Equitas Small Finance Bank Ltd. (Information Note)

Equitas Small Finance Bank Ltd. (Information Note)
by Nikita Bhoota 20/10/2020

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.


Issue Opens- October 20, 2020
Issue Closes- October 22, 2020
Face Value: Rs.10
Price Band- Rs.32-33
Issue Size- Rs.518 cr (at upper price band)
Bid Lot- 450 equity shares
Issue Type: 100% Book building

 

% Shareholding

Pre IPO

Promoter and Promoter Group

95.5

Public

4.5

Source: RHP


Company Overview

Equitas Small Finance Bank (ESFB) is the largest SFB in India in terms of number of banking outlets, and second largest in terms of assets under management (AUM, 16% market share in India) and total deposits in Fiscal 2019 (Source: CRISIL Report). It offers a range of banking products and services with a focus on serving the financially unserved and underserved customer segments in India. Its assets products include provision of small business loans comprising LAPs, housing loans, agriculture loans to micro-entrepreneurs, microfinance to JLGs, used and new commercial vehicle loans, MSE loans, corporate loans and other loans including gold loans. On the liability side, it caters to mass and mass affluent individuals to whom they offer current accounts, salary accounts, savings accounts, and a variety of deposit accounts. As of June 30 2020, its percentage of gross NPAs to gross advances was 2.68%, while percentage of net NPAs to Net Advances was 1.48%. Its Gross Advances (including securitization/ IBPC) were Rs15,573cr and deposits were Rs11,787cr as of June 30, 2020. Secured Advances constituted 75.75% of the total gross advances (including IBPC issued) as on June 30, 2020.

Objective of the Offer:

The offer comprises of a Fresh Issue and an Offer for Sale. ESFB intends to raise fresh capital of Rs280cr which will be utilized towards augmenting the bank’s Tier – 1 capital base to meet its future capital requirements such as organic growth and expansion and to comply with regulatory requirements for enhanced capital base. ESFB shall not receive any proceeds from the offer for sale.

Financials

Cr.( except percentages)

FY18

FY19

FY20

Q1 FY21

Gross Advances (including securitization / IBPC)

7,937

11,703

15,367

15,573

Total Disbursements

5,809

8,578

9,911

564

Total Assets

13,301

15,763

19,315

20,892

Total Deposits

5,604

9,007

10,788

11,787

 

 

 

 

 

Total Income

1,102

1,435

1,778

434

Net Interest Income

861

1,152

1,495

404

PAT

32

211

244

58

 

 

 

 

 

Return on average equity (%)

1.57

9.85

9.84

8.32^

Return on average assets (%)

0.30

1.45

1.39

1.15^

Cost to income ratio (%)

79.97

70.30

66.38

67.27

GNPA (%)

2.68

2.53

2.72

2.68

NNPA (%)

1.46

1.44

1.66

1.48

 

 

 

 

 

CASA Ratio (%)

29.23

25.25

20.47

19.97

Retail term deposit to total term deposit ratio (%)

16.20

24.30

44.42

46.40

Source: RHP, 5paisa Research; ^on annualized basis

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only

Key Positives

Customer centric organization with a deep understanding of the unserved and underserved customer segments

ESFB’s strength lies in promoting financial inclusion within customer segments that are financially unserved and underserved in India. This enables the company to comply with RBI’s requirements for SFBs including meeting “priority sector” lending requirements. As of June 30, 2020, advances to the unserved and underserved segments represented 89.12% of its Gross Advances (including IBPC issued).

ESFB has gained a deep understanding of the market over the years that enables it to meet the financing requirements of potential customers. It undertakes research on various segments within these markets to understand their borrowing profile in the absence of formal documentation.

ESFB believes that the customers prefer a single source for multiple financial services, and it has accordingly customized a range of credit and non-credit products and services to address a variety of financing requirements like small-ticket recurring deposits to promote savings with in its customer segments and distribution of insurance policies like ‘hospital daily cash benefits’, an insurance product to cover emergency medical expenses of its customers.

It also develops products to match the growth cycle of target customer base. For instance, its microfinance customers tend to require micro-LAP loans, and as their enterprises mature, will be able to obtain MSE loans/ working capital loans.

Among the largest SFBs in India with a well-diversified asset portfolio

ESFB is the largest SFB in India in terms of number of banking outlets, as of March 31, 2019, and in Fiscal 2019 they recorded the fourth lowest yields indicating diversification away from microfinance (Source: CRISIL Report). ESFB has been able to successfully diversify its loan portfolio and significantly reduce dependence on microfinance business as compared to other microfinance companies that have converted to SFBs (Source: CRISIL Report).

