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Market Overview Mutual Fund Overview Economy Review Technical View Prominent Headlines Stock Reshuffle Startup Corner Commodity Monthly Round up Testimonials Monthly Insight Performance Sector Outlook: FMCG Book Review Q&A with CIO Management Meet Note Market Mayhem Analysis World Economic Event Calendar INSIGHT April 2020

PANIC UNWINDING

Q&A WITH CIO Mr. Manish Singh, Chief Investment Officer, Crossbridge Capital LLP

TCS LTD. | HDFC BANK LTD. | ITC LTD. BRITANNIA INDUSTRIES LTD. INSIDE THIS ISSUE Market Economy 1 overview 27 Review

Prominent Startup headlines corner PROMINENT March 2020 6 38 Testimo- Sector - 8 nials Testimonial 39 FMCG

Q&A with CIO Market Mayhem - Mr. Manish Singh, Analysis Chief Investment Officer, Crossbridge 9 Capital LLP 45 Mutual Technical 12 fund overview 52 view

Stock Commodity Reshuffle 16 monthly round up 57 Monthly Book insight review Recommendation Am I Being Too 21 performance 58 Subtle by Sam Zell

Management World meet note economic • Godrej Consumer calendar Products Ltd. 24 60

April 2020 INSIGHT 2 MarketOVERVIEW

The worst fears with respect to the coronavirus have come true – it has indeed spread across the globe and still spreading into newer international boundaries.

t has now officially spread to 198 exponentially and the growth curve countries and expanding almost of daily new infected person is a real every day. Given the contentious steep one. The only way to flatten nature of the virus, ignorant will So far, the virus has the curve and slow the progress is Ihave to pay a heavy price. So far, the to advocate strict social distancing virus has got the world’s full attention got the world’s full and lockdowns, else the number and the policymakers and the global attention and the of deaths doubles itself in 2 days, central banks are willing to let their particularly at the early stages of the purse loose and do whatever it takes policymakers and the virus invasion in a nation. Later on, to contain the virus. However, the global central banks with restrictions, it should slow down best way to contain the virus is to are willing to let their and if it doesn’t slow down, then it is seal the international and as well a trouble. For the whole world, total as regional borders and if possible purse loose and do confirmed deaths are still doubling complete lockdown of the nation whatever it takes to in 6 days and that’s not a healthy at the earliest sign. Research work sign, the reason being the virus is shows that without social distancing contain the virus. still exploring into newer regions. and lockdowns, the virus grows The total number of confirmed cases

1 INSIGHT April 2020 cases were reported. Besides, the expatriates which were flown back to India were also responsible for local transmission (stage 2). While China was the the official confirmation for stage The number of country which 3 (community transmission) is yet hospital beds per showed us that to come, doctors and scientists are 1000 people in India lockdown and of the opinion that it has already is only 0.7, compared extensive testing started. For a country where majority to 6.5 in France, 11.5 of the citizens lack general sense are the only ways to in South Korea, 4.2 in keep the virus at bay of awareness, Prime Minister, Modi knew it would be a matter of China, 3.4 in Italy, 2.9 while South Korea time before India moves to stage 4 in the UK, 2.8 in the has been successful (epidemic) unless restrictions are put USA, and 1.5 in Iran. in flattening the curve in. While closing of the international Similarly, doctors per without imposing any borders started partially from 3rd 1000 people is 0.76 in March, it was not until March 12th, sort of lockdowns India, 3.24 in France, but only through when WHO declared Coronavirus as ‘pandemic’, India also suspended 4.02 in Italy, 1.81 in extensive testing and all visas and e-visas with the China. is the country which exception of those for diplomatic, has done the highest UN, or international bodies, official number of tests. and employment purposes until 15 April. By 17th March, it was clear nations. The number of hospital beds that India was moving to nationwide per 1000 people in India is only 0.7, lockdown and on 22nd March, 12 compared to 6.5 in France, 11.5 in states including Telangana and Delhi South Korea, 4.2 in China, 3.4 in Italy, are still doubling in 7 days for the announced lockdown until 31 March. 2.9 in the UK, 2.8 in the USA, and 1.5 whole world. China was the country Railways also suspended all trains in Iran. Similarly, doctors per 1000 which showed us that lockdown till March 31st and India observes people is 0.76 in India, 3.24 in France, and extensive testing are the only ‘janta curfew’. The following day, 4.02 in Italy, 1.81 in China. If the ways to keep the virus at bay while Centre ordered nationwide lockdown medical facilities are overwhelmed South Korea has been successful in and on 24th March, the lockdown in developed countries with such flattening the curve without imposing was imposed for 21 days starting strong foundation, one could only any sort of lockdowns but only midnight. Why the lockdown is of fear for the dreaded situation. India through extensive testing and is the paramount importance is because the has so far reported ~1100 new cases country which has done the highest healthcare infrastructure is dismal and experts opine that the lower number of tests. While it is impossible when compared to other developing numbers has much to do with limited to imitate South Korea, it is observed nations and way below developed number of testing. Till March 20, that lockdown always slows down the growth of the virus once restrictions are put into place, thus the earlier the lockdowns, the better. For example, while Italy still continues to report 5,000 plus new cases, the growth of the virus has slowed down to ~10%, significantly lower than ~30% growth before lockdown. Italy and Spain have been slow movers in imposing lockdowns and thus the absolute number of infected patients have been closing to China’s. USA have been reporting more than 10,000 new cases in the last few days, that has much to do with the shortage of testing kits early on. For India, the story is a complicated one, while the first case was reported in Jan 30, not much growth happened until March when suddenly new

April 2020 INSIGHT 2 India performed 14,514 tests and the downwards FY21 GDP forecasts numbers are small compared to the for India by 2-3% on an average. population of India. The predicted Thus, assuming average growth number of cases by May 15 (based estimates at 5% for FY21 before on research by COV-IND-19 Study lockdown, now we are staring at 2% IMF has stated that Group) will be at 161 per 100,000 kind of growth and some have even the outlook for global (i.e. 2.2 million cases nationwide) lowered below 1%. More revisions growth: for 2020 it is are likely to come given the extent without any intervention and will negative—a recession drastically reduce to 1 per 100,000 and duration of the lockdown given (i.e. 13,800 cases nationwide) with the fact that the virus impact is now at least as bad as the most severe form of intervention. more than a two-quarter affair. during the global Most severe form here is assumed However, this isn’t about India alone, financial crisis or to be travel ban together with social global economy is under roil which worse. However, IMF distancing and lockdown. However, can be gauged from the statement doctors and most epidemiologists released by International Monetary expects recovery in assume that the number could be Fund Managing Director Kristalina 2021. She stated that ~30,000 by May,20 and that will be Georgieva. IMF has stated that the “We strongly support more than enough to overwhelm our outlook for global growth: for 2020 the extraordinary hospital network. it is negative—a recession at least as bad as during the global financial fiscal actions many A lockdown for 21 days will be enough crisis or worse. However, IMF expects countries have to worry economists and there will be recovery in 2021. She stated that “We adverse effect on both production as already taken to strongly support the extraordinary well as private consumption (which boost health systems fiscal actions many countries have is 60% of GDP) of the economy. already taken to boost health systems and protect affected Moreover, the picture is still unclear and protect affected workers and workers and firms. and government will be able to get firms. We welcome the moves of a measure of the situation after major central banks to ease monetary 14 days of lockdown and to what policy. These bold efforts are not only extent community transmission has in the interest of each country, but of happened. The number of infected the global economy as a whole. Even persons and the rate of growth will 2007-08 (-49%). Credit spreads in more will be needed, especially on surely decide whether the lockdown U.S rose close to 2008 levels; U.S. the fiscal front.” She further stated will be lifted early on or postponed. unemployment has zoomed up and that the developed economies are in Loss of economic activity will have volatility in stock markets are close better shape than the emerging ones. devastating effect on the income to 2008 levels. Great Depression Moreover, Investors have already level of citizens, particularly the was the most severe stock market removed US$83 billion from emerging daily wagers, contractual employees crisis to date, with the Dow tanking markets since the beginning of the and particularly the whole informal 89% from its pre-crisis peak. The crisis, the largest capital outflow sector. India was already going decline however occurred over a ever recorded. Foreign investment through a demand slowdown and period of about 34 months. The Great bankers have now lowered global now things have been further Recession saw the U.S markets fall growth to zero this year, matching the complicated. Economists have revised by 49% over a period of 16 months. In major recessions of 1982 and 2009. comparison, it just took three weeks Stock markets around the world have for Dow Jones to decline some 37% gone down with some ferocity and from peak. The markets took about volatility was very high compared 25 years to recover to their pre-crisis to the crisis of 2008. In the US peak after bottoming out during the A lockdown for 21 context, Dow Jones declined ~37% Great Depression. In comparison, it days will be enough from its February peak driven by the took about 4 years after the Global to worry economists Coronavirus pandemic and turmoil Financial Crisis (GFC) of 2007-08 and there will be in the crude oil markets. While it’s and a similar amount of time after difficult to say where this crisis the 2000s crash. U.S. GDP shrank adverse effect on both by about 27% through the Great production as well as could be headed, it would help to compare the current crisis with other Depression and by about 5% from private consumption historic stock market/economic the GFC. From the perspective of the (which is 60% of GDP) crises – namely the Great Depression Indian markets, the characteristics of the economy. of 1929 (-89% decline), Black Monday are similar to other bear markets of 1987 (-31%), the 2000s Recession experienced in India, however once (-34%), and the Great Recession of again the pace of the fall of the ongoing market is about three times

3 INSIGHT April 2020 63 days. In comparison, during GFC while announcing fiscal stimulus markets corrected 64% in 291 days, package - Garib Kalyan Package for dot-com crisis correction of 58% in the poor providing Rs 1,75,000 crore 589 days and in Asian crisis, markets to help them fight the battle against From the perspective corrected 40% in 443 days. Although, Corona Virus, equivalent to 0.8% of the Indian before these crises, except the one of GDP. Government has showed markets, the on hand, markets had a decent rally, its intent to provide in a staggered which is missing this time around. manner as it doesn’t want to run into characteristics are One can argue that global growth a situation where the virus outlasts similar to other bear was already on a slow track and thus funds. RBI also did its part and held markets experienced markets needed a trigger to correct – extraordinary meeting of monetary in India, however ‘blame it on Corona’. policy committee (MPC) between March 24-27 and slashed repo rates once again the pace Distinguished economist, Nouriel by 75 bps to 4.4% and reverse repo of the fall of the Roubini, has warned those who still by 90 bps to 4%. Reverse repo was ongoing market is dream of a V-shaped recovery. In cut more than repo in order to his own words, “Not even during the about three times disincentivize banks to hoard money Great Depression and World War more than the bear and rather lend. Besides, Cash II did the bulk of economic activity market during the reserve ratio (CRR) was also cut by literally shutdown, as it has in China, 100 bps to 3% which again would GFC. This could be the United States and Europe today. release Rs 1.37 lakh cr into market. because of the panic The best-case scenario would be a Liquidity under MSF raised to 3% attack and the pace downturn that is more severe than of deposits from 2%, which would the GFC but shorter-lived, allowing at which things have release liquidity of another Rs 1.37 for a return to positive growth by unfolded with the lakh Cr. These measures together the fourth quarter of this year.” fear of the unknown. with targeted long-term repo However, in order to get close to operations (TLTRO) of up to ₹1 trillion the best-case scenario, developed would infuse liquidity of Rs 3.74 lakh nations needs to do extensive cr. All Banks, lending institutions may testing together with imposing allow a 3-month moratorium on all lockdowns. Since it could take 18 loans and lending institutions, banks, more than the bear market during months for a vaccine to be developed allowed to defer interest on working the GFC. This could be because of the and produced at scale, antivirals capital repayments by 3 months. panic attack and the pace at which and other therapeutics will need Moreover, moratorium on term things have unfolded with the fear of to be deployed on a massive scale. loans, deferment of interest payment the unknown. Volatility as measured Moreover, he advocated for monetary will not result in asset classification by India VIX, which is also called the policies needs to adopt zero or downgrade. These announcements fear index, touched 86.63 on 24th negative interest rates together with were hailed from economists as well March, higher than its historic closing fiscal stimulus. The global central as policy makers as these were the peak of 85.13 it reached during the banks have indeed thrown massive need of the hour. While uncertainty global financial crisis in November amounts of money and accompanied 2008. It must be remembered that by fiscal stimulus. The G20 nations domestic factors have not caused have resolved to collectively inject $5 big bear markets in India. This can trillion into the global economy to be attributed to growing dominance combat the disruption caused by the of foreign portfolio investors (FPIs) coronavirus pandemic on economies and despite domestic institutional world over. Considering that over The G20 nations investors gaining grounds in recent half of India’s gross value added have resolved to years, FPIs still hold ~19% of the comes from the informal sector, collectively inject total market capitalization and 40% which mostly engages informal $5 trillion into the of free-float market cap. Despite workers, a fiscal package was to global economy the FPIs having sold some net Rs be announced to address the poor. 42,000 cr of equities in the year so Nearly 87%of India’s workforce is to combat the far, it still accounts for ~1.5% of their informal, with no written contract, disruption caused holdings against ~6% sell off during paid leave, minimum wages or by the coronavirus GFC. Long story short, there is still terms of work as per regulations, pandemic on plenty of room for FPIs to sell. As thus it was essential that no one economies world for the present Covid-19 correction goes hungry. Incidentally, these over. for Indian equities, the correction were the words used by the Finance from peak to trough dates is 40% in Minister, Nirmala Sitharaman

April 2020 INSIGHT 4 is the only certain element for the choice, provided the choices are time being, India’s macro stability is fair in the first place. Markets never better than it was in previous bear goes broke, companies do, and it markets in terms of real rates of displays the collective sentiment interest, current account deficit and While uncertainty of herd from extreme optimism forex reserves. Moreover, the decline is the only certain to extreme pessimism from time in crude oil prices is a blessing in element for the time to time. The charts below reflects disguise as it would positively impact being, India’s macro the degree of correction from a both inflation as well as growth. stability is better than historical standpoint and gives a good reference point to judge the severity Covid19 is an unprecedented event, it was in previous bear of the fall and the degree of value unknown and unknowable at this markets in terms of emerging with incremental decline if point in time. The uncertainty of it real rates of interest, at all, from hereon, whether be it P/E has led to a crash in markets world current account deficit or P/B or Earning yield to Bond yield across and the ferocity and pace of and forex reserves. or Mcap to GDP. If their is “Panic” the price damage is unthinkable. Bear Moreover, the decline today, the “Unwinding” of it is also markets are always brutal and engulfs in crude oil prices is inevitable. Nothing stays permanent all of market participants with fear a blessing in disguise in space and time and the pendulum and make them behave irrationally. as it would positively of market and emotion swings both A patient investor can only look at impact both inflation ways. Stay Fit & Stay Healthy and the widening gap between value as well as growth. introspect in silence the irrationality and price with incremental fall and to arrive at a fair decision. gradually initiate buy in times of extreme fear in companies of his

Nifty PE Ratio Nifty PB Ratio 30.0 7.0 6.0 25.0 5.0 20.0 4.0

15.0 3.0 2.0 10.0 P/BV Ratio Mean 1 SD+ PE Ratio Mean 1 SD+ 1.0 2 SD+ 1 SD- 2 SD- 5.0 2 SD+ 1 SD- 2 SD- 0.0

Market Cap to GDP ratio (close to the ratio witnessed during the Earnings Yield Getting Attractive 2008 global financial crisis) Earning Yield / Bond Yield 1.90 160.0 146.5 1.70 140.0 1.50 120.0 104.9 1.30 95.3 100.0 95.3 86.0 83.6 1.10 78.3 74.2 74.1

80.0 68.6 67.6 65.5 0.90 60.8 54.5 53.5 52.1

60.0 49.1

45.2 0.70 40.0 0.50

20.0 0.30

0.0 Jan-02 Jan-03 Jan-04 Jan-05 Jan-07 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-17 Jan-20 Jan-06 Jan-08 Jan-09 Jan-16 Jan-18 Jan-19 Mar-20

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-12 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Earning Yield / Bond Yield Average Dec-03 Dec-04 Dec-11 Dec-13 Dec-14 Source: Bloomberg, Ashika Research Note: As on March 26, 2020 Source: Bloomberg, Ashika Research Note: As on March 26, 2020

Paras Bothra President - Equity Research Email - [email protected] Phone: +91 22 6611 1700 Direct: +91 22 6611 1786 Mobile: +91 98203 97061

5 INSIGHT April 2020 he world is in t is definitely not pos- PROMINENT ‘uncharted sible to call the end to Tterritory’ as novel Ithe uncertainty or the coronavirus (COVID-19) volatility in the markets HEADLINES pandemic spreads but but we are getting into MARCH 2020 just as this virus has no an area of very comfort- borders, its cure will have able valuations. If you he outbreak of no borders too. We are have a little patience, the coronavirus may all in this together as markets will come back. Thave an impact on a global community…. It is just the fear of shut- Indian industries such as SATYA NADELLA, down in India and we pharmaceuticals, auto- Microsoft CEO have not yet seen even mobile and electronics a peaking of Covid-19 industries which depend tock prices more cases…. S KRISHNAKU- on China for supplies of than required MAR, Sundaram Mutual raw materials, compo- Sby short-term Fund’s Chief Investment nents or intermediate events (i.e. coronavirus); Officer items…. PIYUSH GOYAL, whereas the ‘value’ Commerce and industry which is driven by long- oronavirus is minister term assumptions like the underlying DCF does not change Cproblem and the ompanies across that dramatically. It will solution is a shutdown the board will be a fair assumption of the economy, which Cface a period that the disruption from has never happened. of virtually no revenue Covid-19 will be short Whether it was SARS but some level of fixed term, and this issue will or whether it was 9/11, costs. This will drain the be not there, say, one whether it was the financials for everyone as year down the line….. Y2K collapse, Harshad nobody is spared during NEELESH SURANA, CIO, Mehta collapse, you this unprecedented Mirae Asset Investment never closed down the crisis. At least a month’s Managers India Pvt. Ltd economy. It is happening business could be lost… for the first time. I do not PAWAN GOENKA, MD, ne should look think anybody on this M&M for guaranteed earth has seen this kind Osurvivors, and of a situation, when the he template is not niche players, to sail global economy is liter- pretty nicely laid through the ongoing ally coming to an halt….. Tout. If you look at coronavirus crisis in the - RAAMDEO AGARWAL, the dot-com recovery, market. The economy MD & Co-founder, Motilal the recovery from the would take at least 6-9 Oswal 9/11 trauma or from months to recover and t’s a good time to Lehman, earliest FII investors must have be picking up some money goes into com- patience through this cri- of the bargains and panies who have been sis. Nobody should stop I getting rid of some of able to continue growing SIPs. And no one should those things that you are earnings through difficult try to take advantage of not too excited about, times and their prices are it either. There is no all or but the idea is not to held back… SAURABH none…. SAMIR ARORA, reduce cash too dramati- MUKHERJEA, founder founder and fund man- cally…..MARK MOBIOUS, of Marcellus Investment ager Helios Capital Founder, Mobious Managers Capital Partners

April 2020 INSIGHT 6 ockdowns hit cash he economic impact flows of both indi- is already visible in Lvidual borrowers Tthe countries most and institutions, in turn affected by the outbreak. The virus will eventually impacting their repay- For example, in China, ments to banks. NPAs will manufacturing and service be conquered, but it will increase and this time sector activity declined dra- have left behind a global mortgages, especially that matically in February. While of SMEs (small and medium the drop in manufacturing recession. The costs of enterprises), need to be is comparable to the start that are incalculably high watched. Cut in pay and of the global financial crisis, at this time. The most fear- layoffs will increase such the decline in services NPAs… MADAN SABNAVIS, appears larger this time— some toll will be on small Chief Economist at CARE reflecting the large impact businesses, the self-em- Ratings of social distancing…GITA ployed & those whose GOPINATH, chief econ- lives depend on meagre he government omist of the International should provide Monetary Fund (IMF) daily wages - ANAND Tpartial guarantees MAHINDRA, Mahindra to make sure banks con- hile the financial Group Chairman tinue lending to small and impact of the medium business enter- Wcoranavirus prises and to large busi- outbreak is not fully known, nesses, but we have to be the situation in the country careful as we have limited is acute and needs some fiscal space so there has to drastic action… C RANGA- be some incentive for the RAJAN, former chairman There is fiscal head- banks to also to take credit of the Economic Advisory room for government risk into account. Credit Council to the Prime Minis- will have to be distributed ter of India. intervention to tackle with caution so that India’s the economic fallout of staggering NPAs do not oronavirus will the Covid-19 pandemic. rise further… RAGHURAM impact India’s RAJAN former Reserve Ceconomic growth India’s growth is set Bank of India Governor “severely”, as the COVID- to fall in the coming 19 lockdown is causing he coronavirus significant disruption months as coronavi- economic halt is across multiple sectors, rus-induced lockdowns Tmore like a “major including manufacturing, snowstorm” than an oil, financial, among others. and restrictions continue economic depression. It is The probability of countries to disrupt economic possible there’s going to be entering into recession and activity, affecting a wide a very sharp, short, I hope companies going bankrupt short, recession in the next has increased and India swathe areas, from quarter because every- is not likely to “remain shops and restaurants thing is shutting down of decoupled” from the global course…BEN BERNANKE, meltdown…ARUN SINGH, to street hawkers to fac- the former Federal Reserve Chief Economist Dun & tories - KV SUBRAMA- chairman Bradstreet India NIAN, Chief Economic Adviser (CEA)

7 INSIGHT April 2020 TESTIMONIALS

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April 2020 INSIGHT 8 In an internal note to my colleagues ten days ago, I indicated Friday March 20 as the market bottom. The low on March 20 on the S&P 500 (SPX) was 2,295, and after more selling on Monday March 23, the SPX is now above the 2,500 level. A range on the SPX of 2,250-2,350 feels like a bottom, particularly with US fiscal action pending. I feel more assured that the market is bottoming. That is not to say the SPX index won’t dip to 2300 again. However, the $2 trillion stimulus plan is a powerful weapon which short-sellers won’t want to face and buyers won’t want to miss.

Q: While the situation is contained to a large extent in China, things have turned scary in Italy, Spain, France, Germany, USA. Global trade has practically come to a standstill. To what extent COVID-19 could trim global growth estimates?

A: Give a virus a scary name, start talking about how it came from somebody eating bat soup in China, cut interest rates to zero and the fear it unleashes is inevitable. Perception is everything. A global recession, Q&A WITH CIO Mr. Manish Singh - Chief Investment Officer, Crossbridge Capital LLP Both the monetary and fiscal authorities have been quick to Q: The global markets are going “V-shaped” economic recovery have respond. However, through unprecedented times. Is diminished as the virus has spread over the last two the scenario really that scary to be wider. I expect a U-shaped recovery weeks, the odds of compared with Great Depression of with a narrow drop as supply-chains a rapid “V-shaped” 1930s or there could be a V-shaped are realigned and demand comes economic recovery economic recovery? back slowly. Of course, the recovery will be super charged if a treatment/ have diminished as A: Every recession is different and cure comes along earlier than the virus has spread we are certainly not going to have a expected. In terms of asset prices wider. I expect a 1930s like depression. Lessons learnt and markets, while I don’t want to U-shaped recovery from that and subsequent crises minimize the significance of the with a narrow drop including the 2008 financial crisis market declines, the circumstances as supply-chains led to many measures which we see surrounding 1929 and the present are realigned and now on display. Both the monetary - in terms of the reasons for the demand comes back and fiscal authorities have been decline - aren’t all that similar to slowly. quick to respond. However, over the one another. Calling a bottom to the last two weeks, the odds of a rapid market is never an easy call to make.

