Market Outlook - web.angelbackoffice.comweb.angelbackoffice.com/Research_ContentManagement/pdf_report/M… · Market Outlook May 07, 2018 Market Cues Indian markets are likely to

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Market Outlook

May 07, 2018


Market Cues

Indian markets are likely to open flat, tracking global indices and SGX Nifty.

U.S. Stocks showed a substantial move to the upside over the course of the previous

trading session after opening at a lower level. The major averages pulled back off

their best levels in the final hour of trading but held on to significant gains. The Dow

Jones surged up to 24,263 and the Nasdaq was up by 1.7 percent to 7,210.

U.K. stocks rose in the previous session as miners recovered from losses in the

previous session and investors cheered trading updates from the likes of

International Consolidated Airlines Group and EasyJet. The FTSE 100 was up by

0.4% to end at 7,533.

On domestic front, Indian shares fell modestly, tracking weak global markets as

investors kept an eye on the U.S.-China trade talks and looked ahead to the release

of U.S. jobs report for April later in the day for further indications of the strength of

the labor market and inflation pressures. Traders also exercised some caution

ahead of Karnataka state elections scheduled to be held on May 12. The BSE

Sensex ended on a negative of 0.5% at 34,915.

News Analysis

RBI to infuse liquidity in bond market as forex reserve dips by $3.22 bn

Detailed analysis on Pg2

Investor’s Ready Reckoner

Key Domestic & Global Indicators

Stock Watch: Latest investment recommendations on 150+ stocks

Refer Pg5 onwards

Top Picks

Company Sector Rating CMP

(`) Target

(`) Upside

(%)

Blue Star Capital Goods Accumulate 797 867 8.8

Dewan Housing Finance Financials Accumulate 628 720 14.7

Century Plyboards Forest Product Buy 307 400 30.4

Navkar Corporation Others Buy 167 265 59.0

KEI Industries Capital Goods Accumulate 426 485 13.9

More Top Picks on Pg4

Key Upcoming Events

Date Region Event Description Previous

Reading

Consensus

Expectations

May 08, 2018 US Unnemployment rate 4.10 4.00

May 09, 2018 US Producer Price Index (mom) 0.20

May 10, 2018 UK Industrial Production (YoY) 2.20 3.10

May 10, 2018 US Initial Jobless claims 211.00

May 10, 2018 US Consumer price index (mom) (0.10) 0.30

More Events on Pg7

Domestic Indices Chg (%) (Pts) (Close)

BSE Sensex (0.5) (188) 34,915

Nifty (0.6) (61) 10,618

Mid Cap (0.4) (58) 16,561

Small Cap (0.2) (45) 17,991

Bankex (0.1) (16) 28,663

Global Indices Chg (%) (Pts) (Close)

Dow Jones 1.4 332 24,263

Nasdaq 1.7 121 7,210

FTSE 0.4 31 7,533

Nikkei (0.2) (35) 22,473

Hang Seng (1.3) (387) 29,927

Shanghai Com (0.3) (10) 3,091

Advances / Declines BSE NSE

Advances 1,082 697

Declines 1,638 1,101

Unchanged 122 86

Volumes (` Cr)

BSE 2,924

NSE 29,431

Net Inflows (` Cr) Net Mtd Ytd

FII (90) (436) 6,961

*MFs 359 359 46,112

Top Gainers Price (`) Chg (%)

PCJEWELLER 175 43.7

JUSTDIAL 436 14.2

RTNPOWER 5 9.4

BOMDYEING 300 5.5

HCC 18 5.1

Top Losers Price (`) Chg (%)

HEXAWARE 387 -14.2

JSWENERGY 75 -7.7

CASTROLIND 185 -5.4

AJANTPHARM 1198 -5.4

TATAELXSI 1161 -5.1

As on May 04, 2018

http://www.bseindia.com/stock-share-price/ilfs-transportation-networks-ltd/ilfstrans/533177/

2


Market Outlook

May 07, 2018


News Analysis


The central bank’s foreign exchange reserves dipped by $3.22 billion in the week

to 27 April, after having fallen by $2.5 billion in the week before, according to

the RBI data. This is the sharpest fall in forex reserves since the week ended

October 7, 2016, when the reserves had dipped by $4.3 billion. Most of the dip is

to check the rupee’s rapid slide.

