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March 2016
In This Issue
Market Outlook for the month
Equity Market Outlook
Derivatives & Commodities Market Outlook
Key
Dear Investor,
Recommended Funds
Global Market
Index
29-Feb-16
MoM (%)
YoY(%)
Sensex
23,002
-7.5
-21.7
Nifty
6,987
-7.6
-21.5
FTSE
6,097
0.2
-12.2
Dow
16,517
0.3
-8.9
Nasdaq
4,558
-1.2
-8.2
Hang Sang
19,112
-2.9
-23.0
Economic Pulse
Key Indicators Current Month
Change (%)
IIP
-1.3%
WPI
-0.90%
10 Year Yield
7.62%
-2.06
USD/ INR
68.42
0.93
Crude ($)
35.97
3.54
29181
9.57
could lead the upmove initially. FD investors should lock into rates before April'16,
when Banks are expected to cut base rates by 40-50bps.
Taxing times for the Rich: The Budget raised surcharge on 1CR+ salary from 12%
to 15%, raised service tax to 15%, imposed a 1% luxury tax on large cars and a
1-4% Infra cess on cars\UVs, brought in perquisite tax on employer's PF contribution
>INR1.5Lakhs, and taxed dividends@10% >INR10Lakhs. This RICH tax is expected
to fund the BHARAT construction and support agenda. The Economic Survey presents
a road-map for future budgets to Tax the INR1Lakh cr subsidy paid to the Rich.
Outlook: Rate cut and consumption boom should drive earnings in FY17 and beyond.
Advance tax numbers on March 15th will be a reality check for 4Q performance.
In the interim, one could look at a Bounce-back that could become a fresh impulse.
Our Multi-Cap recommended portfolio offers 5 large-cap stocks for SIP investors and
our MIDCAP recommended portfolio is now available ~15% off the peak. A good
time to Build a portfolio just as our government looks to Build a strong Bharat.
Ravi Shenoy
Vice President
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Equity Market Outlook
MOSt Advisor
March 2016
USDINR
the month but saw a Bullish Harami formation at the middle of the
month. The pattern remained intact despite the event volatility & defined
the consolidation range of 6850-7250.
Relative rotation study of the Global markets saw Nifty moving from the
underperforming to the neutral zone. USDINR has approached the upper
extreme of the Upward Sloping Channel which also coincides with the
2013 extreme & is emerging as an inflection zone. A price confirmation
could push the pair towards the lower extreme of the pattern which could
Nifty Weekly
On the weekly scale sustaining 'Bullish Harami' pattern despite the event
volatility coupled with Z score being at the lower extreme raises the odds
in favour of the bulls. But the big move would kick-in only post cross over
of 7250. Till then we may see a time correction with upper bound at 7250
and lower bound at the recent monthly low around 6850. In case of a
close below 6850 would void the set-up and could extend the drift.
Neutral set of cues were seen from open interest actively in stock futures,
which saw lack of carry forward, while short hedges got carried forward.
NIFTY Z-Score
Option writers seem too aggressive keeping the 7000 strike ( at the money)
highly congested. Option indicated immediate range of 6800-7200 also
coincides with consolidating range.
Amongst sectors energy remains firm within the outperforming zone while
realty on the other hand has evidence of further deterioration. Rest all the
major sectors still remain in the neutral zone awaiting a directional confirmation.
Sectoral Highlights
Sector
Our Views
Energy
Positive
HPCL
Buy / 688
Midcap
Neutral
Pidilite
Buy / 586
IT
Neutral
Infy
Buy / 1084
NBFC
Neutral
HDFC
Buy / 1060
Top Pick
Recommendation/CMP
On This Page
MOSt Advisor
Monthly Markets Newsletter
March 2016
Actionable
Sector Rollovers: Key notables: Among sectors Two Wheelers ( Bajaj-Auto and
Heromotoco) saw Short covering, Cement, Metal, Telecom see biggest unwinding
month but we did not see enough carry forward resulting into unwinding
Banks , Auto Ancillary and Engineering stocks saw carried forward shorts
Following are the sectors that saw shorts getting built-up for most part of the
Oil prices ended nearly flat in February but saw extremely choppy moves with prices touching almost $26 before recovering by the end of the
month as slowdown in US output coupled with talks about an output freeze by major producers helped. US oil output continues to dip, albeit
at a slower pace but a continuing decline in the oil rig count is raising hopes among the bulls.
U.S. shale oil production is expected to fall for an eighth straight month in March with output set to fall by nearly 93,000 bpd to 4.92 million.
North Dakota's oil output fell nearly 3% in December, the first drop in three months signaling that producers may have finally begun to curb
output. OPEC output also fell 0.8% m/m from the January's near record levels to 32.37 mbpd in February.
The major part of the recent rebound was also fueled by the decision by Saudi, Russia, Qatar and Venezuela to freeze output at January levels.
However, the success of this deal is largely contingent on Iran and Iraq supporting it as they are the ones with the highest incremental
production growth at this juncture.On the inventory side, US crude oil inventories are at a record 507.6 million barrels while product stocks at
Europe's Amsterdam-Rotterdam-Antwerp(ARA) hub remain at record highs. The inventory overhang is the biggest risk to price gains from here.
Demand outlook meanwhile looks cloudy as Asian oil demand was lower 0.6% m/m in January .While Chinese demand was strong in 2015,
the strength is unlikely to be the same this year with GDP and manufacturing activity slowing.
Looking ahead, even as the market action in oil has turned increasingly choppy, signs are that market has established a near term bottom and
we could see some more gains in the coming month.