9 INSIGHT April 2020 once unthinkable in 2020, is now of humanitarian crisis too due to The creation of many new facilities a foregone conclusion. The fight is challenges that the shutdown brings then- Quantitative easing (QE), now on to stop this recession from to the vast amount of migrant labour. primary dealer credit facility (PDCF), deepening and taking hold for more But there is no easy solution if the commercial paper funding facility than two quarters, as the world goes spread of virus is to be contained. (CPFF), Term Asset-Backed Securities into synchronized lockdown to deal The size of the stimulus package Loan Facility (TALF) all came in with the outbreak. Economic growth announced by the Modi Government handy this time. The Fed could act had been falling in many countries - 22bn$ - is underwhelming and will quickly, supersize the programs as before the COVID-19 virus struck. need to be increased. India shouldn’t well as create new ones. The opening So this lockdown makes the growth be afraid of running higher fiscal of swap lines by the US Fed is also concerns more acute. Global growth deficit in this time of need. If the very welcome relief as it has diffused in 2019 was the slowest since the stimulus package is increased the the shortage of dollar which has been Great Financial Crisis (GFC) of 2008- growth rate could still hit +3% in at the heart of many of the past crisis 09. The world’s GDP rose by roughly 2020, if not then worse may happen. particularly in the emerging markets. +2.2%. I expect the global growth in On the positive side - oil price COVID-19 will very likely change 2020 to be about one-fifth less than cratering is a blessing in disguise economic policymaking forever. A last year i.e. +1.8%. as also India is less integrated new consensus has emerged among with the Chinese production and policymakers and economists in Q: How long do you see the COVID- hence less susceptible to collapse in favour of bold new fiscal measures. In 19 pandemic to sustain? How serious international demand. the very same way that the financial is the situation in UK and in Europe? crisis of 2008 changed everything for Q: Across the World, central A: The lock down in the UK is likely monetary policy and international bankers have showed urgency and to continue until the end of April and financial systems (banks were made aggressiveness and infused liquidity. I’d imagine same or worse applies to safer and therefore during this crisis How effective monetary policies the rest of Europe. The rate of growth we are not talking about them going and quantitative easing could be in of cases of COVID-19 in the UK seems under), COVID-19 change for fiscal today’s scenario? to be stabilizing and signs are that policy and way the economies are it will be less of the disaster than A: We have to be thankful that a swift run in the future. The US Federal initially thought. Last week, Prof Neil action by the US Federal Reserve Reserve can always handle issues Ferguson, infectious disease expert has managed to avoid 1930s like that affect the liquidity of the banking from Imperial College, London gave depression. The work done by the US system. However, interest rate cuts evidence to the UK’s parliamentary Federal Reserve to deal with the 2008 when rates are already very low, select committee on science and Great Financial Crisis (GFC) may don’t do much - particularly, when technology as part of an inquiry have just prevented a depression. the problem is not the supply of into the nation’s response to the credit but the demand for it, as both coronavirus outbreak. The UK deaths economic activity and consumption from the disease once anticipated to collapse. Boosting growth to a higher cross more than 400,000 are now level can only be achieved when both unlikely to exceed 20,000 and could A global recession, monetary and fiscal policy work in be as low at 5,000 to 6,000. However, once unthinkable tandem. the authorities will likely err on in 2020, is now a Q: How do you see the measures the side of caution. So expect the foregone conclusion. taken by India so far, whether it economic disruption to continue well The fight is now on is lockdown or RBI announcing towards the end of Q2. to stop this recession measures or the finance minister’s Q: How do you see the situation in from deepening and slew of big bang announcement for India and its effect on economic taking hold for more the poor? growth? than two quarters, A: First, thanks to PM Modi A: India has undertaken the most as the world goes Government’s efforts over the past draconian lockdown as initial into synchronized five years, India is able to provide signs indicate. Loss to Indian lockdown to deal with its population with near-universal production will be immense as the the outbreak. access to banking services. Direct full effect of economic shutdown cash transfers delivered through becomes apparent. There is a risk this system and other rural schemes

April 2020 INSIGHT 10 will be very effective in reducing the As for “killing shale oil” as some Consumer staples and perhaps select pain that economic shutdown brings. have suggested the intention of large cap financials too given the Second, RBI’s announcements - large Saudi Arabia is behind increasing RBI’s help for the sector. rate cut, reserve requirement cuts, its oil supply, the shale rocks aren’t Q: How big a contagion could be regulatory forbearance, targeted going anywhere. Production can for the banking sector or any other lending etc. will help ease financial be suppressed for a while but will sector which you think is vulnerable conditions and safeguard the much recover when market conditions are in today’s scenario and will take time needed financial stability in these right. It is also worth remembering to recover? extraordinary times. Third, as I that the US industry has already have already said above, the fiscal done a lot to reduce headcount and A: If the slowdown is prolonged stimulus will have to be increased increase productivity. Since May then naturally the Non-performing and “whatever it takes” approach is 2018, US crude production has risen loans will accumulate and impair needed. The “Washington consensus” more than 30%. But the number of the banking assets. Having said that - Fiscal policy discipline, with jobs in oil and gas is unchanged. So the Indian banking sector is already avoidance of large fiscal deficits yes there is pain for US shale oil but going through a tough time so the relative to GDP- is out of the window. they will survive. I see oil staying in risk of renewed profligacy is not India should embrace the new world $30-$35 range for the rest of the year. a concern. Prefer large cap banks consensus on using more fiscal with higher percentage of exposure Q: Which sectors do you see to be powers to stabilise and grow the to retail sector over the corporate impacted the most and which are economy. Fourth, while the banks lending sector. the ones which could throw up have been helped, and the poor will opportunities? Q: US Fed is concerned about get direct cash benefit transfer, illiquidity even for Treasury bills A: Consumer discretionary, the Small and Medium Enterprises as people have started hoarding Industrials will be the most impacted (SMEs) need more help. The Govt and cash given record volatility. Does sector until we see growth restored. RBI should not presume that banks a similar ploy hold true for India Therefore, it is best to stay invested will continue to lead to the SMEs. or one should keep nibbling at the in defensive sectors - Healthcare and Bank risk aversion towards SMEs beaten down names? could be fatal to the Indian economy. Therefore, partial loan guarantees A: After every crisis, the tendency with the Govt taking the first loss to save does increase. The illiquidity will likely be needed for credit to in the US T-bill was more a factor continue to flow to SMEs which are of capital market leveraged The Govt and RBI such a key pillar of Indian economy. trades which I gather is not a big should not presume phenomenon in the Indian markets. Q: One of the other aspects that that banks will So I don’t see illiquidity in Indian no one is talking about amidst the continue to lead to govt bonds becoming a problem in Covid-19 scare is lower oil prices. the SMEs. Bank risk India. As for nibbling at the beaten How significant help can it provide aversion towards down names in a bear market, it’s to the Indian economy and more SMEs could be fatal to important to remember - investing importantly where do you see oil the Indian economy. is about discipline. Timing the prices stabilizing in next six months Therefore, partial market is not easy and it is more a to a year? loan guarantees with matter of luck. Based on your risk A: Low oil price is significant boost the Govt taking the appetite and investment goals, set to the Indian economy as it reduces first loss will likely yourself a simple schedule. Here’s the external shock and allows Modi be needed for credit one - if the NIFTY index falls by Government to follow an aggressive to continue to flow to -20% (i.e. bear market) then I will by fiscal policy. There’s plenty of oil SMEs which are such X amount and if it falls by another in this world and the OPEC cartel a key pillar of Indian -10% then another X or 2X amount is broken. Like Humpty-Dumpty economy. and so on and importantly follow up the OPEC cartel cannot be put back on it. Laddering your purchase is together no matter who tries it. better than waiting for a bottom like “waiting for Godot”.

For contacting with Mr. Manish Singh his Email ID is [email protected]

11 INSIGHT April 2020 Mutual Fund Overview DSP TOP 100 EQUITY FUND

Investment Objective across market cycles and does not take high debt or cash The primary investment objective is to seek to generate calls even in falling or volatile markets. The fund also long term capital appreciation from a portfolio that is churns sectors well based on market conditions. It follows substantially constituted of equity and equity related a growth strategy and has a relatively low portfolio securities of large cap companies. From time to time, the turnover of about 13% in comparison with its peers. fund manager will also seek participation in other equity Beyond this, the holdings are fairly well-diversified. and equity related securities to achieve optimal portfolio Important Information construction. NAV (G) (Rs.) 155.2 Investment Rationale NAV (D) (Rs.) 13.04 The fund provides investors with an opportunity to Inception Date March 10, 2003 invest in the blue-chip companies. The volatility is Fund size (Rs. Cr.) 2469.45 comparatively lesser since the stocks are chosen from Fund Manager Gopla Agarwal & Jay Kothari the top 100 largest corporations by market capitalisation. Entry load Nil Such companies are leaders in their segments and may Exit Load 1% for redemption within 364 days give decent returns. Compared to those that invest in Benchmark S&P BSE 100 TRI smaller companies, such funds tend to fall less when Min Investment (Rs.) 500 stock prices fall. Therefore, they are more suited to Min SIP Investment (Rs.) 500 conservative equity investors.

With a low risk and an above average return, this mutual Key Ratios fund is for those who want to take an exposure to the Beta (x) 1.11 stock market for the long term in a safe manner. A large Standard deviation (%) 15.11 cap fund with a consistently good track record since Sharpe Ratio 0.14 the time it was launched proves its performance. The Alpha (%) -1.60 portfolio consists of blue chip stocks which are essentially R Squared 88.26 the largest corporations listed on the stock market with a stellar management and good performance. Expense ratio (%) 2.06 Portfolio Turnover ratio (%) 13.00 The scheme is invested in equities by more than 95% Avg Market cap (Rs. Cr.) 17,545.3

April 2020 INSIGHT 12 Portfolio as on Feb 28, 2020 % SECTOR ALLOCATION Stocks % of Net assets HDFC Bank 10.2 Cons Non Durables 3.1 Bajaj Finance 8.0 Services 3.6 ICICI Bank 8.0 Auto 4.4 Axis Bank 5.5 Construction 4.5 Reliance Industries 4.9 Pharma 5.0 Kotak Mahindra Bank 4.1 Larsan & Tourbo 4.1 Cement 5.5 Bharti Airtel 3.6 Software 6.1 State Bank of India 3.4 Oil & Gas 6.9 Maruti Suzuki 3.1 Finance 16.9 Asset Allocation Banks 33.6 Equity Cash 0.0 10.0 20.0 30.0 40.0 99.63% 0.37% Note: All data are as on Feb 28, 2020; NAV are as on Mar 27, 2020 Source: Factsheet, Value Research Performance of the Fund alongwith Benchmark (as on Mar 27, 2020) 1 month 3 months 6 months 1 year 3 Years 5 Years Since Inception Fund (%) -29.218 -31.45 -26.78 -23.14 -4.08 -0.31 17.29 Benchmark (%) -25.625 -29.05 -24.91 -24.13 -1.12 1.95

Ashika Mutual Fund Recommendation Alpha Generation Month of Fund Name Benchmark NAV as on 1 Year 3 Year 5 Year Recom 27.3.2020 Return Return Return (%) (%) (%) Mar-19 Mirae Asset Large Cap Fund NIFTY 200 39.03 -22.68 -0.09 4.15 Apr-19 SBI Focused Equity Fund S&P BSE 500 119.86 -12.91 5.07 6.03 May-19 Invesco India Small Cap Fund S&P BSE 250 SmallCap TRI 8.25 -21.50 - - Jun-19 ICICI Prudential Multi Asset Fund Nifty 50 Total Return (70) 208.87 -21.40 -2.74 2.28 Jul-19 ICICI Prudential Asset Allocator Fund CRISIL Hybrid 50+50 Moder- 47.40 -13.56 1.45 4.47 ate Index Aug-19 Nippon India MultiCap Fund S&P BSE 500 64.89 -33.69 -5.91 -2.59 Sep-19 Canara Robeco Emerging Equities Fund Nifty Large midcap 250 TRI 75.22 -18.98 -0.52 5.87 Oct-19 LIC MF large & Mid Cap Fund Nifty Large midcap 250 TRI 12.22 -16.21 -0.37 4.65 Nov-19 ITI Multi Cap Fund Nifty 500 TRI 7.75 - - - Dec-19 Parag parikh Long Term Equity Fund Nifty 500 TRI 21.85 -14.42 3.42 6.09 Jan-20 DSP Dynamic Asset Allocation Fund CRISIL Hybrid 35+65 14.22 -5.26 2.09 4.35 Aggressive Feb-20 Invesco India Growth opportunities Fund S&P BSE 250 Large Midcap 27.10 -20.11 1.17 3.06 65:35 TRI Note: All data are as on Feb 28, 2020; NAV are as on Mar 27, 2020 Source: Factsheet, Value Research

Large & Mid Cap Fund ALL DATA BELONGS TO 3/25/2020 NAV AUM 3 M 6 M 1 Yr 3 Yr 5 Yr Since Sharpe Exp. (Rs Cr) Inception Ratio Ratio Return SBI - Large & Midcap Fund Reg (G) 154.52 2906 (31.82) (30.39) (29.11) (5.35) 0.05 12.02 0.28 2.15 Invesco - India Growth Opportunities Fund (G) 24.79 2498 (31.52) (28.81) (26.48) (1.92) 0.88 7.46 0.47 2.05 Kotak - Equity Opportunities Fund (G) 87.25 3168 (31.33) (27.88) (26.28) (4.59) 1.29 14.92 0.27 2.12 LIC - Large & Mid Cap Fund - Reg (G) 11.4 657 (29.31) (26.20) (21.56) (2.70) 2.99 2.61 0.36 2.56 Sundaram - Large and Mid Cap Fund (G) 23.94 1167 (34.95) (32.16) (29.30) (4.43) 1.21 6.91 0.40 2.23

13 INSIGHT April 2020 Value Fund ALL DATA BELONGS TO 3/25/2020 NAV AUM 3 M 6 M 1 Yr 3 Yr 5 Yr Since Sharpe Exp. (Rs Inception Ratio Ratio Cr) Return SBI - Contra Fund Reg (G) 69.68 1267 (32.26) (32.69) (35.80) (10.62) (4.90) 14.80 -0.25 2.24 UTI - Value Opportunities Fund (G) 43.12 4403 (32.71) (29.42) (29.25) (5.54) (2.62) 10.41 0.2 2.21 Nippon India - Value Fund (G) 49 2948 (34.41) (33.40) (32.63) (6.80) (1.01) 11.32 0.14 2.07 Kotak - India EQ Contra Fund (G) 36.07 866 (34.37) (32.09) (30.63) (3.68) (0.04) 9.14 0.41 2.45 Invesco - India Contra Fund (G) 33.79 4668 (30.81) (28.37) (29.22) (3.27) 1.63 9.85 0.38 2

Focus Fund Axis - Focused 25 Fund Reg (G) 22.08 9764 (28.38) (24.97) (17.24) 1.80 4.32 10.70 0.64 1.85 Mirae - Asset Focused Fund Reg (G) 7.73 2738 (34.32) (30.86) 0.00 0.00 0.00 (24.39) - 2.01 SBI - Focused Equity Fund Reg (G) 110.75 8264 (27.70) (23.45) (19.40) 2.33 4.19 16.66 0.67 1.88 Motilal Oswal - Focused 25 Reg (G) 16.62 1237 (31.97) (27.58) (21.68) (3.39) 0.56 7.61 0.31 2.2 Sundaram - Select Focus Reg (G) 127.74 1046 (34.10) (30.69) (27.67) (2.67) 0.09 15.49 0.53 2.36

ELSS Fund Mirae - Asset Tax Saver Fund Reg (G) 12.39 3282 (34.60) (31.29) (28.62) (2.21) 0.00 5.18 0.49 1.93 Kotak - Tax Saver Scheme (G) 31.7 1135 (31.82) (29.12) (26.47) (4.92) 0.34 8.37 0.24 2.47 Motilal Oswal - Long Term Equity Fund Reg (G) 12.34 1686 (34.03) (31.46) (27.28) (5.50) 2.91 4.15 0.34 2.1 DSP - Tax Saver Fund Reg Fund (G) 33.9 6096 (34.15) (31.72) (28.49) (5.56) 1.24 9.70 0.2 1.95 Axis - Long Term Equity Fund (G) 35.51 21659 (27.91) (24.85) (17.29) 1.18 2.57 13.13 0.65 1.62

Multi Cap Fund Parag Parikh - Long Term Equity Fund Reg (G) 19.37 2795 (27.46) (25.26) (22.08) 0.07 3.44 10.11 0.54 2.01 SBI - M Multicap Fund Reg (G) 34.17 8492 (32.82) (32.34) (28.54) (5.08) 1.39 8.87 0.22 1.89 Kotak - Standard Multicap Fund (G) 24.6 29460 (34.21) (31.65) (29.46) (4.72) 1.66 8.79 0.28 1.65 ICICI Pru - Multicap Fund Reg (G) 190.44 5082 (35.92) (33.72) (34.32) (8.54) (0.76) 12.26 0 1.92 DSP - Equity Fund Reg (G) 30.11 3523 (29.49) (27.42) (21.25) (2.03) 1.59 8.99 0.43 2.11

Small Cap Fund Invesco - India Smallcap Fund Reg (G) 7.66 578 (27.74) (25.92) (26.77) 0.00 0.00 (16.74) - 2.36 SBI - Small Cap Fund Reg (G) 38.06 3476 (28.37) (27.37) (25.42) (1.92) 6.11 13.51 0.40 2.2 Axis - Small Cap Fund Reg (G) 23.12 2507 (26.90) (24.89) (15.31) (0.44) 4.01 14.18 0.62 1.98 Kotak - Smallcap Fund (G) 49.57 1633 (30.58) (29.87) (29.65) (9.69) (0.44) 11.19 0.02 2.3 ICICI Pru - Smallcap Fund Reg (G) 16.66 1153 (34.44) (33.49) (32.36) (11.55) (4.10) 4.19 0.02 2.3

Thematic/Sectoral Fund Franklin - Build India Fund (G) 25.45 1083 (38.31) (37.52) (39.11) (10.12) (2.52) 9.11 -0.09 2.28 ICICI Pru - Banking & Financial Services 37.09 3372 (46.54) (42.88) (41.81) (9.76) 0.24 11.97 0.29 2.11 Fund Reg (G) Kotak - Pioneer Fund (G) 6.92 681 (32.68) 0.00 0.00 0.00 0.00 (55.31) - 2.73 Sundaram - Services Fund (G) 8.36 1293 (33.60) (28.36) (23.55) 0.00 0.00 (10.81) - 2.41 Aditya Birla SL - Digital India Fund Reg (G) 41.06 413 (24.98) (23.89) (22.70) 5.01 3.11 5.04 0.73 2.52

Blance/BAF Fund SBI - Equity Hybrid Fund Reg (G) 110.51 32470 (23.97) (20.95) (16.42) 0.97 3.22 12.99 0.54 1.62 Sundaram - Equity Hybrid Fund Reg (G) 70.86 1806 (26.48) (23.45) (20.79) (1.59) 1.65 10.68 0.42 2.21 ICICI Pru - Balanced Advantage Fund Reg (G) 28.66 28092 (24.66) (21.84) (18.28) (1.56) 2.51 8.19 0.33 1.73 Kotak - Balanced Advantage Fund Reg (G) 8.52 3845 (24.08) (21.35) (17.38) 0.00 0.00 (8.99) - 2.06 Aditya Birla SL - Balanced Advantage Fund 42.11 2630 (24.14) (22.44) (19.67) (3.66) 2.81 7.47 -0.08 2.02 (G)

April 2020 INSIGHT 14 Equity Savings Fund ALL DATA BELONGS TO 3/25/2020 NAV AUM 3 M 6 M 1 Yr 3 Yr 5 Yr Since Sharpe Exp. (Rs Cr) Inception Ratio Ratio Return HDFC - Equity Savings Fund (G) 31.71 3859 (15.68) (15.39) (14.12) (3.92) (0.53) 7.73 -0.17 1.98 ICICI Pru - Equity Savings Fund (G) 12.12 1474 (18.44) (17.38) (14.59) (2.50) 0.14 3.74 0.29 1.36 Kotak - Equity Savings Fund Reg (G) 12.75 1712 (15.77) (14.67) (12.16) (1.49) 1.67 4.50 0.38 2.11 Axis - Equity Saver Fund Reg (G) 11.48 793 (16.45) (14.65) (13.03) (0.65) 1.84 3.00 0.44 2.32 SBI - Equity Savings Fund Reg (G) 11.28 1497 (18.76) (17.58) (15.18) (4.45) (0.63) 2.50 0 1.7

Arbitrage Fund Aditya Birla SL - Arbitrage Fund Reg (G) 20.01 5677 0.13 1.10 2.48 5.86 5.87 6.72 0.63 0.85 ICICI Pru - Equity Arbitrage Fund Reg (G) 25.72 13591 0.05 0.98 2.29 5.80 5.80 7.40 0.54 0.93 Kotak - Equity Arbitrage Fund (G) 27.9 17662 0.25 1.18 2.55 5.98 6.06 7.34 0.94 0.98 Nippon India - Arbitrage Fund (G) 19.99 10423 0.08 1.02 2.39 6.00 6.05 7.56 0.96 1.05 SBI - Arbitrage Opp Fund Reg (G) 25.41 5499 0.23 1.25 2.46 5.89 5.92 7.22 0.61 0.91

Index Fund HDFC - Index Fund-NIFTY 50 Plan - (G) 71.35 1059 (35.33) (36.05) (32.56) (10.83) (4.19) 11.49 0.3 0.3 ICICI Pru - Nifty Next 50 Index Fund Reg (G) 16.59 649 (34.68) (34.03) (33.01) (18.41) (8.76) 5.30 -0.1 0.85 HDFC - Index Fund - Sensex Plan 237.19 803 (35.17) (35.66) (31.80) (8.95) (2.53) 11.95 0.43 0.3 SBI - Nifty Index Fund Reg (G) 67.02 548 (35.43) (36.22) (32.81) (11.31) (4.63) 11.54 0.26 0.69 ICICI Pru - Nifty Index Fund Reg (G) 75.89 565 (35.19) (35.91) (32.40) (11.13) (4.62) 11.96 0.26 0.45

Solutions NAV AUM Mod AMP (IN 3 M 6 M 1 Yr 2 Yr Sharpe Exp. Duration Yrs ) Ratio Ratio (in Yrs) ICICI Pru - Retirement Fund Pure Debt 10.93 376 - 10.095 0.33 2.63 8.46 0.00 - 2.06 Plan (G) (27/03/2019) Aditya Birla SL - Retirement Fund 30s 7.21 129 - 7.07 (30.19) (27.45) (28.03) 0.00 - 2.65 Plan (G) (23/03/2020) HDFC - Retirement Savings Fund Hybrid 12.85 388 12.743 (24.85) (23.53) (22.53) (8.54) 0.23 2.73 Equity Reg (G) 0.35 (23/03/2020) Aditya Birla SL - Bal Bhavishya Yojna 7.52 230 - 7.38 (29.92) (27.20) (27.90) 0.00 - 2.6 Wealth Plan (G) (23/03/2020) Axis - Childrens Gift Fund Reg (G) 10.93 461 10.817 (23.90) (20.99) (14.76) (5.42) 0.42 2.44 0.50 (23/03/2020)

Dynamic/Multi Assets Invesco - India Dynamic Equity Fund (G) 23.2 838 22.68 (23.28) (21.33) (18.80) (8.16) 0.23 2.19 0.41 (23/03/2020) ICICI Pru - Asset Allocator Fund (FOF) (G) 44.33 7375 43.7926 (24.63) (22.26) (19.00) (4.39) 0.6 1.45 0.88 (23/03/2020) DSP - Dynamic Asset Allocation Reg (G) 13.51 1307 13.409 (16.37) (14.66) (9.93) (2.19) 0.31 2.39 0.72 (23/03/2020) SBI - Dynamic Asset Allocation Fund (G) 11.13 613 11.0136 (20.28) (17.15) (16.35) (6.45) -0.03 2.01 (0.04) (23/03/2020)

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

15 INSIGHT April 2020 STOCK RESHUFFLE

Stock Reshuffle

In the light of Covid-19 crisis and its impending impact on the Indian economy, Nifty has corrected ~31% from its peak in Jan’2020. We have reviewed our past recommendations and have taken a conscious call to reshuffle our portfolio at this point in time and get into largecap stocks from our recommended universe where the correction has been steep relative to its historical valuation and which stands a better chance of regaining business strength. We believe this is the need of the hour to tactically consolidate our position in businesses with strong cashflows, brand recall, strong B/S and available at lower than three-year median valuations. Accordingly, we have decided to exit from Equitas Holdings, Gujarat State Petronet, Just Dial & Indian Hotel and simultaneously increase position in ITC, Britannia, HDFC Bank & TCS. So this time we refrain to take up new ideas, rather buy into earlier recommended stocks which have corrected sharply because of the recent Coronavirus outbreak and its impact on the economy. Other nine stocks which remains open are Aarti Industries, Metropolis Healthcare, Bajaj Finance, Concor, HDFC Life, Dr. Reddy’s Lab, Procter & Gamble Hygiene, Axis Bank, Tech Mahindra. We continue to like the above mentioned stocks and intend to hold at present. The companies mentioned are fundamentally sound and some are niche businesses with good long-term prospects and we will keep reviewing them from time to time. As and when more clarity emerges we might think of adding some more where the value/price mismatch is disproportionately widened.