The central bank has also tried to soothe the frayed nerves of bond dealers by

announcing a secondary market bond purchase of Rs 100 billion. This, coupled

with the recent measures taken to allow foreign investors to pick up any security

they want without any maturity restriction, should help boost bond market

sentiment by adding liquidity. Rising crude oil prices, twin deficits of the country

and rising yields in developed countries are also exerting pressure on local yields.

On the last trading day, primary dealers, or underwriters of government bond

auctions, had to buy Rs 17.45 billion of a bond maturing in two years, against the

Rs 20 billion on offer.

Economic and Political News


Sugar cess divides state governments at GST Council meeting

GST Council okays single return a month

PFRDA raises NPS equity investment cap to 75% for private sector subscribers

India requests $4 bn assistance from ADB to expand sovereign operations

Corporate News

$2.7bn shaved off PC Jeweller m-cap after promoter gifts shares to family

Dalmia Bharat moves NCLAT against NCLT direction

Another company moves Delhi HC against RBI circular on virtual currencies

DoT takes a call to cut levies as telcos bleed

3


Market Outlook

May 07, 2018


Quarterly Bloomberg Brokers Consensus Estimate

ICICI Bank Ltd – May 07, 2018

Particulars ( ` cr) 4QFY18E 4QFY17 y-o-y (%) 3QFY18 q-o-q (%)

PAT 1061 2025 (47.6) 1650 (35.7)

Exide Industries Ltd – May 07, 2018


Sales 2438 2225 9.6 2277 7.1

EBIDTA 319 262 21.8 283 12.7

% 13.1 11.8 12.4

PAT 185 165 12.1 154 20.1

Tata Chemical Ltd – May 07, 2018


Sales 2959 2919 1.4 2574 15.0

EBIDTA 570 488 16.8 563 1.2

% 19.3 16.7 21.9

PAT 277 343 (19.2) 832 (66.7)

4


Market Outlook

May 07, 2018


Top Picks

Company Market Cap

(` Cr)

CMP

(`) Target

(`) Upside

(%) Rationale

Alkem Laboratories 23,828 1,993 2,441 22.5

Strong growth in domestic business due to its

leadership in acute therapeutic segment. Alkem

expects to launch more products in USA, which

bodes for its international business.

Blue Star 7,651 797 867 8.8

Favorable outlook for the AC industry to augur well

for Cooling products business which is out pacing

the market growth. EMPPAC division's profitability

to improve once operating environment turns

around.

Dewan Housing Finance 19,687 628 720 14.7

With a focus on the low and medium income (LMI)

consumer segment, the company has increased its

presence in tier-II & III cities where the growth

opportunity is immense.

ICICI Bank 181,868 283 416 47.0

Well capitalized with CAR of 18.1% which gives

sufficient room to grow asset base. Faster resolution

of NPA would reduce provision cost, which would

help to report better ROE.

KEI Industries 3,335 426 485 13.9

High order book execution in EPC segment, rising

B2C sales and higher exports to boost the revenues

and profitability

Music Broadcast Limited 2,111 370 475 28.4

Expected to benefit from the lower capex

requirement and 15 year long radio broadcast

licensing.

Navkar Corporation 2,509 167 265 59.0

Massive capacity expansion along with rail

advantage at ICD as well CFS augur well for the

company

Siyaram Silk Mills 3,050 651 851 30.8

Strong brands and distribution network would boost

growth going ahead. Stock currently trades at an

inexpensive valuation.

TV Today Network 2,666 447 603 34.9

Market leadership in Hindi news genre and no. 2

viewership ranking in English news genre, exit from

the radio business, and anticipated growth in ad

spends by corporate to benefit the stock.

Maruti 262,177 8,679 10,619 22.4

After GST, the company is expected to see higher

volumes along with improving product mix. The

Gujarat plant will also enable higher operating

leverage which will be margin accretive.

GIC Housing 2,265 421 655 55.7

We expect loan book to grow at 24.3% over next

two year; change in borrowing mix will help in NIM

improvement

Century Plyboards 6,815 307 400 30.4

We expect CPIL to report net Revenue/PAT CAGR of

~17%/16% over FY2017-20E mainly due to

healthy growth in plywood & lamination business,

forayed into MDF & Particle boards on back of

strong brand & distribution network.

