-6.3
142.9
3.8
31.6
-13.1
-15.8
49.5
99.5
6.5
2.5
Buy
Hold
Buy
Hold
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Hold
Buy
Buy
Buy
76.5
61.8
468.0
5075.6
1828.8
174.3
128.7
349.5
45.9
57.7
1141.6
996.1
257.8
55.6
413.4
39.0
130.8
225.2
156.9
647.2
18437.5
110.0
90.0
652.0
5600.0
1950.0
204.0
162.0
485.0
60.0
85.0
1400.0
1260.0
400.0
76.0
558.0
75.0
165.0
378.0
185.0
930.0
136.7
75.4
101.0
60.5
655.4
370.2
5720.2 2417.1
2160.0
975.0
228.9
137.2
312.0
126.0
464.8
277.0
78.9
45.1
79.8
56.3
1402.3
975.0
1128.0
842.0
393.4
254.0
84.9
52.3
526.0
299.2
73.2
37.6
231.5
123.6
336.0
222.6
253.5
129.8
910.0
535.9
23903.8 17319.8
-18.9
-19.5
-19.3
-9.8
-9.8
-8.8
-25.6
-17.5
-14.0
-14.5
-12.3
-8.3
-17.9
-18.4
-18.7
-16.6
-17.8
-22.0
-22.7
-23.1
-15.5
-19.4
-9.6
-15.2
17.0
19.6
10.2
-27.7
-6.8
-10.7
-15.0
-5.2
-1.1
-11.2
-12.0
3.5
-3.8
-7.6
-12.6
5.2
-21.8
-9.2
-27.0
-24.7
-23.0
18.1
24.5
-1.2
-42.8
-16.0
-23.7
-19.8
-15.6
-5.8
-24.9
-28.1
-14.7
-38.8
-18.6
-22.4
-3.9
-23.7
-17.3
-32.7
-13.0
13.3
108.4
66.6
1.6
-54.6
25.1
-27.4
-6.6
6.9
17.8
-16.6
-25.3
30.3
-9.8
-29.0
-8.3
-22.7
5.6
1.5
-9.8
-10.4
-10.2
0.4
0.4
1.5
-17.3
-8.2
-4.3
-4.9
-2.5
2.0
-8.7
-9.2
-9.5
-7.2
-8.6
-13.2
-14.0
-14.4
-5.9
-14.8
-4.4
-10.3
23.7
26.5
16.5
-23.6
-1.5
-5.6
-10.1
0.2
4.5
-6.1
-7.0
9.4
1.7
-2.3
-7.6
11.3
-17.3
-4.0
-15.8
-13.1
-11.2
36.2
43.6
13.9
-34.1
-3.1
-12.0
-7.5
-2.7
8.7
-13.4
-17.1
-1.7
-29.4
-6.1
-10.5
10.8
-11.9
-4.6
-28.6
-7.8
20.1
120.9
76.6
7.7
-51.9
32.6
-23.1
-1.0
13.3
24.9
-11.6
-20.8
38.1
-4.4
-24.7
-2.8
-18.1
12.0
7.5
Buy
Buy
Hold
Hold
Buy
Hold
Hold
Buy
2988.3
6051.4
1221.2
830.0
317.1
319.9
401.8
832.7
7610.7
3650.0
7000.0
1380.0
925.0
365.0
**
460.0
1025.0
1260.0
4900.0
830.0
707.2
294.0
225.0
276.6
606.0
7277.5
-5.9
-2.4
-8.4
-8.6
-3.9
8.2
-9.1
-7.6
-6.3
16.4
-3.3
8.8
2.0
5.1
19.2
-5.4
-9.2
2.9
39.6
4.2
1.6
-8.4
-6.0
15.1
4.6
-7.8
-5.0
139.5
12.8
18.0
14.7
-7.6
34.1
46.0
37.3
5.3
4.7
8.6
2.0
1.7
6.9
20.4
1.1
2.8
4.2
23.1
2.2
15.0
7.8
11.2
26.1
0.0
-4.0
8.8
61.0
20.2
17.1
5.6
8.4
32.8
20.7
6.3
9.6
153.9
19.6
25.0
21.6
-2.1
42.1
54.8
45.5
11.6
Hold
Hold
Buy
Buy
Buy
Buy
Hold
1988.5
27.3
940.3
1074.0
692.7
2547.5
554.0
10970.0
NA
38.0
1050.0
1240.0
820.0
3000.0
660.0
2407.0 1805.1
44.4
24.2
1058.5
707.5
1186.2
893.2
957.1
573.7
2839.7 2345.0
677.6
512.5
11927.5 10124.5
2.7
-12.4
1.3
1.6
3.6
1.5
-1.0
0.4
-0.1
-7.5
0.5
7.5
-7.8
-1.1
1.5
3.0
-2.3
-14.4
-6.7
-4.2
-23.5
-6.2
-15.0
-7.5
-6.2
-29.5
15.3
18.5
8.2
0.1
-2.0
6.5
14.3
-2.5
12.7
13.0
15.2
13.0
10.1
11.7
5.6
-2.2
6.3
13.6
-2.5
4.6
7.3
8.9
12.7
-1.3
7.6
10.5
-11.8
8.2
-1.9
6.7
-0.6
-25.3
22.2
25.6
14.7
6.1
3.9
12.9
Hold
Buy
Hold
Buy
Hold
Buy
Buy
Buy
Hold
Buy
206.2
489.6
161.4
233.8
128.2
235.1
56.0
135.8
936.9
685.0
270.0
730.0
185.0
310.0
160.0
325.0
90.0
210.0
1150.0
850.0
-26.8
-14.8
-12.9
-7.4
-13.1
-13.8
-22.8
-18.4
-8.6
-8.8
-16.9
-4.9
-1.3
-0.8
5.0
7.5
-10.2
-19.6
-0.9
-2.6
-23.9
-16.0
-10.5
-13.9
-10.8
4.1
-34.8
-24.6
-22.8
-19.8
-8.4
-33.0
-22.5
3.8
-0.9
41.4
-35.6
248.0
10.3
-2.7
-18.6
-5.2
-3.1
3.0
-3.4
-4.0
-14.1
-9.3
1.7
1.5
-12.1
0.6
4.4
4.9
11.0
13.6
-5.0
-15.0
4.7
3.0
-12.2
-3.1
3.2
-0.7
2.9
20.1
-24.8
-13.0
-10.9
-7.5
-2.9
-29.0
-17.8
10.1
5.1
49.9
-31.7
268.9
17.0
3.1
3435.0
6575.0
1459.0
981.0
410.0
342.0
467.0
1130.3
8382.8
300.0
828.1
231.0
306.5
159.4
291.8
104.9
200.0
1318.0
972.5
194.2
452.0
145.3
197.0
116.6
128.6
50.1
37.7
825.1
615.0
EQUITY
REPORT CARD
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON SEPTEMBER 04, 2015)

COMPANY
V-Guard Industries
Triveni Turbines
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
JB Chemicals
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
Eros International Media
Info Edge (India) NEW
KDDL NEW
KKCL
Orbit Exports NEW
Raymond
Relaxo Footwear
Speciality Restaurants
Thomas Cook India
Zee Entertainment
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
Bajaj Holdings
Bharti Airtel
Bharat Electronics
Gateway Distriparks
Max India
Ratnamani Metals and Tubes
Supreme Industries
UPL
BSE500 Index
CNX500 Index
CNXMCAP Index
CURRENT PRICE AS ON PRICE

52 WEEK
RECO
04-SEP-15
TARGET
HIGH
LOW
Buy
903.0
1155.0
1198.0
742.2
Buy
106.1
145.0
151.8
83.0
1730.0
2332.4 1705.4
15432.6
18814.2 13835.6
RELATIVE TO SENSEX
1M
3M
6M
12M
3.1
10.3
10.9
31.9
-2.1
6.5
-2.2
30.4
-7.3
-8.4
-11.9
-11.0
-4.4
-1.5
-2.6
7.9
Hold
Buy
Buy
Hold
Hold
Reduce
408.2
87.8
212.0
9.1
1533.9
24.4
2815.5
1242.3
500.0
225.0
320.0
**
1860.0
**
500.0
229.8
289.7
37.3
1893.8
45.3
3456.8
1894.0
132.1
86.3
197.1
7.9
1400.0
20.5
2780.3
1142.7
-1.0
-37.4
-14.6
-18.4
-12.7
-23.2
-13.9
-10.2
103.2
-41.4
-12.3
-30.5
-6.8
7.7
-10.5
-12.5
148.8
-58.7
-15.8
-67.5
-15.7
-34.0
-15.6
-30.3
194.8
-57.5
-17.3
-75.8
-2.5
-37.2
-11.6
-28.2
10.2
-30.4
-5.0
-9.2
-2.8
-14.5
-4.2
0.0
114.9
-38.1
-7.3
-26.6
-1.4
13.9
-5.4
-7.5
187.0
-52.3
-2.9
-62.5
-2.7
-23.9
-2.7
-19.6
212.5
-55.0
-12.3
-74.4
3.3
-33.4
-6.3
-23.9
Buy
Buy
Hold
435.8
835.9
218.9
8539.8
565.0
1100.0
345.0
670.0
1067.9
621.0
11742.3
413.7
796.5
202.7
8243.3
-1.0
-15.4
-17.4
-11.8
-7.4
-8.4
-10.4
-8.8
-8.9
-4.8
-22.1
-11.3
-29.4
-17.6
-60.3
-23.5
10.1
-5.9
-8.1
-1.9
-2.1
-3.2
-5.3
-3.5
5.1
9.8
-10.2
2.4
-25.2
-12.7
-57.9
-18.9
Hold
Buy
Buy
Hold
Hold
Hold
Hold
Buy
Buy
Buy
723.1
649.6
1812.6
2176.8
1026.3
275.4
761.5
1859.6
857.7
1589.4
17136.2
815.0
795.0
2300.0
2300.0
1065.0
**
**
1860.0
980.0
1600.0
832.5
752.9
2045.0
2484.7
1262.9
292.3
888.0
2115.0
1200.8
1720.0
18842.7
381.5
558.7
1060.9
1572.0
676.0
173.2
591.3
1306.8
748.0
810.3
15345.7
-4.1
-8.2
-1.9
12.2
3.4
-0.9
4.9
13.4
3.3
11.5
0.2
10.3
3.3
0.1
21.3
23.0
25.5
19.8
6.7
3.1
32.0
8.8
35.3
-10.4
19.2
26.4
28.4
55.6
12.1
4.5
-14.8
46.0
4.4
74.1
17.9
46.6
36.3
33.1
28.8
0.2
40.8
-0.6
86.6
25.8
6.7
2.1
9.2
24.8
15.0
10.3
16.7
26.1
15.0
24.1
11.5
16.6
9.2
5.8
28.2
30.0
32.7
26.7
12.8
9.1
39.5
15.0
56.0
3.3
37.5
45.8
48.1
79.5
29.2
20.5
-1.7
68.4
20.5
84.6
25.0
55.4
44.5
41.1
36.5
6.2
49.3
5.4
97.8
33.3
Buy
Buy
Hold
Buy
3374.7
318.7
10765.5
2915.1
4475.0
420.0
11800.0
3750.0
4024.9
380.0
12388.9
3399.0
3218.0
270.0
8000.5
2297.2
-9.9
-11.1
-5.9
-7.0
-1.6
-1.7
-3.3
1.9
-12.6
-5.1
-3.9
-11.7
-5.5
-6.7
28.6
7.9
0.3
-1.1
4.7
3.4
4.0
3.9
2.3
7.8
0.8
9.4
10.9
1.9
0.2
-1.1
36.3
14.3
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Buy
Buy
140.9
236.3
476.4
749.0
248.0
2170.0
368.0
387.4
499.0
144.9
203.3
360.4
260.0
350.0
570.0
1103.0
375.0
2480.0
630.0
500.0
650.0
180.0
265.0
425.0
262.0
368.0
644.4
1015.0
424.5
2342.7
495.0
579.5
615.0
218.8
256.9
421.7
95.1
218.0
234.3
697.1
138.8
1624.1
234.1
360.1
216.2
125.0
130.1
279.5
-31.7
-23.9
-19.1
-11.8
-22.4
-2.4
-21.5
-18.7
-13.4
-9.8
-6.8
-10.6
-25.0
-14.2
9.8
-6.3
-17.5
7.6
-2.1
-5.6
18.1
-5.8
-13.6
11.5
-41.1
-26.3
15.0
-11.6
-26.0
18.4
-3.8
-25.2
41.1
-20.3
-4.9
6.1
53.1
-19.7
76.7
-2.9
58.1
23.4
45.4
-16.0
130.1
6.4
41.3
27.6
-24.0
-15.4
-10.0
-1.8
-13.6
8.6
-12.7
-9.6
-3.6
0.3
3.7
-0.5
-20.7
-9.3
16.1
-0.9
-12.7
13.8
3.6
-0.2
24.9
-0.4
-8.7
17.9
-32.1
-15.0
32.6
1.9
-14.6
36.6
10.9
-13.7
62.8
-8.1
9.7
22.3
62.3
-14.9
87.3
2.9
67.6
30.8
54.2
-10.9
143.9
12.8
49.8
35.3
Buy
Buy
Hold
Buy
Buy
Buy
Hold
Buy
Buy
2010.3
1588.8
350.0
3228.1
321.6
502.8
597.2
590.0
529.7
10143.9
6421.1
12591.8
2500.0
1815.0
450.0
3900.0
420.0
648.0
750.0
750.0
600.0
2344.9
1694.1
452.5
4160.0
459.4
576.8
806.3
746.8
576.4
11764.8
7428.1
14237.6
1446.2
1206.5
332.5
1964.0
218.0
306.3
412.0
540.0
299.5
9840.8
6204.0
10940.9
-11.7
5.7
-14.8
-21.3
-12.2
-10.4
1.8
-6.9
-5.6
-10.0
-10.0
-10.0
18.1
21.6
-15.5
-1.9
-11.8
5.3
3.4
-10.2
-4.6
-3.8
-4.2
-0.1
16.8
16.2
0.2
-11.3
-22.0
8.0
-23.1
-12.6
28.7
-11.2
-11.8
-4.1
38.4
21.1
-13.0
65.3
32.1
51.0
45.3
-6.3
44.7
-0.4
-1.2
10.7
-1.8
17.6
-5.2
-12.4
-2.3
-0.3
13.3
3.5
5.1
0.2
0.1
0.1
24.9
28.6
-10.6
3.7
-6.8
11.3
9.3
-5.0
0.8
1.7
1.3
5.7
34.7
34.1
15.6
2.3
-10.1
24.6
-11.3
0.8
48.5
2.5
1.7
10.6
46.7
28.4
-7.7
75.2
40.0
60.0
54.1
-0.6
53.4
5.6
4.7
17.3
In Top Picks basket
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
-7.3
4.3
-3.8
24.4
-12.0
0.8
-15.2
23.0
-16.6
-13.4
-23.6
-16.1
-14.1
-6.8
-15.5
1.8
** Price target under review
September 2015
from sharekhans desk
FROM SHAREKHANS DESK
September 2015
Unseasonal discount sale

Last month, equity markets across the world went into a tailspin led by a plunging Chinese
stock market. The Chinese stock market has been on a downward spiral this year and
plunged by a whopping 39% since June 12, when its year-old bubble had popped. Together
with the persisting Greece crisis and fears of a US Federal Reserve (Fed) rate hike, Chinas
plummeting equity market created a panic-driven sell-off in the commodity and equity
markets globally.
Though the Indian equity market also witnessed a break-down from its multi-month trading
range largely led by continued selling pressure from the foreign investors, the extent of the
damage in India was relatively lower compared with its emerging market peers, in terms of
both the extent of the depreciation in the rupee against the dollar and the decline in the
Indian equity market.
The improving fiscal health of India and an astute governor at the helm of the Reserve
Bank of India have supported the rupee. On the other hand, strong domestic retail inflows
have partially absorbed the selling pressure from the foreign investors. As compared with
net outflow of Rs17,248 crore from the foreign investors, the domestic mutual funds bought
equities worth Rs10,530 crore in August this year on the back of continued retail inflows
into equity mutual funds. Moreover, the government could also raise close to Rs9,300
crore by offering part stake in Indian Oil Corporation in the last month.
In the near term, volatility is likely to persist largely due to global issues like the uncertainty
related to the outlook of the Chinese economy and its fall-out on the economies globally.
Another global event that may add to the volatility is the Feds September 17 meeting.
Some expect the Fed to announce a rate hike at the meeting, though we do not expect a
hike before December this year. Moreover, it is largely accepted that the rates are going to
go up in the USA sooner or later.
Locally, there are two events that may provide direction to the market in the near term. The
monetary policy review meeting of our own central bank on September 29, 2015. In the
aftermath of the Chinese stock market crash the prices of commodities including crude oil
have fallen sharply which may prompt the inflation-focused Reserve Bank of India to reduce
the key policy rates, giving in to the long-pending demand of Indian corporates.
The other key event is the upcoming assembly election in Bihar. If the Bharatiya Janata
Party manages to win this critical election with a good margin, it will demoralise the
opposition parties and provide enough confidence to the ruling National Democratic Alliance
to aggressively push forward the reform agenda.
Corrective phases in a multi-year bull market are usually opportunities to buy into quality
stocks as valuations turn more reasonable. In the last multi-year rally in 2003-08, there
were three occasions of a correction of over 15% in the benchmark indices which were
followed by handsome returns over the following year.
However, it is not possible to perfectly time the market and catch the bottom. Thus, it is
always advisable to focus on individual stocks and buy gradually. Investors can either
choose from the basket of close to 100 stocks actively tracked by our Fundamental research
team (around another 60 companies are under soft coverage) or follow any of the model
portfolios (like Sharekhan Top Picks, Wealth Creator or Power Portfolio) depending upon
their investment style and horizon.
6
EQUITY
MARKET OUTLOOK
FUNDAMENTALS
MARKET OUTLOOK
SEPTEMBER 07, 2015
Volatility galore
Global sell-offs led by weakness in China wreck Indian market:
by the Reserve Bank of India (RBI) at the September 29, 2015 review
The Indian equity market got caught in the wave of global volatility
meet, in line with a sharp moderation in inflation and sluggish
driven by a meltdown in the Chinese equity market that was
industrial activity. Second, the outcome of the Bihar election is
followed by a knee-jerk reaction from the Chinese authorities to
critical. A comprehensive win by the Bharatiya Janata Party (BJP)
control the situation and support the economy. Amid the rising
would provide enough confidence to the National Democratic
uncertainty, foreign investors pulled out of risky assets including
Alliance (NDA) government to push forward reforms whereas a
equities of emerging markets (EMs) like India, which witnessed
win by the grand coalition could put the NDA government on the
record outflows of over Rs17,000 crore in August this year. On
back-foot and strengthen the Narendra Modi baiters within the
the other hand, the domestic institutional investors remained buyers
BJP fold. Globally, the situation should improve from the high level
providing vital cushion to the stock market.
of volatility seen in the past few weeks.
Domestic economy largely resilient, Parliament logjam and erratic
Valuation comfort rises after recent correction: After the correction,
monsoon did weaken sentiment: Domestically, the macro scenario
the valuation of the Sensex has declined to ~15x FY2016E earnings,
is stable with a global rout in commodity prices further pushing
which is close to the long-term mean, though on a relative basis
down inflation and also positively affecting the current account
(compared with the other EMs), the premium has gone up due to a
deficit. Moreover, there are some positive signs like improving order
sharp correction in these EM indices. Given there are limited triggers
inflow into capital goods companies, rising auto volume sales and
in the near term and global sentiment is adverse, the domestic stock
a reducing number of stalled projects. However, the government
market may remain volatile and fluctuate in a wider band. We prefer
needs to push forward key reforms like the Goods & Services Tax
sectors that are likely to benefit from the weakness in commodity
and land acquisition bills to sustain the momentum. The Parliament
prices and a revival in consumer demand, such as pharmaceuticals
logjam and erratic monsoon rainfall are acting as a drag and could
and information technology, apart from select auto companies,
delay the expected revival in the economy.
private sector banks and financial service companies, and consumer

discretionary stocks.
Corporate earnings remain weak; hope hinges on revival in H2: As

expected, the earnings growth for Q1FY2016 was weak enough to
SENSEX ONE-YEAR FORWARD P/E BAND
prompt further cuts in the consensus earnings estimates of the Sensex

companies for FY2016 and FY2017. After the recent cut in the
earnings estimates, the consensus is now building an earnings growth
of 12% for FY2016; the growth is largely expected to be backended (in the second half of the fiscal). The expectations for the
FY2017 earnings growth still hover around the 18-20% mark on
the back of the positive effects of interest rate cuts getting reflected
in demand and an additional booster from the Seventh Pay
Commission in the form of a 25-30% salary hike to 15 million
central and state government employees with effect from April 2016.
Key events ahead; RBI rate cut and Bihar election: Two key domestic
events lying ahead are the expected resumption of interest rate cuts
Source: Bloomberg, Sharekhan Research
September 2015
MARKET OUTLOOK
EQUITY
FUNDAMENTALS
FII OUTFLOWS INCREASE IN RECENT MONTHS
China slowdown an overhang on market: Following the devaluation

of the yuan and weak macro data, the Chinese stock market and
some of the other EMs faced one of the biggest corrections since
the Global Financial crisis. The Chinese equity indices tumbled by
39% from the peak whereas the other EMs including India witnessed
ripples. The commodity prices resumed their downward trend with
a significant correction in the major commodities, thereby hurting
the commodity based economies (Brazil, Russia, and Indonesia).
On the other hand, the US economic data shows a mixed trend
with the view widely split on rate hikes by the US Federal Reserve
(Fed) in September 2015.
PERFORMANCE OF EMERGING MARKET INDICES SINCE LAST TWO MONTHS
Indias macros look better amid global turmoil: While India too
was caught in the turbulence in the global financial markets, steady
domestic consumption and correcting crude prices will support the
Indian economy. A global slowdown led correction in the
commodity prices will have a positive impact on most macroeconomic variables such as fiscal deficit, inflation, current account
deficit including consumption growth, corporate earnings etc.
However, after a strong spell in June the monsoon rains have been
deteriorating and the rainfall deficit stood at about 20% till August.
Even if the monsoon does not have a meaningful impact on inflation,
a weak monsoon may prolong the revival in the rural economy.
The government has been on a spending mode (capital expenditure

Reversal of FII flows affected market, domestic participation
up 18% in Q1FY2016) and the recent fall in the commodity prices
increasing: In response to the global shake-up, the foreign
is more of a blessing that would expand the scope for spending
institutional investor (FII) related outflows increased sharply across
across segments (critical for a pick-up in the economy) without
the EMs including India which had an adverse impact on their
straining the fiscal situation.
respective currencies. In August alone the FIIs pulled out about
INFLATION CLEARLY DOWNTRENDING
Rs17,000 crore from the Indian market, though part of the outflow
was compensated by the domestic institutions, which made
purchases worth Rs10,500 crore in August. The inflows in mutual
funds have increased significantly as the average asset under
management (AUM) increased by 36% year on year (YoY; till July
as per the data of Association of Mutual Funds of India [AMFI]).
While the global situation remains volatile in the near term, India
is differentiated among the EMs (thanks to a higher growth rate,
lower inflation and interest rates, and political stability) and clarity
on tax laws (minimum alternate tax) should improve the market
sentiment.
September 2015
EQUITY
MARKET OUTLOOK
FUNDAMENTALS
GDP AND CAD
that goes through it will be perceived as a positive by the market.

