Page 1
SPARK INDIA DAILY
11 March 2015
Page 1
DEALER COMMENTARY
Key benchmark indices edged lower for a second consecutive session &
closed at lowest level in nearly 3-1/2 weeks. Market breadth was negative.
Market participants remained cautious ahead of IIP & CPI data on Thursday.
Financials, energy and select metal & FMCG shares were major draggers
today, while telecom stocks logged strong gains. Among BSE sectoral
indices, realty fell the most (1.83%), followed by oil & gas (0.78%), power
(0.63%) and banking (0.49%). Consumer durables index was the star-
performer (up 1.2%), followed by TECk (0.78%), metal (0.58%) and
infrastructure (0.51%). Currency factor was at play with INR, like most Asian
currencies weakened against USD. USD hit multi-year highs against the euro
and yen on growing chance of Fed hiking interest rates by mid-year. India VIX
was down 1.8% at 15.5325. About 61 stocks registered a fresh 52-week high
while 30 stocks fell to a fresh 52-week low.
WHAT’S INSIDE
MCX Ltd – SELL (TP of Rs. 1,080)
Exchange and Currency Performance
Spark Focus Stocks
Technical Indicators
Spark Model Portfolio
Today’s News & Announcements
Find Spark Research on Bloomberg (SPAK <go>),
Thomson First Call, Reuters Knowledge and Factset
0
500
1000
1500
2000
2500
40,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ind
exed
Single stock futures Stock index futures Stock options Stock index options
30,000
Impact of STT on NSE volumes (First chart) and Turnover (Second chart)
Source: Company, Spark Capital
In 2008, STT on options contracts were reduced by changing the tax base from notional value of option
contract to option premium. No. of option contracts on NSE increased significantly (186%) in 2008 and
has been on a exponential growth since then, way higher than future growth. Today, India has one of the
highest index option trading
STT was introduced for both cash and derivative
markets for stock exchanges in 2004. Futures were
charged higher than the cash, to encourage investors
to hold stocks for long term. Options volumes were
weak till 2008 due to higher costs (Option cost + STT)
as taxes on both futures and options were charged on
notional principal
STT got
introduced
in Oct.2004
Index Options volume
increased ~300% in 2008 with
change in STT in options
Page 2 Page 2
SPARK INDIA DAILY
11 March 2015
Today 1d 5d 1m 3m 6m 12m Today 1d 5d 1m 3m 6m 12m
US (Dow Jones) 17,663 -1.8 -3.0 -1.1 0.4 3.6 8.0 -3.4 11.4 Dollar Index# 98.7 0.1 2.9 3.9 11.3 17.1 23.8 -0.1 25.1
UK (FTSE100) 6,703 -2.5 -2.7 -1.7 3.7 -1.4 0.3 -3.9 10.4 Pound 1.5 0.0 -1.3 -1.1 -4.2 -7.3 -9.3 -12.4 0.8
Japan (Nikkiei 225) 18,758 0.5 0.3 6.3 8.7 17.9 23.2 -1.2 35.1 Yen 121.4 -0.2 -1.4 -0.8 -2.3 -11.8 -15.2 -0.5 20.4