LT Foods 2,845 89 128 43.9

We expect sales/PAT to grow at 13.5%/20% over

next two years on the back of strong distribution

network & addition of new products in portfolio.

Safari Industries 1,351 607 750 23.5

Third largest brand play in luggage segment

Increased product offerings and improving

distribution network is leading to strong growth in

business. Likely to post robust growth for next 3-4

years

HSIL Ltd 2,762 382 510 33.5

We expect HSIL to report PAT CAGR of ~15% over

FY2017-20E owing to better improvement in

operating margin due price hike in container glass

segment, turnaround in consumer business.

Source: Company, Angel Research

5


Market Outlook

May 07, 2018


Top Picks

Company Market Cap

(` Cr)

CMP

(`) Target

(`) Upside

(%) Rationale

Aditya Birla Capital 34,964 159 218 37.1

We expect financialisation of savings and

increasing penetration in Insurance & Mutual fund

would ensure steady growth.

Parag Milk Foods 2,531 301 333 10.6

One of the leading Indian dairy products

companies in India created strong brands in dairy

products. Rising revenue share of high-margin

Value Added Products and reduction in interest cost

is likely to boost margins and earnings in next few

years.

Matrimony.com Ltd 1,930 850 984 15.8

We expect MCL to report net revenue CAGR of

~15% to ~`450cr over FY2018-20E mainly due to

strong growth in online matchmaking & marriage

related services. On the bottom-line front, we

expect a CAGR of ~28% to `82cr over the same

period on the back margin improvement.

HDFC Bank 5,15,032 1,983 2,315 16.7

HDFC Bank maintained its steady growth in the

4QFY18. The bank’s net profit grew by 20.3%.

Steady growth in interest income and other income

aided PAT growth. The Strong liability franchise

and healthy capitalisation provides strong earning

visibility. At the current market price, the bank is

trading at 3.2x FY20E ABV.


6


Market Outlook

May 07, 2018


Fundamental Call

Company Market Cap

(` Cr)

CMP

(`) Target

(`) Upside

(%) Rationale

CCL Products 4,117 310 360 16.3

CCL is likely to maintain the strong growth trajectory

over FY18-20 backed by capacity expansion and

new geographical foray

Nilkamal 2,496 1,673 2,178 30.2

We forecast Nilkamal to report top-line CAGR of

~9% to `2,635cr over FY17-20E on the back of

healthy demand growth in plastic division. On the

bottom-line front, we estimate ~10% CAGR to

`162cr owing to improvement in volumes.

Prism Cement 5,969 119 160 34.5

The prism has diversified exposure in the different

segment such as Cement, Tile & ready mix concrete.

Thus we believe, PCL is in the right place to capture

ongoing government spending on affordable

housing and infrastructure projects.

Elantas Beck India Ltd 1,765 2,227 2,500 12.3

Elantas Beck India is the Indian market leader in

liquid insulation segment used in electrical

equipments like motors, transformers etc. It derives

demand from several industries which are expected

to register 10%+ CAGR in demand in the coming

years.

Greenply Industries 3,783 309 395 28.0

Greenply Industries Ltd (GIL) manufactures plywood

& allied products and medium density fibreboards

(MDF). GIL to report net revenue CAGR of ~14% to

~`2,478cr over FY2017-20E mainly due to healthy

growth in plywood & lamination business on the

back of strong brand and distribution network

GMM Pfaudler Ltd 1,133 775 861 11.1

GMM Pfaudler Limited (GMM) is the Indian market

leader in glass-lined (GL) steel equipment. GMM is

expected to cross CAGR 15%+ in revenue over the

next few years mainly led by uptick in demand from

user industries and it is also expecting to increase its

share of non-GL business to 50% by 2020.

L&T Finance Holding 35,173 176 210 16.2

L&T Fin’s new management is on track to achieve

ROE of 18% by 2020 and recent capital infusion of

`3000cr would support advance growth.

