MOSt
Advisor
Monthly Markets Newsletter
November 2017
In This Issue
•
Market Outlook for the month
•
Investment Ideas
• Equity Market Outlook
• Derivatives & Commodities Market Outlook
• Model Advisory Portfolios
• Recommended Funds
• New PMS offerings: Invesco India DAWN Portfolio
Key Highlights
Nifty hits fresh life time highs
Most of the sectorial indices rallied
Bulls got charged up on Recapitalization plan
Dear Investor,
Market in October 2017:
Nifty index witnessed a historic month
as it scaled up previous peak of 10178 and promptly rallied to
hit a new life time high at 10385. Index closed the month with
the decent gains of 5.58% in line with the positive Global
sentiment.
Government took a radical step in announcing the recapitalization plan for PSU Banks
which generated lot of positive sentiment for the segment and overall market. The
RBI policy during the first week of the month also resulted in cutting SLR.
Geo-political tensions were subdued and market has seen all round Bullishness for
individual sectors as the rally was fairly broad based.
So far, 2Q'18 results have been in line with expectation in which private sector Banks
and NBFC have delivered better than expectation while negative surprise is seen from
selective Pharma and Oil Marketing Companies.
Pre. Mth
Global Market
Index
31-Oct 17
MoM (%)
YoY(%)
Sensex
Nifty
FTSE
Dow
Nasdaq
Hang Sang
33,213
10,335
7,493
23,377
6,728
28,246
6.2
5.6
1.6
4.3
3.6
2.5
18.9
19.8
7.8
28.9
29.7
23.2
Economic Pulse
Key Indicators Current Mth
FIIs sold worth INR 7826 Cr. in equity markets for the October month whereas DIIs
bought worth INR 10091 Cr. DIIs are continuously buying from last seven months
and poured more than INR 73000 Cr. in CY17.
INR has appreciated from its high of 65.66 to 64.75 and it is supporting to overall
bullish market sentiment.
Outlook November 2017:
Nifty has been making higher highs - higher lows from
last ten consecutive months and if this formation is negated then only medium term
trend could take a halt else momentum is likely to extend for fresh highs.
Nifty has given the consolidation breakout from its broader trading range of 9685
to 10178. So now till it holds above 10178 zones, rally can extend towards 10550-
10600 and even higher levels, while on the downside immediate support is seen at
10250 levels.
Chandan Taparia
IIP
CPI
10 Year Yield
USD/ INR
Crude ($)
Gold (10 gms)
4.3%
3.28%
6.86%
64.74
61.37
29333
1.2%
3.36%
6.66%
65.28
57.54
29692
Thought for the month
1
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Monthly Markets Newsletter
Large Cap Investment Ideas,
Mid Cap Investment Ideas
Must Act
November 2017
Investment Ideas
Dabur India
CMP*:
Target:
INR 333
INR 395
√
Dabur India is the second largest FMCG company in India, in terms of Product portfolio.
Rural outlook seems to be buoyant and Dabur is likely to report faster growth in rural
sales compared to urban sales. The much-vaunted earnings revival in the sector appears
poised to come through, and rural dependent plays are likely to be at the vanguard.
√
With expected EPS CAGR of ~18% compared to less than 12% CAGR over FY14-17,
current valuation is attractive. Hence we recommend BUY with PT of INR395.
BUY
Capital First
CMP*:
Target:
INR 755
INR 925
√
CAFL is a non-deposit-taking NBFC focusing largely on retail lending. It offers loans to
small and medium business enterprises, 2W/CD loans, and also home loans via its sub-
sidiary Capital First Home Finance. While the company has grown its AUM at 26% CAGR
over FY12-17, it has not compromised on asset quality.
