ValueGuide Jun2016

Value
Guide
June 2016
For Private Circulation only
www.sharekhan.com
Liquidity: two sides of it
Intelligent Investing
Regular Features
Products & Services
Traders Edge
Stock Updates
Sector Updates
Viewpoints
Report Card
Earnings Guide
PMS
Top Picks
Wealth Creator
MF Picks
Advisory
Technical view
Commodities and Currencies
F&O Insights
June 2016
Sharekhan ValueGuide
CONTENTS
EQUITY
From Sharekhans Desk

FUNDAMENTALS
Easy liquidity is a
favourable condition
for relatively risky
assets especially
equities in general
and, within equities,
the emerging market
equities in particular. However, availability of ample liquidity at
near zero interest rates globally has its own side effects. One
of them is a relatively higher level of volatility.
06
Stock Updates
Sector Updates
Viewpoints
12 REGULAR FEATURES
23 Report Card
24 Earnings Guide
TECHNICALS
Nifty
DERIVATIVES
26 View
27
ADVISORY DESK
MID Trades
40 Derivative Ideas
40
FUNDAMENTALS
Crude Oil
Gold
Silver
Copper
Lead
28
29
29
29
29
Zinc
Nickel
Chana
Jeera
Soya bean
29
30
31
31
31
TECHNICALS
Gold
Silver
Crude Oil
32 Copper
32 Jeera
32 Mentha oil
33
33
33
FUNDAMENTALS
USD-INR
EUR-INR
34
34
GBP-INR
JPY-INR
34
34
TECHNICALS
USD-INR
EUR-INR
35 GBP-INR
35 JPY-INR
35
35
COMMODITY
RESEARCH BASED EQUITY PRODUCTS

Top Picks Basket
Wealth Creator Portfolio
PMS DESK
7
11
ProPrime - Diversified Equity 36

ProTech - Index
Futures Fund
37
ProTech - Trailing Stops
38
WealthOptimizer PMS
39
CURRENCY
MUTUAL FUNDS DESK

Top MF Picks (equity)
42
Top SIP Fund Picks
43
4
I
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disclaimer
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June 2016
REPORT CARD
EQUITY
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON JUNE 02, 2016)

COMPANY
CURRENT PRICE AS ON PRICE

RECO
02-JUNE-16 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
M&M
Maruti Suzuki
Rico Auto Industries
TVS Motor
BSE Auto Index
BANKS & FINANCE
Allahabad 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
W
Britannia
NE
Emami NEW
GSK Consumers
Godrej Consumer Products
Hindustan Unilever
ITC
Jyothy Laboratories
Marico
Zydus Wellness
BSE FMCG Index
IT / IT SERVICES
Firstsource Solution
HCL Technologies
Infosys
Persistent Systems
Tata Consultancy Services
Wipro
BSE IT Index
CAPITAL GOODS / POWER
Bharat Heavy Electricals
CESC
Crompton Greaves
Finolex Cable
Greaves Cotton
Kalpataru Power Transmission
PTC India
Skipper
Thermax
Triveni Turbine NEW
Va Tech Wabag
V-Guard Industries
June 2016
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Buy
Reduce
155.0
105.6
2595.0
91.8
3144.3
1333.3
4186.7
35.8
296.6
19332.1
180.0
120.0
2600.0
105.0
**
1450.0
4700.0
47.0
250.0
223.4
127.1
112.9
64.0
2656.0 2133.2
101.9
72.0
3172.0 2257.2
1442.1 1091.3
4790.0 3193.3
61.2
27.7
340.9
201.0
19936.1 15385.1
-4.2
-2.2
4.5
0.1
6.6
0.2
9.8
-11.1
-9.7
4.2
-3.1
14.7
17.9
11.0
17.5
5.2
19.2
18.8
2.3
17.0
-5.8
11.8
8.0
1.8
17.0
-2.6
-8.6
-20.0
-4.2
2.6
-16.2
46.2
16.1
15.7
15.6
7.0
7.9
-10.5
23.2
2.3
-8.3
-6.4
0.0
-4.2
2.0
-4.1
5.1
-14.9
-13.5
-0.3
-14.1
1.6
4.4
-1.7
4.1
-6.8
5.6
5.3
-9.3
3.7
-8.2
9.0
5.2
-0.8
14.0
-5.0
-10.9
-22.0
-6.6
-0.1
-14.0
49.9
19.1
18.7
18.6
9.8
10.7
-8.2
26.3
4.9
Reduce
Buy
Hold
Buy
Buy
Reduce
Buy
Reduce
Buy
buy
Buy
Hold
Reduce
Buy
Buy
Hold
Buy
Hold
Buy
51.8
524.4
7964.6
1851.4
141.6
86.6
564.2
34.9
51.5
1260.6
1175.0
241.4
67.0
474.0
37.0
77.5
200.6
116.4
1049.1
20055.2
44.0
590.0
8000.0
2290.0
181.0
80.0
570.0
30.0
60.0
1380.0
1300.0
250.0
58.0
558.0
55.0
92.0
251.0
132.0
1050.0
107.5
39.4
613.5
366.7
8000.0 4170.0
2160.0 1435.2
216.3
109.4
198.0
78.4
570.0
321.0
57.4
30.8
79.8
41.4
1372.4 1011.5
1195.0
928.0
321.0
180.8
95.7
47.3
526.0
388.7
52.3
29.7
180.6
69.3
291.9
148.3
222.7
104.0
1052.5
590.0
22068.7 15224.3
-11.3
8.4
11.9
-4.1
-12.1
-7.1
27.9
-9.6
11.1
14.2
3.8
1.3
-4.9
1.2
-5.1
-11.8
4.9
-10.5
9.0
4.0
16.1
30.6
23.4
6.5
2.0
-0.8
46.6
7.1
7.3
16.6
19.4
17.1
10.8
6.5
14.2
4.1
22.3
1.3
42.9
21.4
-33.2
10.9
36.8
-9.6
-21.9
-34.2
48.0
-19.6
-13.5
1.8
8.5
-12.4
-29.4
-3.6
-8.7
-46.7
-20.8
-34.0
35.2
0.1
-50.7
-10.8
75.6
19.8
-14.1
-55.0
35.4
-37.0
-28.7
0.9
14.3
-22.8
-6.0
12.0
-15.1
-49.0
-28.7
-32.2
16.9
-6.4
-15.1
3.7
7.1
-8.2
-15.9
-11.1
22.4
-13.5
6.4
9.3
-0.7
-3.0
-9.0
-3.2
-9.2
-15.6
0.4
-14.4
4.3
-0.4
2.8
15.7
9.4
-5.6
-9.6
-12.1
29.9
-5.1
-5.0
3.3
5.8
3.8
-1.8
-5.7
1.2
-7.7
8.4
-10.3
26.6
7.6
-34.9
8.1
33.3
-11.9
-23.8
-35.9
44.3
-21.7
-15.7
-0.8
5.8
-14.6
-31.1
-6.1
-11.0
-48.0
-22.8
-35.6
31.8
-2.4
-49.4
-8.5
80.1
22.9
-11.9
-53.9
38.9
-35.4
-26.8
3.5
17.2
-20.8
-3.5
14.9
-12.9
-47.6
-26.9
-30.4
19.9
-4.0
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Buy
2799.5
1015.0
5702.6
1543.2
868.2
358.0
283.5
249.0
776.0
8188.4
3550.0
1250.0
6650.0
1550.0
980.0
375.0
360.0
270.0
915.0
2421.0
901.0
5366.5
1060.0
765.4
266.5
239.6
189.3
632.0
6782.2
-3.4
2.7
-2.5
12.6
-1.5
13.9
-8.0
-2.9
4.8
7.1
-2.7
3.4
6.1
19.1
3.8
13.7
7.5
7.1
17.5
10.5
-6.9
9.2
-4.1
18.8
2.6
6.9
-9.9
19.8
-5.3
3.2
8.3
-8.7
-8.1
36.4
-1.1
13.7
5.5
14.7
-19.3
5.5
-7.6
-1.7
-6.7
7.8
-5.7
9.0
-12.0
-7.1
0.3
2.5
-13.8
-8.4
-6.0
5.6
-8.1
0.8
-4.7
-5.1
4.1
-2.1
-9.3
6.4
-6.5
15.8
0.0
4.1
-12.2
16.8
-7.7
0.6
11.1
-6.3
-5.7
40.0
1.5
16.7
8.3
17.7
-17.2
8.2
Hold
Buy
Buy
Buy
Buy
Hold
41.4
721.4
1261.6
727.0
2650.2
540.4
11678.0
49.0
950.0
1430.0
820.0
2750.0
650.0
45.9
24.2
1006.0
706.4
1274.8
932.6
798.0
562.5
2770.0 2115.0
613.3
507.9
11927.5 10044.6
-2.2
-1.3
4.1
-0.8
3.9
0.0
3.1
26.7
-11.0
11.8
20.2
15.7
3.6
10.1
-11.2
-15.0
16.6
11.7
11.8
-3.8
7.0
29.2
-22.5
25.9
-1.8
2.2
0.5
9.3
-6.4
-5.5
-0.3
-5.0
-0.6
-4.3
-1.3
12.3
-21.2
-0.9
6.5
2.5
-8.2
-2.4
-13.5
-17.2
13.6
8.8
8.9
-6.3
4.3
32.5
-20.5
29.1
0.7
4.9
3.1
12.1
Reduce
Hold
Reduce
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Buy
120.1
538.1
74.1
349.2
137.5
245.1
68.3
146.8
755.0
108.0
612.1
1387.5
115.0
580.0
65.0
360.0
160.0
290.0
90.0
190.0
800.0
130.0
650.0
**
-5.6
0.7
18.4
21.5
1.8
15.6
4.0
1.8
-2.7
-2.1
3.3
43.0
27.5
22.8
46.7
46.7
9.0
40.8
10.7
4.5
-1.3
19.0
40.9
65.4
-32.5
-0.4
1.4
38.8
-7.0
-10.4
2.5
-11.9
-13.0
-1.1
-16.2
47.4
-53.3
2.9
16.6
40.1
14.3
10.8
1.3
-13.3
-22.5
-3.7
-20.0
47.7
-9.7
-3.6
13.3
16.3
-2.6
10.7
-0.5
-2.6
-6.9
-6.3
-1.1
36.8
13.0
8.8
30.0
29.9
-3.4
24.7
-2.0
-7.4
-12.5
5.4
24.8
46.6
-34.3
-2.9
-1.2
35.3
-9.4
-12.7
-0.1
-14.1
-15.2
-3.6
-18.3
43.7
-52.1
5.6
19.6
43.7
17.3
13.7
3.9
-11.1
-20.4
-1.2
-17.9
51.5
3435.0
1367.9
6800.0
1550.0
944.0
362.2
342.0
269.9
989.0
8256.1
290.0
624.3
74.9
359.5
162.6
291.8
75.0
219.9
1148.0
133.2
834.0
1398.0
90.2
404.6
39.2
201.0
112.6
160.0
50.1
116.0
690.0
87.5
408.8
780.0
EQUITY
REPORT CARD
FUNDAMENTALS
STOCK IDEAS STANDING (AS ON JUNE 02, 2016)

COMPANY
BSE Power Index
BSE Capital Goods Index
INFRASTRUCTURE / REAL ESTATE
Gayatri Projects
ITNL
IRB Infra
Jaiprakash Associates
Larsen & Toubro
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
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)
Cox and Kings
Inox Leisure NEW
Info Edge (India) NEW
KDDL
KKCL
Orbit Exports NEW
Raymond
Relaxo Footwear
Speciality Restaurants
Thomas Cook India
Wonderla Holidays
Zee Entertainment Enterprises
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
Bajaj Holdings
Bharti Airtel
Bharat Electronics
Gateway Distriparks
Max Financial
PI Industries NEW
Ratnamani Metals and Tubes
Supreme Industries
UPL
BSE500 Index
CNX500 Index
CNXMCAP Index
CURRENT PRICE AS ON PRICE

52 WEEK
RECO
02-JUNE-16 TARGET
HIGH
LOW
1869.3
2137.9 1559.4
14491.1
18814.2 10934.9
189.5
64.0
197.1
5.3
1016.1
2204.1
1000.1
Buy
Buy
Buy
Hold
Buy
577.0
68.6
218.0
5.4
1477.3
2787.2
1428.5
730.0
110.0
300.0
**
1550.0
769.2
158.5
272.2
17.7
1888.0
3430.2
1568.1
-1.8
-6.8
0.5
-28.0
16.8
5.0
5.1
Hold
Buy
Hold
352.7
956.3
187.9
9378.2
400.0
1250.0
345.0
487.3
1089.8
334.1
10349.3
300.4
818.0
148.7
7987.3
6.1
-3.0
-3.9
-0.4
Buy
Hold
Hold
Buy
Buy
Hold
Buy
Hold
788.9
468.1
324.3
1141.8
834.7
1475.4
746.8
1335.8
15167.8
885.0
581.0
352.0
1150.0
1096.0
1850.0
945.0
1525.0
891.5
748.0
454.4
1242.4
1262.9
2129.0
966.0
1699.8
18842.7
582.0
457.5
295.0
863.9
671.1
1280.0
704.0
1175.1
14418.9
Buy
Hold
Hold
Hold
4341.4
498.0
13733.6
3233.0
4705.0
520.0
13900.0
3580.0
4404.4
515.4
13900.0
3454.9
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Buy
168.1
152.0
204.6
777.6
196.0
1798.5
216.5
478.8
438.6
87.1
183.0
387.8
456.7
215.0
250.0
285.0
1000.0
230.0
2360.0
500.0
500.0
575.0
115.0
255.0
450.0
470.0
Buy
Buy
Hold
Buy
Hold
Buy
Buy
Hold
Hold
Buy
1058.7
1522.0
366.2
1164.5
308.2
369.9
681.1
496.3
919.8
605.0
10822.4
6849.2
13331.1
1200.0
2100.0
425.0
1450.0
315.0
418.0
800.0
600.0
**
**
-6.8
2.4
-3.2
-25.0
30.3
18.6
31.1
1M
-3.4
4.2
RELATIVE TO SENSEX
3M
6M
12M
2.0
-4.3
-6.5
9.5
-3.8
-13.2
-26.4
-21.1
-13.4
-58.5
7.3
0.9
6.5
169.1
-54.2
-13.1
-69.3
-13.2
-13.6
-7.3
-6.0
-10.8
-3.8
-31.1
11.8
0.5
0.6
-17.4
-9.3
-14.3
-33.6
15.5
5.1
16.1
-28.3
-23.1
-15.6
-59.5
4.6
-1.7
3.8
176.1
-53.1
-10.9
-68.5
-11.0
-11.4
-4.9
16.9
-1.8
23.4
11.4
-7.1
-0.3
-17.9
0.2
-23.7
6.8
-25.1
-1.4
1.6
-7.1
-8.0
-4.7
3.6
-13.0
9.3
-1.3
-9.5
-2.8
-19.9
-2.4
-21.7
9.5
-23.1
1.2
3.8
-13.4
1.6
7.1
2.5
-7.3
-7.0
-4.7
-2.3
16.1
-10.0
3.0
18.8
11.7
-15.4
-13.1
7.1
-1.1
-4.5
-28.3
-16.2
0.1
-13.6
-17.7
3.5
-4.6
-7.4
16.3
-29.6
-9.5
25.8
-1.7
-16.5
-13.7
15.1
-6.7
-0.7
-17.1
-2.7
2.5
-1.9
-11.3
-11.0
-8.8
-6.4
2.9
-20.2
-8.7
5.2
-1.0
-25.0
-23.0
-5.1
-12.4
-6.9
-30.1
-18.3
-2.4
-15.8
-19.8
0.8
-7.0
-9.7
19.4
-27.8
-7.2
29.0
0.9
-14.4
-11.5
18.1
-4.2
3233.0
291.0
9350.0
2579.0
6.6
8.5
4.9
2.1
27.2
34.5
28.1
11.9
16.6
30.3
17.5
12.7
21.2
54.5
17.0
7.7
2.0
3.9
0.4
-2.3
12.7
19.2
13.5
-0.9
13.7
27.0
14.6
9.8
24.3
58.5
20.0
10.5
219.4
317.0
276.3
938.0
367.0
2320.0
495.0
518.9
615.0
172.4
246.0
430.4
459.2
135.5
140.1
156.3
688.1
162.0
1603.3
207.1
350.0
357.7
80.0
165.0
240.2
318.0
-8.1
-20.0
0.9
5.8
-6.0
-1.6
-16.7
13.3
-7.4
-9.5
-0.4
-0.1
8.4
10.4
-7.4
10.2
12.1
-12.2
-3.9
-17.3
18.6
13.5
1.5
-6.6
6.1
14.9
-11.7
-40.3
-16.5
-10.6
-44.0
-9.8
-40.5
15.1
-10.1
-28.5
-11.6
7.6
8.5
-17.5
-48.6
28.4
-1.2
-46.8
-10.5
-41.4
9.5
6.8
-45.3
-25.2
46.5
41.3
-12.1
-23.4
-3.4
1.2
-10.1
-5.9
-20.3
8.4
-11.4
-13.4
-4.7
-4.3
3.8
-2.2
-18.0
-2.4
-0.7
-22.2
-14.9
-26.7
5.1
0.6
-10.1
-17.3
-6.0
1.8
-13.9
-41.8
-18.7
-12.9
-45.5
-12.1
-42.0
12.2
-12.4
-30.3
-13.9
4.8
5.8
-15.4
-47.3
31.7
1.3
-45.4
-8.2
-39.8
12.4
9.5
-43.9
-23.2
50.3
45.0
1108.4
1747.8
452.5
1416.9
399.7
466.6
739.9
700.0
1004.0
613.0
11438.2
7233.8
14237.6
684.3
1282.7
282.3
984.0
205.6
302.8
495.4
387.0
520.0
342.0
9012.0
5717.0
11190.4
26.3
5.5
-0.1
-2.1
5.2
-0.6
7.7
2.0
16.0
9.9
3.6
3.6
0.6
46.1
9.9
13.3
11.3
17.8
11.7
22.1
16.6
31.5
45.5
13.8
13.7
12.4
9.2
-10.1
12.5
-6.4
-12.4
-14.8
8.0
-10.3
45.7
39.1
2.0
2.1
0.3
30.7
19.4
-12.3
-3.1
-21.1
-6.1
2.5
-12.5
39.0
9.9
-0.7
-0.5
2.6
20.8
1.0
-4.4
-6.3
0.7
-4.8
3.1
-2.4
11.0
5.2
-0.8
-0.9
-3.7
29.4
-2.7
0.4
-1.4
4.4
-1.1
8.2
3.3
16.5
29.0
0.8
0.7
-0.4
6.4
-12.4
9.7
-8.8
-14.6
-16.9
5.2
-12.6
42.0
35.6
-0.5
-0.5
-2.3
34.1
22.5
-10.0
-0.6
-19.1
-3.7
5.1
-10.2
42.6
12.8
1.9
2.1
5.2
In Top Picks basket
ABSOLUTE PERFORMANCE
1M
3M
6M
12M
0.9
15.2
-1.9
-8.9
8.9
23.6
-1.3
-15.3
** Price target under review
June 2016
from sharekhans desk
FROM SHAREKHANS DESK
June 2016

Easy liquidity is a favourable condition for relatively risky assets especially equities in general
and, within equities, the emerging market equities in particular. However, the availability of
ample liquidity at near-zero interest rates globally has its own side effects. One of them is a
relatively higher level of volatility. In the prevailing conditions, any good or bad news tends to
get quickly reflected in valuations, thereby resulting in sharp and frequent swings in the market,
pushing it from one extreme to the other, ie from extreme optimism to excessive pessimism.
The case in point is the extreme pessimism prevailing globally in the initial couple of months of
2016 driven by global uncertainties like rate hikes in the USA, the slowing Chinese economy
and the fall-out of Chinas move to devalue the yuan among other concerns. The equity markets
plummeted globally with several leading benchmark indices touching their 52-week low levels
in February and March 2016.
However, the situation has changed dramatically in the past couple of months. Equities have
recovered sharply from the lows of February and March this year. Optimism is palpable across
the key equity markets globally. Even the beaten-down commodities (especially crude oil and
metals) have pulled back sharply from the extreme distress levels seen a few months back.
Given the past experience, it would be prudent to not extrapolate and take it as a sustainable
trend for the rest of year. Umpteen times we have seen such sharp market swings only to see
them reverse quickly too. Mind you, it can happen again. Our Research team highlights a
number of events in June that could lead to higher volatility in the near term. In June, the
central banks of the USA and Japan have their scheduled monetary policy meetings. The US
central bank could look to hike interest rates (unwind its extremely loose monetary policy
followed in the past eight years) whereas the Bank of Japan is expected to take further liquidity
infusion measures to support a languishing Japanese economy. Also, the fate of the European
Union could change depending on the outcome of the referendum in the UK to decide whether
to exit or stay in the European Union.
From retail investors perspective, wild market swings highlight a basic principle of investing,
ie avoid chasing short-term market swings (or that it is futile to try and time the market). Even
seasoned market participants do get caught on the wrong side in an attempt to pre-empt such
market swings.
Thus, for a retail investor, it is better to invest systematically in a basket of carefully chosen
quality companies with a structural growth story rather than spending energy on timing the
market swings. Investment in quality businesses do generate healthy returns that are generally
in line or even higher than the reported earnings growth of the company over a longer time.
We, at Sharekhan, do offer quality advice and research products to help investors build a
quality portfolio to optimise returns (with lower volatility) from equity investments. Do get in
touch with our branches or customer service team for the same.
EQUITY
SHAREKHAN TOP PICKS
FUNDAMENTALS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

The rally in the Indian equity market sustained for the third
consecutive month. With a more conducive global environment
(easing concerns related to the currency war, better economic data in
the USA, stabilisation of commodity prices at higher than distress
levels) and supportive developments locally (a positive monsoon
forecast, a prudent budget followed by rate cuts by the Reserve Bank
of India, signs of revival in corporate earnings), the Indian equity
markets returns for CY2016 have turned positive and India is no
longer underperforming compared with its emerging market peers.
(though it performed better than the CNX Midcap 100 Index).

In view of the slew of events globally in June (FOMC monetary
policy review, Bank of Japans policy meet, referendum in the UK
on Brexit), we maintain our fairly conservative portfolio
composition. The only change recommended this month is the
introduction of Dhanuka Agritech (Dhanuka) in place of Tata
Consultancy Services. Dhanuka reported an impressive performance
for Q4FY2016 and should perform better this year, given the
expectation of a good monsoon. On the other hand, the sentiment
for IT stocks could be dented due to an increasing rhetoric against
outsourcing in the run-up to the presidential elections in the USA
and possible currency fluctuations in the event of a rate hike in the
USA or an unfavourable outcome of the UK referendum.
In the three-month period, the benchmark indices (Sensex, Nifty

and CNX Midcap 100) have appreciated by 15-18% each whereas
our Top Picks basket has appreciated by 20.6% in spite of the
underperformance in May compared with the Sensex and the Nifty
CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED)
1 month
3 months
(%)
6 months
1 year
3 years
5 years
145.9
Top Picks
2.1
20.6
5.3
6.0
117.4
Sensex
4.1
15.9
1.9
-4.3
34.7
44.3
Nifty
4.0
18.3
2.8
-3.3
35.7
47.6
CNX MIDCAP
0.7
15.0
0.4
0.9
69.9
62.0
26.2
29.0
36.0
-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
Sharekhan
Sensex
May-16
35.1
CY2011
Jul-15
CY2012
Dec-15
-5.6
Feb-15
55.1
6.4
Apr-14
30.9
8.5
Sep-14
29.9
12.4
Jun-13
63.6
CY2013
Nov-13
CY2014
Jan-13
6.5
Mar-12
-0.8
-4.1
Aug-12
2.7
-5.1
Oct-11
2.0
13.9
May-11
5.2
CY2015
600
550
500
450
400
350
300
250
200
150
100
Jul-10
CNX
MIDCAP
Dec-10
Nifty
Feb-10
YTD CY2016
Sensex
CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

APRIL 2009
Sep-09
(TOP PICKS VS BENCHMARK

INDICES)
Sharekhan
(Top Picks)
Apr-09
ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)

