Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Indian mutual fund industry has assets of almost INR 7.93 trillion (US$106.3bn) across Multi cap, Large Cap, Large and Mid Cap, Mid Cap, Small Cap and Flexi Cap equity schemes. Equity schemes classified as large cap need to have at least 80% of their assets invested in large cap stocks, large and mid cap schemes need to have at least 35% of their assets in large cap stocks and at least 35% in mid cap stocks, mid cap funds need to hold at least 65% of their assets in mid cap stocks, and small cap funds need to hold at least 65% of their assets in small cap stocks. Flexi cap funds can invest across market caps.The Association of Mutual Funds in India (AMFI) publishes the list of the stocks in each market cap segment in January and July each year and mutual funds have one month to rebalance their portfolios to adhere to the new categorization.We are just past halfway through the review period for the second half of 2021. Using data to the close on 4 October, at the next recategorization in January 2022, we see 10 stocks moving from the mid cap segment to the large cap segment, 11 stocks moving from the large cap segment to the mid cap segment , 11 stocks are expected to move from the small cap segment to the mid cap segment, with16 stocks moving from the mid cap to the small cap segment. <a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOMATO IN)</a> will be a part of the large cap universe, while 4 other newly listed stocks will be a part of the mid cap universe.Historically, stocks moving to a higher market cap category have outperformed stocks that migrate to a lower market cap category over the back half of the review period. In some cases, the outperformance continues past the announcement of the changes as well. This can be attributed to fund managers realigning their portfolios to meet the new categorization. This provides opportunities to pre-position for the move and unwind post the announcement of the reclassification.

The Indian mutual fund industry has assets of almost INR 7.93 trillion (US$106.3bn) across Multi cap, Large Cap, Large and Mid Cap, Mid Cap, Small Cap and Flexi Cap equity schemes. Equity schemes classified as large cap need to have at least 80% of their assets invested in large cap stocks, large and mid cap schemes need to have at least 35% of their assets in large cap stocks and at least 35% in mid cap stocks, mid cap funds need to hold at least 65% of their assets in mid cap stocks, and small cap funds need to hold at least 65% of their assets in small cap stocks. Flexi cap funds can invest across market caps.The Association of Mutual Funds in India (AMFI) publishes the list of the stocks in each market cap segment in January and July each year and mutual funds have one month to rebalance their portfolios to adhere to the new categorization.We are just past halfway through the review period for the second half of 2021. Using data to the close on 4 October, at the next recategorization in January 2022, we see 10 stocks moving from the mid cap segment to the large cap segment, 11 stocks moving from the large cap segment to the mid cap segment , 11 stocks are expected to move from the small cap segment to the mid cap segment, with16 stocks moving from the mid cap to the small cap segment. Zomato (ZOMATO IN) will be a part of the large cap universe, while 4 other newly listed stocks will be a part of the mid cap universe.Historically, stocks moving to a higher market cap category have outperformed stocks that migrate to a lower market cap category over the back half of the review period. In some cases, the outperformance continues past the announcement of the changes as well. This can be attributed to fund managers realigning their portfolios to meet the new categorization. This provides opportunities to pre-position for the move and unwind post the announcement of the reclassification.

India: Stock Reclassification & Active Portfolio Management (Dec 2021)

External broker reports(aggregated public sources), Prabhudas Lilladhar

Prabhudas Lilladhar

External broker reports(aggregated public sources)

Equity Bottom-Up

Cholamandalam Investment and Finance / Equity Bottom-Up

Our extensive channel checks across first time buyers, small &amp; large fleet operators and credit heads are suggestive of a bleak 9MFY22 for CV financiers. While lockdown impositions stand behind and collection efficiencies have picked up (avg. 90%), the repayment capabilities of driver/owner, small fleet operators continue to remain weak. While festive season demand is building up, fleet operators expect mere 10-15% business growth uptick from current levels and the same is function of improved consumption trends.<div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