It assesses the track record of existing customers to advance higher credit to meet their specific financial requirements, thereby further customizing few of its products. This approach has resulted in the growth of its gross secured loan product portfolio, which has grown at a CAGR of 48.35% from Rs5,265cr as of March 31, 2018 to Rs11,585cr as of March 31, 2020, and was Rs11,797cr as of June 30, 2020. Within its credit portfolio, small business loans (including housing loan) and vehicle finance product segments recorded significant growth with a CAGR of 53.34% and 29.62%, respectively, from March 31, 2018 to March 31, 2020.

The bank believes that it is relatively insulated from counter cyclical impacts across economic cycles owing to its diversified asset base and each of its product lines is well positioned to grow, creating a foundation of stability, sustainability and scalability for our operations.

Customized credit assessment procedures for effective credit risk management

ESFB applies different credit assessment procedures based on the products they offer. For instance, sanctioning small business loans involves telephonic checks with the potential customer, followed by in-person meetings by the senior loan officer to understand the business, cash flows and other parameters based on which a proposal is prepared. The senior loan officer’s proposal is scrutinized and in certain circumstances, reassessed to check for discrepancies, if any. For vehicle loans, they also undertake inspections of the vehicle through an independent expert, to verify registration information, condition of the vehicle and market value. They additionally apply a proprietary discounted cash flow model, which is adjusted based on the income profile of the customer and type of product. It also has risk management framework to identify, measure, monitor and manage credit, market and operational risks including IT security risk.

ESFB’s risk management and credit evaluation processes, together with its ability to evaluate risk, have enabled it to contain level of NPAs, restructured standard asset and special mention accounts category 2 levels. As of June 30, 2020, Gross NPAs were 2.68% of Gross Advances (including IBPC issued), and Net NPAs were 1.48% of Net Advances.

Key Risks

The continuing impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on its business, operations and future financial performance.

ESFB is subject to stringent regulatory requirement including RBI’s SFB Licensing Guidelines as per which ESFB’s Promoter Equitas Holdings Limited is required to reduce its shareholding in ESFB to 40% on or prior to Sept 4, 2021.

Watch this video to know more about Equitas Small Finance Bank IPO -

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5 Stocks to benefit from Modi’s rural focus policies

22/10/2020

The Modi Government is actively focusing on reviving the rural economy. The government has undertaken many initiatives in order to improve consumption, infrastructure and job opportunities in the rural parts of India. Various programs have been designed by the Government to fulfill the rural requirements. In order to double the farm income by 2022, the government has allocated Rs1.07 lakh crore for expenditure on rural development, out of which Rs.48,000cr is allocated to MNREGA for FY2017-18. At present, as per the media articles, India has ~4 crore un-electrified rural households and the Government targets to provide electricity to every village under its Deendayal Gram Jyoti Yojana. Moreover, the Pradhan Mantri Awaas Yojana (PMAY) plans to provide shelter to people in rural India.

We believe that with increasing rural income levels in the coming years, the rural consumption will get a boost, which in turnwould prove positive for the Indian business scenario. We have chosen some stocks that are likely to benefit from the pick-up in rural economy and are good investment bets from a long term perspective.

Mahindra & Mahindra Financial Services (MMFSL)

MMFSL is one of the leading non-banking finance companies in India, which focuses on the rural and semi-urban sectorsand is the largest Indian tractor financier.Its AUM mix comprised of auto/UV (28%), tractors (17%), cars (22%), CV (12%), pre-owned cars (9%) and SME (12%) as of September 2017. AUM is expected to grow at 17% CAGR over FY17-19E on account of pick-up in rural economy supported by average monsoon in the last two years.. NCDs are forecasted to be ~60% of funding mix in FY19E (vs. 47% in Q2FY18). This will lead to lower cost of funds and margin expansion by~130bps to 8.1% in FY19E. Better collection efficiency via rural cash flows would reduce GNPA to 8% in FY19E (vs. 9% in FY17). We see an upside of 16% from CMP of Rs.475 from one year point of view.