The other factors are the upcoming Bihar election which will not
only push the reform agenda but also be critical in improving the
governments tally in the upper house of the Parliament. The RBI
seems broadly convinced about the dip in inflation and may resume
rate cuts as global issues subside, thus the central bank will be keenly
watched by the market.
Valuation broadly in line with the long-term mean: The Sensex has
corrected by ~15% from its peak. The correction was accompanied
by a 12-14% downgrade in its consensus earnings estimate for
FY2016. After the recent cut in the earnings estimate, the consensus
is now building an earnings growth of 12% for FY2016; the growth
is largely expected to be back-ended (in the second half of the fiscal).

The expectations for the FY2017 earnings growth still hover around
Eye on reforms/rate cuts: The wash-out of the monsoon session of
the 18-20% mark on the back of the positive effects of interest rate
the Parliament, the logjam on the GST bill and the surrender on
cuts getting reflected in demand and an additional booster from
the land acquisition bill have been set-backs for the government
the Seventh Pay Commission. The valuation has turned reasonable
preventing it from pushing critical reforms amid a minority in the
and the Sensex trades at ~15x FY2016E (~13x FY2017) consensus
upper house of the Parliament. The government is contemplating
earnings estimate, which is close to the long-term mean.
the scope for the passage of the GST bill in a special session and if
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
September 2015
EQUITY
SHAREKHAN TOP PICKS
FUNDAMENTALS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

August of 2015 turned out to be quite volatile for the equity markets
globally. Chinese rumbles grew louder as the government struggled
to support the countrys plummeting equity market and economy.
However, the fears of a currency war got triggered by an unexpected
move by China to devalue its currency against the US Dollar. The
uncertainty driven-risk aversion led to a flight of global liquidity
out of equities in general and the emerging markets in particular.
This month, we are making two changes in the folio. Both are related
to a routine churning of stocks from the banking & financial sector.
We are replacing Yes Bank with IndusInd Bank, which is
comparatively better placed to increase its market share in the retail,
and small and medium enterprise space after a recent mobilisation
of fresh equity capital. It is also a play on a revival in the commercial
vehicle segment with 25% of its loan book exposed to vehicle
financing (namely, commercial vehicles).
In the volatile environment also the Top Picks folio of select stocks
outperformed the benchmark indices, Sensex and Nifty (which
declined by 6.5% each), with a relatively lower loss of 5.8% since
our last portfolio revision on July 31, 2015. The smart
outperformance of close to 400 basis points in a flattish month of
July followed by an outperformance in a sharp corrective phase
highlights the resilience of the portfolio.
Another change in the banking and financial space is the introduction

of Bajaj Finance in place of Capital First. We believe that the
aggressive base rate cut announced by HDFC Bank would have a
relatively higher impact on the folio of Capital First as compared
with Bajaj Finance.
CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED)

1 month
3 months
Top Picks
Sensex
Nifty
CNX Mid-cap
-5.8
-6.5
-6.6
-4.9
(%)
-1.7
-5.6
-5.6
-0.9
ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)
Sharekhan
(Top Picks)
Sensex
Nifty
CNX
MIDCAP
CY2015
11.1
-4.5
-3.8
3.8
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)
410.3
161.9
161.4
260.4
6 months
1 year
3 years
5 years
-4.1
-11.2
-11.4
-2.7
31.6
-2.4
-0.7
15.2
130.5
51.5
52.8
84.8
114.2
43.8
45.4
44.9
CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

APRIL 2009
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
FY15
PER
FY16E
2,042
45.5
91
110.2
Bajaj Finance
5,024
Cadila Healthcare
Aditya Birla Nuvo

Ashok Leyland
Century Plyboards
IndusInd Bank
CMP*
(RS)
FY17E
PRICE
TARGET (RS)#
UPSIDE
(%)
7.2
2,500
22
18.0
23.6
98
19.5
19.2
5,600
11
27.3
27.5
28.3
2,300
22
44.0
39.5
34.1
260
70
29
FY17E
FY15
41.5
7.1
25.9
16.5
4.9
28.1
22.8
17.8
20.3
1,888
33.6
24.6
17.5
153
22.8
18.0
14.6
ROE (%)
FY16E
857
25.2
20.4
16.2
19.2
20.5
21.5
1,108
Lupin
1,929
36.1
32.6
26.0
27.1
23.1
22.8
**
Maruti Suzuki
4,168
33.9
23.3
18.4
16.6
20.8
22.2
4,700
13
Reliance Industries
857
10.7
11.3
9.2
10.8
9.4
10.5
1,100
28
SBI
247
14.1
10.3
7.8
10.6
13.2
15.7
378
53
TCS
2,565
25.6
20.8
18.3
33.7
32.8
30.3
3,000
17
386
37.8
33.9
28.0
19.0
18.6
20.1
425
10
Zee Entertainment
*CMP as on August 31, 2015 # Price target for next 6-12 months
September 2015
** Under review
10
EQUITY
NAME
FUNDAMENTALS
CMP
(RS)
ADITYA BIRLA NUVO
2,042
FY15
45.5
SHAREKHAN TOP PICKS

PER
FY16E
41.5
FY17E
FY15
ROE (%)
FY16E
FY17E
7.1
7.2
PRICE
TARGET (RS)
2,500
UPSIDE
(%)
22
Remarks: Aditya Birla Nuvo (ABNL), a conglomerate holding company, is present in different businesses ranging from lifestyle, telecom, fertilisers
to financials, with each having either leadership or a strong competitive position in its market. We believe that owing to the holding
company structure and composition, the underlying businesses are trading at a discount to their fair value.
Over the last few years the company has made efforts to consolidate its position in each of the business verticals and gained market
share in the respective businesses.

ABNLs strong position in each of its business verticals (life insurance, telecom, lifestyle and asset management) will pave the way for
growth. Also, the companys efforts to implement the necessary restructuring steps to unlock value for its minority shareholders
through disinvestment of the sub-scale businesses (carbon black and business process outsourcing), demerger of growth businesses
or consolidation within the group are likely to enhance the shareholders value in this quality conglomerate business. Thus, we see
scope for further re-rating of the stock as each of its businesses gets valued optimally, does not suffer holding structure and has a
diversified business profile (no holding discount). We, therefore, retain our positive stance on the stock and maintain our Buy rating on
the stock.
ASHOK LEYLAND
91
110.2
25.9
16.5
4.9
18.0
23.6
98
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 domestic heavy CV industry witnessed a sharp fall in
volumes over FY12-14 given an economic slowdown. The industry witnessed a turnaround in FY15 with a 16% growth.
ALL entered the light commercial vehicle (LCV) segment with the launch of the Dost in joint venture (JV) with Nissan. The JV has
additionally launched the Partner LCV and Stile van. Going forward, we expect ALL to gain a foothold in the LCV segment and expand
its market share.
The company is also concentrating on verticals other than CVs to de-risk its business model. It has a strong presence in exports and
continues to expand in 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. In FY15, ALL raised Rs660 crore via a qualified
institutional placement and sold non-core assets to pare its debts. With no significant capital expenditure planned, we expect the
balance sheet to get de-leveraged and the return ratios to improve.
BAJAJ FINANCE
5,024
28.1
22.8
17.8
20.3
19.5
19.2
5,600
11
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; the valuation after the recent correction has turned more reasonable (3.1x its FY1207E book value). We have a Buy
rating on BFL with a price target of Rs5,600.
CADILA HEALTHCARE
1,888
33.6
24.6
17.5
27.3
27.5
28.3
2,300
22
Remarks: Cadila Healthcare is set to enter a high-growth trajectory, thanks to its aggressive product filings in the USA and Latin America, a
recovery in its joint venture business and the launch of niche products in the Indian market including the generic version of Gilead
Sciences' Hepatitis C drug, Sofosbuvir, in India under the brand name SoviHep.
Cadila Healthcare, which generates close to 36% of its total revenues from the US market, is likely to be among the key beneficiaries
of a favourable business environment in the generic space. The company has over 161 abbreviated new drug applications (ANDAs)
pending approval out of 260 ANDAs filed with the US Food and Drug Administration (USFDA) that will unfold over the next two to three
years.
We expect the company to record overall revenue and profit CAGR of 21% and 39% over FY2015-17 respectively from the base
business. The OPM of the company will see a sustained expansion of over 400BPS in the next two years, mainly on the back of
stronger traction in the branded business in India and Latin America, a better generic pricing scenario in the USA and optimisation of
capabilities in the joint venture business.
11
September 2015
EQUITY
SHAREKHAN TOP PICKS

NAME
CMP
(RS)
CENTURY PLYBOARDS
153
FY15
22.8
PER
FY16E
18.0
FY17E
FY15
ROE (%)
FY16E
FY17E
14.6
44.0
39.5
34.1
FUNDAMENTALS
PRICE
TARGET (RS)
260
UPSIDE
(%)
70
Remarks: Century Plyboards (Century) is a leading player in the fast growing plyboard and laminate segment, with an overall market share of
around 25% of the organised plyboard market and an estimated size of Rs4,500-4,800 crore annually. The organised plywood and
laminate segment is growing at healthy double-digit growth rates due to an improving demand environment and a shift towards
branded products. Century with its strong brand equity, unparalleled distribution network (10,000 touch points) and manufacturing
presence in the timber-rich region of Myanmar is well poised to cash in on the robust growth opportunity.
The introduction of the Goods and Services Tax (GST) would create a level playing field for the organised players. The unorganised
players are currently out of the tax net and thus enjoy lower costs by evading taxes. After the introduction of GST, the tax advantage
enjoyed by the unorganised players would diminish sharply and the market share of the organised players is likely increase significantly,
benefiting Century.
We believe Century with its top-of-the-mind brand recall is well positioned to ride the economic revival-driven recovery in demand and
increase its market dominance in the plywood and laminate segments. A robust revenue growth and margin expansion would enable
the company to deliver a strong growth ahead. We expect it to post a 25.0% earnings CAGR over FY2015-17. The implementation of
GST would provide a fillip to the revenue and earnings performance. In view of these positives, we maintain our Buy rating on the stock
with a price target of Rs260 (valued at 25x its FY2017E).
INDUSIND BANK
857
25.2
20.4
16.2
19.2
20.5
21.5
1,108
29
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 3.1x 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.
LUPIN
1,929
36.1
32.6
26.0
27.1
23.1
22.8
**
Remarks: A vast geographical presence, focus on niche segments like oral contraceptives, ophthalmic products, para-IV filings and branded business
in the USA are the key elements of growth for Lupin. The company has remarkably improved its brand equity in the domestic and
international generic markets to occupy a significant position in the branded formulation business. Its inorganic growth strategy has seen
a stupendous success in the past. The company is now debt-free and that enhances the scope for inorganic initiatives.
The acquisition of US-based Gavis is a good strategic fit. Gavis has manufacturing plants in the USA and a portfolio of 20 products
along with a pipeline of 65 ANDA filings. Thus, the management believes the revenues could touch $300 million by 2018, up from $96
million in 2014. The margins are also healthy at 36% and would firm up further. But even after taking the revenues projected for the
next three years into account, it works out to close to 3x the consideration of $880 million. On the positive side, the acquisition would
be earnings accretive from the first year itself.
Lupin is expected to see stronger traction in the US business on the back of the key generic launches in recent months and a strong
pipeline in the US generic business (over 95 ANDAs pending approvals including 86 first-to-file drugs) to ensure the future growth. The
key products that are going to provide a lucrative generic opportunity for the company include Nexium (market size of $2.2 billion),
Lunesta (market size of $800 million) and Namenda (market size of $1.75 billion) that will be going out of patent protection in CY2015.
MARUTI SUZUKI
4,168
33.9
23.3
18.4
16.6
20.8
22.2
4,700
13
Remarks: Maruti Suzuki India Ltd (MSIL) is the market leader in the domestic passenger vehicle (PV) industry. In FY2015, as against an industry
growth of a modest 3.9% MSIL has grown its volumes by 11.1% and in the process expanded its market share by 441BPS to 45%.
The company further strengthened its sales and service network, and added 309 outlets in FY15. Additionally, the drive undertaken by
its management to tap the potential in rural areas paid rich dividends in difficult times for the industry and in the face of rising competitive
intensity; this reaffirms the resilience of MSILs positioning and business model.
MSILs new sedan, Ciaz, has received a positive response from the market and helped MSIL establish a presence in the segment.
Also, with the new premium cross-over, ie S-Cross (to be retailed at exclusive Nexa outlets) the company is looking to move up the
ladder. MSIL 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.
We expect customer sentiment to improve on the back of a strong government at the centre. Additionally the PV segment is expected
to benefit from the pent-up demand over the past two years; this will benefit MSIL the most due to its high market share in the entry
level segment. The recent depreciation of the Japanese Yen is expected to boost profitability.
September 2015
12
EQUITY
NAME
FUNDAMENTALS
CMP
(RS)
RELIANCE INDUSTRIES
857
FY15
10.7
SHAREKHAN TOP PICKS

PER
FY16E
11.3
FY17E
FY15
ROE (%)
FY16E
FY17E
9.2
10.8
9.4
10.5
PRICE
TARGET (RS)
UPSIDE
(%)
1,100
28
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.
In the short term the GRM is likely to taper down after hitting a multi-year high in Q1FY2016; however, on an annual basis, we expect
the GRM to remain healthy. The stock is available at an attractive valuation considering the size, strong balance sheet and cash flow
generating ability of the company.
SBI
247
14.1
10.3
7.8
10.6
13.2
15.7
378
53
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.
TCS
2,565
25.6
20.8
18.3
33.7
32.8
30.3
3,000
17
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. Moreover, the quality of its
performance has also been quite impressive, ie it has been able to report a broad-based growth in all its service lines, geographies and
verticals consistently.
Though cross-currency head winds and softness in some verticals will keep the earnings volatile in the near term, we believe the
overall improvement in the USA will drive the growth in the coming years. Also, the companys increasing capabilities in the digital
space (the digital business contributed close to 12.5% of total revenues in Q1FY2016), which is a high-growth area, consolidates its
position among the top global IT companies. We maintain TCS as our top pick in the IT sector and have a Buy rating on the stock.
ZEE ENTERTAINMENT
386
37.8
33.9
28.0
19.0
18.6
20.1
425
10
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 is well placed to benefit from the digitisation theme and the overall recovery in the macro economy. Also, the success of the
newly launched channel, &TV and recent acqustion of Odia GEC channel Sarthak TV, would augur well and improve the companys
position in the general entertainment channel space.
13
September 2015
EQUITY
WEALTH CREATOR PORTFOLIO
WEALTH CREATOR PORTFOLIO
FUNDAMENTALS
AUGUST 31, 2015
Wealth Creator portfolio

Portfolio performance review
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.
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
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
The Wealth Creator folio has appreciated by 10.7% (weighted

average returns) since its inception comprehensively beating
the returns from the benchmark indices in the same period.
No changes or revisions were suggested in the folio in

August 2015. The prices are on August 31, 2015.
COMPARATIVE RETURNS
Particulars
Returns (August 31, 2015)

Since inception (August 21, 2014)
Wealth Creator folio (weighted average returns)
10.7
- Large-cap (64%)
14.0
- Mid-cap (36%)
5.0
Sensex
-0.3
Nifty
1.0
CNX Mid-cap
UPDATE ON WEALTH CREATOR PORTFOLIO
Sr No
Scrip
16.8
Weights
Reco price (Rs)

31-Aug-15
Price target (Rs)

Mar-18
Potential upside
8%
507
1,210
138.8%
Large-caps (64% weightage; 8% each))

1
Axis Bank
Larsen & Toubro
8%
1,605
3,800
136.7%
Maruti Suzuki
8%
4,205
7,450
77.2%
Cummins
8%
1,100
1,708
55.2%
State Bank of India
8%
247
580
134.7%
Sun Pharmaceuticals
8%
898
1,650
83.8%
Tata Consultancy Services
8%
2,565
5,100
98.8%
Tata Motors DVR
8%
237
675
185.1%
Mid-caps (36% weightage; 4% each)

9
PTC India Financials
4%
41
112
171.5%
10
V-Guard
4%
898
2,100
133.9%
11
Gateway Distripark
4%
361
810
124.3%
12
IRB Infra
4%
234
650
178.2%
13
Network 18 Media
4%
49
150
205.8%
14
Gabriel India
4%
88
200
127.5%
15
Century Plyboard
4%
153
440
187.7%
16
Triveni Turbines
4%
115
265
130.4%
17
Dhanuka Agritech
4%
475
1,260
165.1%
* Please note we see scope for an upward revision in the price target (3-year) of some of the stocks depending on the extent of economic recovery and will keep updating you on the same
September 2015
14
EQUITY
STOCK IDEA
FUNDAMENTALS
BRITANNIA INDUSTRIES
BUY
CMP: RS2,886
AUGUST 27, 2015
Here is a perfect match for every portfolio

KEY POINTS
COMPANY DETAILS
Price target:
Rs3,650
Market cap:
Rs34,605 cr
52-week high/low:
Rs3,435/1,233
NSE volume (No of shares):
2.1 lakh
BSE code:
500825
NSE code:
BRITANNIA
Sharekhan code:
BRITANNIA
Free float (No of shares):
5.91 cr
Strong brand; tasting success under new leadership: Britannia Industries Ltd (Britannia) is
the second largest player in the Indian biscuit market with about 30% market share. Within
two years of inducting Varun Berry in the top management the company has tasted success
by redefining its strategies with focus on enhancing its distribution reach, increasing inhouse production and continuously innovating the product portfolio. Britannias sales
volume has got into a double-digit growth trajectory and OPM surged to 14% (from 6-7%
in FY2013), making it one of the fastest growing FMCG companies in two years.
Turning into a snack and food company: Britannia has chalked out an aggressive growth
strategy to sustain the double-digit volume growth in the biscuit segment by enhancing its
product portfolio and increasing its distribution reach. Apart from this, Britannia 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 also has a presence in categories such
as rusk and cakes, which are at a nascent stage. The company even has plans to re-enter the
breakfast market with relevant product offerings.
Margins not only sustainable but could also firm up further: Britannias OPM improved to
14% in Q1FY2016 from merely 7% in FY2013. This can be attributed to: (1) an improving
revenue mix in favour of high-margin products; (2) operating efficiency through increased
in-house production; (3) a drop in the distance travelled, which reduced the distribution
cost; and (4) falling commodity prices. Going ahead, we believe there is scope for an
improvement of 100-200BPS in the OPM. Despite the introduction of new products and
expansion into new food categories, the shift in the revenue mix in favour of premium and
relatively high-margin categories would aid margin expansion.
Valuation; buy with PT of Rs3,650: Under the new leadership, Britannia has been able to
leverage and monetise its strong brand and position in the biscuit and snack segments. It
reported a healthy growth of 50% CAGR in earnings over FY2012-15 which is ahead of
its peers. 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
efficiencies. We initiate coverage on the stock with a Buy recommendation, assigning it a
price target of Rs3,650 (valuing the stock at 38x the average of the FY2017E and FY2018E
earnings).
Key risk: Any increase in competitive intensity (especially by the regional brands) and rise
in the price of the key inputs would act as a key risk to our earnings estimates in the near
to medium term.
SHAREHOLDING PATTERN
PRICE CHART
VALUATIONS (CONSOLIDATED)
Particulars
Net sales (Rs cr)
Operating profit (Rs cr)
PRICE PERFORMANCE
OPM (%)
(%)
1m
3m
6m
12m
Absolute
0.0
15.2
40.9
130.5
Relative
to Sensex
9.3
22.3
55.8
133.9
Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article.
Adjusted PAT (Rs cr)
FY14
FY15
FY16E
FY17E
FY18E
6,912.7
7,858.4
9,013.8
10,450.7
12,123.9
627.2
863.9
1,259.8
1,531.2
1,833.1
9.1
11.0
14.0
14.7
15.1
395.9
542.5
839.7
1038.9
1258.4
104.9
EPS (Rs)
33.0
45.2
70.0
86.6
P/E (x)
87.4
63.8
41.2
33.3
27.5
EV/EBIDTA (x)
55.2
40.0
27.2
22.2
18.4
RoE (%)
58.9
53.3
55.5
48.8
43.6
RoCE (%)
42.9
46.9
51.5
46.6
43.0
For detailed report, please visit the Research section of our website, sharekhan.com.
15
September 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
ADITYA BIRLA NUVO

BUY
CMP: RS2,227
AUGUST 12, 2015
Healthy performance; PT revised to Rs2,500
COMPANY DETAILS
Price target:
Rs2,500
Market cap:
Rs28,980 cr
52 week high/low:
Rs2,340/1,402
NSE volume (no. of shares):
2.0 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
12m
Absolute
18.8
19.7
29.6
58.6
Relative to Sensex
17.7
17.1
31.3
43.3

