CONTENT. August Fundamentals I Technical I Derivatives

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1 Fundamentals I Technical I Derivatives August 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 Vipin Kumar 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 vipin.k@religare.com Dear Investor, July 2017 marked a historic month for the Indian stockmarket, as the Nifty conquered an important psychological milestone of 10,000. Nifty gained a strong 5.8% supported by strong rally in Banking stocks (Bank Nifty up 8.2%). The Sensex surged 5.2% to top the 32,500 mark. However, the broader market indices underperformed the benchmarks with the BSE Mid-cap and Small-cap indices gaining 5.1% and 4.4% respectively. All sectors, with the exception of FMCG, gained during the month. Leading gainers besides Banking were Metals, IT and Realty which gained 7-9%. FMCG lost 3.2% post GST rollout. Domestic MFs continued their strong buying spree investing ~Rs 11,800cr, while FII buying slowed down further at ~ Rs 1,900cr (~Rs 4,000cr in June; ~Rs 10,000cr in May). The notable global event last month was the US Fed meet outcome. Along expected lines, the US Fed maintained its dovish stance and kept its benchmark interest rate unchanged. clear signal of another rate increase in 2017 could be inferred from the US Fed commentary. However, the central bank did confirm its plan to begin reducing its massive bond holdings relatively soon. Further on the macro-front, the start of August saw the release of the RBIs third bi-monthly monetary policy of FY18, wherein the benchmark repo and reverse repo rates were reduced by 25bps each to 6% and 5.75% respectively. This was in-line with our expectations. Lower inflation, normal monsoon and smooth rollout of GST gave the RBI room for a rate cut. However, at the same time, by not changing its policy stance to accommodative, and indicating of inflation rising from the current levels owing to several variables like inflation base effect fading out, 7th central pay commission implementation, farm loan waiver impact on state finances, etc., the RBI seems to have maintained a cautious stance, making future policy cuts highly data dependent. On the economy front, GST implementation impact was felt on the services sector activity, which registered contraction and fell to its lowest level in nearly four years. This is on top of the weakness in manufacturing activity, which has fallen to eight-year lows. However, for India's automakers, the single producer tax was beneficial. Courtesy GST rates, prices of 2-wheelers and 4-wheelers were reduced, which helped the auto majors report better than expected volume sales numbers for the month of July. We are in the middle of the first quarter earnings season of FY18 and broadly the numbers have been a mixed bag so far, with divergences more visible in the mid-cap space. So far in the Nifty pack, GST impact was visible most on the consumer facing business viz. Asian Paints, HUL, which we believe is a transitory phase. Private sector banks did well with the likes of Yes Bank, Indusind Bank, Kotak Bank and HDFC Bank reporting good earnings. Among other large caps, Reliance Industries, ACC and L&T also reported better than expected earnings performance. The laggards so far have been from the Pharma space. Going forward, with the quarterly report cards of several companies still to be released over the next days, earnings will have to be closely monitored, as valuations of several companies are at considerable premium compared to their historic average. Moreover, while the bulls have so far not displayed any signs of letting the control go off the market, it is also important to bear in mind the factors, which could send them running for cover. The key amongst these are 1) the escalation of geopolitical tensions in either the rth Korea-US or the India-China standoffs; 2) recovery in earnings is now critical for India Inc. if the current market valuation of ~19x FY18E earnings is to sustain, which is already factoring in a 15-16% earnings growth; 3) a normal or above-normal monsoon is important to support the rural economy and aid India Inc. s earnings recovery. Thus, to conclude, while our medium-to-long-term outlook on the market continues to remain positive, investors/traders should be ready to take market volatility in their stride. 