Sharekhan Value Gde Jan 17

January 2017
1 Sharekhan ValueGuide
January 2017 2 Sharekhan ValueGuide
CONTENTS
From Sharekhans Desk EQUITY

The markets havent FUNDAMENTALS
moved an inch in two Stock Update 17 REGULAR FEATURES
years. At the start of Viewpoints 26 Report Card 4
2017, the benchmark Sector Update 28 Earnings Guide I
indices, Nifty and
Sensex, stand at the TECHNICALS DERIVATIVES
same level as at the Nifty 29 View 30
beginning of 2015.
All hopes of a strong ADVISORY DISK DERIVATIVES
revival in the Indian economy and corporate earnings MID Trades 37 Derivatives Ideas 37
leading to a long-term, secular rally in Indian equities
have been belied.
CURRENCY
06
RESEARCH BASED EQUITY PRODUCTS FUNDAMENTALS
USD-INR 31 GBP-INR 31
Market Outlook 07 EUR-INR 31 JPY-INR 31
Top Picks Basket 12
Wealth Creator Portfolio 16
TECHNICALS
USD-INR 32 GBP-INR 32
PMS DESK EUR-INR 32 JPY-INR 32
WealthOptimizer PMS 33
ProPrime - Diversified Equity 34 MUTUAL FIND DESK
ProTech - Index Futures Fund 35 Top MF Picks (equity) 38
ProTech - Trailing Stops 36 Top SIP Fund Picks 39
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mission, or any other use is strictly prohibited. This Document is subject to changes without prior notice. Kindly note that this document is based on technical analysis by studying charts of a stocks price movement and trading volume, as opposed to focusing on a companys
fundamentals and as such, may not match with a report on a companys fundamentals.(Technical specific) This document does not constitute an offer to sell or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Though
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deavour to update the information herein on reasonable basis, SHAREKHAN, its subsidiaries and associated companies, their directors and employees (SHAREKHAN and affiliates) are under no obligation to update or keep the information current. Also, there may be regulatory,
compliance, or other reasons that may prevent SHAREKHAN and affiliates from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipients of this report should also be aware
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nor has served as officer, director or employee or engaged in market making activity of the company. Further, the analyst has also not been a part of the team which has managed or co-managed the public offerings of the company and no part of the analysts compensation was,
is or will be, directly or indirectly related to specific recommendations or views expressed in this document.
Either SHAREKHAN or its affiliates or its directors or employees / representatives / clients or their relatives may have position(s), make market, act as principal or engage in transactions of purchase or sell of securities, from time to time or may be materially interested in any of
the securities or related securities referred to in this report and they may have used the information set forth herein before publication. SHAREKHAN may from time to time solicit from, or perform investment banking, or other services for, any company mentioned herein. Without
limiting any of the foregoing, in no event shall SHAREKHAN, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind.
Compliance Officer: Ms. Namita Amod Godbole; Tel: 022-6115000; For any queries or grievances kindly email igc@sharekhan.com or contact: myaccount@sharekhan.com
REPORT CARD EQUITY FUNDAMENTALS
STOCK IDEAS STANDING (AS ON JANUARY 04, 2017)

PRICE AS 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX
CURRENT PRICE
COMPANY ON
RECO TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M
04-JAN-17
Automobiles
Apollo Tyres Hold 185.3 210.0 235.0 127.1 1.8 -16.0 19.8 20.4 0.2 -10.8 22.0 14.2
Ashok Leyland Buy 83.9 90.0 112.9 73.5 12.2 3.1 -13.4 -7.9 10.6 9.5 -11.7 -12.7
Bajaj Auto Hold 2684.1 2910.0 3122.0 2172.0 -0.6 -7.3 1.4 10.7 -2.1 -1.5 3.3 4.9
Gabriel India Buy 109.5 130.0 130.0 75.0 2.1 -8.8 18.3 16.1 0.6 -3.2 20.6 10.0
Hero MotoCorp Buy 3004.9 3500.0 3740.0 2375.0 -5.6 -15.0 -4.0 16.6 -7.0 -9.7 -2.2 10.5
M&M Buy 1222.0 1450.0 1509.0 1091.3 6.7 -13.7 -15.9 -0.8 5.1 -8.3 -14.3 -6.0
Maruti Suzuki E Buy 5502.2 6430.0 5974.0 3193.3 8.6 -3.1 32.7 20.9 6.9 2.9 35.3 14.7
Rico Auto Industries Buy 57.4 84.0 75.4 27.7 -1.8 -11.2 38.2 24.3 -3.3 -5.7 40.9 17.9
TVS Motor Buy 375.3 455.0 420.0 256.0 4.7 -0.3 20.0 32.4 3.1 5.9 22.3 25.5
BSE Auto Index 20665.0 23209.9 15385.1 5.2 -9.3 4.3 14.0 3.6 -3.7 6.2 8.0
Banks & Finance
Allahabad Bank Hold 62.1 80 88.4 39.4 -8.1 -23.0 -17.6 -8.9 -9.5 -18.2 -16.1 -13.6
Axis Bank Hold 453.1 560 638.3 366.7 -1.5 -17.1 -15.9 4.3 -3.0 -11.9 -14.3 -1.1
Bajaj Finance Hold 871.9 1010 1183.9 534.9 -1.6 -19.5 6.4 44.6 -3.1 -14.5 8.4 37.1
Bajaj Finserv Buy 2960.9 3450 3480.0 1551.3 -0.6 -7.5 25.9 51.3 -2.1 -1.7 28.3 43.4
Bank of Baroda Buy 148.0 200 179.6 109.4 -8.1 -12.9 -7.4 -2.1 -9.5 -7.4 -5.6 -7.2
Bank of India Hold 107.7 140 128.8 78.4 -7.3 -9.5 -1.6 -6.1 -8.7 -3.9 0.3 -11.0
Capital First Hold 608.8 760 797.4 346.2 15.2 -17.8 -1.1 46.8 13.5 -12.6 0.7 39.2
Corp Bank Reduce 41.6 30 51.0 30.8 -7.9 -5.6 -3.7 -2.5 -9.3 0.3 -1.9 -7.5
Federal Bank Buy 65.8 95 86.0 41.4 -3.6 -12.8 9.3 19.1 -5.0 -7.4 11.4 12.9
HDFC Buy 1212.1 1550 1464.0 1011.5 -2.0 -15.4 -2.5 0.9 -3.5 -10.1 -0.7 -4.3
HDFC Bank E Buy 1185.5 1415 1318.5 928.0 -0.3 -8.1 1.1 11.6 -1.8 -2.3 3.0 5.8
ICICI Bank Hold 251.1 310 298.4 180.8 -3.2 -2.7 1.2 0.3 -4.7 3.3 3.1 -4.9
IDBI Bank Hold 70.0 72 85.8 47.3 3.2 -3.0 -7.0 -17.6 1.6 3.0 -5.3 -21.9
LIC Housing Finance Buy 517.0 700 624.3 388.7 -7.0 -13.5 4.3 6.7 -8.4 -8.1 6.3 1.1
PTC India Financial Services Buy 38.5 55 42.9 29.7 1.3 -0.1 2.3 0.1 -0.2 6.1 4.3 -5.1
Punjab National Bank Hold 115.3 155 164.4 69.3 -14.0 -20.9 2.3 2.2 -15.3 -16.0 4.2 -3.1
SBI Buy 242.9 320 288.8 148.3 -4.4 -6.5 8.9 11.5 -5.9 -0.7 11.0 5.7
Union Bank of India Hold 125.6 145 159.6 104.0 -11.5 -17.5 -6.9 -11.9 -12.9 -12.4 -5.2 -16.5
Yes Bank Buy 1163.2 1520 1450.0 631.6 1.1 -9.4 4.1 66.4 -0.4 -3.8 6.0 57.8
BSE Bank Index 20446.2 23694.7 15224.3 -2.1 -9.1 -1.3 9.0 -3.5 -3.4 0.6 3.3
Consumer goods
Britannia Buy 2852.4 3950 3584.3 2505.1 -4.2 -17.9 1.1 -3.4 -5.6 -12.8 3.0 -8.4
Emami Buy 1037.5 1300 1260.8 901.0 0.7 -11.4 -7.7 4.9 -0.8 -5.8 -6.0 -0.6
GSK Consumers Hold 5058.6 6400 6695.0 4650.0 -0.3 -18.1 -16.7 -21.3 -1.8 -13.1 -15.2 -25.4
Godrej Consumer Products Buy 1531.4 1665 1715.0 1118.8 5.6 -6.8 -6.4 15.6 4.0 -1.0 -4.6 9.6
Hindustan Unilever Buy 821.6 915 954.0 765.4 -1.2 -3.7 -7.2 -2.5 -2.7 2.3 -5.5 -7.6
ITC Buy 245.5 280 266.0 177.7 7.4 1.8 0.2 15.9 5.8 8.1 2.1 9.9
Jyothy Laboratories Buy 335.0 400 381.0 252.1 -7.9 -7.1 9.5 10.9 -9.3 -1.3 11.6 5.1
Marico Buy 257.8 290 306.9 207.3 1.2 -8.4 -2.2 16.3 -0.3 -2.7 -0.3 10.3
Zydus Wellness Buy 872.7 1000 930.0 632.0 2.7 -1.7 9.9 2.6 1.1 4.4 12.0 -2.7
BSE FMCG Index 8200.7 9043.8 6782.2 3.1 -3.9 -3.2 6.2 1.6 2.1 -1.3 0.7
IT / IT services
Firstsource Solution Hold 39.0 47 53.7 28.7 7.6 -5.1 -21.8 -7.6 6.0 0.8 -20.4 -12.4
HCL Technologies E Buy 857.0 965 889.9 706.4 8.0 5.6 16.2 4.4 6.4 12.1 18.4 -1.0
Infosys Buy 997.8 1150 1279.3 900.3 3.4 -3.9 -14.8 -5.4 1.9 2.1 -13.2 -10.3
Persistent Systems Buy 646.9 790 798.0 501.1 8.4 -2.2 -5.4 1.2 6.8 3.9 -3.6 -4.1
Tata Consultancy Services Hold 2379.5 2450.0 2744.8 2051.9 7.1 -0.8 -4.1 2.2 5.5 5.4 -2.3 -3.1
Wipro Hold 475.6 550.0 607.0 408.1 3.3 -1.3 -15.2 -13.8 1.7 4.9 -13.6 -18.3
BSE IT Index 10216.8 11775.5 9123.1 5.3 -0.3 -8.2 -4.1 3.7 5.9 -6.4 -9.1
Capital goods / Power
Bharat Heavy Electricals Hold 127.1 155.0 175.0 90.2 0.2 -7.9 -7.7 -22.9 -1.4 -2.2 -5.9 -26.9
CESC Buy 646.4 720.0 683.5 404.6 11.8 2.2 4.8 26.4 10.1 8.6 6.8 19.8
Crompton Greaves Hold 61.2 70.0 88.9 39.2 -19.8 -21.6 -17.1 -6.8 -21.0 -16.7 -15.5 -11.7
Finolex Cable Buy 413.0 550.0 464.0 200.8 -0.6 -7.7 12.5 65.7 -2.1 -2.0 14.7 57.1
Greaves Cotton Buy 122.1 160.0 150.4 114.1 -6.1 -5.2 -11.4 -10.3 -7.6 0.7 -9.7 -15.0
Kalpataru Power Transmission Buy 263.4 305.0 286.6 160.0 7.6 3.7 0.4 5.2 6.0 10.2 2.3 -0.3
PTC India Buy 73.9 90.0 87.9 56.1 0.5 -2.6 -3.1 14.0 -1.0 3.4 -1.2 8.1
Skipper Buy 138.3 190.0 219.9 122.0 2.7 -11.9 -13.5 -27.3 1.2 -6.5 -11.9 -31.1
Thermax Hold 781.3 920.0 949.0 690.0 -5.8 -12.2 -8.4 -10.9 -7.3 -6.7 -6.7 -15.6
Triveni Turbine Buy 119.7 140.0 135.7 87.5 3.4 -4.9 -2.5 10.9 1.8 1.0 -0.7 5.2

EQUITY FUNDAMENTALS REPORT CARD
STOCK IDEAS STANDING (AS ON JANUARY 04, 2017)
PRICE AS 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX
CURRENT PRICE
COMPANY ON
RECO TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M
04-JAN-17
Va Tech Wabag Buy 479.8 650.0 686.4 408.8 -2.9 -14.8 -20.5 -29.0 -4.4 -9.5 -19.0 -32.7
V-Guard Industries Buy 164.6 210.0 226.4 78.0 -3.1 -10.7 17.0 77.7 -4.6 -5.2 19.2 68.4
BSE Power Index 2021.0 2153.9 1559.4 1.7 -1.0 1.0 4.3 0.1 5.2 2.9 -1.1
BSE Capital Goods Index 13973.7 15835.4 10934.9 1.0 -6.0 -8.4 1.0 -0.5 -0.2 -6.6 -4.3
Infrastructure / Real estate
Gayatri Projects Hold 652.5 700.0 790.0 482.0 4.9 -5.9 -0.2 -11.3 3.4 -0.1 1.7 -15.9
ITNL Buy 113.0 120.0 119.3 64.0 17.7 11.2 39.9 26.1 15.9 18.1 42.5 19.6
IRB Infra Buy 206.8 260.0 266.4 177.5 9.4 -18.2 -4.7 -19.1 7.7 -13.2 -2.9 -23.3
Jaiprakash Associates Hold 9.8 ** 13.5 5.3 29.8 -10.5 7.7 -18.3 27.8 -4.9 9.7 -22.6
Larsen & Toubro Buy 1376.6 1640.0 1615.0 1016.1 1.1 -5.0 -11.1 11.0 -0.4 0.9 -9.4 5.2
NBCC Buy 247.1 340.0 299.4 162.0 11.2 -11.1 28.8 25.9 9.5 -5.6 31.2 19.3
CNX Infra Index 2767.0 2999.2 2204.1 1.1 -3.2 -4.3 2.8 -0.5 2.8 -2.5 -2.6
BSE Real estate Index 1355.3 1646.5 1000.1 8.4 -13.8 -13.9 1.7 6.8 -8.5 -12.3 -3.6
Oil & gas
Oil India Hold 456.5 ** 467.5 300.4 7.0 10.0 25.0 19.5 5.4 16.8 27.4 13.3
Reliance Buy 1067.2 1300.0 1129.6 888.1 7.3 -2.7 8.2 8.3 5.7 3.4 10.2 2.7
Selan Exploration Technology Hold 190.8 345.0 231.1 148.7 0.6 3.7 -6.4 -4.6 -0.9 10.1 -4.7 -9.6
BSE Oil and gas Index 12390.8 12588.1 7987.3 5.7 4.6 23.6 34.3 4.1 11.1 25.9 27.3
Pharmaceuticals
Aurobindo Pharma Buy 667.0 945.0 895.0 582.0 -7.3 -23.0 -11.8 -20.7 -8.7 -18.2 -10.2 -24.8
Cipla Hold 568.3 610.0 657.6 457.5 -0.5 -4.9 11.8 -11.7 -2.0 1.0 13.9 -16.3
Cadila Healthcare Hold 362.1 450.0 429.8 295.0 -8.5 -7.0 8.4 13.9 -9.9 -1.2 10.5 8.0
Divi's Labs Hold 752.3 ** 1381.6 743.7 -33.8 -42.1 -34.3 -33.9 -34.8 -38.5 -33.0 -37.3
Glenmark PharmaceuticalsE Buy 899.0 1150.0 994.0 671.1 4.3 -4.3 9.9 -3.2 2.7 1.6 12.0 -8.2
Lupin Hold 1489.0 1850.0 1911.9 1280.0 0.0 0.0 -4.7 -16.7 -1.5 6.3 -2.9 -21.0
Sun Pharmaceutical Industries Buy 637.4 845.0 898.5 571.9 -11.5 -16.6 -17.2 -20.1 -12.9 -11.4 -15.6 -24.3
Torrent Pharma Hold 1349.7 1765.0 1769.5 1175.1 0.2 -17.8 -3.2 -4.2 -1.3 -12.7 -1.3 -9.2
BSE Health Care Index 14868.2 16865.9 13955.4 -4.8 -9.9 -5.4 -10.2 -6.3 -4.3 -3.6 -14.9
Building materials
Grasim E Buy 867.0 1105.0 1072.2 646.6 -0.7 -11.8 -4.9 19.1 -2.2 -6.4 -3.1 12.9
The Ramco Cements Hold 575.3 655.0 685.4 352.7 -1.2 -9.4 0.0 48.9 -2.7 -3.7 1.9 41.2
Shree Cement Hold 14122.6 18000.0 18519.0 9350.0 -6.2 -20.3 -3.5 28.1 -7.7 -15.3 -1.7 21.4
UltraTech Cement Hold 3301.4 3350.0 4130.0 2579.0 -7.9 -16.5 -3.2 20.4 -9.3 -11.3 -1.3 14.2
Discretionary consumption
Century Plyboards (India) Hold 175.9 257.0 267.8 135.5 1.7 -32.2 -17.5 2.6 0.1 -28.0 -16.0 -2.7
Cox and Kings Buy 181.3 225.0 257.4 140.1 8.8 -19.4 4.7 -23.6 7.1 -14.4 6.6 -27.5
Inox Leisure Hold 230.0 255.0 293.4 170.0 4.2 -13.9 -6.5 -2.5 2.6 -8.5 -4.7 -7.6
Info Edge (India) Buy 860.5 1040.0 1025.0 688.1 -2.8 -3.4 1.5 3.7 -4.2 2.6 3.4 -1.7
KKCL Buy 1800.0 2360.0 2246.0 1603.3 0.0 -3.6 0.4 -14.7 -1.5 2.4 2.3 -19.1
Orbit Exports Hold 314.9 ** 388.9 205.3 19.0 19.5 24.3 -16.9 17.2 26.9 26.7 -21.2
Raymond Hold 507.7 675.0 654.0 350.0 3.0 -10.4 9.4 22.0 1.5 -4.8 11.5 15.6
Relaxo Footwear Buy 400.8 525.0 526.1 350.0 -4.7 -14.3 -17.5 -19.9 -6.1 -9.0 -15.9 -24.0
Thomas Cook India Buy 186.3 229.0 228.9 165.0 -0.7 -8.1 -14.9 -8.7 -2.2 -2.4 -13.2 -13.4
Wonderla Holidays Buy 338.7 395.0 420.0 316.0 2.9 -13.9 -14.7 -14.1 1.4 -8.6 -13.1 -18.6
Zee Entertainment E Buy 458.6 600.0 589.9 350.1 3.5 -18.6 -0.2 9.2 1.9 -13.5 1.7 3.5
Diversified / Miscellaneous
Aditya Birla Nuvo Hold 1292.4 ** 1664.0 684.3 3.5 -6.9 2.4 28.3 1.9 -1.1 4.4 21.6
Bajaj Holdings Buy 1838.5 2516.0 2245.0 1310.0 -8.9 -7.7 10.4 13.2 -10.3 -2.0 12.5 7.3
Bharti Airtel Hold 313.9 364.0 385.0 282.3 -1.5 -3.1 -15.6 -3.6 -3.0 2.9 -14.0 -8.6
Bharat Electronics E Buy 1432.2 1660.0 1540.0 1008.0 0.9 12.8 13.7 6.0 -0.6 19.8 15.9 0.5
Gateway Distriparks Hold 254.5 275.0 360.0 205.6 8.8 3.2 -17.5 -15.7 7.2 9.6 -15.9 -20.1
Max Financial Hold 559.5 570.0 628.0 302.8 5.0 0.2 6.1 36.2 3.4 6.4 8.2 29.1
PI Industries E Buy 828.8 955.0 921.9 495.4 -0.3 -1.1 15.3 27.0 -1.8 5.0 17.4 20.4
Ratnamani Metals and Tubes Hold 692.3 ** 810.0 387.0 20.6 22.9 36.3 29.7 18.8 30.5 38.9 22.9
Supreme Industries Buy 887.0 1067.0 1025.0 640.3 0.0 -3.6 -0.9 30.4 -1.5 2.4 1.0 23.6
UPL Buy 667.6 800.0 730.7 342.0 2.4 -1.3 20.1 55.2 0.8 4.8 22.4 47.1
BSE500 Index 11119.1 12083.1 9012.0 1.2 -7.0 0.0 7.4 -0.3 -1.2 1.9 1.8
CNX500 INDEX 7030.8 7647.5 5717.0 1.2 -7.0 -0.1 7.5 -0.3 -1.2 1.8 1.9
CNXMCAP INDEX 14681.3 16169.1 11190.4 1.1 -8.0 4.8 10.9 -0.4 -2.3 6.7 5.2
E In Top Picks basket ** Price target under review

FROM SHAREKHANS DESK
from sharekhans desk Will equity returns break the two-year impasse?
Two years and the markets havent moved an inch. At the beginning of Year 2017, the
benchmark indices, Nifty and Sensex, stood at same levels as Jan 2015. All hopes of a strong
revival in economy and corporate earnings leading to a continued rally in the Indian equities
have been belied.
The broader market has performed better with close to double-digit gains in the Midcap
and Smallcap indices. In terms of sectors, the Autos and Private Banks were consistent
performers with unexpected resurgence of oil& gas and metal stocks. However, over the
past two years, the return from equities as an asset class has fallen far short of consensus
expectations despite the interest cut of 175 basis points in policy rates by RBI, easing of
inflationary pressures and the overall improvement in the economy.
The muted returns from the equities in the past couple of years can be explained by two broad
reasons: 1) Elusive corporate earnings growth and; 2) General de-rating of emerging markets
due to changing dynamics of financial markets globally. In 2015, the profits of Sensex/Nifty
companies were dented by a crash in commodity prices (pushing Metal and Energy companies
into losses). In 2016, the earnings were depressed due to plummeting profits (or even losses)
of Banks (adverse impact of policy action taken to clean up the balance sheets of banks), and
technology disruption led slowdown in the growth of IT Services companies. Thankfully, the
weak earnings growth of the past two years has formed a low base, and the earnings growth
would look healthy going forward, as profits for Banks, Metals and Energy sector companies
normalise during the current year.
On the other hand, the global scenario still remains unpredictable. The reversal of monetary
stance in US, and deterioration in economic activity in Europe and China would continue
to act as major overhang in the immediate future. Moreover, the elections in France and
Germany this year could spring more surprises, as unexpected events seem to have become
the norm these days.
Domestically, in the immediate future, investors would keenly watch announcements in
the Union Budget (to be announced on February 1). The expectations are running high, as
the Government could announce policy measures to support the economy post the demand
disruption due to the fallout of demonetisation.
A spate of assembly elections in the coming months will also have some sentimental effect
on the markets. The outcome of election in Uttar Pradesh (and to some extent Punjab) will
be the most significant out of all the state elections. In a way, the state elections will be
a litmus test for Prime Minister Narendra Modi and his government, coming in the wake of
the demonetisations shock & awe impact. Finally, not to forget the disruption that the
implementation of GST could cause to businesses that would have to adjust to new indirect
tax regime sometime in FY2018.
Against this very volatile and uncertain backdrop, valuations of the overall Indian market as
well as individual stocks have come down to reasonable levels. Indias GDP has cumulatively
grown by 18.5% over two years, but the market cap of listed equities has largely remained
stagnant. Thus, on the top-down macro basis, the valuations have corrected significantly
with Mcap-to-GDP at 0.7x, which is at a discount to long-period average. So, this looks like
the right time to cherry pick quality businesses.
Keep faith and have patience, Year 2017 promises to be a rewarding year for equity investors
after two years of impasse. Please refer to our Market Outlook Report Darkest before the
dawn on page 7.

EQUITY FUNDAMENTALS MARKET OUTLOOK
Market Outlook December 27, 2016

Darkest before the dawn
Wall of worries: The backdrop has changed dramatically Market view - volatility to persist in immediate
in the past few weeks to say the least. A couple of future: Benchmark Indian equity indices are likely to
months back, the macro situation for India was quite remain volatile in the near term due to the expected
favorable (low commodity prices, declining interest weakness in Q3FY2017 results, uncertainty over the
rates, narrowing deficits, a stable currency and a benign pace of remonetisation, outcome of the crucial UP state
global economic situation), along with growing hopes elections and recovery in the domestic economy (led
of a strong revival in corporate earnings in H2FY2017. by favourable proposals in Union Budget and follow-up
However, the scenario has changed materially in a policy action against black money). Globally also, the
short span of time. The Governments surprise move to financial markets would take some more time to adjust to
demonetise 86% of high denomination currency has led the changing monetary policy stance in USA and Europe,
to a sudden disruption in consumer demand, making and the unpredictable policy framework of the Trump
FY2017 a washout year for growth in corporate earnings. government.
Commodity prices (including crude oil) are firming
up and would further hurt profitability of the Indian Risk-reward turning favorable: We are of the opinion
businesses, besides adversely impacting government that investors should use the current volatile phase
finances. If that wasnt enough, the global environment to systematically buy into quality stocks over the
has turned uncertain, underscored by a rout in bond next few months, as the outlook for the Indian equity
markets and flow of money reversing out of the emerging market remains constructive for the medium term (12-
markets (EM). 24 months). The valuations have turned reasonable and
the corporate earnings are expected to revive strongly
Will history repeat itself?: The reversal in the monetary from a low base (resulting from flattish growth in the
stance of the worlds largest economy (ie USA), along past couple of years). Follow our model portfolios and/or
with uncertainty over the potential fiscal policies to advisory products to build a quality portfolio.
be adopted by the US president-elect Donald Trump
has caused some nervousness in the global financial Sector preferences: Though the Financials (especially
markets. Notwithstanding the near-term volatility, the private banks and select NBFCs) and some pockets of
global markets have historically responded positively Consumer stocks (especially Auto/Auto Ancillaries)
and rallied during interest rate upcycles in USA. In the could under perform in the near term, we expect these
past three decades, the equity markets have rallied two important sectors to give handsome gains over the
post the first rate hike by the Federal Reserve during whole of FY2017. We are also selectively positive on Oil
an interest rate upcycle. That is because rising interest & Gas, IT Services and Defence related companies. We
rates imply improving economic growth, higher inflation, also recommend carefully chosen Midcap picks through a
low unemployment and better corporate results. Given bottom-up research to generate alpha for your portfolio.
the past experience, the global equity markets should Sensex PE (based on one-year forward earnings)
improve considerably, as the initial volatility eases out.
25.0
Light at end of tunnel - H2CY2017 could be vastly 22.0

different: While the global economic scenario is
19.0
expected to gradually improve, the adverse impact
of demonetisation or other measures to curb black 16.0
money should also subside by H2CY2017. Our base case 13.0

assumption is that the weakness in Q3 and Q4 of FY2017 10.0
would reverse by Q1FY2018 and corporate earnings
should grow at high double-digit rates by H2FY2018 on 7.0
Dec-08
Dec-10
Dec-12
Dec-14
Dec-16
a lower base and a strong bounce back in the economy.

Moreover, the valuations (already corrected) would turn
+1 sd PER Avg PER -1 sd
more favorable over the next couple of quarters.