Healthy performance aided by financial and manufacturing verticals: In Q1FY2016

Aditya Birla Nuvo Ltd (ABNL)s consolidated revenues grew by 9.9% on a Y-o-Y
basis, led by a strong growth in the financial business (+43% YoY), followed by the
fertiliser business (+19.2% YoY) an
d the branded apparels business (+14.4%
YoY). Led by a turnaround in the lifestyle business and coupled with a margin
improvement in the financial services vertical (EBIT up 509BPS YoY), manufacturing
(fertiliser, insulator) and telecom verticals (EBIT up 152BPS YoY), the operating profit
grew by a strong 31.8% YoY. The strong operating performance translated into a
healthy 50.4% Y-o-Y growth in the net earnings for the quarter.
Healthy growth in financials; Pantaloons business turning around: The company sounded
confident of its NBFC business and continues to nurture its plans to grow the loan
book size, though it believes the market environment remains challenging for the lifestyle
segment. Further, with consolidation of the businesses (Madura Coats and Pantaloons)
along with the companys effort towards growing the business via expansion through
the online and brick-and-mortar routes would enable it grow and thrive going ahead.
Retain Buy with revised PT of Rs2,500: ABNLs strong position in each of its business
verticals (life insurance, telecom, lifestyle and asset management) and its restructuring
efforts to unlock value for the minority shareholders either through disinvestment of
the sub-scale businesses (carbon black and BPO), a demerger of the growth businesses
and/or consolidation within the group are likely to enhance the shareholders value in
this quality conglomerate business. Thus, we maintain our Buy rating with a revised
price target of Rs2,500.
APOLLO TYRES
BUY
CMP: RS188
AUGUST 12, 2015
Margins continue to surprise; maintain Buy with
an unchanged PT of Rs240
COMPANY DETAILS
Price target:
Rs240
Market cap:
Rs9,545 cr
52 week high/low:
Rs249/155
51.6 lakh
BSE code:
500877
NSE code:
APOLLOTYRE
Sharekhan code:
APOLLOTYRE
28.2 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
5.1
8.1
2.9
12m
8.6
Relative to Sensex
4.1
5.8
4.2
-1.9

September 2015
Revenues under pressure; margins hit an all-time high: For Q1FY2016, Apollo Tyres
(Apollo) witnessed pressure on the stand-alone revenues as volumes and realisations
both fell by 3.5%. Its European operations reported an 8% volume growth. The negative
effect of the rupees appreciation against the euro and price cuts taken led to a 19% fall
in the revenues in rupee terms. However, Apollo continued to reap the benefits of a
sharp decline in the raw material prices and its consolidated margins touched an alltime high of 17.7%. The net profit after tax (PAT) rose by 27.5% YoY to Rs291 crore
as against our estimate of Rs298 crore.
Management proposes higher capital expenditure: The management expects the
radialisation level in India for truck and bus tyres to increase significantly from 35% in
FY2015 to 70% in the next four to five years. In keeping with this outlook, the
management has raised its planned investment for truck and bus radial (TBR) tyres in
Chennai. Apollo will be investing Rs4,000 crore over the next three years in India for
capacity expansion in addition to the 400-million-euro investment for the greenfield
facility in Hungary. As of Q1FY2016, the company has achieved a cash positive level
(consolidated) and hence is in a position to undertake the large investment plan.
Maintain Buy with a PT of Rs240: We have lowered our revenue estimates for the
stand-alone operations and raised the margin expectations in tune with the current
trend and the continued benefit on the raw material front. Consequently, there is no
significant change in our earnings estimates for FY2016 and FY2017. We remain positive
on the stock and reiterate our Buy rating with an unchanged price target of Rs240,
discounting the FY2017E earnings by 10x.
16
EQUITY
STOCK UPDATE
FUNDAMENTALS
ASHOK LEYLAND
BUY
Price target:
Rs98
Market cap:
Rs25,172 cr
CMP: RS88
AUGUST 13, 2015
A strong operating performance; Buy maintained
with revised PT of Rs98
52 week high/low:
Rs90/33
KEY POINTS
189 lakh
BSE code:
500477
NSE code:
ASHOKLEY
Sharekhan code:
ASHOKLEY
141.2 cr
ALL continues to beat industry growth: For Q1FY2016, Ashok Leyland Ltd (ALL)
maintained a lead over its competitors and posted an impressive growth of 44.6% in
the domestic medium and heavy commercial vehicle (MHCV) segment as against the
industry growth of 23.1%. The multiple price hikes undertaken during FY2015, soft
commodity prices and a higher operating leverage enabled ALL to expand operating
profit margin by 540BPS YoY to 10.1% vis--vis our expectation of 9.7%. The interest
cost for the quarter also fell by 28% YoY, enabling the company to post a net PAT of
Rs159 crore as against our expectation of Rs131 crore.
Consistent gain in market share: ALL has been consistently gaining market share in the
bread-and-butter MHCV truck segment. In FY2015, ALL expanded its market share
by 443BPS to 27.2% and its share is nearing 30% in the current quarter. The company
is benefitting from an industry shift to higher tonnage multi-axle vehicles (>25mt).
Additionally, efforts taken by the management to expand its network outside its
traditional southern market are also paying dividends. The management expects the
MHCV industry to grow by about 20% in FY2016, higher than the earlier guidance of
10-15%. We expect ALL to outperform with a 31% growth. Additionally, the benefit
of relatively benign commodity prices and high operating leverage is expected to help
maintain margins above the 10% mark.
Maintain Buy with a revised PT of Rs98: Given the significant outperformance by ALL as
compared with the industry, we have revised upwards our volume estimates for FY2016
and FY2017. We have also factored in higher operating profit margins due to soft commodity
prices and increased operating leverage. As a result, we have raised our earnings estimates
for FY2016 and FY2017 by 12% and 15% respectively. We remain positive on the stock
and reiterate our Buy recommendation with a revised price target of Rs98.
COMPANY DETAILS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
23.0
23.3
32.0
153.1
Relative to Sensex
23.4
19.4
36.7
134.8

AUROBINDO PHARMA
HOLD
CMP: RS783
AUGUST 17, 2015
Good results, limited upside; maintain Hold
with revised PT of Rs815
COMPANY DETAILS
Price target:
Rs815
Market cap:
Rs45,745 cr
52 week high/low:
Rs796/382
15.8 lakh
BSE code:
524804
NSE code:
AUROPHARMA
Sharekhan code:
AUROPHARMA
13.4 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
0.8
12.5
36.6
99.2
Relative to Sensex
0.1
8.1
40.1
82.8

Strong US performance led to better Q1FY2016 results: Aurobindo Pharmas revenues

in Q1FY2016 rose by 14% YoY to Rs3,320.4 crore largely on account of a strong
revenue growth in the US business. However, higher expenses during the quarter lead
to a marginal decline of 78BPS to 21.8% in the OPM. A high tax rate and decline in
margin resulted in a growth of 11% in the adjusted earnings to Rs458 crore.
Steady shift towards high-margin products: The company has received approval for eight
products during the quarter of which four are injectables. With these approvals, the company
is slowly moving toward high-value products. In Q1FY2016, the company continued to
gain market share in gSuprax as no other competitors was able to launch products.
US to drive growth: The management has indicated at the launch of strong products in
the coming quarters which will help the company to achieve higher growth and also
improve its margin from H2FY2016 and FY2017 onwards. Going forward, the company
is likely to see better traction on the OPM front as the newly acquired entities will
show a better profitability and more approvals of high-margin products from the USFDA.
The USA will remain a key growth driver for the company.
PT revised to Rs815; maintain Hold since limited upside: We have marginally revised our
earnings estimate upward for FY2016 and maintained our earnings estimate for FY2017
to factor in a strong revenue growth from new product launches and high tax rate. Hence,
our revised EPS estimates for FY2016 and FY2017 stand at Rs30.4 and Rs40.5 respectively.
Consequently, we have revised our price target upward to Rs815. But due to a limited
upside from the current market price we have maintained our Hold rating on the stock.
17
September 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
BHARAT HEAVY ELECTRICALS

HOLD
CMP: RS266
AUGUST 7, 2015
Q1 numbers slipped on poor execution;
Hold maintained
COMPANY DETAILS
Price target:
Rs270
Market cap:
Rs65,351 cr
52 week high/low:
Rs300/195
KEY POINTS
32.9 lakh
BSE code:
500103
NSE code:
BHEL
Sharekhan code:
BHEL
90.4 cr
Dismal performance: For Q1FY2016, Bharat Heavy Electricals Ltd (BHEL) reported a
disappointing performance as its net earnings plummeted sharply YoY and revenues
declined by 16% YoY due to poor order inflow in the past and poor execution in this
quarter. Its GPM contracted by 425BPS YoY resulting in a loss at the operating level.
BHEL managed to report a positive net profit of Rs34 crore against a PAT of Rs194
crore in Q1FY2015 on the back of an other income of Rs573 crore. The poor operating
performance was a negative surprise for the Street.
Order inflows perk up; execution pick-up delayed: On the positive side, this quarter
witnessed a better order inflow of Rs19,688 crore against a negligible order of around
Rs1,127 crore in Q1FY2015 due to large orders won from the Telangana utility. Further,
the company is L1 for projects of capacity totaling 4000MW. The total order backlog
of BHEL has gone up to Rs116,205 crore, up 19% YoY, with the large inflow. Out of
these around Rs24,000 crore of orders are stranded orders. The management guided
that the order execution should get traction from Q3FY2016 onwards, as orders from
Telangana should kick-start and the execution hurdles should be cleared by then.
Valuations; retain Hold for patient investors: The company is under severe pressure on
profitability due to weak order inflows in the past but believes that the future order
inflow outlook is the single most important factor to determine the future prospect of
the company. We have fine-tuned our earnings estimates for FY2016 and FY2017,
given the execution slippage in Q1FY2016. However, we have maintained our Hold
rating on the stock with an unchanged price target of Rs270.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
8.3
14.4
1.5
24.1
Relative to Sensex
7.5
10.3
2.7
12.3

CADILA HEALTHCARE
BUY
CMP: RS2,017
AUGUST 12, 2015
In-line performance;
maintain Buy with revised PT of Rs2,300
COMPANY DETAILS
Price target:
Rs2,300
Market cap:
Rs41,304 cr
52 week high/low:
Rs2,045/1,075
1.3 lakh
BSE code:
532321
NSE code:
CADILAHC
Sharekhan code:
CADILAHC
5.2 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
1.7
16.2
28.0
73.8
Relative to Sensex
0.8
13.8
29.7
57.0

September 2015
US business drives revenues; higher tax rate restricted net income growth: For
Q1FY2016, Cadila Healthcare (Cadila) reported a healthy performance, its revenues
grew by 18.8% YoY to Rs2,434 crore. The growth was led by the US market, which
jumped by 37% YoY to Rs910 crore and the same contributed to 40% of the total
revenues. Its OPM expanded by 384BPS to 22% (excluding the one-time income of
Rs66.6 crore [$10.5 million], pertaining to sell-off ANDAs in the US subsidiary, the
management indicated that $3 million will come in Q2FY2016). For the quarter, the
effective tax rate has increased to 32% (owing to a change in the invoicing policy for
the supply of its products to the subsidiary) as compared with a normal tax of around
18%. Hence, the earnings for the quarter grew by 47.1% YoY to Rs353.
Filing of new products remained strong: During the quarter, the company filed six
additional ANDAs with the USFDA and launched one new product in the US market.
For the domestic market, the company launched 12 new products of which four products
are first to be launched in India. The company has a strong pipeline of products of which
some are exclusive. Currently, the company has 165 ANDAs pending with the USFDA.
Maintain Buy with a revised price target of Rs2,300: The management expects 40
filings in the US market during FY2016. We believe with a strong presence in the US
market, and a higher number of product filings and approvals in the subsequent years,
the growth in the US market is expected to be strong. We have tweaked our earnings
estimates and expect an EPS CAGR of 39% over FY2015-17 to Rs108. We maintain
our Buy rating on the stock with a revised price target of Rs2,300.
18
EQUITY
STOCK UPDATE
FUNDAMENTALS
COX & KINGS

BUY
CMP: RS301
AUGUST 7, 2015
Indian business shines; education and Meininger
buinesses affected by high base
COMPANY DETAILS
Price target:
Rs350
Market cap:
Rs5,097 cr
52 week high/low:
Rs366/221
33,149
BSE code:
533144
NSE code:
COX&KINGS
Sharekhan code:
COX&KINGS
8.8 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
17.5
-1.5
-2.4
16.2
Relative to Sensex
16.7
-5.1
-1.3
5.2

Muted performance on like-to-like basis: Cox & Kings India Ltd (CKIL)s consolidated
revenues declined by 7.5% YoY to Rs683.6 crore in Q1FY2016. The OPM improved
by 113BPS to 48.7%. This along with lower interest cost and lower depreciation led to
a 6% growth in the reported PAT.
Indian business performs well; education business registered muted performance: CKILs
Indian leisure business performed extremely well; its revenues grew by 16% and EBIDTA
grew by 17.3% YoY in Q1FY2016. Though the international leisure business revenues
stood flat YoY, yet its EBIDTA grew by 16.0% YoY on the back of tight cost control.
The education and Meininger businesses revenues stood flat during the quarter due to
a high base of Q1FY2015 and adverse currency movement.
Cash from operations improved; repaid Rs65-crore debt in Q1FY2016: CKIL prudently
managed its working capital requirement which helped the company to generate free
cash of Rs125 crore. Thus, the company utilised Rs65 crore of free cash to further
reduce its debt on the books. The company is planning to reduce debt by Rs300-350
crore in FY2016 through improving cash flows.
Maintained FY2017 earnings; recommend Buy: We have reduced our earnings estimate
for FY2016 by 5% to factor in the delay in bed addition in the education and Meininger
businesses, while we have maintained our estimates for FY2017. We expect the Indian
business to perform strongly in the coming years, while the performance of the education
business is likely to recover in the coming quarters. Further, the deleveraging of the
balance sheet will boost its earnings growth over the next couple of years. The stock is
currently trading at 9.8x its FY2017E earnings (EV/EBIDTA of 6.6x). We maintain
our Buy recommendation on the stock with an unchanged price target of Rs350.
EROS INTERNATIONAL MEDIA

HOLD
CMP: RS532
COMPANY DETAILS
AUGUST 17, 2015
Strong show; maintain Hold with PT revised to Rs570
Price target:
Rs570
Market cap:
Rs4,927 cr
52 week high/low:
Rs644/221
KEY POINTS
3.5 lakh
BSE code:
533261
NSE code:
EROSMEDIA
Sharekhan code:
EROSMEDIA
2.4 cr
Strong revenues; margin performance continues to disappoint: For Q1FY2016 Eros

International Media Ltd (EIML) reported a 95.7% Y-o-Y growth in revenues to Rs473
crore, led by movies and other regional language releases. However, out of the total
revenues Rs144 crore is attributed to third-party sales to parents (excluding which,
revenues were up by 36% YoY). The EBIT margin stood at 27% (improved YoY).
During the quarter, 16 movies were released, seven Hindi films, eight Tamil/Telugu
films and one regional film as compared with nine films during Q1FY2015, which
included five Hindi and four Tamil/Telugu films. The net income grew by 48.7% YoY
to Rs53.4 crore.
Maintain Hold with a revised PT of Rs570: We like EIMLs strategy of picking quality
movie content and the improvement in the catalogue monetisation revenues. The recent
success of movies across genres is a testimony to EIMLs strong expertise in content
management. We have tweaked our earnings estimates for FY2016 and FY2017 owing
to an increase in the revenue estimates and higher tax rates. Though, we still remain
sceptical on the cash generation profile of the company (it remains free cash flow
negative, the management is hopeful of turning positive in FY2016), yet given the
improvement in the revenue visibility and the monetisation success in the digital media,
we have increased our target multiple for the company and revised our price target to
Rs570. However, given the recent run-up in the last three months (more than 30%)
and limited upside from the current level, we maintain our Hold rating on the stock.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-10.4
30.8
34.8
136.0
Relative to Sensex
-10.9
25.7
38.2
116.6

19
September 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
FINOLEX CABLES
BUY
CMP: RS267
AUGUST 11, 2015
Strong Q1 numbers beat estimates; Buy retained
COMPANY DETAILS
Price target:
Rs310
Market cap:
Rs4,068 cr
52-week high/low:
Rs306/188
1.6 lakh
BSE code:
500144
NSE code:
FINCABLES
Sharekhan code:
FINCABLES
9.8 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
5.3
2.2
5.7
34.0
Relative to Sensex
3.4
-2.2
5.5
19.2

Strong earnings growth, on margin expansion: Finolex Cables Ltd (FCL) reported a
strong earnings growth of 39% YoY to Rs48 crore despite flat revenues as the operating
profit margin (OPM) expanded substantially (up 263BPS YoY) in Q1FY2016.
Consequently, the operating profit of FCL grew by 31% YoY to Rs73 crore in this
quarter and helped the earnings to grow at 39% YoY.
Cable demand still muted; new product lines to drive future growth: During the quarter,
the electrical cable volume improved by 5% YoY and the expected recovery in demand
is not yet visible for electrical cables. On the other hand, the communication cables
business should continue to perform well for the next two quarters. The company is
still waiting for the regulatory approvals from BIS for its planned launch of switchgear
range of products. Now, FCL has chalked out a plan to venture into fan business by
setting up a new facility (capacity of 2,400,000 fans annually). We see this as a natural
and suitable extension of its existing product line and FCL could easily leverage its
strong brand recall and franchise.
Valuationfine-tuned estimates; retain Buy: Though we were positively surprised by
the margin expansion in its electrical cable segment during Q1FY2016, yet we believe
retaining a part of the copper price correction for the whole year would be difficult.
Given the net cash positive balance sheet, strong cash flow and healthy return ratios,
we remain positive on the company. Further, the plan to enter the fan market looks
like a directionally positive step. Therefore, we retain our positive stance on the stock
and reiterate our Buy rating with an unchanged price target of Rs310.
GLAXOSMITHKLINE CONSUMER HEALTHCARE

BUY
CMP: RS6,326
AUGUST 6, 2015
Performance to improve in H2FY2016;
upgraded to Buy; PT revised to Rs7,000
COMPANY DETAILS
Price target:
Rs7,000
Market cap:
Rs26,633 cr
52 week high/low:
Rs6,564/4,758
15,131
BSE code:
500676
NSE code:
GSKCONS
Sharekhan code:
GSKCONS
1.2 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
1.6
-0.5
13.7
27.9
Relative to Sensex
0.9
-4.2
15.0
15.8

September 2015
Revenues grew in single digits; improved margin aided bottom line growth: In
Q1FY2016, GSK Consumers revenues grew by 7.5% with volume growth remaining
almost flat to growing at low single digits, as demand for the health food drinks segment
is yet to improve in the domestic market. The GPM improved by 582BPS YoY to
67.6% boosted by lower milk and milk powder prices. However, the OPM improved
by 152BPS YoY to 14.6%, as higher other expenses (increased by 26% YoY) arrested
significant expansion in the OPM. The operating profit grew by 20.0% YoY and the
reported PAT grew by 19.1% in Q1FY2016.
Volume growth likely to revive in H2FY2016: We expect GSK Consumers volume
growth to improve to 4-6% by H2FY2016 and gradually improve with a steady pickup in the demand for health food drinks segment. The focus on improving penetration
in the northern and western parts of India along with new product additions would
remain one of the key growth drivers for the company. On the other hand, the margin
improvement is expected to sustain in the coming quarters as milk, milk powder and
barley prices have remained benign. This will continue to support the bottom-line
growth in the backdrop of a weak demand environment.
Upgrade to Buy with revised price target of Rs7,000: We have fine-tuned our earnings estimates
for FY2016 and FY2017 to factor in a better than expected operating profit margin. An
improvement in the demand environment especially in urban India would improve the growth
prospects of the company. Also, the company has a strong balance of more than Rs2,000
crore, which it can utilise for organic or inorganic initiatives. Hence, we upgrade our rating
on the stock from Hold to Buy with a revised price target of Rs7,000.
20
EQUITY
STOCK UPDATE
FUNDAMENTALS
HERO MOTOCORP
BUY
CMP: RS2,624
AUGUST 4, 2015
GPM at a five-year high;
maintain Buy with PT of Rs3,250
COMPANY DETAILS
Price target:
Rs3,250
Market cap:
Rs52,406 cr
52-week high/low:
Rs3,272/2,252
KEY POINTS
7.2 lakh
BSE code:
500182
NSE code:
HEROMOTOCO
Sharekhan code:
HEROMOTOCO
13.1 cr
Weakness in volumes; positive surprise on margins: In continuation with the trend of

H2FY2015, Hero MotoCorp Ltd (HMCL) had another weak quarter as volumes fell by
4% YoY and revenues declined by 1.2% YoY. However, the rise in the gross profit
margin (GPM) to a five-year high on the back of soft commodity prices led to an impressive
273-BPS sequential expansion in the margins to 15.1%. With a lower depreciation charge
on a Y-o-Y basis (no amortised royalty payment to Honda, Japan), the net profit rose by
33.3% YoY to Rs750 crore comfortably beating our estimate of Rs678 crore.
Management expects demand recovery during the festive season; positive outlook on
margins: Given the sluggishness in the domestic two-wheeler industry in the first four
months of FY2016, the management has lowered its growth forecast for the industry
to 3-4% as compared with 5-7% earlier. A recovery in the consumer sentiment is
expected during the festive season and H2FY2016 to be strong in terms of volumes.
HMCL will be launching two new scooter models ahead of the festive season which
will help it compete better in that fast growing segment. Meanwhile, the management
expects the operating profit margin (OPM) to remain at the current level, given the
benefit of the commodity costs.
Maintain Buy with unchanged price target of Rs3,250: We continue to expect the
demand to remain weak for the two-wheeler industry in H1FY2016 and a recovery in
the festive season. We have lowered our volume estimates but increased the margins
expectation and thus our earnings estimates for FY2016 and FY2017 remain unchanged.
We remain positive on the stock and maintain our Buy recommendation with an
unchanged price target of Rs3,250.
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
4.7
17.1
-3.0
12m
6.2
Relative to Sensex
4.1
11.2
-1.3
-5.3

KALPATARU POWER TRANSMISSION

BUY
CMP: RS276
AUGUST 10, 2015
A very healthy performance, turn-around of infra
segment; PT raised to Rs325
COMPANY DETAILS
Price target:
Rs325
Market cap:
Rs4,251 cr
52 week high/low:
Rs292/129
2.0 lakh
BSE code:
522287
NSE code:
KALPATPOWR
Sharekhan code:
KALPATPOWR
6.2 cr
KEY POINTS
Healthy earnings growth; turn-around of infra segment: For Q1FY2016 Kalpataru
Power Transmission Ltd (KPTL)s stand-alone business reported a very healthy earnings
growth of 16% YoY to Rs48 crore, ahead of our estimate. This was driven by a doubledigit revenue growth and a 47-BPS OPM expansion YoY. The highlight of the results
was the turn-around of the infrastructure segment (the railways and pipeline laying
works) after 11 quarters. Consequently, KPTL (stand-alone) managed to report an
OPM of above 10% in Q1FY2016 while its PAT grew by 16% YoY. Factoring an
M2M loss of Rs5 crore, the adjusted PAT stood at Rs53 crore in Q1FY2016. JMC
Projects (a subsidiary of KPTL) continued to improve its margin, in line with the guidance
of the management, which is now focused on margin expansion rather than top line
growth.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
2.6
23.0
19.5
67.2
Relative to Sensex
2.1
14.8
20.2
49.4

