Arihant’s Value Plus – December 2019 – Monthly Investment Newsletter


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The S&P BSE Sensex was up by 2.4% and the CNX Nifty climbed 2.3% for the month. Foreign investors continued their buying spree and invested Rs 12,925 cr in the cash market in the month of November. In a major privatisation push, the government announced its decision to sell its 53.29% stake in BPCL to a strategic investor.


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INDIAN INDICES Indices Nov-19 Oct-19 Monthly Change (%) SENSEX 40793.81 40129.05 1.66 Ç NIFTY 50 12056.00 11877.45 1.50 Ç NIFTY BANK 31946.10 30066.25 6.25 Ç NIFTY MIDCAP 100 17222.15 16818.90 2.40 Ç NIFTY 500 9813.65 9689.65 1.28 Ç NIFTY IT 14998.05 15559.40 -3.61 È NIFTY REALTY 282.05 269.00 4.85 Ç NIFTY INFRA 3323.30 3322.55 0.02 Ç DOW JONES 28051.41 27046.23 3.72 Ç NASDAQ 8665.47 8292.36 4.50 Ç HANG SENG 26346.49 26906.72 -2.08 È FTSE 7346.53 7248.38 1.35 Ç NIKKEI 23293.91 22927.04 1.60 Ç (Source: BSE & NSE) BSE SECTORAL INDICES Indices Nov-19 Oct-19 Monthly Change (%) AUTO 18099.52 18945.63 -4.47 È BANKEX 36190.99 33924.81 6.68 Ç CD 24872.70 26893.46 -7.51 È CG 17384.46 18823.14 -7.64 È FMCG 11723.58 12245.94 -4.27 È HC 13603.33 13229.05 2.83 Ç IT 14875.14 15392.04 -3.36 È METAL 9778.97 9305.46 5.09 Ç OIL & GAS 15155.61 15734.75 -3.68 È PSU 7072.70 7190.87 -1.64 È REALTY 2166.53 2062.95 5.02 Ç TECK 7460.77 7461.08 0.00 Ç GLOBAL INDICES Indices Nov-19 Oct-19 Monthly Change (%) COMMODITIES Particulars Nov-19 Oct-19 Monthly Change (%) MCX GOLD 38030.00 38578.00 -1.42 È MCX SILVER 44506.00 46764.00 -4.83 È MCX CRUDE OIL 3980.00 3853.00 3.30 Ç MCX NATURAL GAS 167.20 187.00 -10.59 È ( Source: Falcon software) FOREX Particular Nov-19 Oct-19 Monthly Change (%) USD-INR 71.74 70.92 1.16 Ç EUR-INR 78.93 79.16 -0.29 È GBP-INR 92.58 91.91 0.73 Ç JPY-INR 65.48 65.55 -0.11 È FII Activity (Rs. Cr.) Date Gross Purchases Gross Sales Net Pur/Sales Total for Nov 2019 162,789.91 137,559.28 25,230.63 Total for 2019* 1,337,751.17 1,245,185.48 92,565.69 (Source: SEBI) MF Activity (Rs. Cr.) Date Gross Purchases Gross Sales Net Pur/ Sales Total for Nov 2019 58,469.96 63,392.97 -4,923.01 Total for 2019* 679,847.02 614,746.96 65,100.06 (Source: SEBI) *Till Nov 2019 & SH KERS ( Source: Falcon software) 2 ARIHANT CAPITAL DECEMBER 2019


