Investment Strategist - Kotak Securities [PDF]

Investment Strategist February 2016

About the cover With the economy showing signs of losing steam, the market is hoping for measures to recharge growth.

IN THIS ISSUE Monthly Fundamental Outlook

One Month Portfolio

1

Domestic markets remained under pressure (down about 6% MoM) on lower-than-expected results, faltering global economic growth (especially in China), Yuan depreciation and the steep fall in oil prices.

Monthly Derivative Outlook

5

Monthly Technical Outlook

6

Positive above 7250.

It was highly unexpected that the market will recover back to 7540 levels by the end of the month but not only it recovered but also closed above it along with a broad based participation from major indices namely Technology, Energy and Banks.

Forex Insight Research & Analysis

Albert Einstein is widely credited with saying "The definition of insanity is doing the same thing over and over again, but expecting different results".

9

Latest Fundamental Stock Recommendation

12

Preferred Picks - Fundamental

14

Yield to Maturity (YTM) of tax free bonds Trading in secondary markets

23

Mutual Fund Recommendations

24

Company Fixed Deposits & Forthcoming IPOs

25

7

RESEARCH TEAM Fundamental Desk Dipen Shah IT

Ruchir Khare Capital Goods, Engineering

Amit Agarwal Logistics, Transportation

Jayesh Kumar Economy

Sanjeev Zarbade Capital Goods, Engineering

Saday Sinha Banking, NBFC, Economy

Ritwik Rai FMCG, Media

Sumit Pokharna Oil and Gas

Teena Virmani Construction, Cement

Arun Agarwal Automobiles

Meeta Shetty, CFA Pharmaceuticals

Jatin Damania Metals & Mining

Pankaj Kumar Midcap

K. Kathirvelu Production

Technical Desk Shrikant Chouhan

Amol Athawale

Derivative Desk Rahul Sharma

Malay Gandhi

Prashanth Lalu

Sahaj Agrawal

GLOBAL & SECTORAL INDICES

Change in the Global Indices INDICES

As on 29 January - 16

30 December - 15

% change

Sensex

24,871

25,960

-4.2%

Nifty

7,564

7,896

-4.2%

Dow Jones

16,466

17,604

-6.5%

Nasdaq

4,614

5,066

-8.9%

FTSE

6,084

6,248

-2.6%

DAX

9,798

10,743

-8.8%

CAC 40 index

4,417

4,677

-5.6%

Hang Seng

19,683

21,882

-10.0%

China

2,738

3,573

-23.4%

Japan

17,518

19,034

-8.0%

Spain

8,816

9,642

-8.6%

Italy

18,657

21,418

-12.9%

Sectoral Indices SECTOR

As on 29 January - 16

30 December - 15

% change

CNX midcap

12,469

13,366

-6.7%

BSE midcap

10,417

11,104

-6.2%

BSE small cap

10,870

11,779

-7.7%

FMCG

19,133

20,069

-4.7%

Capital Goods

12,368

14,140

-12.5%

Banking

17,604

19,347

-9.0%

PSU

6,235

6,770

-7.9%

Oil & Gas

9,258

9,486

-2.4%

Auto

17,046

18,486

-7.8%

Tech

11,165

10,942

2.0%

Healthcare

16,305

16,931

-3.7%

Metal

6,894

7,339

-6.1%

Realty

1,209

1,324

-8.7%

MONTHLY FUNDAMENTAL OUTLOOK Domestic markets remained under pressure (down about 6% MoM) on lower-than-expected results, faltering global economic growth (especially in China), Yuan depreciation and the steep fall in oil prices. These concerns weighed on the market sentiments resulting in net FII outflows during the month.

Benchmark indices - India

We do expect the remaining results to portray sluggish trends. On the global front, decisions on rate hike by US Fed, more stimulus by ECB, growth in China and oil price trends are likely to be watched closely in near to medium term. One of the major concerns on the economy has been the subdued private sector capex. Government is working on improving the investment climate and simultaneously, increasing public sector infrastructure investment. It is in this context that, the budget will gain significant importance - Fiscal consolidation v/s Growth. Government will have to strike a fine balance between meeting the fiscal deficit targets and stimulating the investment climate in terms of higher investment in infrastructure. With RBI having likely front-loaded the cuts, it is critical for the government to focus on implementation (growth) and also get crucial legislations like land bill, and GST bill passed in the parliament at the earliest. One of the major concerns on

We are hopeful of more the economy has been the subdued private sector capex. legislative and executive Government is working on reforms by the improving the investment Government in the climate and simultaneously, ensuing months and increasing public sector infrastructure investment. It is continue to maintain in this context that, the budget positive stance on will gain significant domestic infrastructure importance. and interest-rate sensitive sectors, with medium to long term perspective. Our preference stays for companies having strong balance sheets and ethical managements. We are also positive on select large cap exportoriented stocks, wherein the volatility in earnings in limited and which will benefit from the recent rupee depreciation. Key risks to our recommendation would come from geo-political concerns globally, decline in foreign inflows, sharp currency movements and spike in oil prices.

Market performance - sector wise (January 2016)

Source: Bloomberg

Source: Bloomberg

Key domestic events to watch out for in near term Domestic markets were impacted in January 2016, by Chinese slowdown, weakness in commodity prices (especially crude) as well as the subdued results for Q3FY16. In the near term, we expect the focus of the markets to remain on expected policy measures from Government including in Budget 2016-17. We also expect special dividend payouts from PSEs. Focus on Budget Government will have to strike a fine balance between meeting the fiscal deficit targets and stimulating the investment climate in terms of higher investment in infrastructure. We expect the focus of the budget to be on a simpler tax regime, further increase in planned capital expenditure to support growth, focus on rural upliftment to make growth sustainable, focus on make in India program to create employment opportunities, renewable energy, etc Move towards a simpler tax regime The FM had indicated in the previous budget that, the Government will simplify the direct tax regime by removing exemptions and also bringing down the tax rate from 30% to 25% over the next 4 years. We expect the budget to initiate that process. The budget will also likely consider the recommendations of Parthasarathi Shome committee/ Easwar panel committee, which are aimed at simplifying tax administration. Suggestions include time-bound refunds, avoiding retrospective amendments to tax laws, and streamlining of the tax administration. Other suggestions include lowering of rates for tax deducted at source along with other amendments to tax laws to improve ease of doing business. We believe that government would look at those recommendations that do not have large revenue implications. If these measures are implemented, it would result in buoyancy in tax collections. Imposition of duties to safeguard domestic industry from cheaper imports - In order to safeguard the interest of domestic manufacturers against dumping of cheaper imports, Government may announce anti-dumping duties, hiking of customs duties or minimum floor price of imports for various sectors.

Investment Strategist February 2016

1

MONTHLY FUNDAMENTAL OUTLOOK The Tiles industry is expected to see imposition of anti-dumping duty on polished vitrified tile imports from China to the extent of $3 per MSM. Steel industry has asked for the minimum floor price for the imports and bringing all the grades of product across the value chain in the umbrella of the safeguard duty. If the above action is taken by the government, it can bring relief for the steel industry. For non-ferrous segment also, industry has asked for hike in customs duty. Tyre industry is also likely to see some relief as it has called for imposition of anti-dumping duty and hiking of customs duty on cheap bus and truck radials from China. Also, customs duty on tyres need to be increased from 10% to 30% with a view to correct inverted duty between tyres and natural rubber. Thus key beneficiaries could be tiles, steel, auto sector-related companies. OFS/Share buyback/Special dividend to be seen in order to meet disinvestment shortfall Government had set a target of Rs.695bn via disinvestment for the current fiscal and has so far been able to garner only Rs.134bn. Due to volatile market conditions, the government has been able to sell stake in only five PSUs - IOC , PFC , REC, Dredging Corp and EIL, as against the 20 companies, which were short-listed (including OIL, Nalco, NMDC, Coal India NTPC, ONGC, BHEL). Owing to lower than expected disinvestment proceeds, government is looking for alternate options to shore up revenues. The Government has revised dividend policy for CPSEs and has told central public sector enterprises (CPSEs) to declare an annual dividend of 30% of profit after tax (PAT) or 30% of the central Government's equity whichever is higher, as against from the earlier rate of 20% of PAT or 20% of equity. Thus, we might see one more year of high dividends from central/state-owned companies having huge cash balance. As per reports, Government has also asked state-run aluminium maker Nalco to buyback 25% cent of its shares, which will give the Government an estimated Rs.32.50bn. Decision on the same is likely to coming in few weeks. RBI maintains rates; future rate cuts contingent on budget and monsoon Expectedly, RBI has maintained the repo rate as well as the CRR. The GDP and inflation forecasts for FY17 have been tweaked marginally. It has left future rates dependent on future inflation prints (monsoons to be an important consideration) and the Union Budget provisions. Thus, while RBI has maintained its accommodative stance, we maintain that, it will act post-budget, if the budget largely sticks to the FRBM targets while supporting growth. The implementation of VII CPC would be an important factor to watch out for. RBI has been consistently maintaining price stability and fiscal prudence as the prime objectives.

