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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>With over 90% of the review period complete, <a href="https://www.smartkarma.com/entities/adani-enterprises-ltd" target="_blank" data-smartkarma-citation="entities:245:1" rel="noopener">Adani Enterprises (ADE IN)</a> is a high probability inclusion 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> and will replace <a href="https://www.smartkarma.com/entities/shree-cement-ltd" target="_blank" data-smartkarma-citation="entities:10531:1" rel="noopener">Shree Cement (SRCM IN)</a>. </li>
<li>We estimate passive <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a> trackers will need to buy nearly 7% of the real float on <a href="https://www.smartkarma.com/entities/adani-enterprises-ltd" target="_blank" data-smartkarma-citation="entities:245:1" rel="noopener">Adani Enterprises (ADE IN)</a> and the stock should continue to outperform. </li>
<li>
<a href="https://www.smartkarma.com/entities/adani-green-energy-ltd" target="_blank" data-smartkarma-citation="entities:29012:1" rel="noopener">Adani Green Energy (ADANIGR)</a>, <a href="https://www.smartkarma.com/entities/adani-transmission-ltd" target="_blank" data-smartkarma-citation="entities:26712:1" rel="noopener">Adani Transmission (ADANIT)</a> and <a href="https://www.smartkarma.com/entities/dmart" target="_blank" data-smartkarma-citation="entities:23656:1" rel="noopener">Avenue Supermarts Ltd (DMART)</a> have higher average free float market caps and could be included if added to the F&amp;O segment.</li>
</ul>


With over 90% of the review period complete, Adani Enterprises (ADE IN) is a high probability inclusion to the NIFTY Index (NIFTY INDEX) and will replace Shree Cement (SRCM IN). 
We estimate passive NIFTY Index (NIFTY INDEX) trackers will need to buy nearly 7% of the real float on Adani Enterprises (ADE IN) and the stock should continue to outperform. 

Adani Green Energy (ADANIGR), Adani Transmission (ADANIT) and Avenue Supermarts Ltd (DMART) have higher average free float market caps and could be included if added to the F&amp;O segment.


NIFTY50 Index Rebalance Preview: Adani Enterprises Should Replace Shree Cement

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

External broker reports(aggregated public sources)

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Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

Equity Bottom-Up

<div><div><div><ul><li>Q1FY23 highlights: Revenue grew 94,9% to INR98.07bn (FY19-22 CAGR: 19.3%).</li></ul><div><div><ul><li>Revenue/LTL EBITDA per sq. ft came in at INR32.4k/3.2k per sq. ft (88/85% of pre-pandemic base), partly attributable to pick-up in store additions and their larger sizes (added 110 stores over past three years; store count: 294; 10 added in Q1).</li><li>However, given higher-than-pre-pandemic AoVs, cuts in bills/store are likely to run deeper.</li></ul></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>

Q1FY23 highlights: Revenue grew 94,9% to INR98.07bn (FY19-22 CAGR: 19.3%).Revenue/LTL EBITDA per sq. ft came in at INR32.4k/3.2k per sq. ft (88/85% of pre-pandemic base), partly attributable to pick-up in store additions and their larger sizes (added 110 stores over past three years; store count: 294; 10 added in Q1).However, given higher-than-pre-pandemic AoVs, cuts in bills/store are likely to run deeper.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.

<ul>
<li>We are past the halfway mark in the review period of 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> September rebalance. We see one potential change which should be announced end August.</li>
<li>There is a high probability of <a href="https://www.smartkarma.com/entities/adani-enterprises-ltd" target="_blank" data-smartkarma-citation="entities:245:1" rel="noopener">Adani Enterprises (ADE IN)</a> being included in the index, while either <a href="https://www.smartkarma.com/entities/shree-cement-ltd" target="_blank" data-smartkarma-citation="entities:10531:1" rel="noopener">Shree Cement (SRCM IN)</a> or <a href="https://www.smartkarma.com/entities/hero-motocorp-ltd" target="_blank" data-smartkarma-citation="entities:2391:1" rel="noopener">Hero Motocorp (HMCL IN)</a> will be deleted.</li>
<li>The impact of passive fund trading on the stocks is high in terms of days of ADV, but very high in terms of delivery volume.</li>
</ul>


We are past the halfway mark in the review period of the NIFTY Index (NIFTY INDEX) September rebalance. We see one potential change which should be announced end August.
There is a high probability of Adani Enterprises (ADE IN) being included in the index, while either Shree Cement (SRCM IN) or Hero Motocorp (HMCL IN) will be deleted.
The impact of passive fund trading on the stocks is high in terms of days of ADV, but very high in terms of delivery volume.


