Entering a stock at peak valuation? – 5 questions to ask

When markets make merry, many stocks have seemingly compelling stories even for entering at peak valuation. And the market is fine with stretched valuations to accommodate such stories. In other words, every market-favoured stock appears to scream – buy me at any price.

But when challenges emerge, the same market starts react so sharply that investors who bought into the story midway start making losses. Yes, there isn’t a bigger disaster for stock market investors than earnings and PE multiples contracting together.

Don’t mistake the above for sectors cyclically falling out of favour or new themes being picked. That is different and is not new to equity investors. A cyclical capex story with growth in earnings or a commodity turnaround lasting for a few years before peaking out does not catch a seasoned investor by surprise as such sectors are prone to cyclical trends. Valuations in such cases also rise and get stretched only over a period of time. 

But in the last 3 years we have also seen a different trend emerging. We have seen sudden take-offs in certain sectors mostly backed by long-term extrapolation of short-term triggers, leading to stretched valuations. What followed was a sharp de-rating that spelled disaster for stocks in the sector. While these traps become evident in hindsight, let us look at how these happen and how you can steer clear of such casualties. 

The take-off stories, peak valuation and the fall

There were several sectors where Covid-19 turned out to be a trigger for a sudden wave. First, the IT sector that saw a massive up move with significant PE re-rating. Then it was the turn of chemicals, pharmaceutical and diagnostics sectors. In all these sectors what transpired had a common thread as follows: 

  • All of these sectors were mostly immediate beneficiaries of Covid and the upmove in their stock prices was accompanied by sharp earnings growth/margin expansion. 
  • The market started extrapolating these sharp growth trends assuming that they would continue well into the future. In other words, it misread short-term one-off spikes as structural shifts in earnings trajectory.
  • That meant valuations factored in all such strong growth forecasts right away – leading to stretched valuations. 
  • When companies in the sectors did not deliver – and had both revenue and margin contraction (as the short-term triggers did not sustain), what followed was a sharp correction. Even slowing growth was meted out harsh treatment and stocks of such companies were punished. 

Let’s look at how such trends played out in some of the major sectors and what lesson it holds for us.

#1 The big take-off in IT sector

ITsector was a major beneficiary of digitization spends globally in the aftermath of Covid-19. The narrative also started playing out in terms of double-digit earnings growth for the sector with mid-tier players doing far better.

But the sharp spike in US interest rates, expected funding winter (reduced capital inflows) for start-ups and steep correction in Nasdaq stocks put a question mark on this growth and a sharp correction followed. While the companies were still reporting double digit growth up to Q3FY23 with optimistic outlook, market was not in a mood to take it for granted as the digitization story risked a big pause. 

The result? the large cap IT basket has seen complete reversal of the PE re-rating while the mid-cap IT is still holding on to some of the valuation gains as can be seen from the charts below. 

The correction caught many on the wrong foot as investors had to give up on their gains entirely, especially if they had entered in the last one year. Even the ones who spotted the trend halfway up are not sitting on any gains.  

What exactly transpired here? It is noteworthy that the actual earnings growth played out as expected until Q3FY23. It is the fall in earnings growth visibility that led to PE contraction. The entire sector correction of 30-50% in the last one year happened due to PE contraction alone. Expectations took a further knock after the SVB and Credit Suisse episodes as the sector is heavily dependent on the BFSI sector for its business.

Market seems to have extrapolated the trend of the Covid-aftermath digital narration and stretched valuations far beyond historical averages. The result is that the sector saw a steep correction and was wiped clean of the froth that had built up. For investors who shied away earlier on valuation concerns, this may well present an opportunity to check stocks in the sector. (Check Prime Stocks for our picks here)

#2 Spur in demand for pharma, chemical and diagnostic services

The above-mentioned sectors have taken investors for a rollercoaster ride in the last 3 years. For pharmaceuticals and chemicals, it was a period marked by an unpredicted and volatile growth phase where sudden spike in demand, supply disruptions from China and inventory stocking by customers led to sales and profit spike. Markets saw a new future for all of these sectors. But all the above three factors reversed together post Covid, leading to contraction in both sales and margins.

Let’s first look at the pharma basket with three diversified players just to illustrate: Divis, Pfizer and IPCA Laboratories. The table below shows their fall in stock prices.