Fine-tune earnings estimates and revise price target to Rs325; maintain Buy: We expect
the operating profit margin of its stand-alone business to improve (above 10%), with
the turn-around of its infrastructure business and depletion of the legacy projects. Against
this backdrop, we have fine-tuned our earnings estimates for FY2016 and FY2017.
Moreover, the continued margin expansion of JMC Projects (stand-alone) and potential
value unlocking from the listing of Shree Shubham Logistics are additional positive
triggers. Therefore, we retain our positive stance on the stock and revise our price
target to Rs325. We reiterate our Buy rating on KPTL.
21
September 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
KDDL
BUY
CMP: RS290
AUGUST 18, 2015
Healthy performance from Ethos; maintain Buy
COMPANY DETAILS
Price target:
Rs375
Market cap:
Rs263 cr
52-week high/low:
Rs425/139
BSE volume (No of shares):
0.15 lakh
BSE code:
532054
Sharekhan code:
KAMLADLS
0.4 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
5.0
-14.6
-15.5
96.1
Relative to Sensex
7.1
-17.0
-12.6
81.2

Snapshot of consolidated performance: In Q1FY2016 KDDLs top line grew at 17.9%

YoY while its operating profit grew by 39% YoY resulting in a sharp 119-BPS margin
expansion. Led by a healthy operating performance, the net earnings saw a Y-o-Y
turn-around from a marginal loss of Rs1 lakh in Q1FY2015 to a profit of Rs1.33 crore
in Q1FY2016.
Ethos posts a strong show: Ethos (an 80% subsidiary) posted a 25.5% top line growth
on the back of a strong 16% same-store sales growth. Its contribution from the online
channel continues to improve and for the current quarter, the online sales constituted
around 29% of the total revenues. An asset light model for the online presence brings
operating leverage which has led to a strong margin expansion in the business (+170BPS margin expansion; over 2x growth in the operating profit).
Maintain Buy with PT of Rs375: The growth momentum and the margin expansion
trend in the Ethos business are panning in line with our expectations. Thus, we continue
to like Ethos' unique high-end watch retailing business, which is expected to grow
manifold by cashing in on the growth in the luxury watch segment and the increasing
trend towards online e-tailing. Thus, we believe that KDDL is available at reasonable
valuations to play on the fast-growing online niche luxury market and would witness
valuation re-rating as the quarterly results unfold. Hence, we maintain our Buy rating
on the stock with an unchanged price target of Rs375 (valued at 6x FY2017E earnings
for the stand-alone business + 1.1x FY2017E sales of Ethos).
MAHINDRA & MAHINDRA

BUY
CMP: RS1,388
AUGUST 7, 2015
A positive surprise on margins; Buy maintained
with revised PT of Rs1,550
COMPANY DETAILS
Price target:
Rs1,550
Market cap:
Rs85,199 cr
52 week high/low:
Rs1,441/1,106
11.1 lakh
BSE code:
500520
NSE code:
M&M
Sharekhan code:
M&M
45.6 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
6.6
18.7
18.7
13.8
Relative to Sensex
5.9
14.4
20.0
3.0

September 2015
OPM at 14.3% beats estimates: Mahindra & Mahindra (M&M) had another poor
quarter in terms of volumes as the dual effect of a weak demand for tractors and a lack
of new products in the utility vehicle (UV) segment troubled the company. However,
M&M made up for the fall in the volumes by improving the margins substantially. A
control of the overhead costs and the benefit of soft raw material prices led to a sharp
improvement in the margins. As a result, the decline in the net PAT was contained at
7.3% YoY to Rs831 crore as against our estimate of Rs694 crore.
Recovery of tractor segment in H2FY2016; new launches to drive auto volumes: Barring
a few states, the monsoon rainfall has been largely satisfactory this year. The management
expects a recovery for tractors in H2FY2016 starting with the harvesting and festive
season. It expects a 4-5% growth for the tractor industry in FY2016 which translates
into a 20% plus growth in H2FY2016 on the depleted base of the last year. Also, a lack
of products in the compact sports utility vehicle (SUV) segment has been a sore point
for M&M. The company will be launching a compact UV, TUV3OO, in mid September
followed by a compact cross-over in H2FY2016. These products are expected to fill
the gap in the companys portfolio and drive the growth of the auto division.
Maintain Buy with revised PT of Rs1,550: Given the impressive margin performance
in Q1FY2016, we have increased our earnings estimates for FY2016 and FY2017 by
8% and 6% respectively to factor in the higher profitability. We maintain our Buy
recommendation on the stock with an SOTP-based revised price target of Rs1,550 (vs
Rs1,485 earlier).
22
EQUITY
STOCK UPDATE
FUNDAMENTALS
MARICO
HOLD
CMP: RS440
AUGUST 5, 2015
Margin gains to sustain in near term;
Hold maintained
COMPANY DETAILS
Price target:
Rs460
Market cap:
Rs28,379 cr
52 week high/low:
Rs466/258
KEY POINTS
9.6 lakh
BSE code:
531642
NSE code:
MARICO
Sharekhan code:
MARICO
26.0 cr
Improved margins enhance PAT growth: For Q1FY2016 Marico registered a strong
PAT growth of 24%, largely driven by a 182-BPS improvement in the OPM. The
strong improvement in the OPM can be attributed to a 109-BPS improvement in the
GPM, which was mainly due to a reduction in the prices of the key inputs, such as
copra (11%), LLP (28%) and rice bran (10%). Maricos consolidated volume growth
stood at 5% in Q1FY2016, which is better than the 3% volume growth in Q4FY2015.
Outlook--volume growth trajectory to improve in coming quarters: The company expects
the volume growth trajectory of its domestic market to improve from the current level
of mid single digits to 8-10% in the coming quarters. The key growth drivers will be
the rising consumption in the urban markets well supported by the direct distribution
initiative of Project One (60% increased direct coverage in top six metros). The OPM
of its domestic business is expected to remain in the range of 16-17%. On the
international front, the company expects the revenue growth to improve to 10-12%
with an improvement in the performance of the key geographies, such as Bangladesh,
MENA and Southeast Asia.
Premium valuation provides limited upside; maintain Hold: We have broadly maintained
our earnings estimates for FY2016 and FY2017. The stock is currently trading at a
premium valuation of 31.6x its FY2017E EPS of Rs13.9 and does not provide much
upside from the current level. Hence, we maintain our Hold recommendation on the
stock with an unchanged price target of Rs460.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.4
7.7
24.2
66.4
Relative to Sensex
-0.9
2.2
26.4
48.4

MAX INDIA
BUY
CMP: RS554
AUGUST 13, 2015
Steady performance; maintain Buy
with PT revised to Rs648
COMPANY DETAILS
Price target:
Rs648
Market cap:
Rs14,768 cr
52 week high/low:
Rs577/292
3.3 lakh
BSE code:
500271
NSE code:
MAX
Sharekhan code:
MAX
15.9 cr
KEY POINTS
Consolidated PBT up by 14.8%: For Q1FY2016 Max India reported a decent set of
numbers as its profit before tax increased by 14.8% YoY (consolidated) supported by
a 13.4% growth in EBITDA. Max Life reported a flattish growth in profit on a Y-o-Y
basis (Rs118 crore) though the operating metrics remained steady. Max Healthcare
reported a profit of Rs10 crore as compared with a loss of Rs5 crore in Q1FY2015.
APE growth slack in Q1; likely to improve in coming quarters: The annual premium
equivalent (APE) for Max Life declined by 11.5% due to a high base of Q1FY2015
and some temporary slowdown in bancassurance and partnership channels. On the
healthcare side, the overall EBITDA margin eased slightly due a sharp increase in
revenues and hiring in new hospitals whereas the EBITDA of the existing hospitals
remained healthy at 12.7%.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
12.3
30.3
21.6
86.0
Relative to Sensex
12.7
26.2
26.0
72.5

PT revised to Rs648; maintain Buy: The demerger of Max India into three verticals is
likely to be complete by October 2015 which would result in an enhanced focus on the
individual businesses and a reduction in the holding company discounts for valuation
purpose. The easing of foreign direct investment in the insurance sector leaves scope
for unlocking value from the insurance business. We have revised our price target to
Rs648 (increased valuation multiple for the life insurance business to 2x FY2017E EV
and factored in the capacity increase in the healthcare business) and maintained our
Buy rating on the stock.
23
September 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
PTC INDIA FINANCIAL SERVICES

BUY
CMP: RS49
AUGUST 10, 2015
Strong operating performance, asset quality
stable; Buy maintained
COMPANY DETAILS
Price target:
Rs75
Market cap:
Rs2,742 cr
52-week high/low:
Rs73/34
15.8 lakh
BSE code:
533344
NSE code:
PFS
Sharekhan code:
PFS
22.5 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
0.7
-11.5
-22.4
32.7
Relative to Sensex
0.2
-17.4
-22.0
18.6

Operating performance remains strong; spreads expand: For Q1FY2016, PTC India
Financial Services (PFS) reported a strong growth in the net interest income (up 25%
YoY) led by a healthy growth in loans and expansion of spreads (up 43BPS QoQ to
4.58%). However, the growth in the net profit was 17.7% (better than estimated) due
to higher tax rate (35% in Q1FY2016 vs 28% a year ago). The non-interest income
grew by 53.8% and contributed to the earnings expansion.
Loan growth picking up; asset quality stable: While the outstanding loans grew by
32.8% YoY, the sanctions saw a healthy growth of 73% QoQ mostly in the renewable
energy sector. Currently, the renewable energy sector constitutes 41% of the outstanding
book as compared with 35% in Q1FY2015. The asset quality remained stable as gross
NPAs were at 1.24%, similar to that in Q4FY2015.
Valuations and outlook: The operating performance of PFS remained strong and
profitability has also shown an improvement in Q1FY2016. Going ahead, the loan
book growth is likely to remain strong led by the governments focus on the renewable
energy sector and the companys specialisation in the sector. The stressed loans have
already been provided and we expect spreads to improve (due to a decline in the
borrowing costs). PFS has sold its entire stake in Ind Barath Energy for Rs312 crore
and an exit from the remaining investment book will add value. We estimate core
earnings would grow at a CAGR of 52.2% (not factoring the gains on investment)
leading to healthy return ratios. We maintain our Buy rating on the stock with an
unchanged price target of Rs75.
RATNAMANI METALS & TUBES

HOLD
CMP: RS674
AUGUST 10, 2015
Downgraded to Hold with a revised PT of Rs750
COMPANY DETAILS
Price target:
Rs750
Market cap:
Rs3,132 cr
52-week high/low:
Rs806/400
17,780
BSE code:
520111
NSE code:
RATNAMANI
Sharekhan code:
RATNAMANI
1.9 cr
KEY POINTS
For Q1FY2016, Ratnamani Metals & Tubes reported a strong revenue growth of
21% YoY to Rs430 crore driven by a strong growth in the carbon steel (CS) pipe
segment. Moreover, the operating performance also improved marginally on account
of an improved realisation of the CS pipe segment (increased orders for coated pipes).
Hence, the earnings for the quarter stood at Rs50 crore (up 30% YoY).
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
1.7
-10.2
-17.2
46.2
Relative to Sensex
1.3
-16.2
-16.7
30.6

September 2015
The current order book (in terms of values) at the end of June 2015 stood at Rs944. In
the SS pipe division, the order book declined by 30% while in the CS division the
decline was at 29% YoY. Though the management sees a good opportunity for SS
pipes (which account for 45% of the revenues) in the refinery space and CS space in
river connecting projects, and expects the overall volume growth to be around 10% in
FY2016, yet owing to the softening of steel prices, the order book in value terms could
decline in FY2016 for both the segments. This could result in a lower growth in the
overall revenues in FY2016. Nevertheless, the management expects the margins to
remain around 18-19% in FY2016. On capacity expansion, the company is planning a
total capex of Rs220 crore in phase 1 to expand its SS capacity by 10,000 tonne. The
project will take around two years and will be financed through internal accruals.
Owing to lower revenue estimates for FY2016 and FY2017, we are revising our earnings
estimates downward by 9% and 8% for FY2016 and FY2017 respectively. Consequently,
we have revised our price target to Rs750. Also, owing to a limited upside from the
current level, we have downgraded our recommendation to Hold from Buy.
24
EQUITY
STOCK UPDATE
FUNDAMENTALS
RELIANCE INDUSTRIES
BUY
CMP: RS853
AUGUST 26, 2015
Recent correction a buying opportunity;
upgraded from Hold to Buy
COMPANY DETAILS
Price target:
Rs1,100
Market cap:
Rs275,707 cr
52 week high/low:
Rs1,067/797
37.4 lakh
BSE code:
500325
NSE code:
RELIANCE
Sharekhan code:
RELIANCE
177.2 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-19.1
-8.2
-0.3
-16.0
Relative to Sensex
-11.6
-1.2
11.1
-14.9

Core segments stand firm and remain high cash generators: The core business segments
of Reliance Industries Ltd (RIL), refining and petrochemicals, remain strong. Currently,
the continued weakness in global crude oil prices has raised concerns for the oil & gas
companies and the same is reflecting in the stock prices of these companies. However,
the continued weak crude price trend has a limited effect on the earnings of RILs core
business segments, as it has the ability to pass on the cost variation as a refinery and
petrochemical producer. The exploration business is expected to be negatively affected
by the weak crude price. However, the profit before interest and tax contribution of
the segment is 11% only and the Street is not factoring any meaningful upside from
this segment in the next few years too. On the contrary, the likely commencement of
the ongoing major projects (petcoke gasifiers and off-gas crackers) in its refinery and
petrochemical businesses is going to lift its core earnings substantially from FY2017
onwards. The core segments are expected to remain strong cash generators for RIL.
Recent correction in stock price a buying opportunity: The share price of RIL has
corrected substantially in the recent past (by 19% in a month and by 13% in a week).
The correction gives investors a better entry point in our view. Therefore, we have
upgraded our rating from Hold to Buy with an unchanged price target of Rs1,100
based on our sum-of-the-parts valuation.
SHREE CEMENT
HOLD
CMP: RS11,641
AUGUST 5, 2015
Maintain Hold with revised PT of Rs11,800
COMPANY DETAILS
Price target:
Rs11,800
Market cap:
Rs40,551 cr
52 week high/low:
Rs11,755/5,675
0.2 lakh
BSE code:
500387
NSE code:
SHREECEM
Sharekhan code:
SHREECEM
1.2 cr
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
4.9
12.5
5.7
56.2
Relative to Sensex
4.3
6.8
7.6
39.2

KEY POINTS
Lower cement realisation affects earnings negatively: For Q4FY2015, Shree Cement
reported a revenue growth of 4.1% YoY to Rs1,724.6 crore largely on account of
volume growth (up 16.9% YoY) led by capacity addition (in the Chhattisgarh unit).
However, the cement realisation declined by 13.0% YoY. The company reported a net
profit decline of 62.5% to Rs104.1 crore (which includes an extraordinary cost of
Rs24 crore) for Q4FY2015 on account of a lower operating margin (down 581BPS
YoY) and a higher depreciation charge (up 54.9% YoY).
Better power performance limited impact on operating performance: The performance
of the cement division was affected by lower realisation during the quarter leading to a
decline of 43.1% YoY in the EBIDTA per tonne, which stood at Rs675. However, the
power division posted both better volume (up 14.9% YoY) and realisation (up 8.8%
YoY at Rs3.7 per unit). Consequently, the operating profit for the quarter declined by
18.8% YoY to Rs356.8 crore.
Maintain Hold with revised price target of Rs11,800: We have marginally revised our
earnings estimate upwards in order to factor in the better realisation hereon in the cement
division and the sustainable operating performance of the power division. Hence, we
have revised our price target upward to Rs11,800. However, from the valuation point of
view, we see a limited upside potential from the current level and an unfavourable riskreward ratio. Thus, we maintain our Hold rating on the stock. At the current market
price, the stock is trading at 16.1x its EV/EBIDTA and PE of 33.7x FY2017E.
25
September 2015
STOCK UPDATE
EQUITY
FUNDAMENTALS
SUN PHARMACEUTICAL INDUSTRIES

BUY
CMP: RS866
AUGUST 12, 2015
Q1 operationally better than expected; retain
Buy with PT of Rs980
COMPANY DETAILS
Price target:
Rs980
Market cap:
Rs208,458 cr
52 week high/low:
Rs1,200/748
KEY POINTS
50.4 lakh
BSE code:
524715
NSE code:
SUNPHARMA
Sharekhan code:
SUNPHARMA
109.0 cr
Excluding one-time charge related to Ranbaxy integration, operating performance ahead of

expectations: For Q1FY2016, Sun Pharmaceutical Industries (Sun Pharma) reported a 60%
decline in earnings YoY to Rs479 crore which included a one-time charge of Rs685 crore.
Adjusting for that its earnings declined by 19% YoY. The companys revenues for the quarter
grew marginally by 3% to Rs6,522 crore on account of price hikes for some products by
Taro Pharma, a strong traction in its Indian business and a pleasant surprise from a surge in
the US business sequentially. Its EBIDTA margin declined by 550BPS to 24.8% YoY but it
also included a one-time expense related to a restructuring and other write-offs. Adjusting for
the same the EBIDTA margin was at 28%, which is ahead of our expectations.
Synergy with Ranbaxy; Halol plant remains key development to watch ahead: The
management is confident about the synergy with Ranbaxy through improving
productivity of the overall Ranbaxy business and synergy benefits derived from certain
products. During Q1FY2016, the performance of the Halol plant improved marginally
and may improve further in the coming quarters on account of regulatory approvals.
We expect to a see gradual improvement with a reduction in the integration related
expenses and traction in its US business with a pipeline of 159 products including the
expected launch of Gleevec in Q4FY2016.
Revised price target downwards owing to managements cautious outlook: We have
incorporated the managements concern (lower growth in revenues, higher R&D
spending and decline in profitability) in our earnings estimates. Likewise we have reduced
our revenue estimates in the range of 10-12%. Consequently, we have cut our EPS
target for FY2016 and FY2017 by 22% and 16% respectively and revised our price
target downwards to Rs980. We maintain our Buy rating on the stock though.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-6.6
-12.7
-9.1
10.3
Relative to Sensex
-7.5
-14.6
-7.9
-0.4

V-GUARD INDUSTRIES
BUY
CMP: RS976
AUGUST 4, 2015
Healthy Q1 performance; upgraded to Buy;
PT revised to Rs1,155
COMPANY DETAILS
Price target:
Rs1,155
Market cap:
Rs2,925 cr
52 week high/low:
Rs1,198/717
KEY POINTS
15,629
BSE code:
532953
NSE code:
VGUARD
Sharekhan code:
VGUARD
1.0 cr
For Q1FY2016 V-Guard Industries (V-Guard) reported a healthy double-digit earnings

growth of 13% YoY, supported by a mid single-digit revenue growth, marginal OPM
expansion and lower interest outgo over the last year. The operating profit grew by
7.5%; further, owing to a debt repayment of Rs15 crore the interest cost dropped and
the PAT grew by 13% YoY to Rs25 crore in Q1FY2016.
The non-south market continued to register a healthy growth of around 16% YoY.
The share of revenues as well as profitability from the non-south market continues to
rise; the non-south business contributed 38% of the revenues and 20% of the operating
profit in this quarter. The company has shifted its inventory valuation method from
the end-of-the-quarter valuation to the weighted average method for the period which
helped to neutralise the copper price correction to a large extent.
During the post-results conference call, the management of V-Guard retained its guidance
(a 15% revenue growth and EBITDA margin of 8.0-8.5%) for the full year. After the
success of its premium water heater (Pebble), V-Guard is planning to launch another
premium brand (Verano) in H2FY2016. We believe the continuous efforts of the
company to expand in the non-south market (which has started contributing
meaningfully to operating profit) and new launches with better brand visibility would
drive the growth in future. Moreover, potential drivers like benefits from the
implementation of the Goods and Services Tax and a revival in urban consumption are
yet to be factored in. Hence, we have revised upwards our earnings estimate for FY2017
and upgraded the stock from Hold to Buy with a revised price target of Rs1,155 (based
on 28x FY2017E EPS).
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
10.7
-1.9
-2.3
12m
30.7
Relative to Sensex
10.1
-6.8
-0.5
16.5

September 2015
26
SHAREKHAN SPECIAL
EQUITY
SHAREKHAN SPECIAL
FUNDAMENTALS
AUGUST 21, 2015

Q1FY2016 earnings review
No major surprises on earnings; revenues decline but margin

expansion supports earnings: The earnings of the Sensex grew on
an aggregate basis by a modest 6% YoY (excluding Tata Motors);
a tad better compared with the past couple of quarters and were
largely in line with the modest expectations of the Street. The positive
takeaway from the results was the improvement in the operating
margins to 20.1% (ex banks and financials) which helped the
earnings to grow and mitigated the effect of a close to 5% decline
in the aggregate revenues during the quarter. The margin
improvement was aided by soft commodity prices and was more
prominent in consumer goods companies along with the energy
and telecom companies whereas there was margin pressure in sectors
like metals, cement and capital goods.
in corporate earnings, the consensus earnings estimates for Sensex (at

an aggregate level) were downgraded by 2-3% for FY2016 and
FY2017. Post-moderation in expectations, in the last six to eight months
the consensus is factoring an 11-12% earnings growth for Sensex in
FY2016 and a relatively much better growth of 18-20% for FY2017.
Again the Street is factoring an improvement in the margins (resulting
from soft commodity prices and operating leverage) and lower interest
rates to boost the earnings growth as the consensus is building a high
single-digit growth in revenues over the two-year period of FY201517 as against a healthy double-digit growth in the earnings.
Valuation
After the downgrade in consensus earnings estimates, the Sensex
trades at close to 18.5x FY2016 and 15.0-15.5x FY2017 earnings
estimates which are at a slight premium to the long-term average
multiple. In light of the uncertain global conditions and lack of any
domestic triggers, the benchmark indices could continue to
consolidate in the range of 300-400 points (Nifty) in the near term.
Any positive development on the policy front and/or resumption of
interest rate cuts by the RBI and/or improvement in corporate
earnings are the key monitorables that could drive the benchmark
indices to higher levels.
Key takeaways; some green shoots visible but challenges remain:

Some of the positive takeaways from the quarterly results are the
marked slowdown in fresh NPAs reported by the public sector
banks, improving order booking by specific infrastructure and
capital goods companies, and sustained strong commercial vehicle
and passenger car sales. On the other hand, the global commodity
and export-focused companies are reeling in pain in terms of both
weak demand-led pricing pressure and volatility in foreign exchange.
Outlook
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or
having a postition in the companies mentioned in the article.
Consensus earnings downgraded once again, but still factors in a healthy

double-digit growth in earnings over FY2015-17: Given the weakness
Source: Company data, Sharekhan Research
INFORMATION TECHNOLOGY
AUGUST 25, 2015
Rupee tailwinds, positive cushion for margins

