Wealth-Insight - Apr 2020 PDF

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April 2020
Volume XIII, Number 10
28
COVER STORY
EDITORIAL POLICY
The goal of Wealth Insight, as with
all publications from Value
Research, is not just limited to
generating profitable ideas for its
readers; but to also help them in
generating a few of their own. We
aim to bring independent, unbiased
and meticulously- researched
stories that will help you in taking
better-informed investment
Viral
decisions, encouraging you to
indulge in a bit of research on your
own as well.
All our stories are backed by
investing
quantitative data. To this, we add
rigorous qualitative research
obtained by speaking to a wide
variety of stakeholders. We firmly
stick to our belief of fundamental
research and value-oriented
approach as the best way to earn How to use the pandemic to
wealth in the stock market. Equally
important to us is our unwaveringly
set your investments up
focus on long term planning. for future gains
Simplicity is the hallmark of
our style. Our writing style is
simple and so is the presentation
of ideas, but that should not be
construed to mean that we
over-simplify.
Read, learn and earn – and let’s
grow and evolve as we undertake
this voyage together.
Editor
Dhirendra Kumar
Senior Associate Editor
Vibhu Vats
Copyediting
Debjani Chattopadhyay,
Rachael Rajan 10 WORDS WORTH WISDOM 32 IN FOCUS
Research & Analysis
Danish Khanna, Rajan
Gulati and Yash Rohra
Buffett’s latest Why Prashant Jain
Design
Mukul Ojha
annual letter likes PSUs
Production
The most insightful excerpts Prashant Jain, ED & CIO, HDFC AMC,
Hira Lal reveals his thinking behind loading up
Data source for stocks on PSU stocks in his funds.
AceEquity
© 2020 Value Research India Pvt. Ltd.

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Total pages 64, including cover
4 Wealth Insight April 2020

Columns
7 34 INTERVIEW
EDIT
by DHIRENDRA KUMAR
‘In financial
The rules have
not changed services, being
In spite of whatever may have
been happening in the markets currently, by
sticking to the basics, one can do well
a tortoise is
sometimes a
37
STRAIGHT TALK blessing’
by ANAND TANDON
Stock markets – SONAM UDASI
what’s next? Senior Fund Manager,
After the recent crash in the Tata Mutual Fund
market, investors are asking how soon it
will recover and where they should invest.
Here is some help.
40 8 INSIGHT 26 STOCK STORY

EVERYDAY ECONOMICS
by PUJA MEHRA The thoughtful investor Oh, no!

All things viral How Yes
The rapid spread of the
coronavirus has scared people.
14 MONTHLY AGENDA
Bank turned
from a
The need is to arrest fear and deal with the The most bearish and growth
problem rationally.
bullish phases machine to a
wealth
42 18 MARKET COMPASS
destroyer
MAINSTREET
Index Watch
by SAURABH MUKHERJEA
Big Moves
48 STOCK SCREEN
In India, quality Quality stocks
trumps ‘cheap’ available cheap
valuations
Low valuations, including those of small caps,
22 VIS-A-VIS
Reasonably priced
often don’t translate into good returns Bearings barons growth stocks
Discount to book value
44 23 ANALYST’S DIARY High dividend-yield
OFFBEAT
How the market stocks
by SANJEEV PANDIYA
may fare Attractive blue chips
The dart-throwing
monkey Building trust
Why you should do your
own guessing
Desi vs videshi 62 WORDS WORTH NOW
',6&/$,0(5
The contents of Wealth Insight published by Value Research India Private Limited (the ‘Magazine’) are not intended to serve as professional advice or guidance and the Magazine takes no responsibility or liability, express or implied, whatsoever for any investment
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April 2020 Wealth Insight 5

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EDIT
The rules have not changed

In spite of whatever may have been happening in the markets
currently, by sticking to the basics, one can do well
DHIRENDRA KUMAR
The basic principles of savings and disaster except that it’s worldwide and simultaneous.
investment are not under lockdown. In fact, this is This makes it impossible to understand or deal with in
exactly the kind of situation where they are the most financial terms. Think of the 2007-08 global financial
useful and should be followed most rigorously. Our crisis. At that time, the governments around the world
cover story this month is on the obvious topic, and I latched onto the idea of pouring money into economies
suspect it’s just the first of many in the coming – get businesses and people to start spending and we’re
months that will be about the impact that the virus is done. There were a lot of undesirable side effects but
having and will have on our savings and investments. this ‘helicopter money’ approach did get things moving.
A lot of you might be in a panic because of the sharp It goes without saying that many things will change.
drop in the value of your investments. However, the It’s entirely possible that entire industries’ movement
stock market is not the economy. This is something towards a future way of working will be accelerated.
that you should not forget even in normal times. The Things that could have been digital but were physical
day-to-day movements of the stock market reflect the because of inertia will disappear fast. That’s an
collective opinion of traders on what will happen the obvious conclusion. However, from that kind of
next day, week or month. When there’s time of great motherhood statement all the way to an actual business
uncertainty, this period shrinks to hours or at most impact will be a long time coming. If you look for
next morning. All that traders are trying to do right specifics right now, you’ll just make mistakes.
now is to somehow stay afloat till the next session. This sounds like the most boring and banal thing in
It would be a grave mistake to imagine that when the the world, but this is just the time to stick to the basics.
Sensex or the Nifty fall by 30 or 40 per cent, that number The ‘stick to the basics’ advice is made exactly for
is a fair (or even sane) judgement of where the economy extreme times, whether on the upside or the downside.
will be in two or three years. One circuit down, two, Do not get carried away by the apparent enormity of
three – it does not matter. These are just numbers the events. Choosing quality investments, being
driven by people who are focused on what will happen conservative, having an asset allocation and sticking
tomorrow morning and who are just guessing about to it while the debt-equity balance changes, ensuring
what will actually happen. And the wild, manic- that only long-term money stays in equities – these are
depressive swings that stock markets are putting up the same formulae that work every time and no matter
shows that these are indeed nothing more than guesses. how unlikely it looks right now, these are the ones that
Investors are panicking because it looks like that the will keep working regardless of the source or the
huge drops in the markets are reflective of something depth of the panic today.
that’s really going to happen to the economy. That’s not That may sound strange at first but actually that’s
true. I’m not saying that the situation will not be dire true of all equity investing, whether in good times or
for a time to come, but there’s no way of predicting. bad, in normal times or perilous ones. Because of the
The cause is clear – this is not a financial or an nature of this event, it’s easy to lose sight of that, but
economic event. It is an externality. It is like a natural that would be a great peril by itself.

INSIGHT
The thoughtful investor

The budget carries 3 stark messages a) We will not go back to
6.5% GDP growth anytime soon b)The market was narrow and
will remain that way till growth picks up and c) Quality and high
RoE auto pilot businesses will continue to dominate. Adventurism
should take a back seat.
Basant Maheshwari Direct taxes are an important instrument to reduce inequality of

@BMTheEquityDesk income. Also it confirms with most of Adam Smith’s ‘canons of
taxation’. The direct tax rates need to be reduced else it leads to
Followers stealing. And the salaried bear most of the brunt - they can’t
94.3K
adjust nor steal.
Getting rich is a process. Most of us can’t take that pressure and

wind up to just staying comfortable. The risks always appear
smaller once the returns have been made. 5 yrs of controlled risk
Why Follow creates 50 yrs of wealth.But you have to live on the edge -
betting all that you have.
Basant Maheshwari is the
author of The Thoughtful if you’ve hit 50 lakhs wealth creation will become a habit. But it’s
Investor and co-founder & not the end. You have to still be hungry for more. You can’t buy
partner at Basant Maheshwari ETFs and large cap stable names. You have to look at growing not
Wealth Advisors LLP. protecting. And the best wealth decisions won’t come out of a
Maheshwari’s tweets touch consensus opinion.
upon current topics and how
they affect investors. They The first 10 lakhs needs a lot of self control. You have to stop
also feature his observations spending to reach here. The next 15 lakhs needs skill. You have
on the markets, investing, to grow what you’ve saved. From 25 lakh to 50 lakhs it’s self
the economy, taxation, and control. You have to stop thinking of buying a home, car, Holiday,
more. Being a well-known TV etc.
commentator for various
business TV channels, his
All large investors started small. If the corpus was built on salary
views and opinions carry
or non-market related income then you always seek risk averse
credence and are definitely
strategies. If you start on inherited wealth you’ll do below average
worth following.
to avg returns. You have to start poor. Having nothing to lose is
an advantage !
The P/BV is an overrated tool. It hides the efficient & glorifies the
inefficient. The ‘Book Value’ is also a yard for garbage dumping &
stays with the company for ever.RoE & P/E are better metics as
it’s the EPS that generates dividend, the only thing available for
shareholders.
Compiled by Rachael Rajan

WORDS WORTH
WISDOM
Buffett’s
latest
annual
letter
Warren Buffett’s annual letters to
shareholders are not just
a report of Berkshire Hathaway’s
performance but they are also
full of wisdom. Here are the most
insightful excerpts from his 2019
annual letter.
Importance of retained earnings

For the crux of [Edgar Lawrence] Smith’s [an
economist and financial advisor who wrote
Common Stocks as Long Term Investments]
insight, I will quote an early reviewer of his
book, none other than John Maynard Keynes:
“I have kept until last what is perhaps Mr.
Smith’s most important, and is certainly his
most novel, point. Well-managed industrial
companies do not, as a rule, distribute to the
shareholders the whole of their earned
profits. In good years, if not in all years, they
retain a part of their profits and put them
back into the business. Thus there is an
element of compound interest (Keynes’
italics) operating in favour of a sound
industrial investment. Over a period of years,
the real value of the property of a sound
industrial is increasing at compound interest,
quite apart from the dividends paid out to the
shareholders.”...
Nevertheless, when business ownership
was sliced into small pieces – “stocks” –
buyers in the pre-Smith years usually thought
of their shares as a short-term gamble on
market movements. Even at their best, stocks
were considered speculations. Gentlemen
preferred bonds.

WORDS WORTH
WISDOM
What Buffett looks for in an investment stretch over many decades.
In addition, we constantly seek to buy new This collect-now, pay-later model leaves
businesses that meet three criteria. First, P/C companies holding large sums – money
they must earn good returns on the net we call “float” – that will eventually go to
tangible capital required in their operation. others. Meanwhile, insurers get to invest this
Second, they must be run by able and honest float for their own benefit. Though individual
managers. Finally, they must be available at a policies and claims come and go, the amount
sensible price. of float an insurer holds usually remains
fairly stable in relation to premium volume.
Consequently, as our business grows, so does
our float. And how it has grown, as the
following table shows:
*URZWKLQWKHÁRDWRI%XIIHWW·VLQVXUDQFH
EXVLQHVV
Year Float ($ mn)
1970 39
1980 237
1990 1,632
2000 27,871
Acquisitions are like marriage 2010 65,832
In reviewing my uneven record, I’ve 2018 122,732
concluded that acquisitions are similar to 2019 129,423
marriage: They start, of course, with a joyful
wedding – but then reality tends to diverge ...but the insurance business is not free
from pre-nuptial expectations. Sometimes, from troubles
wonderfully, the new union delivers bliss As I have repeatedly done in the past, I will
beyond either party’s hopes. In other cases, emphasize now that happy outcomes in
disillusionment is swift. Applying those insurance are far from a sure thing: We will
images to corporate acquisitions, I’d have to most certainly not have an underwriting
say it is usually the buyer who encounters profit in 16 of the next 17 years. Danger
unpleasant surprises. It’s easy to get dreamy- always lurks.
eyed during corporate courtships. Mistakes in assessing insurance risks can
Pursuing that analogy, I would say that our be huge and can take many years – even
marital record remains largely acceptable, decades – to surface and ripen... A major
with all parties happy with the decisions they catastrophe that will dwarf hurricanes
made long ago. Some of our tie-ups have been Katrina and Michael will occur – perhaps
positively idyllic. A meaningful number, tomorrow, perhaps many decades from now.
however, have caused me all too quickly to “The Big One” may come from a traditional
wonder what I was thinking when I proposed. source, such as wind or earthquake, or it may
be a total surprise involving, say, a cyber
attack having disastrous consequences
beyond anything insurers now contemplate.
When such a mega-catastrophe strikes,
Berkshire will get its share of the losses and
they will be big – very big...
Buffett’s top 15 common-stock investments

and his long-term outlook
Charlie and I do not view the $248 billion
The power of float detailed above [see the table below] as a
One reason we were attracted to the P/C collection of stock market wagers – dalliances
business was the industry’s business model: to be terminated because of downgrades by
P/C insurers receive premiums upfront and “the Street,” an earnings “miss,” expected
pay claims later. In extreme cases, such as Federal Reserve actions, possible political
claims arising from exposure to asbestos, or developments, forecasts by economists or
severe workplace accidents, payments can whatever else might be the subject du jour.

WORDS WORTH
WISDOM
%XIIHWW·VWRSFRPPRQVWRFN to current rates should prevail over the
LQYHVWPHQWV coming decades and if corporate tax rates also
Percentage of Cost Market remain near the low level businesses now
Company company owned ($ mn) ($ mn) enjoy, it is almost certain that equities will
American Express Company 18.7 1,287 18,874
over time perform far better than long-term,
Apple Inc. 5.7 35,287 73,667
fixed-rate debt instruments.
Bank of America Corp. 10.7 12,560 33,380
The Bank of New York Mellon Corp. 9 3,696 4,101
Charter Communications, Inc. 2.6 944 2,632 However...
The Coca-Cola Company 9.3 1,299 22,140 That rosy prediction comes with a warning:
Delta Air Lines, Inc. 11 3,125 4,147 Anything can happen to stock prices
The Goldman Sachs Group, Inc. 3.5 890 2,859 tomorrow. Occasionally, there will be major
JPMorgan Chase & Co. 1.9 6,556 8,372 drops in the market, perhaps of 50%
Moody’s Corporation 13.1 248 5,857 magnitude or even greater. But the
Southwest Airlines Co. 9 1,940 2,520 combination of The American Tailwind,
United Continental Holdings Inc. 8.7 1,195 1,933 about which I wrote last year, and the
U.S. Bancorp 9.7 5,709 8,864 compounding wonders described by Mr.
Visa Inc. 0.6 349 1,924
Smith, will make equities the much better
Wells Fargo & Company 8.4 7,040 18,598
long-term choice for the individual who does
Others 28,215 38,159
not use borrowed money and who can control
Total equity investments carried at market 1,10,340 2,48,027
Data as on December 31, 2019
his or her emotions. Others? Beware!
What we see in our holdings, rather, is an

assembly of companies that we partly own
and that, on a weighted basis, are earning
more than 20% on the net tangible equity
capital required to run their businesses.
These companies, also, earn their profits
without employing excessive levels of debt.
Returns of that order by large, established
and understandable businesses are
remarkable under any circumstances. They The folly of committees
are truly mind-blowing when compared to the Audit committees now work much harder than
returns that many investors have accepted on they once did and almost always view the job
bonds over the last decade – 2.5% or even less with appropriate seriousness. Nevertheless,
on 30-year U.S. Treasury bonds, for example. these committees remain no match for
managers who wish to game numbers, an
offense that has been encouraged by the
scourge of earnings “guidance” and the desire
of CEOs to “hit the number.” My direct
experience (limited, thankfully) with CEOs
who have played with a company’s numbers
indicates that they were more often prompted
by ego than by a desire for financial gain.
Compensation committees now rely much
more heavily on consultants than they used
to. Consequently, compensation arrangements
Forecasting interest rates have become more complicated – what
Forecasting interest rates has never been our committee member wants to explain paying
game, and Charlie and I have no idea what large fees year after year for a simple plan? –
rates will average over the next year, or ten or and the reading of proxy material has become
thirty years. Our perhaps jaundiced view is a mind-numbing experience.
that the pundits who opine on these subjects
reveal, by that very behavior, far more about Evaluating acquisition proposals
themselves than they reveal about the future. Acquisition proposals remain a particularly
What we can say is that if something close vexing problem for board members. The

