Market Outlook
January 25, 2018
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are likely to open flat tracking global indices and SGX Nifty.
BSE Sensex
0.1
22
36,162
U.S. stocks retreated from record territory Wednesday as technology stocks came
Nifty
0.0
2
11,086
under pressure. The NASDAQ and the S&P 500 pulled back into negative territory,
Mid Cap
(0.6)
(103)
17,976
the Dow reached a new record closing high. The Dow rose 0.2% to end at 26,252,
Small Cap
(0.9)
(176)
19,475
while the NASDAQ slid 0.6% to close at 7,415 and the S&P 500 edged down 0.1%
Bankex
0.0
0
31,118
to 2,838.
U.K. stocks slumped on Wednesday; the selling pressure was high in big
Global Indices
Chg (%)
(Pts)
(Close)
multinationals stock as a rally in the pound spooked investors out of companies that
Dow Jones
41 26,252
41
generate most of their revenue abroad. The FTSE 100 dropped 1.1% to end at
7,643.
Nasdaq
(45)
7,415
(45)
FTSE
(88)
7,643
(88)
On domestic front, Indian indices traded in small range on Wednesday, selling
Nikkei
(0.8)
(183)
23,941
pressure in telecom and metal stock along with January expiry due on Thursday kept
market directionless. The Sensex closed higher by 0.06% to close at 36,162, while
Hang Seng
0.1
28
32,959
the Nifty index inched up 0.02% to finish at 11,086.
Shanghai Com
0.4
13
3,559
News Analysis
Advances / Declines
BSE
NSE
Government finally lays out a detailed roadmap for PSU banks
Advances
985
542
Detailed analysis on Pg2
Declines
1,939
1,249
Unchanged
136
65
Investor’s Ready Reckoner
Key Domestic & Global Indicators
Volumes (` Cr)
Stock Watch: Latest investment recommendations on 150+ stocks
BSE
6,102
Refer Pg5 onwards
NSE
42,327
Top Picks
CMP
Target
Upside
Company
Sector
Rating
Net Inflows (` Cr)
Net
Mtd
Ytd
(`)
(`)
(%)
Blue Star
Capital Goods Accumulate
764
867
13.5
FII
1,544
7,867
7,867
Dewan Housing Finance
Financials
Buy
578
712
23.3
*MFs
168
4,412
4,412
Asian Granito
Other
Accumulate
590
651
10.4
Navkar Corporation
Other
Buy
195
265
35.6
Top Gainers
Price (`)
Chg (%)
KEI Industries
Capital Goods Accumulate
399
436
9.3
More Top Picks on Pg4
Ltts
1,217
20.0
Niittech
862
10.0
Key Upcoming Events
Iifl
742
8.0
Previous
Consensus
Date
Region
Event Description
Reading
Expectations
Hexaware
390
7.5
Jan25
US
Initial Jobless claims
220.00
235.00
Amarajabat
876
6.7
Jan25
UK
GDP (YoY)
1.70
1.40
Jan25
US
New home sales
733.00
675.00
Top Losers
Price (`)
Chg (%)
Jan26
Euro Zone ECB announces interest rates
-
-
Jan26
US
GDP Qoq (Annualised)
3.20
3.00
Radico
380
(8.0)
More Events on Pg7
Bhartiartl
459
(6.5)
Deltacorp
364
(6.2)
Dhfl
578
(5.9)
Crompton
250
(5.8)
As on January 24, 2018
Market Outlook
January 25, 2018
News Analysis
Government finally lays out a detailed roadmap for PSU banks
The `.2.11 trillion bank recap announcement was, essentially, a trailer with the
government laying out the complete road map for PSU banks in India. The new
pan has laid out rigorous guidelines for banks to be eligible for recapitalization
funds. The government has allocated
`88,139cr for bank recapitalization
(predominantly through recap bonds) of which `52,311cr will be allocated to 11
PSU banks that are currently under Prompt Corrective Action (PCA). Banks under
PCA are those with very high NPAS and low levels of capital adequacy.
