MOSt
Advisor
Monthly Markets Newsletter
October 2017
In This Issue
•
Market Outlook for the month
•
Investment Ideas
• Equity Market Outlook
• Derivatives & Commodities Market Outlook
• Model Advisory Portfolios
• Recommended Funds
• 4th Bi-Monthly Monetary Policy
Key Highlights
Bulls worried over Economic recovery amid spike in volatility
Market got stuck in a broader trading range with absence of follow
up buying
Dear Investor,
Market in September 2017:
The benchmark Nifty index
registered a new high of 10178 in the mid of month but failed
to hold its gains and witnessed strong sell-off from higher levels.
It tumbled down after hitting a fresh high and fell near to its
YoY(%)
Global Market
Index
30-Sep 17
MoM (%)
Sensex
Nifty
FTSE 100
Dow
Nasdaq
Hang Sang
31,284
9,789
7,373
22,405
6,496
27,554
-1.4
-1.3
-0.8
2.1
1.0
-1.5
12.3
13.7
6.9
22.4
22.3
18.3
August lows and below its 50 DEMA. Nifty index has been
making higher highs - higher lows from last nine months and if this formation is
negated then only medium term trend could get in bears grip.
We have the RBI policy in the first week of the month and if any decision is taken
to cut key interest rates then it may provide much needed boost to the markets.
The second quarter/half yearly results season will begin so again it's going to be a
crucial month for traders and investors alike. Broader market witnessed selling pressure
in the last month but sectors like Metals, Auto, NBFC and Pharma were finding buying
interest and expecting selective stocks of these sectors to continue to perform in line.
FIIs sold aggressively in equity markets with record outflow of INR 23969.97 Cr. for
the September month whereas DIIs bought worth INR 21025.53 Cr.
September expiry day 28th September set new records in the Indian Stock market
with FIIs outflow saw the largest single day selling worth 5328 crores and Market's
turnover crossed 15 Lac Crores for the first time ever.
INR has depreciated from its low of 63.80 and headed towards 65.98 to test its five
months high levels. Sudden jump in USD INR has given a short term concern to
Indian Equity market.
Outlook October 2017:
Nifty index got stuck in a broader range of 9685 to 10178
zones from last twelve weeks. However decline is being bought in the market, but
absence of follow up buying is keeping the upside restricted. It has rebounded from
support zones so an extended bounce could be seen but it requires a decisive hold
above 9980-10000 to negate the short term negativity to hit the new life time high
territory of 10178-10250 zones to cheer the festival season. While on the downside
support is seen at 9777 then 9685 to hold the major up trend.
Chandan Taparia
Economic Pulse
Key Indicators Current Mth
Pre. Mth
IIP
CPI
10 Year Yield
USD/ INR
Crude ($)
Gold (10 gms)
1.2%
3.36%
6.66%
65.28
57.54
29692
-0.1%
2.36%
6.52%
63.9
52.38
29456
Thought for the month
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Monthly Markets Newsletter
Large Cap Investment Ideas,
Mid Cap Investment Ideas
Must Act
October 2017
Investment Ideas
PNB Housing Finance
CMP*:
Target:
INR 1,482
INR 1,675
√
PNB Housing Finance (PNBHF) is a classic turnaround story. While the company was
incorporated in 1988 as a wholly-owned subsidiary of PNB the turnaround started two
decades later in FY10.
√
Over FY10-15, the company invested in technology, re-jigged its operations and pro-
cesses and diversified its loan book. Consequently, over FY12-17, PNBHF's loan book
grew from INR40b to INR400b+, and PAT increased from INR0.8b to INR5.2b.
BUY
√
PNBHF's asset quality has been one of the best among peers, with a GNPL ratio (2year
lag basis) of 0.5% as of FY17. BUY with TP of 1675
√
Piramal Enterprises (PIEL) has carved a niche for itself in wholesale lending, and is now
one of the dominant players in most of the segments in which it operates.
