J Street Volume 273

Index Market View 1 Company Update 2 Around the Economy 3 Knowledge Corner 3 Mutual Fund 4 Commodity Corner 5 Forex Corner 6 Report Card 7 Editor & Contributor Margi Shah Special Contributors Ashesh Trivedi Aditya Nahar For suggestions, feedback and queries [email protected]

Market View: The most important week for the global market

Last Saturday we have discussed that aggressive reforms are required to withstand the selling pressure by FIIs and other international investors. But it is bad luck for India as a country that the important bills are not getting passed for reasons which are not related to the issue. Now the week has come when The Federal Reserve may hike the rates. The worries regarding China has come true and the uncertainties about drastic decision by China is increased. China is devaluating Yuan slowly and surely which is hurting the emerging markets world over. Under the circumstances the clouds of bearishness have gathered and hurting the global markets. Indian market is on verge of breaching the recent low of 7540 / 24833 which if happens can create panic in the market. There is every chance that the market can bounce back from this level but the remarkable recovery is far away. For medium to long term investor this fall gives a chance to accumulate quality stocks in the market. The market may also ignore good IIP data released on Friday and some very positive talks between Japan and India going on at present. The sentiment is down and will revive only on the basis of some strong reasons. It is advisable to remain sidelined for some time and watch for the events in the next week.

Kamal Jhaveri MD- Jhaveri Securities

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Vol.: 273 14th December,2015

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Company Basics

BSE Code 508933

NSE Symbol WELSYNTEX

EQUITY (` in Cr.) 39.24

MKT.CAP (` in Cr.) 434.39

Financial Basics FV (`) 10.00 EPS (`) 11.37 P/E (x) 9.74 P/BV (x) 2.97 BETA 1.3904 RONW (%) 30.61

Share Holding Pattern Holder's Name % Holding Foreign 0.66 Institutions 1.10 Promoters 70.10 Non Prom. 0.00 Public & Others 23.16 Government 5.00

Company Overview Welspun Syntex is a flagship company of the Welspun Group. Welspun group is one of the leading and largest growing business conglomerates in India. Welspun Syntex Limited was established in 1983 and is the flagship company under the Welspun umbrella. Since its inception WSL has grown manifold and is amongst the largest manufacturers and exporters of Polyester Texturised Filament Yarn, Nylon Filament Yarn from India. With plants located at Silvassa and Palghar (Thane), India WSL is well equipped to meet the domestic as well as international demand. It has marketing offices located at Surat and Mumbai in India that facilitate big business ventures. Investment rational Polycycle- a unique kind of Yarn with unique advantages WSL has unique positioning in the BCF segment with POLYCYCLE. Polycycle is a 100% recycled Polyester yarn extruded (derived) from used PET bottles (plastic bottles) using patented process called ReNew. This polyester has same feature and better quality like normal Vargin polyester. Vargin polyester is derived crude feed stock like PTA and MEG. So fluctuation in crude oil prices are less concern. Stable crude oil prices helps to maintain operating margin Man made yarn mainly consumes crude oil based derivatives as Raw material (chips constitutes ~50-60% where as other textures consumes ~40% -45% of total RM cost ). RM cost as % of sales fell from 68.41 to 60.95 YoY, one of the lowest in last five year, largely because of fall in key components like purified terephthalic acid (PTA) and mono-ethylene glycol (MEG) which have touched multi-year lows on account of lower crude prices. Strategically located plant in Union Territory and Maharashtra The company has two state of the art manufacturing plants in Silvasa (UT) and Palghar. Silvassa plant is perfectly located between the two most important Textiles States of India, Gujarat and Maharashtra. This location is situated near sea ports of JNPT and Mumbai and it becomes possible to deliver the finished products and receive the imported raw materials to and from the ports. This location helps Welsun to deliver finished products to its customers in India and overseas.

Valuation : Currently, WELSYNTEX is trading at `131. We recommend “Buy” with target price of `223,

valuing stock 13xFY18E EPS of `17.18.The stock currently trades at 10.06x of FY16E and 8.38xof FY17E

and 6.99x of FY18E.

Company Update : Welspun Syntex Ltd.


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Weekly Market Recap :

• Industrial production (IIP) for October 2015, which has been announced by the government on Friday, 11 December 2015. India's IIP growth moderated to 3.6% in September 2015 over a year ago compared with the revised growth of 6.3% in August 2015.

• Diminishing hopes that the constitutional amendment bill on goods and services tax (GST) will be passed during the ongoing winter session of parliament with main opposition Congress party repeatedly disrupting the parliament also weighed on investor sentiment.

• The committee headed by Chief Economic Adviser Dr. Arvind Subramanian on possible tax rates under goods and services tax (GST) recommended a steep 40% tax on tobacco and tobacco products. Luxury cars, aerated beverages and paan masala are the three other product lines in addition to tobacco and tobacco products for which the committee has suggested sin/demerit rate of 40%.