For Divis and Pfizer their 9M FY23 numbers suggest that they are likely to see lower sales and profits in FY23 than FY22. Though IPCA may escape sales decline, profit is likely to halve from the high base of FY21 (FY22 was also a bit lower than FY21). All these three stocks peaked out in August – October 2021.  

In the case of Divis, the graph shows how sales and margin have contracted for last three quarters in a row as the sale of Covid drug (Molnupiravir, a Merck drug) took a deep plunge. By October 2021, market was assigning the stock its peak valuation of 70 times at the time of peak earnings.  Now, post this correction, the PE may look optically low (at 31 times) based on TTM earnings. But that would be a deceiving number as TTM earnings include the stellar Q4FY22 (see graph). Q4FY23 may come much weaker than that and push down TTM numbers.

For Pfizer, the maker of Corex cough syrup, Becosules (Vitamin B) and Gelusil, sales saw a huge spike of ~50% in Q2FY22 vs Q1FY22 when Covid-19 Wave-2 was at its peak. The stock also saw its PE ratio crossing 50 times. Since then, sales, profits and margins have plateaued for it and the company is likely to report a contraction in sales in FY23 Vs FY22 going by data thus far. PE multiple has also contracted from 50 to 30 post this correction. In the 5 years prior to Covid, Pfizer was a company with hardly any growth. Yet the market lifted its multiples higher since the pandemic.

IPCA was also a beneficiary of Covid as its anti-malarial drug (Hydroxychloroquine) suddenly found huge demand. While IPCA is still doing well on sales growth, margins peaked out between FY21 and FY22 and has since seen a sharp decline in the 9 months of FY23. The margin contraction is so sharp that IPCA is likely to report a 50% decline in profits in FY23 over the high base of FY21 (FY22 was a bit lower than FY21).

Now, let’s get into the chemical space. We will take a market favourite stock - Aarti Industries - to illustrate.

Given below is the quarterly sales and margin performance of Aarti Industries for last 13 quarters. Though sales growth remains, the pace appears to be moderating. Margins have slipped below pre-Covid levels in the last few quarters. 

Even though there is no PE contraction for Aarti Industries, PAT is likely to more than halve in FY23 versus FY22. An already 50% correction in stock price has kept the PE at the same level. This story has played out in many chemical companies.

The chemical sector was also in the limelight post Covid and the sector saw a rush of IPOs – be it chemicals, speciality chemicals or pharmaceutical APIs.

Given below are some of the high-profile IPOs in the last 3 years. These stocks have also given up 40-50% from their peak. Extrapolation of trends that could not sustain and peak valuations accorded at peak earnings resulted in their stock fall.

From the total PAT and M Cap at the peak, you can see that the average PE works out to 90-100 for these 5 stocks. 

Now’ let’s discuss the diagnostics space. 

Diagnostic stocks were a celebrated lot post Covid, almost as if the market discovered a new high growth space to play. Domestic franchisee and absence of USFDA inspection worries made them preferred bets over pharmaceuticals and PE multiples expanded to 70-80 times for these stocks at one point of time, doubling from their pre-Covid multiples.

The stock price of Metropolis Healthcare has now fallen below its pre-Covid price while Dr Lal PathLabs is back to its pre-Covid price. Both these companies are likely to report lower sales and profit in FY23 Vs FY22 and lower profits Vs FY21 as well. PE multiples have also contracted to pre-Covid levels following the 55-65% correction in their stock prices. This was in no way anticipated of this sector. 

From the graph of Metropolis below, you can see that growth peaked in Q2FY22 and has been in a contraction mode since then, on both sales and margin. Though there is still some growth versus pre-Covid, that is nothing more than normal growth anticipated of these high growth stocks.  

To sum up, what we have discussed so far is representative of what has happened to the overall pharmaceutical, chemical and diagnostics space in the last 3 years. 

For investors who shied away from these stocks during such times, it presents an opportunity to plunge into a deeper analysis of good quality stocks in this space. 

