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 5 trillion across Multi cap, Large Cap, Large and Mid Cap, Mid Cap and Small 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.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.In the upcoming recategorization in January 2021, we see 6 stocks moved from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 12 stocks are expected to move from the small cap segment to the mid cap segment with the same number moving the other way. There are quite a few IPOs that will join the small cap list, with just 1 joining the large cap list and 1 joining the mid cap list.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.

The Indian mutual fund industry has assets of almost INR 5 trillion across Multi cap, Large Cap, Large and Mid Cap, Mid Cap and Small 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.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.In the upcoming recategorization in January 2021, we see 6 stocks moved from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 12 stocks are expected to move from the small cap segment to the mid cap segment with the same number moving the other way. There are quite a few IPOs that will join the small cap list, with just 1 joining the large cap list and 1 joining the mid cap list.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: AMFI Stock Categorization Changes to Drive Active Portfolio Churn

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

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Forensic Accounting

As promised at <a href="https://www.smartkarma.com/insights/smartkarma-webinar-accounting-and-insider-diagnostics" target="_blank" data-smartkarma-citation="insights:40146" rel="noopener">Smartkarma Webinar | Accounting and Insider Diagnostics</a>, we have extended our forensic analysis model to India. To learn more about our detailed forensic analysis framework, please refer to our original note on forensic analysis model that caters to Developed Asia at <a href="https://www.smartkarma.com/insights/a-forensic-analysis-tool-for-detecting-accounting-red-flags-focus-on-developed-asia" target="_blank" data-smartkarma-citation="insights:36832" rel="noopener">A Forensic Analysis Tool for Detecting Accounting Red Flags: Focus on Developed Asia</a>.
In this insight, we run our forensic analysis model through our India focused universe that comprises of 141 listed Indian companies that have futures available for shorting on NSE. We score these Indian listed companies to identify high-risk accounting candidates.

As promised at Smartkarma Webinar | Accounting and Insider Diagnostics, we have extended our forensic analysis model to India. To learn more about our detailed forensic analysis framework, please refer to our original note on forensic analysis model that caters to Developed Asia at A Forensic Analysis Tool for Detecting Accounting Red Flags: Focus on Developed Asia.
In this insight, we run our forensic analysis model through our India focused universe that comprises of 141 listed Indian companies that have futures available for shorting on NSE. We score these Indian listed companies to identify high-risk accounting candidates.

Forensic Accounting | High Risk Companies in India

India - Politics, Industrials, IT and Large Caps, EMAlpha

Pankaj Sharma

India - Politics, Industrials, IT and Large Caps

Thematic (Sector/Industry)

The news flow for Indian Auto Industry is turning from bad to worse over previous few weeks as there have been multiple reports highlighting poor festival season sales, decline in numbers for vehicle registrations, sharp increase in inventory at dealers and liquidity crunch potentially impacting sales of CVs. However, November has not been that bad for several auto stocks and BSE Auto Index has also outperformed BSE SENSEX, albeit only marginally. <a href="https://www.smartkarma.com/entities/733" target="_blank" data-smartkarma-citation="entities:733:1">Maruti Suzuki India (MSIL IN)</a> , <a href="https://www.smartkarma.com/entities/2391" target="_blank" data-smartkarma-citation="entities:2391:1">Hero Motocorp (HMCL IN)</a> and <a href="https://www.smartkarma.com/entities/18316" target="_blank" data-smartkarma-citation="entities:18316:1">Eicher Motors (EIM IN)</a> have all been up approximately 10% or even more. This has led to a discussion on investment rationale in several stocks that bad news is fully in their price now and after the huge correction in the months of September and October, the market expectations have become more reasonable on how their business and financial performance will be. While this is somewhat true, we think that November sales numbers for the industry will be the real test because these figures will actually tell you how inventory has moved to end customers from dealers during the festive season. That will be a key factor in determining the near-term direction for these stocks in Indian Auto space.

The news flow for Indian Auto Industry is turning from bad to worse over previous few weeks as there have been multiple reports highlighting poor festival season sales, decline in numbers for vehicle registrations, sharp increase in inventory at dealers and liquidity crunch potentially impacting sales of CVs. However, November has not been that bad for several auto stocks and BSE Auto Index has also outperformed BSE SENSEX, albeit only marginally. Maruti Suzuki India (MSIL IN) , Hero Motocorp (HMCL IN) and Eicher Motors (EIM IN) have all been up approximately 10% or even more. This has led to a discussion on investment rationale in several stocks that bad news is fully in their price now and after the huge correction in the months of September and October, the market expectations have become more reasonable on how their business and financial performance will be. While this is somewhat true, we think that November sales numbers for the industry will be the real test because these figures will actually tell you how inventory has moved to end customers from dealers during the festive season. That will be a key factor in determining the near-term direction for these stocks in Indian Auto space.

India: News Flow Is Turning Even More Negative for Autos but Stocks Doing Well, What's Going On?

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

MSCI Emerging Markets Index / Technical Analysis

Recent USD strength has weighed on EM’s relative performance. Given (1) strength in commodity prices (sans precious metals), (2) the potential for some backing-and-filling of the USD, and (3) MSCI EM price and relative strength support levels continuing to hold, we see recent weakness as a buying opportunity.  The MSCI BRIC index has reasserted its leadership status. In addition to China, fellow BRIC countries Brazil and India exhibit attractive setups, while Chile’sIPSA also presents opportunities. Today’s report includes a wide variety of bottom-up recommendations across the EM universe, spanning most sectors and all market capitalizations.

