MOSt
Advisor
Monthly Markets Newsletter
December 2014
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
• OrionLite Trading Terminal
Key Highlights for the Month
Japan and Europe weaken currencies with QEs
Muted earnings season continues, Sensex earnings downgraded for FY15
Lower commodity prices & inflation to drive Banks & Consumption plays
Dear Investor,
Market performance:
Markets continued to be a in buoyant mood after a sharp
rally in October, with a 3% gain for the S&P BSE Sensex.
The rally was led by Banking (+8.8% m-o-m) while other
Global Market
Index
30-Nov-14
MoM (%)
YoY(%)
sectors were lack-luster. Midcaps (+4.4% m-o-m) outper-
formed large-caps. Our Midcap recommended portfolio
tripled since July 2010 with a 87% return in the last one year.
Key factors for equities
Lower crude = lower inflation = rate cut?
A sharp drop in crude oil prices drove
expectations of lower inflation, lower fiscal deficit and lower current account deficit.
Cut in diesel prices should impact inflation and benefit rate-sensitives and capital-
heavy sectors. This is positive for Automobiles, paints, lubricants, plastics and aviation
companies. A rate-cut from the RBI governor is important for follow-up buying. We
have recommended HPCL, ICICI Bank and TVS Motors to gain from lower crude prices.
Currency wars & exporters:
The Yen and Euro depreciated against the USD boosting
Sensex
Nifty
FTSE 100
Dow
Nasdaq
Hang Sang
28,634
8,588
6,723
17,828
4,791
23,987
2.8
3.2
1.5
4.6
6.6
0.0
37.7
39.1
1.1
10.8
18.0
0.4
Economic Pulse
Key Indicators Current Month
Change (%)
IIP (May)
WPI (June)
10 Year Yield
USD/ INR
Crude ($)
Gold (10 gms)
2.5%
1.77%
8.08%
62.03
70.15
26140
525.0
-25.6
-2.3
1.0
-18.2
-0.2
competitiveness for Japanese & European companies. In such a scenario, we prefer
exporters with a niche. We add Kitex Garments to our Midcap Portfolio as it has a
strong-entry barrier in the niche Infant-wear segment.
Lower inflation = Higher disposable income:
Lower inflation and lower EMIs on
rate-cuts in the next one year will boost disposable income and consumption demand.
Jubilant Food is a consensus BUY for our Fundamental & Quantitative Research teams.
The Road ahead:
Indian Equities, with a 30%+ return YTD, is in favour with foreign investors, with
expectation of a strong inflow in December. Passage of key Bills in the Winter session
of Parliament, continued weakness in commodities and higher earnings visibility with
lower inflation and strong volume numbers are key to sustaining this rally. Our
Monthly Quant Report titled "The going is Good" points out lack of over-optimism
in indicators. BUYing into strong THEMEs with tailwinds or into companies with
strong growth and ROEs is advisable.
Thought for the month
Ravi Shenoy
Vice President
1

On This Page
MOSt
Advisor
Monthly Markets Newsletter
Equity Market Outlook
Markets & Our Recommendations
December 2014
Equity Market Outlook
Technical Outlook
√
Nifty ended the month of November with a gain of 266 points. Early
November the index was in a time corrective mode and broke out later
during the month keeping the overall up-trend intact.
√
Banks and Realty were the best sector performers with a more consistent
gain across stocks from the banking space. All sectors other than Metal,
Energy and Infra closed positive in absolute terms. The switch from Defen-
sives to Cyclical was somewhat evident. Index has been moving up with
no major reversal signal yet and hence, is expected to continue its up-
trend.
√
On the weekly chart Nifty has breached from its consolidation and
resumed its uptrend ; the setup is healthy enough to sustain its momen-
tum. Unless a strong counter-attack is visible, trading the up-trend with a
trailing stop (8300) would be a prudent strategy.
√
On the daily chart, after a breakout from a time correction, the index
pulled back to the support and re-confirmed the immediate support at
8410. The trend is expected to remain healthy and positions can be built
for a target of 8900.