Germany (DAX) 11,500 -0.7 2.0 7.0 16.6 18.7 23.6 -0.9 37.6 Euro 1.1 -0.2 -3.6 -5.8 -14.0 -17.4 -23.0 -23.7 0.1
Brazil (IBOV) 48,293 -1.8 -5.9 0.1 -3.1 -17.2 5.7 -22.5 7.5 Real 3.1 0.7 -5.5 -8.7 -15.6 -26.2 -24.2 -2.2 42.1
Russia (Micex) 1,665 -3.7 -6.6 -5.6 14.5 14.9 27.3 -9.9 40.8 Ruble 62.5 -0.1 -1.1 4.3 -10.9 -40.0 -41.6 -21.1 86.3
India (Sensex) 28,710 -0.5 -2.5 0.6 4.0 6.3 31.5 -4.4 33.1 Rupee 62.8 -0.4 -1.4 -0.9 -1.2 -2.9 -3.1 -1.7 7.6
China (SHCOMP) 3,309 0.7 0.9 4.8 13.1 43.1 65.4 -2.9 67.6 Renminbi 6.3 0.0 0.1 -0.3 -1.2 -2.1 -2.0 -0.2 2.5
South Africa (Jalsh) 52,089 -1.0 -2.0 0.0 8.3 1.7 9.4 -2.8 13.1 Rand 12.4 0.0 -4.5 -4.4 -5.9 -11.3 -12.2 0.0 20.4
HK (H S I) 23,848 -0.2 -2.5 -1.9 2.3 -3.3 7.1 -6.0 12.8 HK Dollar 7.8 0.0 -0.1 -0.1 -0.1 -0.2 0.0 -0.1 0.2
Korea (Kospi) 1,978 -0.3 -1.0 1.7 3.2 -2.8 0.7 -5.5 5.4 Won 1,128.6 -0.5 -2.7 -2.8 -2.5 -8.2 -5.6 -0.1 11.9
Singapore (Straits) 3,388 -0.3 -0.8 -1.6 2.1 1.2 8.3 -2.0 11.0 SG Dollar 1.4 0.3 -1.3 -1.8 -5.3 -8.9 -8.6 -0.3 12.1
Malaysia (KLCI) 1,783 -0.4 -2.4 -0.9 2.2 -4.5 -2.5 -6.0 6.6 Ringgit 3.7 -0.3 -1.8 -3.1 -6.1 -14.0 -11.7 -0.1 18.3
Indonesia (Jakarta) 5,430 -0.6 -0.3 1.8 5.4 5.8 15.4 -1.5 16.5 Ind Rupiah 13,190.0 -0.7 -1.5 -3.5 -6.4 -10.3 -13.6 -0.1 17.2
Commodities Commodities
Brent ($/bbl) 56.7 0.5 -6.4 3.7 -11.0 -42.2 -47.8 -51.0 25.4 Indonesian Coal ($/MT) 62.9 NA NA -1.4 -4.2 -10.5 -21.8 -18.3 0.0
WTI ($/bbl) 48.9 1.2 -5.2 -1.8 -19.7 -46.1 -46.3 -50.9 10.1 S Africa Coal ($/MT) 61.0 NA -3.7 -7.6 -6.9 -16.7 -26.4 NA NA
Copper ($/MT) 5,789 -1.8 -0.9 3.3 -10.6 -16.0 -13.1 -19.4 7.4 Australia Coal ($/MT) 61.8 NA -1.0 -0.6 -4.4 -11.9 -25.4 NA NA
Zinc ($/MT) 2,001 -1.1 -0.4 -4.8 -7.6 -12.9 -2.7 -17.3 3.4 Gold Spot $/Oz 1,163 0.1 -3.4 -5.7 -4.8 -6.2 -13.7 -16.4 2.8
Aluminium ($/MT) 1,746 -1.1 -2.0 -3.8 -9.9 -13.6 0.8 -17.4 4.7 GOLD INDEX (Rs./10g) 25,933.0 -0.8 -3.0 -5.0 -3.6 -5.0 -13.8 -14.7 2.4
Iron Ore ($/MT) 61 -1.1 -4.2 -4.2 -13.0 -25.3 -42.1 -46.2 0.0 Silver Spot $/Oz 15.7 -0.4 -3.8 -7.2 -7.7 -16.0 -25.4 -27.4 9.9
Lead ($/MT) 1,809 -1.6 4.1 -0.5 -9.7 -13.8 -12.0 -20.3 4.9 MCX Silver (Rs./KG) 35,610.0 -1.0 -4.1 -4.9 -5.4 -13.9 -21.8 -23.2 6.0
Currency
Currency Performance (%)
Performance (%) Performance (%)
Asian Asian
Chg.
from
52WH
Chg.
from
52WL
Developed Developed
BRICS BRICS
Global Indices
Equity Performance (%) Chg.
from
52WH
Chg.
from
52WL
Exchange and Currency Performance
Page 3 Page 3
SPARK INDIA DAILY
11 March 2015
101 93 107 97 125 107
38 35 30 36 53
35
101 99 94 99
154
114
-
50
100
150
200
250
300
350
1M
avg
10-M
ar
9-M
ar
5-M
ar
4-M
ar
3-M
ar
Rs. b
n
FII DII Others
NSE / BSE Category wise turnover
Last 5 Day FII Buy FII Sell Net DII Buy DII Sell Net
