Market Outlook
December 18, 2015
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are expected to open negatively tracking the SGX Nifty and most of
BSE Sensex
1.2
309
25,804
its Asian peers.
Nifty
1.2
93
7,844
U.S. markets fell snapping their three day winning streak. The stocks were impacted
Mid Cap
1.6
168
10,911
by dip in the oil prices which are now at a seven year low.
Small Cap
1.7
196
11,559
European shares closed higher after the US Federal Reserve announced its first hike
Bankex
1.0
194
19,102
in almost a decade signaling strengthen in the world’s largest economy. Global
markets reacted positively to the US Fed hike as the uncertainty over the timing of
Global Indices
Chg (%)
(Pts)
(Close)
the rate hike was finally removed.
Dow Jones
(1.4)
(253)
17,496
Indian shares closed in the green amid positive cues from the global markets, as US
Nasdaq
(1.4)
(69)
5,003
Fed’s move to raise interest rates for the first time since 2006 was seen as a sign of
confidence in the world’s biggest economy.
FTSE
0.7
41
6,103
Nikkei
1.6
304
19,354
News & Result Analysis
Hang Seng
0.8
171
21,872
Maruti Suzuki minority shareholders give approval to Suzuki for setting up a
Shanghai Com
1.8
64
3,580
manufacturing plant in Gujarat
RBI announces new rules for calculating base rate
HUL to acquire Indulekha for `330 cr
Advances / Declines
BSE
NSE
Detailed analysis on Pg2
Advances
1,953
832
Declines
759
702
Investor’s Ready Reckoner
Unchanged
202
76
Key Domestic & Global Indicators
Stock Watch: Latest investment recommendations on 150+ stocks
Volumes (` Cr)
Refer P6 onwards
BSE
2,723
Top Picks
NSE
16,999
CMP
Target
Upside
Company
Sector
Rating
(`)
(`)
(%)
Axis Bank
Financials
Buy
435
630
44.6
Net Inflows (` Cr)
Net
Mtd
Ytd
HCL Tech
IT
Buy
860
1,132
31.7
FII
(64)
(3,328)
112,172
ICICI Bank
Financials
Buy
253
354
39.9
MFs
71
1,486
89,879
Ashok Leyland
Automobiles
Buy
89
111
24.4
Larsen & Toubro
Construction
Buy
1,297
1,646
26.9
Top Gainers
Price (`)
Chg (%)
More Top Picks on Pg5
Vakrangee
186
9.6
Key Upcoming Events
Fsl
44
9.5
Previous
Consensus
Date
Region
Event Description
Beml
1,216
8.5
Reading
Expectations
Dec 22
US
Existing home sales
5.36Mn
5.36Mn
Tv18Brdcst
42
6.8
Dec 22
US
3QGDP
2.1%
1.9%
Amtekauto
51
6.7
Dec 23
US
New home sales
495K
500K
Dec 23
UK
3QGDP
2.3%
-
Top Losers
Price (`)
Chg (%)
Pmcfin
1
(9.3)
Pipavavdoc
73
(4.8)
Boschltd
18,326
(2.1)
Abb
1,177
(1.7)
Godrejcp
1,296
(1.7)
As on December 17, 2015
Market Outlook
December 18, 2015
Maruti Suzuki minority shareholders give approval to Suzuki for
setting up a manufacturing plant in Gujarat
Maruti Suzuki India Limited’s (MSIL) minority shareholders have given a go-ahead
to a proposal to develop manufacturing facilities in Gujarat through a 100%
subsidiary owned by parent Suzuki Motor Corporation (SMC). Maruti Suzuki got
89.75% votes in favour of the proposal for a related party transaction with Suzuki
Motor Gujarat. Interestingly only 50% of the minority shareholders participated in
the voting with over 50% shareholders abstained from voting. Effectively, the
ordinary resolution has been passed with requisite majority. Out of 13,22,91,620
shares held by public only 6,58,33,152 participated in the ballot, of which
5,90,84,468 voted in favour of the resolution, whereas 67,48,684 shareholders or
10.25% of participants opposed the resolution.
