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www.nooreshtech.co.in1
26th July 2017
Nooresh Merani
www.nooreshtech.co.in
Flows to Floats – A Heady
Cocktail in the Makin...
www.nooreshtech.co.in2
Heady Cocktail in the Making
A heady cocktail for a Bull Market madness needs following
ingredients...
www.nooreshtech.co.in3
FLOWS --- Liquidity, SIP,
Automation.
www.nooreshtech.co.in4
SIP or a Big GULP every month
Source – AMFI
www.nooreshtech.co.in5
A very conservative Inflow Assumption
• SIP Inflows at Rs 5000 cr per month. Equal to Rs 60000 cr i...
www.nooreshtech.co.in6
Is 1-1.2 lakh crores a high Number ?
• Rs1-1.2 lakh crores is equal to US$15-18 bn.
• FIIs sold aro...
www.nooreshtech.co.in7
SIP Inflows – Automated.
• SIP Inflows are mostly standing instructions. Automated. Do
not care for...
www.nooreshtech.co.in8
Monthly SIP growing at 45% !!
No of SIP Accounts
Have doubled in last years
!! So has the monthly
I...
www.nooreshtech.co.in
Mutual Funds Sahi Hai !!
• Amfi, AMCs to spend Rs 300 crore to create investor awareness.
http://www...
www.nooreshtech.co.in
Mutual Fund Distributors !!
www.nooreshtech.co.in
Mutual Fund Insights !!
• B15= Beyond Top 15 Cities.
• 18% of the assets of the mutual fund industry...
www.nooreshtech.co.in
Distributors Still Rule the Selling !!
• About 9% of the retail investors chose to invest directly, ...
www.nooreshtech.co.in
Holdings Periods of Investors
www.nooreshtech.co.in14
MF Folios on a Record High
The change happened in
Dec 14. Modi Effect or
Rising Market effect ?
www.nooreshtech.co.in15
Direct Equity Participation
from Retail still not catching
up.
www.nooreshtech.co.in16
No of Demat Accounts in 2017
• NSDL – 1.51 cr approx
• CDSL – 1.28 cr approx.
• CDSL and NSDL appr...
www.nooreshtech.co.in17
Direct Equity Retailers are Reducing !
• Even though there has been increase in the number of dema...
www.nooreshtech.co.in18
The Retail Activity !!
www.nooreshtech.co.in19
HNI Investors ? Hardly Any !!
NSDL – Maybe would be
2x or 3x of this !! But still
net would be 5-1...
www.nooreshtech.co.in20
Demat Accounts Increase with Higher IPOs
www.nooreshtech.co.in21
Cultural Change in Retail Participation
• Investors preference is towards Equity SIPs instead of D...
www.nooreshtech.co.in22
FLOAT
Reducing and no Large
IPOs/Equity Issuances.
www.nooreshtech.co.in23
Float in Indian Equities
As on June 2017 ( In Rs Cr ) %
Total Market Cap ( BSE Market Cap) 1,25,96...
www.nooreshtech.co.in24
Nifty 50 and 100 – Lower Float !!
• Promoters + FII + DII hold almost 80-95% of the Nifty Float.
•...
www.nooreshtech.co.in25
Nifty 50 and 100 – Lower Float !!
Promoter (%)
47.7%
DII (%)
16.8%
FII (%)
20.7%
Others (%)
14.7%
...
www.nooreshtech.co.in26
Nifty 50 and 100 – Lower Float !!
Promoter (%)
53.5%
DII (%)
15.2%
FII (%)
18.0%
Others (%)
13.2%
...
www.nooreshtech.co.in27
Will DIIs be more important
than FIIs in coming years ?
www.nooreshtech.co.in28
DIIS Net Buying higher than FIIs in last 3 years !
Last 3 years DII
Net Buying is a
bit
greater th...
www.nooreshtech.co.in29
Last 2 years DII Net Buying is almost 3x of FII buying.
Last 2 years DII
Net Buying is
almost 3x o...
www.nooreshtech.co.in30
FII & DII Ownership – June 2007
• Ownership patterns in India Inc have changed over the last
five ...
www.nooreshtech.co.in31
FII & DII Ownership – March 2009
• FII ownership in Indian stock markets dropped to 15.5%—
levels ...
www.nooreshtech.co.in32
% Holding of FIIs and DIIs in India
Year
Total Market
Capitalization
Foreign
Investors
% Foreign
I...
www.nooreshtech.co.in33
Earnings Growth and Hope of
Capital Expansion ?
www.nooreshtech.co.in34
NIFTY EPS & Earnings Growth
• The earnings growth story reminds us of a child story of –
Sher Aaya...
www.nooreshtech.co.in35
Nifty at 600 EPS ?
• What should be the P-E Multiple when earnings grow at 15-
20% ?
• At 15 times...
www.nooreshtech.co.in36
G-Sec and Sensex – Deja vu
Yields Bottom
out and
Markets too.
Yields Bottom
out and
Markets too. d...
www.nooreshtech.co.in37
Nifty- What happens at all time Highs
www.nooreshtech.co.in38
Better to Ride then to Time !!
www.nooreshtech.co.in39
Conclusions
• A heady Cocktail of Earnings + Low Float + Huge flows in the
Making.
• Over the next...
www.nooreshtech.co.in
Nooresh Merani
Investment Adviser
Cell: +91-9819225396
nooreshtech@analyseindia.com
twitter.com/noor...
www.nooreshtech.co.in
Disclaimer
As investment & trading consultants, Promoters, owners, families, relatives, friends and ...
www.nooreshtech.co.in
Disclaimer
You may make one copy of Content for your personal, non-commercial use as long as it is c...
www.nooreshtech.co.in
• We collect information about who our members are and how they use our site in order to provide our...
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Flows to Floats - A Heady Cocktail in the Making - www.nooreshtech.co.in

