June 2013
In This Issue
• Market Outlook for the month
• Equity Market Outlook
• Derivatives & Commodities Market Outlook
• Large Cap and Mid Cap Investment Ideas
• Model Advisory Portfolios
• Recommended Funds
• Trading Platform
Key Highlights for the Month
US markets continues to lead global equities
Nifty loses steam after a good run, Premium on quality stocks increases
Q4FY13 aggregate Sensex PAT flat YoY, is this the bottom?
Possibility of QE being prematurely scaled back- a new worry
Dear Investor,
Nifty reached out towards the previous high (going up to
6,200), before correcting towards the end to close the
month up 0.9% only at 5986. US equities meanwhile
continue to trade close to life-time high.
Sectoral outperformers remained the same as in the
previous months of this year Consumer, Private banks and Pharmaceuticals being the
favorites, while interest-rate sensitives continued to be weak.
Q4 results would have hopefully marked the bottoming out of the economic growth
cycle. This was a quarter of flat PAT YoY, with 7% YoY sales growth.
PAT Growth contribution was strong from NBFC(32%), Healthcare(31%), Private
Banks(25%), Technology(20%) and Consumer(18%). While Telecom(-58%), Cap Goods
(-10%), Real Estate(-47%), Cement(-17%) and PSU Banks(-17%) were the laggards.
Our Sensex EPS estimate for FY14 stands downgraded by 1.6% to
Rs1346.
Sensex FY14
P/E at 14.7x is at long-term averages; it is imperative for growth to rebound for
market returns.
QE rollback/scaledown- a new worry comes to the fore: After very strong flows
witnessed into equities post the US Fed's announcement of sustained QE last year,
markets had gone up strongly. Meanwhile, the US economy has seen green-shoots
of growth coming back resulting in higher bond yield in the US of 2.13% ( 1.75%
at end CY13), a stronger USD, which is causing the INR to be weaker- a depreciating
INR is a major worry for the market.
Global Market
Index
Sensex
Nifty
FTSE 100
Dow
Nasdaq
Hang Sang
31-May-13
19,760
5,986
6,583
15,116
3,456
22,392
MoM (%)
1.3
0.9
2.4
1.9
3.8
-1.5
YoY (%)
21.8
21.6
23.7
22.0
22.2
20.2
Economic Pulse
Key Indicators
IIP (Jan)
WPI (Jan)
10 Year Yield
USD/ INR
Crude ($)
Gold (10 gms)
Current Month
2.5%
4.89%
7.24%
56.63
100.4
27197
Change (%)
316.7
-18.0
-6.3
5.6
-2.0
0.2
Thought for the month
Gautam Sinha Roy - Vice President
Way Forward
Nifty is expected to consolidate in the near term with the key triggers being:
• RBI's policy decision in the June meet and pass though of lower rates in the system
• Further easing of commodity prices would be key in keeping the CAD under control
Threat
•
•
The fate of the US Fed's QE program is the key trigger for global markets.
Continued political uncertainty is a key risk

On This Page
Equity Market Outlook
Markets & Our Recommendations
June 2013
Equity Market Outlook
Technical Outlook
•
Nifty for the month of May closed with a gain of 55 points. After making a higher high
(above Jan 2013), Nifty could not sustain the higher level and witnessed a pullback in
the latter half of the month. The index has been consolidating within a rising channel
which has resistance around the band of 6250-6300 and support is placed around
5650-5700. A formation of a bearish engulfing pattern around the upper band of the
channel indicates limited upside in the near term to 6250. On the downside, immedi-
ate support is placed at 5900 and on a confirmatory close below the same, incremen-
tal downside can be expected towards 5700. However, until the immediate support of
5900 is taken out, odds favor consolidation within the band of 5900-6250.
Rupee has been depreciating against Dollar and this is a negative for Indian equities
with a long term perspective. Our proprietary model on "Real rate differential between
US & India" indicates that the depreciation in rupee might be mainly led by an eco-
nomic recovery in the US. However, on the short term scale, the correlation of USDINR
with Nifty is low suggesting that the possible implications could occur with a delay.
