Getting ready to march post corrective blip - ICICI Direct

 
Getting ready to march post corrective blip - ICICI Direct
Technical Strategy
                           Getting ready to march post corrective blip…
                                                                                                                    May 2019

Research Analysts

Dharmesh Shah                           Nitin Kunte, CMT                     Ninad Tamhanekar, CMT
dharmesh.shah@icicisecurities.com       nitin.kunte@icicisecurities.com      ninad.tamhanekar@icicisecurities.com

Pabitro Mukherjee                       Vinayak Parmar
pabitro.mukherjee@icicisecurities.com   vinayak.parmar@icicisecurities.com

                                                            April 24, 2019
Getting ready to march post corrective blip - ICICI Direct
Getting ready to march post corrective blip…

  Technical Outlook..                                                           NSE Nifty Weekly Bar Chart

                                                                                                                                                                                                                                        TECHNICAL SECTORAL
The Nifty scaled new lifetime highs (11856), on expected lines in                                                                                                                                     Resistance @ 11856

                                                                                                                                                                                                                                                    PICK
April 2019, followed by consolidation (11850–11550), which is a
normal phenomenon after 18.5% rally in the past six months.

                                                                                                                                                                                                                                MONTHLY MOMENTUM
Anxiety around General Elections has always triggered volatility in
the past. However, markets always steer clear of it once anxiety
settles down, irrespective of the outcome. During the past three
General Elections we observed, Nifty exhibits a robust performance                                                                                                                                       Key support
post the election phase, which makes us confident that volatility                                                                                                                                         threshold
                                                                                                                                                                                                          @10900
owing to major event would present a good opportunity to build a
long term portfolio, as we do not foresee the Nifty going below its
key support base of 10900 around election outcome. Therefore,
investors should start accumulating quality midcap stocks in a
staggered manner.
Over the past 14 sessions Nifty Midcap retraced 78.6% retracement
of the preceding five session rally. A shallow price correction along
with elongated time consolidation form key ingredients of a healthy
corrective phase and reaffirms the overall bullish price structure.

                                                                                                                                                                                                                                                               EquityResearch
                                                                                                                                                                                                                                                                      Research
  Sectors likely to outperform on Relative Strength Model                       Relative Rotation Graph: Cyclicals to outperform
  Realty stocks witnessed a sharp improvement on relative score
  while banking stocks consolidated along with the market while
                                                                                                                    40         Returns              Ranking                            Returns            Ranking
  maintaining its leadership role. We believe both these sectors will

                                                                                                                                                                                                                                                           Equity
  continue their outperformance in relative terms.                                                                  35

                                                                                                                    30
                                                                                                                                    Improving                                               Outperformers

                                                                                                                                                                                                                                                      – Retail
                                                                          -------- Potential Returns (%) --------

                                                                                                                    25
  The price structure of IT stocks remains positive. They are

                                                                                                                                                                                                                                                 – Retail
                                                                                                                                   Capital Goods,                                           Banks, Realty, IT
                                                                                                                    20
  resuming their fresh up move and are likely to outperform in                                                                       Pharma
                                                                                                                    15
  coming months.

                                                                                                                                                                                                                                     ICICI Securities
                                                                                                                    10

                                                                                                                     5
  Healthcare and capital goods stocks have seen an improvement

                                                                                                                                                                                                                               ICICI Securities
                                                                                                                     0
                                                                                                                                                                                  Market Performers
  in price structure. We expect these stocks to perform in the next                                                                Neutral
                                                                                                                     -5                                                               Oil & Gas, FMCG,
  leg of the up move.                                                                                                                   Auto                                                Metals
                                                                                                                    -10

                                                                                                                    -15
  After the recent consolidation, FMCG stocks are expected to
  resume their up move. They are likely to perform at par with the
                                                                                                                    -20       Returns               Ranking                           Returns            Ranking
                                                                                                                          1                    2                        3                        4                 5
  market.                                                                                                                                            -------- Technical Ranking --------
                                                                                                                                                    * Ranking improves from 1 to 5
Source: Bloomberg, ICICI Direct Research
April 24, 2019                                                  ICICI Securities Ltd. | Retail Equity Research                                                                                                             2
Election Year: Cyclicals to drive...