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A constant argument that always ensues in every rally is “what happens if FIIs come to sell”. We believe that this notion is set to take a back seat in current markets. Let us sample this : of the total market cap float in India of Rs 1 tn, inflows in Indian equities have been coming at fast pace of Rs 1-2 lac crore every year. Guess the source for this ? Not FIIs ? Not global sovereign funds ? But our very own domestic investment funds.

As per data analysed by us, automated flows to market as of today are to the tune of Rs 1 – 1.2 lakh crore (yes you read it right US$ 15-20 bn) and this comprises of 3 major components :

(1) Rs 50,000 to 60,000 crores per annum from SIPS at an average of Rs 4000-5000 cr per month

(2) Rs 30,000 to 40,000 crores per annum from LIC (an average number)

(3) Rs 10,000 – 20,000 crores per anum from Local Pension Funds

What is not considered? Ans. FII Inflows and ETF Flows

Against this, of the float in Indian markets, 50% is held by promoters, ~20% by FIIs and 7% by FDIs+FDRs. This leaves only 25-30% of total float in the markets, of which nearly ~13% is already held by DIIs. This leaves only 10-12% of float in the market(i.e. Rs 12-13 lac crore) of investible float for existing listed entities in Indian Markets. The incremental float addition to equity markets (through IPOs / FPOs) is expected to be only Rs 25,000 – 50,000 cr.

Now sample this – Of the Nifty 50 stocks, 33 stocks out of these 50 stocks, Promoters+FIIs+DIIs hold above 85% of equity, while in 14 out of 50 stocks it is above 90%. So, theoretically float is only 10-15% even in Nifty 50 stocks. We believe that DIIs will become more important than FIIs in coming years.

GSec yields on the other hand are at their bottom, generally a phenomena seen when markets bottom out. We believe, a heady cocktail of EARNINGS + LOW FLOAT + HUGE FLOWS are in the making. We believe over the next 1-2 years can expect a major trend up with a lot of hope and belief coming back. Upsides could surprise in a big way and it is better to ride this trend than time it. The risk-reward is similar to 2014 and one should review stance only below 8500 / 8800

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Flows to Floats - A Heady Cocktail in the Making - www.nooreshtech.co.in

