India strategy elara securities - august 2013

Ind

ia S

tra

teg

y

Harendra Kumar

[email protected]

+91 22 3032 8571

Ashish Kumar

[email protected]

+91 22 3032 8536

Henry Burrows

[email protected]

+91 22 3032 8554

Caught on the wrong side

Indian policymaking is struggling in the maze of

impossible trinity. The choice between pegged

exchange rate and an independent monetary

policy becomes important since the Indian

business cycles may not be fully aligned with that

of the US. Now that US yields have firmed up,

either INR can remain a float or pegged to the

USD, the later involving monetary tightening and a

loss of monetary independence. Central banking in

India is inclined towards the later for now while

keeping doors for former wide open. Clearly, the

choice to pursue the middle path may be

distortionary and would inherently include very

short-term patchwork policymaking.

CAD funding: the 21bn dollar question

Looming BoP crisis for India stems from the fact

that capital account, for all optimistic assumptions

may fail to fund the deficit of USDbn88.9 in FY14E.

Assuming more-than-expected long term flows in

(FDI+ Loans + NRI deposits); our estimates show

that there is excessive reliance on "hot money"

flows of around USDbn21 over FY14E. As the US

yields rise and narrow the gap between India and

US paper, the possibility of outflows in debt (early

indication seen in last three months) may be a

prolonged reality. Equity inflows, meanwhile could

suffer a vicious cycle of weakening INR and a

worsening outlook on overall business cycle.

Flows

ETF flow direction has seen an increased

concentration towards US, Japan and European

markets as investors look to avoid the volatility of

Emerging Markets and commodities in the short

term. Recent FII net outflows have significantly

countered the strong YTD start and is now

pushing Indian bourses into a delayed sell off as

hiding places become exposed.

Investment Strategy

The Model Portfolio has seen an outperformance

of 200 bps in the last 3 months. Our contrarian

picks have been working well for us. The structural

construct has remained unchanged and our

preferred investment categories are Oil & Gas,

Automobiles, Power and Consumption. Our

underweights in banks continue and we expect

the benchmark index to see another 10-15%

correction. We would like to highlight that under

recovery theme might reverse with the INR looking

to hold its levels in the current quarter. Notably, as

is the market we have only OWs and UWs and no

Neutral positions. 14 August 2013

India Confronts the Impossible Trinity

Elara Securities (India) Private Limited 2

Index

Executive Summary …………………………………………………………………………… 3

Economy ……………………………………………………………………….……………………. 5

Global Fund Flows ……………………………………………………………..…………..... 18

Global Markets ………………………………………………………………………………….. 29

Rating Watch …………………………………………………………………………………….. 35

Relative Returns …………………………………………………………………………………. 42

Model Portfolio ………………………………………………………………………………….. 44


Tough times warrant realistic outlook

Ex

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India's problems are first order: Policymaking would better address the structural bottlenecks within primary agents of economic activity

viz. land, labor, capital, and business sentiments. In absence of this, restoration of pre-crisis growth will remain purely aspirational. There is

a need to understand the difference between cyclical and structural revival and that a lower rate regime led cyclical revival is passé for

India.

Fed decides course of Indian policy: The liquidity tightening stance of CB in India has resulted in prioritization of “volatility management

in INR” over other mandates in its multiple indicator approach. CB’s successive moves is ample indication that policy has moved in a

direction from where quick reversal is not a natural option. In due course, CB has also removed the confusion about "short-term" nature

of these moves. We see a clear message that the current stance is here to stay, atleast till mid-Sep i.e. when US Fed clarifies on quantum

and direction of QE withdrawal, if any.

India not ready for another devaluation: Fundamental devaluation as an option to overcome the current crisis is largely ruled out as

interplays between various factors in the external and domestic economy cast a shadow on the success out of such a move. Income

effect led price-inelasticity on imports together with negative real rates and dieselization of the economy has meant that currency

weakening may not yield otherwise standard results. Fact remains that government policies and finances are in such shape that any ill-

thought move may probably boomerang with a sovereign downgrade to junk.

Global Flows Go Further West: Although there has been some change in the complexion in the top ETFs, we still note the top ETFs (in

flow terms) are US centric and the trend shows no clear sign of turning. The major SPDR S&P ETF garnered more flows in July (USD 12

bn) than it had done in the last 6 months (USD 10.4 bn) whilst US ETFs accounted for 83.4% of the top 15 flows for July as the

concentration narrowed further.

Delayed Sell Off Exposes India’s Hiding Places: Money moves have continued to flow away from Emerging Markets and commodity ETFs,

with over USD 40.5 bn of selling in the last six months. The withdrawals are now having a knock on effect in India as FIIs move to net

sellers and the Index supports give way. Increasingly, turnover and OI share are being concentrated in a handful of blue-chips, a trend

which is showing few signs of a slowdown, leaving the rest of the market to the mercy of increasingly volatile moves.

Beyond the payment crisis: We see the ensuing 3-months as very critical for the markets, which will largely decide the course over the

medium term i.e. two years. If India weathers the payment crisis, Indian equities might well see a big ‘sentiment’ rally which exposes the

current weak INR trade to risks. Though the purge is not fully complete, ‘Value’ has seemingly become more broad-based even as the

market seems to be ignoring the benefic effects of a good monsoon.

India Macro Outlook


Units FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E Real economy Nominal GDP INR bn 36,934 42,947 49,871 56,301 64,778 77,953 89,749 100,206 113,324

YoY (%) 13.9 16.3 16.1 12.9 15.1 20.3 15.1 11.7 13.1 USD bn 834 948 1,239 1,226 1,366 1,710 1,872 1,840 1,964

GDP per capita INR 30,656 35,234 40,264 45,958 52,235 61,263 69,497 77,740 84,966 USD 692 778 1,001 1,001 1,102 1,344 1,449 1,428 1,473

Real GDP YoY (%) 9.5 9.6 9.3 6.7 8.6 9.3 6.2 5.0 5.6 Demand side Private consumption YoY (%) 8.6 8.5 9.4 7.2 7.4 8.6 8.0 4.0 5.6 Public consumption YoY (%) 8.9 3.8 9.6 10.4 13.9 5.9 8.6 3.9 7.2 Gross capital formation YoY (%) 16.3 15.3 17.2 (1.6) 12.7 16.2 1.5 5.1 7.0 Gross fixed capital formation YoY (%) 16.2 13.8 16.2 3.5 7.7 14.0 4.4 1.7 6.3 Supply side Agriculture YoY (%) 5.1 4.2 5.8 0.1 0.8 7.9 3.6 1.9 3.2 Industry YoY (%) 9.7 12.2 9.7 4.4 9.2 9.2 3.5 2.1 4.1 Services YoY (%) 10.9 10.1 10.3 10.0 10.5 9.8 8.2 7.1 6.8 Demographics Population million 1,106 1,122 1,138 1,154 1,170 1,186 1,202 1,217 1,233

YoY (%) 1.6 1.4 1.4 1.4 1.3 1.4 1.3 1.2 1.3 Prices WPI (annual average) YoY (%) 4.5 6.5 4.8 8.1 3.8 9.6 8.9 7.4 6.1 CPI (annual average) YoY (%) 4.4 6.7 6.2 9.1 12.4 10.4 8.4 10.5 9.5 INR-USD (EOP) 44.6 43.6 40.0 50.9 45.1 44.7 51.2 54.4 58.9 INR-USD (annual average) 44.3 45.3 40.2 45.9 47.4 45.6 47.9 54.5 57.7 Depreciation (%) (1.5) 2.3 (11.1) 14.1 3.3 (3.9) 5.2 13.6 6.0 Money markets Credit growth YoY (%) 39.6 28.5 23.0 17.8 17.1 21.3 16.8 14.1 15.5 Deposit growth YoY (%) 23.4 23.8 22.4 19.9 17.2 15.9 13.5 14.3 13.5 Money Supply (M3) YoY (%) 21.2 21.3 21.4 19.3 16.9 16.1 13.2 13.4 13.2 Policy rates Repo rate (EOP) 6.50 7.75 7.75 5.00 5.00 6.75 8.50 7.50 6.50 Reverse repo rate (EOP) 5.50 6.00 6.00 3.50 3.50 5.75 7.50 6.50 5.50 CRR (EOP) 5.00 6.00 7.50 5.00 5.75 6.00 4.75 4.00 3.50 External interactions Exports USD bn 105.2 128.9 166.2 189.0 182.4 250.5 309.8 306.6 324.2

YoY (%) 23.4 22.6 28.9 13.7 (3.5) 37.3 23.7 (1.0) 5.7 Imports USD bn 157.1 190.7 257.6 308.5 300.6 381.1 499.5 502.2 523.4

YoY (%) 32.1 21.4 35.1 19.8 (2.6) 26.7 31.1 0.5 4.2 Trade deficit USD bn (51.9) (61.8) (91.5) (119.5) (118.2) (130.6) (189.8) (195.6) (199.2) Invisibles USD bn 42.0 52.2 75.7 90.9 80.0 79.3 111.5 107.8 110.3 Current account balance USD bn (9.9) (9.6) (15.7) (28.6) (38.2) (51.3) (78.3) (87.8) (88.9)

% to GDP (1.2) (1.0) (1.3) (2.3) (2.8) (3.0) (4.2) (4.8) (4.5) Capital Account USD bn 25.5 45.2 106.5 9.5 51.6 66.3 68.0 90.2 94.9

% to GDP 3.1 4.8 8.6 0.8 3.8 3.9 3.6 4.9 4.8 Fiscal deficits Centre % to GDP 4.0 3.3 2.5 6.0 6.5 4.8 5.7 5.2 4.8 State % to GDP 2.3 1.7 1.7 2.5 3.0 2.1 2.4 2.2 2.5 Combined % to GDP 6.3 5.0 4.3 8.5 9.5 6.9 8.1 7.4 7.3 Savings Investments Savings % to GDP 33.4 34.6 36.8 32.0 33.7 34.0 30.8 30.4 31.0 Capital formation % to GDP 34.3 35.9 38.0 35.5 36.3 37.0 35.4 35.0 35.4

Economy

Elara Securities (India) Private Limited

CB in India says it is caught in the maze of impossible trinity. In view of the open capital account, the trinity suggests that there is a choice to

be made between pegged exchange rate and an independent monetary policy. This choice becomes important since the Indian business

cycles may not be fully aligned with that of the US. Now that US yields have firmed up, either INR can remain a float or pegged to the USD,

the later involves monetary tightening and a loss of monetary independence.

