Market Outlook
May 23, 2018
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are likely to open negative tracking global indices and SGX Nifty.
BSE Sensex
0.1
35
34,651
U.S. Stocks fell on Tuesday, unable to sustain positive momentum from the previous
Nifty
0.2
20
10,537
session despite overtures from China. China will cut the import tariffs it charges on
Mid Cap
0.7
102
15,738
cars to 15%, which will give a boost to foreign automakers in the world's largest
Small Cap
0.7
111
17,057
market, especially for US automakers. The Dow Jones was down by 0.7% to 24,834
and the Nasdaq closed down by 0.2% to 7,378.
Bankex
0.3
73
28,924
U.K. stocks were modestly higher on Tuesday after a government report showed the
Global Indices
Chg (%)
(Pts)
(Close)
U.K. budget deficit narrowed in April to its lowest level since 2008. Underlying
sentiment remained cautious ahead of the testimony of the Bank of England
Dow Jones
(0.7)
179
24,834
governor Mark Carney to the House of Commons' Treasury Select Committee on the
Nasdaq
(0.2)
16
7,378
latest quarterly inflation report.. The FTSE 100 was up by 0.2% to end at 7,877.
FTSE
0.2
18
7,877
On domestic front, Indian sharesgave up earlier gains to end largely unchanged on
Nikkei
(0.2)
(42)
22,960
Tuesday, tracking mixed global cues. Automakers closed broadly higher after a
Hang Seng
0.6
186
31,234
Bloomberg report that China will cut import duty on passenger cars to 15%.The BSE
Shanghai Com
0.0
1
3,214
Sensex ended largely unchanged at 0.1% to 34,651.
Advances / Declines
BSE
NSE
News Analysis
Advances
1,418
355
After two early Budgets, capital expenditure rises 48% in April
Declines
1,223
1,469
Detailed analysis on Pg2
Unchanged
140
60
Investor’s Ready Reckoner
Key Domestic & Global Indicators
Volumes (` Cr)
Stock Watch: Latest investment recommendations on 150+ stocks
BSE
2,963
Refer Pg5 onwards
NSE
30,180
Top Picks
CMP
Target
Upside
Net Inflows (` Cr)
Net
Mtd
Ytd
Company
Sector
Rating
(`)
(`)
(%)
FII
(100)
(4,952)
8,655
Blue Star
Capital Goods
Buy
707
867
22.6
*MFs
409
8,173
42,632
Dewan Housing Finance
Financials
Buy
608
720
18.5
Parag Milk Food
Others
Buy
323
400
23.8
Navkar Corporation
Others
Buy
154
265
72.3
Top Gainers
Price (`)
Chg (%)
KEI Industries
Capital Goods Accumulate
458
485
5.9
STAR
392
15.0
More Top Picks on Pg4
PCJEWELLER
191
14.9
Key Upcoming Events
BALRAMCHIN
73
11.3
Previous
Consensus
Date
Region
Event Description
NCC
107
9.5
ReadingExpectations
May 23, 2018 Germany PMI Services
53.00
53.00
JPASSOCIAT
16
9.2
May 23, 2018 Euro Zone Euro-Zone Consumer Confidence
0.40
0.40
May 23, 2018 Germany PMI Manufacturing
58.10
57.90
Top Losers
Price (`)
Chg (%)
May 23, 2018 US
New home sales
694.00
679.00
SYMPHONY
1451
-11.2
May 23, 2018 Germany
GDP nsa (YoY)
1.60
1.60
More Events on Pg7
MGL
790
-6.1
EROSMEDIA
122
-4.5
PNBHOUSING
1204
-4.4
JKTYRE
136
-3.5
As on May 22, 2018
Market Outlook
May 23, 2018
News Analysis
After two early Budgets, capital expenditure rises 48% in April
The central government’s capital expenditure (capex) in April 2018 saw a jump of
48 per cent, compared with the same month last year, the consequence of a
second consecutive year of an advanced Budget. The biggest gainers as a result of
this capex boost were the Ministries of Defence, Railways, and Road Transport.