WORDS WORTH
WISDOM
legal orchestration for making 20.3% Is it any wonder that a non-
deals has been refined and
expanded (a word aptly
vs 10.0% wealthy director (“NWD”) now
hopes – or even yearns – to be asked
Berkshire’s compounded
describing attendant costs as annual gain over 1965–2019 to join a second board, thereby
well). But I have yet to see a vs S&P 500 (incl. dividends) vaulting into the $500,000-600,000
CEO who craves an acquisition class? To achieve this goal, the
bring in an informed and articulate critic to NWD will need help. The CEO of a company
argue against it. And yes, include me among searching for board members will almost
the guilty. certainly check with the NWD’s current CEO
Overall, the deck is stacked in favor of the as to whether NWD is a “good” director.
deal that’s coveted by the CEO and his/her “Good,” of course, is a code word. If the NWD
obliging staff. It would be an interesting has seriously challenged his/her present
exercise for a company to hire two “expert” CEO’s compensation or acquisition dreams,
acquisition advisors, one pro and one con, to his or her candidacy will silently die. When
deliver his or her views on a proposed deal to seeking directors, CEOs don’t look for pit bulls.
the board – with the winning advisor to It’s the cocker spaniel that gets taken home.
receive, say, ten times a token sum paid to the Despite the illogic of it all, the director for
loser. Don’t hold your breath awaiting this whom fees are important – indeed, craved – is
reform: The current system, whatever its almost universally classified as “independent”
shortcomings for shareholders, works while many directors possessing fortunes
magnificently for CEOs and the many advisors very substantially linked to the welfare of the
and other professionals who feast on deals. A corporation are deemed lacking in
venerable caution will forever be true when independence. Not long ago, I looked at the
advice from Wall Street is contemplated: Don’t proxy material of a large American company
ask the barber whether you need a haircut. and found that eight directors had never
purchased a share of the company’s stock
using their own money. (They, of course, had
received grants of stock as a supplement to
their generous cash compensation.) This
particular company had long been a laggard,
but the directors were doing wonderfully.
Paid-with-my-own-money ownership, of
course, does not create wisdom or ensure
business smarts. Nevertheless, I feel better
when directors of our portfolio companies
Director compensation have had the experience of purchasing shares
Over the years, board “independence” has with their savings, rather than simply having
become a new area of emphasis. One key been the recipients of grants.
point relating to this topic, though, is almost
invariably overlooked: Director compensation
has now soared to a level that inevitably
makes pay a subconscious factor affecting the
behavior of many non-wealthy members.
Think, for a moment, of the director earning
$250,000-300,000 for board meetings consuming
a pleasant couple of days six or so times a
year. Frequently, the possession of one such
directorship bestows on its holder three to
four times the annual median income of U.S.
households. (I missed much of this gravy Wisdom of buybacks
train: As a director of Portland Gas Light in Berkshire will buy back its stock only if a)
the early 1960s, I received $100 annually for Charlie and I believe that it is selling for less
my service. To earn this princely sum, I than it is worth and b) the company, upon
commuted to Maine four times a year.) completing the repurchase, is left with ample
... cash. WI

MONTHLY
AGENDA

46,000 -31.2% 22,500 -27.8%
39,000 20,000
32,000 17,500
25,000 15,000
Jan 14, 2020 Mar 18, 2020 Nov 5, 2010 Dec 20, 2011
Total trading days 45 Median rise during up days (%) 0.6 Total trading days 277 Median rise during up days (%) 0.9
No. of days of fall 29 Max fall in a day (%) -8.2 No. of days of fall 157 Max fall in a day (%) -4.1
No.of days of rise 16 Max rise in a day (%) 4.0 No.of days of rise 120 Max rise in a day (%) 3.6
10% fall (days) 38 Best week (%) 3.5 10% fall (days) 56 Best week (%) 7.3
20% fall (days) 41 Worst week (%) -19.1 20% fall (days) 194 Worst week (%) -7.2
Median fall during down days (%) -0.5 Median fall during down days (%) -0.9 Recovery (approx) 3 years
COVID-19, which originated in China, is spreading around the world. There Following the 2008-09 global financial crisis, some European nations,
is no vaccine yet for the coronavirus, which causes this disease. COVID-19 especially Greece, found it difficult to honour their debt payments. This led
spreads 10 times faster than normal flu and hence is particularly danger- to the European debt crisis. The EU and IMF had to bail out the troubled
ous. The only remedy as of today is exercising precaution. The world has economies. In India, the Euro crisis was coupled with inflation of around 12
virtually gone into a lockdown due to this disease. per cent in 2010, high interest rates and a slowing economy.

26,000 -60.9%
19,000
12,000
5,000
Jan 8, 2008 Mar 9, 2009
Total trading days 285 Median rise during up days (%) 1.6
No. of days of fall 157 Max fall in a day (%) -11.0
No.of days of rise 128 Max rise in a day (%) 8.2
10% fall (days) 9 Best week (%) 24.9
20% fall (days) 24 Worst week (%) -19.4
30% fall (days) 111 Recovery (approx) 2 years 10 months
Median fall during down days (%) -1.9
The worst recession since 1929 had hit the markets in 2008. It originated in
the US, where the housing loans started going bad in bulk. Liquidity
squeeze in the US market led to bankruptcy of Lehman Brothers. Though
India was relatively untouched by the recession, the markets corrected due
to withdrawals by foreign investors.

MONTHLY
AGENDA

14,000 -29.2% 6,600 -27.3%
12,000 5,900
10,000 5,200
8,000 4,500
May 10, 2006 Jun 14, 2006 Jan 14, 2004 May 17, 2004
10% fall (days) 7 Best week (%) 3.5 10% fall (days) 29.0 Best week (%) 6.0
20% fall (days) 16 Worst week (%) -13.5 20% fall (days) 84.0 Worst week (%) -18.9
Median fall during down days (%) -3.1 Recovery (approx) 4 months Median fall during down days (%) -1.4 Recovery (approx) 9 months
A number of factors were responsible for this decline. First, a CBDT circular May 17, 2004, is the worst day in the history of Sensex as it fell 11.1 per
created confusion that FIIs would have to pay higher taxes. Second, the cent. The shocking defeat of NDA government and the formation of a
global markets were weak and the Indian inflation was rising. A rise in inter- left-supported government scared the market. Panic selling by FIIs wiped
est rates was anticipated. Finally, crude oil was rising and had reached out of $27 billion of the investor wealth.
around $91/barrel in May 2006.
-56.2%
6,500
5,000
3,500
2,000
Feb 11, 2000 Sep 21, 2001
10% fall (days) 19.0 Best week (%) 18.1
20% fall (days) 35.0 Worst week (%) -15.8
30% fall (days) 60.0 Recovery (approx) 3 years 11 months
This market decline can be attributed to the dot-com bubble in the US. The
shares of internet companies had attained dizzying heights. The easiest
way to make money was to suffix ‘.com’ with the company name. Such was
the frenzy for tech stocks that Infosys, then a budding IT company, traded
at a P/E of over 400. Little surprise the bubble eventually burst.
COVID-19 has spooked the markets

worldwide. However, this is not the first time
that the markets have fallen dramatically.
Here are six worst phases when the markets
corrected, along with the various metrics of
the decline. Fortunately, the periods of
recovery eventually followed.
By Rajan Gulati

MONTHLY
AGENDA
¶ 84% ¶ 69.2%

44,000 30,000
36,000 25,000
28,000 20,000
20,000 15,000
Mar 1, 2016 Feb 6, 2020 Aug 28, 2013 Feb 19, 2015
10% rise (days) 56 Best week (%) 8.0 10% rise (days) 8 Best week (%) 9.3
20% rise (days) 125 Worst week (%) -6.1 20% rise (days) 131 Worst week (%) -4.2
30% rise (days) 304 Previous downtrend (%) -22.0 30% rise (days) 172 Previous downtrend (%) -8.9
Median fall during down days (%) -0.4 Median fall during down days (%) -0.4
The period witnessed a liquidity-driven rally, wherein rising flows from mutu- During this time, the economy was going through a phase of pessimism
al funds and global investors led to a run-up in the markets, even though and policy paralysis, resulting in depressed markets. When the NDA gov-
the earnings growth was muted. Although the bull run faced roadblocks like ernment appeared to be coming in power, the market shot up.
demonetisation, implementation of GST, IL&FS crisis and rising bank NPAs,
the markets kept on rising.
159.9%

22,000
17,000
12,000
7,000
Mar 9, 2009 Nov 8, 2010
10% rise (days) 6 Best week (%) 19.0
20% rise (days) 11 Worst week (%) -7.7
30% rise (days) 17 Previous downtrend (%) -61
The market bounced back sharply after crashing due to the US subprime
crisis. This recovery was the result of the global coordinated monetary eas-
ing and massive liquidity injections from global central banks.

MONTHLY
AGENDA
¶ 194% ¶ 126.9%

13,000 6,500
10,000 5,000
7,000 3,500
4,000 2,000
May 17, 2004 May 12, 2006 Sep 24, 2001 Jan 21, 2004
Total trading days 500 Median rise during up days (%) 0.8 Total trading days 584 Median rise during up days (%) -0.7
10% rise (days) 3 Best week (%) 13.7 10% rise (days) 13 Best week (%) 7.5
20% rise (days) 87 Worst week (%) -7.1 20% rise (days) 38 Worst week (%) -6.8
30% rise (days) 123 Previous downtrend (%) -21.8 30% rise (days) 94 Previous downtrend (%) -53.8
Median fall during down days (%) -0.6 Median fall during down days (%) 0.8
High GDP growth and lower interest rates proved to be the ingredients of This phase witnessed a recovery from the dot-com bubble burst. Also,
this historic bull run. Further, Dr Manmohan Singh, an economist and a for- India’s GDP growth started picking up, jumping from a low of 3.8 per cent
mer RBI governor and finance minister, became the prime minister. This in 2002 to around 8 per cent in 2003-04. RBI’s dovish stance also aided the
augured well for the stock market. market rise. The central bank cut interest rates from 8.5 per cent in 2010 to
6 per cent in 2004.
88%
6,000
5,000
4,000
3,000
Jan 1, 1999 Feb 28, 2000
10% rise (days) 5 Best week (%) 14.0
20% rise (days) 44 Worst week (%) -11.3
30% rise (days) 87 Previous downtrend (%) -35.0
This was the period of the dot-com bubble in the US. Companies operating
in the internet space saw their shares skyrocket in hope that they will
deliver bumper profits. In India, IT companies like Infosys and Wipro had
their share prices go up by 17 and 19 times, respectively.
While dramatic market declines spook

investors, they are often followed by
extended recoveries. Here are top six
bullish phases in the history of the
Indian stock market, along with their
key metrics. The message is clear: it
pays to be optimistic.
By Yash Rohra

MARKET
C MPASS INDEX WATCH
S&P BSE Sensex

What a month it has been! The coronavirus scare has thrown the market off the peak it had reached just a
few weeks ago. As the graphs below suggest, the sudden drop has been so cataclysmic that the various
valuation indicators have dramatically fallen below their respective medians. The data for one-year returns
clearly shows the bloodbath that the market’s leading stocks have gone through, let alone the others.
2LÙ\TILYZ 0UKL_TV]LTLU[ :LUZL_4LKPHU

45000
15.67
Price to earnings
2.00
Price to book
40000
35000
30000
1.72
Dividend yield (%)
27.3
Market cap (` lakh cr)
25000
20000
Mar ’15 Mar ’20
=HS\H[PVUZKP]PKLUKZHUKYL[\YUZ
Dividend
7YPJL[VIVVR]HS\L7)
Company name P/E P/B yield (%) 1Y return (%) 3.4
Bharti Airtel 0.0 2.6 0.6 35.1 3.1
Nestle India 63.3 64.5 2.6 22.9
Hindustan Unilever 59.6 41.9 1.2 11.9 2.8
Asian Paints 52.9 13.3 0.7 2.9 2.5
Kotak Mahindra Bank 24.1 3.3 0.1 -15.9
2.2
TCS 19.3 6.1 1.8 -16.3
HCL Technologies 10.9 2.3 1.9 -17.8 1.9
Mar ’15 Mar ’20
Bajaj Finance 24.8 4.2 0.3 -20.6
Ultratech Cement 25.0 2.9 0.4 -21.0
HDFC 12.1 2.1 1.4 -21.5
Power Grid 5.2 1.5 5.5 -24.3
7YPJL[VLHYUPUNZ7,
ICICI Bank 19.4 1.5 0.4 -26.0 30
Titan Company 47.3 10.8 0.6 -27.5 27
Infosys 13.7 3.5 4.1 -28.4
24
Sun Pharma 19.4 1.8 0.9 -30.2
HDFC Bank 16.1 2.5 2.0 -32.5 21
Reliance Industries 12.9 1.3 0.7 -33.3 18
Bajaj Auto 10.7 2.3 3.1 -34.5
15
Maruti Suzuki India 20.6 2.6 1.9 -35.4 Mar ’15 Mar ’20
Hero MotoCorp 8.5 2.1 5.4 -37.4
Tech Mahindra 10.9 2.2 2.9 -37.9
State Bank of India 13.8 0.8 0.0 -38.2
+P]PKLUK`PLSK
NTPC 3.9 0.7 8.0 -43.8
1.75%
Tata Steel 6.0 0.5 4.8 -47.4
L&T 10.4 1.5 2.5 -47.5 1.60
ITC 12.7 3.0 3.7 -47.7 1.45
Mahindra & Mahindra 16.9 0.9 2.9 -55.8
1.30
Axis Bank 18.2 1.0 0.3 -58.5
ONGC 3.6 0.3 3.0 -61.9 1.15
IndusInd Bank 5.2 0.7 2.2 -80.0
1.00
Data as of March 23, 2020 Mar ’15 Mar ’20

MARKET
BIG MOVES C MPASS
Large caps Price to earnings Net profit (` crore)

3M returns (%) 3Y avg RoE (%) 3Y earnings growth (%) 3M price (`) movement
-31.8 7 5763
Tata Steel
425
Metal stocks fell amidst slowdown fears due to the
coronavirus spread. 13.7 41.3 290
-33.2 17 11746
State Bank of India 334
The bank will acquire 49 per cent in Yes Bank at around
`7,250 crore. -0.3 7.9 223
-33.6 8 7478
Hindustan Zinc
207
coronavirus spread. 25.0 0.3 137
-34.5 – -356
Bank of Baroda
97
As per RBIs risk-assessment report, the bank under-
reported bad loans for FY19 by `5,250 crore. 0.8 14.2
64
-36.1 22 750
DLF 233
The stock fell amidst a market-wide sell-off due to the
coronavirus scare. 6.3 17.5 149
-37.0 6 4466
GAIL 124
Tension within OPEC plus countries resulted in falling crude-oil
prices, hence impacting the gas prices. 11.7 46.0 78
-45.1 15 3055
Bandhan Bank 501
The bank has high concentration in North East and East India.
It still needs to meaningfully diversify away from microfinance. 22.3 68.9 275
-47.8 3 10558
144
Vedanta
coronavirus spread. 19.8 40.2
75
-51.7
125
ONGC 4 22360
Tension within OPEC plus countries resulted in
falling crude-oil prices. 13.2 35.5
60
-58.7 10 4502
Indusind Bank
1604
The stock was hit due to the bank’s ratings downgrade,
deteriorating asset quality and deferment of fund-raising plans. 15.0 25.1 663
Our large-cap universe has 83 large companies, making the top 70 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in the last three months.
Data as on March 16, 2020.