2


Market Outlook

May 07, 2018


Key Upcoming Events

Result Calendar

Date Company

May 07, 2018 Tata Chemicals, Exide Industries, ICICI Bank, Vijaya Bank, Visaka Industries

May 08, 2018 Automotive Axle, ABB, Godrej Consumer, Vesuvius India, Aventis

Source: Bloomberg, Angel Research

Global economic events release calendar

Date Time Country Event Description Unit Period

Bloomberg Data

Last Reported Estimated

May 08, 2018 6:00 PM US Unnemployment rate % Apr 4.10 4.00

May 09, 2018

US Producer Price Index (mom) % Change Apr 0.20

May 10, 2018 2:00 PM UK Industrial Production (YoY) % Change Mar 2.20 3.10

6:00 PM US Initial Jobless claims Thousands May 5 211.00

6:00 PM US Consumer price index (mom) % Change Apr (0.10) 0.30

7:00 AM China Consumer Price Index (YoY) % Change Apr 2.10 1.90

4:30 PM UK BOE Announces rates % Ratio May 10 0.50 0.50

May 11, 2018 5:30 PM India Industrial Production YoY % Change Mar 7.10

May 14, 2018 12:00 PM India Monthly Wholesale Prices YoY% % Change Apr 2.47

May 15, 2018 2:30 PM Euro Zone Euro-Zone GDP s.a. (QoQ) % Change 1Q P 0.40

2:00 PM UK Jobless claims change % Change Apr 11.60

7:30 AM China Industrial Production (YoY) % Change Apr 6.00 6.40

India Imports YoY% % Change Apr 7.15

India Exports YoY% % Change Apr (0.66)

2:30 PM Euro Zone Euro-Zone CPI (YoY) % Apr F 1.20


3


Market Outlook

May 07, 2018


Macro watch

Exhibit 1: Quarterly GDP trends

Source: CSO, Angel Research

Exhibit 2: IIP trends

Source: MOSPI, Angel Research

Exhibit 3: Monthly CPI inflation trends

Source: MOSPI, Angel Research

Exhibit 4: Manufacturing and services PMI

Source: Market, Angel Research; Note: Level above 50 indicates expansion

Exhibit 5: Exports and imports growth trends


Exhibit 6: Key policy rates

Source: RBI, Angel Research

7.3 7.6

8.0

7.2

9.1

8.1

7.6

6.8

6.1

5.7

6.5

7.2

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

(%)

3.2 2.9

(0.3)

1.0

4.8

4.1

1.8

8.5

7.1 7.4

7.1

(1.0)

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

(%)

3.0

2.2

1.5

2.4

3.3 3.3

3.6

4.9

5.2 5.1

4.4 4.3

-

1.0

2.0

3.0

4.0

5.0

6.0

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

(%)

40.0

42.0

44.0

46.0

48.0

50.0

52.0

54.0

56.0 M

ar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Apr-18

Mfg. PMI Services PMI

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Exports yoy growth Imports yoy growth(%)

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

Jun-17

Jun-17

Jul-17

Aug-17

Aug-17

Sep-17

Oct-17

Nov-17

Nov-17

Dec-17

Jan-18

Jan-18

Feb-18

Mar-18

Mar-18

Repo rate Reverse Repo rate CRR (%)

4


Market Outlook

May 07, 2018


Global watch

Exhibit 1: Latest quarterly GDP Growth (%, yoy) across select developing and developed countries


Exhibit 2: 2017 GDP Growth projection by IMF (%, yoy) across select developing and developed countries

Source: IMF, Angel Research

Exhibit 3: One year forward P-E ratio across select developing and developed countries

Source: IMF, Angel Research as on 04 May, 2018

0.3

2.5

5.3

6.9

1.1

5.0

5.8

3.7

1.5

2.2

0.8

1.8

1.4

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Bra

zil

Russia

Ind

ia

Ch

ina

South

Africa

Ind

onesia

Ma

laysia

Tha

ilan

d

UK

USA

Germ

any

France

Ja

pa

n

(%)

0.7

1.8

6.7 6.8

0.7

5.2 5.4

3.7

1.7

2.2 2.0

1.6 1.5

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Brazil

Russia

India

China

South A

frica

Indonesia

Malaysia

Thailand

UK

USA

Germ

any

France

Japan

(%)