Economic Data Wrap Up : November India's November Nikkei manufacturing PMI rose to 51.2 from 50.6 in October. India’s November Nikkei services PMI rose to 52.7 from 49.2 in October. India’s IIP growth contracted further to -4.3% in September as compared to -1.1% in August. India’s October CPI inflation spikes to 4.62% compared with 3.99% in September. India’s October WPI inflation eased to 0.16% in October as compared to 0.33% in September. Nifty Technical Outlook: Dec - 2019 Outl k Monthly Market Roundup In the month of November, the rally in Indian markets continued unabated with benchmark indices scaling new all- time high levels. The S&P BSE Sensex was up by 1.66% and the CNX Nifty climbed 1.50% for the month. Foreign investors continued their buying spree and invested Rs 12,925 cr in the cash market in the month of November. In a major privatisation push, the government announced its decision to sell its 53.29% stake in BPCL to a strategic investor. The cabinet committee on economic affairs (CCEA) also cleared divestment of another two major PSUs namely Container Corporation of India (CONCOR) and Shipping Corp. of India (SCI). The month also saw the government announcing some relief measures for the beleaguered telecom sector. In a major relief to telecom players, Union Cabinet approved a two-year moratorium to the telecom operators on pending spectrum payment, which will help these telcos avoid an immediate outflow of over Rs 42,000 cr, thereby improving their immediate cash flow stream. On the sectoral front , most of the sectoral indices ended the month in green. Nifty PSU Bank Index was the top performer with 6.53% gain. Other prominent gainers for the month were Nifty Bank (+6.25%), Nifty Pharma (+3.96%), Nifty Metal (+4.99%), Nifty Finance (+5.12%), Nifty Media (+2.69%) and Nifty Realty (+4.85%). Whereas, Nifty Auto, Nifty FMCG and Nifty IT indices ended the month with a loss of 4.3%, 4.16% and 3.61% respectively. The small and midcap indices took part in the rally and ended the month on a positive note with Nifty 50 Midcap and Nifty 100 Smallcap ending the month with gain of 1.79% and 1.21% respectively. On the economic front, the GDP number for Q2FY20 came as a shocker, with growth declining to a 26-quarter low of 4.5%. The GDP growth for the fiscal ended September 2019 is the weakest since the first quarter of 2013 when the economic growth slumped to 4.4%. The acute pain in the economy has now started reflecting in the GDP number as well. Among other economic indicators, India’s fiscal deficit hit 102.4% of FY20 Budget Estimate at Rs 7.2 lakh cr at the end of October. As far as auto sales numbers are concerned, November 2019 turned out to be another tepid month, with most of the auto players reporting a decline in sales volume. For Maruti, total sales were down by -2% YoY / MoM at 150.6K units while Mid-size segment and exports were down by -62% and -8%. Bajaj Auto reported flat sales, with total sales at 403K units (-1% YoY), while exports showing some traction at 195.4K units (+14% YoY). Rural distress continued to negatively impact M&M’s sales numbers, with Tractor sales down by -19% YoY. While weakness in CV segment impacted Ashok Leyland’s numbers, On the monthly chart, we are observing a narrow range body formation which indicates that markets are circumspect at current level. The monthly trend remains up, hence one needs to adopt positive approach toward the market. In coming month if Nifty trades and close above 12129 level then it is likely to test 12232 – 12336 – 12458 levels. However, if Nifty trades and close below 11983 level then it can test 11879 – 11775 – 11654 levels. Broadly we are of the opinion that the monthly trend is up and any decline in the range of 11972 – 11920 should be used as to go long, with a stop loss of 11800 for a target of 12232 – 12336 – 12458 levels. with Nov 19 total sales at 10.2K units (-22% YoY). On the global front, the Federal Reserve in its meeting decided to hit a pause in its easing cycle following a rate cut in October. The FOMC meeting minutes of last month signaled that it was in no hurry to reassess the path of interest rates. Despite a pause in rate cut from Fed global markets continued their rally, with US’ Dow Jones and Nasdaq closing the month in green with gains of +3.6% and +4.7% respectively. The European markets also closed the month on a positive note with Germany’s DAX and UK’s FTSE closing the month with +2.3% and +0.6% gains respectively. Japan’s Nikkei also closed positive with +1.4% gain. However due to uncertainties about the timeline of signing the Phase-I of US-China trade deal, Asian markets (except Japan) remained on the edge and ended the month in negative zone. Hong Kong’s Hang Seng and China’s Shanghai Composite ended the month with loss of -1.6% and -2.8% respectively. N i ft y 3 ARIHANT CAPITAL DECEMBER 2019