MARKET
C MPASS BIG MOVES
Mid caps Price to earnings Net profit (` crore)

-21.2 – -67459
Vodafone Idea 6
-18.3 -1136.9
The Supreme Court disallowed self-calculation of 7
the AGR dues.
-26.4 662 -270

SAIL
Metal stocks fell amidst slowdown fears due to
the coronavirus spread. -1.2 36.0 37
27
-46.5 27 735
Adani Transmission
321
The stock fell amidst a market-wide sell-off due to the
coronavirus scare. 19.8 23.5
172
-49.6 – -3744
Union Bank of India
The bank is set to merge with PNB and OBC.
-11.1 7.3
59
30
-52.8 4 1046
Oil India
149
Tensions within OPEC plus countries resulted in falling
crude-oil prices. 5.9 2.8
70
-53.4 – -327
Adani Power 61
The stock fell amidst a market-wide sell-off due to
the coronavirus scare. -184.0 -27.9 28
-54.1 – -151
Tata Motors
181
A looming slowdown around the gloabe, including North
America, Europe and China, can affect JLR sales. -6.5 -128.0 83
-55.0 14 1501
Motherson Sumi Systems
148
S&P changed its outlook to negative of a material
subsidiary of the company. 25.1 -7.0 67
-55.8 14 705
Canara Bank
226
The bank called off its entire 30 per cent stake sale in CanFin
homes without giving any reasons. -2.5 14.2
100
-58.4
369
Future Retail 11 691
The virus impact will lead to lower consumer spending
and more online purchases. 12.9 264.8 154
Our mid-cap universe has 179 mid-sized companies, making the next 20 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in the last three months.

MARKET
BIG MOVES C MPASS
Small caps Price to earnings Net profit (` crore)

159.9 – -1
Atlas Jewellery India
67
Curiously, the stock went up when the rest of the market
collapsed. Investors should not fall for the rise. -1.6 24.3 26
118.8 – -673
Unitech
The government-nominated board is expected to submit
the resolution plan by the end of March 2020. -4.7 -311.9 2
1
23.3 – -20606
Yes Bank 37
30
SBI, LIC and other private banks will infuse around
`11,000 crore in the bank. 14.3 29.0
-48.1 – -2311
Jaiprakash Power Ventures
The stock fell in line with the wider sell-off.
-13.2 -18.9 1.44
0.76
-48.3 3 1268
PNB Housing Finance
The company reported a 22 per cent drop in Q3 FY20 net
profit on lower loan disbursals and higher expenses. 14.3 49.1 471
243
-56.6 4 115
Parag Milk Foods
High promoter pledge, coupled with business disruption due
to heavy rains in Q2-Q3, led to a fall in the share price. 9.9 292.3 140
61
-56.7 – -48
Spicejet
The spread of the coronavirus has drastically
reduced travel. 0.0 -188.9 98
43
51
-59.1 3 435
NCC
The company reported a 75 per cent drop (YoY)
in PBT in Q3 FY20. 6.1 72.3
21
-61.1
295
Sterling and Wilson Solar 3 17.9
A lockdown in China has led to supply-chain issues
for the company. – – 115
-62.5 31 17
Olectra Greentech
180
The lockdown in China may impact the
company’s growth. 4.8 -239.7 68
Our small-cap universe (minimum market capitalisation `500 crore) has 587 small-cap companies, making the last 10 per cent of the total market capitalisation.
The list mentions the stocks that have fluctuated most wildly in the last three months. Data as on March 16, 2020.

VIS-A-VIS
Bearings barons
Schaeffler and SKF together command about 44 per cent of India’s bearings
market. Here is how they compare with each other.
Schaeffler India SKF India
Part of the global Schaeffler group, the company It is part of Sweden’s AB SKF group (owns 53 per
manufactures balls and roller bearings used in cent) and manufactures bearings for automotive
industrial (about 42 per cent of FY19 sales) and (about 35 per cent of the sales) and industrial (51 per
automotive (about 48 per cent) applications at its cent) applications. Majority of its industrial
four manufacturing facilities in India. The bearings are imported, while auto bearings are
company offers full range of mobility solutions in manufactured at three facilities. Going forward, the
engines, transmissions and chassis components, company will be focusing more on localisation in
along with ball and roller bearings. the industrial segment.
-PUHUJPHSZ All numbers in ` cr -PUHUJPHSZ All numbers in ` cr
Operating Net Net Total Cash from Market Operating Net Net Total Cash from Market
Revenue profit profit worth debt operations cap Revenue profit profit worth debt operations cap
4,361 634 368 2,706 58 238 12,195 2,980 399 296 1,697 90 181 7,647
7YPJLJOHY[ 7,JOHY[
175
Schaeffler India SKF India 55
Schaeffler India SKF India
150 45 Merger with Luk India and

INA Bearings
125 35
100 25
75 Rebased to 100 15
March 2015 March 2020 March 2015 March 2020
9.9
14.5 13.4 33.2 4.1 0.9 0.0
8.4 25.8 4.2 0.8 0.1
Price to earnings Price to book Dividend yield (%) Debt to equity
Net margin (%) Operating margin (%) -P]L`LHYHUU\HSPZLKNYV^[O

28.7 21.7 21.2
24.8
19.0
16.7
9.3
7.2
4.3 5.0
Revenue (%) Operating profit (%) EPS (%)
ROE (%) ROCE (%) Balance-sheet data for Schaeffler as of Dec ’18; for SKF, it’s Mar ’19.
Price-related data as on Jan 17, 2020.

The Indian bearings market is estimated at `100 billion in size. The market is served primarily by
organised global bearing majors. The industry caters to mainly automotive and industrial sectors.
Though the auto sector is currently experiencing a slowdown, the government push towards building an
extensive road network and Make in India will have a positive impact on the industry.

ANALYST’S
DIARY
How the market may fare

Our analysis of the Sensex’s historical P/Es gives an idea of where the
market is headed in the next one year
T
he recent fall in the equity market has seen Sensex returns over the next one year for various P/E
investors running for cover. The reason this brackets. This gave as an idea of the market direction.
time: COVID-19, a disease caused by the For instance, whenever the Sensex’s P/E has been
coronavirus. There has been no vaccine so far for it higher than 25 (1,200 outcomes), the median next-one-
and that’s the reason investors year returns have been -11 per
are more panicky. Around the cent. The lowest return was
world, governments have -56 per cent. Whenever the
locked down areas. Travel has Sensex’s P/E has been
come to a standstill. Obviously, between 12 and 15 (861
the economy is going to be outcomes), the median next-
impacted in the short to one-year returns have been 36
medium run. Because no one per cent. The market has shot
knows when this threat will up to as high as 103 per cent
subside, the markets are in the next one year.
struggling to find a bottom. As of December 2019, the
Investors are anxiously asking Sensex’s P/E was 29. If one
how the markets will fare in goes by these numbers, a
the future. correction was imminent.
We analysed the daily The markets were
P/E of the Sensex for looking for a reason to
the last 30 years. We correct and COVID-19
then divided the 7,054 has provided them just
outcomes across that. WI
various P/E brackets. By Danish Khanna
We also checked the
:VTL7,JY`Z[HSNHaPUN
The following are next one-year returns of the Sensex across its various P/E brackets. The analysis covers Sensex’s daily returns over the last 30 years.
Next one-year return (%)
Sensex’s P/E Lowest Median Highest % of total outcomes No. of outcomes
Less than 10 59.8 0.1 6

56.2 78.8
Greater than 10 but less than 12 62.4 2.1 146

13.2 109.0
Greater than 12 but less than 15 35.8 12.2 861

-30.6 102.7
Greater than 15 but less than 17 19.7 14.3 1,012

-33.7 134.4
Higher than 17 but less than 20 10.2 26.7 1,883

-43.0 225.5
Higher than 20 but less than 25 9.9 27.6 1,946

-53.6 264.8
Higher than 25 -10.8 17.0 1,200

-56.2 96.1

ANALYST’S
DIARY
Building trust ;H_PUN[PTLZ

The following companies have direct-tax disputes of at least 10 per cent
of their equity.
Here is a list of companies that can Tax-dispute

Disputed amount as % of
5Y median
resolve their income-tax disputes by Company

Mahindra Holidays
amount (` cr)
996
Equity
519.5
operating profit
364.9
availing the Vivad se Vishwas Sonata Software 548 68.2 285.3
scheme, introduced in the Budget Whirlpool Of India 1,289 53.8 263.7

Gillette India 432 53.1 114.2
KRBL 1,269 43.7 197.2
I
n her recent Union Budget speech for FY21, the
Bombay Dyeing 78 79.5 28.3
finance minister, Nirmala Sitharaman, has
Vedanta 20,495 31.0 92.7
introduced a tax-amnesty scheme known as
‘Vivad se Vishwas’. As revealed during the Budget, at SPARC 82 59.0 NA
various appellate bodies, around 4.8 lakh direct tax Indian Overseas Bank 4,469 32.4 NA
cases are stuck, together amounting to around `9.4 Network 18 Media 216 36.0 422.1
lakh crore. Naturally, such a huge number of
Ashoka Buildcon 75 26.3 7.9
outstanding cases aren’t just a financial and resource
strain on courts but also on companies, the tax Central Bank of India 2,569 11.1 NA
department and the government itself. The IDBI Bank 4,302 12.4 NA
government wants companies to opt for this scheme Blue Star 91 10.4 41.4
as it will also ease its fiscal position.
‘NA’ indicates the company has an operating loss. Data as of FY19.
Under this scheme, taxpayers need to pay only the
amount of disputed taxes and they will get a
complete waiver of interest and penalty,
provided they pay the tax by June 30, 2020
(extended from March 31, 2020, due to the
disruption caused by the coronavirus spread).
4.8 lakh
Direct-tax cases pending at
This initiative is motivated by the success of various tribunals
the Sabka Vishwas Scheme floated last year for
the resolution of indirect-tax disputes. Under
this scheme, nearly 1.90 lakh applications
involving duties of about `90,000 crore were
filed. Of this, the government is expected to
` 9.4 lakh cr
Amount stuck in these cases
collect over `39,500 crore.
We sifted through BSE 500 companies
to check their total disputed direct taxes.
This amount is found under the head of
contingent liabilities on the balance
sheet as tax disputes are contingent on
the outcome of appellate bodies.
Further, we filtered out companies
having at least 10 per cent
outstanding tax-dispute
amount as per cent of
total equity. These
companies are given
in the table. WI
By Rajan Gulati

ANALYST’S
DIARY
By Rajan Gulati
Desi vs videshi
Segmentation of the revenues derived from
India and overseas for the Sensex companies
Top 3 companies in terms of overseas revenues (excluding IT)
(In ` cr) (In %)
22
Total companies (excluding
3,04,201
Reliance
Industries
75,141
Tata
Steel
51,087
ONGC
73%
Sun
Pharma
49%
Reliance
Industries
48%
Tata
Steel
banks and finance companies)
Top 3 companies in terms of domestic revenues

(In ` cr) (In %)
38% 62%
TOTAL
REVENUE
4,02,374 3,18,608 95,898 100% 100% 98%

23,72,098 ONGC Reliance
Industries
Larsen &
Toubro
NTPC Power
Grid
Titan
Total revenue (` cr)
2%
14,72,821
Domestic (` cr)
Company that gets
the least of its
8,99,276 revenue from India
International (` cr)

STOCK STORY
Oh, no!
How Yes Bank turned from a growth
machine to a wealth destroyer
A
part from the market fall due to the
coronavirus, the one topic that is trending
these days is Yes Bank. After falling to a low
of some `5, the stock has reacted sharply.
Some investors jokingly called it a ‘multibagger’.
However, for long-term investors, the stock has proved
to be a wealth destroyer.
The bank’s problems started when its former MD
and CEO, Rana Kapoor, was denied an extension by
the RBI. Soon the bank’s NPAs started surfacing.
Being corporate-facing, the bank had greater
exposure to companies, some of them turning out to
be deeply troubled.
The bank’s efforts at raising capital failed.
Eventually, the bank’s board was superseded by the
RBI. The government has now introduced a
reconstruction plan for the bank. SBI and many other
private banks have showed interest in investing in the
bank. Only time will tell whether the bank recovers or
not. Till then hold your breath. WI
By Danish Khanna
29 APR 2010 09 MAY 2011 15 JUL 2013 Spiking NPAs

Launches Enters into a RBI monetary A rapid spike in the bank's non-performing
the next strategic tightening to 17 SEP 2014
assets signals its deteriorating condition.
phase of alliance with arrest rupee Receives
zGross NPA (%) zNet NPA (%) ratings
growth: DHFL for depreciation; 20
Version 2.0 distribution of board upgrade from
16 ICRA and
home loans decided not 12
to nominate CARE
Ashok Kapur’s, 8
the late 4
21 JUN 2010 co-founder, 0
Mar 2010 Dec 2019
ICRA daughter as
upgrades director
ratings for the
bank’s debt
instruments
30 MAY 2014
Raised
$500 million
through a global QIP
`49.7 30 SEP 2013

27 JUL 2010 Total branches
Q1 profits rise 56.3%, stand at 500
advances grow 107.2%, receives 17 SEP 2013
licenses to open 91 branches Raised $255 million

STOCK STORY
26 APR 2019
Caught on the wrong foot Reports first-ever
When other investors were exiting the stock, quarterly loss, provision
retail investors were hiking their stake in it. rise sixfold, stock tanks
zPromoterzDIIs zFIIS zRetail 30%
70 %
8 MAR 2020
60 Rana Kapoor
50 arrested
40
30
5 MAR 2020
20 1 APR 2019
SEBI probes Withdrawals capped
10
0 potential at `50,000
Mar 2010 Dec 2019 `321.1 insider
trading 14 MAR 2020
Three-year lock-in
for investors who
have more than
100 shares for up
to 75% of holdings
26 OCT 2017
Reports divergence in SBI to hold 49%
gross NPAs as of FY17 stake in the bank;
from that of the RBI’s six private-sector
7 SEP 2016 estimates to the tune banks to infuse
of `6,355 cr
Plans to raise
$1 billion `10,000 cr.
through QIBs Reports loss of
but fails to `18,564 cr
find any 19 APR 2017 in Q3 FY20
investor Reports doubling NPAs of
of gross NPA due `40,709 as of
to exposure to Dec 2019
Jaiprakash
Associates 1 DEC 2019
19 SEP 2018
Rana Kapoor
RBI rejects bank’s plea for sells all his
three-year extension to MD stake in the
12 MAY 2017 & CEO Rana Kapoor
Reports bank
divergence of
15 NOV 2018
gross NPAs as of
Mar 2016 from Two independent directors
that of the RBI’s of the bank resign
1 AUG 2015 08 NOV 2016 estimates to the
27 NOV 2018
RBI conducts Demonetisation tune of
Moody’s cuts ratings citing
asset-quality happens `4,176 cr corporate-governance issues
review for
banks 24 JAN 2019
Hires Ravneet Gill, Head
The troublesome accounts of Deutsche Bank India,
The bank’s exposure to some of the as its new CEO
most infamous business groups
Companies Exposure (` cr) 18 JUL 2019
ADAG Group 12800
Essel 8400
Q1 profit falls 91 per cent; gross
DHFL 4735
NPAs over 5 per cent; asset quality
Vodafone Idea 4000
deteriorates; Rana Kapoor pledges stake
IL&FS 2500 `25.6
Jet Airways 550
CG Power* 500
*Yes Bank also has stake of 12.79 per cent in CG Power

COVER STORY
Viral
investing
How to use the pandemic to
set your investments up
for future gains