Capex for the first month of 2018-19 was around Rs 430 billion, compared with
nearly Rs 290 billion in April 2017. Overall expenditure, however, dropped from
Rs 2.42 trillion to Rs 2.31 trillion.
Lower carryovers led to a reduced revenue expenditure outlay for the central
government. For April, it was around Rs 1.87 trillion, around Rs 260 billion or 14
per cent lower than Rs 2.13 trillion in April 2017. The official expenditure, revenue,
and fiscal deficit data for April 2018 will be released on May 31. The capex outlay
for the defence ministry jumped a staggering 127 per cent to Rs 148 billion, from
Rs 65 billion for the same period last year, sources said. Railways saw a capex
increase of Rs 20 billion, while the Ministry of Road Transport and Highways was
allocated Rs 70 billion in capital spending, compared to April last year.
Economic and Political News
SBI to sell stake in SBI Gen, SBI Card and SBI Capital soon
Nipah virus may dent India's fruit exports
Odisha plans steel downstream park at Kalinganagar, Tatas keen to invest
Modi, Putin talk multi-nation trade corridor being built by India via Iran
Corporate News
State Bank of India posts record loss of Rs 77 bn in Q4;
Munjal-Burman combine open to idea of rebid for Fortis Healthcare
NCLAT orders status quo on Essar Steel insolvency for two months
Softbank to sell 'entire stake' in Flipkart to Walmart for about $4 billion
Dalmia Bharat won't revise offer, will move NCLAT if UltraTech plan okayed
CCI approves Bayer's $62.5 bn acquisition for US seed major Monsanto
Market Outlook
May 23, 2018
Top Picks
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Strong growth in domestic business due to its
leadership in acute therapeutic segment. Alkem
Alkem Laboratories
22,959
1,920
2,441
27.1
expects to launch more products in USA, which
bodes for its international business.
Favorable outlook for the AC industry to augur well
for Cooling products business which is out pacing
Blue Star
6,787
707
867
22.6
the market growth. EMPPAC division's profitability
to improve once operating environment turns
around.
With a focus on the low and medium income (LMI)
consumer segment, the company has increased its
Dewan Housing Finance
19,059
608
720
18.5
presence in tier-II & III cities where the growth
opportunity is immense.
Well capitalized with CAR of 18.1% which gives
sufficient room to grow asset base. Faster resolution
ICICI Bank
186,926
291
416
43.1
of NPA would reduce provision cost, which would
help to report better ROE.
High order book execution in EPC segment, rising
KEI Industries
3,587
458
485
5.9
B2C sales and higher exports to boost the revenues
and profitability
Expected to benefit from the lower capex
Music Broadcast Limited
1,922
337
475
41.0
requirement and 15 year long radio broadcast
licensing.
Massive capacity expansion along with rail
Navkar Corporation
2,315
154
265
72.3
advantage at ICD as well CFS augur well for the
company
Strong brands and distribution network would boost
Siyaram Silk Mills
2,860
610
851
39.4
growth going ahead. Stock currently trades at an
inexpensive valuation.
After GST, the company is expected to see higher
volumes along with improving product mix. The
Maruti
258,562
8,559
10,619
24.1
Gujarat plant will also enable higher operating
leverage which will be margin accretive.
We expect loan book to grow at 24.3% over next
GIC Housing
2,083
387
655
69.3
two year; change in borrowing mix will help in NIM
improvement
We expect sales/PAT to grow at 13.5%/20% over
LT Foods
2,690
84
128
52.2
next two years on the back of strong distribution
network & addition of new products in portfolio.
Third largest brand play in luggage segment
Increased product offerings and improving
Safari Industries
1,423
640
750
17.2
distribution network is leading to strong growth in
business. Likely to post robust growth for next 3-4
years
We expect HSIL to report PAT CAGR of ~15% over
FY2017-20E owing to better improvement in
HSIL Ltd
2,634
364
510
40.0
operating margin due price hike in container glass
segment, turnaround in consumer business.
Source: Company, Angel Research
Market Outlook
May 23, 2018
Top Picks
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
We expect financialisation of savings and
Aditya Birla Capital
32000
145
230
58.6
increasing penetration in Insurance & Mutual fund
would ensure steady growth.