10-Mar-15 42.9 50.4 -7.5 18.7 15.8 2.9
9-Mar-15 57.5 49.1 8.4 14.9 15.2 -0.4
5-Mar-15 49.0 48.2 0.8 17.0 19.0 -1.9
4-Mar-15 76.4 48.6 27.9 26.4 26.2 0.2
3-Mar-15 57.3 49.6 7.7 15.7 18.8 -3.0
Market Activity FII & DII - Provisional (INR Bn)
Particulars Today 1D 1M 3M 6M 12M
Reverse Repo 24 12 53 15 107 28
Repo 167 70 106 118 43 320
MSF - 19 4 11 2 93
Net liquidity (143) (76) (56) (113) 63 (385)
Change in BPS
NSE MIBOR 7.51 - (34) (59) (53) (70)
1M CP 9.19 9 84 78 38 (121)
3M CP 8.95 - (10) 46 (9) (121)
6M CP 8.94 (1) (14) 18 (37) (117)
3M CD 8.57 10 (13) 27 (14) (119)
6M CD 8.57 10 (13) 11 (38) (114)
12M CD 8.52 4 (23) (4) (57) (119)
Change in BPS
India 10 yr 7.75 0 2 (12) (76) (99)
US 10 yr 2.13 0 11 (3) (42) (64)
Spread (India 10Y-US10Y) 562
India 10YR AAA corp 8.36 (0) 4 (20) (99) (139)
Spread (India 10Y-AAA10Y) 61
91D T.Bills 8.23 (17) (4) - (38) (92)
1Y T.Bills 7.98 9 (2) (26) (69) (101)
Call rate 7.31 (17) (29) (70) (51) (84)
Change in BPS
LIBOR 0.17 (9) (19) (46) (68) (147)
MIFOR 8.07 (19) 22 49 157 148
OIS 8.08 (15) 15 40 80 101
12m OIS fw d 7.65 1 (2) (11) (82)
Money Market Rates
Liquidity (Rs. Bn)
LIBOR, MIFOR
Bond Market
Bulk Deals (INR Mn)
Date Script Client Type Qty Price
10/03/15 ADVANTA UPL Limited B 540,000 425.00
10/03/15 ADVANTA ITF Mauritius S 550,000 425.04
10/03/15 APLAPOLLO Emblem FII S 200,000 365.15
10/03/15 APLAPOLLO HDFC Mutual Fund B 196,000 365.05
10/03/15 MOTILALOFS HDFCMFACMIPLONGTERMPLAN S 2,406,000 292.00
10/03/15 MOTILALOFS Franklin Templeton Investment Funds B 2,000,000 292.00
10/03/15 Sintex Industries Ltd. Orange Mauritius Investments Limited S 2,040,239 113.17
10/03/15 Winsome Dmnd & Jwllry Bridge India Fund S 550,000 0.41
10/03/15 Zensar Technologies - Ganesh Natarajan S 253,000 668.59
Exchange and Currency Performance
Rank Company Delivery % 30D Del. % Price Chg
1 ULTRATECH CEMENT LTD 77.1 61.7 -1.6%
2 HCL TECHNOLOGIES LTD 76.3 63.5 -1.0%
3 HOUSING DEVELOPMENT FINANCE 75.7 64.8 -4.1%
4 HERO MOTOCORP LTD 72.7 65.3 0.7%
5 BHARAT PETROLEUM CORP LTD 69.7 48.1 0.0%
6 INFOSYS LTD 69.3 66.0 0.4%
7 LUPIN LTD 68.1 49.0 1.5%
8 NMDC LTD 68.0 52.8 1.6%
9 TECH MAHINDRA LTD 68.0 60.5 1.0%
10 OIL & NATURAL GAS CORP LTD 66.6 55.5 -0.5%
Nifty Top 10 Deliveries
Page 4 Page 4
SPARK INDIA DAILY
11 March 2015
1D 1M 3M 1Y FY15E FY16E FY15E FY16E
ASHOK LEYLAND LTD 74.5 2.5 15.9 48.0 324.5 4948.0 (0.1) 29.2 163.2 34.8 4.1 3.8 Sell
AMARA RAJA BATTERIES LTD 845.4 (2.2) 0.7 16.8 131.1 200.7 0.7 78.7 33.5 26.4 8.3 6.5 Add
GATEWAY DISTRIPARKS LTD 429.7 5.9 8.0 32.1 193.1 49.5 (0.7) 66.6 25.4 19.7 3.8 3.4 Buy
KAVERI SEED CO LTD 958.3 (4.6) 11.4 16.6 69.3 101.1 (0.4) 52.2 21.9 17.6 8.5 6.1 Buy