  1. 1. www.nooreshtech.co.in1 26th July 2017 Nooresh Merani www.nooreshtech.co.in Flows to Floats – A Heady Cocktail in the Making !!
  2. 2. www.nooreshtech.co.in2 Heady Cocktail in the Making A heady cocktail for a Bull Market madness needs following ingredients. • Huge Flows – Gush of Liquidity. • Reduced Floating Stock. • Earnings Growth and Visibility with High Margins. Are we in the process of mixing all this together in coming 1-3 years ?
  3. 3. www.nooreshtech.co.in3 FLOWS --- Liquidity, SIP, Automation.
  4. 4. www.nooreshtech.co.in4 SIP or a Big GULP every month Source – AMFI
  5. 5. www.nooreshtech.co.in5 A very conservative Inflow Assumption • SIP Inflows at Rs 5000 cr per month. Equal to Rs 60000 cr in a year. • Rs 40000 Cr LIC inflows. • Rs 20000 cr Pension Funds Inflows. http://www.livemint.com/Money/QfmrEyulcfcrZCFwNWlpAN/EPFO-to-invest-Rs-20000-crore-in-equities-in-201718-Banda.html • Roughly Rs 1-1.2 lakh crores of inflow could be base for FY2018 and FY2019. Last 2 years growth of SIPs is 45% cagr.
  6. 6. www.nooreshtech.co.in6 Is 1-1.2 lakh crores a high Number ? • Rs1-1.2 lakh crores is equal to US$15-18 bn. • FIIs sold around US$ 10-12 bn or roughly Rs 60000 cr in January 2008 to February 2009. • In the rally from March 2009 to December 2010 – FIIs deployed Rs 2.20 lakh crores. !! Nifty went up from 2500 to 6300. • Since September 2013 after the bottom of 2013 FIIs have invested Rs 2 lakh crores (all numbers are approx and rounded off)
  7. 7. www.nooreshtech.co.in7 SIP Inflows – Automated. • SIP Inflows are mostly standing instructions. Automated. Do not care for Valuations. Only Fearful selling after a Crash. • How many investors know how to close a SIP ? ( Login to MF / aggregator/bank site and sell or send a letter to each AMC) • Is the current SIP flow similar to how LIC could keep getting premiums even on Low Returns ? • A simple survey tells us redemptions come either when markets see a crash or there is need of money for the Investor. • Lack of other options make SIP and Mutual Funds more appealing.
  8. 8. www.nooreshtech.co.in8 Monthly SIP growing at 45% !! No of SIP Accounts Have doubled in last years !! So has the monthly Inflow Month SIP Contribution ₹ crore Jun’ 17 4,744 May'17 4,584 Apr'17 4,269 Apr’16- Mar’ 17 43,921 Mar’ 17 4,335 Feb’ 17 4,050 Jan’ 17 4,095 Dec’ 16 3,973 Nov’ 16 3,884 Oct’ 16 3,434 Sep’ 16 3,698 Aug’ 16 3,497 Jul’ 16 3,334 Source – AMFI and TOI
  9. 9. www.nooreshtech.co.in Mutual Funds Sahi Hai !! • Amfi, AMCs to spend Rs 300 crore to create investor awareness. http://www.financialexpress.com/market/amfi-amcs-to-spend-rs-300-crore-to-create-investor-awareness/447588/ • Looking at 300-400 cr annual spend towards Advertising Budget is going to increase further every year. • The penetration of Mutual Funds is Increasing Pan India with a mix of distributors and IFAs. • The above advertisements are seen on TV , Cinema Theatres and everywhere leading to a huge awareness about Mutual Funds just like we saw the Insurance Industry Prosper. • With falling Interest Rates and Lack of Returns in Real Estate and Gold the shift to Equity Mutual Funds as an asset class can be swift.
  10. 10. www.nooreshtech.co.in Mutual Fund Distributors !!
  11. 11. www.nooreshtech.co.in Mutual Fund Insights !! • B15= Beyond Top 15 Cities. • 18% of the assets of the mutual fund industry came from B15 locations in June 2017. • Assets from B15 locations have increased from Rs.2.42 lakh cr. in June 2016 to Rs.3.54 lakh cr. in June 2017. The rate of growth in assets for B15 locations was 46.3% (34% for the industry as a whole during the same period). • About 26% of assets held by individual investors is from the B15 locations. About 10% of institutional assets come from B15 locations. Institutional assets are concentrated in T15 locations, accounting for 90% of the total
  12. 12. www.nooreshtech.co.in Distributors Still Rule the Selling !! • About 9% of the retail investors chose to invest directly, while 17.23% of HNI assets were invested directly. • The proportion of direct investments in equity, to the total assets held by individual investors, was about 6.02% in June 2017. • Direct investments amount to 13% of individual assets, divided as 2% from B15 and 11% from T15.
  13. 13. www.nooreshtech.co.in Holdings Periods of Investors
  14. 14. www.nooreshtech.co.in14 MF Folios on a Record High The change happened in Dec 14. Modi Effect or Rising Market effect ?
  15. 15. www.nooreshtech.co.in15 Direct Equity Participation from Retail still not catching up.
  16. 16. www.nooreshtech.co.in16 No of Demat Accounts in 2017 • NSDL – 1.51 cr approx • CDSL – 1.28 cr approx. • CDSL and NSDL approximately had 1-1.5 cr demat accounts in 2007-2009. • So we have barely gone close to doubling the Investor Accounts in last 10 years. • The new retail money is coming through Mutual Funds and not Direct Equity route.
  17. 17. www.nooreshtech.co.in17 Direct Equity Retailers are Reducing ! • Even though there has been increase in the number of demat accounts, the number of operational accounts have decreased in terms of percentage and also in absolute terms. • Very large number of investors (nearly 75%) have not transacted even once during the year ended Mar-15
  18. 18. www.nooreshtech.co.in18 The Retail Activity !!
  19. 19. www.nooreshtech.co.in19 HNI Investors ? Hardly Any !! NSDL – Maybe would be 2x or 3x of this !! But still net would be 5-10 lakh individuals !!
  20. 20. www.nooreshtech.co.in20 Demat Accounts Increase with Higher IPOs