IIP growth (%)

Source: Bloomberg; Note: IIP growth since April 2009 has been recompiled using new series of WPI

Global events to watch out for Globally, markets have been pressured by the consistent fall in crude prices (except for the recent rise) and the growth concerns in China, among others. Going ahead, we believe that, movement in crude oil price will be an important determinant of global sentiments. Apart from this, markets will also focus on the economic data from China as well as the additional liquidity measures taken by central banks like ECB, PBoC and Bank of Japan. Expectations on the future rate hikes by Fed will also engage market attention. US interest rates hike to be "gradual" US Fed kept the federal funds rate unchanged at 0.25%-0.5% during its last meet in January and said that it is closely monitoring global economic and financial developments and also assessing their implications for the labor market and inflation. Fed rate hikes are expected to be "gradual" as the oil rout has caused a "worrisome" drop in US inflation expectations that may make further rate hikes hard to justify in immediate term. Concerns over weaker global growth are also casting doubt on the pace at which the US central bank will continue hiking rates. ECB may come out with further monetary easing Amid growing concerns over faltering global economic growth, ECB may come out with further monetary easing. With fall in the oil prices, inflation expectations have also fallen and CPI inflation could average much below ECB's forecast of 1 per cent. Credit spreads have also witnessed an increase and Euro has also strengthened against some major currencies. This is likely to prompt ECB for further monetary easing. China slowdown to continue to weigh on market sentiments Weak economic data from China (slow rate of growth of 6.9% in 2015, lower-than-expected Manufacturing PMI and nonmanufacturing PMI) has revived concerns over the country's economic slowdown. Devaluation of the Chinese yuan and expectations of significantly more weakening in the currency have also impacted the markets off-late. These concerns regarding further weakness in Yuan continue to impact sentiments.

Investment Strategist February 2016

2

MONTHLY FUNDAMENTAL OUTLOOK To ease a liquidity squeeze, the People's Bank of China (PBOC) has injected liquidity into the financial system and we expect additional liquidity measures to continue, if growth slows down further. We expect PBOC to go ahead with further liquidity enhancing measures as it would want plenty of liquidity available to the banking system to avoid any cash squeeze ahead of long Lunar New Year celebrations in February. Oil prices to remain under pressure due to continued oversupply Oil hit fresh 12-year lows in January, amid continued concerns about oversupply. The International Energy Agency said that supply continues to exceed demand in 2016. In a bid to remain market share and support their economies, OPEC members have been unwilling to reduce production. On the other hand, demand has moderated because of a slowdown in economic growth in China and Europe. China is the world's second largest oil consumer after the US.

FIIs remained net sellers for the month Weak global growth, falling commodity prices and continued slackness in the Indian economy led to FII selling of Rs.115bn during the month. Correction in oil prices likely led to withdrawal of funds by respective Sovereign Wealth Funds, we believe. On the other hand, domestic mutual funds remained net buyers to the extent of Rs.671bn for the month of January. Over the past few quarters, domestic retail investors have increased their allocations to financial assets, including equities. There have been consistent inflows into the domestic Mutual Funds, which have been a source of support for the Indian markets. With negative market returns over the past few months, it is important for these investors to maintain faith in the markets. Reduced inflows / outflows from domestic MFs will be a cause of concern for the markets.

FII & Mutual Fund investment (Rs Cr)

In the absence of a supply cut, there is further downside risk to prices in the short term. Recently, there have been expectations of production cuts from countries like Saudi-Arabia. However, the same has been denied by Saudi-Arabia. We expect oil prices to remain under pressure due to continued oversupply. Oversupply issue will be exacerbated further as Iran plans to return to the global oil market after western-imposed sanctions were lifted earlier this month. As per industry estimates, Iran can quickly ramp up exports by around 500,000 barrels which would further put pressure on oil prices. As one of the world's largest oil producers, Russia has been and may remain a prominent victim of the plunging prices. About half of Russia's budget revenues currently come from energy exports. Venezuela has the world's biggest known oil reserves, and oil exports account for as much as 95% of the country's revenues. Saudi Arabia's income fell by 23% last year. However, despite this, these conntries have not backed any efforts by OPEN / others to reduce production and increase oil prices. Beneficiaries of lower oil prices would include China, India, Japan etc. India imports 75% of its requirements and falling oil prices will ease its current account deficit. Any decision from OPEC to cut supply can provide support / upsides to oil prices and we need to be watchful of the same.

Brent Crude (US$/bl)

Source: Bloomberg

Recommendation We are hopeful of more legislative and executive reforms by the Government in the ensuing months and continue to maintain positive stance on domestic infrastructure and interest-rate sensitive sectors, with medium to long term perspective. Our preference stays for companies having strong balance sheets and ethical managements. We are also positive on select large cap export-oriented stocks, wherein the volatility in earnings in limited and which will benefit from the recent rupee depreciation. Key risks to our recommendation would come from geo-political concerns globally, decline in foreign inflows, sharp currency movements and spike in oil prices.

Source: Bloomberg

Investment Strategist February 2016

3

MONTHLY FUNDAMENTAL OUTLOOK Preferred picks - Domestic Cyclicals / Investment oriented sectors Sector

Stocks

Automobiles

M&M, Maruti Suzuki, Tata Motors

Banking, NBFCs

Axis Bank, ICICI Bank, SBI, IDFC Bank

Capital Goods, Engineering

Blue Star, Cummins India, Engineers India Ltd Greaves Cotton, L&T, Praj Industries

Cement

Grasim Industries, Ultratech Cements

Construction

IRB Infra, NCC, PNC Infratech, NBCC

Logistics, Transportation

Allcargo, Adani Port

Metals

Hindustan Zinc, Tata Sponge Iron

Midcap

Kajaria Ceramics, Greenply Industries, Century Plyboards

Oil & Gas

GSPL

Paints

Asian Paints, Berger Paints

Real Estate

Phoenix Mills

Shipping

Shipping Corporation of India

Source: Kotak Securities - Private Client Research

Preferred picks - Export oriented / Defensive sectors Sector

Stocks\

IT

Infosys, TCS, KPIT Technologies

Media

TV18 Broadcast

Pharmaceuticals

Sun Pharma, Alembic Pharma

Source: Kotak Securities - Private Client Research

Investment Strategist February 2016

4

MONTHLY DERIVATIVE OUTLOOK Looking Back

Looking Ahead

Nifty began the New Year on a positive note however the party didn't last long as global cues and commodity prices created a havoc in the global markets. Nifty lost significant ground and corrected very sharply to register a new 2-year low. Banking stocks were severely hit especially the PSU Banks as Banknifty broke the psychological level of 15000. After hitting panic lows, markets did try to recover a bit in the end but still ended way below previous month's closing. Rollovers in the Nifty were seen at 70.61% in line with the 3M average of 70.21%. Market wide rollovers stood at 82.48% vs 3M average of 80.78%. IndiaVIX gained significantly for most part of the month and cooled off towards the end to settle the month at 17.24%

Nifty is expected to consolidate a bit before making any fresh advance especially after the major correction witnessed in January. Major support levels for the market are seen at 7250 and 7400 whereas resistance on the upside is seen at 7800 and 8000. Risk reward ratio at 7400 is more favorable for longs than shorts. Banknifty is expected to find support at 14500 however unless a major consolidation happens it is going to underperform the broader market. CNX IT index can continue its outperformance led by INFY and TCS.

