Market Outlook

August 17, 2012

Dealers Diary
Indian markets are expected to open in green, tracing positive opening trades in the SGX Nifty and the major Asian indices. The US markets moved mostly higher over the course of the trading day on Thursday after initially showing a lack of direction. The markets benefited from a positive reaction partly due to remarks by German Chancellor Angela Merkel who said that Germany is committed to doing everything it can to maintain the euro. The US commerce department released a mixed batch of US economic data, showing a drop in housing starts by 1.1% but a substantial increase in building permits to 6.8%. The Labor Department released a report showing that initial jobless claims came in slightly higher than anticipated in the week ended August 11, 2012. European stock markets rose in afternoon trade on Thursday, in reaction to US housing and jobs data. Chinese FDI figures pointed to the worsening trade outlook for the second half of 2012, increasing concerns over the world's secondlargest economy suffering a hard landing. Indian shares edged lower on Thursday on lackluster global cues and the rupee traded lower to hit a two-week low against the dollar on renewed demand for the greenback from banks and importers, weighing on investor sentiment.

Domestic Indices

Chg (%)

(Pts)

(Close)

BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT
Global Indices

(0.4) (0.3) 0.1 0.3 0.1 (0.6) (0.8) 0.6 0.7 (0.5)
Chg (%)

(71.0) 17,657 (17.4) 7.4 17.7 6.1 (41.2) 54.5 54.8 (25.2)
(Pts)

5,363 6,155 6,614 7,289 7,147 9,477 8,525 5,548

(Close)

(91.3) 11,976

(1.4) (153.6) 10,484

Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com
Indian ADRs

0.7 1.0 0.0 1.9 (0.5) 0.0 (0.3)

Chg (%)

85.3 13,250 31.5 1.5 167.7 0.8 (6.8)

(Pts)

3,062 5,835 9,093 3,063 2,112

(Close)

(89.3) 19,963

Markets Today
The trend deciding level for the day is 17,687 / 5,370 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,734 17,810 / 5,384 5,404 levels. However, if NIFTY trades below 17,687 / 5,370 levels for the first half-an-hour of trade then it may correct up to 17,611 17,564 / 5,350 5,336 levels.
Indices SENSEX NIFTY S2 17,564 5,336 S1 17,611 5,350 PIVOT 17,687 5,370 R1 17,734 5,384 R2 17,810 5,404

INFY WIT IBN HDB

Advances / Declines

1.7 (0.4) (0.9) 0.7

0.7 (0.0) (0.3) 0.3

BSE

$42.1 $8.0 $34.4 $35.3

NSE

News Analysis
ICICI Bank successfully raises US $750mn TTMT reports 19% yoy growth in global sales for July 2012 Cairn India acquires 60% stake in an oil block Maruti Suzuki to lift the lock-out at Manesar plant from August 21, 2012
Refer detailed news analysis on the following page

Advances Declines Unchanged

Volumes (` cr)

1,265 1,560 124

647 795 74

BSE NSE

2,188 10,166

Net Inflows (August 14, 2012)

` cr FII MFs Purch 1,972 472 Sales 1,691 373 Net 280 99 MTD 4,612 (760) YTD 57,911 (8,882)

FII Derivatives (August 16, 2012)

` cr
Index Futures Stock Futures

Purch 759 1,009

Sales 773 1,350

Net (14) (341)

Open Interest 16,754 25,312

Gainers / Losers
Gainers Company
Manappuram Finance JSW Ispat IDFC Aditya Birla Nuv Tech Mahindra

Losers Company
Jain Irrigation Indiabulls Fin Jet Air India ITC Piramal Health

Price (`)
36 11 142 805 846

chg (%)
8.3 5.5 4.1 3.7 3.6

Price (`)
79 190 381 258 511

chg (%)
(8.8) (4.6) (3.8) (3.6) (3.5)

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Market Outlook
August 17, 2012

ICICI Bank successfully raises US $750mn

ICICI Bank has successfully raised US $750mn from a 5.5 year overseas bond sale. The bonds carry a coupon of 4.7%. The issue was subscribed by 7.6times, with participation of 312 investors. The bonds were issued by the ICICI Banks Dubai branch. Earlier, it had paid a coupon of 4.75% when it had raised US $ 1bn from overseas in March 2011. At the CMP, the stock is trading at 1.6x FY2014E ABV (after adjusting for value of subsidiaries). We recommend a Buy rating on the stock with a target price of `1,169.