                 In two out of three occasions, the markets behaved indecisively five

                                                                                                                                                                                                            TECHNICAL SECTORAL
                                                                                                                                                 During seven months post elections, all
                 months prior to elections. In contrast, throughout the past three

                                                                                                                                                                                                                        PICK
                                                                                                                                                 sectors performed and clocked double
                 elections, both Nifty and Nifty 500 indices exhibited a robust                                                                  digit gains
                 performance seven months post the election phase with average

                                                                                                                                                                                                    MONTHLY MOMENTUM
                 returns of 27% and 33%, respectively

                                                                                 Sectoral Election Year Trend (Returns in %)                                  Universe: Nifty 500
                                                                                      2004                                 2009                                  2014
                        Sector's Nature                Sectors        5 Months Pre -     7 Months Post -    5 Months Pre -     7 Months Post -     5 Months Pre -    7 Months Post -
                                                                         Election           Election           Election           Election            Election          Election
                      Index                Nifty                            -8                  22                 26                43                  13                 15
                      Index                Nifty 500                        -6                  26                 23                53                  14                 21
                      Cyclical             Auto & Components                -12                 45                 16               120                  28                 80
                      Cyclical             BFSI                              0                  46                5                 70                   20                 43

                                                                                                                                                                                                                                   EquityResearch
                                                                                                                                                                                                                                          Research
                      Cyclical             Capital Goods                    -12                 67                6                 89                   23                 44
                      Cyclical             Cement                           -2                  67                10                69                   33                 53
                      Cyclical             Construction and Infra           -8                  63                37                112                  38                 28
                      Cyclical             Energy                           -11                 36                 52                58                  22                 14

                                                                                                                                                                                                                               Equity
                      Cyclical             Metals                           -25                 77                 34               123                  17                  -1

                                                                                                                                                                                                                          – Retail
                      Cyclical             Power                            -14                 52                 37                45                  13                 16

                                                                                                                                                                                                                     – Retail
                      Defensive            Consumer discretionary           -20                 83                 -5               106                  20                 36
                      Defensive            FMCG                             -5                  51                38                 82                   7                 27

                                                                                                                                                                                                         ICICI Securities
                      Defensive            IT                               -27                 55                 9                119                   8                 34

                                                                                                                                                                                                   ICICI Securities
                      Defensive            Pharmaceuticals                   1                  39                28                 89                  11                 31

                 During all three election years, pharma & BFSI have remained                                                        Among defensives, FMCG and pharma have
                 positive whereas auto, capital goods, construction and infra sectors                                                relatively outperformed five months prior to
                 have relatively outperformed during an election year                                                                elections. In contrast, consumer discretionary and
                                                                                                                                     IT have outperformed seven months post elections
Source: Bloomberg, ICICI Direct Research
April 24, 2019                                                        ICICI Securities Ltd. | Retail Equity Research                                                 Click here to go to top
                                                                                                                                                                                               2
NSE (Nifty): 11576
Nifty – Weekly Bar Chart                        Elongated up trend signifies firm grip of bulls, auguring well for next leg of up move
                                                                                                                                                 Technical Outlook

                                                                                                                                                                                                       TECHNICAL SECTORAL
                                                                                                             11760                       11856

                                                                                                                                                                                                                   PICK
                                                                                                                                                 o The outcome of the general election
                                                                                                                                                   2019 will have a significant bearing
                                                                                        11171                             18.5%
                                                                                                   18.2%                                           on the future course of market

                                                                                                                                                                                               MONTHLY MOMENTUM
                                                                                                                                                   direction. Thus, volatility ahead of
                                                                                                                                                   key event cannot be ruled out.
                                                                                                                               10585               However, we do not foresee the Nifty
                                                                                                                                                   sustaining below 10900 in this phase
                                                10985                                           9952                 10005
                                                                                                                                                 o Historically, elevated volatility during
                                                                                                                                                   General Elections have always
                                                                                                                                                   offered a good entry opportunity for
                                        8968                                                                                                       investors. Hence, investors should
                                                                                                                                                   start building a long term portfolio by
                                                                                                                                                   accumulating quality midcap stocks
                                                                                             Major support threshold at 11000 - 10900              in a staggered manner

