In today's era of knowledge economy and seamless connectivity, we are increasingly being burdened with an overload of information. Solicited or unsolicited information is inundating us through various channels like newspapers, magazines, television, e-mails, websites etc. It is important to breakthrough the clutter and get timely actionable advice which can be executed

ICICI Securities is dedicated to provide objective, independent and actionable research to our clients across various asset classes to help them make informed financial decisions. Our approach is a mix of top down and bottom up where we track the macro indicators to identify investment themes that are playing out. At the same time, we do extensive product research to ensure that we only advise the best in class products to our clients in each asset class. This approach ensures that we identify not only the correct investment theme but also the most suitable product to invest in the theme.

The best minds in the organization sit across the table every month to track the domestic and global macro environment in our meeting after monthly investment committee to ensure that we are up the curve in spotting investment themes to invest or avoid. Our investment committee consists of research heads from our institutional equity, retail, and I-SEC PD along with business heads of the ICICI Securities, Private wealth and retail business. This is further supplemented by inviting a renowned fund manager from the industry. This committee meets with a single point agenda of tracking the macro–economic environment and identify trends which can give actionable advice to our clients.

The investment committee is complemented by our stringent research across equity markets and different product classes.


Direct Equity

Our experienced and award wining research team of over 40 analyst offers timely and unparalleled company and industry insight on base of rigorous analysis. It is one of the widest coverage in domestic industry, with active coverage on about 200 companies across 16 sectors in large/mid/small cap universe. Another key aspect of our research is the monthly and thematic reports on various sectors, keeping the client up-to-date with the latest developments in the sector.

Our team is grouped into smaller teams, specializing in particular industry and sectors. This sector focus allows the analyst to maintain detailed level of knowledge of key drivers of each sector.

Each recommendation is backed by rigorous and in-depth analysis of not only the company's financials but also the management quality and depth, competitors and other external factors impacting the stock price. This ensures due weightage to both qualitative and quantitative factors. Regular interaction with company managements and various other stakeholders help our research analysts develop view on stocks and equip them to foresee upcoming trends well in advance to benefit our clients.

Our fundamental equity research combines expertise with innovative strategies to offer broad range of products including Model Portfolios, Monthly investment strategy, Equity tracker, Pick of the week, sector specific monthly reports, event and result updates and detailed company report.


Mutual Funds

We research mutual funds through a proprietary research methodology which evaluates the schemes and AMC across a wide range of parameters. These parameters are further supplemented by our view across different sectors as well as alignment with our overall investment theme in our investment committee. Some of the parameters used to filter and select mutual funds are portfolio risk and liquidity, risk adjusted returns, returns across various market cycles, past performance of the AMC in the asset class etc. The fund selection is further backed by interaction with the fund managers of the selected schemes on an ongoing basis to monitor their portfolio strategy and performance.

Managed Accounts

Selection on the PMS platform covers the following four broad parameters:

Research & Fund Management – Our selection process includes evaluating the qualification and experience of the investment and research team and their ability to conduct primary research and identify multi-baggers for clients.

Performance evaluation – Consistency of performance across market cycles and performance relative to peer group (PMS / MF) is evaluated for the scheme and the fund manager

Investment Strategy – The suitability of the investment strategy to client portfolios as well as its compatibility with I-Sec's investment outlook is considered along with the resilience of the strategy across market cycles.

Risk control guidelines – We evaluate the risk controls and guidelines followed by the selected scheme and AMC


Alternate Investments

Fund selection for alternate investments encompasses the following main themes:

Investment theme and strategy – Since alternate investment funds are usually longer-tenure products, we evaluate the theme of the fund in terms of novelty, suitability to the client's portfolio and availability of the proposition through other investing platforms.

Strength and experience of Investment Team – Alternate investment funds usually hold concentrated portfolios of 8 – 12 underlying investments of a tenure of 3 – 5 years, the selection and management of the underlying investments becomes crucial to performance. In our evaluation of the fund, we place strong importance on the background and experience of the fund team in investing, managing and exiting such deals and their ability and incentives to work together as a unit.

Portfolio construction and implementation strategy – The fund's ability and process of sourcing deals, evaluating them, investing in them and eventually, exiting them directly impacts investor returns – making this factor an important one in our evaluation.

Background and expertise of Fund House – The presence and experience of the parent group / fund house is also considered since it impacts the fund's ability of raise money from investors, and also, source, negotiate, manage and exit underlying investment deals.


Asset linked Debentures

Since structured products can be customized to take a specific view on any asset class, our selection framework comprises of the following two parameters:

Product Strategy – The prime parameter for selection of a strategy is its fit with our in-house investment outlook so that an investor in the product is able to successfully play out the view on an asset that has been taken.

Issuer profile – Structured products are issued in the form of asset-linked debentures, our evaluation process ensures securities available only from issuers of a high credit quality and issuing and repayment track record.