CONSISTENT TRACK RECORD FOR OVER 7 YEARS
Nifty
Please note the returns are based on the assumption that at the beginning of each month an equal amount was invested in each stock of the Top Picks basket
NAME
Ashok Leyland
CMP*
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
10
109
27.9
20.5
16.3
19.9
24.5
28.2
120
Bajaj Finance
7,575
31.7
25.9
20.6
20.9
19.3
20.5
8,000
Bharat Electronics
1,182
20.8
19.1
16.1
20.9
18.0
18.3
1,450
23
Britannia Industries
2,706
39.9
32.3
26.5
54.1
48.9
44.5
3,550
31
640
29.8
25.3
20.6
22.4
22.3
22.7
780
22
10
Dhanuka Agritech
Havells
365
44.5
36.8
32.8
20.5
22.0
21.9
400
1,181
24.3
20.0
16.3
18.3
19.2
20.4
1,300
10
850
44.5
37.9
31.6
103.7
114.2
110.4
980
15
IndusInd Bank
1,104
27.8
22.2
18.3
16.1
15.6
16.6
**
Maruti Suzuki
4,168
27.5
22.4
17.7
17.0
18.2
19.9
4,700
13
Relaxo
449
44.9
34.5
26.4
20.8
20.5
23.7
575
28
Reliance Industries
959
10.4
10.1
8.7
11.2
10.5
11.0
1,250
30
HDFC Bank
HUL
*CMP as on May 31, 2016 # Price target for next 6-12 months
** Under review
June 2016
EQUITY
NAME
ASHOK LEYLAND
FUNDAMENTALS
SHAREKHAN TOP PICKS
CMP
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
109
27.9
20.5
16.3
19.9
24.5
28.2
120
10
Remarks: Ashok Leyland Ltd (ALL) is the second largest commercial vehicle (CV) manufacturer in India with a market share of 30% in the heavy
truck segment and an even higher share of 43% in the bus segment.
The medium and heavy commercial vehicle (MHCV) volumes were under pressure over the past two years but have witnessed a
sustained recovery and has been growing in double digits over the past few quarters. We expect the MHCV volumes to remain buoyant
over FY2016-17 driven by a pick-up in the economic cycle, improved operator profitability, new launches and phase-wise implementation
of the Bharat Stage IV norms across the country leading to pre-buying.
ALL has a strong presence in the exports market and continues to expand to newer geographies. The company expects the exports
contribution to be around 25% of the revenues over the next three to five years from the current level of 10%. Additionally, ALLs
defence business is expected to get a leg-up due to the governments focus on the indigenous manufacturing of defence products and
foreign direct investment (FDI) in the sector.
ALLs operating profit margin has recovered from the lows on the back of operating leverage and price hikes taken by the company. Its
margins are expected to expand further, given the sustained demand momentum. With buoyant operating cash flows and no significant
capital expenditure planned, we expect the balance sheet to get de-leveraged and the return ratios to improve.
BAJAJ FINANCE
7,575
31.7
25.9
20.6
20.9
19.3
20.5
8,000
Remarks: Bajaj Finance Ltd (BFL) is among the most diversified non-banking financial companies (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 assets under management.
Despite a strong growth in loans, the asset quality remains among the best in the system (gross non-performing assets of 1.2% 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 24% over FY2016-18 resulting in a return on asset (RoA)
and return on equity (RoE) of ~ 3.0% and ~20%, respectively. While we have been positive on BFLs business model and strong
earnings performance, we also have a Buy rating on BFL.
BHARAT ELECTRONICS
1,182
20.8
19.1
16.1
20.9
18.0
18.3
1,450
23
Remarks: Bharat Electronics Ltd (BEL) has got four licences since 2004 in the radar and wafers segments where the company enjoys a monopoly
position. Further, the company has a market opportunity size of Rs70,000 crore over the next seven to eight years in its area of
expertise.
BEL is planning to invest Rs1,500 crore over the next three years under its Make In India expansion and modernisation strategy. The
company will also be increasing its R&D spends to 10% of the total turnover (currently at 8%).
BEL will be focusing on exports, offsets and buyer nominated equipment. The likely increase in the private sector participation has led
BEL to diversify into areas of homeland security, smart cards, smart city elements and solar power plants which have tremendous
growth potential with better operating profit margins.
BEL remains our preferred pick for defense play on account of its strong manufacturing and R&D base. Further, on operational front,
good cost control, increasing indigenisation and discipline in working capital (improved in FY2016) and improving export order book
will aid earnings growth over FY16-18 (13.7% CAGR). We reiterate Buy with an unchanged price target of Rs1,450.
BRITANNIA INDUSTRIES
2,706
39.9
32.3
26.5
54.1
48.9
44.5
3,550
31
Remarks: Britannia Industries (Britannia) is the second largest player in the Indian biscuit market with about 30% market share. It has chalked
out an aggressive growth strategy to sustain the double-digit volume growth in the biscuit segment by enhancing its product portfolio.
It is also striving to expand to the other categories, such as dairy (market size of Rs75,000 crore) and adjacent snacking categories
(market size of Rs30,000 crore).
It is likely to maintain a 14-15% revenue growth rate with the volume growth standing at 10-11% (largely driven by both enhanced
distribution reach and product portfolio). The operating profit margin is expected to remain in the range of 14-15% on the back of
benign input cost and operating efficiency.
The company has a strong balance sheet with the free cash flow consistently improving over the past few years. Its return ratios have
improved over the past few years and remained strong in the upward of 50%.
Under a new leadership, Britannia has been able to leverage and monetise its strong brand and position in the biscuit and snack
segments. We believe that the company can sustain its higher than industry growth rates with an improving distribution reach, entry
into newer categories and focus on cost efficiency. We have a Buy rating on the stock with a price target of Rs3,550.
June 2016
EQUITY
SHAREKHAN TOP PICKS

NAME
DHANUKA AGRITECH
FUNDAMENTALS
CMP
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
640
29.8
25.3
20.6
22.4
22.3
22.7
780
22
Remarks: Dhanuka Agritech is the second largest pan-Indian agrochemicals formulation company with over three decades experience and
reaching 10 million farmers across India. The companys strong product portfolio of over 80 brands is channeled through deepest rural
interiors with a distribution network of over 8,600 direct dealers selling to over 80,000 retailers which provides a distinctive edge over
its competition.
Dhanuka launched 11 products during FY2015-2016 which are expected to scale up significantly (especially Sempra {herbicide for
sugarcane and maize} and Cover {insecticide for paddy, sugarcane, pulses, soyabean}) as the country revives from below normal
rainfall over past consecutive years.
The company will be launching two molecules under 9(3) registration (exclusive products) each year over the next 2-3 years along with
3-4 molecules under 9(4) each year which is expected to propel its earnings momentum over FY2016-2018E.
Dhanuka has placed itself in a commanding position with strong product launches, increased capacity and deepest rural penetration. We
expect its revenues to grow at a CAGR of 20% over FY16-18E. Adapting prudent expansion strategy and no major capex plans in the near
future, Dhanuka is likely to generate strong free cashflows (Rs200 crore during FY2017-2018) and maintain high return ratios (above 20%).
HAVELLS
365
44.5
36.8
32.8
20.5
22.0
21.9
400
10
Remarks: Havells is a leading electrical equipment and appliance manufacturer in India. The poor performance of Sylvania (acquired in 2007)
dragged the balance sheet of the company for a long time; however now Havells is going to divest Sylvania. We believe the deal will not
only strengthen its balance sheet but also add value to the bottom line and lift the return ratios. Therefore, the current overhang will go
away and reflect positively on its financials. In terms of quality, the managements focus on domestic business is expected to increase.
Apart from consolidating its leadership position in the existing products through product innovation and better features, it is also
expanding its product portfolio and making efforts to dwell deeper in the distribution channel by directly connecting with retail and
electrician networks (on the lines of Asian Paints and Astral Poly Technik). Further, consistent free cash flow generation, a high cash
conversion (reported profit to cash flow) record and a consistent high dividend pay-out speak for the management quality. Superior
return ratios and a debt-free balance sheet indicate the quality of business too. Post-divestment of Sylvania, we believe the return
ratios are poised to improve further.
We believe Havells is a deserving high-quality stock, backed by a strong track record of its management and impressive financials.
Going forward, the extraordinary efforts like direct involvement with electricians and retailers will give it a competitive advantage and
help it to consolidate its leadership position in India. Though currently the domestic business is moving at a modest pace, mirroring
consumer demand, we expect the urban consumption to rise in future and Havells is well positioned to captalise on it. Moreover, the
Sylvania divestment would help it to shake off the past overhang and reflect positively on its return ratios as well as valuations.
HDFC BANK
1,181
24.3
20.0
16.3
18.3
19.2
20.4
1,300
10
Remarks: HDFC Bank has a strong presence in the retail segment (~50% of the book) and therefore it has been able to maintain a strong growth
in loans even as industry-wise credit growth remains tepid. Going ahead, with a recovery in the economy and improving sentiment in
consumer sector, the loan growth will improve further which will drive the profitability.
With a current account and savings account (CASA) ratio of over 40% and a high proportion of retail deposits, the cost of funds
remains among the lowest in the system and helps to maintain higher net interest margin (NIM). In addition, the banks loan growth is
led by high yielding products, such as personal loans, vehicle loans, credit card, mortgages etc which has a positive impact on the NIM.
The bank maintains an impeccable asset quality and its NPA ratios are among the lowest in the system. Given the banks stringent
credit appraisal procedures and insignificant exposure to troubled sectors, it is expected to maintain a robust asset quality.
HDFC Bank is well poised to tap the growth opportunities going ahead due to strong capital ratios, healthy asset quality and steady
revival in consumer spending. The bank is likely to maintain a healthy RoE of 19-20% and RoA of 1.8% on a sustainable basis.
Therefore, we expect the valuation premium that it enjoys as compared with the other private banks to sustain.
HUL
850
44.5
37.9
31.6
103.7
114.2
110.4
980
15
Remarks: Hindustan Unilever Ltd (HUL) is Indias largest FMCG company with strong presence in personal care, home care and packaged food
segments in India. The company is a market leader in the personal wash, detergent and shampoo segments in India.
Despite subdued demand environment, HULs volume growth stood at 6% in FY2016 as against 4.0% volume growth in FY2015 on the
back of relevant pricing actions and higher promotional spends.

With expected improvement in the rural economy on the back of an expected by better monsoon and better urban demand (due to the
implementation of the Seventh Pay Commission and lower inflation), we expect HULs volume growth trajectory to improve by 6-8%
(from the current level of 4-6%) in the near to medium term. This, along with a sustained innovation in the portfolio, we expect HULs
earnings to grow at a CAGR of 15% over FY2015-18.
With negative working capital and a strong cash generation ability, the company has a strong balance sheet amongst its peers. Also,
return ratios continue to remain high (RoE and RoCE remained above 100%).
In view of an improved earnings visibility, strong cash generation ability and higher return ratios we have a Buy recommendation on the
stock with a price target of Rs980. The stock is currently trading at 32x its FY2018E EPS of Rs27.2.
June 2016
EQUITY
NAME
INDUSIND BANK
FUNDAMENTALS
SHAREKHAN TOP PICKS
CMP
(RS)
FY16
PER
FY17E
FY18E
FY16
ROE (%)
FY17E
FY18E
PRICE
TARGET (RS)#
UPSIDE
(%)
1,104
27.8
22.2
18.3
16.1
15.6
16.6
**
Remarks: IndusInd Bank is among the fastest growing banks (a 26% CAGR growth over FY2012-2016) having a loan book of Rs88,419 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 35%).
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. Given the strong loan growth, high RoAs and a healthy asset quality, the stock should continue to trade at a premium valuation.
We have a positive outlook on the stock.
MARUTI SUZUKI
4,168
27.5
22.4
17.7
17.0
18.2
19.9
4,700
13
Remarks: Maruti Suzuki India (Maruti) is Indias largest passenger vehicle manufacturer with a strong 45% market share. The company has been
able to gain market share over the last two years on the back of its diverse product portfolio, a large distribution network with an
increased focus on the rural markets and a shift in consumer preference to petrol models from diesel models.
The recently launched premium hatchback, ie Baleno, has received a positive response which will help the company expand its market
share in the segment. Also, the company recently entered the compact utility vehicle space with the launch of Vitara Brezza and has
received an encouraging response. Further, the company also plans to enter into the light commercial vehicle segment which would
further boost its topline.
The company is poised to reap the benefits of an increase in discretionary spending from the Seventh Pay Commission pay-out. The
commencement of the first phase of the Gujarat plant with a 2.5 lakh capacity is scheduled in early FY2018. The management plans
to double its existing sales and premium distribution network (NEXA) in order to achieve its target of doubling the domestic volumes
over the next five years.
RELAXO
449
44.9
34.5
26.4
20.8
20.5
23.7
575
28
Remarks: Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mind-recall
brands, viz, Hawaii, Sparx, Flite and Schoolmate. In the last quarter, it also added another brand, Bahamas, to its product portfolio.
Relaxo has a proactive approach towards both, brand-building and creating capacities. To build its brand and create a pull like FMCG
players, it continues to rope in Bollywood celebrities and this creates an aspirational quotient for its brands. On the one hand, the
company is creating a strong consumer centric aspiration for the consumers; on the other hand, it is keeping its eye on quality, and thus
does not believe in outsourcing. It is in the process of building capacity for future. Despite the current capacity (180 million pieces per
annum) that would take care of growth in the next three years, the company has bought a 15-acre land at Bhiwadi to built additional
capacity to serve the future requirements.
Relaxos strong presence in the lucrative mid priced footwear segment (through its top-of-the-mind-recall brands like Hawaii, Flite and
Sparx) along with its integrated manufacturing set-up, lean working capital requirement and vigilant management puts it in a sweet
spot to cash in on the strong growth opportunity unfolding in the footwear category due to a shift from unbranded to branded products.
We thus maintain our Buy rating on the stock.
RELIANCE INDUSTRIES
959
10.4
10.1
8.7
11.2
10.5
11.0
1,250
30
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. Currently, with soft crude
oil prices RIL is likely to enjoy high GRM in the near to medium term. 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 in the driving seat and contributing a lions share of the profitability and cash flow.
We expect the GRM to remain healthy and new capacities would drive the overall margin and bottomline performance. The stock is
available at an attractive valuation considering the size, strong balance sheet and cash flow generating ability of the company.
June 2016
10
EQUITY
WEALTH CREATOR PORTFOLIO
FUNDAMENTALS
WEALTH CREATOR PORTFOLIO
MAY 31, 2016
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
Sharekhans wealth creator portfolio continues to outperform

broader indices with 7% returns (weighted average basis) as
against 1-3.5% increase in Sensex/Nifty.
We have made one change in the portfolio in the month of June

2016 by replacing Cummins India with Britannia Industries.
Cummins India has stated that all new export models would be
introduced through its unlisted subsidiary in India and the listed
entity would only earn marketing margins on the new products,
which will have negative impact on the earnings and return ratios
in the coming years. And hence we are taking it out of Wealth
creator portfolio.
COMPARATIVE RETURNS
Particulars
Returns (as on May 31, 2016)

Since inception (August 21, 2014)
Wealth Creator folio (weighted average returns)
6.90%
- Large-cap (64%)
7.0%
- Mid-cap (36%)
6.8%
Sensex
1.20%
Nifty
3.40%
CNX Mid-cap
UPDATE ON WEALTH CREATOR PORTFOLIO
Sr No
Scrip
18.90%
Weights
Reco price (Rs)

31-May-2016
Price target (Rs)

March-19
Potential upside
Large-caps (64% weightage)

1
Axis Bank
8%
516
1210
134.7%
Larsen & Toubro
8%
1474
3800
157.7%
Maruti Suzuki
8%
4168
8750
109.9%
Britannia
8%
2706
5400
99.6%
IndusInd Bank
8%
1104
1600
45%
Sun Pharmaceuticals
8%
763
1650
116.3%
Tata Consultancy Services
8%
2575
5100
98.1%
Tata Motors DVR
8%
312
675
116.6%
PTC India Financials
4%
36
112
212.4%
10
V-Guard Ltd
4%
1271
2100
65.3%
11
Gateway Distripark
4%
291
810
178.6%
12
IRB Infra
4%
220
650
195.2%
13
Network 18 Media
4%
42
135
220.3%
14
Gabriel India
4%
90
200
123.5%
15
Century Plyboard
4%
162
440
171.2%
16
Triveni Turbine
4%
107
265
148.8%
17
Dhanuka Agritech
4%
636
1150
80.7%
Mid-caps (36% weightage; 4% each)
* Please note we see scope for upward revision in target price (three-year) of some of the stocks depending on the extent of economic recovery and will keep updating on the same
11
June 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
ANDHRA BANK
BOOK OUT
CMP: RS51
MAY 12, 2016
Asset quality worsens; pain to persist; Book out
COMPANY DETAILS
Market cap:
Rs3,490 cr
52-week high/low:
Rs82/42
KEY POINTS
NSE volume (No of shares):
18.0 lakh
BSE code:
532418
NSE code:
ANDHRABANK
Sharekhan code:
ANDHRABANK
Free float (No of shares):
26.39 cr
High provisions affect profitability: Andhra Bank posted weak Q4FY2016 results with
PAT declining by 72.1% YoY and 61.6% Y-o-Y surge in provisions, modest NII growth
of 9.4% YoY and other income grew by 8.1% YoY. Advances growth of 5.2% YoY
was below the industry average. The Q4 NIMs at 3.41% improved by 17BPS sequentially
owing to an 11-BPS decline in cost of funds.
Asset quality deteriorates; weak outlook: During Q4FY2016, the bank reported a sharp
deterioration in asset quality with GNPAs growing 139BPS QoQ to 8.39%, slippages
of Rs 2,325 crore exacerbated by RBIs asset quality review (AQR) which now is
complete. However, Andhra Banks high exposure in power, iron & steel, construction
etc are worrisome. The bank during Q4 restructured Rs1,161.3 crore (including one
large steel sector exposure). The bank invoked strategic debt restructuring (SDR) in 17
accounts worth Rs3,000 crore while it has done 5:25 refinancing for accounts worth
Rs2,800 crore. The bank has a total restructured portfolio of Rs11,393 crore out of
which a few large accounts could slip into the NPA territory as per the management.
Apart from that, there are other seven to eight accounts having high exposure and
which could slip in the coming few quarters.
Negatives outweigh, Book out: During Q4, the asset quality saw a sharp decline and
the pain is not over yet as per the management despite completion of AQR. Andhra
Bank plans to slow down corporate book growth and, instead, focus on retail and
SME segments. We expect slower loan book growth, high exposure to troubled sectors,
low PCR and high total stress book (GNPA + restructured) of 17.1% could impact
valuations. We opine Booking Out and are discontinuing it from our active coverage.
SHAREHOLDING PATTERN
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-2.2
-2.0
-23.5
-29.3
Relative to Sensex
-3.5
-4.7
-20.6
-26.3
Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article.
For detailed report, please visit the Research section of our website, sharekhan.com.
APOLLO TYRES
BUY
CMP: RS159
MAY 12, 2016
Demand outlook to improve; maintain Buy
with PT revised to Rs180
COMPANY DETAILS
Price target:
Rs180
Market cap:
Rs8,073 cr
52-week high/low:
Rs223/128
24.2 lakh
BSE code:
500877
NSE code:
APOLLOTYRE
Sharekhan code:
APOLLOTYRE
28.4 cr
KEY POINTS
Q4FY2016 results below estimates, affected by SAP implementation issues at European
operations: For Q4FY2016, Apollo Tyres (Apollo)s results missed estimates due to a
weak performance from the European operations. Apollos European operations top
line dipped by 9% YoY in terms of euro due to volume decline and issues in SAP
implementation. The top-line decline led to operating deleverages, and the EBIT margins
for the European operations shrank by 600BPS YoY to 4.8%. The consolidated net
profit at Rs245 crore was significantly lower than our estimate of Rs307 crore.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-8.0
14.9
-0.1
-3.0
Relative to Sensex
-9.2
11.7
3.6
1.1

June 2016
Valuation: Apollos revenues are likely to grow at 11% CAGR over FY2016-18E given
the demand improvement in both European and domestic operations, increased capacity
in the domestic TBR space and commissioning of the new Hungary plant. However,
Apollos margins would dip by 300BPS to 13.6% in FY2017 given the increased raw
material prices and inability to take price hikes. We have revised our FY2017E EPS
earnings to Rs16.5 to factor in margin reduction and higher depreciation expenses
given the increased capex. We have also introduced FY2018E earnings in our note. We
have maintained our Buy rating on the stock with a revised price target of Rs180.
12
EQUITY
STOCK UPDATE
FUNDAMENTALS
BAJAJ FINANCE
HOLD
CMP: RS7,623
MAY 24, 2016
Strong performance; high valuation leaves limited
room for upside
COMPANY DETAILS
Price target:
Rs8,000
Market cap:
Rs41,065 cr
52-week high/low:
Rs7,852/4,125
0.7 lakh
BSE code:
500034
NSE code:
BAJFINANCE
Sharekhan code:
BAJFINANCE
2.3 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
7.7
28.8
43.0
73.8
10.0
20.3
45.7
88.4
Relative to Sensex

Profit up 36.4% YoY: Bajaj Finance Ltd (BFL) reported a healthy 36.4% Y-o-Y growth
with strong NII & advances growth of 37.0% YoY and 36.5% Y-o-Y growth,
respectively. Provisions during Q4 increased by 37.6% YoY due to additional
provisioning of Rs43.9 crore (one infrastructure a/c; still standard). The non-interest
income jumped by 48.4% YoY.
AUM growth healthy; asset quality improves: BFL AUM grew by 36.5% YoY in Q4,
with consumer durable, salaried personal loans and business loans growing strong by
33%, 64% and 75%, respectively. The loan against property (LAP) book remained
flat (up 1%) as the company plans to source these loans from in-house capabilities and
reduce the distributors contribution in order to improve yields on that book. The
management expects that LAP would pick up and foresee good growth once the
transition is done smoothly. The asset quality improved during Q4 as gross nonperforming assets were down by six basis points (BPS) to 1.23% from 1.29% QoQ.
Valuation and outlook: BFLs strong operational numbers, conservative risk
management, customer traction and innovative products pipeline and improving macro
environment would help sustain growth. We expect the net profit to increase at a
compounded annual growth rate of 24.1% YoY over FY2016-18E. The stock currently
trades at a significant premium to its peers owing to strong return ratios, superior asset
quality and healthy growth outlook. We have revised our price target to Rs8,000 by
valuing the stock at 4.1x its FY2018E earnings. However, due to limited upside from
the current level, we have downgraded our rating to Hold.
BRITANNIA INDUSTRIES
BUY
CMP: RS2,680
MAY 23, 2016
Miss on margins but growth prospects intact;
retain Buy with PT revised to Rs3,550
COMPANY DETAILS
Price target:
Rs3,550
Market cap:
Rs32,158 cr
52-week high/low:
Rs3,435/2,381
1.9 lakh
BSE code:
500825
NSE code:
BRITANNIA
Sharekhan code:
BRITANNIA
5.9 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
3.0
7.6
-1.2
26.4
Relative to Sensex
5.2
0.5
0.6
36.9

Volume growth moderates to 10%; price deflation affects revenue growth: For
Q4FY2016, Britannias consolidated total revenues grew by 7% to Rs2,211.4 crore
driven by a double-digit volume growth. The slowdown in the overall demand
environment resulted in moderation in the volume growth. Adjusting for excise duty
issue, the total revenue growth stood at 8% on a Y-o-Y basis.
GPM stood flat; OPM below expectations in spite of 90-BPS improvement: As
anticipated, the GPM registered a marginal decline of 30BPS to 42.1% due to increase
in the input cost and change in the revenue mix. The OPM improved by 90BPS to
13.2%. Hence, the operating profit grew by 15.1% YoY to Rs291.2 crore and the
adjusted PAT grew by 13.8% YoY to Rs190.4 crore in Q4FY2016.
Better monsoon could drive the pace of volumes in H2FY2017; estimates revised
downwards by 2-3% in line with marginal revision in volume growth assumption:
Better monsoon and the governments initiatives would show desired result in the second
half of FY2017. With raw material prices moving up, the improvement in OPM going
ahead would be the function of sustained operational efficiencies and higher volume
growth. Hence, in view of the slowdown in the sales volume, we have revised downwards
our earnings estimates for FY2017 and FY2018 by 2% and 3%, respectively.
Better prospects ahead; retain Buy: Britannias stock price has corrected by 8%, and
currently is trading at 26x its FY2018E earnings. Thus, in view of the limited downside
risk and better growth prospects in the long run, we have maintained our Buy
recommendation on the stock with an unchanged price target of Rs3,550.
13
June 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
CAPITAL FIRST
BUY
CMP: RS486
MAY 16, 2016
Robust operating performance; loan book growth
healthy; PT revised to Rs570
COMPANY DETAILS
Price target:
Rs570
Market cap:
Rs4,435 cr
52-week high/low:
Rs527/321
1.1 lakh
BSE code:
532938
NSE code:
CAPF
Sharekhan code:
CAPF
3.18 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
11.5
30.7
32.6
24.9
Relative to Sensex
12.1
17.5
32.7
31.5

NII jumps 72.2% YoY: For Q4FY2016, Capital First reported a strong operating
performance with the net interest income (NII) surging by 72.2% YoY driven by healthy
42.6% Y-o-Y advances growth and net interest margin (NIM) expansion. The noninterest income reported a sharp uptick (up 40.3% YoY). Provisions during the quarter
were up by 140.9% while the profit after tax (PAT) growth stood at 30.1% YoY.
AUM growth remains healthy, asset quality shows marginal blip: During the quarter,
Capital First reported a strong asset under management (AUM) growth of 34.0% YoY
mainly driven by 36.8% Y-o-Y growth in the retail segment while wholesale AUM
grew by 19.3% YoY. The asset quality showed marginal blip with GNPA% increasing
by 18 basis points (BPS) on a sequential basis. Few loans from the small and medium
enterprise (SME) segment made delayed payments hence turned into NPAs. However,
the management is confident of their upgradation within the next few quarters. Accounts
worth Rs18.24 crore were categorised into NPA due to applicability of RBIs revised
asset classification norms to non-banking finance companies.
Valuation and outlook: Capital First continues to show a strong operating performance
which we expect to sustain in the medium term. Being a niche player in SME and retail
loans (consumer durable, gold etc) we expect the growth momentum to continue which
could be further aided by a rise in the rural income due to better monsoon and
governments effort to drive rural economy. Also, lower interest rate cycle would help
the bank to maintain lower borrowing cost which could help in maintaining healthy
margins. We have rolled over our estimates to FY2018 and valued the company at
2.4x its FY2018E book value leading to a revised price target of Rs570. We maintain
our Buy rating on the stock.
COX & KINGS

BUY
CMP: RS152
MAY 24, 2016
FY2016 was challenging; expect gradual improvement
in FY2017; retain Buy with PT revised to Rs250
COMPANY DETAILS
Price target:
Rs250
Market cap:
Rs2,573 cr
52-week high/low:
Rs317/141
4.2 lakh
BSE code:
533144
NSE code:
COX&KINGS
Sharekhan code:
COX&KINGS
8.6 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-8.5
10.0
-30.6
-41.7
Relative to Sensex
-6.5
2.7
-29.3
-36.9

June 2016
Terrorist attacks in Brussels and Paris affect the performance in Q4: Cox & Kings Ltd
(CKL)s consolidated revenues declined by 3.8% YoY to Rs471.0 crore, as its
international leisure and Meininger business were affected by terrorist attacks in Paris
and Brussels. The consolidated OPM improved by 243BPS YoY mainly on account of
lower ad-spends and other expenses at the consolidated level. The operating profit
grew by 21% YoY to Rs55.8 crore.
Gradual improvement in performance could be seen in FY2017; company targets
reduction of debt by Rs300-400 crore: The domestic leisure travel business registered a
steady performance in the tough market environment with 13% growth in revenues
and 12% growth in the EBIDTA in FY2016. The EBIDTA margin of the business is
expected to stay at around 50%. We expect the education business revenues to grow
by 10% in FY2017 with PGL already booked 86% of the revenue target for FY2017.
Meininger is expected to see a slow improvement in the performance as/of Brussels
property, which will slow down the business performance for one to two quarters. The
company has maintained its target to reduce debt by Rs300-400 crore.
Downward revision in estimates; retain Buy due to discounted valuations: CKLs stock
price has already corrected by 50% (in line with the muted performance for the past
two to three quarters) and is currently trading at discounted valuations of 6.1x its
FY2018E earnings and 5.3x its EV/EBIDTA in comparison with some of the global
peers. We have maintained our Buy recommendation on the stock with a revised price
target of Rs250.
14
EQUITY
STOCK UPDATE
FUNDAMENTALS
GABRIEL INDIA
BUY
CMP: RS90
MAY 20, 2016
Demand outlook robust; maintain Buy with
unchanged PT of Rs105
COMPANY DETAILS
Price target:
Rs105
Market cap:
Rs1,299 cr
52-week high/low:
Rs102/72
2.1 lakh
BSE code:
505714
NSE code:
GABRIEL
Sharekhan code:
GABRIEL
6.5 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
-1.9
17.7
5.3
12m
11.0
Relative to Sensex
-1.5
8.0
4.0
17.7

Operationally in-line performance in Q4FY2016; lower taxation boosts profits: For