High rollovers was seen in telecom, pharma and cement stocks while low rollovers were seen in oil & gas, capital goods and power stocks. Highest rollover was observed in IDFC (95%), Jain Irrigation (93%), Divis Lab (93%), Tata Global (93%) and Bharat Forge (92%). Low rollovers were seen in TVS Motors, Hexaware, Uco Bank, Voltas and MindTree.

From the Nifty50 space, technically sound stocks can be picked up at current levels. Stocks like SUNPHARMA, ACC and TCS can provide good move in the near term. Banking stocks like HDFCBANK, INDUSINDBANK and YESBANK can do well from a trading perspective. BAJAJAUTO can be looked to enter around 2350-2400 levels for the medium term.

Nifty Options Concentration Call option concentration is seen at 7600 call for the February series. On the Put side, highest open interest is seen at 7400 strike price.

Nifty Options Concentration Recommendation Nifty Bull Spread: Buy Nifty Feb 7400 Call and sell Nifty Feb 7700 Call; Max Gain 200 Max Loss 100 (7400 Call CMP 125 & 7700 Call CMP 25)

Source: nseindia.com

CE - Call European

PE - Put European

Strike Price - Strike price for the contract

Stock Specifics SECTOR

POSITION

STOCK

VIEW

RATIONALE

Pharma

Long

AUROPHARMA Buy in the range of 750-775 with a stoploss placed at 700 and Target of 825/900

The stock has corrected to its 200 DMA of 750

Auto

Long

BAJAJAUTO

Positive crossover on the Long term moving average

Buy in the range of 2350-2400 with a stoploss placed at 2300 and Target of 2500/2560

For queries and feedback you can e-mail us at [email protected]

Investment Strategist February 2016

5

MONTHLY TECHNICAL OUTLOOK Monthly Outlook:

Monthly Snapshot Monthly High

:

7973

Monthly Low

:

7241.50

Monthly Close

:

7563.50

Change

:

-4.80%

Trend Watch Short Term

:

Down

Medium Term

:

Down

Long Term

:

Up

Levels to Watch Support : 7540-7520-7490-7470-7420-7370 Resistance

: 7585-7610-7675-7695-7720-7805

It was highly unexpected that the market will recover back to 7540 levels by the end of the month but not only it recovered but also closed above it along with a broad based participation from major indices namely Technology, Energy and Banks. We can call it as a “bear trap” formation for the Nifty/Sensex on monthly basis because it was into break down type of formation during the month below the level of 7540 and quickly retraced to 7240 levels. Till the market is not breaking the level of 7240 it is going to remain in trading range of 7610 and 7290 with a positive bias. Bank nifty is still under pressure and may witness selling pressure close to 16000 levels. Break out buying is advisable above 7610 as per spot basis. And Contra buying is advisable ay 7300 with a stop loss at 7240. However, breach of 7240 would push the market to 7100, which is 50% retracement support level below the earlier support of 7540. Till the currency is not exhibiting any signs of stability or positive reversal we cannot get clarity on the bottoming formation of the nifty. Ahead of the “budget” we are focusing on those sectors and stocks which are in the agenda of current ruling government. Our focus is on Education, Employment, Defence and Railway related sectors and stocks. We like Info-edge, NIIT Ltd, BEML, BEL and TWL, TEXMACO.

Trading Strategy (Spot Basis) Buy Nifty if it falls to 7300 with stop loss at 7240. Buy put option if Nifty bounce to 7550 and keep stop loss at 7610. Buy out of money call option if Nifty breaks 7610.

Nifty Monthly Chart

Source: Bloomberg

For queries and feedback you can e-mail us at [email protected]

Investment Strategist February 2016

6

FOREX INSIGHT RESEARCH & ANALYSIS DOLLAR/RUPEE: Risk of Chinese contagion remains Albert Einstein is widely credited with saying "The definition of insanity is doing the same thing over and over again, but expecting different results". Bank of Japan proved Mr. Einstein right; they launched another monetary stimulation last Friday, hoping to turn around the Japanese economy for good. Honestly I have lost count of how many times they have eased over the past 25 years. Since the real estate and financial bubble popped in Japan, during the late eighties, Japanese economic model has undergone as significant change. They have seen household consumption take the reins of the economy, from investment and exports. Now exports contribute roughly 16% to GDP and investment around 20%, whereas consumption contributes to 60-62% of GDP. With Japan so dependent on raw materials for consumptions and also for inputs in exports, a weaker Yen may not be beneficial to the economy, as it used to be during 1970-80's. At the same time, gross debt in Japan is above 550% of GDP. Bulk of that debt is held is outside the household sector. Much of the household sector debt is mortgages. It is estimated debt on household is around 80% GDP. However, most indebted is government with a debt to GDP of over 250%, followed by financial sector and then corporates. However, private sector, individuals and corporates also holds assets abroad. According to the data available upto 2013, net investment position or net asset held abroad is nearly 300 trillion Yen. Since 2013, Yen has weakened quite a bit, so the current value of that investment will be much higher. One can always argue that not all of the investment can be readily realisable as it can be locked into businesses as FDI. However, it can be said that private citizens and corporate sector, at an aggregate level have assets to fall back to against their debt. However, financial institutions and government is very dependent on Japanese citizens to keep buying their debt. The danger lay there. The way the Japanese policy makers are trying to terrorize the savers out of fixed income savings, it can get messy if money begins to dry up in fixed income investments. Yields may begin to climb and banks have start bleeding deposits and investments. It is well articulated in the speech given by Dr. Rajan, “going bust for growth”, (https:// www.rbi.org.in/Scripts/BS_Speeches View.aspx?Id=957), that between 200-2014, Japanese economy has fared much better than is believed to be. Per capita GDP growth has been in line with other western nations of North America and Europe. Unemployment has stayed low. Yes there is always need for reform in the domestic oriented sectors of the economy to improve productivity but since the launch of Abenomics, there is little of such structural reforms and more of bad economics of FX devaluations and squeeze on disposable income of consumers. Glance through the charts below on GDP and export growth. Japan has suffered 6 quarters of negative growth even after the launch of epic Yen devaluations in 2012. Export growth has stagnated. Domestic firms and individuals are complaining about a cost squeeze. It is hard to

explain how such bad economic policies can be pursued even on the face of overwhelming evidence to the contrary. We are in the 9th year running since the last beginning of economic rebalancing, which began with financial crises in 2007. How many times have the policy makers, central bankers from both sides of Atlantic and in the major economies in EMs have opined that recovery is around the corner. Economic projections from agencies like IMF have ritualistically forecasted a "hockey stick" like recovery, only to start revising the hockey stick graph down to reality and then rinse and repeat it for the next year. Why have they been so off the mark, so consistently? If someone is so consistently wrong, one should just start doing exactly opposite, arithmetically it should be mean a change of luck for good. Central banks have a strange belief that as if economy is a simple machine with so much homogeneity, that one can like clockwork get desired outcome by turning a few levers. They address inflation like one would approach temperature of a liquid. Just turn on the gas for some time, and we can get the inflation right around our hypothetical level which is just right. First of all, their definition of inflation is extremely myopic. Inflation is an increase in price levels in the economy. Inflation can be in anything. Inflation can be in wheat, in I-Phone, in houses, in financial assets and also in wages. The causes of inflation can be also numerous. If there is drought, prices of certain agro commodities are going to rise. Similarly, if there is a strike in a copper mine, copper prices may also rise. Therefore, the cause of inflation cannot be defined by a single factor. However, there is another major cause of inflation in the economy, which can affect the wide basket of goods, services and assets in the economy, is amount of money supply in the economy. It is this lever of inflation which should concern the central bankers. When greater amounts money, chases lesser and lesser amount of goods and services and/or assets in an economy, what you get is price increase. That is your inflation. What is money supply? It is a combination of credit and cash in the economy. In modern times credit is the biggest component of total money supply. Credit is created out of thin air. Credit can be created between any two parties in the economy. Commercial banks are the biggest originators' of credit and they need no deposit money to create credit. Did that startle you; banks do not need deposit to lend? If so, I would suggest the following paper from Bank of England: http://www.bankofengland.co.uk/publications/Documents/quarter lybulletin/2014/qb14q1prereleasemoneycreation.pdf

