What we published What we October 2019 ICICI Securities – Retail Equity Research MOMENTUM PICK Table of Content 1. Result preview – BFSI to remain key driver in muted quarter 2. RBI Monetary Policy Update Oct 2019 3. Initiating Coverage – Indian Asset management Industry PICK MOMENTUM 4. Technical Strategy Report 5. Derivatives Monthly Outlook 6. Derivatives Thematic 7. Currency Thematic Retail Equity Research Equity Retail – 8. Monthly Currency Derivatives 9. Stock recommendations/ F&O recommendations & Quant Ideas ICICI Securities Securities ICICI 10. MF activity report: Top buys/sell by mutual funds in September 2019 Click on headings for respective segment 2 MOMENTUM PICK MOMENTUM Result Preview – BFSI to remain key driver in muted quarter Retail Equity Research Equity Retail – ICICI Securities Securities ICICI 3 Back to Table of BFSI to remain key driver in muted quarter... Content • The overall economic slowdown in the domestic and global economy is likely to reflect on the performances of the I-direct coverage universe. The universe (ex-BFSI) is likely to register revenue and PAT de-growth of 4.6% and 7.6%, respectively. Sectors like auto, metals, oil & gas and construction are likely to register negative MOMENTUM PICK MOMENTUM revenue growth. On the other hand, sectors like capital goods, healthcare, IT and FMCG are likely to report decent numbers. In case of Sensex companies, the consolidated topline is likely de- grow 3.5% whereas the bottomline is expected to grow at 7.5%, largely aided by BFSI. • The government’s recent announcement of a cut in the corporate tax rate from ~34% to 25.2% is likely to provide an immediate benefit in the form of increased cash flows to Corporate India that Research Equity Retail will be either channelised into debt reduction or – incremental investments in increasing capacity, going ahead. Also, taxing new production facilities (that come up by 2023) at 15% will enable attraction of global capital and spur a beleaguered investment cycle. Post the recent Securities ICICI corporate tax cut, we expect Nifty EPS to grow at a CAGR of 20.3% in FY19-21E. Click to read the detailed report … 4 RBI Monetary Policy Update Oct 2019 Oct Update Policy Monetary RBI 5 ICICI Securities – Retail Equity Research MOMENTUM PICK Back to Table of Accommodative stance– to support growth revival Content • RBI continued its rate cut trajectory, • The rate cut stance by the RBI was reducing the benchmark repo rate for a fifth predominantly driven by weak economic time in a row by 25 bps to 5.15% from growth as it lowered its GDP forecast 5.4% while maintaining the spread for significantly. Real GDP growth for 2019-20 reverse repo and MSF at 25 bps resulting in is revised downwards from 6.9% in the a reverse repo rate at 4.9% and MSF rate at August policy to 6.1% – 5.3% in Q2:2019-20 5.4%. The cumulative rate by the RBI since and in the range of 6.6-7.2% for H2:2019-20 PICK MOMENTUM February 2019 is now at 135 bps. The RBI – with risks evenly balanced; GDP growth has also kept the policy stance unchanged for Q1:2020-21 has also been revised at ‘accommodative’, indicating there is downwards to 7.2% further policy space for rate cuts • The MPC decided to continue with an accommodative stance as long as it is • The bond market reaction was muted with necessary to revive growth, while ensuring 10 year G-Sec rising 1 bps to 6.62% post that inflation remains within the target. The the announcement. We expect bond yields RBI Governor, while justifying the 25 bps Research Equity Retail to hover in the 6.40-6.70% range in the near rate cut, mentioned that the cut needs to be – term. If the government and regulators are seen in light of 110 bps cut already done. able to ensure better transmission, bond Hence, scope for further rate cut to support yields have room to shift lower. growth remains and inflation continues to be below RBI’s target. ICICI Securities Securities ICICI Click to read the detailed report … 6 MOMENTUM PICK MOMENTUM Initiating Coverage- Indian Asset Management Industry Retail Equity Research Equity Retail – ICICI Securities Securities ICICI 7 Back to Table of Beneficiary of structural shift in household savings… Content • The past few decades have been a golden period for the Indian asset management industry. This period of growth has been led by a gradual shift of household savings from traditional avenues (FD, gold, real estate) to financial asset including MFs, stocks & bonds. PICK MOMENTUM • We expect industry AUM to grow at CAGR of 18.7% in the next five years to ~| 47.3 lakh crore, with equity-oriented AUM expected to outpace overall AUM by growing at 23% CAGR in FY20-23E. • SIPs inflow have been growing from | 3100 crore per month in April 2016 to | 8100 crore in July 2019; i.e. CAGR