Q4FY2016, Gabriels revenues grew by 5% YoY. Pick-up in the two-wheeler segment
and the passenger vehicle segment led to the top-line growth after a gap of three quarters.
Gabriels operating profit margin (OPM) improved by 70BPS YoY to 8.9%. However,
the net profit beat estimates, led by lower taxation. The adjusted net profit at Rs21.1
crore came ahead of our estimates of Rs17 crore.
Demand to accelerate; expect double-digit growth in FY2017: After a flat growth in
FY2016, the two-wheeler industry (contributes 45% of Gabriels top line) is likely to
grow by 6-7% in FY2017.Further, better economic growth and the implementation of
the Seventh Pay Commission are likely to lead to demand recovery. Also, Gabriel is likely
to outpace the two-wheeler industry given the increased share of supplies to Honda
Motorcycle and Scooter (HMSI). Also, the passenger vehicle segments revenues are likely
to grow in double digits due to a healthy industry growth and the new launches by key
clients. We expect Gabriels revenues to grow at 12% CAGR over the next two years.
Valuation: Gabriels revenues are likely to grow at a healthy 12% CAGR given the
improved outlook of two-wheeler industry and increased share of business from the
existing clients. Also, the companys efforts to curb raw material costs driven by value
engineering and better sourcing coupled with an operating leverage is likely to lead to
margin improvement. We have maintained our FY2017 earnings estimates. We have
also introduced FY2018 earnings estimates in this note. We re-iterate our Buy rating
on the stock with an unchanged price target of Rs105.
GLENMARK PHARMACEUTICALS
BUY
CMP: RS869
MAY 13, 2016
Promising outlook; upgrade to Buy with a revised
PT of Rs1,096
COMPANY DETAILS
Price target:
Rs1,096
Market cap:
Rs24,523 cr
52-week high/low:
Rs1,262/671
6.7 lakh
BSE code:
532296
NSE code:
GLENMARK
Sharekhan code:
GLENMARK
15.1 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
6.4
11.8
-14.7
-3.0
Relative to Sensex
5.0
8.7
-11.6
1.1

Strong operating performance: For Q4FY2016, Glenmark Pharmaceuticals (Glenmark

Pharma) reported a core revenue growth of 25% YoY, while its operating profit grew
by 16% to Rs460.7 crore (excluding forex loss of Rs94 crore and a one-time cost of
Rs65 crore related to sitagliptin litigation cost) and adjusted core profit for the quarter
grew by 22.5% to Rs327 crore. The strong operating performance was driven by growth
across all geographies. India grew by 22.5% YoY; the USA grew by 21.6%YoY; Rest
of the World (RoW) grew by 35.6% and Latin America was up by 33.5% YoY.
However, Europe was up by only 11%.
Strong FY2017 revenue guidance; USA, EU and India to lead growth: The management
has given a revenue growth guidance of more than 25% for FY2017 (including gZetia).
The company will report 12-15% base revenue growth in FY2017 and FY2018 each.
The management has indicated that, for future growth, key focus areas will be
dermatology, contraceptives and complex injectables. The growth would be mainly
driven by the USA, European Union (EU) and India, which are witnessing an exponential
growth on account of launches of new products. The company is gearing up for the
launch of gZetia where it has 180 days exclusivity in the USA (H2FY2017 launch).
Upgrade to Buy with a revised price target of Rs1,096: Taking into account good
product approval rate of FY2016, new product launches in FY2017 and lower tax rate
(25% versus 28% assumed earlier) we have revised our earnings estimates by 14% for
FY2017. We have also introduced FY2018E earnings. Hence, looking at the strong
longterm outlook, we have upgraded our rating to Buy with a revised price target of
Rs1,096 (20x its FY2018E earnings).
15
June 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
GRASIM INDUSTRIES
BUY
CMP: RS4,144
MAY 9, 2016
Firing all cylinders; maintain Buy
with revised PT of Rs4,705
COMPANY DETAILS
Price target:
Rs4,705
Market cap:
Rs38,683 cr
52-week high/low:
Rs4,176/3,242
0.6 lakh
BSE code:
500300
NSE code:
GRASIM
Sharekhan code:
GRASIM
6.4 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
5.1
18.7
11.5
18.9
Relative to Sensex
3.7
15.5
15.6
23.9

VSF and chemical divisions continue their stellar performance: The result for the quarter
is not comparable on a Y-o-Y basis because the company has amalgamated Aditya
Birla Chemicals India Ltd (ABCIL). For Q4FY2016, Grasim Industries (Grasim)s
revenue for the quarter improved by 13.7% YoY to Rs9,896.4 crore led by a volume
growth across all its divisions. The OPM rose by 269BPS led by higher realisations in
viscose stable fibre (VSF; up 11% YoY) and chemical (up 15% YoY) divisions. The
pulp and fibre joint venture (JV)s performance was aided by a higher pulp volume in
its AV Terrace Bay JV along with favourable exchange rates. Further, the company
reported an earnings growth of 37.5% YoY on account of a strong operating profit
growth (up 32.2% YoY).
Favourable outlook and expansion plans to fuel growth going ahead: The full ramp-up
of the Vilayat plant (increasing capacity to 8,04,000 tonne) is likely to aid VSFs volumes
going ahead although prices may soften in the near term. Further, Grasims merger
with ABCIL and an expansion in the caustic division are likely to lead to a strong
performance in the chemical division.
Maintain Buy with a revised price target of Rs4,705: We have revised our earnings
estimates upward for FY2017 and FY2018 factoring improving outlook in the chemical
and VSF verticals. We have maintained our Buy rating on the stock with a revised price
target of Rs4,705. Currently, the stock is trading at 10.4x its PE and 4.0x its EV/
EBIDTA its FY2018E earnings.
GREAVES COTTON
BUY
CMP: RS138
MAY 9, 2016
Growth momentum to pick up;
retain Buy with PT of Rs160
COMPANY DETAILS
Price target:
Rs4,705
Market cap:
Rs38,683 cr
52-week high/low:
Rs4,176/3,242
0.6 lakh
BSE code:
500300
NSE code:
GRASIM
Sharekhan code:
GRASIM
6.4 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
1.0
3.7
-0.1
3.8
Relative to Sensex
-0.4
0.8
3.6
8.2

June 2016
Top-line growth beats estimates; enters positive territory after a gap of four quarters:
After four consecutive quarters of decline, the revenues of Greaves Cotton Ltd (GCL)
picked up in Q4FY2016, reporting a 3% Y-o-Y growth to Rs405 crore. A better product
mix and growth in the generator business enabled GCL to post a marginal growth in
the top line. The margins improved strongly by 410BPS YoY to 15.6%. The adjusted
net profit boosted by higher other income grew by 45% YoY to Rs45 crore.
Growth to pick up in FY2017: GCL indicated that FY2017 is likely to be a growth year
for the company, given the bottoming out of the automotive volumes which form 5560% of the revenues. A better economic growth, release of fresh permits coupled with
double-digit growth in the heavy commercial vehicle segment over the past six to eight
quarters are likely to percolate to smaller vehicles resulting in an improved demand
scenario. Also, given the normal monsoon forecast and improved rural sentiments, the
demand for the farm equipment segment is likely to gain momentum. Further, GCL is
ready with engines for the next emission levels which will boost realisations.
Retain Buy with an unchanged PT of Rs160: GCL is likely to see an 11% CAGR topline growth over the next two years on the back of a pick-up in the automotive business
and the agri equipment space. We have reduced our FY2017 earnings estimates by 9%
to factor in higher depreciation and lower margins performance of Q4FY16 . We have
introduced FY2018 estimates in this note. We reiterate our Buy rating on the stock
with an unchanged price target of Rs160.
16
EQUITY
STOCK UPDATE
FUNDAMENTALS
HINDUSTAN UNILEVER
BUY
CMP: RS846
MAY 9, 2016
Mixed bag performance, prospects likely to
improve in FY2017; maintain Buy
COMPANY DETAILS
Price target:
Rs980
Market cap:
Rs183,066 cr
52-week high/low:
Rs944/765
12.4 lakh
BSE code:
500696
NSE code:
HINDUNILVR
Sharekhan code:
HINDUNILVR
71.0 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
Absolute
-2.1
1.0
6.8
12m
1.3
Relative to Sensex
-3.4
-1.8
10.7
5.6

Volume growth tapered down to 4%; margin expansion led to double-digit PAT growth:
In Q4FY2016, HULs revenues grew by 3.4% to Rs7,809.4 crore affected by the
continued effect of phasing out of excise duty incentives and price deflation. The volume
growth tapered down to 4% in Q4FY2016 from 6% in Q3FY2016, largely on account
of a slowdown in rural demand and re-alignment of channel spends. The benign input
cost led to a 239-BPS improvement in GPM to 51.7%. However, higher advertisement
spends led to a 119-BPS improvement in OPM to 17.0%. The operating profit grew by
11.1% and the adjusted PAT grew by 13.2% YoY to Rs1,030.9 crore.
Outlook for near to medium term: The underlying volume growth stood at 6% in
FY2016 (better than 4-5% volume growth in the earlier fiscals) on the backdrop of
difficult demand environment. However, the key for improvement in the volume growth
is recovery in the rural demand, which can be the function of a good monsoon and the
positives generated through recent initiatives undertaken by the government to improve
the rural economy. With the key input prices seeing an upward trend, the GPM expansion
would be subject to improvement in the revenue mix, premiumisation, an efficient raw
material procurement and an adequate price hike.
Growth prospects likely to improve in FY2017; retain Buy: We have reduced our
earnings estimates for FY2017 by 5% to factor in lower demand environment, while
almost maintained the estimates for FY2018. We have maintained our Buy
recommendation on the stock with an unchanged price target of Rs980. The stock is
currently trading at 32.4x its FY2018E earnings of Rs26.9.
HOUSING DEVELOPMENT FINANCE CORPORATION

BUY
CMP: RS1,093
MAY 2, 2016
Gains from stake sale boost profitability; retail
growth remains healthy; maintain Buy
COMPANY DETAILS
Price target:
Rs1,380
Market cap:
Rs172,637 cr
52-week high/low:
Rs1,371/1,012
29.0 lakh
BSE code:
500010
NSE code:
HDFC
Sharekhan code:
HDFC
157.9 cr
KEY POINTS
Profits surge 40.0% YoY: For Q4FY2016, Housing Development Finance Corporation
(HDFC) posted PAT growth of 40.0% YoY boosted by 264.1% Y-o-Y rise in noninterest income. Gains of Rs1,513 crore from 9% stake sale in HDFC Life helped
boost other income growth. Margins declined slightly by 10BPS to 3.9% from 4.0%
YoY as the incremental book was funded by higher borrowings. Operating expenses
during the quarter were kept steady (down 0.7% YoY) owing to slower growth in
employee expenses. However, provisions rose sharply by 990.0% YoY in Q4 due to
Rs450 crore of additional provisioning (for standard assets).
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-1.6
-7.5
-13.2
-5.8
Relative to Sensex
-2.6
-10.5
-10.0
-2.2
Valuation and outlook: We find HDFC performance decent despite one-off income
gains due to stake sell. Significantly, despite intense competition, the growth in retail
loans has remained steady. We believe any economic revival would help the company
to increase its high-yielding corporate book which could cushion margins. HDFC is a
bellwether in related peer group with enough potential to capture new opportunities.
We expect earnings to grow at 10.5% over FY2016-18E and margins to remain stable.
We maintain our Buy rating with an unchanged price target of Rs1,380.

17
June 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
IPCA LABORATORIES
BOOK OUT
CMP: RS431
MAY 31, 2016
No end to regulatory troubles in sight; better to
shift to alternative opportunities
COMPANY DETAILS
Market cap:
Rs5,439 cr
52-week high/low:
Rs888/425
2.7 lakh
BSE code:
524494
NSE code:
IPCALAB
Sharekhan code:
IPCALAB
6.8 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-14.0
-24.2
-45.9
-34.5
Relative to Sensex
-17.7
-35.1
-47.3
-32.9

Weak performance continues: Ipca Laboratories (Ipca Labs) posted a poor performance
in Q4FY2016 due to continuance of a ban by the USFDA on three of its India-based
facilities. During the quarter, the companys profits remained flat at Rs625 crore, while
OPM got squeezed by 257BPS to 13.1% (vs. 15.6% in Q3FY2015). Operating profit
margin was lower than the expectation at 10.2% (versus expectation of 16.1%) on
account of continuing remediation costs and low API sales. In terms of earnings, the
company reported a net profit of Rs37.6 crore (buoyed by a tax credit of Rs15.6 crore).
Immediate outlook weak; no end to US FDA issues in sight: Unfortunately, the company
does not expect any immediate relief from the regulatory issues in the near term. Lack
of clarity on the resolution and additional expenses on remedial cost (third-party
consulting charges) would keep earnings under pressure. Domestic business and other
business lines are also under pressure. The company has guided for no major sales
from HCQS due to a sharp price correction and competition, which was a key nearterm trigger. The institutional anti-malaria business is expected to reach Rs150 crore
in FY2017. On the domestic business front, formulations sales were severely affected
due to the FDC ban (~3% on sales growth). Hence, the management has guided for
domestic business growth of 12% in FY2017.
Better to move out: Due to continued weakness in earnings and an uncertain outlook, it
is better to avoid the stock. We believe the regulatory issues and pressure on other business
lines could result in further steep downgrade of earnings (20-40%) for consensus for
FY2017/2018. We advise booking out of the stock and dropping our coverage on it.
ITC
BUY
CMP: RS330
MAY 20, 2016
Cigarette business delivered better performance;
maintain Buy
COMPANY DETAILS
Price target:
Rs375
Market cap:
Rs265,557 cr
52-week high/low:
Rs360/268
78.6 lakh
BSE code:
500875
NSE code:
ITC
Sharekhan code:
ITC
801.6 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.8
8.9
-4.4
2.0
Relative to Sensex
-0.4
-0.1
-5.5
8.2

June 2016
Better operating performance; higher tax rate restricted PAT growth: For Q4FY2016,
ITCs net revenues grew by 10.7% YoY to Rs10,168.7 crore. Its core cigarette business
revenues grew by ~10%, while non-cigarette FMCG business revenues grew by just
5.4% during the quarter. The GPM improved by 72BPS YoY to 60.9% and the OPM
improved by 210BPS YoY to 36.3%. The operating profit grew by 17.5% YoY to
Rs3,687.1 crore. However, a higher incidence of tax led to 10% Y-o-Y growth in PAT
to Rs2,495.2 crore in Q4FY2016.
Declared bonus in the ratio of 1:2: ITC has rewarded shareholders with a bonus issue
and a special dividend in FY2016. The company declared a bonus issue of one share to
every two shares held by the shareholders. Also, the company declared a final dividend
of Rs8.5 per share (including a special dividend of Rs2 per share) for the current fiscal.
Maintain Buy: ITC posted a much better operating performance in Q4FY2016 with
some revival in the core cigarette business. We have broadly maintained our earnings
estimates for FY2017 and FY2018. With pressure easing off on the cigarette business
and the managements thrust on expanding the non-cigarette FMCG business (by
entering into newer categories), we expect ITC to deliver double-digit earnings growth
over the next two years. The stock is currently trading at 20.3x its FY2018E earnings.
Thus, in view of better earnings visibility and discounted valuations, we have maintained
our Buy recommendation on the stock with an unchanged price target of Rs375. Any
action taken by the government to curb the consumption of cigarette would act as a
risk to earnings estimates.
18
EQUITY
STOCK UPDATE
FUNDAMENTALS
JYOTHY LABORATORIES
BUY
CMP: RS291
MAY 24, 2016
Volume growth improves to double digits;
OPM beats expectation
COMPANY DETAILS
Price target:
Rs360
Market cap:
Rs5,267 cr
52-week high/low:
Rs342/240
88,147
BSE code:
532926
NSE code:
JYOTHYLAB
Sharekhan code:
JYOTHYLAB
6.0 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.1
14.1
3.9
25.5
Relative to Sensex
2.0
6.6
5.8
36.0

Volume growth back in double-digit trajectory; price cuts affect revenue growth: For
Q4FY2016, JLL reported a revenue growth of ~11% to Rs445.4 crore driven by a
double-digit volume growth of 13.7%. The GPM improved by 135BPS YoY to 50.0%
on the back of lower raw material prices and change in revenue mix. This, along with
lower employee cost as well as advertisement spends led to a 378-BPS improvement in
the OPM to 14.1%. The operating profit grew by 51.9% YoY to Rs62.7 crore and the
PAT grew by 22.4% to Rs35.6 crore during the quarter.
Volume growth to sustain in the range of 9-11%; OPM to remain in the range of 1415%: JLL management is confident of achieving a volume growth in the range of 911% in FY2017 (price hike and better revenue mix would result in 15% revenue growth).
We expect the OPM to sustain in the range of 14.0-14.5% over the next two years
driven by better revenue mix and other cost-saving initiatives (the management targets
OPM to be in the range of 14-15% in the coming years).
Uncertainty over valuations for a possible stake sale to Henkel AG; maintain Buy: We
have broadly maintained our earnings estimates for FY2017 and FY2018. We expect
JLLs revenues to grow at a CAGR of 15% over FY2016-18 (driven by double-digit
volume growth) and the PAT to grow at a CAGR of 17% over FY2016-18. However,
uncertainty prevails owing to the possible exercise of option by Henkel to acquire 26%
in JLL in the near term. We have maintained our Buy recommendation on the stock
with an unchanged price target of Rs360. The stock is currently trading at 24.3x its
FY2018E earnings.
LUPIN
HOLD
CMP: RS1,656
MAY 19, 2016
Strong outlook, FDA overhang continues;
retain Hold with PT revised to Rs1,850
COMPANY DETAILS
Price target:
Rs1,850
Market cap:
Rs74,686 cr
52-week high/low:
Rs2,127/1,294
14.1 lakh
BSE code:
500257
NSE code:
LUPIN
Sharekhan code:
LUPIN
24.12 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
4.0
-7.8
-8.1
-5.1
Relative to Sensex
4.5
-15.4
-9.3
0.7

Strong operating performance: For Q4FY2016, Lupins sales grew by 35.8% to

Rs4,181.2 crore; operating profit improved by 73.2% to Rs1,367.4 crore and profit
grew by 47.5% to Rs807 crore. The strong set of numbers was aided by two months
exclusivity sales from Glumetza coupled with price hikes in Fortamet. Profit was affected
due to higher tax rate of 33.6% in Q4FY2016 against 19.5% in Q4FY2015. Also, the
interest cost has gone up due to increase in debt.
Strong future outlook: The US business reported a sales growth of 58.7% for Q4FY2016
at Rs2,187.1 crore, largely contributed from Glumetza exclusivity. Also, Fortamet price
hike has helped in improving the base business growth and margins as there are just
two generic players in the market with Lupin having a significant market share. The US
business is likely to post a healthy double-digit growth over the next two years.
USFDA continues to remain near-term overhang: Lupin continues to work holistically
to resolve the pending USFDA 483s at Pithampur (Indore), Aurangabad, Goa and
Mandideep plants. The company has responded to Goa observations with a follow-up
update and awaits FDA response. Around 30 products are pending approval from the
Goa plant and around 70 from Pithampur (Indore) site. It has initiated site transfer
from Goa to other FDA-approved sites.
Maintain Hold with a revised price target of Rs1, 850: We have revised downwards
our estimates for FY2017 and FY2018 by 6.3% and 4.4%, respectively, mainly due to
an increase in interest cost and higher tax rate. Also, 483 observations from the USFDA
continue to remain overhang for the near term and poses an upside risk to our valuation.
Hence, we have retained our Hold rating with a revised price target of Rs1,850.
19
June 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
PI INDUSTRIES
BUY
CMP: RS634
MAY 25, 2016
Strong performance with improving growth outlook
COMPANY DETAILS
Price target:
Rs800
Market cap:
Rs8,693 cr
52-week high/low:
Rs785/495
1.6 lakh
BSE code:
523642
NSE code:
PIIND
Sharekhan code:
PIIND
6.6 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-3.7
13.5
-4.9
-10.7
Relative to Sensex
-1.6
6.0
-3.1
-3.3

For Q4FY2016, PI Industries posted a revenue growth of 9% YoY to Rs584.8 crore

which was largely driven by a 6% growth in custom synthesis manufacturing (CSM)
and 17% growth in domestic agri segment. Better operating efficiency and lower input
cost helped the company to post 60-BPS improvement in OPM to 18.3% YoY. Further,
decline in deprecation cost and lower tax rate helped the company to post 58% growth
in earnings to Rs95.3 crore (includes foreign exchange [forex] gain of Rs2.0 crore vs
Rs4.8-crore gain in Q4FY2015). Commissioning of the Jambusar plant, R&D expenses
etc helped the company to have a lower tax rate during the quarter (1% tax rate in
Q4FY2016 vs 30% last year same period).
The management has guided for improvement in sentiments of domestic business
(prediction of a good monsoon) and CSM business which is likely to support revenue
growth of around 18-20% over the next couple of years. On the EBIDTA margins
front, the company has guided for 100-150-BPS improvement on account of operational
efficiency and ramp-up in new facilities. On the order book front, it added another
order worth $70 million taking its order book to $850 million.
We have fine-tuned our earnings estimates for FY2017 and FY2018 to factor in a
lower tax rate (now the management guided for 24-25% tax rate against 28% earlier).
A good monsoon along with new products launched in the CSM business (two to three
new products will be launched in FY2017) will help the company to sustain a strong
growth momentum in the coming years. Hence, we continue to prefer PI Industries due
to its unique business model and a structural growth story. We have maintained our
Buy rating on the stock with an unchanged price target of Rs800.
PTC INDIA
BUY
CMP: RS67
MAY 20, 2016
Strong volume-led earnings growth; retain Buy
COMPANY DETAILS
Price target:
Rs90
Market cap:
Rs1,983 cr
52-week high/low:
Rs75/50
12.3 lakh
BSE code:
532524
NSE code:
PTC
Sharekhan code:
PTC
24.8 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-0.6
6.5
2.6
1.2
Relative to Sensex
-0.2
-2.3
1.3
7.4

June 2016
Strong operating performance driven by volume; provision for investments affects

reported PAT: During Q4FY2016, PTC India (PTC) reported a strong operating
performance driven by a substantial jump in volume. The revenue as well as the operating
profit grew by around 30% YoY, supported by 55% Y-o-Y rise in power trading
volume during this quarter. Below the operating level, with better other income (due to
higher dividend income), the adjusted PAT grew by 43% YoY in Q4FY2016.
Back on growth after a hiatus; double-digit volume growth ahead: The power trading
volume improved during FY2016 (after a flat growth in FY2015) as the medium-term
volume improved. Moreover, the management sounded optimistic after a long time on
volume growth outlook and expects the double-digit growth to continue in future.
Apart from the likely improvement in the short- and medium-term volume, the longterm capacities are expected to come up in future and lift the overall volume. The longterm projects of around 1.2GW came on stream. However, it pushed up the receivables
high as around four new projects came up later by the end of the year and receivables
remained high. Consequently, it squeezed cash flow from operations in FY2016.
Revised earnings estimates and re-iterate Buy on attractive valuation: Given the positive
growth outlook, we have revised our FY2017E earnings and introduced FY2018E
earnings in this note. However, the negative cash flow from operations in FY2016 and
provision for diminution of value of investments would be an overhang on the valuation.
Our SOTP-based price target is unchanged at Rs90 but we continue to rate the stock as
Buy, given the attractive valuation and high dividend yield.
20
EQUITY
STOCK UPDATE
FUNDAMENTALS
RATNAMANI METALS AND TUBES

HOLD
CMP: RS550
MAY 19, 2016
Weak outlook; maintain Hold with
PT revised to Rs600
COMPANY DETAILS
Price target:
Rs600
Market cap:
Rs2,510 cr
52-week high/low:
Rs699/387
4,786
BSE code:
520111
NSE code:
RATNAMANI
Sharekhan code:
RATNAMANI
1.8 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
7.8
27.6
-9.1
-20.1
Relative to Sensex
8.3
17.1
-10.2
-15.3

For Q4FY2016, Ratnamani Metals and Tubes reported a strong volume growth in the
carbon steel (CS) pipe segment (up by 98% YoY driven by L&T order booking of
around Rs150 crore), which has led to an overall revenue growth of 35% YoY to
Rs507 crore (stainless steel [SS] segment volume up by 11% YoY), while realisation
declined for CS pipe segment (down by 17% YoY) and remained flat for SS pipe segment.
The net income for the quarter stood at Rs46.1 crore (up by 43% YoY).
The demand environment remained subdued on account of delay in projects. Also,
export orders remained subdued. However, the recent improvement in crude and steel
prices could improve investment sentiment, but will take time. On a medium- to longterm perspective, the management remained optimistic of improvement in the demand
scenario owing to a pick-up in capex in the domestic market. However, looking at the
current softness in the order flow, the management guided for a flattish volume growth
and margin to remain around 16-17%. The capex for FY2017 is around Rs70 crore
for setting up of a new plant. The current order book, (in terms of value) at the end of
April 2016 stood at Rs830 crore, remained flat YoY.
We remain positive on Ratnamani Metals and Tubes on a long-term perspective looking
at the companys ability to generate better returns ratios than its peers and a strong
balance sheet. We have tweaked our earnings estimates, owing to a better-than-expected
Q4 performance. We have rolled over our price target to FY2018E earnings and arrived
at the price target of Rs600. Owing to a limited upside from current level, we have
maintained our Hold rating on the stock with a revised price target of Rs600.
RELAXO FOOTWEAR
BUY
CMP: RS480
MAY 17, 2016
Price target revised to Rs575; maintain Buy
COMPANY DETAILS
Price target:
Rs575
Market cap:
Rs5,762 cr
52-week high/low:
Rs614/360
26,091
BSE code:
530517
NSE code:
RELAXO
Sharekhan code:
RELAXO
3.0 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-4.5
16.8
0.9
18.7
Relative to Sensex
-4.6
5.2
0.9
24.5

