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Market Overview Mutual Fund Overview Economy Review Technical View Prominent Headlines Stock Picks Startup Corner Commodity Monthly Round up Testimonials Monthly Insight Performance Sector Outlook: Chemical Book Review Q&A with CIO Management Meet Note Q3FY20 Result Analysis World Economic Event Calendar INSIGHT March 2020 Q&A WITH CIO Mr. Saurabh Mukherjea, Founder and Chief Investment Officer - Marcellus Investment Managers Viral Markets BRITANNIA INDUSTRIES LTD. | AARTI INDUSTRIES LTD. METROPOLIS HEALTHCARE LTD. INSIDE THIS ISSUE Market Economy 1 overview 34 Review Prominent Startup headlines corner PROMINENT February 2020 4 39 Testimo- Sector - 6 nials Testimonial 40 Chemical Q&A with CIO Q3FY20 - Mr. Saurabh Result Analysis Mukherjea, Founder and Chief Investment Officer - Marcellus 7 Investment Managers 46 Mutual Technical 11 fund overview 64 view Stock picks Commodity monthly round up • Britannia Industries Ltd. • Aarti Industries Ltd. • Metropolis Healthcare Ltd. 15 68 Monthly Book insight review Recommendation Value Investing performance and Behavioral 24 69 Finance by Parag Parekh Management World meet note economic • Phillips Carbon Black calendar Ltd. 30 72 March 2020 INSIGHT 2 MarketOVERVIEW The coronavirus code named as COVID-19 has turned out to be a new scare for the world markets and have beaten previous records of notorious SARS though the positive thing is the mortality rate which is around 2% in comparison to earlier epidemic outbreaks. 1 INSIGHT March 2020 s the number of death 2018 alone, 30% of growth in world have estimated that even after ease toll has already crossed GDP is contributed by China. These of lockdown in March, Chinese 2,762 worldwide while the data thus signify that a massive economy could experience largest total number of infected impact on China’s GDP will not spare quarterly drop due to simultaneous Apeople at more than 80,000. What’s the World economic growth. hit on both supply and demand side concerning for the world markets is of the economy. The only problem is, While it is difficult to quantify the the fact that the virus has now spread the virus couldn’t have found a better losses to the Chinese economy and outside of China and in places such time to hit, when the world economic in turn global economy, inferences as Italy & Iran which according to growth itself have been soft. US could be drawn from SARS over WHO doesn’t have any direct links economy has lost steam and have global commodities and economy. with the epicenter, Hubei province been caught in a shallow range while Crude oil prices as well food prices in China. Besides, rate of infecting EU economic growth never really softened during the SARS attack, people in a single day has failed to took off after the global financial even for COVID-19, global commodity come down so far. In comparison, crisis. With recent slowdown in prices have fallen. China’s trade SARS which was reported in January German economy, the concerns have surplus turned negative, albeit only 2003, hogged limelight in March 2003 just been broad-based now. Japan for three months between Jan & and the attack rate declined some 76 is slowly slipping into recession and March 2003, only to recover in April. days after shock. By July 2003, WHO despite these developed economies GDP growth took a hit in Q2CY2003 declared that the SARS outbreak has been provided with easy liquidity (at 9% vs 11% in Q1CY2003), although been contained. Thus, going by the from their central banks, the whole not a massive extent. The limited same, the COVID-19 attack rate is strategy has been redundant. At impact from SARS have been limited expected to decline sometime in early the end of the day, balance sheets as the same got arrested within a April. However, what’s concerning is of these central banks have got small range of time. Thus, while the scale of infections for COVID-19 stretched and making the monetary drawing parallels between SARS and at this rate of infection compared to policies as a tool to prop economic COVID-19, one needs to compare SARS which infected ~8100 people growth have run its course. In such the scale of people infected by and responsible for 774 deaths. The a scenario, a faltering Chinese COVID-19 vs SARS as well the scale only positive aspect has been the economy is the last thing the world of the Chinese economy in 2003 mortality rate which has been at policymakers needed. While COVID- and now. Thus, the adverse impact ~3.4% compared to ~9.5% for SARS, 19 may not last beyond April and thus could be far reaching and certainly although depth, breadth and length a temporary scare, nevertheless, ‘fear beyond Q1CY20. Besides, economists of this new coronavirus remains factor’ among China’s population uncertain as of now. According to is evident and given the export an article in CNN, a U.S.