Thematic | Contrarian Investing
India Strategy
Contrarian Investing – Quarterly Update
Please refer our report dated
June 2017
A review of our contrarian investment strategies
Our thematic strategy note on
Contrarian Investing,
published in June 2017 gives a
detailed account of the subject matter. In this note, we have reviewed the
performance of our strategies. Also, since we use quarterly rebalancing to test our
hypothesis, we have run the updated quintiles as on March 31, 2018 and present
our key findings along with our top contrarian bets.
Key takeaways from 4QFY18 quintiles
Please refer our report dated
January 2018
Our analysis suggested that, over a longer term, neutral to moderately popular
stocks deliver significant outperformance, even bettering the performance of
the most popular stocks.
In this quarter, neutral to moderately popular stocks as
well as the most popular stocks failed to beat the benchmark. The least popular
stocks delivered the worst return, followed by the popular quintiles. The neutral
to moderately popular stocks delivered the second best return.
Our findings proved that, over the long term, out-of-favor low P/E stocks deliver
disproportionate returns, significantly beating the benchmark. In contrast, the
performance of high P/E stocks is dismal.
In this quarter, both Q1 (high P/E) and
Q5 (low P/E) stocks failed to beat the BSE100 benchmark, whereas Quintile-4
(second lowest P/E stocks) performed the best.
Similarly, out-of-favor low P/CF stocks deliver disproportionate returns,
significantly beating the benchmark. In contrast, the performance of high P/CF
stocks is dismal.
In this quarter, low P/CF stocks delivered the worst returns,
whereas the high P/CF quintile delivered the third highest returns.
We also note that in some sub-themes, the returns from a quintile deviate from
the long-term pattern highlighted in our initial detailed note. However, this is in
line with the trends observed even in the long-term study – where returns can
deviate for a quarter there but over a long period, the hypothesis is proven
right. For example, in the Popularity theme, instead of Quintile-4, Quintile-3 has
delivered the best returns in 4QFY18. Quintile-3 is the second worst performing
quintile over the last decade.
Best delta: Consensus change from net sell to net buy
As a part of our analysis, we
have divided BSE100 in 5
groups of 20 – Quintile-1
(Q1), Quintile-2 (Q2),
Quintile-3 (Q3), Quintile-4
(Q4) and Quintile-5 (Q5),
respectively, with Q1 being
composed of the most
popular stocks and so on
Our findings suggested that a simple strategy of investing in stocks for which
analyst consensus has changed from “net sell to net buy” with a holding period
of one year has delivered 22.3% annual returns over the last 10 years.
Net Sell to Net Buy stocks for 4QFY18: The only stock that satisfies this criterion
is
TCS.
Exit from list: Biocon
has exited from our list after completing 12 months. It
entered the “net sell to net buy” stocks in January 2017 and delivered 82.5%
return in a year, significantly beating the Nifty (28.8%).
Gautam Duggad – Research analyst
(Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404
Bharat Arora – Research analyst
(Bharat.Arora@MotilalOswal.com); +91 22 3982 5410
Investors are advised to refer through important disclosures made at the last page of the Research Report.
11 April 2018
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Thematic | Contrarian Investing
Top contrarian picks
We highlight our top contrarian Buy and Sell picks based on the various themes we
have covered in this note as well as in the past –
Popularity, Relative Valuations,
Net Sell to Net Buy, Consensus Sells.
Contrarian BUYs: Hero Motors, Tech Mahindra, LICHF, HPCL and NMDC
Contrarian SELLs: Tata Motors, HCL Tech, Ultratech Cement, JSTL, and Zee
Entertainment
Exhibit 1: Performance of our preferred quintiles - Indexed Returns
750
625
500
375
250
125
0
Perfromance of different themes
Low PE
Neutral Stocks
Low PCF
BSE 100
595.8
506.5
512.5
302.3
Source: Bloomberg
Exhibit 2: Top contrarian BUY ideas
Company
Hero Motocorp
Tech Mahindra
LIC Housing Fin.
HPCL
NMDC
Popularity
score
3.9
3.8
3.8
3.6
3.6
% of
Buy/Hold
Ratings
90.2
82.6
91.1
71.1
78.3
Correction
12 month
from 52w
return (%)
high (%)
-11.4
-4.1
-29.4
-26.0
-24.1
16.3
41.0
-10.7
0.8
-8.3
1 Yr Fwd
PE (x)
17.9
15.6
12.1
10.9
8.4
PE -
Prem/Disc
to LPA (%)
0.8
8.8
-3.6
62.1
-13.8
1 Yr Fwd
PB (x)
6.1
2.9
2.1
1.5
1.6
PB -
EPS
Prem/Disc
CAGR
to LPA (%) FY17-20 (%)
-12.6
-1.7
-10.5
40.4
-13.5
9.4
16.8
11.2
-2.4
13.9
Exhibit 3: Top contrarian SELL ideas
Company
Tata Motors
HCL Technologies
UltraTech Cem.
JSW Steel
Zee Ent.
Popularity
Score
4.3
4.0
4.0
4.1
4.0
% of
Buy/Hold
Ratings
95.2
87.5
84.4
91.4
89.7
Correction
12 month
from 52w
return (%)
high (%)
-27.4
-9.0
-14.4
-2.9
-7.2
-25.6
13.7
-3.1
52.7
4.2
1 Yr Fwd
PE (x)
6.0
15.1
32.0
12.0
32.8
PE -
Prem/Disc
to LPA (%)
-54.2
1.2
-7.1
-7.2
-2.7
1 Yr Fwd
PB (x)
2.1
3.6
3.6
1.4
6.8
EPS
PB -
Prem/Disc
CAGR
to LPA (%) FY17-20 (%)
-40.1
-5.0
7.0
54.7
-10.7
43.6
6.2
19.8
17.1
16.2
Exhibit 4: Performance of our Contrarian Buy and Contrarian Sell calls indicated in last quarterly update
Contra buys
Lupin
Hero Motors
Nestle
HPCL
Sun Pharma
BSE100
Price Return
-14.1
1.4
8.8
-20.9
-10.6
-3.4
Contra Sell
KMB
Ultratech Cement
JSTL
GAIL
Bajaj Finance
BSE100
Price Return
10.0
-10.9
8.9
-13.0
8.7
-3.4
Note: in bold stocks which didn’t perform as per expectations, Source: MOSL, Bloomberg
11 April 2018
2