BUY
√
We expect significant margin improvement and stable asset quality to drive RoA/RoE
improvement from 1.6%/12% in FY17 to 1.9%/17% in FY20. We recommend BUY with
PT of 925
PI Industries
CMP*:
Target:
INR 821
INR 890
√
With the industry witnessing signs of a global agchem revival, we believe PI is well
braced to leverage its strong order book and aid growth, with continuous commercial-
ization of new products (3-4 products expected per year). FY18 is expected to be a back-
ended growth year, with improvement largely expected in the quarters to follow.
√
We remains positive on the company and value the stock at 25x FY19E EPS. Recom-
BUY
mend BUY with PT of INR890
√
PNBHF continues to deliver strong growth in its loan book. Increasing geographical spread
and new branch openings (110 branches in FY20E v/s 66 in FY17) are expected to result in
the loan book growing to ~INR1t by FY20 (37% CAGR). With the pace of investments
slowing down, coupled with operating leverage benefits kicking in, the expense ratio is set
to decline meaningfully.
√
We expect PAT CAGR of 41% over FY17-20E. Recommend Buy with a PT of INR1,750
PNB Housing Finance
CMP*:
Target:
INR 1,423
INR 1,750
BUY
Data as on 31st October 2017.
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Monthly Markets Newsletter
Equity Market Outlook
Markets & Our Recommendations
November 2017
Equity Market Outlook
Technical Outlook
√
Nifty witnessed a historic month as the index scaled its previous peak and promptly
USDINR
rallied to make a new life time high at 10385. The price movements of Nifty in last
four months do have a significant implication as it's bullish rising three methods.
This is a continuation pattern and it meant that the consolidation phase is a pause
in the massive up move that we are in since January of this year. The uncertainty
prevalent in last three months is now getting resolved as the buyers seem to be
appearing in full force. The pattern also indicates that the bulls who are of a long
term nature are now readying for more upsides in the Indian market. Nifty also
traded above the 50 DEMA and the average has also started to trend upwards
signifying that the underlying trend in the market is strong.
Nifty Weekly
On the news front, Government took a radical step in announcing the recapital-
ization plan for banks. This generated a very optimistic change in sentiment for
the PSU Banks and overall markets. The RBI policy during the first week of the
month also resulted in RBI cutting the SLR. Geo-Political tensions were subdued
during the month. It was all round bullishness for individual sectors as the rally
was fairly broad based. The top performer was the Nifty Auto and Energy index,
Bank Nifty also performed well while Pharma sector was a gainer but not a spec-
tacular performer. Concluding the market rally this month was broad based with
most sectors performing in line with the overall market sentiment. The breadth is
good and this is a good sign to extend this momentum going forward.
√
Nifty managed to give consolidation breakout above 10178 and base is continu-
ously shifting higher. Option activity for November series suggests 10200 as an
immediate support with fresh Put writing at 10200 followed by 10000 strikes
while 10500 zones could emerge as a hurdle depicted by highest Call OI concen-
tration. PCR OI moved up from 1.20 to multi year high of 1.68 during the series
and at the same time index also rallied well. Overall rising Put Call Ratio with
falling volatility suggests bullish bias of the market.
Strategy-
Strategy
Nifty is in a sharp uptrend and now it needs to hold above 10300 for
a rally towards 10500-10550. A hold above 25198 is required in Bank Nifty for a
rally of 500-750 points to support the overall indices to head to higher levels.
Nifty Daily
√
Sectoral Highlights
Sector
Textiles
Pharma
NBFC
Our Views
Positive
Positive
Positive
Top Pick
SRF
Cadila HC
Bajaj Finance
MBP / MSP
Buy / 1689
Buy / 503
Buy / 1800
TGT / SL
1810 / 1630
550 / 480
1980 / 1750
Note: #Technical view for 1 month perspective
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√
MOSt
Advisor
Monthly Markets Newsletter
Derivatives Market Outlook,
Commodities Market Outlook
Markets & Our Recommendations
November 2017
Derivatives Market Outlook
SECTOR OI
NIFTY - Bull Call Spread
Nifty witnessed rollover of 72.69% V/s 3 MA of 65.41%. Index closed positive
with the gains of 5.88% on expiry to expiry basis. Bank Nifty witnessed rollover
of 68.63% V/s 3 MA of 69.67%. November series started with Open Interest of
Buy 1 Lot 10350 CE,
Sell 1 Lot 10500 CE
Stop Loss
Target
: 40 Points
: 135 Points
23.13mn shares compared to 20.53mn shares seen at the start of October series.