COVER STORY
W
hat’ll be the world unconnected to the rest
like one year from of the world. We had
now? Don’t bet on the our own little scams and slumps
worst-case scenarios to but they were isolated from
come true, either in the world. All this changed
your personal lives or your savings and from the so-called dot-com
investments. Of course, things will get crash of 2001, which was
worse before they stabilise and then get the first ‘globally
better. However, the basics of the world integrated’ crash of the
will not change. Indian markets. Year 2008-
Look at similar events in the past. 09 was even more so.
During 1918-19, a great influenza What can we expect
epidemic swept the world. About 5 crore now? The obvious answer
people died worldwide. India was the is that we do not know what
worst hit, with about 1.8 crore dead. to expect. At this stage, the
That was about 5 per cent of the biggest worry is that in India and
population at the time. That disease was elsewhere in the world, the
far worse than COVID-19 is, and medical disease spread is just beginning. What
science was primitive compared to will happen is still a complete unknown.
today. On top of that, the First World The impact could be deep but short, or
War (1914–18) had just ended. And yet, it could be long and shallow, or
despite all that, the years after that were anything in between. Some industries
a great expansion of economic activity will have one kind of an impact, some
and prosperity. So much so that the another. For instance, one can hardly
exuberance got overdone and resulted doubt that travel and passenger
in the crash of 1929 and the ensuing transport will be in bad shape. Some
depression. Some of us may have heard industries will have supply shocks,
grandparents and great-grandparents some demand shocks and some both.
talk about it. Some will recover quickly.
However, the fact remains that the Inevitably, global companies that
impact of the medical disaster, even wish to diversify from an
such a severe one, was short-lived. Life overdependence on Chinese supply
goes on. Billions of people live their chains may shift some business to India.
daily lives – they work; they eat; they Even so, at this stage, many investors
buy things. Even at this stage, we would
hazard a guess that it will change less
than we think it will. Humanity and the After the Sensex fell 20 per cent
world has seen worse and recovered Returns starting six months after the drop
pretty quickly.
Dates 12M (%) 24M (%) 36M (%)
Still, some things are still up in
the air. The last 20 years have been a Feb-16 11.5 35.8 31.2
great education for all of us May-12 7.5 48.4 35.2
who invest in stocks. Before
Nov-11 21.8 49.3 71.6
that, there used to be
crashes and slumps in the Mar-08 33.2 56.1 27.9
Indian stock markets but Jul-00 -23.5 -24.9 31.6
they were like storms in a
Jan-95 4.4 27.1 -5.2
teacup. Our markets
were tiny compared to May-92 28.4 63.8 18.9
what they are now and Dec-90 142.6 75.4 221.8
they were practically
Absolute figures

COVER STORY
are close to panic or have are not actually saying this, the
crossed the line. No one likes chances of a bounce back are strong.
uncertainty, and this looks like Of course, right now, we are in the
a bad case indeed. middle of the crisis and we don’t
The thing to understand is know how far this is going. When
that 30–40 per cent declines are not one is in the middle of a crisis, then
uncommon in the equity markets of the situation looks very dark. Later,
the world and we do have a history of rational expectations and
how markets fare after such shocks. analyses enter the mind and
One useful thing to do would be to things start looking
look at past declines in stock markets different.
and see what happened subsequently. As in every crisis,
Take a look at the table ‘After the managing one’s psychology is
Sensex fell 20 per cent’ that we have important. Today, a lot of media and
data-crunched to understand what social media are busy
happens after big drops in the equity painting doomsday
markets. pictures. Why are they
These analyses take eight periods doing this? Maybe because
when the Indian markets (as it’s good business to get as many
measured by the Sensex) declined 20 clicks and eyeballs. However, an
per cent or more and then examine excessive and continuous exposure
what happened as time passed by. The of a large mass of people to this
three time periods we examined were relentlessly negative coverage does
12 months, 24 months and 36 months. cause excessively pessimistic
The question we are asking is, ‘How reactions. As we go to press, the fact
long did the markets take to recover is that China, South Korea, Japan and
after a deep shock?’ The data answers Singapore have demonstrated that the
this quite emphatically. problem can be contained with a
We find that even at the shortest combination of approaches. Even
12-month period, the BSE Sensex had Italy, which is now the worse affected,
recovered well. In most of the has seen a slowdown of new cases
cases, the gains from the bottom eight-nine days after a complete
were large, with only the 2000 dot- lockdown commenced. Yes, there will
com crash still strongly be slowdowns and recessions but a
negative after one year. As you bounce back is inevitable.
can see, the recovery after two This brings us to the real question:
years and three years is even what should you actually do? The
stronger except for the odd case answer is the same that it ever was:
of 1995, when a second slump buy quality. In fact, this is the greatest
had started by the time the time to buy quality stocks. There
three-year period ended. were so many that were great except
So are we saying that for the price being too high. Now is
equities would have recovered one the time when we can land them at a
or two years from now? While we good value-oriented entry price.
When one is in the middle of a crisis, then the

situation looks very dark. Later, rational
expectations and analyses enter the mind and
things start looking different.

COVER STORY
In our premium Value Research Stock Advisor service,

we have taken the opportunity to launch a ‘Best Buys
Now’ feature, which has 12 selected stocks that are
available at attractive bargains.
This is not a new phenomenon. Here’s may even be down more. From the
a great example: back in 2008, HDFC short-term earnings perspective, this
Bank fell to half its value. If you had is a justifiable reaction. After all, an
bought it before that crash, when it AMC’s earnings are an exact
was at the peak of that time, your percentage of the amount of money
money today would be five times after it’s managing while the costs are
absorbing that huge loss. From the mostly fixed. As the value of its
bottom, it’s about 10 times. managed funds falls, there is no doubt
There’s no shortage of quality that this company will make lower
stocks that are going abegging right profits this year. However, from a
now at once-in-a-decade bargains. In longer-term perspective, this is
fact, in our premium Value Research irrelevant. The mutual fund business
Stock Advisor service, we have taken is going to have huge growth in the
the opportunity to launch a ‘Best Buys coming decade and HDFC AMC is
Now’ feature, which has 12 selected well-set to exploit that growth. The
stocks that fall into this category. stock has been priced quite fully
Let’s take you into a secret and recently but is great value now. It’s
reveal one of these 12, HDFC Asset the perfect opportunity but there are
Management Company, which runs many, many more like that. In fact,
HDFC Mutual Fund. Since the Wuhan this is the time to reaffirm the basic
panic started, the stock is principles of not just what to invest
down about 30 per in but how to invest. See the points in
cent. By the time you the circles below.
read this, it Now let’s wash our hands and
You
without touching our faces, start
should own
investing. WI
at least 10 to 20
stocks (choosing these
is made easy by Value
Research Stock
Advisor).
You Use cash (or rather,
should stay fixed-income assets) to hold
invested for at least perhaps 10 to 20 per cent of the
five to seven years, total amount you have mentally
regardless of what is assigned to equities. This will enable you
happening in the equity to exploit declines.
markets at any given However, never forget that what make
point in time. these stocks great are their long-term
Market
declines are business prospects, not the short-
a great time to invest term price gyrations.
in these fundamentally That’s quite simple,
strong stocks. Do not isn’t it?
run scared by
crashes.

IN FOCUS PRASHANT JAIN ED & CIO, HDFC AMC
Why Prashant Jain likes PSUs

Focus question You have been known to bet on PSUs. They have not
been long-term wealth creators. What makes you optimistic about
them? Why has been the market ignoring them?
‘It is imprudent to make

blanket judgements based
on ownership alone’
In my opinion, there are a few
misconceptions about public-
sector companies. Neither all PSU
stocks are bad, nor are all private-
sector stocks good. The large
number of failures/problems and
significant wealth erosion in
several private-sector companies,
especially in infrastructure,
NBFC space, banking, telecom,
etc., and significant loss of
economic value in PSUs
(including some unlisted ones) in
telecom, airlines, etc., suggests
that it is imprudent to make
blanket judgements based on
ownership alone. Some of the
most successful companies in
India in power generation,
transmission, oil refining and
marketing, logistics, NBFCs, etc.,
are in fact from the public sector.
However, it is also true that
exceptional companies are mostly
from the private sector. This is
understandable as PSUs have
certain limitations like rules-
driven decision making,
alignment with social interest,
limitations on hiring,
compensation, etc. On the other
hand, PSUs also enjoy certain
advantages, especially in capital-
intensive/natural-resources-led
businesses as also in banks, where
public ownership gives confidence
to people at large.

IN FOCUS
Prashant
‘It’s inaccurate to say that The key issue, therefore, is why financial performance, Jain’s top
PSU stocks have always these PSU stocks sharply creates an opportunity’ 10 PSU
underperformed’ underperformed in the past two It is also interesting to note that bets
It is also inaccurate to say that years and if this significant underperformance by Across all his
PSU stocks have always underperformance is not a sector, despite stable financial portfolios,
Prashant Jain
underperformed their private- warranted by fundamentals, does performance, leads to has the high-
sector counterparts. As the chart it creates an opportunity for undervaluation and creates an est assets
[PSU Index vs Sensex] indicates, future? The underperformance, opportunity for the future. The invested in
the following
in my opinion, is largely due to a following is the list of sectors PSU stocks.
PSU Index vs Sensex large supply of PSU stocks on [see graphic ‘Bouncing back’] These 10 are
Between 2000 and 2017, the PSU Index account of divestment by which significantly also part of
yielded similar returns as the Sensex. After the top 25
that its underperformance began. government, especially through underperformed over a period of stocks of all
CPSE ETFs. The inherent 10 years and it can be seen that his holdings.
zPSU zSensex rebased
structure of ETFs, in my
12000 Bouncing back % of assets
opinion, is suboptimal and is not Market
10000 The following sectors went out of favour for value (` cr)
8000 in the interests of long-term extended periods but then bounced back.
State Bank
6000 investors. Under the ETF route, a zPrevious 10Y return (% CAGR) of India
zNext 10Y or till CY19 return (% CAGR)
4000 pre-decided mix of PSU stocks is
50 CY00 10.11
2000
Sensex rebased to BSE PSU Index
offered at a discount. This, in
40
7413
0 turn, incentivises the arbitrager CY00 CY01 CY02
Jan 2000 Mar 2020 CY07 NTPC
or short sellers to invest in ETFs 30
for 17 years between 2000 and and exit after the ETF is listed. 20 CY17 4.63
2017, the BSE PSU Index yielded This results in a fall in the share 10 ? 3392
the same returns as those of the prices of the underlying 0 Coal India
Capital Metals Auto Cement FMCG PSU
Sensex. However, it is true that companies because of sizeable goods Index 4.21
over the past two years, the PSU selling pressure. Due to this,
‘CY’ stands for calendar year Source: Bloomberg 3084
Index has underperformed some long-only investors are also returns over the next 10 years Power Grid
significantly. This sharp disappointed, thus aggravating were very healthy. 3.71
underperformance of two years the pressure. To conclude, it is erroneous to 2723
has resulted in weak returns Fortunately, there appears to judge a business on the basis of Power
even over longer periods and be a shift in government stance ownership alone, public or Finance Corp
thus gives an impression that from ETFs to strategic private. One’s investment should 3.18
PSU stocks have underperformed divestments now (source: DIPAM be based on the sustainability of 2333
in the long term. secretary interview, dated business, its competitive BPCL
What were the reasons for such February 4, 2020, in Financial advantages, growth prospects 2.71
a sharp underperformance in the Express, https://bit.ly/2QJkgY2). and valuation. The reason for 1986
last two years? Was it linked to This should remove the overhang significant exposure to PSUs in
REC
business underperformance or of regular supply of PSU shares my funds is because the
1.87
was it that only share prices
underperformed? A study of
through ETFs in the market.
Further, strategic divestments
underperformance of last few
years has made these businesses
1370
financials of PSU companies in are likely to be at higher prices attractive. In fact, for some of the GAIL (India)
oil, power, banks, NBFC space, and should result in open offers companies, the dividend yield is 1.60
etc., suggests that the financial creating additional demand for between one to two times of the 1170
performance of majority of these these shares. Strategic G-sec yields. It will be interesting Bank of
companies has been largely divestments should unlock to watch over the next few Baroda
stable or is improving. significant value over the quarters whether this trend of 1.19
medium term, as was the case in underperformance reverses or 870
‘The underperformance is strategic divestment done in 2002. not. In my judgement, this HPCL
largely due to a large underperformance should end as 1.05
supply of PSU stocks on ‘Significant in the long run, just like the 768
account of government underperformance by a water finds its own level, stock Data as of
divestment, especially sector, despite stable prices eventually converge with February 2020
through CPSE ETFs’ the business fundamentals. WI

INTERVIEW SONAM UDASI
Senior Fund Manager, Tata Mutual Fund
‘In financial services,

being a tortoise is sometimes
a blessing’
T
he recent financial turmoil in the Indian
markets, starting with the IL&FS default, has
continued with the Yes Bank meltdown. It has
exposed the inherent weakness in India’s financial-
services industry. We speak to Sonam Udasi of Tata
Mutual Fund about the reason for it. Udasi manages
Tata Banking and Financial Services Fund. He also
talks about insurance companies and AMCs as
investment options. Finally, he tells us how he ensures
quality in his portfolio. Note that the graphs in this
interview are based on the moves Udasi has made in
Tata Banking and Financial Services Fund as of
February 2020.
The crash in Yes Bank has again highlighted the fragility in

the Indian banking system. What’s going on?
Weak underwriting of loans, coupled with a slowing
economy, both global and Indian, have continued to
haunt the financial-services industry. What started as
a corporate bad-loan phenomenon in 2011-12, which
0UJYLHZPUNKLJYLHZPUNJVU]PJ[PVU
Top companies in which his investments have gone up/down in
the last one year
(TV\U[`JY (TV\U[`JY
ICICI Bank 30 Bajaj Finserv -9.9

Axis Bank 22 ICICI
Prudential Life -3.0
Kotak Mahindra
Bank 21 Muthoot Finance -2.6
HDFC 15 City Union Bank -1.2
DCB Bank 3 Bajaj Finance -0.8
ICICI Lombard 1
INTERVIEW
saw PSU banks lose their sheen, IL&FS bust, PMC ;VWOVSKPUNZ
Bank bust, finally found its end-game with Yes Bank Companies in which he has invested the largest amounts
essentially being ‘public’-ised. It has come to this
% of assets ` cr
simply because in the years of economic boom,
financial investors (both debt and equity) priced HDFC Bank 20.8 96
risk incorrectly. ICICI Bank 15.8 73
HDFC 10.7 49
How serious would be the contagion? Where else does the
Kotak Mahindra Bank 10.6 49
problem lie?
It was necessary to stem Yes Bank’s slow death. The Axis Bank 7.6 35
measures seem prudent at this time. One could argue State Bank of India 4.9 23
that they could have stemmed it earlier, but 17
HDFC Life Insurance 3.8
nevertheless it’s welcome that it has been done. This
will give some badly needed time to the system to
Bajaj Finance 3.7 17
stabilise and move forward. That being said, the longer HDFC AMC 3.6 17
the economy stays sluggish, the risk for weaker Muthoot Finance 3.0 14
companies within the financial space (both listed and
unlisted) will loom large. The cost of funds will
continue to be elevated for weaker names and credit ;VWLX\P[`Z[HRLZ
markets are unlikely to ‘unfreeze’ for them in a hurry. Companies in which he holds the highest equity stakes
% of equity ` cr
What makes banking and finance sector so vulnerable to DCB Bank 0.24 12
changes? In a year or so, entire companies which were
IDFC 0.15 7
doing well get decimated, for example, DHFL, Indiabulls
Housing and now Yes Bank. City Union Bank 0.07 11
Over the last two-three centuries, this phenomenon ICICI Securities 0.06 9
has been witnessed across different countries and Muthoot Finance 0.04 14
different asset classes. The investing world oscillates
between extreme ‘greed’ and extreme ‘fear’ – the
HDFC AMC 0.02 17
financial sector in particular, where the raw material ICICI Bank 0.02 73
of the business and its end output, both are capital, Axis Bank 0.02 35
tends to be whiplashed in global economic turmoil.
HDFC Life Insurance 0.02 17
Whenever this happens, that sector weeds out its
weaknesses and emerges stronger. This too shall pass. Kotak Mahindra Bank 0.02 49
The RBI’s role has been questioned in the PMC Bank crisis
and now Yes Bank meltdown. What could have the regulator Among NBFCs, there are many kinds of companies. Which
done? have the most robust business models? Which are
It’s very easy to pass comments sitting in the box. We suspect?
do not know what transpired and what the RBI’s NBFCs with decent capital-adequacy ratios and
thinking was. But certainly this will bring its rigour aggressive risk provisioning should stand the test of
under question and thus make credit underwriting time. NBFC models hinged on strong collaterals should
and risk management more stringent. also flourish going forward.
The promoters/companies that jumped into the
“The investing world oscillates between extreme ‘greed’ and extreme ‘fear’
– the financial sector in particular, where the raw material of the business
and its end output, both are capital, tends to be whiplashed in global
economic turmoil.”

