MARCH 2015 / Vol. XVIII / Issue 3 MARKET REVIEW

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Cecil Bryan Porter
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1 MARCH 2015 / Vol. XVIII / Issue 3 MARKET REVIEW Nifty remained volatile in the eventful month of February as it was marked by events like Delhi elections where the AAP party came out with a stunning majority, followed by the Union and Railway Budget for Key developments in the month were, Wholesale inflation decelerated for the 8th consecutive month this fiscal as it contracted by 0.4% in January. The month witnessed negative growth owing to the steep decline in fuel and power inflation, while food prices are increasing. The rate of inflation based on the consumer price index, however, rose 5.11% in January 2015 compared with a 4.28% gain in December Meanwhile, growth in industrial production decelerated to 1.7% in December 2014 from 3.9% in November Within the IIP, mining contracted 3.2% in December, against 2.6% in the corresponding month last year, while the manufacturing segment, rose 2.1%, compared with a fall of 1.1% in December Electricity generation increased 4.8%, against 7.5% in the year-ago period. The biggest drag on manufacturing was consumer durables. India s trade deficit narrowed to an 11-month low of $8.3 billion in January 2015 due to contraction in imports, helped by declining global oil prices. Trade deficit in the April-January period of this fiscal stood at $118 billion. Exports sharply contracted 11.19% in January to $23.8 billion, while imports declined 11.39% to $32.2 billion. Rising from 52.9 to 53.3, the headline HSBC India Composite PMI Output Index signalled further growth of private sector output in January, extending the current sequence of expansion to nine months. Manufacturing output continued to rise faster than service sector activity, as despite falling from December's 2-year record of 54.5 to 52.9, the headline HSBC India Purchasing Managers' Index remained consistent with a solid improvement in business conditions. International rating agency, Standard & Poor's sharply revised upwards country's GDP growth forecast to 7.9% in FY16, up from its previous estimate of 6.2%, and up further to 8.2% in FY17 as against 6.6% estimated previously, terming India as the "bright spot" in Asia Pacific. Indian metal and cement companies bid aggressively for the coal blocks, increasing the funds available to state governments. In its monetary policy review, RBI maintained its status-quo on repo rate, albeit reduced the SLR by 50 basis points. Economic data remained mixed as WPI decrease raised hopes of rate cut in near future, but on the other hand contraction in IIP growth indicated at weak industrial demand. FII ownership for the quarter ending December 2014 reached 23.4% for the BSE 500 stocks, representing an all-time high ownership of the FIIs, indicating at higher expectations that the government will accelerate reforms and also increased liquidity being poured in the markets. Meanwhile, a standoff between Greece and its European creditors on Greece's bailout program jerked global markets a little. However, the tensions eased after Greece reached a deal with creditors, they approved a list of economic reforms drafted by the country's new government, allowing for a four-month extension of its financial lifeline. On the other hand, Japan s Nikkei was at 8- year high as the country appears to be recovering off recession. US indices too climbed to record territory as Federal Reserve Chair Janet Yellen stuck to her previous language of being datadependent for timing and pace of raising interest rates. India Inc s Q3FY15 results, on a broader level disappointed investors and the key concern of lower earnings continues to bother. For the Sensex companies, the reported net profit has declined 6.5%, on a y-o-y basis, weakest in six quarters, on a 2.2% decline in sales. Among the sectoral indices, IT index gained most by 6.6%, followed by the Metal and MNC index which gained 4.1% and 3.2% respectively. Realty, Pharma, FMCG indices registered marginal gains whereas Auto and Bank indices lost marginally. Energy and Consumption indices lost 2.8% and 2.5% respectively. Market Outlook India is now the fastest growing economy within the BRIC nations and has also exited the club of Fragile Five. US displayed a moderate growth in the last quarter, whereas China now depends on monetary measures to push the economy. China's trade performance slumped in January, with exports falling 3.3% from year-ago levels while imports tumbled 19.9%, increasing concerns about the slowdown in the nation. The People's Bank of China cut its reserve-requirement ratio for banks by 0.5%, in a bid to boost lending to businesses and bolster the economy. The final composite purchasing managers index for the Eurozone rose to a six-month high in January, coming in at 52.6, compared to 51.4 in December. The European Commission s economic sentiment indicator rose by 0.7 points to Japan s exports posted their biggest jump in over a year in January while imports shrank, as the yen s sharp fall helped the country deal with a weak domestic economy. Exports grew 17% from a year ago, whereas imports decreased 9%. Japan's economy rebounded from recession in the final quarter of last year though the growth was weaker than expected. The annualised 2.2% expansion in October-December suggested a recovery after two straight quarters of contraction.

