Gold & Precious Metal Chartbook The tougher part of the trend:: Credit Suisse

Core Themes
• Gold has collapsed following the completion of a medium-term top in April.
• Our core target remains $1157/54, which has nearly been hit.
• Momentum indicators are now warning of a rebound.
• Strength though will remain seen as corrective.
• Positioning data suggest the market is now neutral.
• Lower US inflation expectations are easing near term.
• The USD rally approaches tougher resistance.
• Gold stocks can often turn first, but have yet to base.
• We stay bearish Silver, but momentum is similarly tiring.
• Platinum continues to outperform.
• Palladium stays sideways.

L&T Finance Holdings- Strong AUM growth offset by credit cost increase :: JPMorgan

LTFH 1Q earnings at Rs1.45B, up 20% Y/Y, were below expectations, with
high credit costs (+57% Y/Y) offsetting strong NII growth (33% Y/Y). AUM
growth for the Q was strong at 31% Y /Y, aided by Infra book and rural
financing. Disbursements continue to remain sluggish. Asset quality witnessed
a deterioration in the Jun-Q. Overall GNPA levels increased to 2.54% (vs.
2.03% in Q4) partly due to seasonality in retail business; while there is also
increased stress in CV/CE segment and corporate/infra assets. Credit costs
were up by 50-90bps Y/Y across infra/retail biz and are expected to remain
elevated near term given the overall macro. Further, recent liquidity
tightening measures by RBI pose a downside risk to margins. Maintain N.

Low returns dent appeal -HDFC Life Guaranteed Pension Plan :Business Line

Endowment policies are not ideal retirement vehicles due to their low sum assured, high premiums and stringent surrender charges.

After a hiatus, insurance companies are once again launching deferred annuity products. Only this time, traditional endowment plans are being showcased as an ideal way for you to derive a pension, after you retire.

HDFC Life Guaranteed Pension Plan is one such policy. Premiums can be paid for 5, 7 or 10 years and the total term of the policy is 10-20 years. So you can, for example, pay premiums for 7 years, while the policy period is 20 years.

Like many traditional products there are ‘guaranteed’ additions made for every complete year. There is also a vesting addition made depending on the policy term.

We have analysed its features and suggest whether you should put your money into the policy for retirement pension purposes.

Hero Motocorp - 1QFY14 Review: Higher tax rates offset operating margin gains; re-iterate UW :: JPMorgan

 HMCL’s reported 1Q PAT at Rs.5.5B (-11% y/y) was below our
estimates. While the EBITDA margin (+100bp q/q) surprised, as the
other expenditure cost ratio declined -100bp q/q, tax rate increased
sharply to 26.9% (as the exemptions from the Uttarakhand plant have
partially expired). Our view: We re-iterate our UW stance on Hero
Motocorp given that: i) industry growth outlook remains weak, ii)
scooters are gradually expanding in the product mix, and iii) competition
is intensifying across segments.

Weak quarter LTFH :: Religare Research

Weak quarter
LTFH reported weak results for both infrastructure and retail & corporate
finance businesses. While NIMs remained stable in the retail & corporate
business, advances growth was subdued and asset quality remained under
pressure (GNPLs/NNPLs up 89bps/72bps QoQ). PAT for the infrastructure
finance business grew 3% YoY as NIMs declined QoQ and provisions were
high. A sharp increase in wholesale rates and a change in the loan mix
could put further pressure on NIMs. Maintain HOLD.

Why ‘employee unique identification number’ matters :Business Line

In accordance with Securities and Exchange Board of India and Association of Mutual Funds in India guidelines, it is now mandatory to specify the details of the Employee Unique Identification Number (of the sales person involved in the relevant sale/marketing of mutual fund products) along with the AMFI Registration Number of the distributor and the sub-broker, if any, in mutual fund scheme application forms.

What is EUIN?

EUIN is a unique alpha numeric identity number allotted by AMFI to every employee, relationship manager or sales person of a distributor who interacts with investors for the sale of mutual fund products. EUIN is in addition to the ARN allotted to each distributor. It is also issued to individual and sole proprietorship ARN holders in their individual capacity as persons selling mutual fund products. Thus, while an ARN identifies a distributor, EUIN identifies the sales person who interacts with the investor.

The EUIN of such sales persons is to be disclosed on the Mutual Fund Scheme application forms/transaction requests along with the ARN of the distributor.

The principle is that EUIN should be provided for transactions that are advisory in nature, i.e. when an investment is made by an investor based on the advice provided by an employee, relationship manager, sales person of a distributor or an independent financial advisor (IFA).

What is the objective of introducing EUIN?

The aim is to identify the sales persons involved in selling mutual fund products, when investors invest through a distributor. This will help identify those involved in cases of mis-selling. This unique number also would help track mutual fund sales persons even in case of change in employment from one distributor to another.

Where should the EUIN be indicated?

Necessary provision for mentioning the EUIN (in addition to the capturing of ARN code/sub-broker code) of the employees is available in new application/transaction forms.

Can I leave the EUIN box blank?

The EUIN can be left intentionally blank if an investor has not received any advice on the investment/transaction from the distributor. In such a case, investors should sign an “execution only” declaration on the application form. The declaration would be as below:

I/We hereby confirm that the EUIN box has been intentionally left blank by me/us as this is an “execution-only” transaction without any interaction or advice by the employee/relationship manager/sales person of the above distributor or notwithstanding the advice of inappropriateness, if any, provided by the employee/relationship manager/sales person of the distributor and the distributor has not charged any advisory fees on this transaction.

What are the transactions for which EUIN is applicable?