But when you do so, be cognizant of the following factors: 

  1. Buying stocks based on % correction (price anchoring) or TTM PE may still be deceiving until earnings contraction is complete. You are better off waiting to see visibility in earnings growth than try to catch a falling knife. 
  2. Market was enthused by capex plans of many of the companies in the above segments and in such cases, weak growth and margin contraction may take the RoCE assumptions for a toss. So companies putting very high capex have to be looked upon with extra caution. 
  3. Some of the companies have openly spoken about competitive intensity from China after re-opening. Margin assumptions may have to be revisited in such cases. Even the diagnostics sector has seen competitive intensity.

#3 Pent-up demand and discretionary consumption

Boom in discretionary consumption trend post lock downs turned out to be as deceiving as the trends in Covid beneficiary sectors of healthcare. While there was a pent-up demand, there were quick shifts in consumption patterns and divergent consumption trends in premium and value segments. These trends turned out to be highly deceiving for investors as stocks within the same sector were moving wildly in opposite directions.

Take the case of Bata. Investors confidently betting on it to make new lifetime highs post lock downs were in for a disappointment as subsequent numbers showed that Bata barely managed to churn out any sales growth compared with pre-Covid period.

You can see from the graph that the sales growth between Q3FY20 (pre-Covid) and Q3FY23 is barely in single digits. The stock gave up 30-35% from its peak with contraction in PE multiples from 80 times to 55 times.

While this trend transpired for Bata, its newly listed peer Metro Brands managed to generate significantly higher growth. While Bata is expected to close FY23 with just 10% growth over FY20 (Pre Covid), Metro Brands is on its way to clock a 50-60% growth in the same period. 

So why didn’t the pent-up demand play across companies and that too the popular brands? This can be explained by divergent consumption trends in the premium versus value segments. Metro operates in premium segments with brands such as Metro, Mochi and Crocs.  We also noticed a similar trend in a leading fashion player - with its premium segment doing extremely well in Q3FY23 while its value segment and athleisure segments (shift in consumption pattern) put a poor show. We have written about this in our recent update on the stock.

Another company, Page Industries, the franchise for Jockey, turned out to be a victim of such shift in consumption pattern.  While Page Industries was seeing significant demand for its athleisure products post the lockdowns, market mis-read it for a secular growth trend and took the stock price way higher, to 90-100 times earnings. But the declining sales growth in last two quarters along with margin contraction led to 30-35% correction in the stock price with PE multiple contracting to 60 times from 90 times. 

Here again, market was extrapolating trends and giving peak valuation at the time of peak earnings only to realise later that many of these consumption trends were not structural. The short-term growth bursts caught investors at the deceiving end with many of the stocks correcting by 30-40% from their peak.  

Like the Bata Vs Metro brands, a divergent trend played out in Jubilant Food (Dominos) Vs Westlife Food (Mc Donalds). While Westlife managed to grow, market was not at all impressed with the 24% absolute growth of Jubilant over a 3-year period (6-7% CAGR) as the stock was priced for much higher growth. This led to a 45% correction in Jubilant while Westlife gave up just 10% from its peak. Here, market may have extrapolated in-home consumption trend for Jubilant while Westlife fully benefited from the pent-up demand and out-of-home consumption trend post lockdown.

While the extrapolation of consumption trends and peak valuation at peak earnings led to sharp corrections, most of these are good quality franchises. At least the cool-off in valuation offers opportunities for investors to hunt for winners. 

Unlike in the pharmaceuticals, chemical and diagnostics space we discussed earlier, the valuation in this space is still expensive. 

This calls for investors to arrive at the right entry PE multiple that match the growth rate of each stock to see returns.

Which sectors are at peak valuations now?

Hotels and Hospitals are seeing similar trends that we discussed above. Current valuations are rich at a time when their earnings are also at their highs. Obviously, majority of the companies in both these sectors are enjoying best EBIDTA margins in many years and hence valuations (EV/EBIDTA) may optically look cheaper. 

Let’s take the case of the hotel sector where a combination of higher room rates, higher occupancy and lower supply of rooms are playing out. This is a lethal combination that allows companies to earn high margins and Return on Investment (RoI). But these are also the drivers that lure companies to go for capacity expansion. And when that happens, they all do together as no one wants to miss the bus.  

Here valuations (EV/EBIDTA) may not look stretched compared to their respective historical averages due to record high EBIDTA margins. But if margins were to move back to their averages, then multiples will stretch far beyond the averages. 

