MOSt
Advisor
Monthly Markets Newsletter
January 2018
In This Issue
•
Market Outlook for the month
•
Investment Ideas
• Equity Market Outlook
• Derivatives & Commodities Market Outlook
• Model Advisory Portfolios
• Recommended Funds
Key Highlights
Equities ended 2017 at Highs
Key Events to watch out - Corporate Earning and Union Budget FY19
Outlook for 2018
Dear Investor,
Market in 2017:
Equity market had a spectacular year in
2017. Benchmark Index Nifty50 gave a return of 28.6% while
the Nifty Midcap 100 and Nifty Small Cap 100 outperformed
with returns of 47% and 57% respectively. Despite several
Global Market
Index
29-Dec 17
MoM (%)
YoY(%)
Sensex
Nifty
FTSE
Dow
Nasdaq
Hang Sang
34,057
10,531
7,688
24,719
6,903
29,919
2.7
3.0
4.9
1.8
0.4
2.5
27.8
28.6
13.3
25.1
28.2
36.0
geopolitical issues, Global markets too climbed to their record
highs in 2017.
FIIs bought stocks worth INR 50,800 crore while Mutual funds saw a record inflow
of INR 1.17 lakh crore into equities. INR appreciated by 5.5% in 2017, India's Forex
reserve surged to a new lifetime high of US$405bn.
On sectoral indices, Realty gained the most by 112%, MNC 54%, Metals 49%, Bank
41%, Energy 40%, Auto and FMCG 32% each while Pharma was down by 5%.
Several reforms like GST, IBC, RERA, PSU Bank recapitalization plan etc. were
implemented during 2017 and were well received by the market.
Economic Pulse
Key Indicators Current Mth
Pre. Mth
GDP growth slowed to 5.7% in Q1FY18, but recovered later to 6.3% in Q2FY18.
The corporate earnings growth was still elusive, even as there were some signs of
improvement in the Q2FY18 results. 2HFY18 is likely to see better growth on the
back of healthy demand during festive season and low base of last year.
Outlook for 2018:
We expect Equity market to continue to deliver consistent returns
in 2018 as well aided by stronger economic growth and recovery in corporate
earnings. While the scale of returns expected from benchmark indices would be in
the range of 10-15% on the back of a high base and normalization of valuations,
stock specific action is likely to continue in 2018.
All eyes would be on the Union Budget for FY19. We believe that the government
could maintain with its fiscal deficit targets by slowing down on some public spending
and focus on social spending.
On the macro front GDP growth is expected to recover above 7% in CY2018. However,
inflation could remain above 4% due to increase in commodity and food prices.
Some of the themes that we believe should do well in 2018 are Cyclicals like Cement,
Infra, capital goods; GST beneficiaries like jewelry, retail, footwear, building material;
rural recovery sectors like Auto, FMCG, vehicle financing, etc.
Siddhartha Khemka
Vice President- Head - Retail Research
IIP
CPI
10 Year Yield
USD/ INR
Crude ($)
Gold (10 gms)
2.2%
4.88%
7.32%
63.87
66.87
29252
3.8%
3.58%
7.06%
64.46
63.57
29236
Thought for the month
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Monthly Markets Newsletter
Large Cap Investment Ideas,
Mid Cap Investment Ideas
Must Act
January 2018
Investment Ideas
Motherson Sumi
CMP*:
Target:
INR 379
INR 458
√
Motherson Sumi Systems (MSS) is one of the largest auto ancillary companies in India.
It has four divisions namely the wiring harness (15%), polymers (52%), mirrors (28%)
and others components (5%)
√
MSS has evolved as a partner of choice for all most all OEMs in the world, reflecting in
BUY
increasing share of business and market leadership in all the key businesses that it oper-
ates in.
√
We estimate MSS's consolidated revenues/PAT to grow 22%/33.5% CAGR FY17-20E.
RoCE is expected to improve to 21.2% in FY20 from 14.7% in FY17.
√
Sanghi Industries is a Gujarat-based integrated cement company with capacity of 4.1mt,
63MW captive power plant and a port.
√
It plans to increase its capacity from 4.1mt now to 8.2mt over the next 30 months and
enter into new higher-priced markets
√
With improved pricing and positive operating leverage, we expect EBITDA CAGR of 33%
over FY17-20, PAT CAGR of 61% to INR2.63b and RoE to increase by 11pp to 16.8% in
FY20
Sanghi Industries
CMP*:
Target:
INR 140
INR 157
BUY
Dabur India
CMP*:
Target:
INR 350
INR 410
√
Nearly 50% of Dabur's domestic sales comes from rural India - the highest proportion
among FMCG companies - making it an ideal play on rural revival.
√
For 2QFY18 rural sales grew by 11%, faster than its growth in urban sales at 10%.
√
Worries on both the wholesale channel due to GST implementation and rural sales are
receding faster than expected.
BUY
√
Oberoi Realty Ltd. is a Mumbai-focused premium real estate developer. It enjoys EBITDA
margins of >50%.