Thematic | Contrarian Investing
Contrarian Strategies
1
Popularity as the selection criterion
Does a stock’s popularity with analysts have a
meaningful impact on its performance?
2
Consensus Sell rating (%) as the selection criterion
Sell recommendations are not as common as
buy/hold recommendations, and possess scarcity
value.
3
Consensus Buy rating (%) as the selection criterion
With the scarcity value theme of consensus sell
ratings playing out well, we put to test the street’s
capability to predict the winners.
4
Consensus recommendation change from “Net
Sell” to “Net Buy”
Valuation
1
2
3
P/E
P/B
P/CF
11 April 2018
3

Thematic | Contrarian Investing
1
Neutral to moderately popular stocks (Q4) emerge
winners
In our first note on the theme,
Contrarian investing: It pays to be different,
we had
demonstrated that over longer periods of time, neutral to moderately popular
stocks have performed the best. And results are independent of whether the returns
are measured on average basis or median basis.
Exhibit 5: Stocks on which analysts are neutral to moderately positive have given best returns
600
450
300
150
0
Performance of different quintiles of BSE100 by popularity ( quarterly rebalance)
Most Popular(CAGR-14.4%)
Q3(CAGR-6.7%)
Q5(CAGR-6.1%)
Q2(CAGR-12.9%)
Q4(CAGR-15.5%)
BSE100(CAGR-10.3%)
506.5
452.2
392.2
302.3
208.4
195.2
Absolute Total returns(Average
)
Source: Bloomberg
Above exhibit can be read as follows:
INR1k invested in Quintile-4 in December 2006 would be worth INR5.07k today. Similarly, it can be read for other
quintiles.
Summary of 4QFY18 performance of various quintiles:
In the quarter ended March 2018,
BSE-100 corrected by 4.4%, which also reflects in the performance of the
quintiles. All the quintiles barring Quintile-3 corrected more than the
benchmark BSE-100.
Least popular stocks (Q5) were the worst performing group, whereas the popular
stocks (Q1 and Q2) came in 3
rd
and 4
th
.
Surprisingly, Q3 is the best performing quintile, followed by Q4, Q1, Q2 and Q5.
In our first note on this theme, we had highlighted that typically Q5 and Q3 are
the worst performers –while Q5 was the worst performer, Q3’s performance in
this quarter (best among all quintiles) seems to be an exception.
It’s important to note that investing in stocks as per popularity metric (in Q4)
would deliver the best returns over a longer period of time, though there may be
periods of underperformance on quarterly basis.
Exhibit 6: Both neutral and most popular stocks failed to beat benchmark, whereas Q3
performed the best
Q1
Total returns
Q2
Q3
Q4
Q5
BSE100
-8.2
-8.4
-3.5
-6.2
-13.6
-4.4
Source: Bloomberg
11 April 2018
4

Thematic | Contrarian Investing
It’s important to highlight that BSE-100 index is based on free-float market
capitalization, whereas our Quintiles are equal-weighted portfolios. In 4QFY18, a
BSE-100 portfolio with equal weights would have delivered returns of -8%.
Following a simple strategy of investing in Quintile-4 (neutral to moderately popular
stocks) could generate a significant alpha over the benchmark.
Our study had proven that the most popular (Q1) and the second-most popular (Q2)
quintiles have also beaten the BSE-100 benchmark returns. We have categorized
BSE-100 constituents in 60 winners and 40 losers.
Exhibit 7: Updated BSE-100 constituents divided in five quintiles as per popularity
Q1
BJHI IN
VEDL IN
VKI IN
MM IN
MRF IN
ICICIBC IN
ARBP IN
HDFCB IN
FB IN
ONGC IN
HNDL IN
PWGR IN
UPLL IN
IIB IN
TATA IN
SBIN IN
APHS IN
HDFC IN
ITC IN
NTPC IN
Q2
CROMPTON IN
TTAN IN
LT IN
BRIT IN
YES IN
PIEL IN
EXID IN
IOCL IN
TTMT IN
MSIL IN
MSS IN
TTCH IN
BJFIN IN
INFO IN
ADSEZ IN
TGBL IN
CDH IN
BOB IN
SHTF IN
BHARTI IN
Q4
BHFC IN
HMCL IN
MMFS IN
POWF IN
TECHM IN
LICHF IN
EIM IN
GCPL IN
HAVL IN
IDFCBK IN
GNP IN
CCRI IN
HPCL IN
APNT IN
DIVI IN
KKC IN
SRCM IN
NMDC IN
MRCO IN
RECL IN
Q3
JSTL IN
IHFL IN
COAL IN
BHE IN
NEST IN
RIL IN
BAF IN
KMB IN
PLNG IN
BPCL IN
GRASIM IN
HCLT IN
PIDI IN
AL IN
HUVR IN
Z IN
UTCEM IN
CIPLA IN
GAIL IN
DABUR IN
Q5
AXSB IN
BOS IN
BHIN IN
DRRD IN
SUNP IN
LPC IN
TPWR IN
CLGT IN
BJAUT IN
ACC IN
TCS IN
PNB IN
ACEM IN
DLFU IN
SIEM IN
IDEA IN
TVSL IN
ABB IN
WPRO IN
BHEL IN
Source: Bloomberg
Among the current constituents of BSE-100, we note that Quintile-4 (Q4) has
popularity score ranging from 3.53-3.89.
An important question remains unanswered.
Why does the quintile composed of
stocks that have low consensus ratings/popularity (Quintile-4) outperform all the
other quintiles, even bettering the performance of the most popular stocks?
This is because the investment thesis of the most popular stocks is quite popular,
making them more likely to be discussed in the market. And, as such, there are
fewer marginal buyers with time. On the other hand, neutral to moderately popular
11 April 2018
5

