CONTENT. September Fundamentals I Technical I Derivatives

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1 Fundamentals I Technical I Derivatives September 2017 CONTENT 03 Monthly Wrap-up 04 Dividend Yield Stocks 05 Technical Monthly Outlook 06 Technical - Stock Recommendation 07 Derivatives Monthly Report

2 Team Members Hitesh Agrawal Ajay Pasari, CFA Ajit Mishra Archana Gude Manoj M Vayalar Mehernosh Panthaki Siji A Philip Suhanee Shome hitesh.agrawal@religare.com ajay.pasari@religare.com ajit.mishra@religare.com archana.gude@religare.com manoj.vayalar@religare.com mehernosh.panthaki@religare.com siji.philip@religare.com suhanee.shome@religare.com Dear Investor, The month of August saw the Indian stockmarket come under some pressure, weighed down by domestic as well as global concerns. The Nifty and the Sensex corrected by 1.6% and 2.4% respectively, primarily led by sharp fall in Banking, Pharma and IT stocks. The broader market indices outperformed the benchmark indices with the BSE Mid-cap gaining 1%, while the BSE Small-cap index loss was restricted at 0.6%. Sectorally, the Pharma index was a major laggard, down 7.4%, as weak Q1FY18 results of major pharmaceutical companies and the government s initiative to make essential drugs more affordable, dampened investor sentiments towards the sector. The loss in IT index (3.6%) can primarily be attributed to the near 10% fall in Infosys in August. On the contrary, the Metal, Consumer Durables and Oil & Gas indices rallied ~7%. On the institutional activity front, Domestic mutual funds continued to support Indian equities by investing an additional ~Rs 17,900crs, however, the FIIs opted to take some profits off the table, as they were net sellers to the tune of Rs 12,600crs last month, the highest post vember 2016 (demonetization month). On the macro front, the data points were not encouraging, as the CPI Inflation jumped to 2.36% in July on a yearly basis, after easing for three straight months. The WPI inflation too rose sharply to 1.88%. The strength in CPI and WPI inflation trajectory is likely to continue in coming months, as festive demand starts to creep in. This reduces the scope for the RBI for further rate cut in its next monetary policy. The GDP growth for the April-June quarter too slowed down to 3-year low at 5.7%. The impact of the transition to a new tax regime (GST) led to de-stocking of inventories in June, adversely affecting the economic growth for the quarter. Also, SEBI s disclosure of suspected 331 listed firms as shell companies spooked the market last month, which led to a sharp sell-off in many stocks, as investors were wary of the possibility of a further crackdown of similar nature and became risk-averse. Furthermore, on company specific front, Mr. Vishal Sikka s resignation as MD & CEO of Infosys, added further woes not just for the company and the sector, but impacted overall market sentiments. On the global front, war of words between the USA and rth Korea aggravated the geopolitical strain. However, back home, the diffusion of tension between Indian and China after a 2-month standoff at Doklam, was a welcome respite for investors. Q1FY18 corporate earnings tepid performance can mainly be attributed to de-stocking in major sectors before the GST roll-out. However, going forward, we expect sustainable recovery in earnings from H2FY18, which is also important from market standpoint considering that the market valuation is at premium from the near-term perspective. Moreover, while nothing much changes for the medium-to-long-term India growth story, in the short-term, geopolitical concerns and corporate earnings recovery, along with the Government s reform agendas, will decide the course of the Indian stockmarket. We maintain our positive outlook on Indian equities and continue to advocate taking advantage of any correction in the market. Hitesh Agrawal EVP & Head Retail Research Religare Securities Limited 2

3 FUNDAMENTAL MONTHLY WRAP-UP Indian Indices BSE Sectoral Indices % Change Close 1 Month 1 Year BSE Metal 13, BSE Cons Durable 17, BSE Cap Goods 17, BSE FMCG Sector 10, BSE Healthcare 13, BSE IT Sector 10, BSE PSU 8, BSE Teck 5, BSE Auto 23, BANKEX 27, BSE Oil&Gas 15, BSE Power 2, BSE Realty Index 2, Close price as on August 31, 2017 FIIs Investments In Indian Equities Net Investment (` Crore) % Change Close 1 Month 1 Year SENSEX 31, CNX NIFTY 9, BSE MIDCAP 15, BSE SMLCAP 16, NIFTY BANK 24, Month Jan ,919 (11,129) (1,000) Feb 1,404 11,476 (7,988) 10,485 Mar 20,077 12,078 23,621 33,780 Apr 9,602 11,721 3,655 (2,200) May 14,006 (1,895) 2,579 10,850 Jun 13,991 (5,480) 5,175 4,000 Nifty PE Movement Market Overview The month of August saw the Indian stockmarket come under some pressure, weighed down by domestic as well as global concerns. The Nifty and the Sensex corrected by 1.6% and 2.4% respectively, primarily led by sharp fall in Banking, Pharma and IT stocks. The broader market indices outperformed the benchmark indices with the BSE Mid-cap gaining 1%, while the BSE Small-cap index loss was restricted at 0.6%. Sectorally, the Pharma index was a major laggard, down 7.4%, as weak Q1FY18 results of major pharmaceutical companies and the government s initiative to make essential drugs more affordable, dampened investor sentiments towards the sector. The loss in IT index (3.6%) can primarily be attributed to the near 10% fall in Infosys in August. On the contrary, the Metal, Consumer Durables and Oil & Gas indices rallied ~7%. Market Outlook Q1FY18 corporate earnings tepid performance can mainly be attributed to de-stocking in major sectors before the GST roll-out. However, going forward, we expect sustainable recovery in earnings from H2FY18, which is also important from market standpoint considering that the market valuation is at premium from the near-term perspective. Moreover, while nothing much changes for the medium-to-long-term India growth story, in the short-term, geopolitical concerns and corporate earnings recovery, along with the Government s reform agendas, will decide the course of the Indian stockmarket. We maintain our positive outlook on Indian equities and continue to advocate taking advantage of any correction in the market. Net Investment (` Crore) Month July 13,124 2,593 11,130 1,882 Aug 5,430 (17,249) 9,800 (16000) Sept 5,103 (5,696) 9,330 Oct (1,172) 4,204 (3,500) v 13,753 (7,629) (17,400) Dec (11,325) Nifty Dividend Yield Chart 3