√
Its residential portfolio comprises 19msf of developable area, providing strong growth and
cash flow visibility over the next 10-12 years.
√
It has a strong balance sheet, with ample room for leveraging to buy new land along with
strong brand equity, which helps it to command premium pricing.
Oberoi Realty
CMP*:
Target:
INR 481
INR 580
BUY
*Data as on 29h December 2017.
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Monthly Markets Newsletter
Equity Market Outlook
Markets & Our Recommendations
January 2018
Equity Market Outlook
Technical Outlook
√
Nifty index had a volatile month as it oscillated in a broader range of 10033 to
USDINR
10552 zones. It witnessed a sharp swing in the mid of the month especially on
Gujrat Election result day. It made a Bullish Candle with long lower shadow indi-
cates that decline is being bought in the market. It engulfed the price movement
of November month and closed higher above 10500 zones.
√
It started the month on negative note and fell to 10033 marks but witnessed
strong recovery from lows. In the second last week of the Month it gave a breakout
from its falling Wedge pattern above 10350 zones and hit a new life time high of
10552 mark.
√
The pattern of Higher Tops - Higher bottom still continues to hold in Nifty as
Nifty Weekly
month on month basis supports are gradually shifting higher. It surpassed previ-
ous month high of 10490 and now requires a hold above 10500-10550 zones to
extend its positive momentum.
√
In the month of December, market volatility spiked due to Macro and Micro
economic factors including US FOMC meet, Gujrat Election, RBI Policy and India's
WPI, Trade Balance & Economy Survey.
√
Most of the sectorial indices performed in the last Month while Bank Nifty was
the laggards comparatively. Major buying interest was seen in Metal, Auto, IT,
Media, Pharma and FMCG stocks while marginal buying interest was seen in
Nifty Daily
Banking and Energy sector stocks. Metal sector was a major gainer and most of
the stocks from this sector did well with positivity from its underlying.
√
Nifty made a new life high of 10552 in December series and closed with the gains
of 2.46%. Option activity for January series suggests 10300 as a major support
with fresh Put writing activities while 10700 could emerge as an immediate hurdle
depicted by second highest Call OI concentration. PCR OI of Nifty moved up with
decline in Volatility which suggests overall bullish bias of the market.
Strategy-
Strategy
Overall trend is positive as decline is being bought but requires a
decisive hold above 10500-10550 zones to extend the rally towards 10700 and
higher levels while on declines 10350 then 10200 are likely to act as a support.
Sectoral Highlights
Sector
Auto
IT
Oil & Gas
Our Views
Positive
Positive
Negative
Top Pick
Tata Motors
Tech Mahindra
Hindustan Petroleum
MBP / MSP
Buy / 435
Buy / 513
Sell / 400
TGT / SL
460 / 425
540 / 495
370 / 415
Note: #Technical view for 1 month perspective
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√
MOSt
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Monthly Markets Newsletter
Derivatives Market Outlook,
Commodities Market Outlook
Markets & Our Recommendations
January 2018
Derivatives Market Outlook
SECTOR OI
NIFTY - RATIO BULL CALL SPREAD
Nifty witnessed rollover of 73.19% compared to last Month Average of 63.28%. Index
closed positive with the gains of 2.46% on expiry to expiry basis. Bank Nifty witnessed
rollover of 74.70% V/s last month Average of 55.62%. January series started with
Open Interest of 23.94mn shares compared to 17.83mn shares seen at the start of
December series. Nifty had a volatile series as it fell near to 10000 zones but then
recovered sharply from lows and made a new life time high of 10552 in December
series. Rollover are better that its last three month average but roll cost is slightly
lower which indicates that longs are carrying their bet to the next series but
aggression of longs are missing. Overall long built up were seen in Metal, Auto,
Pharma and FMCG stocks.
BUY 1 LOT OF NIFTY 10500 CALL @ 106
SELL 2 LOT OF NIFTY 10700 CALL @ 34
PREMIUM PAID : 38 POINTS
SL : 30 POINTS
TARGET : 100 POINTS
√
√
√
√
√
Major trend is positive and recent decline could attract buying
interest
It has immediate support at 10350 and maximum Put OI is at
10300 strike
Fresh Put writing at lower strikes suggests that index may hold its
support
Sustained Call writing at 10600 and 10700 could restrict its upside
momentum
Thus, a positive to range bound, Ratio Bull Call Spread is recom-
mended
√
√
√
√
√
√
Auto: Long in Tatamotors , Ashokley and Tvsmotor while shorts in Eicher Motor
Cement: Long in India Cement
Banks : Short in SBIN, Unionbank, Can Bank, PNB and BOB
Metal: Long in Hindalco, NMDC and VEDL
OIL&Gas: Long in IGL and Gail, Short in HPCL
IT: Long in Hexaware, KPIT, Techm and Tataelexsi
Commodities Market Outlook
Crude oil
√
Crude oil prices had roller-coaster ride in 2017 as the first five months saw a sharp decline in prices while the last four months saw a spectacular
rally. On the whole, WTI prices gained nearly 12% last year as the OPEC production cuts started to rebalance markets by slowing supply
√
The reduction of OPEC supply has made prices more sensitive to any supply shocks and that was evident in December. Prices saw a sharp jump
after an unexpected shutdown at North Sea's most important oil pipeline. The pipeline system shifts almost 40% of UK North Sea oil and gas
production, carrying around 450,000 barrels a day of Forties crude. The second disruption came from Libya where militants blew up a pipeline
and impacted nearly 70,000 bpd of oil production.
