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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<ul>
<li>Near the end of the review period, we see 8 stocks migrating upward from Mid to Large Cap and 9 stocks migrating from Small to Mid Cap.</li>
<li>We expect 12 stocks to migrate downward from Large to Mid Cap and 19 stocks from Mid to Small Cap. Four new listings will be added to the Large Caps.</li>
<li>Historically, the upward migrating stocks have outperformed the stocks migrating lower as the active funds rebalance their portfolios to meet regulations around stocks held based on the fund classification.</li>
</ul>


Near the end of the review period, we see 8 stocks migrating upward from Mid to Large Cap and 9 stocks migrating from Small to Mid Cap.
We expect 12 stocks to migrate downward from Large to Mid Cap and 19 stocks from Mid to Small Cap. Four new listings will be added to the Large Caps.
Historically, the upward migrating stocks have outperformed the stocks migrating lower as the active funds rebalance their portfolios to meet regulations around stocks held based on the fund classification.


India: Half-Yearly Stock Reclassification for Active Funds

Forensic Analyst, Trudence Capital Advisors

Nitin Mangal

Forensic Analyst

Trudence Capital Advisors

Trudence Capital Advisors Private Limited is a SEBI-registered Research Analyst, holding SEBI registration number INH000015747. Our firm is dedicated to providing independent and unbiased research on Indian mid to large-cap companies. Trudence Capital is known for its counter-consensus views, with a focus on forensic research and on-ground primary investigations. Our research approach is thorough, involving detailed analysis of accounting practices and governance, alongside extensive channel checks.

Independent & Unbiased Research

Equity Bottom-Up

Indian Railway Catering and Tourism / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/indian-railway-catering-and-tourism-corporation-limited" target="_blank" data-smartkarma-citation="entities:33951:1" rel="noopener">Indian Railway Catering and Tourism (IRCTC IN)</a> has given a superficial return to the shareholders since it has got listed on the Indian bourses. The company is in news post the announced split of shares in the ratio of 1:5. On October 28, 2021, the split of share of the company got effected.On the same day i.e. October 28, 2021, post market hours, the company informed exchanges that Ministry of Railways vide above referred letter has conveyed its decision to share the revenue earned from convenience fee collected by IRCTC in the ratio of 50: 50 w.e.f.  November 1, 2021.  The stock got hammered next morning by more than 28%; later during the day i.e. October 29, 2021, the company again informed exchanges that Ministry of Railways has withdrawn its order for sharing convenience fee, as a result stock got recovered and closed at ~7.5% down from the previous close.There are few grey areas in the news created around the company and in this insight we try to analyse the situation and possible way ahead the Ministry may be eyeing for.

Indian Railway Catering and Tourism (IRCTC IN) has given a superficial return to the shareholders since it has got listed on the Indian bourses. The company is in news post the announced split of shares in the ratio of 1:5. On October 28, 2021, the split of share of the company got effected.On the same day i.e. October 28, 2021, post market hours, the company informed exchanges that Ministry of Railways vide above referred letter has conveyed its decision to share the revenue earned from convenience fee collected by IRCTC in the ratio of 50: 50 w.e.f.  November 1, 2021.  The stock got hammered next morning by more than 28%; later during the day i.e. October 29, 2021, the company again informed exchanges that Ministry of Railways has withdrawn its order for sharing convenience fee, as a result stock got recovered and closed at ~7.5% down from the previous close.There are few grey areas in the news created around the company and in this insight we try to analyse the situation and possible way ahead the Ministry may be eyeing for.

IRCTC Limited: The Possible Implication Of Regulatory Fiasco

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)

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

TSMC (Taiwan Semiconductor Manufacturing) / Technical Analysis

TSMC (Taiwan Semiconductor Manufacturing)

Emerging market equities have been one of the worst areas to invest in 2021, but we see early signs of positive change. With the US dollar failing to break above resistance at $93.50 and the MSCI EM ETF (EEM-US) displaying a false breakdown at $52, we believe now is an opportune time to add exposure to emerging market equities. To be clear, we are not getting overly bullish on EM; we have favored developed int’l (EAFE) over EM since May, and we are now shifting back to a neutral stance between the two. We see reason to believe the tide is shifting in EM’s favor. Below we highlight attractive and actionable themes within EM.

Emerging market equities have been one of the worst areas to invest in 2021, but we see early signs of positive change. With the US dollar failing to break above resistance at $93.50 and the MSCI EM ETF (EEM-US) displaying a false breakdown at $52, we believe now is an opportune time to add exposure to emerging market equities. To be clear, we are not getting overly bullish on EM; we have favored developed int’l (EAFE) over EM since May, and we are now shifting back to a neutral stance between the two. We see reason to believe the tide is shifting in EM’s favor. Below we highlight attractive and actionable themes within EM.

Shifting Exposure To Emerging Markets; Buying TSMC/Taiwan Semi, ICICI Bank, Many Others

External broker reports(aggregated public sources), IDBI Capital

IDBI Capital

External broker reports(aggregated public sources)

IRCTC delivered a strong set of numbers despite challenges from the second wave impact during the quarter as catering segment revenues improved, rail-neer segment turned EBIT positive after 4 quarters and internet ticketing segment continues to deliver strong margins. Revenues were higher than estimate due to higher revenue from catering segment, but EBITDA and PAT were in-line. Margins declined sequentially due to lower volumes. The company reported an 85% YoY increase in revenues to Rs2,434mn, driven by a pick-up in revenues across all business segments, but largely driven by the internet ticketing segment (now 60%+ revenues).<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>

IRCTC delivered a strong set of numbers despite challenges from the second wave impact during the quarter as catering segment revenues improved, rail-neer segment turned EBIT positive after 4 quarters and internet ticketing segment continues to deliver strong margins. Revenues were higher than estimate due to higher revenue from catering segment, but EBITDA and PAT were in-line. Margins declined sequentially due to lower volumes. The company reported an 85% YoY increase in revenues to Rs2,434mn, driven by a pick-up in revenues across all business segments, but largely driven by the internet ticketing segment (now 60%+ revenues).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.

India

Indian Railway Catering and Tourism Corporation Limited provides rail transportation, catering, and tourism services. The Company offers online ticket booking and cancellation, meals, holiday packages, and travel support services. Indian Railway Catering and Tourism serves passengers in India.

Indian Railway Catering and Tourism (IRCTC IN)

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Indian Railway Catering and Tourism (IRCTC IN)

India: Half-Yearly Stock Reclassification for Active Funds

Upward migrations include 8 stocks from MidCap to LargeCap & 9 from SmallCap to MidCap. 4 new listings will join the LargeCaps and 6 new listings...

Brian Freitas

IRCTC Limited: The Possible Implication Of Regulatory Fiasco

There are few grey areas in the news created around the company regarding convenience fee sharing. In this insight we try to analyse the situation...

Nitin Mangal

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

Shifting Exposure To Emerging Markets; Buying TSMC/Taiwan Semi, ICICI Bank, Many Others

We see early signs of positive change within EM, and we present a strong case as to why we believe now is an opportune time to add exposure.

Vermilion Research

IRCTC: Sequential Improvement Continues

IRCTC delivered a strong set of numbers despite challenges from the second wave impact during the quarter as catering segment revenues improved,...

IDBI Capital

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