4 Dividend Yield Stocks Dividend yield is one of the main factors to consider when investing in dividend-paying stocks. It is an indicator of the return that the investors are earning on their shares. In this list we have selected 13 stocks based on their financial performance. Investors interested in dividend income may consider the stocks in this list. Company Name Industry Financial Year End Mcap (Rs cr.) Equity (Rs cr.) Price August 31, 2017 Face Value Book Value EPS P/E (x) Div. / Share [FY17] Div. / Share [FY16] Div. / Share [FY15] Div. Yield (%) Hind.Zinc Mineral , Coal India Mineral ,364 6, NHPC Ltd Power ,803 10, Rural Elec.Corp. Power ,287 1, Oil India Oil&Gas , Natl. Aluminium Mineral , Power Fin.Corpn. Power ,235 2, NMDC Mineral , Akzo bel Paint , , MphasiS IT , Greaves Cotton Capital , Indiabulls Hous. NBFC , , Sonata Software IT , Source - Capitaline 4

5 TECHNICAL MONTHLY OUTLOOK The Month That Was:- Nifty lost points in the month of August, Outlook for Nifty 50 ( ) Support 9820/9700/9630 Resistance 10000/10150/10400 Below is a summary of Top Nifty Gainers & Losers: Top Nifty Gainers August 2017 Scrip Name Close Price* (`) % Change IOC TATASTEEL BPCL TECHM VEDL Top Nifty Losers for August 2017 Scrip Name Close Price* (`) % Change BANKBARODA TATAMTRDVR TATAMOTORS DRREDDY SBIN *Closing of last trading day of the month Breadth of Nifty stocks was negative 29 stocks closed in red while 22 stocks closed in green in the month of August, Relative comparison shows Consumer Durables, Oil and Gas and Metal index were the outperformers whereas Health Care, IT and Capital Goods were the underperformers in August, Sector Relative Performance * All the sectors have been compared with Nifty & the zero line represent Nifty. The movement of the sector vis -a-vis Nifty whether they outperform or underperform is shown in the above chart. It shows which sectors have attracted inflows and also the sectors from where money has exited. Nifty consolidated in a narrow range in the passing month after making a new record high at It settled marginally lower as participants preferred to book some profit, citing mixed local cues and lingering geo-political issues. It plunged sharply in the second week and breached 9700 but recovery in select index majors capped downside in the following weeks. It finally settled above We ve hardly seen any major correction since January, 2017 despite overbought condition. Undoubtedly, it s a bullish scenario but we re now seeing early sign of exhaustion on charts. At present, markets are witnessing time-wise correction but indication of profit taking is high now in September month. Having said that, the overall trend is still bullish and investors should use this phase to buy fundamentally sound counters on dips with medium to long term investment horizon. Private banks, auto and NBFCs are showing resilience and likely to maintain their outperformance ahead also while IT and PSU banking counters may remain under pressure. *Close price as on September 4,

6 TECHNICAL Outlook for Bank Nifty ( ) Support 24050/23800/23500 Resistance 24500/24750/25100 BankNifty also settled lower in line with the benchmark index in August, after trading in a broader range. Mainly, sharp fall in the PSU banking pack pulled the index lower while the private banking counters hovered in a range. We expect the present scenario to continue in September month as well. Traders should prefer only private banks for long trades while any bounce in PSU banking pack should be used to exit long trades, if any. Among the private banking space, mostly counters are holding strong but for fresh buying, RBL bank and KTK Bank can be considered. Stock Recommendations For September BERGEPAINT CMP ` * Stop Loss ` 230 Target ` 270 Buy Range ` ESCORTS CMP ` * Stop Loss ` 620 Target ` 710 Buy Range ` Berger Paints has been a consistent performer and garnered exceptionally returns for the investors. After a strong upside move from 173 to 261 levels, it has been hovering in a range between levels near its record high for almost past four months. It is currently trading around the upper band of that range and likely to witness breakout from the same in near future. Considering all, we suggest traders to initiate long position in the range with closing stop loss of 230 for the target of 270. After hitting a record high, ESCORTS has witnessed a marginal correction from its top and retraced to the support area of long term moving averages of 200 day EMA on daily chart. It is again rebounding from that zone and formed a fresh buying pivot as well. All indications are in the favor of fresh surge in near future. We advise traders to use this phase to accumulate fresh longs in the given range. *Close price as on September 4,