Weak performance; net income affected by one-offs: For Q4FY2016, Relaxo Footwear
(Relaxo) posted a weak revenue growth (+10.2% YoY), on account of a soft demand
and increased competition. Soft revenue along with a sharp increase in fixed overheads
(employee cost and other expenditure were up by 19.8% and 18.2%, respectively)
affected the operating performance, which was down 6% YoY. The overall earnings
for the quarter were affected by several one-offs.
Revenue affected on account of subdued demand coupled with escalated competition:
The subdued growth in the top line was on account of general market slowdown,
coupled with enhanced competitive intensity both, at the regional as well as national
levels. Relaxo, apart from creating a strong brand pull from customers (via its celebrity
endorsement strategy), has now also started focusing on creating a pull from the retailers
(via understanding the gaps between distributors and retailers, and realignment of the
commission structure, etc). These efforts to create retail pull coupled with improving
its distribution footprint and enhancing online and modern retail presence are likely to
restore the growth momentum ahead.
Strong brands, focused management; maintain Buy with PT revised to Rs575: We
expect Relaxo to post 19.9% and 30.2% revenue and earnings CAGR, respectively,
over FY2016-18E.Relaxos strong presence in the lucrative mid-priced footwear segment
(through its top-of-the-mind recall brands like Hawaii, Flite and Sparx) along with its
integrated manufacturing set-up, lean working capital requirement and vigilant
management puts it in a sweet spot to cash in on the strong growth opportunity unfolding
in the footwear category due to a shift from unbranded to branded products. Thus, we
continue with our Buy rating on the stock with a revised price target of Rs575.
21
June 2016
STOCK UPDATE
EQUITY
FUNDAMENTALS
RICO AUTO INDUSTRIES

BUY
CMP: RS35
MAY 23, 2016
Demand visibility improves; maintain Buy with
unchanged PT of Rs47
COMPANY DETAILS
Price target:
Rs47
Market cap:
Rs472 cr
52-week high/low:
Rs64/28
4.9 lakh
BSE code:
520008
NSE code:
RICOAUTO
Sharekhan code:
RICOAUTO
6.7 cr
KEY POINTS
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
-6.9
13.7
-17.1
-19.8
Relative to Sensex
-4.9
6.2
-15.5
-13.1

Top-line growth in line; margins miss estimates slightly: Ricos Q4FY16 consolidated
revenues were up by 3% YoY due to improved off-take from key customers, viz Hero
MotoCorp Ltd (HMCL) and Renault-Nissan. The OPM at 9.1%, improved 530BPS
YoY, but is incomparable as Q4FY15 had the impact of subsidiary restructuring. The
adjusted net profit at Rs8.4 crore, though sharply up on a Y-o-Y basis, was slightly
below our estimate of Rs9.2 crore.
Revival in demand for auto OEMs coupled with commissioning of Chennai plant
provides visibility on top-line growth: With the recent commissioning of HMCLs
Gujarat plant (capacity of 7.5 lakh units in phase-I), and an expected positive outlook
for the two-wheeler demand would have a positive rub-off on Ricos top line. Also, the
other key clients in the passenger vehicle space are having a healthy demand outlook
for FY2017. Rico recently commissioned its Chennai plant to cater to southern Indiabased auto original equipment manufacturers. The plant with an initial capacity of 1.5
lakh sets per annum is expected to add Rs35-40 crore in the top line in FY2017 and
would further ramp up Rs80-90 crore in FY2018.
Maintain Buy with an unchanged PT of Rs47: While a likely improved performance
from the two-wheeler segment and incremental revenues from the Chennai plant provide
comfort on top-line growth, the hardening of raw material prices are likely to affect the
OPM going ahead. We have reduced our earnings estimate for FY2017 by 8% to
Rs3.1 per share to factor in the above changes. We have also introduced FY2018
earnings estimates in this note. We have maintained our Buy rating on the stock with
an unchanged price target of Rs47.
THE RAMCO CEMENTS

HOLD
CMP: RS493
MAY 20, 2016
Good quarter, maintain Hold owing to rich
valuation; PT revised to Rs520
COMPANY DETAILS
Price target:
Rs520
Market cap:
Rs11,737 cr
52-week high/low:
Rs515/293
2.2 lakh
BSE code:
500260
NSE code:
RAMCOCEM
Sharekhan code:
RAMCOCEM
13.7 cr
KEY POINTS
For Q4FY2016, Ramco Cements reported a strong earnings growth on account of
better cost management and higher volume (up 10.9% YoY) in south India although
realisation for the quarter declined (down by 7.5% YoY). Revenue for the quarter
remained flat at Rs997 crore YoY, however operating profit margin (OPM) saw a
sharp jump and increased by 536BPS YoY to 32.9%. Consequently, EBITDA per tonne
improved by 22.7% YoY to Rs1,402 per tonne. Further, lower interest cost (reduction
of borrowings) led to earnings of Rs187 crore (excluding profit on sale of equity
investments of Rs17.53 crore) as against Rs93 crore during Q4FY2015.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
5.3
32.9
33.5
69.9
Relative to Sensex
5.8
21.9
31.9
80.2

June 2016
Ramco Cements has remained our preferred pick in the cement sector due to its quality
management, cost efficiencies (EBIDTA per tonne is one of the highest in the industry)
and a strong balance sheet (debt-equity ratio at around 0.7x). However, after the recent
appreciation, the stock is trading at an enterprise value of close to 9.1x its FY2018E
earnings before interest, depreciation, tax and amortisation (EBIDTA; near to its oneyear forward average EV/EBIDTA). Thus, owing to a limited upside from the current
level (unfavourable risk-return ratio), we are maintaining our Hold recommendation
on the stock with a revised price target of Rs520 (rolling forward our valuation multiple
to FY2018E).
22
EQUITY
STOCK UPDATE
FUNDAMENTALS
V-GUARD INDUSTRIES
BUY
CMP: RS1,187
MAY 5, 2016
Spectacular performance; PT revised to Rs1,350
COMPANY DETAILS
Price target:
Rs1,350
Market cap:
Rs3,571 cr
KEY POINTS
52-week high/low:
Rs1,187/786
7,819
BSE code:
532953
NSE code:
VGUARD
Sharekhan code:
VGUARD
1.0 cr
Stellar performance; beats Street on all fronts: In Q4FY2016, V-Guard more than doubled
(YoY) its earnings to Rs42 crore, driven by a healthy revenue growth (up by 16% YoY)
and strong margin expansion (up by 438BPS YoY). The revenue growth for the quarter
is attributed to a strong traction in products like fans, pumps and water heaters. Also, VGuard maintained its overall pricing across the product range despite subdued prices of
key raw materials and it managed to reduce discounts in the non-south markets, which
altogether resulted in a substantial margin expansion during this quarter.
Impressive cash flow; non-south profitability stepping up: V-Guard continued to generate
a strong cash flow from operations which it utilised to pay off around Rs51-crore debt in
FY2016. Further, the company almost achieved a debt-free status by the end of the year.
On the business front, the company managed to reduce discounts in the non-south markets
without hampering revenue, which echoes positively about its brand acceptance. Going
forward, the management expects non-south margin to improve gradually with operating
leverage. Consequently, the management has revised its OPM guidance upwards to around
10% and aims revenue growth of 15% for the next 2-3 years.
Estimates and price target revised upward; reiterate Buy: The management sounded
positive on the overall growth prospects and revised its margin guidance. It also sees
further scope for improvement in the working capital cash conversion cycle and expects
to sustain the RoCE of around 25% in the long run. With a deleveraged balance sheet,
the company is looking out for inorganic growth opportunities to widen its network
and product range. We have revised our price target on the stock of V-Guard to Rs1,350
(27x its FY2018E EPS) and retained our Buy rating.
PRICE PERFORMANCE
(%)
1m
3m
6m
12m
Absolute
12.3
11.4
11.9
-0.7
Relative to Sensex
13.7
7.7
17.9
7.0

IT
JUNE 03, 2016

Q4FY2016 IT earnings review
Q4FY2016 result review
cost and rupee tailwinds, while Infosys and Tech Mahindra

delivered an in-line performance.
Broadly an in-line quarter: The top five Indian IT service

companies delivered an overall in-line revenue performance,
while HCL Technologies (HCL Tech) missed the estimate during
the quarter ending March 31, 2016. During Q4FY16, the top
five companies reported a growth of 2.0% QoQ on a constantcurrency (CC) basis and 1.6% (versus our estimate of 1.8%)
on a reported basis. Once again, Infosys continued to deliver a
strong performance for four back-to-back quarters now, though,
on an organic basis, Tata Consultancy Service (TCS) led the
pack with 2.1% Q-o-Q growth. Tech Mahindra reported an
overall in-line operating performance, while HCL Tech and
Wipro lagged behind the estimate during the quarter.
Importantly, Cognizant registered a negative growth of 0.9%
on a sequential basis, in line with the companys guidance. On
the operating profit margin front, TCS, Wipro and HCL Tech
fell short of expectations despite the absence of Chennai flood
Demand commentary remains decent, cautious on margins: The

managements of most of the companies foresee challenges in
margin expansion in the coming quarters owing to ongoing
higher spending in digital technologies, coupled with integration
issues (HCL Tech, Wipro and Tech M), pricing pressures and
wage hikes. Though Infosys provided an industry leading
revenue growth guidance of 11.5-13.5% (on CC basis) for
FY2017 (ahead of NASSCOMs growth guidance of 10-12%),
the management expects operating margins will remain in the
range of 24-26% for FY2017 (25% in FY2016). TCS
acknowledged challenges in maintaining the margin band of
26-28% in FY2017 owing to continued investments in digital
technology. The managements of Wipro and Tech Mahindra
noted the consolidation of the acquired entities will have an
adverse impact on their operating margins in FY2017, while
23
June 2016
SECTOR UPDATE
EQUITY
HCL Tech stopped providing margins guidance owing to

integration margin headwinds from Volvo and Geometric Ltd
in FY2017.
FUNDAMENTALS
growth concerns for near to medium term. Currently, the stocks

are attractively trading at 12-17x based on FY2018 estimates.
We remain positive on the IT sector, given the reasonable
valuation and growth pick-up in FY2017/18E. The industrys
digital transformation (spending is moving away from the legacy
services) could continue to result in earnings volatility in the
near to medium term. We believe the current valuation largely
reflects the new normal growth expectation for the industry for
FY2017-18E. We remain selective in our stock preference, in
order of preference, we remain positive on Infosys, TCS and
HCL Tech, and, in the mid-cap space, we remain positive on
Persistent Systems.
Outlook:
Industry transition continues, betting on digital technology:
Given the intense competitive environment for the Indian IT
companies along with continued investments in digital
technology and consolidation of relatively low-margin
acquisitions, the operating margins of the Indian IT companies
will expectedly remain under pressure in FY2017. However,
we believe the continuous ramp-ups in digital spending and the
high-level automation will help the companies to enhance
profitability gradually in next 2-3 years. We continue to maintain
our stance that the IT sector is going through a transition phase,
with an increasing digital adoption and commoditisation of
legacy services, which will continue to result in earnings volatility
in the near term.
Leaders: Infosys, TCS

Laggards: Wipro
Preferred picks: TCS, Infosys and HCL Tech (in the large-cap
space), and Persistent Systems (in the mid-cap space).
Valuation:
Comfort on valuation; remain selective: The de-rating of the IT

sector valuation in the last one year has overcome most of the
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or

having a position in the companies mentioned in the article.
CROMPTON GREAVES CONSUMER ELECTRICALS
VIEWPOINT
CMP: RS135
VIEW: POSITIVE
MAY 19, 2016
The jewel in the crown listed; retain positive stance
Key points
Moreover, focus of the new management to spend on

promotions to improve the brand visibility would drive future
growth and create value in the long run. We expect higher
spending on advertisements, however the overheads related to
restructuring would go down and help to sustain healthy
margin in future. Further, with expected high cash generation,
the likely debt reduction could help to lift earnings.
The jewel in the crown made an eventful listing: The demerged

entity of Crompton Greaves Ltd (CGL), Crompton Greaves
Consumer Electricals (CGCE), made an encouraging listing.
As in our earlier reports, we had quoted consumer business as
a jewel in the crown and highlighted substantial value
unlocking from the demerger. The impressive listing of CGCE
(better than our expectation of Rs110/share) vindicates our
conviction. We believe, after the demerger, backed by a focused
management at the helm, superior returns ratios profile and
strong cash flow track record, the Street will comparably value
the pure play electrical consumer company CGCE with Havells
India.
High quality business + investing in brand = value creation:

Factors like dominating market share (fans 26%, lighting 8%
and pumps 10%), high cash flow generation and superior
returns ratios track record qualify the business as high quality.
Positive stance reiterated on CGCE: In our previous reports

on CGL, we had highlighted the potential value unlocking from
the demerger. We reiterate our positive stance on the newly
listed entity, CGCE, and recommend investors to hold the
demerged entity given the positives on its side. As there is a
limited data available for the new entity now, we shall update
with a detailed working of its future earnings and our price
target later but recommend investors to hold the high quality
consumer business, CGCE.
having a postition in the companies mentioned in the article.
June 2016
24
EQUITY
VIEWPOINT
FUNDAMENTALS
JUBILANT LIFE SCIENCES
VIEWPOINT
CMP: RS379
VIEW: POSITIVE
MAY 23, 2016
Growth back on track; improving balance sheet
Key points
hike and better capacity utilisation will boost growth and

margin profile going forward.
Pharma business will be the key growth driver and helps

improve margins: Jubilant Life Sciences (Jubilant)s pharma
business consists of two divisions, namely Generics and
Specialty Pharma (sterile products). We believe Jubilants
pharma growth would be driven by product launches in
radiopharma and pick-up in volumes and realisations in the
contract manufacturing operation (CMO) of sterile injectables
(given the shortages in the US sterile injectable segment) as
USFDA issues are now in the past. We expect CMO business
volumes to pick up in FY2017-18. The generic growth will be
driven by new filings and incremental ANDA approvals (27
ANDAs pending approval) over the next few years.
LSI business to get boost from nutrition segment: Jubilants
life science ingredient (LSI) business consists of specialty
intermediates (pyridines and its derivatives), nutritional
products (vitamin B) and life science chemicals segments.
Jubilants nutrition business mainly includes vitamin B3
(niacin) used for cosmetics and animal feed consumption and
vitamin B4 (Choline), which is a vital feed additive for poultry.
Jubilant is amongst the worlds largest manufacturers of
Vitamin B3 (niacin and niacinamide). Volume growth, price
Positive view on the stock with better upside: The key growth
drivers in the short term would be USFDA approval for its
radiopharma product, Ruby-fill. Besides, the CMO business
which was affected due to USFDAs warning letters would see
a revival and growth going forward. The company has built a
strong products pipeline in the USA, which will unfold in the
next two to three years. If the company decides to go for an
equity expansion, the debt level might see a significant
reduction. Hence, we have a positive view on the stock with a
potential upside of 20% returns from the current level over
the next six months.
Risk: Key downside risks to our valuation assumptions are;

(a) delay in product approvals; (b) volatility in prices of raw
materials for its specialty chemical divisions; and (c) volatility
in foreign currency.
TCPL PACKAGING
VIEWPOINT
CMP: RS553
VIEW: POSITIVE
MAY 27, 2016
Re-initiate positive stance on improving growth prospects
Key points
Enhanced capacity and improving consumption environment

to drive double-digit growth: TCPL Packaging Ltd (TCPL) is
one of the largest players in the domestic packaging space (with
an expertise in carton packaging). The company is one of the
largest vendors for supplying packaging materials to tobacco,
food and other FMCG product companies (including Nestle
India, Hindustan Unilever and Godrej Consumer Products) in
India. With its new plant in Guwahati getting operational,
TCPLs conversion capacity has increased to 52,200 ton per
annum from 43,200 ton per annum earlier. With the demand
for consumer goods expected to improve on the back of an
expected better monsoon (driving rural demand) and
improving sentiments in the urban India, the revenue growth
of TCPL is expected to grow at a compounded annual growth
rate (CAGR) of about 20% with a stable operating profit
margin (OPM) of 16-17%.
Strong financial background; leverage position is comfortable:
TCPL has a strong financial record with revenues, operating
profit and profit after tax (PAT) growing at a CAGR of 20%,
24% and 47%, respectively over FY2011-15. The OPM of
the company has improved by 16.5% in FY2015 (to further
17.5% in M9FY2016) from 14.5% in FY2011 on the back of
operating efficiencies. The company has a better leverage

position in the packaging industry with its debt-equity ratio
standing at 1.4x. With operating cash flows to improve in the
coming years and no major capital expenditure going ahead,
we expect the debt-equity ratio to further improve in the coming
years. The return ratios have consistently improved and RoE
and RoCE currently stand at 32% and 23%, respectively.
Trading at a discount to packaging peers: TCPL would be one
of key beneficiaries of the improving demand environment in
the FMCG space. Further, the rising trend in the e-commerce
space would add on to the overall revenues in the coming years.
We expect TCPLs revenues and PAT to grow at a CAGR of
19% and 28%, respectively, over FY2015-18. Despite consistent
operational performance, TCPL is trading at 7.2x its FY2018E
earnings, which is at a discount to its peers, such as Huhtamaki
PPL and Essel Propack, which are trading at 15x and 12x,
respectively, their FY2018 consensus estimates. Hence, in view
of its consistent operating performance, better earnings visibility
and discounted valuations, we have re-initiated our positive view
on the stock with an upside of 20-25%.
25
June 2016
EQUITY
TREND & VIEW
TECHNICALS
Out of the Bear Trend

Daily view on Nifty
The Nifty has provided a break-out on the upside from a crucial

range of 8000 to 7700 levels which has a minimum target of
8340 level.
The index has a support at 8000 level now, and till those levels
are not broken on a closing basis, the overall trend in the short
term remains bullish.
The momentum indicators on the daily charts have come well

into a buy mode, thus confirming the upward break-out. The
increase in volumes owing to the break-out is another signal of
a valid breakout
Crucial supports for the index will be around 8160 and 8000
while crucial resistance will be near 8340 and 8500.
Weekly view on Nifty

The Nifty has provided a break-out from an inverse head and

shoulders pattern which has a conservative target of 8336, ie
close to its previous swing high. On a break-out above 8336
level, we will see it inching higher towards 8600 level.
The index has a positive momentum on the weekly charts which

confirms the break-out. The index is also trading well above its
weekly averages mainly 20MSMA and 40MEMA which is a
positive sign.
A crucial support would be around 8000 and 7700 whereas

resistance would be around 8340 and 8500.
Monthly view on Nifty

The index has provided a long downward sloping channel which

indicates the shift in trend from bearish to bullish. Now, the
index seems to have come out of the bear trend and entered
into a bull trend.
However, for the June series, it has a minor resistance at 8340

levels and, only above that, we can hope for 8600 level or else
we can see some profit-booking from those levels which will
lead to some consolidation.
As per the Elliott Wave Theory, this is either Wave III of 3 or

Wave III of C, however, till higher top and higher bottom
continues, the bulls need not worry. So, till 7700 level is not
broken, the bulls can continue to ride the uptrend.
A crucial support will be around 7700 and a crucial resistance

will be around 8340.
Medium term
Trend
Trend reversal
Support
Resistance
Target
Down
8336
7539
8100
7422
June 2016
26
EQUITY
MONTHLY VIEW
DERIVATIVES
Derivative View: Market in a very strong upward momentum

The Nifty started the May series on a flattish note with some negative
bias and, throughout the series, it remained in a range of 77008000 level. However, in the last two trading sessions, the bulls
took over the charge completely and showed a sharp jump of more
than 300 points. Most of the upside was backed by a significant
amount of addition of long position, as open interest of the Nifty
in the last few trading session shot up by more than 30% and with
a high roll-over of around 73%, a majority of this position got
carried forward to the next series too. Apart from the Nifty, the
Bank Nifty had also seen a significant amount of a long build-up in
the last series and both have seen a high roll-over indicating that a
majority of the position is still intact in the system.
Roll-overs in the Nifty stood at 72.82% compared to its previous

month roll-over of 73.92%. Market wide roll-over was at 84.48%
compared to its previous month roll-over of 84.64%.
Top 5 stock futures with the highest OI in current series
STOCK FUTURES (SHAREKHAN SCRIP CODE)
Foreign institutional investors (FIIs), in the initial part of the May

series, were seen unwinding their long position in index futures.
Most of the time, they were the net sellers in the cash market segment
due to which markets struggled in the first half of the series.
However, in the second half, they started building a decent amount
of long position in index futures. Then, they were also the net buyers
in the cash market due to which the market bounced back sharply
from the 7800 level and closed above 8000 in the May series.
OPEN INTEREST (RS CR)
HDFCBANK
3610.05
RELIANCE
3179.20
SBIN
3007.82
TATA MOTORS
2219.28
SUNPHARMA
1921.35
Top 5 stock options with the highest OI in current series

STOCK OPTIONS (SHAREKHAN SCRIP CODE)
SBIN
ROLL-OVER: MARKET-WIDE VS NIFTY
OPEN INTEREST (RS CR)
1385.51
TATAMOTORS
874.84
RELIANCE
705.28
SUNPHARMA
577.06
LT
531.60
View
On the Options front, in the June series, 8000 PE stands with the
highest number of shares in the open interest (OI) followed by the
8100 strike price. On the other hand, on the call side, 8400 CE
stands with the highest number of shares in the open interest (OI)
followed by 8300 strike price.
Roll-over highlights
The benchmark index, the Nifty, started the June series at 2.04
crore shares of open interest compared to 2.10 crore shares in the
last series. In rupee terms, it started the new month with Rs16,450
crore v/s Rs16,570 crore of open interest in Nifty futures, while, in
stock futures, it started the series with Rs58,048 crore v/s Rs 55,644
crore. In index options, it started the month with Rs85,148 crore
v/s Rs81,083 crore and Rs5,905 crore v/s Rs5,541 crore in stocks
options.
The put/call ratio (PCR), after a long time, started this series at a
bit on the higher side at 0.96. Currently, it is hovering around 1.05,
however the Volatility Index has cooled off significantly due to the
sharp upside observed in the last few trading sessions as it settled
below 16.00 at the 15.33 level. Seeing the above data and with
high rollover of long position the market is in a strong momentum
on the higher side and, going forward 8500 level can be targeted in
the coming trading session.
27
June 2016
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Commodities: Likely to be subdued on low global growth, prospects of the US hiking rates
Macro-economy
Key points
US NFP falls well short of forecast, dollar falls
Feds Janet Yellen says it is appropriate to hike rates in the coming months
US Dollar rallies on the rate hike prospects
Both US ISM manufacturing and services PMIs (April) topped the forecast
US job openings in March as per JOLTS was at the highest level since July;
second highest on record
US Q1 GDP revised higher to 0.8% annualised basis, however short of
forecast of 0.9%
US housing data (April) better than the forecast; New home sales (April):
Actual/Forecast: 619K/523K, previous 511K; US Housing starts (April):
Actual/Forecast 1172K/1125K
Chinas credit growth rate data missed the forecast in April due to lack of
demand
Chinas trade balance data (April) showed a lack of domestic demand
Chinas manufacturing PMI (May) stagnant at 50.1, services falls to 53.1
from 53.5 in April
China devalues Yuan to a five-year low against the US Dollar.
Annual US-China strategic and economic dialogue (SED) meeting on June
6 and 7
Brexit fears resurface as leave and remain camps in neck-and-neck
race in opinion polls
Brexit concerns taking a toll on the economy; services PMI at the lowest
since February 2013
Bank of England: UK economy showing a loss of momentum
UKs Q12016 GDP data mostly in line with the forecast of 0.4%; down
from Q42017
BoEs Mark Carney: Monetary stability can be achieved whether the UK
leaves or remains in the EU
OECD blames governments for not doing enough on fiscal fronts
OECD: Heavy lifting done primarily by central banks; cuts global growth
forecasts
Germany Q1 GDP QoQ in line with the forecast of 0.7%; euro-zone GDP
misses the forecast
Japan delays tax hike by 30 months
COMMODITY PRICES IN MAY 2016 (IN $)

Commodity
High
Low
Close
MoM chg %
Copper
5,012.0
4,540.0
4,671.0
-7.5
Zinc
1,945.0
1,809.0
1,923.0
-0.8
Lead
1,793.0
1,626.0
1,700.0
-5.8
Nickel
9,700.0
8,329.0
8,435.0
-10.7
Gold
1,303.8
1,199.8
1,215.3
-6.0
Silver
18.0
15.9
16.0
-10.4
Crude oil
50.2
43.7
49.1
5.2
MONTHLY CHANGE IN DOE CRUDE STOCKS (APR-MAY 2016)

Crude oil
Change in (kbls)
May 20, 2016 (kbls)
Change in (%)
Dist.
Gasoline
-6326
-6101
-1684
537068
150878
240111
-1.16
-3.89
-0.70
Refinary utlisation rate was 89.70% in the last week of May 2016
MONTHLY CHANGE IN SHFE STOCKS (APR-MAY 2016)

Copper
Lead
Zinc
Nickel
Change (in tonne)
-90682
6067
-28992
12604
May 27, 2016
221212
26845
230557
96491
Change (in %)
-29.07
29.20
-11.17
15.02
MONTHLY CHANGE IN LME STOCKS (APR-MAY 2016)

Copper
Lead
Zinc
Nickel
2220
10450
-23575
-15672
May 31, 2016
151720
185475
380700
401766
Change (in %)
1.48%
5.97%
-5.83%
-3.75%
Change (in tonne)
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil: Likely to decline on dollar, elevated OPEC production, ample US inventories
Key points
Iran: Output ceiling has no benefit to the country; wants country-specific quota
Oil records longest run of monthly gains in five years
Oil price gains supported by outages in Nigeria, Canada, Venezuela, and decline in the US oil rigs
US companies idled more than 1000 rigs since the start of last year
The number of US oil rigs at the lowest level since October 2009
WTI oil short positions at the lowest level in last 11 months
Nigerias crude oil production is down by 50% since the start of the year due to attacks on pipelines
Some oil companies restart production in Canada as fires ease amid cooler weather
Crude oil
CMP: $49
Crude oil prices were sharply up as the decline in the US crude oil stockpiles, continuous decline in the US oil rigs, seasonally strong
demand period and shrinking US fuel stockpiles helped the prices rise. The market is under the impression that the oil surplus would give
rise to oil deficit as the demand recovers while the US oil inventories decline. Another major factor that helped the counter-clock gains has
been outages in Nigeria, Canada, Venezuela and Nigeria, etc , which added to the supply concerns. The sharp gains in crude oil came
despite the increasing possibility of a rate hike by the Fed. However, crude oil rally looks overdone as Chinas economic indicators have
been disappointing and the US Dollar is set to rally further. Also, with prices hovering around $50, we can see some of the oil producers
restarting production. Irans oil production is rising. US oil inventories level is near a record high. Some of the lost Nigerian oil output
can be restored in the coming days. Apart from all these factors, OPEC does not have much control over the production quota. The WTI
oil counter is likely to trade between $42 and $52 in the near term.
June 2016
28
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Bullion: Seen sideways to higher