Thematic | Contrarian Investing
stocks are usually neglected by the street and their drivers are evolving. As the
drivers evolve, there is a sudden surge in investor interest in such stocks, leading to
a spike in returns. Thus, the stocks that were previously neglected by investors
deliver significant outperformance.
On the other hand, the least popular stocks underperform. This is because the least
popular stocks have a lot of sell recommendations. Sell recommendations are not
popular on the street – only about 15% of recommendations are sell as against 64%
buy and 21% hold. So, they have scarcity value and are more likely to be acted on.
Exhibit 8: Snapshot of Quintile-4 (neutral to moderately popular stocks)
Company
Asian Paints
Bharat Forge
Container Corpn.
Divi's Lab.
Eicher Motors
Godrej Consumer
Glenmark Pharma.
Havells India
Hero Motocorp
HPCL
IDFC Bank
Cummins India
LIC Housing Fin.
M & M Fin. Serv.
Marico
NMDC
Power Fin.Corpn.
Rural Elec.Corp.
Shree Cement
Tech Mahindra
Popularity
Score
3.6
3.9
3.6
3.6
3.8
3.8
3.7
3.7
3.9
3.6
3.7
3.6
3.8
3.9
3.5
3.6
3.8
3.5
3.6
3.8
CMP
INR
1,144
729
1,263
1,116
29,794
1,089
563
531
3,782
354
50
769
563
496
321
119
90
132
17,043
618
Mcap
INR B
1,097.1
339.6
307.7
296.1
812.0
741.9
158.8
332.2
755.4
539.4
169.9
213.2
284.1
306.1
414.2
376.2
236.6
260.0
593.8
605.7
Trailing
PE(x)
5-year
Current
Avg.
52.7
55.4
31.8
29.2
26.0
45.4
44.1
33.1
37.4
21.4
9.6
21.8
30.1
14.7
27.4
43.9
12.0
7.5
5.1
49.5
15.7
47.1
44.3
27.3
46.3
57.1
16.2
56.5
20.9
8.5
15.8
26.4
14.0
37.5
52.5
14.7
10.6
3.9
42.1
17.7
PE
Prem/
Disc (%)
5.2
48.1
51.7
5.1
1.9
29.4
-51.0
51.2
-2.3
-11.8
-27.7
-12.3
-5.2
37.2
19.6
22.5
42.8
-22.8
-14.9
12.9
FY17
20,163
6,030
9,259
10,604
16,780
12,876
11,088
5,969
33,771
62,088
10,197
7,346
19,311
4,002
8,110
31,504
20,985
61,070
13,391
27,470
Pat
(INR M)
FY18E
20,594
9,305
10,771
8,723
22,159
14,498
8,623
6,955
37,160
60,310
10,230
6,380
19,662
8,514
8,250
43,160
95,000
68,120
12,741
35,353
FY19E
24,348
12,295
12,486
11,679
28,441
16,585
9,289
8,540
40,336
49,551
10,969
8,593
22,377
11,812
9,736
44,428
108,240
78,639
16,496
37,623
PAT
CAGR (%)
FY17-19
9.9
42.8
16.1
4.9
30.2
13.5
-8.5
19.6
9.3
-10.7
3.7
8.2
7.6
71.8
9.6
18.8
127.1
13.5
11.0
17.0
RoE
(%)
FY17
28.5
16.2
10.8
22.0
37.3
24.6
24.7
18.2
35.7
32.4
7.2
21.2
19.1
6.4
36.7
13.5
17.9
19.9
18.4
18.4
Source: MOSL, Bloomberg
11 April 2018
6

Thematic | Contrarian Investing
Best delta: Consensus change from “net sell” to “net
buy”
We looked at instances of change in consensus rating from ‘net sell’ to ‘net buy’ over
2006-2018 across BSE-100 constituents. A change in consensus rating from ‘net sell’
to ‘net buy’ means a change in consensus rating from <3 to >3. We found that a
strategy of investing in stocks with consensus rating change from <3 (net sell) to >3
(net buy) yields better results than any other strategy discussed in this study.
Essentially, these are stocks, which have been ignored, have negative news flow, and
are battling short-to-medium-term challenges. Thus, typically they have consensus
popularity rating <3. However, marginal earnings surprise, improvement in news
flow, and beaten down valuations are some of the factors that result in popularity
scores moving closer and then upwards of 3 (net buy). These stocks are yet to
become over-owned/most popular names on the street (example, Quintile-1 of the
Popularity thesis discussed in earlier sections).
By investing in stocks for which consensus recommendation has changed from ‘net
sell’ to ‘net buy’ as soon as they have been upgraded, and then holding them for 12
months, an investor would have earned an average return of 22.3%.
Exhibit 9: Indexed return over 12 months from “net sell to net buy” change
124
Avg. Return of stocks(consensus change from Net sell to Net Buy)
122.3
116
108
100
t
t+1
t+2
t+3
t+4
t+5
t+6
t+7
t+8
t+9
t+10
t+11
t+12
Source: MOSL, Bloomberg
Exhibit 10: Returns have been significant across all years (2003-2018)
Average Returns
No. of companies
79.2
41
32.5
14
8
25.7
11
42.1
37
17
2.5
10.9
26
4.0
22
21
20.0
17
25.9
24.3
9
15.5
17
1
-8.5
-5.7
Source: MOSL, Bloomberg
11 April 2018
7