SUNDRAM FASTENERS LTD 185.3 1.8 0.3 (2.1) 251.9 30.6 (0.7) 63.8 19.2 14.8 4.3 3.5 NA
WABCO INDIA LTD 5426.3 (1.2) 7.5 21.4 178.5 7.4 0.2 62.5 80.3 47.2 11.8 9.6 Add
CHOLAMANDALAM INVESTMENT AND 569.8 0.3 4.7 23.0 128.4 20.1 (0.6) 73.1 3.5 2.5 3.5 2.5 Buy
CITY UNION BANK LTD 98.0 (1.1) 2.5 6.8 94.4 1323.6 1.3 93.8 2.4 2.1 2.4 2.1 Buy
DCB BANK LTD 109.0 (0.3) (4.4) (0.1) 86.4 397.0 (0.5) 53.0 2.2 1.9 2.2 1.9 Buy
FEDERAL BANK LTD 138.8 (3.0) (0.7) (2.6) 63.6 802.3 (0.5) 51.1 1.6 1.4 1.6 1.4 Buy
INDIAN BANK 175.2 3.0 (3.6) (8.7) 65.6 52.3 (0.6) 57.1 1.0 1.0 1.0 1.0 Sell
KARUR VYSYA BANK LTD 593.5 0.9 1.4 8.0 87.6 49.7 (0.7) 60.9 1.8 1.6 1.8 1.6 Buy
REPCO HOME FINANCE LTD 676.6 (1.6) 3.2 14.6 118.6 64.7 (0.4) 61.2 5.4 4.7 5.4 4.7 Buy
SHRIRAM CITY UNION FINANCE 1977.8 (1.3) (1.8) 15.9 99.3 101.9 1.0 99.0 3.2 2.9 3.2 2.9 Buy
SOUTH INDIAN BANK LTD 26.0 (1.5) 0.2 (7.0) 15.6 1247.0 (0.4) 63.7 1.1 1.0 1.1 1.0 Buy
DALMIA BHARAT LTD 462.7 1.2 0.4 (4.5) 86.3 20.5 (0.1) 63.8 NA 17.4 1.2 1.2 Buy
RAMCO CEMENTS LTD/THE 327.5 (1.9) (0.8) 0.9 65.0 47.9 (0.6) 70.2 25.8 13.5 2.9 2.4 Add
BLUE STAR LTD 325.9 3.6 1.8 (0.5) 97.5 31.6 (0.4) 78.0 40.9 25.8 5.8 5.1 Sell
TTK PRESTIGE LTD 3658.9 (1.8) 7.8 (2.0) 24.1 11.5 (0.6) 42.0 39.0 31.3 6.4 5.6 Sell
VA TECH WABAG LTD 1635.1 (1.7) 9.0 6.9 135.4 49.8 0.2 77.9 38.9 30.3 4.7 4.2 Add
V-GUARD INDUSTRIES LTD 931.1 (0.2) (1.6) (14.7) 106.0 7.0 (0.4) 70.3 35.8 26.8 7.4 6.1 Buy
CYIENT LTD 545.5 (0.9) 2.3 (3.6) 63.0 390.3 4.2 97.3 17.4 16.4 3.4 3.0 Add
FIRSTSOURCE SOLUTIONS LTD 31.2 0.3 7.6 (9.6) 14.3 394.5 (0.7) 53.8 9.2 7.4 0.8 0.7 Buy
HEXAWARE TECHNOLOGIES LTD 274.7 4.8 10.5 32.0 73.4 269.1 (0.4) 35.8 18.6 16.3 5.7 5.2 Add
POLARIS CONSULTING & SERVICE 145.8 0.4 7.1 (25.9) 1.4 142.2 (0.7) 41.3 8.5 8.2 1.5 1.3 Add
REDINGTON INDIA LTD 122.0 (1.2) 1.2 (9.3) 76.9 173.4 (0.8) 55.9 13.0 10.7 2.0 1.7 Buy
BIOCON LTD 432.5 0.3 1.9 (5.0) 0.0 97.4 (0.6) 21.6 20.5 17.3 2.5 2.3 Reduce
APOLLO HOSPITALS ENTERPRISE 1358.1 (0.4) 6.3 18.2 58.8 95.6 (0.1) 58.8 50.6 40.8 5.8 5.2 Reduce
BAJAJ CORP LTD 479.7 0.1 1.0 39.6 132.6 139.2 0.3 67.3 34.2 28.4 14.5 14.3 Buy
BERGER PAINTS INDIA LTD 206.8 (1.1) (5.3) 4.3 96.2 266.8 (0.2) 57.3 22.1 19.1 10.6 8.9 Add
JYOTHY LABORATORIES LTD 283.0 1.3 (8.2) 15.6 47.8 53.0 (0.8) 64.8 38.1 31.2 6.6 6.0 Buy
KEWAL KIRAN CLOTHING LTD 1918.5 0.1 12.5 1.0 72.4 1.3 (0.5) 62.6 36.1 23.0 7.4 6.3 Add
LA OPALA RG LTD 373.8 (1.2) (13.8) (7.1) 166.8 13.2 (0.7) 67.3 49.7 36.5 11.2 9.0 Add
RELAXO FOOTWEARS LTD 707.1 (0.4) 9.7 36.7 170.8 6.9 (0.3) 54.3 52.5 39.4 12.0 9.4 Add
Consumption
Returns (%)
Auto, Agri &
logistics
Financials
Cement
Pharma
Top Del. % Company Price
IT Services
Delivery
Volume
('000)
Rating
PE for all sectors & P/ABV
