J Street Volume 274

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 Fed rate hike is digested by the market - what next???

The much hyped Fed Rate hike is well digested by the global market. The Fed has increased the rate by 0.25% and the new Fed rate is 0.25% to 0.50% from earlier rate of 0 to 0.25%. On the basis of statements made by the Fed Committee earlier, the world market has discounted the event and could digest the same. While raising the rate, the committee stated that the next rate hike will be data dependent and their stance will be accommodative. Considering the same, we can’t expect another rate hike before 3 to 6 months. Now, the world has another worry of Deflation on hand. The Economists world over are forming an opinion that the economic activity across the world is slowing down. For example, the export and import of India is slowing down gradually on monthly basis. There are only few sectors where we find some growth. We also know that huge government spending is the only driving force to generate economic activity in the market. The falling Oil price is also pointing towards deflationary trend in the world market. Unfortunately, we lack political consensus to pass GST Bill which can trigger the positive market sentiment. Under the circumstances, we have to wait for the new allocation by FII in the month of January for market to rally from here on. Some selective counters are providing signals of new breakout so be selective with confidence. Technically, there is a strong support at 7700 and Resistance at 7850. Kamal Jhaveri MD- Jhaveri Securities

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Vol.: 274 21st 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 `157. 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 :

• Data released by the government on Monday, 14 December 2015, showed that inflation based on the wholesale price index (WPI) remained in negative zone in November 2015. WPI stood at negative 1.99% in November 2015 compared to a reading of negative 3.81% for October 2015.

• Meanwhile, the government has lowered its growth forecast for the year ending 31 March 2016 (FY 2016) to 7-7.5% from 8.1-8.5% estimated in February.

• Finance Minister Arun Jaitley reportedly said on Wednesday, 16 December 2015, that the proposed Goods and Services Tax (GST) rate would be much less than 18%.

• On the global front, US Federal Reserve emphasized a gradual path for future interest rate hikes after raising the benchmark rate by 25 basis points to 0.25%-to-0.50% at the conclusion of its two-day monetary policy meeting on Wednesday, 16 December 2015.

Market Eye Week ahead : • Adani Ports and Special Economic Zone (APSEZ) and Asian Paints will replace Vedanta and Hindalco Industries from the

30-share S&P BSE Sensex with effect from Monday, 21 December 2015. • On the political front, developments in winter session of the parliament will be closely watched. The winter session of the

parliament concludes on Wednesday, 23 December 2015. Investors' focus is on whether the Goods and Services Tax(GST) constitutional amendment bill will be passed in the Rajya Sabha.

• On the global front, the US Q3 GDP data is scheduled to release on Tuesday, 22 December 2015. • US new home sales data for the month of November 2015 is slated to release on Wednesday, 23 December 2015. On the

same day, China's CB Leading Economic Index for the month of November 2015 is due. • Also, UK Q3 GDP data is due on the same day. US initial jobless claims data for the current month is scheduled to re-

lease on Thursday, 24 December 2015.

Growth Fund

• A mutual fund whose aim is to achieve capital appreciation by investing in growth stocks. They focus on companies that are

experiencing significant earnings or revenue growth, rather than companies that pay out dividends. • In general, growth funds are more volatile than other types of funds, rising more than other funds in bull markets and falling more in

bear markets.

Around The World


Knowledge Corner :

Mutual Fund Corner

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Source : - www.valueresearchonline.com

Fund Name Scheme Name ICICI Prudential Value Discovery Fund - Regular

Plan

AMC ICICI Prudential Asset Management Company

Type Multi Cap

Category Open-ended and Equity

Launch Date July 2004

Fund Manager Mrinal Singh

Net Assets (` In crore ) Rs. 10931.5 crore as on Nov 30, 2015

Top 10 Sector Break-Ups Fund (%)

Financial 18.34 Energy 12.93 Automobile 9.8 Construction 9.23 Technology 8.74 Engineering 6.95 Services 6.4 Diversified 6.13 FMCG 4.19 Healthcare 4.06

Composition (%) Equity 93.81

Debt 2.97

Cash 3.22

Risk Analysis Volatility Measures Standard Deviation 16.32 Sharpe Ratio 1.17 Beta 1.01 R-Squared 0.70 Alpha 14.90