The EUIN is to be mentioned for all kinds of purchase transactions, such as fresh purchases, additional purchases, switch-ins and new registrations of systematic investment and transfer plans (SIP/STP). In case of SIP/STP triggered transactions, EUIN quoted at the time of SIP/STP registration will be carried forward for subsequent instalments.

EUIN is not applicable for dividend reinvestments, bonus units, redemption and systematic withdrawal plan (SWP) registration.

(Contributed by CAMS Viveka, the Investor Education initiative of CAMS. Views expressed are general practices in the MF industry and may vary on a case-to-case basis).

Sintex Industries: Higher-than-anticipated capex implies depressed ROCE, could delay any re-rating of the name :: Nomura

Downgrade to Neutral, TP scaled back to INR39
We downgrade Sintex to Neutral, as we scale back average FY14-15F
EBITDA by ~16% and cut our target EV/EBITDA to 4.0x (vs 4.8x earlier).
We believe that incremental capex (partly related to the spindle project)
will lead to a 260bp y-y decline in FY14F pre-tax ROCE (vs our earlier
anticipated increase) and delay any re-rating of the stock. Current
valuation at FY14F EV/EBITDA of 4.9x is in line with the past one-year
average trading multiple of 4.8x

Kotak Mahindra Bank (KTKM.BO) Results: Caution Out, Bear In  Citi,

Kotak Mahindra Bank (KTKM.BO)
Results: Caution Out, Bear In
 A beat...but actually beating a retreat — It’s a strong P&L quarter and a bad BS
quarter. But the key takeaway/guidance is management’s almost bearish big picture
view; loan growth guidance cut to 15% (20-30%), credit costs up to 60bps (40-45bps),
GDP outlook – 5% almost a best case and cautious on RBI’s recent moves (high risk of
rising rates, growth likely to suffer). Now, the macro bear amongst the private banks.
 BS: Some pain, sloth and not ready to risk — The miss – a relatively large corporate
asset brings asset quality strain, growth is held back (more CV/CE) though still at 20%,
but most importantly, management guides down decisively on growth (15%) and the
broader economic outlook. There should not be more material/lumpy asset quality
pressures (nothing brewing for now), its retail over corporate assets but as an overlay,
it’s now risk over growth / return.
 P&L: Looks pretty good — Kotak has recorded a strong 42% yoy profit growth, and
it’s a good mix: margins are up a bit, fee income is strong (+29%), operating costs
under check and there’s a substantial trading boost. There’s offset in sharply higher
credit costs; but the qtr’s P&L is good – helped by some flirting with fixed income
trading, and gains of easy liquidity. This trading / liquidity party though may be over.
 Market Turmoil – pain, but seems largely ok — Kotak is – theoretically at least –
more vulnerable to the current market turmoil; wholesale funding, recent fixed income
trading bias and relatively market sensitive. While there probably will be some bond
trading pain (long positions halved before RBI move – but still there); mgmt suggests
they are liquidity surplus, so no big squeeze here. This should only boost its reputation
as a good risk manager – but the P&L will not be as good as this qtr.
 You’re playing safety, P&L and a diversified biz…not growth or optimism — The
last time there was a problem in the system (GFC), Kotak effectively shut shop. This
time, it’s keeping the shutters up – will stay in the game, focus on the P&L, stay away
from all things risky and lag peers in growth. This should keep it and investors safe –
probably the safest in the pvt. banks system. So Kotak looks good if things get bad, but
it won’t look so nice if things get better. Maintain Neutral.

MindTree (MINT.BO) Strong Quarter; Decent Outlook  Citi

MindTree (MINT.BO)
 Strong Quarter; Decent Outlook
 Top mid-cap IT pick; Raise TP to Rs. 1,100 — Mindtree remains our top mid-cap
sector pick given (a) Good revenue growth trajectory (+4% qoq in Q1) – expect 13%
yoy growth in FY14; (b) Big beneficiary of INR depreciation – management confident of
flattish margins at constant currency in Q2 despite wage hikes, and currency benefits
will flow (+40-50bps per 1% depreciation in INR); (c) Valuations of ~9x FY14E.
 Good start to FY14 — Mindtree delivered ~4% qoq growth (Citi exp: 3% qoq) with
EBITDA margins of 18.4% (down 60 bps qoq, Citi exp: 18.1%). Net profit at Rs. 1.35b
(Citi exp: Rs. 1.15b) also benefitted from high forex gains. Growth was led by IT
Services - BFSI and manufacturing/retail verticals and US geography. PES revenues
increased marginally by ~1% qoq. Mindtree signed deals of ~$95mn in the quarter.
 Outlook for Q2 — Management expects good growth to continue into Q2 with margins
remaining stable at constant currency. The negatives of wage hike and significant
campus hiring will be offset by growth and lower visa costs qoq. Part of the INR
benefits will likely flow through as margin gains – although they could partly be offset by
forex losses (~$5m if INR remains at current levels, as per the management).
 Other key takeaways — (a) Hiring was strong with addition of ~700 employees qoq.
(b) Attrition on a LTM basis was 12.4%, lowest level in the past 3 years. (c) DSOs
increased to 77 days from 70 in Q4 – management suggested that it was a slippage on
collections and there was no concern on quality of receivables. (d) PES (~30% of rev)
now reorganized as a separate 'Hi-Tech' vertical to enable cross-selling of services.
 Raise earnings by ~14%; trim multiple marginally — We raise earnings by ~14% for
FY14E/FY15E on account of (a) Significant beat in 1Q – on revenues/margins/forex;
(b) Good revenue momentum and hiring; (c) INR benefits flowing through into margins.
However, we trim our multiple from 11x to 10.5x (~30% discount to HCLT’s target
multiple) given high sensitivity to currency, which remains volatile.