of 34%. In FY19, SIP inflows constitute ~33% of total gross inflow. Retail Equity Research Equity Retail – • Given ease of transaction using technology, increasing appetite of retail investors and low ticket size, momentum of SIP flows is seen remaining intact, which will support overall accretion in AUM. Securities ICICI October 17, 2019 ICICI Securities Ltd. | Retail Equity Research Click to read the detailed report …8 Technical Strategy Report Strategy Technical 9 ICICI Securities – Retail Equity Research MOMENTUM PICK Rally on track, time to board for 13100… Back to Table of Content NSE Nifty Monthly Bar Chart • Empirical evidence depicts that corrections of the magnitude of average 14% from life-time highs, have provided long term buying opportunity, delivering double digit returns (average 24%). MOMENTUM PICK MOMENTUM • Going ahead, we expect the Nifty to continue its ascent to 13100 levels in CY20, as guided by our bottom up model and conventional chart work. Nifty Midcap 100 – Monthly Bar Chart • Nifty midcap index anchored corrective phase in 21st month. In Retail Equity Research Equity Retail technical parlance, ’Number 21’ is – significant as it is derived from Fibonacci number sequence ICICI Securities Securities ICICI Click to read the detailed report … 10 Derivatives Monthly Monthly Outlook Derivatives 11 ICICI Securities – Retail Equity Research MOMENTUM PICK F&O data suggests Nifty to consolidate.. Back to Table of Content • The September series was marked by the immense steps taken by the government to provide a fillip to the economy by reducing corporate tax rates. The corporate tax cut MOMENTUM PICK MOMENTUM gave a boost to market sentiments and drove up the Nifty by 1000 points in just 2 sessions • The Nifty is starting the new series with less than 1.5 million shares, which is the second lowest Nifty OI seen in the last three years. Retail Equity Research Equity Retail • We believe the Nifty – current uptrend may go into some consolidation in the short-term but should continue to pick up as Securities ICICI the series progresses. Click to read the detailed report … 12 Derivatives Thematic Derivatives 13 ICICI Securities – Retail Equity Research MOMENTUM PICK Nifty has generally formed bottom when FIIs’ long/short ratio has reached 0.30 in last three years Back to Table of Content • As mentioned in our August report, since 2017, whenever FPI’s short exposure has increased and long/short ratio has reached 0.30, the Nifty has seen a pullback. Two PICK MOMENTUM instances in 2018 replicated the same. • As expected, FPIs’ long/short ratio has formed a bottom again and started moving up indicating closure of short positions by FPIs. The net short positions Retail Equity Research Equity Retail of more than 1 lakh – contracts have reduced to 42000 contracts till the last session. We believe FIIs will turn net positive in the coming sessions. Securities ICICI 14 Click to read the detailed report … Volume weighted average price of FIIs’ short positions at 11200 Back to Table of Content MOMENTUM PICK MOMENTUM The Nifty fell from 11600 and made a low of 10637. However, post August, the Nifty remained largely range bound hovering around 10800 while Nifty OI declined 16% from its August highs. Retail Equity Research Equity Retail – Average short price of the FIIs short positions is placed at 11200 as indicated by the table on the right. We expect these levels to act as good support. It is likely to trigger short covering in Nifty as well as in stocks Securities ICICI October 17, 2019 ICICI Securities Ltd. | Retail Equity Research Click to read the detailed report 15… Currency Thematic Currency 16 ICICI Securities – Retail Equity Research MOMENTUM PICK US$INR recovering from crucial support of 70.50… Back to Table of Content MOMENTUM PICK MOMENTUM The rupee has almost matched the moves in the Chinese Yuan since the US-China trade war erupted. When the CNY depreciated by 12.7%, the rupee also depreciated by 10.5% till mid-September 2018 Retail Equity Research Equity Retail The Dollar Index continues to gain strength and is almost at 28-month highs at 99.55 levels. Strength in the US$ – is also likely to provide support to the US$INR pair In the options segment, the 71.0 strike has the highest Put OI, which is likely to provide support to the pair. As such, we are of the view that the rupee may catch up with the global set-up (strong US$ and weakening CNY) and could depreciate towards 71.8 levels Securities ICICI October 17, 2019 ICICI Securities Ltd. | Retail Equity Research Click to read the detailed report 17… Monthly Currency Currency Monthly Derivatives 18 ICICI Securities – Retail Equity Research MOMENTUM PICK Relatively positive macros amid strength in US$ Back to Table of may see rupee in a range