Market Eye Week ahead : • The government will release the data on wholesale price index (WPI) for November 2015 on Monday, 14 December 2015. WPI stood

at negative 3.81% for October 2015 compared with a reading of negative 4.54% for September 2015. • The data on inflation based on the consumer price index (CPI) for November 2015, will be announced by the government on Monday,

14 December 2015. The CPI inflation accelerated to four-month high of 5% in October 2015, compared with 4.4% reading inSeptember 2015.

• The data on payment of third installment of advance taxes by India Inc will be out during the middle of December 2015. The datacould provide clues on the expected Q3 December 2015 corporate earnings.

• Shares of public sector oil marketing companies (PSU OMCs) will be in focus as a regular fuel price review is due during the middle of the month.

• On global front, investors will closely watch the decision of US Federal Reserve's two-day monetary policy meeting scheduled on Tuesday, 15 December and Wednesday, 16 December 2015.

KEY EVENTS/FACTORS TO WATCH 1. Mon: WPI data for the month of November 2015, CPI data for the month of November 2015 2. Tues & Wed: Federal Reserve’s two day monetary policy meeting

Free Float

• A company's free float refers to the number of outstanding shares that are available to the public for trade. • Free float is sometimes referred to as float or public float. • Free Float = Outstanding Shares – Restricted Shares • Free float is generally described as all shares held by investors, other than restricted shares held by company insiders. It does not

include restricted shares, which are owned by company management, officers and other various insiders because it's assumed that those shares are being held on a very long-term basis.

Around The World


Knowledge Corner :

Mutual Fund Corner

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Source : - www.valueresearchonline.com

Fund Name Scheme Name ICICI Prudential Balanced Advantage Fund - Regular

Plan

AMC ICICI Prudential Asset Management Company

Type Open-ended and Hybrid

Category Equity-oriented

Launch Date December 2006

Fund Manager Manish Banthia & Manish Gunwani

Net Assets (` In crore ) Rs. 10160.3 crore as on Nov 30, 2015

Top 10 Sector Break-Ups Fund (%)

Financial 16.24 Technology 11.4 Energy 9.2 Automobile 6.54 FMCG 5.26 Healthcare 5.14 Construction 2.67 Engineering 2.52 Diversified 2.09 Services 1.4

Composition (%) Equity 75.56

Debt 35.22

Cash -10.78

Risk Analysis Volatility Measures Standard Deviation 8.35 Sharpe Ratio 1.00 Beta 0.71 R-Squared 0.85 Alpha 6.09

History 2012 2013 2014 2015 NAV (Rs) 17.20 19.08 24.62 25.52

Total Return (%) 33.33 10.93 29.04 3.66

+/‐ VR Balanced 10.79 4.55 3.09 9.16

Rank (Fund/Category) 5/30 5/32 49/57 20/72

52 Week High (Rs) 17.26 19.09 24.65 26.63

52 Week Low (Rs) 12.86 16.00 18.47 24.34

Net Assets (Rs.Cr) 182.86 691.73 4462.86 8209.35

Expense Ratio (%) 2.40 2.82 2.41 2.35

Fund Style

Investment Style Growth Blend Value Large

Medium

Small

Capitalization


Fund Performance v/s S&P CNX Nifty

—– Fund —– CNX Nify (Rebased to 10,000)

