External broker reports(aggregated public sources), Motilal Oswal Financial Services Limited

Motilal Oswal

External broker reports(aggregated public sources)

Equity Bottom-Up

<p>HPCL, the darling of deregulation due to its highest leverage to marketing, is soon going to lose its crown with the addition of 5mmtpa/2mmtpa refining capacity at Visakhapatnam/Mumbai by the end of FY22/CY21. Marketing will account for only 52% of total consolidated EBITDA in FY23E v/s 88% in FY21. Due to Visakhapatnam expansion, Rajasthan greenfield project, and marketing, consolidated debt is expected to rise to INR641b in FY23E from INR427b in FY21, 1.5x its current market capitalization.</p><div class="content-highlight"><em>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.</em></div>

HPCL, the darling of deregulation due to its highest leverage to marketing, is soon going to lose its crown with the addition of 5mmtpa/2mmtpa refining capacity at Visakhapatnam/Mumbai by the end of FY22/CY21. Marketing will account for only 52% of total consolidated EBITDA in FY23E v/s 88% in FY21. Due to Visakhapatnam expansion, Rajasthan greenfield project, and marketing, consolidated debt is expected to rise to INR641b in FY23E from INR427b in FY21, 1.5x its current market capitalization.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.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>We highlight several positive developments that have occurred since last week’s <em>Int’l Compass </em>report, all of which continue to support our overall constructive outlook. Last week we noted Europe’s STOXX 500 was on the cusp of a breakout above 4040; we got the breakout. WTI and Brent crude oil also broke above key multi-year resistance at $67 and $70, respectively. The MSCI ACWI, ACWI ex-US, and EAFE indexes each hit new all-time highs and remain in uptrends. The MSCI Emerging Markets index (EEM-US) bullishly inflected above short-term resistance at $55.35 and RS is reversing the downtrend. These are all bullish signals for global equities, and our constructive outlook remains appropriate.</p>

We highlight several positive developments that have occurred since last week’s Int’l Compass report, all of which continue to support our overall constructive outlook. Last week we noted Europe’s STOXX 500 was on the cusp of a breakout above 4040; we got the breakout. WTI and Brent crude oil also broke above key multi-year resistance at $67 and $70, respectively. The MSCI ACWI, ACWI ex-US, and EAFE indexes each hit new all-time highs and remain in uptrends. The MSCI Emerging Markets index (EEM-US) bullishly inflected above short-term resistance at $55.35 and RS is reversing the downtrend. These are all bullish signals for global equities, and our constructive outlook remains appropriate.

Major Breakouts For WTI and Brent Crude Oil. Actionable Themes: Energy, Manufacturing, Autos/Parts

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<div><p>The Indian mutual fund industry has assets of almost INR 6.6 trillion 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.</p></div><div>
<p>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.</p>
<p>At the next recategorization in July 2021, we see 7 stocks moving from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 13 stocks are expected to move from the small cap segment to the mid cap segment with the 16 stocks moving from the mid cap to the small cap segment. There are 3 recent listings that will enter the mid cap segment with over 18 joining the small cap segment.</p>
<p>Historically, the stocks migrating upward to a higher market cap segment have outperformed stocks that migrate to a lower market cap segment over the 1 month and 2 month period post the publishing of the AMFI list. 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.</p>
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The Indian mutual fund industry has assets of almost INR 6.6 trillion 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.
At the next recategorization in July 2021, we see 7 stocks moving from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 13 stocks are expected to move from the small cap segment to the mid cap segment with the 16 stocks moving from the mid cap to the small cap segment. There are 3 recent listings that will enter the mid cap segment with over 18 joining the small cap segment.
Historically, the stocks migrating upward to a higher market cap segment have outperformed stocks that migrate to a lower market cap segment over the 1 month and 2 month period post the publishing of the AMFI list. 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

Index Rebalance

<p>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> is the flagship index of the National Stock Exchange of India (NSE). The index has 50 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 29 September 2021 and the announcement of the changes will be made four weeks prior to the effective date.</p><p>More than a third of the way through the review period that runs from February to July, we see one possible change to the index with <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a> replacing <a href="https://www.smartkarma.com/entities/indian-oil-corp-ltd" target="_blank" data-smartkarma-citation="entities:7781:1" rel="noopener">Indian Oil Corp (IOCL IN)</a>. There could be more changes if some large stocks like <a href="https://www.smartkarma.com/entities/adani-green-energy-ltd" target="_blank" data-smartkarma-citation="entities:29012:1" rel="noopener">Adani Green Energy Ltd (ADANIGR IN)</a> and <a href="https://www.smartkarma.com/entities/dmart" target="_blank" data-smartkarma-citation="entities:23656:1" rel="noopener">Avenue Supermarts Ltd (DMART IN)</a> are included in the Futures &amp; Options (F&amp;O) segment of the market.</p><p><a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> does not make the cut for index inclusion following the 10% reduction in its free float following the open offer.</p><p>Passive funds benchmarked 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> will need to trade around 3 days of ADV on <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a> and <a href="https://www.smartkarma.com/entities/indian-oil-corp-ltd" target="_blank" data-smartkarma-citation="entities:7781:1" rel="noopener">Indian Oil Corp (IOCL IN)</a>. Plus there will be flow from active funds and from cash and carry baskets on the index.</p><p><a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a> trades at a valuation premium to its regional peers, while <a href="https://www.smartkarma.com/entities/indian-oil-corp-ltd" target="_blank" data-smartkarma-citation="entities:7781:1" rel="noopener">Indian Oil Corp (IOCL IN)</a> trades at a discount to its domestic peers.</p><p>The big event to watch for is the potential inclusion of <a href="https://www.smartkarma.com/entities/adani-green-energy-ltd" target="_blank" data-smartkarma-citation="entities:29012:1" rel="noopener">Adani Green Energy Ltd (ADANIGR IN)</a> and <a href="https://www.smartkarma.com/entities/dmart" target="_blank" data-smartkarma-citation="entities:23656:1" rel="noopener">Avenue Supermarts Ltd (DMART IN)</a> in the F&amp;O segment that will open the door for index inclusion.</p>