Thematic | Contrarian Investing
We highlight that the investment was made after the stock’s popularity rating
changed from -3 to +3, that is, from ‘net sell’ to ‘net buy (and not ‘consensus buy’).
Qualitatively, it suggests that when consensus recognizes the changing fortunes of
an underlying business and upgrades ratings, it pays to be among the early birds in
investing in such a business. Our study shows that returns earned from this strategy
are healthy even in absolute terms. However, one needs to be early to catch these
returns, certainly before the stock becomes a consensus buy and crosses a
popularity score of 3.5.
We applied this framework on BSE-100 constituents. Below is a snapshot of stocks
where the consensus popularity score has changed from <3 to >3.
TCS
has become a “net buy” from “net sell” in January. Our recent report discussed
the cyclical impetus in CY18 that is likely to drive some revenue acceleration in FY19,
even as the structural challenges prevail. A strong exit from FY18 will only fuel that
thesis further, especially given the usual weakness associated with 4Q, with client
focus on freezing budgets for the best part of 4Q’s first month and a half.
Additionally, TCS’ commentary on BFS and margins during 4QFY18 result would be
viewed with key interest.
Exhibit 11: Stocks where popularity has improved from <3 to >3, recently
Company
TCS
Dec-18
2.96
Jan-18
3.06
Feb-18
3.14
Mar-18
3.19
Source: Bloomberg
Exhibit 12: Performance of stocks that have turned ”net buy” from “net sell” in CY17-18
Company
Biocon
Bank of Baroda
Ambuja Cement
ACC Cement
Havells
CGPower
NMDC
BEML
Divis Laboratories
Nestle
Marico
PNB
Shipping Corporation of India
United Spirits
Shree Cement
Dr. Reddy
Jet Airways
TCS
Month
31-Jan
30-Apr
30-Jun
31-Jul
31-Jul
31-Aug
31-Aug
30-Sep
30-Sep
30-Sep
31-Oct
31-Oct
31-Oct
31-Oct
31-Oct
30-Nov
31-Dec
31-Jan
Price Return
th
(as on 11
April.)
82.5*
-19.7
-3.7
-11.5
12.3
1.7
-3.8
-27.3
31.2
16.2
1.8
-48.2
-25.5
13.4
-10.7
-8.0
-25.7
-3.3
Nifty Returns
28.8*
12.0
9.4
3.4
3.4
5.0
5.0
6.4
6.4
6.4
0.8
0.8
0.8
0.8
0.8
1.9
-1.1
-5.5
Alpha
53.7
-31.7
-13.1
-14.9
8.9
-3.4
-8.8
-33.7
24.8
9.7
1.0
-49.0
-26.3
12.6
-11.5
-9.9
-24.7
2.2
Note: Biocon returns are over period of Jan17-18,Source: Bloomberg, MOSL
11 April 2018
8

Thematic | Contrarian Investing
While it is true that a significant number of stocks in the list (11/17) are
underperforming the index, history suggests that only 43% of the companies
outperform the broader index, but when the stocks outperform, they do it by a big
margin. A case in point is
Biocon:
It has exited from our list after completing 12
months. It entered the “net sell to net buy” stocks in January 2017 and delivered
81.9% return in a year, significantly beating the Nifty (28.8%), creating an alpha in
excess of 50%.
Exhibit 13: Roughly 43% stocks in “net sell to net buy” outperform the market but the
margin of outperformance is significantly higher for winners
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Companies from "Net sell
to Net Buy" List
outperforming Nifty
8
9
2
5
1
6
26
16
8
8
16
9
13
2
6
0
"Net sell to
Net Buy" in
an year
14
12
8
14
8
11
41
37
17
26
22
21
17
9
17
1
Average
% of Companies
outperforming
market
57
75
25
36
13
55
63
43
47
31
73
43
76
22
35
0
43
Source: Bloomberg
11 April 2018
9

Thematic | Contrarian Investing
2
Consensus sells are significant underperformers
The underperformance of Quintile-5 (the least popular stocks) in the popularity
theme proves that owing to their scarcity value, sell recommendations can be quite
efficient in predicting stock performance.
This scarcity value prompted us to look at consensus sell ratings in isolation. In our
note on
Contrarian Investing,
we had highlighted our finding that Quintile-1,
composed of stocks with the highest consensus sell ratings, underperformed the
market significantly. So, the consensus has been quite right in predicting sells.
This
can have meaningful implications for investors who can short-sell stocks.
Exhibit 14: Quintile-1, with highest consensus sell ratings, is the biggest underperformer
500
400
300
200
100
0
Absolute Total returns(Average
)
Performance of different quintiles of BSE100 by consensus sell rating ( quarterly rebalance)
Q1(CAGR-6.2%)
Q3(CAGR-10.0%)
Q5(CAGR-13.9%)
Q2(CAGR-12.1%)
Q4(CAGR-11.0%)
BSE100(CAGR-10.3%)
433.6
362.3
323.9
302.3
293.4
197.0
Source: Bloomberg
On the other hand, Quintile-5, composed of stocks with the least consensus sell
ratings, performed the best.
In 4QFY18,
Q1, with the highest consensus sells, performed the worst amongst all quintiles.
This result is in sync with our empirically established relationship.
rd
Q5, with the lowest consensus sell ratings, came in 3 in this quarter.
Q3 was the best performing group, followed by Q2, Q5, Q4 and Q1.
It’s important to note that investing in stocks with the lowest consensus sell
rating (Q5) would deliver the best returns over a longer period of time, though
there may be periods of underperformance on quarterly basis.
Exhibit 15: Quintile-1, with highest consensus sell ratings performed the worst
Q1
Total Returns
-16.0
Q2
-4.6
Q3
-3.6
Q4
-8.0
Q5
-7.8
BSE100
-4.4
Source: Bloomberg
It’s important to highlight that the BSE-100 index is based on free-float market
capitalization, whereas our Quintiles are equal-weighted portfolios. In 4QFY18, a
BSE-100 portfolio with equal weights would have delivered returns of -8%.
11 April 2018
10