INTERVIEW
“The promoters/companies that jumped into the NBFC fray during

boom times and expanded and diversified their lending business, without
building enough risk-mitigation tools, will have to ultimately wind down
their weaker franchises and slowly rebuild on their strengths.”
NBFC fray during boom times and expanded and aids their compounding, return ratios as well as the
diversified their lending business, without building ability to reward shareholders. The runway for
enough risk-mitigation tools, will have to ultimately financial-services businesses in India is very high,
wind down their weaker franchises and slowly rebuild considering poor penetration in these segments
on their strengths. currently. So, in our view, the premium is likely to
Any NBFC which is banking on external capital in a sustain over the next few years till their growth
big way will find the going very tough at least over the momentum remains high.
next one year.
How’s the condition of housing-finance companies now?
Insurance companies, AMCs and now SBI Cards are some Their numbers, barring one or two, still signal stress.
new-age firms. What’s your view on them? Do you find their Among HFCs, weak ones are dying or being weeded
high valuations justified? out. Strong parentage allows some of them to access a
These are largely non-lending financial-services competitive cost of funds. This allows them to thrive
businesses. Luckily, both insurance as well as AMCs and grow in a difficult market while managing risks.
have gained a lot of experience and vintage over the For others where the cost of money continues to be
last 15 years. Some of them are now self-funded and uncompetitive, growth will be slow.
do not require capital to sustain their growth. This
You have just 18 stocks in your Banking and Financial
Services Fund. Top 10 stocks command 82 per cent of your
5L^LU[YHU[Z assets. What gives you conviction to run such a
His new bets over the last one year concentrated portfolio?
Amount invested (` cr) % of AUM The growth in the financial-services sector is linked to
State Bank of India 23 4.9 the economic momentum. In a slowing economy, it
makes sense to be with the strongest balance sheets
HDFC Life Insurance 17 3.8 and companies that are adequately capitalised for
HDFC AMC 17 3.6 growth. In an environment where weak names are
ICICI Securities 9 1.8 falling by the wayside, the survivors will have the
advantage of a growing market share and improving
Indusind Bank 9 1.8
pricing power going forward. Also, non-lending
IDFC 7 1.6 financial companies provide decent long-term growth
trajectory. Our portfolio is aligned with this thought
*VTWSL[LL_P[Z process. When the economy does revive, we believe our
portfolio is best positioned to capitalise on that
Companies from which he has exited in the last one year
opportunity, while giving us flexibility to add more
Max % of assets over last 1 year ` cr
names if the situation normalises.
Max Financial Services 4.3 12
CreditAccess Grameen 2.5 7 How do you ensure quality and reliability when you pick
M&M Financial 2.1 8 stocks for your banking fund?
We fundamentally believe that in the financial-services
JM Financial 2.0 5
industry, efficient users of capital (high ROA, ROE),
Bandhan Bank 1.4 5 prudent risk management (high provision-coverage
MCX India 1.2 5 ratio, counter-cyclical buffer trends) are worth their
weight in gold. In this industry, being a tortoise is
Federal Bank 1.0 4
sometimes a blessing. WI

STRAIGHT TALK
Stock markets – what’s next?

After the recent crash in the market, investors are asking how soon it will
recover and where they should invest. Here is some help.
ANAND TANDON
Since mid-February, stock markets 9PZPUNWVSHYPZH[PVU
around the world, including in India, have witnessed a
The stocks outside top 10 have not been performing in terms of profits as
sharp sell-off as possible economic costs of COVID-19 well as price though they are sticky at about 10 per cent returns.
have begun to be discounted by investors. Most countries
are in the process of restricting travel and instituting Top 10 Remaining 490 Top 10 PAT as % of NSE 500 (RHS)
measures to increase ‘social distancing’ as a means to 35% 85%
Contribution in 1Y returns of NSE 500
‘flatten the curve’ of infection transmission. Direct

impact is being felt in industries such as airlines, travel, 80%
hotels and restaurants, movie theatres and even oil and 20%
gas. Most commentators are out in numbers reassuring 75%
investors that a falling market is an ideal opportunity to
buy. Undoubtedly, this too shall pass. However, investors 70%
are worried about how far the market can fall and what 5%
sectors are most likely to lead the revival. 65%
FY15 FY16 FY17 FY18 FY19
How far can it fall? -10% 60%
The true answer is – no one knows. For now, the impact
Source: Bloomberg, Ambit Capital research. Note: Performance is calculated on a yearly basis
of COVID-19 cannot be estimated in any meaningful as of March every year. PAT is the weighted profits as of every fiscal year-end. Top 10 indicates
way; nor how long the impact will last. If past deep the top 10 stocks by free-float weight as of every fiscal year-end.
corrections were to be repeated, the index fall could be
over 60 per cent. A shallower and more usual correc- which it may be reasonable to expect a fall – and to stag-
tion in an ongoing bull market could be in the range of ger investment so as to get a lower average entry point.
22 per cent, which has already been achieved. The only Assuming a historical worst-case impact, every 7–8 per
meaningful action therefore is to mark out a range over cent fall should lead to a 20 per cent investment of cash
allotted to equity.
The more interesting question is – where to invest?
If past deep corrections were to be As is usually the case, before a fall, the market gets
repeated, the index fall could be over 60 narrower, with fewer stocks performing. A study by
per cent. A shallower and more usual Ambit Capital has an interesting insight – this time
around, not only were the returns of the top 10 stocks
correction in an ongoing bull market could in NSE 500 increasingly contributing more to index
be in the range of 22 per cent, which has returns, the profit contribution was also rising (see the
already been achieved. chart ‘Rising polarisation’).

STRAIGHT TALK
This re-emphasises that the debate about value ver- /V^MHZ[[OL`NYL^

sus growth is essentially meaningless – the market Sensex’s price and earnings growth vs those of HUL and NTPC
pays for growth and higher growth attracts higher val-
2010–19 2000–10
uations. The question that remains is – can valuations
have a cap or is there a new paradigm of growth at ‘any Sensex CAGR 8.10 17.80
cost’ rather than the more accepted ‘growth at a reason- Sensex EPS growth 8.35 11.50
able price’? HUL price CAGR 22.40 4.20
HUL PAT growth 12.52 4.80
Valuations sustain as long as growth sustains and NTPC price CAGR -3.70 14.90*
growth is mean-reverting
NTPC PAT growth 3.36 9.80
Utilities usually exhibit steady growth and are usually
classified in the ‘value’ bucket since their valuations *NTPC’s share price performance from Dec 2004 (stock was listed in Nov 2004).
Stock and index price based on 31st December prices. All no. in %.
reflect their slower growth profile. Consumer-facing
stocks are often high-growth and are priced according-
ly. As an example, I have taken NTPC to represent the ed widely different behaviour. The first decade from
former; and Hindustan Unilever, the latter. 2000 was a wasted one with the stock not performing at
Over a period from mid-2004 (when NTPC was first all, while over the next 10 years, the stock has delivered
listed) to 2007, NTPC’s stock price went up almost three returns of 10 times (see the chart, ‘Stock prices: NTPC
times. Subsequently, it has halved. vs HUL’).
Over two decades from 2000, HUL’s stock has exhibit- Two issues are worth highlighting here. One often
hears comments that brands offer ‘moats’ and that such
:[VJRWYPJLZ!5;7*]Z/<3 companies are therefore able to generate superior
NTPC’s stock price went up three-fold between 2004 and 2007. HUL stock-market performance. Is it the case that between
hadn’t moved until 2010, when it started to pick pace. 2000 and 2009, Hindustan Unilever somehow lost its
‘moat’ and suddenly developed poorer brand equity
5;7* that was later magically discovered over the next
250 decade? Mercifully, the answer is much less mysterious
– it’s all about earnings growth.
200 Take a look at the table ‘How fast they grew’. Over
the decade 2000–2010, the BSE Sensex generated EPS
150
growth of about 11.5 per cent compounded. The Sensex
itself delivered growth of almost 18 per cent year on
100
year. NTPC’s earnings growth over this decade was
50
almost 10 per cent – broadly in line with market earn-
ings. Its share delivered about 15 per cent CAGR over
0 the first five years since listing. On the other hand,
November 2004 March 2020 HUL delivered earnings growth of less than half that
of the index and accordingly its price performance
remained anaemic.
/<3
This reversed over the next decade. As the economy
2500
sputtered, Sensex earnings grew in single digits and so
2000
did market performance. NTPC suffered from sectoral
issues and profit growth fell to low single digits.
1500 Accordingly, its stock price delivered negative returns.
HUL rediscovered its mojo, delivered earnings that
1000 were 1.5 times those of the market and its stock price
compounded at 22 per cent.
500
Market is not seeing a shift in earnings
0 Despite the recent sharp fall in markets, Ambit’s
January 2004 March 2020 research reveals that stocks that were ‘expensive’ have

STRAIGHT TALK
leading the revival. In 1992, cement; in 2000, technology

:[PSSJVTTHUKPUNHWYLTP\T
and media; in 2008, construction and real-estate were
Despite some valuation correction, the spread between most and least
the leaders going into the collapse and in every case,
expensive stocks remains high.
the revival took almost a decade after the collapse.
80 Quintile 1 - ‘Expensive Quintile 3 There is no reason to believe that this would not be the
70 Quintile 5 - ‘Cheap’ case in the current fall, though the reasons will appear
60 only along the way. Financials, in particular NBFCs
and consumer stocks, led the current rally. They may
Price-to-earnings ratio
50
not lead the revival if history were to repeat.
40 It is therefore important to look at stocks that have
30 fallen way more than the collapse in their fundamental
20 values would warrant. Energy, for example, seems to be
a sector ripe for the picking. Every indicator would
10
suggest that both oil and gas and electricity generation
0 are past their prime. However, electricity demand con-
’01 ’03 ’05 ’07 ’09 ’11 ’13 ’15 ’17 ’20*
tinues to grow in India, while generation growth has
Source: Capitaline, Bloomberg, Ambit Capital research. Note: For top 500 companies by
Mcap every year (ex-BFSI), quintiles are based on decreasing P/E. P/E every year is stopped. Also, gas demand is growing rapidly as gas-dis-
calculated as the aggregate Mcap divided by the aggregate profit after tax for the respective tribution companies increase customers, but market
quintile. *Indicates P/E calculated using latest Mcap divided by trailing 12 months PAT as of
valuations continue to price low or no growth. Perhaps
December 2019 quarter.
it is time for things to revert to the mean.
Another area of the market that has performed poor-
While there is good reason to believe that ly and is much hated is government-owned companies.
While there is good reason to believe that these compa-
government-owned companies are never
nies are never going to be run efficiently and in the
going to be run efficiently and in the interest of minority shareholders, there is a price
interest of minority shareholders, there is a below which all companies are ‘value’. Perhaps many
price below which all companies are ‘value’ public-sector companies meet this criterion.
While we wait for the fall and inevitable rise to play
out in the markets, it would be prudent to invest in a
fallen in line with rest of the market, with the relative staggered manner while keeping in mind that high-
premium remaining unchanged (see the chart ‘Still growth stories are likely to be more adversely affected
commanding a premium’). It appears that market par- over the near term and perhaps when the markets do
ticipants are unwilling to bet on any change in earn- recover, the recovery may be more broad-based, espe-
ings distribution between sectors when the crisis ends. cially since it’s likely to be triggered by large doses of
Past experience does not support this view. Every large government support. WI
correction has led to sector rotation, with new sectors Anand Tandon is an independent analyst.
Investing
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EVERYDAY
ECONOMICS
All things viral

The rapid spread of the coronavirus has scared people. The need is to
arrest fear and deal with the problem rationally.
PUJA MEHRA
What is common between the COVID- has two players and there are two strategies. The two
19 pandemic and Yes Bank’s troubles? Panic. Images of players are the shopper and everyone else. The two
shoppers squabbling over toilet rolls, as they struggle strategies are panic-buying or non-panic-buying. If
with overloaded carts, in supermarkets are all over the everyone buys without panicking, an equilibrium is
international media. reached where supplies remain normal. No shortages
What is happening? Panic-buying. People around the ensue.
world are stockpiling essentials, food items, toilet However, if all others are panic-buying, then the opti-
paper, disinfectants, protective masks, medical-grade mal strategy for the shopper is to panic-buy and avoid
gloves, antibacterial soap and hand sanitisers. Shops missing out on supplies. This game’s most likely out-
and stores are running out of stocks. Fear is at play. In come is the second equilibrium where everyone pan-
such situations, while some people stockpile in prepa- ic-buys, resulting in a shortage.
ration of self-isolating, many more, seeing stocks Fear is the most potent human emotion. It is more
deplete, begin to buy large quantities out of the fear of contagious than viruses. Years ago, in a typical episode
the coming shortages. The mad rush and hoarding soon of panic-buying, set off by rumours in Uttar Pradesh
become self-fulfilling prophecies and disrupt emergen- of salt stocks disappearing, a woman lost her life in a
cy supplies to patients and healthcare professionals. stampede. The price of salt shot up to hundreds of
Even before news broke of the first COVID-19 casual- rupees per kilo. Rumours or genuine fear of a run on a
ty in India, cases of sudden spurt in demand, and stock- bank can become self-fulfilling prophecies. If deposi-
piling, of hand sanitisers were reported. Manufacturers tors fear a bank is about to run out of cash, they start
are ramping up production to make sure that shortages withdrawing more cash than they need, endangering
don’t persist. the bank’s ability to meet its liabilities. Therefore, reg-
Panic-buying is a peculiar consumer behaviour, usu- ulators place upper limits on withdrawals in such situ-
ally seen during episodes of natural ations to prevent a run on the bank.
calamities or pandemics. It is selfish and Panic-buying is a This is precisely why on 5th March,
may even seem over the top. But it is not peculiar consumer authorities capped withdrawals from
irrational. Consumers buy more of a Yes Bank at `50,000 a month to pre-
product than they require out of the fear
behaviour, usually vent a run on the bank (this restric-
of missing out later. seen during tion has now been lifted).
A few years ago, Russell Crowe had episodes of Panic-buying is similar to a run on
played the Nobel-winning economist natural calamities a bank. The optimal solution, there-
John Nash in the Oscar-winning film A or pandemics. It is fore, is the same. Supermarkets in the
Beautiful Mind. The film glamourised selfish and may UK have rolled out contingency plans
game theory around the world. Panic- for maintaining availability of sup-
buying is an example of what game the-
even seem over plies during the coronavirus episode.
orists call a Nash equilibrium. Here is the top. But it is They are making home deliveries for
how it works. In a pandemic, the game not irrational. self-isolating consumers as emptying

EVERYDAY
ECONOMICS
shelves trigger panic-buying. They are also rationing estimating its value to the society. But the benefits of
sales by placing strict limits on purchases. taxpayer-funded healthcare are not limited to those
Whenever there is a situation at hand, the first individuals receiving them directly. They also extend to
instinct of most Indians is to call for government inter- the rest of the society. The same, by the way, is true for
vention. Typical solutions offered on WhatsApp groups law and order and education. This is not to say Indian
go like: the government should make hand sanitisers a health and other public services standards don’t need
product only to be sold on prescription. Or the govern- improvement; just that we often don’t realise how much
ment should step in as a holder of contingency reserves. we gain when there are fewer ill people around us.
It should release these strategically in the open market This becomes fully obvious in times of pandemics.
to prevent shortages. These are poor solutions. COVID-19, the flu-like disease, is fast spreading from
Executing them will be very costly and poor use of tax Wuhan, China, to as far as Japan, South Korea, Iran,
money. Further, it will worsen shortages by quickly Italy and the U.S. India has also started to suffer. What
giving rise to rent-seeking and corruption by officials does it take to keep the casualties low?
empowered to manage supplies. The spread of the virus slows down when more and
Just like government intervention, the market also more people with symptoms are able to quickly access
fails in most instances of panic-buying. During health testing facilities and self-isolate if they test positive.
or other emergency situations, the market solution of Slower spread means fewer casualties. It is easy to see
letting prices of essentials rise to clear out the excess why. If infections spread quickly, the health facilities
demand does not work. It is called price-gouging and available get stretched, and hospital beds, ICU
can trigger backlash from people. The best solution is machines, etc., become scarce, which affects all types
for the sellers to ration sales. of patients, not only those infected by the coronavirus.
Public-health emergencies are also when people real- Mortality rates rise.
ise the true value of paying taxes. Recently, a WhatsApp Therefore, making testing facilities free by fully
forward went viral. It was about taxpayers receiving subsidising them at the outbreak of a contagious dis-
precious little by way of government services in return ease is good economics. The benefit to taxpayers is
for the taxes paid. Why government should impose clear. When there are fewer cases of infection, the
hefty taxes on people when their out-of-pocket expenses chance of each individual getting infected reduces –
for school education, healthcare, security, water purifi- including taxpayers. WI
cation and security and safety are high, it complained.
Puja Mehra is a Delhi-based journalist and the author of
Such faulty arguments go viral because people only The Lost Decade 2008–18: How the India Growth Story Devolved into
see the direct beneficiaries of public spending on Growth Without a Story
healthcare and sanitation, and, therefore, end up under-