for banksEV/EBITDA (x)
Capital Goods
% inc/dec to
30D avgDelivery %
Spark Focus Stocks
Page 5 Page 5
SPARK INDIA DAILY
11 March 2015
0
200
400
8000
8100
8200
8300
8400
8500
8600
8700
8800
8900
9000
9100
9200
9300
9400
9500O
I ('0
00)c
on
tracts Call Put
0150300450600
8000
8050
8100
8150
8200
8250
8300
8350
8400
8450
8500
8550
8600
8650
8700
8750
8800
8850
8900
8950
9000
9050
9100
9150
9200
9250
9300
9350
9400
9450
Rs. b
n
Total Call Value Total Put Value
Nifty Open Interest (‘000 contracts)
Technical Indicators
0.8
1.0
1.2
1.4
23-J
an
25-J
an
27-J
an
29-J
an
31-J
an
2-F
eb
4-F
eb
6-F
eb
8-F
eb
10-F
eb
12-F
eb
14-F
eb
16-F
eb
18-F
eb
20-F
eb
22-F
eb
24-F
eb
26-F
eb
28-F
eb
2-M
ar
4-M
ar
6-M
ar
8-M
ar
10-M
ar
Nifty PCR Nifty PCR (30D avg)
FII Open Interest 3-2 3-3 3-4 3-5 3-9 Delta 3-10 Delta Delta
Index Futures 196 222 236 235 233 (1.5) 217 (16.4) (2.5)
Stock Futures 580 600 614 601 606 5.0 591 (15.7) (2.1)
Stock Options 13 21 25 29 30 1.2 31 0.3 (0.5)
Index Options 466 488 519 548 564 16.1 586 21.8 6.5
Total (Rs. Bn) 1255 1331 1393 1413 1434 20.9 1424 (10.0) 1.4
Top CompanyPrice
Change
OI
Change
Close
Price
(Rs. / sh)
JSW Energy Ltd 0.5% 2.2% 114
Colgate-Palmolive India Ltd 1.7% 2.0% 2,106
Aurobindo Pharma Ltd 0.9% 1.3% 1,103
Ranbaxy Laboratories Ltd 1.5% 0.5% 818
Indian Oil Corp Ltd 0.4% 0.1% 350
- - 0.0% -
- - - -
- - - -
- - - -
- - - -
Divi's Laboratories Ltd -0.6% 8.6% 1,762
Hindalco Industries Ltd -4.9% 6.1% 141
Yes Bank Ltd -3.8% 5.9% 824
Cairn India Ltd -1.8% 4.3% 235
GAIL India Ltd -4.2% 4.2% 386
Bank of India -2.9% 4.0% 223
Steel Authority of India Ltd -1.6% 3.7% 66
Aditya Birla Nuvo Ltd -3.1% 3.6% 1,634
IRB Infrastructure Developers -5.3% 3.4% 243
Reliance Pow er Ltd -4.5% 3.4% 58
Bharat Petroleum Corp Ltd -2% -8% 764
Union Bank of India -1% -5% 170
Rural Electrif ication Corp Ltd -3% -5% 342
Bharti Airtel Ltd -1% -5% 343
Kotak Mahindra Bank Ltd -3% -4% 1,365
Shriram Transport Finance Co L 0.6% -7.0% 1,195
Sun TV Netw ork Ltd 0.5% -4.2% 436
Dabur India Ltd 2.9% -4.1% 274
Dr Reddy's Laboratories Ltd 0.8% -4.0% 3,468
Petronet LNG Ltd 0.4% -3.8% 180
Lo
ng
Un
win
dS
ho
rt
Co
veri
ng
Lo
ng
Bu
ild
up
Sh
ort
Bu
ild
up
Nifty PCR
Max Pain Theory (based on Index Options) – Indicative Nifty closing for next Expiry
Page 6 Page 6
SPARK INDIA DAILY
11 March 2015
10.60
10.43
25.16
8.21
14.30
5.20
98.90
5.63
9.99
15.99
5.00
6.23
3.13
55.03
4.23
9.30
15.05
3.78
3.81
2.57
44.83
0 20 40 60 80 100 120
V 1.0 (Oct'13 - Jan'14)
V 1.1 (Jan'14 - Apr'14)
V 1.2 (Apr'14 to Aug'14)
V1.3 (Aug'14 to Sep'14)
v1.4 (Sep'14 to date)
v1.5 (Jan'15)
Total
Sensex BSE200 Spark
Spark Model Portfolio
C o mpanyB SE 200
Weights
Spark
Weights
M cap (R s.
B n)C M P
6M A vg (R s.