                                                                                                                                                                                                                              EquityResearch
                                                                                                                                                                                                                                     Research
                                                                                             as it is:-
                                                                                              78.6% retracement of 10585–11856 at               o Structurally, the current rally (18.5%)
                                               7894                                              10858                                             off October 2018 low (10005) is
                                                                                              52 weeks SMA at 10920                               larger in magnitude compared to the
                                                                                              Upward sloping trend line 10820

                                                                                                                                                                                                                          Equity
                                                                                                                                                   March-August 2018 rally (18.2%). A
                                                                                                                                                   rally getting bigger in magnitude

                                                                                                                                                                                                                     – Retail
                                                                                                                                                   compared to preceding up moves is a
                    6826

                                                                                                                                                                                                                – Retail
                                                                                                                                                   sign of strength and indicates the
                                                                                                                                                   firm grip of bulls in the present
                                                                                                                                                   scenario

                                                                                                                                                                                                    ICICI Securities
                                                                                                                                                                                              ICICI Securities
                                                                                                                                                 o However, possibility of a temporary
                                                                                                                                                   breather cannot be ruled out to cool
                   Weekly RSI oscillator tilted downward amid sustaining above its nine period average, suggesting temporary breather
                                                                                                                                                   off the overbought situation, aiding
                                                                                                                                                   the index to form a higher base on
                                                                                                                                                   the larger degree chart

 Source: Bloomberg, ICICI Direct Research
 April 24, 2019                                                                ICICI Securities Ltd. | Retail Equity Research                                                         2
Shallow price retracement signifies inherent strength
 of broader market
Nifty Midcap 100 – Monthly Bar Chart                                                                                         14         Technical Outlook

                                                                                                                                                                                           TECHNICAL SECTORAL
                                                                                                                            Months

                                                                                                                                                                                                       PICK
                                                                                                                                        o The Nifty Midcap has undergone a
                                                                                                                                          secondary phase of consolidation after

                                                                                                                                                                                   MONTHLY MOMENTUM
                                                                                                                                          last month’s sharp up move (9%) post
                                                                                                                                          bouncing from its 14 month’s cycle
                                                                                                                                          low around 16000
                                                                                                   14
                                                                                                                                        o The current consolidation phase is
                                                                                                  Months
                                                                                                                                          seen as a healthy breather taken by
                                                                                                                                          bulls to gather steam before their
                                                                                                                                          northward journey
                                     14                        14          48 Months SMA                                                o In the process, over the past 14
                                    Months                    Months                                                                      sessions, the index has retraced 78.6%
                                                                                                         Midcap 100 - Daily Bar Chart     of the preceding five session rally. A
                                                                                                                  14 Days                 shallow price correction along with
                                                                                                                             Retraced     elongated time consolidation form the

                                                                                                                                                                                                                EquityResearch
                                                                                                                                                                                                                       Research
                                                                                                         5 Days              78.6%        key ingredients of a healthy corrective
                                                                                                                                          phase and reaffirm the overall bullish
                                                                                                                                          price structure
                                                                                                                                        o We believe the current corrective fall

                                                                                                                                                                                                            Equity
                                                                                                     Shallow retracement signifies        will find its feet around the 61.8%
                                                                                                     robust price structure               Fibonacci retracement of February-

                                                                                                                                                                                                       – Retail
                                                                                                                                          April rally (16045–18463), at 16970.