Recent USD strength has weighed on EM’s relative performance. Given (1) strength in commodity prices (sans precious metals), (2) the potential for some backing-and-filling of the USD, and (3) MSCI EM price and relative strength support levels continuing to hold, we see recent weakness as a buying opportunity.  The MSCI BRIC index has reasserted its leadership status. In addition to China, fellow BRIC countries Brazil and India exhibit attractive setups, while Chile’sIPSA also presents opportunities. Today’s report includes a wide variety of bottom-up recommendations across the EM universe, spanning most sectors and all market capitalizations.

Emerging Markets Strategy: Attractive Setups in China, Brazil, India, and Chile

Independent Research Analyst

Mamta Verma

DC India Research

DC India Research LLP (DCIR) is based out of Mumbai, India.

We specialize in providing customized, independent research across listed and unlisted companies in India across equities and credit including sectoral research. Our customers include India focussed PE funds, special situation funds, domestic AMCs, Wealth Advisory& PMS firms, Rating Agencies & Investment Advisors. 

The DCIR board consists of prominent names from the industry as well as CIO’s of Hedge funds.

Equity Bottom-Up

In this note, we have reviewed the 9m-FY18 performance of the listed players in the Indian Tyre Sector.Note - This review will be followed on with the q4-FY18 results of the companies.Companies covered - <a href="https://www.smartkarma.com/entities/8423" target="_blank" data-smartkarma-citation="entities:8423:1">Apollo Tyres Ltd (APTY IN)</a>, <a href="https://www.smartkarma.com/entities/2930" target="_blank" data-smartkarma-citation="entities:2930:1">Mrf Ltd (MRF IN)</a>, <a href="https://www.smartkarma.com/entities/18722" target="_blank" data-smartkarma-citation="entities:18722:1">Ceat Ltd (CEAT IN)</a>, <a href="https://www.smartkarma.com/entities/8501" target="_blank" data-smartkarma-citation="entities:8501:1">Jk Tyre &amp; Industries Ltd (JKI IN)</a>, <a href="https://www.smartkarma.com/entities/16789" target="_blank" data-smartkarma-citation="entities:16789:1">Goodyear India Ltd (GDYR IN)</a>, <a href="https://www.smartkarma.com/entities/9603" target="_blank" data-smartkarma-citation="entities:9603:1">Tvs Srichakra Ltd (SRTY IN)</a>, <a href="https://www.smartkarma.com/entities/15331" target="_blank" data-smartkarma-citation="entities:15331:1">Balkrishna Industries Ltd (BIL IN)</a>1. Summary -<table class="table table-striped"><tbody>
<tr>
<td>Net Sales</td>
<td>Q3-FY18 YoY</td>
<td>Q3-FY18 QoQ</td>
<td>9M-FY18 YoY</td>
<td>9M-FY18 (Rs. Mn.)</td>
</tr>
<tr>
<td>Apollo Tyres Ltd.</td>
<td>17.13%</td>
<td>16.49%</td>
<td>9.</td>
</tr>
</tbody></table>…

In this note, we have reviewed the 9m-FY18 performance of the listed players in the Indian Tyre Sector.Note - This review will be followed on with the q4-FY18 results of the companies.Companies covered - Apollo Tyres Ltd (APTY IN), Mrf Ltd (MRF IN), Ceat Ltd (CEAT IN), Jk Tyre &amp; Industries Ltd (JKI IN), Goodyear India Ltd (GDYR IN), Tvs Srichakra Ltd (SRTY IN), Balkrishna Industries Ltd (BIL IN)1. Summary -

Net Sales
Q3-FY18 YoY
Q3-FY18 QoQ
9M-FY18 YoY
9M-FY18 (Rs. Mn.)


Apollo Tyres Ltd.
17.13%
16.49%
9.

…

India

Apollo Tyres Limited manufactures tires and tubes for cars, trucks, farm equipment and light commercial vehicles. The Company also manufactures automobile flaps and retreading materials.

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Apollo Tyres (APTY IN)

India: AMFI Stock Categorization Changes to Drive Active Portfolio Churn

The reclassification of stocks to large, mid and small cap will set off a churn in mutual fund portfolios where historically stocks migrating...

Brian Freitas

Forensic Accounting | High Risk Companies in India

As promised at Smartkarma Webinar | Accounting and Insider Diagnostics, we have extended our forensic analysis model to India. To learn more about...

Ankit Agrawal, CFA

India: News Flow Is Turning Even More Negative for Autos but Stocks Doing Well, What's Going On?

The news flow for Indian Auto Industry is turning from bad to worse over previous few weeks as there have been multiple reports highlighting poor...

Pankaj Sharma

Emerging Markets Strategy: Attractive Setups in China, Brazil, India, and Chile

Recent USD strength has weighed on EM’s relative performance. Given (1) strength in commodity prices (sans precious metals), (2) the potential for...

Vermilion Research

Sector Capcule: India Tyre Sector

In this note, we have reviewed the 9m-FY18 performance of the listed players in the Indian Tyre Sector.Note - This review will be followed on with...

DC India Research

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