MAIN STREET
In India, quality trumps

‘cheap’ valuations
Low valuations, including those of small caps,
often don’t translate into good returns
SAURABH MUKHERJEA
Over the years, I have written shown in Exhibits 1 and 2, for both the time periods
extensively about the irrelevance of valuation FY09–14 and FY14–19, the companies which delivered
multiples in India. Thanks to the success of my books, the highest PBT growth also ended up delivering the
Indian investors have begun understanding the sheer highest share-price returns. Interestingly, for both
futility of judging champion franchises like HDFC these time periods, companies which scored the high-
Bank, Asian Paints and Nestle basis their P/E, P/B or est PBT growth (represented by bucket Quartile 1 or Q1
EV/EBITDA multiples. But the same people then turn in below charts) also turned out to be companies gener-
around and tell me that it is better to buy small caps ating the highest ROCEs. The positive relationship
when their P/E multiples are low. However, as we will between PBT growth and ROCE and vice-versa is not
see, that’s not the case even with small caps. surprising, given that companies with higher margin
(and thereby higher PBT) generate higher ROCEs.
The real driver of returns Similarly, a higher ROCE implies higher cash genera-
The last 10 years clearly indicate that the best-perform- tion, lower interest expenses and higher sustainable
ing small-cap stocks have been those which have gener- revenue growth. Hence, the inter-dependent relation-
ated the highest earnings growth as well as the highest ship between the two.
return on capital employed (ROCE). For instance, as Similarly, as shown in Exhibits 3 and 4, the highest
,_OPIP[!Companies which generated the highest PBT CAGR over ,_OPIP[!...Similarly, the highest PBT generating companies over
FY09–14 delivered the highest return over CY09–14… FY14–19 were the best performers on share price return over CY14–19
75% 80% Size of the bubble denotes average

ROCE over CY14–19
50% Q1 60%
Share-price return (CY09–14)
25% Q1
Q2
40%
0% Q3
-15% -5% 5% 15% 25% 35%
-25% PBT CAGR (FY09–14) Q2
20%
-50% Q3
Size of the bubble denotes 0%
Q4 average ROCE over CY10–14 -15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
-75%
Q4 PBT CAGR (FY09–14)
-100% -20%
Source: Ace Equity. Note: Q1 represents companies with the highest quartile PBT CAGR Source: Ace Equity. Note: Q1 represents companies with the highest quartile PBT CAGR
over FY09–14, Q2 the next best and so on. over FY14–19, Q2 the next best and so on.

MAIN STREET
,_OPIP[!Companies with highest ROCEs (FY10–14) have delivered ,_OPIP[!...Similarly, companies with highest ROCEs over FY15–19
the highest share price return over CY09–14... were the best performers on share price return over CY14–19.
40% Size of the bubble represents 20% Size of the bubble represents
PBT CAGR over FY09–14 PBT CAGR over FY14–19
30% 15% Q1
Q1

Q2 10%
20%
Q3 Q2
5%
10%
0%
Q3 0% 10% 20% 30% 40%
0% 5-year average ROCE (FY15–19)
0% 10% 20% 30% 40% -5%
Q4
-10% 5-year average ROCE (FY10–14)
-10%
Q4
-20% -15%
Source: Ace Equity. Note: Q1 represents companies with the highest quartile average Source: Ace Equity. Note: Q1 represents companies with the highest quartile average
RoCE CAGR over FY10–14, Q2 the next best and so on. RoCE CAGR over FY15–19, Q2 the next best and so on.
ROCE companies have delivered highest share-price short periods of irrational exuberance. For instance, in
returns. Interestingly here too, companies which gen- CY17, lower P/E stocks (combined with lower ROCEs)
erated the highest RoCE (represented by Quartile 1 or significantly outperformed the more expensive but
Q1 in below charts) also turned out to be companies quality stocks (represented by higher ROCEs). But
generating the highest PBT CAGRs. such a run does not last long (see Exhibits 5 and 6). The
same set of low P/E stocks which scored big time in
It’s not about cheap valuations CY17 witnessed the steepest fall in CY18 and CY19 as
On the other hand, a common misperception amongst liquidity dried up and share prices started tracking the
investors is that ‘cheapest’ stocks generate the best underlying fundamentals. WI
returns. In reality, there is hardly any correlation
Saurabh Mukherjea is the author of The Unusual Billionaires and
between lower P/E multiples and higher share-price Coffee Can Investing. He’s the founder of Marcellus Investment
return. However, this relationship may prevail for Managers, a SEBI regulated provider of portfolio-management services.
,_OPIP[!Low P/E companies with lower ROCEs significantly ,_OPIP[!...But ‘lower P/E, lower ROCE’ companies corrected more
outperformed high P/E high ROCE companies in the CY17 bull market... sharply than ‘higher P/E, higher ROCE’ companies in CY18 and CY19.
60 60
50 Size of the bubble 50

Q1 Size of the bubble represents FY17 ROCE Q1
denotes FY17 ROCE 40
40
30
FY17 P/E
FY17 P/E
30
Q2 Q2
20
20
Q3
Q3 10
10 Q4
Q4
0
0 -60% -50% -40% -30% -20% -10% 0%
60% 80% 100% 120% 140%
Share-price performance (CY17) Share-price performance (CY18 and CY19)
Source: Ace Equity. Note: Q1 represents companies with the highest quartile P/E at Source: Ace Equity. Note: Q1 represents companies with the highest quartile P/E at
FY17-end, Q2 the next highest and so on. FY17-end, Q2 the next highest and so on.

OFFBEAT
The dart-throwing monkey

Why you should do your own guessing
SANJEEV PANDIYA
So there’s a behavioural economist everyone is trying to beat the market, simply because it
somewhere who found the following through is fun and it just feels like the right thing to do.
experiment: if you take 240 guesses of the weight of 240 And then along came Warren Buffett, Jim Simons,
oxen and 240 people like you do the same, you’re not George Soros and the like and proved Mr Fama wrong.
likely to be the best guesser. The 241st guesser Mr There’s a way to ‘beat the odds’; we even give it a name:
Market (a.k.a. the average of these guesses) is likely to alpha. The business of trying to be the fastest to reach El
be the best guesser of the weight Dorado now has an honourable
of 240 oxen. name and it is taught at Harvard.
So what are we trying to do ;VWZ[VJRZMVY¶ HUKOV^ It’s called seeking alpha! The
here? The weight of each [OL`WLYMVYTLKPU[OLSHZ[KLJHKL business of seeking alpha may be
individual ox has too many % change in stock price rooted in our selfish gene – the
individual dimensions for any Name 2002–2009 2009–19 desire to get ahead, survival of the
single person to track. No way fittest. This desire is instinctive,
Unitech 71,827 -88
can you study each animal’s sub-conscious and primeval. It
Aban Offshore 15,802 -80
individual proclivity to garner fat has, for example, no link with any
Godrej Industries 8,829 741
in different places or its eating evaluation of your ability.
habits – simply too many moving Kalpataru Power 8,019 683 There’s this new belief now
parts for any individual to wrap Vedanta 7,758 233 that it’s pointless to try and you
his head around. JSPL 7,385 9 should just piggyback on what the
But any individual guesser Opto Circuits 6,823 -82 market is guessing and, on
can track five oxen, get to know Bharat Bijlee 6,582 16 average, get the market return,
them well, and beat the rest of the which approximates the nominal
UB Holdings 6,334 1,669
guessers on guessing the weight growth rate of the economy over
GE T&D 6,231 55
of his chosen oxen. That’s how the long term.
Warren Buffett and his ilk beat Praj Industries 5,473 70 There are some investors who
markets: they stick to their circle Sintex Industries 5,389 9 are beating the market by a
of competence and focus on the CG Power 5,152 -95 whopper, some who are losing
oxen they know! Future Enterprises 5,066 40 their shirts, and some who are
If you write a paper saying Nayara Energy 4,719 197 doing just so-so. In toto, everyone
that ‘markets are efficient’, you Glenmark Pharma 4,690 142
together gets the market return,
can get a Nobel Prize (Eugene so most people feel they have
Adani Enterprises 4,586 427
Fama, 1965) for it because this fact come out winners. But for those
Emco 4,037 66
is true for 239 of the 240 guessers who seek to keep looking for that
who are trying to beat the market. Jyoti Structures 4,034 -71 El Dorado (a.k.a. alpha), there are
It represents some insight in a United Spirits 4,001 160 a couple of lessons. One, Mr
world that knows no better, where Source: Bloomberg Market is a fairly bad guesser of

OFFBEAT
the future and with some simple ;VWZ[VJRZVM ¶ HUKOV^ not ‘quality’ but ‘linearity’ – the
tweaks, you can do a damn sight [OLÒHKWLYMVYTLKK\YPUN¶ fond hope that past performance
better. For this, see the two tables.
% change in stock price
is any indicator of the future.
If we take a snapshot of what Given that you have a
Name 2009–2019 2002–09
the market was ranking at the end predisposition to recency, it’s very
Bajaj Finance 45,689 727
of 2009, we find that likely that you will believe that
z Six out of 20, i.e., 30 per cent of Eicher Motors 10,582 362 the recent performance is the best
the top 20, have dropped into VIP Industries 6,886 7 indicator of the past. And I am
the boondocks over the next Vakrangee 6,733 -84 quite sure that you don’t pay
decade. Havells India 6,183 3,084 much attention to the statutory
z Another six, 30 per cent of the TVS Motor Co 5,827 -12 admonition that the future may
top 20, over the next decade AurobindoPharma 4,624 186
not be like the past.
delivered returns that were To make a rational decision,
Hexaware Tech 4,531 216
below the nominal growth rate you can go two ways: take the
Indiabulls Ventures 4,440 -71
of the economy (assumed at 15 humble, ‘won’t try to beat the
per cent/annum), which I am Bajaj Finserv 4,440 -73 market’ choice and just buy an
taking as a surrogate for the IndusInd Bank 4,426 478 index fund. You’re guaranteed to
hurdle rate that an investor HEG 4,140 1,023 not do very well but it’s also likely
seeks. Sundram Fasteners 3,823 147 you won’t go bust. Or you can take
z So, 60 per cent of the portfolio Shree Cement 3,807 2,531 the road less travelled and choose
underperformed, delivering a potential outperformance. As the
SRF 3,793 485
combined net return of second table shows, there’s no
Amara Raja Batteries 3,370 1,222
approximately zero. way to say where the next top 20
MRF 3,351 366
z Three out of 20, 15 per cent of list is coming from (although you
the top 20, delivered a small Sterlite Tech 3,016 125 will be told by sundry people that
premium to the hurdle rate. Graphite India 2,998 898 it is entirely possible).
z And five out of 20, 25 per cent Torrent Pharma 2,950 254 The only reasonable way is to
of the portfolio, is the stuff Source: Bloomberg focus on your shortlist of the
you were looking for, the driver ‘oxen’ that you know. Some part
of returns. of your track record would be
So, if you use the market as
Focus on two important driven by serendipity, depending
your best advisor, this is what things: do you know on which part of the pond you’re
may happen: something (about stationed in. But there are ways to
z Expect 30 per cent of your something) that the periodically tweak your strategy,
portfolio to go to zero. market does not know? look around and place yourself in
z Expect another 30 per cent to
Can you locate a the right mega trend.
underperform the cost of Focus on two important things:
capital, the hurdle rate.
systematic weakness, a do you know something (about
z Expect 40 per cent to ‘misthinking’ that the something) that the market does
outperform, of which half market does all or most not know? Can you locate a
will be the alpha and half will of the time? systematic weakness, a
just acquit itself moderately. ‘misthinking’ that the market
Look at the second table. Is there any hint that the does all or most of the time? Focus on where the market
market anticipated the winners of the last decade (2009– is most likely to change its mind and bet heavily on it.
19) from the rankings of the past decade? The top 20 of The business of beating the market is a serious one.
the period 2020–30 are probably not on any of the above Asking your neighbour or the paanwala is not going to
tables. And what’s worse is that you can rest assured get you anywhere close. And listening to the loudest
that at least half the stocks on the top 20 of this decade voice is positively dangerous. You won’t likely beat the
will be in the boondocks somewhere round the corner. market by buying yesterday’s winners. You can do so by
This brings me to the ‘quality at any price’ debate. finding new stories that have elements which the
Quality is defined as ‘past stock performance’; be market is yet to discover. WI
careful with that definition. What you’re being sold is The author teaches, trades and writes at spandiya.blogspot.com

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STOCK
SCREEN
Ideas to delve deeper

S
ound investment methods outlast cycles and However, please note that they are not our recommen-
fads and generate profits over the long run. dations.
Value Research presents stock screens based on Each stock screen explains the reason behind picking
time-tested principles. the stock, which over time will help you develop your
What are stock screens? These are a listing of attractive own investing rules. As we will be evolving such models
stocks based on the objective principles of sound and implementing changes to the methodology to be in
investment. We apply stock filters carefully crafted by line with economic and market cycles, the list will be
Value Research analysts on the universe of Indian stocks dynamic and updated periodically.
to identify these attractive stocks. The filters are devised In the following pages of ‘Stock Screen’, we present
to identify stocks of the following kinds: five categories that collectively list a number of
Quality stocks available cheap stocks. With these, you will be well-equipped to select
ttractive blue chips
A stocks to build your own portfolio after doing further
Stocks available at a steep discount to book value research. If you think that stock picking is a lot of
High dividend-yield stocks hard work, you can get started with these screens and
Growth stocks available at reasonable prices with time understand the way the ideas are shaping to
We believe that stocks listed in this section are a good make your own judgement on stock selection.
starting point to start a close scrutiny before adding Great investments are not easy to find, but practice,
them to your portfolio. patience and sound principles are all that you need.
Key terms
Universe companies In order to arrive at our universe of companies, we checked ICR of more than two implies that it can service more than twice its current
if the companies traded on all the days for the last two quarters. We considered interest charges.
the companies with a market capitalisation of more than `500 crore. Debt-equity ratio The debt-equity ratio is calculated as the ratio of total out-
Price to book value (P/B) Price to book value is the ratio of the price of a stock standing borrowings of the company to its total equity capital. It essentially tells us
to the book value per share of the company. It shows how much premium investors which companies use excessive leverage to achieve growth. Conventionally, the
are willing to pay for the underlying net assets of the company. debt-equity ratio of less than two is considered safe.
Price to earnings (P/E) The price-to-earnings ratio, or the P/E ratio, is simply Return on equity (RoE) This is measured by taking profit after tax as a percent-
the ratio of the price of a stock to its earnings per share. It shows in multiples how age of net worth of the company. It indicates how efficiently the company has been
much investors are willing to pay for the earnings. The thumb rule of valuing a stock able to utilise investors’ money.
is that a high-growth stock will have a high P/E ratio, while a value stock will have Stock return Stock return is calculated by taking the percentage change in the
a relatively lower P/E ratio. price of the stock adjusted for bonus or split.
Earnings per share (EPS) Earnings per share, or EPS, is calculated by dividing Dividend yield This is defined as the percentage of the dividend paid per share
the company’s net profit with the total number of outstanding shares. to the current market price of the stock. Since the denominator in this ratio is the
EPS growth Growth of the EPS over a specified time period – trailing 12 months market price, a stock’s dividend yield changes every day.
(TTM), a quarter or five years. Quarterly comparisons are on a year-on-year basis. Dividend-payout ratio This is the total dividend paid to the shareholders as a
For five years, the figures are annualised. percentage of net profit.
Price-earnings to growth (PEG) This ratio demonstrates how high a price we Altman Z-Score Developed by Edward Altman of New York University, the Z-Score
are paying for the growth that we are purchasing. It is the ratio of price to earnings predicts a company’s financial distress or the possibility of its going bankruptcy
to the EPS growth of the stock. In all our analyses, we have taken five-year historic within two years. A Z-Score of more than three is desirable.
EPS growth. Modified C-Score It tells the probability of financial manipulations. In order to
Earnings yield Earnings before interest and taxes (EBIT) divided by enterprise develop it, we have modified James Montier’s C-Score. A C-Score of less than four
value. Enterprise value is market cap added to total debt and less cash and is desirable.
equivalents. Piotroski F-Score Developed by Joseph Piotroski, the F-Score highlights financial
Dividend per share Total dividend declared during the year divided by the total performance as compared to that in the previous
number of outstanding shares. year. It thus points out to the current outperformer Growth Value
Net sales This is simply the income that a company derives by in terms of profitability and financial improvement.
selling the goods and services that it produces. The downside of taking sales as an An F-Score of seven or above is good. Large
indicator of growth is that it may not be matched by a similarly scintillating bot- Stock style It indicates the style of the stock. It
tom-line (net profit) performance. A company may be earning revenue at a high is derived from a combination of the stock’s valu- Mid
rate. But if it is doing so by incurring a very high cost, the bottom line may not grow ation — growth or value — and its market capital-
in proportion to the growth in the top line (sales). isation — large, mid and small. For example, on the Small
Interest-coverage ratio (ICR) This indicator is generally used to gauge right we have shown the stock style of a large-cap
whether a company has the ability to service its debt. The interest-coverage ratio growth stock.
is calculated as the ratio of operating profit to interest outgo. A company with an