7 DERIVATIVES DERIVATIVES MONTHLY ROLLOVER REPORT August Expiry Derivatives Summary Sector Rollover (%) On August expiry day, Nifty Index closed at around 9917 after no Volume Weighted Average Price (VWAP) based activity was witnessed throughout the day. The Nifty futures long rollcost (difference between current and next month futures) was at around 29bps vs 34bps. Nifty futures September contract started with around 1.58Cr vs 1.65Cr Open Interest. BankNifty futures have seen an Open Interest at around 16.38lkh vs lkh last series. On expiry, VIX was at around 11.8% levels implying a swing of around 340 points in the Nifty for the next 30 days. The Nifty options highest Open Interest is at 9700 PE and CE. Nifty 9700 put Open Interest stands at around 39lkh and call Open Interest at around 34lkh. September Series Outlook Rollover Synopsis In August series, and are the sectors where highest rollover was witnessed, whereas Textile and Capital each are the sectors where lower rollovers were witnessed. Nifty futures have rolled around 58% vs 68% with respect to last month, and the Open Interest for the new September contract is lower by around 7lkh implying cautious outlook or profit booking at levels. BankNifty futures have rolled at around 68% vs 76% compared to last month. However the Open Interest of BankNifty futures in this September series is also less by around 8lkh, implying long unwinding. The range for Nifty might be and BankNifty between FIIs have sold around Rs Cr in cash market (expiry to expiry) in August. With Nifty futures starting September series with lesser Open Interest as of expiry and Vix inching towards 12% levels, we expect Nifty to witness some range bound movement in the short term. The September weighted average price for Nifty and BankNifty futures are at 9910 and respectively. These might act as the pivot for indices for the month of September. Vix is currently at 11.5% and is likely to be in 10.5% to 14% for the major part of September. We advocate doing BankNifty Bull call spread through options. Buy BankNifty 28 Sep and Sell BankNifty Sep net Stop Loss at 120, Target of 310. Sector-wise banking might be stable, however Automobile and Cement as a sector might outperform for September series. Since we expect the Nifty in the September series to be in a range of 9800 to 10100, buying Nifty Sep put option to hedge all stock futures positions are recommended. 7

8 DERIVATIVES NIFTY September Series Option Data TOP 5 PRICE GAINERS Expiry-to-Expiry TOP 5 PRICE LOSERS Expiry-to-Expiry STOCK NAME % Change PCJEWELLER HINDPETRO L&TFH IOC RELCAPITAL STOCK NAME % Change HDIL ICIL DRREDDY SUZLON INDIACEM TOP 5 STRONG ROLLOVERS STOCK NAME % Rollover MANAPPURAM 94 JSWENERGY 93 IBREALEST 93 CENTURYTEX 93 RELINFRA 92 TOP 5 WEAK ROLLOVERS STOCK NAME % Rollover INFRATEL 56 JUSTDIAL 59 NTPC 60 ARVIND 62 RBLBANK 64 8

9 Before you use this research report, please ensure to go through the disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 and Research Disclaimer at the following link: Specific analyst(s) specific disclosure(s) inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 is/are as under: Statements on ownership and material conflicts of interest, compensation Research Analyst (RA) [Please note that only in case of multiple RAs, if in the event answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) below, are given separately] S.. Statement Answer Tick appropriate I/we or any of my/our relative has any financial interest in the subject company? [If answer is yes, nature of Interest is given below this table] I/we or any of my/our relatives, have actual/beneficial ownership of one per cent. or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance? I / we or any of my/our relative, has any other material conflict of interest at the time of publication of the research report or at the time of public appearance? I/we have received any compensation from the subject company in the past twelve months? I/we have managed or co-managed public offering of securities for the subject company in the past twelve months? I/we have received any compensation for brokerage services from the subject company in the past twelve months? I/we have received any compensation for products or services other than brokerage services from the subject company in the past twelve months? I/we have received any compensation or other benefits from the subject company or third party in connection with the research report? I/we have served as an officer, director or employee of the subject company? I/we have been engaged in market making activity for the subject company? Nature of Interest ( if answer to F (a) above is Yes :... Name(s) with Signature(s) of RA(s). Yes [Please note that only in case of multiple RAs and if the answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) above, are given below] SS... Name (s) of RA. Signtures of RA Serial Question of question which the signing RA needs to make a separate declaration / answer Yes. Copyright in this document vests exclusively with RSL. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose, without prior written permission from RSL. We do not guarantee the integrity of any s or attached files and are not responsible for any changes made to them by any other person. 9

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