                                                                                                                                                                                                  – Retail
                                                                                                                                          Overall, this consolidation would set
                                       Monthly RSI oscillator hovering above its nine period average, suggesting positive bias            the stage for the next leg of the up

                                                                                                                                                                                      ICICI Securities
                                                                                                                                          move

                                                                                                                                                                                ICICI Securities
                                                                                                                                        o Meanwhile, elevated volatility amid
                                                                                                                                          General Election 2019 would offer
                                                                                                                                          bargain buy opportunities. Hence, we
                                                                                                                                          advise investors to focus on
                                                                                                                                          accumulating quality midcap stocks
                                                                                                                                          with improved earnings to ride the
 Source: Bloomberg, ICICI Direct Research
                                                                                                                                          next leg of the up move
 April 24, 2019                                                                  ICICI Securities Ltd. | Retail Equity Research                                            2
Consolidation at lifetime high; augurs well for next
 leg of up move …
Bank Nifty – Weekly Bar Chart                                                                                     Technical Outlook
                                                                                               Immediate hurdle

                                                                                                                                                                      TECHNICAL SECTORAL
                                                                                                  @ 30650

                                                                                                                                                                                  PICK
                                                                                                                  o The Bank Nifty consolidated in a
                                                                                                                    range after a stupendous rally of

                                                                                                                                                              MONTHLY MOMENTUM
                                                                     28388                                          more than 13% during March 2019 as
                                                                                                                    concerns regarding higher crude oil
                                            27652                                                                   prices surfaced. Last month’s
                                                                                                                    consolidation in a broad range of
                                                                                                                    29500-30650 has helped the index in
                                                                                        26617                       forming a higher base for the next leg
                                                                                                                    of the up move

                                                                             24240                                o We witnessed similar narrow range
                                                    23606                                                           consolidation during April 2014 ahead
                                                            Major long term support at 28300-28600 as it is:        of the General Election. However,
                                                                                                                    anxiety ahead of General Elections
                                                             50% retracement of (26617-30008)
                                                                                                                    have always offered a good buying

                                                                                                                                                                                             EquityResearch
             20575

                                                                                                                                                                                                    Research
                                                             The previous breakout area being the high
                                                              of Aug’18
                                                                                                                    opportunity for investors

                                                                                                                  o Volatility is likely to increase as we
                                                                                                                    approach the outcome of the General

                                                                                                                                                                                         Equity
                                                                                                                    Election. However, despite volatility,
                            17606                                                                                   we expect the Bank Nifty to hold

                                                                                                                                                                                    – Retail
                                              Weekly MACD inching upward, suggesting positive bias                  above the major support area of

                                                                                                                                                                               – Retail
                                                                                                                    28600-28300. Any corrective decline
                                                                                                                    towards the same will provide a fresh

                                                                                                                                                                   ICICI Securities
                                                                                                                    buying opportunity

                                                                                                                                                             ICICI Securities
                                                                                                                  o The Bank Nifty has reacted lower
                                                                                                                    twice from 30650 during April 2019,
                                                                                                                    which will continue to act as a hurdle
                                                                                                                    in the coming month

 Source: Bloomberg, ICICI Direct Research
 April 24, 2019                               ICICI Securities Ltd. | Retail Equity Research                                                         2
Sectoral merry-go-round: Cyclicals to drive

Relative Rotation Graph – Month on Month                                                    Outlook

                                                                                                                                               TECHNICAL SECTORAL
                                                                                                                                                           PICK
                                                                                             o Realty stocks witnessed a sharp
                                                                                               improvement on relative score while

                                                                                                                                       MONTHLY MOMENTUM
                                                                                               banking stocks consolidated along
                                                                                               with the market while maintaining
                                                                                               its leadership role. We believe both
                                                                                               these sectors will continue their
                                                                                               outperformance in relative terms
                                                                                             o The price structure of IT stocks
                                                                                               remains positive. They are resuming
                                                                                               a fresh up move. They are likely to
                                                                                               outperform in coming months
                                                                                             o Healthcare, capital goods stocks
                                                                                               have seen an improvement in price
                                                                                               structure. We expect these stocks

                                                                                                                                                                      EquityResearch
                                                                                                                                                                             Research
                                                                                               to perform in the next leg of up
                                                                                               move
                                                                                             o Oil & gas and metal stocks have
                                                                                               been consolidating after the recent

                                                                                                                                                                  Equity
                                                                                               up move. They are likely to remain
                                                                                               market performers in coming month