12

.4

6.1

19

.0

12

.2

15

.7

15

.2

15

.6

15

.8

12

.8

15

.5

13

.3

14

.6

14

.0

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Brazil

Russia

India

China

South

Africa

Indonesia

Malaysia

Thailand

UK

USA

Germ

any

France

Japan

(x)

5


Market Outlook

May 07, 2018


Exhibit 4: Relative performance of indices across globe

Returns (%)

Country Name of index Closing price 1M 3M 1YR

Brazil Bovespa 83,118 (1.8) (1.6) 28.5

Russia Micex 4,502 1.4 7.1 11.4

India Nifty 10,618 3.6 (4.6) 14.0

China Shanghai Composite 3,091 (2.2) (12.8) (1.2)

South Africa Top 40 50,874 4.3 (5.6) 8.4

Mexico Mexbol 46,992 0.7 (7.2) (4.1)

Indonesia LQ45 920 (9.6) (16.8) (0.4)

Malaysia KLCI 1,842 (0.5) (1.4) 4.3

Thailand SET 50 1,176 1.0 (1.7) 18.4

USA Dow Jones 24,263 (0.0) (7.3) 15.5

UK FTSE 7,567 7.6 1.0 3.1

Japan Nikkei 22,473 4.7 (4.9) 19.1

Germany DAX 12,820 6.8 (2.8) 0.8

France CAC 5,516 7.1 0.6 2.1

Source: Bloomberg, Angel Research as on 04 May, 2018 68in4

6


Market Outlook

May 07, 2018


Exhibit 7: Historical Angel Top Picks/Fundamental Calls

Date Added Top Picks/Fundamental Stocks Current Status

02-05-2018 Top Picks HDFC Bank Open

20-04-2018 Top Picks Matrimony.com Ltd Open

16-04-2018 Top Picks Parag Milk Foods Limited Open

06-04-2018 Fundamental GMM Pfaudler Limited Open

07-03-2018 Fundamental Ashok Leyland Ltd Closed (26/04/2018)

03-03-2018 Fundamental Greenply Industries Open

21-02-2018 Top Picks Safari Industries Open

16-02-2018 Top Picks HSIL Ltd Open

07-02-2018 Fundamental Elantas Beck India Ltd. Open

01-02-2018 Top Picks ICICI Bank Open

01-02-2018 Top Picks Aditya Birla Capital Open

04-01-2018 Fundamental CCL Products Open

03-01-2018 Fundamental Nilkamal Ltd Open

01-01-2018 Fundamental Capital First Ltd Closed (15/01/2018)

30-12-2017 Fundamental Shreyans Industries Ltd Closed

21-12-2017 Fundamental Prism Cement Ltd Open

18-12-2017 Fundamental Menon Bearings Limited Closed (17/01/2018)

14-12-2017 Top Picks Ruchira Papers Ltd. Closed (09/02/2018)

28-11-2017 Top Picks Century Plyboards India Open

06-11-2017 Top Picks LT Foods Open

16-10-2017 Fundamental Endurance Technologies Ltd Closed (01/12/2017)

11-Sep-17 Top Picks GIC Housing Open

20-07-2017 Top Picks Music Broadcast Limited Open

07-07-2017 Fundamental L&T Finance Holdings Ltd Closed (28/8/2017)

06-07-2017 Fundamental Syngene International Closed (1/3/2018)

05-07-2017 Top Picks Maruti Open

03-01-2017 Top Picks Alkem Lab Open

30-12-2016 Top Picks KEI Industries Open

04-08-2016 Top Picks TV Today Network Open

05-04-2016 Top Picks DHFL Open

05-01-2016 Top Picks Navkar Corporation Open

08-12-2015 Top Picks Blue Star Open

06-11-2015 Top Picks Siyaram Silk Mills Open


7


Market Outlook

May 07, 2018


Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

DISCLAIMER

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a registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number

INH000000164. Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing

/dealing in securities Market. Angel or its associates/analyst has not received any compensation / managed or co-managed public

offering of securities of the company covered by Analyst during the past twelve months.

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should

make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the

companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine

the merits and risks of such an investment.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

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Market Outlook - web.angelbackoffice.comweb.angelbackoffice.com/Research_ContentManagement/pdf_report/M… · Market Outlook May 07, 2018 Market Cues Indian markets are likely to