Market Outlook

India Research
September 22, 2011

Dealers Diary
The key benchmark indices nudged higher in early trade as most Asian stocks rose and swung between gains and losses later. The market slipped into the red to hit a fresh intraday low in morning trade, reversing direction after hitting a 1.5-week high, and then alternately moved between the positive and negative terrain in mid-morning trade. A bout of volatility was witnessed in early afternoon trade as the key benchmark indices alternately swung between the positive and negative zone. The market recovered after hitting a fresh intraday low in early afternoon trade but once again weakened in mid-afternoon trade on eurozone debt worries. The key benchmark indices nudged lower amid intraday volatility on eurozone debt worries, with the Sensex and Nifty closing down by 0.2% and 0.1%, respectively. A rally in a number of side counters was the highlight of the day's trading session. The mid-cap and small-cap indices closed up by 0.7% each. Among the front runners, ICICI Bank, Jaiprakash Associates, Coal India, Wipro and SBI gained 12%, while Hero MotoCorp, Hindalco Industries, Maruti Suzuki, RIL and Bajaj Auto lost 13%. Among mid caps, Prism Cement, Strides Arcolab, Glodyne Technoserve, Bajaj Hindustan and JSL gained 713%, while Responsive Industries, Himadri Chemicals, Rajesh Exports, India Infoline and A2Z Maintenance and Engineering lost 25%.

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 (%) (0.2) (0.1) 0.7 0.7 0.3 0.5 1.0 (0.9) (0.3) (1.2) (0.3) Chg (%) (2.5) (2.0) (1.4) 0.2 (1.0) 0.4 2.7

(Pts) (7.0) 47.1 51.8 18.4 38.6 (81.4) (102.3) (13.4) (Pts) (52.1) (75.3) 19.9 11.0 65.2

(Close) 5,133 6,476 7,352 6,014 7,759 8,899 8,742 5,203 (Close) 2,538 5,288 8,741 2,792 2,513

(34.1) 17,065

108.3 11,360 (32.0) 12,318

(283.8) 11,125

Markets Today
The trend deciding level for the day is 17,086/5,137 levels. If Nifty trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,17117,276/5,1645,196 levels. However, if Nifty trades below 17,086/5,137 levels for the first half-an-hour of trade then it may correct up to 16,98016,895/5,1065,079 levels.
Indices SENSEX NIFTY S2 16,895 5,079 S1 16,980 5,106 R1 17,171 5,164 R2 17,276 5,196

(190.6) 18,824

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank Advances / Declines Advances Declines Unchanged

Chg (%) (1.9) (1.7) (0.8) (2.5)

(Pts) (1.0) (0.2) (0.3) (0.8) BSE 1,610 1,228 126

(Close) $49.0 $9.6 $36.6 $30.5 NSE 827 603 61

News Analysis
August 2011- GSM net subscriber addition HCL Tech bags a multi-million dollar deal from Deutsche Bank
Refer detailed news analysis on the following page

Net Inflows (September 20, 2011) ` cr Purch Sales FII MFs 2,131 247 1,753 326

Net 379 (79)

MTD 1,922 (880)

YTD 1,114 5,395

Volumes (` cr) BSE NSE 2,537 10,333

FII Derivatives (September 21, 2011) ` cr Index Futures Stock Futures Gainers / Losers Gainers Company India Cements Amtek Auto Century Tex Shree Renuka NCC Price (`) 76 139 305 64 72 chg (%) 5.7 4.9 4.4 4.3 4.1 Company India Infoline Hero Motocorp Hindalco Inds Maruti Suzuki JSW Steel Losers Price (`) 75 2,138 146 1,124 679 chg (%) (3.2) (3.1) (2.8) (2.7) (2.6) Sebi Registration No: INB 010996539
1

Purch 1,641 2,450

Sales 1,730 2,743

Net (89) (292)