2 In US, the consumer-price index fell a seasonally adjusted 0.7% in January 2015 from December The core inflation, however inched by 0.2% from last month and 1.6% over a year. A measure of consumer confidence pulled back in February after jumping to a multiyear-high reading in January. The index of consumer confidence dropped to 96.4 in February from a revised in January. The GDP expanded 2.2% in October- December compared to a growth of 5% in July-September. India changed its base for GDP calculations and the new numbers suggest decent growth for the nation. However, global credit rating agency Moody's said that fiscal policies and structural reforms will determine India's sovereign credit profile. The new numbers paint a rosy outlook for India; however, substantial changes on the ground are yet to be seen, as indicated by Q3 results. TECHNICAL VIEW In the eventful month of February, Nifty initially witnessed profit-booking which took it to a low As we had mentioned in our earlier report, Nifty breached all support levels, and fell to lower levels. Thereafter, Nifty remained volatile and closed the month at 8901, its highest monthly close till date. On the monthly chart, Nifty continues to be in a positive trend, and has sustained the uptrend line. The momentum oscillators continue to trade in positive range. However, on weekly charts, the RSI shows a negative divergence. Going ahead, Nifty is likely to face resistance near 9000 level. Nifty might further move towards 9100 if it manages to cross this resistance. It is important now, that Nifty is supported by buying at higher levels. On the other hand, 8750 is a crucial support for Nifty. INVESTMENT IDEAS MEDIUM TERM (3-6 MONTHS) FINOLEX INDUSTRIES LIMITED CMP (AS ON 28 FEBRUARY 2015) 289 TARGET 325 Finolex Industries Limited is India s largest rigid PVC pipes and fittings manufacturer and the second largest PVC resin manufacturer. Headquartered in Pune, the company has manufacturing plants in Pune, Ratnagiri in Maharashtra and Masar, near Vadodara in Gujarat. It is the only PVC pipe manufacturer with its own PVC resin plant which gives it complete control on the quality of pipes, and also cost advantage. Its products find use in agriculture, sanitation and plumbing, which are focus areas of the Government. Declining crude prices resulted in lower demand for Finolex products from the distributors in Q3FY15, as they delayed orders. The company is also focussing on branding, which also led to hgiher expenses in Q3FY15. However, with crude prices stabilizing now, the company is expected to see a renewed demand. Besides, lower excise duty proposed in the union budget, on certain petro products, will be beneficial to the company. M&M FINANCIAL SERVICES LIMITED CMP (AS ON 28 FEBRUARY 2015) 247 TARGET 300 M&M Financial Services Limited operates in the rural non-banking finance industry. It is amongst the top tractor financer in India and primarily engages in the provision of finance for utility vehicles, tractors, and cars. It also provides personal loans. In Q3FY15, M&M Finance reported lower growth in AUM and also a stress on the NPA front was seen as the asset quality deteriorated, leading to a gross NPA ratio of 17%. The NIM declined to 8% due to lower AUM growth and bad loans. However, the proposals in union budget regarding NBFCs to get recourse to SARFAESI Act for recovery of bad loan is a positive for M&M Finance. Though the growth