Company Overview ICICI Bank was promoted in 1994 by ICICI Limited, an Indian Financial Institution. It is one of the leading private bank in India with over 5,228 branches & 15,159 ATMs spread across the nation. The bank has employee strength of 86,763 by March 2019 and is categorized by RBI as a domestic systemically important bank (D-SIBs). The bank has numerous subsidiaries operating in the businesses of insurance, AMC, securities and home financing, and benefits from the cross selling of several products to its large customer base. ICICI Bank has been traditionally known as a high customer service friendly bank and sets benchmark in customer servicing. ICICI Bank Ltd BUY Target Price: Rs. 618 Value Parameters BSE Code 532174 NSE Symbol ICICIBANK CMP (As on 02 nd Dec, 2019) Rs 511 Face Value Rs 2 52 Week High / Low 517/336 Market Cap (Rs Cr) 3,29,534 BVPS (FY21E) Rs 202 P/BV ratio (x) (FY21E) 2.5 Shareholding Pattern % (Sep ’19) Investment Rationale Rapid shift towards retail lending business: ICICI bank has very rapidly shifted its business mix from high corporate loan exposure to a retail lender, i.e. retail loan book comprises of 62.1% of total advances as of Sep 2019 against 57.3% in Sept 2017. This shift has led to increase of yield on average advances from 8.7% by end of Sept 2018 to 9.5% by end of Sept 2019. Continuou s improvement in Asset Quality: ICICI bank’s management has learnt the lesson of aggressive growth by way of lending to large corporate with compromised credit ratings. The current pace of disbursement of corporate loans reflect the cautiousness marked by sharp fall in new slippages, thereby improving the NPA levels in a steady manner. The marginal increase in retail NPAs is what the bank can sacrifice to get more market share. High growth in core business: The average growth of advances over last 5 years stood at 11.7% while deposits growth averaged at 14.5% for same period with both advances & deposits growing at higher double digits in the last several quarters on YoY basis. Valuations: ICICI bank is poised to compete aggressively with other peers who have significant inroads into retail lending, in several banks are competing to provide made which credit cards, personal loans and home loans for higher spreads. The bank’s insurance subsidiaries are performing at unprecedented levels, securities and AMC subsidiaries are yielding stable profits and overseas banking subsidiaries growing moderately. It is currently trading at a 2.9x P/ABV FY21E. We assign a P/ABV multiple of 2.6x on ABV of Rs 179 for standalone bank and use a SOTP approach to value its subsidiaries, we arrive at a Target Price of Rs 618. We have a ‘Buy’ rating on the stock. Fundamental St ck 4 ARIHANT CAPITAL DECEMBER 2019


NOVEMBER Sales A U T SEC T OR Maruti Suzuki Total Sales: 150,630 units, -2% YoY down Domestic Sales:143,686 units,-2% YoY down PV Sales: 105,767 units, -1% YoY down Exports: 6,944 units, -8% YoY down TVS Motor Total Sales: 266,582 units, -18% YoY down 2Wheeler Sales: 249,350 units, -19% YoY down 3Wheelers Sales: 17,232 units, +34% YoY up Exports: 74,060 units, +27% YoY up Mahindra & Mahindra Total Sales: 41,235 units,-9% YoY down Domestic Sales: 38,614 units, -7% YoY down PV Sales:14,637 units,-10% YoY down CV Sales:17,384 units, -12% YoY down M&HCV Sales:311 units,-51% YoY down Exports:2,621 units, -26%YoY down Atul Auto Total Sales: 4,297 units,+7.3% YoY Up Escorts Total Sales: 7,642 units,-4.5% YoY down Domestic Sales:7,379 units, -3.4% YoY down Exports: 263 units,-27.7% YoY down Tata Motors Total Sales: 38,057 units, -25% YoY down PV Sales:10,400 units, -39% YoY down CV Sales: 30,588 units, -19%YoY down M&HCV Sales:6,050 units, -38% YoY down Ashok Leyland Total Sales: 10,175 units,-22% YoY down M&HCV Sales:5,966 units,-32% YoY down LCV Sales:4,209 units,-4% YoY down Bajaj Auto Total Sales: 403,223 units,-1%YoY down Domestic Sales: 207,775 units, -12% YoY down CV Sales: 59,777 units,-1% YoY down Motorcycle Sales: 343,446 units,-1% YoY down Exports: 195,448 units, +14 YoY Up Hero MotoCorp Total Sales: 516,775 units, -15% YoY down Volvo-Eicher Commercial Vehicles Total Sales: 3,594 units, -24% YoY down Eicher Motorcycle Total Sales:60,411 units, -8% YoY down Exports:2,119 units, +195% YoY up 5 ARIHANT CAPITAL DECEMBER 2019