Other sectors that may be seeing such trends are defence and capital goods though it is difficult to quantify to what extent it is stretched and whether it is the case across stocks. This is because leading companies like ABB and Siemens used to trade at stretched valuations even prior to Covid when their business was not good. But in hindsight, those valuations look reasonable as companies managed to pull fresh orders and delivered better earnings. 

It requires a bit more caution in defence, as the order book building is seen with lot of excitement by the market. Let’s take the case of PSU defence behemoth HAL. The management did a Concall in May 2022 in which they gave a hint of the potential size of orders and the products for which orders are expected. And HAL being the only manufacturer of such products, the order is obviously expected to flow in at some point of time. Between May 2022 and March 2023, the stock has already rallied 50% and it would be safe to assume that the market has built in a lot of  expectation on potential order wins.

Like all the order book stories, companies do well during the order accretion phase and troubles start mounting up during the execution phase and payment phase.  So, getting into these stocks at multiples beyond their long-term averages during their upcycle can spell trouble later. Even if all goes well, the returns may be limited as market may have already built in all the good things in price.  

How to steer clear of such risks

When there is too much expectation form any stock or sector, market doesn’t leave much on the table for investors other than earnings growth because PE multiple expansion may have already happened. If earnings growth disappoints for whatever reason, the downward journey for the stock starts.

For example, if a stock is giving 20-25% earnings growth and is quoting at 40-50 PE, there is no further room for PE rerating. An investor will get only the 20-25% earnings growth by buying such a stock while carrying the risk of PE contraction.   

It is important to get upside on both earnings growth as well as PE re-rating to get the desired returns from a stock. In our own stock recommendation, we faced this struggle in getting stocks that offer both earnings as well as valuation upside. 

When confronted with a mouth-watering opportunity in a stock, ask yourself these questions:

  1. How big the recent spike (last 1 year) in the stock price is and what’s the reason behind it?
  2. Is the spike in stock price accompanied by earnings expansion or expected earnings expansion (changing cycles, order accretion, acquisitions, Govt. policies, etc)?
  3. If there is any unusual growth in sales and can you identify if it is led by structural factors or temporary factors?
  4. If there is any unusual deviation in margin from historical averages (say 5 years or 10 years). Is it led by structural factors or temporary factors?
  5. Does the current valuation still look reasonable due to sharp spike in earnings in the last few quarters or say in the last 1 year? 

Needless to say, Warren Buffett summed it all up when he said – “The investor of today does not profit from yesterday’s growth”.

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5 thoughts on “Entering a stock at peak valuation? – 5 questions to ask”

  1. Interesting article. Banks which had a good rally have now corrected, especially the PSU basket. Post this correction, does this space offer good upside potential in the mid term?

    1. N V Chandrachoodamani

      Welcome your query sir,

      After Q2 results, we did an earnings update on banking stocks with focus on key factors driving such robust earnings growth
      https://www.primeinvestor.in/should-you-still-bank-on-banking-stocks/

      The bottom line was that re-rating is done with and what an investor buying now will get returns equal to earnings growth for reasons mentioned in it. Kindly go through

      Having said, we are still positive on growth and hence returns from this space, but not to the extent we have seen between 2020- 2022

      Thank You

  2. Excellent Article, Thank you
    Paid membership of Prime Investor is best investment I made so far in stock market.
    Since joining Prime, I removed all junks stocks from my portfolio which I added based on so called ” hype & news ”
    Started investing in Quality business based on recommendations from prime.
    Since then, even when overall mood is down in Indian market, I can literally see the the improvements in my portfolio performance and for first time I saw in real life version of comment from Warren buffet ” The first rule of an investment is don’t lose money. And the second rule of an investment is don’t forget the first rule”
    Absolutely happy with Prime Investor paid subscription and your business ethics & best practices.
    Thank you entire team of Prime Investor
    Regards
    Amar

  3. Good Article.
    Your view on sugar stocks . Your opinion needed on it as sugar prices have already hit all time high

    1. N V Chandrachoodamani

      Welcome your query sir,

      Pl refer to our update on Balrampur chini in this context

      You might have noticed/ read from our reports also that this ethanol diversification is reducing volatility in earnings and cash flows for sugar Cos