M n)
A bso lute 1 Yr
R eturn
F inancials - OW 29.6% 33.0% 28.7%
HDFC Bank Ltd 6.0% 2,653 1,059 1,992 45.4%
Kotak M ahindra Bank Ltd 4.0% 1,054 1,365 1,610 81.5%
IndusInd Bank Ltd 5.0% 474 895 729 92.3%
Power Finance Corp 3.0% 382 290 870 72.0%
Yes Bank Ltd 6.0% 344 824 2,319 119.0%
Federal Bank Ltd 3.0% 122 143 549 69.1%
Karur Vysya Bank 3.0% 71 588 92 89.2%
Cholamandalam Inv. 3.0% 82 568 68 135.4%
C o nsumer - OW 13.1% 17.0% 11.9%
Asian Paints Ltd 4.0% 779 813 1,290 69.4%
Dabur India Ltd 3.0% 482 274 338 60.4%
Bajaj Corp Ltd 2.0% 71 479 115 0.0%
Bata Ltd 3.0% 79 1,230 253 13.2%
Redington Ltd 2.0% 49 124 260 0.0%
Whirlpool Ltd 3.0% 86 681 114 230.3%
A uto - OW 10.8% 15.0% 8.0%
Tata M otors Ltd 4.0% 1,688 565 2,802 43.3%
M aruti Suzuki India Ltd 3.0% 1,109 3,671 1,134 0.0%
Hero M otocorp Ltd 3.0% 519 2,599 2,115 33.7%
Exide Industries Ltd 3.0% 151 178 498 52.4%
Wabco India Ltd 2.0% 104 5,493 42 182.1%
H ealthcare - UW 7.1% 6.0% 5.1%
Sun Pharma Ltd 4.0% 2,156 1,041 2,173 74.7%
Torrent Pharma 2.0% 185 1,092 99 104.9%
Info rmatio n T echno lo gy - UW 12.8% 6.0% 2.2%
Wipro Ltd 4.0% 1,630 660 1,164 20.5%
Cyient Ltd 2.0% 62 550 59 68.4%
Oil & Gas - UW 7.6% 6.0% 5.2%
BPCL Ltd 4.0% 552 764 1,180 86.9%
GSPL Ltd 2.0% 62 109 167 84.0%
Infrastructure - UW 10.7% 10.0% 13.8%
Gujartat P ipavav Port Ltd 3.0% 116 241 279 208.1%
Cummins India Ltd 2.0% 249 897 193 77.0%
Sadbhav Engineering Ltd 2.0% 61 357 78 301.7%
Shree Cement Ltd 3.0% 387 11,104 154 115.4%
Others 2.0% 1.8%
Kaveri Seed Ltd 2.0% 69 1,005 181 89.3%
C ash & Others 8.3% 5.0%
T o tal 100.0% 76.6%
Spark Portfolio returns vs. BSE 200 returns
Spark Returns
Spark Portfolio returns outperformance to BSE 200
0
50
100
150
Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15
%
Spark Portfolio BSE 200 INDEX
-20
0
20
40
60
Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15
%
Page 7 Page 7
SPARK INDIA DAILY
11 March 2015
Today’s News
Sector News
Macro RBI buys $12.2 billion from markets in January
Indian CAD for Q3 at 1.6 % of GDP
Lok Sabha clears Land Acquisition Bill
Natural rubber output in February drops 13.5%
China Feb producer price index slide shows deflation lurks
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Bldg. Materials Cheaper cement up for grabs on newly launched government portal
Cement, fertilizer companies disappointed over electricity duty
Page 8 Page 8
SPARK INDIA DAILY
11 March 2015
Today’s Announcements
Asian Paints Signs Memorandum of Understanding (MoU) with the Government of Andhra Pradesh
Dabur India Insider Trading
Today’s Announcements
Page 9
MCX Ltd. CMP
Rs. 1,200
Target
Rs. 1,080
Rating
SELL
Stock performance (%)
1m 3m 12m
MCX 42% 39% 132%
Sensex 1% 3% 31%
CNXIT 2% 12% 26%
Financial summary
Year ADTV (Rs. bn) Revenues (Rs. mn) EBITDA (Rs. mn) PAT (Rs. mn) EPS (Rs.) P/E(x) EV/EBITDA(x) ROE(%)
FY15E 223 2,493 1,020 1,213 23.9 50.3 51.5 10.3%
FY16E 297 3,108 1,617 1,680 33.0 36.4 31.9 13.2%
FY17E 402 3,916 2,173 2,196 43.1 27.8 23.2 15.9%
Rating: ◄► Target price: ◄► EPS: ◄►
Date Mar 11, 2015
Market Data
SENSEX 28710
Nifty 8712.05
Bloomberg MCX IN
Shares o/s 51mn
Market Cap Rs. 62bn
52-wk High-Low Rs. 1,290-425
3m Avg. Daily Vol Rs. 990mn
Index member BSE Midcap
Latest shareholding (%)
Promoters 0.0
Institutions 56.3
Public 43.7
Update Is commodity option a game changer for MCX? - Unlikely
In the union budget 2015-16, the Finance Minister announced the much anticipated merger of SEBI and FMC.
Given the powers accorded to SEBI, launching of Commodity Options and enabling FII to trade in Indian
commodity exchanges could get easier. In this note we explore the impact Commodity Options could have on
MCX. We believe commodity options market in India would be unlike other global markets. We are not changing
our estimates, but increase our P/E multiple to 25x given higher comfort in our ADTV estimates. We retain our
sell recommendation and caution investors that allowing only Commodity options and not allowing FII
participation could impact transaction revenues adversely.
Globally commodity options account for 20-30% of futures notional turnover. In markets such a LME it is very low at 3%
In India we believe Commodity options would cannibalise futures trading and become the primary instrument if CTT is
applied along the same principles of STT
Analysis of NSE F&O trading pattern post change in application of STT for options trading from notional turnover to
Option premium indicate a surge in options trading at the cost of futures. STT cost on trading is substantially lower in
Options as STT is charged only on option premium, whereas in futures STT is charged on contract value.
BSE announced its intention to launch commodity exchange that could be credible competitor given backing of
Deutsche Borse and latest technology platform. We note that BSE has been able to garner 40% market share in
currency derivatives in a period of 18 months.