√
PSU banks were best performers in the ongoing momentum in the bank-
ing arena (sector). On the long term scale the index has broken out from a
cup & handle pattern. The pattern indicates a continuity of the exiting up-
trend.
PSU Bank
Nifty Daily
Nifty Weekly
Detailed report available on- http://ftp.motilaloswal.com/emailer/Marketdiary/QuantitativeMonthly/MOStQuantitativeOutlookMonthly-December2014.pdf
Sectoral Highlights
Sector
Bank
NBFC
Auto
Midcap
Note: #Technical view for 1 month perspective,
Our Views
Positive
Positive
Positive
Positive
Top Pick
PNB
Shriram Trans. Fin
Tata Motors
UCO Bank
Recommendation/CMP
Buy / 1072
Buy / 1078
Buy / 534
Buy / 88
2

On This Page
MOSt
Advisor
Monthly Markets Newsletter
Derivatives Market Outlook,
Commodities Market Outlook
Markets & Our Recommendations
December 2014
Derivatives Market Outlook
√
The open interest activity remained positive in November for Nifty. Rollovers from November series were promising, raising the participation in
double digits expiry over expiry, carrying forward the sentiment into December
√
The option composition shows heavy build-up in Call strikes which are already in the money, could induce sharp upticks as long as we sustain
above 8500 levels. Puts in the strike 8500 through 8300 could provide all the due support
√
Stock futures open interest has also seen increment of 10% MoM with nearly 70% stocks witnessing incremental open interest
SECTORS OI
Nifty- Bull Call Spread
√
Positive OI activity-
Auto Sector
(AshokLey, M&M),
Banking:
(Continuing Longs
in SBI, ICICI along with Short Covering in NBFCs.)
Engineering & IT:
(Longs with
smaller magnitude were added in LT, Voltas and TechM, Wipro
√
Neutral
-
Metal & Power:
Longs in Sail, Short Covering in Hindalco and Longs in
JSW Energy,
Realty:
Short Covering in DLF & IBReal,
FMCG:
Lack of Secular sector
OI activity. Short Covering in Dabur, Longs in select stocks like Asian Paints,
HINDUNILVR along with shorts in ITC & Tea Stocks.
√
Negative -
Pharma:
(Shorts in Ranbaxy, SunPharma)
Actionable
Buy : 1 Lot 8700 CE
Max Profit : INR1500
√
√
√
Sell : 1 Lot 8900 CE
Max Loss: INR500
The view remains positive supported by the evident
futures activity
Sustaining around these levels could have sharp upticks
led by short covering in heavy Calls which are already in
the money
On a broader scale immediate hurdle on the downside
remains at 8500
Commodities Market Outlook
Precious Metals
√
Precious metals were largely stuck in a range last month, as a stronger dollar on one hand and easing by ECB and China on the other kept prices
underpinned. Also, investors were awaiting the Swiss referendum for further direction. However, a no vote in the referendum dented prices .
√
China cut interest rates after more than two years on worries over slowing growth. The PBOC cut the main lending rate by 40 bps and the
deposit rate by 25 bps. The ECB meanwhile continued to maintain a dovish bias. On the other hand, the U.S. economy showed strong
momentum in Q3 as the GDP expanded by 3.9% against expectations of 3.3%.
√
The Q3 report by WGC showed that global gold demand fell 2% to a 5 year low in the Q3at 929 tonnes, led by China which saw total demand
falling 37%. Investment demand continues to go lower with prices, as SPDR holdings have declined more than 22 tonnes in November
following a drop of 28 tonnes in October. The YTD outflow now stands at 77.5 tonnes.
√
Broadly, a string of robust economic numbers from the U.S. and a slight hawkishness by the Fed continues to fuel a bigger downtrend. The
Swiss gold referendum failed to provide any meaningful support and in fact tuned out to be negative for prices.
√
Overall, the $1338/1342 will remain a strong resistance and if $1180 breaks on the downside, we could see a sharp fall towards $1120-1100.