Thematic | Contrarian Investing
We present below the snapshot of Quintile-1 of current BSE-100 constituents, with
the highest SELL ratings and low popularity score.
Exhibit 16: Ten stocks with highest SELL ratings in BSE 100 – Quintile-1 of Consensus Sell
theme
Company
BHEL
ABB
TVS Motor Co.
Siemens
Idea Cellular
Wipro
DLF
Rural Elec.Corp.
Sun Pharma.Inds.
Ambuja Cem.
Buy
11
8
13
8
6
6
6
9
17
15
Sell
23
16
22
12
13
23
6
5
13
12
Hold
7
5
5
4
8
20
4
1
11
14
% of Sell
ratings
56
55
55
50
48
47
38
33
32
29
Popularity
Score
2.4
2.4
2.6
2.7
2.5
2.3
3.0
3.5
3.2
3.1
Source: Bloomberg
The list is dominated by companies from the Capital Goods sector (3),
along with one
each from Auto, Technology, Telecom, Real Estate, FMCG, NBFC and Cement.
11 April 2018
11

Thematic | Contrarian Investing
Consesus buys are not always great investments
3
To test the efficacy of consensus buy ratings, we repeated the analysis with buy
ratings (%), and found that consensus buys are not necessarily great investments.
Q4, the quintile with the second-lowest (in terms of percentage) consensus buy
ratings, delivered the maximum returns! Q4 has been the frontrunner, almost
through the entire decade.
Exhibit 17: Quintile-4 has been the best performer amongst all quintiles
550
450
350
250
150
50
Absolute Total returns(Average
)
Performance of different quintiles of BSE100 by consensus buy rating ( quarterly rebalance)
Q1(CAGR-11.2%)
Q3(CAGR-11.1%)
Q5(CAGR-6.2%)
Q2(CAGR-11.5%)
Q4(CAGR-14.5%)
BSE100(CAGR-10.3%)
471.6
330.8
325.8
338.6
302.3
197.4
Source: Bloomberg
So, contrarian investing does work with consensus buy recommendations, and in
fact, Q4 of popularity theme and consensus buy theme have several common
members amongst themselves.
In the quarter ended March 2018,
Q5, with the lowest consensus buys, was the worst performer amongst all
quintiles, failing to beat the benchmark.
On the other hand, Q1, with the
highest buy ratings, performed 3
rd
best, again failing to beat the benchmark.
Q3, with the third-highest buy ratings, was the best-performing group.
Q4, the contrarian quintile for generating returns, came up second in this
quarter.
It’s important to note that Q4 of popularity theme and consensus buy rating
theme have several members in common. For more details, please refer to our
first note on the theme.
Exhibit 18: Q5, with the least consensus buy ratings, performed the worst, whereas Q4
came up second
Q1
Total returns
-8.0
Q2
-10.0
Q3
-2.5
Q4
-5.4
Q5
-13.6
BSE100
-4.4
Source: Bloomberg
It’s important to highlight that the BSE-100 index is based on free-float market
capitalization, whereas our Quintiles are equal-weighted portfolios. In 4QFY18, a
BSE-100 portfolio with equal weights would have delivered returns of -8%.
11 April 2018
12

Thematic | Contrarian Investing
Exhibit 19: Ten stocks with highest BUY ratings in BSE-100 – Quintile-1 of Consensus Buy
theme
Company
MRF
Vedanta
M&M
ICICI Bank
Aurobindo Pharma
HDFC Bank
Crompton Gr. Con
Federal Bank
UPL
Tata Chemicals
Buy
7
24
40
50
35
51
26
32
25
6
Sell
0
0
0
1
1
3
2
2
2
0
Hold
0
0
3
3
3
3
2
3
2
1
% of Buy ratings
100
100
93
93
90
89
87
86
86
86
Source: Bloomberg
Among these companies,
M&M
is the best bet on rural recovery, as recovery in rural
markets improves visibility of volumes in the tractor and UV businesses. In addition,
the tractor business is launching its third brand,
Trakstar,
focusing on undercutting
lower-priced competitors by 5-10%, with the intent to gain 3-5% market share.
HDFC Bank
has consistently grown its market share in loans and deposits across
credit cycles, and has emerged as the best-managed bank in India with robust
profitability/growth metrics. Increasing granularity of the balance sheet, focus on
fee income growth, an improvement in operating leverage aided by digital
initiatives, and controlled credit costs backed by strong underwriting have enabled
the bank to outperform most peers. We expect the bank to maintain its growth
momentum (regardless of its systemic size) and further gain market share across
business segments.
11 April 2018
13