-Canadian and import dependence on China, team at Laval University in Quebec production disruption will have a projects total coronavirus cases severe impact on world’s supply “might reach a cumulative 550,000 chain. cases in Wuhan” alone. Sadly, that China’s share As for the economic impact on is the best-case scenario and in of World GDP India, trade balance is expected to worst-case model projects 4.4 million increased from 4% be negatively impacted since India could be infected by the time the has higher import dependence on epidemic is over. The researchers in 2000 to 16% in China comprising of ~14% of total warn that COVID-19 “almost certainly 2018 and the share imports. At the same time India has cannot be contained and we must of world exports lower export dependency on China prepare for a pandemic.” A 2004 from 2% in 2000 since only 5% of Indian exports go to paper by two economists published China. Now of total imports, ~32% in Asian Economic Papers (MIT to 11% in 2018. In of the same are oil imports and Press) estimated the global economic 2018 alone, 30% of will benefit with lower oil prices. loss to SARS at $40 billion. One growth in world However, the advantage ends over needs to remember that the scale there and economists are of the and dependence on the Chinese GDP is contributed view that for the remaining ~68% of economy has grown at leaps and by China. imports whether it be inputs or raw bounds. China’s share of World GDP materials, it is expected to be priced increased from 4% in 2000 to 16% in higher. More, importantly, out of 2018 and the share of world exports this 68% imports, 14% is accounted from 2% in 2000 to 11% in 2018. In March 2020 INSIGHT 2 Growing dependence on China Daily new cases 30% 16000 14000 12000 15% 16% 10000 11% 8000 6000 4% 2% 4000 2000 2000 2018 Contribution to GDP growth 0 Share in World GDP 23-Jan 25-Jan 27-Jan 29-Jan 31-Jan China share in world exports 02-Feb 04-Feb 06-Feb 08-Feb 10-Feb 12-Feb 14-Feb 16-Feb 18-Feb 20-Feb 22-Feb 24-Feb Source: World Bank, Ashika Research Source: www.worldometers.info from china alone and is expected pharmaceuticals, automobiles, middle of March. The next set of to witness higher prices. Thus, mobiles, electronics, textiles etc. quarterly results for India Inc. could considering that the import volumes could be impacted due to prolonged be impacted severely if production are not significantly hampered, impact. Although there are hopes of doesn’t start as early as March. As for trade balance is expected to worsen factories resuming production, 10% Q3FY20 earnings season, results were since the benefits of lower oil & production cut by Hero MotoCorp broadly in line with expectations. related prices will be overshadowed shows the way things can turn in Excluding Tata Motors (due to by inflationary impact on 68% of event of delay in recovery as Indian exceptional loss in Q3FY19), topline imports. Similarly, for inflation, manufacturing industries will growth for Nifty 50 has remained 35% of the CPI basket will be moved exhaust raw material inventory by muted (down 0.2% yoy) while by the global commodity prices, EBITDA grew by 5% driven by margin particularly food articles. In fact, expansion on lower commodity costs international food prices are also on and cost cutting exercise by India an uptrend and global food inflation Inc. Net profit has been higher by stood at 6.99% in Dec 2019, after The Confederation 4.7% yoy, lower tax expenses. While 5.97% clocked in November 2019. of Indian Industry the consumer sector has exceeded Thus, either way the trend will be expectations, automobiles, capital the same. However, categories like (CII) estimates goods and metals have missed Household goods and services & that shipping, expectations, and private banks, Personal care and effects together pharmaceuticals, NBFC and healthcare have met accounting for ~8% weight in CPI automobiles, consensus estimates. All eyes are index would be affected by COVID- now on rural recovery post Rabi 19 induced increase in prices of mobiles, electronics, harvest season to uplift the economic articles. Thus, in a way, core inflation textiles etc. could growth engine as higher crop prices could be impacted more than the be impacted if the and 9.5% increase in Rabi cultivation general price levels as the prices of COVID-19 virus will result in higher incomes. In electronics and consumer durables a global supply disruption, the could increase. scare is prolonged. inward looking sectors will provide necessary support to the ailing The Confederation of Indian Industry economic growth.