STOCK
SCREEN
Quality stocks available cheap

The stocks listed below clear essential checks on solvency, accounting,
recent financial performance and valuations No. of companies that
cleared the filters
REASONS TO INVEST THE FILTERS 750

Safety Market cap greater than C-Score less than 4
413
Soundness `500 cr PEG less than 1
69
Good performance Z-Score greater than 2.99 P/E to median P/E less
Reasonable valuations F-Score greater than or equal than 1.5 64
to 7 Earnings yield greater than 5% 27
Banking and finance companies were removed from this analysis as the metrics don’t apply to them.
Safe bets
Company Stock Altman Piotroski Modified Earnings Market Share 52-week
Industry style Z-Score F-Score C-Score yield (%) P/E PEG cap (` cr) price (`) high/low (`)
Andhra Paper
Paper 3.5 9 3 54.3 3.2 0.03 573 143 505-135
DFM Foods
Bakery & Milling Prod. 5.2 9 2 5.4 27.6 0.85 983 200 334-166
Excel Industries
Pesticides 4.7 8 1 29.8 5.1 0.09 575 443 1250-418
Firstsource Solutions
Misc.Other Services 4.9 8 0 18.0 6.2 0.74 2,147 30 58-27
Galaxy Surfactants
Personal Care 6.9 9 2 7.0 18.7 0.64 4,204 1,180 1790-971
Garware Technical Fibres
Misc.Textiles 5.6 9 1 7.5 17.0 0.47 2,407 1,086 1695-902
Godrej Agrovet
Oil cakes & Animal Feed 3.9 8 0 5.5 17.1 0.48 5,909 313 598-287
Granules
Drugs & Pharma 3.4 8 1 9.3 11.6 0.50 3,567 139 189-84
Graphite
Welding machinery 6.4 8 2 194.9 4.1 0.04 2,538 130 480-125
Gujarat Alkalies & Chem
Caustic Soda 3.2 9 0 43.6 3.4 0.12 1,652 225 596-194
Gujarat Gas
Indl.Gases 3.7 8 0 6.8 15.4 0.51 16,373 242 314-142
Heidelberg Cement
Cement 3.0 9 2 12.6 13.4 0.35 3,511 152 218-129
Hester Biosciences
Drugs & Pharma 6.8 8 0 6.4 24.7 0.71 896 1,079 2048-951

STOCK
SCREEN
Company Stock Altman Piotroski Modified Earnings Market Share 52-week

Industry style Z-Score F-Score C-Score yield (%) P/E PEG cap (` cr) price (`) high/low (`)
The Indian Hotels Co

Hotels & Restaurants 3.6 8 1 6.4 26.3 0.83 10,406 91 164-81
IOL Chem & Pharma
Drugs & Pharma 4.9 8 3 46.5 2.6 0.04 977 171 317-162
KNR Construction
Construction 5.2 8 1 11.6 10.7 0.34 3,111 222 312-188
L&T Technology Services
Other Projects 12.6 8 1 9.0 16.2 0.71 13,009 1,234 1820-1041
Lux Industries
Readymade Garments 7.5 9 2 7.1 20.1 0.53 2,600 1,018 1680-925
Oriental Carbon & Chem
Carbon Black 4.2 8 1 15.6 7.7 0.57 589 595 1200-550
Radico Khaitan
Liquors 5.1 8 2 7.3 17.9 0.84 4,091 304 439-262
Sandhar Technologies
Auto Ancillaries 3.4 9 3 9.8 13.0 0.29 1,017 161 314-155
Satia Industries
Paper 3.8 9 2 15.0 7.5 0.20 784 77 113-60
Sun TV Network
Media & Entertainment 29.1 9 0 19.2 9.0 0.65 12,831 326 651-319
TCI Express
Courier Services 28.6 8 3 5.4 25.5 0.48 2,339 617 950-501
Transpek Industry
Inorganic Chem. 4.0 9 1 13.0 10.2 0.19 805 1,390 2032-1077
Tube Investments
Auto Ancillaries 5.2 8 0 5.8 24.7 0.98 7,452 386 577-325
Vinati Organics
Organic Chemicals 29.7 8 3 5.5 23.8 0.94 8,140 791 1256-656
Data as on March 20, 2020. New entrants.
To select stocks by sectors, industries

and indices, visit
www.valueresearchonline.com/stocks/
STOCK
SCREEN
Reasonably priced growth stocks

Growth investing is about picking companies that are fast growing their
bottom lines. But make sure that the valuations are not overheated.
No. of companies that
REASONS TO INVEST THE FILTERS cleared the filters
All-weather style Market cap greater than

At least 20% in the trailing 12
753
Companies with strong `500 cr months YoY
fundamentals Earnings growth of:

At least 20% in latest quarter
YoY 62
Greater stability vis-a-vis
At least 20% in the past five Stocks with a P/E of less
value or growth years 26
than 15
On fast track
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)
Advanced Enzyme Tech

Food Processing 9.7 20.1 0.77 37 23 41 1,262 113 225-100
APL Apollo Tubes

Steel Tubes & Pipes 13.8 21.3 0.47 451 83 27 3,360 1,308 2219-1030
Arman Financial Services

Hire Purchase 12.2 15.2 0.23 55 88 50 529 556 1121-322
Bannari Amman Sugars

Sugar 11.2 21.3 0.30 79 49 35 966 754 1665-690
Bombay Burmah Trading 4.8 9.8 0.23 3,233 220 34 5,179 739 1388-701
Tea & Coffee
Caplin Point Laboratories 8.3 31.4 0.18 28 33 47 1,790 238 467-224

Drugs & Pharma
E.I.D. Parry 4.6 21.3 0.21 86 6,834 26 2,177 127 245-106

Sugar
Fert & Chemicals Travancore 2.1 15.5 0.06 2,075 226 21 1,763 27 55-21
Other Fertilisers
Hindustan Oil Exploration 2.9 43.9 0.11 41 318 27 512 40 136-36

Crude Oil & Natural Gas
Huhtamaki PPL 9.0 36.0 0.42 280 387 21 1,523 202 305-191
Paper prod.
Ion Exchange 8.8 27.2 0.13 216 62 70 893 611 1071-360

Industrial Machinery
JB Chemicals & Pharma 14.8 17.7 0.57 41 46 27 3,964 506 600-312

Drugs & Pharma

STOCK
SCREEN
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)
Kama Holdings
Synthetic Yarn 5.2 6.9 0.17 106 38 23 2,710 4,200 6390-4010
Kei Industries
Wires & cables 9.2 21.3 0.21 49 25 71 2,336 257 615-250
Kingfa Science & Tech

Plastic Resins 13.9 57.6 0.29 43 153 37 509 430 770-370
Linde
Indl.Gases 5.5 234.7 0.02 4,016 2,072 167 3,997 472 801-424
Manappuram Finance 6.0 11.4 0.18 62 57 33 8,027 98 195-74

Hire Purchase
Pilani Investment & Ind Corp 13.3 38.8 -0.54 50 73 42 938 1,160 2643-1125
Invest.Services
PNC Infratech 4.9 15.2 0.18 491 45 38 3,108 125 219-102

Road Transport
Raymond 5.6 32.1 0.51 393 110 26 1,860 275 869-261

Cloth
Satia Industries 7.5 7.5 0.20 48 31 43 784 77 113-60

Paper
Supreme Petrochem 10.7 21.0 0.25 112 130 42 1,268 131 239-113
Torrent Power 9.2 13.2 0.28 77 35 32 13,539 287 333-231

Electricity Distribn.
Transpek Industry 10.2 13.5 0.19 107 149 56 805 1,417 2032-1077
Inorganic Chem.
Voltamp Transformers 9.2 15.7 0.27 58 51 34 1,011 1,007 1483-937

Transformers
Welspun Corp 5.5 22.0 0.18 655 169 50 1,902 72 234-71

Steel Tubes & Pipes
Data as on March 20, 2020. EPS growth rates are annualised. Median P/E is for less than five years if five-year data are not available. New entrants.
For Indian stocks selected as per

investment gurus’ criteria, visit
STOCK
SCREEN
Discount to book value

Stocks available at a discount to their book value indicate bargain and
inherent value, provided the business fundamentals are sound
REASONS TO INVEST THE FILTERS
753
Really cheap Market cap greater than Companies must have a five-year
Relatively undervalued `500 cr earnings growth of more than 619
Companies with assets Debt-equity ratio of less than 1.5 10%
Price at least 10 per cent below 456
times
Return on net worth of more than the book value
284
10% in the most recent year
64
Bargain hunt
Company Stock 5Y EPS Dividend Debt-equity Market cap Share 52-week
Industry style P/E P/B growth (%) yield (%) ratio RoE (%) (` cr) price (`) high/low (`)
Andhra Paper
Paper
3.2 0.6 123 0.0 0.0 30.1 569 145 505-135
Balrampur Chini Mills

Sugar
3.5 0.9 136 2.8 0.8 30.5 1,964 89 195-84
Bodal Chemicals
Organic Chemicals
5.8 0.6 33 1.8 0.2 18.7 546 45 132-42
Bombay Burmah Trading

Tea & Coffee
4.7 1.0 34 0.1 0.2 23.5 5,155 739 1388-701
Capacite Infraprojects
Real Estate
5.4 0.7 10 1.1 0.3 12.2 611 90 295-84
Century Textiles & Ind

Diversified
5.5 1.0 191 2.5 0.9 22.1 3,391 304 1067-262
Cochin Shipyard
Shipping 6.0 1.0 16 4.8 0.0 14.5 3,554 269 492-210
DCM Shriram
Diversified 4.8 1.0 20 3.9 0.5 27.5 3,890 250 639-205
Delta Corp
Media & Entertainment 8.0 0.8 61 2.0 0.0 10.9 1,703 63 278-61
Dhampur Sugar Mills

Sugar 2.7 0.4 48 7.3 1.5 22.5 587 88 246-81
Excel Industries
Pesticides 4.8 0.7 49 4.3 0.0 24.9 552 443 1250-418

STOCK
SCREEN
Future Supply Chain Sol.

Transport Support Services
- 0.8 72 0.8 0.4 12.5 655 150 711-150
Gallantt Ispat
Finished Steel
11.4 0.7 55 0.2 0.3 15.2 579 20 44-16
Gateway Distriparks
2.4 0.7 17 5.2 0.6 25.8 944 87 154-81
GFL
Organic Chemicals
1.5 0.4 14 4.4 0.4 25.1 882 80 1144-729
GHCL
Soda Ash
2.0 0.4 27 5.6 0.7 19.8 854 90 277-85
Glenmark Pharmaceuticals
Drugs & Pharma
8.3 1.0 10 1.0 0.8 17.2 5,940 212 667-162
Graphite
Welding machinery
4.1 0.6 92 42.4 0.1 84.1 2,533 130 480-125

Caustic Soda
3.4 0.4 30 3.6 0.1 17.0 1,644 225 596-194
Gujarat Ind Power Co

Electricity Generation
2.3 0.3 13 5.5 0.2 10.3 801 54 87-48
Gujarat Narmada Valley

Nitrogenous Fertilizer. 5.0 0.3 20 6.0 0.0 15.5 1,799 116 338-105
HEG
Welding machinery 2.3 0.5 108 14.4 0.2 107.0 2,141 555 2201-529
HIL
Cement & Asbestos prod. 4.7 0.7 70 3.7 1.1 16.9 510 680 2030-630
Himadri Speciality Chem

Coal & Lignite 7.0 0.8 49 0.4 0.3 21.3 1,455 35 122-32
Hindustan Oil Exploration

Crude Oil & Natural Gas 3.0 0.8 27 0.0 0.0 33.6 519 40 136-36
Indiabulls Real Estate

Real Estate 6.0 0.6 10 0.0 1.4 17.0 2,051 45 151-38
India Glycols
Organic Chemicals 5.4 0.6 23 2.8 1.0 14.8 661 213 397-178
Indian Oil Corporation

Crude Oil & Natural Gas 6.6 0.7 21 10.2 0.9 14.0 85,292 91 171-76
Jindal Saw
Steel Tubes & Pipes 3.2 0.3 60 3.8 0.9 13.0 1,695 54 103-43

STOCK
SCREEN
Jindal Stainless
Stainless Steel
2.4 0.4 55 0.0 1.3 20.7 905 39 101-34
JK Paper
Paper
2.9 0.6 45 4.4 0.8 23.1 1,424 80 156-68
J Kumar Infraproject
Construction
2.9 0.3 11 2.8 0.4 11.1 613 83 182-71
Jubilant Life Sciences

Drugs & Pharma
8.3 0.8 218 1.6 1.0 13.0 4,470 280 832-250
Kalpataru Power Trans.

