March 19, 2019

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Quant (Derivatives) Pick

Underlying Action
Quant Pick – Union Bank of India SRF
Infosys
Buy
Buy
Cummins India Buy
Duration : 1-3 months
• PRODUCT 1

Quant Pick
Stock Action Initiation Range Target Stop loss Time Frame

ICICI Securities – Retail Equity Research

Union Bank Buy 81-84 99 73.5 3 months

• PRODUCT 2

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Research Analysts
Amit Gupta Raj Deepak Singh
[email protected] [email protected]

Nandish Patel
[email protected]
Buy Union Bank of India in the range of | 81-84, Target: | 99,
Stop Loss: | 73.5; Time frame: Three months

Spot Price 85.50

Beta 1.79

Quant Pick
12M Avg Price (|) 83
Snapshot 12M Avg Volume (Shares) 9006251
3M Avg Roll (%) 92.51%
HV 60 Day (% Annualised) 42.87

Ongoing short covering likely to continue momentum

100 50000
Price Open Interest

ICICI Securities – Retail Equity Research

95 45000
40000
90
35000

Oi in Thousands
Price vs. 85 30000
80 25000
open interest
Price

75 20000
pattern 70
15000
10000
65 5000
60 0
09-Jul-18

30-Jul-18

14-Jan-19
03-Dec-18

24-Dec-18
01-Oct-18

22-Oct-18
18-Jun-18

18-Mar-19
12-Nov-18

04-Feb-19

25-Feb-19
20-Aug-18
28-May-18

10-Sep-18

Source: NSE, Seediff, ICICI Direct Research

March 19, 2019 ICICI Securities Ltd. | Retail Equity Research 2
Derivatives and Quantitative Outlook…

 The banking space has once again taken the lead in the current market up move. The Bank Nifty recorded a new life-time high
on the back of participation from private sector heavyweights. At the same time, midcap banking stocks, especially from the
PSU space, have also started witnessing some traction. We believe that while the Nifty may move into consolidation after a
sharp up move of almost 700 points, midcap banking stocks like Union Bank of India may witness good upsides on the back of
short covering

 The open interest in Union Bank witnessed continued short additions since November 2017 as the stock witnessed a two-third
erosion in value. However, the trend of rising open interest halted from January 2019. The March series open interest was
almost 30% lower compared to the open interest seen in January. We believe the current short covering trend will continue
and the stock may test | 100 levels in coming sessions

 From the inception of the series, the highest Call base in Union Bank was placed at the 85 strike. As the stock has moved
above these levels, further momentum may be seen due to closure of these positions. At the same time, continued writing is

ICICI Securities – Retail Equity Research

visible in ATM Put strikes suggesting expectation of limited downsides

 The resolution of NPA in the banking sector; especially accounts with large exposure, is likely to be a major factor, going
ahead. Resolution of Essar Steel (exposure of ~| 2000 crore), Bhushan Power & Steel and a few stressed power accounts
could reduce NPA numbers thereby benefiting PSBs including Union Bank of India. Further, a revival in credit growth,
especially corporate and SME segment is expected to drive the operational performance ahead

 Historically, the mean-2*sigma of the stock has acted as a strong support level. Union Bank has not spent much time below
these levels. After testing these levels near 60, stocks have started reverting and are likely to test their long term mean in the
recovery process. Currently, mean levels for the stock are placed near | 112 levels providing a good risk-reward opportunity
from current levels

 Note: Call has been initiated on iClick2Gain on March 18, 2019

Source: NSE, Seediff, ICICI Direct Research
March 19, 2019 ICICI Securities Ltd. | Retail Equity Research 3
Quant Picks: Open recommendations…

Date Scrip Action Buy Price Target SL CMP %Ret Time Frame

10-Jan-19 Auro Pharma Buy 755-763 890 685 787 3.1% 3 months
23-Jan-19 Infosys Buy 730-740 860 665 712 -3.9% 3 months
06-Mar-19 SRF Ltd Buy 2310-2340 2715 2100 2401 2.6% 3 months
12-Mar-19 Cummins India Buy 752-765 885 684 744 -2.0% 3 months
13-Mar-19 Karnataka Bank Buy 124-127 152 111 130 2.4% 3 months
14-Mar-19 Tata Global Buy 205-210 245 186 203 -2.6% 3 months
18-Mar-19 Union Bank Buy 81-84 99 74 86 2.7% 3 months

Yearly Quant Picks

12-Dec-18 Ultratech Cement Buy 3820-3900 4850 3320 3996 2.5% 12 months

ICICI Securities – Retail Equity Research

12-Dec-18 Nestle Buy 10550-10850 13550 9075 10495 -2.8% 12 Months

Back
Source: NSE, Seediff, ICICI Direct Research
March 19, 2019 ICICI Securities Ltd. | Retail Equity Research 4
 Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road no.7, MIDC
Andheri (East)
Mumbai – 400 093
[email protected]

ICICI Securities – Retail Equity Research

Source: Bloomberg, ICICI Direct Research
March 19, 2019 ICICI Securities Ltd. | Retail Equity Research 5
Disclaimer

ANALYST CERTIFICATION

We /I, Amit Gupta B.E, MBA (Finance), Raj Deepak Singh BE, MBA (Finance), Nandish Patel, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed
in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report. . It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the
preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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Source: Bloomberg, ICICI Direct Research

March 19, 2019 ICICI Securities Ltd. | Retail Equity Research 6
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Source: Bloomberg, ICICI Direct Research

March 19, 2019 ICICI Securities Ltd. | Retail Equity Research 7