√
We expect a 40% loan CAGR in the NBFC business. The Pharma business has demon-
strated strong growth and improvement in profitability in recent years.
Piramal Enterprise
CMP*:
Target:
INR 2,622
INR 3,266
BUY
√
PIEL has the distinction of being one of the few companies in India to generate 25%+
book value CAGR over past 25+ years.
√
We use SOTP to arrive at FY19 based target price of INR3,266.
Hindalco
CMP*:
Target:
INR 240
INR 310
√
Hindalco is the largest aluminum producer in India with total smelting capacity of
1.32mtpa.
√
We are bullish on the stock due to (a) strong business fundamentals, (b) free cash flow
generation, and (c) the managements' focus on deleveraging, high IRR projects, and
attractively-valued inorganic opportunities so as to deliver stakeholder's value.
BUY
√
We recommend BUY, with a target price of INR310/share.
√
Founded in 2012 via management buyout of an existing NBFC, Capital First (CAFL) is a
non-deposit-taking NBFC focusing largely on retail lending.
√
CAFL is a niche play in the retail NBFC space with a diversified loan portfolio and high
growth potential.
√
We expect significant margin improvement and stable asset quality to drive RoA/RoE
improvement from 1.6%/12% in FY17 to 2%/17% in FY20. We recommend Buy with a TP
of INR925 (3.0x FY19E BVPS).
Capital First
CMP*:
Target:
INR 734
INR 925
BUY
Data as on 30th September 2017.
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Equity Market Outlook
Markets & Our Recommendations
October 2017
Equity Market Outlook
Technical Outlook
√
Nifty witnessed a volatile move in the month of September 2017. Index traded
higher during the first half of the month but failed to hold its gains and witnessed
strong sell-off which pushed the index below its 50 DSMA during the second half
of the month. Nifty made a “Spinning Top” pattern for the month; which shows
a bit of uncertainty and an absence of follow-up buying at higher levels in the
index. Nifty is near to its lower end of the trading range as seen in last two
months. It could very well be the most opportune buying moment as the possi-
bility of the low of 9685 holding out is highly probable. Broader market wit-
nessed selling pressure in the month of September but sector like Metals, Auto,
NBFC and Pharma were finding buying interest and expecting selective stocks of
these sectors to continue to perform in line. Nifty has to move above psychologi-
cal 10,000 zones to get the smooth ride to place itself for the new highs else
short term weakness could persist with stock specific activities.
√
Nifty made a new life time high of 10178 but failed to hold its gains in the later
part of the series and corrected sharply towards 9687. It failed to continue its
positive momentum in the September series and closed with the loss of 1.50%
on expiry to expiry basis. Option activity for September series suggests 9700 as an
immediate support with maximum Put OI while 10000 could emerge as a hurdle
depicted by maximum OI concentration. PCR OI fell down from 1.57 to 1 in last
two weeks of the months and at the same time index also drifted sharply as it
turned from its overbought zones. Rise in volatility with decline in PCR OI sug-
gests that bears are keeping the tight grip on the market.
Strategy-
Strategy
Nifty index managed to rebound from its major support of 9685 after
the sharp decline of around 500 points. Now Nifty has to hold above 9777
zones to witness a bounce back move towards 9950 and 10050 zones. A hold
below 9685 it could start a fresh decline. Short term trend is under the pressure
so traders are suggested to trade cautiously till Nifty stabilises above psychologi-
cally important 10000 zones.
Nifty Daily
Nifty Weekly
USDINR
Sectoral Highlights
Sector
Auto
NBFC
Capital Goods
Our Views
Positive
Positive
Neutral
Top Pick
Maruti
L&T Finance Holdings
Voltas
MBP / MSP
Buy / 7968
Buy / 195
Sell / 495
SL / TGT
7690 / 8400
189 / 209
512 / 460
Note: #Technical view for 1 month perspective
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√
MOSt
Advisor
Monthly Markets Newsletter
Derivatives Market Outlook,
Commodities Market Outlook
Markets & Our Recommendations
October 2017
Derivatives Market Outlook
SECTOR OI
NIFTY - HEDGE - BEAR PUT SPREAD
Nifty witnessed rollover of 69.87% V/s 3 Months Average of 66.44%. Index closed
negative with the loss of 1.50% on expiry to expiry basis. Bank Nifty witnessed
rollover of 64.64% V/s 3 Month Average of 71%.
