Indian equity markets: De-escalation of tensions between the US and Iran and positive global cues like signing of the recent initial trade agreement between the US and China have helped the frontline indices to scale fresh all-time highs. In the broader markets, mid and small-cap indices have outperformed the benchmark indices for the last couple of weeks.
Macro-economics: India’s economic growth has slowed down significantly in the last couple of quarters mainly due to liquidity tightness (lack of credit availability) to small corporates and SMEs. Trade uncertainty between the US and China and slower growth across major economies has also led to slower domestic growth.
Expect gradual recovery in economic growth in coming quarters, helped by a favourable base, some revival in private consumption spending led by the easing liquidity situation and recent government announcements to support growth.
Sectoral view: 2020 could be the year of a cyclical recovery for the economy and sectors like financials, metals, materials and automobiles will outperform, while FMCG and utilities could see muted participation. Stock-specific outperformance is expected in mid and small-cap segments. Stock pickers will be rewarded.
Equity market valuations: We expect the Nifty 50 EPS to see traction of over 20% in FY21. Discounting the Nifty 50 at FY21E at a PER of 21x, Nifty’s year-end target is likely to be around 12,600.
Outlook going forward: We continue to remain positive on equities; however, valuation comfort has moderated after the recent up move seen in markets. Valuation-wise, certain large-cap stocks look overvalued so a staggered shift from large to mid and small caps is recommended. Possible broad-based earnings cycle recovery led by corporate tax cuts should benefit mid and small caps.
Monetary policy actions: After reducing the policy rates by 135 bps over the past one year, the RBI paused in December 2019; however, the policy guidance provides for maintaining the accommodative stance as long as necessary for reviving growth.
The RBI may remain on pause mode for the remainder of FY20 as near-term inflation data is likely to remain elevated on higher food prices and the MPC wants to wait for the budget to see fiscal risks and its implications for growth. We may see status quo on rates till the end of FY20.
Yield curve: The RBI’s decision to conduct Operation Twist (simultaneous purchase and sale of government bonds) has led to benchmark G-sec yields coming down from ~6.85% to 6.60%. However, implementation of Operation Twist has elongated the rate-cut cycle by 6 months.
Growth-inflation dynamics provide visibility for a prolonged period of lower policy rates for the coming months. However, fiscal concerns and higher inflation may keep the longer end of the yield curve volatile.
Liquidity & bond rates: There has been a contraction in corporate spreads of late especially for AAA & AA-rated corporates but not so much for lower-rated ones.
From a risk-return perspective, the short-to-medium end of the yield curve offers better riskadjusted returns as the RBI has maintained an accommodative stance and the system has seen surplus liquidity for last couple of months, and is expected to remain in surplus mode going forward.
Outlook going forward: We recommend a combination of short-duration and medium-to-long duration funds with a portfolio maturity range of 2–5 years.
Going forward, decent quality AA-rated papers shall see higher spread compression and offer an attractive investment opportunity for investors willing to go down a bit on the yield curve.
Disclaimer: This document has been prepared by IndiaNivesh Shares & Securities Private Limited (“INSSPL”), for use by the recipient as information only and is not for circulation or public distribution. INSSPL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSSPL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSSPL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSSPL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSSPL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSSPL does not take responsibility thereof. The research analysts of INSSPL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSSPL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice.
Posted by Mehul Kothari | Published on 22-JAN-2020
Board of Directors of Granules India Limited has approved a proposal to Buy-back up to 1,25,00,000 equity shares of the Company for an aggregate amount not exceeding Rs. 250 crores being 4.92% of the total paid-up equity share capital, at Rs.200/- per equity shareOther Information about the Buyback
•The Entire procedure might take approximate 3 months.•Record date for the buyback is yet to be announced by the company
Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document.This report is based)
Posted by Mehul Kothari | Published on 10-FEB-2020
In line top line, Margin expansion aided by lower input cost while PAT growth boosted by lower taxes!Rating: BUY | CMP: Rs 2411 | Target Price: Rs 3376 | Upside: 40%Hero Motocorp limited reported in line set of Q3FY20 numbers. Total Income decline of around 11% (YoY) came in on expected lines as there was a de-growth of ~14% in quarterly sales volume. Hero’s managed to pull up its blended realization by 4% for the quarter. Better operating efficiencies and lower input cost led to EBIDTA margin going up to 14.94% from 13.98% in Q3FY19. Higher PAT was primarily on account of availing lower tax structure. Numbers appears to be promising in a challenging environment. Better acreage under Rabi crop and higher food inflation is expected to be leaving more disposable income in the hands of farmers. Entry segment (i.e. 100cc) of motorcycle is likely to see revival in volume growth sooner on back drop of aggressive pricing and transition to BSVI technology. We believe that the newly launched BSVI models will have a price impact of around 15% in cost of ownership. Hero being the dominant player in the entry level segment, we believe it will continue to beat competition and strengthen its market share further.
Recommendation: BUYWe had initiated buy recommendation on Hero in our ‘Multicap Investment Advisory Portfolio’ at Rs. 2600 for a target price per share of Rs. 3,376, valuing the company at a PER a of 16x on FY21e. Lower interest rate regime, controlled input prices, higher operating efficiencies, better crop realization by farmers, higher Rabi crop acreage augurs well for the company. We believe Hero will be able to retain its margins and regain steady growth in volumes. Valuation has become more attractive, after the price correction of around 7.20% from our recommended level. We recommend BUY on HEROMOTOCORP.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing.")
Monthly Market Outlook – Debt & Equity Outlook for January 2020
Key factors Analysis
Indian equity markets: De-escalation of tensions between the US and Iran and positive global cues like signing of the recent initial trade agreement between the US and China have helped the frontline indices to scale fresh all-time highs. In the broader markets, mid and small-cap indices have outperformed the benchmark indices for the last couple of weeks.