Thematic | Contrarian Investing
Low P/E stocks outperform high P/E stocks
1
The most favored stocks by the market – the stocks with the highest P/E ratio – give
dismal returns. On the other hand, the least favored stocks – the stocks with the
lowest P/E ratio – are rewarded by the market.
The results of this quarter are
different from expected lines – both high P/E and low P/E stocks have failed to beat
the BSE-100 benchmark, with Q4 (2nd lowest P/E) stocks performing the best.
Exhibit 20: Low P/E stocks outperform the market, whereas high P/E stocks fail to beat the market
600
450
300
150
0
High PE(CAGR-9.0%)
Q3(CAGR-13.4%)
Low PE(CAGR-15.5%)
Q2(CAGR-10.2%)
Q4(CAGR-6.3%)
BSE100(CAGR-10.3%)
Performance of different quintiles of BSE100
507.2
410.2
302.3
298.0
262.7
198.4
Source: Bloomberg
Investors/analysts have consistently overvalued the favorite stocks and undervalued
the out-of-favor stocks! We repeated the same analysis with trailing multiples, and
found that trailing multiples are better predictors of returns, generating significant
alpha over the benchmark, BSE-100.
Exhibit 21: The results are better with trailing P/E ratio
650
550
450
350
250
150
50
Absolute Total returns(Average
)
Performance of different quintiles of BSE100
High PE(CAGR-4.8%)
Q3(CAGR-10.6%)
Low PE(17.2%)
Q2(CAGR-10.2%)
Q4(CAGR-7.2%)
BSE100(CAGR-10.3%)
595.8
310.1
302.3
299.5
217.6
169.8
Source: Bloomberg
Key updates from 4QFY18 on P/E quintiles
In the quarter ended March 2018,
Q1 (Quintile with high P/E stocks) and Q5 (Quintile with lowest P/E stocks) both
performed poorly, failing to beat the benchmark. On the other hand, Q4, with
the second lowest P/E stocks, performed the best.
It’s important to note that quintile performance can depart from our assertion
that “low P/E stocks dominate other quintiles” in some quarters, but over a
longer period, low P/E stocks should outperform other quintiles as per our
detailed study over ten years.
11 April 2018
14

Thematic | Contrarian Investing
Exhibit 22: Low P/E stocks delivered the second best returns in 4QFY18
Q1
Total Return
-8.19
Q2
-9.50
Q3
-7.08
Q4
-4.50
Q5
-7.09
BSE100
-4.44
Source: Bloomberg
It’s important to highlight that the BSE-100 index is based on free-float market
capitalization, whereas our Quintiles are equal-weighted portfolios. In 4QFY18, a
BSE-100 portfolio with equal weights would have delivered returns of -8%.
Low P/E stocks offer higher dividend yield (2.6%) than the market (1.5%), which acts
as a support for stock performance in a downturn. On the other hand, stocks with
high P/E ratios offer lower dividend yield (0.4%) than the market. Worse, they fail to
deliver the growth they promise based on higher P/E ratios!
Exhibit 23: High dividend yield supports performance of low P/E stocks in bear phases
%
Perfomance of Quintiles
Total Return
Price Return
17.2
14.4
10.2
4.8
4.1
0.7
Q1
Q2
1.1
Q3
1.7
Q4
9.2
10.6
8.9
Dividend Return
2006-2017(curr.)
10.3
7.2
5.2
2.0
Q5
2.8
1.5
BSE 100
Source: Bloomberg
8.8
Exhibit 24: Snapshot of low P/E stocks
Company
Aurobindo Pharma
Bajaj Holdings
BPCL
Grasim Inds
HPCL
IOCL
LIC Housing Fin.
Lupin
NMDC
NTPC
ONGC
Power Fin.Corpn.
Power Grid Corpn
Rural Elec.Corp.
Tata Motors
Vedanta
Wipro
Popularity
Score
4.7
5.0
4.0
4.0
3.6
4.3
3.8
3.3
3.6
4.5
4.5
3.8
4.5
3.5
4.3
5.0
2.4
CMP
INR
620
2,648
434
1,084
354
175
563
810
119
169
177
90
196
132
364
285
284
Mcap
INR b
363.1
294.7
941.7
712.7
539.4
1,694.7
284.1
366.1
376.2
1,394.3
2,270.2
236.6
1,026.4
260.0
1,155.5
1,060.9
1,285.2
Trailing
PE(x)
5-year
Current
Avg.
22.9
14.2
8.3
12.0
11.8
15.5
9.6
13.1
14.7
28.3
12.0
11.3
12.3
7.5
13.8
5.1
12.8
11.4
16.0
9.6
15.5
8.5
8.4
14.0
13.0
14.7
13.1
11.1
10.6
13.6
3.9
10.0
14.9
16.1
PE
Prem/
Disc (%)
-38.1
44.0
-18.4
0.1
-11.8
-35.4
-5.2
-54.2
22.5
15.8
-9.2
42.8
-2.0
-22.8
-22.2
30.8
0.5
FY17
23,015
NA
95,070
31,673
62,088
198,495
19,311
25,574
31,504
101,937
210,759
20,985
73,090
61,070
67,288
56,266
83,326
PAT
(INR M)
FY18E
25,647
NA
78,646
22,224
60,310
196,162
19,662
14,016
43,160
107,070
215,532
95,000
88,643
68,120
86,696
84,816
86,816
FY19E
28,508
NA
80,947
45,690
49,551
166,821
22,377
18,157
44,428
125,120
279,259
108,240
108,189
78,639
192,323
124,184
91,140
PAT
CAGR(%)
FY17-19
11.3
NA
-7.7
20.1
-10.7
-8.3
7.6
-15.7
18.8
10.8
15.1
127.1
21.7
13.5
69.1
48.6
4.6
RoE
(%)
FY17
27.6
14.9
32.4
10.8
32.4
20.7
19.1
20.9
13.5
10.5
10.1
17.9
15.6
19.9
9.8
9.7
16.9
Source: MOSL, Bloomberg
11 April 2018
15