Sectoral chart indicates that market has turned to be more mature and most of the
sectors are placed in the neutral space. The defensive pack continues to outperform
and most of the cyclicals are neutral (diminishing the reward to switch sectors). Metals
and Realty continues to trend down on the long term scale and both the sectors
remains an avoid/sell.
Support for the Index is placed at 5900 / 5700
Resistance can be faced at 6150 / 6250
MOSL's Recommendations
•
•
Long positions could be made above 5950
for a potential of 6130 & a stop below 5890
Sell positions could be made below 5880
for a potential of 5700 & a stop above 5950.
•
Nifty
•
CNX BANK
Bank Nifty closed flat on a MoM basis
Statistical models indicate the sector as a neutral performer
Private Banks continue to rule the roost and is expected to witness incremental upside
PSU & Mid-cap banks have been lagging behind
Support for the index is placed at 12150 / 11600
Resistance for the index is placed at 12900 / 13400
Sectoral Highlights
Sector
Pharma
FMCG
Energy
Realty
#Technical view for 1 month perspective
Our Views
Positive
Positive
Neutral
Negative
Top Pick
Dr Reddy
Dabur
ONGC
DLF
Recommendation
#
Buy above 2150
Buy above 158
Buy above 320
Sell below 195
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On This Page
Derivatives Market Outlook, Commodities Market Outlook
Markets & Our Recommendations
June 2013
Derivatives Market Outlook
Derivatives Market Outlook
3
May series rolled a lot of uncertainty into the June expiry with aggregate count on stock
futures evenly divided into three different biases. Around a third of the participating
stocks saw carry forward of long bias, over a third carried forward short bias, while the
rest saw bias turning neutral. As it seems the coming expiry may be more stock specific
than secular in nature, make trading more difficult.
3
In last expiry we had following sector wise observations
3
Auto:
OI action remains more or less on the long side except for Maruti with speculative
MOSL's Recommendations
INDEX: NIFTY
Strategy
Follow-up
LOT SIZE: 50
:
Nifty Bull Call Spread
:
Trade with underlying exit
point of 5850.
shorts.
PSU Financials:
Shorts reinstated in the sector, which got covered last expiry.
Pvt.
Financials:
Long rollovers almost across the sector.
FMCG:
Fresh and continuing Longs
rolled over especially in Large Caps.
Oil & Gas:
ONGC and RIL added longs while other gas
related stocks like GSPL, IGL added shorts.
Metal:
Short rolls continue after a failed
attempt at covering in May expiry.
3
At this juncture Nifty futures remain relatively light, while the options indicate range of
Pay off Profile On Expiry
Break Even
Point
6120
Maximum
Profit
4000
Premium
Outflow
1000
5900-6200. We would recommend to trade the range of 5900 & 6200 till either side
breakout takes place.
Strategy of the Month
•
•
•
Strategy :
Nifty Bull Call Spread
Trade
View
:
Buy 6100 CE; Sell 6200 CE
:
As we trade at the lower end of the band the indicative range presents
relatively more head room on the upside. The exit point as and when would
be decisive breach of the lower end of the band at 5900.
Commodities Market Outlook
Base Metals
Last month turned out to be a superb one for industrial metals as they witnessed a positive rally. On the LME, Copper ended marginally positive,
while Lead and Aluminum were much higher. The latest FOMC minutes showed that although the growth is yet to pick up largely, the Fed
would consider to start cutting down on its monetary easing in the next couple of months, adding to doubts whether or not the easing will
continue to support industrial metals.
3
Data from the US was a mixed bag, which kept the market on its toes. While strong U.S. housing and consumer confidence data lifted prospects
for rising metals demand, a revision of growth numbers for Q2 dented consumer sentiments.
3
Mixed economic data from the US kept market hopes high of the Fed not tightening its monetary policy soon. Also helping form a sentiment
from the euro zone was an ECB member, highlighting that the bank will stick to its expansive monetary policy for as long as necessary.