Macro-economics: India’s economic growth has slowed down significantly in the last couple of quarters mainly due to liquidity tightness (lack of credit availability) to small corporates and SMEs. Trade uncertainty between the US and China and slower growth across major economies has also led to slower domestic growth.
Expect gradual recovery in economic growth in coming quarters, helped by a favourable base, some revival in private consumption spending led by the easing liquidity situation and recent government announcements to support growth.
Sectoral view: 2020 could be the year of a cyclical recovery for the economy and sectors like financials, metals, materials and automobiles will outperform, while FMCG and utilities could see muted participation. Stock-specific outperformance is expected in mid and small-cap segments. Stock pickers will be rewarded.
Equity market valuations: We expect the Nifty 50 EPS to see traction of over 20% in FY21. Discounting the Nifty 50 at FY21E at a PER of 21x, Nifty’s year-end target is likely to be around 12,600.
Outlook going forward: We continue to remain positive on equities; however, valuation comfort has moderated after the recent up move seen in markets. Valuation-wise, certain large-cap stocks look overvalued so a staggered shift from large to mid and small caps is recommended. Possible broad-based earnings cycle recovery led by corporate tax cuts should benefit mid and small caps.
Monetary policy actions: After reducing the policy rates by 135 bps over the past one year, the RBI paused in December 2019; however, the policy guidance provides for maintaining the accommodative stance as long as necessary for reviving growth.
The RBI may remain on pause mode for the remainder of FY20 as near-term inflation data is likely to remain elevated on higher food prices and the MPC wants to wait for the budget to see fiscal risks and its implications for growth. We may see status quo on rates till the end of FY20.
Yield curve: The RBI’s decision to conduct Operation Twist (simultaneous purchase and sale of government bonds) has led to benchmark G-sec yields coming down from ~6.85% to 6.60%. However, implementation of Operation Twist has elongated the rate-cut cycle by 6 months.
Growth-inflation dynamics provide visibility for a prolonged period of lower policy rates for the coming months. However, fiscal concerns and higher inflation may keep the longer end of the yield curve volatile.
Liquidity & bond rates: There has been a contraction in corporate spreads of late especially for AAA & AA-rated corporates but not so much for lower-rated ones.
From a risk-return perspective, the short-to-medium end of the yield curve offers better riskadjusted returns as the RBI has maintained an accommodative stance and the system has seen surplus liquidity for last couple of months, and is expected to remain in surplus mode going forward.
Outlook going forward: We recommend a combination of short-duration and medium-to-long duration funds with a portfolio maturity range of 2–5 years.
Going forward, decent quality AA-rated papers shall see higher spread compression and offer an attractive investment opportunity for investors willing to go down a bit on the yield curve.
Disclaimer: This document has been prepared by IndiaNivesh Shares & Securities Private Limited (“INSSPL”), for use by the recipient as information only and is not for circulation or public distribution. INSSPL includes subsidiaries, group and associate
companies, promoters, employees and affiliates. INSSPL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or
completeness has not been verified by INSSPL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSSPL and/or its officers, employees and the recipient must exercise
independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be
altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSSPL. This document is solely for information purpose and
should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can
go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSSPL does not take responsibility thereof. The research analysts of INSSPL have adhered to the code of conduct under Regulation 24
(2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSSPL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice.
Previous Story
Granules India Limited Buyback Note 2020 | IndiaNivesh
Board of Directors of Granules India Limited has approved a proposal to Buy-back up to 1,25,00,000 equity shares of the Company for an aggregate amount not exceeding Rs. 250 crores being 4.92% of the total paid-up equity share capital, at Rs.200/- per equity shareOther Information about the Buyback •The Entire procedure might take approximate 3 months.•Record date for the buyback is yet to be announced by the company Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document.This report is based)
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Hero Motocorp Limited - Q3 FY20 Stock Result Updates
In line top line, Margin expansion aided by lower input cost while PAT growth boosted by lower taxes!Rating: BUY | CMP: Rs 2411 | Target Price: Rs 3376 | Upside: 40%Hero Motocorp limited reported in line set of Q3FY20 numbers. Total Income decline of around 11% (YoY) came in on expected lines as there was a de-growth of ~14% in quarterly sales volume. Hero’s managed to pull up its blended realization by 4% for the quarter. Better operating efficiencies and lower input cost led to EBIDTA margin going up to 14.94% from 13.98% in Q3FY19. Higher PAT was primarily on account of availing lower tax structure. Numbers appears to be promising in a challenging environment. Better acreage under Rabi crop and higher food inflation is expected to be leaving more disposable income in the hands of farmers. Entry segment (i.e. 100cc) of motorcycle is likely to see revival in volume growth sooner on back drop of aggressive pricing and transition to BSVI technology. We believe that the newly launched BSVI models will have a price impact of around 15% in cost of ownership. Hero being the dominant player in the entry level segment, we believe it will continue to beat competition and strengthen its market share further. Recommendation: BUYWe had initiated buy recommendation on Hero in our ‘Multicap Investment Advisory Portfolio’ at Rs. 2600 for a target price per share of Rs. 3,376, valuing the company at a PER a of 16x on FY21e. Lower interest rate regime, controlled input prices, higher operating efficiencies, better crop realization by farmers, higher Rabi crop acreage augurs well for the company. We believe Hero will be able to retain its margins and regain steady growth in volumes. Valuation has become more attractive, after the price correction of around 7.20% from our recommended level. We recommend BUY on HEROMOTOCORP.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing.")