Rupee depreciation, positive tailwinds: In the last ten days, the
currency pair USD-INR has witnessed a steep correction of close
to 5% and is currently hovering around Rs66 per dollar. The
depreciating rupee acts as a tailwind for the Indian IT companies
and will have a positive effect on the operating profit margins.
The rupees depreciation of 1% will have a positive effect of
30-50BPS at the EBIT level and a 1.5-2.0% effect at the net
income level, keeping other line items constant. For FY2016
and FY2017 the consensus has pegged currency estimates at
around Rs63 and Rs62, which are 3.2% and 4.8% lower
respectively, assuming the USD-INR is reset to Rs65 for FY2016
and to FY2017. Thus, if the rupee stays at around Rs65, logically
it should translate into earnings upgrades of 8-10% for FY2016
and FY2017. However, the anecdotal evidence has a different
reality practically.
margins. However, owing to several moving variables, in terms

of onsite shift, increased sub-contracting costs, higher sales and
marketing (S&M) spending, pricing pressure and hedging loss,
it is very difficult to extrapolate the rupee tailwinds into earnings
upgrades. Even in the quarter of the highest depreciation in the
rupee, the margin performance of the top four IT companies
remained contradictory. Nevertheless, in the environment of
pricing erosion in the legacy services, increasing S&M spending
and building capabilities in the digital space, the depreciation
of the rupee will definitely act as a buffer to support margins.
Valuation: remain positive, correction provides opportunity for
fresh investments: In the last few days, in line with market
correction, the CNX IT Index has also corrected close to 5%.
Given the strong balance sheet and impressive cash flow
generation, IT companies will remain as a tactical investment
bet for the next 12 months. We remain positive on the IT sector,
in view of the improvement expected in the demand environment
in FY2016 and FY2017, and the reasonable valuation of the
top IT companies. In order of preference, we continue to like
TCS, Infosys and HCL Tech among the top IT companies and
Persistent Systems in the mid-cap space.
Anecdotal evidence shows rupee tailwinds have not translated

into margin expansion: Though the depreciating rupee seems
to be a positive tailwind for the sector, yet we note that in reality
the depreciating rupee has not meaningfully translated into
margin expansion in the recent years. If we look at the data
from FY2013-15 (refer to exhibit 1), the rupee has depreciated
by close to 13%. The margin performance of the top four IT
companies remained mixed. Infosys and Tata Consultancy
Services (TCS) delivered a muted margin performance while
Wipro and HCL Technologies (HCL Tech) improved their
27
September 2015
EQUITY
VIEWPOINT
FUNDAMENTALS
AXISCADES ENGINEERING TECHNOLOGIES

VIEW: POSITIVE
CMP: RS329
On an exponential growth path
level of Rs530 crore (combined revenues). The synergy benefits

are expected to play out and improve the blended margin
gradually over the next few years.
Key points
VIEWPOINT
AUGUST 18, 2015
Acquisition unfolded a plethora of high-growth defence

opportunities: AXISCADES Engineering Technologies Ltd
(ACETL), an engineering design IT services company, would
emerge as a play on the fast-growing defence business with the
managements decision to acquire its privately held entity
AXISCADES Aerospace & Technologies Ltd (ACATL), which
caters to leading global defence equipment companies and is
approved/certified vendor of Indian defence forces. The
combined entity will have a presence across the value chain of
aerospace and defence space, and widen the market opportunities
with the cross-selling opportunities and deeper mining of 12+
marquee clients of the combined entity.
Valuation still to reflect the full potential of combined entity;

scope for multi-fold returns in next 3 years: At the current market
price of Rs329 (market cap works out to Rs1,230 crore on fully
diluted equity of 3.77 crore equity shares), the stock trades at
EV of 17.5x combined EBITDA for FY2015 which is an
attractive defence play considering the growth prospects of the
company. We expect the stock to have multi-fold returns in the
next two to three years (for long-term investors). We have a
positive view on the stock and expect it to give an upside of 2025% in the near to medium term.
Risk: 1) Slowdown in global economics will adversely affect the

financial prospects of the company.
Widen market opportunities; revenues to grow by 3.0-3.5x in

next 5 years: The combined entity will benefit from a higher
scale of operations, a unified go to market strategy and a
higher share of the potential business in the aerospace and
defence space. Also, the management is confident of leveraging
its strength to partner with global OEMs in the Make in India
programmes, which is expected to be a humongous opportunity
in the defence space. Overall, the management aspires to grow
its revenues by 3.0-3.5x in the next five years from the current
2) Majority of revenues is coming from global OEMs from

engineering, aerospace and defence space; any conflict of interest
with OEMs will have a negative effect.
CUMMINS INDIA
VIEWPOINT
CMP: RS1,184
VIEW: POSITIVE
AUGUST 7, 2015
Beats Street estimate in Q1; gaining strength
Key points
is depressing while on the domestic side, some pockets are

showing initial signs of an improvement. The marine and mining
scene seems promising in the next two years, given the enhanced
focus of the new government. Against this backdrop, we believe
there is a potential case for over delivery by the management.
Strong Q1; beats Street estimate: Cummins India Ltd (CIL)

delivered an impressive ~40% Y-o-Y growth at the adjusted
PAT level mainly driven by a 24% Y-o-Y revenue growth during
Q1FY2016. Its domestic revenues grew by 17% YoY while
export revenues jumped by 36% YoY during the quarter. The
domestic revenue growth was primarily on account of market
share gain by the company while the export performance was
driven by the continued sourcing from its parent company to
the other geographies. Segment-wise, the power generation
business grew by 19% YoY while the industrial business
witnessed a 22% Y-o-Y growth with some improvement in
government-led infrastructure investments. Adjusting for a onetime gain of Rs82.6 crore in Q1FY2015, the PAT in Q1FY2016
grew by roughly 40% YoY.
Guidance stepping towards the higher band; potential case of

over delivery: The companys revenues grew by 24% in
Q1FY2016 which surprised us positively. Even the management
recognised that the performance for the quarter was
exceptionally well and sounded more optimistic about meeting
the higher band of its earlier growth guidance of 10-15%. The
management of CIL believes the international demand scenario
Positive view reaffirmed; stay put: Since we had initiated our

positive view on the stock on September 18, 2014, the stock has
moved up by more than 70%, backed by a revised guidance by
the management and strong results in this quarter. Despite the
sharp run-up and relatively higher valuation (based on our rough
estimate), we remain positive on the stock as the primary thesis
of our call is still intact and the strong Q1 results reinforce our
conviction. Further, we believe there is a case for over delivery
by the management and the impressive financials of the company
(debt-free, high RoE and high pay-out) are likely to shine
brighter. We believe a revival in the domestic investment cycle
and potential new opportunities from its marine business are
additional triggers to play out in future. Hence, we see around
15% upside from the current level and retain our positive stance
on CIL.
September 2015
28
EQUITY
TECHNICALS
TREND & VIEW
In the final stages of correction

Daily view on Nifty
The Nifty seems to have completed wave Y down as the recent

fall appears to be a three-wave correction on the daily chart.
The reversal, however, will be achieved once the formation of

lower tops and lower bottoms is violated. On the Nifty the
reversal is pegged at 8091. For the short term 7540 to 7420 is
a very crucial support zone and until this zone is broken we
can see the Nifty trading in a range of 7950-7420 levels.
The daily momentum indicator has given a negative cross-over.
Crucial supports for the index will be around 7540 and 7420
while crucial resistance will be near 7950 and 8091.
Weekly view on Nifty

The Nifty has met the equality target on the downside, ie 7540
levels. Hence, wave W = wave Y and the equality target has
been met.
Now, if this has to be a triple zigzag correction, then we will

see a wave X bounce which will retrace this fall from 86607540 levels following which we will see wave Z down. On the
flip side, if the correction is over in a double zig-zag combination,
then the market is near its medium-term bottom.
The momentum indicator is well in sell mode. A reversal is

pegged above 8091 level, which when taken off will confirm
that the correction is done.
A crucial support would be around 7540 and resistance would

be around 8091.
Monthly view on Nifty

The Nifty has retraced 38.2% of its entire rise from 5118 to
9119 levels which is quite reasonable for a wave-4 correction.
The Nifty needs to take off the falling channel on the upside
with a buy cross-over in its momentum indicator in order to
confirm the reversal from down to up.
The index has a reversal pegged at 8500, ie the channel

resistance, and until that level is taken off it will be difficult to
say if the market has bottomed. The downside risk is still there
till the levels of 7160, ie the aggressive target of the bearish
head-and-shoulders pattern.
A crucial support will be around 7540 and a crucial resistance

will be around 8500.
Medium term
Trend
Trend reversal
Support
Resistance
Target
Down
8091
7420
8091
8091 to 7420
29
September 2015
MONTHLY VIEW
EQUITY
DERIVATIVES
Derivative View: More pain ahead

The roll-over activity in both the key indices, ie in Nifty and Bank
Nifty, was on the higher side and with a sharp rise in open interest,
indicating most of the short positions formed in the August series
have been carried forward to the next series. This leaves room for
more downside.
The August series ended in line with the previous two to three
expiries but the market witnessed significant volatility especially in
the second half of the series. The Nifty ended the series with a
sharp cut of more than 5%, which is the biggest fall for any
particular expiry in two years. It has also seen the breaking of the
important supports in the market. The fall was led by multiple
factors like depreciating emerging market currencies including the
rupee, a slowdown in the Chinese economy and the concern of the
USA hiking its interest rates which resulted in a sharp sell-off in the
Nifty in the second half of the series. On open interest, a significant
amount of build-up was observed in both the key indices, ie Nifty
and Bank Nifty, which is more on the shorter side. Also, with a
high roll-over and a decrease in the roll-over cost, most of the short
positions got carried forward to the next series.
Top 5 stock futures with the highest OI in current series

STOCK FUTURES (SHAREKHAN SCRIP CODE)
On the foreign institutional investor (FII) front as well, the FIIs

saw the creation of a significant amount of shorts in index futures.
Simultaneously, the FIIs sold heavily in the cash market, selling
equities worth more than Rs17,000 crore, which is the highest
monthly selling figure since January 2008.
2669.46
HDFCBANK
2581.74
INFY
1736.85
SBIN
1540.86
ICICIBANK
1480.84
Top 5 stock options with the highest OI in current series

STOCK OPTIONS (SHAREKHAN SCRIP CODE)
ROLL-OVER: MARKET-WIDE VS NIFTY
OPEN INTEREST (RS CR)
SBIN
597.12
RELIANCE
455.87
INFY
293.54
ICICIBANK
291.99
MARUTI
287.14
View
The benchmark index, the Nifty, started the September series with
around 2.15 crore shares, which was a bit on the higher side. In
rupee terms, it started the new month with Rs17,193 crore of open
interest vs Rs14,505 crore of open interest in the previous month.
In stock futures it started the series with Rs56,311 crore of open
interest vs Rs62,176 crore of open interest in the previous month.
In index options it started the month with Rs83,683 crore of open
interest vs Rs82,547 crore of the same in the previous month. In
stock options it began the month with Rs5,416 crore of open interest
vs Rs5,945 crore in the previous month. The roll-over in the Nifty
stood at 66.83%, which was higher compared with the previous
months roll-over of 65.92%. The market-wide roll-over stood at
81.83%, which is marginally lower than the previous months rollover of 83.93% and more or less the same as the three-month and
six-month average roll-over of 82.77% and 83.89% respectively.
September 2015
OPEN INTEREST (RS CR)
RELIANCE
On the options front, in the September series 7500 PE stands with

the highest number of shares in the open interest followed by the
7800 strike price. However, the difference between the two strikes
is very less. On the other hand, on the call side, the deep out-of-themoney strike price of 8500 CE stands with the highest number of
shares in open interest followed by the 8200 CE. The Volatility
Index saw a sharp increase and touched a multi-year high of 30-35
level but it has cooled off to 25-26 levels since. Going ahead, we do
expect the Volatility Index to rise further. The put/call ratio has
also started a bit on the higher side in this series at around 0.94
levels. In view of the above data and with shorts getting rolled
over, we feel there is more pain left in the market, and the Nifty
could again test the low of the August series and show more
downside till 7400 in the coming trading session.
30
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Commodities: On shaky ground amid China and US rate hike concerns

Macro-economy
Key points
Commodities fall on Chinas demand concerns and Fed rate hike uncertainty
Bloomberg Commodities Index falls to a 16-year low
Moodys raises concerns over Chinas mounting regional debt
US monthly job report: a mixed picture as job number trails the forecast,
previous two months numbers revised higher, unemployment rate and
participation rate fall, earnings rise
The Fed can delay rate hike on Chinas turmoil
China sets up a fund of up to CNY60 billion to encourage the growth of
small and micro-businesses; lowers the initial capital requirement for fixedasset investment projects
China shifting towards market-oriented economy; risks unwind
China factory gauge shrinks to three-year low
China cuts interest rates for the fifth time since November 2014 to support
the economy
US factories expand at slowest pace since May 2013 on subdued
Chinese demand
US construction spending in the 12 months through July increased 13.9%,
the biggest year-over-year gain since March 2006
More than two-thirds of global PMIs in August deteriorated compared
to July
UK PMI Construction below forecast (57.5) in August vs actual (57.3)
UK exports fell for the fifth month in a row
Brazil and Canada slip into a technical recession
IMFs Lagarde says global growth outlook weaker than IMF July forecast
China Premier Li says no basis for yuans continued depreciation
US Q2 growth revised higher to 3.7% annualised, expectations 3.2%,
prior 2.3%
South Korea exports crash most since 2009 as global trade suffers
The accumulation of dollar assets held as forex reserves across the emerging
world slowing down
COMMODITY PRICES IN AUGUST 2015 (IN $)

Commodity
High
Low
Close
Copper
5364
4855
5135
MoM chg %
-1.82
Zinc
1935
1673
1810
-5.53
Lead
1767
1618
1732
1.76
Nickel
11275
9100
10060
-8.88
Gold
1170.34
1081.17
1133.35
3.42
Silver
15.715
13.98
14.6
-17.89
47.33
37.75
45.22
-4.86
Crude oil
MONTHLY CHANGE IN DOE PETROLEUM STOCKS (JUL-AUG 2015)

Crude oil
Change in (kbls)
August 26, 2015 (kbls)
Change in (%)
Dist.
Gasoline
158
5139
-2570
455428
149951
214163
0.03
3.55
-1.19
Refinary utlisation rate was 92.80% in the last week of August 2015
MONTHLY CHANGE IN SHFE STOCKS (JUL-AUG 2015)

Copper
Lead
Change (in tonne)
25775
-31175
88075
-4932
August 28, 2015
123223
14114
157387
18357
19.50
-2.66
-11.19
23.88
Change (in %)
Zinc
Nickel
MONTHLY CHANGE IN LME STOCKS (JUL-AUG 2015)

Copper
Lead
Zinc
Nickel
Change (in tonne)
25775
-31175
88075
-4932
August 28, 2015
371250
187400
522875
455166
7.46
-14.26
20.26
-1.07
Change (in %)
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil: Highly volatile as production cut talks possible, supply glut, China concerns
Key points
IEA: Global crude oil demand is expected to grow by 1.6mb/d, up 0.2mb/d from the previous projection
World oil supply fell 0.6mb/d in July mainly on lower non-OPEC output
Non-OPEC supply growth is expected to slow sharply to 1.1mb/d this year from 2.4mb/d in 2014, mainly on account of lower prices and spending cuts
As per EIA, US commercial crude oil stocks remain high at 455mb, up by almost 95mb from its seasonally five-year average of 360mb
Oil dependent economies like Venezuela approaching non-OPEC producers like Russia to initiate some action on supporting falling crude prices
Crude prices recovered from the lows as OPEC says it is ready to discuss price decline with the other producers
AS US driving season ends, crude oil shall enter a lean demand period
US weekly rig count has remained stable at 662
WTI NYMEX crude oil
CMP: $46
Crude oil prices fell to a fresh cycle low below $38 on account of China concerns and ample supply amid no signs of production cut by
the Organization of Petroleum Exporting Countries (OPEC). Crude oil rallied sharply nearly 27% from the low as a paper published by
OPEC stated that the organisation is ready to speak with the other producers as prices keep on tumbling. However, it also stated that it
would protect its interests in terms of market share. The counter got further support from Energy Information Administration (EIA)
cutting crude oil output forecast. However, crude oil gave back some of its gains as doubts regarding OPECs steps resurfaced. Russia and
Venezuela have agreed to continue talks between the OPEC and non-OPEC oil producers. However, no country is willing to cut production.
Venezuela is the most vulnerable among producers. RBC analysts cite Algeria, Iraq, Libya and Nigeria as four other nations in fragile
five. With the driving season coming to an end, production cuts would be needed to support the prices. We see a range of $40-50 in the
near term amid high volatility.
31
September 2015
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Precious metals: Fed rate hike and China to drive the markets
Key points
Gold posts a monthly gain on China concerns amid sell-off in risk assets
Gold outperforms base metals and silver in August
Bullion complex seen volatile on stimulus and Fed rate speculation
Chinas gold imports likely to increase as domestic supply lags demand
US gold production declines on lower prices
Indias gold imports in August likely to rise 50% YoY; up 40% in first 8 months
Gold demand to surge by 70% during festive season, say jewellers and traders
COMEX silver inventories down nearly 25% in last five months
Gold coin sales surge 306% YoY In August, silver sales rise more than 100%: US Mint
Silver Institute projects a supply deficit of 57.7 million ounce for 2015
Gold
CMP: $1,121 (spot)
Gold outperformed silver, crude oil and the base metals in August as the risk assets fell on concerns over Chinas economy. China devalued its currency
yuan so as to support the exports but the markets saw it as a sign of confirmation of weakness in the economy. Investors are worried that Chinas
growth, which is already at a 25-year low, can dip below 7%. Weakness in the emerging market currencies and falling equities markets led investors to
pile into gold. The yellow metal trimmed its gains as the euro gave back its gains on a dovish European Central Bank (ECB). The dollar also benefited
as most of the key economic indicators out of the USA topped the forecast, thus keeping the hopes of a rate hike by the US Federal Reserve (Fed) in
September alive. Indias demand for gold is running strong and is likely to strengthen further in the festival season. Even a hike in September would not
be extremely bearish for gold as more than hike it would be about the pace of hike which is likely to be quite measured. Risk assets can suffer further in
the next two months on concerns over Chinas economy. The metal is expected to trade between $1,100 and $1,170 with an upward bias.
Silver
CMP: $14.57 (spot)
Silver moved more in line with the base metals and crude oil rather than gold. The physical demand for the metal is strong as seen in the
declining COMEX silver inventory and the US mint sales. However, rate hike expectations and weakness in the industrial commodities
are keeping a lid on the prices. We expect silver to trade with a positive bias amid China uncertainties. The expected range is $14-15.70.
Base metals: languish as weak Chinese economic appetite takes its toll on demand growth
Key points

Metals decline as yuan devaluation and US rate hike concerns hurt sentiment and stoke demand fear
Chinese authorities took unprecedented dual monetary action of rate cut and reduction in reserve rate
Copper falls for eighth months in a row, the longest losing streak since 2008
Indonesian authorities reaffirm the continuing ban on export of ores amidst speculation of relaxation on export ban
As per ICSG, refined copper production increased by 3% while demand fell by 3% in the January-May period.
Lower metal prices may lead to production cuts now: Chinese aluminium smelters proposing production due to weak demand and lower prices
China s rising lead exports since January 2015 dipped first time in June
As per ILZSG, the zinc market for the January-June period has been in surplus of 157,000 tonne
Nickel pig iron imports in China rise three times to 59,115 tonne in July 2015
Copper
CMP: Rs345 (November) contract)
Copper prices traded in a narrow range of Rs326/kg on the lower side and Rs350/kg on the higher side as weak prices on the London Metal Exchange
(LME) were insulated by weak the Indian Rupee which stemmed the losses. The LME three-month copper has been currently trading below $5,184/tonne
in a bear range, as per the common definition of the bear market that says 20% lower from the yearly high. Production of refined copper in the January-May
period has been higher by 3% while the demand has been lower by 3% over the corresponding period of 2014. Copper LME inventories remain at elevated
levels at 370,000 tonne. Also, Chinas monthly refined copper consumption in June 2015 has been lower at 8.98 lakh tonne as against 9.48 lakh tonne in
June 2014. We expect copper to trade in the range of Rs326-372, any indication on a delay in the Fed rate hike could provide some support to the prices.
Lead
CMP: Rs114.70 (September contract)
Lead prices remained range-bound with Rs108 acting as a good support due to a weakening rupee. As most producers in China were in
destocking mode and there was saturation in e-bike sales in China, the demand for lead remained weak. Also, due to environmental concerns in
China, more batteries are being replaced with lighter ones made of lithium rather than lead. The global lead balance was surplus by 26,000 tonne
in the first half of 2015, though on a month-on-month basis it has come down from 14,000 tonne in March to almost a balanced market in June.
On the positive side, LME inventories have come down from 2.18 lakh tonne in July end to 1.83 lakh tonne in August end. We expect lead prices
to remain in the range of Rs104 on the lower side to Rs119 on the higher side.
Zinc
CMP: Rs121.70
Zinc prices underperformed vis--vis the other commodities as a slowing China affected imports and demand for zinc. Also, the deficit story has
come under cloud with the zinc market balance at a huge surplus of 1.60 lakh tonne in H12015 against a deficit of 2.49 lakh tonne in the same
period in 2014. Slow demand has also led to inventory build-up in the LME and inventory rose to 5.29 lakh tonne in August end from 4.33 lakh
tonne at the start of the month. Weak Chinese real estate and destocking amidst previous apparent demand from financing deals have also
dragged on zinc demand. Overall, we expect zinc prices to remain in the range of Rs111/kg to Rs126/kg.
September 2015
32
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Nickel
CMP: Rs670
Nickel is currently trading at a six-year low as weak demand for stainless steel in China and lower cost of nickel pig iron have led to downside pressure on the
refined nickel prices. Indonesia continues to maintain the ban on ore exports which has affected nickel supplies. Chinas refined nickel imports increased since
April at 38,500 tonne in August 2015, up from 9,500 tonne in August 2014, while stainless steel production has come down suggesting build-up in stocks in
Chinas warehouses. LME nickel inventories remain elevated at 4.54 lakh tonne, slightly lower than the high of 4.70 lakh tonne. On the positive side, almost
80% of nickel pig iron production has turned unprofitable at the current low prices. Also, rising imports could be a sign of destocking running its course.
Overall, we expect nickel prices to recover and dips below Rs650/kg can be seen as favourable buying propositions for Rs800/kg target in the medium term.
CMP as on September 4, 2015
Events watch: Major economic events in September 2015