√
Nifty made a new high of 10355 in the October series and registered the highest
√
expiry to expiry gains in last 19 series. Overall long built up were seen in Pharma,
√
Auto, Banks, FMCG and Media stocks.
√
√
Auto: Long in Tvsmotor, Maruti and Bajaj Auto while shorts in Amar Raja Battery
√
Cement: Long in Ultracem, Short covering in Dalmia Bharat, ACC and Grasim
√
Banks : Long in Federal Bank, PNB while covering in SBIN, Can Bank and ICICI Bank
√
Metal: Long in Hindalco, National Alum, Short covering in SAIL and Jindalstel
√
OIL&Gas: Long addition in Gail, Castrol, Short covering in Hindpetro, BPCL and IOC
√
IT: Long addition in KPIT, Hexaware, Tata Elexsi while short covering in NIIT Tech
Nifty has recently given a range breakout above 10250 zones
Positive momentum with buying in most of the sectors
OI band is shifting higher with maximum Call OI at 10500 strike
Thus, low risk Bull Call Spread is recommended
Commodities Market Outlook
Cruide Oil
√
Oil prices registered a second consecutive monthly gain in October with Brent trading near two-year highs as fundamentals continue to
improve. Demand growth continues to outpace supply growth and the OPEC's resolve to limit supplies is finally bearing fruit
√
OPEC oil output fell by 80,000 bpd to 32.78 mbpd in October and overall compliance touched 92%.Russia has also reduced its oil output by
around 317,000 bpd from 11.24 million bpd in Oct 2016. We believe OPEC's compliance would remain high going forward and help continue
the rebalancing process.
√
US output on the other hand is back near its pre-hurricane levels and remains elevated in y/y comparisons. The growth in production however
seems to have plateaued if the rig count is an indication. US oil rig count fell for a third month in a row in October.
√
On the inventory side, US oil inventories fell by 10 million barrels last month and are now 6.2% lower compared to the same period last year.
US oil stocks have declined by 80 million barrels since March this year. Global oil stocks likely decreased in Q3 for only the second time since
oil prices crashed in the middle of 2014
√
Considering that inventories are edging lower, demand remains strong and supply flat, we expect the medium term outlook for oil to remain
positive. A test of $60 for the WTI is likely over the coming months.
4
 Motilal Oswal Financial Services
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MOSt
Advisor
Monthly Markets Newsletter
MOSt Multi Cap
For Whom :
Investment Duration :
Risk Profile :
Scrip
Hero Motocorp
Zee Entert.
HDFC Bank
Piramal Enterprises
Yes Bank Ltd
CG Consumer Elec.