April 2020 INSIGHT 16 TCS LTD. CMP: Rs 1818 Rating: BUY TCS 3 year Price Chart 4120 Company Information 3620 BSE Code 532540 3120 NSE Code TCS 2620 Bloomberg Code TCS IN ISIN INE467B01029 2120 Market Cap (Rs. Cr) 6,82,408.68 1620 Outstanding shares(Cr) 375.24 1120 52-wk Hi/Lo (Rs.) 2296.0/1504.0 620

Face Value(Rs.) 1.0 120 19 18 Book Value (Rs) 237.9 17 Jul-19 Jul-18 Jul-17 Jan-20 Jan-19 Jan-18 Sep-19 Sep-18 Sep-17 Ma r- Ma r- Ma r- Nov-19 Nov-18 Nov-17 May-19 May-18 May-17

Investment Rationale relative market share versus its peers Nearly 80% revenue of TCS is Management post Q3FY20 result, over the last 7 quarters. coming from overseas market, thus stated that current problems in BFSI TCS had delivered ~28% YoY nearly 5% depreciation in Indian and Retail as a temporary phenom- revenue growth in Digital (Constant rupee against dollars is likely to pro- enon and is hopeful of a turnaround Currency terms), contributing vide some relief on margin front amid in medium to long term, though lock- 33.2% to overall revenue in 2QFY20, disruption caused by the coronavirus downin most advanced economies vis-à-vis 42.1% YoY growth in 1QFY20. fears. IT players expect broad based due to COVID-19 outbreak could push However, company has stopped economic recovery should be likely back the growth to further quarters. providing Digital revenue separately only by the quarter ending December There has been demand coming from Q3FY20 onwards. 31, 1019. from small and medium sized banks and specialized financial players in The Digital growth was supposedly Valuation driven by Life Sciences and Health- US. Geographies like Australia and On the light of COVID-19 fears, Europe are seeing better growth in care vertical. For now, management is focusing on capturing the demand since December 2019, the scrip has BFSI vertical. Overall in BFSI seg- corrected nearly 17% and valuation ment, company has gained 200bps of by increased hiring in the new-age skill sets. As of December 2019, TCS multiple is nearly 8% discount to its has trained over 327,000 employees 10 year Median P/E ratio. At current on emerging technologies and level, the valuation looks quite over 404,000 employees on Agile compelling with risk/reward skewed methodologies. in favour of the stock. Further, large IT companies are more insulated Despite of slow Despite of slow growth and muted from coronavirus disruption as the growth and muted outlook on global IT spend, TCS demand for technological support is outlook on global will continue to be the bellwether in going to surge in this pandemic situa- IT spend, TCS will Indian IT services industry given its breadth and depth in service lines, tion. Thus, we are recommending to continue to be the geographies and verticals, ability to Add the scrip. At cmp, the scrip is bellwether in Indian stitch together integrated offerings, valued at P/E ratio of 19.4x on FY21E IT services industry significant lead in automation skills, Bloomberg consensus EPS of Rs 93.92. given its breadth strong and stable base of experienced and depth in service employees with contextual TCS PE Ratio lines, geographies knowledge and 35.0 and verticals, ability strong product, to stitch together platform and 30.0 integrated offerings, agile delivery 25.0 capabilities. The 20.0 significant lead in strengths of automation skills, TCS will help it 15.0 strong and stable to gain market 10.0 share despite base of experienced 5.0 PE Ratio Mean 1 SD+ its size and also 2 SD+ 1 SD- 2 SD- employees help to keep its 0.0 margins among Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-16 Apr-19 industry’s best. Apr-07 Apr-08 Apr-15 Apr-17 Apr-18

17 INSIGHT April 2020 HDFC BANK LTD. CMP: Rs 900 Rating: BUY HDFC Bank 3 yr price chart 1400 Company Information 1300 BSE Code 500180 1200 NSE Code HDFCBANK 1100 Bloomberg Code HDFCB IN ISIN INE040A01034 1000 Market Cap (Rs. Cr) 4,96,264.84 900 Outstanding shares(Cr) 5,47 800 52-wk Hi/Lo (Rs.) 1305.50/738.75 700

Face Value(Rs.) 1.0 600 Book Value (Rs) 308 Jul-17 Jul-18 Jul-19 Jan-18 Jan-19 Jan-20 Sep-17 Sep-18 Sep-19 Mar-17 Mar-18 Mar-19 Nov-17 Nov-18 Nov-19 May-17 May-18 May-19

Investment Rationale margins (led by unsecured loan book) the pyramid. The restrictions would Banks positively impacted by RBI’s (c) slower growth in fee income have to be a protracted process for steps: We believe that the positive (d) higher NPAs (once moratorium HDFC Bank’s customer base to be steps taken by RBI for the banking period is over). However, HDFC impacted. On succession, Mr. Puri sector: (a) repo rate cut will reduce bank will be positively impacted himself has told earlier that the cost of borrowing from RBI (b) a with higher treasury gains on lower concerns are overblown. In January larger reverse repo cut will disin- bond yields. Besides, given the strong 2020, the HDFC Bank had selected centivize banks to hoard cash and franchise and the ability of manage- a global executive search firm, Egon rather lend (c) cut in CRR will again ment to handle stress and tide over Zehnder, to identify a successor to release funds to lend (d) banks can previous crises, gives us confidence Aditya Puri. Aditya Puri, whose term dip more into MSF and (e) banks will in the bank to comfortabley sail over is set to reach an end in October this not have to mark to market (MTM) the present one at hand as well. year, is also an adviser to the search committee. Mr. Puri has earlier said, investments in corporate bonds, Concerns over bank, priced in: “Succession is not a one -time affair” commercial papers, and non-con- Recently, concerns have been raised and that his successor will neces- vertible debentures, thus no hit on over unsecured retail book of the sarily not be an internal candidate balance sheet (f) moratorium on term bank and management succession. only. We believe, that HDFC Bank is loans will not result in NPAs and thus MR. Aditya Puri, MD of HDFC Bank in an exceptional retail franchise with no incremental credit costs for the a conference call has maintained that strong talent pool. time being. while the unsecured retail book is Strong franchise with proven 16% of portfolio, 75% of the unsecured Valuation loans are to salaried class and not history: While the steps taken by RBI Since Jan 2020, the scrip has cor- showing any stress. The bank even will address some of the concerns rected nearly 33% and valuation before the local outbreak of coro- nevertheless, HDFC bank will be multiple is nearly 37% discount to its impacted over (a) moderation in loan navirus, had already tightened its 10-year Median P/B ratio. At current growth (b) impact on net interest lending criteria. Although, credit card level, the valuation looks compelling spends will come from long term investment per- HDFC Bank PB Ratio down in the near spective with favorable risk reward 10.0 term because of restrictions. On ratio. HDFC Bank remains a quality 8.0 asset quality, Mr. franchise which has stood the test Puri believes that of time and concerns with the bank 6.0 while there will are overblown. Thus, we are recom-

4.0 be some pick up mending to Add the scrip. At CMP, in NPAs, it will the scrip is valued at P/B ratio of 2.37x 2.0 be manageable. on FY21E Bloomberg consensus BVPS PB Ratio Mean 1 SD+ Besides, job of Rs 350 (assuming payout ratio at 0.0 2 SD+ 1 SD- 2 SD- losses start from 19.4%). Apr-07 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-17 Apr-20 Apr-08 Apr-09 Apr-16 Apr-18 Apr-19 the bottom of

April 2020 INSIGHT 18 ITC LTD. CMP: Rs 163 Rating: BUY ITC 3 year Price Chart 370 Company Information BSE Code 500875 320 NSE Code ITC Bloomberg Code ITC IN 270 ISIN INE154A01025 220 Market Cap (Rs. Cr) 2,00,240.45 Outstanding shares(Cr) 1,229 170 52-wk Hi/Lo (Rs.) 310.0/134.95

Face Value(Rs.) 1.0 120 Jul-17 Jul-18 Jul-19 Jan-18 Jan-19 Jan-20 Sep-17 Sep-18 Sep-19 Mar-17 Mar-18 Mar-19 Nov-17 Nov-18 Nov-19 May-17 May-18 May-19

Investment Rationale its FMCG distribution network. to consumer, thereby insulating the ITC board has decided to increase Company has invested heavily in margins from any type of decline dividend payout 80-85% from 68% setting up 20 Integrated Consumer though volume has taken the hit to (dividend distribution tax included) Goods Manufacturing and Logistics some extent. However, ESG-related which is effective from FY20. ITC’s (ICML) facilities that will aid the concerns have remained an overhang dividend payout has been 68% company with economies of scale, for ITC, though efforts in its sustain- (inclusive of dividend tax) in FY19, freshness and close-to-market ability initiatives have ranked ITC and about 56% in the hands of the distribution. Company’s increasing high on ESG performance scores. shareholder. With the payout going focus on scaling up non cigarette up, the stock’s pre-tax dividend yield FMCG business will pay off positively Valuation should be at least 6-6.5%. The higher to ITC’s shareholders in long run Since December 2019, the scrip has corrected nearly 33% and valuation payout and attractive dividend yield Fast Moving Consumer goods is 49% discount to its 10 year Median will drive the stock performance in companies are ramping up produc- P/E ratio. Currently, market is giving near term. tion to meet the steep rise in demand lower multiple to ITC’s future growth as people are rushing to stock up Company has been strengthening given uncertainty in its Hotel busi- essentials and groceries in bulk ness due to coronavirus outbreak and amid of lockdown in entire country slowdown in other business verticals. for 21 days due to the coronavirus At current level, the valuation looks outbreak as several states imposed quite compelling with risk/reward stringent curbs on movement. FMCG ITC board has skew for the stock. Thus, we are companies including HUL, ITC, Parle, recommending to Add the scrip given decided to increase Amul, and Godrej Consumers have its strong franchise, brand, healthy dividend payout ramped up their production after balance sheet and strong manage- 80-85% from 68% over 4 quarters to ensure there are no ment pedigree. At cmp, the scrip is shortages amid panic buying. Thus, (dividend distribution valued at P/E ratio of 12.2x on FY21E ITC is well placed to capitalize on the tax included) which Bloomberg consensus EPS of Rs 13.35. is effective from opportunity as it is rapidly scaling its FMCG business. FY20. ITC’s dividend payout has been ITC recently 68% (inclusive of raised the price ITC PE Ratio of cigarettes 60.0 dividend tax) in in the range FY19, and about 56% between 10% 50.0 in the hands of the to 20% in bid 40.0 shareholder. With to offset the 30.0 the payout going up, increase in taxa- the stock’s pre-tax tion on cigarettes 20.0 announced in dividend yield should the budget 2020. 10.0 PE Ratio Mean 1 SD+ 2 SD+ 1 SD- 2 SD- be at least 6-6.5%. Thus, ITC has 0.0 passed on the higher tax cost Mar-02 Mar-03 Mar-24 Mar-06 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-16 Mar-19 Mar-20 Mar-05 Mar-07 Mar-08 Mar-15 Mar-17 Mar-18

19 INSIGHT April 2020 BRITANNIA INDUSTRIES LTD. CMP: Rs 2530 Rating: BUY Britannia Industries price chart 4000 2000 Company Information 1800 BSE Code 500825 3500 1600 NSE Code BRITANNIA 1400 3000 1200 Bloomberg Code BRIT IN 1000 ISIN INE216A01030 2500 800 Market Cap (Rs. Cr) 60,870 600 Outstanding shares(Cr) 24.0 2000 400 200 52-wk Hi/Lo (Rs.) 3583.75 / 2100 1500 0 Face Value(Rs.) 1 Jun-17 Jun-18 Jun-19 Sep-17 Sep-18 Sep-19 Mar-17 Mar-18 Mar-19 Book Value 165.8 Dec-17 Dec-18 Dec-19 Traded Volume ('000) Britannia

Investment Rationale material inflation) and sharp focus Valuation Due to ongoing market slowdown on cost optimization (cost savings Since February 2020, the scrip has target for the current year is 2.1% of success in new categories has been corrected nearly 25% due to Coro- revenue) should continue to support limited so scale-up of a few products navirus outbreak and its impact on operating margin trend. being delayed. Britannia has been the economy. Currently the valuation less aggressive to introduce new Going forward, it is expected that multiple is 18% discount to its 3 year product and investments in new company’s thrust on distribution median P/E ratio and looks compel- launches. However, the company is expansion and category expansion ling from long term investment per- expected to utilization of its strong with premiumization to drive spective with favorable risk reward cash flows for M&A opportunities growth. While judicious pricing and ratio. Thus, we are recommending (vs. ICDs) to become a total foods strategic input buying with cost company which would be positive in saving measures will help in better to Add the scrip. At CMP, the scrip is long run. margins. valued at P/E ratio of 36.9x on FY21E Bloomberg consensus EPS of Rs. 66.8. Crude have corrected by ~50% and Britannia is a constant play with palm oil have corrected by ~20%, strong earnings visibility. The whereas wheat prices are beginning recent stock underperformance (due to soften, which is expected to ease to overall slowdown) and improving input inflation concerns and in turn margin outlook (due to decline in improve margin. input cost price and cost saving Improving product mix (premium measure) provide a good entry Since February growing faster than value category), opportunity and remains a high 2020, the scrip has moderate competitive intensity, conviction bet. corrected nearly 25% modest price hike (to offset raw due to Coronavirus outbreak and its Britannia PE Ratio impact on the 100.0 economy. Currently the valuation 80.0 multiple is 18% 60.0 discount to its 3 year median P/E 40.0 ratio and looks compelling from 20.0 long term investment 0.0 perspective with favorable risk reward Mar-02 Mar-04 Mar-06 Mar-10 Mar-12 Mar-14 Mar-16 Mar-20 Mar-08 Mar-18 ratio. PE Ratio Mean 1 SD+ 2 SD+ 1 SD- 2 SD-

April 2020 INSIGHT 20 Monthly Insight Recommendation Performance Sheet

Script Buying QTY Bought Value Target Target Booked on Booked Value till Profit Return Holding Annu- Date Rate Price Return Price date Days alised Return Britannia Industries 02-Mar-20 164 3042.9 499031 3400 11.70% Aarti Industries 02-Mar-20 505 988 498940 1177 19.10% Metropolis Healthcare 02-Mar-20 263 1882.5 495095 2200 16.90% Bajaj Finance 03-Feb-20 115 4305.9 495177 5000 16.10% Gujarat State Petronet 03-Feb-20 2040 245.8 501493 300 22.00% Granules India 03-Feb-20 3600 139.6 502632 170 21.80% 07-Feb-20 164.21 591156 88524 17.6% 4 1607% Concor 01-Jan-20 868 575 499091 665 15.70% Mahanagar Gas 01-Jan-20 475 1066.2 506426 1164 9.20% 23-Jan-20 1162 551950 45524 8.99% 22 149% SIS 01-Jan-20 1020 490.3 500147 568 15.80% 07-Feb-20 559 570119 69972 14.00% 37 138% HDFC Life 02-Dec-19 875 571 499608 680 19.10% Dr. Reddy’s Lab 02-Dec-19 171 2922.9 499818 3503 19.80% Just Dial 02-Dec-19 875 570.5 499170 750 31.50% IRCTC 01-Nov-19 561 892.5 500709 1170 31.10% 30-Jan-20 1158 649638 148929 29.70% 90 121% PI Industries 01-Nov-19 350 1432.4 501323 1613 12.60% 07-Feb-20 1612 564109 62787 12.50% 98 47% Procter & Gamble Hygiene 01-Nov-19 40 12324.6 492982 14078 14.20% HDFC Bank 01-Oct-19 405 1235.1 500212 1395 12.90% Indian Hotels 01-Oct-19 3130 159.9 500595 179 11.90% Siemens 01-Oct-19 330 1549 511213 1680 8.40% 23-Oct-19 1689 557420 46207 9.00% 22 150% Gujarat Gas 01-Sep-19 2800 179 501501 200 11.70% 30-Oct-19 200 560000 58499 11.70% 59 72% Hindustan Unilever 01-Sep-19 265 1888 500371 1975 4.60% 20-Sep-19 1957 518507 18136 3.60% 19 70% Divi’s Lab 01-Aug-19 305 1636 498882 1750 7.00% 22-Oct-19 1757 535885 37003 7.40% 82 33% ICICI Bank 01-Aug-19 1175 426 500234 473 11.10% 25-Oct-19 468 550206 49972 10.00% 85 43% City Union Bank 01-Jul-19 2410 208 500935 254 22.20% 16-Jan-20 248 597005 96070 19.20% 199 35% Reliance Nippon Life 01-Jul-19 2250 222 499773 265 19.30% 27-Aug-19 258 579510 79737 16.00% 57 102% Sanofi India 01-Jul-19 87 5740 499387 6775 18.00% 29-Oct-19 6678 581029 81641 16.30% 120 50% Asian Paints 01-Jun-19 346 1445 499797 1560 8.00% 02-Aug-19 1549 535985 36188 7.20% 62 43% Axis Bank 01-Jun-19 614 812 498614 905 11.40% Honeywell Automation 01-Jun-19 19 26087 495655 30195 15.70% 25-Oct-19 29105 552999 57344 11.60% 146 29% MCX 01-May-19 575 868 499354 1005 15.70% 30-Aug-19 971 558147 58793 11.80% 121 36% TCS 01-May-19 220 2259 496953 2490 10.20% Crompton Greaves Cons. 01-Apr-19 2138 234 501153 256 9.20% 20-Sep-19 251 536681 35528 7.10% 172 15% Equitas Holdings 01-Apr-19 3637 138 500875 191 38.70% Page Industries 01-Apr-19 20 25219 504373 29080 15.30% 14-Aug-19 17525 350506 -153867 -30.50% 135 -82% ITC 01-Mar-19 1800 278 500089 319 14.80% Tech Mahindra 01-Mar-19 605 824 498456 960 16.50% HDFC Bank 01-Feb-19 240 2101 504338 1204 -42.70% 20-May-19 2403 576686 72348 14.30% 108 48% Pfizer 01-Feb-19 163 3066 499703 3490 13.80% 20-Sep-19 3389 552433 52730 10.60% 231 17% Abbott India 01-Jan-19 65 7593 493527 8580 13.00% 11-Jun-19 8566 556790 63263 12.80% 161 29% Indraprastha Gas 01-Jan-19 1850 273 504362 315 15.50% 08-Apr-19 314 581748 77386 15.30% 97 58% United Spirits 01-Jan-19 800 623 498624 735 17.90% 14-Feb-20 711 568576 69952 14.00% 409 13% Berger Paints 01-Dec-18 1567 319 499873 369 15.70% 29-Aug-19 369 578223 78350 15.70% 271 21% Cummins India 01-Dec-18 644 776 499744 889 14.60% 16-Jan-19 889 572516 72772 14.60% 46 116%

21 INSIGHT April 2020 Script Buying QTY Bought Value Target Target Booked on Booked Value till Profit Return Holding Annu- Date Rate Price Return Price date Days alised Return Dabur India 01-Nov-18 1299 385 500115 470 22.10% 20-Sep-19 470 610530 110415 22.10% 323 25% Nestlé India 01-Nov-18 52 9680 503360 11370 17.50% 10-Jan-19 11370 591240 87880 17.50% 70 91% Dr. Lal PathLabs 01-Oct-18 524 954 499896 1125 17.90% 06-Feb-19 1125 589500 89604 17.90% 128 51% Godrej Consumer 01-Oct-18 651 768 499968 910 18.50% 01-Feb-20 688 447888 -52080 -10.42% 488 -8% ABB India 01-Sep-18 378 1322 499716 1510 14.20% 14-Sep-18 1510 570780 71064 14.20% 13 399% Bharat Forge 01-Sep-18 752 665 500080 752 13.10% 15-Mar-19 548 412284 -87796 -17.60% 195 -33% Whirlpool of India 01-Sep-18 279 1795 500805 2033 13.30% 09-Oct-19 2033 567207 66402 13.30% 403 12% Cipla 01-Aug-18 800 625 500000 715 14.40% 01-Feb-20 452 361760 -138240 -27.65% 549 -18% Marico 01-Aug-18 1425 351 500175 408 16.20% 25-Sep-19 404 575700 75525 15.10% 420 13% Dishman Carbogen 01-Jul-18 1916 261 500076 307 17.60% 03-Sep-18 307 588212 88136 17.60% 64 101% Procter & Gamble Hygiene 01-Jul-18 51 9900 504900 11100 12.10% 17-Jul-18 11100 566100 61200 12.10% 16 277% Bata India 01-Jun-18 654 764 499656 890 16.50% 23-Jul-18 890 582060 82404 16.50% 52 116% CESC 01-Jun-18 624 802 500348 1020 27.20% 01-Feb-20 722 450528 -49820 -9.96% 610 -6% Nestle India 01-Jun-18 53 9519 504507 10900 14.50% 01-Aug-18 10900 577700 73193 14.50% 61 87% ITC 01-May-18 1786 280 500080 324 15.70% 03-Sep-19 323 576789 76709 15.30% 490 11% Tata Chemical 01-May-18 656 762 499872 890 16.80% 01-Feb-20 758 497116.8 -2755.2 -0.55% 641 0% Voltas 01-Apr-18 806 620 499720 720 16.10% 24-Oct-19 720 580320 80600 16.10% 571 10% Britannia Industries 01-Mar-18 202 2480 500960 2845 14.70% 23-May-18 2845 574690 73730 14.70% 83 65% Infosys 01-Mar-18 876 571 500196 667 16.80% 03-Jul-18 667 584292 84096 16.80% 124 49% Godrej Consumer 01-Feb-18 714 701 500276 804 14.70% 27-Jun-18 804 574056 73780 14.70% 146 37% Power Grid 01-Feb-18 2604 192 499968 223 16.10% 01-Aug-19 216 563115 63147 12.60% 546 8% Maharshtra Seamless 01-Jan-18 990 505 499950 585 15.80% 09-Jan-19 483 478170 -21780 -4.40% 373 -4% Solar Industries 01-Jan-18 423 1182 499986 1480 25.20% 01-Feb-20 1340 566820 66834 13.37% 761 6% Hindustan Copper 01-Dec-17 5263 95 499985 116 22.10% 30-May-18 76 399988 -99997 -20.00% 180 -41% Petronet LNG 01-Dec-17 1992 251 499992 297 18.30% 23-Sep-19 297 591624 91632 18.30% 661 10% Indian Hotels Co. 01-Nov-17 4673 107 500011 127 18.70% 04-Jan-18 127 593471 93460 18.70% 64 107% KNR Constructions 01-Nov-17 2008 249 499992 297 19.30% 21-Dec-17 297 596376 96384 19.30% 50 141% CDSL 01-Oct-17 1471 340 500140 424 24.70% 16-Mar-18 302 444242 -55898 -11.20% 166 -25% Karur Vysya 01-Oct-17 4005 125 500053 145 15.80% 17-Aug-18 100 400500 -99553 -19.90% 320 -23% Hindustan Unilever 01-Sep-17 411 1217 500187 1379 13.30% 18-Jan-18 1379 566769 66582 13.30% 139 35% NMDC 01-Sep-17 3968 126 499968 142 12.70% 01-Jan-18 142 563456 63488 12.70% 122 38% Indraprastha Gas 01-Aug-17 2137 234 500058 280 19.70% 11-Sep-17 280 598360 98302 19.70% 41 175% Kaveri Seed 01-Aug-17 732 683 499956 790 15.70% 24-Dec-18 580 424560 -75396 -15.10% 510 -11% Apollo Tyres 01-Jul-17 2083 240 499920 278 15.80% 07-Aug-17 278 579074 79154 15.80% 37 156% Greaves Cotton 01-Jul-17 3145 159 500055 193 21.40% 26-Jun-18 140 440300 -59755 -11.90% 360 -12% Bosch 01-Jun-17 21 23325 489825 27442 17.70% 18-Sep-18 21000 441000 -48825 -10.00% 474 -8% Relaxo Footwears 01-Jun-17 2183 229 499907 286 24.70% 01-Nov-17 286 623247 123340 24.70% 153 59% PI Industries 01-May-17 577 866 499682 1028 18.70% 09-Jan-18 1028 593156 93474 18.70% 253 27% PNC Infratech 01-May-17 3226 155 500030 200 29.00% 26-Oct-17 200 645200 145170 29.00% 178 60% Akzo Nobel 01-Apr-17 269 1862 500878 2135 14.70% 28-Dec-18 1680 451920 -48958 -9.80% 636 -6% Crompton Greaves 01-Apr-17 2370 211 500070 244 15.60% 16-May-17 244 578280 78210 15.60% 45 127% Deepak Nitrite 01-Mar-17 4673 107 500011 124 15.90% 02-Mar-17 124 579452 79441 15.90% 1 5799% Manappuram Finance 01-Mar-17 5263 95 499985 120 26.30% 22-Dec-17 120 631560 131575 26.30% 296 32% CESC 01-Feb-17 855 585 500175 671 14.70% 13-Feb-17 671 573534 73359 14.70% 12 446% Dewan Housing 01-Feb-17 1724 290 499960 341 17.60% 14-Mar-17 341 587884 87924 17.60% 41 157% Persistent Systems 01-Jan-17 812 616 500192 741 20.30% 09-Jan-18 741 601692 101500 20.30% 373 20% Berger Paints 01-Dec-16 2083 240 499920 280 16.70% 25-Oct-17 280 583240 83320 16.70% 328 19% Britannia Industries 01-Dec-16 332 1505 499660 1761 17.00% 26-Apr-17 1761 584652 84992 17.00% 146 43% Dishman Pharma 01-Dec-16 2058 243 500094 300 23.50% 29-Mar-17 300 617400 117306 23.50% 118 73% Max Financial Services 01-Nov-16 909 550 499950 650 18.20% 07-Apr-17 650 590850 90900 18.20% 157 42% Minda Industries 01-Nov-16 4274 117 500058 151 29.10% 21-Apr-17 151 645374 145316 29.10% 171 62% Natco Pharma 01-Nov-16 870 575 500250 737 28.20% 06-Feb-17 737 641190 140940 28.20% 97 106% Vindhya Telelinks 01-Nov-16 693 722 500346 900 24.70% 05-Jul-17 900 623700 123354 24.70% 246 37% Credit Analysis 01-Oct-16 381 1314 500634 1543 17.40% 10-Oct-16 1543 587883 87249 17.40% 9 707% Nilkamal 01-Oct-16 374 1336 499664 1700 27.20% 17-Oct-16 1700 635800 136136 27.20% 16 622% IDFC Bank 01-Sep-16 9025 55 499985 70 26.40% 22-Sep-16 70 631750 131765 26.40% 21 458% Kirloskar Ferrous 01-Sep-16 5814 86 500004 113 31.40% 10-Apr-17 113 656982 156978 31.40% 221 52% Mahanagar Gas 01-Sep-16 780 641 499980 748 16.70% 17-Oct-16 748 583440 83460 16.70% 46 132% Mercator 01-Sep-16 9615 52 499980 71 36.50% 05-Jan-18 44 418253 -81728 -16.30% 491 -12% Federal Bank 01-Aug-16 7692 65 499980 78 20.00% 25-Oct-16 78 599976 99996 20.00% 85 86% Indian Oil Corp. 01-Aug-16 3683 136 499967 155 14.20% 05-Oct-16 155 570865 70898 14.20% 65 80% LIC Housing Finance 01-Aug-16 963 519 499797 608 17.10% 19-Oct-16 608 585504 85707 17.10% 79 79%