Investment Strategist February 2016

7

FOREX INSIGHT RESEARCH & ANALYSIS

USDINR SPOT WEEKLY CHART

The pair has meandered within the zone between the upper band of the Bollinger and the mean line. Since the uptrend began in mid-2014, we have not seen prices sustain much below the mid- Bollinger and in fact as the uptrend has gathered momentum, we have seldom seen prices travel much below the mean line itself. We see the mean line, the upward sloping green coloured moving average, as the first line of strong defence of the Dollar bulls and the mid-line of Bollinger as the second life. Somewhere between these two defences lay the zone of reversal for the near term pullbacks. The pair is now kissing the upper Bollinger. A few times over the recent past have prices managed to walk the upper band for a couple of weeks. Therefore, we cannot rule out the possibility of an intra-week blowout above upper band,.i.e., above 68.20/30, but sustaining above that can be a tricky game, as central bank can get aggressive on its intervention. Hence, we can look to play a range between 67.00/67.50 and 68.50/80 for the next few of weeks. Intermediate trend remains upward.

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Investment Strategist February 2016

8

ONE MONTH PORTFOLIO - JANUARY Nifty : 7946 Stock

Mcap (Rs mn)

Current Price (Rs.)

PE (x) / PABV (x)* FY15 FY16E

Comment

Infosys

2,550,893

1,105

19.3

16.8

We believe that, the new strategy should allow Infosys to improve growth rates over the long term with sustained margins. Infosys has already made significant progress towards next-generation services and delivery mechanisms.

Tata Motors

1,327,836

391

12.5

8.9

We expect JLR volumes to grow at a healthy pace in 2HFY16 and FY17. JLR's EBITDA margins are likely to witness gradual improvement after bottoming out in 2QFY16

ICICI BANK

1,516,097

261

1.8

1.6

IDFC BANK

206,884

61

1.4

1.2

Hindustan Zinc

621,119

147

8.1

7.7

TV18

79,900

47

39.2

21.4

We think Q3FY16 could potentially be the most profitable quarter in the history of the company TV18 owns the second strongest bouquet among listed peers, which compares favorably with Zee Ent.

Allcargo Ltd

51,301

203

17.7

16.4

MTO Volumes continue to be strong for Allcargo Healthy contribution from other segments Stock is trading at attractive valuations.

Alembic Pharma

131,166

694

31.7

22.3

NCC Ltd.

42,248

76

26.2

17.3

Order inflow is likely to ramp up sharply going forward Company also likely to benefit from large EPC projects from NHAI and debt reduction from stake sale in projects Stock is available at attractive valuations.

Tata Power

163,025

68

10.6

9.4

Decline in coal prices to directly benefit operations at 4000 MW plant at Mundra. Refinance of debt to lead to savings.

GSPL

76,582

136

17.0

14.3

We like the quality of liability franchise - CASA mix at 45.1% (Q2FY16), one of the best in the industry. NIM has been strong on back of strong accretion to low cost deposits as well as better ALM. Lower risk on SME portfolio. Present in the niche infra financing space and is well positioned to benefit from India's large infrastructure opportunity It has aggressively built-up buffer provisions over past several quarters (~10% in Q2FY16). So, even in the worst case scenario, if 1314% of its stressed portfolio turn into NPLs, provision coverage ratio would still remain healthy . The closures of large zinc mines in 4QCY15 will likely curtail supplies, thereby providing support to zinc prices. Strong fundamentals backed by a strong outlook on zinc prices, quality assets and attractive valuations.

Last quarter was robust led by US, however India disappointed, expect India business to pick up in this qua Alembic Pharma looks interesting with no USFDA regulatory issues pending as well as good pipeline.

Earnings will be supported by incremental power sector gas demand/higher tariffs. In the long term, commissioning of the 5 mtpa Mundra terminal would provide upside to gas transmission volume, improving pipeline utilization rates. We await PNGRB's final decision on gas pipeline tariffs and expect upward tariff revision.

Source : Kotak Securities - Private Client research; * P/ABV ratio for ICICI Bank and IDFC Bank

Investment Strategist February 2016

9

ONE MONTH PORTFOLIO - JANUARY Performance of 1 month Portfolio January Recommended Levels NIFTY

Current levels

Returns%

7946

7,510

-5.49

1105

1150

4.07

Tata Motors

391

339

-13.30

ICICI Bank

261

225

-13.79

IDFC Bank

61

52

-15.57

147

166

12.59

47

43

-7.98

Allcargo Ltd

203

185

-8.87

Alembic Pharma

694

609

-12.25

76

64

-15.53

68

61

-9.85

136

149

9.78

PF Infosys

Hindustan Zinc TV18

NCC Tata Power GSPL Cash - GSPL Cash - Hind Zinc

RETURNS -6.59% Nifty -5.49%

Investment Strategist February 2016

10

ONE MONTH PORTFOLIO - FEBRUARY Nifty : 7564 Stock

Mcap (Rs mn)

Current Price (Rs.)

PE (x) / PABV (x)* FY15 FY16E

Comment

Infosys

2,689,403

1165

19.8

17.3

We believe that, the new strategy should allow Infosys to improve growth rates over the long term with sustained margins. Infosys has already made significant progress towards next-generation services and delivery mechanisms.

Tata Motors

1,144,452

337

10.8

7.7

We expect JLR volumes to grow at a healthy pace in 2HFY16 and Fy17. JLR's EBITDA margins are likely to witness gradual improvement after bottoming out in 2QFY16.

Axis Bank

1,941,264

408

2.1

1.8

Engineers India Ltd

65,041

193.0

16.6

13.5

We believe that the company is likely to benefit from the increased spending in Hydrocarbon capex by major PSUs. Stock trades at attractive valuations at current price.

TV18

74,800

44.0

40.0

21.0

We believe that TV18 has started out on what is likely to be a series of strong results. Earnings of the company have reached a threshold level from which they can force a floor, thus reducing risk in the stock.

IDFC Bank

172,686

53

1.2

1.1

Allcargo Logistics

51,283

187.0

16.3

15.1

MTO Volumes continue to be strong for Allcargo. Healthy contribution from other segments. Stock is trading at attractive valuations.

Alembic Pharma

116,802

618

28.2

19.9

Alembic Pharma's last few quarters were robust led by US one offs, this has made the balance sheet stronger. In the mid cap space, Alembic Pharma looks interesting with no USFDA regulatory issues pending as well as good pipeline.

NBCC

115,560

963

32.6

24.2

NCC

35,580

64.0

22.1

14.5

Tata Power

142,380

60

9.2

8.2

Strong Liability franchise - CASA mix at 43-44%, one of the best in the Industry. Bank has fully recognized the necessary impairments as per the RBI assessment in Q3FY16 itself, which partly clears the asset quality overhang on the stock. Healthy asset quality GNPA/NNPA at 1.68%/0.75%, respectively with strong coverage ratio (~72%).

Present in the niche infra financing space and is well positioned to benefit from India's large infrastructure op portunity. It has aggressively built-up buffer provisions over past several quarters (~10% in Q2FY16). So, even in the worst case scenario, if 1314% of its stressed portfolio turn into NPLs, provision coverage ratio would still remain healthy at 55-60%.