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 12, BSE Cons Durable 16, BSE Cap Goods 17, BSE FMCG Sector 10, BSE Healthcare 14, BSE IT Sector 10, BSE PSU 8, BSE Teck 5, BSE Auto 24, BANKEX 28, BSE Oil&Gas 14, BSE Power 2, BSE Realty Index 2, Close price as on July 31, 2017 FIIs Investments In Indian Equities Net Investment (` Crore) % Change Close 1 Month 1 Year SENSEX 32, CNX NIFTY 10, BSE MIDCAP 15, BSE SMLCAP 16, NIFTY BANK 25, 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 July 2017 marked a historic month for the Indian stockmarket, as the Nifty conquered an important psychological milestone of 10,000. Nifty gained a strong 5.8% supported by strong rally in Banking stocks. The Sensex surged 5.2% to top the 32,500 mark. Domestic MFs continued their strong buying spree investing ~Rs 11,800cr, while FII buying slowed down further at ~ Rs 1,900cr (~Rs 4,000cr in June; ~Rs 10,000cr in May). Market Outlook Going forward, with the quarterly report cards of several companies still to be released over the next days, earnings will have to be closely monitored, as valuations of several companies are at considerable premium compared to their historic average. Moreover, while the bulls have so far not displayed any signs of letting the control go off the market, it is also important to bear in mind the factors, which could send them running for cover. The key amongst these are 1) the escalation of geopolitical tensions; 2) recovery in earnings is now critical for India Inc. if the current market valuation of ~19x FY18E earnings is to sustain, which is already factoring in a 15-16% earnings growth; 3) a normal or above-normal monsoon. Thus, to conclude, while our medium-to-long-term outlook on the market continues to remain positive, investors/traders will have to be ready to take market volatility in their stride. Net Investment (` Crore) Month July 13,124 2,593 11,130 1,882 Aug 5,430 (17,249) 9,800 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 July 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 ,944 6, NHPC Ltd Power ,675 10, Rural Elec.Corp. Power ,265 1, Oil India Oil&Gas , Natl. Aluminium Mineral , Power Fin.Corpn. Power ,473 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 gained points in the month of July, Outlook for Nifty 50 ( ) Support 9930/9750/9525 Resistance 10150/10300/10400 Below is a summary of Top Nifty Gainers & Losers: Top Nifty Gainers July 2017 Scrip Name Close Price* (`) % Change YESBANK RELIANCE HINDALCO SBIN VEDL Top Nifty Losers for July 2017 Scrip Name Close Price* (`) % Change ITC DRREDDY IOC SUNPHARMA LUPIN *Closing of last trading day of the month Breadth of Nifty stocks was positive 44 stocks closed in green while 7 stocks closed in red in the month of July, Relative comparison shows Metal, Bankex and Oil and Gas index were the outperformers whereas FMCG, Health Care, and Consumer Durables were the underperformers in July, Sector Relative Performance Nifty surged strongly in the passing month and touched the 10,000 milestone for the first time. Positive local cues i.e. earnings announcements and hope of rate cut and supportive global markets helped it to gain nearly 6% and also close around the month s high. In line with benchmark, buying was witnessed across the board wherein rate sensitive pack viz. banking, financials, auto and pharma made significant contribution while pharma remained under pressure. We re seeing consistent buying interest on every dip despite overbought market conditions. The chart pattern indicates consolidation ahead however movement will continue on stock specific front. Investors should continue with buy on dips approach during that phase while traders should carefully plan their trades, citing possibility of volatile swings. Avoid pharma for any long trade and keep leveraged positions hedged. * 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. *Close price as on August 3,