Year NII (Rscr) Net profit (Rscr) NIM (%) P/BV (x) ROE (%)
FY17 3,790 511 7.6 3.6 6.8
FY18E 4,683 753 8.2 3.2 8.9
FY19E 5,511 1,061 8.4 2.8 11.0

Source: 5Paisa Research

Hero MotoCorp

Hero MotoCorp Limited (Hero), the largest manufacturer of Motorcycles in India, enjoys ~53% market share (Q2FY18 domestic sales volume data). It nearly derives half of its total revenue from rural India.The total volume growth in motorcycle was 13% yoy, and in two-wheeler (2W) was ~11%yoyin Q2FY18. Hero is planning new scooter launches to increase market share in that segment and has outlined Rs25bn capex plan over next 2 years. A satisfactory monsoon, Government’s push to double farm incomes and rising urban incomes are strong triggers that will aid volume growth for the company. Hence, we estimate consolidated revenue and PAT CAGR of 12% and 9% respectively over FY17-19E. Exports comprise only 2.3% of total volumes. Despite Hero being a late entrant into the export market, it plans to double the number of countries that it exports to(from 20 to 40) over next few years.We see an upside of 15% from CMP of Rs.3,804 from one year point of view.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 28,475 16.3 3,377 169.1 22.5 7.5
FY18E 32,224 16.3 3,717 186.1 20.4 6.4
FY19E 35,867 15.8 4,041 202.4 18.8 5.5

Source: 5Paisa Research

Dabur India

Dabur is one of the largest FMCG companies in India. Dabur’s business is divided into four areas i.e. consumer care, foods, retail and international business. It is a likely beneficiary of rural expansion and new product launches. We expect revenue growth to be driven by increasing rural reach and market share gains in juices and toothpaste categories. Dabur plans to penetrate ~60,000 villages (particularly in South India) in near term to capitalize on revival in rural consumption (~45% of revenue). Further, new product launches in hair care, fruit drink and ayurvedic segments are likely to support volume growth.It expects GST to be positive for its portfolio, except for Ayurvedic products where tax levied has risen by 5%. Its recent acquisitions in African market in personal and hair care segments and strengthening online presence with large e-retailers (Amazon) would boost profit. Thus, we expect FY17-19E sales and PAT CAGR of 6.0% and 8.2% respectively.We project an upside of 16% from CMP of Rs.355 from one year point of view.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 7,592 19.9% 1,277 7.3 49.0 12.9
FY18E 7,800 20.3% 1,326 7.5 47.1 11.0
FY19E 8,518 20.3% 1,494 8.5 41.8 9.5

Source: 5Paisa Research

Rallis India

Rallis India, a member of Tata group and a manufacturer of pesticides, fertilizers and fine chemicals, stands to benefit from the launch of ‘Rallis Samrudh Krishi’ by improving the quality and yield of the crops. This is a digital initiative, which will help the company to provide end-to-end Agri Solutions to Indian farmers. The company aims to increase market share of Non-Pesticides portfolio (NPP) going forward. Rallis plans to launch new products in cotton, rice, wheat and hybrid cotton segments. Rallis India also aims to increase its focus on plant growth nutrients to support sustainability of crop yields. The management is optimistic on NPP and expects it to contribute 40% to revenue (currently 31%) over next few years. Also, the company is targeting ~20% yoy increase in sales from Metahelix (subsidiary company) backed by adequate seed supplies. Thereby, we see revenue CAGR of 9.3% over FY17-19E. It is virtually a debt free company, which lends financial stability. We see an upside of 17% from CMP of Rs.274 over a period of one year.

Year Net Sales (Rscr) OPM (%) Adj Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 1,772 14.8% 170 8.8 31.3 4.8
FY18E 1,863 15.4% 178 9.2 29.9 4.4
FY19E 2,117 16.2% 222 11.4 23.9 3.9

Source: 5Paisa Research

Jyothy Laboratories Ltd

Jyothy Laboratories Ltd (JLL), present in soaps and detergents for homecare segment, is expected to rebound post demonetisation and GST. JLL has transitioned from a south based player to a pan India company and has multiple drivers that would enable it to grow its market share in respective categories. JLL’s portfolio of six power brands – Ujala (fabric whitener), Exo (dish bar), Maxo (household insecticides), Henko (fabric detergent), Margo (soaps) and Pril (dish wash) contributed 87% to revenue in FY17. Ujala enjoys ~77% share in niche fabric whitener segment. We believe, owing to JLL’s power brands, newer products (toilet cleaner) and passing of GST benefits, volume growth would get a boost. We expect the company to post revenue CAGR of 7.3% over FY17-19E. We project an upside of 20% from CMP of Rs.388 over a period of one year.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 1,683 15.1% 208 11.5 33.8 6.4
FY18E 1,723 15.5% 164 9.1 42.8 5.6
FY19E 1,936 16.7% 214 11.8 32.8 4.8

Source: 5Paisa Research

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This Festive Season Should I invest in Gold?