  21. 21. www.nooreshtech.co.in21 Cultural Change in Retail Participation • Investors preference is towards Equity SIPs instead of Direct Equity. This makes inflows more Stable and could well be start of a Cultural Change !! Towards Equities and SIPs. • Retail investors’ average account size is Rs. 75,801 • 38% of the Industry’s Equity Assets stay invested for more than 2 years • In the last year SIP per month has increased from Rs 1848 cr in April 2015 to Rs 3122 cr in April 2016 to Rs 4744 cr in June 2017. • The data suggests this trend could last really LONG !
  22. 22. www.nooreshtech.co.in22 FLOAT Reducing and no Large IPOs/Equity Issuances.
  23. 23. www.nooreshtech.co.in23 Float in Indian Equities As on June 2017 ( In Rs Cr ) % Total Market Cap ( BSE Market Cap) 1,25,96,812 100% Promoters ( assuming 50% could be more) 62,98,406 50.00 FDI Investments 5,99,391 4.76 Foreign Depository Receipts 2,84,149 2.26 Foreign Portfolio Investors 24,81,051 19.70 Insurance 883,736 7.02 Local Pension Funds 20,729 0.16 Mutual Funds 6,72,416 5.34 Portfolio Manager 61,152 0.49 Total of Above 1,13,01,030 89.73% Float Left 12,95,782 10.27% 13 lakh crores Source - NSDL Theoretically a float of Rs 12-13 lakh cr could be lower.
  24. 24. www.nooreshtech.co.in24 Nifty 50 and 100 – Lower Float !! • Promoters + FII + DII hold almost 80-95% of the Nifty Float. • 30 out of 50 companies have the Promoter+FII+DII holding above 85% • 14 out of 50 companies it is more than 90%
  25. 25. www.nooreshtech.co.in25 Nifty 50 and 100 – Lower Float !! Promoter (%) 47.7% DII (%) 16.8% FII (%) 20.7% Others (%) 14.7% NIFTY 50
  26. 26. www.nooreshtech.co.in26 Nifty 50 and 100 – Lower Float !! Promoter (%) 53.5% DII (%) 15.2% FII (%) 18.0% Others (%) 13.2% NIFTY 100
  27. 27. www.nooreshtech.co.in27 Will DIIs be more important than FIIs in coming years ?
  28. 28. www.nooreshtech.co.in28 DIIS Net Buying higher than FIIs in last 3 years ! Last 3 years DII Net Buying is a bit greater than FII Buying.
  29. 29. www.nooreshtech.co.in29 Last 2 years DII Net Buying is almost 3x of FII buying. Last 2 years DII Net Buying is almost 3x of FII Buying. Last 1 year DII Net buying is almost same of FII Buying.
  30. 30. www.nooreshtech.co.in30 FII & DII Ownership – June 2007 • Ownership patterns in India Inc have changed over the last five years, with foreign ownership rising to 22% in June 2007 vs 12% in March 2001 while domestic ownership has decreased. Foreign institution-owned portfolio stood at $193 billion. • For top 500 firms, the key owners are promoters/govt (54%), FIIs & ADRs/GDRs (22%), domestic MFs (4.3%), insurance/other institutions (5.5%) and the public (10%), as per a Citigroup analysis based on quarterly shareholding data for the BSE 500 universe (comprising 90% of the Indian market) since March 2001. % Source - http://economictimes.indiatimes.com/news/economy/finance/foreign-ownership-rises-to-22-in-india- inc-citi/articleshow/2378680.cms?intenttarget=no
  31. 31. www.nooreshtech.co.in31 FII & DII Ownership – March 2009 • FII ownership in Indian stock markets dropped to 15.5%— levels last seen in December 2003, which were early days of the big bull rally that climaxed in January 2008 when Sensex the benchmark index of the Bombay Stock Exchange reached its lifetime high of 21,206.77 points. • While insurance firms have increased their stake by 1% in 2008 to 5.04%, the mutual funds’ stake remained unchanged last year even as these funds are sitting on cash of about $4 billion. Source - http://www.livemint.com/Money/Y5yRXV9SCCy6RqsArdi02H/FII-holdings-in-Indian-markets-drops-to- 155.html
  32. 32. www.nooreshtech.co.in32 % Holding of FIIs and DIIs in India Year Total Market Capitalization Foreign Investors % Foreign Investors Domestic Investors % Domestic Investors 2017 1,21,54,525.46 2370667 19.5 1491046 12.27 2016 1,06,23,347.05 2039773 19.2 1312562 12.36 2015 1,00,37,733.65 1975329 19.68 1167228 11.63 2014 98,36,377.16 1855075 18.86 1020014 10.37 2013 70,44,257.84 1337763 18.99 772191 10.96 2012 69,21,815.19 1160343 16.76 829876 11.99
  33. 33. www.nooreshtech.co.in33 Earnings Growth and Hope of Capital Expansion ?
  34. 34. www.nooreshtech.co.in34 NIFTY EPS & Earnings Growth • The earnings growth story reminds us of a child story of – Sher Aaya Sher Aaya … The same way all of us have been calling or waiting for Earnings growth of 15-20% since last 4 years. • The NIFTY Eps has been around the 400 ( +-20) since the last 4 years. • Again this year the Consensus estimates for FY18 are around and 500 and FY19 at 600. • Will Nifty EPS go to Rs 550-600 by FY19 or say FY 20 ?
  35. 35. www.nooreshtech.co.in35 Nifty at 600 EPS ? • What should be the P-E Multiple when earnings grow at 15- 20% ? • At 15 times Nifty should be at 9000 • At 20 times Nifty should be at 12000 • At 25 times Nifty should be at 15000
  36. 36. www.nooreshtech.co.in36 G-Sec and Sensex – Deja vu Yields Bottom out and Markets too. Yields Bottom out and Markets too. déjà vu ?
  37. 37. www.nooreshtech.co.in37 Nifty- What happens at all time Highs
  38. 38. www.nooreshtech.co.in38 Better to Ride then to Time !!
  39. 39. www.nooreshtech.co.in39 Conclusions • A heady Cocktail of Earnings + Low Float + Huge flows in the Making. • Over the next 1-3 years can expect a major trend up with a lot of hope and belief coming back. • Upsides could surprise in a big way and its better to ride this trend. • The Risk-Reward is similar to 2014. • Review stance only below 8500/8800. ( This now shifts to 8800/9100 )
  40. 40. www.nooreshtech.co.in Nooresh Merani Investment Adviser Cell: +91-9819225396 nooreshtech@analyseindia.com twitter.com/nooreshtech www.facebook.com/nooreshtech
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  • RajivCECSA