NIFTY50 Index Rebalance Preview: High Probability Add; Impact Higher than the Headline Numbers

Thematic (Sector/Industry)

<div><div><div><div><ul><li>Recovery trends in discretionary categories are healthy - Our discretionary universe is expected to clock 11/2% revenue/EBITDA growth YoY (partly impacted by Omicron) in Q4FY22 (three-year revenue/EBITDA CAGRs of 15/17% respectively).</li></ul></div></div></div></div><div><div><div><div><ul><li>Ex-jewellery, margin recovery to lag revenue recovery - While profitability is recovering across categories, (1) high commodity prices, (2) restoration of rent/other SG&amp;A overheads coupled with intermittent demand disruptions are likely to keep margins (ex-jewellery) under pressure.</li></ul><div><div><div><div><ul><li>Channel checks: Value chain checks suggest the following: (1) in F&amp;G, international e-tailers, Reliance Retail, and quick commerce players have been improving their assortment availability and pricing mechanisms.</li></ul></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>

Recovery trends in discretionary categories are healthy - Our discretionary universe is expected to clock 11/2% revenue/EBITDA growth YoY (partly impacted by Omicron) in Q4FY22 (three-year revenue/EBITDA CAGRs of 15/17% respectively).Ex-jewellery, margin recovery to lag revenue recovery - While profitability is recovering across categories, (1) high commodity prices, (2) restoration of rent/other SG&amp;A overheads coupled with intermittent demand disruptions are likely to keep margins (ex-jewellery) under pressure.Channel checks: Value chain checks suggest the following: (1) in F&amp;G, international e-tailers, Reliance Retail, and quick commerce players have been improving their assortment availability and pricing mechanisms.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.

Consumer Discretionary - Margin Recovery to Lag that in Topline

<div><ul><li>Recovery trends in discretionary categories are healthy - <span style="font-size: var(--content-font-size);">Our discretionary </span><span style="font-size: var(--content-font-size);">universe is expected to clock 11/2% revenue/EBITDA growth YoY (partly impacted by Omicron) in Q4FY22 (three-year revenue/EBITDA CAGRs of 15/17% respectively).</span></li></ul><div><div><div><ul><li>Ex-jewellery, margin recovery to lag revenue recovery: While profitability is recovering across categories, (1) high commodity prices, (2) restoration of rent/other SG&amp;A overheads coupled with intermittent demand disruptions are likely to keep margins (ex-jewellery) under pressure.</li></ul><div><div><div><div><ul><li>Channel checks: Value chain checks suggest the following: (1) in F&amp;G, international e-tailers, Reliance Retail, and quick commerce players have been improving their assortment availability and pricing mechanisms.</li></ul></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>

Recovery trends in discretionary categories are healthy - Our discretionary universe is expected to clock 11/2% revenue/EBITDA growth YoY (partly impacted by Omicron) in Q4FY22 (three-year revenue/EBITDA CAGRs of 15/17% respectively).Ex-jewellery, margin recovery to lag revenue recovery: While profitability is recovering across categories, (1) high commodity prices, (2) restoration of rent/other SG&amp;A overheads coupled with intermittent demand disruptions are likely to keep margins (ex-jewellery) under pressure.Channel checks: Value chain checks suggest the following: (1) in F&amp;G, international e-tailers, Reliance Retail, and quick commerce players have been improving their assortment availability and pricing mechanisms.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.

Consumer Discretionary Margin Recovery to Lag that in Topline

India

Avenue Supermarts Ltd. (ASL) owns and operates hypermarkets and supermarkets. The Company offers products such as garments, footwears, toys and games, bed and bath linen, stationery, grocery, household, and electronic products. ASL operates throughout India.

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Avenue Supermarts Ltd (DMART IN)

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Avenue Supermarts - Broadly in Line

D-MART’s unit economics, while catching up, remains below pre-pandemic levels. Q1 print was broadly in line. Revenue grew 19.3% CAGR to INR98bn in...

HDFC Securities

NIFTY50 Index Rebalance Preview: High Probability Add; Impact Higher than the Headline Numbers

Adani Enterprises is a high probability add to the NIFTY50 in Sep. Shree Cement is the current delete, though Hero Motocorp is close. There will be...

Brian Freitas

Consumer Discretionary - Margin Recovery to Lag that in Topline

Recovery trends in discretionary categories are healthy: Our discretionary universe is expected to clock 11/2% revenue/EBITDA growth YoY (partly...

HDFC Securities

Consumer Discretionary Margin Recovery to Lag that in Topline

Recovery trends in discretionary categories are healthy; Our discretionary universe is expected to clock 11/2% revenue/EBITDA growth YoY (partly...

HDFC Securities

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