The NIFTY Index (NIFTY INDEX) is the flagship index of the National Stock Exchange of India (NSE). The index has 50 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 29 September 2021 and the announcement of the changes will be made four weeks prior to the effective date.More than a third of the way through the review period that runs from February to July, we see one possible change to the index with Info Edge India (INFOE IN) replacing Indian Oil Corp (IOCL IN). There could be more changes if some large stocks like Adani Green Energy Ltd (ADANIGR IN) and Avenue Supermarts Ltd (DMART IN) are included in the Futures &amp; Options (F&amp;O) segment of the market.Vedanta Ltd (VEDL IN) does not make the cut for index inclusion following the 10% reduction in its free float following the open offer.Passive funds benchmarked to the NIFTY Index (NIFTY INDEX) will need to trade around 3 days of ADV on Info Edge India (INFOE IN) and Indian Oil Corp (IOCL IN). Plus there will be flow from active funds and from cash and carry baskets on the index.Info Edge India (INFOE IN) trades at a valuation premium to its regional peers, while Indian Oil Corp (IOCL IN) trades at a discount to its domestic peers.The big event to watch for is the potential inclusion of Adani Green Energy Ltd (ADANIGR IN) and Avenue Supermarts Ltd (DMART IN) in the F&amp;O segment that will open the door for index inclusion.

NIFTY50 Index Rebalance Preview: Info Edge Could Replace IOC

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Quantitative Analysis

<p>We have devised a few screens to identify long opportunities in the Indian markets. While there are different investment strategies out there, we have focused on catering to three key portfolio strategies: 1) Quality &amp; Growth 2) Income/Dividend Generation and 3) Value. These strategies resonate with our own investment approach and we regularly refer to these screens for our own idea generation.</p>
<p>Below we provide an overview of methodology used and backtest results for each of the screens followed by companies flagged by our screener for each strategy.</p>
<h3><strong>What's Unique?</strong></h3>
<p>Most screens tend to use a plethora of parameters whereas we have relied on 2-3 key parameters determined based on our back testing analysis that uses 7 years of historical data as of 2010. We originally started with multiple variables to devise our screen but eliminated variables that provided limited value addition as guided by back tested results. To filter out noise and any cyclical impact in determining trends, we have used averages across long periods ranging from 3 to 7 years, as appropriate.</p>

We have devised a few screens to identify long opportunities in the Indian markets. While there are different investment strategies out there, we have focused on catering to three key portfolio strategies: 1) Quality &amp; Growth 2) Income/Dividend Generation and 3) Value. These strategies resonate with our own investment approach and we regularly refer to these screens for our own idea generation.
Below we provide an overview of methodology used and backtest results for each of the screens followed by companies flagged by our screener for each strategy.
What's Unique?
Most screens tend to use a plethora of parameters whereas we have relied on 2-3 key parameters determined based on our back testing analysis that uses 7 years of historical data as of 2010. We originally started with multiple variables to devise our screen but eliminated variables that provided limited value addition as guided by back tested results. To filter out noise and any cyclical impact in determining trends, we have used averages across long periods ranging from 3 to 7 years, as appropriate.

Attractive Fishing Areas | India - What's Screening Well?

India

Hindustan Petroleum Corporation Limited refines crude oil and manufactures petroleum and petroleum products. The Company's products, which are sold via outlets throughout India, include lube products, lubricating oil, aviation fuel, hydraulic brake fluid, greases, liquefied petroleum gas and insecticides. The Government of India is the majority shareholder in the company.

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Hindustan Petroleum (HPCL IN)

Battling a three headed-monster

HPCL, the darling of deregulation due to its highest leverage to marketing, is soon going to lose its crown with the addition of 5mmtpa/2mmtpa...

Motilal Oswal

Major Breakouts For WTI and Brent Crude Oil. Actionable Themes: Energy, Manufacturing, Autos/Parts

Today we highlight several positive developments that have occurred since last week’s Int’l Compass report, all of which continue to support our...

Vermilion Research

India: Stock Reclassification & Active Portfolio Management

There are a lot of segment changes expected in July when AMFI recategorizes stocks and mutual funds start to rebalance their portfolios. We...

Brian Freitas

NIFTY50 Index Rebalance Preview: Info Edge Could Replace IOC

We see one potential changes to the NIFTY50 index at the September review. Adani Green and Avenue Supermarts could join the index if listed F&O are...

Brian Freitas

Attractive Fishing Areas | India - What's Screening Well?

We have devised a few screens to identify long opportunities in the Indian markets. While there are different investment strategies out there, we...

Ankit Agrawal, CFA

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