April 2020 INSIGHT 22 Script Buying QTY Bought Value Target Target Booked on Booked Value till Profit Return Holding Annu- Date Rate Price Return Price date Days alised Return Unichem Lab 01-Aug-16 1754 285 499890 360 26.30% 09-Jan-18 360 631440 131550 26.30% 526 18% Aarti Industries 01-Jul-16 962 520 500240 620 19.20% 30-Aug-16 620 596440 96200 19.20% 60 117% Capital First 01-Jul-16 12478 40 500018 47 16.70% 20-Jul-16 47 583504 83486 16.70% 19 321% Godrej Properties 01-Jul-16 1370 365 500050 415 13.70% 05-Apr-17 415 568550 68500 13.70% 278 18% Steel Strips Wheels 01-Jul-16 1096 456 499776 578 26.80% 25-Aug-16 578 633488 133712 26.80% 55 178% Dabur India 01-Jun-16 1724 290 499960 335 15.50% 01-Nov-17 335 577540 77580 15.50% 518 11% Glenmark Pharma 01-Jun-16 588 851 500388 985 15.70% 01-Nov-16 985 579180 78792 15.70% 153 38% Godrej Consumer 01-Jun-16 1013 494 500084 583 18.20% 22-Feb-17 583 590917 90832 18.20% 266 25% Tata Power Co 01-Jun-16 6849 73 499977 85 16.40% 17-Feb-17 85 582165 82188 16.40% 261 23% DCM Shriram 01-May-16 3185 157 500045 195 24.20% 27-May-16 195 621075 121030 24.20% 26 340% Mahindra & Mahindra 01-May-16 752 665 500080 775 16.50% 20-Dec-17 775 582800 82720 16.50% 598 10% PI Industries 01-May-16 787 635 499745 760 19.70% 27-Jul-16 760 598120 98375 19.70% 87 83% ACC 01-Apr-16 365 1370 500050 1580 15.30% 27-Jun-16 1580 576700 76650 15.30% 87 64% VA Tech Wabag 01-Apr-16 1931 259 500129 345 33.20% 24-Mar-17 345 666195 166066 33.20% 357 34% Whirlpool India 01-Apr-16 735 680 499800 810 19.10% 07-Jun-16 810 595350 95550 19.10% 67 104% Marico 01-Mar-16 2119 236 500084 280 18.60% 15-Jul-16 280 593320 93236 18.60% 136 50% NTPC 01-Mar-16 4762 105 500010 123 17.50% 03-Jun-16 123 587313 87303 17.50% 94 68% HCL Tech 01-Feb-16 577 866 499682 1020 17.80% 25-Jan-18 1020 588540 88858 17.80% 724 9% HDFC 01-Feb-16 424 1180 500320 1400 18.60% 29-Jul-16 1400 593600 93280 18.60% 179 38% Hero MotoCorp 01-Feb-16 195 2562 499590 2820 10.10% 02-Mar-16 2820 549900 50310 10.10% 30 123% Indraprastha Gas 01-Jan-16 4762 105 500010 125 18.90% 29-Jun-16 125 594298 94288 18.90% 180 38% Pidilite Ind. 01-Jan-16 907 551 499757 656 19.10% 20-May-16 656 594992 95235 19.10% 140 50% SH Kelkar 01-Jan-16 2000 250 500000 310 24.00% 22-Aug-16 310 620000 120000 24.00% 234 37% Texmaco Rail 01-Jan-16 3311 151 499961 183 21.20% 23-Nov-17 110 364210 -135751 -27.20% 692 -14% Garware Wall Ropes 01-Dec-15 1289 388 500132 488 25.80% 09-Aug-16 488 629032 128900 25.80% 252 37% Sanofi India 01-Dec-15 116 4300 498800 5060 17.70% 01-Mar-18 5060 586960 88160 17.70% 821 8% Wabco India 01-Dec-15 80 6280 502400 7200 14.60% 28-Nov-17 7200 576000 73600 14.60% 728 7% GP Petroleums 01-Nov-15 7463 67 500021 156 132.80% 07-Feb-17 95 708985 208964 41.80% 464 33% HCC 01-Nov-15 28652 17 500007 29 65.40% 03-Jan-17 29 826909 326902 65.40% 429 56% Inox Wind 01-Nov-15 1259 397 499823 500 25.90% 19-Oct-16 225 283275 -216548 -43.30% 353 -45% Sterlite Tech 01-Nov-15 6993 72 500000 107 50.10% 20-Oct-16 107 750349 250349 50.10% 354 52% Castrol India 01-Oct-15 2309 217 499899 255 17.80% 10-Jul-17 195 450255 -49644 -9.90% 648 -6% Syngene Int 01-Oct-15 3115 161 499958 193 19.90% 21-Oct-15 193 599638 99680 19.90% 20 364% Zee Ent. 01-Oct-15 1282 390 499980 464 19.00% 07-Jun-16 464 594848 94868 19.00% 250 28% Berger Paints 01-Sep-15 3365 149 499943 176 18.80% 22-Dec-15 176 593682 93739 18.80% 112 61% Ceat 01-Sep-15 463 1080 500040 1245 15.30% 10-Sep-15 1245 576435 76395 15.30% 9 620% Cummins India 01-Aug-15 520 962 500240 1130 17.50% 06-Aug-15 1130 587600 87360 17.50% 5 1275% Greenply Ind. 01-Aug-15 3281 152 500041 183 20.10% 12-May-16 183 600584 100543 20.10% 285 26% SQS India BFSI 01-Aug-15 735 680 499800 863 26.90% 23-Nov-15 863 634305 134505 26.90% 114 86% TIME Technoplast 01-Aug-15 7576 66 500016 81 22.70% 22-Aug-16 81 613656 113640 22.70% 387 21% Asian Paints 01-Jul-15 658 760 500080 883 16.20% 31-Jul-15 883 581014 80934 16.20% 30 197% Idea Cellular 01-Jul-15 4762 105 500010 122 16.20% 20-Dec-17 60 285720 -214290 -42.90% 903 -17% Maruti Suzuki 01-Jun-15 132 3774 498168 4367 15.70% 04-Aug-15 4367 576444 78276 15.70% 64 90% Whirlpool India 01-Jun-15 658 760 500080 879 15.70% 13-Jul-16 879 578382 78302 15.70% 408 14% Sun pharma 01-May-15 541 925 500425 1220 31.90% 19-Aug-16 790 427390 -73035 -14.60% 476 -11% Tata Global 01-May-15 3546 141 499986 174 23.40% 12-Jul-17 174 617004 117018 23.40% 803 11% Tata Motors 01-May-15 971 515 500065 615 19.40% 20-Jul-16 490 475790 -24275 -4.90% 446 -4% Ultratech 01-May-15 187 2680 501160 3300 23.10% 13-Apr-16 3300 617100 115940 23.10% 348 24% Abbott India 01-Apr-15 124 4020 498480 4680 16.40% 04-Aug-15 4680 580320 81840 16.40% 125 48% Elantas Beck India 01-Apr-15 442 1130 499460 1320 16.80% 29-Jul-15 1320 583440 83980 16.80% 119 52% Strides Arcolab 01-Apr-15 434 1153 500402 1340 16.20% 10-Aug-15 1340 581560 81158 16.20% 131 45% BEML 01-Mar-15 511 978 499758 1200 22.70% 09-Apr-15 1200 613200 113442 22.70% 39 212% MCX 01-Mar-15 425 1177 500225 1552 31.90% 22-May-17 970 412250 -87975 -17.60% 813 -8% Rolta 01-Mar-15 2618 191 500038 250 30.90% 26-Dec-16 61 159698 -340340 -68.10% 666 -37% Amrutanjan Health 01-Feb-15 2227 225 499962 325 44.80% 17-Apr-17 325 723775 223814 44.80% 806 20% HBL Power 01-Feb-15 14327 35 500012 55 57.60% 20-Feb-15 55 787985 287973 57.60% 19 1106% Mangalam Cement 01-Feb-15 1558 321 500118 432 34.60% 16-Jan-18 432 673056 172938 34.60% 1080 12% SML Isuzu 01-Feb-15 511 979 500269 1222 24.80% 10-Mar-15 1222 624442 124173 24.80% 37 245% Dewan Housing 01-Jan-15 2519 199 500022 240 20.90% 15-Jan-15 240 604560 104539 20.90% 14 545% Emami 01-Jan-15 1277 392 499946 462 18.00% 28-Jan-15 462 589974 90029 18.00% 27 243% Torrent Pharm 01-Jan-15 456 1096 499776 1338 22.10% 18-Jun-15 1338 610128 110352 22.10% 168 48%

23 INSIGHT April 2020 MANAGEMENT MEET NOTE

Godrej Consumer Products

Company Information Apart from hair colors all are included in essential BSE Code 532424 products. NSE Code GODREJCP Pace of sales have gone down since last 4 days because Bloomberg Code GCPL.IN of state borders have sealed, thus movement of goods ISIN INE102D01028 have been restricted from manufacturing units to the distributors. Market Cap (Rs. Cr) 51,120.9 Sector Consumer goods Essential goods (sanitizers & Hand wash) comprise of Promoter Holding 63.24% 40-45% of entire product portfolio and Home Insecticides Outstanding shares(Cr) 102.23 (HI) is one third of portfolio. 52-wk Hi/Lo (Rs.) 771.7/425.1 In Indonesia also, people have been working from Face Value(Rs.) 1.0 home due to lock down. In Africa, where the company has Book Value (Rs) 74.17 operating factories, company has enough stock of fiber, enough stock which will last for 2 months. So, in Africa, company will not see any shortage in supply chain in next 2 months. Meeting pointers The coronavirus pandemic is evolving and it is very In India, company is also holding enough stock, now its dynamic considering that some of all about managing from manufac- the factories have been shut down, turing to transportation and then to impacting the supply chain. distribution.

There has been lockdown orders in The lockdown will definitely impact most of the states in India. In India, company topline but the full impact, company will be able to analyze at the end of Management has been striving to is also holding the month. Company is taking down mitigate it but it is very dynamic and enough stock, the stock of every alternate day. evolving by the day. now its all about There is adequate stock for online On front end, there was not too managing from retailers and modern trade retailer. much of challenges like stocking manufacturing up the distributors and to meet the to transportation Raw material prices demand for essential products and and then to Company has been very selective not for discretionary. However, on in price Increases and company has the back end, manufacturing beating distribution. already increased prices in soaps in for last couple of days. January 2020 and that was the last price increase company has done.

April 2020 INSIGHT 24 The fall in crude oil prices has not been replicated in In order to deal with the slowdown, company has the crude derivatives prices i.e. palm oil. Company is launched innovative products like shampoo hair color monitoring the prices closely and company has taken (5 minutes hair color which need to apply on the hair price increase in past couple of months ago. Now with the like shampoo and that will give desire color). Company situation, company is refraining from any further price has received good response in this new product in hair hike. category.

Company has done most of palm oil sourcing from Secondly, company has taken Indian actress Anushka Indonesia, so the restriction on import of Malaysian palm Sharma on the board and refresh the whole products in oil has not affected company’s raw material sourcing. order to bring very natural offering.

Rural India accounts nearly 28% of total revenue while Company is also working on Rs 10 herbal powder, in urban contributes the rest 72% of total domestic revenue. which company has faltered and now management is focusing to bring back competency in that segment. Value Volume convergence Actually, in this area company is still working on to make At the start of FY20, company has decided the volume it competitive. growth as a key trigger across the category. With the start of FY20, company got volume franchise in and therefore New launches gained market share across category. In soaps and hair Goodnight gold flash is performing very well in the mar- color company gained market share. Focusing on volume kets. Earlier, this product was launched in South India and strategy, really gives rich dividend to the company, now it has scaled up nationally. especially in tough environment when the sentiment was Goodnight natural range has been launched recently in very weak in last 3 quarters. online in Amazon platform and if company sees interest As from 1st quarter of FY21, the idea was to reduce and demand traction from the customers, then company the gap between value and volume and in next couple of will take it to premium branded trade and modern trade. quarters, there will be gradual convergence of value and Currently, the market size of these two products are volume. On soaps front, there was total price deflation very small and gradually they will be scaled up. The idea of that company has which has cor- gold flash is to replace the active plus rected little bit, company has taken electric which is currently now 35% of 5-6% price increase and that has HI portfolio. narrowing the gap. Company has also launched In hair color portfolio, the shampoo Hair color is more incense in HI category and it has which is premium format, where discretionary and been performing very well and it value volume gap is reducing. has been scaled up to 10-12 sticks. Gradually, the value volume gap staple. Over the Company has been scaling it up convergence will start happening last 3-4 quarters, and incense category is performing from Q4FY20 onwards. people are reasonably well. But, now company stretching their Hair color category slow- has re-worked in this segment and consumption in gradually gaining market share. ing down Hair color is more discretionary this category. When Incense sticks kind of thing and staple. Over the last 3-4 quarters, People are started, there were bunch of players people are stretching their con- generally coloring who were illegal and not play in sumption in this category. People are their hair in 4-5 fair manner. They use pesticides in generally coloring their hair in 4-5 weeks, which they incense which are harmful to health. weeks, which they are now stretching None of these products are WHO this to 6-7 weeks, thus postponing by are now stretching certified and none of these actives couple of weeks. In hair color, com- this to 6-7 weeks, are certified for use of humans. pany has seen increase in penetration thus postponing by When the company has identified but consumption is slowing down in couple of weeks. the problem of using illegal incense this category, thus resulted in overall sticks by consumers, it has taken ini- tepid performance in hair color tiatives of educating the consumers category.

25 INSIGHT April 2020 and distributors that these uncerti- which might not result in positive fied incense are harmful and it need currency transmission. Similar for to be stopped either wise it will have Indonesia also, where currency long term impact on health. Alternate channels has depreciated more than Indian currency. However, as per manage- Company has also under taken like e-commerce ment it is now hard to determine the raids to these manufacturers in order and modern gain from currency depreciation and to ensure that these units should trade have seen not seeing too much of benefit from be closed. Over the last 2 quarters significant and currency depreciation. incense sales has gone down, disproportionate basically stagnated, which showed Looking forward statement the manufactures either gone to growth. As per management, in next 5 years, other format or people are not getting E-commerce historical growth should come back into these products. Overall, the sign accounts nearly 3% and it should be single digit growth is positive for the players like Godrej of overall sales. mainly for India business. Consumers Products Ltd. who play across HI category. Company offers Godjrej Protekt Sanitizer accounts natural incense to its customers merely 0.2% of total sales, thus slash- which is performing well. ing price of sanitizer will not have any material impact on top line. Overall the consumption of incense has stagnated at 12-13% and growth in HI category is coming from electric Alternate channels like e-commerce and modern parasol, coil, etc. trade have seen significant and disproportionate growth. E-commerce accounts nearly 3% of overall sales. International business Segment Revenue % The growth in Indonesia is well defined and will see consistent performance from previous quarter in Household Insecticides 40% Indonesia. Soaps 30-35%

Company operates at multiple geographies, thus Hair Colors 15-20% currency depreciation benefit depends, like the currency Air freshener & liquidator 7% of Africa has depreciated at same pace or at higher pace, Source: company

Volume growth (%) 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 Household Insecticides 17% -2% 0% -5% -4% 4% 3% Personal care (soaps) 10% 11% 2% -1% 3% -4% -4% Hair care 12% 22% 1% 6% -1% 1% -4% Source: company

Geography revenue % 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 Domestic 54.8% 49.3% 47.8% 55.3% 55.4% Indonesia 14.4% 15.0% 13.5% 15.5% 16.3% Africa (incl SON) 24.8% 21.3% 20.4% 21.5% 24.7% Others 6.1% 5.0% 4.8% 4.6% 5.9% Geography EBIT % Domestic 74.0% 67.3% 51.3% 67.1% 73.9% Indonesia 15.4% 22.0% 14.6% 17.7% 18.8% Africa (incl SON) 11.9% 7.7% 7.8% 8.4% 10.0% Others -1.4% -0.5% -0.3% 0.6% 0.1% Source: company

April 2020 INSIGHT 26 ECONOMY REVIEW

Economy review Global growth was already weak and the developed nations were tapering off from their liquidity induced manipulated growth trajectory in the last year or so.

lobal strategists have massive across Italy, Spain, Germany, time and again stressed France, USA, and Iran. Things have on poor cashflows, rising now turned scary as the contours of leverage and stretched China has contained the virus are still unknown and early valuationsG of firms as signs of lockdown and closing of international the virus to a larger impending global recession since borders is the need of the hour. Oil extent; however, scale last year. On the contrary, markets prices have crashed to 18-year low, is massive across Italy, around the world scaled new highs plunging below $25 per barrel due and perhaps needed a virus threat Spain, Germany, France, to demand fears from Coronavirus as a trigger for profit booking which USA, and Iran. Things pandemic and on expectations of of course now have escalated and have now turned scary record high supplies as key producers triggered global recession. While as the contours of the Saudi Arabia and Russia show no the novel coronavirus or covid-19 virus are still unknown signs of reducing output amid a originated from China but has now and early lockdown and tussle in between. Oil markets are spread across entire world and the closing of international certainly pricing in global recession pandemic is still spreading and borders is the need of and that is definitely a possibility penetrating into newer territories. the hour. but again depth, breath & length China has contained the virus to of the impending recession are a larger extent; however, scale is only guesses at this point of time.

27 INSIGHT April 2020 Economists are busy downgrading the lack of awareness and self- global growth estimates every other consciousness among Indians and day anticipating the devastation the limited medical infrastructure, it the Covid-19 virus could unleash. As China has showed, was necessary for an early lockdown Biological & pharmaceutical lockdown in Wuhan to prevent escalation like that of scientists are busy to find the was on the way to Italy, which has been late in locking best possible drug combination to tame the number of down its international and regional contain the virus and the race for borders. As China has showed, vaccination is on. Although, Dr. new cases reported. lockdown in Wuhan was on the way Mike Ryan, director of the WHO Similarly, Italy and to tame the number of new cases Health Emergencies Program, told Iran also showed reported. Similarly, Italy and Iran BBC television that it would take at successful decline also showed successful decline in “least a year” for a vaccine to become in average rate of average rate of growth of new cases available, emphasizing the need for growth of new cases after lockdown at 13% & 7% vs 31% and rigorous safety standards. 29% before lockdown respectively. after lockdown at For France and Spain which have Covid-19 has now officially spread 13% & 7% vs 31% and announced lockdown recently in to 197 countries, the number of 29% before lockdown March, the absolute number of new worldwide active cases have now respectively. daily cases spiked after lockdown, inched ~543,000 and the number of although the rate of increase has deaths worldwide close to 35,000. declined. A similar phenomenon was The calculated fatality rate is ~4.3% observed in China too, before cooling now and the severity of the situation off and this could be attributed to can be gauged from the precarious situation in Italy where either higher number of cases reported or increased the average daily reported cases is north of 5,000. Iran is incidence of testing. The next few weeks are thus crucial reporting ~3000 new cases every day and the number of for India to curb growth in number of daily new cases and new cases reported worldwide is at runrate of ~60,000. whether it would be able to curb the growth is the bigger For India, the number of cases has now spiked to 1100 question. and growing at north of 30% on a daily basis. Considering

New daily cases in China post lockdown New daily cases in Italy 16000 7000

14000 6000 12000 5000 10000 4000 8000 Lockdown 3000 9th March 6000 lockdown 23rd Jan 2000 4000 2000 1000

0 0 23-Jan 30-Jan 06-Feb 13-Feb 20-Feb 27-Feb 22-Feb 24-Feb 26-Feb 28-Feb 05-Mar 12-Mar 19-Mar 01-Mar 03-Mar 05-Mar 07-Mar 09-Mar 11-Mar 13-Mar 15-Mar 17-Mar 19-Mar 21-Mar worldometers.info worldometers.info

Iran new daily cases France daily new cases 1600 Lockdown 2000 13th March 1400 1800 1600 Lockdown 1200 16th March 1400 1000 1200 800 1000 600 800 600 400 400 200 200 0 0 15-Feb 17-Feb 19-Feb 21-Feb 23-Feb 25-Feb 27-Feb 29-Feb 19-Feb 21-Feb 23-Feb 25-Feb 27-Feb 29-Feb 02-Mar 04-Mar 06-Mar 08-Mar 10-Mar 12-Mar 14-Mar 16-Mar 18-Mar 20-Mar 22-Mar 02-Mar 04-Mar 06-Mar 08-Mar 10-Mar 12-Mar 14-Mar 16-Mar 18-Mar 20-Mar worldometers.info worldometers.info

April 2020 INSIGHT 28 Spain daily new cases Daily new cases-India 4500 100 4000 90 3500 80 70 3000 Lockdown 60 2500 14th March 50 2000 40 1500 30 1000 20 500 10 0 0 30-Jan 06-Feb 13-Feb 20-Feb 27-Feb 15-Feb 17-Feb 19-Feb 21-Feb 23-Feb 25-Feb 27-Feb 29-Feb 05-Mar 12-Mar 19-Mar 02-Mar 04-Mar 06-Mar 08-Mar 10-Mar 12-Mar 14-Mar 16-Mar 18-Mar 20-Mar 22-Mar worldometers.info worldometers.info

Healthcare officials around the world has a bigger role to play when it are baffled by the dearth of data on comes to abrupt jump in number of exactly how far and how fast the new daily cases diagnosed, which virus is spreading. A CNBC article happened for USA. Thus, number claims that lack of data in the U.S. is The CNBC article state of cases reported daily provides an largely the result of delays in rolling that nevertheless, how incomplete picture of the outbreak out widespread testing in the early incomplete, the data at any moment in time since there stages of the outbreak. Yonatan is still important to could be patients who could be sick Grad, a professor of Immunology and the task of controlling but haven’t gone to the doctor or Infectious Diseases at the Harvard the spread of the clinic and thus not recorded. The T.H. Chan School of Public Health illness. Moreover, the CNBC article state that nevertheless, stated “for the U.S., when we see article also stressed how incomplete, the data is still reports of numbers, they are best important to the task of controlling understood not as new cases but on “social distancing” the spread of the illness. Moreover, as identified cases where the true and its advantages on the article also stressed on “social number of cases is unknown.” Thus, flattening of the curve distancing” and its advantages on as testing becomes more widespread of spread of the illness flattening of the curve of spread and the number of confirmed cases from a steep rise in the of the illness from a steep rise in rises, a sharper picture is beginning initial phases. Thus, the initial phases. Thus, “social to emerge of the pace of the spread “social distancing” distancing” helps in controlling of the virus. Moreover, with regards the spread of the illness, claims the helps in controlling the to the sudden abrupt jump in new CNBC article. This will essentially reported cases, Dr. Caitlin Rivers, a spread of the illness, help in delaying the spread of the senior scholar at the Johns Hopkins claims the CNBC virus and thus has better chance to Center for Health Security is of the article. deliver care to all those patients and opinion that “when people get sick overwhelming heath care systems. especially in the context of a new Doctors are of the opinion that outbreak, it takes a while to move reducing the slope over time can them through the detection pipeline have a big impact. The article further and the diagnostic pipeline,” Thus the big jump in new states that countries that have contained the outbreak cases doesn’t mean that all of them got sick on that have taken aggressive measures to test widely and also particular day rather more recently. Besides, cases can be isolate serious patients. For instance, in China and South removed from the total if they are found to be incorrectly Korea the practice of isolating and treating infected diagnosed. Moreover, the availability of the test kits also patients have resulted in limiting the spread of the illness.