Maruti Suzuki India Limited had sought approval of the minority shareholders,
pursuant to the Companies Act, 2013 and the Listing Regulations, for a related
party transaction with Suzuki Motor Gujarat Private Limited for entering into:
a) A contract manufacturing agreement for the production and sale of vehicles;
and b) Lease deed for leasing land for purposes of implementing the contract
manufacturing agreement. The Gujarat unit is envisaged to have an installed
capacity of 750,000 units annually.
We fail to understand the logic of the proposed transaction of Suzuki’s 100%
subsidiary setting up a manufacturing unit exclusively for Maruti with an initial
investment of `3,500 cr in the light that Maruti itself has the requisite cash
available. Maruti itself could have set up a manufacturing plant with the proposed
investment through internal accruals. Given this complex arrangement, we
maintain our Neutral stance on the stock.
RBI announces new rules for calculating base rate
The RBI has announced the marginal cost of funds methodology for calculating the
interest rates on advances given by the banks.
Key highlights of the guidelines are as under:
All rupee loans sanctioned and credit limits renewed with effect from.
April 1, 2016 will be priced with reference to the Marginal Cost of Funds
based Lending Rate (MCLR) which will act as an internal benchmark for such
purposes.
Banks will review and publish their MCLR of different maturities every month
on a pre-announced date.
The periodicity of reset shall be one year or lower.
Existing loans and credit limits linked to the Base Rate may continue till
repayment or renewal, as the case may be. Existing borrowers will also have
the option to move to the Marginal Cost of Funds based Lending Rate (MCLR)
linked loan at mutually acceptable terms.
Banks will continue to review and publish Base Rate as hitherto.
The shift of the marginal cost of funds is due to the gap between the base rate cut
announced by RBI which has been 125 basis points for this calendar year whereas
Market Outlook
December 18, 2015
the median base lending rate has declined only by 60 basis points during the
given period.
This scheme will help in making the advances rates charged by the banks more
closely based on prevailing market rates and removing some of the freedom
lenders now possess in order to allow quicker transmission of monetary policy.
The guidelines are also expected to ensure availability of bank credit at interest
rates which are fair to the borrowers as well as the banks.
if we are looking at the different banks in the sector, PSU banks have more loans
linked to base rate. We expect that as a rule if the banks shift to the marginal cost
of funding while the remaining parameters stay unchanged, then every 25 basis
points base rate cut can reduce the yields by around 10 basis points while a
similar number for private banks tends to be somewhere between 3-5 basis points.
In our view, as observed in the past when the base rate methodology was
introduced there was a lot of uncertainty regarding the implications of the same on
the banking industry. However, it has been observed that growth depends on the
competitive market dynamics as well as banks have a leeway in terms of spreads
which they can use to their advantage given the market dynamics.
HUL to acquire Indulekha for `330 cr
In a bid to strengthen its position in the evolving premium natural personal care
segment, consumer goods major Hindustan Unilever Ltd (HUL) has signed an
agreement with Mosons Group to acquire its flagship brand Indulekha for Rs. 330
crore. The deal envisages the acquisition of the trademarks ‘Indulekha’ and
‘Vayodha’, intellectual property, design and knowhow. HUL will pay Mosons
Group Rs.
`300 crore upon closing of the transaction and a deferred
consideration of 10% on the domestic turnover of the brands each year, payable
annually for a five-year period commencing FY18.
The transaction is subject to fulfillment of certain conditions and the parties will
work together to complete this over the next few months. Mosons will continue to
manage the business until the completion of the transaction.
As per the management the acquisition of Indulekha brings a premium brand with
strong credentials around ayurveda that will complement its existing portfolio and
strengthen presence in the hair care category. HUL sees an opportunity in
leveraging Indulekha’s ‘naturals’ and therapeutic positioning.”
Indulekha was first launched in 2009 as a premium ayurvedic hair oil. Over the
years, ‘Indulekha Bringha Oil’ has carved out a niche for itself supported by
endorsements and sustained investments in brand-building. The product was later
relaunched in 2014 with a unique comb like cap (popularly referred to as the
‘Selfie’) that aids direct application of oil on the scalp, an innovation that has
delighted consumers since its introduction.
