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MOSL: Morning India (14/June/18): 1. India Strategy (Sensex reconstitution); 2. TCS; 3. Ecoscope (a. Is US economic recovery really maturing?; b. CAD widens to 1.9% of GDP in FY18); 4. India Life Insurance

MOrning India (14/June/18): 1. India Strategy (Sensex reconstitution: Upgrade in FY19E EPS); 2. TCS; 3. Ecoscope (a. Is US economic recovery really maturing?; b. CAD widens to 1.9% of GDP in FY18); 4. India Life Insurance

 

Today’s top research theme

India Strategy: Sensex reconstitution – Weight of Metals to increase 130bp to 2.6%; Healthcare to hit eight-year low

• The S&P BSE Sensex composition is all set for a reshuffle on Monday, June 18, 2018. Vedanta will replace Dr Reddy's Labs. We analyze how these changes will impact the earnings and alter the weights of various sectors.
• Vedanta will be included in the benchmark, with weight of 1.3%, taking Metals' weight to 2.6% (+130bp). With this inclusion, the Metals sector will have two stocks in the benchmark (Tata Steel having 1.3% weight).
• With the exit of Dr Reddy's Labs (weight: 0.8%), Healthcare stands to lose the most in terms of weight (-70bp to 1.7%). Earlier, in December 2017, Cipla and Lupin were excluded from the benchmark.
• Other losers include Private Banks (-20bp), Technology (-10bp), Consumer (10bp), and Autos (-10bp).
• The aggregate weight of the existing Sensex stocks will decline by 50bp post the reshuffle.
• Sensex EPS for FY19/FY20 will see an upgrade of 1.7%/1.8%, primarily due to a higher increase in free float PAT (+2.3%/2.4% for FY19/FY20) than in free float market cap (+0.5%).

Piping hot news

HDFC Bank gets nod from cabinet for ₹24,000 crore FDI

• The cabinet on Wednesday cleared one of the largest foreign direct investment (FDI) proposals before it—a plan by HDFC Bank Ltd to raise ₹24,000 crore. The capital infusion will not result in breaching the foreign equity holding cap of 74% in the private sector lender.