Thematic | Contrarian Investing
Exhibit 25: Snapshot of high P/E stocks
Company
ABB
Apollo Hospitals
Asian Paints
Bajaj Fin.
Bharti Airtel
BHEL
Britannia Inds.
Colgate-Palm.
Crompton Gr. Con
DLF
Godrej Consumer
Havells India
Hind. Unilever
Marico
Nestle India
Pidilite Inds.
Titan Company
TVS Motor Co.
Popularity
Score
2.4
4.5
3.6
4.1
4.1
2.4
4.3
3.3
4.5
3.0
3.8
3.7
4.0
3.5
4.1
4.0
4.4
2.6
CMP
INR
1,295
1,075
1,144
1,933
385
87
5,175
1,098
231
204
1,089
531
1,376
321
8,356
978
939
645
Mcap
INR b
274.5
149.5
1,097.1
1,117.2
1,540.6
320.9
621.3
298.5
144.6
364.7
741.9
332.2
2,977.6
414.2
805.6
496.8
833.5
306.6
Trailing
PE(x)
5-year
Current
Avg.
93.6
65.3
49.7
52.7
29.2
47.0
33.1
49.9
43.7
49.1
43.8
44.1
37.4
44.4
43.9
65.2
47.1
48.0
37.2
51.9
55.4
52.0
114.6
60.1
70.7
49.8
51.0
50.2
57.1
56.5
64.3
52.5
64.6
60.8
109.8
52.7
PE
Prem/
Disc (%)
-30.2
4.6
5.2
77.9
143.7
81.5
41.8
13.9
3.9
14.6
29.4
51.2
44.6
19.6
-1.0
29.0
129.0
41.9
FY17
3,745
2,063
20,163
18,366
44,421
4,917
8,843
5,774
2,932
3,094
12,876
5,969
42,490
8,110
11,924
8,579
8,017
5,581
PAT
(INR m)
FY18E
4,200
3,602
20,594
25,678
14,445
11,597
10,107
6,519
3,193
7,040
14,498
6,955
51,863
8,250
13,500
9,039
11,127
6,717
FY19E
6,383
5,011
24,348
35,379
7,320
13,246
12,613
7,686
4,057
10,504
16,585
8,540
61,155
9,736
15,340
10,572
14,131
10,664
PAT
CAGR (%)
FY17-19
30.6
55.9
9.9
38.8
-59.4
64.1
19.4
15.4
17.6
84.2
13.5
19.6
20.0
9.6
13.4
11.0
32.8
38.2
RoE
(%)
FY17
12.7
6.3
28.5
21.6
6.6
1.5
36.9
50.1
76.4
2.9
24.6
18.2
66.5
36.7
40.9
28.2
20.6
25.6
Source: MOSL, Bloomberg
11 April 2018
16

Thematic | Contrarian Investing
Low P/B stocks dominate, but overall results mixed
2
Our empirical analysis suggests that high P/B stocks have delivered the best returns
over the last 10 years, closely followed by Q2, which is followed by low P/B stocks.
However, low P/B stocks have dominated other quintiles for most of the decade.
P/B
Exhibit 26: Returns of BSE-100 and all quintiles barring Quintile-4 are quite close
450
350
250
150
50
Absolute Total returns(Average
)
High PB(CAGR-13.8%)
Q3(CAGR-10.3%)
Low PB(CAGR-11%)
Q2(CAGR-12.5%)
Q4(CAGR-7.5%)
BSE 100(CAGR-10.3%)
Performance of different quintiles of BSE100
427.1
374.5
323.4
302.3
302.1
227.2
Source: Bloomberg
We have repeated the same analysis with trailing P/B ratio. The low P/B stocks
based on trailing BV did better than low P/B stocks based on forward BV, whereas
the high P/B stocks did somewhat worse. Again, low P/B stocks led the other groups
for the majority of the decade and are the second-best performing group.
Exhibit 27: Trailing P/B ratio also presents the same picture
450
350
250
150
50
Absolute Total returns (Average
)
High PB(CAGR-12.2%)
Q3(CAGR-7.6%)
Low PB(CAGR-12.1%)
Q2(CAGR-12.3%)
Q4(CAGR-9.6%)
BSE 100(CAGR-10.3%)
Performance of different quintiles of BSE100
368.3
359.8
365.9
302.3
278.9
227.6
Source: Bloomberg
However, the results are again much less appealing as compared to the P/E theme.
In 4QFY18, Q5, with the lowest P/B stocks, performed the worst, whereas high P/B
stocks were the second-best performer.
11 April 2018
17

Thematic | Contrarian Investing
Exhibit 28: Low P/B stocks (Q5) have delivered the worst return in 4QFY18
Q1
Total Returns
-5.69
Q2
-4.30
Q3
-5.92
Q4
-7.56
Q5
-16.40
BSE100
-4.44
Source: Bloomberg
It’s important to highlight that the BSE-100 index is based on free-float market
capitalization, whereas our Quintiles are equal-weighted portfolios. In 4QFY18, a
BSE-100 portfolio with equal weights would have delivered returns of -8%.
11 April 2018
18

Thematic | Contrarian Investing
Low P/CF stocks outperform high P/CF stocks
P/CF
The least popular (out of favor) stocks with low P/CF ratio outperformed every other
group, generating an alpha of 2.9% (returns CAGR of 13.2%) over the benchmark
(BSE-100: CAGR of 10.3%). High P/CF stocks also delivered decent returns, beating
the BSE-100 benchmark narrowly.
Exhibit 29: Low P/CF stocks beat high P/CF stocks
550
425
300
175
50
High PCF(CAGR-11.0%)
Q3(CAGR-10.5%)
Low PCF(CAGR-13.5%)
Q2(CAGR-10.3%)
Q4(CAGR-7.4%)
BSE 100(CAGR-10.3%)
Performance of different quintiles of BSE100
415.1
322.2
308.1
302.3
302.1
223.6
Absolute Total returns(Average
)
Source: Bloomberg
We repeated the same analysis with trailing P/CF ratios. The outperformance
increased with trailing ratios. The low P/CF quintile outperformed every other
group. The high P/CF quintile delivered the least returns, failing to beat the
benchmark and underperformed every other quintile. This is in harmony with our
analysis on the P/E theme.
Exhibit 30: Margin of outperformance increases significantly with trailing P/CF ratios
675
550
425
300
175
50
High PCF(CAGR-4.8%)
Q3(CAGR-11.3%)
Low PCF(CAGR-15.6%)
Performance of different quintiles of BSE100
Q2(CAGR-10.6%)
Q4(CAGR-13.4%)
BSE 100(CAGR-10.3%)
Absolute Total returns(Average
)
512.5
411.7
333.8
302.3
310.6
169.1
Source: Bloomberg
Key updates from 4QFY18 on P/CF quintiles
In the quarter ended March 2018,
The low P/CF quintile (Q5) has performed the worst, failing to beat the BSE-100
benchmark, whereas the high P/CF Quintile came in 3
rd
and also failed to beat
the BSE-100 benchmark.
Q4 (Quintile with the second lowest P/CF ratio) performed the best, followed by
Q2, Q1, Q3 and Q5.
11 April 2018
19