3 and asset quality concerns remain, M&M Finance is very well placed to reap benefit from the revival in rural demand. Beside this, declining interest rates will make loans cheaper, reducing the NPA problem. The stock is trading at a P/BV multiple of 2.7, comparatively lower than its peers. SENSEX NIFTY 8901 MARCH 2015 CMP (As 28 FEBRUARY 2015) COMPANY ANALYSIS REVIEW TUBE INVESTMENTS OF INDIA LIMITED INDUSTRY METAL PRODUCTS STOCK INFO Mkt. Cap Cr BSE Group A Shareholding Pattern Equity BSE Code Promoters Trading Vol NSE Symbol TUBEINVEST Institutions Week High/Low 389/170 Bloomberg TIIN Public Face Value 2 Reuters TUBE.BO Others The stock was earlier recommended in Sajag - Investing Opportunities: Midcaps in June 2014 report. We continue to maintain our positive view on the stock given its strong management and presence in growth verticals. Tube Investments of India Limited (TIIL) is an engineering company, operating in three segments: cycles and components, engineering and metal formed products. Headquartered in Chennai, TIIL is a wholly owned subsidiary of Murugappa Group. TIIL is the holding company of Murugappa s finance arm Cholamandalam Investment & Finance, and Shanthi Gears. Investment rationale TIIL has 45% market share in its engineering and metal forming segment. Its engineering division supplies precision tubes to automotive companies across globe. The metal formed products division manufactures car door frames, window and guide channels, hydro-formed parts and frames for various types of motor castings. With a revival in passenger car and growth in 2- wheeler sales, TIIL will be able to grow its sales from this segment. It has market presence in power plants, boiler, textile machinery and general engineering. It manufactures and supplies roll formed sections for wagons and coaches apart from subassemblies of sidewalls, end-walls and roof for the railways. In last quarter the company inaugurated its large diameter tubes manufacturing plant which adds tpm to its capacity. The management expects to generate revenue of Rs. 450 crore from this plant by FY17. Its cycles and components division offers TI cycles, including BSA, Hercules, track and trial and Montra. It has large dealer network across India, over 10,000 touch points across India. TIIL also manufactures super premium lifestyle cycles for fitness industry, which is growing at 18%. TIIL is also likely to benefit from make in India campaign because, a larger part of technical products required in setting-up infrastructure, are imported in India. So, a push in infrastructure spending and import substitution will be favourable for TIIL for its metal formed products. The management also is looking at collaborating with a foreign company who wishes to set shop in India for such technical products. Additionally, its subsidiaries Cholamandalam Finance and Shanthi gears are improving performance. The company does not foresee a big capital expenditure now for a few years, indicating at a stable balance-sheet in future. Consolidated Financial Performance (Rs. Cr) Year End Equity Networth Capital Employed Sales Other Income PBIDTA PAT Book Value (Rs) EPS (Rs.) Dividend (%) Payout (%) Quarter-Ended Var. (%) Sales Other Income PBIDT PBT PAT

CMP (As on 28 FEBRUARY 2015) 113 SINTEX INDUSTRIES LIMITED INDUSTRY PLASTICS STOCK INFO Mkt. Cap. 4419.42 Cr BSE Group A Shareholding Pattern Equity 38.90 BSE Code 502742 Promoters 37.72 Trading Vol.

4 CMP (As on 28 FEBRUARY 2015) 113 SINTEX INDUSTRIES LIMITED INDUSTRY PLASTICS STOCK INFO Mkt. Cap Cr BSE Group A Shareholding Pattern Equity BSE Code Promoters Trading Vol NSE Symbol SINTEX Institutions Week High/Low 120/34 Bloomberg SINTIN Public Face Value 1 Reuters SNTX.BO Others The stock was earlier recommended in December 2012 in a company analysis report. The company faced problems thereafter, which affected the stock price. However, now Sintex has resolved issues regarding sourcing of funds and is seeing demand recovery. We maintain a positive view for the company. Sintex is one of the leading providers of plastics and niche textile-related products in India. With global footprints spanning 9 countries, Sintex has a strong presence in the European, American, African, and Asian markets including countries like France, Germany and USA. Sintex Group's prime business comprises of building products, custom mouldings and textile. Investment rationale Prefabricated structures under building products and custom moulding segment, together contribute 67% of total revenues, which are also high margin business (above 20%). Prefabs reported strong sales growth of 26% in Q3FY15. Custom moulding segment grew by 37% in Q3. Monolithic business under building products segment suffers because of lower Government orders. Sintex is likely to benefit from Government s Swacch Bharat mission on its building structures front. Execution in education (class rooms), healthcare and sanitations remain key drivers for Prefabs. Its custom molding segment caters to products used across the spectrum in different sectors such as autos, electrical, aerospace, healthcare and defence among others. The push for Make in India and focus on defence sector will mean increase in outsourcing by the OEMs. Sintex operates in niche textile business and supplies premium yarn. The segment grew by 22% in Q3 with improving margins. It has commissioned a spinning mill which will commence its commercial production of first 1 lakh spindles in September It s EPC and tank businesses remain stable, contributing nearly 10% to its revenues. The stock of Sintex witnessed correction in 2013 owing to its piled debt affecting margins, combined with slowing sales. However, in last few quarters the company has been performing well as it has increased revenue and also reduced its high cost debt. The total debt is now Rs crore at a consolidated level. With efficient working capital management, increasing operating margins as raw material prices remain stable, the management expects Q4 to be better and end FY15 with at-least 25% growth in topline. The 9 month EPS adds up to 10, as also it has been growing in every quarter. Consolidated Financial Performance (Rs. Cr) Year End Equity Networth Capital Employed Sales Other Income PBIDTA PAT Book Value (Rs)* EPS (Rs.)* Dividend (%) Payout (%) Quarter Ended Var. (%) Sales Other Income PBIDT PBT PAT *adjusted for FCCB conversion CMP (As on 28 FEBRUARY 2015) 168 CCL PRODUCTS (INDIA) LIMITED INDUSTRY COFFEE STOCK INFO Mkt. Cap Cr BSE Group B Shareholding Pattern Equity BSE Code Promoters Trading Vol NSE Symbol CCL Institutions Week High/Low 195/41 Bloomberg CCLPIN Public Face Value 2 Reuters CCLP.BO Others 15.85