                                                                                                                                                             – Retail
                                                                                             o After recent consolidation, FMCG

                                                                                                                                                        – Retail
                                                                                               stocks are expected to resume their
                                                                                               up move. They are likely to perform

                                                                                                                                            ICICI Securities
                                                                                               at par with the market
                                                                                             o Auto stocks have witnessed relative

                                                                                                                                      ICICI Securities
                                                                                               strength during last month as they
                                                                                               moved into improving quadrant.
                                                                                               However, the current up move is
                                                                                               seen as a pullback after sharp fall.
                                                                                               Auto stocks are likely to enter a
                                                                                               base formation in the coming month
Source: Bloomberg, ICICI Direct Research
April 24, 2019                             ICICI Securities Ltd. | Retail Equity Research                                      2
Sectoral Indices – Relative to benchmarks

 Relative Strength Comparative: Evaluating the underlying strength

                                                                                                                                                                                                                TECHNICAL SECTORAL
                                                                                                                                                                                                                            PICK
  • To closely gauge the underlying strength in the respective sectors vis-à-vis the benchmark, we analyse the Relative Strength Comparative (RSC) indicator. As the name suggests, it is a
    comparative measure of strength vis-à-vis a benchmark or a sector

                                                                                                                                                                                                        MONTHLY MOMENTUM
  • While the RSC line is rising, the sector is outperforming the general market i.e. it is either rising faster than the benchmark in an up trending market or going down less, in a down
    trending market or even rising. While the RSC line is falling, the sector is underperforming the broad equity market. If the market is going up, the sector is going up less or may be even
    going down. If the market is going down when the RSC line is falling, the sector is going down more than the market. A flat RSC line indicates in line market performance going up or
    down by the same magnitude

  • The purpose of this exercise is to identify those sectors that are outperforming and avoid sectors that are underperforming

  NSE IT – Monthly Chart                                                   NSE IT Index vs. Nifty – Relative Comparison                               NSE IT Index

                                                                                                                                                                                                                                       EquityResearch
                                                                                                                                                                                                                                              Research
 Structural up trend intact
                                                                                                                                                      •   The index has formed a higher base
                                                                                                                                                          around 14000 after a strong up move in
                                                                                                                                                          CY18,      indicating         constructive

                                                                                                                                                                                                                                   Equity
                                                                                                                                                          improvement in price structure
                                                                                                                                                      •   The RSC line oscillating in a range

                                                                                                                                                                                                                              – Retail
                                                                                                                                                          indicates a breather in relative
                                                                                                                                                          outperformance

                                                                                                                                                                                                                         – Retail
                                                                                                                                                      •   Going ahead, we expect the technology
                                                                                                                                                          space to outperform in upcoming month of

                                                                                                                                                                                                             ICICI Securities
                                                                                                                                                          volatility as we approach General Election
                                                                                                                                                          outcome

                                                                                                                                                                                                       ICICI Securities
                                                                                                                                                      •   Technically, TCS, Tech Mahindra, HCL
                                                                                                                                                          Tech, FSL remain robust on the price
                                                                                                                                                          structure front

 Source: Bloomberg, ICICI Direct Research
April 24, 2019                                                      ICICI Securities Ltd. | Retail Equity Research                                                                              8
Sectoral Indices – Relative to benchmarks

BSE Capital Goods – Monthly Chart               BSE CG vs. Sensex – Relative Comparison                       BSE Capital goods Index

                                                                                                                                                                          TECHNICAL SECTORAL
                                                                                                                                                                                      PICK
                                                                                                              •    The index has maintained higher high-low
                                                                                                                   formation after bouncing from key long

                                                                                                                                                                  MONTHLY MOMENTUM
                                                                                                                   term trend line support, indicating
                                                                                                                   resumption of up trend
                                                                                                              •    The RSC line, however, is languishing
                                                                                                                   below 0.50 levels where we may expect it
                                                                                                                   to bottom out and resume outperformance
                                                                                                                   in coming months
                                                                                                              •    Going ahead, we expect the capital goods
                                                                                                                   index to extend its rally towards 20000
                                                                                                              •    L&T, Kalpataru Power and KEC are looking
                                                                                                                   structurally positive on price charts