Our extensive channel checks across first time buyers, small &amp; large fleet operators and credit heads are suggestive of a bleak 9MFY22 for CV financiers. While lockdown impositions stand behind and collection efficiencies have picked up (avg. 90%), the repayment capabilities of driver/owner, small fleet operators continue to remain weak. While festive season demand is building up, fleet operators expect mere 10-15% business growth uptick from current levels and the same is function of improved consumption trends.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Sector Update - CV Financiers  Structural weakness persists for FY22; stay selective

Index Rebalance

Post market close on 23 August, the Index Maintenance Sub-Committee (IMSC) of NSE Indices announced the results of the September index review for the NIFTY family of indices. The rebalance will be effective after the close of trading on 29 September and passive funds will need to trade at the close (VWAP over the last 30 minutes of trading) on the day.There are no changes to the <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a>, in line with what we expected.There are 5 changes to the NIFTY Next 50 Index. <a href="https://www.smartkarma.com/entities/bank-of-baroda" target="_blank" data-smartkarma-citation="entities:545:1" rel="noopener">Bank Of Baroda (BOB IN)</a>, <a href="https://www.smartkarma.com/entities/cholamandalam-investment-and-finance" target="_blank" data-smartkarma-citation="entities:17583:1" rel="noopener">Cholamandalam Investment and Finance (CIFC IN)</a>, <a href="https://www.smartkarma.com/entities/jindal-steel-power-ltd" target="_blank" data-smartkarma-citation="entities:6614:1" rel="noopener">Jindal Steel &amp; Power (JSP IN)</a>, <a href="https://www.smartkarma.com/entities/pi-industries-ltd" target="_blank" data-smartkarma-citation="entities:6040:1" rel="noopener">Pi Industries (PI IN)</a> and <a href="https://www.smartkarma.com/entities/steel-authority-of-india" target="_blank" data-smartkarma-citation="entities:14323:1" rel="noopener">Steel Authority of India (SAIL IN)</a> will be included in the index, while <a href="https://www.smartkarma.com/entities/abbott-india-ltd" target="_blank" data-smartkarma-citation="entities:9687:1" rel="noopener">Abbott India (BOOT IN)</a>, <a href="https://www.smartkarma.com/entities/alkem-laboratories-ltd" target="_blank" data-smartkarma-citation="entities:26928:1" rel="noopener">Alkem Laboratories Ltd (ALKEM IN)</a>, <a href="https://www.smartkarma.com/entities/mrf-ltd" target="_blank" data-smartkarma-citation="entities:2930:1" rel="noopener">Mrf Ltd (MRF IN)</a>, <a href="https://www.smartkarma.com/entities/petronet-lng-ltd" target="_blank" data-smartkarma-citation="entities:15235:1" rel="noopener">Petronet LNG (PLNG IN)</a> and <a href="https://www.smartkarma.com/entities/united-breweries-ltd" target="_blank" data-smartkarma-citation="entities:18080:1" rel="noopener">United Breweries (UBBL IN)</a> will be deleted from the index.While the headline impact in terms of ADV looks low, a look at the impact compared to the delivery volumes paints a different picture.There are a whole bunch of changes to constituents of other indices too. However, the assets tracking these indices are small and there will be negligible impact on the stocks.There is an expansion of the index universe for the NIFTY indices with REITs and Infrastructure Investment Trusts (InvITs) becoming eligible for inclusion in the indices.

