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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<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)

Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

ASA Capital Management

ASA Capital Management is a boutique Research and Investment Advisory firm focusing on primary research in India. ASA provides bespoke research services to Institutional Clients with a focus on due diligence backed with primary research, Field Trips & Channel Checks.

Thematic (Sector/Industry)

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<p>This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment methods, consumer income growth and savings data, freight and travel, rural development and agriculture to the availability of finance and liquidity. </p>
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<p>The Indicators for the month of July indicate a further recovery in most aspects of the economy. The rural economy still continues to be the main engine and is expected to remain so.</p>
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<p>The data tracker is a joint initiative done along with insight provider <a href="https://www.smartkarma.com/profiles/nitin-mangal" target="_blank" data-smartkarma-citation="accounts:1988" rel="noopener">Nitin Mangal.</a></p>
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This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment methods, consumer income growth and savings data, freight and travel, rural development and agriculture to the availability of finance and liquidity. 


The Indicators for the month of July indicate a further recovery in most aspects of the economy. The rural economy still continues to be the main engine and is expected to remain so.





The data tracker is a joint initiative done along with insight provider Nitin Mangal.








Alternative Data | India Consumer Tracker - Recovery Continues

<p>This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment methods, consumer income growth and savings data, freight and travel, rural development and agriculture to the availability of finance and liquidity. </p>
<p>The Indicators for the month of June indicate a recovery in most aspects of the economy. Rural Economy continues to be the main engine and is expected to remain so. </p>
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<div class="content-highlight">
<p>The data tracker is a joint initiative done along with insight provider <a href="https://www.smartkarma.com/profiles/nitin-mangal" target="_blank" data-smartkarma-citation="accounts:1988" rel="noopener">Nitin Mangal.</a></p>
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This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment methods, consumer income growth and savings data, freight and travel, rural development and agriculture to the availability of finance and liquidity. 
The Indicators for the month of June indicate a recovery in most aspects of the economy. Rural Economy continues to be the main engine and is expected to remain so. 


The data tracker is a joint initiative done along with insight provider Nitin Mangal.


Alternative Data | India Consumer Tracker - Rural India Is Firing Recovery

<p>The objective of this Insight is to reflect back on our work published on Smartkarma. To highlight what has worked for us and more importantly what has not worked and our plans to improve the same. </p>
<p>Going forward our Macro Insights in 2020 will focus on "The Road to USD 5 Trillion Economy". MSME and SME are the heart of Indian Economy, and their ability to grow and innovate will remain the key to achieve this goal and hence the importance to track them.</p>
<p>For Sectoral research, our focus for 2020 will be on Retail, Payments &amp; Auto. As India moves from unorganised to organised trade, Indian Retail is likely to throw up huge opportunities both for incumbents as well as e-retailers. Payments will continue to remain attractive as India goes cashless &amp; the BS-VI related confusions and overall macro demand environment will continue to make Autos an interesting space for 2020.</p>
<p>We intend to make no change in our consumer coverage in 2020, possibly introducing some consumption names along with staples. There are high chances of underperformance in Consumer Staples as we do not expect major volume recovery at least until H2 CY2020.</p>
<p>Lastly, we expect our regional coverage to expand in 2020. We will stick to our core sectors i.e. Consumer Staples, Consumer Discretionary and Auto along with Payments and possibly explore more collaborative and on-ground research with the primary objective of helping a PM with allocation across the region.</p>
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The objective of this Insight is to reflect back on our work published on Smartkarma. To highlight what has worked for us and more importantly what has not worked and our plans to improve the same. 
Going forward our Macro Insights in 2020 will focus on "The Road to USD 5 Trillion Economy". MSME and SME are the heart of Indian Economy, and their ability to grow and innovate will remain the key to achieve this goal and hence the importance to track them.
For Sectoral research, our focus for 2020 will be on Retail, Payments &amp; Auto. As India moves from unorganised to organised trade, Indian Retail is likely to throw up huge opportunities both for incumbents as well as e-retailers. Payments will continue to remain attractive as India goes cashless &amp; the BS-VI related confusions and overall macro demand environment will continue to make Autos an interesting space for 2020.
We intend to make no change in our consumer coverage in 2020, possibly introducing some consumption names along with staples. There are high chances of underperformance in Consumer Staples as we do not expect major volume recovery at least until H2 CY2020.
Lastly, we expect our regional coverage to expand in 2020. We will stick to our core sectors i.e. Consumer Staples, Consumer Discretionary and Auto along with Payments and possibly explore more collaborative and on-ground research with the primary objective of helping a PM with allocation across the region.