The brand, with a strong presence across Kerala, Tamil Nadu and Karnataka and
a recent foray into Maharashtra, had a turnover of Rs. 100 crores and an EBITDA
margin of around 30% for the year ending March 2015.
Market Outlook
December 18, 2015
Economic and Political News
India can see some capital outflow post Fed hike: Rangarajan
Govt working on coal allotment procedure for commercial mining
Govt defers plan to impose 2% levy on air tickets from January 1, 2016
Corporate News
Bajaj Electricals to create separate portfolio for online sales
Thomas Cook completes acquisition of Kuoni Travel
USFDA approves Aurobindo's drugs for diarrhoea, allergy
Market Outlook
December 18, 2015
Top Picks ★★★★★
Large Cap
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
To outpace battery industry growth due to better technological
Amara Raja Batteries
14,610
855
1,040
21.6
products leading to market share gains in both the automotive
OEM and replacement segments.
Earnings to grow strongly given the MHCV cyclical upturn.
Ashok Leyland
25,399
89
111
24.4
Focus on exports and LCV's provides additional growth
avenue.
Healthy pace of branch expansion, backed by distribution
Axis Bank
103,560
435
630
44.6
network, will be the driving force for the bank’s retail business
and overall earnings.
The stock is trading at attractive valuations and is factoring all
HCL Tech
121,177
860
1,132
31.7
the bad news.
Strong visibility for a robust 20% earnings trajectory, coupled
HDFC Bank
272,433
1,080
1,262
16.9
with high quality of earnings on account of high quality retail
business and strategic focus on highly rated corporates.
Due to its robust franchise and capital adequacy position, the
bank is well positioned to grow by at least a few percentage
ICICI Bank
147,071
253
354
39.9
points higher than the average industry growth rate from a
structural point of view.
Back on the growth trend, expect a long term growth of 14%
Infosys
254,260
1,107
1,306
18.0
to be a US$20bn in FY2020.
Well positioned to benefit from such expected gradual
recovery in the overall domestic capex cycle, given its presence
Larsen & Toubro
120,765
1,297
1,646
26.9
across various infrastructure segments, its execution
capabilities, and its strong balance sheet.
LICHF continues to grow its retail loan book at a healthy pace
with improvement in asset quality. We expect the company to
LIC Housing Finance
24,479
485
571
17.7
post a healthy loan book which is likely to reflect in a strong
earnings growth.
Source: Company, Angel Research
Mid Cap
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Favourable outlook for the AC industry to augur well for
Cooling products business which is out pacing the market
Blue Star
3,314
368
429
16.4
growth. EMPPAC division's profitability to improve once
operating environment turns around.
Change in business focus towards high-margin chronic &
Ipca labs
9,382
744
900
21.0
lifestyle segments and increasing penetration in Europe and
US
Economic recovery to have favourable impact on advertising &
circulation revenue growth. Further, the acquisition of a radio
Jagran Prakashan
5,152
158
169
7.2
business (Radio City) would also boost the company's revenue
growth.
Strong brand & quality teaching with innovative technologies &
MT Educare
587
147
169
14.6
higher government educational spending to boost growth
Earnings boost on back of stable material prices and
Radico Khaitan
1,500
113
156
38.4
favourable pricing environment. Valuation discount to peers
provides additional comfort
Strong brands and distribution network would boost growth
Siyaram Silk Mills
1,043
1,113
1,354
21.7
going ahead. Stock currently trades at an inexpensive
valuation.
Structural shift in the Lighting industry towards LED lighting will
Surya Roshni
618
141
183
29.8
drive growth.
Source: Company, Angel Research
Market Outlook
December 18, 2015
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited and Metropolitan Stock Exchange of India Limited. It is also registered as a Depository Participant with
CDSL and Portfolio Manager with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Private Limited is
a registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number
INH000000164. Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing
/dealing in securities Market. Angel or its associates including its relatives/analyst do not hold any financial interest/beneficial
ownership of more than 1% in the company covered by Analyst. Angel or its associates/analyst has not received any compensation /
managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. Angel/analyst
has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity
of the company covered by Analyst.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from
or in connection with the use of this information.
Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