√
Auto: Long built-up in Ashokley, Bajaj Auto, Tvsmotor while shorts in Amar Raja
Battery and M&M
India Cement
BUY NIFTY 9800 PUT @ 120;
SELL NIFTY 9600 PUT @ 60
MAX RISK
MAX REWARD
: 60 POINTS (INR 4500/-)
: 140 POINTS (INR 10500/-)
√
√
√
√
Index failed to hold 9950 zones and corrected sharply towards
9685
Highest Call OI congestion is seen at 10000 followed by 9900
strikes which is restricting its upside movement
Short term trend is finding pressure so a hedged strategy can be
taken for protection
Thus a hedge strategy Bear Put Spread is recommended
√
Cement: Short built up in ACC, Grasim and Ambujacem while long liquidation in
√
√
√
√
Banks : Long in Kotak Bank, Axis Bank while Shorts in other most of the PSU Banks
Metal: Long built in National Alum and Tatasteel
Pharma: Long built up in Sunpharma while short covering in Divislab and DrReddy
NBFC: Longs in DHFL, Bajaj Finance and Bharat Finance while shorts in Equitas,
Lichsgfin and M&MFin
√
OIL&Gas: Long addition in OIL India, Gail, IGL while huge short covering in ONGC
Commodities Market Outlook
Gold
√
Gold whipsawed sharply last month with prices crossing $1350 at the start of the month but the rally fizzled out towards the end as the dollar
bounced back. Geo-political tensions peaked early in the month which led to sharp jump in safe haven buying but that faded out too as
tensions eased.
√
Gold's rally this year has been based on two major factors. Political dysfunction in the US and the geo-political drama in the Korean peninsula.
While these factors would continue to provide a floor to prices, gold would remain vulnerable as these factors wax and wane.
√
The factors that may push up gold remain uncertain and difficult to predict whereas the headwinds for gold are relatively visible. Rate hikes by
the Fed will remain a detriment to prices and emergence of inflation could hasten the pace of hikes. The reflation trade could emerge once
again if the tax reforms proposed by Donald Trump go ahead. Secondly, global growth remains robust with economies of US and Europe firmly
in expansion mode. This takes away the allure of gold given that other risk assets may continue to perform well under that scenario.
√
Given this, the possibility of price correction in the short term is higher as downside risks are well entrenched while upside risks remain
dependent on unknowns. From a trading perspective, it remains prudent to sell extreme rallies and buy on meaningful dips to protect against
the mentioned uncertainties. A broader consolidation is likely in the short to medium term before we get any decisive triggers.
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Monthly Markets Newsletter
MOSt Multi Cap
For Whom :
Investment Duration :
Risk Profile :
Scrip
Hero Motocorp
Zee Entert.
HDFC Bank
Yes Bank Ltd
Piramal Enterprises
CG Consumer Elec.