      Our update on Balrampur chini will throw light on how ethanol diversification is helping sugar Cos

      But, then this also brings in Govt. intervention on pricing, volume off-take, capacity utilization, etc
      One has to be watchful of these new challenges as well

      Thank you

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  9. The RA or its directors or its employee or its associates have not managed or co-managed the public offering of any company. The RA or its directors or its employee or its associates have not received any compensation for investment banking or merchant banking of brokerage services from the subject company. The RA or its directors or its employee or its associates have not received any compensation for products or services other than above from the subject company. The RA or its directors or its employee or its associates have not received any compensation or other benefits from the Subject Company or 3rd party in connection with the research report/ recommendation.
  10. The subject company of its research recommendations was not a client of the RA or its directors or its employee or its associates during twelve months preceding the date of recommendation services provided.
  11. The RA or its directors or its employee or its associates has not served as an officer, director or employee of the subject company. Research Analysts has not been engaged in market making activity of the subject company.

PrimeInvestor Financial Research Pvt. Ltd., its Associates, the Research Analysts or their relatives holds ownership of 1% or more, in respect of the said issuer company(ies)? – NO

8. Termination of service and refund of fees:

The RA may terminate or suspend rendering of Research Services to the client in the following circumstances:

  1. On account of suspension/cancellation of registration of RA by SEBI. In case of suspension of certificate of registration of the RA for more than 60 (sixty) days or cancellation of the RA registration, RA shall refund the fees, on a pro rata basis for the period from the effective date of cancellation/ suspension to end of the client’s subscription period.
  2. The RA voluntarily chooses to terminate its Research Service. In the event of such termination of the Research Service, the RA shall refund the fees, on a pro rata basis for the period from the date of such termination of research service to end of the client’s subscription period.

9. Grievance redressal and dispute resolution:

Any grievance related to:

  1. nonreceipt of research report, or
  2. missing pages or inability to download the entire report, or
  3. any other deficiency in the research services provided by RA

shall be escalated promptly by the client to the person/employee designated by RA, in this behalf as under:

Name: Bhavana Acharya
Designation: Director & Compliance Officer, PrimeInvestor Financial Research Pvt Ltd
Email: [email protected]

The RA shall be responsible to resolve grievances within 7 (seven) business working days or such timelines as may be specified by SEBI under the RA Regulations.

RA shall redress grievances of the client in a timely and transparent manner. Any dispute between the RA and his client may be resolved through arbitration or through any other modes or mechanism as specified by SEBI from time to time.

If the client is not satisfied with the response of the RA, he/she can lodge his/her grievances with SEBI at scores.sebi.gov.in. Alternatively, the client may also write to any of the offices of SEBI. For any queries, feedback or assistance, please contact SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575

Details on grievances are available on the Website as follows: https://primeinvestor.in/ra-grievance/

10. Additional clauses:

Scope of the Research Service: The Research Services will be limited to providing independent research recommendation and shall not be involved in any advisory or portfolio allocation services. The Research Services are not meant to be tailor-made or customized solutions that specifically apply to each client based on his/her risk profile.

The RA never guarantees the returns on the recommendation provided. Investor shall take note that investment/trading in stocks/Index or other securities is always subject to market risk. Past performance is never a guarantee of same future results. The RA shall not be responsible for any loss to the Investors.

This service is not directed for access or use by anyone in a country, especially the USA, Canada or the European Union countries, where such use or access is unlawful or which may subject PrimeInvestor Financial Research Pvt Ltd or its affiliates to any registration or licensing requirement.

The Research Service, including recommendations, research reports, updates, and other information will be accessible through the RA’s website https://primeinvestor.in only. Such recommendations and updates will not be provided over phone calls.

Fees: Our current fee structure, the term and duration of our subscription for our Research Service, can be viewed on our website: https://primeinvestor.in/prime-pricing. Eligibility for any discounts is ascertained at the time the client subscribes. Any such discount and its tenure shall be at the discretion of the RA.

Subscription and access to content services fall under the purview of Goods and Services Tax (GST) as per the current indirect taxation policy, Government of India. Unless otherwise indicated, prices stated on our website are exclusive of applicable GST, any applicable value added tax (VAT) or other sales taxes. We are a business-to-consumer (B2C) service provider and we do not commit to provide any input tax credit on GST charged on subscription to our Research Service.

