Market Outlook

India Research
July 7, 2011

Dealers Diary
The market edged higher on the back of firm Asian stocks. In a quick span, the indices retreated and moved in a tight range below the baseline till the early afternoon session. Weak opening of European shares also weighed on the market. Selling pressure was witnessed in banking and OMC stocks. With strong volatility, the market reversed previous losses and ascended above the baseline. Nonetheless, weak investor sentiments pulled back modest gains. The indices ended with marginal losses with the Sensex and Nifty losing ~0.1% each. The mid-cap index remained flat, whereas the small-cap index gained 0.2%. Among the front-runners, Tata Motors, HDFC, Hindalco, L&T and RIL gained 0.82%, while RCom., Tata Power, ICICI Bank, Hero Honda and JP Associates lost ~2%. Among mid caps, SpiceMobile, Gujarat FluoroChemicals, Bharat Forge, Sadbhav Eng. and Wabco TVS India gained 510%, while Greaves Cotton, Sterling Intl., KGN Ind., IRB Infra. and Tata Teleservices lost 35%.

Domestic Indices BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT Global Indices Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) -0.1% -0.1% 0.0% 0.2% -0.4% -0.4% -0.9% 0.4% 0.1% 0.2% -0.1% Chg (%) 0.5% 0.3% -0.4% 1.1% -0.5% -0.2% Chg (%) -0.4% 0.0% -2.7% -0.2%

(Pts) (6.7) 2.6 19.2 (28.1) (38.0) 33.3 16.0 (8.5) (Pts) 56.2 8.3 (21.1) 110.0 (15.0) (5.9) (Pts) (0.3) 0.0 (1.3) (0.3)

(Close) 5,625 6,962 8,358 6,388 8,595 8,973 8,971 6,175 (Close) 12,626 2,834 6,003 10,083 22,518 3,115 2,810 (Close) $66.5 $13.3 $48.2 $180.0

(17.6) 18,727

(121.1) 12,915 20.7 15,184

Markets Today
The trend deciding level for the day is 18744 / 5631 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18806 18885 / 5650 - 5675 levels. However, if NIFTY trades below 18744 / 5631 levels for the first half-an-hour of trade then it may correct up to 18665 18603 / 5606 - 5586 levels.
Indices SENSEX NIFTY S2 S1 R1 R2

-1.0% (230.4)

18,603 5,586

18,665 5,606

18,806 5,650

18,885 5,675

News Analysis
HDFC Bank splits shares in 1:5 ratio Cadila Healthcare receives warning letter from USFDA
Refer detailed news analysis on the following page

Advances / Declines Advances

BSE 1,449 1,418 116

NSE 709 704 65

Net Inflows (July 05, 2011) ` cr Purch FII MFs 2,662 363

Sales 1,801 464

Net 861 (101)

MTD 4,723 (16)

YTD 6,045 3,109

Declines Unchanged

Volumes (` cr)

FII Derivatives (July 06, 2011) ` cr Index Futures Stock Futures Gainers / Losers Gainers Company Bharat Forge Torrent Power Unitech Mcleod Russel Titan Ind. Price (`) 322 245 34 283 224 chg (%) 4.6 3.6 3.5 2.8 2.8 Company LIC Housing Fin. IRB Infra. Castrol India Tata Teleservices Indiabulls Fin. Losers Price (`) 224 169 555 19 168 chg (%) (4.8) (4.0) (3.8) (3.0) (2.7) Purch 902 823 Sales 892 1,101 Net 10 (278) Open Interest 12,532 30,275

BSE NSE

2,674 9,881

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

HDFC Bank splits shares in 1:5 ratio

At the 17th Annual General Meeting held on July 6, 2011, HDFC Bank announced the sub-division of stocks in the ratio of 1:5 in order to encourage wider retail participation in the company. The bank's shareholders have approved the stock split in the company's share in a 1:5 ratio i.e., one share of `10 will be split into five shares of `2 each. HDFC Banks fundamentals and earnings outlook remain strong but at 3.4x FY2013E ABV, we believe the stock is fairly valued. Hence, we remain Neutral on the stock.

Cadila Healthcare receives warning letter from USFDA

Cadila Healthcare has received warning letter from USFDA for Sarkhej site. Although this development is negative, it is not going to impact the companys financial performance as the site is still not contributing to the turnover. Until all corrections have been completed and FDA has confirmed corrections of the violations and the firms compliance with CGMP is completed, FDA may withhold approval of any new applications or supplements listing the firm as a drug product manufacturer. Management is in the process of replying and taking the corrective steps for the same. Additionally, the other USFDA facilities were re-inspected in January 2011 and have not received any adverse comments. Thus, given the development, we maintain our estimates. At the CMP of `949, the stock trades at 25x FY2012E and 18x FY2013E P/E. We recommend Accumulate on the stock with a target price of `1,053.

Economic and Political News

Companies raise `4,781cr in May via IPOs, rights issues Oil Ministry refers Reliance-BP deal to CCEA for approval Review meet for power, coal sectors by PM postponed Government macro data not reliable, says RBI Probe into Essar, Swan to be over by August 31: CBI

Corporate News
Lupin's US arm gets FDA nod for hypertension drug Coromandel inks pact with Qatar firm for urea supply Tata Steel sales volume in India up 14% in 1QFY2012 JSW's crude steel production up 9% to 1.7mt in 1QFY2012 SC allows Lafarge to mine limestone in Meghalaya
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

July 7, 2011

Market Outlook | India Research

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July 7, 2011