    Nov. 12, 2017

A constant argument that always ensues in every rally is “what happens if FIIs come to sell”. We believe that this notion is set to take a back seat in current markets. Let us sample this : of the total market cap float in India of Rs 1 tn, inflows in Indian equities have been coming at fast pace of Rs 1-2 lac crore every year. Guess the source for this ? Not FIIs ? Not global sovereign funds ? But our very own domestic investment funds. As per data analysed by us, automated flows to market as of today are to the tune of Rs 1 – 1.2 lakh crore (yes you read it right US$ 15-20 bn) and this comprises of 3 major components : (1) Rs 50,000 to 60,000 crores per annum from SIPS at an average of Rs 4000-5000 cr per month (2) Rs 30,000 to 40,000 crores per annum from LIC (an average number) (3) Rs 10,000 – 20,000 crores per anum from Local Pension Funds What is not considered? Ans. FII Inflows and ETF Flows Against this, of the float in Indian markets, 50% is held by promoters, ~20% by FIIs and 7% by FDIs+FDRs. This leaves only 25-30% of total float in the markets, of which nearly ~13% is already held by DIIs. This leaves only 10-12% of float in the market(i.e. Rs 12-13 lac crore) of investible float for existing listed entities in Indian Markets. The incremental float addition to equity markets (through IPOs / FPOs) is expected to be only Rs 25,000 – 50,000 cr. Now sample this – Of the Nifty 50 stocks, 33 stocks out of these 50 stocks, Promoters+FIIs+DIIs hold above 85% of equity, while in 14 out of 50 stocks it is above 90%. So, theoretically float is only 10-15% even in Nifty 50 stocks. We believe that DIIs will become more important than FIIs in coming years. GSec yields on the other hand are at their bottom, generally a phenomena seen when markets bottom out. We believe, a heady cocktail of EARNINGS + LOW FLOAT + HUGE FLOWS are in the making. We believe over the next 1-2 years can expect a major trend up with a lot of hope and belief coming back. Upsides could surprise in a big way and it is better to ride this trend than time it. The risk-reward is similar to 2014 and one should review stance only below 8500 / 8800

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