We believe MCX’s would have to price options trading competitively as competition would offer it for free or at very low
cost. BSE’s pricing of Currency derivates is at 2% of NSE’s price.
Global exchanges such as CME / ICE charge on a per contract basis and not on option premium. Conversion of the
charges to “as percentage of option premium” indicates 15 – 30 bps as trading cost in comparison to 2bps charged by
NSE. We expect MCX pricing to be lower than other global exchanges.
At 2 bps of trading cost MCX would need to have an ADTV of Rs. 640bn to make incremental transaction revenues of
Rs. 500mn.
SRIVATHSAN RAMACHANDRAN, CFA [email protected] +91 44 4344 0039
AISHWARIYA KPL [email protected] +91 44 4344 0040
Page 10
MCX Ltd. CMP
Rs. 1,200
Target
Rs. 1,080
Rating
SELL
0
500
1000
1500
2000
2500
40,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ind
exed
Single stock futures Stock index futures Stock options Stock index options
30,000
Impact of STT on NSE volumes (First chart) and Turnover (Second chart)
Source: Company, Spark Capital
Analysis of NSE suggests options could become primary instrument
In 2008, STT on options contracts were reduced by changing the tax base from notional value of option
contract to option premium. No. of option contracts on NSE increased significantly (186%) in 2008 and
has been on a exponential growth since then, way higher than future growth. Today, India has one of the
highest index option trading
STT was introduced for both cash and derivative
markets for stock exchanges in 2004. Futures were
charged higher than the cash, to encourage investors
to hold stocks for long term. Options volumes were
weak till 2008 due to higher costs (Option cost + STT)
as taxes on both futures and options were charged on
notional principal
STT got
introduced
in Oct.2004
Index Options volume
increased ~300% in 2008 with
change in STT in options
… it still contributes ~ 45% of F&O revenues of NSE
Source: NSE, Spark Capital
Despite the sharp rise in Options Volume and Turnover..
Source: NSE, Spark Capital
0%
20%
40%
60%
80%
100%
FY08 FY09 FY10 FY11 FY12 FY13
No
tio
na
l T
urn
ov
er
Futures Options
0%
20%
40%
60%
80%
100%
FY08 FY09 FY10 FY11 FY12 FY13
Reven
ue
Futures Options
Page 11
MCX Ltd. CMP
Rs. 1,200
Target
Rs. 1,080
Rating
SELL
Transaction charges in options across global exchanges
Specifications US$/
COMEX/NYMEX – Cost per contract per side
Gold Options 100 Troy ounces 2.2
Silver Options 5,000 Troy ounces 2.2
Copper Options 25,000 Pounds 1.8
Brent Crude Oil Options 1,000 Barrels 1.0
Natural Gas Weekly 4 Options 10,000 MMBtu 1.0
LME - Per leg/ per side/ per lot
Futures, Carries, Traded options and TAPOs 0.9
ICE – Per contract
Gold / Silver options 100 / 5000 troy ounces 0.6
Energy options 1.3
Assumed as for square off trades for a member
Globally options continue to be low as % of notional turnover (options & futures)
Source: Bloomberg, Spark Capital Research
Global Exchanges
Options account for 5 – 30% of total turnover in exchanges such as CME
/ ICE / LME
Moreover most volumes are only in near month contract only with low
market depth for other month contracts
Exchanges charge on “per contract basis” for F&O trades in both equity
and commodity markets unlike in India. In India exchange transactions
are on “Contract Value” or “Option premium”.
NSE’s option pricing is Rs. 200 per million for stock option premium and
Rs. 3 per million for currency option premium.