For now, CB in India is inclined towards the forfeiting monetary independence but the domestic conditions might warrant a shift towards the

monetary independence to revive the sagging economy. As the CB commentary keeps the doors on possible shift of stance wide open, there

is a visible attempt to tread the middle path. We believe that such a stance will indeed be distortionary and inherently include very short-term

patchwork policymaking.

6

On the wrong side of trilemma CB and Government fighting a lone battle

Eco

no

my

Fully flexible ERR - Japan, Canada

Exchange rate stability Pre-1980 China Small Euro zone members like Greece,

Hong Kong

India is currently caught in a classic

‘impossible trinity’ trilemma whereby

we are having to forfeit some

monetary policy discretion to address

external sector concerns.

- RBI Q1 Monetary policy statement

“

”

INR on a 2-sigma breakout

EME FX performance


Source: CMIE, RBI, Bloomberg, MoF, Elara Securities Research

Global Contagion or Internal Conflict FX prioritized in multiple objectives of monetary policy

…will test its level of float

Eco

no

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35

40

45

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60

65

Jul-0

7

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c-0

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Au

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c-1

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r-1

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g-1

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Jan

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3

-2 SD

-1 SD

Decadal average

+1 SD

+2 SD

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Jul-0

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g-1

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16 Mar 2007 25 Dec 2009 16 Mar 2004

(20)

(15)

(10)

(5)

0

5

CNY SGD PHP RUB TRY INR BRL JPY ZAR

(%)

Jun-13 Jan-13

INR moves in-sync with net BoP balance



Fundamentals behind INR free-fall

(1.5)

(1.0)

(0.5)

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1.0

1.5

2.0 35

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3

(USD

bn

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(USD

-IN

R E

R)

USD-INR ER Net BoP balance

(100)

(75)

(50)

(25)

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91

FY

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CAD Short-term debt

Rapid rise in short-term debt

Real yields (adj. CPI) still negative in India

(15)

(10)

(5)

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Jun

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(%)

91-day t-bill 10 year yield

REER suggests small undervaluation

98.8

90

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100

105

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(20

04

-05

=1

00

)

Eco

no

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Borrowing on Repo window turns flat

MSF borrowing spike up to INR400bn lately


Recent Measures to curb speculation in the FX market

Jul 9, 2013

RBI: Directs banks to not carry out any proprietary trading in the

currency futures / exchange traded currency options markets.

SEBI: Curtail position limits and increase margin requirements for

Currency Derivatives.

Jul 15, 2013

1. MSF rate adjusted by 300bps above the policy repo rate under

the LAF to 10.25%.

2. LAF window gets limited to 1% of NDTL of the banking system

at INR750bn

3. OMO worth INR120bn to sell bonds on 18 July 2013

Jul 23, 2013

1. Minimum daily CRR balance raised to 99% versus 70% earlier.

2. Overall limit for access to LAF by each individual bank set at

0.5% of its own NDTL outstanding. Earlier move cancelled.

Aug 8, 2013

1. Notifies auction of cash management bills worth INR220bn

once every week to further soak the liquidity out of money

markets.

9


Aftereffects of monetary tightening Short-term rates in unchartered territory

0

500

1,000

1,500

2,000

2,500 1

4-J

un

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28

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26

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(IN

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Repo Reverse Repo

0

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100

150

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450

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17

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Eco

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Short-term rates on CMBs spike up

Devolved auctions YTD approach historical highs


Yield curve bends on tight liquidity

10


Short-term rates in unchartered territory

Cash management bills peak out at 11.7%, cool enough for

banks to borrow from the MSF window at 10.25% and get

paid 11.70% in the short-term treasury. Of course, it works

only till 1% of NDTL. The latest move, thus will take time to

squeeze out systemic liquidity.

If INR250bn becomes the norm for borrowing in the MSF

window, system would see stress after 2-3 such auctions post

which around INR660bn would have been out of the system.

Prima facie, this is the time when the banking system might

face a tough time finding liquidity, resulting in systemic rise in

all rate at the short end, and could spill over to the long end

too in some cases.

11.7 11.2 11.2 9.9 8.9 0

2

4

6

8

10

12

14

12-Aug-13 25-Jul-13 25-Jul-13 13-Aug-13 1-Aug-13

35 56 28

7 7

Maturity (in days)

0

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120

FY

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FY

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(IN

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8.0

8.5

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1.7

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.9

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.1

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.7

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.6

19

.4

Yie

ld c

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e (

%)

18-Jun 12-Aug

Eco

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Formal hike in CRR more probable in future

With the recent moves, CB has altered the way short-term

rates move, otherwise within the reverse repo and repo rates

on LAF window. Successive moves on liquidity squeeze would

mean that this band now shifts in a wide range of 300bps

between repo rate and the MSF rate.

With MSF as the new policy rate, for all practical purposes, CB

in India may not have to officially hike the repo rates, as they

are redundant anyways. The reversal on CRR however cannot

be ruled out and remains very much on the cards.

We believe that monetary policy will now largely work in out-

of-policy framework, depending upon movements in INR.


One-year OIS already pricing a rate hike

11


Envisioning next moves Further liquidity tightening means hike in CRR

3

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(%)

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12

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3

(%)

Repo Reverse repo MSF

New short term

rate zone

Short term rates in a new band

Eco

no

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6

7

8

9

10

5-J

ul

12

-Ju

l

19

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l

26

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l

2-A

ug

9-A

ug

(%)

1-yr OIS 5-yr OIS

Sharp outflow in FII debt holding

Capital account, for all optimistic assumptions may fail to fund

the CAD of USDbn88.9 in FY14E. Even assuming more-than-

expected inflows in long term flows in (FDI+ Loans + NRI

deposits); our estimates show that there is excessive reliance

on "hot money“ flows to the extent of USDbn21.3 over FY14E.

And this assumes a significant improvement in FDI inflows,

from USDbn19.8bn to USDbn23.8, assuming incremental

money does flow through post the best of efforts by the Indian

policymakers.

The primary concern is, as US yields rise and the gap between

Indian paper and US paper contracts, the possibility of

outflows in debt (early indication seen in last three months)

may be a prolonged reality. Equity flows, meanwhile could

suffer a vicious cycle of weakening INR and a worsening

outlook on overall business cycle. Elara Securities (India) Private Limited 12

CAD: 21bn dollar funding risk External concerns multiply by the day

4.5

5.0

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Au

g-1

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b-1

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Ap

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3

Jun

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(%)

Margins narrow b/w India and US paper


Eco

no

my

(1.5)

(1.0)

(0.5)

0.0

0.5

1.0

1.5

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13

(USD

bn

)

FII Equity Inv FII Debt Inv Net FII inflow


Regime change at CB Can the new incumbent wield a “magic wand”?

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12 month change 2qma SAAR

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(%)

CPI-IW CPI-all India

Post crisis average CPI

Inflation

Structural CPI inflation is a key macro-stability risk

Indian growth cycle exposed to sustained slowdown

Post the CB adventures in domestic money market, there is a

visible wedge between the onshore and offshore (NDF) markets of

INR. New governor comes at helm when the domestic liquidity has

sharply dried, thus leading to revision of base rates by some

private sector banks. As such, the policymaking has to tread

cautiously because any lapse could probably boomerang with a

sovereign downgrade to junk.

Challenges before the new incumbent of Mint Street

Short run (immediate)

Clarity on CB's FX policy

Clear articulation of implications for the money market, and

the exit strategy.

Mitigate funding risks on CAD

Medium-to-long run

Restore the credibility of central bank, in clear communication

for a start,

FSLRC recommendations, specifically on institution of a

monetary policy committee,

Separation of debt management office out of CB,

Shift from multiple indicator approach to a inflation target

regime, on CPI,

Innovations in financial sector inclusion, including new

licenses in banking sector.

Eco

no

my


Investment cycle has seen a bottom but recovery uncertain


Growth

We stick to our forecast of 5.6% real growth over FY14E, and

observe that potential downside risk of 30-40bps could be

capped owing to a possible surprise in farm sector.

Our estimates seemed conservative a few weeks back but are

now placed on a level field with most of the street paring their

growth estimates post the liquidity tightening moves since

mid-July.

It helps us that our forecast had already built up on our

assumption of no case for monetary easing in India over CY14,

a consensus view now.

Investments

The interplay of structural and cyclical component will ensure

that while investments will not fall further, a sharp rise may

not materialize.

Though investment does have a small election multiplier, the

fundamentals on ground suggest a need to address primary

concerns of investment accretion in the economy.