                                                                                                                                                                                                 EquityResearch
                                                                                                                                                                                                        Research
  BSE Oil & Gas – Monthly Chart                 BSE Oil & Gas vs. Sensex – Relative Comparison            BSE Oil & Gas Index

 Index expected to form higher base
                                                                    Relative ratio likely to bottom out

                                                                                                                                                                                             Equity
 above14000 and resume rally                                                                              •       The March-April rally has resulted in faster
                                                                                                                  retracement of the last falling segment
                                                                                                                  indicating a positive turnaround. We expect

                                                                                                                                                                                        – Retail
                                                                                                                  the index to hold above 14000 and

                                                                                                                                                                                   – Retail
                                                                                                                  eventually rally in coming months towards
                                                                                                                  16500-17000

                                                                                                                                                                       ICICI Securities
                                                                                                          •       The RSC line is placed at lower band of
                                                                                                                  rising channel, and is likely to see an

                                                                                                                                                                 ICICI Securities
                                                                                                                  outperformance in coming months aided by
                                                                                                                  positive price structure
                                                                                                          •       Structurally, gas distributors like MGL are
                                                                                                                  expected to do well

 Source: Bloomberg, ICICI Direct Research
April 24, 2019                              ICICI Securities Ltd. | Retail Equity Research                                                               9
Sectoral Indices – Relative to benchmarks

  NSE FMCG– Monthly Chart                              NSE FMCG Index vs. Nifty – Relative Comparison               NSE FMCG Index

                                                                                                                                                                              TECHNICAL SECTORAL
                                                                                                                                                                                          PICK
   Elongated consolidation augurs
   well for larger up trend                                                                                     •     The index is undergoing a healthy
                                                                                                                      consolidation while stock specific

                                                                                                                                                                      MONTHLY MOMENTUM
                                                                                                                      performances are expected to continue
                                                                                                                •     In relative terms, we expect the sector to
                                                                                                                      perform in tandem with benchmark
                                                                                                                •     Structurally, ITC, Marico, Nestlé are
                                                                                                                      looking positive on price chart while
                                                                  On relative terms, sector likely to perform         Hindustan Unilever and Colgate Palmolive
                                                                                                                      are placed at support levels offering
                                                                  at par with benchmark                               favourable risk-reward set up
                                                                                                                •     Among consumer discretionary space,
                                                                                                                      Havells, Voltas and Supreme Ind. are
                                                                                                                      looking structurally positive

                                                                                                                                                                                                     EquityResearch
                                                                                                                                                                                                            Research
  BSE Realty – Monthly Chart                           BSE Realty vs. Sensex – Relative Comparison                  BSE Realty Index

                                                                                                                                                                                                 Equity
           Falling channel breakout augurs well                                                                 •    The index took a breather after sharp rally
           for structural up trend                                                                                   in March 2019, making market healthy

                                                                                                                                                                                            – Retail
                                                                                                                •    The RSC line is seen pointing higher after

                                                                                                                                                                                       – Retail
                                                                                                                     triple bottom indicating relative out
                                                                                                                     performance

                                                                                                                                                                           ICICI Securities
                                                                                                                •    Going ahead, we expect the real estate
                                                                                                                     space to extend its outperformance backed

                                                                                                                                                                     ICICI Securities
                                                                                                                     by broad based participation and volatility
                                                                                                                     around election results would offer
                                                                                                                     incremental buying opportunity
                                                                                                                •    Oberoi Realty, Godrej Properties, Phoenix
                                                                                                                     Mills are looking structurally positive while
                                                                                                                     Brigade Enterprises and Sobha offers
                                                                                                                     favourable risk-reward set up
 Source: Bloomberg, ICICI Direct Research
April 24, 2019                                    ICICI Securities Ltd. | Retail Equity Research                                                            10
Sectoral Indices – Relative to benchmarks

  BSE Metal – Monthly Chart                                          BSE Metal vs. Sensex– Relative Comparison                BSE Metal Index