Region
Event
Survey
Actual
Prior
Impact
Date
Date
Region
Event
Survey
Actual
Prior
Impact
09/01/2015
China
Manufacturing PMI
49.8
49.7
50
The indicator is crucial as China is the biggest consumer of metals; data trailing the forecast
and remaining in contraction zone would be bearish for the industrial commodities but
speculation that China may take more steps to support the economy limits the downside
09/01/2015
USA
ISM Manufacturing PMI
52.5
51.1
52.7
The index trailed the forecast and fell to a two-year low; data is bearish for industrial commodities
and supportive for precious metals as it can force the Fed to delay the rate hike
09/02/2015
USA
ADP non-farm employment change
200K
190K
177K
Data slightly below forecast, hence somewhat bearish for the dollar and industrial
commodities but speculation that the Fed may delay the rate hike on China concerns amid
soft US data is supporting for industrial commodities
09/03/2015
Europe
Minimum bid rate
0.05%
0.05%
No change expected but focus would be on ECB's Draghi speech; an indication of more
easing measures would be euro bearish and supportive for industrial commodities
09/03/2015
USA
ISM Non-Manufacturing PMI
58.2
60.3
Better than expected data would support industrial commodities and dollar but be bearish
for precious metals complex
09/04/2015
USA
Non-farm employment change
218K
173 K
215K
Data trails the forecast but earnings were up and unemployment rate came down to 5.1%,
so it is kind of a mixed job report
09/08/2015
China
Trade balance
43
China concerns have roiled the markets as the growth rate is at the lowest level in 25 years
and could dip below 7%; both imports and exports need to be analysed to gauge the demand
for commodities; weaker than expected data would be bearish for industrial commodities
and positive for bullions
09/10/2015
China
CPI YoY
1.60%
China can cut interest rates further to support the economy if the inflation remains subdued;
that would be supportive for industrial commodities
09/10/2015
UK
Official bank rate
0.50%
0.50%
No change expected
09/11/2015
USA
PPI MoM
-0.10%
0.20%
The Fed can delay rate hike if inflation trails the forecast, more so as to take care of the
turmoil in the global markets on China's concerns
09/11/2015
USA
Prelim UoM consumer sentiment
91.8
91.9
Better than expected data is positive for the economy, thus it would support the dollar and
industrial commodities but weigh on precious metals
13/9/2015
China
Industrial production YoY
6.00%
China's macro-economic indicators are running soft; yet another soft data would stoke
concerns regarding the health of the economy, thus would be bearish for the industrial
commodities and bullish for gold
15/9/2015
Japan
Monetary policy statement
No change in interest rate expected but Bank of Japan may indicate a dovish posture as
the global markets fall; in that case yen and gold would fall
15/9/2015
Europe
German ZEW economic sentiment
65.7
German economy is doing somewhat better currently; the data is expected to reflect the
same, thus would be bullish for the euro and industrial commodities
15/9/2015
UK
Inflation report hearings
Subdued outlook on inflation would be bearish for the pound as it would force the Bank of
England to delay the rate hike, especially in the current scenario of global turmoil
15/9/2015
USA
Core retail sales MoM
0.40%
Better than expected data would be positive for the dollar and industrial commodities but
bearish for precious metals
16/9/2015
USA
Core CPI MoM
0.10%
Subdued data would be bearish for the dollar as the Fed could delay rate hike; bullion
would rally
17/9/2015
USA
Housing starts
17/9/2015
USA
FOMC statement
Markets are expecting the Fed would not hike the rates at its September meeting; if this
turns out to be the case, commodities especially bullion would rally
20/9/2015
Europe
Greek parliamentary election
This is an event risk for the markets; the markets could fall if the leftist parties come to
power as it would jeopardise the bail-out agreement with the creditors
22/9/2015
China
Caixin Flash Manufacturing PMI
47.1
Weaker than expected data would be bearish for industrial commodities and bullish for gold
22/9/2015
Europe
German Flash Manufacturing PMI
53.3
Germany's economy is doing well, so the data is expected to be encouraging for the markets;
euro and industrial commodities would benefit
24/9/2015
USA
Core durable goods orders MoM
0.60%
Better than expected data would be positive for the dollar and industrial commodities but
bearish for precious metals
25/9/2015
USA
Final GDP QoQ
3.70%
Better than expected data means better economy, so it would be bearish for the bullion
complex but positive for industrial commodities
30/9/2015
USA
ADP non-farm employment change
190K
The US housing sector is a key contributor to the economy, thus encouraging data would
support the dollar and industrial commodities but bullion complex would fall
33
Better than expected would be bullish for the dollar but bearish for bullion complex
September 2015
TREND & VIEW
COMMODITY
TECHNICALS
Gold:Bulls in control
Gold tumbled down sharply till the multi-month falling trend

line in July 2015. The yellow metal formed a consolidation near
the trend line for a few weeks and started moving higher.
In the last few sessions gold moved up sharply but faced

resistance near the falling trend line. It has fallen back towards
the key daily moving averages (DMAs), which are acting as
supports. Thus, from here gold can start climbing up once again.
Once it crosses the falling trend line and the recent high, ie
$1,168.40, gold can rise higher.
The subsequent levels will be $1,205 and $1,232. On the other

hand, the recent low of $1,077 will act as a major support.
Trend
Up
Trend
reversal
Supports
Resistances
Target
$1,077
$1,109/$1,094
$1,147/$1,168
$1205/
$1232
Silver: Base in formation

Silver in the penultimate week failed to sustain above the key

DMAs and tumbled sharply. It broke the crucial swing lows of
$14.42 and $14.33 on an intra-week basis. However, silver
recovered from a falling trend line and posted a weekly close
above these supports.
A larger structure shows that the white metal has formed an

ending diagonal pattern. Thus, unless the recent low of $13.93
breaks silver can be expected to move up. The key levels on the
upside will be 15.66 and 16.26.
Trend
Up
Trend
reversal
Supports
Resistances
Target
$13.93
$14.41/$14.17
$15.33/$15.72
$15.66/
$16.26
Crude oil: In recovery mode

Since the beginning of July crude oil has been falling. The fall
was breaking up into lower degree waves.
However, it recently completed an impulse on the downside

and entered the pull-back mode.
The short-term momentum indicators have turned bullish.
The pull-back is breaking up into lower degree waves. Thus,

crude oil can extend till $50.15 and $53.10. On the other hand,
the 20-day moving average (DMA), which is near $42.95, will
act as a major support on a closing basis.
Trend
Up
Trend
reversal
Supports
Resistances
Target
$42.95
$45/$43.21
$49.33/$51.41
$50.15/
$53.10
September 2015
34
COMMODITY
TREND & VIEW
TECHNICALS
Copper: Takes a leap

COMEX copper had formed a complex pull-back, which had

faced resistance near the 61.8% retracement of the entire
previous fall (from $3.294 to $2.419). From the key Fibonacci
level the red metal tumbled towards a crucial multi-month trend
line and the lower end of the medium-term falling channel.
Copper formed a short-term base near those supports and started

moving up.
It has surpassed a medium-term falling trend line. The shortterm momentum indicators have turned bullish.
Thus, copper can attempt a bounce till $2.50-2.58 levels. The

recent low of $2.209 will act as a strong support.
Trend
Up
Trend
reversal
Supports
Resistances
Target
$2.209
$2.287/$2.25
$2.51/$2.57
$2.50/
$2.58
Aluminium: Relief rally

MCX aluminium was trading in a multi week downward sloping

channel. Within that channel it had formed a sideways channel,
which was reflecting consolidation.
The consolidation has turned out to be an accumulation and

the base metal has jumped up since.
The short-term as well as medium-term momentum indicators

have turned in favour of bulls.
Thus, aluminium is expected to form a deep retracement of the

previous fall. The key levels on the upside will be Rs112.50
and Rs115.60. A reversal of the bullish view can be placed below
the 20-DMA, ie Rs102.50.
Trend
Up
Trend
reversal
Supports
Resistances
Target
102.50
105.10/104
109.50/112
112.50/
115.60
Jeera: About to topple

NCDEX jeera formed a short-term bounce in the last few

sessions. It retraced 50% of the previous fall and tested a crucial
swing high of Rs16,675.
The agri-commodity also faced resistance near the daily upper

Bollinger Band. These multiple hurdles have attracted a fresh
round of selling in jeera.
As a result, it has started tumbling down once again. However,

the fall is breaking up into lower degree waves.
Once the crucial support zone of Rs15,740-15,525 breaks jeera

can fall back to the low of Rs14,400. On the other hand,
Rs16,400-16,690 will act as a key resistance zone.
Trend
Trend
reversal
Supports
Resistances
Target
Down
Rs16,690
Rs15,525/15,135
Rs16,400/16,595
Rs14,400
35
September 2015
CURRENCY
MONTHLY VIEW
FUNDAMENTALS
Currencies: Yen and euro rallied due to global equity sell-off

Key points
Indias CPI eased to 3.8% in July from 5.48% in June and IIP rose
to 3.8% in June from 2.7% in May
People's Bank of China cut the one-year lending rate to 4.6% from
4.85% and reserve requirement ratio by 0.5%
US prelim GDP rose by 3.7% in Q2 of 2015 from 2.3% in Q1 of 2015
Indias GDP expanded by 7.0% in Q1 of FY2016 from 7.5% in the
last quarter
August 2015 contract price movement
CURRENCY LEVELS IN AUGUST 2015 (IN RS)

Currency
High
Low
Close
Monthly chg (%)
USD-INR
66.765
63.715
66.045
3.34
EUR-INR
77.261
69.19
74.59
5.67
GBP-INR
105.2806
98.5938
102.0092
2.05
JPY-INR
56.1
51.06
54.9
6.27
August 2015 contract price movement
USD-INR
CMP: Rs66.4(spot)
Recap: The Indian Rupee depreciated by 3.34% against the dollar in the previous month on the back a rise in risk aversion in the global markets and
weak economic data from China. Weak manufacturing data from China led to the fear that a slowdown in the world's second largest economy could
weigh on global growth. Further, devaluation in the other currencies hurt market sentiment. Investors worry that export competitiveness may force
the other Asian countries to take similar measures. China has devalued its currency yuan against the dollar by almost 5% causing Vietnam and
Kazakhstan to devalue dong and tenge respectively. The Reserve Bank of India (RBI) Governor Raghuram Rajan said the recent depreciation in the
yuan is not a cause for concern immediately but a similar correction in the other currencies would be a concern. The demand for the dollar from oil
importers and outflows from the local shares proved negative for the rupee. However, any further fall was prevented as worries over slowing global
growth and falling expectations of inflation led to the speculation that the US Federal Reserve (Fed) may delay the rate hike.
Outlook: The Indian Rupee is expected to trade with a negative bias in this month on the back of a strong dollar and weak macro-economic
datas. India gross domestic product (GDP) expanded by 7.0% in Q1FY2016 from 7.5% in the last quarter. The demand for the dollar may go
up on a series of robust economic data points from the USA. The market view on rate hike by the Fed remains divided. Some fear that the Fed may
increase the rates in September due to a series of upbeat economic data whereas some others expect the Fed to hold back its rate hike decision on
worries over a slowing global growth and falling expectations of inflation. All eyes will be on Federal Open Market Committee (FOMC) meeting
on September 17n 2015. As per the latest REER reading (provisional; 111.95) the rupee is overvalued by more than 10%. Additionally, worries
over global economic growth may add to the downside pressure. However, a sharp fall in the currency may be prevented as the market expects
the RBI to lower its benchmark interest rates after the Indian GDP came below expectations and with inflation under control. Falling commodity
prices will benefit the Indian economy by lowering the inflationary pressures. Easing inflation may provide the RBI room to cut rates. The USDINR may face resistance near 68.8; a sustained break above this level may cause the pair to depreciate to 70.0. A strong support lies near 64.0 and
a sustained break below this level may cause the rupee to appreciate till 62.5.
EUR-INR
CMP: Rs73.83(spot)
Recap: The euro appreciated by 2.094% against the dollar in August this year. It moved northward on the back of weakness in the dollar. The
dollar gave up its strength as the Fed failed to provide any indication if it would raise the short-term rates by September. Further, investors pushed
back expectations of a rate hike by the Fed in September to December as weak manufacturing data from China led to worries over a slowing
global growth. The Euro Area Composite Index rose to 54.1 in August from 53.9 in July. Greece made 3.2-billion-euro payment to European
Commercial Bank (ECB) after receiving 13 billion euros from its creditors as part of the third bail-out fund. The euro as funding currency because
of the nations low interest rates got strengthen as money flew back to where it was funded from during risk times. However, at the end of the
month the single currency came under pressure as ECB policy maker Peter Praet hinted that more easing could be seen as lower commodity prices
increased the risk that the ECB may miss its inflation target.
September 2015
36
CURRENCY
FUNDAMENTALS
MONTHLY VIEW
Outlook: The euro is expected to trade with a negative bias as the demand for the dollar may rise on expectations of strong economic data from
the USA. Further, expectations of mixed economic data from the euro zone may prove unfavourable. A divergence in global monetary policies
will add to the downside pressure. The ECB indicated that the central bank could expand its quantitative easing programme whereas the Fed is
expected to hike rates sooner. The ECB has also lowered its inflation projections for 2016 and 2017 from 1.5% and 1.8% to 1.1% and 1.7%
respectively. Investors worry that a strong euro may hurt the euro zone export industry. Greek prime ministers resignation has renewed tensions
in the region. Political uncertainty may prove negative for the euro. Investors will remain cautious ahead of the FOMC meeting and Greek
parliamentary election. As per the polls, left wing Syriza Party is losing support. The EUR-INR may face a strong resistance near 76.7 and a
sustained break above this level may cause the pair to depreciate till 78.8. A strong support lies near 72.0 and a sustained break below this level
may plunge the pair to 68.7.
GBP-INR
CMP: Rs101.1 (spot)
Recap: The pound depreciated by 1.76% in August this year on the back of a strong dollar demand and weak economic data from the country.
A slower growth in manufacturing, construction and services sectors fuelled worries among market participants that the economic recovery may
be losing momentum. The minutes of the Bank of England (BoE)s meeting showed that only one policy member voted in favour of a rate hike.
The market was expecting at least two policymakers to be in favour of a rate hike. Officials cut their outlook for the UK inflation for the rest of
the year. In its quarterly Inflation Report, it said the near-term outlook for inflation is subdued and the recent decline in energy prices will bear
down until at least the middle of 2016. However, a sharp fall was cushioned as expectations of a rate hike in September by the Fed started to fade
after dovish FOMC meeting minutes and weak manufacturing data from China led to worries over a slowing global growth. Further, an
unexpected rise in inflation fuelled expectations of a rate hike by BoE before the end of the year. The UK Consumer Price Index rose 0.1% in July
from 0.0% in June this year.
Outlook: The pound is likely to trade with a negative bias. A strong dollar after upbeat economic data from the USA and hawkish statement from
Fed officials may add to the downside pressure. Further, weak economic data from the country would prove unfavourable for the pound as it has
given rise to worries over the economic health of the country. The UK Manufacturing PMI declined to 51.5 in August from 51.9 in July. The rate
of growth in new orders slowed. The UK Construction PMI increased to 57.3 in August from 57.1 in July. A fall in the Services PMI signals a slow
economic growth. The Service PMI followed the ongoing weakness in the manufacturing and construction sectors. Weaker activity in the service,
manufacturing and construction sectors may fuel the belief that the BoE will not raise the rates until 2016. Investors will remain cautious ahead
of the FOMC meeting. The GBP-INR spot may face resistance near 104. A sustained break above this level may cause the pair to depreciate till
106.6. A strong support lies near 98.7 and a sustained break below this level may take the pair down till 96.8.
JPY-INR
CMP: Rs55.56 (spot)
Recap: The yen appreciated by 2.11% in August this year. A rise in risk aversion in the global markets after weak economic data from China,
political uncertainty in Greece and tension on Korean borders led to the rise in demand for safe haven. North Korean leader Kim Jong Un ordered
his army to prepare for war after an exchange of fire with South Korea. Devaluation in the other currencies hurt market sentiment. China
devalued its currency yuan against the dollar by almost 5% causing Vietnam and Kazakhstan to devalue the dong and the tenge respectively.
However, a sharp gain was prevented on the back of a divergence in the global monetary policies. The Fed is expected to increase the rates
whereas the Bank of Japan is likely to continue with its loose monetary policy. Mixed economic data from Japan proved unfavourable. The
unemployment rate fell to 3.3% from 3.4% but household spending eased 0.2%, well below the 1.3% gain expected.
Outlook: The yen is expected to trade with a positive bias. A rise in risk aversion in the global markets, weak economic data from China, worries
over a slowing global growth and political uncertainty in Greece may lead to a rise in the demand for the safe haven. The yen as a funding
currency because the nations low interest rates may strengthen as money flows back to where it was funded from during risk times. However,
sharp gains may be prevented as the market expects the Fed to hike interest rates sooner this year after a series of robust economic data from the
USA whereas the Bank of Japan is likely to continue with its loose monetary policy until it achieves its 2% inflation target. Investors worry that
a strong yen may hurt its export industry and push the Bank of Japan to provide more monetary stimulus. The market participants will remain
cautious ahead of the Bank of Japans monetary policy meet. The bank is expected to keep its monetary policy unchanged. The JPY-INR spot may
find a strong support near 53.7 and a sustain break below this level may plunge the pair to 52.0. An immediate resistance lies near 56.6 and a
sustained break above this level may push up the pair till 58.5.
CMP as on August 05, 2015
37
September 2015
TREND & VIEW
CURRENCY
EUR-INR: Scope for bulls
USD-INR: Going north

The USD-INR was consolidating in a sideways to bearish

manner for a few weeks. The consolidation unfolded in a
channelised manner.
The price took support near the lower end of the channel as
well as near the medium-term rising trend line. From there the
currency pair has started the next leg up.
It has broken out from the channel on the upside and is rallying
sharply. The short-term as well as medium-term momentum
indicators are in line with the rally.
The subsequent levels on the upside will be 67.30, ie the upper
channel line, and 67.50, ie the larger pattern target. A reversal
can be trailed to 65.41.

JPY-INR: Bulls take control

The GBP-INR was trading in a medium-term falling channel. It

recently formed a short-term base near the key daily moving
averages and started moving up.
It has broken out form the channel on the upside. The shortterm and medium-term momentum indicators have triggered a
bullish cross-over.
Thus, the currency pair looks poised for a decent upside. It is
expected to test the high of 106.98.
Beyond the high the GBP-INR can target 110.15. On the other
hand, the 20-weeky moving average (99.41) will act as a crucial
support.
Currency
View
USD-INR
The EUR-INR formed a multi-week channelised correction, which

found support near the 61.8% retracement mark. From the key
Fibonacci level the currency pair started rallying.
It broke out from the upper channel line. Recently it surpassed a
medium-term falling trend line and in the last few sessions it has
come down to retest the trend line.
The daily and weekly momentum indicators are in sync with the
bullish break-out. Thus, from here on the currency pair is expected
to start moving higher.
The key levels on the upside will be 78.21 and 78.87. On the other
hand, 72.70-72.15 will act as a major support zone.
GBP-INR: Upside potential

TECHNICALS

For several weeks the JPY-INR was trading in a sideways manner.

It formed a short- to medium-term base for itself and started
rallying.
It crossed a short-term as well as medium-term falling trend line.
The daily and weekly momentum indicators are in favour of bulls.
Thus, the currency pair is expected to form a deep retracement
of the previous fall. In the last few sessions it has formed a minor
degree correction, which can be taken as a buying opportunity.
The key levels on the upside will be 0.5735 and 0.5840. A reversal
can be placed at 0.5276.
Reversal
Supports
Resistances
Target
Up
65.41
65.85/65.69
66.49/66.90
67.30-67.50
GBP-INR
Up
99.41
100/99.55
102.53/104.95
106.98-110.15
EUR-INR
Up
72.15
73.75/72.97
75.22/76.50
78.21-78.87
JPY-INR
Up
0.5276
0.5432/0.5340
0.5595/0.5667
0.5735-0.5840
September 2015
38
PMS
DESK
PMS FUNDS
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:
ProPrime
(based on fundamental research)
Top Equity
Diversified Equity
ProTech (based on technical analysis)
We have a wide range of strategies that you can choose from.

