Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>After market close on Friday 20th May 2022, the constituency changes for S&amp;P BSE 100, SENSEX 50, and SENSEX Next 50 Indices were announced. </li>
<li>There will be no changes for S&amp;P BSE SENSEX and S&amp;P BSE BANKEX Indices in the June 2022 Rebalance. </li>
<li>These changes will become effective at the open of Monday 20th June 2022. Below is a closer look at each of the names involved in the June 2022 Rebalance.</li>
</ul>


After market close on Friday 20th May 2022, the constituency changes for S&amp;P BSE 100, SENSEX 50, and SENSEX Next 50 Indices were announced. 
There will be no changes for S&amp;P BSE SENSEX and S&amp;P BSE BANKEX Indices in the June 2022 Rebalance. 
These changes will become effective at the open of Monday 20th June 2022. Below is a closer look at each of the names involved in the June 2022 Rebalance.


S&P BSE Indices: No Changes for SENSEX; 7 ADDs/DELs for BSE 100 in June 2022

External broker reports(aggregated public sources), Nirmal Bang

Nirmal Bang

External broker reports(aggregated public sources)

A Relationship Beyond Broking

Nirmal Bang, one of the leading stock broking companies in India, caters to retail and institutional clients by offering them a range of financial products and services, including equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS.

Nirmal Bang is drawn from a diversity of professional backgrounds, and blend of experience, skill and dedication is shared with its clients. Nirmal Bang emphasizes adequate, thorough research local and world-wide developments, balancing these with the astute discovery of intrinsic values, synergies and growth. The aim is simply to help the investors to maximize their returns.

Equity Bottom-Up

<ul><li><span style="font-size: var(--content-font-size);">Demand holds reasonably well: Demand continued to hold strong across segments and regions.</span></li></ul><div><div><div><div><div><ul><li>Cost pressures to persist in the near term; reiterates sustainable margin guidance</li></ul><div><div><div><div><ul><li>Rs22.5bn capex to cater to medium term demand: BKT has decided to keep on hold investment of Rs3.5bn to continue operating the old Walunj plant and operations in the plant will continue, taking its total capacity to 360k MT by the end of FY23. Project capex for FY23 will likely be at ~Rs9bn each.</li></ul></div></div></div></div></div></div></div></div></div><p><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></p>

Demand holds reasonably well: Demand continued to hold strong across segments and regions.Cost pressures to persist in the near term; reiterates sustainable margin guidanceRs22.5bn capex to cater to medium term demand: BKT has decided to keep on hold investment of Rs3.5bn to continue operating the old Walunj plant and operations in the plant will continue, taking its total capacity to 360k MT by the end of FY23. Project capex for FY23 will likely be at ~Rs9bn each.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.

Balkrishna Industries - Margin Pressure to Sustain; Valuation Remains Attractive

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>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.</p><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>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.</p><p>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.</p>

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

<p>Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This bullish price action combined with market dynamics which remain mostly healthy lead us to believe the lows of this recent correction are in. Consumer Discretionary and Manufacturing Sectors continue to be two attractive Sectors that are outperforming globally; we highlight numerous actionable names in today's report.</p>

Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This bullish price action combined with market dynamics which remain mostly healthy lead us to believe the lows of this recent correction are in. Consumer Discretionary and Manufacturing Sectors continue to be two attractive Sectors that are outperforming globally; we highlight numerous actionable names in today's report.

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

Pankaj Sharma

India - Politics, Industrials, IT and Large Caps

Thematic (Sector/Industry)

<p>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.</p>

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?

India

Balkrishna Industries Ltd. manufactures automobile tires and tubes. The Company also manufactures different varieties of paper & paper boards and processes synthetic textiles.

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Balkrishna Industries (BIL IN)

S&P BSE Indices: No Changes for SENSEX; 7 ADDs/DELs for BSE 100 in June 2022

S&P BSE Index changes for June 2022 were announced last week. No changes for SENSEX. 7 Adds/Deletes for BSE 100 including some negative and...

Janaghan Jeyakumar, CFA

Balkrishna Industries - Margin Pressure to Sustain; Valuation Remains Attractive

Balkrishna Industries’ (BKT) revenue in 4QFY22 came in ahead of our estimate, led by strong volume growth of 13% YoY vs our expectation of 6.5% YoY.

Nirmal Bang

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

Global Equity Strategy:

Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This...

Vermilion Research

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

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