2019 Review & 2020 Key Themes | What Has Worked, What Has Not

Equity Bottom-Up

<p>We recently attended the extraordinary general meeting (EGM) of <a href="https://www.smartkarma.com/entities/4353" target="_blank" data-smartkarma-citation="entities:4353:1">Zydus Wellness (ZYWL IN)</a>. The primary agenda for the EGM was to approve the issue of fresh equity and raise debt to finance the acquisition of <a href="https://www.smartkarma.com/entities/2253" target="_blank" data-smartkarma-citation="entities:2253:1">Kraft Heinz Co (KHC US)</a> 's Indian subsidiary Heinz India Private Limited jointly with <a href="https://www.smartkarma.com/entities/12914" target="_blank" data-smartkarma-citation="entities:12914:1">Cadila Healthcare (CDH IN)</a>. This will include the brands Complan (Health Food Drink), Glucon D (Glucose Powder), Nycil (Talcum Power) and Sampriti Ghee. We believe the deal is in sync with management's vision of developing Pharma oriented consumer brands. However with recent acquisition of <a href="https://www.smartkarma.com/entities/18984" target="_blank" data-smartkarma-citation="entities:18984:1">Glaxosmithkline Consumer Healthcare (SKB IN)</a> by  <a href="https://www.smartkarma.com/entities/13828" target="_blank" data-smartkarma-citation="entities:13828:1">Hindustan Unilever (HUVR IN)</a> the competition in the health food drink market may get intense. Having said that, the largest brand Glucon D will likely continue market leadership along with Everyuth and Nycil which will be a good addition to the Zydus Portfolio. Any attempt for market share gains with Complan and Sampriti ghee will be futile and may come at a cost of margins. Based on preliminary, we expect full effect of the deal to appear on FY 2020 financials. Our preliminary estimates indicate a FY 2021 EPS of 51.68, which with a average PE multiple of 34.56 leads to a price target of INR 1809 per share implying an upside of 35% from latest close price of INR 1342. We will revisit our estimates post Q4 FY19 numbers when a much clearer picture is likely to emerge. </p>

We recently attended the extraordinary general meeting (EGM) of Zydus Wellness (ZYWL IN). The primary agenda for the EGM was to approve the issue of fresh equity and raise debt to finance the acquisition of Kraft Heinz Co (KHC US) 's Indian subsidiary Heinz India Private Limited jointly with Cadila Healthcare (CDH IN). This will include the brands Complan (Health Food Drink), Glucon D (Glucose Powder), Nycil (Talcum Power) and Sampriti Ghee. We believe the deal is in sync with management's vision of developing Pharma oriented consumer brands. However with recent acquisition of Glaxosmithkline Consumer Healthcare (SKB IN) by  Hindustan Unilever (HUVR IN) the competition in the health food drink market may get intense. Having said that, the largest brand Glucon D will likely continue market leadership along with Everyuth and Nycil which will be a good addition to the Zydus Portfolio. Any attempt for market share gains with Complan and Sampriti ghee will be futile and may come at a cost of margins. Based on preliminary, we expect full effect of the deal to appear on FY 2020 financials. Our preliminary estimates indicate a FY 2021 EPS of 51.68, which with a average PE multiple of 34.56 leads to a price target of INR 1809 per share implying an upside of 35% from latest close price of INR 1342. We will revisit our estimates post Q4 FY19 numbers when a much clearer picture is likely to emerge. 

EGM Diaries | Zydus Wellness (ZYWL IN) | A Boost of Instant Energy

India

Zydus Wellness Ltd. processes dairy products.  The Company produces margarine, butter, and cheese.

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Zydus Wellness (ZYWL IN)

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

Alternative Data | India Consumer Tracker - Recovery Continues

This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment...

Pranav Bhavsar

Alternative Data | India Consumer Tracker - Rural India Is Firing Recovery

This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment...

Pranav Bhavsar

2019 Review & 2020 Key Themes | What Has Worked, What Has Not

The objective of this Insight is to reflect back on our work published on Smartkarma. To highlight what has worked for us and more importantly what...

Pranav Bhavsar

EGM Diaries | Zydus Wellness (ZYWL IN) | A Boost of Instant Energy

We recently attended the extraordinary general meeting (EGM) of Zydus Wellness (ZYWL IN). The primary agenda for the EGM was to approve the issue...

Pranav Bhavsar

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