One of the leading Indian dairy products
companies in India created strong brands in dairy
products. Rising revenue share of high-margin
Parag Milk Foods
2,720
323
400
23.8
Value Added Products and reduction in interest cost
is likely to boost margins and earnings in next few
years.
We expect MCL to report net revenue CAGR of
~15% to ~`450cr over FY2018-20E mainly due to
strong growth in online matchmaking & marriage
Matrimony.com Ltd
1,780
783
1,016
29.8
related services. On the bottom-line front, we
expect a CAGR of ~28% to `82cr over the same
period on the back margin improvement.
Source: Company, Angel Research
Market Outlook
May 23, 2018
Fundamental Call
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
CCL is likely to maintain the strong growth trajectory
CCL Products
3,986
300
360
20.1
over FY18-20 backed by capacity expansion and
new geographical foray
We forecast Nilkamal to report top-line CAGR of
~9% to `2,635cr over FY17-20E on the back of
Nilkamal
2,489
1,668
2,178
30.6
healthy demand growth in plastic division. On the
bottom-line front, we estimate
~10% CAGR to
`162cr owing to improvement in volumes.
GMM Pfaudler Limited (GMM) is the Indian market
leader in glass-lined (GL) steel equipment. GMM is
expected to cross CAGR 15%+ in revenue over the
GMM Pfaudler Ltd
1,202
822
920
11.9
next few years mainly led by uptick in demand from
user industries and it is also expecting to increase its
share of non-GL business to 50% by 2020..
Elantas Beck India is the Indian market leader in
liquid insulation segment used in electrical
equipments like motors, transformers etc. It derives
Elantas Beck India Ltd
1,625
2,050
2,500
22.0
demand from several industries which are expected
to register 10%+ CAGR in demand in the coming
years.
Greenply Industries Ltd (GIL) manufactures plywood
& allied products and medium density fibreboards
(MDF). GIL to report net revenue CAGR of ~14% to
Greenply Industries
3,397
277
395
42.6
~`2,478cr over FY2017-20E mainly due to healthy
growth in plywood & lamination business on the
back of strong brand and distribution network
L&T Fin’s new management is on track to achieve
L&T Finance Holding
33,149
166
210
26.5
ROE of 18% by 2020 and recent capital infusion of
`3000cr would support advance growth.
Market Outlook
May 23, 2018
Key Upcoming Events
Result Calendar
Date
Company
Tata Motors, Motherson Sumi, Areva, Ramco Cements, KPIT Cummins, Indraprasth Gas, Bajaj Electrical, Sterling Tools,
May 23, 2018
CESC
May 24, 2018
Cummins India, MOIL, GAIL, GSK Pharma, GIPCL
Source: Bloomberg, Angel Research
Global economic events release calendar
Bloomberg Data
Date
Time
Country
Event Description
Unit
Period
Last Reported
Estimated
May 23, 2018
1:00 PMGermany PMI Services
Value
May P
53.00
53.00
7:30 PMEuro Zone Euro-Zone Consumer Confidence
Value
May A
0.40
0.40
1:00 PMGermany PMI Manufacturing
Value
May P
58.10
57.90
7:30 PMUS
New home sales
Thousands
Apr
694.00
679.00
11:30 AMGermany GDP nsa (YoY)
% Change
1Q F