Open Interest 15,523 30,592

Please refer to important disclosures at the end of this report

Market Outlook | India Research

August 2011 - GSM net subscriber addition

Cellular Operators Association of India (COAI) reported GSM subscriber data for August 2011. GSM subscriber net addition data continued its declining trend during this month as well and was reported to be weak on mom basis across all telecom operators (except Idea). Net subscriber addition number stood at merely 5.3mn (almost at all-time low), down by whopping 30% mom, taking the total GSM subscriber base to 611.8mn subscribers in August 2011. Weakness across the board: In August 2011, Net addition run rate on mom basis for all operators (except Idea) dropped off steeply. Among the incumbents, Bharti and Vodafone reported a significant decline in their net subscriber addition numbers, with net addition numbers dropping to merely 1.2mn and 1.1mn, down 23.8% and 24.0% mom, respectively. BSNL, which was bucking the declining trend since the last two months, reported a significant decline in net subscriber addition in August 2011 to only 0.4mn from 1.8mn in July 2011. Idea emerged as the dark horse by reporting net subscriber addition of whopping 2.3mn as against 1.0mn in July 2011, up 132% mom, which led to a 30bp mom increase in its subscriber market share to 16.1%. Subscriber market share of Bharti and Vodafone remained stable mom at 28.1% and 23.6%, respectively; however, market share of BSNL declined by 10bp to 14.8%. Among new operators, Videocon and S Tel reported a net decline of 0.65mn and 0.1mn subscribers in their subscriber base, respectively. Net subscriber addition of Uninor declined by 67.0% mom, as it added merely 0.3mn subscribers. Subscriber market share of all new operators remained flat on mom basis, expect for Videocon, which reported a 20bp decline in its subscriber market share to 1.0% because of net reduction of 0.65mn subscribers in its subscriber base. Circle-wise highlights: In August 2011, the net addition run rate of all the circles declined significantly, the highest being for Metro circle, which reported addition of merely 0.4mn subscribers, down 57.2% mom from 0.9mn in July 2011. This led to a decline in net subscriber market share of Metro circle to 7.6% from 12.4%. In the Metro circle, during the month, Idea reported the highest net addition of 0.27mn subscribers, followed by Vodafone, Bharti and Aircel, which reported 0.23mn, 0.09mn and 0.05mn net subscriber additions, respectively. Subscriber addition run rate of A circle remained comparatively stable at 2.3mn as against 2.6mn in July 2011. Subscriber additions in B and C circles also fell to 2.0mn and 0.6mn from 2.7mn and 1.3mn in July 2011, respectively. For Bharti, such a decline in net subscriber additions was along expected lines, thus our estimates remain unchanged. However, Ideas net addition numbers came in as a positive surprise. The driving force for the overall sector is the increase in tariff rates as well as increasing use of value-added services, which will lead to higher ARPU for all players, thereby aiding profitability. Bharti continues to be a better bet due to its low-cost integrated model (owned tower infrastructure), potential opportunity to scale up in Africa, established leadership in revenue and subscriber market share and relatively better KPIs. However, overall we remain Neutral on the telecom sector.

HCL Tech bags a multi-million dollar deal from Deutsche Bank

HCL Tech has signed a five-year multi-million dollar application support transformation deal with Deutsche Banks capital markets arm. The service factory delivery model implemented by HCL Tech is expected to significantly enhance productivity, driven by transparent service-level agreements and performance metrics, and comes as Deutsche Bank endeavors to move away from a traditional applications support model to a set of unique process-driven services governed by global standards like information technology infrastructure library. The transformational program, which will result in significant vendor consolidation, involves the management of key banking applications that are the backbone to Deutsche Banks critical businesses. We maintain our Buy rating on HCL Tech with a target price of `578.
September 22, 2011 2

Market Outlook | India Research

Economic and Political News

India's coal production deficit to reduce in FY2012 IMF trims growth forecasts for India, China Quake damage estimated to be `1 lakh cr: Sikkim CM

Corporate News
NTPC to scale down 12th Plan capacity target to 66,000MW PFC gets RBIs approval for US$1bn overseas debt issue Sterlite Technologies gets `114cr order from BSNL Voltas to buy Wipro's water business
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

September 22, 2011

Market Outlook | India Research

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September 22, 2011