Key points
Gold posts the first monthly loss in 2016 as it drops 6%
Disappointing US NFP data to help gold recover
Barclays: Gold ETP inflows pick up in May despite rate hike possibility
Turkeys gold demand remains sluggish as scrap sales rise
Chinas net gold imports from Hong Kong drop 4.2% in April on weak seasonal demand
Physical demand for gold remains weak in India and China
Brexit concerns can support gold
Moodys: Gold prices to remain volatile
Chinas silver imports rise 20% in the first quarter on Q-o-Q basis
Gold
CMP: $1,215
Gold prices fell sharply last month on the growing possibility of a rate hike by the US Federal Reserve. It is to be noted that even the dovish camp,
the Federal Reserve officials, has been vocal about the possibility of a rate hike in the coming months. The latest FOMC minutes revealed that the
members view negative rates as politically toxic. Janet Ms Yellen, the Fed chairwoman, opined that it would be appropriate to hike rates in the
coming months. Another bearish factor for gold has been a weaker physical demand in India and China. The markets are still not discounting the
two rate hikes fully. The yellow metal managed to survive a brief dip below $1200. The disappointing US non-farm payroll report of May would
help gold recover some of its lost ground. The markets would be focused on the UK referendum due on June 23. If the country decided to remain
in the European Union, the US Federal Reserve would move ahead with its hike agenda in July. Thus, gold would face selling into rallies. The
expected range is $1,200-$1,270 in the near term.
Silver
CMP: $16
The economic indicators out of China are negative for the metal. However, Chinas silver imports have been up in the first quarter. We expect
a downside pressure on the base metals to resume as seasonal weakness sets in. The white metal is expected to trade between $15.80 and $16.80
in the near term as it would be helped by gold to some extent.
Base metals in broad range on weak fundamentals and divergent monetary policies by global central banks
Key points
ICSG: Refined copper market for January-February 2016 was in production surplus of 76,000 ton against a surplus of 134,000 tons in the

corresponding period in 2015

Economic Intelligence Unit (EIU): Global copper consumption to expand by 1.8% in 2016 against a contraction of 0.8% in 2015
ILZSG: Refined lead market balance in surplus of 13.700 ton in March 2016 against a surplus of 38,100 ton in February 2016
EIU: World refined lead consumption to expand by an average 2.3% in 2016 (previously 2.9%) against a contraction of 2.9% in 2015
ILZSG: Refined zinc market balance in deficit of 13,600 ton in March 2016 against a surplus of 42,000 ton in February 2016.
Goldman Sachs: Zinc stands alone raises forecast for zinc to $2100/ton over the next 12-month horizon on tightening of supply and robust
demand in China
Macquarie Research: Nickel demand beating expectation for the first time in years could put the market in a deficit
EIU: Refined nickel consumption to rise 2.4% in 2016 to 2mn ton against 13.8% rise in 2015 while 5.4% contraction in 2014
Copper
CMP: Rs309/kg (June 2016 contract)
MCX copper ended May lower at Rs312.50/kg, down by 6.50% owing to weak Chinese manufacturing data and fall in Chinas copper imports in
April. Copper inventories on the London Metal Exchange (LME) were mildly up at 151,725 ton by May-end from 149,500 ton in the previous
month, however coming off from highs of 161,625 ton during the month. Copper prices were supported at lower levels on fall in stocks on the
Shanghai Futures Exchange (SHFE) which were at 221,212 ton down by 29% from 3,11,894 ton last month. Chinas refined copper imports were
lower at 341,677 ton (down by 25.40% over 458,068 tons in March 2016). EIU estimates the copper supply growth to remain muted in 2016 as
Chinas largest suppliers pledged to cut output by 350,000 ton along with the global suppliers like Glencore. Also, supply cuts from the US on lower
realisation would support prices. We expect copper to remain supported at lower levels and trade in range of Rs286/kg to Rs342/kg at the upper end.
Lead
CMP:Rs117/kg (June 2016 contract)
MCX lead ended May lower at Rs113.70/kg down by 4.60% from Rs119.20 in April on rising inventories on exchanges and saturation in battery demand.
Lead inventories on LME rose by 6% to 185,475 tons from 175,025 ton in April. On SHFE, inventories rose by 29% to 26,845 ton from 20,778 ton in
April 2016. EIU estimates Chinas lead consumption to remain mixed in 2016 as weak battery demand from the e-cycle sector stagnating for first time in
16 years, rising environmental concerns supporting lithium-based battery demand over lead acidic batteries and lower oil prices supporting global fleet
demand would continue to evoke mixed views on lead. In view of current factors, we expect lead to trade in range of Rs122/kgRs.108/kg.
Zinc
MCX zinc outperformed other base metals, albeit ending May with slight gains at Rs129.40/kg helped by an expected deficit and bullish estimation reports
from Goldman Sachs supporting the metal. Also, Glencore supported the view that structural deficit was returning in zinc markets. Zinc inventories on
LME fell by 5.80% to 380,700 ton in May from 404,275 tons in April on improved demand-and-supply slowdown. Stocks on SHFE also fell to 230,557
29
June 2016
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
ton from 259,549 ton down by over 11%. EIU expects the global zinc output to contract by 1.4% in 2016 while the Chinese supply to fall by 2% on
tightening concentrates and concerted efforts by the Chinese producers to control production. We expect zinc has already outperformed in very short
duration and further rallies could face headwinds. We expect zinc to trade in the range of Rs141/kgRs124/kg.
Nickel
MCX nickel turned out worst performer amongst the base metals in May ending at Rs568.70/kg down by 9.50% from Rs.628.60/kg, weighed by
rising stockpiles and weak stainless steel demand. Nickel inventories on SHFE rose steeply to 96,491 ton surging 15% from 83,887 ton in May,
although inventories on the LME fell slightly to 401,766 ton from 417,438 ton. Visible stocks in the exchange are at almost 500,000 ton with the
possibility of almost 150,000 tied up in finance deals, according to Norlisk. We expect nickel to remain in the range of Rs510/kgRs660/kg in
near term as stockpiles would weigh on rallies in the absence of any meaningful supply cuts.
CMP as on June 02, 2016
Events watch: Major economic events in June 2016

Region
Event
31/5/2016
Date
US
CB Consumer Confidence
Survey
Actual
Prior
96.1
92.6
94.7
06-01-2016
China
Manufacturing PMI
06-01-2016
China
06-01-2016
Confidence data trailing the forecast is negative for the US Dollar and the industrial
commodities; it is positive for the bullion complex. However, since most of the other major
data have been better than expected, impact of confidence data is limited.
50
50.1
50.1
The data showed that manufacturing was stagnant. The impact is somewhat negative for
the industrial commodities.
Caixin Manufacturing PMI
49.2
49.2
49.4
As per Caixin data, the manufacturing contracted yet again, which is negative for the base
metals and crude oil. However, industrials commodities have been holding well on the
account of the US data.
US
ISM Manufacturing PMI
50.3
51.3
50.8
US manufacturing expanded at slighty faster rate than expected, which is positive for the
base metals and crude oil. It is positive for the US Dollar, and thus negative for the bullion
complex.
06-02-2016
Europe
Minimum Bid Rate
0.00%
0.00%
0.00%
No change as per the expectations. The 2016 growth has been revised higher, while rest of
the forecast remains largely unchanged.
06-03-2016
US
Non-Farm Employment Change
160k
38K
160k
Data unexpectedly turned out to be way below the forecast; negative for the US Dollar and
positive for the bullion complex. Industrial commodities to fall on weaker demand prospects.
Some impact would be negated as the Verizon strike and bad weather could have affected
data to some extent.
06-03-2016
US
Unemployment Rate
4.90%
4.70%
5.00%
A decline in the unemployment rate positive for the US$ however the effect negated by
poor NFP employement figure.
06-03-2016
US
ISM Non-Manufacturing PMI
55.3
--
55.7
Better than expected data would be positive for the base metals and negative for gold and
silver. Crude oil would also rise.
06-06-2016
US
Fed Chairperson Yellen Speaks
Feds Janet Yellen reiterating the rate hike possibility would boost the US Dollar as the
markets have yet to discount the impact of two rate hikes. In that case, precious metals
would fall.
06-08-2016
China
Trade Balance
$55.70b
--
$45.56b
Both import and export figures have to be considered for estimating the domestic and the
global demand. The data of late have been mostly reflecting a weak demand. If the trend
continues, it would be bearish for the industrial commodities, while bullion can rise on a
safe haven demand.
06-10-2016
US
Prelim UoM Consumer Sentiment
94.5
--
94.7
Higher than expected inflation reading would be positive for the US Dollar and the industrial
commodities, and negative for the bullion complex.
06-12-2016
China
Industrial Production y/y
6.00%
--
6.00%
China's data are quite important for the industrial commodities as the nation is biggest
consumer of the raw materials. A disappointing figure would be positive for the bullion on a
safe haven demand, and bearish for the industrial commodities.
15/6/2016
Japan
Monetary Policy Statement
No change is expected in near-term, however market participants would look forward to

clues for further easing. In that case, the yen would fall.
15/6/2016
US
PPI m/m
0.40%
--
0.20%
A higher than expected inflation reading would be negative for the precious metals as the
possibility of a rate hike in the near term would rise. The reading would be somewhat
negative for the other commodities as well.
15/6/2016
US
FOMC Economic Projections
The traders would be looking forward to the Fed's view on inflation expectations, GDP
growth rate and employment. A hawkish Fed would send the US Dollar higher and bullion
complex lower. Other commodities would fall too.
15/6/2016
US
FOMC Statement
15/6/2016
US
Federal Funds Rate
16/6/2016
US
FOMC Press Conference
16/6/2016
US
CPI m/m
17/6/2016
US
Housing Starts
21/6/2016
Europe
German ZEW Economic Sentiment
--
--
6.4
28/6/2016
US
Final GDP q/q
--
--
0.80%
June 2016
0.50%
--
0.50%
Impact
Clues to the rate hike are important.

No change expected, however the focus would be on the Fed's stance regarding rate hike
prospects.
0.20%
--
0.40%
A higher than expected inflation reading would be bullish for the US Dollar and bearish for
the commodities in general.
--
--
1172k
The US housing data for April have been upbeat. The continuation for the trend would be a
positive for the US Dollar and negative for the bullion. Base metals would rally on better
demand prospects.
30
Clues to the rate hike are important.
Better than expected number would be positive for the euro and industrial commodities.
Data trailing the forecast would be negative for the US Dollar and positive for the bullion.
Base metals and crude oil to fall.
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
CCEA announces MSP for kharif 2016-17; sharp rise in pulses and oilseeds
News highlights
Price performance
Commodity
The Maharashtra government imposes stock limits in sugar to

curb rising prices
Expiry
May 31,
2016 (Rs)
Apr 29,
2015 (Rs)
% Change
Skymet revises its monsoon forecast to 109% of LPA from its

earlier estimates of 105%
Chana
Vegetable oil imports rise 12% in April to 12.42 lakh tonne

from 11.09 lakh tonne YoY
Dhaniya
June
6836
7167
(4.62)
Guargum
June
5230
6140
(14.82)
SEBI and NCDEX tighten their risk management mechanism
Cotton body pegs output lower at 341 lakh bales on crop

damage
Chana
Chana June futures were one of the largest gainers in the agri
commodities basket in May. Prices gained 7% MoM to Rs6,035
per quintal from Rs5,640 last month. Prices made a record high of
Rs6,146 towards the end of the month. Prices gained due to lower
arrivals of chana and due to lower output. A good demand from
millers and buying by the stockists also supported the prices.
However, the prices eased marginally from record levels towards
the end of the month due lower demand from millers at higher
levels. The demand in the spot markets has also declined at record
levels.
Chana may trade on a mixed note in the coming days. A sluggish
demand at record prices and lack of bulk demand by the millers
may help ease the prices. However, a lower arrival pressure of the
new crop may support the prices.
Paddy
Jowar
Bajra
Maize
Ragi
Tur (Arhar)
Moong
Urad
Groundnut-in-shell
Soyabean
Sunflower Seed
Nigerseed
Sesamum
Cotton
Common
Grade A
Hybrid
Maldandi
Yellow
Medium Staple
Long Staple
MSP 2015-16
5640
7.00
Cottonseed oilcake
June
2334
2310
1.04
Guarseed
June
3105
3439
(9.71)
Jeera
June
16345
17650
(7.39)
Maize
June
1371
1262
8.64
Ref Soy Oil
June
649.25
657.6
(1.27)
RM Seed
June
4431
4472
(0.92)
Soybean
June
3835
4038
(5.03)
Sugar
June
3555
3537
0.51
Turmeric
June
7964
8384
(5.01)
Wheat
June
1678
1660
1.08
Soya bean June futures largely remained under the grip of bears in
May due to weak soya meal export demand as well a forecast of
above-normal monsoon. However, expectations of a decline in soya
bean acreage due to a likely shift towards pulses cushioned the
downside. Higher soya bean prices on CBOT due to good demand
for US soya meal from China as well as crop concerns in Argentina
also cushioned the downside. Prices declined 5.03% lower MoM
at Rs3,835 compared with Rs4,038 in the previous month.
According to SEA of India, soya meal exports from India declined
92% to 1,442 tonne in April 2016 compared with 18,017 tonne in
April 2015. We expect soya bean prices to continue to remain weak
over the days to come. Forecast of above-normal rains by both, the
IMD as well as Skymet, may keep prices under a downside pressure.
A weak soya meal export demand for Indian soya meal may add to
the downside pressure. However, lower supplies in the domestic
market and rising global soya bean prices may support the prices.
Fears of a lower sowing of the oilseed due to a shift towards pulses
may also lend support to the prices.
Jeera June futures started the month of May on a bullish note on

good export demand and buying from stockists. It made a contract
high of Rs18,040 in the first week. However, prices declined from
higher levels on increasing arrivals of the new crop as well as forecast
of above-normal rains this year. Prices declined 7.39% month-onmonth (MoM) to Rs16,345 per quintal from Rs17,650 last month.
Jeera may trade on a mixed note. Higher arrivals coupled with
comfortable carryover stocks may pressurise the prices. However,
a good export demand coupled with the demand for a good quality
crop from the domestic buyers may cushion the downside and
support prices at lower levels.
Variety
6035
Soya bean
Jeera
Commodity
June
MSP 2016-17
Increase
1470
1510
1625
1650
1330
1365
1725
5050*
5225*
5000*
4220*
2775*
3950*
3825*
5000*
3860
4160
Rs/ Quintal
60
60
55
60
55
40
75
425
375
375
190
175
150
175
300
60
60
1410
1450
1570
1590
1275
1325
1650
4625*
4850*
4625*
4030
2600
3800
3650
4700
3800
4100
Bonus
%
4.3
4.1
3.5
3.8
4.3
3
4.5
9.2
7.7
8.1
4.7
6.7
3.9
4.8
6.4
1.6
1.5
Rs/ Quintal
425
425
425
100
100
100
100
200
-
* includes bonus
31
June 2016
TREND & VIEW
COMMODITY
TECHNICALS
Gold: Bulls warming up

Gold broke out from a large ending diagonal pattern in

February. Since the break-out, it rallied nicely till $1,282.
KS T (- 3 .3 9 1 8 5 )
5
0
-5
1330
From that level, gold has been trading in a range-bound manner.

Near the end of April, it had crossed the high of $1,282; however
the up move turned out to be a part of a larger correction.
1320
1310
1300
1290
0 .0 %
1280
1270
1260
1250
Structurally, it seems to be forming an expanded flat pattern.

The level of $1,194-$1,190 is a key support zone where the fall
can subside.
1240
1230
2 3 .6 %
1220
1210
1200
3 8 .2 %
1190
1180
1170
5 0 .0 %
The level of $1,136 will act as a major support. Once gold

resumes the up trend, $1,303 will be the target from short to
medium-term perspective.
1160
1150
1140
6 1 .8 %
1130
1120
1110
1100
1090
1080
1070
1060
1050
1 0 0 .0 %
1040
View
Up
Reversal
Supports
Resistances
Target
$1,136
$1,190/$1,164
$1,233/$1,249
$1,303
1030
N o vem be r
1020
Z
D e ce m b e r
2 0 16
F e b ru a ry
Ma rch
Ap ri l
Ma y
Ju n e
Ju ly
Silver: Near key support zone

Silver formed an impulse on the upside, which got over at $15.95

in February. Since then, it was trading in a broad range.
KS T (-4 .74 0 2 9 )
5
0
-5
In terms of a wave structure, the price action formed a running

flat pattern. From there, the white metal rallied nicely. It broke
out from a multi-month falling trendline.
SI L VER [ C ASH ] ( 1 5.9 9 7 0 , 1 6 .0 8 3 0 , 1 5 .7 7 0 0, 1 5 .9 4 1 0 , -0 . 0 4 0 00 )

1 8 .5
0 .0 %
1 8 .0
1 7 .5
2 3 .6 %
It formed another impulse on the upside and entered the correction

mode. The level of $16-$15.80 is a key support zone where the
correction can subside and the next leg-up can start. The target
area from short to medium-term perspective will be $17.82$18. On the other hand, $15.45 will act as a crucial support on
a closing basis.
1 7 .0
3 8 .2 %
1 6 .5
5 0 .0 %
0 .0 %
6 1 .8 %
1 6 .0
7 8 .6 %
1 5 .5
2 3 .6 %
3 8 .2 %
1 5 .0
5 0 .0 %
1 0 0.0 %
6 1 .8 %
1 4 .5
7 8 .6 %
View
Reversal
Supports
Resistances
1 4 .0
Target
1 0 0 .0 %
Up
$15.45
$15.60/$15.50
1 3 .5
$16.44/$17.40 $17.82-$18
ber
N o ve m b e r
D e ce m b e r
2016
F e b ru a ry
Ma rc h
Ap ri l
Ma y
Ju n e
Ju ly
Crude oil: Poised for a fall

NYMEX crude oil rallied nicely in the month of February and

March. From the high of $42.49, it formed a short-term
correction. It found support near the junction of 40-day
exponential moving average (DEMA), the daily lower Bollinger
Band and the 38.2% retracement mark.
KS T (5 .1 6 0 7 8 )
15
10
5
0
-5
L IG H T C R U D E C O N T IN U O U S 1 0 0 0 B AR R EL S [ N YMEX] ( 48 .8 2 0 0 , 4 9 .2 5 0 0 , 4 7 .7 5 00 , 4 9.0 1 0 0 , -0 .0 9 00 0 )
54
53
52
51
50
49
48
47
1 0 0 .0 %
46
7 8 .6 %
45
44
Near those supports, bulls rushed in to provide support.

Consequently, the oil started the next rally and crossed the high
of $42.49. Overall, the oil formed a deep retracement of the
previous fall and has reached near the high of $50.92.
43
42
6 1 .8 %
41
40
39
5 0 .0 %
38
37
36
3 8 .2 %
35
34
The oil is facing pressure as it is approaching a high. The shortterm momentum indicator is in a negative divergence and
triggered a bearish crossover.
33
31
30
29
28
27
Thus, unless the high is crossed, the oil can fall back towards
$43.20-$43.00.
View
Down
June 2016
Reversal
Supports
Resistances
Target
$50.92
$47.25/$45.10
$50/$50.21
$43.20$43.00
32
2 3 .6 %
0 .0 %
26
25
p te m b e r
32
O ct o b e r
N o ve m b e r
Dec em ber
2 0 16
F e b ru a ry
M a rch
Ap ri l
Ma y
Ju n e
Ju l y
COMMODITY
TREND & VIEW
TECHNICALS
Copper: Rolling down

COMEX copper faced resistance in March near the junction of

40 week exponential moving average (WEMA) and the the weekly
upper Bollinger Band. From the high of $2.3235 the red metal
tumbled down significantly.
MAC D (-0 . 0 22 6 0 )
0 .0 0
-0 . 05
H G C O PP ER C O N T IN U O U S 2 5 0 0 0 LB S [ C O MEX] ( 2 .0 8 7 0 0 , 2 .08 9 5 0 , 2 .0 5 1 50 , 2 .0 7 3 0 0 , -0 .0 2 2 50 )
2 .4 5
2 .4 0
However, from 61.8% of the previous rise, copper bounced back

once again. It moved up only to face resistance near the previous
high. Thus, the red metal started sliding down once again.
2 .3 5
0 .0 %
2 .3 0
2 .2 5
2 3 .6 %
2 .2 0
3 8 .2 %
Recently, it broke a crucial rising trendline and bounced to retest

the trendline. Once the level of $2.14 is crossed on a closing
basis, copper can start next leg-down. The levels of $2.00 and
$1.94 will be the targets from short to medium-term perspective.
2 .1 5
5 0 .0 %
2 .1 0
6 1 .8 %
2 .0 5
7 8 .6 %
2 .0 0
1 .9 5
1 0 0 .0 %
View
Down
Reversal
$2.14
Supports
$2.03/$1.98
Resistances
$2.11/$2.13
Target
$2.00/
$1.94
1 .9 0
16
23
be r
30
7
14
D ec e m b e r
21
29
11
19
25
1
8
Fe b ru a ry
2 01 6
16
22
29
7
Ma rc h
14
21
28
4
Apr il
11
18
25
2
9
Ma y
16
23
31 6
Ju n e
13
20
27
4
J ul y
Jeera: Downward trajectory

NCDEX jeera was moving up in a channelised manner since the

beginning of February. It formed a channel within a channel.
0
JE ER A Q U IN TAL - 1 MO N T H (1 6 , 36 0 .0 0 , 1 6 ,36 0 .0 0 , 1 6 ,1 7 5 . 0 0 , 1 6 ,2 0 5 .0 0, -1 4 0 .0 0 0 )
The move that started from the March low reached near a crucial
resistance zone. This leg achieved 161.8% of the equality target
and retraced 78.6% of the previous fall. It also halted near the
upper ends of both the channels.
1 8 00 0
1 7 00 0
1 6 50 0
1 0 0 .0 %
Thus, the agri-commodity entered a correction mode. The fall is

breaking up into lower degree waves.
6 1 .8 %
Supports
Rs15,870/
Rs15,640
Resistances
Rs16,430/
Rs16,560
1 5 00 0
5 0 .0 %
2 3 .6 %
3 8 .2 %
3 8 .2 %
2 3 .6 %
1 4 50 0
5 0 .0 %
1 4 00 0
Thus, the next leg-down looks round the corner. The levels of
15505 and 15385 will be the subsequent levels on the downside.
On the higher side, 16530-16620 will act as a crucial resistance
zone on a closing basis
Reversal
Rs16,620
1 6 00 0
1 5 50 0
0 .0 %
It has broken multiple supports on the way down. Recently, it

cracked through the lower channel line and has retested the same.
View
Down
1 7 50 0
1 6 1 .8 %
6 1 .8 %
500
MAC D (-3 9 .28 6 5 )
0 .0 %
1 3 50 0
1 0 0.0 %
1 3 00 0
1 2 50 0
7
14
D e ce m b e r
21 28
4
2016
11
18
25
1
8
Fe b r ua r y
15
22
29
8
Ma rc h
14
21 28
4
Ap ri l
11 18
25
2
M ay
16
23
30
6
Ju n e
13
20
Target
Rs15,505/
Rs15385
Mentha oil: Poised for a fall

As can be seen from the adjacent chart, MCX mentha oil tumbled
significantly for several weeks in February and March.
KS T (2 .6 5 0 0 4 )
5
0
-5
The fall unfolded in a channelised manner. In April, the agricommodity broke out on the upside and formed a short-term
pullback.
M EN TH A O IL - K G - 1 M O N T H (8 7 8. 9 0 0 , 8 8 0 .70 0 , 86 7 .8 0 0 , 8 7 0 .5 0 0 , -1 3 3 .3 0 0)
1 0 10
1 0 00
990
980
970
960
1 0 0 .0 %
950
940
The oil seems to have formed distribution over the last few weeks.
61.8% retracement of the previous fall acted as a crucial resistance
level.
930
920
910
900
6 1 .8 %
890
880
5 0 .0 %
870
860
3 8 .2 %
Thus, unless the level of 896 is crossed on a closing basis, the

bias remains down. The short to medium-term target on the
downside will be 818 with an intermediate support at 850.
850
840
2 3 .6 %
830
820
810
800
0 .0 %
790
780
770
760
750
View
Reversal
Supports
Resistances
Target
740
730
14
Down
Rs896
Rs850/Rs826
Rs885/Rs892
ber
Rs818
33
21 28
4
2 0 16
11
18
25
1
8
F e b ru a ry
15
22
29
8
M a rc h
14
21 28
4
Ap ri l
11 18
25
2
Ma y
16
23
30
6
J une
13
20
27
4
Ju l y
June 2016
MONTHLY VIEW
CURRENCY
FUNDAMENTALS
Currencies: Dollar advances on rate hike expectation

Key points
China Caixin Manufacturing PMI fell to 49.4 in April from 49.7 in
March
US non-farm payrolls increased by 106K in April but missed the
expectation of 203K
India IIP rose 0.1% in March and CPI accelerated to 5.39% in April
India WPI turned positive after 17 months to 0.34% in April from
-0.85% in March
May 2016 contract price movement
CURRENCY LEVELS IN MAY 2016 (IN RS)

Currency
High
Low
Close
Monthly chg (%)
USD-INR
67.75
66.23
67.04
0.87
EUR-INR
77.01
74.63
74.92
-0.29
GBP-INR
99.23
95.58
98.29
1.32
JPY-INR
62.85
60.29
61.18
2.54
May 2016 contract price movement