Land acquisition bill and mining bills are two major policy

levers to watch out for in future. But, for that to happen and

reflect on ground, it will take a new government in India by

late H1CY14.

Inflation

Headline WPI suffers fresh ERPT pangs as estimates show that

every 10% depreciation adds 92bps (RBI estimates even higher

at 120bps) on the headline.

The lead and lag of primary to manufacturing inflation may

result in trajectory reversal of the later owing to ERPT

pressures.

14


India business cycle In search of fresh trough amidst a very weak capex momentum

5.6

5.7

6.4

5.6 5.6

5.8

FY

14

G

eo

wth

est

. (%

)

Ela

ra e

st

RB

I

PM

EA

C

Co

nse

nsu

s

IMF

AD

B

Growth consensus heads southwards

Yo

Y g

row

th (

%)

2000 2002 2004 2006 2008 2010 2012

(10)

(5)

0

5

10

15

20

Eco

no

my


India FDI reforms July 2013

15


India reforms process Crisis-led reforms not a lever in short-run business cycle

Sector Current

limit Proposed

limit Automatic

route FIPB route

Telecommunications 74% 100% Up to 49% 49%-100%

Insurance 26% 49% Full -

Oil refining 49% 49% Full

Asset reconstruction 74% 100% Full 49%-100%

Single-brand retail 100% 100% Full 49%-100%

Courier services 100% 100% Full -

Defence production* 26% 26% Full -

Credit information com 49% 74% Full -

Tea plantations** - 100% Up to 49% 49%-100%

Power exchanges 49% 49% Full -

Public-owned oil refineries 49% 49% Full -

Stock exchanges 49% 49% Full -

Commodity bourses 49% 49% Full -

Clearing corporations 49% 49% Full -

To create a sustainable avenue for funding CAD, government

came up with a slew of announcements in accordance with

Mayaram Committee recommendations to open up/ease FDI

restriction in 13.

Positive symbolically

The game changer moves, in our view would be shifting various

FDIs from approval to automatic route framework as these would

not have to pass through the corridors of power in New Delhi or

provincial assemblies.

But no trickle down soon

FDI investments are long term money and require a long-term

call on the domestic economy. And at this time, it may not be

fully material given the distressed state of the economy.

Considering the stressed balance sheet of telecom player in

India and the high spectrum costs that have ruined the

telecom industry per se, expectations of entry of new players

to substantially shore up FDI nos. may be a tough ask, after all.

Defense FDI, being a sensitive subject is more of a posturing

exercise and may not effectively materialize after all. But, small

pockets could surprise, may not be in next 1-2 quarters but

certainly when INR attains somewhat stability.

Eco

no

my


Source: RBI, Elara Securities Research

India BoP Forecast (USDbn,%)

FY08 FY09 FY10 FY11 FY12 FY13 FY14E Current Account a.Exports, RBI 166.2 189.0 182.4 250.5 309.8 306.6 324.2

Y/Y% 28.9 13.7 (3.5) 37.3 23.7 (1.0) 5.7 % of GDP 13.4 15.4 13.4 14.6 16.6 16.7 15.8

b.Imports, RBI 257.6 308.5 300.6 381.1 499.5 502.2 523.4 Y/Y% 35.1 19.8 (2.6) 26.8 31.1 0.5 4.2 %to GDP 20.8 25.2 22.0 22.3 26.7 27.3 25.4

c.Exports, Customs 162.9 183.1 178.3 250.8 305.7 300.2 319.2 d.Imports, Customs 249.8 299.3 287.6 369.4 489.1 490.3 520.3

Of which Oil 79.6 91.5 86.8 105.8 155.0 169.0 172.4 Of which Gold 16.7 20.7 28.6 40.5 56.3 53.6 46.3 Non-Oil Non-Gold 153.5 187.1 172.2 223.1 277.8 267.7 301.6

e. Trade balance, RBI (a-b) (91.4) (119.5) (118.2) (130.6) (189.7) (195.6) (199.2) % of GDP (7.4) (9.7) (8.7) (7.6) (10.1) (10.6) (9.7)

f.Trade Balance, Customs (c-d) (86.9) (116.2) (109.3) (118.6) (183.4) (190.1) (201.1) Difference b/w RBI and Customs Data (4.5) (3.3) (8.9) (12.0) (6.3) (5.5) 1.9 g. Invisibles 75.8 90.9 80.0 79.3 111.5 107.8 110.3

Services 39.1 53.4 36.2 44.1 64.1 64.9 69.2 Software Services 36.9 43.7 48.2 50.9 60.9 63.5 67.8

Investment income flows (5.1) (7.1) (8.0) (18.0) (16.0) (21.4) (19.4) Remittances 41.7 44.6 51.8 53.1 63.5 64.3 68.2 Official transfers 0.2 0.2 0.3 0.0 0.0 (0.3) 0.4

I.Current account balance (15.6) (28.6) (38.2) (51.3) (78.2) (87.8) (88.9) % of GDP (1.3) (2.3) (2.8) (3.0) (4.2) (4.8) (4.3)

Capital Account h. FDI (i-ii) 15.9 22.4 18.0 11.8 22.1 19.8 23.8

i.FDI-To India 34.7 41.7 33.1 29.0 33.0 27.0 34.0 ii.FDI-Abroad (18.8) (19.4) (15.1) (17.2) (10.9) (7.1) 10.2

i. Portfolio Investment (FII+ADRs+GDRs) 27.3 (13.9) 32.4 31.5 17.4 27.8 24.1 j. Loans 40.7 8.3 12.4 29.1 19.3 31.1 28.6

External assistance 2.1 2.4 2.9 4.9 2.3 1.0 2.0 Commercial borrowings 22.6 7.9 2.0 12.2 10.3 8.5 11.2 Short-term credit 15.9 (2.0) 7.6 12.0 6.7 21.7 15.4

k. Banking Capital 11.8 (3.2) 2.1 5.0 16.2 16.6 16.1 Of which NRI deposits 0.2 4.3 2.9 3.2 11.9 14.8 15.2

l. Rupee debt service (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.2) m. Other capital 11.0 (4.0) (13.2) (11.0) (6.9) (5.0) 2.5 II.Capital account (h+i+j+k+l+m) 106.5 9.5 51.6 66.3 68.0 90.2 94.9

% of GDP 8.6 0.8 3.8 3.9 3.6 4.9 4.6 III.Errors & Omissions 1.3 1.1 0.0 (3.0) (2.4) 2.7 0.0 Overall balance (I+II+III) 92.2 (18.0) 13.4 12.0 (12.6) 5.1 6.0 Exchange rate

INR/USD-ann. avg. 40.2 45.9 47.4 45.6 47.9 54.5 57.7

Eco

no

my


India government finance

Non-tax revenue

growth at ~33% in a

slowing economy is a

strong assumption

(INR bn) % to GDP 12-month change

FY12Act FY13BE FY13RE FY14BE FY13RE FY14BE 13RE/12Act 14BE/13RE

1 Revenue Receipts 7,514 9,357 8,718 10,564 8.7 9.3 16.0 21.2

2 Tax Revenue (net to centre) 6,298 7,711 7,421 8,841 7.4 7.8 17.8 19.1

3 Non-Tax Revenue 1,217 1,646 1,297 1,723 1.3 1.5 6.6 32.8

4 Capital Receipts (5+6+7) 5,529 5,552 5,590 6,090 5.6 5.4 1.1 8.9

5 Recoveries of Loans 189 117 141 107 0.1 0.1 (25.2) (24.1)

6 Other Receipts (disinvestment) 181 300 240 558 0.2 0.5 32.7 132.5

7 Borrowings and other liabilities 5,160 5,136 5,209 5,425 5.2 4.8 1.0 4.1

8 Total Receipts (1+4) 13,044 14,909 14,308 16,654 14.3 14.6 9.7 16.4

9 Non-Plan Expenditure 8,920 9,699 10,016 11,101 10.0 9.8 12.3 10.8

10 Revenue Account 8,121 8,656 9,197 9,930 9.2 8.7 13.2 8.0

11 Interest Payments 2,732 3,198 3,167 3,707 3.2 3.3 15.9 17.1

13 Subsidies of which 2,179 1,900 2,577 2,311 2.6 2.0 18.3 (10.3)

14 Food 728 750 850 900 0.8 0.8 16.8 5.9

15 Fertilizer 700 609 660 660 0.7 0.6 (5.7) 0.0

16 Fuel 685 436 969 650 1.0 0.6 41.5 (32.9)

17 Others Subsidies 66 105 98 101 0.1 0.1 48.5 3.1

12 Others 3,210 3,558 3,453 3,912 3.4 3.4 7.6 13.3

18 Capital Account 799 1,043 819 1,171 0.8 1.0 2.5 43.0

19 Plan Expenditure 4,124 5,210 4,292 5,553 4.3 4.9 4.1 29.4

20 On Revenue Account 3,337 4,205 3,434 4,433 3.4 3.9 2.9 29.1

21 On Capital Account 787 1,005 858 1,120 0.9 1.0 9.0 30.5

22 Total Expenditure (9+19) 13,044 14,909 14,308 16,654 14.3 14.6 9.7 16.4

23 Revenue Expenditure (10+20) 11,458 12,861 12,631 14,363 12.6 12.6 10.2 13.7

24 Capital Expenditure (18+21) 1,586 2,048 1,677 2,291 1.7 2.0 5.7 36.6

25 Revenue Deficit (23-1) 3,944 3,504 3,913 3,799 3.9 3.3

26 Fiscal Deficit (22-1-5-6) 5,160 5,136 5,209 5,425 5.2 4.8

27 Primary Deficit (26-11) 2,428 1,938 2,042 1,718 2.0 1.5

Humungous target of

disinvestment,

unrealistic in an

election year

Non-plan to grow at

~11% despite all

attempts at juggleries

Subsidies: understated

on food, large deferrals

on fuel will materialise

Plan exp. growth at

29% is substantial

Fiscal deficit has upside

risks of ~20bps in FY13

actuals, FY14BE at

4.9% is for now, only a

number

Source: indiabudget.nic.in

Eco

no

my

Global Fund Flows

Global ETFs; best performers 1 Month

Developed Market Flow Preference The Capital Flow Game Concentrates Further West

Global ETFs; best performers 6 Months


US ETFs accounted for 77% of the flows for the top 15 ETFs

over the last six months. In July they accounted for 83.4% as

the concentration narrowed.