√
The OPEC's commitment to supply cuts this year coupled with robust demand has led to a drawdown in inventories globally and has resulted
in tightening market balances. With the extension of the deal, effectively, oil supply amounting to 1.8 million bpd will stay off markets in 2018.
The fact that Libya and Nigeria have informally agreed to cap output at 2017 highs will provide additional boost to prices over medium term
√
Considering that OPEC cuts will last for the entire year and demand is set to remain strong, the trend for oil prices should be up. The growth
in US shale will be the primary headwind and keep excessive price rallies in check. A demand shock or OPEC unity failing will be tail-risks.
4
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MOSt
Advisor
Monthly Markets Newsletter
MOSt Multi Cap
For Whom :
Investment Duration :
Risk Profile :
Scrip
HDFC Bank
Bajaj Auto Limited
HDFC Standard Life
Yes Bank Ltd
Zee Ent.
Piramal Enterprises
CG Consumer Elec
PC Jeweller Limited
Havells
Capital First
Can Fin Homes Ltd
Granules India
Sterling Tools Ltd
Nilkamal Limited
Total
*Data as on 29th December 2017.
MOSt Multi Cap , MOSt Velocity
Build a Portfolio
January 2018
Long Term Investors
One year and above
Moderate Investors
Wtg. Sectoral Allocation
10
10
5
10
10
10
5
5
5
5
5
5
5
5
5
100
In
: Havells, Nilkamal
We are recommending a MULTI-CAP approach with the
following characteristics:
√
Corpus requirement of INR 10 Lakhs
√
40-50% in Large-cap and 50-60% 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
1872
3334
386
315
582
2867
276
457
562
693
473
137
433
1837
Ramco Cements Ltd 786
Out : Shriram City Union Finance
MOSt Velocity
For Whom :
Investment Duration :
Risk Profile :
Scrip
Tata Motors Ltd
RBL Bank Ltd
Shriram Transport
Federal Bank Ltd
IOC
Reliance Ind.
Larsen & Toubro
Eicher Motors
Maruti Suzuki
Cash
Total
*Data as on 29th December 2017.
Medium Term Investors
Few months horizon
Moderate Investors
Wtg. Sectoral Allocation
10
10
10
10
10
10
10
10
5
5
10
100
In
30%
20%
10%
Sum of wtg
Investment characteristics
√
Corpus requirement of INR 10 Lakhs
√
Investment Rationale based on TechnoFunda
√
Maximum stocks open : 10
√
Cash holding based on market direction call. Cash to be deployed
sec
CMP
432
510
1481
109
389
921
1258
30341
9730
10%
20%
Automobiles
Capital Goods
Cash
Financial
10%
Oil & Gas
Textile
in case of sharp market falls
√
10% in a particular Stock and 30% (max) in a Sector
Indo Count Industries 124
: Shriram Transport, Larsen&Toubro
Indo Count Industries
Out : N.A.
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MOSt PMS - Model Portfolio
Managed Funds
January 2018
MOSt PMS
Performance since inception
√
LargeCap PMS:-
VALUE STRATEGY- An amount of 1cr. Invested in March 2003 is worth INR 26.18 crore (compounded return of 24.72%)
√
MidCap PMS:-
ASK IEP STRATEGY- Amount of 1 cr. Invested in January 2010 is worth INR 4.71 crore (compounded return of 21.6%)
√
MidCap PMS:-
NTDOP STRATEGY- Amount of 1 cr. Invested in December 2007 is worth INR 6.08 crore (compounded return of 19.62%)
√
Small & Midcap PMS-
IOP STRATEGY- Amount of 1 cr. Invested in February 2010 is worth INR 3.97 crore (compounded return of 19.13%)
Latest Performance of all OUR PMS (Portfolio Management Services) strategies. (As on 31st December, 2017)
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Investment Product
Motilal Oswal Mutual Fund
January 2018
Motilal Oswal Mutual Fund 3 year track record
All our MOAMC mutual funds have completed more than three years. Please find below performance update of all of them.
MOSt Focused 25 Fund
Performance Update
SIP Returns
MOSt Focused Midcap 30 Fund
Performance Update
SIP Returns
MOSt Focused Multicap 35 Fund
Performance Update
SIP Returns
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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.: Motilal Oswal Securities Ltd. (MOSL): INZ000158836 (BSE/NSE/MSE); 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 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