Among the non-PCA banks, SBI, PNB, BOB, Canara Bank and Union Bank will be
the major recipients of recap funds. Among the PCA banks, IDBI Bank, Bank of
India, UCO Bank, Central Bank and IOB will be the major recipients. The
government has also given a tacit assurance that not a single state run bank would
be allowed to fail. As part of the recap deal banks will also have to identify non-
core areas for hiving off, as well as overseas branches to be shut down. The big
takeaway is that the recapitalization package will actually create `500,000cr of
incremental lending capacity, which can catalyze the revival of the capital
investment cycle in India.
The details of the plan were outlined by Rajeev Kumar, Secretary, Department of
Financial Services, government of India.
Economic and Political News
DIPP notifies foreign direct investment relaxation in several sectors
`800-bn recap bonds won't affect FY18 fiscal deficit target: FinMin
Trade remains sore point between India, ASEAN
Corporate News
Bharat Electronics to consider buyback proposal on Jan. 30
Phillips Carbon to consider raising funds on Jan. 31.
Majesco unit wins contract from Reliance Nippon Life Insurance.
Market Outlook
January 25, 2018
Quarterly Bloomberg Brokers Consensus Estimate
Maruti Ltd - Jan 25, 2018
Particulars ( ` cr)
3QFY18E
3QFY17
y-o-y (%)
2QFY18
q-o-q (%)
Sales
19,240
16,888
13.9
21,768
(11.6)
EBIDTA
2,979
2,488
19.8
3,677
(18.9)
%
15.5
14.7
16.9
PAT
2,006
1,744
15.1
2,484
(19.2)
Dr. Reddy - Jan 25, 2018
Particulars ( ` cr)
3QFY18E
3QFY17
y-o-y (%)
2QFY18
q-o-q (%)
Sales
3,688
3,723
(0.9)
3,559
3.5
EBIDTA
691
864
(20.1)
669
3.3
%
18.7
23.2
18.8
PAT
337
492
(31.5)
305
10.5
LIC Housing Finance - Jan 25, 2018
Particulars ( ` cr)
3QFY18E
3QFY17
y-o-y (%)
2QFY18
q-o-q (%)
PAT
527
499
5.6
489
7.8
Market Outlook
January 25, 2018
Top Picks
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Strong growth in domestic business due to its
leade`hip in acute therapeutic segment. Alkem expects
Alkem Laboratories
26,297
2,199
2,441
11.0
to launch more products in USA, which bodes for its
international business.
We expect the company would report strong
Asian Granito
1,774
590
651
10.4
profitability owing to better product mix, higher B2C
sales and amalgamation synergy.
Favorable outlook for the AC industry to augur well for
Cooling products business which is out pacing the
Blue Star
7,328
764
867
13.5
market growth. EMPPAC division's profitability to
improve once operating environment turns around.
With a focus on the low and medium income (LMI)
consumer segment, the company has increased its
Dewan Housing Finance
18,119
578
712
23.3
presence in tier-II & III cities where the growth
opportunity is immense.
Loan growth is likely to pick up after a sluggish FY17.
Lower credit cost will help in strong bottom-line
Karur Vysya Bank
8,300
114
160
40.0
growth. Increasing share of CASA will help in NIM
improvement.
High order book execution in EPC segment, rising B2C
KEI Industries
3,126
399
436
9.3
sales and higher exports to boost the revenues and
profitability
Expected to benefit from the lower capex requirement
Music Broadcast
2,226
390
475
21.7
and 15 year long radio broadcast licensing.
Massive capacity expansion along with rail advantage
Navkar Corporation
2,941
195
265
35.6
at ICD as well CFS augur well for the company
Strong brands and distribution network would boost
Siyaram Silk Mills
3,361
717
851
18.7
growth going ahead. Stock currently trades at an
inexpensive valuation.
Market leadership in Hindi news genre and no. 2
viewership ranking in English news genre, exit from the
TV Today Network
2,702
453
500
10.4
radio business, and anticipated growth in ad spends
by corporate to benefit the stock.