MARKET OUTLOOK EQUITY FUNDAMENTALS
Consensus Vs contrarian: Knowing the unknowns! 2. Gold weak, crude firm; gold could shine in
2017
Year 2016 will go down as a year of surprises.
Geopolitical events like Brexit and Trump win Consensus view: Gold was on the losing side for
on the one hand, and the unexpected economic another year. Seen as a hedge against inflation,
the benign inflationary expectations weighed down
events like the rout in bond markets and the
gold prices. On the other hand, the commodity
strong upsurge in commodity prices on the other complex (including crude oil) has firmed up
hand were not anticipated at all. Consequently, considerably in 2016 contrary to consensus view at
expecting the unexpected became the norm rather the start of the year. Consensus expects the trend
than the exception in 2016. Given the experience to continue in 2017 also.
of 2016, we look at important expectations that Contrarian view: If crude oil has to head higher
the consensus is building for year 2017 and the and consequently trigger inflation (and inflationary
possible contrarian outcomes that could emerge expectations), then logically gold would reverse its
finally. weakness and head higher in 2017.
1. US economy: High on hopes; scope for 3. Consumer demand destruction post

demonetisation, market leadership to move away
disappointment
from Retail/Consumer businesses; Expect Private
Consensus view: Expectations are running high Banks, NBFC and Auto stocks to lead the rally again
on Mr Trumps ability to roll out an effective fiscal in 2017
policy framework (key proposals would include cut Consensus view: Enough has been written on
in corporate taxes, huge investment in infra) that trucks being off road, traders out of business and
would provide enough stimulus to the US economy consumer demand plummeting post the move to
and take the US GDP growth to 3-4% sooner rather suck out 86% of currency through demonetisation
in India. Consequently, the consumer demand
than later. Better economic growth, coupled with
and retail focused businesses would suffer and
lower corporate taxes would boost corporate underperform in 2017.
earnings and US equity markets, whereas the US
bond market is likely to remain weak. Contrarian view: Despite the despondency and the
initial plunge in demand post the announcement
Contrarian view: High expectations driven of demonetization, the recovery in consumer
consensus view tends to overestimate and could demand could surprise positively because: 1) the
bulk of high denomination currency has come back
very well be the case this time too. First, expecting
into the banking system (indicates limited loss of
the new US President to quickly come out with a
wealth generally); 2) stable prices of consumer
resurrection plan, followed by the US Congress not goods and the announcement of price hikes by
delaying or diluting the proposals, and expecting auto companies (Maruti, Bajaj Auto etc) and some
immediate benefits from the fiscal policies is consumer companies do not indicate any major
perhaps too optimistic. So, bonds could reverse disruption in supply chain or for that matter their
their losses in 2017 and the US equity markets pricing power (& thus demand). As a result, some
of the quality names in Private Banking, NBFC and
could underperform given the premium valuations
Consumer space would continue their winning
and high expectations of a turnaround in the US streak in 2017 once the valuations adjust over the
economy and corporate earnings. next few week/months.

While FY2017 appears weak for corporate earnings, Rising commodity prices
H2FY2018E may be vastly improved: Market 3000
expectations for Q3FY2017 earnings were high due to the

reasonably strong Q2FY2017 earnings (see chart below). 2500
Strong Q2FY2017 PAT growth had raised hopes of a stronger H2FY2017E

2000
25
20
1500
15
10
1000
5
Nov-16
Jan-16
Jun-16
Jul-16
May-16
Feb-16
Mar-16
Apr-16
Oct-16
Dec-15
Aug-16
Sep-16
Dec-16
0
-5
Aluminium USD/MT Copper (USD/2MT) ZINC (USD/MT)
-10
Source: Bloomberg
-15
Apart from the rising commodity prices, the sharp spike
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
in the US bond yields too is also a pain point as far as
EM money flows are concerned, as the global investors
Sensex PAT Growth (%)
appetite is clearly shifting more towards the resurging US
Source: Sharekhan research, Bloomberg markets. We believe that the rising US bond yields are
However, we believe that the expected weakness in indicative of the Feds monetary tightening stance.
Q3FY2017 results, uncertainty related to the pace of US, UK bond yields climbing
remonetisation, outcome of the crucial UP state elections
and recovery in the domestic economy (led by favourable 3.0
proposals in the Union Budget and follow-up policy action 2.5
against black money) have led to the near-term volatility 2.0

in the market, which is likely to persist for some time 1.5
to come. Globally too, portfolio would take some more
time to adjust to the changing monetary policy stance 1.0
in USA and Europe, along with the unpredictable policy 0.5
framework of the Trump government. 0.0
Nov-16
Jan-16
Jun-16
Jul-16
May-16
Feb-16
Mar-16
Apr-16
Oct-16
Aug-16
Sep-16
Dec-16
Our base case assumption is that the weakness in Q3
and Q4 of FY2017 would ease out by Q1FY2018 and US Generic Bond Yield % UK Generic Bond Yield %
corporate earnings should grow at high double-digit rates
Source: Bloomberg
by H2FY2018 on a low base. Moreover, the valuations
(already corrected) would turn more favorable over the But, the Feds monetary tightening is more due to its
next couple of quarters. confidence in the revival of the US economy, and not
surprisingly, the US GDP grew by 3.2% in 3QCY2016,
GST another disruptive change for the economy: up from 1.4% in 2QCY2016. The US GDP growth rate
The domestic situation will get more uncertain, owing is expected to average 2% over the next three years.
to global volatility and the expected teething troubles FII inflow/outflow in Indian markets for Equity & Debt
during the implementation of the Goods & Services Tax 30000
(GST) in FY2018. A complete reform of the current indirect
20000
tax system would require companies to recalibrate and
realign their business models to GST. However, we expect 10000
the GST implementation to be deferred to October 0
2017, which we believe will provide some buffer to the -10000
corporate sector. -20000
-30000
Firming commodity prices and rising US bond yields
Nov-16
Jan-16
Jun-16
Jul-16
May-16
Feb-16
Mar-16
Apr-16
Oct-16
Aug-16
Sep-16
Dec 2016 *
to put pressure on inflows into EMs: Of late, the basic

commodity prices have also begun to harden even though
the US dollar has strengthened vis--vis the Euro.
Equity Debt
Source: NSDL

MARKET OUTLOOK EQUITY FUNDAMENTALS
Therefore, for now, the investor appetite for the US Sensex PE (based on one-year forward earnings)
assets is strong, which in the near term does impact the 25.0
EM fund flows. 22.0
Flaring commodity prices and rising US bond yields are 19.0
likely to put pressure on inflows into EMs. As seen above, 16.0
the net FII inflow into India has been negative for the 13.0
past couple of months, thereby keeping the domestic 10.0

equity markets depressed.
7.0
Dec-08
Dec-10
Dec-12
Dec-14
Dec-16
Historical rise in US interest rates results in rally in
US equity markets & EMs: Historically, there have been
+1 sd PER Avg PER -1 sd
instances that indicate that the US equity market and
Source: Sharekhan research, Bloomberg
EMs tend to rally during interest rate upcycle in USA. This
has been the experience in the last three interest rate Hence while the FY2017E earnings are likely to remain
upcycles in USA, spread over three decades. weak, expectations are of a broad-based improvement in
earnings in FY2018E compared to FY2017E.
Historically growth in NASDAQ and Fed rates have coincided
with EM growth PAT growth YoY % of Sensex sectors
PAT % PAT %
1400
9 Sensex Growth Contribution Growth Contribution to
1200
7
sectors to PAT growth PAT growth
1000 FY17E FY17E FY18E FY18E
5
800
Auto 23.3 32.9 28.3 16.4
3
Capital 12.9 5.6 12.6 2.1
600
1 Goods
400 -1 Chemical 19.2 1.8 18.3 0.7
200 -3
Finance -10.1 -29.5 48.6 42.8
FMCG 7.8 5.9 13.0 3.6
0 -5
Healthcare 26.9 15.4 20.2 4.9
Dec-88
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Dec-10
Dec-12
Dec-14
Dec-16
IT 4.9 12.6 8.8 7.8

Nasdaq Index (1/5th Scale) MSCI EM Index US FED Interest Rate
Metal/ 28.1 17.2 28.4 7.4
Mining
Source: Bloomberg
Oil & Gas 17.3 41.6 12.0 11.3
One reason for such a correlation may be because the Power -2.8 -1.6 14.0 2.5
Telecom -6.4 -1.9 6.1 0.6
interest rate hikes by the Fed have normally been in
Source: Sharekhan research, Bloomberg
response to rising inflation, driven by a strong growth in
the US economy and/or the global economy.
Almost all the Sensex sectors (except Chemicals,
Valuations have also turned reasonable now: Hurt by Healthcare and Oil & Gas) are expected to perform
the FII outflows as well as the recent correction linked to better in FY2018E compared to FY2017E performance.
demonetisation, Indian equity markets are now trading at Important sectors like Finance (21% weight in Sensex)
attractive valuations of ~15x (one-year forward earnings) and Auto (11.8% weight in Sensex) are expected to post
which is below the historic average PE multiple. a smart turnaround in FY2018E as compared to FY2017E
earnings growth.

Market view - volatility to persist in the immediate in tax collections, one may reasonably expect some
future: measures to pacify the sour mood of the nation post the
demonetisation measure. Already, the Reserve Bank of
Markets are factoring in near-term pressures, and hence India (RBI) has revised the FY2017E GDP expectations
there has been a significant correction in FY2017E EPS downwards and a stimulus at this time would be welcome.
estimates. Impacted by the near-term pessimism, the
benchmark Indian indices are likely to remain volatile in RBI pares FY2017E GDP estimate post demonetisation
the immediate term. However, there has been negligible
7.60%
impact on FY2018 and FY2019 earnings estimates, which
indicate that earnings expectations are still intact for the
long term.
Consensus earnings estimates (Bloomberg) - downgrades still to
come!
7.10%
2400
2200
2000
1800
Earlier Post Demonetization
1600
Source: RBI
1400
We expect the RBI to provide a helping hand to the
Nov-16
Jun-16
Jul-16
May-16
Oct-16
Aug-16
Sep-16
Dec-16
Government in achieving the elusive economic revival

with around 50BPS rate cut in the benchmark rates in
FY17 EPS Consensus Estimate FY18 EPS Consensus Estimate
the next two quarters. We also expect the central
FY19 EPS Consensus Estimate
Source: Bloomberg government to give some sort of fiscal stimulus and/or
provide some relief to Rural India in the Union Budget, to
The benchmark Indian indices are likely to remain not only boost economic growth but also make a positive
volatile in the immediate future given the expected impact on the outcome of the crucial UP election.
weakness in Q3FY2017 results, uncertainty related to
the pace of remonetisation, outcome of the crucial UP Time to go long; risk-reward favorable now: We are of
state elections and recovery in the domestic economy the opinion that investors should use the current volatile
(led by favourable proposals in the Union Budget and phase to systematically buy into quality stocks over the
follow-up policy action against black money). Globally next few months, as the outlook for the Indian equity
also, the financial markets would take some more time to market remains constructive in the medium-term (12-
adjust to the changing monetary policy stance in USA and 24 months). The valuations have turned reasonable and
Europe, along with the unpredictable policy framework the corporate earnings are expected to revive strongly
of the Trump government. from a low base (resulting from flattish growth in the
past couple of years). Follow our model portfolios and/or
UP elections - a referendum on demonetisation: advisory products to build a quality portfolio.
Uttar Pradesh is very important as far as Indian politics
is concerned, given its size and representation in the The benchmark Indian indices are likely to remain volatile
parliament (80 seats out of 543 in the Lok Sabha). UP in the immediate future due to the expected weakness
was one of the key reasons for the BJP securing an in Q3FY2017 results, uncertainty related to the pace of
absolute majority during the May 2014 general election. remonetisation, outcome of the crucial UP state election
It has complex caste equations, a large population of and recovery in the domestic economy (led by favourable
poor people and a big trader community. UP assembly proposals in the Union Budget and follow-up policy action
polls will be a litmus test for the BJP. The UP election against black money).
may be taken as a referendum on the BJP-run central
governments performance so far, especially on the Sector preferences: Though the Financials (especially
demonetisation move. private banks and select NBFCs) and some pockets in the
Consumer space (especially Auto/Auto Ancillaries) could
Union Budget (advanced to February 1), fiscal/ under perform in the near term, we expect these two
monetary stimulus may rekindle positive sentiments important sectors to deliver handsome returns over the
(provided Government has elbow room to do it): The whole of FY2017. We are also selectively positive on Oil
demonetisation move has led to weakness in consumption & Gas, IT Services and Defence related companies. We
demand and would likely impact GDP growth in the next also recommend carefully chosen Midcap picks through
couple of quarters. With the likelihood of windfall gains bottom-up research to generate alpha for your portfolio.

Sharekhan Top Picks EQUITY FUNDAMENTALS
Sharekhan Top Picks

The Sharekhan Top Picks sustained its winning run in the year December was one such occasion, with the Sharekhan Top Picks
2016 also. Initiated in January 2009, our basket of carefully portfolio declining by 1.4% compared to the 0.1-0.5% decline in
picked 12 companies has managed to beat the benchmark Indian Nifty/Sensex and a 3.7% fall in the CNX Midcap Index. However,
stock indices consistently for eight consecutive years. The the performance for the full year 2016 was still ahead of all
cumulative returns over the past eight years have far exceeded the benchmark indices. Moreover, we expect the performance
the returns from Nifty/Sensex and the CNX Midcap 100 Index to pick up, as the portfolio has now been readjusted in line with
without taking undue risks (70-75% invested in Large Cap index the changing market dynamics.
stocks at any point of time). Please refer to the annual returns Accordingly, we are making three changes this month. We are
table below. reducing exposure to the Auto sector (weakness to persist in
The healthy performance across market cycles underlines the near term due to adverse effect of demonetisation on consumer
importance of having an actively managed balanced portfolio demand) by removing TVS Motor and replacing it with HCL
and the benefits of superior selection of stocks based on in- Technologies. We believe that IT Services sector has been de-
depth research. A lot of the success of the Sharekhan Top Picks rated significantly and offers a buying opportunity now.
also depends on getting the sector allocation right and taking a Other two changes are: Introduction of Balrampur Chini and RBL
holistic approach to portfolio construction - instead of a random Bank in place of Emami (near term outlook dented by slowdown
stock picking method. in consumer demand) and Finolex Cables (booking profit).
At times, unexpected events like demonetisation of high Balrampur Chini is our preferred pick to play the uptrend in
currency notes and its widespread fallout on some sectors do sugar cycle, whereas RBL Bank is well capitalised to sustain its
lead to minor under-performance for a short period of time. strong growth track record.
CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED) (%)

1 month 3 months 6 months 1 year 3 years 5 years
Top Picks -1.4 -7.8 1.2 8.8 102.8 207.7
Sensex -0.1 -4.4 -1.4 1.8 25.5 71.8
Nifty -0.4 -4.9 -1.1 3.2 29.6 77.9
CNX MIDCAP -3.7 -6.9 3.9 7.1 76.9 127.2
ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES) (%) CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS SINCE
Sharekhan Sensex Nifty CNX APRIL 2009)
(Top Picks) Midcap 700
100 600
CY2016 8.8 1.8 3.2 7.1 500
CY2015 13.9 -5.1 -4.1 6.5 400
CY2014 63.6 29.9 30.9 55.1
300
CY2013 12.4 8.5 6.4 -5.6
200
CY2012 35.1 26.2 29.0 36.0
100
CY2011 -20.5 -21.2 -21.7 -25.0
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Aug-09
Dec-09
Aug-10
Dec-10
Aug-11
Dec-11
Aug-12
Dec-12
Aug-13
Dec-13
Aug-14
Dec-14
Aug-15
Dec-15
Aug-16
Dec-16
CY2010 16.8 11.5 12.9 11.5
CY2009 116.1 76.1 72.0 114.0 Sh arekh an Top Picks Sen sex Nifty
Please note the returns are based on the assumption that at the beginning of each month an equal amount was invested in each stock of the Top Picks basket
Name CMP* PER (x) RoE (%) Price Upside

(Rs) FY16 FY17E FY18E FY16 FY17E FY18E target (Rs)# (%)
Balrampur Chini 125 13.8 7.4 8.6 18.7 30.1 22.1 150 20
Bharat Electronics 1,374 24.2 21.4 18.7 15.5 13.8 13.7 1,660 21
Glenmark Pharma 889 23.5 17.3 15.4 25.0 25.7 22.7 1,150 29
Grasim Industries 861 16.5 12.4 11.0 9.5 10.9 10.6 1,150 33
HCL Tech** 825 20.5 14.3 12.2 21.7 26.4 25.9 965 17
HDFC Bank 1,200 24.7 20.2 16.5 18.3 19.1 20.1 1,415 18
Indian Oil Corp 324 11.8 10.7 9.2 18.4 18.1 18.7 355 10
IndusInd Bank 1,107 28.8 22.3 17.0 16.1 16.7 17.6 1,460 32
Maruti Suzuki 5,323 35.2 21.3 19.5 18.0 23.4 21.7 6,430 21
PI Industries 832 37.5 28.1 23.6 29.2 30.0 27.6 955 15
RBL Bank 335 37.2 28.8 20.5 11.2 12.0 13.7 375 12
Zee Entertainment 452 44.3 34.0 25.0 22.1 25.4 28.1 600 33
*CMP as on December 30, 2016 # Price target for next 6-12 months ** FY16 of HCL Tech is for 9 months period from July 01, 2015 to March 31, 2016.

EQUITY FUNDAMENTALS Sharekhan Top Picks
PER ROE (%) PRICE UPSIDE

Name CMP (Rs)
FY16 FY17E FY18E FY16 FY17E FY17E TARGET (RS) (%)
BALRAMPUR CHINI MILLS 125 13.8 7.4 8.6 18.7 30.1 22.1 150 20
Remarks: Balrampur Chini Mills (BCML) is one of the largest sugar mills in India with sugarcane crushing capacity located in the second
highest sugar producing state in India - Uttar Pradesh. The company has sugarcane crushing capacity of 76,500 tonne per day
(TCD). It also has Distillery and Co-generation operations of 320 KLPD and 148.2 MW (saleable), respectively.
The Indian sugar companies are in a sweet spot, as sugar prices have firmed up to Rs35-36 per kg in the domestic market
(from the lows of Rs20 per kg in July 2015) due to a demand-supply mismatch in the international market. The domestic sugar
production is expected to be down 10% YoY in sugar year (SY) 2015-16 and is expected to dip further in SY 2016-17. The upsurge
in the domestic sugar prices is positive for large sugar companies such as BCML with large production capacity, better leverage
position and strong relationships with cane farmers.
BCMLs leverage position is much better in the domestic sugar industry compared to some of the other UP-based sugar companies,
such as Dhampur Sugar (1.2x as on September 30, 2016). The company is confident of funding the capex of Rs100 crore and repay
the debt of around Rs150 crore in FY2017 on the back of expected improvement in the cash flows.
Any significant increase in the global sugar production (resulting in a drop in sugar prices) or a decline in the sugar recovery rate
would act as a key risk to the earnings.
BCML stock is trading at 7.4x its FY2017E earnings and 8.6x its FY2018E earnings, which is much lower than the 18-20x multiple
it commanded in the last sugar up-cycle of sugar season 2008-10. We have a positive view on the stock.
BHARAT ELECTRONICS 1,374 24.2 21.4 18.7 15.5 13.8 13.7 1,660 21
Remarks: Bharat Electronics (BEL), a PSU manufacturing electronic, communication and defence equipment, stands to benefit from the
enhanced budgetary outlay for strengthening and modernising the countrys security.
The Make in India initiative of the NDA government, along with greater thrust to modernise the countrys defence equipment
will support the earnings growth in the coming years, as it is the only player with strong research and manufacturing capabilities
across the country.
The companys current order book of ~Rs34,700 crore provides revenue visibility for the next 3-4 years. We expect the companys
revenue to grow at a CAGR of 14% over FY2017-FY2019E to Rs10,600 crore, led by strong order wins and impressive execution
rate.
BEL remains our preferred pick in the defense sector on account of its strong manufacturing and R&D base, and growing
indigenisation.
GLENMARK PHARMA 889 23.5 17.3 15.4 25.0 25.7 22.7 1,150 29
Remarks: Glenmark Pharmaceuticals is a research-driven global pharmaceuticals organization, focused on discovering novel molecules and
developing high-quality generics & specialty products for markets across the globe. Glenmark has 17 manufacturing facilities
across five countries, including the US, Switzerland, Argentina, Czech Republic and India. Glenmark has five R&D Centres around
the world engaged in discovery of novel biological and chemical entities.
The management has indicated that for future growth, the key focus areas will be Dermatology, Contraceptives and Complex
Injectables. The future growth would be mainly propelled by US, EU and India markets, which are witnessing exponential growth
on account of new product launches. The company is gearing up for the launch of gZetia, where it has 180-day exclusivity in the
US (launch in H2FY2017). Also, there are few more significant opportunities, which fall in FY2018.
Glenmark is in the process of aggressively ramping up products in the US, India and EU markets, which should give a major boost
in the next couple of years. The gZetia launch scheduled in H2FY2017 will give a big fillip to the companys sales and profitability,
which should further help reduce debt. We have a positive outlook on Glenmark and recommend a Buy.
GRASIM INDUSTRIES 861 16.5 12.4 11.0 9.5 10.9 10.6 1,150 33
Remarks: Grasim Industries, a flagship company of the Aditya Birla Group ranks among Indias largest private sector companies having core
businesses of Cement (~70% of revenue with listed subsidiary UltraTech Cement), Viscose Stable Fibre (~20%) and Chemicals
(~10%). The company has benefitted from improvement in its profitability in all of its three divisions with outlook continuing to
be positive.
The timely acquisition of JP Groups cement assets, continuous brownfield expansions and de-bottlenecking are likely to
increase its cement capacity to over 90MT. The structural growth triggers like rising infrastructure investment and pick-up in
rural demand (owing to a good monsoon) are likely to help sustain a favourable growth outlook for the cement sector. The revival
in VSF prices, absence of major capacity additions in China, low inventory and leverage of LIVA brand are likely to sustain VSF
divisions profitability going forward. Further, the company will expand its Caustic Soda capacity from 840KTPA to 1048KTPA in
FY2018, which should sustain its volume growth.
The current restructuring exercise of aligning high-growth businesses in Manufacturing (Cement, Textiles, Chemicals, Insulators,
Solar etc) and Services (Financial Services & Telecom post approval of proposed group restructuring scheme) provides a unique
opportunity to investors to hold a well-diversified portfolio, which is expected to maintain strong growth momentum going
forward across verticals. Overall, we expect Grasim Industries to reap benefits going forward, considering the revival in its core
VSF division, strong demand and better realisations in Chemicals and sturdy growth outlook for the Cement business.

Sharekhan Top Picks EQUITY FUNDAMENTALS

Name CMP (Rs)
HCL TECH 825 20.5 14.3 12.2 21.7 26.4 25.9 965 17
Remarks: HCL Technologies (HCL Tech) has a leadership position in ERD and IMS space, which together account for ~58% of the companys
total revenue. The management believes that cross selling to the existing ERD and IMS clients could unravel a larger opportunity.
The company is also taking the inorganic route to strengthen its existing offerings besides expanding its digital piece. The
company has done a series of acquisitions and investments, namely Trygstad Technical Services, Concept to Silicon Systems,
Geometric, IP partnership IBM, Butler America Aerospace.
The management has made investments in digital technologies (DRYiCE), which will catapult HCL Tech to the next level of
growth during the ongoing digital transition. HCL Tech has been continuously monetising its digital works.
HCL Tech has more than 50% of its workforce in the US as local hires. Also, it is the top paymaster among the Indian IT companies,
which makes it relatively less vulnerable to potential visa and wage hike issues in the US market under the new Donald Trump
administration.
We remain positive on HCL Tech in view of its large order wins, acquisitions in the ERD space and IBM-IP investments. In addition,
the management has provided industry-leading revenue growth outlook for FY2017 with a stable margin trend. The stock is
trading at inexpensive valuation of 14.3x and 12.2x its FY2017E and FY2018E earnings, respectively.
HDFC BANK 1,200 24.7 20.2 16.5 18.3 19.1 20.1 1,415 18
Remarks: HDFC Bank has a pre-eminent presence in the retail banking segment (~50% of loan book) and has been able to maintain a
strong & consistent loan book growth, gradually gaining market share. Going forward, economic recovery and improvement in
consumer sentiment would be positive growth drivers for the banks loan growth, which will in turn drive its profitability.
Backed by a current account & savings account (CASA) ratio of 40%+ and a high proportion of retail deposits, the banks cost of
funds remains among the lowest in the system, helping it to maintain higher net interest margin (NIM). In addition, the banks
loan book growth is driven by high-yielding retail products such as personal loans, vehicle loans, credit cards, mortgages etc,
mostly to own customers (which also positively impacts NIMs).
HDFC Bank has been maintaining near impeccable asset quality, with its NPA ratios consistently been among the lowest versus
comparable peers. The bank has been able to maintain a robust asset quality due to its stringent credit appraisal procedures
and negligible exposure to troubled sectors.
HDFC Bank is well poised to tap the growth opportunities going ahead due to strong capital ratios, healthy asset quality and
steady revival in consumer spending. Recent demonetisation would help the bank to gain more deposits. Also, as lending and
transactions through formal routes increase, HDFC Bank would benefit since it is a leading private sector bank and it is likely that
it will gain market share in this segment. The bank is likely to maintain a healthy RoE of 18-20% and RoA of 1.8% on a sustainable
basis. Therefore, we expect it to sustain the valuation premium that it enjoys vis--vis other private banks.
Indian Oil Corp 324 11.8 10.7 9.2 18.4 18.1 18.7 355 10
Remarks: Indian Oil Corporation (IOC) is a leader in the domestic downstream oil sector with non-replicable infrastructure total refining
capacity of 80.7 mmt (35% market share), retail outlets of 25,363 (45% market share) and pipeline capacity of 80.6 mmt (market
share of 55% among downstream companies). The company is also a market leader in the domestic petroleum sales with volume
of 72.7 mmt (45.9% market share) in FY2016.
We expect IOCs EPS to grow by 10%/17% in FY2017/FY2018, led by ~6-7% growth in domestic consumption of HSD/MS, recovery
in refining margins (Singapore complex GRM has improved sharply to around$7/bbl in Q3FY2017 so far vs $5.1/bbl in Q2FY2017),
stabilisation of the 15-mmt Paradip refinery (expected to operate at 90% utilisation by February 2017) and inventory gains (given
our expectation of stable-to-rising oil prices). The Paradip refinery could add Rs3-4/share to FY2018E EPS at GRM of $9-10/bbl.
The company is also implementing pipeline expansion projects at an estimated capex of Rs12,000 crore over the next couple of
years, which would add 22 mmt to IOCs pipeline capacity.
IOC has a strong balance sheet, with low net debt-to-equity ratio (D/E) of 0.64x in FY2016 and we expect RoE to expand to 18.7%
in FY2018 (vs 18.4% in FY2016).
IndusInd Bank 1,107 28.8 22.3 17.0 16.1 16.7 17.6 1,460 32
Remarks: IndusInd Bank is among the fastest growing banks (26% CAGR over FY2012-FY2016), with a loan book of Rs93,678 crore and 1,000
branches across the country. About 55% of the banks loan book comprises of retail finance, which is a high-yielding category,
and is showing signs of growth.
Given the aggressive measures taken by the management, the deposit profile has improved considerably (CASA ratio of ~35%).
Going ahead, the bank would follow a differentiated branch expansion strategy (5% branch market share in identified centers)
to help in ensuring healthy growth in savings accounts and retail deposits.
IndusInd Bank has maintained its asset quality despite sluggish economic growth and higher proportion of retail finance in its
loan book. The banks asset quality is among the best in the industry, with total stressed loans (restructured loans + gross NPAs)
forming just 1.4% of the loan book.
A likely revival in the domestic economy will further fuel growth in the banks consumer finance division while strong capital
ratios will support future growth plans. Though the recent demonetisation has raised questions regarding delinquencies in
certain lending segments, the management expects asset quality to remain under control. The stock should continue to trade
at a premium valuation, underpinned by strong loan growth, quality management, high RoAs and healthy asset quality. We have
a positive outlook on IndusInd Bank.