Flattening the curve

Source: CNBC

29 INSIGHT April 2020 Total confirmed cases

Source: CNBC

The important factor to contain the virus to conduct However, this feat is difficult to be replicated elsewhere maximum number of tests since a country will have without locking down the borders since there are more positive cases if a test has been conducted in the inherent risks involved. However, when it comes to tests first place. Naturally, countries that have performed undertaken per million population, South Korea doesn’t more tests will tend to have more confirmed cases. In rank at the top even after performing such elaborate other words, there is a positive correlation between tests and extensive number of tests. For India, it’s pointless to performed and cases confirmed. However, that doesn’t look at the per capita numbers, however looking at the necessarily mean that countries that have done more tests conducted vs total confirmed cases, India has fared tests will always have more positive patients. South Korea better among other Asian peers. Although, we must note has been leading all countries with media reports stating the number of new cases reported is still lower in India of testing 12,000 patients a day, it has been compared partly due to the lack of awareness among citizens as well strongly against U.S. which have tested only 11,000 odd as social stigma attached, thus resulting in lower cases patients by the time South Korea tested 274,504 people getting reported and few people getting tested than it since January 3, when it reported its first confirmed should have been ideally. Besides, the mandate for getting case. U.S. wasn’t far behind reporting its first case either, tested also needed to change. Thankfully, on 20th March, however it fell miserably behind the curve in performing Modi government took one small step closer to that by tests due to unavailability of kits. South Korea is one of expanding testing to those hospitalized with respiratory only two countries with large outbreaks, alongside China, distress who did not have known contact with a person to flatten the curve of new infections. What’s noteworthy with foreign travel history. This will broaden the scope is that the country has achieved this remarkable feast of testing and will include patients infected through without China’s draconian restrictions on speech and community transmission (stage three). movement, or economically damaging lockdowns.

Tests conducted vs. Total confirmed cases COVID-19

April 2020 INSIGHT 30 Total COVID-19 tests performed by the country

Per million people: Tests conducted vs. Total confirmed cases COVID-19cases COVID-19

However, given the vastness of back to India, it was necessary for India and the lack of awareness them to get admitted to quarantine among the population, flattening facilities if showed symptoms or be the curve could be a herculean However, given the under ‘self-quarantine’ if there are no task even after considering that vastness of India symptoms. Symptoms needed from India undertakes rigorous and and the lack of 5-14 days to appear while affected extensive level of testing at par with awareness among patients could potentially infect many South Korea. Thus, early lockdown the population, in between the day getting infected was rather necessary for India to flattening the curve and finally showing signs. Majority prevent the rapid spread of the could be a herculean of expatriates failed to adhere to the virus even if military personnel is strict guidelines for ‘self-quarantine’ task even after required to be deployed, since the and thus posing the imminent threat situation is akin to a war. While first considering that of pushing India to stage three or case was reported for India in Jan India undertakes community-based transmission. Given 30, the same recovered and there rigorous and the population density of India, it were no new cases reported until extensive level of would be a matter of time for Covid-19 March. However, given the gravity testing at par with to turn a full-blown epidemic, if India of the situation elsewhere and the South Korea. moved to stage three. Thus, selectively, number of expatriates returning limitations were brought about from

31 INSIGHT April 2020 March 3rd when India banned travel from four countries- and Delhi announced lockdown till 31st march. However, China, South Korea, Italy and Iran. This was followed on 23rd March, the Centre extended the lockdown to by Health ministry issuing guidelines to avoid mass whole of India and that legal action will be taken against gatherings, Manipur closed its border with Myanmar, those violating the measures. While media articles were India also suspended all visas and e-visas granted to rife with expectations that the President could also nationals of France, Germany and Spain on or before 11 invoke Article 352 of the Constitution to order nationwide March. With WHO declaring the virus as global pandemic, emergency, Prime Minister Modi instead declared a India suspends all visas with exceptions of diplomats, UN three week nationwide “complete lockdown” from 24th or international bodies and for employment purposes March midnight aimed at stemming the spread of virus. till 15th April. This was followed by announcements to “Twenty-one days of lock-down is a long time, but it is maintain social distancing till march 31st, closure of important to save you and your family—this is the only museums, schools, colleges. Maharashtra government way we have,” Modi said warning: “This is as good as a was the first to announce lockdown in Mumbai, Nagpur curfew.” The Centre has made a provision of Rs 15,000 and Pune. Rajasthan government followed the same and crore for strengthening country’s health infrastructure eventually on March 22nd, 12 states including Telangana for the treatment of coronavirus-infected patients.

Timeline of COVID-19 interventions in India 3-Mar-20 • India travel ban has been issued on four countries – China, South Korea, Italy and Iran

6-Mar-20 • Union Health Ministry issued advisory to mass gatherings

7-Mar-20 • Agra Mayor urged the Union government to close down historical monuments including Taj Mahal • Kuwait suspends flights to India

9-Mar-20 • Qatar puts India on travel ban list

10-Mar-20 • Manipur closed its international border with Myanmar

11-Mar-20 • India suspends all visas and e-visas granted to nationals of France, Germany and Spain on or before 11 March

12-Mar-20 • WHO declared the COVID-19 outbreak as ‘pandemic’ • India suspends all visas with the exception of those for diplomatic, UN, or international bodies, official and employment purposes until 15 April • India reports 1st death

13-Mar-20 • India reports 2nd death • Several academic institutions (e.g. JNU, IIT, IIM) cancel classes/convocations, some closed hostels

16-Mar-20 • Centre proposes social distancing measures until 31 March • India bans passengers from EU countries, UK and Turkey until 31 March • Central government recommends the closure of educational institutions until 31 March

17-Mar-20 • Taj Mahal will be shut down until 31 March; ASI closes 3,000 monuments and 200 museums • Mandatory quarantine of passengers coming from UAE, Qatar, Oman, Kuwait • India is heading towards a countrywide lockdown mode

18-Mar-20 • India reports third death • PM chairs high-level meeting on COVID-19 situation

19-Mar-20 • Government of India orders no commercial international flight to land in India for one week from 22 March • Prime Minister Narendra Modi calls on for self-imposed citizen curfew on 22 March • Some state governments ban public transportation • India records fourth death

20-Mar-20 • Maharashtra announces lockdown in Mumbai, Nagpur and Pune • JNU orders students to vacate hostels • India records fifth death

April 2020 INSIGHT 32 21-Mar-20 • Maharashtra postpones Class 10 exams, while West Bengal postpones Class 12 exams • Private labs can conduct Covid-19 tests, says Maharashtra government • Rajasthan Government declares lockdown until 31 March • India records sixth death

22-Mar-20 • 12 states including Telangana and Delhi announce lockdown until 31 March Section 144 imposed from 9 pm to 12 am (midnight) in Bangalore city • India observes Janta curfew • Indian Council of Medical Research (ICMR) issues guidelines for private laboratories for coronavirus testing. The maximum cost for testing samples has been put at Rs 4,500 • Railways suspends all train services until 31 March • International commercial passenger flights are not allowed to land in India from today for one week

23-Mar-20 • Centre ordered all states in India to impose lockdown • Legal action will be initiated against people violating lockdown measures

24-Mar-20 • Prime Minister Narendra Modi announced lockdown for 21 days from 12am today • PM announces Rs150bn for people infected with coronavirus • Ayushman Bharat scheme likely to cover COVID-19 test and treatment Source: https://www.pharmaceutical-technology.com/news/india-covid-19-coronavirus-updates-status-by-state/

While India seems to have done advantage of their networks to test remarkably well in controlling the their own people, assuming supplies number of confirmed cases so far, were available. Second, the policy compared to other nations in the The study finds that for testing has barely changed. early phase of the pandemic, there India cannot escape While the central government still is a critical missing component in the exponential takes the lead on tests — claiming the assessment, stated an analysis growth curve and it can do 60,000 of them in a week by COV-IND-19 Study Group, an — private labs can now administer interdisciplinary group of scholars the study predicted the tests, too. The problem is private and data scientists. According to cumulative number testing is not a wide-scale operation them “The number of truly affected of cases in India yet. Thus, the article stated that a cases,” depends on the extent of on March 31 at change to either stance, it’s likely testing, the accuracy of the test 379, on April 15 at India won’t get a firm grasp on the results and, in particular, the extent of the outbreak. Shamika frequency and scale of testing of 4836, and on May Ravi, a health policy expert at the asymptomatic cases who may have 15 at 58643. These Brookings Institution in India stated been exposed. The frequency of are however best in the Vox. Com article that “The testing has been very low in India underestimates, testing protocol has to become more and in fact another article in Vox. while the aggressive; we are testing too few.” com stated that the initial tests The research by COV-IND-19 Study upper credible conducted were “weak” since those Group stated that as India enters didn’t specifically test for Covid-19, limit to these stage three of escalation, it will have but just any strain of coronavirus, corresponding to devastating effects on the already including SARS and MERS. While these case count overstretched healthcare system of more testing is a good thing however estimates are India. As seen for other countries experts are of the view that there are 2507, 28925 and like the US or Italy, COVID-19 two big problems with that optimism, enters gradually and then explodes stated the Vox.com article titled approximately suddenly. “India’s coronavirus lockdown and its 915 thousand, The COV-IND-19 Study Group ran a looming crisis, explained”. First, only respectively. predictive model based on current the central government is currently data from India (till March 16) with authorized to conduct tests. That standard epidemiologic tools of means the state leaders can’t take modeling disease transmission and

33 INSIGHT April 2020 estimating the theoretical number of infected at any number of reported positive cases was very low compared given time and compared projections for India against to its population (likely due to low frequency of testing). US and Italy. The study finds that India cannot escape The authors state that the rate of growth of COVID-19 the exponential growth curve and the study predicted cases in India until March 19 seems to follow the pattern cumulative number of cases in India on March 31 at of US with a lag of around 13 days, just like US numbers 379, on April 15 at 4836, and on May 15 at 58643. These were similar to that of Italy by 11 days in the early stages are however best underestimates, while the upper of the pandemic. However, availability of testing and credible limit to these corresponding to these case count community transmission in India may lead to a spike estimates are 2507, 28925 and approximately 915 thousand, in a single day and that will shift the projection curve respectively. The number of cases has already passed significantly and India can definitely start looking like 1100 and the study was done based on early data when the USA or Italy in terms of case counts.

Cumulative number of COVID-19 infections update on March 19

COVID-19 cumulative confirmed cases by day

April 2020 INSIGHT 34 The fact that cases have doubled of critical care beds and ventilators in just 4 days states that we have in India is not officially known, but entered exponential growth phase, is believed to be sharply lacking. besides, epidemiologists in India With ICU beds estimated at 70,000 already fear that the disease has Based on World nationally, if even one out of every moved to stage three. Based on World Bank figures quoted 10 cases were to require an ICU bed Bank figures quoted by COV-IND-19 by COV-IND-19 by the end of May, India would be Study Group, the number of hospital Study Group, the running at full capacity, if not earlier. beds per 1000 people in India is only Besides, state wise, the situation will 0.7, compared to 6.5 in France, 11.5 in number of hospital differ. For instance, Bihar has just South Korea, 4.2 in China, 3.4 in Italy, beds per 1000 one government hospital bed for 2.9 in the UK, 2.8 in the USA, and 1.5 people in India is every 1 lakh people, while Goa has in Iran. Similarly, doctors per 1000 only 0.7, compared 20. The COV-IND-19 Study Group report also found travel bans and people is 0.76 in India, 3.24 in France, to 6.5 in France, 11.5 4.02 in Italy, 1.81 in China. Critically social distancing would help arrest ill COVID-19 patients (about 5–10% of in South Korea, 4.2 the projected exponential growth of those infected) will require ICU beds, in China, 3.4 in Italy, COVID-19 in India, however there are which constitute between 5 and 10% 2.9 in the UK, 2.8 in not enough statistical evidence with of bed capacity in Indian hospitals the USA, and 1.5 in regards to warm temperatures. The [Yeolekar & Mehta 2008] with very study also advised the government high occupancy rates. The predicted Iran. to continue imposing the bans, to number of cases by May 15 will be drastically increase the number of at 161 per 100,000 (i.e. 2.2 million tests administered daily, to provide cases nationwide) without any protective gear to health care intervention and will drastically reduce to 1 per 100,000 workers and first responders, setup COVID-19 testing (i.e. 13,800 cases nationwide) with the most severe form mobile labs, hospitals and mobile cabins (also called of intervention. Most severe form here is assumed to be ‘Fangchang’) like South Korea and China (Huoshenshan travel ban together with social distancing and lockdown. hospital). Most importantly, the Centre should provide Thus, if the government is successful in implementing livelihood assistance over the quarantine period to those lockdown and social distancing, it can potentially reduce who test positive. This will incentivize people to get tested the number of positive cases to ~14,000 by May 15, else and comply with social isolation protocols, particularly the national healthcare system will be overwhelming. the daily wage earners. Another article in The Print states that while the number

Proportion of population is specifically vulnerable subgroups at potentially high risk of COVID-19 severity risk in India Metric Number† (in millions) Year Source Uninsured 1,104 2014 Prinja et a1. 2019 Population over 65 92.5 2020 (est.) CIA World Factbook Hypertension (men)* 175.7 2015/16 Gupta & Ram 2019 Hypertension (women)* 132.6 2015/16 Gupta & Ram 2019 People with cardiovascular disease* 78.7 2016 Prabhakaran et a1. 2018 Population with COPD* 75.9 2016+ Lancet 2018 Population with asthma* 45.5 2016 Lancet 2018 Develop cancer by age 75 (men)* 70.3 2018 NIVPR Develop cancer by age 75 (women)* 62.3 2018 NIVPR Population with diabetes (adult) 122.8 - IDF Access to impatient department facilities*** 731.4 2012 IMS Institute 2013 Access to outpatient department*** 1,104 2012 IMS Institute 2013 † based on 2020 est. of 1.38 billion from UN Department of Economic and Social Welfare * age-standardized’ ** risk; *** defined as within 5-kilometer distance of home or work Abbrev.: COPD, chronic obstructive pulmonary disease; IDF, International Diabetes Federation; NICPR, National Institute of Cancer Prevention and Research

Source: Predictions and role of interventions for COVID-19 outbreak in India, COV-IND-19 Study Group

35 INSIGHT April 2020 India’s economy is poised to shrink next quarter and to be severely impacted (which is largely consumption). full-year expansion set to suffer markedly, as a three- However, the downgrades will depend on the extent of week nationwide lockdown starting Wednesday brings the lockdown. Overall a global recession is imminent, only activity to a standstill. According to Prakash Sakpal, unknown is the extent and length, which will depend on an economist at ING in Singapore, with two of the the easing of lockdown in all nations. three-week shutdown falling in April, gross domestic The world can learn a lot from China itself, as the country product growth in the quarter to June could contract has shown how to stop the virus in its tracks with the about 5%. The economy, which expanded 4.7% in the lockdown of Wuhan and simultaneous stimulus measures quarter ended December, hasn’t seen a contraction in at for the economy – from cheaper credit to fiscal measures. least two decades. The major drag for the GDP growth While the country may still slide into recession but has will be massive decline in private consumption which the highest chances of bouncing back soon. India did the accounts for 57% of GDP. Mr. Sakpal is of the opinion that first part right (with the lockdowns in place), nevertheless “With all non-essential consumption dropping virtually it was needed to be supported with policy initiatives to to zero for a week in the current support growth - either through quarter means year-on-year GDP interest rate reduction or easing of growth plunges to just about 1%,” fiscal purse strings or both. Due to This has prompted ING to cut its transport curbs, supply chains have growth forecast for FY21 to 0.5% been thrown out of the gears and from 4.8% earlier. Deutsche Bank’s The economy, thus food scarcity and hence spiking Chief India Economist Kaushik Das which expanded inflation is an inevitable outcome. expects real GDP growth to collapse 4.7% in the quarter One of the biggest fallouts of the in April-June to a negative print of ended December, current shutdown is concerns of 5% year-on-year or more, going by hasn’t seen a massive job losses. This would have China’s experience. Mr. Das further a further adverse impact on the believes that it will take time for contraction in at already muted demand. The MSME the economy to get back to pre- least two decades. sector needed immediate support lockdown stage and thus negative The major drag for since 87% of India’s employment is in real GDP growth for July-September the GDP growth informal sector. Economists urged still remains a possibility, which will be massive government to loosen the purse even would be assessed later. Assessments if the fiscal deficit scales higher to 5% by other economists are less severe, decline in private of GDP. The government would be like Rahul Bajoria, a senior economist consumption which supported with higher income from at Barclays Plc in Mumbai has revised accounts for 57% of increase in excise duties on petrol real GDP growth for FY21 at 3.5% GDP. and diesel by Rs 18/ltr and Rs 12/ltr from 5.2% earlier. Majority of the respectively (together with Rs 3/ltr economists expect 60% of the GDP

April 2020 INSIGHT 36 hikes a few days ago). On 26th March, Finance minister Surely, the government will provide stimulus packages as promised, came up with a stimulus plan (Garib Kalyan in a staggered manner, as stated in the Economic Times Package) for the poor providing Rs 1,75,000 crore to help article considering the stimulus is ~0.8% of GDP. In them fight the battle against Corona Virus, equivalent to comparison, $2 trillion provide to boost US economy 0.8% of GDP. Some of the highlights from the package are: is ~10% of US GDP. RBI also did its part and held (a) Rs 50 lakh medical cover per person for the extraordinary meeting of monetary policy committee government’s sanitation workers, ASHA workers, doctors, (MPC) between March 24-27 and slashed repo rates by 75 paramedics, others, if they need it. The scheme is to bps to 4.4% and reverse repo by 90 bps to 4%. Reverse repo benefit 20 lakh such workers. was cut more than repo in order to disincentivize banks to hoard money and rather lend. Besides, Cash reserve ratio (b) Under Pradhanmantri Garib Kalyan Yojana, 5 kg rice (CRR) was also cut by 100 bps to 3% which again would or wheat will be given for free for the next three months. release Rs 1.37 lakh cr into market. Liquidity under MSF Besides, 1 kg pulse available regionally will also be given for free to 80 crore people raised to 3% of deposits from 2%, which would release liquidity of another Rs 1.37 lakh Cr. These measures (c) Each farmer would be given Rs 2000 during the month together with targeted long-term repo operations of April 2020. It would cover 8.7 crore farmers (TLTRO) of up to Rs 1 trillion would infuse liquidity of Rs (d) Senior citizens, widows, and Divyangs to get one-time 3.74 lakh cr. All Banks, lending institutions may allow a additional payment of Rs 1000 in two installments for the 3-month moratorium on all loans and lending institutions, next three months. This is expected to benefit 3 crore such banks, allowed to defer interest on working capital people under Direct Benefit Transfer repayments by 3 months. Moreover, moratorium on term (e) 20 crore woman Jan Dhan account holders will get an loans, deferment of interest payment will not result in ex-gratia amount of Rs 500 per month for the next three asset classification downgrade. These announcements months, to fight coronavirus were hailed from economists as well as policy makers as (f) MNREGA wages to be hiked to Rs202 from Rs182. these were the need of the hour. The US Fed has slashed Will benefit each person by Rs2,000 Will benefit 5cr interest rates to near zero, pledged more than US$ 700bn households. in asset purchase and backstopped foreign authorities with the offer of cheap dollar financing. ECB followed (g) To provide an adequate supply of cooking gas, for with a US$ 850bn stimulus plan to spur systemic liquidity. the next three months 8.3 crore BPL family will get free Globally fiscal as well as monetary stimulus packages will cylinders flood equity markets as was the case (h) Collateral free loans doubled to Rs in GFC back in 2008. However, 2020 20 lakhs for Self Help Group women, Coronavirus led crisis and 2008 GFC to help 7 crore women. Earlier the are in different context, this time it’s limit used to Rs 10 lakh. a healthcare catastrophe morphed (i) The government will pay the EPF Globally fiscal as into a financial crisis. Although, the contribution, both of the employer well as monetary stimulus packages offered might take and employee, ie. 24% for the next stimulus packages its time to get reflected and in the three months. This is for all those will flood equity meantime the stock markets may run establishments which have upto markets as was the its course, although it’s still uncertain 100 employees, out of which 90% and a lot depends on how long the case in GFC back employees draw less than Rs 15,000 pandemic lasts. Nevertheless, it takes per month in 2008. However, time to restart the economy, like a (j) EPFO schemes regulation will be 2020 Coronavirus Bloombergquint article stated that amended to allow the non-refundable led crisis and 2008 while expectations were running high advance of 75% of the standing GFC are in different back in October 2008, with Federal amount credit to the user or three- context, this time Reserve interest rates hurtling month wages, whichever is lower. toward zero and Congress passing a This will benefit 4.8 crore workers it’s a healthcare $700 billion bailout package for the (k) Rs 31,000 crore is available in the catastrophe economy. However, none of these Building and other Construction morphed into a helped for the stock markets, right Workers’ Fund (BOCW). These can financial crisis. away, and shares fell for another 4 be used for 3.5 crore construction months plunging 40% before they workers rebounded.

37 INSIGHT April 2020 START-UP CORNER At Ashika Capital, we are extremely passionate about fostering symbiotic relationships that are aimed at building and sustaining high-growth founder led businesses. We strongly believe that financial capital is the first stepping stone to build a scalable, sustainable and impactful business. Therefore, our endeavour is to identify great entrepreneurs in pursuit of building businesses that carry magnanimous investment potential. Here is an INSIGHT into Mr. Mihir Mehta businesses that we have worked/working with –

Autobrix Based out of Bangalore, AutoBrix formerly CleanseCar is an app based end to end car cleansing service provider with features like real-time car wash status, one-click renewal, and easy online payment and rescheduling processes. The company is currently operational across Bengaluru, Chennai, Hyderabad, Mumbai, Pune, Delhi, and Gurgaon. Serving more than 33,000 cars on a daily basis, the company is currently achieving a monthly ARR of 2 Cr. Backed by the likes of Dr. Apoorv Ranjan Sharma (Founder, Venture Catalysts), Lalit Agarwal (Head of Venture Capital at a Sovereign Wealth Fund), Bobby Reddy (Indus Ventures), among others, the company is currently looking to raise USD 10 mn to expand into tier 2 cities across the country.