Although there has been some change in complexion in the

top ETFs, we still note half of the top 15 ETFs (in flow terms)

were US centric in July and the trend shows no clear sign of

turning.

The SPDR S&P ETF garnered more flows in July (USD 12 bn)

than it had done in the last 6 months (USD 10.4 bn).

Glo

ba

l F

un

d F

low

s

Source: Bloomberg, Elara Securities Research

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000 SP

DR

S&

P 5

00

iSh

are

s R

uss

ell

20

00

Fin

an

cia

l Se

lect

iSh

are

s H

igh

Yie

ld

Po

we

rsh

are

s Q

QQ

Te

ch

no

log

y S

ele

ct

Ind

ust

. Se

lect

Se

cto

r

iPA

TH

S&

P 5

00

VIX

iSh

are

s M

SC

I E

M

Go

ld M

ine

rs E

TF

iSh

are

s Silv

er

Tru

st

En

erg

y

Se

cto

r SP

DR

Ba

rcla

ys

Hig

h Y

ield

Pro

Sh

are

s U

ltra

VIX

MSC

I Ja

pa

n E

TF

(in

mn

)

0

2,000

4,000

6,000

8,000

10,000

12,000

SP

DR

S&

P 5

00

MSC

I Ja

pa

n E

TF

Fin

an

cia

l Se

lect

iSh

are

s R

uss

ell

20

00

Go

ld M

ine

rs E

TF

Te

ch

no

log

y S

ele

ct

Ind

ust

. Se

lect

Se

cto

r

iPA

TH

S&

P 5

00

VIX

iSh

are

s 2

0yr

Tre

asu

ry

Ult

raSh

ort

S&

P5

00

SP

DR

Do

w J

on

es

Dir

exio

n S

ma

ll C

ap

Pro

Sh

are

s U

ltra

VIX

Pim

co

To

tal R

etu

rn

Co

ns.

Sta

ple

s Se

lect

(in

mn

)

80

90

100

110

120

130

140

150

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

US Japan UK Euro Stocks

Global Indices: Performance (YTD)

Source: Bloomberg, Elara Securities Research Source: Bloomberg, Elara Securities Research

SPDR S&P ETF; performance & fund flows (1 Year)

US ETFs – Key Sectors Continued Strength Broad Based Investor Confidence

Financial Sector ETF: Performance & Fund Flows (1 Year)


Industrial Sector ETF: performance & fund flows (6 months)

20

Glo

ba

l F

un

d F

low

s


(10,000)

(5,000)

0

5,000

10,000

15,000

20,000

25,000

30,000 A

ug

-12

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

(in

mn

)

Fund Flows Performance

Russell Small Cap 2000 ETF: Performance & Fund Flows (1 Year)

(3,000)

(2,000)

(1,000)

0

1,000

2,000

3,000

4,000

5,000

6,000

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

(in

mn

)


(800)

(600)

(400)

(200)

0

200

400

600

800

1,000

Fe

b-1

3

Fe

b-1

3

Ma

r-1

3

Ma

r-1

3

Ap

r-1

3

Ap

r-1

3

Ap

r-1

3

Ma

y-1

3

Ma

y-1

3

Jun

-13

Jun

-13

Jul-1

3

Jul-1

3

(in

mn

)


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

(in

mn

)




MSCI Europe ETF: Performance & Fund Flows (1 Year)

Other Western Markets Steady Europe & Japan; Robust Performance YTD

MSCI Japan ETF: Performance & Fund Flows (1 Year)


European Indices: Healthy Performance (1 Year - Rebased)

Glo

ba

l F

un

d F

low

s


(2,000)

0

2,000

4,000

6,000

8,000

10,000 A

ug

-12

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

(in

mn

)


(2,000)

(1,000)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

(in

mn

)


80

85

90

95

100

105

110

115

120

125

130

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

UK Euro Stocks

Germany France

60

80

100

120

140

160

180

04

-Ja

n-1

3

18

-Ja

n-1

3

01

-Fe

b-1

3

15

-Fe

b-1

3

01

-Ma

r-1

3

15

-Ma

r-1

3

29

-Ma

r-1

3

12

-Ap

r-1

3

26

-Ap

r-1

3

10

-Ma

y-1

3

Emerging Mkt Volatility Europe Volatility US VIX

Global Volatility Profiles: 3-Month (Rebased)



Worst Global ETFs: Fund Outflows (6 Months)

Commodities & Emerging Markets Leading The Way In Short Term Outflows

Worst Global ETFs: Fund Outflows (3 Months)


Commodities Performance (3 Months)

Glo

ba

l F

un

d F

low

s


(16,000) (14,000) (12,000) (10,000)

(8,000) (6,000) (4,000) (2,000)

0 SP

DR

Go

ld S

ha

res

Va

ng

ua

rd F

TSE

EM

iSh

are

s M

SC

I E

M

iSh

are

s Silv

er

Tru

st

Ma

rke

t G

old

Min

ers

FT

SE

A5

0 C

hin

a I

nd

ex

MSC

I B

razi

l C

ap

pe

d

Ma

rke

t Ju

nio

r G

old

Min

iSh

are

s C

hin

a L

arg

e-C

ap

iSh

are

s In

ve

stm

en

t G

rad

e

Ult

raSh

ort

S&

P5

00

iSh

are

s 2

0+

Ye

ar

Bo

nd

iSh

are

s U

S P

refe

rre

d

Da

ily S

ma

ll C

ap

Be

ar

iSh

are

s JP

M U

SD

EM

(in

mn

)

(7,000)

(6,000)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

0

Va

ng

ua

rd F

TSE

EM

SP

DR

Go

ld S

ha

res

iSh

are

s M

SC

I E

M

iSh

are

s Silv

er

Tru

st

iSh

are

s M

SC

I B

razi

l

iSh

are

s In

ve

stm

en

t G

ra

iSh

are

s F

TSE

A5

0 C

hin

a

iSh

are

s U

S P

refe

rre

d

iSh

are

s H

igh

Yie

ld C

or

iSh

are

s 2

0+

Yr

Bo

nd

iSh

are

s C

hin

a

iSh

are

s JP

Mo

rga

n E

M

Ba

rcla

ys

Hig

h Y

ield

iSh

are

s U

S R

ea

l E

sta

te

Ve

cto

rs G

old

Min

ers

(in

mn

)

60

70

80

90

100

110

120

03

-Ma

y-1

3

10

-Ma

y-1

3

17

-Ma

y-1

3

24

-Ma

y-1

3

31

-Ma

y-1

3

07

-Ju

n-1

3

14

-Ju

n-1

3

21

-Ju

n-1

3

28

-Ju

n-1

3

05

-Ju

l-1

3

12

-Ju

l-1

3

19

-Ju

l-1

3

26

-Ju

l-1

3

Gold Silver Aluminium WTI Crude Brent

The two major sources of outflows have undoubtedly been

commodities & Emerging Markets. Over the last 6 months they

have cumulatively accounted for USD 41.3 bn of ETF outflows.

Brazil & China seeing persistent selling along with Gold and

Silver ETFs, accounting for over 40% of the outflows in the last

three months.

Much of these flows have been re-directed into developed

market ETFs (US, Japan, Europe), as shown by slide 2.