6 TECHNICAL Outlook for Bank Nifty ( ) Support 24400/24000/23800 Resistance 24900/25300/25750 BankNifty traded in line with the benchmark index and witnessed phenomenal rise in the passing month. Surprisingly, the PSU banking majors made a strong comeback which equally supported by the private banking counters. Finally, it gained over 8% and settled above mark. We expect consolidation in the banking space too but the trend would remain positive. Any meaningful correction especially in the private banking players should be considered as buying opportunity. However, PSU banking counters may witness erratic move and should be avoided for long trades. Among the private banking counters, prefer HDFC Bank, ICICI Bank, RBL bank, KTK Bank and Yes bank on dips. Stock Recommendations For August BATAINDIA CMP ` * Stop Loss ` 585 Target ` 700 Buy Range ` PCJEWELLER CMP ` * Stop Loss ` 238 Target ` 300 Buy Range ` After a slide from its record high i.e from the levels of 748 to 400 mark, BATAINDIA has undergone a consolidation phase in a broader range for almost a year. This consolidation phase has led to the formation of Inverted Head and Shoulder Pattern on weekly chart, which act as continuation pattern if forms within a trend. After hitting a record high in the passing month, PCJEWELLERS has witnessed a marginal correction from its top. Currently, it s hovering in a narrow range near its support zone of short term moving averages on daily chart, indicates a pause prior to further up move. Recently, it has posted a breakout from the neckline of the pattern, supported with significant rise in volume. We advise traders should use this phase to accumulate fresh long in the given range. Considering all these facts, we suggest traders to initiate long positions in the range of with closing stop loss of 585 for the target of 700. *Close price as on August 3,

7 DERIVATIVES DERIVATIVES MONTHLY ROLLOVER REPORT July Expiry Derivatives Summary Sector Rollover (%) Nifty Index closed at around after vwap based selling activity was witnessed through out the second half of the day and even in last 30 min of trade. The Nifty futures long roll cost (difference between current and next month futures) was at around 34 bps vs 15.7 bps. Nifty futures Aug contract started with around 1.65 Cr vs 1.94 Cr open interest. Bank Nifty futures have seen an open interest at around lkh vs 22.7 lkh, last series. At expiry, VIX was at around 11.2% levels implying a 336 odd points swing in the Nifty in next 30 days. At Expiry, the highest Nifty options open interest was at 9800 PE and CE Rollover % August Series Outlook Nifty futures has rolled around 68% vs 73% with respect to last month, and the open interest for the new Aug contract is lower by around 30 lkh implying cautious outlook or profit booking at levels. BankNifty futures rolled at around 76% vs 69% compared to last month. However the open interest of Bank nifty in this series is more by around 2.5 lkh, implying fresh long build up. The range for Nifty might be and FIIs have bought around Rs 1745 Cr in cash market (expiry to expiry) in July, and sold index option of around Rs 2100 Cr on the day of July expiry. With Nifty futures started Aug series with lesser open interest as of expiry and Vix inching towards 12% levels we expect Nifty to witness some profit booking and slide towards the 9800 levels in the short term. Rollover Synopsis In July, 89%, 86 and 85% are the sectors where highest rollover was witnessed, whereas 76%, Technology and Capital 77 each are the sectors where lower rollovers were witnessed. The August weighted average price for Nifty and BankNifty futures are at and respectively. These might act as the pivot for indices for the month of August. Vix is currently at 11.45% and is likely to be in 10% to 14% for the major part of August. We recommend buying REPCOHOME as per levels mentioned below. Buy REPCOHOME Aug futures between , stop loss at 727, target 845. Sector-wise banking might outperform, however Oil & Gas and Metals as a sector the down side seems limited for Aug series. Since we expect the Aug series to be in a range of 9800 to 10200, buying Nifty Aug put option to hedge all stock futures positions are recommended. 7

8 Open Interest (in lakhs.) DERIVATIVES NIFTY August Series Option Data* Nifty Open Interest Put Call *Options data as on July 27, 2017 TOP 5 PRICE GAINERS Expiry-to-Expiry TOP 5 PRICE LOSERS Expiry-to-Expiry STOCK NAME % Change SINTEX JUBLFOOD INFIBEAM JPASSOCIAT JINDALSTEL STOCK NAME % Change GRASIM ICIL AJANTPHARM NIITTECH MINDTREE TOP 5 STRONG ROLLOVERS STOCK NAME % Rollover CENTURYTEX 96 MCX 93 GSFC 92 IBREALEST 92 JSWENERGY 92 TOP 5 WEAK ROLLOVERS STOCK NAME % Rollover POWERGRID 40 INFIBEAM 56 VOLTAS 57 EICHERMOT 58 TECHM 61 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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