This Festive Season Should I invest in Gold?
23/10/2020

With the pandemic hitting the world economy, the precious metal started inching closer to its record high and then making a dip and rebounding has confused investors if this festive season is the time to invest in Gold. Historically, gold was always considered to be one of the safest options to invest in as this is one such commodity that has given returns even during the crises. And now in the current situation where the world economy is grappling to survive, the yellow metal has again out performed with a spike of around 28% in 2020. The out-performance of this commodity in this year, when even crude-oil witnessed its lowest, is only reaffirming the fact that it is one of the most reliable investment options. And obviously, those who have missed the opportunity, would now be considering increasing the allocation to this asset class. So let's try to analyse if it is really wise to do so. 

What factors were driving the Gold rally?

Generally, its been observed that the investors tend to turn towards Gold when the market crashes, but now even when the markets are rallying, gold continues to inch higher. Various factors such as the fear of politicians’ decision to push through unprecedented stimulus packages, speculations about further government-ordered lockdowns, global central banks' plans to print money faster to increase the spending, and US Dollor's sudden decline against Euro and YEN, have resulted in a rare combination of raising inflation and sluggish growth. In such an uncertain scenario, the investors are looking for safe havens which would not lose value.

Though we did witness the stagnation in the Gold price for around 2-3 years, it made up for the losses in the last 6-12 months. With prices scaling up by over 40%, the investors are reassured that this is one of the most reliable options when they are looking at diversifying their portfolio.

Is it a good time to invest in Gold?

According to market experts, there is no good or bad time to buy gold as it is mainly a long term investment option. Further, here are speculations that gold might hit its another high in a few months to come so it might prove to be a great time to invest. Also, the global uncertainty is a more reliable asset class. Let’s not forget that in the previous two quarters during the uncertainties and fluctuations, gold has helped maintain the stability in the portfolio. Furthermore, one can consider reducing the allocation to the asset class after the end of this period where we are making a leap in the dark. But returns from this yellow metal will be influenced by demand for the commodity, exchange rate between USD and INR, and prices per ounce in USD. So one needs to keep a close eye on all the three factors while making a decisions.

What should be the ideal share of Gold in a portfolio?

While the ideal share of gold in your portfolio should be minimum in between 1%-5%, it could shift higher to around 5% - 15% depending on the nature of your requirements, financial goals and risk appetite. Also, looking at the current scenario, even the minor increase in the proportion of gold in your portfolio can have a great bearing. 

How do I go about with Gold Investment?

There are multiple ways in which you can invest in the Gold. A buyer can choose how he would want to go ahead with the investment by contemplating on the nature of every form to identify which is most comfortable to him. The options to buy gold include:

Digital Gold: This is the most modern and potentially the safest and low-cost way to accumulate gold. Digital gold provides you the flexibility to get the gold converted into a physical form at any given point once you have accumulated at least 0.5 gram gold. The best part about this option is the flexibility in terms of the amount of investment. You can start with as low as Rs50 in this option. You can invest in digital gold though reliable platforms like 5paisa App.

Physical Gold: This is the most traditional way of holding this commodity. It offers you maximum liquidity. However, it also calls for the cost of storage and insurance. This way you can directly invest in coins, jewellery or any such gold accumulation schemes offered by your jeweler to buy a gold product of your choice.

 

Paper Gold: This is another cost effective substitute to the physical gold that includes options like Gold exchange traded funds (ETF) and Sovereign Gold Bonds (SGB). While ETF provides you flexibility of buying and selling it at any point it time through exchanges, you can also start investment in it through SIP. However, in this option you need to buy a minimum of 1 gram gold. On the other hand SGB is issued by the government and does not allow you as much flexibility as the buying window is opened by government for a specified period. 

Continued global uncertainty that has fueled the surge is expected to continue for quite some time. So if at all you are considering diversifying your portfolio to this investment option, this could prove to be a great opportunity to do so. Furthermore, we do not recommend looking at short term returns while buying this commodity. Also, exceeding the recommended limits for the allocation being lured by the unprecedented rally might defeat the purpose. So the key would be to bifurcate your portfolio but allocation to this asset class should ideally not exceed 15% as of now.

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Confused? How to choose stocks from same sector for investment?