Equity Markets Overview & Investment Strategy :

Indian equity markets took a breather in October 2021 after sharp up move in the last 2-3 months. Small caps however, witnessed some correction as investors looked to book some profit after a significant relative outperformance.

Indian equity markets scaled to new all-time highs in Oct 21. However, markets could not hold on to gains for long following weak global cues, led by the China’s economic growth data which slowed for the third consecutive month and constant selling by FII’s. Downgrade of weightage of Indian equities by major global investment banks seems to have led to FII selling seen in October 2021.

FII’s were net sellers in equities to the extent of INR 136 bn. in Oct vs. net purchase of INR 131.5 bn. in Sep while Mutual funds bought equities worth INR 15.1 bn. vs. INR 47.9 bn. in September.

Mkt Cap to GDP is currently higher than long term average of 77.5. While it may seem like the markets are overvalued, but this is as a result of subdued GDP growth in FY 21 due to the economic impact of the pandemic. With the GDP expected to grow at a faster rate in the medium, the ratio is soon expected to normalize.

Source: NSE, MOSPI, Motilal Oswal, ICICI Securities Research

1. Indian markets have been one of the best performing markets this calendar year and are up 26.4% YTD CY21.

2. Key fundamental factors for the continued uptrend are TINA factor in terms on investment avenues for domestic investors, increased pace of vaccination, robust tax collection in H1 FY22 providing much needed financial muscle for Government for expediting spending on capex and infrastructure, supportive monetary policy, policy reforms by the Government and revival in personal consumption.

3. Going forward, we expect Nifty earnings to grow at 25.7% CAGR in FY21E- 23E. We are valuing NIFTY at 20,000 i.e. 24.5x P/E on FY23E EPS of Rs. 815.

4. Going ahead possible risks for Indian markets – 1) Inflation remains above RBI’s comfort zone 2) Hardening crude oil price in the near term 3) Possible declaration of taper tantrum by US Fed 4) Rapid spread of Covid 3rd wave in India.

5. Due to the combination of strong global growth and expected domestic recovery in 2nd half of FY 22, allocation should be added to Metals, Capital Goods, Infrastructure, Cement and Engineering sector. Also incremental buying can be considered in IT and leaders in BFSI. Exposure to FMCG should be pruned due to expensive valuations.

6. In the banking space, Tier 1 and select Tier 2 private sector banks can be considered for investments as they have strong capital and the moratorium levels have fallen to single digits. However, PSU banks should be avoided due to concerns of increase in non-performing loans and low capital adequacy ratios.

7. The deployment should be based on the risk profile of the client and the investment horizon:

a. Ideally a staggered approach across 6-9 months or at a 5-10% correction from the current levels should be adopted for building a quality portfolio.

b. Fresh Allocation to Mid- cap/Small Cap Funds (upto 25% of equity portfolio) should be considered with a medium to long term (4-5 years) time horizon through the SIP route.

c. Focused stock picking strategies in the PMS / AIF platforms which are cap-agnostic are also ideal for long-term investments.

8. Products like PE Funds should be looked at from a long term perspective (8 -10 years) as they have the potential to manage risk effectively, taking away the market vagaries from the portfolio. Such products, however, shouldn’t be more than 5-10% of the overall portfolio.


Select Sectors Commentary :


1. Cement companies are expecting strong pick up in the retail segment, post monsoon and ease of lockdowns along with healthy support from real estate & infra segment.

2. The cement companies have already announced price hikes in the range of 5-8% across regions These hikes will cover up current cost pressure and should aid partially in recouping of margins lost in Q2 FY22. Further price increase from hereon should be in line with fuel and freight cost increases.


1. Strong revenue growth is witnessed across IT universe, as observed from companies which have reported their earnings so far. Large cap reported revenue growth (organic+ inorganic in few ones) in the range of 4% to 12.8% QoQ in CC term while mid/small caps reported in the range of 2.6% to 11% in CC terms

2. The deal momentum looks strong as a result of which few companies increased their revenue guidance for FY 22 while high sub-contractor costs weighs on near term margins.


1. Credit growth shows signs of revival with focus on secured retail and MSME segment. Deposits witnessed steady growth with marginal uptick in CASA.

2. Improvement in collection led to ~10-60 bps QoQ decline in GNPA. PCR continued to remain robust. Restructured book witnessed QoQ addition to the tune of ~30-90 bps QoQ

3. With normalization in economy, business growth and asset quality outlook remains optimistic


1. FMCG companies have witnessed moderate sales growth during the quarter largely led by price hikes & product mix improvement

2. We believe the current inflationary scenario would continue for 1-2 quarters, which would continue to pressurize margins & also adversely impact growth for some of the price elastic categories.


1. Commodity costs inflation continued to dent gross margins in Q2 FY22. However, calibrated price hikes over the past 12 months (~6-8%) as well as operating leverage benefits, helped mitigate some of the RM costs increase. 2. Going forward, we expect CV industry to outperform over FY 21-23 E primarily tracking increasing infrastructure spend by the government, pick up in economic activity as well as revival in private capex cycle.