Commodity Corner

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FUNDAMENTAL: Gold prices on weekly basis settled flat but still ended with losses and silver prices ended with more than three percent losses as investors positioned themselves for a likely U.S. rate rise. A rate increase at the Federal Reserve's policy meeting on Dec. 15-16 would be the first in nearly a decade and could dent demand for non-interest paying gold. The core figure strips out volatile categories such as gasoline, automobile and food sales. Separately, the Labor Department said its Producer Price Index increased by 0.3% in November, following a 0.4% decline a month earlier. The data could provide the retail industry with momentum for the final weeks of the Holiday season. Meanwhile, gold prices ignored weak crude oil prices, which flirted with 11-year lows. Weakness in oil prices could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation. Options data shows that investors have boosted bets that the gold price will soon drop to $1,000 an ounce while assets in SPDR Gold Trust, the top bullion exchange traded fund, are at their lowest since September 2008. The Federal Funds Rate, the Fed's benchmark rate offered on interbank, overnight loans, has remained at its current level between zero and 0.25% since December, 2008, shortly after the start of the Financial Crisis. Any increase of the targeted range for the Federal Funds Rate is expected to be modest at 25bps. The FOMC last approved a rate hike in June, 2006. A rate hike is viewed as bearish for gold, which is not attached to interest rates and struggles to compete with high-yield bearing assets. Gold premiums in India fell as a quick rebound in prices prompted consumers to postpone purchases, but buying interest in China remained strong ahead of the spring festival early next year. Indian dealers were charging a premium of 20 cents to $1 an ounce over the global benchmark this week, compared to $1.25 to $2 last week. In the week ahead, investors will be focusing their attention on Wednesday’s outcome of the final Fed meeting of 2015. U.S. economic reports on inflation, manufacturing activity and industrial production will also be closely watched. RECOMMENDATION : SELL GOLD @ 25900 SL 26200 TGT 25400-24900. SELL SILVER @ 34500 SL 35200 TGT 33900-33200. FUNDAMENTAL: Base metals prices last week ended with mixed node where lead, copper and zinc ended with gains whereas aluminium and nickel ended with losses. Copper prices gained by over two percent amid optimism surrounding recent supply-cut announcements by major mining compa-nies, such as Glencore, Freeport-McMoran and Anglo American. Nickel has plunged 44 percent this year, the worst performing main contract on the London Metal Exchange. Prices touched the lowest since June 2003 last month. While Society Generale SA earlier this month forecast the nickel mar-ket to be in deficit in both 2016 and 2017, years of excess production has expanded stockpiles. Inventories reached a record of about 900,000 tons, equal to almost six months of global demand, Macquarie Group Ltd. estimated last month. Sluggish trade and inflation figures released last week added to concerns over the health of the world's second-biggest economy. The rate of economic growth in China slowed to 6.9% in the third quarter, according to official data, dropping below the 7% level for the first time since the global financial crisis. China's activity data was stronger than expected in November, with factory output growth picking up to a five-month high, signaling that a flurry of stimulus measures from Beijing may have put a floor under a fragile economy. Confidence at big Japanese manufacturers held steady in the three months to December but is seen worsening, a closely watched central bank survey showed on Monday. U.S. consumers showed some muscle in November at the start of the holiday shopping season, sug-gesting enough momentum in the economy for the Fed to raise interest rates next week for the first time in nearly a decade. China's aluminium smelters pledged to shut more production this month and not to add any new capacity in 2016, as the industry pushes to shore up plunging prices for the metal. Hedge funds and money managers cut their net short positions in COMEX copper contracts in the week to Dec. 8, U.S. Commodity Futures Trading Commission data showed on Friday. In the week ahead, investors will be focusing their attention on Wednesday’s outcome of the final Fed meeting of 2015. U.S. economic reports on inflation, manufacturing activity and industrial production will also be closely watched. Wednesday’s survey data on euro zone private sector growth will be scrutinized by market watchers for signs of a recovery in the region. RECOMMENDATION : BUY COPPER @ 312 SL 300 TGT 322-330. BUY ZINC @ 101 SL 97 TGT 105.50-109. BUY NICKEL ABV 600 SL 570 TGT 635-660. BUY ALUMINIUM @ 99 SL 96 TGT 102-105. BUY LEAD @ 113 SL 109 TGT 116-120 FUNDAMENTAL:Crude oil prices on weekly basis ended with more than 10 percent losses as pressure continued since OPEC abandoned its output ceiling of 30 million bpd. Prices also came under pressure after the International Energy Agency (IEA) warned that global oversupply of crude could worsen next year. The IEA, which advises developed nations on energy, warned that demand growth was starting to slow. Consumption is likely to have peaked in the third quarter and demand growth is expected to slow to a still-healthy 1.2 million bpd (barrels per day) in 2016, as support from sharply falling oil prices begins to fade. Led by No. 1 crude exporter Saudi Arabia and other big Middle East oil producers such as Iran and Iraq, the group pumped 31.7 million bpd in November. Traders have been perplexed by oil's decline since the Dec. 4 meeting of the Organization of the Petroleum Ex-porting Countries which all but abandoned price support for crude by removing OPEC's production ceiling in an oversupplied market. Brent's session low was $37.36 - barely a dollar above the $36.20 hit during the financial crisis. If Brent falls below that level in the coming week, that will be its lowest since mid-2004, when it traded at around $34 a barrel. Brent and U.S. crude's West Texas Intermediate (WTI) futures fell as much as 5 percent on the day and 12 percent on the week as mild pre-winter weather and a plummeting U.S. stock market added to the toll on oil prices. Natural gas ended with more than 8 percent losses and on Nymex prices settled below $2 mark for the first time in three years as mild forecasts for December gets even milder and expectations for heating demand fall even more. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended December 4 fell by 76 billion cubic feet, compared to expectations for a decline of 64 billion. That compared with a drawdown of 53 billion cubic feet in the prior week, 51 billion cubic feet in the same week last year, while the five-year average change for the week is a decline of 65 billion cubic feet. Total U.S. natural gas storage stood at 3.880 trillion cubic feet, 11.7% higher than levels at this time a year ago and 6.1% above the five-year average for this time of year. RECOMMENDATION : SELL CRUDE OIL @ 2500 SL 2650 TGT 2350-2200. SELL NAT.GAS @ 140 SL 152 TGT 126-115.