NBCC had a strong order book of Rs 300 bn (excluding new redevelopment orders from DDA of ~Rs 100 bn) at the end of Q2FY16 and further added Rs 85.2 bn of new orders in Q3FY16. The inflow of large size redevelopments orders in recent time would further strengthen company's order book and would be positive for future growth in financials. Order inflow is likely to ramp up sharply going forward for the company. Company also likely to benefit from large EPC projects from NHAI and debt reduction from stake sale in projects. Stock is available at attractive valuations. Decline in coal prices to directly benefit operations at 4000 MW plant at Mundra.Refinance of debt to lead to savings

Source : Kotak Securities - Private Client research; * P/ABV ratio for ICICI Bank and IDFC Bank

Investment Strategist February 2016

11

LATEST FUNDAMENTAL STOCK RECOMMENDATION EV/EBIDTA(x) Name of the Company

Latest Reco ^

Price Price as Latest Upside as on On latest price (Down 29-Jan Report target* side) (Rs) (Rs) (Rs) (%)

Latest Report Date (Rs)

Mkt Cap (Rs mn)

EPS (Rs) FY115

PE (x)

RoE (%)

FY16E FY15 FY16E

FY15

FY16E

P/ABV(x)* FY15 FY16E

Banking Allahabad Bank Andhra Bank Axis Bank Bank of Baroda DCB Bank HDFC Bank ICICI Bank IDFC Bank Indian Bank Jammu & Kashmir Bank Punjab National Bank State Bank of India Union Bank of India

ACCUM ACCUM BUY ACCUM BUY BUY BUY BUY BUY BUY ACCUM BUY ACCUM

54 52 408 125 78 1,050 230 53 91 71 91 180 131

77 68 389 167 79 1,041 232 51 129 83 135 243 163

86 76 510 180 100 1,200 312 89 160 112 150 332 175

60.3 45.7 24.9 43.5 27.7 14.3 35.6 69.4 75.0 56.8 64.3 84.5 33.7

13-Nov-15 13-Nov-15 21-Jan-16 09-Nov-15 14-Jan-16 27-Jan-16 29-Jan-16 29-Jan-16 04-Nov-15 30-Dec-15 10-Nov-15 09-Nov-15 09-Nov-15

26,825 29,182 968,112 258,575 19,598 2,498,013 1,326,734 177,934 39,302 34,653 154,845 1,207,201 72,033

13.2 14.0 35.2 13.2 5.8 49.1 21.5 21.5 15.2 14.5 19.6 36.9

16.6 18.8 41.3 16.4 6.0 59.5 24.4 22.5 15.9 16.9 23.3 37.2

4.1 3.7 11.6 9.5 13.5 21.4 10.7 4.3 4.7 6.3 9.2 3.5

3.2 2.8 9.9 7.6 13.1 17.6 9.4 4.1 4.5 5.4 7.7 3.5

6.6 9.3 17.8 7.2 9.8 18.4 14.7 8.0 11.5 6.8 10.9 12.8

8.0 11.3 18.7 8.7 9.3 19.2 15.0 7.9 11.0 7.6 11.7 11.4

0.5 0.5 2.1 1.0 1.4 3.7 1.8 0.5 0.7 0.7 1.2 0.7

0.5 0.5 1.8 0.9 1.3 3.2 1.5 0.5 0.6 0.7 1.1 0.6

NBFCs HDFC Ltd IDFC LIC Housing Finance M&M Financial Services Shriram Transport Finance Co

BUY BUY BUY REDUCE BUY

1,175 41 476 208 844

1,170 45 464 208 941

1,380 84 550 200 1,090

17.4 107.4 15.6 (3.8) 29.1

28-Jan-16 15-Dec-15 19-Jan-16 22-Jan-16 30-Oct-15

1,727,279 64,395 226,053 99,456 189,112

45.2 NM 33.4 7.3 62.2

48.1 10.4 36.8 10.2 71.4

26.0 NM 14.2 28.5 13.6

24.4 3.9 12.9 20.4 11.8

21.4 NM 19.5 7.0 15.2

20.4 10.5 18.5 9.2 15.4

5.6 0.4 2.7 2.5 1.9

5.0 0.3 2.3 2.6 1.7

Auto & Auto Ancillary Apollo Tyres Ashok Leyland Bajaj Auto Ltd Eicher Motors Ltd # Escorts Ltd Hero MotoCorp Ltd Mahindra & Mahindra Maruti Suzuki India Ltd Motherson Sumi Systems Ltd Tata Motors TVS Motors

BUY 147 ACCUM 90 ACCUM 2,342 ACCUM 16,547 ACCUM 135 ACCUM 2,566 BUY 1,233 BUY 4,096 BUY 266 BUY 337 SELL 292

35.6 4.9 18.1 10.5 39.8 14.2 20.3 15.3 23.2 45.4 (6.9)

03-Nov-15 06-Nov-15 26-Oct-15 09-Nov-15 03-Nov-15 23-Oct-15 17-Dec-15 29-Jan-16 09-Nov-15 17-Dec-15 28-Oct-15

74,315 238,426 677,760 446,758 16,529 513,130 759,682 1,236,947 352,116 1,069,321 138,848

21.3 2.7 132.1 494.8 9.0 155.6 55.3 157.3 9.4 31.3 10.4

22.3 3.9 146.5 596.0 17.2 177.6 71.9 214.6 14.3 43.7 13.6

6.9 33.2 17.7 33.4 15.0 16.5 22.3 26.0 28.3 10.8 28.1

6.6 23.0 16.0 27.8 7.9 14.4 17.2 19.1 18.6 7.7 21.5

19.5 14.4 32.6 43.2 5.7 42.8 16.6 18.7 32.8 12.6 26.8

17.3 18.0 30.2 36.5 10.2 39.3 18.9 21.9 37.6 19.0 28.1

4.1 14.8 11.5 17.4 10.1 11.2 16.4 12.1 9.8 3.9 17.2

4.5 11.5 10.0 14.1 6.0 9.8 12.2 9.6 6.8 3.0 13.6

Building Material Century Plyboards (India) Ltd Greenply Industries Ltd Kajaria Ceramics Ltd Supreme Industries Ltd

BUY BUY ACCUM ACCUM

150 176 974 741

166 177 955 689

230 233 1,009 768

53.8 32.4 3.5 3.7

23-Dec-15 20-Jan-16 28-Jan-16 27-Jan-16

33,264 21,240 73,649 94,075

7.9 10.1 30.7 16.8

10.9 13.0 40.4 32.0

18.9 17.5 31.7 44.1

13.7 13.6 24.1 23.1

38.2 22.5 28.8 18.2

38.4 15.6 9.6 23.3 9.8 8.0 29.2 9.6 13.0 29.9 21.4 12.0

Capital Goods & Engineering ABB Ltd * AIA Engineering Bajaj Electricals Ltd Bharat Electronics BHEL Blue Star Ltd Carborundum Universal Ltd Crompton Greaves Cummins India Elgi Equipment Ltd Engineers India Ltd Greaves Cotton Havells India Ltd Kalpataru Power Transmission Larsen & Toubro Praj Industries Ltd Siemens India * * Suzlon Energy Thermax Time Technoplast Ltd Va Tech Wabag Ltd Voltamp Ltd Voltas Ltd

SELL ACCUM ACCUM REDUCE REDUCE BUY BUY SELL ACCUM SELL BUY BUY ACCUM SELL BUY BUY SELL RS ACCUM BUY REDUCE ACCUM BUY

971 822 182 1,232 139 362 173 171 924 125 193 129 297 198 1,102 97 1,021 20 840 53 590 874 287

1,255 931 240 1,231 165 360 186 182 1,033 133 211 139 300 259 1,409 81 1,237 23 832 55 668 823 274

1,206 1,130 265 1,277 170 404 215 163 1,150 110 240 170 320 258 1,660 105 1,095 NA 900 69 700 882 310

24.2 37.5 45.9 3.7 22.6 11.7 24.6 (4.9) 24.5 (11.7) 24.6 31.8 7.9 30.4 50.7 8.0 7.3 7.2 29.6 18.6 1.0 8.2

04-Nov-15 04-Nov-15 06-Nov-15 29-Jan-16 14-Dec-15 27-Oct-15 13-Jan-16 30-Oct-15 09-Nov-15 03-Nov-15 27-Jan-16 04-Nov-15 28-Jan-16 09-Nov-15 02-Nov-15 10-Dec-15 01-Dec-15 03-Jun-15 29-Oct-15 18-Nov-15 10-Nov-15 18-Jan-16 10-Nov-15

205,786 77,259 17,942 295,572 339,399 32,517 32,258 110,002 256,022 19,679 64,923 31,495 185,172 30,362 1,016,272 17,213 337,885 30,387 99,912 11,129 31,278 8,824 94,705

