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MOSL: Morning India (14/December/18)-1. India Strategy (Crude turning from a headwind to a tailwind); 2. Fund Folio (Indian Mutual Fund Tracker); 3. JSW Steel (Vijaynagar plant visit); 4. South Indian Bank (Ret

MOrning India (14/December/18): 1. India Strategy (Crude turning from a headwind to a tailwind); 2. Fund Folio (Indian Mutual Fund Tracker); 3. JSW Steel (Vijaynagar plant visit: The big getting bigger); 4. South Indian Bank (Retail segment gaining focus)

 

Today’s top research theme

India Strategy: Crude turning from a headwind to a tailwind; Bodes well for Indian macros

• Brent crude oil prices have corrected by 30% since Oct'18, while the INR has bounced back from the lows of INR74 per dollar to ~INR71.6 now. Almost ~85% of India's crude oil demand is imported, and thus, any change in the crude oil prices impacts key macro variables like CAD, fiscal deficit and inflation.
• The rise in crude oil prices has impacted the margins of sectors like Consumer/Auto/Cement in 1HFY19 and also raised the bogey of fuel price regulation for the OMCs, resulting in a sharp correction in the stock prices. Thus, cooling crude oil prices does provide a cushion for margins of companies in these sectors.
• We believe that Financials also benefit indirectly from lower oil prices, given the cool off in bond yields, easing liquidity and potential lower inflation trajectory.
• Key beneficiaries: OMCs, Pidilite, Asian Paints, HUL, GCPL, Maruti, Indigo, SH Kelkar and tyre companies. Indirect Beneficiaries: Financials [Our top ideas: ICICI Bank, Federal Bank, HDFC, LIC HF, and MMFS].

Piping hot news

Government mulls additional Rs 30,000 crore capital infusion in PSU banks

• The government is considering additional capital infusion of up to Rs 30,000 crore in public sector banks as they have been unable to raise required funds from the markets, sources said.