History 2012 2013 2014 2015 NAV (Rs) 57.38 62.15 107.99 111.68

Total Return (%) 46.01 8.31 73.76 3.42

+/-Nifty 50 18.31 1.55 42.37 9.71

+/- S&P BSE 500 14.81 5.06 36.80 6.45

Rank (Fund/Category) 7/42 9/47 25/78 37/187

52 Week High (Rs) 57.44 62.15 108.70 120.07

52 Week Low (Rs) 39.46 47.85 58.56 106.67

Net Assets (Rs.Cr) 2300.35 2830.81 7367.40 10150.38

Expense Ratio (%) 1.90 2.33 2.26 2.24

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: Bullion prices ended with losses last week as pressure seen on prices after the U.S. Federal Reserve lifted interest rates for the first time in nearly a decade. The Federal Reserve boosted U.S. interest rates for the first time since 2006 while signaling that the pace of subsequent in-creases will be “gradual.” Citing improved labor market conditions and expectations that long-term inflation would move toward its targeted goal of 2%, the Federal Open Market Committee (FOMC) raised short-term interest rates on Wednesday for the first time in nearly a decade. In a unanimous vote, the FOMC lifted the target range on its benchmark. Federal Funds Rate by 25 basis points to a level between 0.25% and 0.50%. The Fed Funds Rate is the rate offered by institutions on overnight, interbank loans at the Federal Reserve Bank of New York. The beginning of the Fed's first tight-ening cycle since The Great Recession has been largely viewed as bearish for gold, which struggles to compete with high-yield bearing assets in higher rate environments. In order to manage the Fed Funds Rate effectively, the U.S. Central Bank is implementing a pair of levers to help main-tain the rate near its target. The Fed's new cycle began on Thursday when the New York Fed initiated the Overnight Reverse Repurchase Program (RPP) on its Open Market Desk. The tool intends to bolster loan demand, as the Fed borrows cash overnight from institutions in exchange for U.S. treasuries at a rate of 0.25%. The country’s gold imports fell by 36.48 per cent to $3.53 billion in November this year on account of sluggish global prices. The world’s second-biggest gold consumer had imported gold worth $5.57 billion in the same month last year. Even the over-seas purchase of pearls, precious and semi-precious stones has taken a hit. In the London market, the average gold prices had fallen to $1,088 per ounce in November this year while its rates were high at $1,176 in the same period last year. Silver prices had also dropped in the same period. That apart, import of pearls, precious and semi-precious stones declined 53.49 per cent to $977.51 million from $2,101.75 million in the said period. RECOMMENDATION : SELL GOLD @ 25450 SL 25720 TGT 25120-24850. SELL SILVER @ 34500 SL 35200 TGT 33900-33400 FUNDAMENTAL: Base metals prices last week ended with losses where lead prices dropped more among other base metals as the dollar firmed after the first U.S. rate increase in nearly a decade. But lead prices recovered most of its losses on Friday after a drop in available inventories in London Metal Exchange warehouses. Lead prices showed the biggest gains on the LME after exchange data showed the amount of cancelled stock - metal earmarked for delivery from warehouses - more than tripled to nearly 80,000 tonnes, meaning it was no longer available to potential buyers. Some in-vestors seemed to be starting to square their books, a process which could pick up before the year end. The copper market was boosted by news that large copper smelters in China will hold a quarterly executive meeting in Shanghai. CRU sees copper prices averaging around $4,600 next year from around $5,400 a tonne this year, with the trough most likely to occur in the second quarter. China's economy was plagued by pervasive weakness in the fourth quarter, results from a private survey of Chinese firms showed, raising questions about the veracity of stronger than expected official activity data released this month. The number of Americans filing for unemployment benefits last week fell from a five-month high, suggesting sustained labor mar-ket healing that could lead to further Federal Reserve interest rate hikes next year. Germany's economy is expected to continue on its robust expansion path at the end of this year, driven by upbeat business sentiment and a stable labour market, despite a cooling in emerging markets, the Finance Minis-try said. On Dec. 15, 10 large medium and high-grade NPI Chinese producers agreed on production cuts in the coming year, and rumors of nickel stockpiling were also heard. In China’s spot nickel market, demand is expected to wane further as year-end nears. Nickel miners are under mounting pressure to reduce production and even shut down operations in the face of dropping nickel prices. China’s aluminum output fell significantly in Novem-ber as production cuts began to yield result. Output was 2.48 million tonnes in November, down from October’s 2.59 million tonnes and down 20.3% from a year ago. Century Aluminum will continue operating its Mount Holly, South Carolina, smelter at half capacity after agreeing to a three-year deal with power provider Santee Cooper, Century and Santee Cooper said. RECOMMENDATION : BUY COPPER @ 309 SL 304 TGT 314.50-322. BUY ZINC @ 98 SL 96 TGT 100.50-103.50.BUY NICKEL @ 575 SL 550 TGT 599-612. BUY ALUMINIUM @ 99 SL 96 TGT 102.50-104.BUY LEAD @ 109 SL 105 TGT 114.50-118 FUNDAMENTAL: Crudeoil prices on weekly basis dropped by around five percent as crashing oil prices showed little signs of stabilizing follow-ing a modest increase in domestic oil rigs last week. Energy traders also reacted to news that the U.S. Congress approved a sweeping $1.1 trillion spending bill, which includes the repeal of a four-decade ban on crude exports. The ban had been in place since 1975, when Congress approved the Energy Policy and Conservation Act to boost domestic supply in response to a global oil crisis started that had persisted for two years. Both the international and U.S. domestic benchmarks of crude are down by more than 17% since OPEC opted to leave its output quota unchanged two weeks ago at a closely-watched meeting in Vienna. Oil services firm Baker Hughes said in its weekly rig count that U.S. oil rigs rose by 17 to 541 last week for the week ending on December 11. A week earlier, the rig count fell by 21 to 524, its sharpest drop in two months. Any increase in the rig count provides a lagging indicator that U.S. crude production could be on the rise. Natural gas dropped by around 12.58% as traders increasingly fear warm weather and heavy stockpiles are leading to a glut that will last deep into next year. Pressure also seen after government data showed the smallest stockpile drop on record for the time of year. Inventories fell by 34 billion cubic feet last week, compared with the five-year average withdrawal of 120 billion for the period, according to the U.S. Energy Information Administration. Natural gas production is poised to reach a fifth straight annual record this year, even as prices decline, government data show. Output will climb 6.3 percent to 79.58 billion cubic feet a day as supply from the Mar-cellus and Utica shale reservoirs expands, according to the U.S. Energy Information Administration. Last spring, supplies were 55% below the five-year average, indicating producers have more than made up for all of last winter’s unusually strong demand. RECOMMENDATION : SELL CRUDE OIL @ 2520 SL 2650 TGT 2380-2250. SELL NAT.GAS @ 126 SL 136 TGT 118-105