Nifty performance vs BRIC peers YTD (re-based to 100)

India - FII Buying On The Decline Markets Seeing Delayed Sell Off


Net FII & DII inflows (MoM)

23

Glo

ba

l F

un

d F

low

s


70

80

90

100

110

120

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

China Brazil Emerging Markets Russia India

4,800

5,000

5,200

5,400

5,600

5,800

6,000

6,200

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Total Flows (FII &DII) FII Flows nifty index

90

100

110

120

130

140

150

160

170

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Au

g-1

3

India US Japan UK Euro Stocks

4,500

4,700

4,900

5,100

5,300

5,500

5,700

5,900

6,100

6,300

(150)

(100)

(50)

0

50

100

150

200

250

300

350

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

FII Flows (20 DMA) FII Support NIFTY INDEX

FII flows (20 DMA) vs Nifty performance (1 Year)

Nifty performance vs Developed Mkts YTD (re-based to 100)



India

Foreign Equity Investments Flows Asian Emerging Markets (inc. Japan)


Glo

ba

l F

un

d F

low

s


Japan Indonesia

Philippines Taiwan Thailand

Sri Lanka Vietnam Dubai

(3,000) (2,000) (1,000)

0 1,000 2,000 3,000 4,000 5,000

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3 (2,500)

(2,000) (1,500) (1,000)

(500) 0

500 1,000 1,500

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3 (5,000)

0

5,000

10,000

15,000

20,000

25,000

30,000

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

(400)

(200)

0

200

400

600

800

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

(5,000) (4,000) (3,000) (2,000) (1,000)

0 1,000 2,000 3,000 4,000

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3 (2,000)

(1,500)

(1,000)

(500)

0

500

1,000

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

(400) (300) (200) (100)

0 100 200 300 400 500

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3 (100)

(50)

0

50

100

150

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3 (20)

(10)

0

10

20

30

40

50

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

The argument for India preference India Losing Short Term Flow Share


Foreign equity investment flows (ex. Japan) – 1 month

Glo

ba

l F

un

d F

low

s


(5,000)

0

5,000

10,000

15,000

20,000

25,000

30,000 In

dia

Ind

on

esi

a

Ph

ilip

pin

es

Ta

iwa

n

Th

aila

nd

Vie

tna

m

Sri

La

nka

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Ind

ia

Ind

on

esi

a

Ph

ilip

pin

es

Ta

iwa

n

Th

aila

nd

Vie

tna

m

Sri

La

nka

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

1,000

1,500

Ind

ia

Ind

on

esi

a

Ph

ilip

pin

es

Ta

iwa

n

Th

aila

nd

Vie

tna

m

Sri

La

nka

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

2,500

3,000

Ind

ia

Ind

on

esi

a

Ph

ilip

pin

es

Ta

iwa

n

Th

aila

nd

Vie

tna

m

Sri

La

nka

Foreign equity investment flows (ex. Japan) – YTD

Foreign equity investment flows (ex. Japan) – 3 Months

Foreign equity investment flows (ex. Japan) – 1 Year



India – The Domestic View Point Large Cap Defensive Names Dominating


Aggregate Open Interest Ratios

26

Turnover Ratios: Largecaps Still Dominating Trade

Glo

ba

l F

un

d F

low

s


52%

56%

60%

64%

68%

72%

0%

20%

40%

60%

80%

100%

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Midcap To Nifty 50 (LHS)

Midcap to all FNO Stocks (LHS)

:Nifty 50 Stocks To All FNO Stocks (RHS)

0%

10%

20%

30%

40%

50%

20%

30%

40%

50%

60%

70%

80%

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Nifty 50 Stocks To All Stocks (LHS) Midcap To Nifty 50 (RHS)

30%

35%

40%

45%

50%

55%

60%

65%

70%

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

PRIVATE PUBLIC

Bank OI: Private vs Public Share

0

1

2

3

4

5

6

7

Au

tos

Pri

va

te B

an

k

PSU

Ba

nk

Ca

p G

oo

ds

Fin

an

cia

ls

FM

CG

IT

Me

tals

Oil

& G

as

Po

we

r &

En

g

Re

al E

sta

te

Te

leco

ms

3 Year Turnover 6 Month Turnover

"Where Is The Liquidity? Stocks with >1% of Total Traded Daily Value"



India – The Domestic View Point Rate Sensitives Continue To Feel The Heat


OI Share – Defensives Vs Rate Sensitives

27

Glo

ba

l F

un

d F

low

s


0%

5%

10%

15%

20%

25%

40%

45%

50%

55%

60%

65%

70%

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Rate Sensitives (RHS) Defensives (LHS)

0%

4%

8%

12%

16%

20%

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

Real Estate Power/Eng Metals Oil and gas

OI Share – High Beta Sectors

0.0%

0.5%

1.0%

1.5%

2.0%

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

GAIL NMDC HNDL BHEL SESA

Key Nifty Rate Sensitives: Turnover Share Declining

0%

2%

4%

6%

8%

10%

12%

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Jun

-13

Jul-1

3

RIL HDFCB HDFC SUNP HUVR ITC

Key Nifty Defensives: Turnover Share Increasing



Open Interest Share: Sector-wise High Beta Counters Losing Out


Sector OI Share: 6 Months

28

Sector OI Share: Current

Glo

ba

l F

un

d F

low

s


Sector OI Share: 1 Year

Sector OI Share: 3 Months



Banks 24.33%

Auto 7.96%

Metals 8.13%

Power/Eng 9.37%

Oil and gas 6.22%

Pharma 4.89%

Telecom 3.13%

IT 12.30%

Cement 2.24%

FMCG 6.24%

Infra 1.80%

Real Estate 2.51%

Media 1.06%

Misc. 9.79%

Banks 23.83%

Auto 7.05%

Metals 10.89%

Power/Eng 13.74%

Oil and gas 7.81%

Pharma 3.76%

Telecom 2.72%

IT 7.88%

Cement 2.33%

FMCG 5.94%

Infra 2.49%

Real Estate 3.08%

Media 0.78%

Misc. 7.72%

Banks 22.69%

Auto 5.65%

Metals 12.00%

Power/Eng 15.16%

Oil and gas 8.46%

Pharma 4.95%

Telecom 2.70%

IT 5.99%

Cement 3.02%

FMCG 6.20%

Infra 2.64%

Real Estate 3.28%

Media 0.89%

Misc. 6.37%

Banks 29.40%

Auto 6.23%

Metals 15.12%

Power/Eng 14.42%

Oil and gas 6.00%

Pharma 2.06%

Telecom 2.82%

IT 8.33%

Cement 2.69%

FMCG 4.26%

Infra 1.61%

Real Estate 2.01%

Media 0.37%

Misc. 4.68%

Global Markets

Nifty weekly

Medium-term trends BRICs Under Pressure

Brazil Bovespa weekly


Shanghai composite weekly

Russia MICEX weekly

30

Glo

ba

l M

ark

ets


Medium-term trends Developed Market Bullish Trends


S&P 500 weekly Nikkei weekly

Eurostoxx Weekly

Glo

ba

l M

ark

ets


Dollar Index weekly



Medium-term trends MSCI EM, India Volatility, Brent Crude


MSCI Emerging Markets Weekly India Volatility weekly

Brent Crude Weekly

Glo

ba

l M

ark

ets


Index Returns



India China Brazil Russia EURO

Stoxx Japan US

1 Month

Return (5.7) 2.1 4.9 1.3 7.0 (3.4) 4.0

YTD

Return (6.3) (9.7) (22.2) (7.7) 8.3 33.0 19.0

1 Year

Return 3.6 (5.0) (17.8) (6.2) 16.9 57.0 21.1

FII & DII Shareholding Patterns A Look At Defensives


Hindustan Unilever Sun Pharmaceuticals

HCL Technologies

Glo

ba

l M

ark

ets


Ultratech Cement



0

100

200

300

400

500

600 M

ar-

08

Jul-0

8

No

v-0

8

Ma

r-0

9

Jul-0

9

No

v-0

9

Ma

r-1

0

Jul-1

0

No

v-1

0

Ma

r-1

1

Jul-1

1

No

v-1

1

Ma

r-1

2

Jul-1

2

No

v-1

2

Ma

r-1

3

(in

mn

)

Domestic Institutional Investors Foreign Institutional Investors

0

50

100

150

200

250

Ma

r-0

8

Jul-0

8

No

v-0

8

Ma

r-0

9

Jul-0

9

No

v-0

9

Ma

r-1

0

Jul-1

0

No

v-1

0

Ma

r-1

1

Jul-1

1

No

v-1

1

Ma

r-1

2

Jul-1

2

No

v-1

2

Ma

r-1

3

(in

mn

)


0

20

40

60

80

100

120

140

160

180

Ma

r-0

8

Jul-0

8

No

v-0

8

Ma

r-0

9

Jul-0

9

No

v-0

9

Ma

r-1

0

Jul-1

0

No

v-1

0

Ma

r-1

1

Jul-1

1

No

v-1

1

Ma

r-1

2

Jul-1

2

No

v-1

2

Ma

r-1

3

(in

mn

)


0

10

20

30

40

50

60

Ma

r-0

8

Jul-0

8

No

v-0

8

Ma

r-0

9

Jul-0

9

No

v-0

9

Ma

r-1

0

Jul-1

0

No

v-1

0

Ma

r-1

1

Jul-1

1

No

v-1

1

Ma

r-1

2

Jul-1

2

No

v-1

2

Ma

r-1

3

(in

mn

)


FII & DII Shareholding Patterns A Look At Defensives


Idea Telecom Cipla Pharmaceuticals

Lupin Pharmaceuticals

Glo

ba

l M

ark

ets



0

100

200

300

400

500

600

Ma

r-0

8

Jul-0

8

No

v-0

8

Ma

r-0

9

Jul-0

9

No

v-0

9

Ma

r-1

0

Jul-1

0

No

v-1

0

Ma

r-1

1

Jul-1

1

No

v-1

1

Ma

r-1

2

Jul-1

2

No

v-1

2

Ma

r-1

3

(in

mn

)


0

50

100

150

200

250

Ma

r-0

8

Jul-0

8

No

v-0

8

Ma

r-0

9

Jul-0

9

No

v-0

9

Ma

r-1

0

Jul-1

0

No

v-1

0

Ma

r-1

1

Jul-1

1

No

v-1

1

Ma

r-1

2

Jul-1

2

No

v-1

2

Ma

r-1

3

(in

mn

)


0

20

40

60

80

100

120

140

160

Ma

r-0

8

Jul-0

8

No

v-0

8

Ma

r-0

9

Jul-0

9

No

v-0

9

Ma

r-1

0

Jul-1

0

No

v-1

0

Ma

r-1

1

Jul-1

1

No

v-1

1

Ma

r-1

2

Jul-1

2

No

v-1

2

Ma

r-1

3

(in

mn

)


Rating Watch - Post Q1FY14

Upgrade/Downgrade R

ati

ng

Wa

tch

36 Elara Securities (India) Private Limited

Preview Q1FY14 Review Q1FY14

Name of company Bloomberg

Code

CMP

12 Aug 2013

Current Mkt

Cap (INR mn)

Target

Price Recomm.