We may change the Subscription Fees and charges then in effect, or add new fees or charges which will take effect at the end of the client’s subscription period, by giving notice in advance and an opportunity to cancel renewal of the subscription.

Subscription Access & Renewal: Subscription to the Website commences immediately on the realisation of payment of the Subscription Fees. Subscriptions are set to be renewed automatically at the end of the subscription period.

Unless the client notifies us before the end of his/her subscription period, or the client cancels the auto-renewal mandate within the period specified by law, that the client does not wish to renew his/her subscription, the client’s subscription will renew for the period defined by the client’s subscription plan. We will charge the subscription using the same payment method that you previously used.

Although the client may notify to us his/her intention to his/her subscription, such notice will only take effect at the end of his/her then current subscription period, and he/she will not receive a refund other than as set out under Clause 8 in these Terms.

The client may notify us of his/her wish to cancel his/her subscription by sending an email to [email protected]. The client must provide at least 5 business days advance notice for this to be implemented.

Refunds: There can be no cancellation and refund of subscription fee paid once the subscription is active, other than as stated in Clause 8 of these Terms. If the client is entitled to a refund as specified under Clause 8 of these Terms, the RA will credit that refund to the card or other payment method used by the client to submit payment, unless it has expired - in which case the RA will contact the client to proceed with the refund. If we do issue a refund or credit due to circumstances outside the obligations specified under Clause 8, we are under no obligation to issue the same or a similar refund in the future.

General disclaimers: The recommendations made herein in the Research Services are expression of views and/or opinions and should not be deemed or construed to be advice for the purpose of purchase or sale of any security, nor a solicitation or offering on any investment/ trading opportunity on behalf of the company, AMC, insurance company, or issuer of security referred to herein.

The content and research reports generated by the RA does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities.

The information/ opinion/ views mentioned in research reports or by the RA are not meant to serve as a professional guide to the client or recipients of this Report. The research report, recommendation, or any other content published by the RA do not assure or guarantee any minimum or fixed returns to the client or recipients of the reports/ recommendations/ content.

Use of this information is at the client’s own risk. The client must make his/ her own investment decisions based on his/her specific investment objective and financial position and using such independent advisors as he/she believes necessary. The services rendered by the RA are on a best-effort basis. All information in the content or research report of the RA is provided on an as is basis. Information is believed to be reliable but the RA does not warrant its completeness or accuracy and expressly disclaim all warranties and conditions of any kind, whether express or implied.

While due care has been taken to ensure that the disclosures, information, and opinions given are fair and reasonable, PrimeInvestor Financial Research Pvt Ltd and/or none of its officers, directors, partners, employees, agents, subsidiaries, affiliates or business associates shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way whatsoever from the information/ opinions/ views contained in the research report and recommendations that form part of the Research Service, and/or mails, social media or notifications issued by PrimeInvestor Financial Research Pvt Ltd or any other agency appointed/authorised by PrimeInvestor Financial Research Pvt Ltd. Returns and performance figures mentioned in the research report represent past performance and should not be constituted to be future returns or guaranteed returns.

Any agreements, transactions or other arrangements made between the client and any third party named on (or linked to from) the Website are at your own responsibility and entered into at your own risk. Any information that you receive via the Website, whether or not it is classified as “real time”, may have stopped being current by the time it reaches you. Market price information may be rounded up/down and therefore may not be entirely accurate.

The purpose of these disclosures is to provide essential information about the Research Services in a manner to assist and enable the prospective client/client in making an informed decision for engaging in Research Services before onboarding.

History, present business and background: PrimeInvestor Financial Research Private Limited is registered with SEBI as Research Analyst with registration no. INH200008653. The Research Analyst got its registration on August 19, 2021 and is engaged in offering research and recommendation services.

Disciplinary history: There are no pending material litigations or legal proceedings against the Research Analyst. As on date, no penalties / directions have been issued by SEBI under the SEBI Act or Regulations made thereunder against the Research Analyst relating to Research Analyst services.

Details of the RA's associates: No associates.