12.1 42.1 5.6 54.6 3.7 9.1 8.3 2.7 27.1 3.7 11.6 8.8 9.2 13.4 43.6 3.0 20.9 NM 23.1 6.0 18.2 33.0 9.4

26.8 49.3 15.4 63.9 7.6 13.6 11.9 7.7 31.8 5.5 14.3 9.5 10.5 15.4 57.2 4.8 29.6 NM 28.3 7.1 30.4 44.0 12.2

80.3 19.5 32.4 22.6 37.5 39.7 20.8 63.5 34.1 33.7 16.6 14.7 32.3 14.8 25.3 32.4 48.8 NM 36.3 8.9 32.4 26.5 30.5

36.2 16.7 11.8 19.3 18.3 26.6 14.5 22.3 29.0 22.6 13.5 13.6 28.3 12.8 19.3 20.3 34.5 NM 29.7 7.5 19.4 19.9 23.5

8.9 17.8 7.8 16.3 2.7 13.2 13.6 4.5 24.8 12.1 14.3 24.1 29.3 9.6 9.6 8.3 13.7 NM 5.5 11.5 10.7 9.0 14.0

17.6 18.1 19.5 18.2 5.5 18.2 17.5 11.9 26.3 16.2 16.5 21.9 29.1 10.3 11.8 12.7 17.3 NM 6.6 12.2 16.6 12.0 16.3

Cement ACC ## Grasim Industries India Cements Shree Cement UltraTech Cement

REDUCE 1,240 BUY 3,394 REDUCE 94 REDUCE 10,550 BUY 2,840

13.5 25.0 9.7 6.2 5.9

21-Oct-15 30-Oct-15 06-Jan-16 08-Jan-16 21-Jan-16

232,919 44.1 61.1 311,198 245.0 383.5 28,812 4.6 4.8 367,553 141.5 329.4 778,187 84.5 131.6

28.1 13.9 20.4 74.6 33.6

20.3 8.8 19.6 32.0 21.6

9.8 9.3 3.8 9.4 11.7

13.1 15.5 11.3 13.2 5.3 3.3 3.8 5.4 5.3 19.1 25.9 13.6 16.0 16.8 10.9

Construction IL&FS Transportation Network IRB Infrastructure Developers KNR Construction Nagarjuna Construction NBCC PNC Infratech Ltd Simplex Infrastructures MT Educare Ltd

ACCUM BUY BUY BUY BUY BUY BUY BUY

80 243 495 64 963 504 280 165

89 259 558 77 984 523 319 187

95 295 650 101 1,122 609 412 230

18.8 21.4 31.4 56.8 16.5 20.8 47.1 39.6

10-Nov-15 23-Oct-15 07-Jan-16 13-Nov-15 31-Dec-15 09-Nov-15 17-Nov-15 12-Jan-16

15,532 80,780 13,895 35,803 122,288 25,855 13,908 6,557

8.3 16.7 39.6 4.4 40.0 29.9 30.5 11.5

16.3 13.8 18.2 22.2 33.2 21.2 19.2 22.3

9.6 14.6 12.5 14.6 24.1 16.9 9.2 14.3

2.6 13.4 12.7 4.9 24.4 12.3 4.8 21.9

4.2 11.4 16.4 6.9 27.4 11.5 9.4 29.7

FMCG Colgate Palmolive (India) Ltd Dabur India Ltd Godrej Consumer Products Ltd Hindustan Unilever ITC Ltd Marico Ltd Nestle India Ltd Pidilite Industries

ACCUM BUY ACCUM REDUCE ACCUM ACCUM SELL REDUCE

858 251 1,225 817 320 222 5,480 566

854 244 1,147 804 309 200 6,290 569

909 287 1,257 805 332 217 5,230 590

6.0 14.5 2.6 (1.5) 3.7 (2.1) (4.6) 4.2

28-Jan-16 29-Jan-16 28-Jan-16 18-Jan-16 25-Jan-16 05-Nov-15 30-Oct-15 30-Oct-15

233,362 435,630 396,382 1,764,504 2,477,708 285,485 528,382 287,655

21.6 25.2 7.1 8.2 33.2 38.3 19.2 22.4 12.5 13.8 5.7 6.2 81.9 130.1 15.4 16.8

39.7 35.3 36.9 42.5 25.6 38.9 66.9 36.8

34.0 69.1 80.7 24.7 21.8 30.6 30.0 29.1 29.1 23.7 32.0 22.3 21.5 23.9 20.2 36.5 111.4 124.5 29.7 25.4 23.2 32.6 33.5 16.9 15.3 35.8 34.1 29.8 26.2 22.6 42.1 29.9 44.9 35.0 23.0 33.7 31.1 28.1 23.8 22.4

170 200 87 94 2,516 2,765 16,693 18,288 173 189 2,623 2,931 1,218 1,484 4,103 4,722 266 328 380 490 277 272

1,382 1,407 3,661 4,242 101 103 11,032 11,200 2,617 3,009

4.9 17.6 27.2 2.9 29.0 23.8 14.6 7.4

30.8 12.1 8.8 17.5 34.6 21.7 10.2 25.3 30.0 15.9 12.2 8.4 19.3 7.5 15.4 16.9 25.0 NM 23.7 5.1 12.1 24.8 23.4

19.9 10.3 4.9 18.9 7.5 15.5 7.9 12.5 24.9 11.8 7.9 7.7 19.8 6.8 13.9 11.1 17.9 NM 18.8 4.5 8.9 15.4 17.0

11.5 9.3 7.6 7.1 NM NM 7.9 7.2 27.9 19.6 10.8 8.8 5.8 5.0 12.8 8.4

*P/BV for Banking & NBFC’s

Investment Strategist February 2016

12

LATEST FUNDAMENTAL STOCK RECOMMENDATION Name of the Company

Latest Reco ^

Price Price as Latest Upside as on On latest price (Down 29-Jan Report target* side) (Rs) (Rs) (Rs) (%)

Latest Report Date (Rs)

Mkt Cap (Rs mn)

Information Technology Cyient Ltd (Infotech) Geometric Ltd HCL Technologies Infosys Technologies KPIT Technologies Mphasis Ltd NIIT LTD NIIT Technologies Oracle Financial Services Soft Tata Consultancy Services (TCS) Wipro Technologies Zensar Technologies

REDUCE ACCUM REDUCE BUY BUY REDUCE BUY ACCUM SELL ACCUM ACCUM REDUCE

438 159 866 1,165 143 456 86 552 3,659 2,391 563 900

468 165 840 1,140 139 460 79 515 3,828 2,325 545 837

489 175 879 1,305 160 480 92 548 3,800 2,562 582 872

11.6 10.4 1.5 12.0 11.7 5.2 7.5 (0.7) 3.9 7.1 3.4 (3.1)

Logistics Adani Port & Special Eco Zone Allcargo Global Logistics Blue Dart Express Container Corporation of India Gateway Distriparks Ltd Gujarat Pipavav Port Ltd (GPPL)

BUY BUY SELL BUY ACCUM BUY

212 188 6,289 1,187 302 161

232 180 7,580 1,210 322 155

320 225 5,500 1,660 350 175

50.8 20-Jan-16 20.0 15-Dec-15 (12.5) 23-Oct-15 39.9 28-Jan-16 15.8 15-Dec-15 8.6 29-Jan-16

425,243 51,375 149,043 231,436 32,654 68,306

Media Dish TV India Ltd Entertainment Network (ENIL) HT Media Hindustan Media Ventures Ltd Sun TV Network TV18 Broadcast Zee Entertainment Ent

ACCUM SELL NR ACCUM REDUCE BUY ACCUM

91 722 78 275 379 44 420

108 683 283 378 41 397

118 662 300 384 67 428

29.3 (8.3) 9.1 1.3 53.1 1.9

28-Oct-15 28-Oct-15 28-Jan-16 29-Oct-15 18-Jan-16 18-Jan-16

Metals & Mining Hindustan Zinc JSW Steel National Aluminium Co Tata Sponge Iron Ltd