1.60
1.60
May 24, 2018
2:00 PMUK
CPI (YoY)
% Change
Apr
2.50
2.50
6:00 PMUS
Initial Jobless claims
Thousands
May 19
222.00
220.00
7:30 PMUS
Existing home sales
Million
Apr
5.60
5.55
May 25, 2018
2:00 PMUK
GDP (YoY)
% Change
1Q P
1.20
1.20
May 29, 2018
7:30 PMUS
Consumer Confidence
S.A./ 1985=100 May
128.70
128.00
May 30, 2018
6:00 PMUS
GDP Qoq (Annualised)
% Change
1Q S
2.30
2.30
1:25 PMGermany Unemployment change (000's)
Thousands
May
(7.00)
May 31, 2018
6:30 AMChina
PMI Manufacturing
Value
May
51.40
Jun 01, 2018
6:00 PMUS
Change in Nonfarm payrolls
Thousands
May
164.00
195.00
6:00 PMUS
Unnemployment rate
%
May
3.90
3.90
Source: Bloomberg, Angel Research
Market Outlook
May 23, 2018
Macro watch
Exhibit 1: Quarterly GDP trends
Exhibit 2: IIP trends
(%)
(%)
8.5
10.0
9.0
9.1
7.3
7.4
9.0
8.0
7.0
8.0
8.1
7.0
7.6
7.6
8.0
7.3
7.2
7.2
6.0
6.8
4.8
7.0
6.5
5.0
4.1
4.4
6.1
5.7
4.0
6.0
2.9
3.0
1.8
5.0
2.0
1.0
4.0
1.0
-
3.0
(1.0)
(0.3)
Source: CSO, Angel Research
Source: MOSPI, Angel Research
Exhibit 3: Monthly CPI inflation trends
Exhibit 4: Manufacturing and services PMI
56.0
Mfg. PMI
Services PMI
(%)
6.0
54.0
5.2
5.1
4.9
4.6
52.0
5.0
4.4
4.3
50.0
4.0
3.6
3.3
3.3
48.0
3.0
2.4
2.2
46.0
2.0
1.5
44.0
1.0
42.0
40.0
-
Source: Market, Angel Research; Note: Level above 50 indicates expansion
Source: MOSPI, Angel Research
Exhibit 5: Exports and imports growth trends
Exhibit 6: Key policy rates
(%)
Exports yoy growth
Imports yoy growth
(%)
Repo rate
Reverse Repo rate
CRR
35.0
6.50
30.0
6.00
25.0
5.50
20.0
5.00
15.0
4.50
10.0
4.00
5.0
0.0
3.50
(5.0)
3.00
Source: Bloomberg, Angel Research
Source: RBI, Angel Research
Market Outlook
May 23, 2018
Global watch
Exhibit 1: Latest quarterly GDP Growth (%, yoy) across select developing and developed countries
(%)
8.0
6.9
7.0
5.8
6.0
5.3
5.0
5.0
1.1
3.7
4.0
2.5
3.0
2.2
1.8
2.0
1.5
1.4
0.8
1.0
0.3
-
Source: Bloomberg, Angel Research
Exhibit 2: 2017 GDP Growth projection by IMF (%, yoy) across select developing and developed countries
(%)
6.7
6.8
7.0
6.0
5.4
5.2
5.0
3.7
4.0
3.0
1.8
2.2
2.0
1.7
1.6
1.5
2.0
0.7
0.7
1.0
-
Source: IMF, Angel Research
Exhibit 3: One year forward P-E ratio across select developing and developed countries
(x)
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
-
Source: IMF, Angel Research as on 22 Mayl, 2018
Market Outlook
May 23, 2018
Exhibit 4: Relative performance of indices across globe
Returns (%)
Country
Name of index
Closing price
1M
3M
1YR
Brazil
Bovespa
81,815
(4.6)
(3.2)
19.5
Russia
Micex
4,522
1.4
7.1
11.4
India
Nifty
10,517
(0.3)
(0.1)
11.7
China
Shanghai Composite
3,214
4.0
(1.5)
5.0
South Africa
Top 40
51,311
1.1
2.0
7.5
Mexico
Mexbol
45,305
(7.7)
(6.4)
(7.7)
Indonesia
LQ45
907
(11.8)
(17.8)
(3.9)
Malaysia
KLCI
1,854
(0.8)
1.1
4.8
Thailand
SET 50
1,171
(2.0)
0.4
18.8
USA
Dow Jones
25,013
1.4
(0.8)
19.7
UK
FTSE
7,859
7.4
8.6
5.0
Japan
Nikkei
23,002
5.3
8.7
15.7
Germany
DAX
13,078
4.0
6.1
3.8
France
CAC
5,638
4.5
6.6
5.5
Source: Bloomberg, Angel Research as on 22 May, 2018 68in4