Infrastructure
6.4 1.0 31 1.4 0.8 17.4 3,279 211 555-196
KCP
Cement
16.1 0.8 20 2.1 0.7 13.9 628 49 108-40
Kiri Industries
Dyes & Pigments
3.3 0.5 59 0.9 0.1 10.8 786 234 654-200
LT Foods
Other Agri.prod.
3.5 0.4 12 0.9 1.3 11.0 526 16 40-13
Maithan Alloys
Ferro Alloys
4.6 0.8 86 1.7 0.0 25.8 1,053 360 699-316
Majesco
Computer Software
11.1 0.8 49 0.7 0.0 12.9 604 209 588-204
Mastek 4.9 0.6 13 4.1 0.1 16.4 503 205 509-192

Computer Software
Meghmani Organics 3.9 0.8 51 2.6 0.7 31.5 984 39 73-35

Pesticides
Music Broadcast 9.4 0.8 12 0.0 0.1 10.2 524 15 50-12

Media & Entertainment
National Aluminium Co 22.4 0.6 30 17.8 0.0 16.5 6,035 32 58-24

Aluminium
National Peroxide 21.9 0.7 31 5.3 0.1 14.0 707 1,231 3170-1052
Inorganic Chem.
NCC 3.0 0.3 128 6.8 0.6 13.3 1,348 22 119-18

Construction
NHPC 6.9 0.8 19 6.9 0.8 12.1 21,295 21 29-15

NOCIL 7.3 0.9 50 3.9 0.0 16.8 1,060 64 150-59

Thermoplastics

STOCK
SCREEN
Phillips Carbon Black

Carbon Black
4.0 0.6 45 5.2 0.5 25.3 1,151 67 182-59
Polyplex Corporation
Plastic Films
3.2 0.4 88 14.0 0.3 21.9 1,168 366 657-314
Rail Vikas Nigam

Construction
4.2 0.6 31 6.4 0.7 14.6 2,898 14 30-13
Ramkrishna Forgings
Auto Ancillaries
13.6 0.6 63 0.9 1.1 14.8 554 171 545-151
Shriram Pistons & Rings

Auto Ancillaries
10.0 1.0 14 2.2 0.1 14.4 1,040 465 1099-445
Siyaram Silk Mills

Cloth
12.1 0.9 10 3.0 0.6 13.8 676 144 486-121
Take Solutions
Misc.Other Services
3.5 0.4 21 2.4 0.3 12.6 609 41 160-39
Tata Chemicals
Soda Ash
4.7 0.4 33 5.5 0.5 11.0 5,838 229 780-210
Tata Steel
Finished Steel
6.6 0.5 12 4.4 1.5 14.2 35,889 298 562-255
Technocraft Industries
Steel Tubes & Pipes
5.3 0.6 11 0.0 0.8 15.5 540 226 580-210
Time Technoplast 3.2 0.4 15 3.1 0.5 13.3 664 29 109-27

Other Forms-Primary Plastic
Triveni Engineering & Ind 3.5 0.8 34 1.8 1.5 18.8 978 39 88-36
Diversified
TVS Srichakra 9.6 1.0 13 4.2 0.6 15.1 727 946 2287-881
Tyres & Tubes
TV Today Network 6.8 0.9 16 1.5 0.0 18.3 923 154 345-128
Varroc Engineering 8.6 0.8 52 2.2 0.8 14.1 2,472 183 655-166
Auto Ancillaries
Welspun Enterprises 7.1 0.4 39 4.7 0.4 10.2 638 43 143-42

Construction
West Coast Paper Mills 2.9 0.7 114 3.5 0.3 30.6 934 141 297-138
Paper
Data as on March 20, 2020. EPS growth rates are annualised. New entrants.

STOCK
SCREEN
High dividend-yield stocks

Good dividends are not just a bonus in addition to stock returns, they also
accumulate to become sizeable in the long run
REASONS TO INVEST THE FILTERS
Cushion against volatility Market cap greater than Stocks with a current dividend 753
Higher total return `500 cr yield of more than 3%
628
Generate regular tax-free Dividend payout ratio of less Stocks with sustained per
income than 40% share dividend and amount 88
over the past five years
63
Dear dividend
Company Stock Dividend Dividend Dividend Earnings Market cap Share 52-week
Industry style P/E PEG per share (`) yield (%) pay-out ratio (%) yield (%) (` cr) price (`) high/low (`)
Allcargo Logistics
6.7 1.38 3.5 5.1 35.5 16.4 1,684 69 123-64
Apollo Tyres
Tyres & Tubes
10.6 -0.83 3.3 3.6 27.3 9.6 5,097 89 228-84
Automotive Axles
Auto Ancillaries
9.6 0.38 19.5 4.7 24.8 16.2 629 414 1295-366
Birlasoft
Computer Software
7.2 -3.21 2.0 3.5 18.9 28.6 1,594 58 106-50
Bombay Dyeing
Textile Processing
0.6 – 1.5 3.4 2.5 36.7 906 44 147-42
CESC
4.9 0.34 17.5 3.7 19.6 15.5 6,251 472 855-432
Cochin Shipyard
Shipping
6.0 0.28 13.0 4.8 35.8 79.3 3,554 269 492-210
Cyient
Computer Software
6.3 0.73 15.0 5.5 34.6 27.3 2,973 269 685-254
DCM Shriram
Diversified
4.8 0.25 9.8 3.9 16.9 23.1 3,890 250 639-205
Deepak Fertilisers
Inorganic Chem.
10.2 -0.50 3.0 3.8 37.4 9.9 708 79 169-57
Edelweiss Fin Services

Invest.Services
8.8 0.75 1.4 3.4 12.5 – 3,814 41 211-38
Excel Industries
Pesticides
4.8 0.09 18.8 4.3 15.4 31.3 552 443 1250-418

STOCK
SCREEN
Gateway Distriparks
2.4 0.16 4.5 5.2 13.4 10.6 944 87 154-81
GHCL
Soda Ash
2.0 0.08 5.0 5.6 14.0 33.6 854 90 277-85
Graphite
Welding machinery
4.1 0.04 55.0 42.4 31.6 196.8 2,533 130 480-125

Caustic Soda
3.4 0.12 8.0 3.6 8.5 43.8 1,644 225 596-194
Gujarat Ind Power Company

2.3 0.17 2.9 5.5 17.2 43.5 801 54 87-48
Gujarat Mineral Dev Corp

Coal & Lignite
3.9 -0.30 2.0 5.8 28.9 36.0 1,105 35 85-30
Gujarat State Fertilizers

Nitrogenous Fertilizer.
10.1 1.35 2.2 5.9 17.8 11.5 1,478 37 111-37
HIL
Cement & Asbestos prod.
4.7 0.13 25.0 3.7 18.4 16.4 510 680 2030-630
Himatsingka Seide 4.7 0.40 5.0 8.1 25.0 14.3 610 62 241-56
Silk Textiles
Hindustan Aeronautics 6.8 0.46 19.8 3.5 29.2 18.0 19,144 565 896-472
Air Transport
Housing & Urban Dev Corp 2.9 0.17 0.8 3.8 14.0 10.5 4,334 22 47-20
Housing Finance
IIFL Finance 3.9 0.31 5.0 5.5 23.1 – 2,884 90 480-86

Invest.Services
IRB Infrastructure Dev 2.7 0.31 2.5 4.3 10.3 16.3 2,054 59 160-53
Construction
Jagran Prakashan 3.7 0.46 3.5 8.2 37.8 32.9 1,201 43 129-39
Books & Newspapers
Jamna Auto Inds. 15.0 0.46 1.0 3.6 27.5 12.1 1,052 26 63-21
Auto Ancillaries
Jindal Saw 3.2 0.06 2.0 3.8 7.5 12.4 1,695 54 103-43
Steel Tubes & Pipes
JK Paper 2.9 0.06 3.5 4.4 14.6 37.5 1,424 80 156-68

Paper
Kirloskar Oil Engines 6.3 1.32 5.0 5.3 33.0 54.2 1,354 93 205-87
Auto Ancillaries

STOCK
SCREEN
LIC Housing Finance

Housing Finance
4.2 0.32 7.6 3.4 15.8 10.1 11,289 225 587-209
Lumax Industries
Auto Ancillaries
11.2 1.08 35.0 4.2 31.5 10.9 784 831 1902-751
Magma Fincorp
Equipt.Leasing
3.6 -0.92 0.8 4.0 7.1 12.4 539 20 138-19
M&M Financial Services

Misc. Fin.services
8.5 0.78 6.5 3.1 21.9 11.6 13,004 210 442-187
Mastek
Computer Software
4.9 0.14 8.5 4.1 20.1 38.3 503 205 509-192
National Peroxide
Inorganic Chem.
21.9 0.71 65.0 5.3 24.3 6.7 707 1,231 3170-1052
Nava Bharat Ventures

Diversified
2.5 0.22 1.5 3.8 7.5 22.1 686 39 121-36
NBCC
Real Estate
22.6 -2.62 0.7 3.8 31.2 -20.4 3,069 17 68-14
NCC
Construction
3.0 0.02 1.5 6.8 15.6 33.8 1,348 22 119-18
NOCIL
Thermoplastics
7.3 0.14 2.5 3.9 22.4 19.6 1,060 64 150-59
NRB Bearings
Ball Bearings
14.5 0.54 2.6 4.8 23.3 8.9 524 55 204-50
Nucleus Software Exports

Computer Software
7.6 1.74 9.0 4.4 35.1 31.1 593 203 399-200
Phillips Carbon Black

Carbon Black
4.0 0.09 3.5 5.2 15.7 24.0 1,151 67 182-59
Piramal Enterprises
Drugs & Pharma
7.1 -1.32 28.0 4.0 35.1 12.2 15,445 685 2730-665
PNB Housing Finance

Housing Finance
2.5 0.13 9.0 4.7 12.6 11.5 3,231 192 983-190
PTC
Electricity Distribn.
2.8 1.64 4.0 11.0 27.8 12.9 1,073 36 81-33
Rane Holdings
Auto Ancillaries
21.1 -0.11 19.0 5.3 26.2 10.3 516 361 1603-350
Sasken Technologies
Telecom.Services
6.2 -1.21 12.5 3.2 23.7 26.1 596 397 774-335

STOCK
SCREEN
Seshasayee Paper
Paper
3.2 - 4.0 4.0 13.1 68.4 626 100 226-88
Sharda Cropchem
Misc.Chem.
8.7 324.44 4.0 3.2 20.5 22.2 1,117 124 420-115
Siyaram Silk Mills

Cloth
12.1 1.68 4.4 3.0 20.8 10.3 676 144 486-121
Sobha
Real Estate
5.0 0.76 7.0 3.9 22.4 24.7 1,714 180 588-170
Srikalahasthi Pipes
Pig Iron
3.9 0.19 6.0 4.2 23.8 44.2 668 144 262-123
Sterlite Technologies
Communication Equipt.
5.7 0.08 3.5 4.8 25.0 20.1 2,943 73 231-59
Sun TV Network
9.0 0.65 12.5 3.8 34.4 19.2 12,843 326 651-319
Tata Power Company

15.1 -3.55 1.3 3.5 16.0 9.8 9,954 37 77-33
Tata Steel Long Products - - 12.5 5.7 15.5 -33.5 844 187 854-409
Sponge Iron
Tata Steel 6.6 0.56 13.0 4.4 14.6 10.1 35,889 298 562-255
Finished Steel
Time Technoplast 3.2 0.23 0.9 3.1 10.0 27.6 664 29 109-27
Other Forms-Primary Plastic
Welspun Enterprises 7.1 0.07 2.0 4.7 23.4 43.4 638 43 143-42
Construction
West Coast Paper Mills 2.9 0.00 5.0 3.5 11.2 42.2 934 141 297-138
Paper
Zensar Technologies 7.2 2.70 2.8 3.2 20.1 23.6 1,980 88 271-87
Computer Hardware
Data as on March 20, 2020. EPS growth rates are annualised. New entrants.
For real-time, customisable

stock screens, visit
STOCK
SCREEN
Attractive blue chips

Investing in blue chips at reasonable valuations is one of the simplest
methods of wealth creation with limited pain
REASONS TO INVEST THE FILTERS cleared the filters
Liquidity Large and mid caps
235
Large companies in respective businesses Debt-equity ratio of less than two
199
Strong balance sheets Interest coverage ratio should be more than two
Liked by institutions Five-year average ROE of more than 20% 155
Annualised earnings growth of more than 20% over 75
the past five years
PEG of less than 1.5 17
Five-year average return on equity above 20% 9
4
Solid foundation
Company Stock Debt-equity Interest 5Y avg 5Y EPS Market cap Share 52-week
Industry style P/E PEG ratio coverage ratio RoE (%) growth (%) (` cr) price (`) high/low (`)
Aarti Industries
Organic Chemicals
24.7 0.91 0.9 4.4 24 25 13,379 768 1071-713
Godrej Consumer Products

Cosmetics & Toiletries
23.2 1.27 0.5 9.8 27 20 51,121 499 772-476
Hindustan Petro Corpn.
11.8 0.30 0.9 12.6 23 44 31,886 209 334-150
Vinati Organics
Organic Chemicals
23.6 0.94 0.0 196.2 26 25 8,081 791 1256-656
Data as on March 20, 2020. EPS growth rates are annualised.
For real-time, customisable

stock screens, visit
WORDS WORTH
NOW
We were leaders in I request all people in the country

antibiotics but due to
government and media to get out of house only when it is
pressure that we are extremely necessary; try and do
charging so much, we all work from home…Even World
stopped making them
for the last 20 years War I and II did not affect as
and started to import many countries as coronavirus has
from China. Today we
are 100% dependent on
done… Avoid this mindset that it
China and they control will not affect India.
prices. And we are so Narendra Modi Prime minister, Business Standard, March 20, 2020
stupid, we just killed our
industry because of media That [shutting the market due to The failure of a few
and government pressure. COVID-19] will create panic. I feel corporates has led
Let us use this opportunity market forces should be allowed to to a lot of gossip and
to revive some of these transact business freely. The call for speculation, this is what
industries, even if it costs closing down will create panic and more happened with IndusInd
more. Pharma companies selling. I feel the wise thing is to allow Bank as well. Everything
are not criminals, they are was smooth sailing for
actually saints.
the market to settle down on its own.
us; just one transaction
Motilal Oswal MD & CEO, Motilal Oswal Financial Services,
Kiran Mazumdar Shaw Chairperson,
BusinessLine, March 19, 2020
on IL&FS, which was a
Biocon, Mint, March 19, 2020 triple A rated firm and
almost with a sovereign
I am afraid that backing, went bad.
the impact of We have deep pockets
the coronavirus and we are completely
on the [aviation] backing IndusInd
industry bank, though
has been it does not
particularly need capital
severe. With the for the next
precipitous dip two years.
in revenues, the Ashok Hinduja
Chairman, Hinduja
very survival of Group of Com-
the industry is panies India, The
now at stake. Economic Times,
Ronojoy Dutta CEO, March 16, 2020
IndiGo, Business
Standard, March 20, 2020
Yes Bank depositors’ money is fully safe and secure; bank’s

identity will be retained as a private sector entity… `10,000
crore capital infusion is adequate and ensures compliance with
regulatory requirements.
Shaktikanta Das RBI governor, Financial Express, March 17, 2020

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Editor: Dhirendra Kumar.

4 Wealth Insight April 2020

40 8 INSIGHT 26 STOCK STORY

by PUJA MEHRA The thoughtful investor Oh, no!

April 2020 Wealth Insight 5

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April 2020 Wealth Insight 7

The thoughtful investor

Basant Maheshwari Direct taxes are an important instrument to reduce inequality of

Getting rich is a process. Most of us can’t take that pressure and

8 Wealth Insight April 2020

Importance of retained earnings

Subscription copy of [v_cfa@yahoo.com]. Redistribution prohibited.

Buffett’s top 15 common-stock investments

April 2020 Wealth Insight 11

What we see in our holdings, rather, is an

12 Wealth Insight April 2020

April 2020 Wealth Insight 13

14 Wealth Insight April 2020

COVID-19 has spooked the markets

April 2020 Wealth Insight 15

¶ 84% ¶ 69.2%

  159.9%

16 Wealth Insight April 2020

¶ 194% ¶ 126.9%

While dramatic market declines spook

April 2020 Wealth Insight 17

S&P BSE Sensex

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18 Wealth Insight April 2020

Large caps Price to earnings Net profit (` crore)

April 2020 Wealth Insight 19

Mid caps Price to earnings Net profit (` crore)

-26.4 662 -270

20 Wealth Insight April 2020

Small caps Price to earnings Net profit (` crore)

April 2020 Wealth Insight 21

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150 45 Merger with Luk India and

Net margin (%) Operating margin (%) -P]L`LHYHUU\HSPZLKNYV^[O

Revenue (%) Operating profit (%) EPS (%)

22 Wealth Insight April 2020

How the market may fare

Less than 10 59.8 0.1 6

Greater than 10 but less than 12 62.4 2.1 146

Greater than 12 but less than 15 35.8 12.2 861

Greater than 15 but less than 17 19.7 14.3 1,012

Higher than 17 but less than 20 10.2 26.7 1,883

Higher than 20 but less than 25 9.9 27.6 1,946

Higher than 25 -10.8 17.0 1,200

April 2020 Wealth Insight 23

Building trust ;H_PUN[PTLZ

Here is a list of companies that can Tax-dispute

resolve their income-tax disputes by Company

scheme, introduced in the Budget Whirlpool Of India 1,289 53.8 263.7

24 Wealth Insight April 2020

Top 3 companies in terms of domestic revenues

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¶ 84% ¶ 69.2%

159.9%

¶ 194% ¶ 126.9%

Net margin (%) Operating margin (%) -P]L`LHYHUU\HSPZLKNYV^[O

Bank & Branch 6DYH

All-weather style Market cap greater than