BUY REDUCE ACCUM BUY

161 1,057 35 412

145 1,030 41 397

175 1,080 44 540

8.7 2.2 27.5 30.9

Oil & Gas Aban Offshore Ltd Cairn India Ltd Castrol India Ltd * * Chennai Petroleum Corporation Gujarat State Petronet Ltd (GSPL) Indraprastha Gas (IGL) MRPL Oil India Ltd Petronet LNG

ACCUM ACCUM ACCUM REDUCE BUY ACCUM ACCUM BUY REDUCE

191 122 420 186 139 560 65 352 246

222 113 454 214 142 465 57 399 207

244 126 502 220 160 496 63 520 214

Paints Asian Paints Ltd Berger Paints Kansai Nerolac Paints Ltd

ACCUM BUY REDUCE

870 266 263

847 238 266

925 275 275

Pharmaceuticals Alembic Pharma Cadila Healthcare Ltd Cipla Dr Reddy's Laboratories Ltd Lupin Sun Pharmaceuticals Torrent Pharmaceuticals

BUY ACCUM SELL SELL ACCUM ACCUM SELL

617 304 585 3,105 1,711 873 1,399

625 313 658 3,388 1,945 790 1,544

Power NTPC Tata Power Company Ltd

BUY BUY

142 60

Real Estate Phoenix Mills Ltd

BUY

BUY REDUCE BUY

Shipping GE Shipping Company Pipavav Def & Offshore Engg Shipping Corporation of India

15-Jan-16 04-Nov-15 20-Jan-16 15-Jan-16 22-Jan-16 23-Oct-15 21-Jan-16 18-Jan-16 24-Nov-15 13-Jan-16 19-Jan-16 21-Jan-16

EPS (Rs) FY115

48,684 32.4 9,933 13.4 1,222,439 40.4 2,665,271 58.7 27,399 14.4 95,213 33.5 14,090 4.5 32,357 44.3 306,432 166.8 4,680,731 122.3 1,377,003 36.5 38,801 73.5

PE (x)

RoE (%)

FY16E FY15 FY16E

FY15

P/ABV(x)*

FY16E

FY15 FY16E

38.9 15.2 58.5 67.5 16.5 38.9 7.1 47.1 183.5 136.8 40.2 81.9

13.5 11.8 21.4 19.8 10.0 13.6 19.0 12.5 21.9 19.6 15.4 12.2

11.3 10.4 14.8 17.3 8.7 11.7 12.0 11.7 19.9 17.5 14.0 11.0

17.7 19.4 18.6 23.6 19.1 12.6 13.9 18.5 33.5 43.0 21.3 25.3

18.3 18.6 17.4 24.8 18.4 13.8 19.8 17.2 28.4 42.0 20.3 23.1

8.8 4.8 15.7 14.8 5.4 7.8 17.2 6.2 15.4 14.1 9.1 7.5

6.5 3.8 10.4 12.8 4.5 6.7 12.5 5.3 13.2 12.4 7.7 6.2

13.1 10.5 80.0 59.3 12.4 5.5

16.8 12.4 90.9 66.3 15.9 6.4

16.2 17.9 78.6 20.0 24.4 14.5

12.6 15.2 69.2 17.9 19.0 16.5

21.1 12.3 58.4 13.4 12.2 13.1

21.8 12.7 62.7 13.4 14.1 13.2

12.4 10.3 45.1 15.1 12.7 16.4

10.3 9.2 40.0 12.9 10.6 14.2

97,090 34,442 18,200 20,186 149,405 74,813 410,809

2.0 19.6 NM 24.0 22.4 1.1 10.5

2.8 20.7 NM 27.6 22.6 2.1 13.8

45.6 36.8 NM 11.5 16.9 39.8 40.0

32.6 34.9 NM 10.0 16.8 20.8 30.4

NM 13.0 NM 21.9 23.7 5.5 17.4

NM 12.1 NM 21.3 21.4 9.5 20.0

10.9 20.2 NM 8.5 7.1 27.7 26.4

8.7 18.4 NM 7.0 6.7 15.7 20.9

25-Jan-16 01-Jan-16 28-Dec-15 22-Jan-16

680,277 255,489 88,907 6,352

18.1 27.7 2.7 16.3

17.6 92.8 2.9 45.4

8.9 38.2 12.8 25.3

9.1 11.4 11.9 9.1

16.7 2.8 5.5 3.2

14.8 8.6 5.7 8.4

4.9 7.8 3.3 5.8

4.1 5.9 3.3 0.1

27.7 3.2 19.5 18.2 15.2 (11.4) (3.4) 47.9 (12.9)

06-Nov-15 25-Jan-16 06-Nov-15 05-Nov-15 04-Jan-16 11-Dec-15 30-Oct-15 10-Nov-15 20-Nov-15

11,078 229,014 207,790 27,744 77,923 78,379 114,318 211,317 184,200

88.1 7.3 12.4 61.8 8.3 32.7 2.2 50.4 11.5

89.3 7.4 13.9 40.3 9.5 37.3 8.6 55.2 14.5

2.2 16.7 33.9 3.0 16.7 17.1 29.9 7.0 21.4

2.1 16.5 30.2 4.6 14.6 15.0 7.6 6.4 17.0

9.3 2.3 72.9 43.5 12.0 20.0 7.1 12.8 14.2

8.8 6.4 6.3 2.3 3.9 2.7 64.7 21.1 19.1 20.9 4.0 4.1 12.0 8.6 7.9 19.0 9.1 8.8 23.8 16.6 7.5 12.9 3.1 2.6 15.7 12.5 9.6

6.3 3.2 4.7

19-Jan-16 22-Dec-15 27-Jan-16

834,234 184,650 141,568

19.1 5.7 6.6

23.2 7.0 7.7

45.5 46.7 39.8

37.5 38.1 34.1

29.7 22.9 19.7

28.5 28.3 23.8 22.6 27.6 22.7 20.3 24.5 21.1

750 340 650 2,920 2,220 850 1,490

21.5 11.8 11.1 (6.0) 29.8 (2.6) 6.5

22-Jan-16 06-Jan-15 06-Nov-15 26-Nov-15 28-Oct-15 21-Dec-15 02-Nov-15

116,698 22.0 311,410 15.2 470,420 23.9 528,539 149.0 767,100 56.1 2,100,318 21.3 236,406 96.2

31.1 14.8 29.9 145.9 82.0 33.9 74.4

28.1 20.0 24.5 20.8 30.5 41.0 14.5

19.9 20.6 19.6 21.3 20.9 25.8 18.8

62.8 28.3 16.5 23.6 25.3 15.3 23.6

32.9 22.8 17.7 19.4 29.0 22.8 25.5

136 68

147 84

3.2 39.8

30-Oct-15 10-Nov-15

1,174,643 142,617

9.4 6.5

9.7 7.3

15.2 9.2

14.7 8.2

9.2 7.9

9.1 10.5 10.4 13.1 5.5 4.8

300

340

420

40.0

09-Nov-15

43,455

11.0

12.4

27.3

24.2

7.9

7.9 18.9 16.7

336 73 82

371 79 93

430 76 105

27.8 3.8 28.1

09-Nov-15 18-Jan-16 16-Dec-15

51,133 50,596 34,706

85.2 NM 12.6

95.7 NM 14.7

3.9 NM 6.5

3.5 NM 5.6

14.6 NM 8.6

14.4 NM 9.1

10.8 13.3 14.3 12.4 17.2 25.1 9.0

14.3 13.6 11.5 12.3 11.4 16.0 13.0

3.4 3.0 NM NM 5.9105.9

Source: Kotak Securities -^ All recommendations are with a 9-12 month perspective from the date of the report/update. Investors are requested to use their discretion while deciding the timing, quantity of investment as well as the exit. * Figures for CY15 & Cy16 ** Figures for CY16 & Cy17 # Figures for CY15 & FY17 (15 month period) ## Figures for CY16 & CY17 - September year ending NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) and/or Kotak Securities policies in circum- stances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. NM= Not Meaningful

Investment Strategist February 2016

13

YIELD TO MATURITY (YTM) OF TAX FREE BONDS TRADING IN SECONDARY MARKETS Company Name National Highways Authority of India