The Chocolate Spoon Company A one of its kind investment proposition in a multi-format, multi-brand F&B business, conceptualized in 2013 as passion project and commercialized in 2017, this award winning business today boasts of four+ major category leading brands across the Restaurant, QSR and Cloud Kitchen segments. Armed with a robust omni-channel play, employing 350+ persons, the business has shown robust growth at a CAGR of 53% over the last 3 years and clocks close to 1,000 orders per day. Backed by ever growing customer love, this venture aspires to become India’s largest multi-cuisine food services play over the next decade. The business is looking to raise USD 7mn for its next phase of expansion.

Chai Break An interesting investment proposition in ALP Retail Pvt. Limited that operates two brands - Chai Break & Publik (launched in Nov 2019). About ALP Retail: Launched in the year 2011, Chai Break, a comfort, home-style cafe is known for disrupting Urban, Tier II and Tier III cities of Eastern India with its Multi- Cuisine menu serving- North Indian, Chinese and Italian at an AOV of INR 500. The company has successfully cracked the code for Tier II and Tier III cities which has helped them to achieve positive PAT Margin, since inception, clocking Revenue as high as INR 43 Lakhs per month from one single Chai Break outlet. The company maintains an attractive mix of online & offline sales i.e., 10% and 90% respectively. Not just that, the company also enjoys strong Gross Margin of ~ 68% and is currently all set to clock Revenue of INR 35Cr.+ for FY20, achieving a CAGR of ~ 40% over the last 3 years. Led by passionate promoters with 16+ years of experience in the F&B Space and backed early on by Venture Catalyst, the company has successfully marked its presence across Eastern India with its 21 outlets. With a focus to disrupt and penetrate deeper into the Tier II and Tier III cities across the Eastern India, the company is currently looking to raise USD 3 mn in this round.

These are the top three business opportunities that interested stakeholders can pursue from an investment standpoint. If you are interested to know more about these companies from the perspective of business operations, investment thesis, exit opportunities and more, please drop in a line to us at [email protected].

April 2020 INSIGHT 38 SECTOR OUTLOOK

FMCG DEMAND RECOVERY TO BE GRADUAL

rolonged economic downturn has adversely and zone factors driven by manufacturers, coupled with impacted the demand consolidation of smaller players have of India’s fast-moving been instrumental in the slowdown. consumer goods (FMCG) Further, lower pace of innovation has Pcompanies, resulted in weak volume limited consumer demand pick-up. growth for leading FMCG companies Rural demand is The Indian FMCG sector has been in last five quarters. 2019 has been a on a slow growth trajectory since tough year for the FMCG industry, expected to witness the past four quarters since Q4 FY19. which slid to a three-year low growth a gradual demand The initial signs of a slowdown were of 9.7% largely due to a steep contrac- pick up on the noticed by larger players of the tion in rural market. In CY 2018, the back of favorable sector when they witnessed softening industry clocked a growth of 13.5%. of demand for such goods, especially From a high of 13.6% growth in the monsoons, from the rural segment. Rural India, first quarter of 2019, the slowdown expectation of tax which usually is expected about 30% has deepened to 10.3% in the second rate cuts including higher growth rates than that of quarter and just 7.9% in the third GST and personal urban India, is currently displaying quarter. In the last quarter of CY19, tepid growth rate. However, rural growth rate slumped further to 7.3%. income tax which demand is expected to witness a In Q4 of 2018, the sector had grown announced in Union gradual demand pick up on the back at more than double the pace at 15.7%. Budget FY21 are of favorable monsoons, expecta- It had peaked in the third quarter in favor of rural tion of tax rate cuts including GST of 2018 (July-September) when the and personal income tax which growth rate was 16.2%. A mix of economy. announced in Union Budget FY21 macroeconomic factors, channel are in favor of rural economy. As

39 INSIGHT April 2020 per CRISIL, rural FMCG revenue will recover to 11-12% in The share of premium products remain low FY21 from lows of about 8-9% in FY20, largely driven by in the Indian FMCG market better agriculture GDP growth. Further, higher spending by the government on rural infrastructure could benefit rural incomes and, thereby, demand for FMCG products. Moreover, there has been sudden surge in sales of staples, daily necessities and personal hygiene products in last couple of weeks as panic buying took hold across India amid the fear of closures as Covid-19 case rises. The demand for hand sanitizer, hand wash, soaps and Source: Industry report other personal hygiene products are on rise and demand Rising incomes and expansion of the middle class and surpass the supply. In order to meet the demand, Indian high-income segment FMCG companies are expanding their capacity and few have planned to enter into the hand sanitizer segment to cash in the growing demand.

Premiumization to drive growth Premiumization is getting prominence day by day for Indian FMCG players as motivation behind consumers’ purchasing decision is changing.People are increasingly looking for products that are slightly better and companies realize they are willing topay a premium for them. From company’s perspective, the goal of premiumization is to increase perceivedvalue of the product and will- ingness to pay at the lowest possible cost to increase Source: Industry report margins on every unit sold. However, always there is a question that in a market like India, where there is still Key FMCG segments penetration in India huge scope for volume growth i.e. throughpenetration and by improving per capita consumption, is there a need to drive premiumization. In any market,whether volume is growing or not, a certain section of people are always increasingly looking for products thatare slightly better, through which they can show they are moving ahead in life. Rising income and growing aspirations on account of increasing disposable income are the factors that are driving premiumization.For the affluent, it is an Source: Industry report emotional need to feel exclusive as theymove from premium to super Rising modern channel premium products whereas for upper of distribution to support middle income class it is the aspira- growth tion andrewarding self-experience Ecommerce and Ecommerce and modern trade that makes one upgrade. Penetration modern trade channel, channel, which are considered as of internet, leading to exposure to which are considered the modern channels of distribution globalculture, along with higher as the modern channels compared to general trade, are incomes has played an important of distribution witnessing sharp growth across role in building aspirations, leading compared to general categories. These modern channels to higherconsumption of premium trade, are witnessing are acting as a testing ground for products. Higher mix of premium sharp growth across many FMCG companies for their new consumer products lead to better categories. These product launches. Companies get key stickiness to the category, thus better modern channels are consumer insights about their prod- pricing power and eventually better acting as a testing ucts through in-store samplings and margins. Thus, FMCG companies ground for many through online data, and an opportu- are looking to focus at the premium FMCG companies for nity to make course corrections. Even level due to high competition or their new product for hinterlands, there are technol- strong market leader at the base level launches. ogy-enabled distribution platforms where margins are comparatively low particularly like StoreKing, which will compared to premium products. help hinterland to get more access

April 2020 INSIGHT 40 to variety of products with faster prices, since Indian government stop replenishment cycle. Many new importing palm oil from Malaysia. categories or premium variants are Malaysian palm oil prices on a YoY launched by consumer companies During Q3FY20, basis remain high (+39.2% YoY and online first before it goes to tradi- there is visible 12.2% QoQ) but the prices have come off from recent highs made in early tional channel. India’s FMCG industry inflation in food and Jan’2020 (down 19% from the recent is now making its presence felt in the oil commodities, peak). In the Agri basket, Wheat, e-commerce channel, appealing to while rest of FMCG Barley, Dairy, Sugar and Edible Oil consumers’ need for convenience and commodity basket had continue to see inflation on a YoY in sync with increasing smartphone been fairly benign. basis during the current quarter. and internet penetration. As per the Crude and currency However, prices of wheat and barley report of market researcher Nielsen, continue to be volatile have come down from January 2020 sales of FMCG on e-commerce are due to the geopolitical levels and with the expectation of a expected to touch USD 4 billion by imperatives, bumper wheat crop, wheat prices are 2022, contributing 5% to overall coronavirus expected to be benign going forward sales of packaged consumer goods pandemic, global as well. Dairy prices continue to sold in the country from the current remain inflationary for the quarter economic cycles and but milk production is expected to contribution of 2% or USD 1.2 billion trade dynamics. pick up in FY21 given the abundant to the overall sales of FMCG. The water in reservoirs and expectations growth will be on the back of growing of a normal monsoon, which should smartphone penetration, increased arrest any further rise in milk pro- data consumption and efforts by large companies to make curement and retail prices. Sugar price during the quarter their products available online. While, on other hand the remain stable owing to decrease in sugar production and share of traditional trade is expected to shrink during that expected lower output for the ongoing sugar year 2019-20. period. In preliminary research on the market, Nielsen Soyabean refined edible oil (Mumbai) prices are up 15.7% noted that online shoppers in the country’s top metros YoY and 8.4% QoQ, though price of edible oil has corrected were showing higher instances of online shopping making from the peak in the last couple of months due to poor 6% of all FMCG purchases through e-commerce. Amongst global demand. The escalation in commodity prices such these, foods are the biggest contributor with 44%, followed as edible oil, wheat flour and sugar may lead to price increases in the biscuits space with manufacturers likely by personal care (40%) and household care (13%). Thus, to take 3-6% price hike. Many FMCG players are contem- e-commerce is currently being used as an additional plating of hiking the price of their products due to rise channel and not cannibalizing other channels as buying in their raw material prices. But looking at current grave behavior differs across channels. situation due to rapid rise of coronavirus infected cases across the country, how much rationale is the price hike is Raw material inflation witnessed during a question. Q3FY20 During Q3FY20, there is visible inflation in food and oil commodities, while rest of FMCG commodity basket had Malaysian Palm oil price trend been fairly benign. Crude and currency continue to be volatile due to the geopolitical imperatives, coronavirus pandemic, global economic cycles and trade dynamics. Crude oil price declined significantly in last one and half month, as Saudi Arabia, the world’s top exporter, launched a price war and shrink in the demand for oil due to world wide lockdown on account of coronavirus pandemic. The price war followed the implosion of an alliance between the OPEC cartel, led by Saudi Arabia, Source: Bloomberg and Russia. The coronavirus has undermined energy demand worldwide, but especially in China, which is now Wheat price trend the number one importer of crude oil, guzzling roughly 10 million barrels a day. Factories have been idled and thousands of flights canceled around the world as the coronavirus outbreak that began in Wuhan, China, has become a global pandemic. The International Energy Agency expects demand will contract in 2020 for the first time since the recession in 2009 that followed the global financial crisis. Palm oil which is one of the key essential ingredients for soap manufacturers witnessed volatility in Source: Bloomberg

41 INSIGHT April 2020 Edible oil price trend with overall reservoir storage levels are much higher compared to last year, which bode well for sowing of the Rabi season crop. During Q3FY20, volume growth of the most FMCG companies remained under pressure. FMCG industry’s growth which was stable at high single-digits in Q2FY20, moderated to low single digits in Q3FY20. Consumer staples’ volume growth dented in Q3FY20 on account of overall consumption slowdown (average volume growth down to 1.4% YoY from 4.7% YoY in Q2FY20). Source: Bloomberg Rural growth continues to lag urban growth, staying at 0.5x urban growth however bigger companies continue to Sugar price trend do well on the back of their distribution strength. Further, number of new launches has gone down in the current environment. Additionally, liquidity crisis continues to dent liquidity with wholesalers and retailers, thereby exerting pressure on the trade pipeline. Consumer companies highlighted continued demand moderation particularly in the rural markets due to unfavorable sentiment and liquidity issues in the trade channel. However, management of FMCG companies are building hopes on Source: Bloomberg demand revival in another two Mentha price trend to three quarters banking on some of the initiatives undertaken by The recent the government performance of the to improve FMCG companies the liquidity environment shows that weakness in domestic still persists amid Source: Bloomberg markets and shaky consumer better rabbi demand, channel Growth pangs for FMCG companies crop production, The recent performance of the FMCG companies shows though recent liquidity issues and that weakness still persists amid shaky consumer countrywide erratic monsoon in demand, channel liquidity issues and erratic monsoon in lockdown due most parts of the most parts of the country. The slowdown, which became to coronavirus country. evident from the 4QFY19, is expected to persist till the end outbreak could of FY20 now with no visible signs of any uptick. Overall defer the growth monsoon in FY20 was above the long period average further.

April 2020 INSIGHT 42 FMCG Players Quarterly Volume Growth (%) Companies Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Asian paints 7.5 10.5 12.0 11.0 24.0 10.0 20.0 16.0 11.0 Bajaj Consumer 5.2 5.9 8.7 0.1 7.0 5.5 4.7 1.3 (8.6) Berger Paints 8.0 13.0 15.0 15.0 19.0 10.5 12.0 13.0 10.0 Britannia 13.0 13.0 13.0 12.0 7.0 7.0 3.0 3.0 3.0 Colgate 12.0 4.0 3.0 5.5 7.0 5.0 6.0 4.0 2.3 Dabur 13.0 7.7 21.0 8.1 12.4 4.3 9.6 4.8 5.6 Emami (Domestic) 6.0 9.0 18.0 (4.0) 3.5 2.0 0.1 1.0 (2.0) Godrej Consumer (Domestic) 18.0 6.0 14.0 5.0 1.0 1.0 5.0 7.0 7.0 GSK Consumer 17.0 8.0 12.8 13.7 9.6 6.5 5.4 3.6 (1.0) Hindustan Unilever 11.0 11.0 12.0 10.0 10.0 7.0 5.0 5.0 5.0 ITC (Cigarettes) (5.0) (2.5) 1.5 6.0 7.5 7.5 3.0 2.5 2.0 Jubilant (Dominos) 17.8 26.5 26.5 20.5 14.6 6.0 4.1 4.9 5.9 Jyoti Labs 11.5 11.4 18.5 4.4 6.1 6.0 5.6 8.3 (5.6) Kansai Nerolac 14.5 14.5 15.0 9.0 15.0 4.0 10.0 1.0 (2.5) Marico – Domestic 9.4 1.0 12.4 6.0 5.0 8.0 6.0 1.0 (1.0) Marico – Parachute 15.0 (5.0) 9.0 8.0 9.0 6.0 9.0 (1.0) (2.0) Marico – Soffola 0.1 (1.0) 10.0 5.0 2.0 18.0 3.0 1.0 11.0 Marico - Value added hair 8.0 11.0 15.0 5.0 7.0 1.0 7.0 - (7.0) oils Nestle India 18.0 6.9 11.5 15.3 11.5 9.3 12.3 9.0 5.5 Pidilite 23.0 14.0 20.2 11.0 13.0 4.0 6.3 0.6 3.0 United breweries 12.0 24.0 12.0 17.0 16.0 7.5 5.0 6.0 (7.0) United Spirits - volume (14.2) (1.4) 1.1 - 3.8 1.0 6.0 1.0 (1.8) growth Source: company

Sudden demand surge for slowing sales in the past 2 months in FMCG companies due to Q4FY20. FMCG companies including coronavirus outbreak HUL, ITC, Parle, Amul, and Godrej Consumers have ramped up their Consumer goods companies are FMCG companies production after over 4 quarters to ramping up production to meet the including HUL, ITC, steep rise in demand as people are ensure there are no shortages amid rushing to stock up essentials and Parle, Amul, and panic buying. In order to combat groceries in bulk amid of lockdown Godrej Consumers with the coronavirus and to stop the in entire country for 21 days due to have ramped up community spread, Prime Minister the coronavirus outbreak as several their production announced entire country lockdown for 21 days and that makes many states imposed stringent curbs on after over 4 quarters movement. This marks a reversal of manufacturing companies to shut last year’s fortunes when companies to ensure there are their units to curb the spread of cut production because of weak no shortages amid coronavirus. However, manufac- consumption across segments. panic buying. turers of groceries and essential However, as per companies’ state- products, especially in the food, ments, this surge in demand will be hygiene and pharmaceutical seg- short lived and will not make up for ments, are exempted but will have to stagger shifts besides adopting other

43 INSIGHT April 2020 safety protocols. FMCG companies are both ramping up January high, Nifty corrected more than 30%, with one their production and also going for third-party manufac- of worst affected equity market in the world and most turers to meet the demand. Consumer goods sales slowed declines since 2008 economic crisis. Before Coronavirus sharply in January and February in 2020 from the year crisis, most of the FMCG companies including Nestle, earlier with expansion even decelerating for categories HUL, Britannia, Colgate, Dabur, Marico and Emami such as soaps, shampoo and skincare products. All the were expensively valued, though all these companies FMCG companies are assuring that they are not out of have strong moat in their business, ability to generate stocks and they are well prepared to meet the sudden consistent healthy cash flows and have established brand spike in demand. For the past two months, the market name. The current market correction has given an entry growth halved for most FMCG companies and such point for investors to invest in these gems and become a bulk buying will still not compensate and bring up the part of India’s long term growth story. These consumption growth level to the year ago number. As per the FMCG oriented companies have strong business moats, high companies post the crisis, they expect demand to be lull pedigree of management and healthy financials and are in the following months. Such slow growth in January the best proxy of India’s strong consumption story. & February witnessed by FMCG companies despite the The current health crisis due to coronavirus outbreak is low base of 2019, when the market expanded at one of a short term pain which is expected to be to pick-out in the slowest rates in a decade, led to a fall in production. next 3 month, though it will adversely impact country’s To stop the hoarding, many retailers have posted notices economic growth in near term. All global banks and assuring the buyers those stocks of groceries and other developed nations’ governments have been taking ade- essential items are adequate, asking them not to hoard quate measures to provide enough goods and shop only for their need. liquidity in the economy and to avoid However, distribution of products any type of global recession. Indian is a key area for concern as locked government has also assured to down has stopped the movement of provide required stimulus package products between states. Though The sharp in order to avoid any type of deep government has exempted groceries correction in the economic slowdown. The huge and other food products from lock equity market consumption story in India still down and allowed goods train and amid rapid spread remain intact, only there is minor trucks movement across the country blip due to coronavirus outbreak, to ensure uninterrupted supply of of corona virus which is expected to be stabilized food products among the people. across the globe in next couple of months and again has made many the Indian economy will be back on Compelling valuations post FMCG companies’ steep correction in prices growth track. Thus, Indian FMCG valuation sector has strong visibility of longer The sharp correction in the equity term growth opportunity which is market amid rapid spread of corona compelling at volume led, low capital intensity, high virus across the globe has made current level. cash generation, strong return ratios many FMCG companies’ valuation and good management quality. compelling at current level. From

April 2020 INSIGHT 44 MARKET MAYHEM ANALYSIS

MARKET MAYHEM ANATOMY OF CRISIS

The CY20 has been full of action so far in the first 2 months, with each event having significant impact on the India’s anticipated economic rebound in FY20. These events include the mixed set of 3QFY20 corporate earnings, announcement of Union Budget for FY21, US Presidents’s visit to India, the ongoing social unrest over Citizenship bill and on top of all this, the outbreak and accelerated spread of Corona virus which is threatning the global growth prospects.

45 INSIGHT April 2020 Stock markets in India and the world have no material impact in boosting over are in a tizzy as the Coronavirus consumer sentiment or driving outbreak tightens its grip day by business investments. day. Unfortunately, the outbreak has The Coronavirus is turning into a come at a time when major global global pandemic or not is difficult From an economic economies have already been slowing to guess, though it is spreading perspective, down due to US-China trade tariff rapidly infecting global economies the outbreak of war and other geopolitical issues and financial markets. At the hurting business sentiments. To Coronavirus has begining of March 2020 the virus is top it all, the friction between oil brought down crude spreading rapidly outside of China, producing giants Saudi Arabia and oil prices by 30% in with a spike in reported cases in Russia threaten to bring in additional South Korea, Italy, Iran and new the last couple of disruptions in the global economy. cases in South America. India too months, which is The markets are going through a reported ~730 number of cases as a huge positive for turbulent time as WHO has declared of March 26, 2020. As of March 26, Indian economy in coronavirus as global pandemic the virus infected a total of ~533,000 terms of fiscal deficit which has triggered a risk-off worldwide and has killed over and inflationary sentiment, however interest rate cuts 24,000 people. The Governments by Central banks globally is likely are battling to control the contagion pressures. Moreover, to support economic growth and by restricting travel and isolating central banks across maintain positive investor sentiment. patients. the major regions In order to protect the US economy After a seeming recovery seen have cut interest from the impact of Corona virus the post the Union Budget 2020, the rates and looking at US Fed announced an unscheduled 50 benchmark indices had a free-fall, infusing more cash bps interest rate cut, however fears of a prolonged slowdown restricted with the Nifty alone losing nearly to support their the positive investor sentiments. In 30% since February 2020. Indian economy. line with US Fed and other central markets aren’t falling alone. The banks, the RBI has also announced global environment has turned an unscheduled 75 bps interest rate quite volatile given the rising risk cut along with proactive measures of a global economic slowdown. aimed at liquidity support and Since February 2020, key global down crude oil prices by 30% in the transmission. However given current indices such as Dow, FTSE, CAC 40 last couple of months, which is a uncertainty and fears caused by virus and DAX decline by -25%, -21.9%, huge positive for Indian economy in it is expected that these rate cuts to -23.7%, and -23.9% respectively. While terms of fiscal deficit and inflationary Asian markets such as Shanghai pressures. Moreover, central banks and Nikkei lost around -6.5% and across the major regions have cut 15.8%.The cumulative impact of the interest rates and looking at infusing Coronavirus and the subsequent more cash to support their economy. After a seeming disruption has wiping off almost $23 trillion in investor wealth within a Comparing India’s recovery seen post period of few weeks. In India, the lockdown stage with other the Union Budget situation is additionally worrisome. nations 2020, the benchmark The contagion of financial duress As highlighted above, the number of indices had a free- threatens to spread across the Indian cases in India stands at ~730 (as on fall, with the Nifty financial system. Post the IL&FS 26Mar’20), and these have- i) nearly alone losing nearly meltdown and PMC Bank fiasco, the doubled every 5 days, and ii) have 30% since February banking regulator has stepped in to been growing on a daily basis by 2020. Indian save one of the large private sector ~30%. India has almost nationwide banks from going bust. However, lockdown from 23Mar’20. Now markets aren’t falling there is always an opportunity in alone. The global the question is whether India has adversity. In the past, it has been announced a lockdown too early environment has seen that such global outbreaks have on as it could result in prolonged turned quite volatile been controlled in a few months adverse economic implications. We given the rising risk and the correction was a great note that nations like China and opportunity to invest. of a global economic Iran announced lockdowns when slowdown. From an economic perspective, the their “announced” daily cases were outbreak of Coronavirus has brought increasing at the rate of 40%+.