EQUITY FUNDAMENTALS Sharekhan Top Picks

Name CMP (Rs)
Maruti Suzuki 5,323 35.2 21.3 19.5 18.0 23.4 21.7 6,430 21
Remarks: Maruti Suzuki India (Maruti) is Indias largest passenger vehicle (PV) manufacturer with a strong 47% market share. Over the last
two years, the company has been able to gain market share due to new product launches, a vast distribution network (with an
increased focus on the rural markets) and a shift in consumer preference to petrol models from diesel models.
The recently launched premium hatchback Baleno has received a strong response, which will help Maruti to expand its market
share in the segment. The compact sports utility vehicle (SUV) Vitara Brezza has also received an encouraging response. Both
the new products command a waiting period of 6-8 months each. Further, the recent entry in the light commercial vehicle (LCV)
segment would also boost overall volumes.
Maruti has maintained its FY2017 volume target of 1.55 million units despite the demonetisation move, as the proportion of
financing in the companys overall sales is around 80%, which is higher than the PV industry average of ~65-70%. Hence, the
impact of demonetisation on Maruti sales is likely to be relatively lower.
In FY2018, Maruti would see higher volume growth, driven by the expected resurgence in demand post demonetisation and
planned new launches. Also, the Gujarat plant is expected to commence operations in March 2017. New products and high order
backlog for the recent launches (Baleno and Brezza) would enable Maruti to outpace the PV industry growth in FY2018.
PI Industries 832 37.5 28.1 23.6 29.2 30.0 27.6 955 15
Remarks: PI Industries (PII) is one of the leading companies in the Indian agro-chemicals industry with a unique business model. Its key
focused areas are branded products (in-license products) and custom synthesis & manufacturing (CSM) (high-growth segment).
PII makes and market a niche product in agrochemicals, which help it to outpace the industry growth. CSM is contributing ~60%
to the total revenue. This segment is growing at CAGR of ~30% for the last three years and we believe it would be the key growth
driver in the coming years.
Demand is expected to be unaffected by the demonetisation move, as outlook for the CSM business (exports), which accounts
for ~60% of total sales, remains strong and benign. In the domestic market, demand is likely to be impacted in the near term,
which could normalise by Q4FY2017.
On the EBIDTA margin front, PII has guided for 100-150BPS improvement on account of better operational efficiency (reduction
in fixed costs) and a favorable product mix. The companys order book remains steady at $800 million.
PII has lined up a capex of ~Rs200 crore for FY2017 and ~Rs150 crore for FY2018. Structurally, PII will benefit from its unmatched
CSM capabilities, wide distribution reach and brand advantage.
RBL Bank 335 37.2 28.8 20.5 11.2 12.0 13.7 375 12
Remarks: RBL Bank (RBL) has been among the fastest growing private sector banks in the past 5-6 years, with advances CAGR of 61.9% over
FY2011-FY2016. Over these years, the bank had restricted its growth to a few geographies, but now it is focusing on expanding
into newer locations.
Despite a high growth trajectory, RBL has managed to maintain a strong asset quality over the years. As of March 2016, RBLs
GNPA stood at 0.98%, which was among the best in the banking industry. The bank mostly lends working capital loans to large
and medium corporates, which are short-term in nature and less risky.
Since 2010, RBL has seen a business transformation under the new management team spearheaded by Vishwavir Ahuja (current
MD & CEO). He has over 35 years of experience in the banking industry and was also the Managing Director in Bank of America
for their India business.
RBL has invested and worked towards significantly improving and upgrading its processes, risk management systems, digital
technology, branch expansion and human capital. As a result, the banks operations are better calibrated now, and should start
showing results in terms of improved return ratios and a stable asset quality going forward.
Zee Entertainment 452 44.3 34.0 25.0 22.1 25.4 28.1 600 33
Remarks: Among the key players in the domestic Cable TV industry, we expect the broadcasters to be the prime beneficiaries of the
mandatory digitisation process initiated by the government. The broadcasters would benefit from higher subscription revenue
at the least incremental capex, as the subscriber declaration standard improves in the Cable TV industry
Zee Entertainment Enterprises (ZEEL) continues to lead the broadcasting industry in advertising revenue growth. ZEEL is one of
the leading players in television broadcasting with a bouquet of 40+ TV channels across genres.
With its exit from the loss-making Sports business, ZEELs operating margins will improve in the coming years. With this deal,
ZEEL will be in a much more comfortable position to accelerate inorganic or strategic investments.
The recent acquisition of general entertainment TV business from the Reliance Group will help ZEEL to expand its regional
presence and facilitate a foray into the comedy genre in the Hindi speaking markets. The management expects to achieve
EBITDA breakeven by the time the consolidation of the acquisition is complete (H2FY2018).
The ZEEL management has increased its focus on digital, movies, and international operations to improve the content
monetisation. The managements intent to remain a pure play media company gives us confidence on the prudent capital
allocation going forward. We continue to see ZEEL as the prime beneficiary of the macro revival and ongoing digitisation trend.

Wealth Creator Portfolio EQUITY FUNDAMENTALS
Wealth Creator Portfolio December 30, 2016

Ahead of broader indices
Objective: To build a balanced and actively managed portfolio Portfolio performance review
of quality companies that will help create meaningful wealth
for investors in the multi-year rally expected in the Indian Despite tough market conditions, the Sharekhans Wealth
equity market. Creator portfolio continued to outperform the broader
indices in December 2016, with cumulative weighted
In addition to some bottom-up picks, the portfolio contains average returns of 7.7% as against 1.0%/3.7% returns in
stocks identified based on three key themes: Sensex/Nifty.
Policy push: Stocks from sectors benefiting from We are not making any changes in the current portfolio and
improvement in the policy environment expect it to maintain the lead in performance over the key
Early gainers: Beneficiaries of an economic recovery indices in the new year too.
(stocks from auto, banking & financial services, logistic
sectors)
Evergreen: Steady performers that provide stable and
consistent returns including urban consumption plays
COMPARATIVE RETURNS
Particulars Returns (as on December 30, 2016)
Since inception (August 21, 2014)
Wealth Creator folio (weighted average returns) 7.7
- Large-cap (64%) 6.1
- Mid-cap (36%) 10.4
Sensex 1
Nifty 3.7
CNX Mid-cap 28.4
UPDATE ON WEALTH CREATOR PORTFOLIO

Reco price (Rs) Price target (Rs)
Sr No Scrip Weights Potential upside
30-Dec-2016 March-2019
Large-caps (64% weightage; 8% each)
1 Axis Bank 8 450 1210 168.9
2 Larsen & Toubro 8 1349 3800 181.6
3 Maruti Suzuki 8 5323 8750 64.4
4 Britannia 8 2882 5400 87.4
5 IndusInd Bank 8 1107 1950 76.1
6 Sun Pharmaceuticals 8 630 1650 162
7 Tata Consultancy Services 8 2362 5100 115.9
8 TVS Motors 8 361 725 101
Mid-caps (36% weightage; 4% each)
9 Capital First 4 573 1485 159.3
10 V-Guard 4 162 310 90.9
11 Indian Oil Corporation 4 326 580 78.1
12 IRB Infra 4 196 650 231.2
13 Network 18 Media 4 33 135 304.2
14 Gabriel India 4 107 200 86.1
15 Century Plyboards 4 168 440 161.8
16 Triveni Turbine 4 119 265 123.6
17 PI Industries 4 832 1900 128.3
* Please note we see scope for upward revision in target price (three-year) of some of the stocks depending on the extent of economic recovery and will keep updating on the same

EQUITY FUNDAMENTALS Stock Update
Apollo Tyres
Hold CMP: Rs190 December 22, 2016
COMPANY DETAILS
Price target: Rs210 Challenging times ahead; downgrade to Hold
Market cap: Rs9,654 cr
52-week high/low: Rs235/128 KEY POINTS
NSE volume (No of shares): 30.3 lakh Demonetisation to impact domestic demand: Demonetisation has led to a cash crunch
BSE code: 500877 situation and has impacted demand in the consumption space. Post the demonetisation
announcement, the RBI has lowered the FY2017 GDP forecast from 7.6% to 7.1%, which
NSE code: APOLLOTYRE
would affect freight availability and consequently the demand for new Commercial
Sharekhan code: APOLLOTYRE Vehicles (CV). Lower freight availability would result in lower utilisation of fleet, leading
Free float (No of shares): 28.4 cr to postponement of replacement demand for CV tyres. The situation is expected to have a
SHAREHOLDING PATTERN significant impact on the volumes of Apollo Tyres (derives about 65% of its domestic revenue
from the CV segment). We expect flat revenue as against the earlier projection of a mid-
Institutions
7% Corporate
Bodies
single digit growth.
H
ardening of raw material prices to impact margins: The price of natural rubber has risen
4%
Foreign
sharply in the last two months. Crude oil prices too have increased by around 15-17% post
Promoters
33% the announcement of production cut by OPEC nations in early December 2016. Also, given
44% the weak pricing power (on account of lower demand post demonetisation) and continued
Public and dumping by the Chinese players, we believe the Indian tyre companies are unlikely to hike
Others
12% prices to pass on the increased raw material (RM) costs. We expect rising RM prices to
impact Apollo Tyres margins from Q4FY2017.
PRICE PERFORMANCE Valuation: Given the lower freight, the domestic CV tyre off-take is likely to be adversely
(%) 1m 3m 6m 12m impacted. Further, Apollo Tyres has to bear the rising RM costs, as it is unlikely to undertake
Absolute 6.0 -10.5 31.1 28.4 pricing action due to the weak demand scenario and increased competition from the Chinese
Relative to Sensex 4.1 -3.0 33.1 24.1 players. Therefore, we have reduced our earnings estimates by 3%/13% for FY2017/FY2018.
Given the double whammy of subdued demand and rising RM costs, we have downgraded our
recommendation to Hold with a revised price target of Rs210.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be
holding or having a postition in the companies mentioned in the article. For detailed report, please visit the Research section of our website, sharekhan.com.
Aurobindo Pharma
Buy CMP: Rs691 December 16, 2016
COMPANY DETAILS
Price target: Rs825
US drug pricing probe a near-term overhang;
Market cap: Rs40,423 cr Long-term outlook intact; PT revised to Rs825
52-week high/low: Rs895/582
NSE volume (No of shares): 19.7 lakh KEY POINTS
BSE code: 524804 The event: Twenty US states have filed a lawsuit against six generic pharma companies
NSE code: AUROPHARMA in relation to the alleged fixing of drug prices. Aurobindo Pharma is one of the six generic
Sharekhan code: AUROPHARMA pharma companies mentioned in the lawsuit. The lawsuit is related to antibiotic Doxycycline
Hyclate and Glyburide.
Free float (No of shares): 27.0 cr
The impact: Pharma stocks have corrected sharply of late (~5-10%) in the past week, as
SHAREHOLDING PATTERN the US agencies have expanded the scope of their probe into the alleged fixing of drug
Public and
Institutions
prices. It is difficult to ascertain a definite timeline and the outcome of the US litigations,
others
8% as these cases usually take at least two years just for investigation. The management has
11%
clarified that the drug being probed (Glyburide) contributed ~Rs7-8 crore to the companys
Foreign
sales in FY2016. The companys operations will not be impacted due to the latest regulatory
27% development in the US.
Outlook: With Aurobindo Pharma guiding for major injectable launches (6-7 drugs), we
expect major growth to occur in H2FY2017, especially driven by the launch of Meropenem
Promoters and Vancomycin (in the injectable category) and gNexium (in the oral segment). The
54% earnings visibility for FY2017 and FY2018 is pretty strong due to the increased approval of
PRICE PERFORMANCE key drugs.
(%) 1m 3m 6m 12m Valuation - Maintain Buy with revised PT of Rs825: We expect the upcoming launches and
approvals of key products, coupled with higher contribution from injectables in FY2017-
Absolute -5.2 -11.1 -6.1 -15.3 FY2018 to improve valuation going ahead. However, the US drug pricing probe and the US
Relative to Sensex -6.0 -4.9 -6.1 -20.4 president-elect Donald Trumps heathcare policy will remain an overhang in the near term.
Therefore, we have revised downward the earnings multiple to 14x from 16x earlier. The
price target has been revised to Rs825 and we maintain our Buy rating.

Stock Update EQUITY FUNDAMENTALS
Bajaj Finance
COMPANY DETAILS
Price target: Rs1,010
Demonetisation dents near-term sentiment;
Market cap: Rs46,289 cr outlook challenging
52-week high/low: Rs1,180/535
BSE code: 500034 The Governments demonetisation move has adversely impacted the overall financial industry
NSE code: BAJFINANCE and Bajaj Finance (BFL) is no exception. The BFL management indicated that enquiries and
disbursals dropped in certain categories post the official demonetisation announcement.
Sharekhan code: BAJFINANCE
However, the impact has not been uniform and the bulk of the demonetisation fallout
Free float (No of shares): 22.98 cr has been seen on segments like Two Wheelers (2W) and Three Wheelers (3W), Consumer
SHAREHOLDING PATTERN Durables and Loan Against Property (LAP) segments.
Others In Consumer Durables finance, 2W/3W finance and Rural segments, lending has seen a
0.3% significant deterioration, owing to high dependency on cash collections. Other mass-affluent
and urban-centric products have seen a relatively smoother switch to digital and cheque-
based payment routes. While in the near term, the collections may be impacted negatively,
Public
42.3% in the long term, any shift towards the formal banking channels will result in significant
Promoter operational efficiencies for BFL and the industry.
57.3%
Though the data taken was for a short-term period, the BFL management feels that it would
take 4-5 months for things to normalise post the demonetisation-driven shock. Due to the
festival season falling around the demonetisation announcement (November 8, 2016), we
PRICE PERFORMANCE believe the impact of the slower loan disbursals and muted demand would not only affect
(%) 1m 3m 6m 12m Q3FY2017 but also the entire FY2017. Also, going forward, other measures (if any) announced
Absolute -3.5 -22.3 16.2 63.4 by the Government to combat the black money malaise may pose near-term challenges to
Relative to Sensex -1.7 -16.5 15.4 50.7 BFLs growth as well as asset quality / profitability. Due to near-term uncertainties, we have
reduced our valuation and earnings estimates for FY2017E and FY2018E. We maintain our
Hold rating with a revised price target of Rs1,010.
CESC
COMPANY DETAILS
Price target: Rs720
Operationally on track;
Market cap: Rs8,359 cr upgrade to Buy with revised PT of Rs720
BSE code: 500084 Steady standalone earnings performance: In Q2FY2017, CESCs total revenue grew by 6%
NSE code: CESC YoY to Rs1,956 crore, driven by 3% YoY rise in volume and 2% YoY increase in tariff. Though
the topline grew by 6% YoY, higher fuel cost affected the operating profit, which came in
Sharekhan code: CESC
flat YoY at Rs531 crore. The Operating Profit Margin (OPM) contracted slightly while the
Free float (No of shares): 6.6 cr operating profit per unit remained almost flat YoY at Rs2.8/unit. Consequently, the PAT
SHAREHOLDING PATTERN stood at Rs243 crore vs. Rs235 crore in Q2FY2016.
Others P
ositive developments in new power projects to reduce losses substantially in FY2017:
8% The Haldia plant is stable now, operating at a Plat load Factor (PLF) of 81.8%. The Chandrapur
DII plant operated at 28.6% PLF and signed a PPA with NPCL for the supply of 200MW, which is
19% Promoters awaiting regulatory approval. Currently, the Chandrapur plant has 80% PPA tied up, which
50% would substantially reduce the loss in FY2017 compared to FY2016. The newly acquired
distribution business in Rajasthan would achieve a break-even at the end of FY2018.
Foreign U
pgrade to Buy with a revised price target of Rs720: The outlook for CESCs Power
23% Generation business has improved with meaningful positive developments in its subsidiaries,
especially in Chandrapur. Further, the Retail and Process businesses remain on track though
PRICE PERFORMANCE the Retail business would get impacted in the immediate future due to demonetisation. We
(%) 1m 3m 6m 12m have adjusted our price target (PT) to factor in the distribution license win in Rajasthan and
Absolute 7.0 -2.6 12.4 23.7 potential cash losses in the IPL franchise over the next two years. The key for further upside
Relative to Sensex 9.0 4.6 11.6 14.1 would be improvement in PPA tie-ups for the Chandrapur facility, reduction of losses in the
Retail vertical and monetisation of unrelated business of IPL franchise. Therefore, we are
upgrading the stock to Buy with a revised PT of Rs720.

Cipla
COMPANY DETAILS
Price target: Rs610
Approval of gSeretide for UK to boost business;
Market cap: Rs44,511 cr maintain Hold with revised PT of Rs610
BSE code: 500087 The event: Cipla recently received the UKMHRAs approval to launch its combination
NSE code: CIPLA
inhaler Sereflo (gSeretide - indicated for Asthma treatment) in the UK market. The UK sales
for gSeretide stood at $288 million as of June 30, 2016. The UK is a lucrative market for
Sharekhan code: CIPLA gSeretide; with limited competition (Mylan and Cipla are the only two players).
The impact: The UK approval for gSeretide comes at a crucial time for Cipla, as it will help
SHAREHOLDING PATTERN the company to gain traction in its business across global markets. The UK market will have
Public and Institutions limited competition for the product and better profitability due to the complex nature of
others 16% the product. We expect the company to launch the product by Q4FY2017.
23% Outlook: We expect the companys margins to improve on the back of the acquisition of
InvaGen and Exelan in USA, launch of combination inhalers across various global markets
and several international restructuring initiatives. This in turn will help Cipla to improve
Foreign profitability, owing to expansion of the companys US business, increase in the number of
24% new product launches and cost-control initiatives.
Promoters Maintain Hold with revised PT of Rs610: We maintain our FY2017 and FY2018 earnings
37%
estimates, and introduce FY2019 earnings estimates. However, on account of the continued
PRICE PERFORMANCE overhang of the USFDA issues and uncertainty related to a potential change in US
(%) 1m 3m 6m 12m governments healthcare policy stance, most of the pharma stocks have corrected more
than 10-15% in the past 2-3 weeks. Therefore, we have revised downwards our earnings
Absolute 3.2 -6.4 16.8 -12.3
multiple to 20x from 22x earlier, as Cipla has also received 483 observations from the USFDA
Relative to Sensex 1.4 1.5 18.6 -15.2 for its Goa plant (more procedural in nature). We now value the stock on average earnings
of FY2018E and FY2019E. We continue to maintain our Hold rating with a revised price
target of Rs610.
Cox & Kings

COMPANY DETAILS
Price target: Rs225
FY2017 to be year of consolidation;
Market cap: Rs2,895 cr FY2018 to be better; PT revised to Rs225
BSE code: 533144 Revenue grows in double digits; margins disappoint: During Q2FY2017, Cox & Kings (CKL)
NSE code: COX&KINGS revenue grew by 11.7% YoY to Rs2,557.8 crore on a like-to-like basis. The double-digit topline
growth can be attributed to a 11% YoY growth in the domestic Leisure Travel business and a
Sharekhan code: COX&KINGS
~40% YoY growth in other revenue. Excluding forex loss, the Operating Profit Margin (OPM) at
Free float (No of shares): 8.6 cr the consolidated level stood at 48.0% in Q2FY2017 as against 46% in Q2FY2016. Consolidated
SHAREHOLDING PATTERN PAT before Minority Interest & Exceptional Item declined by 45.5% YoY to Rs84 crore.
Others
17%
D
emonetisation to affect domestic Leisure Travel business: CKL has indicated that the
Governments demonetisation drive will have near-term impact on the outbound bookings
in the upcoming holiday season, while the MICE business is not expected to be affected. On
Promoters the positive side, lots of travelers are shifting to large branded players, who normally deal
FIIs
51% in cheque/online booking/card payments.
30%
E
stimates reduced: We have reduced our earnings estimates for FY2017 and FY2018 by
Domestic
institutions
about 10% each to factor in the lower-than-expected revenues in Education and Meininger
2% business and demonetisations impact on the domestic Leisure Travel business.
PRICE PERFORMANCE R
etain Buy with revised PT of Rs225: Demonetisation and GST implementation will act as
catalysts for CKLs domestic Leisure Travel business in the long run due to the shift from the
(%) 1m 3m 6m 12m
unorganised players to organized ones. On the other hand, Education and Meininger business
Absolute -28.2 -11.7 11.8 -31.5 is expected to post a decent performance in the coming years. Also, the management is
Relative to Sensex -24.8 -5.9 10.8 -33.8 planning to reduce its consolidated debt by Rs400-500 crore per year through internal cash
flows. Therefore, we maintain our Buy recommendation with a revised price target of
Rs225.

Glenmark Pharmaceuticals
COMPANY DETAILS
Focus on niche launches, outlook strong;
Market cap: Rs26,386 cr maintain Buy with unchanged PT of Rs1,150
BSE code: 532296 Betting big on niche launches on account of a robust pipeline: Glenmark Pharmas
strategic blueprint outlines aggressive plans to expand its global presence by sharpening
NSE code: GLENMARK focus on complex generics, and widening the manufacturing base, with a clear emphasis on
Sharekhan code: GLENMARK therapeutic areas like Dermatology, Oncology and Respiratory. The company plans to grow
Free float (No of shares): 15.1 cr the Generics business through differentiated products, launch of speciality & innovative
products and entry into new dosage forms like Inhalers.
SHAREHOLDING PATTERN
Investment & financial update: Glenmark Pharmas management has guided for an annual
Institutions capex of Rs600-700 crore over the next three years for building facilities and widening the
Public and 6% geographic presence. Annual spend on intangible assets will be Rs200 crore for the next
others three years, mainly on account of in-licensing deals. With the recent launch of gZetia,
11% cash generation over the next 2-3 quarters should remain strong, which should primarily be
utilised to repay debt. We expect the RoCE to improve from the current level of 19-20% to
Foreign 24%+ over the next 4-5 years.
36%
Promoters Guidance: Glenmark Pharmas management has guided for revenue CAGR of 15-20% over the
47% next five years, with 80% revenue contribution coming from India, USA and EU markets, and
the API segment. The Operating Profit Margin (OPM) is expected to be in the range of 22-24%
from FY2018 onwards, while the R&D expenditure (net of out-licensing income) is forecast
PRICE PERFORMANCE at 11% of sales.
(%) 1m 3m 6m 12m Maintain Buy with unchanged PT of Rs1,150: Glenmark Pharma is in the process of
Absolute 4.5 2.3 24.3 3.5 aggressively ramping up products in USA, India and EU, which should give a major boost to
Relative to Sensex 3.6 10.9 24.8 -1.4 its topline in the next couple of years. The gZetia launch scheduled in H2FY2017 will give
a big fillip to sales and profitability, which should further help reduce debt. We continue to
remain positive on the stock and maintain our Buy rating with an unchanged price target
Sharekhan Limited, its analyst or dependant(s) of the analyst might be of Rs1,150.
holding or having a postition in the companies mentioned in the article.
For detailed report, please visit the Research section of our website, sharekhan.com.
Godrej Consumer Products

Buy CMP: Rs1,455 December 14, 2016
COMPANY DETAILS
Demonetisation impact limited to 50% of business;
Market cap: Rs49,548 cr upgrade to Buy with revised price target of Rs1,665
52-week high/low: Rs1,710/1,120
We interacted with the management of Godrej Consumer Products (GCPL) to gauge the impact
NSE volume (No of shares): 2.2 lakh of demonetisation on the companys domestic business. Some of the key highlights of our
BSE code: 532424 interaction are as follows.
NSE code: GODREJCP KEY POINTS
Sharekhan code: GODREJCP Impact of demonetisation limited to domestic business; Wholesale channel materially
Free float (No of shares): 12.5 cr hit: GCPL is expected to be relatively less affected by demonetisation compared to other
FMCG companies, as its domestic business constitutes ~50% of overall consolidated revenue.
SHAREHOLDING PATTERN The Wholesale Trade Channel (40-45% of GCPLs domestic distribution network) has been
Others significantly affected by demonetisation, while Retail and Modern Trade have seen relatively
6% lower impact. Further, Rural India, which is witnessing a substantial slowdown in consumer
off-take due to demonetisation, has a penetration of ~28-30% within GCPLs overall revenue
Foreign & pie. Overall, 20-22% of GCPLs consolidated business could see a significant impact in the
Institutions coming quarters due to demonetisation.
31%
Q3FY2017 could see dip in standalone revenue; performance to be better in Q4FY2017:
We expect a drop in GCPLs standalone revenue in Q3FY2017 but expect Q4FY2017 to be
Promoters
relative better, as the liquidity situation gradually improves (especially in South India). On
63% the margin front, the management indicated that it has withdrawn freebies/promotional
offerings/price discount in Soaps, while it has taken a price increase of 2% in the HI products.
PRICE PERFORMANCE Further, it reduced the Advertising & Promotional spends substantially in November-
(%) 1m 3m 6m 12m December to support operating margin.
Absolute -0.3 -10.4 -2.7 14.9 Cut estimates for FY2017, FY2018: We have reduced our FY2017/ FY2018 earnings estimates
by 6%/4% to factor in the impact of lower sales and profitability due to demonetisation.
Relative to Sensex 0.1 -5.0 -4.5 6.2
Upgrade to Buy with revised PT of Rs1,665:. The stock has already corrected by 12% from its
high and is currently trading at 33.0x its FY2018E earnings. In view of the limited impact of
Sharekhan Limited, its analyst or dependant(s) of the analyst might be demonetisation and long-term growth prospects, we upgrade our rating from Hold to Buy
holding or having a postition in the companies mentioned in the article. with a revised price target of Rs1,665.

IRB Infrastructure Developers

COMPANY DETAILS
Price target: Rs260
Faster realisation of claims to ease funding
Market cap: Rs6,927 cr requirements; retain Buy
NSE volume (No of shares): 19 lakh KEY POINTS
BSE code: 532947 IRB Infrastructure receives Rs270 crore arbitration claim for two projects: IRB
NSE code: IRB Infrastructure Developers (IRB Infra) has received 75% of the arbitration award amounts
Sharekhan code: IRB for two projects, aggregating to Rs270 crore. With this, the National Highway Authority of
India (NHAI) has initiated the release of 75% of the arbitral award. As on December 21, the
NHAI has sanctioned Rs1,780 crore for 11 companies (besides IRB Infra, others are HCC,
SHAREHOLDING PATTERN IL&FS Engineering, Gayatri Projects etc). The sanctioned amount is to be released after
FII
five days from the acceptance of the payout from the concessionaire/contractor and after
29% verification of the bank guarantees.
E
asing pressure on funding is enhancing capability for bidding of new projects: The
Promoters
Institutions faster realisation of arbitration claims is likely to help IRB Infra to repay its bank loans
57%
7% and/or to fund its ongoing projects. The company has debt repayment worth Rs500-600
Public & crore due in FY2017 while the equity requirement over the next two years is Rs1,500-1,600
others crore. Realisation of arbitration claims, along with strong operating cash flows from the
7%
operational assets is likely to ease funding requirement for ongoing projects during FY2017.
PRICE PERFORMANCE Further, the companys ability to bid for new projects is likely to be enhanced.
(%) 1m 3m 6m 12m Maintain Buy with unchanged price target of Rs260: Post demonetisation, IRB Infras stock
Absolute 5.1 -20.0 -6.0 -18.1 has witnessed a correction, which is in line with the sector peers. We believe that the fall
provides an opportunity to the long-term investors to enter the stock. We believe that the
Relative to Sensex 3.2 -13.3 -4.5 -20.8
macro-economic outlook for IRB Infra remains sanguine. Consequently, we maintain Buy
with an unchanged price target of Rs260.
LIC Housing Finance

COMPANY DETAILS
Price target: Rs700
Business mix to favor correction in Real Estate;
Market cap: Rs27,049 cr not impacted by demonetisation
BSE code: 500253 Slow off-take of houses across the country due to high prices has resulted in a high inventory
NSE code: LICHSGFIN pile-up in the Real Estate sector. If the Governments demonetisation measures are able
Sharekhan code: LICHSGFIN to check the black money flow to the Real Estate sector, it may lead to further price
correction, thereby resulting in better affordability. A low interest rate regime and cheaper
bank credit may lead to higher demand for housing loans, especially from the salaried class.
SHAREHOLDING PATTERN Also, since the salaried class has been the least affected by the cash crunch, we dont
expect a significant impact on LIC Housings asset quality.
Government bond yields have declined by around 30BPS post demonetisation, as the steep
Promoter rise in bank deposits has resulted in high liquidity, which will help keep interest rates benign.
40.3% Low interest rates and better affordability in the Realty space are the key growth drivers for
Public individual home buyers, which form around 88% of LIC Housing Finances borrowers. Also,
59.7% the lower Cost of Fund (CoF) would be a positive for reducing overall costs, besides enabling
it to maintain NIM around the current level (2.68% in Q2FY2017).
LIC Housing is a strong player in the NBFC housing finance space, with a significant amount of
PRICE PERFORMANCE its loan book comprising salaried and urban segment, which puts it in a favourable position
(%) 1m 3m 6m 12m to benefit from demonetisation in the long run. We expect some slowdown in the companys
Absolute 8.5 -4.8 13.2 12.5 disbursements in the near term (H2FY2017), but as things stabilise, it could gather pace and
increase significantly in the long run. LIC Housings asset quality has been improving steadily
Relative to Sensex 6.5 3.3 14.9 8.7
over the last couple of years, with high average ROE of 17+%. We maintain our Buy rating
with an unchanged price target of Rs700.