Target

Price Recomm. Revision %

Upside/

Downside %

IndusInd Bank IIB IN Equity 373 195,399 475 Reduce 487 Buy 2 31

Godrej Consumer GCPL IN Equity 862 293,454 879 Accumulate 756 Sell (14) (12)

Marico MRCO IN Equity 203 130,771 196 Sell 222 Accumulate 13 9

JK Paper CPM IN Equity 25 3,436 39 Accumulate 30 Reduce (23) 19

Cadilla healthcare CDH IN Equity 691 141,430 812 Reduce 757 Accumulate (7) 10

Ranbaxy RBXY IN Equity 367 155,289 306 Sell 332 Accumulate 9 (9)

Bharti Airtel BHARTI IN Equity 342 1,366,311 303 Reduce 378 Accumulate 25 10

Idea Cellular IDEA IN Equity 163 542,027 105 Reduce 170 Accumulate 62 4


Target price change R

ati

ng

Wa

tch


Preview Review

Company

CMP

12 Aug

2013

Target

Price Recomm.

Target

Price Recomm.

Revision

%

Up/

Downside %

Automobiles

Hero Motocorp 1,907 2,300 Buy 2,250 Buy (2) 18

Bajaj Auto 1,808 1,869 Reduce 1,895 Reduce 1 5

TVS Motors 32 44 Accumulate 43 Buy (2) 33

Maruti Suzuki 1,380 2,023 Buy 1,840 Buy (9) 33

M & M 861 966 Reduce 903 Reduce (7) 5

Tata Motors 281 340 Accumulate 340 Accumulate 0 21

Banking

Axis Bank 1,070 1,672 Buy 1,520 Buy (9) 42

Bank of India 177 301 Buy 261 Buy (13) 48

Canara Bank 247 454 Buy 309 Buy (32) 25

HDBK 602 758 Accumulate 758 Buy 0 26

ICBN 867 1,469 Buy 1,387 Buy (6) 60

IndusInd Bank 373 475 Reduce 487 Buy 2 31

Karur Vysya 338 491 Accumulate 412 Buy (16) 22

OBC 142 289 Accumulate 160 Accumulate (45) 12

PNB 535 826 Buy 772 Buy (7) 44

SBI 1,605 1,950 Reduce 1,553 Reduce (20) (3)

Syndicate Bank 70 135 Buy 97 Buy (28) 39

UBI 119 257 Buy 200 Buy (22) 68

Allahabad Bank 72 110 Accumulate 75 Reduce (32) 4

Andhra Bank 59 100 Accumulate 60 Reduce (40) 1

City Union Bank 45 70 Buy 65 Buy (7) 44

DCB 44 60 Buy 60 Buy 0 37

Dena Bank 47 100 Buy 55 Accumulate (45) 17

J&K bank 1,065 1,800 Buy 1,800 Buy 0 69

Indian Bank 70 180 Buy 80 Accumulate (56) 14

Cement

JK Lakshmi 62 155 Buy 112 Buy (28) 79

JK Cement 174 340 Buy 290 Buy (15) 67

Shree Cement 3,922 5,000 Accumulate 5,065 Accumulate 1 29

India Cements 44 95 Buy 52 Accumulate (45) 17

ACC 1,168 1,365 Accumulate 1,270 Accumulate (7) 9

Ambuja 179 182 Reduce 163 Sell (10) (9)

UltraTech 1,689 2,175 Accumulate 2,175 Accumulate 0 29

Grasim Ind. 2,409 3,485 Accumulate 3,026 Accumulate (13) 26

FMCG

HUL 616 534 Sell 537 Sell 1 (13)

ITC 336 361 Accumulate 399 Accumulate 11 19

GSK consumer 3,969 3,948 Sell 4,333 Reduce 10 9

Colgate 1,328 1,301 Sell 1,371 Reduce 5 3

GCPL 862 879 Accumulate 756 Sell (14) (12)

Dabur 167 173 Accumulate 187 Accumulate 8 12

Marico 203 196 Sell 222 Accumulate 13 9

Zydus Wellnes 571 729 Accumulate 605 Accumulate (17) 6

Jyothy Labs 169 221 Accumulate 208 Buy (6) 23

Hospitality

EIH 48 65 Accumulate 57 Buy (12) 17

IHCL 43 56 Accumulate 55 Buy (2) 29

Preview Review

Company

CMP

12 Aug

2013

Target

Price Recomm.

Target

Price Recomm.

Revision

%

Up/

Downside %

Infrastructure

HCC 11 13 Accumulate 13 Buy 0 22

IRB 72 158 Buy 145 Buy (8) 103

ITNL 126 260 Buy 226 Buy (13) 79

NCC 20 42 Buy 42 Buy 0 108

Sadbhav 70 121 Accumulate 121 Accumulate 0 73

Larsen & Toubro 798 1,051 Accumulate 980 Accumulate (7) 23

MBL Infra 83 211 Buy 176 Buy (17) 112

Media

Dish TV 47 90 Buy 75 Buy (16) 61

Sun TV 405 525 Buy 525 Buy 0 30

Zee Ent. 243 290 Buy 305 Buy 5 26

Metals

Hindalco Ind. 94 80 Sell 74 Sell (8) (21)

Hindustan Zinc 104 148 Buy 148 Buy 0 42

Sterlite Ind 79 103 Accumulate 94 Accumulate (8) 20

JSW Steel 517 652 Sell 513 Sell (21) (1)

Tata Steel 237 405 Buy 405 Buy 0 71

Sesa Goa 135 171 Accumulate 147 Accumulate (14) 9

Coal India 274 378 Accumulate 331 Buy (13) 21

GMDC 93 214 Buy 131 Buy (39) 41

Midcap

Piramal Glass 98 108 Buy 90 Buy (16) (8)

TTK Prestige 3,658 3,340 Buy 3,050 Buy (9) (17)

ENIL 228 300 Buy 300 Buy 0 32

Navneet Pub 54 80 Buy 80 Buy (0) 48

Paper

TNPL 90 180 Buy 155 Buy (14) 72

JK Paper 25 39 Accumulate 30 Reduce (23) 19

Pharmaceuticals

Cadilla Healthcare 691 812 Reduce 757 Accumulate (7) 10

Cipla 416 457 Accumulate 478 Accumulate 4 15

Dr. Reddy's 2,181 2,545 Buy 2,685 Buy 5 23

Divi's Lab 1,008 1,293 Buy 1,208 Buy (7) 20

Lupin 820 936 Accumulate 935 Accumulate (0) 14

Ranbaxy 367 306 Sell 332 Accumulate 9 (9)

Sun Pharma 542 1,110 Accumulate 592 Accumulate (47) 9

Print Media

DB Corp 253 270 Accumulate 285 Accumulate 6 13

Hindustan Media 121 162 Buy 162 Buy 0 34

Jagran Prakashan 90 123 Buy 125 Buy 2 40

HT Media 97 140 Buy 140 Buy (0) 44

Telecom

Bharti Airtel 342 303 Reduce 378 Accumulate 25 10

Idea Cellular 163 105 Reduce 170 Accumulate 62 4

Tours & Travels

Mahindra Holidays 221 299 Accumulate 294 Accumulate (2) 33

Source: Elara Securities Research

Sales growth R

ati

ng

Wa

tch


No. Name of company Bloomberg Code CMP

12 August 2013

Current Mkt Cap

(INR mn) Q1FY13 Q1FY14A Growth(%)