Series

Rating

Tenure

Int Date

CMP

Accrued Int

Yield

N8

AAA

10

1st April

1002.20

4.38

8.29%

NA

AAA

15

1st April

1009.15

4.50

8.24%

N9

AAA

15

1st April

1008.45

4.35

7.96%

NC

AAA

15

1st December

1102.60

14.52

7.80%

NJ

AAA

15

15th October

1008.48

8.79

7.68%

NK

AAA

20

15th October

1009.85

8.76

7.61%

NB

AAA

10

1st December

1080.00

13.74

7.59%

NE

AAA

10

1st December

1100.00

14.17

7.53%

-

AA+

15

25th October

1122.00

23.91

7.52%

NF

AAA

15

1st December

1150.00

14.94

7.51%

-

AAA

20

1st December

1010.00

20.93

7.46%

NG

AAA

20

1st December

1168.90

14.79

7.45%

N4

AAA

15

1st December

1000.00

11.80

7.44%

-

AAA

15

17th October

1033.00

22.17

7.38%

-

AAA

20

17th October

1046.36

22.41

7.35%

ND

AAA

20

5th October

1053.00

24.97

7.33%

-

AA+

20

25th October

1159.99

23.86

7.33%

N2

AAA

15

1st October

1100.00

0.00

7.31%

N9

AAA

15

1st December

1128.00

14.94

7.30%

-

AAA

15

15th April

1180.00

69.35

7.29%

INE906B07EH2 National Highways Authority of India INE906B07EJ8 National Highways Authority of India INE906B07EI0 Rural Electrification Corporation Limited INE020B07ID2 Indian Railway Finance Corporation Limited INE053F07835 Indian Railway Finance Corporation Limited INE053F07843 Rural Electrification Corporation Limited INE020B07IC4 Rural Electrification Corporation Limited INE020B07IF7 Housing & Urban Development Corp Ltd INE031A07949 Rural Electrification Corporation Limited INE020B07IG5 Rural Electrification Corporation Limited INE020B07JU4 Rural Electrification Corporation Limited INE020B07IH3 Rural Electrification Corporation Limited INE020B07GZ9 Power Finance Corporation Limited INE134E07562 Power Finance Corporation Limited INE134E07588 NTPC Limited INE733E07JW2 Housing & Urban Development Corp Ltd INE031A07956 National Highways Authority of India INE906B07CB9 Rural Electrification Corporation Limited INE020B07HS2 Indian Railway Finance Corporation Limited INE053F07686 As on 1st February, 2016

Disclaimers: 1 2 3 4 5 6 7

Kotak Securities Limited (KSL) may have taken proprietary long/short position in the above mentioned scrip and therefore should be considered as interested. Analyst holding: Nil. The views provided herein are general in nature and does not consider risk appetite or investment objective of particular investor; clients are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with KSL”. For more details please refer the issue document. Debt investments are subject to risk. Past performance is no guarantee for future performance. This document has been prepared by Kotak Securities Limited and is meant for sole use by the recipient and not for circulation. This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such YTM (Yield To Maturity): Annualized yield that would be realized on a bond if the bond was held until maturity date Accrued Interest: Interest earned on a bond till date for the current financial year from the date of allotment/last interest payment date Please note that the face value of the above mentioned bonds is Rs 1000 respectively Record Date for the above mentioned bonds in most cases is 15 days prior to interest payment date. To know record date for a specific bond, please refer offer document. CMP (Current Market Price) is the closing price as on 1st February, 2016

Investment Strategist February 2016

23

MUTUAL FUND RECOMMENDATIONS

CAGR (%) Recommended Equity Funds

Corpus (In Crs.)

1 Year

3 Years

5Years

Absolute Returns for period less than 1 year, CAGR for 1 year & above Large Cap Funds DSP BlackRock Focus 25 Fund

1,177

-9.00

13.05

9.67

Franklin India Prima Plus - Growth

6,337

-5.74

17.81

14.77

Kotak Select Focus Fund - Reg - Growth

3,948

-8.80

17.86

13.87

SBI Bluechip Fund - Growth

3,624

-2.05

17.58

14.60

Mid Cap Funds Kotak Emerging Equity Scheme - Reg - Growth

833

-3.10

22.17

17.70

Canara Robeco Emerging Equities - Growth

911

-0.36

29.35

21.73

SBI Magnum Midcap Fund - Growth

1,471

5.50

28.78

21.64

Opportunistic Funds Birla Sun Life Equity Fund - Growth

2,481

-8.32

17.67

12.19

4,086

-11.88

21.34

17.07

11,065

-6.85

22.84

17.74

Franklin India High Growth Companies Fund - Growth ICICI Prudential Value Discovery Fund - Growth ELSS Funds Axis Long Term Equity Fund - Growth

6,867

-2.93

26.29

20.31

Birla Sun Life Tax Relief 96 - Growth

2,010

-4.91

20.57

13.64

Franklin India Taxshield - Growth

1,868

-6.45

17.83

15.01

AUM is as of Dec 2015. Average Maturity of Schemes are as of Dec 2015 Tracker as on February 01, 2016.

Investment Strategist February 2016

24

COMPANY FIXED DEPOSITS COMPANY'S NAME

NON CUMULATIVE INTEREST RATE 1YR

BAJAJ FINANCE LIMITED

2YRS

3YRS

5YRS

8.40(M)

8.55(M)

8.55(M)

8.55(M)

8.45(Q)

8.60(Q)

8.60(Q)

8.60(Q)

8.55(H)

8.70(H)

8.70(H)

8.70(H)

8.75(Y)

8.90(Y)

8.90(Y)

8.90(Y)

HDFC LIMITED Regular Deposits

7.95(M)

7.95(M)

7.95(M)

7.95(M)

(Maximum Limit: Less than Rs.2 Crore)

8.00(Q)

8.00(Q)

8.00(Q)

8.00(Q)

8.10(H)

8.10(H)

8.10(H)

8.10(H)

8.25(A)

8.25(A)

8.25(A)

DEEWAN HOUSING FIN. LTD (Aashray Deposits)

LIC HOUSING FINANCE LTD

8.35(M)

8.60(M)

8.60(M)

8.60(M)

8.45(Q)

8.65(Q)

8.65(Q)

8.65(Q)

8.55(H)

8.80(H)

8.80(H)

8.80(H)

8.25

8.25(18 months)

8.40

8.50

8.35(24 months) MAHINDRA & MAHINDRA FINANCE SERV LTD

SHRIRAM Trans FINANCE CO.LTD. (Maximum Limit: Less than Rs. 1 Crore)

PNB Housing Finance Limited

7.90(Q)

8.20(Q)

8.20(Q)

8.20(Q)

8.00(H)

8.30(H)

8.30(H)

8.30(H)

8.75(Y) 8.57(H) 8.48(Q) 8.42(M)

8.75(Y) 8.57(H) 8.48(Q) 8.42(M)

9.00(Y) 8.81(H) 8.71(Q) 8.65(Q)

9.00(Y) 8.81(H) 8.71(Q) 8.65(Q)

7.70(M)

7.70(M)

7.95(M)

7.95(M)

7.75(Q)

7.75(Q)

8.00(Q)

8.00(Q)

7.85(H)

7.85(H)

8.05(H)

8.05(H)

8.00(Y)

8.00(Y)

8.25(Y)

8.25(Y)

The Fixed Deposits list is not comprehensive but contains few Fixed Deposits currently available for Public. Investors should read the fixed deposit application forms before applying for the same.

Capital Gain Bonds

INTEREST RATE / TENURE

REC 54EC Capital Gain Bonds (Series X)

6.00% payable annually, 3 year

NHAI 54EC Capital Gain Bonds (SERIES XVI)

6.00% payable annually, 3 year

IPO

Lead Manager/ Lead Broker

INFIBEAM INCORPORATION LIMITED IPO

Kotak is one of the lead manager

HEALTHCARE GLOBAL ENTERPRISES LIMITED IPO

Kotak is one of the lead manager

LARSEN & TOUBRO INFOTECH LIMITED IPO

Kotak is one of the lead manager

PARAG MILK FOODS LIMITED

Kotak is one of the lead manager

Investment Strategist February 2016

25

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Investment Strategist February 2016