0%
10%
20%
30%
Jan/1
3
Fe
b/1
3
Mar/
13
Apr/
13
May/1
3
Jun/1
3
Jul/13
Aug/1
3
Sep/1
3
Oct/
13
Nov/1
3
Dec/1
3
Jan/1
4
Fe
b/1
4
Mar/
14
Apr/
14
May/1
4
Jun/1
4
Jul/14
Aug/1
4
Sep/1
4
Oct/
14
Nov/1
4
Dec/1
4
Jan/1
5
As %
of
no
tio
na
l tu
rno
ver
CME ICE Futures US LME
In Global exchanges options account only for small portion of turnover
Page 12
MCX Ltd. CMP
Rs. 1,200
Target
Rs. 1,080
Rating
SELL Financial Summary
FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E
Profit & Loss account Cash flows
Revenues 3,197 2,273 2,864 3,643 Cash from operating 385 1,663 1,866 2,848
Other Operating Income 209 220 244 273 Cash from investing 527 1,042 1,065 1,233
Total income 3,407 2,493 3,108 3,916 Cash from financing -1,133 -439 -609 -1,061
Softw are support charges 622 408 438 518 Free cash flow 326 1,623 1,806 2,788
Contribution to SGF 171 31 37 125 Key metrics
Others 1,499 1,284 1,210 1,265 Turnover (Rs. bn) 86,543 58,301 78,227 1,05,307
EBITDA 1,457 1,020 1,617 2,173 Agg. Charges 1.76 1.84 1.75 1.67
EBIT 1,114 770 1,423 2,008 Transaction revenues 3,053 2,144 2,736 3,515
Interest expense 11 15 - - Ratios(%)
Interest income 993 936 976 1,129 Revenue grow th -35% -27% 25% 26%
PBT 2,096 1,691 2,399 3,137 PAT grow th -49% -21% 38% 31%
Taxes 569 478 720 941 EBIT margins (%) 33% 31% 46% 51%
PAT 1,528 1,213 1,680 2,196 PAT margins (%) 45% 49% 54% 56%
Diluted EPS 30.1 23.9 33.0 43.1 ROE 13% 10% 13% 16%
Balance sheet ROCE 9% 6% 9% 11%
Share capital 510 510 510 510 ROIC 27% 20% 39% 71%
Reserves & surplus 10,931 11,704 12,775 13,910 Valuation metrics
SGF 1,720 1,898 2,083 2,373 O.shares (mn) 51 51 51 51
Other long term liabilities 449 449 449 449 Diluted shares 51 51 51 51
Total 13,610 14,561 15,818 17,242 Market cap 60,819 61,010 61,112 61,112
Net f ixed assets 1,735 1,531 1,397 1,292 EV 52,493 52,507 51,593 50,365
Other long term assets 413 413 413 413 P/E (x) 39.8x 50.3x 36.4x 27.8x
Cash and equivalents 14,183 16,449 18,771 21,791 EV/EBITDA (x) 36.0x 51.5x 31.9x 23.2x
Current assets 15,267 17,549 20,019 23,362 EV/Sales (x) 15.4x 21.1x 16.6x 12.9x
Margin deposits 2,585 3,656 4,566 6,006 P/BV (x) 5.3x 5.0x 4.6x 4.2x
Current liabilities 3,805 4,926 6,006 7,819 DPS 10 7 10 17
Total 13,610 14,561 15,818 17,242 Earning yield 2.5% 2.0% 2.7% 3.6%
Financial summary - standalone
Page 13
MCX Ltd. CMP
Rs. 1,200
Target
Rs. 1,080
Rating
SELL Financial Summary
0
200
400
600
800
1000
1200
1400
1600
1800
1-Jan-12 1-Jul-12 1-Jan-13 1-Jul-13 1-Jan-14 1-Jul-14 1-Jan-15
Historical Target
MCX
Report Date CMP (Rs.) TP (Rs.) Recommendation
16/Feb/15 860 860 Reduce
18/Nov/14 871 760 Sell
30/Sep/14 816 720 Sell
Page 14
MCX Ltd. CMP
Rs. 1,200
Target
Rs. 1,080
Rating
SELL Disclaimer
Spark Disclaimer
Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities and
infrastructure advisory services. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in the last five years. We
have not been debarred from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of registration been cancelled by SEBI at any point of
time.
Spark Capital has a subsidiary Spark Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered
with SEBI as Investment Advisor. Spark Capital has also an associate company Spark Infra Advisors (India) Private Limited which is engaged in providing infrastructure
advisory services.
This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should
be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of
companies referred to in this document.
Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies
referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This
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and/or its affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to
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material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal.
Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this
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deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit
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This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark
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Also, there may be regulatory, compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective
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or reliance on this report.
Absolute
Rating
Interpretation
BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year
horizon
ADD Stock expected to provide positive returns of >5% – <15% over a 1-year
horizon SELL Stock expected to fall >10% over a 1-year horizon
Page 15
MCX Ltd. CMP
Rs. 1,200
Target
Rs. 1,080
Rating
SELL
Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency,
Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:
Disclosure of interest statement MCX
Analyst financial interest in the company No
Group/directors ownership of the subject company covered No
Investment banking relationship with the company covered No
Spark Capital’s ownership/any other financial interest in the company covered No
Associates of Spark Capital’s ownership more than 1% in the company covered No
Any other material conflict of interest at the time of publishing the research report No
Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:
Managing/co-managing public offering of securities
Investment banking/merchant banking/brokerage services
products or services other than those above
in connection with research report
No
Whether Research Analyst has served as an officer, director or employee of the subject company covered No
Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research
analyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.
Additional Disclaimer for US Institutional Investors
This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under
the Securities Exchange Act of 1934, as amended) only by Decker and Co, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act
of 1934, as amended). Decker and Co accepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities discussed in
the research material may do so through Decker and Co. All responsibility for the distribution of this report by Decker and Co, LLC in the US shall be borne by Decker and Co,
LLC. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if Spark Capital
Advisors (India) Private Limited or Decker and Co, LLC is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should
satisfy yourself before reading it that Decker and Co, LLC and Spark Capital Advisors (India) Private Limited are permitted to provide research material concerning investment
to you under relevant legislation and regulations;
Cont’d