Can Fin Homes Ltd
Sterling Tools Ltd
P I Industries Ltd
Shriram City Union
Capital First
DHFL
Granules India
Cash
Total
MOSt Multi Cap , MOSt Velocity
Build a Portfolio
November 2017
Long Term Investors
Few months to a year
Moderate Investors
Wtg. Sectoral Allocation
10
10
10
10
10
5
5
5
5
5
5
5
5
5
5
100
In
: NA
We are recommending a MULTI-CAP approach instead of a
MIDCAP approach. The Multi-cap INVESTMENT will have the
following characteristics:
√
Corpus requirement at INR 10 Lakhs
√
50% in Large-cap and 50% in mid-cap
√
15 companies to invest at maximum, 10 minimum
√
Large-cap stocks are suitable for SIP investments as well
√
Adheres to our QGLP philosophy
CMP
3850
542
1809
2748
314
221
480
270
821
2306
755
643
140
Out : SRF
Ramco Cements Ltd 718
MOSt Velocity
For Whom :
Investment Duration :
Risk Profile :
Scrip
Tata Motors Ltd
Eicher Motors Ltd
RBL Bank Ltd
Federal Bank Ltd
Dalmia Bharat Ltd
IOC
Cash
Total
Investment Norms: INR 10 lakhs (Model Corpus)
Medium Term Investors
Few months horizon
Moderate Investors
Wtg. Sectoral Allocation
10
5
10
10
10
10
10
35
100
In
: IOC
Jindal Steel & Power
√
Maximum stocks open : 10
√
Target Investment Horizon: 1 Year
√
Cash holding based on market direction call. Cash to be deployed
in case of sharp market falls
√
Occasional Hedging by buying options
√
Investment Rationale on every idea is provided
√
10% in a particular Stock and 30% (max) in a Sector
CMP
428
32233
525
122
2992
416
LIC Housing Finance 599
Out : Ultratech Cement,
5
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MOSt PMS - Model Portfolio
Managed Funds
November 2017
MOSt PMS
Performance since inception
√
LargeCap PMS:-
VALUE STRATEGY- An amount of 1 cr. Invested in March 2003 is worth INR 25.91 crore (compounded return of 24.94%)
√
Multi Cap PMS:-
ASK IEP STRATEGY- Amount of 1 cr. Invested in December 2007 is worth INR 4.48 crore (compounded return of 21.3%)
√
Multi Cap PMS:-
NTDOP STRATEGY- Amount of 1 cr. Invested in December 2007 is worth INR 5.76 crore (compounded return of 19.32%)
√
Small & Midcap
PMS- - IOP STRATEGY- Amount of 1 cr. Invested in February 2010 is worth INR 3.63 crore (compounded return of 18.17%)
Latest Performance of all OUR THREE PMS (Portfolio Management Services) strategies. (As on 31st Oct. 2017)
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Investment Product
Invesco India DAWN Portfolio
November 2017
New PMS offerings: Invesco India DAWN Portfolio
Invesco Asset Management (India) has an average asset base of over INR 32,783.9 Cr.* across Mutual Funds, PMS and offshore advisory
mandates. It offers expertise across equity, fixed income & gold investments with the aim of serving the investment needs of domestic and global
investors (individuals, corporates & institutions). This includes a broad range of best-in-class investment products across asset classes, regions &
risk spectrum, coupled with high standards of customer service. (*For quarter ending September 2017.)
Invesco Limited is one of the world's largest leading independent global investment management firms
√
US$858.3 billion in assets under management around the globe.
√
Specialized investment teams managing investments across a wide range of asset classes and investment styles.
√
Nearly 7,000 employees worldwide.
√
On-the-ground presence in more than 20 countries, serving clients in more than 120 countries.
√
Publicly traded on NYSE, S&P 500 constituent; market cap of more than US$ 14 billion
*Source: Invesco data as on June 30 2017
Investment Objective:
To generate capital appreciation by investing in companies available at reasonable valuations
Investment Strategy:-
√
Exposure to sectors and stocks whose earnings are expected to improve due cyclical recovery
√
Emphasis on mean reversion & value style investing, with focus on companies with quality business models & management
√
Allocation to companies which exhibit operating & financial leverage, exposure to under owned companies
√
Bottom up stock picking approach without bias towards market cap or sector
Portfolio Construct:-
√
Maximum exposure per stock restricted to 10% at time of initial investments
√
Concentrated strategy of 15 -25 companies
Current Investment Opportunity
√
Cyclical recovery sectors: Financials, Industrials, Consumer Discretionary
√
Under owned sectors for Value style investing: Pharmaceutical, Information Technology
7
 Motilal Oswal Financial Services
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costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre,
2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id: na@motilaloswal.com, Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231; MSE(F&O):
INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset Management Company Ltd.
(MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal
Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities Products. * Motilal Oswal Real Estate Investment
Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products