Marico
COMPANY DETAILS
Price target: Rs290
Recent correction a good entry point;
Market cap: Rs31,733 cr upgrade to Buy with revised PT of Rs290
BSE code: 480010 Demonetisation impact - Wholesale and Rural sales affected; Modern Trade and Chemist
channels performing well: Like other FMCG companies, Marico is also feeling the pinch from
NSE code: MARICO the Governments demonetisation measure, with its sales expected to be lower in H2FY2017.
Sharekhan code: MARICO The companys revenue was down 20-25% in the early days of the demonetisation-linked
Free float (No of shares): 52.02 cr liquidity crunch, but has seen a gradual improvement in the recent past. Thus, overall, we
expect Maricos H2FY2017 performance to be lower compared to H1FY2017, with revenue
SHAREHOLDING PATTERN and profitability both expected to see a drop.
Others Faster recovery expected due to a diversified product portfolio and lower exposure to
8% rural markets: With lower exposure to Rural India, we expect Marico to see a faster recovery
Foreign & compared to other FMCG companies, owing to strong brands and a wide distribution reach
Institutions (4.5 million outlets). Further, South India has seen an early recovery from demonetisation in
32% terms of improvement in the liquidity scenario, which would enable Marico to recover faster
than other FMCG companies. Overall, we should expect Marico to post a better operating
performance from Q1FY2018 onwards.
Promoters Estimates cut to factor in demonetisation impact: We have reduced our earnings estimates
60% for FY2017/FY2018 by 10%/9% to factor in the adverse impact of demonetisation. Also, we
have introduced FY2019 numbers.
PRICE PERFORMANCE
Recent fall provides a good entry point; upgrade to Buy: The stock has corrected by around
(%) 1m 3m 6m 12m 17% in the past two months and is trading at about 28.8x its FY2019E earnings. This provides
Absolute -0.3 -13.0 -2.2 9.4 a good opportunity to enter. Therefore, we have upgraded our recommendation from Hold
Relative to Sensex -2.1 -5.7 -0.7 5.7 to Buy with a revised price target of Rs290 (valuing the stock at 34x its FY2019E earnings).
Key risk: A slow recovery in demand and significant increase in the raw material prices could
act as key risks to our earnings estimates.
Persistent Systems
COMPANY DETAILS
Price target: Rs790
Investing in right areas for sustainable growth;
Market cap: Rs5,273 cr maintain Buy with PT of Rs790
We attended Persistent Systems (PSL) 7th Investor Day in Pune, where the management primarily
NSE volume (No of shares): 0.8 lakh
shared its digital strategies, monetisation of IP platform and partners in ecosystem.
BSE code: 533179
NSE code: PERSISTENT KEY POINTS
Sharekhan code: PERSISTENT Well crafted strategies to strengthen digital capabilities: PSL has clearly laid out its strategies
Free float (No of shares): 5.0 cr to further strengthen its future growth prospects: (a) Focus on digital transformation; (b)
SHAREHOLDING PATTERN Strengthen its leadership team (IBM employees and other key recruitment across the world);
(c) Transform into a global company; (d) Focus on technology, and (e) Build partnerships
Corporate Foreign
(PSL is focusing on sales partnerships to gain traction in key accounts).
Bodies
2%
24%
I BM-IOT alliance progressing well, expect to grow in double digits: PSL is focusing on
developing Internet of Things (IoT) products and platforms, as it sees significant traction from
Institutions
12%
Public and
Others
Industrial Machinery, SmartCity, Healthcare and Smart Agriculture verticals (addressable
24% market is huge at $120 billion). The total world IoT market is expected to grow at 32% CAGR
over FY2015-FY2022 to $883 billion. The management believes that the integration of IBM
Promoters
CE/CLM and PSL IoT offering will grow in double digits in the coming years; the alliance is
38% well on track to achieve its target revenue of $45-50 million for FY2017.
PRICE PERFORMANCE M
aintain Buy with a price target of Rs790: We continue to remain positive on PSLs
(%) 1m 3m 6m 12m strategies of investing and building capabilities in new-age technologies to remain relevant
to customers in the ongoing transition phase in the IT industry. We also expect sustainable
Absolute -1.2 -2.0 -13.9 -7.1
growth in the companys revenues with improved profitability going ahead, led by higher
Relative to Sensex -2.0 4.8 -13.9 -12.6 contribution from its IP-led investments and partnerships. We maintain our Buy rating on
PSL with an unchanged price target of Rs790.

Ratnamani Metals & Tubes

COMPANY DETAILS
Price target: Rs600
Soft quarter,
Market cap: Rs2,692 cr demand outlook improves for FY2018
NSE volume (No of shares): 13,768 KEY POINTS
BSE code: 520111 Weak quarterly performance: Ratnamani Metals & Tubes (RMTL) reported weak earnings for
NSE code: RATNAMANI Q2FY2017, owing to a 13% YoY drop in overall volume and 9% YoY fall in blended realisations.
The companys revenue declined by 24% YoY to Rs336.0 crore on account of 11%/13% YoY
Sharekhan code: RATNAMANI
fall in SS/CS volumes. Notably, realisations for SS/CS pipes were down by 3%/15% YoY. Lower
Free float (No of shares): 1.9 cr input costs, coupled with a change in the revenue mix resulted in a 221BPS YoY improvement
SHAREHOLDING PATTERN in the Operating Profit Margin (OPM). Net profit declined by 13.8% YoY to Rs28.5 crore. The
Corporate
companys order book stood at Rs723 crore in November 2016, down ~48% YoY.
Bodies
2%
S
oft outlook for FY2017, but demand environment to improve in FY2018: The RMTL
Institutions
3% Foreign management indicated that demand outlook will improve in the next 3-4 months, driven by
16% acceleration in the domestic capex cycle, primarily led by the Oil Refinery upgradations and
Power sector projects. The RMTL management expects order finalisation of several delayed
Public and
Others
projects to improve, as commodity prices have started recovering, but depreciation in the
Promoters
60%
19% Indian rupee may put some pressure. Looking at the prevailing softness in the new order
inflows, the RMTL management expects sluggish volume growth for 2017, but has reiterated
FY2017 margin guidance of 16-18%.
PRICE PERFORMANCE Reiterate Hold with price target of Rs600: Given the lower order bookings (down 48%
(%) 1m 3m 6m 12m YoY) and weak Q2FY2017 exit, we have tweaked our earnings estimates for FY2017 and
Absolute -12.4 3.2 15.2 1.7 FY2018. From a long-term perspective, we remain positive on RMTL, owing to its strong
Relative to Sensex -8.3 9.9 14.2 -1.7 balance sheet, ability to generate superior return ratios and incremental revenue from the
expansion of seamless SS tube capacity in the next few years. We maintain our Hold rating
with a PT of Rs600.
Reliance Industries
COMPANY DETAILS
Refining margin firm; petcoke gasifier economics
Market cap: Rs323,292 cr could improve on higher oil price
52-week high/low: Rs1,129/889
BSE code: 500325 Economics of petcoke gasification to improve with higher oil prices: Reliance Industries
NSE code: RELIANCE (RIL) is in the final stage of implementing its Petcoke Gasification Plant and it would use
Sharekhan code: RELIANCE petcoke produced from RILs refinery to produce Syngas (to be used as fuel in refining
process) and replace LNG. The economics of petcoke gasification depends on price
Free float (No of shares): 178 cr differential between LNG (indexed to oil price) and the petcoke price. For every $10/
SHAREHOLDING PATTERN bbl increase in crude oil price, RILs GRM would rise by $0.4/bbl due to cost savings from
petcoke gasification.
Others
22% GRMs remain strong: The Singapore complex refining margins have increased by 43% QoQ
to $7.3/bbl Quarter till Date (QTD) in Q3FY2017, led by a sharp rise in gasoline cracks to
Promoters
45% $10.2/bbl ($6.6/bbl in Q2FY2017), fuel oil cracks to $5.5/bbl (vs $7.6/bbl in Q2FY2017)
DII and diesel cracks to $12.9/bbl (vs $10.7/bbl in Q2FY2017).
12%
RJIO extends free offer till March 31, 2017: RJIO will introduce a Happy New Year offer
FII
on December 4 and the new subscribers would be given free voice and data services till
21% March 31, 2017. The existing customers would automatically get signed up for new offer on
December 31. We believe that extension of offer is aimed at accelerating RJIOs target to
PRICE PERFORMANCE add 100 million customers.
(%) 1m 3m 6m 12m Valuation and view core businesses remain strong; maintain Buy with PT of Rs1,300:
We maintain our positive stance on the margins of RILs core businesses - Refining and
Absolute -5.8 -6.6 3.4 3.6 Petrochemicals given the strong demand outlook. The companys RoGC and Petcoke
Relative to Sensex -1.4 -0.5 2.4 0.1 Gasification projects are expected to operate at full capacity in Q2FY2018 and H2FY2018,
respectively, and thus the full benefits from these projects would be reflected in FY2019.
We maintain our Buy rating on RIL with an unchanged SoTP-based price target of Rs1,300.

State Bank of India

COMPANY DETAILS
Price target: Rs320
Higher valuation of insurance subsidiary and
Market cap: Rs204,471 cr demonetisation are long-term positives
BSE code: 500112 State Bank of India (SBI) has agreed to sell a 3.9% stake in SBI Life (SBIL) to KKR and Temasek
NSE code: SBIN for Rs460 per share. SBI currently holds a 74% stake in SBIL while the balance is held by
Sharekhan code: SBIN BNP Paribas Cardiff (the life, property and casualty insurance arm of BNP Paribas SA). With
Free float (No of shares): 309.1 cr this deal, SBI Life has been valued at Rs46,000 crore or 3.54x FY2016 Market Consistent
SHAREHOLDING PATTERN Embedded Value (MCEV) of Rs12,999 crore. The valuation given to SBIL is higher than the
recently listed ICICI Prudential Lifes valuation of ~3.4x its FY2016 Embedded Value during
the IPO.
Public
39% H
owever, gains from the sharp rise in deposits, further strengthening of retail demand and
market share gains in retail accounts on long-term basis are some of the positives for the
bank. SBI is the largest commercial bank in India in terms of size and reach, and could be
Promoter
61% a big beneficiary of the demonetisation drive (higher CASA, reduced cost of funds, lower
lending rates, inroads into new customers etc). SBI has a ~29% market share in terms of
debit cards issuance and a 23% share in debit card spends. This market leadership would be
a key advantage for SBI, as government pushes for cashless transactions across the country.
PRICE PERFORMANCE
In the near term, challenges in asset quality may prevail for Public Sector Banks in general.
(%) 1m 3m 6m 12m
However, we believe that with significant corporate stress already recognised in the system
Absolute 2.6 1.0 27.0 15.3
and the current benign interest rate environment, there may be significant positives for SBI
Relative to Sensex 4.5 8.5 26.1 6.3
in the medium- to long-term. We maintain out Buy rating on SBI with an unchanged price
target of Rs320.
TVS Motor Company

COMPANY DETAILS
Price target: Rs455
Demonetisation to have limited impact on volumes;
Market cap: Rs16,968 cr recent correction provides attractive entry point
NSE volume (No of shares): 19 lakh KEY POINTS
BSE code: 532343 TVS relatively less impacted by demonetisation: TVS Motor Company (TVS) outpaced the
NSE code: TVSMOTOR Two Wheeler (2W) industry in November 2016, reporting flat volume as against the 8% YoY
drop in industry volumes. TVS has a higher share of Mopeds and Scooters (both segments
Sharekhan code: TVSMOTOR
account for 60% of TVS 2W volumes as against industry proportion of ~36%), which have
Free float (No of shares): 20.2 cr been less affected by demonetisation. Moped being a relatively low-ticket and a utilitarian
SHAREHOLDING PATTERN product and Scooter being more of an urban product, have seen a relatively lower impact
Institutions
of demonetisation. Further, as per the TVS management, Moped sales are predominantly
14% driven by the Southern market (forms 60% of total Moped volumes), where demonetisation
Corporate has had a relatively lower impact.
Promoters Bodies
57% 1% T
VS to introduce first product in tie-up with BMW in Q4FY2017: TVS will roll out its first
Foreign
product (likely in 250-300 cc range) in tie-up with BMW in Q4FY2017. The product is likely to
17% be a game changer for the company, as it will enable it to gain a foothold in the high-margin
Public and
Others
Premium Motorcycles space. We expect TVS to gain immensely from the BMW tie-up, as the
11% brands aspirational value is likely to increase. Further, the better manufacturing practices
and designing cues gained in the upcoming BMW product is likely to be applied to the entire
PRICE PERFORMANCE portfolio, enabling TVS to improve its market share and margins going forward.
(%) 1m 3m 6m 12m Maintain Buy with unchanged price target of Rs455: TVS is likely to continue outpacing
Absolute -8.3 15.1 31.8 23.3 the 2W industry growth given its favourable product mix. We expect TVS to report a healthy
Relative to Sensex -3.9 22.6 30.7 19.2 36% earnings growth over FY2016-FY2018. We have fine-tuned our earnings estimates on the
back of the recent demonetisation move and maintain our Buy rating with an unchanged
price target (PT) of Rs455.

UltraTech Cement
Hold CMP: Rs3,158 December 28, 2016
COMPANY DETAILS
Weak demand environment clouds outlook;
Market cap: Rs86,821 cr maintain Hold with revised PT of Rs3,350
52-week high/low: Rs4,130/2,581
BSE code: 532538 Demand environment deteriorates due to demonetisation; to affect volume in near
NSE code: ULTRACEMCO term: Our channel checks with the cement dealers across India imply that cement volumes
Sharekhan code: ULTRACEMCO across regions are down 25-40% since demonetisation (Nov. 4, 2016). Further, average
Free float (No of shares): 10.4 cr cement prices witnessed a correction of around Rs10/bag in December over November (up
SHAREHOLDING PATTERN Rs15/bag YoY). The Eastern region (accounts for 16% of UltraTech Cements total capacity)
is the worst affected with a 6% YoY and a 4% QoQ decline in cement prices. In the West and
Public & others South regions (55% of UltraTech capacity), cement prices have remained more or less flat
11%
YoY. Cement prices in the Northern region (29% of UltraTech capacity) are up 8% YoY.
V
olume and realisation pressure leads to earnings cut: Being the largest pan-India cement
Foreign
21% player, UltraTech is likely to get affected due to a weak demand environment during
Promoter H2FY2017, which may put further pressure on its realisations. Moreover, UltraTech took
MF & FI 62%
price cuts of Rs15-20/bag in December, which coupled with the higher fuel prices is likely
6%
to impact margins in H2FY2017. Consequently, we have reduced our volume and realisation
estimates for FY2017/FY2018 by 5%/2%.
PRICE PERFORMANCE
M
aintain Hold with revised price target of Rs3,350: We have lowered our earnings estimates
(%) 1m 3m 6m 12m
for FY2017 and FY2018, leading to revision in our price target to Rs3,350. However, we have
Absolute -9.7 -19.4 -6.8 12.5
maintained our Hold rating.
Relative to Sensex -9.4 -13.3 -6.7 9.3
Risk: Elongated demand recovery can put pressure on cement prices. This, coupled with
rising fuel costs could lead to downward revision in estimates and valuation.
V-Guard Industries
COMPANY DETAILS
Price target: Rs210
Demonetisation a near-term blip;
Market cap: Rs5,265 cr beneficial for long-term value proposition
BSE code: 532953 Impact of demonetisation: 1) V-Guard Industries (V-Guard) witnessed deferent of
NSE code: VGUARD discretionary consumer spending, especially in the Southern markets while the other
geographies did well in relative terms; 2) On the products front, Cable & Wires and Pumps
Sharekhan code: VGUARD
have been doing well. Electric Fans and Invertors witnessed pressure on sales, which is
Free float (No of shares): 10.4 cr largely due to the off-season slack while Water Heater sales did not perform as expected
SHAREHOLDING PATTERN due to protracted hot weather across India; c) The companys exposure to the rural segment
(~55%) is likely to result in deferment of demand while the urban segment will be relatively
Others
10%
better off. However, in aggregate, the V-Guard management is yet to conclusively assess
DIIs the extent of damage from demonetisation and the timing of revival in consumer demand
12% in the near term.
B
enefits to accrue in medium to long term: The Governments demonetisation move is
FII likely to severely affect the unorganised market, reducing the product pricing spread,
13% besides offering an opportunity to grab a higher market share. Moreover, the impending GST
Promoters
65% implementation will be beneficial for V-Guard, as it is facing rigorous pricing pressure from
the unorganised market, which is outside the tax ambit at present.
PRICE PERFORMANCE R
etain Buy with unchanged price target of Rs210: Factoring in the demonetisation event,
(%) 1m 3m 6m 12m we had already revised our valuation and earnings estimates in our last report dated Nov. 25,
Absolute -13.0 -7.2 25.3 87.2 2016. We expect V-Guard sales to get adversely impacted in the near term, but the company
Relative to Sensex -10.1 1.7 26.0 79.2 is likely to reap benefits once normalcy returns, as the fundamental value proposition for its
products remains intact. Therefore, we retain Buy with an unchanged price target (PT) of
Rs210 (based on 33x FY2019 earnings).

VIEWPOINT EQUITY FUNDAMENTALS
Aditya Birla Fashion & Retail Viewpoint

View: Positive CMP: Rs138 December 05, 2016
Demonetisation to cause near-term disruption;
gearing up for a better performance
Key points expected to be much lower in comparison to H1FY2017.
Revenue grows but new investments in MFL lead to drop S hift in seasons to improve business cycle: ABFRL is
in OPM: For Q2FY2017, Aditya Birla Fashion & Retails building an agile design and supply chain by shifting from
(ABFRL) overall revenue grew by 13% YoY, mainly led by two seasons to four seasons. The company has worked with
a 22% YoY growth in Pantaloons and a 5% YoY growth in internal and external consultants for this transition with an
Madura Fashion & Lifestyle (MFL). But, MFL witnessed a aim of introducing the latest trends and to aid correction in
10% YoY decline in revenue on a like-to-like basis due to inventory.
inventory correction and a prolonged End of Season Sale Retain positive stance; potential upside of 15-20%: We
(EOSS). However, the Operating Profit Margin (OPM) of have factored in lower growth for FY2017 in our rough
8.8% was down by only ~70BPS, led by lower discounting estimates considering the after-effects of demonetisation.
in the MFL business and reduced operating leverage in the However, we expect better financial performance in FY2018
Pantaloons business. and FY2019. Expected recovery in the macro-economic
Demonetisation to cause near-term pain; H2FY2017 environment, better performance by Pantaloons and an
to be weaker vs H1FY2017: Demonetisation has had an improved performance by some of recent acquisitions
adverse effect on ABFRLs operations, particularly MFLs would be the key triggers for ABFRL in the near term. The
wholesale business. The wholesale channel has a significant recent correction in the stock price could be seen as a good
exposure to cash dealings, which will impede the companys entry point in view of its long-term growth prospects. We
ability to absorb incremental inventory. Also, footfalls in maintain our Positive view on ABFRL and expect 15-20%
the Pantaloons business would be affected in Q3FY2017 upside from the current level.
and early part of Q4FY2017 due to a slowdown in overall For detailed report, please visit the Research section of our website, sharekhan.com.
discretionary consumption. Since 45% of the companys Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a
business happens in cash, H2FY2017 performance is postition in the companies mentioned in the article.
Balrampur Chini Mills Viewpoint

Sweetness to sustain
Key points C
omfortably placed in terms of leverage; focus remains on
reducing debt: As on September 30, 2016, BCMLs debt-to-
Sugar prices firmed up in FY2017; likely to remain
equity ratio stood at 0.59x (down from 1.39x as on March
relatively stable in FY2018 due to favorable demand-
31, 2016) due to a debt reduction of almost Rs1,000 crore
supply scenario: The Indian sugar companies are in a sweet
in the last six months. Its leverage position is much better
spot, as sugar prices have firmed up to Rs35-36 per kg in
in the domestic sugar industry compared to some of the
the domestic market due to a demand-supply mismatch
other UP-based sugar companies such as Dhampur Sugar
in the international market. The upsurge in the domestic
(1.2x).
sugar prices is positive for UP-based sugar companies such
as Balrampur Chini Mills (BCML) with large production A
better play in sugar upcycle: In the event of a sugar
capacity, better leverage position and strong relationship upcycle, BCML is a better play due to its relatively higher
with cane farmers. production capacity and better leverage position compared
to peers. The stock is trading at 7.3x its FY2017E earnings
F
Y2017 to be a blockbuster year; FY2018 to be stable:
and 8.5x its FY2018E earnings, which is much lower than
Buoyed by the spike in sugar prices and better sugar recovery
the 18-20x multiple it commanded in the last sugar upcycle
(10.5-11% vs 9.5-10% in earlier years), BCML is expected to
of season 2008-2010. We have a positive view on BCML and
post blockbuster operating performance in FY2017. BCML
expect it to deliver 18-20% return in the next 6-12 months.
registered a revenue growth of 48.3% YoY and OPM of 20.3%
in H1FY2017. Though the companys domestic production K
ey risk: Any significant increase in the global sugar
is expected to be higher YoY, the global demand-supply production or a decline in sugar recovery would act as a
mismatch should keep the domestic sugar prices firm at key risk to earnings.
the current level in the near term. Therefore, the OPM is For detailed report, please visit the Research section of our website, sharekhan.com.
expected to remain at ~16.0% in FY2018, which is higher Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a
than FY2014-FY2016. postition in the companies mentioned in the article.

EQUITY FUNDAMENTALS VIEWPOINT
Indian Oil Corporation Viewpoint

Refining margins soften but long-term outlook remains intact
Key points gains (QTD, Brent oil at $50.6/bbl vs $47/bbl in Q2FY2017).
The Marketing segments earnings are also expected to
Refining margins fall sharply to $6/bbl in December: Post
witness improvement given 14%/7.8% YoY increase in MS/
the OPECs decision to cut oil production by 1.2mbpd, the
HSD consumption during October-November, owing to
Singapore complex GRMs have declined sharply by 24%
demonetisation.
to ~$6/bbl in December so far vs $8/bbl in November.
The diesel cracks declined to $10.4/bbl (vs $13.1/bbl in Maintain positive view owing to strong earnings growth
November), naphtha cracks declined to $0.2/bbl (vs $2.7/ potential and resilient RoE: IOCL would benefit from
bbl in November) and fuel oil cracks was down to $5.1/bbl inventory gains given the higher oil prices while GRMs also
(vs $3.9/bbl in November). remain healthy despite the recent correction. Moreover, ~6-
7% growth in the consumption of HSD/MS and stabilisation
FY2018E EPS cut; expect strong Q3FY2017 earnings:
of Paradip refinery are expected to drive 10%/17% earnings
Given the correction in refining margins, we have lowered
growth in FY2017E/FY2018E. IOCL is trading at an attractive
our FY2018 assumption on GRMs for Indian Oil Corporation
valuation of 8.7x FY2018E EPS, underpinned by strong
(IOCL) to $5.2/bbl ($5.6/bbl earlier). We have also
earnings growth outlook and resilient RoE of 18-19%. We
reduced our FY2018E EPS by 4.5% to Rs35.4. We maintain
maintain our positive view on IOCL and expect ~15-20%
our FY2017E EPS of Rs30.2, given the likely benefit of
upside from CMP.
inventory gains in next two quarters. We expect IOCL to
report strong earnings in Q3FY2017 on the back of recovery For detailed report, please visit the Research section of our website, sharekhan.com.
in GRMs (Singapore complex GRMs at ~$7/bbl in Q3FY2017 Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a
so far vs $5.1/bbl in Q2FY2017), coupled with inventory postition in the companies mentioned in the article.
Suven Life Sciences Viewpoint

Strong long-term outlook
Key points few years may see approvals by FY2018 and (d) the newly
built Vizag facility will see a ramp-up.
On August 11, 2016, we had initiated viewpoint coverage
on Suven Life Sciences (Suven) at a price of Rs205, buoyed CRAMS business to gain traction: Suvens revenue has
by visibility in sales growth for the next 2-3 years and seen a 27% CAGR during the past five years, which included
improving profitability. However, we feel that the recent the supply of three key intermediates for the pre-launch
secular correction in the Pharma stocks gives us a good entry phase during FY2015. Suven expects to get repeat orders
point in Suven, as we are confident of timely monetisation for these intermediates for a longer period. We expect the
of key opportunities that could result in earnings upgrade revenue CAGR to be 20% and net profit CAGR to be 40%+
in the future. Therefore, we maintain our positive stance during FY2017E-FY2018E.
on the stock and expect 15-20% return in the medium term. Prudent policy of expensing R&D through P&L; balance
Q2FY2017 a mixed bag performance: Sales for Q2FY2017 sheet sturdy: Suven follows a prudent policy of writing
remained flat at Rs122.3. EBIDTA grew by 17.21% to Rs43.6 off R&D expenses in the year of occurrence. Also, it has
crore and Operating Profit Margin (OPM) improved by not resorted to borrowings to invest in R&D. The company
540BPS to 35.7%. Net profit grew by lower-than-expected utilised its strong cash & bank balance of Rs250 crore for
5.25% YoY to Rs26.5 crore due to a higher tax outgo (30% vs. capex and innovation, which limits the financial risk.
20% earlier). Positive view with better upside: We have a positive
FY2017 & FY2018 will be exciting: Suven will witness view on Suven due to the companys clear focus, visibility
the following key developments during FY2017-FY2018: (a) in sales growth for the next 2-3 years and improving
repeat orders from three key intermediates (b) Phase 2a profitability. We see a potential upside of 18-20% over the
clinical trials for SUVN-502 are expected to be completed next six months.
by December 2017, which may open up out-licensing For detailed report, please visit the Research section of our website, sharekhan.com.
opportunity in CY2018; (c) few ANDAs filed during the past Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a
postition in the companies mentioned in the article.

SECTOR UPDATE EQUITY FUNDAMENTALS
IT January 05, 2017

Q3FY2017 earnings preview
Q3FY2017 result expectations margins and pricing outlook and (5) Impact on businesses
in view of weak global growth, protectionism, disruptive
A weak quarter: The October-December quarter has
technologies and macro-economic uncertainties.
seasonally been a weak quarter for the IT companies,
owing to furloughs and lower number of working days. Outlook
This time, the already challenging business environment
Uncertain demand environment, macro issues yet to
was further impacted by the cross-currency headwinds
subside: In Q3FY2017, the performance of the top IT
(led by depreciation in GBP/EUR/JPY by 6%/4%/7%
companies will remain subdued, owing to cross-currency
against USD) and project-specific issues. Infosys
headwinds, company-specific issues, furloughs and lower
constant currency (CC) revenue growth performance
number of working days. Further, the potential change in
will be marred by ramp-down of RBS deal, whereas Tata
US visa policies, protectionism and ongoing Brexit-linked
Consultancy Services (TCS) CC revenue growth will be led
uncertainties could delay clients CY2017 budget decisions
by recoup of India business revenue worth Rs180 crore.
in certain verticals. However, we see traction in some
On an organic basis, Tech Mahindra will deliver best-in-
verticals (ERD, BFS, etc) and higher capital allocation
class CC revenue growth of 2.9% QoQ (inorganic growth
towards disruptive technologies, which could accelerate
at 3.4% QoQ), followed by HCL Technologies (1.7% QoQ;
the overall industry growth in the coming years. We
inorganic growth at 2.8% QoQ), TCS (1.6% QoQ), Wipro
maintain our stance that the IT industry is in a transition
(0.5% QoQ; inorganic growth at 1.2% QoQ) and Infosys (a
phase, focusing on local hires and modernising the best
decline of 0.2% QoQ). On the margin front, we believe
practices for its legacy businesses. This transition phase
that the OPM of top IT companies during Q3FY2017
will take some more time (~2-3 years) and would result in
will be adversely impacted on account of seasonality
volatility in earnings in the near to medium term.
(Q3 being a traditionally weak quarter), cross-currency
headwinds, wage revision (HCL Tech) and ramp-down of Valuation
deals (Infosys). This will be offset by rupee depreciation Reasonable; macro uncertainties cloud stock
and operational efficiencies to some extent. We believe outperformance: Though after the recent correction
that Tech Mahindra could see an improvement in margins in stock prices, the valuations of IT companies (trading
(led by seasonally better quarter in profitability for below their historical P/E multiples) look inexpensive,
Comviva and absence of one-off expenses incurred in the potential minimum wage hike for H1-B workers, along
Q2FY2017), while margins for TCS and Wipro (IT servcies with lingering macro-economic uncertainties will restrict
EBIT margin) will remain intact on a sequential basis, any major outperformance in the near to medium term.
driven by rupee depreciation benefits and operational We continue to remain selective in terms of preferred
improvements. picks in the IT sector, as these companies are investing
Key issues to watch out for would be: (1) Commentary and building new-age technologies in an efficient manner
on CY2017 annual IT budgets, budgeting cycle for for driving sustainable growth in the coming years. Given
verticals like Healthcare and demand outlook trend on that valuations are reasonable and a major de-rating is
verticals like BFSI, Retail etc (2) Measures to mitigate already behind, we see select buying opportunity from a
risk from the potential increase in minimum wage for long-term perspective (12-15 months time horizon).
H1-B visa workers (3) Commentary on positioning in the Preferred picks: HCL Tech and Infosys (in large-cap
new-age digital/platforms/automation technologies space) and Persistent Systems (in mid-cap space).
and growth prospects in this space (4) Commentary on
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a
postition in the companies mentioned in the article.