Usage of Website Content: This Website is controlled and operated by the RA. All material, including research reports, recommendations, portfolios, ratings, lists of financial products, illustrations, statements, opinions, views, photographs, products, images, artwork, designs, text, graphics, logos, button icons, images, audio and video clips and software (collectively, “Content”) are protected by copyrights, trademarks and other intellectual property rights that are owned and controlled by the RA or by other parties that have licensed their material to us.

Except where otherwise agreed in writing with the RA, material on the Website is solely for the client’s personal, non-commercial use. Except as provided below, the client must not copy, reproduce, republish, upload, post, transmit or distribute such material in any way, including by e-mail or other electronic means and whether directly or indirectly and the client must not assist any other person to do so.

Without the prior written consent of the RA, modification of the materials, use of the materials on any other web site or networked computer environment or use of the materials for any purpose other than personal, non-commercial use is a violation of the copyrights, trademarks and other proprietary rights, and is prohibited. Any use for which the client receives any remuneration, whether in money or otherwise, is a commercial use for the purposes of these Terms.

The client may occasionally distribute a copy of a research report, or a portion of the same, from the Website in non-electronic form to a few individuals without charge, provided the client includes all copyright and other proprietary rights notices in the same form in which the notices appear, original source attribution, and the phrase “Used with permission from PrimeInvestor Financial Research Pvt. Ltd.”

While the client may occasionally download and store research reports or information from the Website for his/her personal use, he/she may not otherwise provide others with access to the same. The foregoing does not apply to any sharing functionality we provide through the Website that expressly allows the client to share Content or links to Content with others. In addition, the client may not use Content he/she has downloaded for personal use to develop or operate an automated trading system or for data or text mining.

The client agrees not to rearrange or modify the Content available through the Website. The client agrees not to display, post, frame, or scrape the Content for use on another website, app, blog, product or service, except as otherwise expressly permitted by these Terms. You agree not to create any derivative work based on or containing the research products and Content. The framing or scraping of or in-line linking to the Services or any Content contained thereon and/or the use of webcrawler, spidering or other automated means to access, copy, index, process and/or store any Content made available on or through the Services other than as expressly authorized by us is prohibited.

The client further agrees to abide by exclusionary protocols (e.g., Robots.txt, Automated Content Access Protocol (ACAP), etc.) that may be used in connection with the Research Services. The client may not access parts of the Research Services to which he/she is not authorized, or attempt to circumvent any restrictions imposed on your use or access of the Services.

As a general rule, the client may not use the Content, including without limitation, any Content made available through one of our RSS Feeds, in any commercial product or service, without our express written consent.

The client may not create apps, extensions, or other products and services that use our Content without our permission. The client may not aggregate or otherwise use our Content in a manner that could reasonably serve as a substitute for a subscription to the Website.

The client may not access or view the Services with the use of any scripts, extensions, or programs that alter the way the Services are displayed, rendered, or transmitted to you without our written consent.

The client agrees not to use the Services for any unlawful purpose. We reserve the right to terminate or restrict the client's access to the Website if, in our opinion, the client's use of the Services may violate any laws, regulations or rulings, infringe upon another person's rights or violate these Terms.

Prohibited content: The Website includes comments sections, blogs and other interactive features that allow interaction among clients and between clients and the RA. We call the information posted by or contributed by users “Contributed Content.” In the course of availing of the Research Services or uploading any post or comment on the Website, the client shall not post any Contributed Content that (i) contains nude, semi-nude, sexually suggestive photos, (ii) tends or is likely to abuse, harass, threaten, impersonate or intimidate other users of the Website and/or Research Services, (iii) is lascivious or appeals to the prurient interest or if its effect is such as to tend to deprave and corrupt persons who are likely to use or have access to the Website and/or Services, or (iv) otherwise violates, is prohibited or restricted by applicable law, rule or regulation, is offensive or illegal or violates the rights of, harms or threatens the safety of other users of the Website and/or Services (collectively “Prohibited Content”).

We reserve the right to cease to provide the client with the Research Services or access to the Website, or terminate your subscription, with immediate effect and without notice and liability, for violating these Terms, applicable law, rules or regulations and reserves the right to remove Prohibited Content which is in violation of these Terms, or is otherwise abusive, illegal or disruptive. The determination of whether any content constitutes Prohibited Content, violates these Terms, or is otherwise abusive illegal or disruptive, is subject to the sole determination of the Firm.