3

On This Page
MOSt
Advisor
Monthly Markets Newsletter
Large Cap Investment Ideas,
Mid Cap Investment Ideas
Must Act
December 2014
Large Cap Investment Ideas
√
HPCL's 2QFY15 gross under recovery stood at INR52b, all of which was borne by the
govt. and upstream companies.
Market & Our Recommendation
HPCL
CMP*:
Target:
INR597
INR637
√
HPCL's gross debt has reduced sharply by INR83b (26%) to INR236b at Sep’14 end (v/s
INR319b in FY14) led by lower working capital loan.
√
Diesel deregulation is expected to result in 52% reduction in under recoveries by FY16
v/s FY14 to INR674b. Crude drop to lower working capital & under recovery further.
√
Earnings growth is seen from reduction in interest cost and higher marketing margin in
diesel (INR0.5/ltr in FY16/FY17)
√
ICICI Bank is well positioned to leverage the economic recovery opportunity with high
core RoA, strong distribution network and capitalization
BUY
ICICI Bank
CMP*:
Target:
INR1754
INR1900
√
Management remains confident of reducing stress additions in FY15 and have guided for
credit cost of 0.9%
√
PAT CAGR is expected to be 18%+ over FY14-17 v/s 16% balance sheet CAGR
√
Value unlocking in insurance business will be a key trigger with Insurance Bill Passage
as a key factor to watch for.
BUY
Mid Cap Investment Ideas
√
KTG has a strong presence in the highly specialized infant wear (0-2 years) market - a
segment where competitors have found the going tough due to stringent safety norms.
√
KTG intends to improve its revenue mix in favor of high margin clients who procure
value-added products which will drive continued margin improvement.
√
KTG plans to buy/license a brand for the US market and also become a wholesaler with
Kitex Garments
CMP*:
Target:
INR528
INR651
BUY
the intent of moving higher in the value chain.
√
Over the next 12-18 months, TVSL plans to launch multiple products which will fill gaps
in its portfolio and increase its market share.
√
The management is targeting EBITDA margins of 10% by FY18E from current levels of 6%
√
Expect EPS CAGR of 58% with return ratios (RoE) improving from 20% in FY14E to 33%
in FY16E.
TVS Motors
CMP*:
Target:
INR230
INR277
BUY
Data as on 28th November 2014
4

On This Page
MOSt
Advisor
Monthly Markets Newsletter
MOSt Value, MOSt Velocity, MOSt Mid-Cap
Build a Portfolio
December 2014
MOSt Value - Model Advisory Portfolio for Investors
Scrip
L&T
SBI
Tata Steel
Axis Bank
HDFC
Tata Motors
IPCA
Sundaram Finance
ICICI Bank
HPCL
Coal India
Jubilant Foodworks
Total
MBP
1639
321
473
481
1161
534
684
1300
1754
597
355
1430
Wtg.
10.0
10.0
10.0
10.0
10.0
10.0
7.5
7.5
7.5
7.5
5.0
5.0
100
Sectoral Allocation
For Whom
Investment
Duration
Risk Profile
What’s In
ICICI Bank
Jubiliant Foods
HPCL
Long Term
Investors
few months
to a year
Defensive
Investors
What’s Out
Infosys
ITC
Sun Pharma
UltraTech Cement
MOSt Velocity 10 - Model Advisory Portfolio for Positional Traders
Scrip
Axis Bank
Yes Bank
Punjab National Bank
TATAMTRDVR
Hero MotoCorp
Bharat Forge
TVS Motor
L&T
Voltas Limited
Bharti Airtel
United Spirits
Britannia Industries
Glenmark Pharmaceuticals
Hindustan Petroleum
Jubilant Foodworks
NTPC
Cash
Total
MBP
481
710
1072
340
3147
965
229
1639
271
382
2736
1648
820
597
1430
142.7
Wtg.