1 Sun TV Network SUNTV IN Equity 405 159,663 4,258 6,019 41.4

2 IndusInd Bank IIB IN Equity 373 195,399 4,841 6,795 40.4

3 City Union Bank CUBK IN Equity 45 24,126 1,379 1,874 35.8

4 Sadbhav SADE IN Equity 70 10,544 4,215 5,632 33.6

5 Axis Bank AXSB IN Equity 1,070 502,013 21,799 28,652 31.4

6 Sun pharma SUNP IN Equity 542 1,121,066 26,581 34,822 31.0

7 Karur Vysya Bank KVB IN Equity 338 36,275 2,539 3,319 30.7

8 Development Credit Bank DEVB IN Equity 44 10,931 639 831 30.0

9 HDFC Bank HDFCB IN Equity 602 1,438,872 34,841 44,187 26.8

10 Bank of India BOI IN Equity 177 105,207 20,436 25,370 24.1

Companies with High Sales growth

Companies with Low Sales growth


12 August 2013

Current Mkt Cap


1 Sesa Goa SESA IN Equity 135 117,546 17,326 3,780 (78.2)

2 GMDC GMDC IN Equity 93 29,717 4,965 3,701 (25.5)

3 Sterlite Ind STLT IN Equity 79 264,316 106,484 82,491 (22.5)

4 Ranbaxy RBXY IN Equity 367 155,289 31,741 26,332 (17.0)

5 JK Lakshmi JKLC IN Equity 62 7,343 5,334 4,569 (14.3)

6 JK Cement JKCE IN Equity 174 12,168 7,356 6,574 (10.6)

7 Ambuja ACEM IN Equity 179 276,107 25,660 23,457 (8.6)

8 ITNL ILFT IN Equity 126 24,546 15,796 14,511 (8.1)

9 Andhra Bank ANDB IN Equity 59 33,239 9,385 8,739 (6.9)

10 NCC NJCC IN Equity 20 5,170 14,720 13,792 (6.3)


EBITDA growth R

ati

ng

Wa

tch



12 August 2013

Current Mkt Cap


1 HCC HCC IN Equity 11 6,460 690 2,012 191.6

2 DB Corp DBCL IN Equity 253 46,408 765 1,328 73.7

3 Hindustan Media Ventures HMVL IN Equity 121 8,881 260 397 52.8

4 ENIL ENIL IN Equity 228 10,883 201 299 48.5

5 Maruti Suzuki MSIL IN Equity 1,380 416,931 7,864 11,662 48.3

6 Sadbhav SADE IN Equity 70 10,544 391 578 47.8

7 Idea Cellular IDEA IN Equity 163 542,027 14,355 20,763 44.6

8 Lupin LPC IN Equity 820 367,227 4,576 5,895 28.8

9 Jagran Prakashan JAGP IN Equity 90 29,723 788 1,013 28.5

10 Cipla CIPLA IN Equity 416 333,614 5,500 6,923 25.9

Companies with High EBITDA growth

Companies with Low EBITDA growth

No. Name of company Bloomberg Code

CMP

12 August 2013

Current Mkt Cap


1 Sesa Goa SESA IN Equity 135 117,546 6,564 (428) (106.5)

2 Ranbaxy RBXY IN Equity 367 155,289 5,113 2,624 (48.7)

3 GSK Pharmaceuticals GLXO IN Equity 2,285 193,559 2,127 1,222 (42.6)

4 JK Lakshmi JKLC IN Equity 62 7,343 1,218 702 (42.3)

5 JK Cement JKCE IN Equity 174 12,168 1,565 914 (41.6)

6 GMDC GMDC IN Equity 93 29,717 2,685 1,714 (36.2)

7 ACC ACC IN Equity 1,168 219,362 6,508 4,335 (33.4)

8 Ambuja ACEM IN Equity 179 276,107 7,223 4,920 (31.9)

9 India Cements ICEM IN Equity 44 13,608 2,777 1,910 (31.2)

10 Dish TV DITV IN Equity 47 49,517 1,556 1,217 (21.8)


PAT growth R

ati

ng

Wa

tch



12 August 2013

Current Mkt Cap


1 Development Credit Bank DEVB IN Equity 44 10,931 189 428 126.5

2 Idea Cellular IDEA IN Equity 163 542,027 2,341 5,227 123.2

3 Tata Steel TATA IN Equity 237 229,741 5,979 11,213 87.5

4 DB Corp DBCL IN Equity 253 46,408 459 792 72.6

5 Glenmark Pharmaceuticals GNP IN Equity 552 149,531 783 1,287 64.4

6 Hindustan Media Ventures HMVL IN Equity 121 8,881 193 303 56.7

7 ENIL ENIL IN Equity 228 10,883 130 199 53.6

8 Maruti Suzuki MSIL IN Equity 1,380 416,931 4,238 6,316 49.0

9 Torrent Pharmaceuticals TRP IN Equity 418 70,655 1,019 1,490 46.3

10 Lupin LPC IN Equity 820 367,227 2,804 4,011 43.0

Companies with High PAT growth

Companies with Low PAT growth

No. Name of company Bloomberg Code

CMP

12 August 2013

Current Mkt Cap


1 Sun pharma SUNP IN Equity 542 1,121,066 7,956 (12,761) (260.4)

2 JK Paper CPM IN Equity 25 3,436 141 14 (90.2)

3 India Cements ICEM IN Equity 44 13,608 748 160 (78.7)

4 Sadbhav SADE IN Equity 70 10,544 524 161 (69.3)

5 JK Lakshmi JKLC IN Equity 62 7,343 503 157 (68.8)

6 Sesa Goa SESA IN Equity 135 117,546 11,499 4,937 (57.1)

7 JK Cement JKCE IN Equity 174 12,168 689 309 (55.2)

8 JSW Steel JSTL IN Equity 517 125,067 3,981 2,214 (44.4)

9 ACC ACC IN Equity 1,168 219,362 4,179 2,591 (38.0)

10 NCC NJCC IN Equity 20 5,170 166 105 (36.7)


EPS - Upgrade/Downgrade R

ati

ng

Wa

tch


Name of company Bloomberg Code CMP

12 August 2013

Current Mkt Cap

(INR mn) FY14E FY14R Q1 Revision %

EPS Upgrade - FY14E

Hindustan Media Ventures HMVL IN Equity 121 8,881 12.2 14.9 22

Idea Cellular IDEA IN Equity 163 542,027 4.8 5.7 17

DB Corp DBCL IN Equity 253 46,408 14.4 16.4 14

IRB IRB IN Equity 72 23,797 11.2 12.7 13

Jyothy Labs JYL IN Equity 169 28,041 6.7 7.5 12

EPS Downgrade - FY14E

Piramal Glass PIRA IN Equity 98 7,950 9.5 5.2 (45)

Sun pharma SUNP IN Equity 542 1,121,066 37.5 20.8 (45)

Sesa Goa SESA IN Equity 135 117,546 37.5 22.2 (41)

India Cements ICEM IN Equity 44 13,608 9.2 6.1 (33)

Oriental Bank of Commerce OBC IN Equity 142 41,561 43.2 29.2 (32)

Name of company Bloomberg Code CMP

12 August 2013

Current Mkt Cap

(INR mn) FY15E FY15R Q1 Revision %

EPS Upgrade - FY15E

Idea Cellular IDEA IN Equity 163 542,027 5.9 9.7 64

Hindustan Media Ventures HMVL IN Equity 121 8,881 13.5 16.2 20

ENIL ENIL IN Equity 228 10,883 20.0 22.8 14

Bharti Airtel BHARTI IN Equity 342 1,366,311 17.2 19.0 11

Bajaj Auto BJAUT IN Equity 1,808 523,060 128.2 135.3 6

EPS Downgrade - FY15E

Sun pharma SUNP IN Equity 542 1,121,066 46.3 24.7 (47)

Piramal Glass PIRA IN Equity 98 7,950 13.8 7.9 (43)

Oriental Bank of Commerce OBC IN Equity 142 41,561 50.6 31.0 (39)

India Cements ICEM IN Equity 44 13,608 11.0 7.8 (29)

Syndicate Bank SNDB IN Equity 70 41,986 23.8 17.2 (28)


Relative Returns

Market leadership missing R

ela

tiv

e R

etu

rns


CMP as on 14 August 2013

Last Price 1 month 3 month 6 month 1 year 2 year 3 year

SENSEX Index 19,380 (2.9) (1.7) (0.6) 9.3 15.1 6.7

BSE100 Index 5,727 (4.3) (4.7) (3.3) 6.7 11.2 1.6

BSE200 Index 2,279 (4.7) (5.7) (4.6) 4.9 8.4 (1.9)

BSE500 Index 7,012 (4.8) (6.2) (5.5) 3.4 5.8 (4.6)

NIFTY Index 5,743 (4.4) (4.2) (2.6) 6.7 13.2 5.3

NIFTYJR Index 11,322 (5.2) (8.1) (4.4) 10.6 9.5 (4.7)

CNX100 Index 5,637 (4.5) (4.8) (2.9) 7.3 12.5 3.6

CNX500 Index 4,393 (5.1) (6.6) (5.5) 3.7 6.6 (4.0)

BSEMDCAP Index 5,592 (7.6) (13.5) (15.4) (9.0) (14.2) (26.8)

BSESMCAP Index 5,388 (6.1) (11.9) (18.2) (18.3) (29.3) (44.5)

NIFTYM50 Index 1,852 (4.9) (12.0) (13.5) (12.6) (17.7) (34.7)

CNXMCAP Index 6,961 (6.7) (12.2) (11.8) (4.7) (8.2) (20.1)

BSEAUTO Index 10,870 2.8 (1.3) 0.7 15.4 27.4 23.9

BANKEX Index 11,423 (14.6) (20.6) (19.1) (5.3) (1.8) (6.3)

BSETCG Index 7,661 (19.6) (21.4) (21.6) (23.8) (37.0) (47.8)

BSETMCG Index 6,742 (3.0) 1.2 16.2 28.5 72.5 105.6

BSETHC Index 9,125 (2.8) 2.8 15.2 25.3 50.9 65.4

BSET Index 7,620 11.6 27.7 17.0 36.7 52.3 38.2

BSEMETL Index 7,354 (5.1) (14.6) (25.8) (30.9) (40.2) (52.1)

BSEOIL Index 8,586 (2.4) (1.5) (4.6) 1.4 2.0 (15.3)

BSEPOWR Index 1,462 (12.1) (16.7) (19.5) (25.7) (36.0) (53.2)

BSETPSU Index 5,433 (8.9) (20.1) (25.5) (24.4) (32.4) (43.9)

BSEREAL Index 1,344 (11.4) (28.5) (34.0) (19.1) (25.6) (63.4)

BSETECK Index 4,378 10.2 21.5 15.6 36.2 38.1 27.2

CNXBANK Index 10,036 (14.4) (20.2) (18.5) (4.6) (1.4) (6.5)

CNXIT Index 7,952 9.7 25.7 15.2 33.9 46.8 30.0

DOLL100 Index 964 (6.4) (14.9) (15.2) (3.3) (17.8) (22.7)

DOLLEX Curncy 618 (6.7) (15.8) (16.3) (4.8) (19.8) (25.4)