Post market close on 23 August, the Index Maintenance Sub-Committee (IMSC) of NSE Indices announced the results of the September index review for the NIFTY family of indices. The rebalance will be effective after the close of trading on 29 September and passive funds will need to trade at the close (VWAP over the last 30 minutes of trading) on the day.There are no changes to the NIFTY Index (NIFTY INDEX), in line with what we expected.There are 5 changes to the NIFTY Next 50 Index. Bank Of Baroda (BOB IN), Cholamandalam Investment and Finance (CIFC IN), Jindal Steel &amp; Power (JSP IN), Pi Industries (PI IN) and Steel Authority of India (SAIL IN) will be included in the index, while Abbott India (BOOT IN), Alkem Laboratories Ltd (ALKEM IN), Mrf Ltd (MRF IN), Petronet LNG (PLNG IN) and United Breweries (UBBL IN) will be deleted from the index.While the headline impact in terms of ADV looks low, a look at the impact compared to the delivery volumes paints a different picture.There are a whole bunch of changes to constituents of other indices too. However, the assets tracking these indices are small and there will be negligible impact on the stocks.There is an expansion of the index universe for the NIFTY indices with REITs and Infrastructure Investment Trusts (InvITs) becoming eligible for inclusion in the indices.

NIFTY NEXT50 Index Rebalance: More Beneath The Surface

External broker reports(aggregated public sources), Axis Direct

Axis Direct

Cholamandalam Invst. &amp; Finance Company Ltd (CIFC) Q1FY22 performance was a mixed bag, with strong operating performance (PPOP up 55.8%/19.9% YoY/QoQ) while elevated provisioning of Rs 5.6 Bn led to a PAT de-growth of 24% YoY (up 34% QoQ). NII growth (34.8%/1.4% YoY/QoQ) was driven by stable NIM of 7.6% even as the AUM growth lagged. Disbursements were muted at Rs 36 Bn, down 55% QoQ as mobility was restricted due to lockdown restrictions. Asset quality deteriorated as Gross stage 3 assets rose to 6.8% (4% QoQ).We maintain HOLD with a target price of 570 (3.7x FY23 P/ABV)<div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

Cholamandalam Invst. &amp; Finance Company Ltd (CIFC) Q1FY22 performance was a mixed bag, with strong operating performance (PPOP up 55.8%/19.9% YoY/QoQ) while elevated provisioning of Rs 5.6 Bn led to a PAT de-growth of 24% YoY (up 34% QoQ). NII growth (34.8%/1.4% YoY/QoQ) was driven by stable NIM of 7.6% even as the AUM growth lagged. Disbursements were muted at Rs 36 Bn, down 55% QoQ as mobility was restricted due to lockdown restrictions. Asset quality deteriorated as Gross stage 3 assets rose to 6.8% (4% QoQ).We maintain HOLD with a target price of 570 (3.7x FY23 P/ABV)Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cholamandalam Invesment & Finance: Strong Operating Performance; Pressure on Asset Quality

India

Cholamandalam Investment and Finance Company Limited operates as a financial services provider. The Company offers vehicle finance, home equity loans, investment advisory, stock broking, and other financial services to customers.

Cholamandalam Investment and Finance (CIFC IN)

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Cholamandalam Investment and Finance (CIFC IN)

India: Stock Reclassification & Active Portfolio Management (Dec 2021)

Halfway through the review period, we take a look at stocks that could migrate across the large, mid and small cap segments. With over US$100bn of...

Brian Freitas

Sector Update - CV Financiers Structural weakness persists for FY22; stay selective

Our extensive channel checks across first time buyers, small & large fleet operators and credit heads are suggestive of a bleak 9MFY22 for CV...

Prabhudas Lilladhar

Sector Update - CV Financiers Structural weakness persists for FY22; stay selective

Our extensive channel checks across first time buyers, small & large fleet operators and credit heads are suggestive of a bleak 9MFY22 for CV...

Prabhudas Lilladhar

NIFTY NEXT50 Index Rebalance: More Beneath The Surface

There are 5 changes to the NIFTY Next 50 Index that will be implemented at the close on 29 September. The impact is quite large compared to the...

Brian Freitas

Cholamandalam Invesment & Finance: Strong Operating Performance; Pressure on Asset Quality

We maintain HOLD with a target price of 570 (3.7x FY23 P/ABV). Cholamandalam Invesment & Finance (CIFC) Q1FY22 performance was a mixed bag.

Axis Direct

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