Our strategies are based on fundamental research and technical analysis.
Index Futures Fund
Trailing Stops
PROPRIME - TOP EQUITY

Product performance
as on August 31, 2015
OVERVIEW
The ProPrimeTop Equity PMS strategy is suitable for the long-term investors looking
to create an equity portfolio through disciplined investments that will lead to a growth
in the portfolios value with low to medium risk.
INVESTMENT STRATEGY
(In %)
Scheme
Sensex
Nifty
1 month
-5.3
-6.5
-6.6
3 month
-6.0
-5.6
-5.5
6 month
-11.9
-10.5
-10.5
-1.9
-1.3
0.2
1 year
Disciplined investment decisions are taken in specific stocks based on thorough

fundamental research.
Best month
12.9
11.2
12.4
Worst month
-10.6
-8.9
-9.3
Investments are made primarily in the Nifty Fifty or the BSE 100 scrips.
Best quarter
21.7
13.5
14.5
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.
Worst quarter
-13.2
-6.1
-10.4
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.
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
Ashok Leyland
Axis Bank
Gateway Distriparks
2% per annum; AMC fee charged every quarter
Hero MotoCorp
0.5% brokerage
ICICI Bank
20% profit sharing after the 12% hurdle is crossed at the end of
Larsen & Toubro
every fiscal
Lupin
Reliance Industries
State Bank of India
Tata Motors
FUND OBJECTIVE
A good return on money through long-term investing in quality companies
39
September 2015
PMS
PMS FUNDS
DESK
PROPRIME - DIVERSIFIED EQUITY

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.
Product performance
(In %)
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough

fundamental research.
A balanced mix of value and growth stocks (mid-cap and small-cap) is created
that represents investment opportunities across sectors and market capitalisation.
Invests in quality value and growth stocks with good earnings visibility and healthy
balance sheet.
The fund manager, with the help of extensive, in-house, superior research,
identifies fundamentally sound companies to invest in.
The fund manager strives to capture the short-term trading opportunities to

maximise the potential of the swings in specific stocks.
Scheme
S&P CNX 500
1 month
-8.3
-6.1
3 month
-1.3
-4.2
6 month
-3.5
-7.9
1 year
0.1
4.9
Best month
36.3
34.4
Worst month
-23.4
-27.2
Best quarter
60.3
51.2
Worst quarter
-30.5
-28.6

Top 10 stocks
Apollo Tyres
PRICING
Charges
Axis Bank
Federal Bank
Gateway Distriparks
2% per annum; AMC fee charged every quarter
Hero MotoCorp
0.5% brokerage
ICICI Bank
20% profit sharing after the 12% hurdle is crossed at the end of every
fiscal
IL&FS Transport Networks

Lupin
Reliance Industries
Sun Pharmaceutical Industries
FUND OBJECTIVE
A good return on money through long-term investing regardless of short-term volatility
September 2015
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
1.02
-6.51
-6.58
3 months
-3.10
-5.55
-5.48
FY14-15
-3.41
24.89
26.65
FY13-14
8.79
18.85
17.98
FY12-13
3.65
8.23
7.31
FY11-12
13.10
-10.50
-9.20
FY10-11
9.20
10.90
11.10
FY09-10
14.70
80.50
73.80
151.72
159.60
163.81
Since inception*
PRICING
Best month
28.90
-23.89
-26.41
Worst month
-17.10
-0.02
0.55
Charges
Best quarter
33.30
49.30
42.04
Worst quarter
-11.70
17.33
22.25
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
Index Futures Fund rebounded from an extreme negative drawdown to close August
of 2015 in the positive. This was a big change as the range-bound moves were eating
into the returns of the folio for some time. We think that the system is out of the
woods. The expansion in volatility is likely to benefit the index trading system for the
rest of the year. Experience tells us that trending markets always follow a major
drawdown.
The domestic stock market after months of trying to push higher has sold off below
8000. This should be a major trend reversal for the market for the months ahead and
marks the start of a highly volatile phase, which is usually beneficial to products like
Index Futures Fund that trade both sides of the market. Moves of over 10% in both
directions should be the norm going forward.
Fund Manager: Rohit Srivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.
41
September 2015
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
2.46
-6.51
-6.58
3 months
6.75
-5.55
-5.48
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls.
FY14-15
-3.69
24.89
26.65
FY13-14
-1.06
18.85
17.98
A risk model has been developed for stock portfolio allocation that reduces the
risk and portfolio volatility through staggered building of positions.
FY12-13
14.89
8.23
7.31
FY11-12
29.00
-6.10
-4.60
It is non-leveragedthe exposure will never exceed the value of the portfolio.
FY10-11
FY09-10
45.24
41.85
43.60
Best month
9.10
11.30
12.40
Worst month
-4.40
-1.96
-1.66
PRICING
Since inception*
Charges
AMC fees:
0%
Best quarter
9.90
-12.69
-12.47
Brokerage:
0.05%
Worst quarter
-8.20
9.24
9.92
Profit sharing:
Flat 20% charged on a quarterly basis
*09th May 2011
FUND MANAGERS VIEW

Trailing Stops returned 2.46% in August 2015 as we were aided by large market
moves. We believe this puts to an end a period of range-bound moves and stocks
going in both directions damaging the one-sided trades that form part of our core
strategy. This should also mark better times ahead for this line of product as we are
able to ride out clear trends that are sustained.

Investments in
Nifty Index
Stock futures
The domestic stock market after months of trying to push higher has sold off below
8000. This should be a major trend reversal for the market for the months ahead and
marks the start of a highly volatile phase, which is usually beneficial to products like
Index Futures Fund that trade both sides of the market. Moves of over 10% in both
directions should be the norm going forward.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
September 2015
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.
ALPHA DELIVERY PICKS

This is a long only, cash market delivery product where stock ideas are rolled out based on short-term triggers with
proper fundamental rationales. The buying price range, stop loss and probable target are clearly defined at the time of
initiation. These ideas are for a maximum period of one to two months for the medium-term investor. For more details
of this product 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.
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.
Report Card
MID performance*
Product
Month
No. of calls
Profit booked
Stop loss hit
Strike rate (%)
MID Derivative Calls performance*

Ticket size (Rs)
Alpha Delivery Picks

Aug 2015
YTD FY2016
11
34
3
15
8
19
27
44
Month
100,000
Aug 2015
YTD FY2016
No. of calls
19
117
Profit booked
10
68
Stop loss hit

Strike rate (%)
9
53
49
58
Note: We have discontinued Alpha Swing *Based on closed calls
43
September 2015
September 2015
44
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)
AUGUST 17, 2015

Data as on August 07, 2015
Scheme name
Large-cap funds
Reliance Top 200 Fund
Birla Sun Life Frontline Equity Fund - Reg ICICI Prudential Focused Bluechip Equity Fund - Ret
Kotak 50 - Reg
ICICI Prudential Select Large Cap Fund - Ret
Indices
BSE Sensex
Mid-cap funds
Mirae Asset Emerging Bluechip Fund
Canara Robeco Emerging Equities
Principal Emerging Bluechip Fund
Religare Invesco Mid N Small Cap Fund
Kotak Emerging Equity Scheme - Reg
Indices
BSE Mid-cap
Multi-cap funds
Birla Sun Life Pure Value Fund
Franklin India High Growth Companies Fund
SBI Magnum Multiplier Fund
SBI Magnum Multi Cap Fund
HDFC Capital Builder Fund
Indices
BSE 500
Tax saving funds
Axis Long Term Equity Fund
Birla Sun Life Tax Relief 96
Birla Sun Life Tax Plan
SBI Magnum Tax Gain Scheme 93
L&T Tax Advantage Fund
Indices
CNX500
Thematic funds
ICICI Prudential Exports and Other Services Fund
Franklin Build India Fund
Birla Sun Life Infrastructure Fund - Plan A
Canara Robeco Infrastructure Fund
Birla Sun Life Financial Planning FoF Aggressive
Indices
S&P Nifty (CNX Nifty)
Balanced funds
Star
rating

NAV (Rs)
Absolute
6 months
Returns (%)
Compounded annualised
1 year
3 years
5 years
Since inception
25.2
170.2
30.5
181.4
23.3
4.2
3.6
2.6
4.8
-1.1
27.6
23.0
19.6
27.3
13.4
25.7
25.7
22.9
22.2
20.0
14.9
14.7
14.6
12.4
11.6
12.3
24.5
16.7
24.2
14.6
28,236.4
-1.7
10.3
17.1
9.2
16.6
32.4
64.9
73.7
37.4
27.8
14.2
14.6
11.5
8.7
11.2
46.2
47.8
43.4
36.8
45.8
40.6
40.1
38.0
36.4
34.6
25.5
23.3
18.4
20.8
17.4
26.0
19.7
34.5
19.5
13.0
11,557.5
11.7
34.7
26.0
11.7
15.7
40.8
31.1
165.5
34.4
210.4
7.8
6.1
10.0
9.3
4.2
25.6
39.5
34.3
33.7
24.8
36.6
36.1
27.9
27.4
25.6
18.8
19.5
14.6
13.4
14.4
21.0
15.2
15.4
13.3
15.2
11,358.7
2.1
16.3
19.0
9.2
15.8
32.4
22.9
28.9
119.0
40.1
8.7
8.2
7.7
5.9
7.1
36.4
38.7
37.2
26.7
27.1
34.8
30.5
29.5
25.5
23.6
22.2
14.4
16.8
14.5
13.4
23.3
11.8
12.8
17.5
15.8
7,183.9
2.2
16.7
19.5
9.6
9.8
48.2
30.7
27.8
39.5
17.0
15.3
7.1
5.2
5.9
4.4
39.7
43.6
23.5
27.5
20.1
43.0
38.1
25.1
23.0
18.8
22.4
19.8
9.4
11.7
-
17.6
20.8
11.5
15.2
13.4
8,564.6
-1.1
12.0
17.1
9.5
14.6
L&T India Prudence Fund
20.2
7.1
27.9
25.5
17.0
ICICI Prudential Balanced
95.4
4.1
21.5
25.0
17.0
15.4
HDFC Balanced Fund
111.4
4.6
22.5
23.6
16.3
17.5
Franklin India Balanced Fund
94.0
5.4
30.2
23.5
14.8
15.4
Birla Sun Life 95
581.0
4.0
24.7
23.1
14.0
21.9
--
0.5
12.3
14.4
9.4
13.3
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
September 2015
MUTUAL FUNDS
MF PICKS
SHAREKHANS TOP SIP FUND PICKS
DESK
AUGUST 17, 2015

Data as on August 07, 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
Reliance Top 200 Fund
25.2
12,984.2
9.0
54,267.6
15.1
102,842.1
11.6
SBI Bluechip Fund
29.6
13,154.2
10.6
54,156.9
15.0
104,786.1
12.0
Birla Sun Life Frontline Equity Fund - Reg
170.2
12,915.6
8.4
52,233.9
13.6
100,386.8
11.0
Kotak 50 - Reg
181.4
13,058.7
9.5
51,853.6
13.2
95,916.3
10.0
ICICI Prudential Focused Bluechip Equity Fund - Ret
30.5
12,740.3
6.8
50,345.7
12.2
95738.0
10.0
28,236.4
12,206.6
1.85
45,613.1
8.40
83,622.1
6.96
Birla Sun Life Pure Value Fund
40.8
13,287.4
11.8
64795.2
22.3
124,750.5
16.0
Franklin India High Growth Companies Fund
31.1
13,257.1
11.5
62544.3
20.9
123,491.6
15.8
SBI Magnum Multiplier Fund
165.5
13,422.9
13.1
56866.2
17.0
107,624.6
12.6
SBI Magnum Multi Cap Fund
34.4
13,379.7
12.7
56,677.2
16.8
106,095.5
12.3
BSE Sensex
Multi-cap funds
HDFC Capital Builder Fund
210.4
12,929.2
8.5
53,824.0
14.8
101,232.6
11.2
11,358.7
12,620.7
5.56
48,551.8
10.73
88,028.0
8.07
64.9
14,020.0
18.6
71,117.8
26.3
140,511.3
18.9
Mirae Asset Emerging Bluechip Fund
32.4
13,906.0
17.5
68,032.7
24.4
138,576.0
18.6
Kotak Emerging Equity Scheme - Reg
27.8
13,679.6
15.4
65,162.4
22.6
124,347.4
16.0
Principal Emerging Bluechip Fund
73.7
13,731.7
15.9
64,998.0
22.5
128,271.5
16.7
BSE 500
Mid-cap funds
Canara Robeco Emerging Equities
Religare Invesco Mid N Small Cap Fund
37.4
13,343.8
12.3
62,645.7
20.9
125,245.3
16.1
11,557.5
13,708.4
15.36
55,674.9
16.02
102,606.5
11.48
Axis Long Term Equity Fund
32.4
13,412.9
12.7
62,160.0
20.5
125,346.2
16.1
Birla Sun Life Tax Relief 96
22.9
13,541.0
14.2
58,716.8
18.3
110,600.3
13.2
Birla Sun Life Tax Plan
28.9
13,475.7
13.6
57,814.6
17.6
110,161.6
13.2
119.0
13,025.5
9.4
54,217.8
15.1
103,063.4
11.6
40.1
13,202.4
11.0
52,904.2
14.1
98,000.1
10.5
8,564.6
12,286.8
2.57
46,069.8
8.77
84,369.0
7.15
BSE Midcap
Tax saving funds
SBI Magnum Tax Gain Scheme 93

L&T Tax Advantage Fund
CNX Nifty
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.
September 2015
46
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Sharekhan Earnings Guide

Company
CMP
(Rs)
Prices as on September 04, 2015

Sales
Net profit
FY17E
EPS
(%) EPS
growth
FY15
FY16E
FY17E FY17/FY15
PE (x)
RoCE (%)
RoNW (%)
FY15 FY16E FY17E FY16E FY17E FY16E
FY17E
DPS
Div
yield
(Rs) (%)
FY15
FY16E
FY17E
FY15
FY16E
170.2
12,785.2
12,710.7
14,059.4
1,060.1
1,140.1
1,224.5
20.8
22.4
24.1
7%
8.2
7.6
7.1
23.0
20.1
20.5
18.5
2.0
1.2
85.0
13,562.2
18,698.1
23,084.2
233.9
996.3
1,559.4
0.8
3.5
5.5
158%
103.4
24.3
15.5
21.2
29.2
18.0
23.6
0.5
0.5
2,211.0
21,612.0
23,784.6
27,120.8
3,087.1
3,757.3
4,272.5
106.7
129.8
147.7
18%
20.7
17.0
15.0
46.0
45.5
32.6
32.2
50.0
2.3
83.2
1,444.1
1,632.3
1,956.7
60.6
86.9
119.5
4.2
6.1
8.3
40%
19.7
13.8
10.0
29.2
33.4
24.2
27.1
1.1
1.3
2,290.9
27,585.3
29,578.1
33,633.9
2,540.7
3,195.5
3,933.2
127.2
160.0
197.0
24%
18.0
14.3
11.6
61.6
62.8
45.1
45.9
60.0
2.6
1.1
AUTOMOBILES
Apollo Tyres
Ashok Leyland
Bajaj Auto
Gabriel Industries
Hero MotoCorp
M&M
1,110.6
37,468.3
42,652.7
49,386.7
3,087.6
3,993.2
4,910.3
52.2
67.5
83.0
26%
21.3
16.4
13.4
18.5
20.9
18.7
19.9
12.0
Maruti Suzuki
4,063.3
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%
33.1
22.8
17.9
22.2
22.2
18.0
18.0
25.0
0.6
45.4
1,346.3
1,076.2
1,233.3
-0.9
33.1
59.4
-0.1
2.4
4.4
-690.1
18.6
10.3
10.3
15.6
7.0
11.6
3.0
6.6
223.2
9,920.1
12,015.8
14,323.7
401.8
503.3
687.0
8.5
10.6
14.5
26.4
21.1
15.4
23.8
29.0
27.8
31.4
1.9
0.9
Allahabad Bank
76.5
8,173.9
8,878.6
10,068.0
620.9
1,106.9
1,473.7
10.9
19.4
25.8
54%
7.0
3.9
3.0
8.5
10.5
1.6
2.1
Andhra Bank
61.8
6,037.5
6,677.9
7,660.9
638.4
1,050.5
1,261.1
10.6
17.4
20.9
41%
5.8
3.5
3.0
10.0
11.1
2.0
3.2
Rico Auto Industries

TVS Motor
31%
BANKS & FINANCE
Axis (UTI) Bank
468.0
22,589.2
26,402.1
31,221.0
7,355.9
31.0
36.3
44.0
19%
15.1
12.9
10.6
17.9
18.6
5.5
1.2
Bajaj Finance
5,075.6
2,871.7
3,705.9
4,698.1
893.6
1,173.6
1,505.1
178.7
220.3
282.5
26%
28.4
23.0
18.0
19.5
19.2
18.1
0.4
Bajaj Finserv
1,828.8
7,587.0
1,689.8
106.2
17.2
0.0
0.0
1.8
0.1
Bank of Baroda
174.3
17,589.2
19,073.3
22,338.0
3,398.4
4,359.6
5,545.9
15.3
19.7
25.0
11.4
8.9
7.0
10.5
12.2
3.2
1.8
Bank of India
128.7
15,576.7
16,884.6
19,188.1
1,708.9
1,640.0
2,106.4
25.7
24.6
31.6
11%
5.0
5.2
4.1
5.1
6.3
5.1
4.0
Capital First
349.5
501.4
695.5
865.8
110.7
171.4
239.5
12.2
18.8
26.3
47%
28.7
18.6
13.3
10.5
13.3
2.2
0.6
Corp Bank
45.9
5,552.8
6,204.3
7,092.3
584.0
685.2
995.5
7.0
8.2
11.9
31%
6.6
5.6
3.9
6.4
8.7
1.4
3.1
Federal Bank
8,612.3 10,424.2
28%
57.7
3,258.7
3,738.6
4,443.7
1,004.9
1,114.7
1,394.1
5.9
6.5
8.1
18%
9.8
8.9
7.1
13.7
15.2
1.1
1.9
1,141.6
7,630.7
9,263.1
11,220.9
5,990.1
7,164.2
8,521.1
38.0
45.5
54.1
19%
30.0
25.1
21.1
20.4
21.2
13.0
1.1
HDFC Bank
996.1
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%
24.4
20.0
16.3
18.7
19.8
8.0
0.8
ICICI Bank
257.8
31,215.7
35,649.2
41,934.7 11,175.4
13,064.2 15,907.3
19.3
22.5
27.4
19%
13.4
11.4
9.4
15.5
17.0
5.0
1.9
IDBI Bank
55.6
9,755.5
9,687.7
10,757.3
873.4
1,041.6
1,310.5
5.4
6.5
8.2
22%
10.2
8.6
6.8
4.2
5.1
0.7
1.4
413.4
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%
15.1
12.0
9.8
20.4
21.2
5.0
1.2
39.0
340.7
444.6
576.9
160.9
277.6
372.5
4.4
7.1
9.5
47%
8.9
5.5
4.1
18.1
21.3
1.0
2.6
Punjab National Bank
130.8
22,446.3
24,459.4
28,244.3
3,061.6
4,106.4
5,159.6
16.5
22.1
27.8
30%
7.9
5.9
4.7
10.1
11.6
3.3
2.5
SBI
225.2
77,591.1
85,970.2
99,619.3 13,101.6
17,862.2 23,772.7
17.5
23.9
31.8
35%
12.8
9.4
7.1
13.2
15.7
3.5
1.6
Union Bank of India
156.9
11,966.9
13,291.5
15,416.7
1,781.6
2,162.8
2,705.2
28.0
34.0
42.5
23%
5.6
4.6
3.7
10.5
12.0
6.0
3.8
Yes Bank
647.2
5,534.3
6,804.2
8,432.7
2,005.4
2,338.2
3,005.2
48.0
56.0
71.9
22%
13.5
11.6
9.0
18.6
20.4
9.0
1.4
Britannia
2,988.3
7,858.4
9,013.8
10,450.7
542.5
839.7
1,038.9
45.2
70.0
86.6
38%
66.1
42.7
34.5
51.5
46.6
55.5
48.8
16.0
0.5
GSK Consumers*
6,051.4
4,136.4
4,564.2
5,316.9
583.6
709.9
827.7
138.8
168.8
196.8
19%
43.6
35.8
30.7
46.4
45.2
30.6
29.8
55.0
0.9
GCPL
1,221.2
8,242.2
9,573.5
11,429.3
923.8
1,247.0
1,466.0
27.1
36.6
43.1
26%
45.1
33.4
28.3
24.6
26.6
27.7
26.4
5.5
0.5
4,672.4
5,563.1
18.0
21.6
25.7
19%
46.1
38.4
32.3
145.6
138.1
104.8
100.6
15.0
1.8
10,754.0 12,590.1
12.0
13.4
15.7
14%
26.4
23.7
20.2
40.2
39.7
32.3
32.0
6.3
2.0
1.3
HDFC
LIC Hsg. Fin.

PTC India Fin. Ser.
CONSUMER GOODS
Hindustan Unilever
830.0
31,199.7
34,663.0
39,668.9
3,886.5
ITC
317.1
36,507.4
41,392.2
47,990.3
9,607.7
Jyothy Laboratories
319.9
1,514.8
1,724.2
2,009.6
123.1
185.3
194.9
6.7
10.0
10.6
26%
47.7
32.0
30.2
15.6
21.5
22.2
20.5
4.0
Marico^
401.8
5,733.0
6,354.5
7,404.6
573.5
669.5
899.2
8.9
10.4
13.9
25%
45.1
38.6
28.9
40.7
43.3
31.8
32.6
2.5
0.6
Zydus Wellness
832.7
415.2
467.3
537.0
98.7
121.2
140.0
25.3
31.0
35.8
19%
32.9
26.9
23.3
28.9
27.4
26.8
25.3
6.0
0.7
1.4
IT / IT SERVICES
CMC
1,988.5
2,513.5
2,889.6
3,406.8
296.0
360.6
421.7
97.7
119.0
139.2
19%
20.4
16.7
14.3
29.4
29.0
24.3
24.0
27.5
Firstsource Solution
27.3
3,034.6
3,231.4
3,509.5
234.3
269.0
316.4
3.5
4.0
4.7
16%
7.8
6.8
5.8
11.5
12.2
12.1
12.6
0.0
0.0
HCL Technologies**
940.3
37,062.0
42,049.1
47,364.1
7,255.0
7,679.2
8,946.9
51.4
54.4
63.4
11%
18.3
17.3
14.8
37.8
36.7
31.4
29.8
22.0
2.3
1,074.0
53,319.0
59,915.2
67,366.4 12,330.0
13,245.2 14,918.1
692.7
1,891.3
2,144.3
TCS^^
2,547.5
94,648.4
107,936.2
Wipro
554.0
46,954.5
50,855.2
55,449.2
BHEL
206.2
29,542.0
30,493.7
CESC
489.6
6,189.0
6,628.3
Crompton Greaves
161.4
14,013.0
Finolex Cable
233.8
Greaves Cotton^
Kalpataru Power
Infosys
Persistent Systems
53.9
57.9
65.2
10%
19.9
18.5
16.5
33.9
34.2
24.6
24.8
59.5
5.5
350.8
36.3
35.8
43.9
10%
19.1
19.3
15.8
26.0
27.1
18.9
20.0
10.0
1.4
24,122.9 27,477.1
100.3
123.2
140.3
18%
25.4
20.7
18.2
42.0
38.8
32.8
30.3
32.0
1.3
8,652.8
9,392.2 10,513.6
35.3
38.3
42.9
10%
15.7
14.5
12.9
17.5
17.6
20.4
20.2
12.0
2.2
34,916.2
1,419.9
1,607.8
2,369.1
5.8
6.6
9.7
29%
35.5
31.4
21.3
7.0
9.8
4.6
6.5
2.1
1.0
7,149.0
698.0
704.3
765.2
52.4
52.9
57.4
5%
9.3
9.3
8.5
7.2
7.3
8.4
8.6
9.0
1.8
14,248.0
15,628.0
183.0
146.0
365.0
2.1
2.3
5.8
66%
76.9
70.2
27.8
8.1
11.2
3.7
8.7
1.2
0.7
2,449.1
2,736.9
3,162.8
175.8
191.9
243.3
11.5
12.5
15.9
18%
20.3
18.7
14.7
18.9
21.3
19.3
21.7
1.8
0.8
128.2
1,692.2
1,733.0
1,869.9
127.7
187.5
210.1
5.2
7.7
8.6
28%
24.5
16.7
14.9
28.9
29.0
21.5
21.5
1.1
0.8
235.1
4,422.3
4,899.0
5,548.0
165.6
193.0
251.0
10.8
12.6
16.3
23%
21.8
18.7
14.4
15.8
17.9
8.9
10.7
1.5
0.6
56.0
13,081.7
13,561.0
14,080.0
189.3
207.0
216.0
6.4
7.0
7.3
7%
8.7
8.0
7.7
11.4
11.4
7.5
7.4
2.0
3.6
2,470.4
290.6
123,907.1 19,648.4
286.1
CAPITAL GOODS / POWER
PTC India
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
September 2015
EQUITY
FUNDAMENTALS
Company
CMP
(Rs)
Skipper
135.8
Thermax
936.9
4,697.4
Va Tech Wabag
685.0
2,435.2
V-Guard Industries
903.0
1,745.9
Triveni Turbine
106.1
EARNINGS GUIDE
Sales
FY15
1,312.8
FY16E
1,602.5
Net profit
EPS
(%) EPS
growth
FY17E FY17/FY15
12.1
42%
PE (x)
RoCE (%)
RoNW (%)
FY15 FY16E FY17E FY16E FY17E FY16E