98.9
62.8
67.8
76.8
67.6
98.4
67.4
62.3
76.3
61.8
75.8
97.9
67.2
67
97.4
96.9
66.8
75.3
61.3
66.6
96.4
66.4
EURINR
JPYINR
USD-INR
26-May-16
24-May-16
22-May-16
20-May-16
18-May-16
16-May-16
14-May-16
12-May-16
10-May-16
08-May-16
06-May-16
04-May-16
26-May-16
24-May-16
22-May-16
20-May-16
18-May-16
16-May-16
14-May-16
12-May-16
10-May-16
08-May-16
06-May-16
04-May-16
02-May-16
60.8
USDINR
95.9
02-May-16
74.8
66.2
GBPINR
CMP: Rs67.30 (spot)
The Indian Rupee (INR) depreciated by 0.87% against the US Dollar in the previous month on the back of a strong dollar and downbeat macro-economic data.
The dollar advanced due to hawkish statements from the US Federal Reserve officials and improvement in the economic data. Further, concerns over delay in
monsoon and rise in the CPI data dampen the expectation of a rate-cut by the RBI. Foreign institutional investors (FII)s net outflows added a downside pressure
on the rupee. FIIs net sold stocks and bonds worth Rs1,865.88 crore in May.
Outlook: INR is expected to trade with a negative bias on the back of a strong dollar. Further, investors will remain cautious ahead of the FOMC meeting. The
market fears that FII outflows may be seen if the US Federal Reserve hikes the interest rate in June. A rise in the CPI data dampens the expectation of a rate-cut
by the RBI. Investors are moving towards a safe haven and pulling back from riskier assets as the market sentiment is hurt after downbeat manufacturing data
round the globe led to concerns over the global economic health. As per the latest REER reading (provisional) (110.62), the rupee is overvalued by more than
10%. The expected trading range in the near term is 66.068.60.
GBP-INR
CMP: Rs75.34 (spot)
The euro depreciated by 2.78% on the back of a strong dollar and a cut in the growth forecast by the EU. Further, downbeat economic data from
euro zone and divergence in the monetary policy added a downside pressure. The dollar gained strength after the US Federal Reserve officials
signaled that the central bank may raise the rate sooner than expected. Europe flash GDP expanded at a slower pace at 0.5% in Q1 2016
compared to an initial estimate of 0.6%. Europe CPI fell to -0.2% in April.
Outlook: The euro currency expected to remain under pressure as traders will remain cautious ahead of the European Central Bank and the US
Federal Reserve policy meeting. If the US Federal Reserve increases the rates, the demand for dollar may shoot up. The European Central Bank
is likely to keep its policy unchanged. Any dovish statement from the ECB officials may weigh on the euro. A strong dollar and divergence in the
monetary policy will add a downside pressure. Further, downbeat economic data from the euro zone will hurt the euro. The expected trading
range in the near term is 73.3077.0.
EUR-INR
CMP: Rs97.14 (spot)
The pound depreciated by 0.88% on the back of a strong dollar and divergence in the monetary policy. Further, downbeat economic data added
a downside pressure. The IMF joined BoE in warning of risk if the UK leaves the EU. However, a sharp fall was cushioned on rise in hopes that
Britain will remain in the EU.
Outlook: The pound is expected to remain under pressure as traders will remain cautious ahead of a referendum. If the UK votes to remain in the
EU, we may see an upside in pound as the market sentiment will improve. However, later, the pound may correct reflecting a weak economic
data. Such data from the UK will add fear among the investors that the economy is losing momentum. Activity in manufacturing, services and
construction sector may slow down. The expected trading range in the near term is 95.60100.50.
JPY-INR
CMP: Rs61.67(spot)
The yen depreciated by 3.97% on the back of a strong dollar and divergence in the monetary policy. The US Federal Reserve officials signaled
that the central bank may raise the rate sooner than expected, whereas Bank of Japan is expected to continue with its loose monetary stance.
Japan's officials said that Tokyo was ready to intervene in the currency market if needed.
Outlook: The yen is expected to trade with a positive bias on the back of an upbeat economic data from Japan. Further, the demand for a safe
haven may increase on rise in risk aversion in the global markets, worries over the global economic health and a volatility in the crude oil prices.
The Japanese Prime Minister Shinzo Abe announced a delay of two and a half years in the sales tax increase. Delay in the tax hike for a longer
term raised concerns about the lack of Japanese monetary stimulus. Traders will remain cautious ahead of the outcome of the OPEC meeting and
the US Federal Reserve monetary policy meeting. The expected trading range in near term is 59.2064.30.
CMP as on June 02, 2016
June 2016
34
CURRENCY
TECHNICALS
TREND & VIEW
EUR-INR: Upside potential
USD-INR: Scaling up

USD-INR had crossed the all-time high of 68.80 and made a

new high of 68.89. However, it could not sustain in the higher
territory and reacted sharply.
The fall found support near a crucial swing low as well as near
the lower end of a medium-term rising channel. It formed an
accumulation triangle near those supports and started rallying.
The rally is breaking up into lower degree waves and a minor
degree correction has taken support near the key daily moving
averages (DMAs). The daily momentum indicator is in line with
the price action.
Subsequent levels on the upside will be 67.80-68.30. On the
other hand, 66.60-66.50 will act as a key support zone on a
closing basis
M A C D ( 0 .1 5 9 3 8 )
0
0
0
0
0
-0
-0
-0
After a sharp fall in February, the EUR-INR found support

near a medium-term rising trendline. From there, the EUR-INR
moved up in March andApril. In the month gone by, the
currency pair has witnessed a short-term correction.
The price has reached near a short-term and a medium-term
rising trendline. A key support zone will be 74.30-73.90. Till
the time these levels hold on a closing basis, the currency pair
can resume the larger up-trend.
On the upside, EUR-INR can test the swing high of 77 and,
beyond that, the falling trendline from the previous swing high,
which is near 77.50.
R e l a ti v e S tr en g t h I n d e x ( 4 5 . 1 7 6 2 )
.4
.3
.2
.1
.0
.1
.2
.3
50
E U R IN R ( 7 5 . 42 0 0 , 7 5 . 6 2 0 0, 7 4 .8 9 8 0 , 7 4 . 9 86 0 , - 0 .4 4 1 0 0 )
8 0 .5
8 0 .0
U S D IN R - IN D I A N R U P E E ( 6 7 .4 7 4 5 , 6 7 . 5 0 0 0 , 6 7 . 2 0 5 5 , 6 7 .2 5 7 7 , - 0 . 1 6 5 8 0 )
7 9 .5
6 9 .5
7 9 .0
7 8 .5
7 8 .0
6 9 .0
10 0 . 0 %
7 7 .5
7 7 .0
6 8 .5
7 6 .5
78 . 6 %
7 6 .0
7 5 .5
6 8 .0
7 5 .0
61 . 8 %
7 4 .5
6 7 .5
50 . 0 %
7 4 .0
7 3 .5
38 . 2 %
7 3 .0
6 7 .0
7 2 .5
23 . 6 %
7 2 .0
6 6 .5
7 1 .5
7 1 .0
0. 0 %
7 0 .5
6 6 .0
7 0 .0
6 9 .5
6 5 .5
6 9 .0
6 8 .5
6 8 .0
6 5 .0
6 7 .5
6 7 .0
6 4 .5
6 6 .5
6 6 .0
6 5 .5
6 4 .0
6 5 .0
b er
O ct o be r
N o ve m b e r
D e ce m b e r
2 01 6
F e b ru a ry
M a rc h
A p ri l
May
J une
J u ly
15

From the high of 105.54, GBP-INR entered a correction mode.

The fall retraced 78.6% of the previous rise and unfolded in a
channelised manner. The price reached a near lower end of the
channel, where it formed an Ending Diagonal pattern, which
broke out on the upside.
Since then, the price is heading higher. Recently, it crossed upper
end of the channel and is retesting the channel line. A short-term
rising trendline as well as key DMAs are nearby.
From a short-term perspective, 99.50 & 100.92 ie 50% and
61.8% retracement mark, respectively, will be the key levels on
the upside. The bullish potential remains intact as long as the
swing low of 95.65 holds.
MACD (0.39317)
May
J un e
J u ly
Au g u s t
S e p te m b e r
N o v e m be r
2016
F e b r u a r y M a rc h
A p ri l
May
Ju n e
Ju ly
JPY-INR is an up-trend from a medium-term perspective. The recent

short-term correction found support near the junction of daily lower
Bollinger Band and the key DMAs and multiple rising trendlines.
From there, the currency pair seems to have started the next leg on the
upside. The short-term momentum indicator has triggered a bullish
crossover whereas the medium-term momentum indicator is already
in a bullish mode.
Thus, the recent low of 60.27 will act as a crucial support. On the
higher side, 62.84 and 64 will be the targets from a short and mediumterm perspective, respectively.
K S T (-0 . 05 2 3 0 )
1.5
1.0
0.5
0.0
-0.5
100.0%
4
3
2
1
0
107.0
106.5
106.0
105.5
GBPINR (97.1840, 97.4510, 96.8780, 96.9920, -0.19901)
0.0%
A p ri l
JPY-INR: Bullish outlook
GBP-INR:Near multiple supports

Fe b r u a r y
-1
J P Y IN R ( 6 1 . 5 4 6 0 , 6 2 . 0 0 5 0 , 6 1 .5 0 0 0 , 6 1 . 7 7 2 0 , + 0 .2 3 2 0 0 )
6 5 .0
105.0
104.5
104.0
103.5
103.0
102.5
102.0
101.5
23.6%
6 3 .5
6 3 .0
6 2 .5
6 2 .0
101.0
100.5
100.0
50.0%
99.5
99.0
98.5
6 0 .5
98.0
5 9 .5
97.5
97.0
5 9 .0
38.2%
61.8%
6 4 .0
61.8%
38.2%
50.0%
6 4 .5
6 1 .5
6 1 .0
6 0 .0
5 8 .5
96.5
23.6%
96.0
5 8 .0
95.5
5 7 .5
95.0
5 7 .0
94.5
78.6%
5 6 .5
94.0
0.0%
93.5
5 6 .0
93.0
5 5 .5
92.5
5 5 .0
92.0
100.0%
91.5
5 4 .5
91.0
5 4 .0
90.5
5 3 .5
90.0
5 3 .0
89.5
89.0
5 2 .5
88.5
March
April
May
June
July
Augus t
Septem ber
Currency
View
USD-INR
Up
Novem ber
2016
February
March
April
May
June
30
7
14
D ec e m b e r
July
21
28
4
2016
11
18
25
1
8
F e b ru a ry
15
22
29
7
M ar c h
14
21
28
4
A p r il
11
18
25
2
May
16
Reversal
Supports
Resistances
Target
66.50
67.04/66.86
67.67/68.00
67.80-68.30
GBP-INR
Up
95.65
96.50/96.18
98.82/99.80
99.50-100.92
EUR-INR
Up
73.90
74.59/74.30
76.00/76.60
77-77.50
JYP-INR
Up
60.2700
60.94/60.45
62.62/63.10
62.84-64
35
23
30
6
Ju n e
13
June 2016
PMS FUNDS
PMS
DESK
Portfolio Management Service

We are pleased to introduce you to Sharekhans Portfolio
Management Service (PMS) in which we completely manage
your investment portfolio so that you stop worrying about
the market volatility and focus your energy on things that
you like to do!
We have the following strategies on offer:
ProPrime
(based on fundamental research)
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 - DIVERSIFIED EQUITY

Product performance
as on May 31, 2016
OVERVIEW
The ProPrimeDiversified Equity PMS strategy is suitable for long-term investors
looking to create an equity portfolio through disciplined investments that will lead to a
growth in the portfolios value with medium to high risk.
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough

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

record and have partial exposure to quality companies in the mid-cap space.
(In %)
Scheme
S&P CNX 500
1 months
1.6
3.3
3 months
10.9
16.7
6 months
-4.0
1.8
1 year
0.9
-2.2
Best month
36.3
34.4
Worst month
-23.4
-27.2
Best quarter
60.3
51.2
Worst quarter
-30.5
-28.6
Disclaimer: Returns are based on a clients

returns since inception and may be different from
those depicted in the risk disclosure document.
Top 10 stocks
PRICING
Minimum investment of Rs25 lakh
Charges
Apollo Tyres
Axis Bank
Federal Bank
2% per annum; AMC fee charged every quarter
IndusInd Bank
0.5% brokerage
Hero MotoCorp
20% profit sharing after the 12% hurdle is crossed at the end of
every fiscal
ICICI Bank
IL&FS Transport Networks
Lupin
Reliance Industries
Sun Pharmaceutical Industries
FUND OBJECTIVE
A good return on money through long-term investing in quality companies
June 2016
36
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.
(In %)
Scheme
Sensex
Nifty
The strategy has the potential to generate profits irrespective of the market
direction by going long or short on Nifty futures.
1 months
-6.8
4.1
4.0
3 months
-10.4
15.9
16.8
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.
FY15-16
11.3
-9.4
-8.9
FY14-15
-3.4
24.9
26.7
FY13-14
8.8
18.9
18.0
FY12-13
3.7
8.2
7.3
FY11-12
13.1
-10.5
-9.2
FY10-11
9.2
10.9
11.1
14.7
80.5
73.8
158.9
163.4
170.1
INVESTMENT STRATEGY
Product performance
as on May 31, 2016
The portfolio is not leveraged, ie its exposure never exceeds its value.
PRICING
FY09-10
Charges
Since inception*
AMC fees:
0%
Brokerage:
0.05%
Profit sharing:
Flat 20% charged on a quarterly basis
Best month
28.9
28.3
28.1
Worst month
-17.1
-23.9
-26.4
Best quarter
33.3
49.3
42.0
Worst quarter
-11.7
-25.0
-24.5
*01-Feb-2006
FUND MANAGERS VIEW

After months of positive returns and good winning signals we finally faced a narrow
trading range that resulted in four long-short signals that were unprofitable. This
caused a drawdown in the net asset value of the Index Futures Fund. As always,
every drawdown is followed by a winning streak and we should expect the same
here.

The market itself had started to trend nicely in 2015, something we had expected to
continue. So this months non-trending market came as a surprise. Having said that,
this trend cannot be permanent. The market has been in a low-volatility environment
for years which is not sustainable and when volatility shoots up so will our returns.
Till then, we are still in a low-return environment.
Investments in
Nifty Index
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
37
June 2016
PMS FUNDS
PMS
DESK
PROTECH - TRAILING STOPS

OVERVIEW
Our ProTechTrailing Stops PMS strategy is ideal for Traders and Investors looking for Regular Income from trading and desire to make profits in both bullish and
bearish market conditions. It is designed to payout book profits on monthly basis.*
It is also for those investors who are looking for better income than Fixed Income
or Deposits. This strategy involves going Long (buying) or Short (selling without
holding) on stock futures.
(In %)
* Terms and conditions apply
Scheme
Sensex
Nifty
0.8
4.1
4.0
3 months
1.2
15.9
16.8
FY15-16
-0.6
-9.4
-8.9
FY14-15
-3.7
24.9
26.7
FY13-14
-1.1
18.9
18.0
FY12-13
14.9
8.2
7.3
FY11-12
29.0
-6.1
-4.6
FY10-11
FY09-10
39.6
43.9
47.0
1 month
INVESTMENT STRATEGY
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls.
A risk model has been developed for stock portfolio allocation that reduces the
risk and portfolio volatility through staggered building of positions.
Product performance
as on May 31, 2016
It is non-leveragedthe exposure will never exceed the value of the portfolio.
Since inception*
PRICING
Best month
9.1
11.3
12.4
Worst month
-5.1
-8.9
-9.3
Charges
Best quarter
9.9
13.5
13.5
AMC fees:
0%
Worst quarter
-8.2
-12.7
-12.5
Brokerage:
0.05%
*09th May 2011
Profit sharing:
Flat 20% charged on a quarterly basis

FUND MANAGERS VIEW

A return of 0.77% for the month is small but is a good start to the new financial year,
as Trailing Stops had ended the last year with flat returns. Huge variations in stock
behavior vs index behavior have put us on a back foot in terms of taking risk. Our
focus remains on capital preservation till the market starts to trend clearly with broadbased market participation.
Investments in
Nifty Index
Stock futures
A broad-based participation is usually good for our top-down trading approach for
this fund.
Our market view remains that we will see increasing volatility in the months ahead
which should see the sectors in the market align in terms of direction.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.
June 2016
38
PMS
DESK
WEALTHOPTIMIZER
WEALTHOPTIMIZER PMS
The Indian equity market presents an excellent opportunity for the long-term investors. Sharekhan offers you solutions to meet your
financial objectives. WealthOptimizer is a portfolio management product that involves enhancing wealth over the long term. The goal is
to not only outperform the market but also generate superior returns.
Strategy
To invest in the most undervalued stocks of growing companies on the basis of reported financial performance
How the product works
Fundamental analysis is performed on more than 5,000 companies
Stocks with sound fundamentals are picked, subject to strategy conditions
Top 10 stocks are selected each day based on the maximum scope to grow
No particular sector forms more than 20% of the clients portfolio
Fundamentals of stocks held are reviewed every quarter based on quarterly results
Automated decision making system for transparent and disciplined investing
Key product specifications
Minimum investment amount: Rs25 lakh
Recommended investment duration: Two years or more
Phone: 022-6750 2152 / 2261 / 2363 / 2104
E-mail: pms@sharekhan.com
Disclaimer: Product is offered by Sharekhan Ltd (Registered Portfolio Manager with SEBI Regn. Nos. INP000000662 CIN No. U99999MH1995PLC087498) and having registered office at 10th Floor,
Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai -400042, Maharashtra. Tel: 022-61150000. Email: igc@sharekhan.com,
pms@sharekhan.com. This information does not purport to be an invitation or an offer for services, client is required to take independent advise before opting for any service. Securities investments are
subject to market and other risks and client should refer to the risk disclosure document carefully. Past performance is no indication of future results. Future performance may vary. Detailed disclaimers and
risk disclosure document is available on our website www.sharekhan.com, please acquaint yourself with these before investing.
39
June 2016
MONTHLY PERFORMANCE
ADVISORY
DESK
Advisory Products and Services

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

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

Ideas
Ideas based on Stock Ideas,

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

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

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

These calls are based on the analysis of open interest, implied volatility and put-call ratio in the derivative market. It is a leveraged product and ideal for aggressive traders. These calls have pre-defined stop
loss, targets, time frame and quantity to execute. For details of the
product please write to us at derivative@sharekhan.com.
C) Time frame
Performance
Reporting
Daily
Report Card
MID performance*
Product
Month
No. of calls
Open
Profit booked
Stop loss hit
Strike rate (%)
June 2016
MID Derivative Calls performance*

Ticket size (Rs)
New Alpha Delivery Picks

May 2016
FY2016
4
1
2
1
2
50
Month
No. of calls
40
100,000
May 2016
FY2016
23
39
Profit booked
22
Stop loss hit

Strike rate (%)
14
9
17
56
41
June 2016
MUTUAL FUNDS
MF PICKS
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)
DESK
MAY 09, 2016

Data as on May 02, 2016
Scheme name
Large-cap funds
SBI Bluechip Fund
Birla Sun Life Frontline Equity Fund - Reg
ICICI Prudential Focused Bluechip Equity Fund - Ret
Religare Invesco Business Leaders Fund
Franklin India Bluechip
Indices
BSE Sensex
Mid-cap funds
DSP BlackRock Micro Cap Fund - Reg
Reliance Small Cap Fund
Franklin India Smaller Companies Fund
SBI Magnum Midcap Fund
Mirae Asset Emerging Bluechip Fund
Indices
BSE MID CAP
Multi-cap funds
Birla Sun Life Pure Value Fund
L&T India Value Fund
ICICI Prudential Value Discovery Fund
Kotak Select Focus Fund - Reg
BNP Paribas Dividend Yield Fund
Indices
BSE 500
Tax-saving funds
Birla Sun Life Tax Relief 96
Franklin India Taxshield
Religare Invesco Tax Plan
BNP Paribas Long Term Equity Fund
ICICI Prudential Long Term Equity Fund (Tax Saving) - Reg
Indices
Nifty 500
Thematic funds
ICICI Prudential Exports and Other Services Fund
Franklin Build India Fund
Sundaram Rural India Fund - Reg
Birla Sun Life Special Situations Fund
DSP BlackRock Natural Resources & New Energy Fund - Reg
Indices
Nifty 50
Balanced funds
HDFC Balanced Fund
L&T India Prudence Fund
Franklin India Balanced Fund
Birla Sun Life Balanced 95
DSP BlackRock Balanced Fund
Indices
Crisil Balanced Fund Index
Star
rating

NAV (Rs)
Absolute
6 months
Returns (%)
Compounded annualised
1 year
3 years
5 years
Since inception
28.7
158.3
28.3
20.2
349.1
1.7
-1.3
-1.7
-1.8
-1.2
4.2
-0.4
-1.1
-0.2
1.4
19.4
16.4
15.1
14.8
14.0
14.6
12.3
11.1
10.4
10.0
10.9
22.4
14.0
11.1
21.8
25,437.0
-4.2
-5.8
8.8
6.0
15.9
43.0
25.7
40.2
61.9
31.0
1.8
-3.5
2.5
4.2
0.4
10.0
9.2
6.6
10.3
8.4
40.5
38.9
35.6
34.3
32.8
22.5
21.0
23.0
22.4
23.1
17.8
18.3
14.5
17.8
21.5
11,164.4
1.6
7.1
20.4
9.7
21.2
39.2
24.4
111.8
22.6
33.9
1.4
-2.3
-1.5
-1.7
-1.5
7.6
4.4
-0.3
2.0
0.5
31.5
26.9
26.4
20.6
19.3
18.4
17.0
17.8
14.0
13.5
18.4
15.2
22.9
13.1
12.2
10,392.7
-2.5
-2.8
11.6
7.1
14.5
21.5
420.6
34.4
29.0
264.6
0.4
-0.7
-2.0
-1.3
-2.2
1.5
2.4
0.4
1.2
0.6
22.9
21.4
21.0
20.6
20.5
14.1
14.8
14.4
15.7
13.1
9.8
24.5
14.1
10.9
21.6
6,580.2
-2.4
-2.5
11.9
7.5
9.1
44.1
28.3
27.9
16.8
19.5
-7.7
-0.2
7.7
-6.4
14.6
2.8
-2.0
12.9
-2.4
7.3
31.8
28.8
20.0
19.7
18.4
20.3
19.2
12.8
11.6
5.9
15.3
16.9
10.8
6.5
8.7
7,805.9
-3.0
-4.6
9.2
6.5
13.8
108.3
19.4
91.8
565.5
108.9
-0.2
-1.1
0.6
0.9
-0.8
2.2
2.6
4.0
3.2
3.2
20.3
19.8
18.6
17.5
16.1
14.1
13.6
13.4
12.5
10.4
16.4
13.5
14.5
20.9
15.1
--
-0.4
0.3
9.2
7.6
12.3
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.
June 2016
42
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP SIP FUND PICKS
MAY 09, 2016

Data as on May 02, 2016
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 (%)
45,942.8
8.7
5 years
60,000
Present Avg. annual
value (Rs)
return (%)
Large-cap funds
SBI Bluechip Fund
29
12,313.8
2.9
93,976.6
9.5
Birla Sun Life Frontline Equity Fund - Reg
158
12,027.2
0.2
42,891.2
6.2
86,825.3
7.8
Franklin India Bluechip
349
12,100.8
0.9
42,546.0
5.9
81,651.7
6.5
20
11,946.1
-0.5
42,444.9
5.8
83,165.5
6.9
Religare Invesco Business Leaders Fund

ICICI Prudential Select Large Cap Fund - Ret
22
12,035.0
0.3
40,534.9
4.2
79,085.4
5.8
25,437.0
11,688.3
-2.8
37,832.4
1.7
72,108.7
3.8
DSP BlackRock Micro Cap Fund - Reg
43
12,483.3
4.4
59,298.0
18.7
126,770.6
16.4
Reliance Small Cap Fund
26
12,219.7
2.0
55,508.0
16.0
121,089.3
15.3
SBI Magnum Midcap Fund
62
12,524.2
4.8
54,052.4
15.0
119,593.5
15.0
Franklin India Smaller Companies Fund
40
12,484.8
4.4
53,825.7
14.8
121,882.5
15.5
BSE Sensex
Mid-cap funds
Mirae Asset Emerging Bluechip Fund
31
12,257.6
2.3
53,391.8
14.5
116,907.1
14.5
11,164.4
12,414.8
3.76
47,400.7
9.90
89,767.4
8.53
Birla Sun Life Pure Value Fund
39
12,328.2
3.0
51,386.2
13.0
109,057.3
12.9
L&T India Value Fund
24
11,986.8
-0.1
49,476.4
11.5
104,306.0
11.9
BSE Midcap
Multi-cap funds
ICICI Prudential Value Discovery Fund

SBI Magnum Multi Cap Fund
Kotak Select Focus Fund - Reg
BSE 500
112
12,017.3
0.2
48,357.0
10.7
103,044.2
11.6
33
12,312.0
2.8
47,589.9
10.0
95,849.2
10.0
23
12,022.4
0.2
45,222.7
8.1
92,193.7
9.1
10,392.7
11,885.0
-1.04
40,384.8
4.02
76,803.8
5.14
Tax-saving funds
Birla Sun Life Tax Relief 96
21
12,156.3
1.4
47,193.7
9.7
96,618.2
10.2
421
12,114.3
1.0
46,059.2
8.8
92,984.1
9.3
DSP BlackRock Tax Saver Fund
32
12,163.6
1.5
45,140.9
8.1
92,032.0
9.1
BNP Paribas Long Term Equity Fund
29
11,966.0
-0.3
45,100.8
8.0
92,544.6
9.2
265
12,018.0
0.2
44,143.1
7.2
89,998.4
8.6
7,805.9
11,804.9
-1.8
38,637.6
2.5
73,443.4
4.2
Franklin India Taxshield
ICICI Prudential Long Term Equity Fund

(Tax Saving) - Reg
Nifty 50
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan
first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest
that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
43
June 2016
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Sharekhan Earnings Guide

Company
CMP
(Rs)
Prices as on June 02, 2016

Sales
FY16
FY17E
Net profit
FY18E
FY16
FY17E
FY18E
FY16
EPS
(%) EPS
growth
FY17E
FY18E FY18/FY16
PE (x)
RoCE (%)
RoNW (%)
FY16 FY17E FY18E FY17E FY18E FY17E
DPS
FY18E
Div
yield
(Rs) (%)
AUTOMOBILES
Apollo Tyres
155.0
11,793.0
13,087.8
14,592.7
1,045.2
837.8
1,013.9
20.7
16.5
19.9
-2%
7.5
9.4
7.8
13.0
14.5
12.4
13.3
2.0
1.3
Ashok Leyland
105.6
18,821.6
22,006.4
25,621.0
1,112.7
1,497.8
1,917.2
3.9
5.3
6.7
31%
27.1
19.9
15.8
25.2
29.5
24.5
28.2
1.0
0.9
2,595.0
22,687.6
24,434.1
27,805.0
3,652.4
3,840.7
4,349.3
126.3
132.8
150.4
9%
20.5
19.5
17.3
39.0
39.3
27.5
27.6
50.0
1.9
91.8
1,438.2
1,593.7
1,789.8
75.8
83.8
100.1
5.3
5.8
7.0
15%
17.3
15.8
13.1
26.2
27.4
20.0
20.9
0.5
0.5
Hero MotoCorp
3,144.3
28,599.3
31,667.5
35,868.8
3,132.4
3,218.7
3,514.5
156.9
161.2
176.0
6%
20.0
19.5
17.9
48.6
46.4
35.1
33.0
40.0
1.3
M&M
1,333.3
38,856.6
45,169.8
51,356.0
3,291.9
3,657.1
4,493.8
53.0
58.9
72.4
17%
25.2
22.6
18.4
18.1
19.7
14.9
16.2
12.0
0.9
Maruti Suzuki
4,186.7
57,746.2
68,110.6
78,843.9
4,571.0
5,623.0
7,133.0
151.3
186.1
236.1
25%
27.7
22.5
17.7
24.4
26.7
18.2
19.9
25.0
0.6
Bajaj Auto
Gabriel Industries
Rico Auto Industries

TVS Motor
35.8
1,007.0
1,111.8
1,245.0
34.0
41.6
57.2
2.5
3.1
4.2
30%
14.3
11.5
8.5
11.3
13.9
8.2
10.4
0.5
1.4
296.6
11,243.9
13,088.8
15,456.5
437.8
574.2
765.3
9.2
12.1
16.1
32%
32.2
24.5
18.4
24.1
29.5
25.3
28.8
2.5
0.8
0.0
BANKS & FINANCE