Confused? How to choose stocks from same sector for investment?
by Nikita Bhoota 27/10/2020

There are many stocks in a sector but an investor prefers to choose one or two stocks for investment. The ultimate goal of the long-term investor is to earn superior returns. But how to choose the best stock for investment is a challenge? The best method for stock selection is to study the fundamental aspects of the company. The fundamental analysis helps the investor to understand the growth potential of the business and make an informed investment decision. Although, fundamental analysis is a time-consuming method but this will help the investor to take right investment decision.

The general understanding about the fundamental analysis is to have a look at different ratios like Price-to-Earnings or P/E ratio, Earnings Per Share or EPS, Debt-to-Equity or D/E ratio, Return on Equity or ROE, Return on Capital Employed or ROCE etc. These ratios help to understand the performance of the company, but will not help to conclude whether the company is the best investment in the sector unless it is compared with peer companies.

Therefore, comparing the companies in the same sector is the best way to select the stock for investment. Now let us understand how it can be done.

Follow Relative valuation method:

The first step for comparing the companies in the same sector is comparing the relative valuation of one company with its competitors in the market. The following steps should be followed to compare relative valuations.

Pick any of the financial ratios like PE PB, ROE, ROCE, EV/EBITDA etc.

Make a list of companies who are the competitor to the company the investor has selected to invest in

Calculate the ratio for all the companies including the company the investor is keen to invest in. The investor can follow a table format this makes it easy to compare the valuations.

Let’s take an example to understand the concept

Suppose the investor decides to invest in an FMCG company HUL. Now the investor has to calculate and compare the ratios of HUL with all the companies with whom HUL competes in the market.

Company

P/E ratio

P/B ratio

ROE (%)

HUL

67.8

56.9

85.8

Dabur

60.0

13.8

25.0

colgate

47.5

24.3

53.7

Nestle

70.9

71.7

106.6

Britannia

57.5

18.5

32.8

Source:5paisa Research

Before comparing the ratios, it is important to understand these ratios

P/E ratio – A high P/E ratio means the stock is possibly overvalued as its price is high as compared to its earnings. On the contrary, a low P/E ratio means that the stock is undervalued and can be a great investment opportunity.

P/B ratio- PB ratio that's greater than one means that the stock price is trading at a premium to the company's book value whereas, P/B ratio less than one means the stock is trading at an attractive valuation and offers an investment opportunity.

ROE- ROE indicates how effectively a company's management uses investors' money. Increasing ROE over time can mean a company is good at generating shareholder value. On the contrary declining ROE can mean that management is making poor decisions on reinvesting capital in unproductive assets.

These ratios can also be compared to the industry average to get a clearer picture. The investor can include more ratios based on his requirements. Another important aspect the investor should consider is future earnings growth. However, calculating projected numbers is a tedious task and requires detailed research. Therefore, we recommend investors to read research reports of 4-5 research analysts who have expertise in calculating the projections. The investor can refer to the broking companies’ websites where the research analyst of the respective broking company generally publishes the research reports of the companies under their coverage list. It is essential to understand the future prospects of the company where the investor is currently planning to invest to earn huge returns in the long-run.

As of now, we have focussed on quantitative aspects, now let’s turn our attention to the qualitative aspects for a complete analysis of the stock.

There can be times when two or more companies in a sector have similar financial statements making it difficult to differentiate between them. This is when you need to start looking at the qualitative aspects of the company.

Study the management of the company:

The investor should look at the management of all companies under comparison. Choose for companies that have a stable management team without frequent additions or deletions. Check on how long the managers have worked there and what type of compensation they get as well as factors like stock buybacks to see how well management is doing. It is also important to understand the quality and skill of a company's management for estimating future success and profitability of the company.

Understand companies core business

The investor should study the business model, revenue generation model, future prospect of the products of the company, how it got started? How long they are in the market, what is the revenue and profit margin they have been maintaining as of now and historically? Answer to this question will help to make an informed investment decision.

For example, film entertainment companies like PVR and Inox generally earn revenue from sales of movie tickets, sale of food and beverages, advertising income etc.

Product competitiveness:

It is essential to understand how competitive is the product of the company in the market. This is because the success of any business depends on how the company manages its competition. Analyze this aspect by looking at factors like the threat of new entry, the threat of substitution, bargaining power of suppliers, bargaining power of buyers and Competitive landscape. This theory of analyzing the competition is popularly known as the porter five forces model.