1. India Business: significant traction visible both in chronic and acute therapies as the marketing activities have gone up in full throttle via hybrid model (virtual and direct). Significant reduction in Covid 19 medications.

2. US Business: headwinds persist with on an average base business price erosion in mid to high single digit especially in oral solids. With slower approvals pace outlook remains bleak. Respiratory & injectables are doing relatively better.


1. Logistics sector saw mixed results during the quarter, with surface players registering strong recovery, while ports registered subdued performance (mainly due to lower commodity offtake, led by rising costs).

2. We expect logistics sector to report growth above pre pandemic levels in Q3 FY22. With dedicated freight corridor (DFC) expected to normalise in Q3, we could see initial signs of modal shift of containers from road to rail.

3. Surface, Ports and Air cargo will continue to see positive traction on the topline and bottomline front
Source: ICICI Direct Research


Debt Markets Overview & Investment Strategy

1. Domestic interest rates are likely to gradually inch up due to concerns of higher inflation from rebound in economy activities coupled with supply chain issues and sharp rise in freight costs. The shorter end of the curve is expected to re-align with normalization in the interest rates. This has been already started in form of additional variable rate reverse repo (VRRR) for more than 14 days announced by RBI. RBI is expected to maintain the accommodative stance for promoting economic growth in the near term but at the same time will be watchful about trajectory of inflation.

2. RBI will also continue to actively manage yields with a combination of measures like OMOs / OTs which may keep the yield curve anchored around the current levels. The potential inclusion of Indian bonds in global indices will further anchor the long term curve, as and when it happens.

3. Rate normalization process may first see tightening of liquidity, followed by shrinkage in the spread between the reverse repo and repo rate, followed by a hike in the repo rate. Next two MPC meetings will be crucial for determining the future trajectory of rates.

4. Currently, 6-8yr AAA corporate bond segment is trading around 6.3%-6.6% which is almost 60-100 bps higher than the 3-5yr segment. The 6-8yr segment had not compressed much in the past 1yr as compared to the sharp gains witnessed in the 3-5yr segment. Hence, a roll-down strategy in this segment offers good carry opportunity with an investment horizon of 3 years and above.

5. Also, blended fund with a balanced exposure to decent quality AA and AAA assets is also likely to generate good carry returns with a time horizon of 3 years and above. The duration is managed aggressively with a focus on earning carry yield along with mitigating the interest rate risk.

6. In a rising interest rate environment with steep yield curve, the duration risk needs to be calibrated at regular intervals. Ultra short term and Arbitrage fund which offer tax efficient returns are ideal for short term parking upto 6-9 months.

7. The existing investments in the BPSU, Corporate Bond Funds, and Short Term category having more than 1 year of holding period should be continued to be held.


Gold, Crude Oil and Currency Views:


1. Historically, Gold has had a negative correlation with equities and debt, and hence adding allocation to Gold in the portfolio can result in optimum portfolio diversification

2. Gold prices rose by 1.5% MoM in Oct’21, supported by a retreat in US bond yields and dollar with investors focusing on the Federal Reserve’s response to inflationary pressure and concerns on tepid economic growth. Also, domestically, with the gradual unlocking of the economy and festive demand picking up, India’s Gold import saw a 252% jump during the period Apr-Sep on a YoY basis.

3. We continue to remain bullish on Gold from medium to long term perspective. Any dips in prices should be used to increase allocation. We continue to recommend 10% allocation to Gold in the overall portfolio (5% in core allocation) through Sovereign Gold bonds (Primary/Secondary market) and (5% tactical allocation) through ETFs.

Source: World Gold Council, Bloomberg | Returns till 1 year are absolute; > 1 year are CAGR


1. Rupee depreciated by 0.9% while the dollar index went slightly down by 0.1% in last one month

2. The rupee, at the start of October, depreciated amid strong dollar, persistent FII outflows and surge in crude oil prices. However, in the second half the rupee covered most of its losses on the back of correction in dollar from its high and improved economic data.

3. We expect currency to remain range bound around current levels. However, strengthening dollar and surge in crude oil prices can be a key downside risk. Also, timing and pace of Fed’s bond tapering can further pressurize the currency.

Source: Bloomberg, RBI | Returns till 1 year are absolute; > 1 year are CAGR


1. Crude Oil prices appreciated by 6.9% in last one month and have rallied by a staggering ~118% since October’20.

2. The ongoing energy crisis in India, China and Europe because of coal and gas shortage has resulted in higher demand for oil as a substitute. Moreover, with the opening of economies amid reduction in Covid cases worldwide, demand for crude has ramped up.

3. With the Organization of the Petroleum Exporting Countries maintaining a slow increase in supply rather than intervening to add more barrels to the market, crude supply has tightened resulting in prices touching multi-year high.

4. We expect Crude to trade around the elevated levels of 85- 95 over the next few months.

Source: Ministry of Petroleum & Natural Gas, Bloomberg | Returns till 1 year are absolute; > 1 year are CAGR

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