Market Outlook

India Research
September 5, 2011

Dealers Diary
The key benchmark indices regained strength in late trade as index pivotals extended gains in volatile trade. Volatility ruled the roost as Indian bourses outperformed global peers, which were subdued as caution prevailed ahead of the release of key US jobs data later in the day. The market breadth was strong. Index heavyweight Reliance Industries (RIL) advanced for the third straight session of trade. Realty major DLF reversed initial losses in volatile trade to log steep gains. Most auto stocks rose in reaction to higher August 2011 monthly sales. Domestic markets logged gains for the third running day as they played a catch-up with global peers as they reopened after a two-day closure on account of local holidays. Resumption of buying by foreign funds also boosted sentiment. The Sensex and Nifty closed with gains of 0.9% and 0.8%, respectively. The mid-cap index logged gains of 0.8%, however the small-cap index closed flat. Among the front runners, DLF, Tata Steel, Sterlite Industries, M&M and Bajaj Auto gained 3-6%, while Tata Power, TCS, BHEL, NTPC and Infosys lost 1-2%. Among mid caps, Manappuram Finance, VIP Industries, Parsvnath Developers, Cox & Kings and Chambal Fertilisers gained 6-11%, while DB Corp., Electrosteel Steels, KGN Industries, SREI Infra and Bajaj Electricals lost 4-5%.

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

Chg (%) 0.9 0.8 0.8 0.0 1.1 0.7 0.4 2.1 2.8 2.2 (1.3) Chg (%) (2.2) (2.6) (2.3) (1.2) (1.8) (0.8) (1.1)

(Pts) 39.0 51.0 2.3 67.6 50.3 175.6 180.7 (66.2) (Pts) (65.7) (126.6) (110.1) (24.1) (27.8)

(Close) 5,040 6,325 7,134 6,030 7,666 8,572 8,534 4,996 (Close) 2,480 5,292 8,951 2,843 2,528

144.7 16,821

45.4 10,950 332.3 12,429

(253.3) 11,240

Markets Today
The trend deciding level for the day is 16,833/5,049 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,97817,135/5,1055,169 levels. However, if NIFTY trades below 16,833/5,049 levels for the first half-an-hour of trade then it may correct up to 16,67616,531/4,9844,929 levels.
Indices SENSEX NIFTY S2 16,531 4,929 S1 16,676 4,984 R1 16,978 5,105 R2 17,135 5,169

(372.4) 20,213

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank Advances / Declines Advances Declines Unchanged Volumes (` cr) BSE NSE

Chg (%) (2.7) (1.2) (3.6) (4.2)

(Pts) (1.4) (0.1) (1.4) (1.4) BSE 1,660 1,157 121

(Close) $49.6 $9.7 $38.0 $32.0 NSE 877 552 51

News Analysis
Supreme Court permits e-auction of iron ore inventory in Karnataka Cement dispatches for August 2011 Coverage on Everonn and Educomp dropped
Refer detailed news analysis on the following page

Net Inflows (August 30, 2011) ` cr Purch FII MFs 2,964 753

Sales 2,286 486

Net 678 267

MTD (9,541) 2,497

YTD (808) 6,274

2,194 12,908

FII Derivatives (September 2, 2011) ` cr Index Futures Stock Futures Gainers / Losers Gainers Company Manappuram Fin. Shriram Trans Reliance Comm. JSW Steel Chambal Fert. Price (`) 56 673 84 721 113 chg (%) 11.1 6.7 6.3 6.3 6.3 Company Indiabulls Real Estate IDBI Bank Amtek Auto Educomp Solutions Gujarat NRE Coke Losers Price (`) 81 106 129 197 27 chg (%) (4.1) (3.9) (3.6) (3.5) (3.4) Sebi Registration No: INB 010996539
1

Purch 3,176 1,781

Sales 2,637 1,367

Net 539 414

Open Interest 13,908 27,286

Please refer to important disclosures at the end of this report

Market Outlook | India Research

Supreme Court permits e-auction of iron ore inventory in Karnataka

The Supreme Court (SC) has permitted e-auction of 1.5mn tonnes (per month) of raw iron ore from the inventory lying in Karnataka mines. As per estimates, there are 25mn tonnes of iron ore inventory in Karnataka. However, it has stated that this iron ore should be used exclusively to meet the requirements of the domestic steel industry in the region and no ore should be exported. The NMDC pricing structure will be used as a reserve price after adjusting for the grade. The SC had banned iron ore mining in Karnataka's Bellary, Tumkur and Chitradurga districts following the recommendation of the Central Empowered Committee, which had detected illegal iron ore mining in these districts. A substantial portion of this inventory should be available to JSW Steel in our view as approximately 14mn tonnes of the piled-up inventory is of low-grade iron ore. Barring JSW Steel, there are no players that can utilise the low-grade iron ore in the Karnataka region. We maintain our Neutral rating on the stock.

Cement dispatches for August 2011

ACCs dispatches for August 2011 stood at 1.88mn tonnes, up by healthy 19.7% yoy, aided by higher installed capacity. Ambuja Cements (Ambuja) posted moderate 2.7% yoy growth in dispatches in August to 1.51mn tonnes. ACC and Ambuja are currently trading at US$111 and US$138 per tonne, respectively, on CY2012 capacity. We continue to remain Neutral on ACC and Ambuja.

Coverage on Everonn and Educomp dropped

The Income Tax (IT) Department conducted a raid on Everonn Education Ltd. on August 4, 2011. The companys Managing Director, P Kishore was arrested in an alleged bribery case to an IT official. IT officials found that the firm had allegedly concealed taxable income of `116cr. To hide the taxable income of the company, Mr. Kishore allegedly offered a bribe to one of the officials of the IT Department. The companys corporate governance policies have been in question since long. Thus, we discontinue our coverage on the stock. Also, we drop our coverage on Educomp Solutions, owing to high liquidity requirements haunting the companys business fundamentals.

September 5, 2011

Market Outlook | India Research

Economic and Political News

Exports growth could taper off as US, Europe slows FDI deals should not come with any strings attached: RBI Manufacturing sector profit to fall by 5.7% in 2QFY2012, forecasts CMIE

Corporate News
L&T revives plans to sell stake in electrical business M&Ms new global SUV XUV 500 to hit roads by December-end RPower gets US Exim Bank funding for solar plant RCom to merge three business divisions
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

September 5, 2011

Market Outlook | India Research

Research Team Tel: 022-3935 7800 E-mail: research@angelbroking.com Website: www.angelbroking.com

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September 5, 2011