After GST, the company is expected to see higher
volumes along with improving product mix. The
Maruti Suzuki
2,84,794
9,428
10,619
12.6
Gujarat plant will also enable higher operating
leverage which will be margin accretive.
We expect loan book to grow at 24.3% over next two
GIC Housing
2,403
446
655
46.8
year; change in borrowing mix will help in NIM
improvement
We expect CPIL to report net Revenue/PAT CAGR of
~17%/16% over FY2017-20E mainly due to healthy
7,498
338
400
18.5
growth in plywood & lamination business, forayed into
Century Plyboards India
MDF & Particle boards on back of strong brand &
distribution network.
We expect sales/PAT to grow at 13.5%/20% over next
LT Foods
2,879
90
128
42.2
two years on the back of strong distribution network &
addition of new products in portfolio.
We expect sales/PAT to grow at 13%/16% over next
two years on the back of strong healthy demand in
Ruchira Papers
429
191
244
27.4
writing & printing paper and Kraft paper. Further,
China had banned making paper from waste pulp
which would benefit Indian paper companies.
We expect financialisation of savings and increasing
Aditya Birla Capital
39781
176
230
30.6
penetration in Insurance & Mutual fund would ensure
steady growth.
Source: Company, Angel Research
Market Outlook
January 25, 2018
Fundamental Call
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
CCL is likely to maintain the strong growth trajectory
CCL Products
3,982
299
360
20.3
over FY18-20 backed by capacity expansion and new
geographical foray
We forecast Nilkamal to report top-line CAGR of ~9%
to `2,635cr over FY17-20E on the back of healthy
Nilkamal
2,911
1,951
2,178
11.7
demand growth in plastic division. On the bottom-line
front, we estimate ~10% CAGR to `162cr owing to
improvement in volumes.
We expect sales/PAT to grow at 9%/14% over next two
years on the back of healthy demand growth in
Shreyans Industries
266
193
247
28.3
printing. Further, China had banned making paper
from waste pulp which would benefit Indian paper
companies.
The prism has diversified exposure in the different
segment such as Cement, Tile & ready mix concrete.
Prism Cement
6,919
137
160
16.4
Thus we believe, PCL is in the right place to capture
ongoing government spending on affordable housing
and infrastructure projects.
Source: Company, Angel Research
Market Outlook
January 25, 2018
Key Upcoming Events
Result Calendar
Date
Company
January 25, 2018
United Phosphorus, Maruti, LIC Housing Fin., Jindal Steel, Nilkamal, Dr Reddy's, Indoco Remedies
January 27, 2018
Shriram Trans., Persistent, Divi's Lab.
Source: Bloomberg, Angel Research
Global economic events release calendar
Bloomberg Data
Date
Time
Country
Event Description
Unit
Period
Last Reported
Estimated
Jan 25, 2018
7:00 PMUS
Initial Jobless claims
Thousands
Jan 20
220.00
235.00
3:00 PMUK
GDP (YoY)
% Change
4Q A
1.70
1.40
8:30 PMUS
New home sales
Thousands
Dec
733.00
675.00
Jan 26, 2018
6:15 PMEuro Zone ECB announces interest rates