EQUITY TECHNICALS TREND & VIEW
Nifty in a corrective mode

Daily view on Nifty
The Nifty has managed to bounce back sharply from the 50%
retracement level of the rise from 6825 to 8968.
However, the Index is in a downtrend and is now approaching
significant resistance level of Downward Sloping Trendline, which
is pegged at 8310.
If the Nifty manages to break above the Downward Sloping
Trendline then it is likely to head higher towards the major
resistance of 8430.
In the near term, 8130 will act as support. The Index can drift
lower towards 8020 if it closes below 8130.
The momentum indicator on the daily chart is in a Buy mode,
thereby confirming the short-term uptrend.
Crucial supports for the Nifty will be around 8130 and 8020 while
crucial resistance will be near 8306 and 8430 levels.
Weekly view on Nifty

The Nifty is in a corrective mode after hitting a high of 8968. The
correction till 7893 has been in the form of w-x-y-x-z, indicating
that the downside in the near term has completed and a counter-
trend move of the fall is likely.
The Index has seen a pull-back up to the 38.2% retracement of the
fall from 8968 to 7893.
If the Nifty manages to close above the 38.2% retracement ie 8310,
then the pull-back can extend towards 8430 and 8560, ie 50% &
61.8% retracement levels respectively.
For the current expiry, the Nifty is unlikely to break down below
7893.
However, the medium-term trend for the Nifty remains bearish.
Any rise towards the 50% and 61.8% Fibonacci retracement levels
should be seen as a selling opportunity as long as the Index doesnt
close above 8600.
The momentum indicator on the weekly chart has turned positive,
but it is below the zero line.
Crucial support will be around 7893 whereas crucial resistance will
be near 8600 levels.
Monthly view on Nifty

The Nifty has been in a corrective mode after hitting a high of
8968.
On the monthly chart, the Index is making lower top, higher
bottom, indicating that there is a possibility of triangle formation.
Also, the Index is in wave (iv), which further confirms the possibility
of triangle formation, wherein it is expected to be in the range of
7645-8900.
From a long-term perspective, we are in a bull market and the
Index is in an upward sloping channel, indicating that it is in an
uptrend. Any dip should be seen as a buying opportunity.
The momentum indicator on the monthly chart has turned
negative, pointing to a possibility of consolidation in the coming
months.
A crucial support will be around 7893 and 7645; resistance will be
around 8600.
Trend Trend reversal Support Resistance Target
Down 8600 7645 8600 7645

MONTHLY VIEW EQUITY DERIVATIVES
Derivative view: Long additions visible;

positive momentum to continue
The Nifty Futures started the December F&O series on Top 5 stock futures with the highest OI in current series
a positive note and continued to advance in the first
half of the series. But, in the second half, the Index STOCK FUTURES (SHAREKHAN SCRIP CODE) OPEN INTEREST (RS CR)
saw selling pressure and surrendered all of its earlier
gains - closing the December series with a minor gain of HDFC BANK 3,402.65
around 1.75%. A significant amount of open interest (OI)
got built, which we feel is the mix of longs and shorts.
However, the major domestic event of demonetisation SUNPHARMA 1,938.12
made the market participants jittery in the December
series. Consequently, the market remained volatile and SBIN 1,910.19
underperformed all its international peers.
FIIs were sellers throughout the December series, RELIANCE 1,615.28
especially in the cash market segment. In January too,
FIIs have sold more than Rs2,000 crore in the first 7-8
trading sessions. However, in the F&O segment, they INFY 1,422.91
have been accumulating long positions (both in Index
Futures and Stock Futures), which is a positive sign for Top 5 stock options with the highest OI in current series
the market in the near term. Therefore, we feel it is only
a matter of time before FIIs resume cash-based buying STOCK FUTURES (SHAREKHAN SCRIP CODE) OPEN INTEREST (RS CR)
too in the coming trading sessions, which will, in turn
give strength to the market.
SBIN 966.69
ROLL-OVER: MARKET-WIDE VS NIFTY
Nifty Market Wide MARUTI 821.00
90.00%
80.00%
70.00% YESBANK 630.16
60.00%
50.00%
INFY 557.95
84.84%
84.01%
82.42%
82.24%
81.99%
81.45%
81.09%
69.97%
69.49%
40.00%
65.60%
63.21%
63.10%
30.00%
20.00%
TATASTEEL 532.06
10.00%
0.00%
Dec
Nov
Jan
Sep
Aug
Oct
View
Roll-over highlights
On the options front, in the January series, 8000 PE has
The benchmark Nifty Futures started the January F&O
series at 1.69 crore shares of OI Vs 1.59 crore shares OI the highest number of shares in OI, followed by the 8200
at the start of the Deember F&O series. In rupee terms, strike price. On the call side, the 8400 CE has the highest
it started the January series with an OI of Rs13,677 crore number of shares in OI followed by the 8300 strike price.
v/s Rs12,763 crore in the previous series. Stock Futures
started the January F&O series with OI of Rs64,521 crore The Put-to-Call (PCR) ratio started the January series
v/s OI of Rs77,957 crore at the start of the December on the higher side at 1.00. On the other hand, the India
series. Index Options started the January series with OI
Volatility Index (VIX) traded in a narrow range of 15-18
of Rs93,417 crore v/s Rs93,537 crore OI in the preceding
series while OI in Stock Options stood at Rs6,619 crore throughout the December series and currently it is at
v/s Rs6,148 crore at the start of the December series. around 15 levels. Seeing the above data and the rebound
Rollovers in Nifty Futures were higher at 69.49% compared in the Nifty Futures (from the crucial support of 7900-
to 63.10% in the last series. Market-wide rollover into 8000), we feel that the market has still more room on the
January was decent at 84.84% compared to the previous higher side till 8400.
months rollover of 82.24%.

CURRENCY FUNDAMENTALS MONTHLY VIEW
Currencies: Dollar advances as Fed lifts rate hike projection

Key points CURRENCY LEVELS IN DECEMBER 2016 (IN RS)
India GDP grows by 7.3% in Q2FY2017 vs 7.1% in Q1FY2017 Currency High Low Close Monthly chg (%)
The Reserve Bank of India keeps interest rates unchanged; USDINR 68.76 67.33 68.24 -0.77
cuts growth estimates to 7.1% from 7.6% earlier
EURINR 73.35 70.42 71.066 -2.57
India CPI inflation eases to 3.63% in November vs 4.2% in
October GBPINR 86.88 83.06 83.4351 -2.21
US Federal Reserve raises key rate by 25 basis points to JPYINR 61.38 57.25 57.94 -5.41
between 0.5% and 0.75%
December 2016 contract price movement December 2016 contract price movement
68.8 87
60.8 73.2
68.6 86.5
60.3
68.4 72.7 86
59.8
68.2 72.2 85.5
59.3
68 85
67.8 58.8 71.7
84.5
67.6 58.3 71.2
57.8 84
67.4
70.7 83.5
67.2 57.3
67 56.8 70.2 83
30-Nov-16
02-Dec-16
04-Dec-16
06-Dec-16
08-Dec-16
10-Dec-16
12-Dec-16
14-Dec-16
16-Dec-16
18-Dec-16
20-Dec-16
22-Dec-16
24-Dec-16
26-Dec-16
28-Dec-16
29-Nov-16
01-Dec-16
03-Dec-16
05-Dec-16
07-Dec-16
09-Dec-16
11-Dec-16
13-Dec-16
15-Dec-16
17-Dec-16
19-Dec-16
21-Dec-16
23-Dec-16
25-Dec-16
27-Dec-16
USDINR JPYINR EURINR GBPINR
USDINR CMP: Rs68.23

The Indian rupee appreciated by 0.77% against the US dollar last month, as GDP data showed that the economy accelerated in Q2FY2017, growing
by 7.3% as against 7.1% in Q1FY2017. However, sharp gains were prevented owing to a strong dollar, weak domestic market sentiments and
continued FII outflows from local shares & debt markets. The dollar is gaining strength after the Fed raised its key rates by 25 basis points (BPS)
to between 0.5% and 0.75%, and signaled faster pace of rate increases in 2017. As per NSDL, FIIs withdrew $3,988.84 million from Indian shares
and debt markets in December.
Outlook: The Indian rupee is expected to trade with a negative bias on the back of a strong dollar and continued FII outflows from Indian shares
and debt markets. The dollar is gaining strength amid a growing view that the Fed will adopt a more aggressive monetary tightening approach
in the wake of upbeat US economic data. The gap between the US and Indian sovereign bond yields is narrowing. The rise in US bond yields will
prompt foreign investors to sell their Indian market holdings. Demand for the dollar from importers may hurt the rupee going forward. As per
the latest REER reading (115.39), the rupee is overvalued by more than 10%. Expected trading range in the near term is 67.20-70.0.
EURINR CMP: Rs71.0
The Euro depreciated by 0.68% on account of a strong dollar. The European Central Bank (ECB) reduced the size of its bond purchasing program
but extended it beyond what was expected. The ECB cut its asset buying to 60 billion Euros from 80 billion Euros and extended its purchases to
December 2017 from March 2017. Further, worries over political uncertainty in Italy after the No vote in a referendum on constitutional reforms
added downside pressure on the euro.
Outlook: The Euro currency is expected to trade with a negative bias due to the strong dollar and divergence in international monetary policy.
Widening of yield spreads between the US and Germany may also hurt the euro. The spread between 10-year US Treasury and German bund
yields are widening mainly on account of divergence in monetary policies between the US and Europe, besides the disparate outlook for GDP and
inflation in the two regions. Further, lingering fears over political uncertainty in Europe and turmoil in Italian banks will act as an overhang.
Traders will remain cautious ahead of the ECB and FOMC monetary policy meetings. The expected trading range in the near term will be 68.75-
73.0.
GBPINR CMP: Rs83.55
The pound depreciated by 1.34% owing to a strong dollar and downbeat economic data from the UK. The British government asked its parliament
to respect its timetable for leaving the European Union (EU). This dampens expectations of a possible delay in the UKs exit from the EU. The
high-frequency data shows that activity in the UKs manufacturing sector (including industrial production) has slowed.
Outlook: The pound is expected to fall on the back of a strong dollar and disappointing economic data from the UK. Persistent divergence in
global monetary policy set-up and uncertainty over Brexit may hurt the pound going ahead. The Fed raised interest rates by 25BPS whereas the
Bank of England (BOE) continued with its loose monetary policy. The expected trading range for the pound in near term is 81.60-86.0.
JPYINR CMP: Rs57.75
The yen depreciated by 2.12% on account of the a strong dollar and divergence in the global monetary policy set-up. The dollar gained strength
after the Fed raised rates by 25BPS to between 0.5% and 0.75%, and signaled faster pace of rate increases in 2017. Demand for safe haven assets
declined on the growing risk appetite in the domestic market. The spread between the US and Japanese bonds yields widened.
Outlook: The yen is expected to trade with a negative bias on the back of a strong dollar and divergence in the global monetary policy set-up.
Traders will remain cautious ahead of the Bank of Japan and FOMC monetary policy meetings. The widening spread between the US and Japanese
bond yields may also hurt the yen. However, a sharp downside may be prevented, as demand for safe haven assets may improve on lingering
worries about Brexit, political uncertainty in Europe, fears over global economic slowdown, and volatility in crude oil prices. The expected
trading range in the near term is 56.20-58.80.
CMP as on January 04, 2017

TREND & VIEW CURRENCY TECHNICALS
USDINR: Slide on the cards EURINR: Channelised decline

In June, USDINR had faced resistance near the 78.6% In mid-August, EURINR faced resistance near a falling
retracement of the February-March fall. After that, it trendline from the previous highs and started tumbling.
entered a correction mode. Structurally, it formed a multi-week triangular pattern and
During September-October, the price was in a consolidation broke out on the downside in the beginning of October.
phase, which broke out on the upside. In November, the On the downside, it broke multiple supports. In terms of
currency pair rallied towards the high of 68.89. the wave structure, it is forming a complex correction,
Near the highs, the bears came in to restrict further upside. which is unfolding in a channelised manner.
Consequently, it entered a correction mode. Overall, EURINR can slide till 69.30, ie lower end of the
USDINR has retraced nearly 61.8% of the previous rise and broader channel. On the flip side, the swing high of 72.35
can slide further till 66.80. On the other hand, 68.90 will will act as a crucial resistance on a closing basis.
act as a key resistance on a closing basis.
MACD (0.07935)
KST (-0.08300) 3
2
1
0 0
-1
-2
EURINR (71.5390, 71.5900, 71.1750, 71.2530, -0.17700)

USDINR - INDIAN RUPEE (67.9447, 68.2250, 67.8999, 68.1389, +0.19440) 78.5
69.7
69.6
69.5 78.0
69.4
69.3 77.5
69.2
69.1 77.0
69.0
100.0% 68.9 76.5
0.0%
68.8
68.7 76.0
68.6
75.5
68.5
68.4
68.3 75.0
78.6% 23.6%
68.2
74.5
68.1
68.0
67.9 74.0
38.2%
61.8% 67.8
73.5
67.7
67.6
50.0% 73.0
67.5
50.0%
67.4
67.3 72.5
61.8%
67.2
38.2% 67.1 72.0
67.0
66.9 71.5
78.6% 66.8
23.6% 66.7 71.0
66.6
66.5 70.5
66.4
66.3 70.0
100.0% 66.2
66.1 69.5
0.0% 66.0
65.9 69.0
65.8
65.7 68.5
65.6
65.5
February March April May June July Augus t Septem ber October Novem ber Decem ber 2017 February Novem ber 2016 February March April May June July Augus t Septem ber Novem ber Decem ber 2017 February
GBPINR: Bears have an upper hand JPYINR: Bearish outlook

GBPINR has been in a downtrend from a medium-term JPYINR formed a triangular pattern and broke out on the
perspective. On the way down, the currency pair cracked downside in the beginning of October. It also broke a rising
the lower channel line and reached near the 61.8% trendline along with the price pattern.
retracement of the previous multi-year rally. It was then trading in a downward sloping channel. In
Near the key Fibonacci level, the bulls rushed in, which the beginning of November, it broke the lower end of the
resulted in a short-term bounce. However, the rebound channel and continued to tumble, breaking the lower end
looks over at 86.89, from where GBPINR has started sliding of the larger channel too.
again. Consequently, JPYINR reached the 61.8% retracement
Key levels to watch on the downside will be 82-80.74. On mark. Once the support zone of 57.35-57.15 is breached,
the other hand, 84.90 will act as a key resistance on a JPYINR can fall till 56.30. On the other hand, 59.30 will act
closing basis. as a key resistance on a closing basis.
KST (-1.21828) 10 KST (-0.40287)
5
5
0
-5
0
GBPINR (83.8710, 83.9910, 83.5850, 83.6400, -0.17600)
110
JPYINR (58.0328, 58.2200, 57.8699, 57.9708, -0.14120) 70.0

0.0%
69.5
105 69.0
68.5
0.0% 68.0
67.5
100 67.0
66.5
66.0
23.6% 65.5
65.0
95
64.5
23.6% 64.0
63.5
38.2% 63.0
90 62.5
62.0
38.2% 61.5
61.0
50.0%
85 60.5
60.0
50.0% 59.5
59.0
61.8% 58.5
80 58.0
61.8% 57.5
57.0
56.5
75 56.0
55.5
78.6% 55.0
54.5
54.0
70 53.5
53.0
52.5
52.0
51.5
65 51.0
100.0% 100.0%
50.5
50.0
49.5
2010 2011 2012 2013 2014 2015 2016 2017

Apr May Jun Jul Aug Sep Oct Nov Dec 2016 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017
Currency View Reversal Supports Resistances Target

USD-INR Down 68.90 67.74/67.30 68.50/68.80 66.80
GBP-INR Down 84.90 82.88/81.83 84.10/84.80 82-80.74
EUR-INR Down 72.35 70.73/70.35 71.81/71.87 69.30
JYP-INR Down 59.30 57.62/56.98 58.58/59.22 56.30

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WEALTHOPTIMIZER PMS
The Indian equity market presents an excellent opportunity for the long-term investors. Sharekhan offers you solutions to meet your
financial objectives. WealthOptimizer is a portfolio management product that involves enhancing wealth over the long term. The goal is
to not only outperform the market but also generate superior returns.
Strategy
Strategy
To invest in the most undervalued stocks of growing companies on the basis of reported financial performance
How the
How the product
product works
works
Fundamental analysis is performed on more than 5,000 companies
Stocks with sound fundamentals are picked, subject to strategy conditions
Top 10 stocks are selected each day based on the maximum scope to grow
No particular sector forms more than 20% of the clients portfolio
Fundamentals of stocks held are reviewed every quarter based on quarterly results
Automated decision making system for transparent and disciplined investing
Key product
Key product specifications
specifications
Minimum investment amount: Rs25 lakh
Recommended investment duration: Two years or more
Phone: 022-6750 2152 / 2261 / 2363 / 2104 z E-mail: pms@sharekhan.com
Disclaimer: Product is offered by Sharekhan Ltd (Registered Portfolio Manager with SEBI Regn. Nos. INP000000662 CIN No. U99999MH1995PLC087498) and having registered office at 10th Floor,
Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai -400042, Maharashtra. Tel: 022-61150000. Email: igc@sharekhan.com,
pms@sharekhan.com. This information does not purport to be an invitation or an offer for services, client is required to take independent advise before opting for any service. Securities investments are
subject to market and other risks and client should refer to the risk disclosure document carefully. Past performance is no indication of future results. Future performance may vary. Detailed disclaimers and
risk disclosure document is available on our website www.sharekhan.com, please acquaint yourself with these before investing.
January 2017
Sharekhan
ValueGuide 33
33 Sharekhan ValueGuide
December 2016
PMS FUNDS PMS DESK
Portfolio Management Service

We are pleased to introduce you to Sharekhans Portfolio We have the following strategies on offer:
Management Service (PMS) in which we completely manage
your investment portfolio so that you stop worrying about ProPrime (based on fundamental research)
the market volatility and focus your energy on things that Diversified Equity
you like to do!
ProTech (based on technical analysis)
We have a wide range of strategies that you can choose
Index Futures Fund Trailing Stops
from. Our strategies are based on fundamental research
and technical analysis.
PROPRIME - DIVERSIFIED EQUITY

Product performance
OVERVIEW as on December 31, 2016
The ProPrimeDiversified Equity PMS strategy is suitable for long-term investors
(In %) Scheme Nifty 500
looking to create an equity portfolio through disciplined investments that will lead
1 Month -1.5 -1.4
to a growth in the portfolios value with medium to high risk
3 Month -3.6 -5.6
6 Month 3.8 0.0

INVESTMENT STRATEGY
1 Year 5.6 3.8
Disciplined investment decisions are taken in specific stocks based on thorough
fundamental research. Best Month 30.0 13.5
Worst Month -17.9 -10.5

Investments are made primarily in the Nifty Fifty or the BSE 100 scrips.
Best Quarter 41.0 51.2
Attempts to have an exposure of minimum of 70% in the Nifty Fifty stocks and
that of minimum of 90% in the BSE 100 stocks. Worst Quarter -29.2 -12.0
Endeavours to create a core portfolio of blue-chip companies with a proven Disclaimer: Returns are based on a clients
track record and have partial exposure to quality companies in the mid-cap returns since inception and may be different
space from those depicted in the risk disclosure
document.
PRICING
Top 10 stocks
Minimum investment of Rs25 lakh Britannia Industries
Charges
HDFC Bank
2% per annum; AMC fee charged every quarter II&Fs Transport Networks
0.5% brokerage IndusInd Bank
20% profit sharing after the 12% hurdle is crossed at the end of every fiscal
L&T Finance Holdings
Lupin
RBL Bank
Reliance Industries
TVS Motor Company
ZEE
FUND OBJECTIVE
A good return on money through long-term investing in quality companies

PMS DESK PMS FUNDS
PROTECH - INDEX FUTURES FUND
OVERVIEW
The ProTechIndex Futures Fund PMS strategy is suitable for long-term investors
who desire to profit from both bullish and bearish market conditions. The strategy Product performance
involves going long (buying) or going short (selling without holding) on Nifty futures as on December 31, 2016
by predicting the market direction based on a back-tested automated model. (In %) Scheme Sensex Nifty
1 Month -1.12 -0.10 -0.47

INVESTMENT STRATEGY 3 Months -3.03 -4.45 -4.94
The strategy has the potential to generate profits irrespective of the market FY 15-16 11.28 -9.36 -8.86
direction by going long or short on Nifty futures.
FY 14-15 -3.41 24.89 26.65
An automated basic back-testing model is used to predict the market direction
for the Nifty which then decides the strategy to be deployed in terms of going FY 13-14 8.79 18.85 17.98
long or short.
FY 12-13 3.65 8.23 7.31
The portfolio is not leveraged, ie its exposure never exceeds its value.
FY 11-12 13.10 -10.50 -9.20
FY 10-11 9.20 10.90 11.10

PRICING
FY 09-10 14.70 80.50 73.80
Minimum investment of Rs25 lakh
Since Inception* 133.02 163.00 170.91
Charges
Best Month 28.90 28.26 28.07
AMC fees: 0%
Worst Month -17.10 -23.89 -26.41
Brokerage: 0.05%
Best Quarter 33.30 49.29 42.04
Profit sharing: Flat 20% charged on a quarterly basis
Worst Quarter -17.73 -24.98 -24.53
*01-Feb-2006
Disclaimer: Returns are based on a clients

FUND MANAGERS VIEW returns since inception and may be different
from those depicted in the risk disclosure
The fund was down 1% in December, as the market did not do much in the month. The document.
narrow range kept any major trend from developing. The Nifty has started to bounce back
and the trend may have turned positive. If it gets large enough, we should see a positive
month in January.
Investments in
For the months ahead, the Nifty is likely to be in a broad range of 7800-8900 with a downward
bias. The low volatility has had an impact on the outcome of the Model and we continue to Nifty Index
monitor the possibility that it will change.
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.

PMS FUNDS PMS DESK
PROTECH - TRAILING STOPS
OVERVIEW
Our ProTechTrailing Stops PMS strategy is ideal for Traders and Investors looking
for Regular Income from trading and desire to make profits in both bullish and
bearish market conditions. It is designed to payout book profits on monthly basis.*
Product performance
It is also for those investors who are looking for better income than Fixed Income
or Deposits. This strategy involves going Long (buying) or Short (selling without as on December 31, 2016
holding) on stock futures. (In %) Scheme Sensex Nifty
* Terms and conditions apply
1 Month 0.18 -0.10 -0.47
3 Months -1.50 -4.45 -4.94

INVESTMENT STRATEGY
FY 15-16 -0.56 -9.36 -8.86
This strategy spots the winning trades based on technical analysis vs time frame-
based portfolios, basically the momentum calls. FY 14-15 -3.69 24.89 26.65
A risk model has been developed for stock portfolio allocation that reduces the FY 13-14 -1.06 18.85 17.98
risk and portfolio volatility through staggered building of positions.
FY 12-13 14.89 8.23 7.31
It is non-leveragedthe exposure will never exceed the value of the portfolio. FY 11-12 29.00 -6.10 -4.60
FY 10-11 - - -
PRICING FY 09-10 - - -
Minimum investment of Rs25 lakh
Since Inception* 32.28 43.70 47.46
Charges
Best Month 9.10 11.25 12.43
AMC fees: 0% Worst Month -5.09 -8.93 -9.28
Brokerage: 0.05% Best Quarter 9.90 13.52 13.53
Profit sharing: Flat 20% charged on a quarterly basis Worst Quarter -8.20 -12.69 -12.47
*09th May 2011
Disclaimer: Returns are based on a clients

FUND MANAGERS VIEW returns since inception and may be different
from those depicted in the risk disclosure
The fund saw little change during December in what was a difficult month - being the end- document.
of-the-year holiday season. The market did drop, but it was very narrow and slow. The Nifty
appears to have started a bounce back, which can continue going ahead, and if it does rise
long enough, we expect to see a positive month in January.
Investments in
For the months ahead, the Nifty is likely to be in a broad range of 7800-8900 with a downward
Nifty Index
bias. The low volatility has had an impact on the outcome of the Model, and we continue to
monitor the possibility that it will change. Stock futures
Fund Manager: Rohit Srivastava
FUND OBJECTIVE
Absolute returns irrespective of market conditions.