Customers and Geographic exposure:

The investor has to find out about the customers of the company. Does the company have a few big customers or many small customers? Do they focus on niche market, or do they cover all segments of customers? To understand a company, getting answers to the above questions is essential. Because then you will understand where the company stands in mind of the customers. Additionally, the investor also has to find out the geographical exposure of the company. Does the company only operate in certain territories? If yes, why? Do the company cover only urban or rural areas? What is their sales-break-down as per each territory? Where they sell more, and why? Asking yourself these questions and searching for answers will help you know the company well and make wiser choices at the end of the day.

Corporate Governance:

If the corporate governance of a business is not in order, the whole business will suffer sooner or later. So, checking out the corporate governance of a company is of utmost importance. The investors need to find answers to the questions such as are the rules of the company in line with the company’s mission and vision? are they legally compliant with the government’s policies? Are the company serving every stakeholder of the company? If the answer to the above questions is “YES” then usually, the company is pretty good at corporate governance.

Conclusion:

While researching a stock, it is important to get as many details about the company.  While the financial statements are a quick way to look into the financial position of the company, ensure that the qualitative and quantitative aspects are not ignored. If the company is not compared with its competitors, the investor will not get the true picture and will find it difficult to take a final call on investment.

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Do You Know sectors to Benefit from Joe Biden’s win?

Benefit from Joe Biden's Win
by Nikita Bhoota 11/11/2020

The markets have turned volatile in advance of the United States (U.S) election and continue to remain volatile post-election. The waves were felt not only in India but across the globe in the equity markets. Joe Biden is to be the 46th President of the U.S and it would certainly lift hopes of certain sectors back in India.

Certain industries that might get affected more than others with Biden’s victory.  Biden plans to spend roughly US $3.2 trillion over the next decade. His plan includes a spending budget of US $750 billion to improve healthcare and the US $750 billion to revamp education as per the media reports. The win of Joe Biden might not make any material difference in the long run, but in the near term.

We have gathered a list of sectors that are likely to benefit from Joe Biden victory as the U.S President.

Metal Stocks and Pharma stocks:

We expect metal stocks to benefit from Biden’s infrastructural push. Metal stocks could gain on the expectation of higher steel export to the U.S for additional infrastructure spending of ~$700-800 bn in the next 10 years.

The Indian Pharma sector is expected to benefit from the Biden win on the back of increased push for generic prescriptions and push to affordable health insurance. Biden plans to protect and strengthen The Affordable Care Act, which ensures a reduction in healthcare costs and access to health insurance for the U.S citizens. This implies more reliance on generic drugs and biosimilars, that would be positive news for Indian Pharma companies. As per the media reports, the U.S imports ~$7 billion worth of formulations from India annually. An increased scope for access to affordable health insurance would also boost the demand for generic drugs.

Electric Vehicle companies:

Biden in his campaign had made it clear that his administration’s focus will be on green energy. As per the media reports, Biden has promised $400 billion in public investment to transition to clean energy, including advanced battery technology and electric vehicles. Therefore, Shares of EV companies and the battery and the solar sectors would benefit from Biden’s win. Biden could also ease concerns about the trade war with China leading to a positive impact on global trade.

Real Estate, Financial Institutions:

A Biden win would mean a larger stimulus followed by additional means to improve healthcare access and other social welfare programs. Sectors that are likely to get impacted include real estate, financial institutions, student loans, etc.

Chemicals, Cement and IT sector

The Chemical sector which competes with China might have a positive impact as the U.S can take a tough stand against China. Similarly, the infrastructure push by Biden will benefit the cement industry.

The market experts have an opinion that visa restrictions for software engineers sent by Indian IT companies could ease. Trump has tightened norms for H-1B visas, mostly used by software services providers to send engineers for on-site work. That prompted IT companies to ramp up hiring local talent in the past three years, increasing costs in the market that contributes 50-65% of the revenue for India’s five largest IT firms. A Biden presidency is, however, seen to be less hostile to immigrants.

Conclusion:

U.S elections are likely to lead to short-term market swings that will be insignificant over the longer run.  Therefore, we recommend the investors to stick to their long-term strategy and stay focused on individual stocks.

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10 key parameters for analysing your trades

10 key parameters for analysing your trades
17/11/2020

As the share market is highly volatile, investors rely on some variables which can help them trade successfully. These variables are flexible as they change according to the condition of the share market and adapt themselves accordingly.

Every investor must consider using the given below variables when logging their trades as these can help them to avoid losses and better analyze their mistakes to make successful share market strategies.