%
Jan 25
-
-
7:00 PMUS
GDP Qoq (Annualised)
% Change
4Q A
3.20
3.00
Jan 30, 2018
3:30 PMEuro Zone Euro-Zone Consumer Confidence
Value
Jan F
1.30
8:30 PMUS
Consumer Confidence
S.A./ 1985=100
Jan
122.10
123.10
3:30 PMEuro Zone Euro-Zone GDP s.a. (QoQ)
% Change
4Q A
0.70
Jan 31, 2018
2:25 PMGermany Unemployment change (000's)
Thousands
Jan
(29.00)
6:30 AMChina
PMI Manufacturing
Value
Jan
51.60
51.50
Feb 01, 2018
3:00 PMUK
PMI Manufacturing
Value
Jan
56.30
12:30 AMUS
FOMC rate decision
%
Jan 31
1.50
1.50
Feb 02, 2018
7:00 PMUS
Change in Nonfarm payrolls
Thousands
Jan
148.00
180.00
2:30 PMIndia
RBI Reverse Repo rate
%
Feb 7
5.75
Feb 07, 2018
7:00 PMUS
Unnemployment rate
%
Jan
4.10
4.10
Source: Bloomberg, Angel Research
Market Outlook
January 25, 2018
Macro watch
Exhibit 1: Quarterly GDP trends
Exhibit 2: IIP trends
(%)
(%)
10.0
9.0
8.4
9.1
9.0
8.0
8.0
7.9
7.0
7.6
7.5
8.0
7.3
7.2
7.0
6.0
4.8
7.0
6.3
5.0
4.4
4.1
6.1
6.1
5.7
3.5
3.2
6.0
4.0
2.9
3.0
2.0
5.0
2.0
1.2
1.0
4.0
1.0
-
3.0
(1.0)
(0.3)
Source: CSO, Angel Research
Source: MOSPI, Angel Research
Exhibit 3: Monthly CPI inflation trends
Exhibit 4: Manufacturing and services PMI
56.0
Mfg. PMI
Services PMI
(%)
6.0
54.0
5.2
4.9
52.0
5.0
3.9
50.0
3.7
3.6
4.0
3.3
3.3
3.2
3.0
48.0
3.0
2.4
2.2
46.0
2.0
1.5
44.0
1.0
42.0
40.0
-
Source: Market, Angel Research; Note: Level above 50 indicates expansion
Source: MOSPI, Angel Research
Exhibit 5: Exports and imports growth trends
Exhibit 6: Key policy rates
(%)
Exports yoy growth
Imports yoy growth
(%)
Repo rate
Reverse Repo rate
CRR
60.0
6.50
50.0
6.00
40.0
5.50
30.0
5.00
20.0
4.50
10.0
4.00
0.0
3.50
(10.0)
3.00
Source: Bloomberg, Angel Research
Source: RBI, Angel Research
Market Outlook
January 25, 2018
Global watch
Exhibit 1: Latest quarterly GDP Growth (%, yoy) across select developing and developed countries
(%)
8.0
6.9
7.0
5.8
6.0
5.3
5.0
5.0
1.1
3.7
4.0
2.5
3.0
2.2
1.8
2.0
1.5
1.4
0.8
1.0
0.3
-
Source: Bloomberg, Angel Research
Exhibit 2: 2017 GDP Growth projection by IMF (%, yoy) across select developing and developed countries
(%)
6.7
6.8
7.0
6.0
5.4
5.2
5.0
3.7
4.0
3.0
1.8
2.2
2.0
1.7
1.6
2.0
0.7
1.5
0.7
1.0
-
Source: IMF, Angel Research
Exhibit 3: One year forward P-E ratio across select developing and developed countries
(x)
25.0
20.0
15.0
10.0
5.0
-
Source: IMF, Angel Research
Market Outlook
January 25, 2018
Exhibit 4: Relative performance of indices across globe
Returns (%)
Country
Name of index
Closing price
1M
3M
1YR
Brazil
Bovespa
83,680
11.0
5.9
26.4
Russia
Micex
2,307
9.0
10.7
5.4
India
Nifty
11,086
5.7
7.7
32.8
China
Shanghai Composite
3,559
8.0
4.8
14.7
South Africa
Top 40
54,576
6.4
5.6
18.0
Mexico
Mexbol
50,747
3.9
0.6
6.7
Indonesia
LQ45
1,124
9.4
14.2
24.9
Malaysia
KLCI
1,837
4.9
5.5
10.7
Thailand
SET 50
1,196
6.3
9.4
22.0
USA
Dow Jones
26,252
5.9
13.2
31.6
UK
FTSE
7,643
1.6
1.6
6.7
Japan
Nikkei
23,941
4.7
12.1
26.7
Germany
DAX
13,415
3.8
4.4
14.9
France
CAC
5,495
3.3
2.7
15.6
Source: Bloomberg, Angel Research p68in4