On This Page
Large Cap Investment Ideas,
Mid Cap Investment Ideas
MOSt Advisor
Must Act
March 2016
Bajaj Finance
CMP*:
INR 5932
Target:
INR 7194
BUY
Post de-regulation and sharp drop in crude prices, we expect marketing division profit-
HPCL
CMP*:
INR 688
Target:
INR 1299
Of the three OMCs, HPCL's earnings are more sensitive to a change in the marketing
margin-given its higher ratio of marketing-to-refining volume.
BUY
An INR0.5/ltr increase in diesel marketing margin increases HPCL's FY16E EPS by 32%.
Hence, it would be the largest beneficiary of higher auto fuel margins.
We value HPCL at 5.5x for refining and 8x for marketing for a fair value of INR1,299.
INR 575
Target:
INR 907
AUM of INR522b.
Market share gains will drive AUM growth of 24% CAGR for the next three years.
IHFL is the lowest levered HFCs (4.3x) and this will support growth without equity
dilution. Asset quality trend is likely to remain stable.
BUY
De-risked business model, good profitability and high dividend yield warrant premium.
We recommend to Buy with a target price of INR907.
Engineers India (EIL), a PSU, is the O&G consultant and executor for O&G projects for
ONGC, OIL, IOC, BPCL and HPCL.
Reduction in under-recovery for the Oil and gas sector due to lower crude prices and
decontrol of diesel and petrol prices has helped improve improve Oil PSU cash flows and
boost order flows for EIL.
The Euro-VI norms will entail spend to raise fuel standards and could bring in INR50008000cr consultancy orders and INR15000-20000 cr EPC orders for EIL.
Engineers India
CMP*:
INR 150
Target:
INR 265
BUY
On This Page
MOSt Value, MOSt Velocity, MOSt Mid-Cap
MOSt Advisor
Build a Portfolio
March 2016
Scrip
MBP
Ultratech Cement
2769
11.9
Bajaj Finance
5932
11.6
Lupin
1755
11.2
Hero Motocorp
2500
10.8
HDFC
1060
10.2
BPCL
769
10
TVS Motors
268
4.4
Berger Paints
224
4.2
3.6
3.5
Finolex cables
238
3.5
3.1
Eveready Industries
221
3.1
Dish TV
68
2.5
Engineers India
150
2.1
Cash
4.3
Total
100
MBP
Dish TV
Larsen & Toubro
Sun Pharma
ICICI Bank
Axis Bank
HDFC
Hindalco
HPCL
IOC
United Spirits
SBI
Titan Industries
Ultratech Cement
Zee Entertainment
Cash
Total
68
1076
854
190
376
1060
69
688
368
2651
159
317
2769
372
Returns
3mth
Portfolio -8.8%
BSE 200
6mth 12mth
-4.9% -7.0%
Investment Duration :
Risk Profile :
Aggressive Investors
Scrip
MBP
Bajaj Finance
5932
TVS Motors
268
12.3
Berger Paints
224
11.6
10.2
9.9
Finolex cables
9.6
238
8.8
Eveready Industries
221
8.8
Dish TV
68
7.0
Engineers India
150
6.0
Cash
3.1
Total
100
Whats In
--
--
On This Page
MOSt Advisor
Managed Funds
March 2016
MOSt PMS
Value Strategy
Scrips
Value Strategy: - The Strategy aims to benefit from the Long term compounding effect on
investments done in good businesses, run by great business managers for superior wealth
creation.
Value Strategy has the investment style of buying Undervalued stock & Sell overvalued
stocks, irrespective of Index Movements.
Money multiplied by 17.80 times in just 12 years.
Rs 1 Cr invested in Value PMS in March 2003 is worth Rs. 17.80Crs vs. 6.91Crs in Nifty 50.
Since its inception, Value Strategy has delivered annualized returns of 24.92% vs. Nifty 50
returns of 16.11%, an outperformance of 8.81% (CAGR).
NTDOP Strategy
NTDOP Strategy:The strategy aims to deliver superior returns by investing in focused themes
Sector Allocation
Auto & Auto Ancillaries
Banking & Finance
Pharmaceuticals
FMCG
Oil and Gas
% Holdings
12.52
11.68
8.13
7.85
7.14
% Holdings
29.24
23.46
12.52
7.14
6.62
% Holdings
he strategy aims to capitalize on the themes of Consumerism, Banking & Financial Services
& Infrastructure in the Indian Economy.
13.73
13.10
10.76
7.40
6.74
Since its inception, NTDOP Strategy has delivered 15.43% annualized returns vs. 3.85% of
Sector Allocation
% Holdings
which are part of the next Trillion Dollar GDP growth opportunity. It aims to predominantly
invest in Mid Cap stocks with a focus on Identifying Emerging Stocks/Sectors.
All the above figures are of a model client. Returns shown above are calculated on NAV method "Returns shown above are
post fees & expenses". Past performance may or may not be sustained in future.
30.23
22.49
16.87
10.76
5.97
Sector Allocation
Banking & Finance
Pharmaceuticals
Auto & Auto Ancillaries
Oil and Gas
Airlines
% Holdings
12.56
10.42
9.41
9.37
6.66
% Holdings
28.52
19.40
17.42
10.42
6.19
Data as on 29th February 2016
On This Page
MOSt Advisor
Investment Product
March 2016
Motilal Oswal Securities Ltd. (MOSL) Member of NSE, BSE & MCX-SX
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No