Allahabad Bank
51.8
7,808.6
8,458.0
(743.3)
663.8
-12.1
10.8
0.0
4.8
4.4
0.0
0.0
Axis (UTI) Bank
524.4
26,204.4
30,442.4
35,621.5
8,223.7
9,438.7
11,258.4
34.5
39.6
47.2
17%
15.2
13.2
11.1
16.5
17.2
5.0
0.9
Bajaj Finance
7,964.6
4,029.7
4,973.7
6,210.9
1,278.6
1,563.6
1,969.9
238.8
292.0
367.9
24%
33.4
27.3
21.7
19.3
20.5
25.0
0.3
Bajaj Finserv
1,851.4
9,446.4
1,863.3
117.1
15.8
0.0
0.0
1.8
0.1
141.6
17,738.7
20,063.6
23,133.7 (5,395.6)
2,239.0
3,635.4
-23.4
9.7
15.7
14.6
9.0
5.5
8.4
3.0
2.1
Bank of India
86.6
15,377.2
17,084.7
19,230.6 (6,089.2)
959.5
1,250.0
-74.5
11.7
15.3
7.4
5.7
2.9
3.7
0.0
0.0
Capital First
564.2
818.1
1,087.6
1,422.2
166.2
228.1
316.4
18.2
25.0
34.7
38%
31.0
22.6
16.3
12.7
15.8
2.5
0.4
Corp Bank
34.9
5,974.6
6,381.9
(506.5)
214.1
-5.0
2.1
0.0
16.6
1.9
0.0
0.0
0.0
Federal Bank
51.5
3,290.6
3,684.7
4,284.5
475.8
744.4
1,017.9
2.8
4.3
5.9
46%
18.6
11.9
8.7
8.8
11.1
0.7
1.4
10,510.5
Bank of Baroda
HDFC
1,260.6
8,387.5
9,356.6
7,093.1
7,694.9
8,653.5
44.9
48.7
54.7
10%
28.1
25.9
23.0
20.0
20.0
17.0
1.3
HDFC Bank
1,175.0
38,343.2
45,700.4
54,289.3 12,296.2
14,953.6
18,360.2
48.6
59.1
72.6
22%
24.2
19.9
16.2
19.2
20.4
9.5
0.8
ICICI Bank
241.4
36,547.1
39,070.1
45,327.9
9,726.3
11,233.1
13,921.5
16.7
19.3
23.9
20%
14.4
12.5
10.1
12.3
14.2
5.0
2.1
IDBI Bank
67.0
9,499.7
10,450.9
11,918.9 (3,664.8)
977.4
1,497.4
-17.8
4.7
7.3
14.1
9.2
3.5
5.2
0.0
0.0
1.2
LIC Housing Finance
474.0
2,944.1
3,323.3
1,660.8
1,992.6
32.9
39.5
0.0
14.4
12.0
20.1
0.0
5.5
PTC India Fin. Ser.
37.0
414.2
527.2
671.8
391.1
333.0
429.3
7.0
5.9
7.6
5%
5.3
6.2
4.8
18.0
20.3
1.2
3.2
Punjab National Bank
77.5
22,188.8
23,923.7
29,013.9 (3,974.4)
1,639.1
3,269.7
-20.2
8.3
16.7
9.3
4.7
4.2
8.0
0.0
0.0
SBI
200.6
85,040.2
92,817.6
104,429.9
9,950.7
12,490.9
14,925.9
12.8
16.1
19.2
22%
15.6
12.5
10.4
8.4
9.4
2.6
1.3
Union Bank of India
116.4
11,944.8
13,113.4
14,645.1
1,351.6
1,955.0
2,361.9
19.7
28.4
34.4
32%
5.9
4.1
3.4
8.3
9.3
2.0
1.7
1,049.1
7,278.9
8,937.7
11,221.6
2,539.5
3,121.7
3,974.0
60.4
74.2
94.5
25%
17.4
14.1
11.1
20.8
22.3
10.0
1.0
Britannia
2,799.5
8,678.9
10,084.9
11,582.1
813.6
1,006.8
1,223.8
67.8
83.9
102.0
23%
41.3
33.4
27.4
75.0
68.3
48.9
44.5
20.0
0.7
Emami
1,015.0
2,623.8
3,121.6
3,684.9
526.9
617.3
808.1
23.2
27.2
35.6
24%
43.8
37.3
28.5
38.7
47.5
40.8
44.4
3.0
0.3
GSK Consumers*
5,702.6
4,106.6
4,450.3
4,976.6
683.8
789.7
872.9
162.6
187.7
207.5
13%
35.1
30.4
27.5
45.1
42.7
29.7
28.2
70.0
1.2
GCPL
Yes Bank
CONSUMER GOODS
1,543.2
8,957.2
10,401.2
12,137.7
1,140.3
1,347.3
1,635.4
33.5
39.6
48.0
20%
46.1
39.0
32.2
22.3
23.9
24.7
24.3
5.8
0.4
Hindustan Unilever
868.2
32,482.7
36,063.7
40,288.4
4,143.4
4,843.8
5,811.2
19.1
22.4
26.9
19%
45.5
38.8
32.3
153.1
149.5
114.2
110.4
9.5
1.1
ITC
358.0
36,837.4
40,726.5
47,710.5
9,844.7
11,102.7
13,034.9
12.3
13.9
16.3
15%
29.1
25.8
22.0
39.8
41.0
31.8
32.6
8.5
2.4
Jyothy Laboratories
283.5
1,646.6
1,869.4
2,167.4
157.9
181.2
216.9
8.7
10.0
12.0
17%
32.6
28.4
23.6
17.2
21.6
20.1
21.2
1.0
0.4
Marico
249.0
6,132.0
6,669.4
7,646.9
709.4
851.3
1,017.6
5.5
6.6
7.9
20%
45.3
37.7
31.5
47.5
45.6
35.9
33.9
3.8
1.5
Zydus Wellness
776.0
431.5
487.1
559.9
102.6
118.2
138.0
26.3
30.3
35.3
16%
29.5
25.6
22.0
22.6
22.2
20.7
20.8
6.5
0.8
0.0
IT / IT SERVICES
Firstsource Solution
41.4
3,230.3
3,648.7
3,979.4
265.0
327.3
383.8
3.9
4.9
5.7
20%
10.5
8.5
7.2
12.3
12.5
12.6
13.0
0.0
HCL Technologies***
721.4
31,136.0
47,022.3
53,192.4
5,669.0
8,000.9
9,195.6
40.3
56.9
65.4
27%
17.9
12.7
11.0
32.3
31.6
26.1
25.3
17.0
2.4
1,261.6
62,441.0
70,896.3
78,679.3 13,492.0
15,435.2
17,225.2
59.0
67.5
75.3
13%
21.4
18.7
16.8
36.0
36.1
25.8
26.0
24.3
1.9
Infosys
Persistent Systems
727.0
2,312.3
2,947.6
2,650.2
108,646.2
121,665.6
540.4
51,244.0
58,129.2
63,397.1
BHEL
120.1
25,138.0
29,240.0
CESC
538.1
6,493.0
7,150.0
TCS
Wipro
297.4
337.4
399.3
37.2
42.2
49.9
16%
19.6
17.2
14.6
25.7
26.6
19.2
19.6
8.0
1.1
134,932.4 24,215.2
3,362.4
26,617.1
29,697.2
123.6
135.9
151.6
11%
21.4
19.5
17.5
37.5
34.8
29.5
27.3
43.5
1.6
8,892.2
9,907.4
11,104.6
36.2
40.5
45.1
12%
14.9
13.3
12.0
17.8
17.7
19.3
18.6
12.0
2.2
33,308.0
(913.0)
(98.0)
946.0
-3.7
-0.4
3.9
30.8
4.4
2.8
0.4
0.3
7,787.0
707.0
746.5
794.8
53.3
56.3
60.0
6%
10.1
9.6
9.0
7.3
7.4
8.4
8.6
10.0
1.9
0.0
CAPITAL GOODS / POWER
Crompton Greaves
74.1
5,272.0
5,828.0
6,206.0
127.0
124.0
230.0
2.0
3.4
3.7
36%
37.1
21.8
20.0
5.7
6.1
4.5
4.6
0.0
Finolex Cable
349.2
2,461.0
2,682.0
3,036.0
249.0
271.0
302.0
16.3
17.7
19.7
10%
21.4
19.7
17.7
23.3
22.6
23.2
22.8
2.5
0.7
Greaves Cotton^
137.5
1,616.2
1,732.2
1,982.9
174.0
189.8
209.0
7.1
7.8
8.6
10%
19.4
17.6
16.0
30.0
30.4
20.7
20.9
5.5
4.0
Kalpataru Power
245.1
4,365.0
5,376.0
5,927.0
200.0
250.0
278.0
13.0
16.3
18.1
18%
18.9
15.0
13.5
17.1
16.6
10.6
10.7
1.5
0.6
68.3
12,799.0
12,572.0
13,383.0
220.0
227.0
243.0
7.4
7.7
8.2
5%
9.2
8.9
8.3
11.9
12.2
12.9
13.1
2.5
3.7
146.8
1,506.0
1,752.0
2,066.0
83.1
95.1
115.4
8.1
9.3
11.3
18%
18.1
15.8
13.0
24.7
24.2
22.3
22.1
1.4
1.0
PTC India
Skipper
Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated
^^ FY2015 earnings numbers are on reported basis, including the one-time impact of bonus for employees to the tune of Rs2,627.9 crore
44
June 2016
EQUITY
FUNDAMENTALS
Company
CMP
(Rs)
Thermax
755.0
Triven Turbine
108.0
796.3
Va Tech Wabag
612.1
2,549.0
1,387.5
1,862.0
2,100.0
V-Guard Industries
EARNINGS GUIDE
Sales
FY16
4,352.0
FY17E
4,066.0
Net profit
FY16
25.6
EPS
(%) EPS
growth
FY17E
24.4
FY18E FY18/FY16
26.8
2%
PE (x)
RoCE (%)
RoNW (%)
FY16 FY17E FY18E FY17E FY18E FY17E

29.5 30.9 28.2 16.2 16.7
11.3
DPS
FY18E
11.4
Div
yield
(Rs) (%)
6.0 0.8
FY18E
4,328.0
FY16
306.0
FY17E
291.0
FY18E
319.0
1,032.4
1,191.8
107.6
147.7
172.2
3.3
4.5
5.2
27%
33.1
24.1
20.7
51.8
43.0
36.0
30.3
1.1
3,020.0
3,577.0
85.6
128.5
164.1
15.8
23.7
30.2
38%
38.7
25.8
20.3
17.5
19.4
12.5
14.5
4.0
0.7
2,370.0
111.7
129.7
150.2
37.1
43.1
49.9
16%
37.4
32.2
27.8
35.9
34.7
25.1
24.1
2.5
0.2
1.0
INFRASTRUCTURE / REAL ESTATE

Gayatri Projects
ITNL
IRB Infra
Jaiprakash Associates
Larsen & Toubro
577.0
1,812.2
2,375.7
2,941.8
58.6
97.5
146.7
16.5
27.5
41.4
58%
34.9
21.0
13.9
11.0
12.9
11.5
15.2
2.0
0.3
68.6
8,263.8
8,624.0
9,277.9
311.5
224.1
324.2
9.5
6.8
9.9
2%
7.2
10.1
7.0
8.6
9.1
3.3
4.7
2.0
2.9
218.0
5,130.2
5,744.0
6,333.5
635.8
797.8
873.7
18.1
22.7
24.9
17%
12.0
9.6
8.8
12.3
14.2
15.5
15.0
4.0
1.8
5.4
8,793.8
- (3,511.7)
-14.4
0.0
0.0
1,477.3 102,632.0
115,975.0
5,349.0
6,066.0
50.8
57.4
65.1
13%
29.1
25.7
22.7
7.7
8.3
11.6
12.1
16.3
1.1
4.5
128,435.0
4,732.0
10,549.0
2,545.0
2,019.0
2,387.0
42.3
33.6
39.7
-3%
8.3
10.5
8.9
9.9
11.3
8.9
10.1
16.0
356,080.0 27,207.0
27,848.0
32,483.0
92.3
94.5
110.2
9%
10.4
10.1
8.7
8.5
9.3
10.5
11.0
10.5
1.1
OIL & GAS

Oil India
352.7
9,765.0
9,053.0
Reliance Ind
956.3 276,544.0
308,545.0
Selan Exploration
187.9
62.0
78.1
12.9
20.9
7.9
12.7
23.8
14.8
9.2
7.2
5.0
2.6
Aurobindo Pharma
788.9
13,896.1
16,477.8
19,707.6
2,048.0
2,630.0
3,455.0
35.0
44.9
59.0
30%
22.5
17.6
13.4
29.4
33.1
31.6
30.6
2.5
0.3
Cipla
468.1
13,678.3
16,843.3
19,670.7
1,505.9
1,979.9
2,688.9
19.5
24.6
33.5
31%
24.0
19.0
14.0
14.5
17.4
15.2
17.4
2.0
0.4
Cadila Healthcare
324.3
9,837.6
10,763.2
12,437.1
1,522.6
1,870.5
2,265.9
14.9
18.3
22.1
22%
21.8
17.7
14.7
28.5
31.3
27.2
26.0
3.2
1.0
1,141.8
3,769.0
4,256.1
5,178.5
1,111.9
1,228.4
1,448.7
41.9
46.3
54.6
14%
27.2
24.7
20.9
33.5
34.1
26.7
26.1
10.0
0.9
834.7
7,650.0
9,615.0
10,101.0
1,068.0
1,453.0
1,546.0
37.8
51.5
54.8
20%
22.1
16.2
15.2
23.8
23.0
25.7
21.7
2.0
0.2
1,475.4
14,208.5
17,022.9
20,420.4
2,270.7
3,035.1
3,791.7
50.4
67.4
84.1
29%
29.3
21.9
17.5
22.2
25.6
21.7
21.5
7.5
0.5
746.8
28,269.7
35,638.9
36,757.9
5,401.1
7,317.6
8,122.9
22.4
30.4
33.8
23%
33.3
24.6
22.1
23.5
24.2
19.2
17.9
3.0
0.4
1,335.8
6,529.0
6,762.3
7,276.9
1,862.0
1,165.2
1,290.5
110.0
68.9
76.3
-17%
12.1
19.4
17.5
26.5
24.3
26.5
21.5
35.0
2.6
4,341.4
35,625.0
41,756.0
47,777.0
2,347.0
3,037.0
3,732.0
251.4
325.3
399.8
26%
17.3
13.3
10.9
14.2
16.2
10.3
10.9
18.0
0.4
498.0
3,661.0
4,044.0
4,560.0
517.0
615.0
737.0
21.7
25.8
31.0
20%
22.9
19.3
16.1
11.1
12.1
18.2
18.5
3.0
0.6
13,733.6
5,568.0
8,586.0
10,514.0
474.0
1,106.0
1,431.0
136.2
317.5
410.7
74%
100.8
43.3
33.4
16.0
17.0
16.0
17.0
24.0
0.2
3,233.0
23,841.0
27,354.0
32,193.0
2,205.0
2,778.0
3,559.0
80.5
101.4
129.9
27%
40.2
31.9
24.9
15.8
18.4
11.9
13.4
9.0
0.3
PHARMACEUTICALS
Divi's Labs
Glenmark Pharma
Lupin
Sun Pharma
Torrent Pharma
BUILDING MATERIALS
Grasim
The Ramco Cements
Shree Cement**
UltraTech Cement
DISCRETIONARY
CONSUMPTION
Century Plyboards (India)
168.1
1,664.0
1,925.0
2,192.0
167.0
199.0
230.0
7.5
8.9
10.3
17%
22.4
18.9
16.3
21.8
20.6
30.4
26.5
1.0
0.6
Cox and Kings
152.0
2,351.9
2,345.0
2,680.8
284.9
302.3
426.2
16.8
17.9
25.2
22%
9.0
8.5
6.0
10.3
13.0
13.1
16.5
1.0
0.7
Inox Leisure
204.6
1,332.7
1,589.7
1,910.2
77.5
91.9
124.1
8.4
10.0
13.5
27%
24.2
20.4
15.1
14.0
16.3
10.9
12.8
0.0
0.0
Info Edge (India)
777.6
723.5
854.5
1,024.9
153.0
209.6
261.1
12.7
17.3
21.6
31%
61.4
44.9
36.0
15.5
17.2
10.8
12.0
3.0
0.4
KDDL
196.0
449.8
514.2
605.7
5.3
8.7
16.7
5.2
8.6
16.4
78%
37.7
22.8
12.0
11.1
12.9
10.1
16.5
1.5
0.8
KKCL
1,798.5
457.4
517.0
585.8
68.0
84.9
97.3
55.1
68.9
78.9
20%
32.6
26.1
22.8
28.4
28.8
22.2
22.6
60.0
3.3
Orbit Exports
150.0
161.0
185.0
216.0
23.0
25.2
29.9
16.0
17.6
20.8
14%
13.8
12.8
10.6
15.9
16.6
20.7
20.9
3.8
1.7
Raymond
478.8
5,621.0
6,028.0
6,489.0
115.5
140.6
196.5
20.3
23.1
32.3
26%
23.6
20.7
14.8
10.9
12.4
8.4
10.6
3.0
0.6
Relaxo Footwear
438.6
1,715.4
2,038.4
2,465.6
120.2
155.5
203.9
10.0
13.0
17.0
30%
43.9
33.7
25.8
28.3
28.9
20.5
23.7
0.6
0.1
87.1
321.4
379.9
460.1
0.2
14.7
26.4
0.0
3.1
5.6
28.1
15.5
6.5
11.2
4.7
8.1
1.0
1.1
Thomas Cook India
183.0
4,236.7
5,402.7
6,609.4
50.2
145.8
317.4
0.8
3.0
6.5
185%
228.8
61.0
28.2
14.2
25.0
11.8
22.8
0.4
0.2
Wonderla Holidays
387.8
205.4
296.7
380.3
59.8
73.9
100.9
10.6
13.1
17.9
30%
36.6
29.6
21.7
25.7
31.0
17.5
21.1
0.5
0.1
Zee Entertainment
456.7
5,851.5
6,776.2
8,040.9
1,026.8
1,345.3
1,613.1
9.6
12.5
15.3
27%
47.7
36.4
29.8
26.6
28.5
20.7
21.9
2.3
0.5
0.5
Speciality Restaurants
DIVERSIFIED / MISCELLANEOUS
Aditya Birla Nuvo
1,058.7
5,422.6
7,110.5
7,794.1
303.6
370.0
395.2
23.3
28.5
30.4
45.4
37.1
34.8
6.4
6.5
4.4
4.5
5.0
Bajaj Holdings
1,522.0
469.8
2,265.2
203.5
7.5
25.0
1.6
366.2
96,619.0
10,600.0
116,770.0
4,775.0
6,429.0
8,114.0
11.9
16.1
20.3
31%
30.8
22.7
18.0
13.5
15.2
9.9
9.5
1.4
0.4
2.2
Bharti Airtel
Bharat Electronics
1,164.5
7,295.2
8,465.8
9,898.2
1,364.9
1,486.5
1,763.5
56.9
61.9
73.5
14%
20.5
18.8
15.8
18.0
18.3
13.4
13.7
25.7
Gateway Distriparks
308.2
1,046.1
1,166.1
1,289.0
123.6
139.8
168.8
11.4
12.9
15.5
17%
27.1
24.0
19.9
14.6
17.1
14.4
17.0
7.0
2.3
Max Financial
369.9
11,711.9
252.7
9.5
39.1
0.0
0.0
PI Industries
681.1
2,096.8
2,495.2
2,984.2
300.0
339.8
409.9
22.2
25.2
30.4
17%
30.7
27.0
22.4
31.3
32.2
26.1
25.2
3.1
0.5
Ratnamani Metals
496.3
1,719.0
1,841.0
2,026.0
162.7
181.0
198.0
34.8
38.7
42.4
10%
14.3
12.8
11.7
22.0
21.2
16.2
15.6
5.5
1.1
Supreme Industries**
919.8
2,974.8
5,197.5
6,207.8
212.2
421.3
519.9
16.7
33.2
40.9
57%
55.0
27.7
22.5
33.5
35.5
26.5
27.0
7.5
0.8
UPL
605.0
13,301.5
14,994.1
16,986.0
1,438.9
1,620.6
1,983.7
33.6
37.8
46.3
17%
18.0
16.0
13.1
18.2
18.7
20.3
20.6
5.0
0.8
^Marico post bonus 1:1