MUTUAL FUND Indian equity markets ended on positive note in November 2019. The barometer index, S&P BSE Sensex delivered positive returns of 1.66% to settle at 40793.81 and Nifty50 gained 1.50% ending the month at 12056.00. MF ACTIVITY Indian mutual funds turned net seller of equities to the tune of Rs 4923.01 crores in the month of November 2019. Highest Selling was recorded in the second week of the month when the fund houses made total net sell of Rs 3050.36 crores of equities. On the other hand, foreign institutional investors (FIIs) were net buyers to tune Rs 25230.63 crores worth of equities in November Rs in Crores Gross Purchases Gross Sales Net Investment 1 st Week 3116.85 2825.98 290.87 2 nd Week 13210.63 16260.99 -3050.36 3 rd Week 11189.04 10647.15 541.89 4 th Week 13702.48 13517.56 184.92 5 th Week 17250.96 20141.29 -2890.33 Total 58469.96 63392.97 -4923.01 Mutual Fund Activity In November 2019 Note: Mutual Fund activity as on Nov 2019 M UT U A L 6 ARIHANT CAPITAL DECEMBER 2019


Scheme Name Latest NAV* AUM as on 31 st Oct, 19 (Rs in Cr) Launch Date Returns (%) Min. Investment Amount One Year Three Years Five Years Since Inception SIP Lump sum Large Cap Fund Axis Bluechip Fund(G) 31.62 8,749 05-Jan-10 18.29 19.28 9.91 12.11 500 5000 ICICI Pru Bluechip Fund (G) 43.99 24,132 23-May-08 10.03 12.66 8.44 13.71 100 100 Mirae Asset Large cap Fund(G) 54.00 15,897 04-Apr-08 12.32 15.55 11.47 15.57 1000 5000 Multi Cap Fund Axis Focused 25 Fund(G) 30.50 8,800 29-Jun-12 16.01 17.92 12.41 16.10 1000 5000 Kotak Standard Multicap Fund(G) 37.25 28,348 11-Sept-09 13.17 13.98 10.93 13.53 500 5000 SBI Magnum Multicap Fund (G) 50.75 8,334 29-Sept-05 11.99 11.93 10.61 12.17 500 1000 Mid Cap Fund DSP MidCap Fund(G) 56.48 6,691 25-Jun-07 10.57 10.13 10.66 14.18 500 5000 L&T Mid Cap Fund (G) 132.47 5,831 9-Aug-04 1.49 9.48 10.71 18.40 500 5000 AUM as on Returns (%) Scheme Name YTM Latest NAV* 31 st Oct, 2019 (Rs in Cr) One Month Three Months Six Months One Year Since Inception Liquid Fund Axis Liquid(G) 5.29 2153.22 30,068 0.44 1.4 3.07 6.86 7.84 ICICI Pru Liquid Fund(G) 5.36 287.23 61,402 0.43 1.39 3.06 6.82 7.80 Ultra Short Term Fund Kotak Saving Fund(G) 6.10 31.51 11,281 0.56 1.78 3.90 8.26 7.79 L&T Ultra Short term Fund(G) 5.49 32.05 2,841 0.49 1.65 3.78 8.05 7.48 AUM as on 31 st Oct,2019 (Rs in Cr) Returns (%) Scheme Name Latest NAV* Launch Date One Year Three Years Five Years Since Inception Mirae Asset Tax Saver(G) 18.93 2,671 28-Dec-15 14.08 17.65 - 17.67 Axis LT Equity Fund(G) 48.63 21,492 29-Dec-09 15.21 16.29 11.38 17.22 Kotak Tax Saver(G) 46.29 987 31-May-96 12.96 12.22 9.28 11.54 Debt Scheme- Liquid Funds Recommendation ELSS Scheme Recommendation Equity Scheme Recommendation Note: Returns as on 30 th November, 2019, Returns < 1 yr annualized, Returns > 1 yr compounded annualized. Note: NAV and Returns as on 30 th November, 2019, Returns <1 yr annualised, >1 yr compounded Note: NAV and Returns as on 30 th November, 2019, Returns < 1 yr annualized, Returns > 1 yr compounded 7 ARIHANT CAPITAL DECEMBER 2019





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