                                                                                                                                                                                       TECHNICAL SECTORAL
                                                                                                                                                                                                   PICK
                Early signs of revival
                                                                                                                          •     The Metal Index maintained higher high-
                                                                                  Relative underperformance to continue         low on monthly scale amid stock specific

                                                                                                                                                                               MONTHLY MOMENTUM
                                                                                                                                activity in April 2019
                                                                                                                          •     The RSC line, however, continues to head
                                                                                                                                south,    highlighting   the     relative
                                                                                                                                underperformance of the metals space
                                                Higher low at                                                             •     Going ahead, we expect the Metal Index
                                            61.8% retracement                                                                   to form a base while the ferrous space is
                                                                                                                                expected to do well. However, in relative
                                                                                                                                terms, the sector is likely to continue its
                                                                                                                                underperformance
                                                                                                                          •     We like Tata Steel and Jindal Steel &
                                                                                                                                Power from risk-reward perspective

                                                                                                                                                                                                              EquityResearch
                                                                                                                                                                                                                     Research
  NSE Pharma– Monthly Chart                                          NSE Pharma Index vs. Nifty – Relative Comparison         NSE Pharma Index

                                                                                                                                                                                                          Equity
                                                                                                                          •    The Pharma index bounced back from its
                                                                                                                               CY18 after forming triple bottom

                                                                                                                                                                                                     – Retail
                                                                                                                          •    The RSC line is still trending down

                                                                                                                                                                                                – Retail
                                                                                                                               indicating relative under performance of the
                                                                                                                               sector

                                                                                                                                                                                    ICICI Securities
                                                                                                                          •    Going ahead, we expect the pharma space
                                                                                                                               to see a decent pullback after base

                                                                                                                                                                              ICICI Securities
                                                                                                                               formation over the past six months. We
                                                                                                                               expect the index to head towards 10000
                                                                                                                          •    Stocks like Glenmark Pharma, Lupin, Suven
                                                                                                                               Lifescience, Hikal    remain structurally
                                                                                                                               positive

 Source: Bloomberg, ICICI Direct Research
April 24, 2019                                                  ICICI Securities Ltd. | Retail Equity Research                                                       11
Sectoral Indices – Relative to benchmarks

  BSE Auto – Monthly Chart                       BSE Auto vs. Sensex – Relative Comparison                BSE Auto Index

                                                                                                                                                                  TECHNICAL SECTORAL
                                                                                                                                                                              PICK
                                                                                                      •    The index continues to form a lower high
                                                                                                           low sequence indicating well defined down

                                                                                                                                                          MONTHLY MOMENTUM
                                                                                                           trend. The RSC line remains in a sharp
                                                                                                           down     trend     highlighting    relative
                                                                                                           underperformance
                                                                                                      •    The index has corrected 50% from its highs
                                                                                                           over the past year, which has rendered
                                                                                                           prices to the oversold trajectory. With a
                                                                                                           weak price structure and oversold
                                                                                                           readings, we expect the sector to trade in
                                                                                                           a range and relatively under perform
                                                             Relative under performance to continue
                                                                                                      •    We expect Maruti Suzuki, Hero MotoCorp
                                                                                                           to offer a favourable risk reward. They are
                                                                                                           expected to see a pullback

                                                                                                                                                               ICICI Securities
                                                                                                                                                         ICICI Securities       – Retail
                                                                                                                                                                           – Retail      EquityResearch
                                                                                                                                                                                     Equity     Research
 Source: Bloomberg, ICICI Direct Research
April 24, 2019                              ICICI Securities Ltd. | Retail Equity Research                                                      12
Forthcoming Economic Event Calendar

                                                                                                                                                                  TECHNICAL SECTORAL
                                                                                                                                                                              PICK
                          Date                           Event                         Date                                           Event
                          US                                                           China