Thematic | Contrarian Investing
It’s important to note that quintile performance can depart from our assertion
that “low P/CF stocks dominate other quintiles” in some quarters, but over a
longer period, low P/CF stocks have outperformed every other quintile.
Exhibit 31: Both low P/CF and high P/CF stocks failed to beat the BSE-100 in 4QFY18
Q1
Total Returns
-8.25
Q2
-5.80
Q3
-9.17
Q4
-3.42
Q5
-10.50
BSE100
-4.44
Source: Bloomberg
It’s important to highlight that the BSE-100 index is based on free-float market
capitalization, whereas our Quintiles are equal-weighted portfolios. In 4QFY18, a
BSE-100 portfolio with equal weights would have delivered returns of -8%.
The low P/CF stocks offer higher dividend yield (2.3%) than the market (1.5%); this
acts as a support for stock performance during a market downturn. On the other
hand, stocks with the highest P/CF ratios offer lower dividend yield (0.52%) than the
market. Worse, they often fail to deliver the growth that analysts envisage for them.
Exhibit 32: High dividend yield supports low P/CF stocks in bear market (%)
Total Return
Price Return
Dividend Return
15.6
11.3
2006-2018 (curr.)
Perfomance of Quintiles
10.6
4.8
3.9
0.83
Q1
Q2
1.29
Q3
1.75
Q4
11.3
13.4
9.6
13.2
10.3
8.8
9.3
2.09
Q5
2.46
BSE 100
1.49
Source: Bloomberg
Exhibit 33: Summary of low P/CF stocks
Company
Bharti Airtel
BPCL
Coal India
Grasim Inds
Hindalco Inds.
HPCL
IOCL
LIC Housing Fin.
Lupin
ONGC
Power Grid Corpn
Rural Elec.Corp.
Tata Power Co.
Tata Chemicals
Vedanta
Popularity
Score
CMP
INR
Mcap
INR B
Trailing
PE(x)
5-year
Current
Avg.
47.0
114.6
11.8
9.6
14.9
19.2
15.5
15.5
43.1
23.3
9.6
8.5
13.1
8.4
14.7
14.0
28.3
13.0
12.3
11.1
13.8
13.6
5.1
3.9
153.7
33.8
17.6
20.1
11.4
14.9
PE
Prem/
Disc(%)
143.7
-18.4
28.6
0.1
-46.0
-11.8
-35.4
-5.2
-54.2
-9.2
-2.0
-22.8
-78.0
13.9
30.8
FY17
44,421
95,070
92,678
31,673
19,069
62,088
198,495
19,311
25,574
210,759
73,090
61,070
13,969
8,583
56,266
PAT
(INR M)
FY18E
14,445
78,646
110,432
22,224
42,679
60,310
196,162
19,662
14,016
215,532
88,643
68,120
13,165
8,587
84,816
FY19E
7,320
80,947
163,907
45,690
57,666
49,551
166,821
22,377
18,157
279,259
108,189
78,639
19,615
11,203
124,184
PAT
CAGR (%)
FY17-19
-59.4
-7.7
33.0
20.1
73.9
-10.7
-8.3
7.6
-15.7
15.1
21.7
13.5
18.5
14.2
48.6
RoE
(%)
FY17
6.6
32.4
37.8
10.8
7.4
32.4
20.7
19.1
20.9
10.1
15.6
19.9
17.1
13.5
9.7
4.1
4.0
4.1
4.0
4.5
3.6
4.3
3.8
3.3
4.5
4.5
3.5
3.3
4.3
5.0
385
434
275
1,084
214
354
175
563
810
177
196
132
84
724
285
1,540.6
941.7
1,709.8
712.7
480.6
539.4
1,694.7
284.1
366.1
2,270.2
1,026.4
260.0
227.9
184.3
1,060.9
Source: MOSL, Bloomberg
11 April 2018
20

India Strategy
THEMATIC/STRATEGY RESEARCH GALLERY
9 February 2018
24

Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
Thematic | Contrarian Investing
*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of
which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited
(BSE), Multi Commodity Exchange of India Limited(MCX) and National Commodity & Derivatives Exchange Limited(NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National
Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products
.Details
of associate entities of Motilal Oswal Securities Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in the subject company at
the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act
as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial
instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.;
however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have
received any compensation from the subject company in the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in
this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result,
the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part
or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report
is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied,
is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to
buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by
virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the
specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Analyst ownership of the stock
Companies where there is interest
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or
its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have
expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong)
Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only
available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from
registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption
under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional
Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional
investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,
MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of
this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject
to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal
Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the
Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced
in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in
this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of
independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document
(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including
those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy,
completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.
MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform
investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this
into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and
the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees
to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL
or any of its affiliates or employees free and harmless from all losses, 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.:022-38281085.
Registration details of group entities.: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100.IRDA Corporate Agent-CA0541. 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
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