10.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
15.0
100
Sectoral Allocation
For Whom
Investment
Duration
Risk Profile
What’s In
Axis Bank
PNB
Hero MotoCorp
Bharat Forge
TVS Motors
Medium Term
Investors
Few months
horizon
Moderate
Investors
What’s Out
HCL Tech
SBIN
Dabur
Marico
Grasim
MOSt Mid Cap- Model Portfolio for Aggressive Investors
Scrip
Suprajit Engineering
Bajaj Finance
Kitex Garments
Berger Paints
Bajaj Corp
Finolex cables
TVS Motors
Repco Home Finance
Engineers India
Jain Irrigation System - DVR
Total
MBP
122
3094.8
528.15
392.5
324.5
262.7
230
544.9
230
53
Wtg.
12.4
11.8
11.3
11.0
10.7
10.4
10.1
9.9
7.7
4.7
100.0
Sectoral Allocation
For Whom
Investment
Duration
Risk Profile
What’s In
Kitex Garments
TVS Motors
Long Term
Investors
few months
to a year
Aggressive
Investors
What’s Out
Persistent System
Unichem
Data as on 28th November 2014
5

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MOSt
Advisor
Monthly Markets Newsletter
MOSt PMS, MOSt Mutual - Model Portfolio
Managed Funds
December 2014
MOSt PMS
Value Strategy
√
The Strategy aims to benefit from the Long term compounding effect on investments done
in good businesses, run by great business managers for superior wealth creation.
√
Value Strategy has the investment style of buying Undervalued stock & Sell overvalued
stocks, irrespective of Index Movements.
√
Money multiplied by 17.93 times in just 11 years.
√
INR1 Cr invested in Value PMS in March 2003 is worth INR17.93 Crs vs. 8.49 Crs in CNX
Nifty.
√
Since its inception, Value Strategy has delivered annualized returns of 27.99% vs. CNX Nifty
returns of 20.07%, an outperformance of 7.92% (CAGR).
Top Holdings in Value Strategy
Scrips
Eicher Motors Ltd.
Bosch Ltd.
Sun Pharmaceuticals Ltd.
HDFC Bank Ltd.
Tech Mahindra Ltd.
% Holdings
17.71
12.18
10.40
8.70
8.57
Sector Allocation
Auto & Auto Ancillaries
Banking & Finance
Infotech
Pharmaceuticals
FMCG
% Holdings
34.99
23.73
15.07
10.40
5.43
Data as on 28th November 2014
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 its inception, NTDOP Strategy has delivered 18.46% annualized returns vs. 5.60% of
CNX Midcap, delivering an annualized alpha of 12.86%.
Top Holdings in NTDOP Strategy
Scrips
Eicher Motors Ltd.
Bosch Ltd.
Page Industries Ltd.
Bajaj Finance Ltd.
Voltas Ltd.
% Holdings
16.19
12.26
11.04
7.73
5.83
Sector Allocation
Auto & Auto Ancillaries
Banking & Finance
FMCG
Engineering & Electricals
Diversified
% Holdings
28.45
26.35
20.72
6.52
5.83
All the above figures are of a model client. Returns shown above are calculated on NAV method "Returns shown above are
post fees & expenses". Past performance may or may not be sustained in future.
MOSt Mutual - Model Portfolio
AGGRESSIVE - High Risk
Scheme Name
Type
Franklin India Smaller Comp Fund(G) E
IDFC Sterling Equity Fund
E
Sundaram SMILE Fund
HDFC Balanced Fund (G)
IDFC Dynamic Bond Fund
Total
G: Growth , E: Equity, HE: Hybrid-Equity, D: Debt, F: Fund
Data as on 28th November 2014
Return %
1yr
92
64
34
56
10
DEFENSIVE - Low Risk
Scheme Name
Axis Short Term Fund (G)
IDFC Dynamic Bond Fund (G)
Franklin India Prima Fund
ICICI Pru Equity - Arbitrage Fund (G)
Total
Return %
Type
D
D
E
E
3yrs Wtg%
42
21
15
25
8
20
20
20
20
20
100%
1yr
12
9
10
30
10
3yrs Wtg%
10
8
8
21
8
20
20
20
20
20
100%
Franklin India Short Term Income (G) D
E
HE
D
Data as on 28th November 2014
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Monthly Markets Newsletter
Game Changer
Investment Solutions
OrionLite Trading Terminal
December 2014
7

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