ADVISORY DESK MONTHLY PERFORMANCE
Advisory Products and Services

The Advisory Desk is a central desk consisting of a Mumbai-based
expert team that runs various sample model portfolios (for illustrative
purposes only) for clients of all profiles, be they traders or investors.
These products are different from Sharekhans research-based technical
and fundamental offerings as these essentially try to capture the
trading opportunities in stocks where momentum is expected before or
after some event including the announcement of results or where some
news/event is probable.
Advisory products are ideal for those who do not have time to either
monitor the market tick by tick or shift through pages of research for
data or pour over complex charts to catch a trend. However, all these
products require perfect discipline and money management.
For investors
PORTFOLIO DOCTOR
It is a service under which the Portfolio Doctor reviews an existing portfolio based on various parameters and suggests changes
to improve its performance. To avail of this service please write to the Portfolio Doctor at portfoliodoctor@sharekhan.com.
NEW ALPHA DELIVERY PICKS

This is a long only, cash market delivery product where stock ideas will
New Alpha Delivery Picks Rules
be rolled out based on short-term triggers with proper fundamental
rationale. Recently we revised certain features of Alpha Delivery Ideas Ideas based on Stock Ideas,
Picks to incorporate ideas from both the Fundamental research desk Viewpoints, Stock Updates,
and the Market analysis team. The time frame of the stock ideas in Market analysis
New Alpha Delivery Picks will be a maximum of two months. Stop
Weightage (%) 7
loss will be 5-10% and profit potential will be 10-20%. We will report
the old series performance data separately. For more details please
write to us at alphapicks@sharekhan.com Stop Loss (%) Maximum 10, minimum 5
For traders Profit Potential (%) Maximum 20, minimum 10
SHAREKHANS PRE-MARKET ACTION Time Frame Maximum 2 months
These ideas are put out in Sharekhans Pre-market Action report along 5% trailing Stop loss on 5% rise
Trail Stop loss
with stop loss and targets valid for a day. There is a market watch list in stock price
of stocks with positive and negative bias for intra-day traders. For A) Pre defined / Trail stop loss
Exit Rules
more details please write to us at premarket@sharekhan.com. is hit
B) Unexpected event/news/
MID DERIVATIVE CALLS outcome
These calls are based on the analysis of open interest, implied volatility
C) Time frame
and put-call ratio in the derivative market. It is a leveraged product
and ideal for aggressive traders. These calls have pre-defined stop Performance
Daily
loss, targets, time frame and quantity to execute. For details of the Reporting
product please write to us at derivative@sharekhan.com.
Report Card
MID performance* MID Derivative Calls performance*
Product New Alpha Delivery Picks Ticket size (Rs) 100,000
Month December 2016 FY2016-17
Month December 2016 FY2016-17
No. of calls 5 60
No. of calls 7 113
Open 4 4
Profit booked - 38 Profit booked 4 57
Stop loss hit 3 18 Stop loss hit 3 56
Strike rate (%) - 68 Strike rate (%) 57 50

MF PICKS MUTUAL FUNDS DESK
Sharekhans top mutual fund picks (equity) December 12, 2016

Data as on December 01, 2016
Scheme name Star NAV (Rs) Returns (%)
rating Absolute 6 Compound annualised
months 1 yr 3 yrs 5 yrs Since inception
Large-cap funds
SBI Bluechip Fund 30.3 1.9 7.3 20.5 19.0 10.8
Birla Sun Life Top 100 Fund 45.2 4.5 6.6 18.1 17.4 14.5
ICICI Prudential Top 100 Fund 259.7 11.1 11.5 16.0 16.0 19.4
BNP Paribas Equity Fund 65.1 -3.2 -1.4 15.5 15.4 16.6
IDFC Classic Equity Fund 34.1 7.5 11.1 14.7 14.1 11.4
Indices
BSE Sensex 26559.92 -0.6 1.5 8.5 10.0 15.8
Mid-cap funds
Reliance Small Cap Fund 29.6 14.1 7.8 38.5 28.8 19.1
Canara Robeco Emerging Equities 65.8 8.9 4.8 35.8 26.9 17.4
Franklin India Smaller Companies Fund 45.0 7.9 13.5 34.7 29.8 14.8
Kotak Emerging Equity Scheme 30.1 9.1 13.7 34.5 24.5 12.0
SBI Magnum Midcap Fund 66.7 4.7 10.4 31.5 27.6 17.6
Indices
BSE MID CAP 12355.03 9.0 11.5 24.9 16.8 21.1
Multi-cap funds
Birla Sun Life Pure Value Fund 44.4 12.5 12.6 34.9 24.5 18.7
L&T India Value Fund 28.2 13.3 11.1 31.4 24.4 16.2
SBI Magnum Global Fund 94 137.1 2.4 3.6 24.5 21.5 14.8
ICICI Prudential Multicap Fund 223.2 9.9 9.1 21.6 18.3 15.0
BNP Paribas Dividend Yield Fund 36.0 4.0 4.6 19.2 17.0 12.1
Indices
BSE 500 11130.68 3.3 4.9 13.5 12.3 14.5
Tax-saving funds
Reliance Tax Saver (ELSS) Fund 48.0 9.1 6.1 26.8 21.6 15.0
DSP BlackRock Tax Saver Fund 36.4 9.7 12.2 23.1 20.4 14.0
Axis Long Term Equity Fund 31.2 0.2 3.2 23.0 21.5 17.8
ICICI Prudential Long Term Equity Fund (Tax Saving) 287.9 7.6 4.7 19.6 18.3 21.4
HDFC Long Term Advantage Fund 260.9 7.6 12.9 18.1 16.5 22.7
Indices
Nifty 500 7040.25 3.3 4.9 13.8 12.6 9.1
Thematic funds
UTI Transportation and Logistics Fund 92.3 5.7 4.7 35.1 29.3 19.1
Franklin Build India Fund 31.4 7.7 8.8 31.2 24.8 17.1
DSP BlackRock Natural Resources & New Energy Fund 26.0 34.2 45.6 29.5 14.6 11.8
ICICI Prudential Banking and Financial Services Fund 43.5 17.5 21.2 26.8 23.9 19.4
Birla Sun Life MNC Fund 568.4 -3.1 -2.1 26.6 23.5 17.7
Indices
Nifty 50 8192.9 0.2 3.0 9.8 10.6 13.6
Balanced funds
ICICI Prudential Balanced 104.9 12.8 13.5 20.6 18.4 14.7
Tata Balanced Fund 178.6 5.0 6.1 20.6 17.8 16.3
L&T India Prudence Fund 21.0 5.9 6.1 20.4 17.9 13.6
Reliance RSF - Balanced 43.2 4.6 6.0 19.4 16.5 13.6
SBI Magnum Balanced Fund 103.5 5.8 7.4 19.4 18.6 16.1
Indices
Crisil Balanced Fund Index -- 3.7 7.3 11.1 10.8 12.3
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We
at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable
portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.n
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

MUTUAL FUNDS DESK MF PICKS
Sharekhans top sip fund picks December 12, 2016

Data as on December 01, 2016
Investment period 1 year 3 years 5 years
Total amount invested (Rs) 12,000 36,000 60,000
Present Avg annual Present Avg annual Present Avg annual
Funds would have grown to (Rs) NAV value (Rs) return (%) value (Rs) return (%) value (Rs) return (%)
Large-cap funds
SBI Bluechip Fund 30 12,250 2.3 42,377 5.7 90,358 8.7
IDFC Classic Equity Fund 34 12,676 6.2 41,586 5.1 82,004 6.6
ICICI Prudential Focused Bluechip Equity Fund 31 12,559 5.1 40,905 4.5 83,695 7.0
Kotak 50 177 12,152 1.4 40,261 3.9 81,356 6.4
BNP Paribas Equity Fund 65 11,693 -2.8 38,659 2.5 80,952 6.3
BSE Sensex 26560 12,048 0.4 36,873 0.8 71,396 3.6
Mid-cap funds
DSP BlackRock Micro Cap Fund 50 13,155 10.5 53,093 14.2 1,31,655 17.3
Mirae Asset Emerging Bluechip Fund 36 13,162 10.6 50,008 11.9 1,21,242 15.4
Reliance Small Cap Fund 30 13,060 9.7 49,194 11.3 1,23,994 15.9
Kotak Emerging Equity Scheme 30 12,887 8.1 48,511 10.8 1,10,767 13.3
Franklin India Smaller Companies Fund 45 12,757 6.9 48,127 10.5 1,20,044 15.1
BSE Midcap 12355 12,675 6.1 44,675 7.7 92,710 9.3
Multi-cap funds
L&T India Value Fund 28 12,995 9.1 47,574 10.0 1,08,473 12.8
Kotak Select Focus Fund 25 12,675 6.1 43,792 6.9 94,119 9.6
Franklin India High Growth Companies Fund 31 12,615 5.6 43,728 6.9 1,00,032 11.0
ICICI Prudential Multicap Fund 223 12,727 6.6 43,335 6.6 91,604 9.0
BNP Paribas Dividend Yield Fund 36 12,309 2.8 41,462 5.0 87,141 7.9
BSE 500 11131 12,298 2.7 39,302 3.1 77,520 5.3
Tax-saving funds
DSP BlackRock Tax Saver Fund 36 12,855 7.8 44,456 7.5 95,519 9.9
Reliance Tax Saver (ELSS) Fund 48 12,626 5.7 42,571 5.9 95,852 10.0
HDFC Long Term Advantage Fund 261 12,898 8.2 42,144 5.5 87,319 7.9
Axis Long Term Equity Fund 31 12,014 0.1 41,709 5.2 95,817 10.0
ICICI Prudential Long Term Equity Fund (Tax Saving) 288 12,433 3.9 41,622 5.1 89,771 8.5
Nifty 50 8193 12,116 1.1 37,600 1.5 72,901 4.0
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We
at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable
portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.n
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

EARNINGS GUIDE EQUITY FUNDAMENTALS
Sharekhan Earnings Guide Prices as on January 04, 2017

Company CMP Sales Net profit (%) EPS PE (x) EPS RoCE (%) RoNW (%) DPS Div
(Rs) growth Rs. Yld(%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY18/FY16 FY16 FY17E FY18E FY17E FY18E FY17E FY18E
Automobiles
Apollo Tyres 185.3 11,793.0 13,030.5 14,526.6 1,045.2 996.7 988.8 20.5 19.6 19.4 -3% 9.0 9.5 9.6 14.7 13.7 14.1 12.5 2.0 1.1
Ashok Leyland 83.9 18,890.9 20,214.0 22,074.5 1,153.2 1,331.9 1,430.8 4.1 4.6 4.9 9% 20.5 18.2 17.1 19.5 19.4 22.2 22.0 1.0 1.1
Bajaj Auto 2,684.1 22,624.7 22,116.7 25,772.6 3,741.2 3,902.8 4,376.9 129.4 135.0 151.3 8% 20.7 19.9 17.7 37.4 36.9 27.6 27.0 50.0 1.9
Gabriel India 109.5 1,438.2 1,556.4 1,760.0 75.8 83.2 103.7 5.3 5.8 7.2 17% 20.7 18.9 15.2 24.7 26.4 19.0 20.3 0.5 0.4
Hero Motocorp 3,004.9 28,514.0 30,010.4 33,994.6 3,047.0 3,396.1 3,767.9 152.6 170.1 188.7 11% 19.7 17.7 15.9 49.0 47.0 36.3 34.5 40.0 1.3
M&M 1,222.0 38,874.8 43,386.9 49,569.8 3,285.6 3,702.9 4,417.9 52.9 59.6 71.1 16% 23.1 20.5 17.2 17.8 19.0 14.9 15.9 12.0 1.0
Maruti Suzuki 5,502.2 57,746.2 66,648.0 77,219.0 4,571.0 7,538.0 8,245.0 151.3 249.6 272.9 34% 36.4 22.0 20.2 31.0 28.9 23.4 21.7 25.0 0.5
Rico Auto Industries 57.4 1,007.0 1,145.1 1,319.5 34.0 57.4 71.5 2.5 4.2 5.3 46% 22.9 13.7 10.8 13.8 15.3 11.1 12.4 0.5 0.9
TVS Motor 375.3 11,243.9 12,342.3 14,738.9 437.8 602.3 811.3 9.2 12.7 17.1 36% 40.8 29.5 21.9 23.8 28.3 25.7 28.2 2.5 0.7
Banks & Financials
Allahabad Bank 62.1 7,808.6 8,364.8 9,302.7 (743.3) 332.4 672.8 -12.1 5.4 11.0 - - 11.5 5.7 - - 2.3 4.6 0.0 0.0
Axis (UTI) Bank 453.1 26,204.4 29,402.9 34,262.1 8,223.7 8,533.6 10,348.6 34.5 35.8 43.4 12% 13.1 12.7 10.4 - - 15.1 16.1 5.0 1.1
Bajaj Finance 871.9 4,029.7 5,067.9 6,630.0 1,278.6 1,627.6 2,196.9 23.9 30.4 41.0 31% 36.5 28.7 21.3 - - 20.0 22.3 2.5 0.3
Bajaj Finserv 2,960.9 9,446.4 - - 1,863.3 - - 117.1 - - - 25.3 - - - - - - 1.8 0.1
Bank of Baroda 148.0 17,738.7 20,878.3 22,580.6 (5,395.5) 2,829.9 3,956.0 -23.4 12.2 17.1 - - 12.1 8.6 - - 6.8 9.0 0.0 0.0
Bank of India 107.7 15,377.2 17,581.6 18,664.8 (6,089.2) 136.9 1,061.7 -74.5 1.7 13.0 - - 64.3 8.3 - - 0.4 3.2 0.0 0.0
Capital First 608.8 806.9 1,094.7 1,434.9 166.4 211.4 303.5 18.2 23.2 33.3 35% 33.4 26.3 18.3 - - 11.8 15.3 2.4 0.4
Corp Bank 41.6 5,974.6 6,344.9 7,079.4 (506.5) 182.7 214.4 -5.0 1.8 2.1 - - 23.3 19.8 - - 1.6 1.9 0.0 0.0
Federal Bank 65.8 3,290.6 3,829.5 4,463.4 475.6 811.2 1,046.1 2.8 4.7 6.1 48% 23.8 13.9 10.8 - - 9.6 11.4 0.7 1.1
HDFC 1,212.1 8,387.5 9,356.6 10,510.5 7,093.1 7,694.9 8,653.5 44.9 48.7 54.7 10% 27.0 24.9 22.1 - - 20.0 20.0 17.0 1.4
HDFC Bank 1,185.5 38,343.2 45,461.1 54,382.9 12,296.2 14,984.5 18,358.7 48.6 59.3 72.6 22% 24.4 20.0 16.3 - - 19.1 20.1 9.5 0.8
ICICI Bank 251.1 36,547.1 40,979.0 41,532.8 9,726.3 10,870.5 12,223.1 16.7 18.7 21.0 12% 15.0 13.4 11.9 - - 11.4 11.7 5.0 2.0
IDBI Bank 70.0 9,499.6 10,297.1 11,813.5 (3,664.8) 812.8 1,246.7 -17.8 3.9 6.1 - - 17.7 11.6 - - 2.9 4.3 0.0 0.0
LIC Hsg. Fin. 517.0 2,944.1 3,386.1 4,088.8 1,660.8 1,918.7 2,430.9 32.9 38.0 48.1 21% 15.7 13.6 10.7 - - 19.4 20.9 5.5 1.1
PTC India Fin. Ser. 38.5 414.2 527.2 671.8 391.1 340.3 429.3 7.0 5.3 6.7 -2% 5.5 7.3 5.8 - - 16.8 17.6 1.2 3.1
PNB 115.3 22,188.8 25,362.9 29,022.8 (3,974.4) 1,801.1 2,194.2 -20.2 8.3 10.1 - - 13.9 11.4 - - 4.6 5.4 0.0 0.0
SBI 242.9 85,040.2 90,128.7 1,01,674.2 9,950.7 10,776.3 13,268.8 12.8 13.9 17.1 15% 18.9 17.5 14.2 - - 7.3 8.4 2.6 1.1
Union Bank of India 125.6 11,944.8 12,941.6 14,809.2 1,351.6 1,364.2 2,351.8 19.7 19.8 34.2 32% 6.4 6.3 3.7 - - 5.8 9.5 2.0 1.6
Yes Bank 1,163.2 7,278.9 9,091.2 11,349.1 2,539.4 3,225.3 4,066.6 60.4 76.7 96.7 27% 19.3 15.2 12.0 - - 21.4 22.7 10.0 0.9
Consumer Goods
Britannia 2,852.4 8,397.2 9,943.3 11,345.8 831.5 984.3 1,180.9 69.3 82.0 98.4 19% 41.2 34.8 29.0 76.4 67.3 48.1 43.7 20.0 0.7
Emami 1,037.5 2,393.7 2,767.7 3,290.8 528.1 607.9 810.2 23.3 26.8 35.7 24% 44.6 38.7 29.1 40.3 44.7 38.5 48.2 3.0 0.3
GSK Consumers* 5,058.6 4,308.7 4,518.5 5,167.3 686.9 730.1 837.6 163.3 173.6 199.1 10% 31.0 29.1 25.4 41.9 41.6 27.7 27.4 70.0 1.4
GCPL 1,531.4 8,757.8 9,669.2 11,243.1 1,086.7 1,217.0 1,498.4 31.9 35.7 44.0 18% 48.1 42.9 34.8 20.4 22.7 21.7 22.2 5.8 0.4
Hindustan Unilever 821.6 33,491.3 33,410.6 37,716.7 4,167.3 4,218.4 5,201.5 19.3 19.5 24.0 12% 42.7 42.1 34.2 78.2 71.1 57.2 51.7 9.5 1.2
ITC 245.5 36,582.7 40,527.6 46,866.4 9,311.3 10,539.9 12,783.4 7.7 8.7 10.6 17% 31.8 28.2 23.2 40.4 44.2 31.5 35.8 8.5 3.5
Jyothy Laboratories 335.0 1,659.5 1,815.0 2,104.8 74.2 147.8 217.5 4.3 8.2 12.0 67% 77.9 40.9 27.9 17.6 21.8 16.7 21.9 1.0 0.3
Marico 257.8 6,024.5 5,948.8 6,916.1 707.9 777.7 988.0 5.5 6.0 7.7 18% 46.9 43.0 33.5 43.4 44.3 33.3 33.9 3.8 1.5
Zydus Wellness 872.7 429.5 459.5 523.9 103.7 122.9 137.2 26.5 31.4 35.1 15% 32.9 27.8 24.9 25.4 23.8 23.5 22.0 6.5 0.7
IT / IT services
FSL 39.0 3,217.3 3,803.4 4,273.9 255.2 318.0 375.8 3.8 4.7 5.6 21% 10.3 8.3 7.0 13.9 14.0 16.3 16.4 0.0 0.0
HCL Technologies*** 857.0 31,136.0 46,784.6 52,663.9 5,669.0 8,096.2 9,470.2 40.3 57.6 67.4 29% 21.3 14.9 12.7 32.4 32.2 26.4 25.9 17.0 2.0
Infosys 997.8 62,441.0 68,910.2 74,858.5 13,492.0 14,285.1 15,675.0 59.0 62.4 68.5 8% 16.9 16.0 14.6 32.6 31.8 23.3 22.8 24.3 2.4
Persistent Systems 646.9 2,312.3 2,896.5 3,328.4 297.4 308.4 350.5 37.2 38.5 43.8 9% 17.4 16.8 14.8 23.0 23.5 17.3 17.3 8.0 1.2
TCS 2,379.5 1,08,646.2 1,17,866.0 1,27,846.1 24,215.2 25,899.3 28,363.1 122.9 131.4 143.9 8% 19.4 18.1 16.5 37.2 34.2 28.9 26.5 43.5 1.8
Wipro 475.6 51,244.0 55,802.6 59,911.3 8,892.2 8,506.5 9,634.4 36.2 34.5 39.0 4% 13.1 13.8 12.2 13.5 14.3 16.5 16.8 12.0 2.5
Cap goods / Power
BHEL 127.1 25,138.0 29,454.2 34,469.6 (913.0) 607.7 1,054.7 -3.7 2.5 4.3 - - 51.2 29.5 2.8 4.6 1.8 3.1 0.4 0.3
CESC 646.4 6,493.0 7,059.8 7,467.2 707.0 715.9 740.1 53.3 54.0 55.8 2% 12.1 12.0 11.6 7.4 7.1 8.0 7.8 10.0 1.5
Crompton Greaves 61.2 5,272.0 5,818.9 5,452.1 128.4 155.8 262.5 2.0 2.5 4.2 45% 30.6 24.6 14.6 4.7 5.9 3.3 5.3 0.0 0.0
Finolex Cable 413.0 2,461.0 2,767.3 3,214.5 249.0 316.0 348.6 16.3 20.7 22.8 18% 25.3 20.0 18.1 26.3 25.1 28.1 26.0 2.5 0.6
Greaves Cotton 122.1 1,616.2 1,716.5 1,973.1 181.4 184.8 208.7 7.4 7.6 8.5 7% 16.5 16.1 14.4 29.4 30.5 20.3 21.0 5.5 4.5
Kalpataru Power 263.4 4,365.0 5,020.4 5,759.2 200.0 256.6 298.0 13.0 16.7 19.4 22% 20.3 15.7 13.6 16.7 17.4 10.8 11.4 1.5 0.6
PTC India 73.9 12,799.0 13,646.4 14,921.1 218.4 263.1 287.6 7.4 8.9 9.7 15% 10.0 8.3 7.6 13.8 14.2 13.8 13.9 2.5 3.4
Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated

EQUITY FUNDAMENTALS EARNINGS GUIDE
Company CMP Sales Net profit (%) EPS PE (x) EPS RoCE (%) RoNW (%) DPS Div
(Rs) growth Rs. Yld(%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY18/FY16 FY16 FY17E FY18E FY17E FY18E FY17E FY18E
Skipper 138.3 1,506.0 1,746.6 2,076.4 83.1 96.0 117.6 8.1 9.4 11.5 19% 17.1 14.7 12.0 24.9 24.6 22.6 22.7 1.4 1.0
Thermax 781.3 4,352.0 4,056.0 4,239.0 305.0 284.0 313.7 25.6 23.9 26.3 1% 30.5 32.7 29.7 15.7 16.4 11.0 11.3 6.0 0.8
Triveni Turbine 119.7 796.3 913.0 1,053.0 107.6 142.0 162.0 3.3 4.3 4.9 23% 36.7 27.8 24.4 61.7 55.0 41.8 37.0 1.1 0.9
Va Tech Wabag 479.8 2,549.0 3,020.0 3,577.0 88.9 138.7 173.4 16.4 25.5 31.9 39% 29.3 18.8 15.0 17.8 19.8 13.3 14.9 4.0 0.8
V-Guard Industries 164.6 1,862.0 1,975.4 2,329.1 111.7 132.1 160.5 3.7 4.4 5.3 20% 44.4 37.5 30.9 35.2 35.7 25.3 25.2 3.5 2.1
Infra / Real Estate
Gayatri Projects 652.5 1,812.2 2,061.6 2,529.2 58.6 75.9 116.7 16.5 21.4 32.9 41% 39.4 30.5 19.8 10.3 11.9 9.0 12.5 2.0 0.3
ITNL 113.0 8,263.8 8,624.0 9,277.9 311.5 224.1 324.2 9.5 6.8 9.9 2% 11.9 16.6 11.5 8.6 9.1 3.3 4.7 2.0 1.8
IRB Infra 206.8 5,130.2 5,932.7 6,745.8 635.8 670.4 875.7 18.1 19.1 24.9 17% 11.4 10.8 8.3 12.5 14.9 13.2 15.4 4.0 1.9
Jaiprakash Asso 9.8 8,793.8 - - (3,511.7) - - -14.4 - - - - - - - - - - 0.0 0.0
Larsen & Toubro 1,376.6 1,01,964.0 1,13,804.0 1,25,961.0 4,199.0 5,301.0 6,203.0 45.1 56.9 66.6 22% 30.5 24.2 20.7 7.9 8.9 11.6 12.6 14.3 1.0
NBCC 247.1 5,838.3 7,147.0 10,446.9 311.1 363.1 526.9 5.2 6.1 8.8 30% 47.7 40.8 28.1 37.4 45.7 22.5 27.8 2.0 0.8
Oil & gas
Oil India 456.5 9,765.0 9,809.0 10,435.0 2,545.0 2,170.0 2,380.0 42.3 36.1 39.6 -3% 10.8 12.6 11.5 10.6 11.3 9.5 10.1 16.0 3.5
Reliance 1,067.2 2,76,544.0 2,99,408.5 3,40,501.8 27,630.0 30,978.2 33,887.1 93.7 105.1 114.9 11% 11.4 10.2 9.3 9.1 9.2 11.4 11.3 10.5 1.0
Selan Exp 190.8 62.0 78.1 96.2 12.9 20.9 24.5 7.9 12.7 14.9 37% 24.1 15.0 12.8 9.2 10.4 7.2 8.1 5.0 2.6
Pharmaceuticals
Aurobindo Pharma 667.0 13,896.1 16,477.8 19,707.6 2,048.0 2,630.0 3,455.0 35.0 44.9 59.0 30% 19.1 14.9 11.3 29.4 33.1 31.6 30.6 2.5 0.4
Cipla 568.3 13,678.3 16,023.9 17,871.1 1,505.9 1,709.2 2,205.0 19.5 21.3 27.4 19% 29.1 26.7 20.7 12.7 14.8 13.2 14.7 2.0 0.4
Cadila Healthcare 362.1 9,837.6 10,839.2 12,372.1 1,522.6 1,782.4 2,261.1 14.9 17.4 22.1 22% 24.3 20.8 16.4 28.9 33.2 26.3 26.2 3.2 0.9
Divi's Labs 752.3 3,769.0 4,256.1 5,178.5 1,111.9 1,228.4 1,448.7 41.9 46.3 57.2 17% 18.0 16.2 13.2 32.3 32.9 26.3 26.7 10.0 1.3
Glenmark Pharma 899.0 7,650.0 9,499.0 10,272.0 1,068.0 1,451.0 1,631.0 37.8 51.4 57.8 24% 23.8 17.5 15.6 24.3 25.7 25.7 22.7 2.0 0.2
Lupin 1,489.0 14,208.5 17,022.9 20,420.4 2,270.7 3,035.1 3,791.7 50.4 67.4 84.1 29% 29.5 22.1 17.7 22.2 25.6 21.7 21.5 7.5 0.5
Sun Pharma 637.4 28,269.7 35,638.9 36,757.9 5,401.1 7,317.6 8,122.9 22.4 30.4 33.8 23% 28.5 21.0 18.9 23.5 24.2 19.2 17.9 3.0 0.5
Torrent Pharma 1,349.7 6,529.0 6,762.3 7,276.9 1,862.0 1,205.6 1,380.3 110.0 71.3 81.6 -14% 12.3 18.9 16.5 27.1 25.8 27.3 22.7 35.0 2.6
Building Materials
Grasim 867.0 35,171.6 38,180.6 43,623.5 2,443.6 3,250.8 3,650.6 52.3 69.6 78.2 22% 16.6 12.4 11.1 14.8 15.6 10.9 10.6 4.5 0.5
The Ramco Cements 575.3 3,672.9 4,020.7 4,456.1 534.4 633.1 755.7 22.4 26.6 31.7 19% 25.6 21.6 18.1 11.5 12.4 18.7 18.8 3.0 0.5
Shree Cement** 14,122.6 5,568.0 8,959.9 10,405.1 461.1 1,543.8 1,938.6 132.3 443.1 556.4 105% 106.7 31.9 25.4 23.2 23.5 22.4 22.7 24.0 0.2
UltraTech Cement 3,301.4 23,841.0 23,277.9 27,277.7 2,287.2 2,288.1 2,802.5 83.5 83.5 102.3 11% 39.6 39.5 32.3 13.4 15.1 10.0 11.0 9.5 0.3
Discretionary
Cox and Kings 181.3 2,351.9 2,206.8 2,514.2 284.9 279.5 382.5 16.8 16.5 22.6 16% 10.8 11.0 8.0 11.9 14.1 16.5 18.9 1.0 0.6
Century Ply (I) 175.9 1,664.0 1,901.0 2,318.7 160.5 192.1 228.8 7.2 8.6 10.3 19% 24.4 20.4 17.1 22.8 22.4 31.3 28.7 1.0 0.6
Inox Leisure 230.0 1,332.7 1,231.3 1,551.4 77.5 48.7 102.3 8.4 5.3 11.1 15% 27.4 43.3 20.6 11.0 17.2 7.6 13.8 0.0 0.0
Info Edge (India) 860.5 723.5 856.4 1,019.3 153.0 199.1 260.1 12.7 16.5 21.5 30% 67.8 52.1 40.0 15.2 17.1 10.3 12.0 3.0 0.3
KKCL 1,800.0 457.4 511.0 577.4 68.0 81.6 93.5 55.1 66.2 75.8 17% 32.7 27.2 23.7 31.3 31.4 25.5 25.5 60.0 3.3
Orbit Exports 314.9 150.0 116.0 139.0 23.0 19.2 24.2 16.0 13.3 16.8 2% 19.7 23.7 18.7 12.5 14.9 16.0 17.7 3.8 1.2
Raymond 507.7 5,621.0 6,022.0 6,562.0 115.5 144.6 187.3 20.3 23.8 30.8 23% 25.0 21.3 16.5 11.4 12.8 8.6 10.2 3.0 0.6
Relaxo Footwear 400.8 1,715.4 1,891.6 2,195.6 117.3 137.2 177.6 9.8 11.4 14.8 23% 40.9 35.2 27.1 28.6 35.2 19.0 21.9 0.6 0.1
Thomas Cook India 186.3 4,236.7 5,404.3 6,459.3 50.2 128.7 266.0 0.8 2.6 5.5 162% 232.8 71.6 33.9 10.5 19.5 13.4 22.0 0.4 0.2
Wonderla Holidays 338.7 205.4 259.0 328.0 59.8 53.5 79.2 10.6 9.5 14.0 15% 32.0 35.6 24.2 19.1 26.0 12.9 17.7 0.5 0.1
ZEEL 458.6 5,851.5 6,672.6 7,341.4 933.1 1,277.3 1,737.9 10.2 13.3 18.1 33% 45.0 34.5 25.3 26.7 30.8 25.4 28.1 2.3 0.5
Diversified / Miscellaneous
Aditya Birla Nuvo 1,292.4 5,422.6 5,372.4 5,783.1 303.6 304.7 472.1 23.3 23.4 36.3 25% 55.5 55.1 35.6 7.0 7.3 3.7 5.4 5.0 0.4
Bajaj Holdings 1,838.5 469.8 - - 2,265.2 - - 203.5 - - - 9.0 - - - - - - 25.0 1.4
Bharti Airtel 313.9 96,619.2 1,00,050.0 1,06,779.7 4,735.3 3,758.2 3,529.3 11.8 9.4 8.8 -14% 26.6 33.4 35.7 10.5 8.6 5.9 4.6 1.4 0.4
Bharat Electronics 1,432.2 7,295.2 8,205.3 9,330.9 1,364.9 1,538.2 1,762.2 56.9 64.1 73.4 14% 25.2 22.3 19.5 18.5 18.2 13.8 13.7 17.0 1.2
Gateway Distriparks 254.5 1,046.1 1,099.5 1,196.7 123.6 108.3 134.5 11.4 10.0 12.4 4% 22.4 25.6 20.6 13.0 15.0 11.4 14.3 7.0 2.8
Max Financial 559.5 11,711.9 - - 252.7 - - 9.5 - - - 59.1 - - - - - - 0.0 0.0
PI Industries 828.8 2,096.8 2,495.2 2,984.2 300.0 399.6 475.5 22.2 29.6 35.2 26% 37.3 28.0 23.5 34.6 34.1 30.0 27.6 3.1 0.4
Ratnamani Metals 692.3 1,719.0 1,497.3 1,800.9 162.7 139.8 172.2 34.8 29.9 36.8 3% 19.9 23.2 18.8 16.9 19.0 12.8 14.1 5.5 0.8
Supreme Industries** 887.0 2,974.8 4,812.0 5,843.1 212.0 420.5 522.9 16.7 33.1 41.2 57% 53.1 26.8 21.5 30.4 33.7 26.0 26.4 7.5 0.8
UPL 667.6 13,301.5 15,520.3 18,046.2 1,438.9 1,843.4 2,243.4 27.6 35.3 43.0 25% 24.2 18.9 15.5 18.5 19.0 22.5 22.3 5.0 0.7
^Marico after 1:1 bonus