22.6 15.7
11.2 27.4 27.5 24.1
DPS
FY17E
26.0
Div
yield
(Rs) (%)
0.2 0.1
FY17E
1,938.1
FY15
61.4
FY16E
88.7
FY17E
123.9
FY15
6.0
FY16E
8.7
5,185.0
5,913.0
335.7
386.0
455.0
28.2
32.4
38.2
16%
33.2
28.9
24.5
23.7
24.7
16.1
16.8
7.0
0.7
2,869.0
3,448.0
110.1
137.2
181.1
20.3
25.3
33.4
28%
33.7
27.1
20.5
21.2
24.3
14.4
16.8
4.0
0.6
1,978.0
2,295.0
70.7
94.9
123.6
23.6
31.7
41.2
32%
38.3
28.5
21.9
32.3
35.0
23.0
24.8
4.5
0.5
650.8
947.8
1,287.4
93.3
138.8
181.8
2.8
4.2
5.5
40%
37.9
25.3
19.3
65.7
58.1
46.6
39.7
0.9
0.8
408.2
1,601.1
1,965.9
2,527.9
25.5
56.8
107.2
8.4
16.0
30.2
89%
48.4
25.5
13.5
9.0
11.5
7.6
12.5
2.0
0.5
87.8
6,320.7
7,316.9
8,660.2
308.8
215.6
541.0
12.5
8.7
21.9
32%
7.0
10.0
4.0
8.4
9.7
3.7
9.0
4.0
4.6
212.0
3,847.5
4,487.0
5,049.9
542.9
665.7
864.8
15.4
18.9
24.6
26%
13.7
11.2
8.6
12.1
13.4
14.4
16.6
4.0
1.9
INFRASTRUCTURE / REAL ESTATE

Gayatri Projects
ITNL
IRB Infra
Jaiprakash Associates
9.1
10,854.3
13,905.8
15,220.7
-867.3
-93.2
115.2
-4.1
-0.4
0.5
-2.2
-20.8
16.8
6.6
7.3
-0.7
0.9
0.0
0.0
1,533.9
57,017.4
64,528.5
77,594.1
4,699.0
5,094.0
6,357.0
50.7
55.0
68.6
16%
30.3
27.9
22.4
14.6
17.1
13.0
14.6
14.3
0.9
24.4
7,090.3
8,316.6
9,381.7 -1,681.4
-356.0
-268.0
-50.6
-10.7
-8.1
0%
-0.5
-2.3
-3.0
-1.7
2.3
-48.8
-58.3
0.0
0.0
Oil India
435.8
9,748.2
9,926.5
2,624.0
2,943.0
41.8
43.7
49.0
8%
10.4
10.0
8.9
13.2
14.1
11.9
12.4
10.0
2.3
Reliance Ind
835.9 375,435.0
347,433.6
22,287.0 27,459.0
80.1
75.7
93.3
8%
10.4
11.0
9.0
7.5
8.8
9.4
10.5
10.0
1.2
Selan Exploration
218.9
79.3
Aurobindo Pharma
723.1
12,120.5
Cipla
649.6
11,345.4
Cadila Healthcare
1,812.6
8,651.3
Divi's Labs
2,176.8
Glenmark Pharma
Larsen & Toubro

Punj Lloyd
OIL & GAS
74.2
11,356.0
2,510.2
404,645.9 23,566.0
110.9
28.3
26.3
39.1
17.3
16.0
23.8
17%
12.7
13.7
9.2
11.2
15.3
9.1
12.6
5.0
2.3
13,603.1
16,016.9
1,635.4
1,775.0
2,363.0
28.0
30.4
40.5
20%
25.8
23.8
17.9
26.0
30.5
29.6
29.6
6.8
0.9
13,627.0
16,673.0
1,180.8
1,793.0
2,563.0
14.7
22.3
31.9
47%
44.2
29.1
20.4
17.7
21.9
15.2
18.4
2.0
0.3
10,663.1
12,672.4
1,150.6
1,569.0
2,207.3
56.2
76.6
107.8
39%
32.3
23.7
16.8
27.3
30.3
27.5
28.3
12.0
0.7
3,114.9
3,732.8
4,580.9
865.5
1,040.2
1,350.3
65.2
78.4
101.7
25%
33.4
27.8
21.4
32.2
33.5
26.1
27.0
20.0
0.9
1,026.3
6,644.8
8,068.0
9,806.0
747.0
935.0
1,353.7
27.5
34.5
49.9
35%
37.3
29.7
20.6
18.9
22.6
24.2
26.3
2.0
0.2
275.4
1,120.7
1,327.5
1,529.6
112.9
146.8
187.0
13.3
17.3
22.1
29%
20.7
15.9
12.5
16.2
17.7
13.1
14.2
3.0
1.1
0.1
PHARMACEUTICALS
JB Chemicals
Ipca Laboratories
Lupin
Sun Pharma
Torrent Pharma
761.5
3,142.0
3,337.0
3,931.0
254.0
330.0
538.0
19.8
26.1
42.7
47%
38.5
29.2
17.8
13.9
20.0
14.1
19.8
1.0
1,859.6
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%
34.8
31.5
25.0
30.8
31.0
23.1
22.8
7.5
0.4
857.7
27,286.5
28,078.2
32,007.8
4,778.4
5,699.3
8,698.1
23.1
23.7
34.0
21%
37.2
36.2
25.2
21.1
25.1
18.3
22.4
0.0
0.0
1,589.4
4,585.0
6,906.1
6,927.2
751.0
1,507.2
1,224.9
44.4
89.1
72.4
28%
35.8
17.8
22.0
38.5
28.7
45.4
26.1
11.3
0.7
3,374.7
32,436.0
35,700.0
41,721.0
1,753.0
1,685.0
2,178.0
190.9
183.3
237.2
11%
17.7
18.4
14.2
11.4
13.1
6.6
7.6
18.0
0.5
318.7
3,743.0
4,155.0
4,871.0
258.0
317.0
435.0
10.8
13.3
18.3
30%
29.5
24.0
17.4
11.4
14.1
6.9
8.2
1.5
0.5
10,765.5
6,454.0
7,750.0
9,475.0
462.0
741.0
1,211.0
133.1
212.6
347.6
62%
80.9
50.6
31.0
13.0
19.0
14.0
18.0
22.0
0.2
2,915.1
22,656.0
25,781.0
30,654.0
2,065.0
2,258.0
3,014.0
75.4
82.4
110.0
21%
38.7
35.4
26.5
13.1
16.2
10.8
12.7
9.0
0.3
0.4
BUILDING MATERIALS
Grasim
The Ramco Cements
Shree Cement**
UltraTech Cement
DISCRETIONARY
CONSUMPTION
Cox and Kings
236.3
2,569.1
2,414.1
2,783.8
399.8
422.6
519.2
23.6
25.0
30.7
14%
10.0
9.5
7.7
11.9
14.9
16.3
19.4
1.0
Century Plyboards (I)
140.9
1,588.0
1,825.0
2,155.0
149.0
188.0
234.0
6.7
8.5
10.5
25%
21.0
16.6
13.4
24.2
23.7
39.5
34.1
2.0
1.4
Eros Intl Media
476.4
1,421.2
1,771.5
2,001.8
247.1
312.6
355.8
26.7
33.8
38.5
20%
17.8
14.1
12.4
20.4
21.5
19.1
18.0
0.0
0.0
Info Edge (India)
749.0
611.6
699.9
833.5
164.7
136.9
201.9
13.7
11.4
16.8
11%
54.7
65.7
44.6
10.9
14.8
7.7
10.3
1.0
0.1
KDDL
248.0
411.7
479.2
587.9
8.7
11.4
14.7
9.5
12.5
16.2
31%
26.1
19.8
15.3
13.9
14.1
17.8
18.5
2.0
0.8
KKCL
2,170.0
405.1
467.4
551.9
66.3
75.8
109.3
53.7
61.5
88.6
28%
40.4
35.3
24.5
30.0
32.0
22.1
27.8
22.0
1.0
Orbit Exports
368.0
158.0
187.0
225.0
27.9
32.7
41.2
19.4
22.8
28.8
22%
19.0
16.1
12.8
21.1
21.7
30.4
30.5
4.5
1.2
Raymond
387.4
5,352.0
5,977.0
6,756.0
115.8
127.6
168.8
18.9
20.8
27.5
21%
20.5
18.6
14.1
11.5
12.7
7.8
9.5
3.0
0.8
Relaxo Footwear
499.0
1,472.8
1,873.2
2,412.7
103.1
156.2
216.7
8.6
13.0
18.1
45%
58.0
38.4
27.6
40.9
32.5
25.1
29.9
0.5
0.1
Speciality Restaurants 144.9
299.4
349.7
439.3
9.5
19.0
35.6
2.0
4.0
7.6
95%
72.4
36.2
19.1
8.2
14.4
6.1
10.7
1.0
0.7
Thomas Cook India
203.3
3244.3#
3,698.5
4,376.8
112.3
219.7
345.4
2.8
4.8
7.6
65%
72.6
42.3
26.7
20.5
27.0
15.5
21.2
0.5
0.2
Zee Entertainment
360.4
4,883.7
5,604.7
6,559.8
977.5
1,092.8
1,321.3
10.2
11.4
13.8
16%
35.3
31.6
26.1
27.5
29.8
18.6
20.1
2.6
0.7
0.3
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
2,010.3
10,260.1
11,425.6
584.2
639.3
44.9
49.2
44.8
40.9
8.9
7.1
7.0
Bajaj Holdings
1,588.8
523.9
2,028.7
182.3
8.7
32.5
2.0
350.0
92,039.0
96,158.0
105,816.0
5,883.0
5,970.0
6,613.0
14.7
14.9
17.2
8%
23.8
23.5
20.3
12.3
14.2
4.8
8.8
3.9
1.1
Bharti Airtel
Bharat Electronics
3,228.1
6,775.9
7,695.9
8,971.4
1,100.6
1,273.6
1,527.8
137.6
159.2
191.0
18%
23.5
20.3
16.9
16.0
16.5
12.2
12.5
27.5
0.9
Gateway Distriparks
321.6
1,105.0
1,090.9
1,219.6
187.8
178.5
222.4
17.3
16.4
20.5
9%
18.6
19.6
15.7
16.1
19.6
19.3
22.9
7.0
2.2
Max India
502.8
14,815.0
279.6
10.5
47.9
5.0
1.0
Ratnamani Metals
597.2
1,675.6
2,050.0
2,478.0
172.5
205.7
264.1
37.0
43.9
56.6
24%
16.2
13.6
10.6
29.0
31.4
20.6
22.1
5.5
0.9
Supreme Industries**
590.0
4,255.0
4,767.0
5,635.0
312.0
344.0
439.0
24.5
27.1
34.5
19%
24.1
21.8
17.1
27.6
30.9
23.4
25.0
8.0
1.4
UPL
529.7
12,090.5
13,710.6
15,436.4
1,224.0
1,306.3
1,608.8
28.6
30.5
37.5
15%
18.5
17.4
14.1
16.7
18.1
19.3
19.8
5.0
0.9
^Marico estimates excluding Kayas financials

Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers
48
** June year ended

#We have annualised these ratios to make them comparable
September 2015
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 in 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 Rs240.
Ashok Leyland
Ashok Leyland, the second largest CV manufacturer in India, is a pure CV play. It has ventured into LCV space
with the launch of Dost in collaboration with Nissan. The MHCV volumes have been under pressure over the past
two years due to a subdued economic environment. The discounts in the system have come down and the company
has managed to take price hikes which propped up margins. A strong government at the centre is expected to
focus on growth led by manufacturing and infrastructure sectors which will improve CV segments volumes. The
company has raised Rs660 crore via QIP and has sold non-core assets to pare its debt. We have a Buy
recommendation on the stock with a price target of Rs98.
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. A pick-up in the volumes post-election in the PV and CV segments as well as higher growth in the twowheeler segment, increase in market share with HMSI and continued growth in the aftermarket sales are expected
to drive the revenue growth going forward. Moreover, with increasing utilisation levels and higher proportion of
revenues from the profitable CV segment, the OPM is expected to expand from 6.6% in FY13 to 7.9% in FY16.
Further, a reduction in debt level would lead to higher return ratios, going forward. Therefore, we recommend a
Buy with a price target of Rs100.
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 due
to weak monsoon rainfall. However, with the expectation of normal rainfall we expect the tractor segment to
recover and grow at 3-4% in FY16. The value of its subsidiaries adds to its sum-of-the-parts valuation. Higher
farm income, strong rural positioning and lower vulnerability to interest rates make it a proxy play on food
inflation.
Maruti Suzuki
Rico Auto Inds.
Maruti Suzuki is Indias largest small car manufacturer. Though the demand for diesel cars is witnessing pressure,
the petrol segment is witnessing a recovery due to the narrowing differential between petrol and diesel prices. The
company plans to launch 14 new models over the next five years (including some in the high-value UV space)
which would boost its volumes and realisation. The recent launch of Celerio diesel variant and Ciaz have been
well received. The company has also launched the new Alto K10 with automatic transmission which will be the
cheapest automatic available in the country. We expect customer sentiment to improve on the back of a strong
government at the centre. Additionally, the PV segment is expected to benefit from the pent-up demand over the
past two years and will benefit Maruti Suzuki most due to its high market share in the entry level segment. We
remain positive on the stock with a price target of Rs4,700.
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.
49
September 2015
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Remarks
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 H2FY15. Exports, especially of three-wheelers, are doing
extremely well. We expect a margin expansion of 40-50BPS over FY14-16.
Banks & Finance
With a wide network of over 3,000 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.
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 5,000 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 4,800 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 44% 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 3,800 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
50
September 2015
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
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.
51
September 2015
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Remarks
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.
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 17%. A stable OPM
and lower interest cost would aid the PAT to grow at 38% CAGR over FY14-17.
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
CMC
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 FY2016. Thus, we expect a better operating performance
from it in FY2016.
IT/IT services
As per the scheme of amalgamation, CMC as an entity will cease to exist in the next six months as it will get fully
integrated into TCS. Thus, by the record date of the swap ratio, the stock price of CMC will eventually trade at a
discount of around 21% to that of TCS as per the swap ratio of 79 shares of TCS for every 100 shares of CMC. We
retain our Hold rating on the stock for the existing shareholders, in line with our positive view on TCS (for which we
have a price target of Rs3,000). But for fresh investment it would be more prudent to buy into TCS rather than
CMC, as the latter will cease to exist as an entity in the next few quarters.
Firstsource
Firstsource Solutions is a specialized BPO service provider. It has scripted a remarkable turn-around from being
on the brink of a financial burn-out to being an operationally sound company with a large scope for further
improvement. 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. The
growth in actual contract value (ACV) deals remained muted and grew from $495 million to $501 million
sequentially, with net deal wins of $5-7 million. On the margins front, the management reduced its EBITDA
margins guidance level for FY2016 to 70-90BPS from 100-150BPS earlier in FY2015, leading to margin pain in
H1FY2016.
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. Further, 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.
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.
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 strong presence in newer technologies, strength to improve its IP base
and the best-in-the-class margin profile which sets it apart from the other mid-cap IT companies. Weakness and
volatility in legacy ISV segment coupled with softness in IP revenues will restrict the revenue trajectory for FY16
on an organic basis. Also, margins remain under pressure on account of an increase in investments in the enterprise
digital transformation strategy. We believe the integration and consolidation of Aepona Holdings will have a
material impact on estimates for FY16 and FY17.
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
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.
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BHEL
CESC
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 Rs101,018 crore stands at around 3.4x FY15 sales.
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. We
retain our Buy recommendation on CESC.
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 and leveraging its brand strength to build a high-margin consumer
product business (of switchgears, lamps etc). However, a derivative exposure and the subsequent overhang are
matters of past now, leading to a strong case for 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 9-10%;
however the OPM of JMC Projects (a subsidiary) is showing signs of improvement. Listing of Subham Logistics is
also expected to unlock value. 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 Rs2,400 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. The management sounded positive
with a likely recovery in industrial capex cycle. 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.
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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 30% (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.
Va Tech Wabag
Gayatri Proj
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. The strong potential of its international business, its sound execution track record
and bulging order book, and the strong performance of subsidiaries further reinforce our faith in it. Recent 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
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 473 million barrels (mmbbls) and
941mmbbls respectively. In addition to the huge oil reserves, the companys reserve-replacement ratio is quite
healthy at 1.6x, which implies a comfortable level of accretion of oil reserves through new discoveries. Further, it
offers healthy dividend yield, which provides comfort to investors. 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, though weak global oil prices are likely to be an overhang on the stock 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 while the
prospects for its E&P business remains bright, though currently it remains depressed. 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, incremental
capacity in the petchem business 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. We expect
production ramp-up in FY16 and hence we expect the earnings to grow significantly in the next two to three years.
However, weak global oil prices are likely to be an overhang on the stock in the medium term.
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Pharmaceuticals
Aurobindo Pharma 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
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.
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 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 FY15 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.
J B Chemicals
Three years after selling the OTC business in Russia and CIS, JB Chemicals and Pharmaceuticals has re-established
itself in the export market while retaining leadership in the domestic branded formulation market. A major chunk
of the proceeds from the sale of the OTC business has stayed in its balance sheet while the operating performance
of the company has improved in recent quarters. We expect the company to fast forward growth rates on the back
of focus on regulated markets like the USA. The utlisation of surplus cash of over Rs500 crore would provide the
key trigger to the stock.
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.
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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 FY15.
Torrent Pharma
Grasim
The Ramco Cements
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.
UltraTech Cement
UltraTech Cement is Indias largest cement company with approximately 52mtpa 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 Rs350.
Eros Intl Media
Eros International Media Ltd (EIML) is one of the largest integrated film studios in India with multi-platform
revenue streams and a well-established distribution network across the globe. With its proven track record, an
impressive movie slate and alliance with HBO coming into foray, it is well poised to gain from the rising discretionary
spending on film entertainment driven by the countrys favourable demographics. We like EIMLs strategy of
picking quality movie content and improvement in the catalogue monetisation revenues and the recent success of
movies across genres is a testimony to EIMLs strong expertise in content management. Though we remain sceptical
about the cash generation profile of the company, we like the stock for the improvement in its revenue visibility
and the monetisation success of the digital media business.
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. 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 ecommerce boom in India.
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.
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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 Rs375.
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 Rs630.
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.
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 upgrade it to a Buy with a price
target of Rs265.
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%. 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
revenues will also benefit from the phases III and IV of the digitisation process (will be more visible in FY17).
Diversified/Miscellaneous
Aditya Birla Nuvo
Bajaj Holdings
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 & 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.
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FUNDAMENTALS
EARNINGS GUIDE
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 Rs22,500 crore
provides revenue visibility for the next three to four years.
GDL
Max India
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.
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. After a subdued FY15 performance, the company is expecting 10-12% volumes
with a better operating performance (due to stable polymer prices). In addition, new launches of 70 value-added
products would further support margin performance in FY16. With expectations of a healthy volume growth,
better product mix and expansion in margins in the coming years, we have fine-tuned our earnings estimates for
FY16 and FY17. Therefore, we have retain a Buy rating with a price target of Rs750.
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 FY15. 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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MUTUAL FUNDS DESK

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CURRENT PRICE AS ON PRICE

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FROM SHAREKHANS DESK

Unseasonal discount sale

SEPTEMBER 07, 2015

meet, in line with a sharp moderation in inflation and sluggish

driven by a meltdown in the Chinese equity market that was

industrial activity. Second, the outcome of the Bihar election is

followed by a knee-jerk reaction from the Chinese authorities to

critical. A comprehensive win by the Bharatiya Janata Party (BJP)

would provide enough confidence to the National Democratic

uncertainty, foreign investors pulled out of risky assets including

Alliance (NDA) government to push forward reforms whereas a

equities of emerging markets (EMs) like India, which witnessed

record outflows of over Rs17,000 crore in August this year. On

back-foot and strengthen the Narendra Modi baiters within the

the other hand, the domestic institutional investors remained buyers

providing vital cushion to the stock market.

of volatility seen in the past few weeks.

Domestic economy largely resilient, Parliament logjam and erratic

Valuation comfort rises after recent correction: After the correction,

monsoon did weaken sentiment: Domestically, the macro scenario

the valuation of the Sensex has declined to ~15x FY2016E earnings,

is stable with a global rout in commodity prices further pushing

which is close to the long-term mean, though on a relative basis

down inflation and also positively affecting the current account

sharp correction in these EM indices. Given there are limited triggers

a reducing number of stalled projects. However, the government

market may remain volatile and fluctuate in a wider band. We prefer

sectors that are likely to benefit from the weakness in commodity

and land acquisition bills to sustain the momentum. The Parliament

prices and a revival in consumer demand, such as pharmaceuticals

and information technology, apart from select auto companies,

delay the expected revival in the economy.

private sector banks and financial service companies, and consumer

Corporate earnings remain weak; hope hinges on revival in H2: As

prompt further cuts in the consensus earnings estimates of the Sensex

Source: Bloomberg, Sharekhan Research

FII OUTFLOWS INCREASE IN RECENT MONTHS

China slowdown an overhang on market: Following the devaluation

Source: Bloomberg, Sharekhan Research

Source: Bloomberg, Sharekhan Research

The government has been on a spending mode (capital expenditure

up 18% in Q1FY2016) and the recent fall in the commodity prices

increasing: In response to the global shake-up, the foreign

is more of a blessing that would expand the scope for spending

institutional investor (FII) related outflows increased sharply across

across segments (critical for a pick-up in the economy) without

the EMs including India which had an adverse impact on their

straining the fiscal situation.

respective currencies. In August alone the FIIs pulled out about

INFLATION CLEARLY DOWNTRENDING

GDP AND CAD