April 2020 INSIGHT 46 Post the lockdown (i.e. cases until 3.3% in 2020, up from 2.9% in 2019. 20Mar’20), these nations successfully However, following the continued managed to bring this growth spread of the Covid-19 Virus and the significantly down. Other nations recent deaths reported in Italy and such as US, Italy, France and Spain Global treasury South Korea, the IMF has recently too announced a lockdown only yields have eased in cut its 2020 global economic growth recently in March when the number recent weeks, with forecast by 0.1%. On China, it expects of cases were expanding ~15-22% the US 30-year bond economic growth in 2020 to decline daily. Consequently, the growth has hitting an all-time to 5.6% this year from earlier forecast increased post the lockdown which low, as a combination of 6.0%. The IMF’s World Economic might have to do with the higher of Covid-19 virus Outlook (WEO) Update For India, IMF incidence of testing or actual cases fears and weak U.S. has revised 2020 growth forecast to being reported as it happened in business activity data 5.8%, down 0.9% from the previous Hubei. It is questionable where India drove a flight into estimate. is, and whether it could be successful traditional safe haven to curb the number of cases early on. Bond yields dip on assets. concerns of Covid-19 virus Global markets had worse on global economy month since GFC Global treasury yields have eased in Global markets had their one of the Mar) recent weeks, with the US 30-year worst month since global financial bond hitting an all-time low, as a 14% rally in 6 days (7th Apr - 2nd crisis (GFC). Most asset classes combination of Covid-19 virus fears May) corrected sharply. Equities, bonds, and weak U.S. business activity data precious metals, crypto currencies, 10% rally in 7 days (2nd July - 11th drove a flight into traditional safe commodities all fell in unison. USD July) haven assets. Both the 10-year and stood out, perhaps as the only safe 20% rally in 6 days (16th Apr - 24th 30-year yields are down nearly 50 haven. Volatility jumped to highest July) basis points so far this year. In UK since GFC. Stimulus measures to 12% rally in 10 days (29th July - 12th and Germany, government bond combat the impact of coronavirus Aug) yields touched their lowest level in appeared soothing the nerves several months, as investors shifted 13% rally in 2 days (18th Sep - 22nd towards the end of the week. out of riskier assets following news Sep) of the new Covid-19 virus’s spread in Despite all these rallies, the market India Bear market rallies in Italy. The yield on Germany’s 10-year fell 61% in 198 days 2008-2009 bond fell to -0.5%, its lowest in more 25% rally in 9 days (22nd Jan-4th than four months and below 0% for Feb) Global economic outlook vulnerable to spread of the first time since October. After 12% rally in 6 days (11th Feb - 19th Covid-19 virus RBI cut interest rate, India’s 10-year Feb) bond yield fell to hit a ten-year low of In its January forecast, the IMF had 5.983%. 11% rally in 6 days (18th Mar - 28th pegged global growth estimate at

Nifty through past crisis period 14000 COVID 19 Pandemic Price Erosion: -38% 12000

10000

8000 Global Financial Crisis 2011 European Debt Crisis Price Erosion: -61% Price Erosion: -28% 2015-16 Global market sell-off 6000 Price Erosion: -23% Asian Financial Crisis, 4000 Price Erosion: -33% Dot-com Bubble, 2000 Price Erosion: -51% May 2004 Market Crash Price Erosion: -30% 0 Jul-01 Jul-08 Jul-15 Oct-99 Oct-06 Oct-13 Apr-03 Apr-10 Apr-17 Feb-02 Feb-09 Feb-16 Jan-98 Jan-05 Jan-12 Jan-19 Jun-11 Jun-18 Sep-02 Sep-09 Sep-16 Dec-00 Dec-07 Aug-98 Aug-05 Aug-12 Aug-19 Mar-99 Mar-06 Mar-13 Nov-03 Mar-20 Nov-10 Nov-17 Jun-04 Dec-14 May-00 May-07 May-14 Source: Bloomberg, Ashika Research Note: As on March 26, 2020

47 INSIGHT April 2020 Market respond after epidemic breakout subside Virus Outbreak Duration of Return epidemic Nifty during epidemic 6M post 12M post SARS Jan-03 to Mar-03 -10.1% 44.5% 83.4% Avian Influenza Jan-04 to Aug-04 -12.3% 28.8% 50.3% Ebola Dec-13 to Feb-14 -1.1% 28.3% 39.0% Zika Nov-15 to Feb-16 -13.4% 19.7% 24.1% Covid-19 Jan-20 - ? Source: Bloomberg, News Articles, Ashika Research Note: As on March 27, 2020

Navigation through Market Peak and Though Peak Trough Peak to Return Trough 1M 3M 6M 12M Apr 98-Nov 98 21-Apr-98 21-Oct-98 -33% 9% 18% 43% 73% Feb 00-May 00 11-Feb-00 23-May-00 -28% 22% 12% 1% -4% Feb 01-Sep 01 15-Feb-01 21-Sep-01 -41% 14% 24% 35% 14% Jan 04-May 04 14-Jan-04 17-May-04 -30% 8% 15% 32% 44% May06-June 06 05-Oct-06 14-06-2006 -30% 19% 29% 46% 58% Jan 08-Oct 08 08-Jan-08 27-Oct-08 -61% 9% 7% 38% 92% Nov 10-Dec 11 05-Nov-10 20-Dec-11 -28% 10% 16% 13% 28% May- Aug 2013 17-May-13 28-Aug-13 -15% 10% 15% 17% 51% Mar 15 to Feb 16 03-Mar-15 25-Feb-16 -23% 11% 13% 22% 26% Aug 18 to Oct 18 28-Aug-18 26-Oct-18 -15% 5% 8% 17% 15% Jan 20 to Mar 20 14-Jan-20 23-Mar-20 -38% ? ? ? ? Source: Bloomberg, Ashika Research

Worst weekly corrections in history of Nifty Sectoral index price performance since start of February 0.0% 5% -2.0% -5% -4.0%

-6.0% -15%

-8.0% -25% -10.0% -13.9%

-16.8% -17.3%

-8.0%

-8.1%

-20.2% -8.4%

-8.6% -12.0% -8.7%

-9.4% -35% -9.5%

-9.8% -9.8% -25.1%

-27.3%

-14.0% -10.1% -29.0% -10.6%

-11.0% -11.2% -31.5%

-32.0% -16.0% -45% -12.2% -34.3% -12.3% -35.1% -35.4% -35.5% -35.8%

-35.9% -36.7%

-18.0% -14.1% -41.3% -42.3%

-55%

IT -20.0% -15.9% PSU Infra Auto Bank Metal FMCG Realty Energy Midcap Finance BSE 500 Telecom Smallcap Oil & Gas Healthcare 12-Jul-09 26-Jul-98 20-Jan-08 26-Oct-08 12-Oct-08 31-Oct-99 15-Oct-00 15-Apr-01 Cons Durable 16-Sep-01 24-Sep-00 22-Mar-20 06-Mar-94 15-Mar-20 09-Mar-08 21-May-06 14-May-00 16-May-04 Capital Goods Source: Bloomberg, Ashika Research Note: As on March 26, 2020 Source: Bloomberg, Ashika Research Note: As on March 26, 2020

Global index price performance since start of February Period wise return erosion in past global sell-off 0% 140 -5% 120 -10%

100

-15% -6.5%

-20% -10.6% 80

-25% -15.8%

-16.1%

-19.4% -19.5% -20.3%

-30% -20.6% -21.9%

-23.7%

-23.9% 40

-35% -25.0% -25.8%

Dot-com Bubble Global Financial 2011 2015-16 COVI

-40% -30.5% 20 Crisis European Debt Global market D 19 -34.1% -45% -34.3% Crisis sell-off 0

-50% US UK Jul-08 Jul-15 Jul-11 Jan-08 Jan-09 Jan-16 Jan-20 Jun-08 Jun-00 Jun-15 Oct-08 Oct-15 Jun-01 Apr-08 Oct-11 Apr-15 Italy Feb-00 Feb-01 Feb-11 Feb-20 Sep-08 Sep-00 Sep-15 Mar-08 Mar-00 Mar-15 Dec-07 Dec-00 Dec-08 Dec-10 Dec-15 Aug-00 Sep-01 Mar-01 Mar-11 Nov-00 Nov-10 Aug-01 Aug-11 Nov-11 May-01 May-11 May-00 India Brazil China Japan Korea Russia French Taiwan Mexico German Argentina Singapore DOW FTSE DAX NIKKEI Nifty Hong Kong Source: Bloomberg, Ashika Research Note: As on March 26, 2020 Source: Bloomberg, Ashika Research Note: As on March 26, 2020

April 2020 INSIGHT 48 Nifty PE Ratio Nifty PB Ratio 30.0 7.0 6.0 25.0 5.0 20.0 4.0

15.0 3.0 2.0 10.0 P/BV Ratio Mean 1 SD+ PE Ratio Mean 1 SD+ 1.0 2 SD+ 1 SD- 2 SD- 5.0 2 SD+ 1 SD- 2 SD- 0.0

0.0 27-Jul-06 23-Jan-17 07-Jan-13 01-Jan-01 01-Jun-11 12-Jun-15 28-Jun-19 26-Oct-09 25-Oct-13 07-Oct-05 18-Oct-01 04-Apr-16 29-Feb-08 03-Sep-18 20-Mar-12 29-Dec-08 13-Aug-10 06-Aug-02 11-Mar-04 23-Dec-04 14-Aug-14 14-Nov-17 21-May-07 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-07 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-17 Jan-20 29-May-03 Jan-06 Jan-08 Jan-09 Jan-16 Jan-18 Jan-19 Source: Bloomberg, Ashika Research Note: As on March 26, 2020 Source: Bloomberg, Ashika Research Note: As on March 26, 2020 Monthly FIIs flow in Indian Equity FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 April 6679 1075 6508 9361 7213 -1109 5414 9602 11721 8416 2394 -5552 21193 May 3960 -5012 20117 -9437 -6614 -347 22169 14006 -5768 2543 7711 -10060 7920 June 1643 -10096 3830 10508 4572 -501 -11027 13991 -3344 3713 3617 -4831 2596 July 23872 -1837 11066 16617 8030 10273 -6086 13110 5319 12612 5161 2264 -12419 August -7771 -1212 4903 11688 -10834 10804 -5923 5430 -16877 9071 -12770 1775 -17592 September 16133 -8278 18344 24979 -158 19262 13058 5103 -6475 10443 -11392 -10825 7548 October 20591 -15347 9077 28563 1677 11364 15706 -1172 6650 -4306 3055 -28921 12368 November -5850 -2598 5497 18293 -4198 9577 8116 13753 -7074 -18244 19728 5981 25231 December 5579 1750 10233 2050 98 25088 16086 1036 -2817 -8176 -5883 3143 7338 January -13036 -4245 -500 -4813 10358 22059 714 12919 -11126 -1177 13781 -4262 12123 February 1733 -2437 1217 -4586 25212 24439 1404 11476 -5521 9902 -11423 17220 1820 March -130 530 19928 6898 8381 9124 20077 12078 21143 30906 11654 33981 -59388 Total 53404 -47706 110221 110121 43738 140033 79709 111333 -14172 55703 25634 -88 8737 Source: CDSL, Ashika Research Note: As on March 25, 2020

FIIs and DIIs investment patterns since start of February Market Cap to GDP ratio (close to the ratio witnessed during the 10000 160.0 2008 global financial crisis)

8000 146.5 6000 140.0

4000 120.0 104.9 2000 95.3 100.0 95.3 86.0

0 83.6 78.3 74.2 74.1

80.0 68.6 -2000 67.6 65.5 60.8 54.5

-4000 53.5 52.1

60.0 49.1 -6000 45.2 -8000 40.0

20.0

0.0 01-Jan-20 08-Jan-20 15-Jan-20 22-Jan-20 29-Jan-20 05-Feb-20 12-Feb-20 19-Feb-20 26-Feb-20 04-Mar-20 11-Mar-20 18-Mar-20 25-Mar-20 Mar-20

FII DII Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-12 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-03 Dec-04 Dec-11 Dec-13 Dec-14 Source: CDSL, NSE, Ashika Research Note: As on March 26, 2020 Source: Bloomberg, Ashika Research Note: As on March 27, 2020

Earnings Yield Getting Attractive 1.90 Earning Yield / Bond Yield 1.70 1.50 1.30 1.10 0.90 0.70 0.50 0.30 Jan-02 Jan-03 Jan-04 Jan-05 Jan-07 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-17 Jan-20 Jan-06 Jan-08 Jan-09 Jan-16 Jan-18 Jan-19 Earning Yield / Bond Yield Average Source: Bloomberg, Ashika Research Note: As on March 27, 2020

49 INSIGHT April 2020 The fear index freaks Out – CBOE Volatility Index (VIX) India Volatility Index (VIX) 90 90

80 80

70 70

60 60

50 50

40 40

30 30

20 20

10 10

0 0 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 May-08 May-09 May-10 May-12 May-15 May-16 May-17 May-18 May-19 May-08 May-09 May-10 May-12 May-15 May-16 May-17 May-18 May-19 May-11 May-13 May-14 May-11 May-13 May-14 Source: Bloomberg, Ashika Research Note: As on March 27, 2020 Source: Bloomberg, Ashika Research Note: As on March 27, 2020

Rate cuts by various Central Bankers in Feb’20 and Mar’20 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Australia 0.75 0.75 0.75 0.75 0.50 Brazil 5.00 4.50 4.50 4.25 4.25 Canada 1.75 1.75 1.75 1.75 1.25 India 5.15 5.15 5.15 5.15 4.40 Mexico 7.50 7.25 7.25 7.00 7.00 New Zealand 1.00 1.00 1.00 1.00 0.25 Russia 6.50 6.25 6.25 6.00 6.00 Thailand 1.25 1.25 1.25 1.00 1.00 UAE 2.00 2.00 2.00 2.00 1.50 UK 0.75 0.75 0.75 0.75 0.25 US 1.75 1.75 1.75 1.75 0.25

Source: Bloomberg, News Articles, Ashika Research Note: As on March 27, 2020

Impact of COVID-19 on subsidy packages and tax/fee various sectors rationalization to tide this current Aviation crisis. With the recent outbreak of the Forecasts of Travel & Tourism Coronavirus COVID-19, the skies Due to the present Coronavirus have become gloomier for the CAPA indicate induced crisis, the Travel & Indian Aviation industry. Weak and many airlines Tourism sector is facing a lock down depressed demand for domestic will go bankrupt situation which is both unique and travel, restrictions to and from the by May which in is the most challenged sector at this Coronavirus affected countries turn will severely stage. With the shut down and slow has directly impacted travel. down expected to last for a period Cancellations and consequent and negatively stretching from January till October, underutilization of aircraft has impact tourism 2020 as the six months off season is had a further negative impact on and hospitality. also going to commence shortly after the financial state of the industry. Governments in a compromised winter and spring Forecasts of CAPA indicate many many affected season, the industry will see cash airlines will go bankrupt by May flows normalising only in November, which in turn will severely and countries globally 2020. negatively impact tourism and have already hospitality. Governments in many Hotels introduced urgent The hotel industry is highly affected countries globally have relief measures for dependent on MICE (meetings, already introduced urgent relief incentives, conferences, and measures for airline operators. airline operators. exhibitions) activities and corporate The aviation industry in India is in travel, and will be the first to desperate need of similar support,

April 2020 INSIGHT 50 be impacted in this pandemic Indian pharmaceutical companies Textiles situation. According to industry are now running close to exhausting Many garment/textile factories in interactions, cancellations were their supply of raw material (API) China have halted operations owing received for March, April and May, and considering supply from to the outbreak of coronavirus, and occupancies in March were other countries. However, it has adversely affecting exports of fabric, sub-30%. Curbs on visa till April 15 not reached a level of crisis at this yarn and other raw materials from and progression of Covid-19 globally point in time as enough stocks and India. The disruption is expected to will have a severe impact on influx viable alternatives are available. The slow down cotton yarn exports by of foreign travellers, bringing down industry is also seeking to ensure 50%, leading to a severe impact on occupancies of hoteliers. Fall in the adequacy of APIs for essential the spinning mills in India. Due to occupancy below a certain level drugs in case supplies from China are this slowdown in the flow of goods (60-65%) will push up operating costs, indefinitely disrupted. and hence revenue, textile units eroding margins. Chemicals may be hampered in making annual interest and repayments to financial Malls, Theatres and Eateries Local dyestuff units in India are institutions, thereby defaulting their Globally Governments are pushing heavily dependent on imports of dues. This will also adversely impact for ban on mass gatherings in several raw materials including the demand from cotton farmers, public places which predominantly chemicals and intermediates, from who were already witnessing includes Malls, Theatres and Eateries. China. Delayed shipments from subdued prices and fear that the said These are famous destinations for China and a spike in raw material price may fall further if the China week-ends and summer vacations prices are affecting the dyes and crisis continues unabated. It may be where people gather in large dyestuff industry, especially in mentioned that India already has a numbers to spend time with family Gujarat. It was found that nearly 20% price disadvantage against countries (for lighter moments with family of the production has been impacted like Vietnam, Pakistan and Indonesia and entertain kids), friends and due to the disruption in raw material which have duty free access to China corporate colleagues. In India, many supply. China is a major supplier for export of cotton yarn. On the states have ordered shutting of of speciality chemicals for textiles other hand, the coronavirus issue in Malls and Theatres. Also, people in especially Indigo which is required China unfolds a big opportunity for many locations would be voluntarily for denim. The business in India is all those industries where China is avoiding these places due to self- likely to get affected and people are a major exporter, including textiles. quarantine and scare of Corona securing their supplies. However, it is Indian fibre and yarn industry have spread. So, this will have a adverse also an opportunity since US and EU enough capacity and capability impact on overall consumer spending will try and diversify their markets (quality/ supply chain efficiencies) to and will have an adverse impact on and mitigate the China risk. Some of service many of the markets vacated the entire industries. this business can be diverted to India by China. if taken advantage of. Pharma Though India is one of the top Consumer Durables formulation drug exporters in the The consumer durables sector will world, the Indian pharma industry be impacted due to shutdown of relies heavily on imports of bulk manufacturing units in China. Indian drugs (APIs and intermediates that Though India is durables manufacturers have a large give medicines their therapeutic one of the top dependence on China for critical value). India imported around Rs. formulation drug inputs such as compressors for 249 billion worth of bulk drugs in air-conditioners and refrigerators. It FY19 that account for approximately exporters in the is seen that almost all requirements 40% of the overall domestic world, the Indian of compressors as well as certain consumption. Though Indian players pharma industry other components required for white have the technical capabilities, relies heavily on goods are imported, with bulk of the they been more focused on value same being imported from China. added products or formulations and imports of bulk Companies that may get impacted have been unable to compete with drugs (APIs and are Havells (Lloyd), Voltas, Whirlpool. China due to cost disadvantage. The intermediates that Electrical goods and appliances coronavirus outbreak continues to give medicines their companies such as Crompton disrupt supplies of pharmaceutical Greaves Consumer and Havells ingredients from China. This has therapeutic value). also import lighting and switchgear resulted in shortages and potential products from China and may be price increases of generic drugs impacted. including anti-infectives in India.

51 INSIGHT April 2020 Technical view

Key takeaways from March 2020 India’s Current Account Deficit fell to 0.2% of GDP in Coronavirus spreads beyond China to as many as 202 Q3FY20 against 0.9% in the Q2FY20 countries leading to severe sell off across the global Prime Minister Narender Modi ordered lockdown of 21 markets. days to stop virus outbreak.

Central bankers across the globe in Indian Equity markets and its global a coordinated manner tried to soothe counterparts fell sharply in the last financial markets by cutting interest month on the back of fast spreading rates and opening of credit lines by Coronavirus beyond China, raising the government. FIIs were on a fears of global economic slowdown. India’s industrial output, measured heavy selling spree US markets witnessed a decline of in Index of Industrial Production and remained net 28% from its peak, Indian markets (IIP), expanded 2% during January, sellers of Rs58279 too mirrored the global sell-off falling 30% from its January peak. the fastest in six months against crore. DIIs though 0.07% in previous month. Market breadth was negative with have caught up with Nifty Midcap & Smallcap indices Retail price inflation rate fell for FIIs in terms of net were down by 38% & 46% respec- the first time in seven months to buying in Indian tively. FIIs were on a heavy selling 6.58% in February from 7.59% a month equities worth spree and remained net sellers of ago. Rs58279 crore. DIIs though have IHS Markit showed India’s Rs47534 crore - their caught up with FIIs in terms of net services Purchasing Managers’ Index highest inflows in buying in Indian equities worth rose to 57.5 in February from 55.5 in last six months. Rs47534 crore - their highest inflows January in last six months. On the sectoral

April 2020 INSIGHT 52 front all major Indices ended in red weighed heavily by As per the Dow theory Index had been forming lower Realty, Metal, Auto and Infra which were down by 42%, low and lower high indicating that the broader trend is 41%, 37% & 36% respectively. down and hence in order to end the carnage Nifty need to sustain above the key support level of 7900 and initiate a FIIs and DIIs investment patterns since start of February higher high, higher low formation for the next couple of 10000 8000 weeks on a closing basis. The level of 8900-9100 would 6000 act as intermediate resistance for the market. Scaling and 4000 sustaining of the support turn resistance (8900-9100) on a 2000 0 closing basis might bring some optimism amidst elevated -2000 global volatility. -4000 -6000 -8000 01-Jan-20 08-Jan-20 15-Jan-20 22-Jan-20 29-Jan-20 05-Feb-20 12-Feb-20 19-Feb-20 26-Feb-20 04-Mar-20 11-Mar-20 18-Mar-20 25-Mar-20

FII DII Source: CDSL, NSE, Ashika Research Note: As on March 26, 2020

Sectoral index price performance since start of February 5%

-5%

-15%

-25% -13.9%

-16.8% -17.3%

-20.2%

-35% -25.1%

-27.3% -29.0% -31.5%

-32.0% -45% -34.3% -35.1% -35.4% -35.5% -35.8% -35.9% -36.7% -41.3% -42.3%

-55%

IT Historically, over the past two decades Index witnessing PSU Infra Auto Bank Metal FMCG Realty Energy Midcap

Finance correction of more than 25% occurred six times. In four BSE 500 Telecom Smallcap Oil & Gas Healthcare

Cons Durable instances Index bottomed out post ~30% decline. Pres- Capital Goods Source: Bloomberg, Ashika Research Note: As on March 26, 2020 ently Nifty corrected by 30% hence one can selectively be optimistic at present level. History clearly points towards an ideal investment opportunity. Thus investors should Benchmark Index Nifty has been gaining support around accumulate quality stocks in a phased manner. 7900 as it happens to be the 80% retracement of the last major upmove i.e. considering Low:6825; High:12430 since February 2016 till January 2020 which comes around 7946. The said level further coincides with the November 2016 low of 7916 i.e. the Demonetization period. The next crucial support emanates from 50% retracement of the entire rally since 2008 onward i.e. Low: 2252.75: High: 12430.50 which comes around 7300-7350

Presently 90% of the Nifty constituent stocks are trading below its 200dma indicating extreme pessimism. Last such extreme reading was witnessed in February 2008 followed by February 2016 which eventually led to a turnaround in sentiment.

53 INSIGHT April 2020 Significant correction % of Stocks below 200dma USDINR hit the lowest level in history amid the outbreak, weakened past 75.00. The plunge in domestic currency led Feb-08 91 to a sharp rise in domestic bond yields as market partic- Mar-11 65 ipants’ feared heavy outflow from Indian dated securities Feb-16 93 by overseas investors. Mar-20 95 Crystal gazing the derivative data In the past two decades benchmark Index witnessed Option data indicates the Nifty could trade in a wider multiple virus outbreak and the market took a hit in the range of 7,500 to 8,500 levels. Maximum Call open interest course but eventually managed to recover within six was at 9000 then 10,000 strike while maximum Put open months. Following are some of the viral outbreaks and interest was at 8000 then 7500 strike. Marginal Call how market reacted once the fear subsided. writing was seen at 8100 and 9700 strike while Put writing

Virus Duration % Return % Return was seen at 8100 to 7300 strikes. Nifty rollover was at 62% Outbreak during the post much lower than 3-months average of 77% while market outbreak 6-months wide rollover was at 87%, slightly higher than 3-months SARS Jan-Mar 2003 -10.1 44.5 average of 86%. Considering low cost of rollover and India VIX at its 11-year historical high where 1000 points seems Avian Influenza Jan-Aug 2004 -12.3 28.8 to be the new normal it seems that the present pullback Ebola Dec 2013-Feb 2014 -1.1 28.3 may be due to short covering. Traders are still long on Zika Nov 2015-Feb 2016 -13.4 19.7 volatility due to high VIX and high dispersion of option Daily RSI has turned up and we observe a confirmation data. of positive divergence pattern in daily RSI/Nifty. On the Call -Put Options Open Interests Distributions weekly time frame RSI is now at swing low of 19 indicating for Apr’20 Contract of an oversold region for the Index. Recently more than 1800000 70% of Nifty constituent stocks were trading below RSI Call 1686975 1600000 Put 1426575 reading of 30, such extreme levels were last seen in 2008. 1400000 Presently 54% of the Nifty constituents are trading below 1200000 1247400

1000000 888450 857475 100

30 RSI. This could be positive indication and may mark a 717300

800000 1047075 671 675075 reversal. 600000

400000 195150 16175 1 108150 90000

200000 84900 69975 69075 62925 60150 58575 55275 49650 43200 40125 35325 33900 32925 28800 27300 26250 22875 19725 18825 14100 12525 8250 Significant correction % of Nifty 50 Stocks below 30 RSI 6825 83250 0 172275 86025 67125 Feb-08 80 7700 7800 7900 8000 8100 8200 8300 8400 8500 8600 8700 8800 8900 9000 9100 9200 9300 9400 9500 9600 Mar-11 45 Feb-16 64 Summing it up: Mar-20 72 Nifty started the month on a negative note and continued Other correlated markets like in Bul- the fall with negative momentum. lion counter, yellow metal continue Entire global markets are witnessing its upside momentum as mounting massive selloff due to prevailing worries over the economic fallout corona virus fear. Price action formed from the fast-spreading corona- To pause the ongoing consecutive bearish candle with virus drove investors towards the corrective decline oversold placement of the oscillators but to pause the ongoing corrective safe-haven metal. However financial Index need to sustain crisis is about weakness in all asset decline Index need to sustain above classes and a desire to hold cash. above key trend key trend deciding level of 7900 and With a wave of fiscal and monetary deciding level of buck the trend with higher high for- stimulus by global central banks 7900 and buck the mation for the next couple of session would provide a base building for trend with higher and open the pullback option towards Gold. Crude oil prices may continue high formation for 8900-9100 Hence it would be better to drop further as worries about not to pre-empt anything and should the next couple of keep focusing on further develop- global demand persist as the spread session and open of coronavirus showing no sign of ments with respect to coronavirus abating. Saudi Arabia and Russia the pullback option and investors should accumulate started a price war after failing to towards quality stocks in a staggered manner. agree to extend their pact to cut 8900-9100 Overall, turn positive on rise above output to support the markets. While 8900/9100 for the upside targets of

April 2020 INSIGHT 54 9800 to 10000 levels or else index could take time to form technical parameters indicates chances of respite in near a bottom or maybe around 6800-7300. term and can expect a V-shaped recovery if Index is able to sustain above 18100. Other indices to watch for: NIFTYFMCG Bank Nifty The Index was the least vulnerable in the recent turmoil, Bank Nifty has been the architect of recent predicament the resistance turn support zone of 2015 now stands at of 2020 where it witnessed correction to the extent of 22600. Hence the structure indicates that the down- 25%. The correction in the sector was largely driven by trend can be impeding for a while. Though NIFTYFMCG PSU banks. However the recent decline brought the Index breached the 10- year old trendline and a clear outperfor- closer to its 10-year old trendline support (17100) and the mance in the sector can be seen if it is able sustain above 50% retracement mark (18000). Hence the confluence of 25150.