TTMT reports 19% yoy growth in global sales for July 2012
Tata Motors (TTMT) reported a strong growth of 19% yoy (8% mom) for July 2012 to 101,605 units led by 41.4% yoy (50% mom) growth in the domestic passenger vehicle (PV) sales. Jaguar and Land Rover (JLR) however, posted lower-thanexpected volume growth of 40.8% yoy (down 4.6% mom) to 26,921 units. While Land Rover volumes jumped 55% yoy to 22,857 units led by Evoque sales; volumes were down by 6.3% mom. Jaguar sales declined 7% yoy to 4,064 units; however it grew by 6.1% on a mom basis. Global commercial vehicle (CV) sales registered a flat growth (up 1.1% yoy) mainly due to weak demand in the domestic medium and heavy commercial vehicle (MHCV) sales. At the current market price of `235, the stock is trading at 5.4x and 2.9x FY2014E earnings and EV/EBITDA, respectively. We maintain our Buy rating on the stock with an SOTP based target price of `292.

Cairn India acquires 60% stake in an oil block

Cairn India has acquired 60% stake from PetroSA in an oil and exploration block in Orange basin (Block 1) of South Africa. Block 1 covers a large area of 19,922km and is currently in the initial stages of exploration. It has an existing gas discovery and identified oil and gas leads and prospects. Cairn India has not spent any funds for acquisition; however, it will make all the required investments for exploration and drilling and will work as an operator. Until further update, we maintain our estimates and our Accumulate rating on the stock with a target price of `380.

Maruti Suzuki to lift the lock-out at Manesar plant from August 21, 2012
Maruti Suzuki (MSIL) has decided to lift the lockout and begin production in a phased manner at its Manesar plant from August 21, 2012. MSIL intends to produce 150 cars/day (capacity of 1,700 cars/day) initially, including the Swift and Dzire, which would be ramped up in a gradual manner subsequently. This announcement comes on the expected lines as media reports had already suggested that the company will start the production soon. The shutdown at the Manesar plant (~35% of MSILs installed capacity) which began on July 18, 2012 will last for ~27 working days and is likely to result in a production loss of ~45,000 units. We expect the shutdown to impact the 2QFY2013 financial

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Market Outlook
August 17, 2012

performance sharply as the Manesar plant which produces the in demand products, Swift and Dzire is expected to cost the company ~`2,200cr in top-line during the quarter. Nonetheless, re-opening of the plant is a positive development and will enable the company to ramp-up in time to meet the festival demand. At `1,172 the stock is trading at 13.4x FY2014E earnings. Currently we have an Accumulate rating on the stock with a target price of `1,227. The Manesar plant which has an installed capacity of 550,000 units has been shutdown since July 18, 2012, following a violent stand-off between the workers and the management. The unrest led to a death of senior management executive who was burnt to death inside the plant facilities and 96 other supervisors and managers were injured and hospitalized. As a part of the investigation, Haryana police has arrested 12 union leaders and is still inquiring into the matter. Further, MSIL has issued termination notices to 500 regular workers, who were allegedly involved in the July 18 violence. The production is set to begin under the presence of 500-600 policemen and ~100 special security guards appointed by the company as the company is extremely concerned about the safety of its employees. Going ahead, MSIL has decided not to employ contract workers on the direct production line and will start regularizing contract workers from September 2, 2012.

Economic and Political News

Interest rate decision will depend on inflation situation: RBI India Inc's July M&A deals down 43% at US$2bn y-o-y PE investments in India plunge 35% to US$1,616mn in Apr-Jun Forex reserves down to 7 months import cover: RBI

Corporate News
Nalco's foray into energy sector, to invest `40,000cr BGR Energy-Hitachi JV cuts investment in Tamil Nadu by 20% Santarus sues Dr Reddy's over heartburn drug
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

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