The stock was earlier recommended in Sajag Online publication in August 2014.

5 The stock was earlier recommended in Sajag Online publication in August We remain in favour of the stock as it increases revenue from new plant along with its export house status and its presence in coffee manufacturing which is a specialized field with entry barriers for new entrants. CCL Products (India) Limited, together with its subsidiaries, manufactures and sells coffee products in India and abroad. It is considered to be among the leading manufacturers, suppliers and exporters of a diverse assortment of instant & soluble coffee. It exports its products to approximately 60 countries worldwide. Investment rationale When other coffee manufacturers were going through tough phase, CCL commissioned its Vietnam plant with MTPA in FY14. This plant has logistical advantage owing to its proximity to coffee growing areas and enjoys tax concessions for more than 10 years. The company has not outlined any big capital expenditure going forward, which will ensure sufficient cashflow to the firm. Besides this, increasing production and realization from Vietnam facility will also enable efficient working capital flow, as the processes become faster due to its favourable location. CCL has forayed into retailing of its brands under Continental. The company also supplies to Indian railways. According to the management, the instant coffee sales in India for FY15 would be 20,000 tonnes and that in FY16 would be 25,000 tonnes. With per capita coffee consumption in India at lower end compared to developed nations, the company has a huge scope in developing economies like India. A major deciding factor for profitability of this company is coffee bean prices. In last few years, the commodity prices have been declining which aided operating margins. However, to insure for price volatility, the company follows pre-sell model which enables it to pass on the price hike to its customers, as it places order for its raw material with suppliers, once the customer confirms order. The company is operating near to 50% capacity, which indicates at further potential to cater to increase in demand. With a low working capital debt, CCL has decreased its finance costs in last few quarters and has improved its return on equity to 20% in FY14. Consolidated Financial Performance (Rs. Cr) Year End Equity Networth Capital Employed Sales Other Income PBIDTA PAT Book Value (Rs)* EPS (Rs.)* Dividend (%) Payout (%) Quarter Ended Var. (%) Sales Other Income PBIDT PBT PAT *adjusted for corporate actions Source: Company, Prowess, Capital line, Sajag Research CORPORATE ACTIONS DURING THE MONTH COMPANY RECORD DATE PURPOSE Coal India 4-Mar % Interim Dividend Power Fin.Corpn. 5-Mar-15 85% Interim Dividend Power Grid Corpn 10-Mar-15 Interim Dividend O N G C 25-Mar-15 Second Interim Dividend GAINERS AND LOSERS OF THE MONTH (from Nifty-50) GAINERS LOSERS COMPANY OPEN CLOSE % COMPANY OPEN CLOSE % Jindal Steel & Power Ltd % Punjab National Bank % H C L Technologies Ltd % Bharat Heavy Electricals Ltd % Coal India Ltd % Bajaj Auto Ltd % Lupin Ltd % D L F Ltd % Hindalco Industries Ltd % Tata Steel Ltd %