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 showed some profit booking as rate hike by FED was discounted and the USD INR had already rallied before the event. The Federal Open Market Committee (FOMC) had done hike of 25bps in last week’s meeting. But on Friday, the rupee settled almost flat against the US dollar, as domestic stocks fell after authorities lowered the economic growth target for the country and flagged worries over fiscal consolidation, erasing recent gains. But We expect the US dollar to garner buying support on declines against rupee for target of 66.80-67.10 in near term as overall trend is still up.

Level S2 S1 CP R1 R2 High Low Close

USD/INR 66.13 65.79 66.71 67.05 67.63 67.30 66.38 66.46


JPY/INR 53.75 52.75 54.74 55.74 56.73 55.72 53.73 54.76


GBP/INR 98.10 96.97 100.13 101.26 103.29 102.16 99.00 99.23

Level S2 S1 CP R1 R2 High Low Close EUR/INR 71.07 70.18 72.67 73.56 75.16 74.27 71.78 71.96

Market Recap :

• The Indian rupee appreciated for the fifth straight session against the dollar on Monday, 21 December 2015 on increased selling of the US currency by ex-porters.

• The domestic currency opened at Rs 66.34 against

the dollar and climbed further to a high of 66.28 so far during the day. In the spot currency market, the Indian unit was last seen at 66.31, off early highs.

• The rupee had appreciated by a modest two paise

to settle at 66.40 against the greenback on Friday. • Meanwhile, the dollar index, which measures the

greenback's strength against a trade-weighted basket of six major currencies, ended Friday's session down 0.47% at 98.73.


• Last week it was advised that one can do fresh buy at support zone of 7550 with low of the week as the stop loss. The low registered

was 7551 and buying was triggered. Resistance during the week will be at 7850-7900. Better opening and initial rise during the week to 7800-7850-7900 can be used to exit long and sell with a stop loss of 7930. Traders short can maintain the same level of 7930 as the stop loss. The last swing bottom was at 7539. The same is likely to be tested in coming weeks. Trend will become bullish only if nifty manages to crosses and closes above 7930.

• Trend in global markets, investment by foreign portfolio investors (FPIs), the movement of rupee against the dollar and crude oil price movement will dictate trend on the bourses in the holiday shortened week ahead.

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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 121 157 223 30% Buy

Natco Pharma 02/11/2015 509 560 636 10% Buy

SRF Ltd. 21/09/2015 1140 1243 1374 9% Accumulate

Ahluwalia contracts 24/08/2015 235 279 368 19% Buy

Sun Pharma 03/07/2015 831 754 1041 -9% Buy

Infinite Computer Sol. 20/07/2015 190 218 255 15% Buy

Nitin Spinners Ltd. 06/07/2015 79 70 94 -11% Buy

Bank of Baroda 01/06/2015 163 159 217 -2% Buy

Ambika Cotton Mills 18/05/2015 880 805 1149 -9% Buy

Sadbhav Engineering Ltd.

04/05/2015 298 339 430 14% Buy

Omkar speciality Chemicals

16/03/2015 152 230 251 51% Buy

DHFL 16/02/2015 252 231 368 -8% Buy

TV Today Network 27/01/2015 222 312 337 41% Buy

M&M 12/1/2015 1238 1277 1452 3% Buy

Havells India 27/10/2014 274 304 346 11% Buy

All Cargo Logistics 05/08/2014 260 354 342 36% Exit

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

Adani Port 05/07/2014 280 261 347 -7% Buy

L & T 05/07/2014 1750 1290 1866 -26% 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 274