Changes to Research Services: We are constantly endeavouring to improve the quality of Research Services provided to our clients. Due to this, the form and nature of the Research Services provided may change from time to time without any prior notice to the client. We reserve the right to introduce and initiate new features, functionalities, components to the Website and/or Research Services and/or change, alter, modify, or discontinue existing ones without any prior notice to the client.

Warranty and liability disclaimer: The Website, Research Services, and all the materials and services, included on or otherwise made available to the client through this Website is provided by the RA on an “as is” and “as available” basis without any representation or warranties, express or implied except otherwise specified in writing. Without prejudice to the foregoing paragraph, the RA does not warrant that:

  • This Website and/or Research Services will be constantly available, or available at all;
  • The information on this Website or provided through the Research Services is complete, true, accurate or not misleading; or
  • The quality of any products, services, information, or other material that you obtain through the Website or Services will meet your expectations.

The RA, to the fullest extent permitted by law, disclaims all warranties, whether express or implied, including the warranty of merchantability, fitness for particular purpose and non-infringement. The RA makes no warranties about the accuracy, reliability, completeness, or timeliness of the Website, Research Services, Content, Contributed Content, Services, software, text, graphics and links.

The RA does not warrant that this Website, Research Services, information, content, materials, or any other material included on or otherwise made available to you through this Website, their servers, or electronic communication sent by the RA are free of viruses or other harmful components.

Nothing on this Website constitutes, or is meant to constitute, advice of any kind.

Indemnification: The client:

  1. Represents, warrants and covenants that no materials of any kind provided by him/her will:
    1. Violate, plagiarise, or infringe upon the rights of any third party, including copyright, trademark, privacy or other personal or proprietary rights; or
    2. Contain libellous, Prohibited Content or other unlawful material;
  2. Hereby agree to indemnify, defend and hold harmless the RA and all of the RA’s officers, directors, owners, agents, customers/clients, information providers, affiliates, licensors and licensees (collectively, the “Indemnified Parties”) from and against any and all liability and costs, including, without limitation, reasonable advocate’s fees, incurred by the Indemnified Parties in connection with any claim arising out of any breach by the client of these Terms or the foregoing representations, warranties and covenants. The client shall cooperate as fully as reasonably required in the defence of any such claim. The RA reserves the right, at its own expense, to assume the exclusive defence and control of any matter subject to indemnification by the client.

Applicable law: This Website, including the Content and Contributed Content and information contained herein, and the provision of Research Services shall be governed by the Securities and Exchange Board of India, laws of the Republic of India and the courts of Chennai, India which shall retain exclusive jurisdiction to entertain any proceedings in relation to any disputes arising out of the same. As such, the laws of India shall govern any transaction completed using this Website.

Information gathered and tracked: Information submitted or collected on the Website or pursuant to the use of the Services is stored in a database. Specifically, we store the username, name, e-mail address, contact number, as submitted or collected on our Website or through the provision of the Research Services. We may use such information to send out occasional promotional materials, including alerts on new Services available, or other promotional and marketing material relating to our clients and customers.

In accordance with the Information Technology Act 2000, the name and the details of the Grievance Officer at PrimeInvestor is provided below:

Mr. Srikanth Meenakshi
PrimeInvestor Financial Research Pvt. Ltd., Registered office: 659, 4th Avenue, D-Sector, Anna Nagar Western Extension, Chennai 600 101.
Email: [email protected]

11. Mandatory notice:

Clients shall be requested to go through Do’s and Don’ts while dealing with RA as specified in SEBI master circular no. SEBI/HO/MIRSD-POD-1/P/CIR/2024/49 dated May 21, 2024 or as may be specified by SEBI from time to time.

12. Optional Centralised Fee Collection Mechanism:

SEBI has operationalized a centralized fee collection mechanism for IA and RA. Under this mechanism, clients shall pay fees to IAs/RAs through a designated platform/portal administered by a recognized Administration and Supervision body. This is an optional mechanism for the registered entities. At this time, PrimeInvestor has opted out of this fee collection mechanism. Therefore, all subscription payments for the Research Services will be through the modes as specified in Clause 5 of these Terms.

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