Sectors that reversed the most in major corrections Crisis Year Cause Sensex % Decline No. of Days Sector reversed the most 1998-99 Asian Financial Crisis 33 2000-01 Dot-com bubble 53 2004 NDA defeat 22 134 Finance, Bank, FMCG 2008-09 Global Financial Crisis 61 287 Auto, Bank, Finance 2010-11 European Debt Crisis 28 432 Pharma, Auto, Bank 2015-16 Chinese Stock market turbulance 21 324 Bank, Finance, FMCG 2020 COVID Pandemic 30 62

55 INSIGHT April 2020 Nifty 50 Performance Stocks 1 month YTD 1 year Stocks 1 month YTD 1 year Adani Ports and Special -28.7% -32.3% -30.7% Indian Oil Corporation -28.1% -38.2% -51.9% Economic Zone Ltd. Ltd. Asian Paints Ltd. -12.8% -11.2% 7.3% IndusInd Bank Ltd. -73.5% -79.7% -82.4% Axis Bank Ltd. -55.2% -56.4% -56.8% Infosys Ltd. -22.6% -17.7% -16.7% Bajaj Auto Ltd. -33.9% -38.2% -34.1% JSW Steel Ltd. -41.8% -43.4% -46.0% Bajaj Finance Ltd. -46.2% -38.9% -11.9% Kotak Mahindra Bank -22.6% -22.9% -3.9% Ltd. Bajaj Finserv Ltd. -48.5% -48.5% -30.9% Larsen & Toubro Ltd. -36.8% -41.5% -44.2% Bharat Petroleum -39.0% -44.3% -28.7% Mahindra & Mahindra -44.8% -48.2% -58.5% Corporation Ltd. Ltd. Bharti Airtel Ltd. -19.9% -5.3% 30.9% Maruti Suzuki India Ltd. -19.7% -31.5% -24.0% Bharti Infratel Ltd. -32.6% -42.0% -52.9% NTPC Ltd. -26.9% -34.4% -43.4% Britannia Industries Ltd. -19.4% -19.4% -20.9% Nestle India Ltd. -11.1% -2.3% 35.1% Cipla Ltd. -10.8% -20.9% -28.9% Oil & Natural Gas -35.8% -51.7% -61.5% Coal India Ltd. -28.4% -41.3% -47.3% Corporation Ltd. Dr. Reddy's Laboratories -5.0% 1.5% 5.0% Power Grid Corporation -19.2% -23.1% -25.9% Ltd. of India Ltd. Eicher Motors Ltd. -15.4% -34.2% -32.1% Reliance Industries Ltd. -22.3% -28.3% -20.8% GAIL (India) Ltd. -30.1% -37.7% -79.0% State Bank of India -42.1% -43.2% -37.4% Grasim Industries Ltd. -35.8% -39.2% -46.1% Sun Pharmaceutical -7.2% -20.0% -26.0% HCL Technologies Ltd. -21.6% -20.0% -55.8% Industries Ltd. HDFC Bank Ltd. -28.6% -33.0% -62.9% Tata Consultancy -17.6% -19.3% -11.7% Services Ltd. Hero MotoCorp Ltd. -22.2% -31.4% -35.2% Tata Motors Ltd. -51.4% -61.9% -59.4% Hindalco Industries Ltd. -44.3% -55.9% -54.7% Tata Steel Ltd. -31.1% -38.7% -44.8% Hindustan Unilever Ltd. -6.6% 7.8% 24.0% Tech Mahindra Ltd. -35.1% -30.9% -31.7% Housing Development -27.9% -32.4% -15.4% Titan Company Ltd. -29.8% -23.7% -21.1% Finance Corporation Ltd. UPL Ltd. -48.0% -50.2% -67.6% ICICI Bank Ltd. -39.5% -41.0% -19.6% UltraTech Cement Ltd. -25.6% -20.6% -17.8% ITC Ltd. -25.8% -38.1% -49.8% Vedanta Ltd. -50.7% -58.5% -63.0% Indian Oil Corporation -28.1% -38.2% -51.9% Wipro Ltd. -27.2% -29.5% -31.5% Ltd. Yes Bank Ltd. -19.0% -36.5% -88.3% IndusInd Bank Ltd. -73.5% -79.7% -82.4% Zee Entertainment -50.1% -56.5% -70.2% Enterprises Ltd.

April 2020 INSIGHT 56 Commodity monthly round-up

COPPER lockdown begins, disrupting copper and cobalt supplies from the Democratic Republic of Congo and Zambia. Monthly Gain/ Quarterly Gain/ Yearly Gain/Loss Speculative positions at US futures exchanges showed Loss Loss some squaring up of short positions by hedge funds but -14.13% -22.04% -22.04% overall the mood is bearish as market is at net shorts. Important News: Speculative Positions at COMEX in COPPER Copper is one of the top looser in recent market sell off Global demand of copper shattered due to economic lockdowns due to corona virus Recent stimulus packages from different countries is now locking copper’s free fall Copper price which sensed the economic fallout from Corona Virus, started falling from January 2020. At one point of time in month of March, it went down to near 30%. A $2 trillion U.S. bill aimed at helping unemployed Source: investing.com, CFTC workers and industries hurt by the coronavirus epidemic failed to rouse copper prices for long. The number of Technical Analysis Americans filing claims for unemployment benefits Monthly Support/Resistance surged to a record of more than 3 million last week of R3 R2 R1 Pivot S1 S2 S3 March as strict measures to contain the coronavirus pandemic brought the country to a sudden halt. From supply $3.60 $2.91 $2.55 $2.26 $1.90 $1.61 $0.96 side, top copper miner Codelco said it would suspend Near 20 year trend line has been taken away by the market construction of some projects including the Chuquica- in copper future which is significant. The trend line was mata mine in a bid to halt the spread of the coronavirus. taken out at 2.32 area and currently the market is at 2.18. Sumitomo Corp will suspend operation at its San Cris- Near support is at 1.96. At any point of time if market tobal silver-zinc-lead mine in Bolivia and its Ambatovy wants to go up then 2.32 area will be hard to crack. Weekly nickel mine in Madagascar to prevent the spread of the RSI is at oversold territory but no bottom formation can coronavirus. be seen in the chart. Less OI is indicating that some profit South Africa’s export terminals will close to mineral taking was there, currently renewed selling pressure may exports from midnight, when a nationwide 21-day resurface for target of 1.96.

Weekly Chart: Copper LME

57 INSIGHT April 2020 BOOK REVIEW

Am I Being Too Subtle by Sam Zell

The book written by the author assets. He believes that business is to be solved. Indifference to rejection is a very successful entrepreneur not a battle to be waged-it’s a puzzle is a fundamental part of being an of Equity Group Investments entrepreneur. (EGI) in American business and The book is more about his is an autobiography. A self-made journey as an entrepreneur. He billionaire who made his fortune and his earlier partner believed in primarily in real estate largely creating an institution based out and is sector agnostic in seeking From buying real of meritocracy. The work culture, opportunties. The book reflects his estate cheap after the passion for pursing something, trait of seeing what others don’t a market crash, to honing creative thinking, alignment as far as opportunity is concerned. of interest, trust & honesty, business From buying real estate cheap after investing in often acumen and instinct of a go-getter of a market crash, to investing in unglamorous EGI culture is worth the appeal. He often unglamorous industries with industries with believes that if you are good at what long-term value, Zell acts boldly on you do, you have the freedom to be supply and demand trend to grab the long-term value, who you really are. first-mover advantage. His famous Zell acts boldly on saying is “if everyone is going left, supply and demand In this book with the incidents look right”. Before venturing into any and deals he locked up and his investments, he works on gathering trend to grab thought process clearly reflects his facts and figures, regulations, the first-mover entrepreneurial prowess and can be objectively envisaging the demand/ advantage. His highlighted as follows: supply situation and take bold Reputation: He truly believes decisions instinctively. His thinking famous saying is “if in long-term relationship and is independent and not tainted everyone is going reputation which is your most by prejudices or biases. He is also left, look right”. important asset. Your name reflects famously called the Grave Dancer your character for his strategy of targeting troubled

April 2020 INSIGHT 58 Opportunities (Keep your Eyes (and and strength of his business Mind) Wide Open: He is also a power relationships and the longevity of networker and traveler, spending employee tenure across the Equity over a thousand hours flying around companies are among his proudest He is a big believer the world visiting new places and accomplishments. Loyalty and trust of having skin in meeting new people. Sam has a are priceless commodities. And they the game, it works great entrepreneurial mindset; he go both ways. is always looking for opportunities Do the Right Thing: Success for him because naturally everywhere. He is a voracious would be guided always by principles. consumer of information and always all invested parties There is an attitude that you can’t reading books, newspapers and are driven to make be both successful and ethical which listening to anything that might be he begs to differ. Underachievers the right decisions a clue for a hidden opportunity. perspective of the world and have Opportunities are not always there for the business and been pushing that idea since the but you have to be patient and be not what benefits beginning of time is “success prepared, once they come one needs achieved either by cutting corners or just one individual. to be bold enough to take advantage is a crook” Skin in the game of them. One such opportunity he is a great equalizer seeks is an emerging market at the Sam Zell is the chairman of Equity verge of investment-grade rating. If Group Investments, the private because it places add to it the scale for that emerging investment firm he founded in all the partner’s market is available in terms of 1968, and the chairman of five NYSE interests in creating demographics and all, he would companies. Finally, he simply doesn’t be willing to look for opportunity buy into many of the made-up rules value and working where the partners are bending of social convention. The bottom-line with tenacity to backward for you for capital and the is: If you are really good at what you achieve success. opportunity is worth considering. do, you have the freedom to be who you really are.” Be Ready to Pivot and Keep it Simple: He believes in staying nimble and be the pivot: Though he started his career in real estate, but Skin in the game & have a he is sector agnostic. He moves in Contrarian Approach: He is a big and out of real estate, manufacturing, believer of having skin in the game, it pharmaceuticals, logistics, energy, Success for works because naturally all invested and a bunch of other industries. him would be parties are driven to make the right He basically is opportunistic. He decisions for the business and not believes greatly in the laws of guided always by what benefits just one individual. supply and demand; liquidity equals principles. There Skin in the game is a great equalizer value; limited competition; long- is an attitude that because it places all the partner’s term relationships and others as interests in creating value and mentioned. These are the simple you can’t be both working with tenacity to achieve frameworks on which he views successful and success. He has been involved with potential opportunity. His attention ethical which he companies where management is not to demographics guided shifts in invested, and the outcome is almost strategy at all his Equity companies begs to differ. always detrimental to value creation and add to it the simplification of Underachievers and shareholder value. risk. Problem solving is his passion. perspective of the He also like to be the number one Risk: He as always worked on or two in the sector which he is in world and have deals and invested after thoroughly and willing to lead from the front assessing the downside of it, if been pushing that are his principles which lead him to the venture fails otherwise. He idea since the great success. In real-state, he had objectively analyze the supply and been biggest manufacturer of homes beginning of time is demand dynamics of every deal. He and RV parks, residential apartment invests in deals below replacement “success achieved buildings, REIT’s, waste-to-energy value. Investing in deals with big either by cutting companies and more. All done upside and small downside and never opportunistically and ahead of time corners or is a risk what you cannot afford to lose. In to seize the biggest opportunities. a way he always seems to have been a crook” contrarian. Prize Loyalty: the length

59 INSIGHT April 2020 3 17 24 10 Friday CPI YoY PPI YoY Markit Eurozone Composite PMI Eurozone Markit CPI MoM Change in Nonfarm Payrolls in Nonfarm Change Rate Unemployment Index ISM Non-Manufacturing RBI Repurchase Rate Repurchase RBI Tertiary Industry Index MoM Index Industry Tertiary All Industry Activity Index MoM Index Activity All Industry U. of Mich. Sentiment US: U. Goods Orders US: Durable JN: Natl CPI YoY JN: JN: PPI Services YoY Industrial Production MoM JN: Industrial Production CH: GDP YoY EC: CPI YoY JN: CH: Industrial YoY Production CH: US: JN: PPI YoY CH: IN: US: US: US: EC: 2 9 16 23 30 Thursday Trade Balance Wholesale Inventories MoM Inventories Wholesale Eight Infrastructure Industries Infrastructure IN: Eight MoM JN: Industrial Production Claims US: Initial Jobless Rate Refinancing EC: ECB Main QoQ SA EC: GDP Initial Jobless Claims US: Initial Jobless Sales Home US: New Fuel MoM Auto Inc UK: Retail Sales Groups Banking UK: PSNB ex Comfort Consumer US: Bloomberg Initial Jobless Claims US: Initial Jobless Starts US: Housing Business Outlook Fed US: Philadelphia Flows TIC Long-term US: Net Permits US: Building IN: Industrial YoY Production Claims US: Initial Jobless of Mich. Sentiment US: U. MoM UK: Industrial Production US: Markit India PMI Mfg PMI India IN: Markit Claims US: Initial Jobless Goods Orders US: Durable Orders US: Factory US: 1 8 15 22 29 Wednesday Trade Balance Trade Balance BoP Basis Trade Balance BoP FOMC Rate Decision (Upper Bound) Rate Decision (Upper US: FOMC Annualized US: GDP QoQ MoM Sales Home US: Pending Confidence EC: Consumer Consumption US: Personal UK: CPI YoY Applications US: MBA Mortgage MoM NSA UK: PPI Output Confidence EC: Consumer UK: RPI MoM IN: Applications US: MBA Mortgage MoM Advance US: Retail Sales MoM US: Industrial Production Manufacturing US: Empire BoP Current Account Balance Account Current JN: BoP MoM Orders Machine JN: Core Applications US: MBA Mortgage JN: US: ISM Manufacturing PMI Mfg CH: Caixin China PMI Mfg Japan Bank JN: Jibun PMI Manufacturing Eurozone EC: Markit SA UK PMI Manufacturing UK: Markit 7 21 14 28 Tuesday Trade Balance Wholesale Inventories MoM Inventories Wholesale Wholesale Prices YoY Wholesale Jobless Rate JN: Jobless Confidence Consumer US: Conf. Board MoM PX House UK: Nationwide Ratio JN: Job-To-Applicant US: Jobless Claims Change UK: Jobless Rate 3Mths UK: ILO Unemployment Sales Home US: Existing Rate Count UK: Claimant YoY Orders JN: Machine Tool IN: CH: MoM Price Index US: Import US: NFIB Small Business Optimism Labor Cash Earnings YoY Cash Earnings JN: Labor CI Index JN: Leading YoY Spending JN: Household Index JN: Coincident 6 13 27 20 Monday , US: United States, EC: European Union, UK: United Kingdom, CH: China, JN: Japan Kingdom, UK: United Union, States, EC: European , US: United Trade Balance Dallas Fed Manf. Activity Manf. Fed US: Dallas JN: Index Activity Nat Fed US: Chicago CI Index JN: Leading Prices MoM House UK: Rightmove CPI YoY IN: CPI Statement Budget US: Monthly Markit India PMI Composite PMI India IN: Markit UK Construction PMI UK: Markit/CIPS IN: India World economic calendar economic calendar World April 2020

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61 INSIGHT April 2020 Services at Ashika Wealth Advisory Private Limited

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It is the Flagship company of the group and incorporated in the year 1994. A RBI registered Non-Banking Financial Company carrying on NBFI Activities i.e. investment in shares an securities and providing Loan to Individuals, corporates HNI etc. The company floated its shares to public in 2000 and got listed with CSE. Thereafter, in 2011 , the shares were traded on BSE under permitted category and in 2014 got listed with MSEI. It has a registered FII as one of its investor.

Ashika Investment Managers Pvt. Ltd.

Registered under ROC, Mumbai on 13 WJuly 2017. It is a wholly owned subsidiary of Ashika Global Securities Pvt Ltd. The company has created a trust named Ashika Alternative Investment and has applied to SEBI for registration under Category 3, AIF.

April 2020 INSIGHT 62 AWARDS

NSDL Stock Performer Awards CDSL Excellent Performer in BTVI Emerging Company BTVI Young Business Leader of the Year 2019 Depository Services of the Year 2019 of the Year 2019

Helping Clients Reach for Better Via SIP – National NSDL STAR PERFORMANCE AWARD 2018 from Franklin Templeton Investments, 2018

NSE Market Achievers Award 2018 NSE Market Achievers Award 2017 REGEIONAL RETAIL MEMBER OF THE YEAR 2018 - REGEIONAL RETAIL MEMBER OF THE YEAR 2017 - EASTERN INDIA EASTERN INDIA

63 INSIGHT April 2020 Ashika Stock Broking Ltd.

Ashika Stock Broking Limited (“ASBL”) Analysts (including their relatives) Research analysts (forming part of started its journey in the year 1994 and may have financial interest in the Research Desk) have not received any is presently offering a wide bouquet of subject company(ies). And, the said compensation or other benefits from services to its valued clients including financial interest is not limited to the subject companies or third parties broking services, depository services having an open stock market position in connection with the research and distributorship of financial prod- in /acting as advisor to /having a loan report/ research recommendation. ucts (Mutual funds, IPO & Bonds). It transaction with the subject com- Moreover, Research Analysts have not became a “Research Entity” under pany(ies) apart from registration as received any compensation from the SEBI (Research Analyst) Regulations clients. companies mentioned in the research 2014 in the year of 2015 (Reg No. report/ recommendation in the past 2) ASBL or its Research Analysts INH000000206). twelve months. (including their relatives) do not have ASBL is a wholly owned subsidiary of any actual / beneficial ownership of 5) The subject companies in the Ashika Global Securities (P) Ltd., a RBI 1% or more of securities of the subject research report/ recommendation registered non-deposit taking NBFC company(ies) at the end of the month may be a client of or may have been Company. ASHIKA GROUP (details immediately preceding the date of a client of ASBL during the twelve enumerated on our website www. publication of the source research months preceding the date of con- ashikagroup.com) is an integrated report or date of the concerned cerned public appearance for invest- financial service provider inter alia public appearance. However, ASBL’s ment banking/ merchant banking / engaged in the business of Investment associates may have actual / beneficial brokerage services. Banking, Corporate Lending, Com- ownership of 1% or more of securities 6) ASBL or their Research Analysts modity Broking, Debt Syndication & of the subject company(ies). have not managed or co–managed Other Advisory Services. 3) ASBL or its Research Analysts public offering of securities for the There were no significant and mate- (including their relatives) do not subject company(ies) in the past rial disciplinary actions against ASBL have any other material conflict of twelve months. However, ASBL’s taken by any regulatory authority interest at the time of publication of associates may have managed or co– during last three years except routine the source research report or date managed public offering of securities matters. of the concerned public appearance. for the subject company(ies) in the However, ASBL’s associates might past twelve months. DISCLOSURE have an actual / potential conflict of Research reports are being prepared 7) Research Analysts have not served interest (other than ownership). and distributed by ASBL in the sole as an officer, director or employee capacity of being a Research Analyst 4) ASBL or its associates may have of the companies mentioned in the under SEBI (Research Analyst) Regu- received compensation for investment report/ recommendation. lations 2014. The following disclosures banking, merchant banking, broker- 8) Neither ASBL nor its Research and disclaimer are an essential part age services and for other products Analysts have been engaged in of any Research Report so being and services from the subject compa- market making activity for the distributed. nies during the preceding 12 months. companies mentioned in the report / However, ASBL or its associates or its 1) ASBL or its associates, its Research recommendation.

DISCLAIMER The research recommendations and information are solely for the personal information of the authorized recipient and does not con- strue to be an offer document or any investment, legal or taxation advice or solicitation of any action based upon it. This report is not for public distribution or use by any person or entity, where such distribution, publication, availability or use would be contrary to law, regulation or subject to any registration or licensing requirement. We will not treat recipients as customer by virtue of their receiving this report. The report is based upon the information obtained from public sources that we consider reliable, but we do not guarantee its accuracy or completeness. ASBL shall not be in anyways responsible for any loss or damage that may arise to any such person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations.

April 2020 INSIGHT 64 Gyanada Foundation Ashika Group supports charitable foundation to fuel the aspirations of young girls in India. Amidst COVID-19, we hope all our readers are safe and in good health. We would recommend referring to the WHO (World Heath Organisation) website for precautions and measures to be undertaken. One of our student Parth, from APJ Abdul Kalam school, has made an informative video story about simple dos and don’ts for COVID-19 on Scratch. Here is the link: https://scratch.mit.edu/projects/378675352. Do watch and stay safe!

At Gyanada Foundation, we believe children must learn to think, link and apply their understanding visibly. This helps the students to connect with real world concerns, just like Parth did. A wonderful opportunity for this kind of exposure was provided by the CEL hackathon, to create projects on Scratch, held on 9th February, 2020 for which the preparations had begun since three weeks before the event. Students came up with innovative projects and ideas based on the sustainability development goals as given by the United nations. Goal number 2,3,4 and 16 were the most voted on and implemented by students. (insert image of the four SDG Goals)

Zero hunger quiz: Students of APJ Abdul Kalam school implemented this goal in a quiz format. Here each question related to zero hunger was scored as +2 for correct answer and -1 for a wrong one. The interesting part about the quiz was that after answering the question, the quizmaster gave valuable tips on how to achieve this goal of zero hunger.

No quota system videostory: Another interesting project made by the students of MD Bhatia School, was on the unfair system of quota. The topic of the project in itself shows the maturity of the kids and their understanding of the right and wrong. The project highlighted the goal of peace, justice and strong institution. They represented their understanding through the story of a group of friends, where although one of them scored exceptional marks, he was unable to get into the course of his choice. While his friend, got in, with a much lower score.

We, at Gyanada Foundation, engage students in practical learning. For this we provide kids with Gyanada Lab Kits. To help us fund these kits, visit: https://gyanada.org/donate.html. You can also write to us at [email protected] or connect with us at 9819044922. Our bank details are: GYANADA FOUNDATION HDFC Bank, Stephen House Branch, Current A/c No. 50200002885400 IFSC CODE: HDFC0000008 MICR CODE: 700240002

65 INSIGHT April 2020 of CDSL/NSDL, AMFI Mutual FundAdvisor,Research Analyst) (Member :NSE,BSE,MSE,MCX, ICEXDepository participant Fax No:Fax 033-40102543 Phone: 033-40102500 7th Floor, Kolkata-700020 226/1, Trinity Registered Office Ashika Global SecuritiesPvt.Ltd. A.J.C. BoseRoad SEBI Regsitration No :INH00000006(RA) Ashika Stock Broking Ltd. Ashika Credit CapitalLtd. SEBI RegistrationNo :INZ000169130 CIN No. U65929WB1995PTC069046 CIN No. L67120WB1994PLC062159 CIN No. U65921WB1994PL217071 For anyFor research related query: [email protected] (RBI Registered NBFC)(RBI Registered NBFC)(RBI Group Companies www.ashikagroup.com Toll Free No.: 18002122525 SEBI Registrationnumber –INA300013759 InvestmentSEBI Registered Adviser CIN number –U65999WB2018PTC227019 Ashika CIN No. U30009WB2000PLC091674 (SEBI Ashika CapitalLtd. CIN number –U65929MH2017PTC297291 Ashika Investment Managers Ltd Pvt. Fax No:Fax 022-66111710 Phone: 022-66111700 Mumbai-400021 214, Nariman Point, 10thFloor 1008, Raheja Centre, Corporate Office Authorised Merchant Banker) Wealth Advisors Pvt Ltd. .

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