6 MUTUAL FUND PERFORMANCE NAV as on 28-FEBRUARY-2015, Return % LIQUID FUNDS NAV 7 DAYS 15 DAYS 30 DAYS 3 MON 6 MON 1 YR ICICI Pru - Savings Fund Reg (G) Birla SL - Cash Mgr Reg (G) ARBITRAGE FUNDS NAV 15 DAYS 30 DAYS 3 MON 6 MON 1 YR ICICI Pru - Equity Arbitrage Fund Reg (G) IDFC - Arbitrage Fund Reg (G) GLOBAL FUNDS NAV 3 MON 6 MON 1 YR 2 YR 3 YR Franklin - India Feeder Franklin US Opp (G) ICICI Pru - US Bluechip Equity Fund Reg (G) BALANCED FUNDS NAV 3 MON 6 MON 1 YR 2 YR 3 YR SBI - M Balanced Fund Reg (G) Tata - Balanced Fund Plan A (G) L&T - India Prudence Fund (G) ICICI Pru - Balanced Reg Plan (G) HDFC - Balanced Fund (G) Birla SL - 95 Fund Reg (G) ICICI Pru - Balanced Advantage Fund Reg (G) TAX PLANS NAV 3 MON 6 MON 1 YR 2 YR 3 YR Axis - Long Term Equity (G) Reliance - Tax Saver (G) Birla SL - Tax Plan Reg (G) SBI - Tax Advantage Fund Sr1 (G) IDFC - Tax Advantage Reg (G) MIDCAP AND SMALL CAP PLANS NAV 3 MON 6 MON 1 YR 2 YR 3 YR Franklin - India Smaller Companies Fund (G) Reliance - Small Cap Fund (G) SBI - Small & Midcap Fund Reg (G) UTI - Mid Cap Fund (G) Can Robeco - Emerging equities Reg (G) DSP BlackRock - Micro Cap Fund Reg (G) SBI - M MidCap Fund Reg (G) MIP NAV 3 MON 6 MON 1 YR 2 YR 3 YR Birla SL - MIP II Wealth 25 Plan Reg (G) ICICI Pru - MIP 25 Reg (G) LARGE AND MIDCAP EQUITY PLANS NAV 3 MON 6 MON 1 YR 2 YR 3 YR Birla SL - India Oppt Fund Reg (G) SBI - Blue Chip Fund Reg (G) Kotak - Select Focus Fund (G) Birla SL - Frontline Equity Fund Reg (G) Birla SL - Top 100 Fund Reg (G) Franklin - India Prima Plus (G) SBI - M Multicap Fund Reg (G) LARGECAP EQUITY PLANS NAV 3 MON 6 MON 1 YR 2 YR 3 YR Reliance - TOP 200 Fund Ret (G) Axis - Equity Fund (G) UTI - Equity Fund (G) ICICI Pru - Focused Bluechip Equity Fund Reg (G) ICICI Pru - Top 100 Fund Reg (G) MULTICAP EQUITY PLANS NAV 3 MON 6 MON 1 YR 2 YR 3 YR Franklin - India High Growth Companies Fund (G) Birla SL - Buy India Reg Fund (G) L&T - India Value Fund (G) Birla SL - India Gen Next Fund Reg (G) Birla SL - Equity Fund Reg (G) SECTORAL PLANS NAV 3 MON 6 MON 1 YR 2 YR 3 YR UTI - Transportation & Logistics (G) Franklin - Build India Fund (G) Birla SL - MNC Fund Reg (G) UTI - MNC Fund (G) Birla SL - Infrastructure Fund Reg (G) ICICI Pru - Exports and Other Services Fund Reg (G) SBI - Pharma Fund Reg (G) ICICI Pru - FMCG Plan Reg (G)

7 Visit us at For opening your account with us and Net Trading please contact Vallari FOR PRIVATE CIRCULATION ONLY DISCLAIMER: This Document is for private circulation & for information purposes only.it does not have regard to specific investment objectives, financial situation & the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report & should understand that statements regarding future prospects may not be realised. In no circumstances it be used or considered as an offer to sell or solicitation of any offer to buy or sell the securities mentioned in it. The information in this document has been obtained from sources believed reliable, but we do not represent that it is accurate or complete. We hereby certify that the views expressed in this research report accurately reflect our personal views about the subject companies & their securities. We certify that we have not been, have not, & will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation in this report. We may or may not hold shares in the recommended companies. Contact: RASHMI; Tel.No: or send at for further clarification BOOK - POST If undelivered please return to: SAJAG SECURITIES PVT. LTD. Regent Chambers, Opp. Garware College, 33/15-B, Karve Road, Pune Tel:

JANUARY 2015 / Vol. XVIII / Issue 1

JANUARY 2015 / Vol. XVIII / Issue 1 As 2015 begins. Indian markets in the year 2014 witnessed a sharp rally, where key indices like Nifty gained 31%. As the year comes to an end and the New Year 2015 begins,