BULLION

BASE METALS

ENERGY


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Commodity Corner

USD/INR

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Forex Corner

EUR/INR

GBP/INR

JPY/INR

Market Eye Week ahead :

• Last week, the USD INR was almost flat but the US dollar gained over the weekend against major expat currencies on the back of an oil price decline and concerns over individual economies. The level of 67.26 against US dollar is acting as an immediate hurdle for the pair. If it manages to surpass it, then it could continue further towards 69 levels in short term, Tracking the technical charts, the USD-INR pair is heading towards its life high of 68.80 and above. The Federal Open Market Committee (FOMC) is widely expected to hike 25bp at this week's meeting. The focus now is on the rate hike path, as the market outlook remains divergent from FOMC projections.

Level S2 S1 CP R1 R2 High Low Close

USD/INR 66.85 66.65 67.00 67.20 67.35 67.14 66.79 67.06


JPY/INR 54.52 53.82 54.88 55.58 55.94 55.24 54.18 55.22


GBP/INR 100.72 99.95 101.24 102.01 102.53 101.75 100.46 101.50

Level S2 S1 CP R1 R2 High Low Close EUR/INR 72.57 71.61 73.23 74.19 74.85 73.90 72.28 73.52

Market Recap :

• The Indian rupee depreciated against the dollar on Monday, 14 December 2015 mainly on strong de-mand for the American unit from importers and some banks amid a lower opening of the domestic equity market.

• The domestic currency opened at Rs 67.04 versus the greenback and dropped to a low of 67.07 before recovering back to a high of 66.97 so far during the day. In the spot currency market, the Indian unit was seen at 66.9975.

• The rupee had closed 17 paise lower against the US dollar at 66.88 on Friday, the lowest level in more than two years in the face of strong demand for greenback.

• The dollar index, which measures the US currency’s strength against major currencies, was trading at 97.789, up 0.23% from its previous close of 97.565.


• Bearish candle has been witnessed last week. Cluster of support is at 7714, 7691, 7626 and 7539. Breaking 7539 with weekly closing and bear-

ish candle can lead to a correction of the rally from 5118 to 9119. The 38.2% retracement is at 7587 against which Nifty has registered a low of 7539. Further retracement levels on fall and close be 7539 will be at 7114 which is 50% retracement levels. Traders short need to maintain the stop loss at 7980 and look for lower levels of 7714-7691-7626-7539 to cover short position. Traders can do fresh buy in support zone of 7550-7450 with low of the week as the stop loss. Resistance during the week will be at 7845-7915-7980.

• On the political front, developments in winter session of the parliament will be closely watched. Investors' focus is on whether the GST constitutional amendment bill will be passed in the Rajya Sabha.

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J Street Recommendations Report Card

Top Fundamental Stocks

Stocks Rec. Date CMP on Rec. CMP Target Absolute Return @

CMP Status

Welspun syntax Ltd. 23/11/2015 121 131 223 9% Buy

Natco Pharma 02/11/2015 509 548 636 8% Buy

SRF Ltd. 21/09/2015 1140 1178 1374 3% Accumulate

Ahluwalia contracts 24/08/2015 235 256 368 9% Buy

Sun Pharma 03/07/2015 831 769 1041 ‐8% Buy

Infinite Computer Sol. 20/07/2015 190 210 255 11% Buy

Nitin Spinners Ltd. 06/07/2015 79 64 94 ‐20% Buy

Bank of Baroda 01/06/2015 163 157 217 ‐4% Buy

Ambika Cotton Mills 18/05/2015 880 771 1149 ‐12% Buy

Sadbhav Engineering Ltd.

04/05/2015 298 346 430 16% Buy

Omkar speciality Chemicals

16/03/2015 152 210 251 38% Buy

DHFL 16/02/2015 252 215 368 ‐15% Buy

TV Today Network 27/01/2015 222 284 337 28% Buy

M&M 12/1/2015 1238 1287 1452 4% Buy

Havells India 27/10/2014 274 303 346 11% Buy

All Cargo Logistics 05/08/2014 260 358 342 38% Exit

PTC India Fin. Ser. 07/07/2014 39 38 45 ‐3% Buy

Adani Port 05/07/2014 280 255 347 ‐9% Buy

L & T 05/07/2014 1750 1274 1866 ‐27% Buy

It's not important whether you are right or wrong, It’s about how much money you make when you're right and how much you lose when you're wrong.”



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J Street Volume 273