3
Manufacturing data in Japan was seen expanding in May, as a weak Yen and increased demand in the United States and China lifts exports. This
improving data points out that the new premier's fiscal and monetary expansionary policies have helped improve sentiment.
3
On the supply front, a series of mining accidents and plant shutdowns this year have pushed copper's supply back into the spotlight, supporting
prices. The global market for copper is expected to swing into a small surplus this year after several years of deficit.
3
Copper
inventories on the LME and Shanghai were seen falling for 8 continuous week, signaling a turnaround in stockpiles which were seen at
their highest in the first quarter. LME warehouse inventories shave also started to erode from the highest levels seen during the last month.
Copper in May ended 3% higher, backed by supply outages and improved demand in China., but a sustained rally has eluded the metal due
to doubts on the outlook for the global economy. Growth numbers from the euro zone, monthly review from the ECB along with US monthly
jobs numbers will also provide some direction. With a lower than estimated surplus to 46,000 tons previously forecasted 1,27,000 tons, we
expect LME copper prices could be in the range of $7200-$7500, which in worst case can slide towards $7050.
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On This Page
Large Cap Investment Ideas, Mid Cap Investment Ideas
Must Act
June 2013
Large Cap Investment Ideas
3
Idea Cellular, an Aditya Birla Group company, is India's third
Recommendation
with a
Market & Our
largest wireless operator
Idea
CMP*:
Target:
Rs131
Rs150
BUY
revenue market share of ~15%.
3
Idea's strong execution in established as well as new circles will drive wireless traffic CAGR
of 11% over FY13-15E.
3
We expect consolidated EBITDA CAGR of 21% over FY13-15E largely driven by traffic growth,
higher data revenue contribution and operating leverage.
3
Maintain Buy with a revised target price of
Rs150
3
State Bank of India (SBIN) is India's largest commercial bank, with a standalone balance
SBI
CMP*:
Target:
Rs2,046
Rs2,600
BUY
sheet size of over INR14tn+, 33000 branches and ~25% marketshare in India.
3
SBI’s CASA stands at 46% and helps reduce cost of borrowings significantly.
3
While core operating performance is likely to be under pressure, healthy trading gains
would help maintain RoA of ~0.9% over FY14-15.
3
Improvement in macro-economic environment should help improve the quality of the
loan book over a period of time.
3
Maintain Buy with a target price of
Rs
2,600 (1.1x FY15 con BV+INR115 for Ins).
Mid Cap Investment Ideas
3
Asset addition in the last five years is
Rs
850 cr, which should result in a 15-20% revenue
growth over the next 2 years.
3
Growth in the overseas subsidiaries is likely to be higher (40-45%) than the growth
domestically(12-15%) - A re-rating driver.
3
Free-cash flows should aid reduction of debt to the tune of
Rs
100 cr in FY14. This
Time Technoplast
CMP*:
Target:
Rs40
Rs68
BUY
repayment should see EV shift in favour of equity investors.
3
The stock trades at 4xFY14E EV/EBITDA vs 7XFY13E EV/EBITDA historical average for
period starting one year after the time of listing.
3
We see ROCE as having bottomed out and continue to recommend a BUY on the stock
with a target of
Rs
68.
3
Exide dominates the automotive battery market with 69% market-share in the OEM
space and 33% market-share of the replacement market.
3
We estimate Exide's OEM sales to rise 8% and 17% in FY14E and FY15E respectively. OEM
margins to move back into the double digit range.
3
Exide owns ING Insurance, having bought-out the remaining stake from its partners for
Exide Industries
CMP*:
Target:
Rs138
Rs166
BUY
Rs
550 cr. A partial sale of stake will bring in cash.
3
Exide trades at 22xFY13A and 18xFY14E earnings.
3
BUY with a 1 year target of
Rs
166.