**June-ended financial year till FY2015, FY2016 consists of only 9 months
Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016; hence, we have not estimated the FY2017 numbers
Divis Labs after 1:1 bonus; BEL after 2: 1 bonus
*** June ended
Cadila Healthcare post stock split from Rs5 to Rs1

Remarks
Automobiles
Apollo Tyres Apollo Tyre is the market leader in truck and bus tyre segments with a 28% market share in India. The company will be investing $600mn
over the next three years to set up a greenfield facility in Hungary and Rs4,000 crore to expand capacity at Chennai facility. The expanded
capacities are likely to come on stream by 2017-18. Also the recent foray in the 2 wheeler tyres strengthens Apollo Tyres presence across
all the key automobile segments. Post the demonetisation announcement, the RBI has lowered the FY2017 GDP forecast from 7.6% to
7.1%. This would affect freight availability and consequently demand for new Commercial Vehicles (CV). Further, lower freight availability
would result in reduced utilisation of truck fleets, thereby affecting the replacement demand for CV tyres. Also, the international prices of
natural rubber are up 35% in the last two months. Given the double whammy of subdued demand and rising raw material costs, we have
downgraded our recommendation to Hold from Buy. We revise our price target on the stock to Rs210.
Ashok Leyland Ashok Leyland, the second largest CV manufacturer in India, is a pure CV play. The Governments recent demonetisation move (banning
of Rs500 and Rs1000 notes) would lead to a liquidity crunch, which in turn will impact consumption demand. The Government expects
Q3FY2017 GDP growth to moderate to 5.5% from the 7.1% GDP growth expected in H1FY2017. Slower GDP growth will impact freight
generation and consequently the MHCV demand. Further, the truckers existing fleet utilisation has been impacted on the back of the
current liquidity crunch, which would lead to deferment of the new vehicle purchases. We expect demonetisation to impact the MHCV
demand in the next two quarters. However, FY2018 is likely to see GDP growth picking up once the liquidity situation normalises and the
business cycle attains stability. We have reduced our FY2017 and FY2018 earnings estimates by 14% and 16%, respectively, to factor in
the lower MHCV demand and the consequent drop in the margins. However, given the long-term growth prospects and expectations of
demand pick-up in FY2018, we have retained our Buy rating on the stock with a revised PT of Rs90.
Bajaj Auto Bajaj Autos domestic motorcycle volumes have been under pressure over the last couple of years largely due to issues in the executive
segment However, the launch of CT100 and refreshed Platina has given a much needed volume push while the newly launched Pulsar
variants, Avenger and V-series have helped consolidate its leadership in the premium and luxury motorcycle segments. The macro-
economic issues (sharp currency depreciation) in the key export markets including Nigeria have affected the dispatches to these countries
and the impact is likely to be felt for the next one to two quarters. The launch of its quadricycle, RE60, has been delayed by legal issues
and the matter is expected to be sorted soon and will be a trigger for re-rating of the stock. However, the Governments demonetisation
move has led to a severe liquidity crunch and has an adverse impact on the cash-driven motorcycle sales.. Given the decline in BALs
domestic volumes (on account of demonetisation) and persistent weakness in its exports volumes, we have cut our volume estimates for
the company. We now expect BALs overall FY2017 volumes to decline by 4% YoY as against a marginal growth anticipated earlier. Given
the cut in the volume estimates, we have lowered our FY2017/FY2018 earnings by 8%/9%. Consequently, we have revised downwards
the price target to Rs2,910, but have retained our Hold rating on the stock.
Gabriel India Gabriel is one of Indias leading manufacturers of shock absorbers and front forks with a diversified customer base. Gabriels revenues
are expected to grow at a healthy 15% CAGR over FY2016-FY2018 due to improved outlook for the two-wheeler industry and the
passenger car segments. There has been a ramp-up in supplies to Honda Motorcycle & Scooters (HMSI) new plant in Gujarat, as also to
the new models of Maruti Suzuki and Mahindra & Mahindra (M&M). In the near term, the stock performance would be influenced by the
recovery in the two-wheeler market, a likely positive rub-off from the implementation of the Seventh Pay Commissions recommendations
and expectations of a normal monsoon in 2016. The recent demonetisation move will impact demand, especially in the 2W segment
(where transactions are cash based). GIL believes that demonetisation will impact demand in Q3FY2017 but the long-term growth outlook
is strong. Apart from the RM cost reduction, GIL is also working on controlling the overhead costs through productivity improvement. GIL
is targeting to reach double-digit OPM as against 9.4% OPM in H1FY2017. We maintain our Buy rating on the stock with an unchanged
PT of Rs130.
Hero MotoCorp HMCL is the largest two-wheeler manufacturer in the world with sales of over 6.6 mn vehicles in FY16 and a domestic market share of
39%. We expect the two-wheeler industry to grow at 10-12% CAGR over the next five years driven by increased penetration levels in rural
areas and replacement demand. HMCL is expected to maintain its leadership position in the industry with new launches in the premium
motorcyles and scooters segments. Further, massive capex plans implemented by the company in the past, shall ramp up the production
levels. The Governments decision to demonetise the high-value currency notes is likely to result in a cash crunch and defer discretionary
consumer purchases such as Two-Wheelers (2W). The impact is expected to be severe in the rural areas where a large chunk of
transactions are cash-based. This is likely to impact rural-focused automobile players, including Hero MotoCorp. However, the volumes
are likely to recover in the next 6-8 months once the macro-economic environment attains stability. Therefore, we believe that Heros
long-term growth prospects are intact but it will experience some pressure in the near term. We maintain our Buy recommendation with
a revised price target (PT) of Rs3,500.
M&M M&M is a leading maker of tractors and UVs in India. We expect demand for the automobile segment to pick up with an improvement
in customer sentiment. Additionally, new launches especially in the compact UV space will drive volume growth. After growing in strong
double digits, the tractor demand was under pressure in FY15-16 due to weak monsoon. Tractor sales improved significantly in H1FY2017
and the management expects the demand traction to sustain going ahead. M&M is working on launching a new platform for Tractors in
the sub-30 HP category in H1FY2018 and we expect Tractor demand to grow at 16% CAGR over the next two years. However, near-term
concerns like demonetisation are likely to impact demand in the short term (transactions in rural areas where M&M has strong presence
are predominantly done in cash). We expect M&Ms topline and bottomline are likely to grow at 13% and 16% CAGR, respectively
between FY2016 and FY2018. While the long-term demand potential is strong, the same is likely to be impacted in the near term. We
have reduced our earnings estimates by 3% and 8% for FY2017 and FY2018, respectively to factor in the impact on volume. We maintain
our Buy rating on the stock with a revised price target of Rs1,450.

Maruti Suzuki Maruti Suzuki is Indias largest passenger vehicle maker with a strong 46% market share. It has been able to gain market share over the
last two years on the back of a diverse product portfolio, a large distribution network with an increased focus on rural markets and a shift
in consumer preference to petrol models from diesel. It is poised to reap the benefits from the increased discretionary spending from the
Seventh Pay Commission pay-out. The recently launched premium hatchback, Baleno and Compact SUV Vitara Brezza have received a
positive response which will help the company expand market share in the segment. The management plans to double its existing sales
and distribution network in order to achieve its target of doubling domestic volumes over the next five years. Maruti is likely to outpace
the PV industry growth rate in FY2017-FY2018 on the back of sustained strong demand for recent launches and a robust product
pipeline. The commissioning of the first phase of Gujarat plant will further aid volume expansion. MSILs yen exposure is expected to
reduce with a higher localisation level while the royalty on future models shall be INR denominated, thus shielding the OPMs partly. Also,
Operating Profit Margin (OPM) is expected to improve on the back of operating leverage and lower discounts due to strong demand. The
Governments demonetisation move is unlikely to have any material impact on Marutis volumes given the higher proportion of financing
in its sales, and a long waiting period on recently launched models (Baleno and Vitara Brezza). Further, Marutis FY2018 volume growth
would be higher, driven by the expected resurgence in demand post demonetisation and the planned new launches. We maintain our
Buy rating with a revised price target of Rs6,430.
Rico Auto Inds. Rico Auto is one of the largest producers of high-pressure non-ferrous die castings for the auto sector. The significant cash inflow due to
stake sale in a JV company has enabled it to deleverage its balance sheet. Additionally, a lower interest burden will result in a growth in
the earnings and free cash flow. Further, improved demand outlook from the key customers - Hero MotoCorp, Maruti Suzuki and Renault
(60-65% of total revenue), coupled with commissioning of the Chennai plant will boost the companys topline going forward. Also, the
proposed new plant at Rajasthan is expected to commence operations by Q3FY2018 and will start contributing to the topline. Driven by a
strong demand outlook and consequent plans to ramp up capacity, we expect Ricos revenue to grow at 14.5% CAGR between FY2016
and FY2018. Further, the companys margins are also likely to improve due to a better product mix, operating leverage and improved
profitability of subsidiaries/JV. We maintain our Buy rating and raise our price target (PT) to Rs84.
TVS Motor TVS Motor is the fourth largest two-wheeler manufacturer in the country with a strong presence in the scooter segment. The scooter
segment has surpassed the growth in the motorcycle segment over the past couple of years and currently contributes 30% of the total
two-wheeler volumes. On the motorcycle front, two new launches in January 2016 (Apache RTR and Victor) have generated higher
volumes for the company TVSM is poised to outpace the 2W industry growth given the new launches and sustained demand for its
products. TVS has a higher share of Mopeds and Scooters (their combined contribution in TVS 2W volumes is 60% as against industry-
wide average proportion of ~36%), which have been less affected by demonetisation being utilitarian products. The alliance with BMW
would further aid topline growth. We also believe that the alliance with BMW would be a game changer for TVSM, as it would enhance
its brand image in the premium motorcycle category. Also, the technological inputs received from BMW would significantly enhance the
brand appeal of the entire TVSM product range, enabling it to command higher margins. Benefits of operating leverage, better product
mix and alliance with BMW are expected to aid in margin expansion over the next 1-2 years. We expect TVS to outpace the 2W industry
and report a 36% CAGR in net profit over the next two years. We retain our Buy rating with a revised price target of Rs455
Banks & Finance

Allahabad Bank With a wide network of over 3,000 branches spread across India, Allahabad Bank enjoys a stronghold in north and east India. But it has
reported a rise in NPAs resulting in deterioration of its asset quality. Higher proportion of stressed loans and low tier-I CAR remain the key
concerns of the bank.
Axis Bank Axis Bank is the third largest private sectors bank, continues to grow faster than the industry and has diversified its book in favour of the
retail segment (~40% of loans in retail segment). The banks liability profile has improved significantly which would help to sustain the
margins at healthy levels. We expect the earnings growth to remain reasonably strong driven by a healthy operating performance. While
asset quality pressures have emerged as pain points due to infrastructure and steel exposures, we expect the stress to persist in near
term.
Bajaj Finance Bajaj Finance, owned by Bajaj Finserv, is a fast growing, well-diversified leading NBFC in the country. It has assets spread across
products, viz loans for consumer durables, two- and three-wheelers, loans to small & medium enterprises (SMEs), mortgage loans and
commercial loans. Despite strong growth in loans, the asset quality and provisioning remain among the best in the system. Given the
strong growth rate, high margins and return ratios, its premium valuations within the NBFC space is justified.
Bajaj Finserv Bajaj Finserv is a financial conglomerate having presence in financing business (vehicle finance, consumer finance and distribution)
and is among the top players in the life insurance and general insurance segments. Its consumer finance (Bajaj Finance) and general
insurance businesses continue to report a robust performance while the life insurance business is showing signs of a pick-up after being
affected by a change in regulations.
Bank of Baroda Bank of Baroda is among the top public sector banks (PSBs) having a sizeable overseas presence (over 100 offices in 24 countries) and
a strong network of over 5,000 branches across the country. It has a stronghold in western and eastern India. Its performance metrics
remain better than that of the other PSBs and asset quality has deteriorated in line with the RBIs directive to clean the balance sheet.
Bank of India Bank of India has a network of over 4,800 branches, spread across the country and abroad, along with a diversified product and services
portfolio, and steadily growing assets. The operating performance and earnings have eroded significantly due to margin deterioration and
sharp rise in NPAs. Given the rise in the number of incremental stressed loans and the relatively weaker capital position, its valuations
may remain subdued.

Capital First Capital First (erstwhile Future Capital Holdings) had been acquired by global private equity firm, Warburg Pincus (a 72% stake). The
present management has taken several initiatives to tap the high-growth retail product segments, like gold loans, loan against property
and loan against shares. It has a strong CAR and sound asset quality. Its loan book is expected to sustain a 25-30% growth in the next
three years. As a result of several initiatives taken, the operating leverage will play out and may lead to significant pick-up in profitability
over medium term.
Corp Bank Corporation Bank is a mid-sized PSB having a relatively higher presence in south India. It is predominantly exposed to the corporate
segment, which constitutes about 45% of its book. Due to a higher dependence on the wholesale business and a low CASA ratio, it lags
its peers in terms of operational performance. Also, the rise in NPAs could keep provisioning high and weaken earnings performance.
Federal Bank Federal Bank is among the better performing old private sector banks in India with a strong presence in south India, especially Kerala.
Under the new management, the bank has taken several initiatives, which would improve the quality of its earnings and asset book.
The asset quality has shown stress in the past few quarters, though we expect a gradual improvement in the NPAs and the operating
performance to pick up gradually. The valuations seems attractive over the medium to long term.
HDFC HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. It has interests in banking,
asset management and insurance through its key subsidiaries. As these subsidiaries are growing faster than HDFC, the value contributed
by them would be significantly higher going forward. Due to a dominant market share and consistent return ratios, it should continue to
command a premium over the other NBFCs. Any unlocking of value from its insurance business will be positive for the stock.
HDFC Bank HDFC Bank is among the top performing banks in the country having deep roots in the retail segments. Despite the general slowdown in
the credit growth, the bank continues to report a strong growth in advances from retail products. Its relatively high margins (compared with
its peers), strong branch network and better asset quality make HDFC Bank a safe bet and there is scope for expansion in the valuations.
ICICI Bank ICICI Bank is Indias largest private sector bank with a network of over 3,800 branches in India and a presence in around 18 countries.
The bank has made inroads into retail loans (~45% of the book) and significantly improved its liability franchisee. The operating profit
improved significantly though its exposure to some troubled sectors (infrastructure, steel etc) has increased pressure on the asset quality.
However, a healthy growth in the operating income and proceeds from monetisation of the stake in subsidiaries will help to deal with the
NPA challenges.
IDBI Bank IDBI Bank is one of leading PSBs of India in terms of size of asset, though it is largely present in the corporate lending space. It is gradually
working towards improving its liability base and expanding the retail book which is likely to reflect in the form of better margins and return
ratios. However, due to huge asset quality pressure, low tier-I CAR and slower business growth, the stock is likely to underperform in the
near term.
LIC Housing LICHFL is the third largest mortgage financier (including banks) in India with a market share of 11% and loan book of over Rs1,00,000
crore. It is promoted by Life Insurance Corporation of India, which is among the most trusted brand in the country. With over 200 branches,
1,241 direct sales agents, 6,535 home loan agents and 782 customer relationship associates, the company has among the strongest
distribution structures in India to support business expansion. Going ahead, a revival in the economy and moderation in the borrowing
rates could be the key triggers for the stock. Therefore, considering stable RoE of ~20%, sound asset quality and healthy growth outlook,
the companys fundamentals are strong.
PNB Punjab National Bank has one of the best liability mixes in the banking space, with low-cost deposits constituting around 40% of its
total deposits. This helps it to maintain one of the highest margins among PSBs. However, in view of the weakness in the economy and
relatively higher exposure to troubled sectors, the asset quality stress has increased and NPA issues will persist over next few quarters.
PFS PTC India Financial Services, owned by PTC India, is focused on providing financial solutions to projects in the energy value chain. Given
the robust lending opportunities in the renewable energy segment and the likely reforms in the thermal power segment, the loan growth
is expected to remain strong over the next two to three years. The proceeds from exits in investments would add to the profitability. The
asset quality despite some deterioration is manageable.
SBI State Bank of India is the largest bank of India with loan assets of over Rs14 lakh crore. The successful merger of the associate banks and
value unlocking from insurance business could provide further upside for the bank. While the bank is favourably placed in terms of liability
base and the operating profit is also better than peers; the asset quality has emerged as a key pain point which will affect the earnings
growth.
Union Bank Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become the largest retail, MSME bank.
Hence, it has ramped up its manpower and infrastructure to ramp up retail, SME lending. The banks asset quality challenges have come
to fore (mainly from the corporate portfolio) whereas low tier-1 CAR also remains an area of concern.
Yes Bank Yes Bank, a new generation private bank, started its operations in November 2004 and has emerged as among the top performing banks.
It follows a unique business model based on knowledge banking, which offers product depth and a sustainable competitive edge over
established banking players. The bank is suitably poised to ride the recovery in the economy and the retail deposit franchise is showing
a sharp improvement which will support the margins in the medium to long term

Consumer goods
Britannia Britannia is the second largest player in the Indian biscuit market with about 30% market share. Under a new leadership, Britannia has
been able to leverage and monetise its strong brand and position in the biscuit and snack segments. The company can sustain its higher
than industry growth rates with an improving distribution reach, entry into newer categories and focus on cost efficiency. There will be
some impact on the business in the near term due to demonetisation. However, the long-term growth strategy will remain intact. We
recommend a Buy on the stock with a price target of Rs3,950.
Emami Emami is one of the largest players in the domestic FMCG market with a strong presence in the under-penetrated categories such as
cooling oil, antiseptic cream, balm and mens fairness cream. The recently acquired Kesh King brand improves the product and margin
profiles of the company. The desire to become a large FMCG player by riding on a portfolio of differentiated brands and widening reach in
various geographies will help Emami to achieve a growth of over 20% CAGR over the next 2-3 years. There will be some impact on the
business in the near term due to demonetisation, but the long-term growth strategy will remain unaffected. We recommend a Buy on the
stock.
GSK Consumer GSK Consumer Healthcare is a leading player in the MFD segment with ~70% share in the domestic market. Judicious new launches and
brand extensions, and the expansion of its distribution reach have helped it to stay ahead of the competition and maintain its pricing power
over the years.. There will be some impact on the business in the near term due to demonetisation, but the long-term growth strategy will
remain intact. In a bid to de-risk its business model, it has expanded its product portfolio by entering into new categories such as biscuits
and oats in the recent years. With cash balance of more than Rs2,500 crore, the company can invest in growth initiatives and/or reward
its shareholders with a healthy dividend payout.
GCPL Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide market segments in India. The
recent acquisitions, ie Strength of Nature, Darling Group, Tura, Megasari and Latin American companies, have helped the company
to expand its geographic footprint and improve growth prospects. GCPL is expected to be relatively less affected by demonetisation
compared to other FMCG companies, as its domestic business constitutes ~50% of overall consolidated revenue. Though GCPLs
domestic business is expected to see near-term pressure on the performance, its long-term growth prospects remain bright. Further, the
companys international business is expected to post a better performance, underpinned by the revival in Indonesia and expectations of
strong revenue growth and improvement in profitability in Africa. We have upgraded our rating from Hold to Buy with a revised price
target of Rs1,665.
HUL Hindustan Unilever is Indias largest FMCG Company. Due to demonetisation, we expect HULs performance to be sluggish in the next
two quarters. Its performance is expected to improve gradually from Q1FY2018 onwards. HULs management is of the opinion that the
urban market will be the first to see revival due to a better banking system while recovery in the rural areas will come with a lag. Due to
the recent stock correction, we maintain our Buy recommendation with a revised price target of Rs915 In the long term, it will be one of
the key beneficiaries of the Indian consumerism story.
ITC ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, to strengthen and enhance
its other non-cigarette businesses. This would nurture the growth of these businesses some of which are at a nascent stage. The quantum
of excise duty of 10% declared in the Union budget 2016-17 was much lower than in the earlier years. This should help in stabilising
cigarette sales volume in the coming years. The current valuation makes ITC one of the cheapest stocks in the large-cap FMCG space.
Jyothy Labs Jyothy Laboratories is the market leader in the fabric whitener segment in India. With the successful integration of Henkel and the
induction of a new management team led by S Raghunanadan, it has transformed itself from a one-brand wonder to an aggressive FMCG
player. There will be some impact on the business in the near term due to demonetisation (especially in the rural areas), but there will not
be any change in the companys long-term growth strategy.
Marico Marico is among Indias leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing in the market. It
follows a three-pronged strategy which hinges on expansion of its existing brands, launch of new product categories (especially in the
beauty and wellness space) and growth through acquisitions Marico is feeling the pinch from the Governments demonetisation measure,
with its sales expected to be lower in H2FY2017. Marico is one of the strongest players in the domestic branded Hair Oil and Edible Oil
markets, with a leadership position in both the categories. With less exposure to Rural India, we expect Marico to see a faster recovery
when the demonetisation pain abates, owing to strong brands and a wide distribution reach of 4.5 million outlets. Due to the recent stock
correction, we maintain our Buy recommendation with a revised price target of Rs290
Zydus Wellness Zydus Wellness has small product portfolio, consisting of just three brands (Nutralite, Sugar Free and Everyuth) that cater to a
niche category. Though there will be some near-term impact on the business of the company due to demonetisation, Zydus Wellness
management is confident of clocking good revenue growth in the coming quarters on account of a revamped distribution system, gradual
improvement in the macro-economic environment, planned launch of new products/variants in its core categories and expansion of its
footprints in the international markets.
IT/IT services
Firstsource Firstsource Solutions is a specialized BPO service provider. The management continues to maintain revenue growth (10-12% YoY on CC
terms) and margin expansion (70-90BPS YoY) guidance for FY2017 with an upward bias. The health of its balance sheet is improving
gradually as the company is gradually reducing its debt burden through internal accruals. The company expects to be comfortably net
cash positive by the end of FY17. We expect the ongoing macro overhang to restrict the stocks outperformance in the near-to-medium
term, as FSL has 38.1% exposure to the UK.

HCL Tech HCL Technologies has a leadership position in ERD and IMS space, together accounting for ~58% of the companys total revenue. The
management believes that cross-selling to the existing ERD and IMS clients could unravel a larger business opportunity going forwardThe
company has not shied away from taking the inorganic route (10 acquisition/partnerships in the last 18 months) to strengthen its offerings.
In addition, the management has made investments in digital technologies (DRYiCE), which will catapult the company to the next level
of growth during the ongoing digital transition. We remain positive on the company in view of its large order wins, acquisitions in the ERD
space, investments in applications space and superior earnings visibility.
Infosys Infosys is Indias premier IT and IT-enabled Services Company that provides business consulting, technology, engineering and outsourcing
services. It has also given a promising aspiration target for 2020 of achieving $20bn in revenues and 30% in margin. Under the leadership
of Vishal Sikka, the company is doing the right thing by investing in the digital space (both organic and inorganic), improving client
engagement through design thinking, and automation. We remain positive on the companys growth prospects for the coming years.
Persistent Persistent Systems has proven expertise and a strong presence in newer technologies, strength to improve its IP base and the best-
in-the-class margin profile which set it apart from the other mid-cap IT companies. PSLs management foresees healthy traction in its
IP business Accelerite (accounts for 9% of total revenue). PSL is focusing on the development of IoT products and platforms, as it sees
significant traction from Industrial Machinery, SmartCity, Healthcare and Smart Agriculture verticals. Further, led by the recent acquisitions
and alliance with IBM to build IoT solutions for IBMs Watson platform, we expect the revenue momentum to accelerate in FY2017/
FY2018 and the margins are likely to remain stable on the back of the initiatives taken by the company.
TCS Tata Consultancy Services is among the pioneers of the IT services outsourcing business in India and is the largest IT service firm in the
country. Its management expects the digital revenues to grow much faster in the coming years; these grew by 52.2% YoY to $2.3 billion
in FY16. The management noted that headcount addition will be materially lower than in FY16 and dependence on Visas will come down.
We believe that the ongoing transition phase of the IT industry and the weak spending environment will restrict stock outperformance in
the medium term. On a longer term basis, we still prefer TCS, owing to its diversified portfolio and head-start in the Digital space.
Wipro Wipro is among the top five IT companies in India but in the last few years it has been lagging the industry in terms of growth. We believe,
owing to weakness in the energy, telecom, and some project deferrals, its unlikely to show material improvement in earnings on an
organic basis in FY17. The management has given an ambitious target of $15 billion revenues and 23% margin by 2020. We see the
target of new CEO Abid Ali Neemuchwala as an uphill task looking at the current growth trajectory. Therefore, we remain sceptical, as
anecdotal evidence on Wipro in the last two to three years does not inspire confidence.
Capital goods/Power
BHEL Bharat Heavy Electricals, Indias biggest power equipment manufacturer, has been the prime beneficiary of the multi-fold increase in the
investments made in the domestic power sector over the last few years. However, the order inflow has been showing signs of slowing
down which would remain a major concern for the company. The key challenge before the company now would be to maintain a robust
order inflow and margin amid rising competition and lower order inflow.
CESC CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) which is a strong cash
generating business. Further, 600MW of regulated generation capacity (to serve Kolkata distribution) has come on stream recently in
Haldia. Also its 600MW thermal power project at Chandrapur has signed PPA and started operating. The losses in the retail business are
coming down gradually over the past and it is expected to break even soon. The BPO subsidiary, FirstSource, is performing well in line
with expectations. However, the recent diversification into unrelated businesses like IPL franchisee would hurt its valuations.
Crompton Greaves Crompton Greaves key businessesindustrial and power systemsare passing through a rough patch and are potential beneficiaries
of the upcoming investment cycle revival. Also, the company is looking to unlock value by selling its international subsidiaries.
Finolex Cables Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improving demand environment in
its core business of cables. It is leveraging its brand strength to build a high-margin consumer product business. It has recently launched
Fans and switch Gears. Further, it is planning to launch water Heaters soon. Addition of new products in the product portfolio could be the
next growth driver. We see a healthy earnings growth, return ratios in high teens and superior cash flows which bode well for the stock.
Hence, we remain positive on the stock.
Greaves Cotton Greaves Cotton is a mid-sized and well-diversified engineering company. Its core competencies are in diesel/petrol engines, power
gensets, agro engines, pump sets (engine segment) and construction equipment (infrastructure equipment segment). The management
has taken a strategic call to close and hive off the loss-making infrastructure equipment division. A positive outlook for all the business
segments, coupled with the companys ongoing efforts to launch new products and widen its geographical reach is likely to drive topline
going forward. Further, GCL is ready with Bharat Stage 4 compliant engines (Bharat Stage 4 to be implemented from April 1, 2017 pan-
India), which will further aid topline growth in FY2018. We expect GCLs topline to grow at 10% CAGR between FY2016 and FY2018. We
remain positive on the stock and maintain our Buy rating with a price target of Rs160.
Kalpataru Kalpataru Power Transmission is a leading EPC player in the transmission & distribution space in India. Opportunities in this space are
likely to grow significantly, thereby providing healthy growth visibility. The OPM of the stand-alone business is likely to remain around 10%;
however the OPM of JMC Projects (a subsidiary) is showing signs of improvement. We see some value unlocking potential from selling
assets or listing of new business in future. We remain positive.