**June-ended financial year till FY2015, FY2016 consists of only 9 months
Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers
Divis Labs post 1:1 bonus
BEL post Bonus: 2: 1
*** June ended
45
* Inox Leisure FY2015 includes consolidation of Satyam Cineplexes, which will affect the overall profitability
#We have annualised these ratios to make them comparable
Cadila Healthcare post stock split from Rs5 to Rs1
June 2016
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
Automobiles
Apollo Tyres
Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share in India. The company
will be investing $600mn over the next three years to set up a greenfield facility in Hungary and Rs4,000 crore to
expand capacity at Chennai facility. The expanded capacities are likely to come on stream by 2017-18. Also the
recent foray in the 2 wheeler tyres strengthens Apollo Tyres presence across all the key automobile segments. The
operating margins are likely to dip by 300BPS to 13.6% in FY2017 given the increased raw material prices and
inability to take price hikes. We maintain our Buy recommendation on the stock with a revised price target of Rs180.
Ashok Leyland
Ashok Leyland, the second largest CV manufacturer in India, is a pure CV play. The MHCV have witnessed a
sustained recovery and have been growing in double digits over the past few quarters. We expect MHCV volumes
to remain buoyant over FY16-17 driven by a pick-up in the economic cycle, Mining & Infrastructure projects,
improved operator profitability, expectations of a normal monsoon and phase-wise implementation of Bharat
Stage IV norms across the country leading to pre-buying. Also, recent focus on defence sector would boost the top
line, albeit in the long term. A favorable product mix and an operating leverage will enable the company to
improve its margins. We have a Buy recommendation on the stock with a price target of Rs120.
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 However, the launch of CT100 and refreshed Platina has given a much needed
volume push while the newly launched Pulsar variants, Avenger and V-series would help consolidate its leadership
in the premium and luxury motorcycle segments. The macro-economic issues (sharp currency depreciation) in the
key export markets including Nigeria have affected the dispatches to these countries and the impact is likely to be
felt for the next one to two quarters. The launch of its quadricycle, RE60, has been delayed by legal issues and the
matter is expected to be sorted soon and will be a trigger for re-rating of the stock. The new permit issues in the
three-wheeler space shall act as key triggers for the company in the short term. Further, margins would also come
under pressure given the increase in the commodity prices, increased marketing expenses and expiry of incentives
at the Pantnagar plant. We maintain a Hold rating on the stock with an unchanged price target of Rs2,600.
Gabriel India
Gabriel is one of Indias leading manufacturers of shock absorbers and front forks with a diversified customer
base. Gabriels revenues are expected to grow at a healthy 12% CAGR due to improved outlook for the twowheeler industry, ramp-up in supplies to Honda Motorcycle and Scooters new plant in Gujarat and to the new
models of both Maruti Suzuki and M&M. In the near term the stock performance would be influenced by the
recovery in the two-wheeler markets and a likely positive rub-off from the implementation of the recommendations
of the Seventh Pay Commission and expectations of a normal monsoon in 2016. Also, the companys efforts to
curb raw material costs driven by value engineering and better sourcing coupled with operating leverage is likely
to lead to margin improvement. Therefore, we continue with our Buy rating on the stock with a price target of
Rs105.
Hero MotoCorp
HMCL is the largest two-wheeler manufacturer in the world with sales of over 6.6 mn vehicles in FY16 and a
domestic market share of 39%. 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 with new launches in the premium motorcyles and scooters segments.
Further, massive capex plans implemented by the company in the past including production from Gujarat plant
are likely to commence operations in H1FY2017 which shall ramp up the production levels. However HMCLs
margins are likely to reduce by around 100BPS to 14.5% for FY2017 due to increased R&D expenses, commodity
price increases and higher marketing and advertising expenses. We have downgraded our rating on the stock from
Buy to Hold with a revised price target of Rs3,000.
M&M
M&M is a leading maker of tractors and UVs in India. We expect demand for the automobile segment to pick up
with an improvement in customer sentiment. Additionally, new launches especially in the compact UV space will
drive volume growth. After growing in strong double digits, the tractor demand was under pressure in FY15-16
due to weak monsoon. However, with the expectation of normal rainfall we expect the tractor segment to recover
and report a strong growth in FY17. We remain positive on the stock, given its leadership position in the domestic
tractor and UV segments as well as the value derived from its subsidiaries across business segments. We maintain
our Buy rating on the stock with a price target of Rs1,450.
Maruti Suzuki
Maruti Suzuki is Indias largest passenger vehicle maker with a strong 46% market share. It has been able to gain
market share over the last two years on the back of a diverse product portfolio, a large distribution network with
an increased focus on rural markets and a shift in consumer preference to petrol models from diesel. It is poised to
reap the benefits from the increased discretionary spending from the Seventh Pay Commission pay-out. The
recently launched premium hatchback, Baleno and Compact SUV Vitara Brezza have received a positive response
which will help the company expand market share in the segment. Further, the company has a pipeline of new
launches over the next few years, with the most important being the entry into the compact utility vehicle and
light commercial vehicle segments. The management plans to double its existing sales and distribution network in
order to achieve its target of doubling domestic volumes over the next five years. MSILs yen exposure is expected
to reduce with a higher localisation level while the royalty on future models shall be INR denominated, thus
shielding the OPMs partly. We remain positive on the stock with a price target of Rs4,700.
46
June 2016
EQUITY
FUNDAMENTALS
EARNINGS GUIDE
Remarks
Rico is one of the largest producers of high-pressure non-ferrous die castings for the auto sector. It has 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 has enabled it to deleverage its balance
sheet. Additionally, a lower interest burden will result in a growth in the earnings and free cash flow. The company
expects a revenue growth of 15% in the coming years. Further, Hero MotoCorps (biggest client contributing 32%
of revenues) new products especially in the scooter segment will add up to the revenues of Rico Auto. While a likely
improved performance from the two-wheeler segment and incremental revenues from the Chennai plant provide
comfort on top-line growth, the hardening of raw material prices are likely to affect the OPM, going forward. We
maintain our Buy recommendation on the stock with a price target of Rs47.
TVS Motor is the fourth largest two-wheeler manufacturer in the country with a strong presence in the scooter
segment. The scooter segment has surpassed the growth in the motorcycle segment over the past couple of years and
currently contributes 30% of the total two-wheeler volumes. With the launch of the Jupiter, the refreshed Wego and
the new Scooty Zest, the company has balanced its scooter portfolio and witnessed incremental volumes. On the
motorcycle front, two new launches in January 2016 (Apache RTR and Victor) have generated higher volumes for
the company. In addition, launches in H2FY17 in the premium segment in collaboration with BMW would aid
market share gains. Exports remain challenging due to currency headwinds and are likely to stabilise over the next
two to three quarters. The OPM is likely to remain under pressure as the marketing and brand promotion expenses
would remain elevated. Further, increased competition would lead to pricing pressure which would also restrict
margin improvement. We maintain our Reduce rating on the stock with a price target of Rs250.
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 NPAs resulting in deterioration of its asset quality. Higher proportion of stressed
loans and low tier-I CAR remain the key concerns of the bank.
Rico Auto Inds.
TVS Motor
Allahabad Bank
Axis Bank
Axis Bank is the third largest private sectors bank, continues to grow faster than the industry and has diversified
its book in favour of the retail segment (~40% of loans in 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 have emerged as pain
points due to infrastructure and steel exposures, we expect the stress to persist in near term.
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 better than that of the other PSBs and asset quality has deteriorated
in line with the RBIs directive to clean the balance sheet.
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 and earnings have eroded
significantly 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) had been acquired by global private equity firm, Warburg Pincus
(a 72% stake). The present management has taken several initiatives to tap the high-growth retail product segments,
like gold loans, loan against property and loan against shares. It has a strong CAR and sound asset quality. Its
loan book is expected to sustain a 25-30% growth in the next three years. As a result of several initiatives taken,
the operating leverage will play out and may lead to significant pick-up in profitability over medium term.
Corp Bank
Corporation Bank is a mid-sized PSB having a relatively higher presence in south India. It is predominantly
exposed to the corporate segment, which constitutes about 45% of its book. Due to a higher dependence on the
wholesale business and a low CASA ratio, it lags its peers in terms of operational performance. Also, the rise in
NPAs could keep provisioning high and weaken earnings performance.
Federal Bank
Federal Bank is among the better performing old private sector banks in India with a strong presence in south
India, especially Kerala. Under the new management, the bank has taken several initiatives, which would improve
the quality of its earnings and asset book. The asset quality has shown stress in the past few quarters, though we
expect a gradual improvement in the NPAs and the operating performance to pick up gradually. The valuations
seems 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.
47
June 2016
EQUITY
EARNINGS GUIDE
FUNDAMENTALS
Remarks
HDFC 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
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 made inroads into retail loans (~45% of the book) and significantly improved
its liability franchisee. The operating profit improved significantly though its exposure to some troubled sectors
(infrastructure, steel etc) has increased pressure on the asset quality. However, a healthy growth in the operating
income and proceeds from monetisation of the stake in subsidiaries will help to deal with the NPA challenges.
IDBI Bank
IDBI Bank is one of leading PSBs of India in terms of size of asset, 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 huge asset quality pressure, 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 few 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 is manageable.
SBI
State Bank of India is the largest bank of India with loan assets of over Rs14 lakh crore. 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 better than peers; the asset
quality has emerged as a key pain point which will affect the earnings growth.
Union Bank
Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become the
largest retail, MSME bank. Hence, it has ramped up its manpower and infrastructure to ramp up retail, SME
lending. The banks asset quality challenges have come to fore (mainly from the corporate portfolio) whereas low
tier-1 CAR also remains an area of concern.
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 in the medium to long term.
Britannia
Emami
GSK Consumer
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 Rs3,550.
Emami is one of the largest players in the domestic FMCG market with a strong presence in the under-penetrated
categories such as cooling oil, antiseptic cream, balm and mens fairness cream. The recently acquired Kesh King
brand improves the product and margin profiles of the company. The desire to become a large FMCG player by riding
on a portfolio of differentiated brands and improving reach in various geographies will help Emami to achieve a
growth of over 17% CAGR over the next two to three years. We recommend a Buy on the stock.
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 Rs2,500 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.
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Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide market
segments in India. The recent acquisitions, ie Strength of Nature, Darling Group, Tura, Megasari and Latin
American companies, have helped the company to expand its geographic footprint and improve growth prospects.
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 moderate inflation, improving sentiments in the
urban market and expectations of a better monsoon, HULs volume growth in the domestic business is expected
to improve in the coming years. Also, new product launches and entry into new categories will drive the performance
of the company in future. With improving business fundamentals the downside risk in the stock price is limited.
Hence, we recommend a Buy 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 quantum of excise duty of 10% declared in the Union budget 2016-17 was
much lower than in the earlier years. This should help in stabilising cigarette sales volume in the coming years. The
current valuation makes ITC one of the cheapest stocks in the large-cap FMCG space.
GCPL
HUL
ITC
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 has transformed itself from a
one-brand wonder to an aggressive FMCG player. We expect its top line to grow at a CAGR of 15%. A stable
OPM and lower interest cost would aid the PAT to grow at 26% CAGR over FY15-17.
Marico
Marico is among Indias leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing
in the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of new
product categories (especially in the beauty and wellness space) and growth through acquisitions. While the domestic
product portfolio is likely to achieve a steady growth in volumes, the international business is yet to gain momentum.
Marico has been our preferred pick in the FMCG sector and we remain positive on its long-term growth story.
Zydus Wellness
Firstsource
Zydus Wellness is bearing the brunt of a limited product portfolio of three brands (Nutralite, Sugar Free and
Everyuth) that cater to a niche category. The company would benefit from a lower input cost, improving urban
consumer sentiment and a new distribution system in FY17. Thus, we expect a better operating performance from
it in FY17.
IT/IT services
Firstsource Solutions is a specialized BPO service provider. The management expects to deliver a 10-12% growth
in FY2017. The health of its balance sheet is improving gradually as the company is gradually reducing its debt
burden through internal accruals. The company expects to be comfortably net cash positive by the end of FY17
and have a total debt of $85 million by the end of FY17. We expect the earnings momentum to gather steam and
FSL to deliver higher numbers in the coming years.
HCL Tech
HCL Technologies is a global technology company. Its management indicates that the demand environment looks
promising with an increase in market share coupled with a significant increase in the deal funnel. However, the
increasing complexity of IMS engagement has led to a delay in project ramp-ups in the IMS business (accounts for
35% of its revenues). Nevertheless, the management has made investments in digital technologies and Internet of
things (IOT), and already won a few deals in the space. (25% of total deals wins in FY2015 comes from digital
space). However, the margins are expected to remain under pressure in the medium term owing to integration
margins headwinds from Volvo (Q1FY17) and Geometric (end of FY17). We remain positive on the company in
view of its order wins, healthy pipeline of deals and superior earnings visibility, notwithstanding some near-term
softness in the IMS vertical owing to some projects delays.
Infosys
Infosys is India's premier IT and IT-enabled Services Company that provides business consulting, technology,
engineering and outsourcing services. For FY17, the management has provided a revenue growth guidance of 11.513.5% (on CC basis), ahead of NASSCOMs Indian IT industry growth guidance of 10-12% for FY17, which implies
a CQGR of 3.3-4.1%. It has also given a promising aspiration target for 2020 of achieving $20bn in revenues and
30% in margin. Under the leadership of Vishal Sikka, the company is doing the right thing by investing in the digital
space (both organic and inorganic), improving client engagement through design thinking, and automating and
innovating for future growth prospects. We remain positive on the companys growth prospects for the coming years.
Persistent
Persistent Systems has proven expertise and a strong presence in newer technologies, strength to improve its IP
base and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies. Looking at
the strong growth in enterprise revenue, whose contribution to the revenues has increased to 26.0% in Q4FY16 as
against 24.1% a year ago, PSLs enterprise digital transformation strategy is shaping up well. Further, led by the
recent acquisitions of two units of US-based cloud software firm, Citrix Systems, a pick-up in the IP-led revenues
with the acquisition of newer products and recent alliance with IBM to build IoT solutions for IBMs Watson
platform, we expect the revenue momentum to accelerate in FY17 and the margins are likely to remain stable on
the back of the initiatives taken by the company.
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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 expects the digital revenues to grow much faster in the coming
years; these grew by 52.2% YoY to $2.3 billion in FY16. The management noted that headcount addition will be
materially lower than in FY16 and dependence on Visas will come down. We remain positive on the company,
given its strong positioning, scale advantage and head start in digital technology.
Wipro
BHEL
Wipro is among the top five 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, telecom, and some project deferrals, its unlikely to show
material improvement in earnings on an organic basis in FY17. The management has given an ambitious target of
$15 billion revenues and 23% margin by 2020, but refrained from giving any timeline to track the roadmap of the
improvement. We see the target of new CEO Abid Ali Neemuchwala as an uphill task looking at the current growth
trajectory. Therefore, we remain sceptical, as anecdotal evidence on Wipro in the last two to three years does not
inspire confidence.
Capital goods/Power
Bharat Heavy Electricals, Indias biggest power equipment manufacturer, has been the prime beneficiary of the multifold increase in the investments made in the domestic power sector over the last few years. However, the order inflow
has been showing signs of slowing down which would remain a major concern for the company. The key challenge
before the company now would be to maintain a robust order inflow and margin amid rising competition and lower
order inflow.
CESC
CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) which
is a strong cash generating business. Further, 600MW of regulated generation capacity (to serve Kolkata distribution)
has come on stream recently in Haldia. Also its 600MW thermal power project at Chandrapur has signed PPA and
started operating. The losses in the retail business are coming down gradually over the past and it is expected to
break even soon. The BPO subsidiary, FirstSource, is performing well in line with expectations. However, the
recent diversification into unrelated businesses like IPL franchisee would hurt its valuations.
Crompton Greaves Crompton Greaves key businessesindustrial and power systemsare passing through a rough patch and are
potential beneficiaries of the upcoming investment cycle revival. Also, the company is looking to unlock value by
selling its international subsidiaries.
Finolex Cables
Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improving
demand environment in its core business of cables. It is leveraging its brand strength to build a high-margin
consumer product business of fans. 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 management has taken a strategic call to close and hive off the loss-making infrastructure
equipment division. GCLs growth momentum is expected to pick up and we expect 11% CAGR over FY2016-18
due to a revival in the automotive business and the agri-equipment space. A better economic growth, improved
product mix, forecast of a normal monsoon after two consecutive years of drought coupled with new product
launches are likely to spur revenue growth for GCL. We remain positive on the stock and maintain our Buy rating
with a price target of Rs160.
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. The OPM
of the stand-alone business is likely to remain around 10%; however the OPM of JMC Projects (a subsidiary) is
showing signs of improvement. We retain our Buy rating.
PTC India
PTC India is a leading power trading company in India with a market share of 35-40% in the short-term trading
market. In the last few years, the company has made substantial investments in areas like power generation
projects and power project financing which will start contributing to its earnings. Long pending receivables was
one of the drags on the companys balance sheet and return ratios; however, the concern has receded after receiving
payment from UPSEB. We retain Buy due to expectations of a healthy volume uptick with an increasing share of
long-term contract business.
Skipper
Skipper is uniquely placed to exploit the growing opportunities in two lucrative segments: power (transmission
tower manufacturing and EPC projects) and water (PVC pipes). It has a comfortable order book of more than
Rs2,500 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 has expanded the PVC capacity manifold (4x)
and aspires to turn a national player from a regional player.
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 consolidated revenues. However, the company has shown its
ability to maintain a double-digit margin in a tough environment. We retain Hold on the stock due to its rich
valuation.
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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.
The company has a strong presence in the south region. It is also aggressively expanding in non-south markets and
is particularly focusing on the tier-II and III cities where there is a lot of pent-up demand for its products.
Va Tech Wabag
Gayatri Proj
VA Tech Wabag (VTW) is one of the worlds leading companies in the water treatment field with eight decades of
plant building experience. Given the rising scarcity of fresh water availability, we expect flow of huge investments
in water segment both globally and domestically. With rising urbanisation and industrialisation in India, we
expect substantial investments in this space. Given the large opportunity ahead and inherent strengths of VTW,
like professional management, niche technical expertise and global presence.
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 Rs10,380 crore, which is 6.5x 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.
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 has been facing earnings pressure across business verticals. Further, it is in the process of
concluding its cement asset sale to deleverage its balance sheet. The construction and real estate division has also
been underperforming lately. The current uncertainty in business restructuring and liquidity concerns has led to a
cautious view on the stock.
L&T
Oil India
Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the
domestic infrastructure capex cycle. Further, backed by its sound execution track record and healthy order book, the
company will do well. Monetisation of the non-core businesses and listing of L&T Infotech would unlock value.
Measures planned by the company to improve its return ratios augur well. Hence, we remain positive on the stock.
Oil & gas
Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India.
The total proven and probable reserves of the company stand at 52 MMTOE and 121 MMTOE respectively. Its
reserve-replacement ratio is also healthy. It offers a healthy dividend yield and the full benefit of the recent policy
reforms like deregulation of diesel and DBT scheme for LPG consumers are expected to reflect in its future earnings
and add value. However, weak crude oil prices are going to weigh heavily on the earnings and, in turn, on the
stock price for some time.
Reliance Ind
Selan Exploration
Reliance Industries has one of the largest and complex refining businesses in India which enjoys a substantially higher
refining margin over the benchmark GRM. Further, its petrochemical business is also highly efficient, where RIL is
expanding capacity. We expect the GRM to remain healthy and the petrochem margin to be maintained in the medium
term on an uptick in the domestic demand. Currently, the decline in gas output from the KG-D6 basin is weighing
on the stock price; however, capex in downstream business (incremental capacity in the petchem business and petcoke
gasification in refining) would be the earnings driver in the coming years. Large investment in Reliance Jio could add
value in long term.
Selan Exploration Technology is an oil E&P company with five oil fields in the oil-rich Cambay Basin of Gujarat.
The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production.
Further, it intends to explore its next field, Indrora, which is the most prolific one with significant reserves. Based
on this, we expect it to ramp up production significantly, subject to approval for the new wells. However, weak
global oil prices are likely to be an overhang on the stock in the medium term.
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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. Cadila has recently received warning letter for two facilities. The key products like gAsacol HD,
gPrevacid, gNexium and gToprol are under process for site transfers and would be future key triggers as these
products are limited competition products.
Cipla
Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on
technology-intensive products in the inhalation and nasal spray segments; (2) established front-end presence in the
key markets like South Africa, USA and Europe; (3) developed an appetite for inorganic expansions; and (4)
invested in future growth areas like biosimilars. However, delays in filing of gAdvair, growing competition and
lack of clarity on the timeline for the launch of gAdvair in the US market, pending 483 observations at Indore SEZ
and closure of recent acquisition of Invagen and Exelan are growing concerns as these will create operational
pressure for the next two years.
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. In order to compensate for the delay in planned
greenfield facility with an investment of Rs5 billion in the Kakinada special economic zone (SEZ), Divis has
initiated capital expenditure (capex) worth Rs2.5 billion in its export oriented unit in Visakhapatnam. The
management expects the Kakinada SEZ to boost growth in FY18, reaffirming that a 20% growth over the next
few years is likely.
Glenmark Pharma
The management has given a revenue growth guidance of more than 25% for FY2017 (including Zetia). The
company will report 12-15% base revenue growth in FY2017 and FY2018 each. The management has indicated
that for future growth, the key focus areas will be dermatology, contraceptives and complex injectables. The
growth would be mainly driven by the USA, EU and India, which are witnessing an exponential growth on
account of launch of new products. Currently, it has three new chemical entities and four new biological entities
in clinical trials, out-licensing potential.
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. The company has
recently successfully launched Glumetza in the US market (180 days exclusivity) which shall reflect for two
months in Q4FY2016 and in H1FY2017. However, we believe in the near term, the stock may remain rangebound till the USFDA concerns subside, especially since a few observations are repetitive in nature. Moreover, it
is a little worrying that it is the second plant under the USFDA scanner in a short period of time. We remain
focused on the Goa plant and the outcome of the 483s issued there in March 2016 and July 2015, given that it is
a large source of Lupins pipeline and any delay in product approvals could hurt the earnings forecast. Product
approvals from this plant would be a monitorable.
Sun Pharma
The combination of Sun Pharma, Taro, Dusa Pharma, the generic business of URL Pharma and the acquisition of
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 $300-mn
synergy from the merger of Ranbaxy by FY18. With a strong cash balance, it is well positioned to capitalise on the
growth opportunities and inorganic initiatives.
Torrent Pharma
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. Company 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.
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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 full ramp-up of Vilayat plant (increasing capacity to
804,000 tonne) is likely to aid VSF volumes going ahead, though prices may soften in the near term. Further, the merger
of ABCIL and expansion in caustic division are likely to maintain a strong performance in chemical division. On the
cement front, the company expects demand to pick up in the near term while a slow execution of government projects and
surplus inventory remain concern areas.
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. In certain key markets of The Ramco Cements like Telangana,
Maharashtra and Andhra Pradesh, the demand for cement is getting affected by the scarcity of available water for
construction. The water levels in the 31 reservoirs in south India stand at just 17% of its storage capacity while parts
of Maharashtra are already whirling under acute water crisis. Consequently, we see very limited scope of revival in
retail cement demand for the above regions which can adversely affect Q1FY17 earnings.
Grasim
The Ramco Cements
Shree Cement
Shree Cements cement grinding capacity has grown to 25.6mtpa which will support its volume growth in the
coming years. It has a power plant with capacity of 612MW for its own consumption and 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 66.3mtpa cement capacity. The eastern
region has seen a robust growth in infrastructure and housing demand while the other regions have seen infrastructure
spending only with no major improvement in housing and rural demand. The management has guided for a 7-8%
demand growth for FY17 driven by infrastructure spend and revival in retail demand after a good monsoon.
However, the uncertainty over cement price and increase in price of pet coke (trading with upward bias, Q2FY17
onwards may feel the impact) will be the key monitorable for FY17. However, cost efficiency (impact of new
grinding and waste heat recovery) and base effect may lead to better operating performance for UltraTech.
Discretionary consumption
Century Plyboards
Century Plyboards 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 Rs215.
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 Rs250.
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. Further, prevailing lower competitive intensity in the real estate
space is positive in terms of profitability. We expect Zomato business growth to extend in the coming years, with
better integration of services and increasing monetisation opportunities. Zomatos revenue will be in the range of
Rs300-350 crore in FY2017, a growth of ~60-95% YoY. Further, the management believes Zomato will break
even at the end of FY2017 as the current cash burn per month falls in the range of $1.6-1.7 million from the earlier
$9 million. Going ahead, other investee ventures, like www.meritnation.com, www.policybazaar.com,
www.mydala.com and www.canvera.com, are also likely to gain from the ongoing e-commerce boom in India.
INOX Leisure
INOX Leisure Ltd (ILL), Indias second largest multiplex operator with 107 properties and 420 screens across 57
cities accounting for about 23% of the multiplex screens in India, is scripting a blockbuster growth story through
a mix of inorganic and organic expansion plan to scale up the total screen count to 688 screens over the next 2430 months. The ILL mega show is supported by an improving content quality in the Indian mainstream and
regional cinema with its movies regularly hitting the Rs100-crore or Rs200-crore box-office collection mark. We
believe ILL with its strong brand and extended reach is well poised to leverage the opportunity in Indias underpenetrated multiplex sector.
KKCL
Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has
created a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is ahead
of its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled with
a robust balance sheet make us positive on the company.
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Remarks
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 to arrive at a price target of Rs230.
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.
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 maintain Buy with a price target
of Rs255.
Wonderla Holidays
Wonderla Holidays Ltd (WHL) is the largest amusement park company in India with over a decade of successful
and profitable operations. It owns and operates two amusement parks under the brand name Wonderla in Kochi
and Bengaluru, and came up with a third park in Hyderabad in Q1FY2017. With a steady improvement in
footfalls, the Hyderabad park getting operational in Q1FY17, a strong growth in the non-ticket revenues (F&B
and product sales) and an 4-5% increase in the annual ticket price, WHLs revenues are expected to grow at a
CAGR of 30% over FY15-18. Its OPM of 44-45% is better compared with some of the mature international
parks.
Zee Entertainment
Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainment
companies. It has a bouquet of more than 34 channels across Hindi, regional, sports and lifestyle genres. For FY2017,
the management expects that the industry ads revenue growth range of 15-16% and ZEEL will continue to beat the
industry average led by market-share gain. ZEEL continues to outperform the broadcasting advertising market and
expects to continue the momentum with an improvement in the macro economy. The management indicated that the
strong momentum will continue in the ads revenue growth led by higher investments in content along with a focus
on international markets and market-share gains. We continue to see ZEEL as the prime beneficiary of macro revival
and digitisation.
Diversified/Miscellaneous
Aditya Birla Nuvo
We believe that post-demerger of the fashion vertical, Madura and Pantaloons from itself, ABNL will derive significant
value from its financial services business offering investors an opportunity to participate in diversified growth financial
segments like life insurance, asset management and NBFC along with other financial businesses. ABNL continues to
hold a 24% stake in Idea Cellular along with an exposure to the manufacturing vertical. In the wake of strong
competitive headwinds in the telecom sector (emanating from Reliance Jios entry, to high-cost spectrum auctions and
inability of the players to pass on the cost to the customers in the form of higher tariffs), we have adjusted Idea
Cellulars estimates and valuation (now valuing it at 5.8x FY2017 EV/EBITDA, with enhanced debt). This has resulted
in a downward revision of our price target to Rs1,200 per share.
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Bajaj Holdings
Bajaj Holdings & Investment Ltd (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its
manufacturing business was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business consisting of the
wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and properties,
assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing and strategic ones, now remain
with BHIL. BHIL is a primary investment company focused on new business opportunities. Given the strategic nature
of BHILs investments (namely BAL and BFL), we have given a holding company discount of 50% to BHILs equity
investments. The liquid investments, and investments in other group companies have been valued at cost. We have
a Buy recommendation on the stock with a price target of Rs2,100.
Bharti Airtel
Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industry
as well as the company focusing on the quality of revenues rather than volume, better times can be expected ahead
for the sector and hence the company. We remain optimistic about the company.
BEL
Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, stands to benefit from
the enhanced budgetary outlay for strengthening and modernising the countrys security. The Make in India
initiative of the government will support the earnings growth in the coming years, as it is the only player with strong
research and manufacturing units across the country. The companys current order book of around Rs21,648 crore
provides revenue visibility for the next three to four years.
GDL
With its dominant presence in the container freight station segment and recent forays into the rail freight and cold
chain businesses, Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cow
while its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largest
players in the CFS business and has also evolved as the largest player in the rail freight business as well as the cold
storage business. The proposed capex for a.ll the three segments will strengthen its presence in each of the segments
and increase its pan-India presence.
Max India
Max India has demerged into three different entities of which Max Financial Services will hold Max Life Insurance
(new Max India will hold Max Healthcare, Max Bupa Health Insurance and Antara businesses). Max Life Insurance
(held by Max Financial Services) is among the leading private sector insurers, has gained the critical mass and
enjoys among the best operating parameters in the industry. As the insurance sector is showing signs of stabilisation,
the companys favourable product mix and a strong distribution channel will result in a healthy growth in the
premiums and profits.
PI Industries
PI Industries (PI), a leading agro-chemical company, has a differentiated business model with focus on the fastgrowing custom synthesis and manufacturing (CSM) business, which contributes 60% of its revenues. To sustain
the growth momentum, the company has expanded its manufacturing capacity in Jambusar at a cost of Rs300
crore and the new capacity which has commissioned in H2FY2016. The commissioning of the Jambusar facility
and the launch of new products in the agro-chemical segment will help the company to achieve a revenue growth.
On the other hand, the margins are expected to improve over the next three years. PI is one of the few agrochemical companies that have a unique business model and are an example to the other chemical companies.
Ratnamani Metals Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. In spite of the challenging business
environment due to increasing competition, the stock is attractively valued. The management has maintained a strong
outlook on the potential opportunities in the oil & gas sector and inter-connection of the rivers across the country.
Supreme Ind
Supreme Industries is a leading manufacturer of plastic products with a significant presence across piping, packaging,
industrial and consumer segments. We remain positive on its new launches of value-added products and capacity
expansion plans. However, the recent volatility in the prices of its raw materials (mainly polymers) amid a highly
competitive environment is likely to limit the growth in the margin in the near term. Hence, while we remain
positive on its long-term structural story, we maintain our Hold rating on the stock.
UPL
A leading global producer of crop protection products, intermediates, specialty chemicals and other industrial
chemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop
protection products and post-harvest activities. A diversified geography and the recent acquisition of DVA Agro
Brazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Its
revenues are likely to grow at 12-15% and EBIDTA margin is expected to remain at 18-20% in FY17. 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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Liquidity: two sides of it

Products & Services

From Sharekhans Desk

RESEARCH BASED EQUITY PRODUCTS

ProPrime - Diversified Equity 36

MUTUAL FUNDS DESK

Top SIP Fund Picks

STOCK IDEAS STANDING (AS ON JUNE 02, 2016)

CURRENT PRICE AS ON PRICE

STOCK IDEAS STANDING (AS ON JUNE 02, 2016)

CURRENT PRICE AS ON PRICE

In Top Picks basket

** Price target under review

from sharekhans desk

FROM SHAREKHANS DESK

Liquidity: two sides of it

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

Sharekhan Top Picks

(though it performed better than the CNX Midcap 100 Index).

In the three-month period, the benchmark indices (Sensex, Nifty

CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCE

(TOP PICKS VS BENCHMARK

ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES)

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

back of relevant pricing actions and higher promotional spends.

SHAREKHAN TOP PICKS

WEALTH CREATOR PORTFOLIO

WEALTH CREATOR PORTFOLIO

MAY 31, 2016

Wealth Creator portfolio

Objective: To build a balanced and actively managed portfolio of

Policy push: Stocks from sectors benefiting from improvement

Early gainers: Beneficiaries of an economic recovery (stocks from

Evergreen: Steady performers that provide stable and consistent

Sharekhans wealth creator portfolio continues to outperform

We have made one change in the portfolio in the month of June

Returns (as on May 31, 2016)

Wealth Creator folio (weighted average returns)

Reco price (Rs)

Price target (Rs)

Large-caps (64% weightage)

Larsen & Toubro

Tata Consultancy Services

Tata Motors DVR

PTC India Financials

Mid-caps (36% weightage; 4% each)

NSE volume (No of shares):

Free float (No of shares):

Sharekhan Limited, its analyst or dependant(s) of the analyst might be

NSE volume (No of shares):

Free float (No of shares):

Sharekhan Limited, its analyst or dependant(s) of the analyst might be

NSE volume (No of shares):

Free float (No of shares):

Sharekhan Limited, its analyst or dependant(s) of the analyst might be

NSE volume (No of shares):

Free float (No of shares):

Sharekhan Limited, its analyst or dependant(s) of the analyst might be

NSE volume (No of shares):

Free float (No of shares):