Data as on 31st May 2013
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On This Page
MOSt Value, MOSt Velocity, MOSt Mid-Cap
Build a Portfolio
June 2013
MOSt Value - Model Advisory Portfolio for Investors
Scrip
SBI
Infosys
Maruti
ITC
ICICI Bank
Idea
ONGC
L&T
Exide
Dabur
Tech Mahindra
LIC Housing
Hindalco
Dr Reddy
Container Corporation
Cash
Total
CMP
2065
2412
1620
342
1154
132
330
1400
138
156
968
256
102
2092
1144
Wtg.
12.5
7.5
7.5
7.5
7.5
5
5
5
5
5
5
5
5
5
5
7.5
100
Sectoral Allocation
For Whom
Long Term
Investors
Investment Duration
For few months
to a year
Risk Profile
Defensive
Investors
What’s In
Idea
ONGC
L&T
Exide
What’s Out
NMDC
Lupin
MOSt Velocity 10 - Model Advisory Portfolio for Positional Traders
Scrip
ONGC
Oil India
Sun TV
Infosys
Idea
Glenmark Pharma
ACC
Maruti
Bank of Baroda
SBI
Havells
ITC
Cash
Total
CMP
330
600
420
2430
132
595
1230
1620
658
2065
745
342
Wtg.
7.5
5
5
5
7.5
7.5
5
5
5
5
5
5
32.5
100
Sectoral Allocation
For Whom
Medium Term
Investors
horizon
Investment Duration
Few months
Risk Profile
Moderate
Investors
What’s In
Sun TV
Infosys
idea
Glenmark Pharma
ACC
Maruti
What’s Out
ICICI Bank
HDFC
Dabur
Dr. Reddy
Tech Mahindra
MOSt Mid Cap- Model Portfolio for Aggressive Investors
Scrip
Engineers India
Bajaj Finance
Gruh Finance
GMDC
Muthoot
FDC
Unichem Labs
Bajaj Corp
TBZ
Finolex cables
Total
CMP
163
1485
227
140
140
90
165
275
240
53
Wtg.
10.8
14.3
10.9
7.7
6.7
10.6
8.9
9.1
10.8
10.0
100
Sectoral Allocation
For Whom
Long Term
Investors
Investment Duration
For few months
to a year
Risk Profile
Aggressive
Investors
What’s In
-
-
What’s Out
-
-
Data as on 31st May 2013
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On This Page
MOSt PMS, MOSt Mutual - Model Portfolio
Managed Funds
June 2013
MOSt PMS
Value Strategy
•
Top Holdings in Value Strategy
Scrips
HDFC Bank Ltd
Bosch Ltd
Nestle India Ltd
HDFC Ltd
State Bank of India
Value Strategy: - The Strategy aims to benefit from the Long term compounding effect on
investments done in good businesses, run by great business managers for superior
wealth creation.
Value Strategy has the investment style of buying Undervalued stock & Sell overvalued stocks,
irrespective of Index Movements.
Money multiplied by 10 times in just 10+ years.
Rs1Cr
invested in Value PMS in March 2003 is worth
Rs10.85
Crs vs. 5.82 Crs in CNX Nifty
Since Inception Value Strategy has delivered 26.35 % annualized returns vs. 19.06 % of CNX
Nifty, delivering an annualized alpha of 7.29%.
% Holdings
13.36
10.98
10.78
9.02
8.30
•
•
•
•
Sector Allocation
Banking & Finance
Auto & Auto Ancillaries
Pharmaceuticals
FMCG
Infotech
% Holdings
30.69
23.12
11.31
10.78
10.60
Data as on 31st May 2013
All the above figures are of a model client. Returns shown above are calculated on NAV method "Returns shown above are post fees & expenses
MOSt PMS
NTDOP Strategy
•
Top Holdings in NTDOP Strategy
Scrips
% Holdings
14.42
10.67
9.64
7.69
6.44
Page Industries Ltd.
GlaxoSmithkline Consumer Ltd.
Eicher Motors Ltd.