PTC India PTC India is a leading power trading company in India with a market share of 35-40% in the short-term trading market. In the last few
years, the company has made substantial investments in areas like power generation projects and power project financing which will
start contributing to its earnings. We retain our positive stance on expected healthy volume uptick, with an increasing share of long-term
contract business.
Skipper Skipper is uniquely placed to exploit the growing opportunities in two lucrative segments: power (transmission tower manufacturing
and EPC projects) and water (PVC pipes). It has a comfortable order book of more than Rs2,400 crore in the transmission business,
which looks promising given the huge investments proposal by the government in the power T&D segment in the next five years. It has
expanded the PVC capacity manifold (4x) and aspires to turn a national player from a regional player.
Thermax The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Incs capex. Thermax group
order book stands at around consolidated revenues. However, the company has shown its ability to maintain a double-digit margin in a
tough environment. We retain Hold on the stock due to its rich valuation.
Triveni Turbines Triveni Turbines (TTL) is a market leader in 0-30MW steam turbine segment. TTL is at an inflexion point with a strong ramp-up in the after-
market segment and overseas business while the domestic market is showing distinct signs of a pick-up. The company has also formed
a JV with GE for steam turbines of 30-100MW range which is likely to grow multi-fold in the next 4-5 years. TTL is virtually a debt-free
company with a limited capex requirement and an efficient working capital cycle, reflected in very healthy return ratios. Further, boosted
by the expected uptick in the domestic capex cycle, the companys earnings are likely to grow by 25%+ per annum over the next 3-4
years.
V Guard Ind V-Guard Industries is an established brand in the electrical and household goods space, particularly in south India. Over the years, it has
successfully ramped up its operation and network to become a multi-product company. The company has a strong presence in the south
region. It is also aggressively expanding in non-south markets and is particularly focusing on the tier-II and III cities where there is a lot of
pent-up demand for its products.
Va Tech Wabag VA Tech Wabag (VTW) is one of the worlds leading companies in the water treatment field with eight decades of plant building experience.
Given the rising scarcity of fresh water availability, we expect flow of huge investments in water segment both globally and domestically.
With rising urbanisation and industrialisation in India, we expect substantial investments in this space. Given the large opportunity ahead
and inherent strengths of VTW, like professional management, niche technical expertise and global presence, we remain positive on the
stock.
Infrastructure/Real estate
Gayatri Proj Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road and industrial construction
businesses. The order book stands at Rs12,510 crore, which is 6.9x its FY2016 revenues. It is also expanding its power and road BOT
portfolio and plans to unlock value by offloading stake to private equity. The company has potential to transform itself into a bigger entity.
IL&FS Trans IL&FS Transportation Networks is Indias largest player in the BOT road segment with a pan-India presence and a diverse project
portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with the geographical diversification across 12 states
reduce the risk to a large extent and provide comfort. Further, a strong pedigree along with the outsourcing of civil construction activity
helps it to scale up its portfolio faster. Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure
sector.
IRB Infra IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator in the country with all its
projects being toll based. It has an integrated business model with an in-house construction arm which provides a competitive advantage
in bidding for the larger projects and captures the entire value from the BOT asset. Further, it has a profitable portfolio as majority of its
operational projects have become debt-free and it has presence in high-growth corridors which provides healthy cash flow. Thus, it is well
poised to benefit from the huge opportunity in the road development projects on the back of its proven execution capability and the scale
of its operations.
Jaiprakash Asso Jaiprakash Associates has been facing earnings pressure across business verticals. Further, it is in the process of concluding its cement
asset sale to deleverage its balance sheet. The construction and real estate division has also been underperforming lately. The current
uncertainty in business restructuring and liquidity concerns has led to a cautious view on the stock.
L&T Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the domestic infrastructure
capex cycle. Further, backed by its sound execution track record and healthy order book, the company will do well. Monetisation of the
non-core businesses will continue for some time, leaving scope for further value unlocking. Measures planned by the company to improve
its return ratios augur well. Hence, we remain positive on the stock.
NBCC NBCC (India), a Navratna public sector enterprise is notified as a Public Works Organization (PWO), which gives it a unique eligibility to
bag orders on a nominated basis from government departments and PSUs. NBCC has already amassed a huge order book, which gives
it a strong revenue visibility for the next five years. Moreover, future prospects look much brighter given the opportunities from multiple
areas, like redevelopment of old government colonies in Delhi, Rajasthan & Odisha, development of government lands, Smart Cities,
Housing for All 2022 and Amrut. Given the huge competitive advantage, a unique business model, high return ratios and healthy cash
flows, we remain positive on the stock.

Oil & gas

Oil India Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India. The total proven and
probable reserves of the company stand at 52 MMTOE and 121 MMTOE respectively. Its reserve-replacement ratio is also healthy.
Though currently weak global crude oil prices are weighing on its performance, operational performance is healthy and offers high
dividend yield.
Reliance Ind Reliance Industries has one of the largest and complex refining businesses in India which enjoys a substantially higher refining margin
over the benchmark GRM. Further, its petrochemical business is also highly efficient, where RIL is expanding capacity. We expect the
GRM to remain healthy and the petrochem margin to be maintained in the medium term on an uptick in the domestic demand. Currently,
the decline in gas output from the KG-D6 basin is weighing on the stock price; however, capex in downstream business (incremental
capacity in the petchem business and petcoke gasification in refining) would be the earnings driver in the coming years. Large investment
in Reliance Jio could add value in long term.
Selan Exploration Selan Exploration Technology is an oil E&P company with five oil fields in the oil-rich Cambay Basin of Gujarat. The initiatives taken to
monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production. Further, it intends to explore its next field,
Indrora, which is the most prolific one with significant reserves. Based on this, we expect it to ramp up production significantly, subject to
approval for the new wells. However, weak global oil prices are likely to be an overhang on the stock in the medium term.
Pharmaceuticals
Aurobindo Pharma Aurobindo Pharma is set to post a healthy growth on the back of a ramp-up in the US and European markets, thanks to a strong product
pipeline built over a period and focus on niche segments like injectibles, hormones, penems and sterile products. The expected increase
in the export-led business and a favourable tilt in the revenue mix are likely to boost the margin, resulting in a faster growth in the earnings
as compared with the revenues. It has recently acquired the commercial operations (revenue size EUR320mn) of Actavis Plc in seven
western European countries and of Natrol in the USA to take on the nutraceutical business, which is a strategic fit.
Cadila Cadila Healthcares performance in the US generic vertical is likely to improve on the back of new product approvals. Besides, its
consumer business and exports to the emerging markets will help it to achieve a superior growth. Cadila has recently launched its
Authorised Generic (AG) Asacol HD in the US market, numbers from which will start reflecting from Q2FY2017 onwards. This will help
the company to get its US business growth back on track. Further, the company expects the resolution of USFDA warning letter to come
in Q2FY2017 (by September 2016), which will be another key trigger to improve the overall operating performance from Q2FY2017
onwards.
Cipla Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on technology-intensive
products in the inhalation and nasal spray segments; (2) established front-end presence in the key markets like South Africa, USA and
Europe; (3) developed an appetite for inorganic expansions; and (4) invested in future growth areas like biosimilars. The UK approval for
gSeretide comes at a crucial time for Cipla, as it will help the company to gain traction in its business across global markets. The Cipla
management sounded confident of ramping up USA and EU businesses with new product launches, and expects benefits from cost-
control initiatives to drive the companys earnings from FY2018 onwards.
Divis Labs The US Food & Drug Administration (USFDA) inspected Divis Laboratories (Divis Lab) Unit-II at Visakhapatnam (Vizag) from November
29, 2016 to December 06, 2016. The USFDA has issued Form 483 with five observations, which are moderate to serious in nature. Divis
Labs Unit-II at Vishakhapatnam/Vizag is a very critical unit for the company, as majority of its exports are from this unit (around 50%+
sales come from this unit and even larger contribution to profitability). If the USFDAs 483 observation letter escalates to a Warning Letter
/ Import Alert, then it will impact the companys financials significantly, leading to a possible sharp downward revision in estimates.
Glenmark Pharma The management has given a revenue growth guidance of more than 25% for FY2017 (including Zetia). The company will report 12-15%
base revenue growth in FY2017 and FY2018 each. The management has indicated that for future growth, the key focus areas will be
dermatology, contraceptives and complex injectables. The growth would be mainly driven by the USA, EU and India, which are witnessing
an exponential growth on account of launch of new products. Currently, it has three new chemical entities and four new biological
entities in clinical trials, out-licensing potential. The gZetia launch scheduled in H2FY2017 will give a big fillip to the companys sales and
profitability, which should further help reduce debt on the companys balance sheet.
Lupin The expected ramp-up in the launch of oral contraceptives, ophthalmic products, branded franchise (with addition of in-licenced product-
Alinia, Inspira Chamber VHC and Locoid lotion) in the USA and a robust pipeline of new launches in the domestic and overseas markets
provide strong growth visibility for Lupin. Lupin has recently successfully closed its outstanding 483 letter at its key plant in Goa. Around
30 products are pending for USFDA approval from the Goa plant, which we expect to start soon. Delay in key product approvals, coupled
with growing competition and pricing pressure in the US business are increasing strain on the operating performance in the near term.
Sun Pharma The combination of Sun Pharma, Taro, Dusa Pharma, the generic business of URL Pharma and the acquisition of Ranbaxy offers
an excellent business model for Sun Pharma. Also, the integration process with Ranbaxy is set to help boost the profitability due to
favourable synergies from H2FY2017. The management maintains its aim to achieve a $300-mn synergy from the merger of Ranbaxy.
With a strong cash balance, it is well positioned to capitalise on the growth opportunities and inorganic initiatives. The company has
started receiving few approvals from the Halol unit, which points to resolution of the plant issues in the near future. Also, the Specialty
segment is expected to perform well, as the company has recently launched BromSite drug (used to treat Dry Eye disease). Also, very
recently, Sun Pharma launched Authorized Generics (AG) for Benicar, Benicar HCT, Azor and Tribenzor. All four products put together
recorded sales of $2.5 billion for the 12-month ended August 2016. Therefore, we expect Sun Pharmas H2FY2017 financial performance
to be positive and long-term performance to be solid.

Torrent Pharma A well-known name in the domestic formulation market, Torrent Pharmaceuticals has been investing in expanding its international
presence. With the investment phase now over, it should start gaining from its international operations in the USA, Russia and Brazil.
Better field force productivity, focus on developed market and stronger balance sheet would result in a sustainable earnings growth.
Company acquired 30 key brands of Elder Pharma for Rs2,000 crore which is a strategic fit in long run. The company has proposed to
raise funds up to Rs10,000 crore through a mix of equity and debt instruments, part of which may be used for inorganic initiatives.
Building materials
Grasim Grasim is better placed compared with the other large players in the cement space due to its strong balance sheet, comfortable debt/
equity ratio, attractive valuation and diversified business. The full ramp-up of Vilayat plant (increasing capacity to 804,000 tonne) is likely
to aid VSF volumes going ahead, though prices may soften in the near term. Further, the merger of ABCIL and expansion in caustic
division are likely to maintain a strong performance in chemical division. On the cement front, the company expects demand to pick up in
the near term while a slow execution of government projects and surplus inventory remain concern areas.
The Ramco Cements The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from the capacity addition carried out ahead
of its peers in the southern region. In certain key markets of The Ramco Cements, like Telangana, Maharashtra and Andhra Pradesh,
demand has started to pick up but realisations have been under pressure. The company has reaped the benefits through cost-saving
measures, besides constantly reducing its debt, leading to improved profitability. In a nutshell, better volumes, cost efficiencies and
reducing leverage have yielded benefits for the company.
Shree Cement Shree Cements cement grinding capacity has grown to 27.2mtpa which will support its volume growth in the coming years. It has a power
plant with capacity of 612MW for its own consumption and merchant sale which is expected to support its revenue growth going ahead.
Thus, a volume growth of the cement division and the additional revenue accruing from the sale of surplus power will drive the earnings
of the company.
UltraTech Cement UltraTech Cement is Indias largest cement company with approximately 91mtpa cement capacity post acquisition of JP Associates
cement assets. The eastern region has seen a robust growth in infrastructure and housing demand while the other regions have seen
infrastructure spending only with no major improvement in housing and rural demand. The management has guided for a 7-8% demand
growth for FY17 driven by infrastructure spend and revival in retail demand after a good monsoon. However, the uncertainty over cement
price and increase in price of pet coke (trading with upward bias, Q3FY2017 onwards may feel the impact) will be the key monitorable
for FY17. However, cost efficiency (impact of new grinding and waste heat recovery) and base effect may lead to better operating
performance for UltraTech.
Discretionary consumption
Century Plyboards Century Plyboards is a leading player in the organised plywood industry with a market share of 25%. A strong growth in the sector,
Centurys premium positioning and brand equity strength, and the impending GST roll-out would enable it to post a revenue growth
(CAGR) of 18.1% over FY2016-FY2018E. On the back of a revenue growth and better absorption of fixed costs, the earnings are likely to
grow at a rate of 19.4% CAGR over FY2016-FY2018E. We believe that the structural growth story in terms of GST implementation and
capacity expansion benefits remains intact, but are still 6-9 months away. Therefore, we downgrade the stock to Hold with an unchanged
price target (PT) of Rs257.
Cox & Kings: Cox & Kings is an integrated player in the tourism & travel industry, with a strong presence in the global leisure travel segment and the
education tourism segment in Europe. It has a 30% market share in the global outbound tourism market. Demonetisation and GST
implementation are key positives for CKLs domestic Leisure Travel business from a long-term perspective due to the expected shift
from the unorganised players to organized ones. On the other hand, Education and Meininger business is expected to post a decent
performance in the coming years. Also, the management would reduce the consolidated debt by Rs400-500 crore per year through
internal cash flows. Therefore, we maintain our Buy recommendation with a revised price target of Rs225
Info Edge (India) Info Edge is Indias premier online classified company in the recruitment, matrimony, real estate, education and related service sectors.
Naukri is a quality play on the improving macro environment and is directly related to the GDP growth and Internet/mobile penetration.
Further, prevailing lower competitive intensity in the real estate space is positive in terms of profitability. We expect Zomato business
growth to extend in the coming years, with better integration of services and increasing monetisation opportunities. Going ahead, other
investee ventures, like www.meritnation.com, www.policybazaar.com, www.mydala.com and www.canvera.com, are also likely to gain
from the ongoing e-commerce boom in India.
INOX Leisure INOX Leisure Ltd (ILL), Indias second largest multiplex operator with 112 properties and 440 screens across 57 cities accounting for
about 23% of the multiplex screens in India, is scripting a blockbuster growth story through a mix of inorganic and organic expansion plan
to scale up the total screen count to 688 screens over the next 24-30 months. The ILL mega show is supported by an improving content
quality in the Indian mainstream and regional cinema with its movies regularly hitting the Rs100-crore or Rs200-crore box-office collection
mark. We continue to remain positive on ILL from a long-term perspective, given its pan-India growth plans, healthy balance sheet (lower
financial leverage) and potential benefits from GST rollout.
KKCL Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has created a niche space
in the minds of consumers. There will be near term impact of demonetisation on the branded apparel space, as consumers are likely
to postpone their discretionary purchases. In the long run, increase in volume through channels such as national store chains and
e-commerce would drive double-digit revenue growth for the company. Also, factors such as the implementation of the Seventh Central
Pay Commission (CPC) and a stable inflation will propel overall apparels sales in the coming quarters.

Orbit Exports Orbit Exports (Orbit) is a leading manufacturer and exporter of novelty fabrics exporting its products to over 32 countries. It is a recognised
star export house and operates in the niche area of high-end fancy fabrics, which are mainly used by designers in womens fashion
apparels. FY2017 can be considered as a year of consolidation for Orbit, with events such as slowdown in the Middle East, currency
devaluation in LatAm and demonetisation in India adversely affecting the companys performance in the near term. However, the Orbit
management is confident of recovery in FY2018, with a clear focus on growing the high-margin businesses. Also, Orbit has one of the
better balance sheets in the Textile industry and we expect it to improve further in the coming years. However, in view of near-term
concerns in the export markets, we downgrade our rating from Buy to Hold with a revised price target of Rs310.
Raymond Raymond is present in the fast-growing discretionary & lifestyle category of branded textiles and apparels. With growing incomes, rise
in aspirations to lead a luxurious life, greater discretionary spending and favourable demographics, the segment of branded apparels &
fabrics presents a good growth opportunity and Raymond with its brands and superior distribution set-up is very well geared to encash
the same. There will be near term impact on its business operations due to demonetisation. However, the company is focusing on
strengthening its balance sheet by improving the working capital management and reducing debt. Better revenue growth in the core
Textiles business and reduction in the interest cost should help the company to achieve double-digit earnings growth in the coming years.
Also, the stock has an embedded real estate value from the land parcel in Thane. Any development with regard to value unlocking in the
non-core businesses (including Engineering & Tools businesses) would act as a fresh trigger.
Relaxo Footwear Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mind-recall
brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investment opportunity due to its growing scale,
strong brand positioning and healthy financial performance. Being mainly into the mass footwear segment, the revival of revenue after
the demonetisation effect would be faster for Relaxo compared to other footwear retail players. We expect the revival in the companys
sales to kick in from Q1FY2018. Also, the implementation of GST will bring under its fold all the unorganised players, and we believe that
the price difference between branded and unbranded players will get reduced.
Thomas Cook (I) Thomas Cook India (TCIL), owned by the legendary value investor Prem Watsa, is an integrated leisure travel and human service
management company in India. The improvement in the domestic and global macro environment provides a huge growth opportunity in
the Indian leisure and travel industry. The top management of TCIL has indicated that the Governments demonetisation drive will have
near-term impact on the performance of its Travel & Tourism business, as the bookings for summer holidays 2017 (Q1FY2018) will be
adversely impacted. However, TCILs management is confident of seeing a recovery in the Travel business in the next 6-8 months once
the macro-economic environment attains certain stability. We maintain Buy with a price target of Rs229.
Wonderla Holidays Wonderla Holidays Ltd (WHL) is the largest amusement park company in India with over a decade of successful and profitable operations.
It owns and operates two amusement parks under the brand name Wonderla in Kochi and Bengaluru, and came up with a third park
in Hyderabad in Q1FY2017. Demonetisation would have a larger impact on the discretionary consumer spends. Being a seasonally
strong quarter for WHL, Q3FY2017 would see the impact of demonetisation on its footfalls. Further, the lower footfalls are likely to affect
the growth of non-ticketing revenues in the near term. Overall, WHL is expected to post muted operating performance at all the three
amusement parks in H2FY2017. Although we expect the operating performance to be subdued in the short term, the long-term growth
prospects of the company are intact. Therefore, we maintain our Buy recommendation with a revised price target of Rs395.
Zee Entertainment Zee Entertainment Enterprises, part of the Essel group, is one of Indias leading TV media and entertainment companies. It has a
bouquet of more than 40 channels across Hindi, regional, sports and lifestyle genres. ZEEL continues to outperform the broadcasting
advertising market and expects to continue the momentum with an improvement in the macro economy. ZEELs recent move to exit from
the loss-making sports business will improve its profitability, strengthen balance sheet and position the company to accelerate inorganic
or strategic investments. We continue to see ZEEL as the prime beneficiary of macro revival and digitisation.
Diversified/Miscellaneous
Aditya Birla Nuvo We believe that the outlook for ABNLs Financial Services business remains bright, although the Manufacturing vertical continues to lag.
Further, Ideas profitability is likely to remain under pressure in the near term. Pre-amalgamation, we have revised our price target (PT)
for ABNL to Rs1,250 on account of de-rating of its Telecom business and subdued operating performance of its Manufacturing verticals.
We maintain our Hold rating on the stock.
Bajaj Holdings Bajaj Holdings & Investment Ltd (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its manufacturing business
was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business consisting of the wind farm and financial services businesses
was vested with Bajaj FinServ (BFS). All the businesses and properties, assets, investments and liabilities of erstwhile Bajaj Auto, other
than the manufacturing and strategic ones, now remain with BHIL. BHIL is a primary investment company focused on new business
opportunities. Given the strategic nature of BHILs investments (namely BAL and BFL), we have given a holding company discount of 50%
to BHILs equity investments. The liquid investments, and investments in other group companies have been valued at cost. Further, the
price target (PT) for BFS has been revised upwards to Rs3,890, as the company has reported better-than-expected results for Q2FY2017
and long-term upside potential remains intact since all three business streams are in high-growth and emerging segments. Consequently,
we have maintained our Buy rating and have revised upwards the PT to Rs2,737.

Bharti Airtel Bharti Airtel is the leader in the Indian mobile telephony space. The long awaited entry of a competitor with deep pockets Reliance
Jio - in the market with aggressive pricing and deep market penetration strategy, Airtel will have to bear the brunt in the short term. Going
forward, from a long-term perspective, explosive growth in the data segment, strong network and reach will help Bharti emerge stronger,
but the near-term blips make us keep our Hold rating on the stock with a price target of Rs 364
BEL Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, stands to benefit from the enhanced
budgetary outlay for strengthening and modernising the countrys security. The Make in India initiative of the government will support
the earnings growth in the coming years, as it is the only player with strong research and manufacturing units across the country. The
companys current order book of around Rs34,675 crore provides revenue visibility for the next three to four years.
GDL With its dominant presence in the container freight station segment and recent forays into the rail freight and cold chain businesses,
Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cow while its investments in the rail and cold
storage businesses have started bearing fruits. It is one of the largest players in the CFS business and has also evolved as the largest
player in the rail freight business as well as the cold storage business. The proposed capex for a.ll the three segments will strengthen its
presence in each of the segments and increase its pan-India presence.
Max India Max India has demerged into three different entities of which Max Financial Services will hold Max Life Insurance (new Max India will hold
Max Healthcare, Max Bupa Health Insurance and Antara businesses). Max Life Insurance (held by Max Financial Services) is among
the leading private sector insurers, has gained the critical mass and enjoys among the best operating parameters in the industry. As the
insurance sector is showing signs of stabilisation, the companys favourable product mix and a strong distribution channel will result in a
healthy growth in the premiums and profits.
PI Industries PI Industries (PII), a leading agro-chemical company, has a differentiated business model with focus on the fast-growing custom synthesis
and manufacturing (CSM) business, which contributes 60% of its revenues. To sustain the growth momentum, the company has expanded
its manufacturing capacity in Jambusar at a cost of Rs300 crore and the new capacity has commissioned in H2FY2016. PII is gradually
ramping up production at the recently commissioned Jambusar facility. The new products launched in the recent past have gained
good acceptability in the market and would continue to contribute to topline growth. We expect demand to be majorly unaffected due to
demonetisation, as outlook for the CSM business (exports), which accounts for ~60% of total sales, remains strong and unaffected. In the
domestic market, demand is likely to be impacted due to demonetisation, which could normalise by Q4FY2017. On the EBIDTA margin
front, PII has guided for 100-150BPS improvement on account of a richer product mix and likely improvement in operational efficiencies.
The companys order book stands at $800 million. PII has lined up a capex of ~Rs200 crore for FY2017 and ~Rs150 crore for FY2018.
Structurally, PII will benefit from its unmatched CSM capabilities (exports business), distribution reach and brand advantage in the
domestic markets. We have maintained our Buy rating on the stock with a revised PT of Rs955.
Ratnamani Metals Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. Despite the challenging business environment
due to increasing competition, we remain positive on RMTL on the back of its strong balance sheet, the companys ability to generate
superior return ratios in the coming years and expansion of seamless SS tube capacity in the next few years. Further, the management
has maintained a strong outlook on the potential opportunities in the oil & gas sector and inter-connection of the rivers across the country.
Supreme Ind Supreme Industries is a leading manufacturer of plastic products with a significant presence across piping, packaging, industrial and
consumer segments. We remain positive on its new launches of value-added products and capacity expansion plans, which are largely
funded by its robust internal accruals. The company enjoys superior return ratios with low gearing levels. With diversified products,
extensive distribution network, improved capital structure and government thrusts on better infrastructure, Supreme has emerged as one
of the best proxy play on the increasing use of plastic consumption in India. Hence, we remain positive on the stock.
UPL UPL is a leading global producer of crop protection products, intermediates, specialty chemicals and other industrial chemicals, United
Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop protection products and post-harvest
activities. It has also started to focus on premium products in agro-chemicals. UPLs consistent focus and ability to introduce innovative
products (both in India and overseas markets), presence in high-growth markets (Brazil and India) and plans of tapping new markets
(China and Africa)augur well for the company. Strong growth momentum in the Latin American markets, with the company aiming to
outpace the industry growth and gain market share, coupled with a favorable outlook for the Indian business will help UPL to boost
its overall performance and achieve its revenue growth target of 15% for FY2017. Also, a better product mix, operating leverage and
likelihood of market share gains in the key markets should boost the overall performance. We retain our Buy rating with a revised Price
Target (PT) of Rs800.

Sharekhan Value Gde Jan 17

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January 2017

From Sharekhans Desk EQUITY

STOCK IDEAS STANDING (AS ON JANUARY 04, 2017)

January 2017 4 Sharekhan ValueGuide

January 2017 5 Sharekhan ValueGuide

January 2017 6 Sharekhan ValueGuide

Market Outlook December 27, 2016

Light at end of tunnel - H2CY2017 could be vastly 22.0

money should also subside by H2CY2017. Our base case 13.0

a lower base and a strong bounce back in the economy.

January 2017 7 Sharekhan ValueGuide

1. US economy: High on hopes; scope for 3. Consumer demand destruction post

January 2017 8 Sharekhan ValueGuide

expectations for Q3FY2017 earnings were high due to the

Strong Q2FY2017 PAT growth had raised hopes of a stronger H2FY2017E

proposals in the Union Budget and follow-up policy action 2.5

against black money) have led to the near-term volatility 2.0

in USA and Europe, along with the unpredictable policy 0.5

framework of the Trump government. 0.0

the GST implementation to be deferred to October 0

2017, which we believe will provide some buffer to the -10000

corporate sector. -20000

to put pressure on inflows into EMs: Of late, the basic

January 2017 9 Sharekhan ValueGuide

EM fund flows. 22.0

Flaring commodity prices and rising US bond yields are 19.0

likely to put pressure on inflows into EMs. As seen above, 16.0

past couple of months, thereby keeping the domestic 10.0

IT 4.9 12.6 8.8 7.8

January 2017 10 Sharekhan ValueGuide

Government in achieving the elusive economic revival

January 2017 11 Sharekhan ValueGuide

Sharekhan Top Picks

CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED) (%)

Name CMP* PER (x) RoE (%) Price Upside

January 2017 12 Sharekhan ValueGuide

PER ROE (%) PRICE UPSIDE

January 2017 13 Sharekhan ValueGuide

PER ROE (%) PRICE UPSIDE

January 2017 14 Sharekhan ValueGuide

PER ROE (%) PRICE UPSIDE

PI Industries 832 37.5 28.1 23.6 29.2 30.0 27.6 955 15

January 2017 15 Sharekhan ValueGuide

Wealth Creator Portfolio December 30, 2016

UPDATE ON WEALTH CREATOR PORTFOLIO

January 2017 16 Sharekhan ValueGuide

January 2017 17 Sharekhan ValueGuide

January 2017 18 Sharekhan ValueGuide

Cox & Kings

January 2017 19 Sharekhan ValueGuide

Godrej Consumer Products

January 2017 20 Sharekhan ValueGuide

IRB Infrastructure Developers

LIC Housing Finance

January 2017 21 Sharekhan ValueGuide

January 2017 22 Sharekhan ValueGuide

Ratnamani Metals & Tubes

January 2017 23 Sharekhan ValueGuide

State Bank of India

TVS Motor Company

January 2017 24 Sharekhan ValueGuide

January 2017 25 Sharekhan ValueGuide

Aditya Birla Fashion & Retail Viewpoint