Can Fin Homes Ltd
Sterling Tools Ltd
P I Industries Ltd
SRF Ltd
Shriram City Union
Capital First
DHFL
Total
MOSt Multi Cap , MOSt Velocity
Build a Portfolio
October 2017
Long Term Investors
Few months to a year
Moderate Investors
Wtg. Sectoral Allocation
10
10
10
10
10
5
5
5
5
5
5
5
5
5
5
100
Returns
3mth
6mth
12mth
8.4%
12.3%
15.1%
We are recommending a MULTI-CAP approach instead of a
MIDCAP approach. The Multi-cap INVESTMENT will have the
following characteristics:
√
Corpus requirement at INR 10 Lakhs
√
50% in Large-cap and 50% in mid-cap
√
15 companies to invest at maximum, 10 minimum
√
Large-cap stocks are suitable for SIP investments as well
√
Adheres to our QGLP philosophy
CMP
3775
520
1806
350
2622
209
2655
247
741
1541
2061
734
550
MOSt Multicap -0.9% 4.1%
Sensex
BSE 200
1.2%
3.2%
7.2%
7.2%
Ramco Cements Ltd 692
Granules India Limited113
Absolute returns as on 30th September 2017
MOSt Velocity
For Whom :
Investment Duration :
Risk Profile :
Scrip
Tata Motors Ltd
Eicher Motors Ltd
RBL Bank Ltd
Federal Bank Ltd
LIC Housing Finance
UltraTech Cement
Dalmia Bharat Ltd
Jindal Steel & Power
Cash
Total
Investment Norms: INR 10 lakhs (Model Corpus)
Medium Term Investors
Few months horizon
Moderate Investors
Wtg. Sectoral Allocation
10
5
10
10
10
10
10
5
30
100
Returns
Portfolio
BSE 200
3mth
6mth
12mth
1.7%
15.9%
-0.4% -4.0%
3.2%
7.2%
√
Maximum stocks open : 10
√
Target Investment Horizon: 1 Year
√
Cash holding based on market direction call. Cash to be deployed
in case of sharp market falls
√
Occasional Hedging by buying options
√
Investment Rationale on every idea is provided
√
10% in a particular Stock and 30% (max) in a Sector
CMP
402
31213
507
113
627
3854
2569
135
Absolute returns as on 30th September 2017
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MOSt PMS - Model Portfolio
Managed Funds
October 2017
MOSt PMS
Performance since inception
√
LargeCap PMS:-
VALUE STRATEGY- An amount of 1 cr. Invested in March 2003 is worth Rs. 24.69 crore (compounded return of 24.26%)
√
MidCap PMS:-
ASK IEP STRATEGY- Amount of 1 cr. Invested in December 2007 is worth Rs. 5.54 crore (compounded return of 19.39%)
√
MidCap PMS:-
NTDOP STRATEGY- Amount of 1 cr. Invested in December 2007 is worth Rs. 5.53 crore (compounded return of 19.01%)
√
Small & Midcap
PMS- IOP STRATEGY- Amount of 1 cr. Invested in February 2010 is worth Rs. 3.56 crore (compounded return of 18.07%)
Latest Performance of all OUR THREE PMS (Portfolio Management Services) strategies. (As on 30th Sept. 2017)
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Investment Product
4th Bi-Monthly Monetary Policy
October 2017
4th Bi-Monthly Monetary Policy
Monetary Policy update – Rates unchanged
Insights:
With Indian economy facing issue of raising inflation, FII fleeing and rupee tumbling and country’s GDP slipping to 5.7% in June quarter, RBI in
the fourth bi-monthly monetary policy kept the repo rate and CRR unchanged at 6% and 4% respectively, but cut the statutory liquidity ratio (SLR)
requirements by 50 bps to 19.5%. Also the projection of GVA has been revised downward to 6.7% from august 2017 projection of 7.3%.
The decision of MPC is consistent with neutral policy stance with the objective of achieving the medium-term target for consumer price index (CPI)
inflation of 4 per cent.
Current allocations to fixed income could have an overweight into short term/credit accrual funds. Tail end allocations to Dynamic Bond Funds
could be considered as yield back up from current levels. Existing investors should stay put and not rush to exit at current juncture. As we have said
in last policy update we still expect that “rate cut toh bakki hai”.
Scheme Recommendation:-
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within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves
of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or
lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability
arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses,
costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre,
2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id: na@motilaloswal.com, Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231; MSE(F&O):
INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset Management Company Ltd.
(MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal
Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities Products. * Motilal Oswal Real Estate Investment
Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products