                                                                                                                                                          MONTHLY MOMENTUM
                          1-May            FOMC Rate Decision (Upper Bound)            2-May                                 Caixin China PMI Mfg
                          1-May            FOMC Rate Decision (Lower Bound)            6-May                             Caixin China PMI Composite
                          9-May                  Initial Jobless Claims                10-May                                New Yuan Loans CNY
                          9-May                    Continuing Claims                   15-May                                   Retail Sales YoY
                          10-May                     CPI MoM/YoY                       16-May                               New Home Prices MoM
                          15-May               Industrial Production MoM               16-May                           Industrial Production YTD YoY
                          21-May               Existing Home Sales MoM                 20-May                          FX Net Settlement - Clients CNY
                          30-May                 GDP Annualized QoQ                    27-May                                 Industrial Profits YoY
                          31-May                  PCE Deflator MoM                     30-May                            Swift Global Payments CNY

                                                                                                                                                                                         EquityResearch
                                                                                                                                                                                                Research
                          31-May                 U. of Mich. Sentiment                 31-May                                 Manufacturing PMI
                          India                                                        UK
                          2-May                  Nikkei India PMI Mfg                  1-May                          Markit UK PMI Manufacturing SA
                          6-May                Nikkei India PMI Services               2-May                          Markit/CIPS UK Construction PMI

                                                                                                                                                                                     Equity
                          10-May                Industrial Production YoY              2-May                             Bank of England Bank Rate

                                                                                                                                                                                – Retail
                          13-May                        CPI YoY                        10-May                               Industrial Production YoY

                                                                                                                                                                           – Retail
                          15-May                 Wholesale Prices YoY                  22-May                          Retail Sales Ex Auto Fuel MoM
                          31-May                        GDP YoY                        23-May                            CBI Retailing Reported Sales

                                                                                                                                                               ICICI Securities
                          31-May                Fiscal Deficit INR Crore               31-May                               GfK Consumer Confidence

                                                                                                                                                         ICICI Securities
Source: Bloomberg, ICICI Direct Research
April 24, 2019                                                             ICICI Securities Ltd. | Retail Equity Research
Notes to RRG Charts......

  In this section, we focus on the relative performance of the BSE sectoral indices. The adjacent scatter chart highlights the relative performance of various sectors of the BSE relative to the

                                                                                                                                                                                                              TECHNICAL SECTORAL
  Sensex with the y-axis plotting the relative price momentum and the x-axis plotting the relative price. The chart is then subdivided into four quadrants. The details of each quadrants has been

                                                                                                                                                                                                                          PICK
  explained in the notes at the end of the report.

                                                                                                                                                                                                      MONTHLY MOMENTUM
  Leadership quadrant: Top right is “Leadership” quadrant, which represents a sector that has strengthened in relative price and momentum vis-à-vis the Sensex.

  Weakening quadrant: Bottom right is the “Weakening” quadrant where the relative price of a sector has started to deteriorate and momentum has started to slow.

  Lagging quadrant: Bottom left is the “Lagging” quadrant where the relative price of a sector has become negative with momentum suggesting underperformance vis-à-vis the benchmark.

  Improving quadrant: Top left is the “Improving” quadrant where the relative price trend of the sector has started to rise with momentum.

                                                                                                                                                                                                           ICICI Securities
                                                                                                                                                                                                     ICICI Securities       – Retail
                                                                                                                                                                                                                       – Retail      EquityResearch
                                                                                                                                                                                                                                 Equity     Research
April 24, 2019                                                       ICICI Securities Ltd. | Retail Equity Research                                                                           14
MOMENTUM PICK
Pankaj Pandey                  Head – Research                    pankaj.pandey@icicisecurities.com

                                                                                                      ICICI Securities – Retail Equity Research
                               ICICI Direct Research Desk,

                               ICICI Securities Limited,

                               1st Floor, Akruti Trade Centre,

                               Road No 7, MIDC,

                               Andheri (East)

                               Mumbai – 400 093

                               research@icicidirect.com

April 24, 2019   ICICI Securities Ltd. | Retail Equity Research                                  15
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                                                                                                                                                                                                                                                                                            MOMENTUM PICK
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April 24, 2019                                                                                      ICICI Securities Ltd. | Retail Equity Research                                                                                                                               16
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