DEFTY Index 3,215 (7.5) (15.5) (15.2) (3.9) (17.0) (20.5)

Source: Bloomberg

Model Portfolio

Positive Comments Negative Comments

Automobiles Good monsoons, currency tailwinds,

trough valuations, margin expansion

Cement Two-quarter weakness on demand slowdown,

monsoon

Consumption Good monsoons, Macro, Demographics,

Regulation, PE multiple expansion

Financials NPA cycle prolonged, credit off take weak,

interest rate cycle pushed out

Oil & Gas

INR depreciation peaking out, Diesel Price

Hikes, Crude, Re-pricing of Gas

Infrastructure Contraction phase, deleveraging, few options

Pharma India seeing cyclical slowdown,

Concentrated plays, Regulatory risk

Metals End prices soft, demand weak

Power Utilities Movement in tariff negotiations, Gas

resolution, Merchant rates uptick, Coal

prices

Capital Goods Weak investment cycle, order book visibility

weak

Technology Strong US recovery, Reasonable

valuations, margin levers

Telecom Non-remunerative business models, regulatory

overhang, Return of Reliance

Sector Framework M

od

el

Po

rtfo

lio


Key sector weights M

od

el

Po

rtfo

lio

46

Sector Overweight/

Underweight bps

Nifty

weights

Elara

weights

Auto Overweight 112 8.4 9.5

Consumers Overweight 299 14.0 17.0

IT Services Overweight 216 11.0 13.2

Oil & Gas Overweight 200 12.0 14.0

Pharma Overweight 189 5.6 7.5

Power & CG Overweight 46 4.3 4.8

Others Overweight 225 0.0 2.3

Cement Underweight (74) 3.2 2.5

Financials Underweight (465) 30.7 26.0

Infra Underweight (336) 4.4 1.0

Metals Underweight (184) 4.1 2.3

Real Estate Underweight (40) 0.4 0.0

Telecom Underweight (188) 1.9 0.0

Sector Nifty

Stocks#

Elara Stocks# Elara Model

Stocks# Nifty Non Nifty

Auto 5 4 0 4

Cement 4 1 1 2

Consumers 3 2 2 4

Financials 10 6 1 7

Infra 2 0 1 1

IT Services 3 3 2 5

Metals 6 2 0 2

Oil & Gas 5 3 1 4

Pharma 5 4 0 4

Power & CG 5 2 1 3

Real Estate 1 0 0 0

Telecom 1 0 0 0

Others 0 0 1 1

Total 50 27 10 37

# No, of stocks


Sector Overweight/Underweight Elara weights

(18 Jun,2013)

Elara weights

(13Aug, 2013) bps change

Weight Up/

Down

Auto Overweight 9.5 9.5 0 n

Consumers Overweight 16.5 17.0 50 h

IT Services Overweight 13.2 13.2 0 n

Oil & Gas Overweight 14.0 14.0 0 n

Pharma Overweight 7.0 7.5 50 h

Power & CG Overweight 4.8 4.8 0 n

Others Overweight 2.5 2.3 (25) i

Cement Underweight 3.5 2.5 (100) i

Financials Underweight 26.8 26.0 (75) i

Infra Underweight 1.0 1.0 0 n

Metals Underweight 1.3 2.3 100 h

Real Estate Underweight 0.0 0.0 0 n

Telecom Underweight 0.0 0.0 0 n


Model portfolio

Mo

de

l P

ort

foli

o


Company Nifty Elara Price as on

weights Weights 13-Aug-13

NIFTY Index 5699

Bajaj Auto 1.3 1,859

Hero Motocop 0.9 2.5 1,943

Mahindra & Mahindra 2.3 1.0 874

Maruti Suzuki 1.1 2.0 1,397

Tata Motors 2.9 4.0 291

Auto Total Overweight 8.4 9.5

ACC 0.6 1,161

Ambuja 0.7 174

Grasim 0.9 0.9 2,442

Shree Cement - 1.6 3,947

UltraTech Cement 1.0 1,696

Cement Total Underweight 3.2 2.5

Hindustan Unilever 3.2 3.5 622

ITC 9.7 9.5 334

Dabur 1.5 172

Zee 2.5 249

Asian Paints 1.2 440

Consumers Total Overweight 14.0 17.0

Bank of Baroda 0.6 520

Axis Bank 2.3 2.0 1,143

HDFC 7.2 5.0 792

HDFC Bank 6.7 7.0 621

ICICI Bank 6.9 6.5 893

IDFC 0.9 112

IndusInd Bank 1.1 384

Kotak Mahindra Bank 1.5 2.0 659

PNB 0.6 539

State Bank of India 2.7 2.0 1,620

J&K Bank 1.5 1,050

Financials Total Underweight 30.7 26.0

JP Associates 0.4 33

L&T 3.9 804

ITNL 1.0 127

Company Nifty Elara Price as on

weights Weights 13-Aug-13

Infra Total Underweight 4.4 1.0

HCL Technologies 1.0 2.0 941

Infosys 6.1 5.0 3,084

TCS 4.0 3.5 1,820

Tech Mahindra 1.5 1,331

Wipro 1.2 468

IT Services Total Overweight 11.0 13.2

Hindalco 0.7 91

Jindal Steel 0.6 226

Sesa Goa 0.3 136

Tata Steel 1.0 1.0 241

Coal India 1.1 1.3 269

NMDC 0.5 109

Metals Total Underweight 4.1 2.3

BPCL 0.5 1.5 286

Oil India 1.0 475

Cairn 0.9 298

GAIL 0.7 309

ONGC 3.0 3.0 275

Reliance Ind. 6.9 8.5 853

Oil & Gas Total Overweight 12.0 14.0

Cipla 1.0 2.0 425

Dr Reddys 1.4 2.0 2,238

Ranbaxy 0.3 398

Sun Pharma 2.0 2.0 547

Lupin 0.9 1.5 839

Pharma Total Overweight 5.6 7.5

BHEL 0.8 121

NTPC 1.7 1.5 144

Power Grid 0.8 1.3 96

Reliance Infra. 0.3 363

Reliance Power 2.0 75

Tata Power 0.7 76

Power & CG Total Overweight 4.3 4.8

DLF 0.4 0.0 150

Real Estate Total Underweight 0.4 0.0

Bharti Airtel 1.9 0.0 346

Telecom Total Underweight 1.9 0.0

Rallis India 0 2.3 145

Others Overweight 0 2.3

Total 100.0 100.0

Source: NSE, Elara Securities Research

Model portfolio performance

Mo

de

l P

ort

foli

o


(100)

(50)

0

50

100

150

200

250 1

8-J

un

-13

23

-Ju

n-1

3

28

-Ju

n-1

3

3-J

ul-1

3

8-J

ul-1

3

13

-Ju

l-1

3

18

-Ju

l-1

3

23

-Ju

l-1

3

28

-Ju

l-1

3

2-A

ug

-13

7-A

ug

-13

12

-Au

g-1

3

bp

s

EMP Outperformance


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Disclaimer for U.S. Investors

India Elara Securities (India) Pvt. Ltd. Indiabulls Finance Centre, Tower 3, 21st Floor, Senapati Bapat Marg, Elphinstone Road (West) Mumbai – 400 013, India

Tel : +91 22 3032 8500

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Tel : +4420 7486 9733

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New York, NY 10022, USA Tel :212-430-5870

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Tel : +65 6536 6267

Team Details

Harendra Kumar Managing Director [email protected] +91 22 3032 8571

Sales

Anuja Sarda London +44 77 3819 6256 [email protected] +44 20 7299 2577

Amit Mamgain India +91 98676 96661 [email protected] +91 22 3032 8543

Himani Singh India +91 99875 56244 [email protected] +91 22 3032 8501

Manan Thakkar India +91 98193 81181 [email protected] +91 22 3032 8542

Prashin Lalvani India +91 98334 77685 [email protected] +91 22 3032 8544

Sales Trading & Dealing

Manan Joshi India +91 98704 72678 [email protected] +91 22 3032 8555

Manoj Murarka India +91 99675 31422 [email protected] +91 22 3032 8551

Vishal Thakkar India +91 98694 07973 [email protected] +91 22 3032 8552

Research

Aarthisundari Jayakumar Analyst Pharmaceuticals [email protected] +91 22 3032 8510

Abhinav Bhandari Analyst Construction, Infrastructure [email protected] +91 22 3032 8507

Aliasgar Shakir Analyst Mid caps & Telecom [email protected] +91 22 3032 8516

Ashish Kejriwal Analyst Metals & Mining [email protected] +91 22 3032 8505

Ashish Kumar Economist [email protected] +91 22 3032 8536

Aashish Upganlawar Analyst FMCG [email protected] +91 22 3032 8546

Deepak Agrawala Analyst Power and Capital Goods [email protected] +91 22 3032 8523

Henry Burrows Analyst Derivative Strategist [email protected] +91 22 3032 8554

Mohan Lal Analyst Media , Automobiles [email protected] +91 22 3032 8502

Mona Khetan, FRM Analyst Banking & Financials, Strategy [email protected] +91 22 3032 8514

Rakesh Kumar Analyst Banking & Financials [email protected] +91 22 3032 8559

Ravi Sodah Analyst Cement [email protected] +91 22 3032 8517

Sumant Kumar Analyst Travel & Hospitality, Paper [email protected] +91 22 3032 8503

Pooja Sharma Associate Automobiles [email protected] +91 22 3032 8519

Stuart Murray Associate Oil & Gas [email protected] +91 22 3032 8568

India strategy elara securities - august 2013

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