Bosch Ltd.
J & K Bank
NTDOP Strategy: The strategy aims to deliver superior returns by investing in focused themes
which are part of the Next Trillion Dollar GDP growth opportunity. It aims to predominantly
invest in Small & Mid Cap stocks with a focus on Identifying Emerging Stocks/Sectors.
The strategy aims to capitalize on the themes of Consumerism, Banking & Financial Services
& Infrastructure in the Indian Economy.
Since Inception NTDOP Strategy has delivered 11.78% annualized returns vs. -1.87% of CNX
Midcap, delivering an annualized alpha of 13.65%.
In last 1 Year, NTDOP Strategy has delivered 33.66% returns vs. 13.39% of CNX Midcap,
generating an alpha of 20.27%.
•
•
Sector Allocation
FMCG
Banking & Finance
Auto & Auto Ancillaries
Diversified
Engineering & Electricals
% Holdings
29.09
22.44
17.33
6.95
6.82
Data as on 31st May 2013
•
All the above figures are of a model client. Returns shown above are calculated on NAV method "Returns shown above are post fees & expenses
MOSt Mutual - Model Portfolio
AGGRESSIVE - High Risk
Scheme Name
Franklin India Bluechip Fund(G)
ICICI Pru Focused BlueChip Eq (G)
UTI Opportunities Fund(G)
Franklin India Flexi Cap Fund(G)
ICICI Pru Dynamic Plan-Reg(G)
Birla SL MIP II-Wealth 25(G)
IDFC Dynamic Bond-A(G)
Total
G: Growth , E: Equity, D: Debt, F: Fund
Return %
Type
E
E
E
E
E
D
D
1yr
19.75
22.46
19.82
20.71
13.56
13.77
14.53
3yrs
7.01
9.23
10.43
5.89
5.17
7.92
10.09
Wtg%
20%
20%
10%
10%
10%
15%
15%
100%
DEFENSIVE - Low Risk
Scheme Name
IDFC Dynamic Bond-A(G)
Reliance Dynamic Bond(G)
UTI Bond Fund(G)
IDFC SSIF-MT-Reg(G)
Franklin India Bluechip Fund(G)
ICICI Pru Focused BlueChip Eq-(G)
Reliance Equity Opportunities (G)
Total
Type
D
D
D
D
E
E
E
Return %
1yr
14.53
15.04
15.13
10.81
19.75
22.46
18.04
3yrs
10.09
10.81
10.71
8.69
7.01
9.23
9.47
Wtg%
15%
20%
15%
20%
10%
10%
10%
100%
Data as on 31st May 2013
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Investment Solutions
Integrated Trading Platform
June 2013
Game Changer
The All-Powerful Integrated Trading Platform
Now playing on a screen near you
The all new Motilal Oswal Trading Platform now comes with advanced features to
provide you with Insight, Information, Research, Action and Review facility; all in
one place. Now trade seamlessly in Equity, Commodity*, Currency, IPO and
Mutual Funds across devices like Desktop, Mobile, Web and Phone; and no matter
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Insight
• Customisable News & Analysis
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Action
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Research
• Buy sell strategy signals
• Integrated Research & Advice
• Idea Dashboard
• Detailed Research Reports
Review
• Portfolio Restructuring Service
• Comparative analysis of portfolio
• Recommended Model Portfolios
• Integrated view of MOSL and
Non-MOSL Portfolios
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Motilal Oswal Securities Ltd. (MOSL) Member of NSE and BSE
Reg. Office: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai 400 064. Tel: 022 3080 1000. Registration Nos.: NSE (Cash) : INB231041238 ; NSE (F&O) : INF231041238
; BSE (Cash) : INB011041257 ; BSE(F&O) : INF011041257 ; CDSL : IN-DP-CDSL-09-99 ; NSDL : IN-DP-NSDL-152-2000 ; AMFI :ARN 17397 ; MOSL is a distributor of Mutual Funds and IPOs.*PMS : INP000000670; *PMS &
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