Market Outlook

India Research
October 19, 2011

Dealers Diary
The Indian markets are poised for a positive opening tracing firm opening in most of the Asian markets in the early market trade. The domestic benchmark indices fell second straight day yesterday and touched one-week closing low as sentiments weakened due to weakness in global shares as uncertainty persisted over the speedy resolution of eurozone crises. Global cues remained fragile over concerns about the global economic outlook after Moody's warned that it may put a negative outlook on France's Aaa credit rating and China reported a slowdown in third quarter GDP. European bourses ended on a mixed note. However, US indices closed higher following strong earnings reports from Bank of America and upbeat data on homebuilder confidence. On the domestic front, investors remain cautious and will closely watch out for the 2QFY2012 corporate earnings as profitability remains a key issue. Poor quarterly results by IT majors TCS and HCL Technologies have also impacted the sentiments. In addition, re-ignition of fears that the debt crisis in Europe has more legs to play out will serve as an overhang.

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 (%) (1.6) (1.6) (1.2) (1.0) (0.6) (0.8) (1.4) (1.7) (1.7) (1.2) (3.7) Chg (%) 1.6 1.6 (0.5) (1.6) (4.2) (2.0) (2.3)

(Pts) (276.8) (80.8) (75.1) (68.6) (37.3) (56.6) (160.7) (148.5) (194.6) (107.2) (208.0) (Pts) 42.5 (26.4) (137.7) (797.5) (54.3) (56.9)

(Close) 16,748 5,038 6,114 6,854 5,855 7,352 10,970 8,840 11,120 8,550 5,462 (Close) 2,657 5,410 8,742 18,077 2,725 2,383

180.1 11,577

Markets Today
The trend deciding level for the day is 16,747/5,035 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,826 16,903 / 5,060 5,082 levels. However, if NIFTY trades below 16,747/5,035 levels for the first half-an-hour of trade then it may correct up to 16,670 16,592 / 5,013 4,989 levels.
Indices SENSEX NIFTY S2 16,592 4,989 S1 16,670 5,013 R1 16,826 5,060 R2 16,903 5,082

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) 1.4 (0.4) 0.9 1.8

(Pts) 0.8 (0.0) 0.3 0.6

(Close) $55.8 $9.7 $36.6 $31.8

News Analysis
2QFY2012 Result Reviews Hero MotoCorp, HCL Tech., Petronet LNG, CRISIL 2QFY2012 Result Previews HDFC Bank, Hindustan Zinc, Crompton Greaves, Infotech Enterprises, Alembic Pharmaceuticals
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 951 1,814 110

NSE 367 1,090 59

Net Inflows (October 17, 2011)

` cr FII MFs ` cr Index Futures Stock Futures Purch 1,890 293 Sales 1,492 522 Purch 2,439 3,865 Gainers Company Price (`) chg (%) Company Net 392 (230) Sales 2,669 4,185 Net (229) (319) MTD (133) 348 YTD (2,087) 5,845 Open Interest 13,571 28,494 Losers Price (`) chg (%)

Volumes (` cr) BSE NSE 2,200 8,812

FII Derivatives (October 18, 2011)

Gainers / Losers

Patni Computer ING Vysya Bank Coal India Torrent Power Hindustan Copp.

338 324 330 234 223

15.8 3.1 2.7 2.5 2.4

Chambal Fert. HCL Tech TCS Mphasis Educomp Soln.

87 401 1,034 321 256

(13.5) (8.6) (7.7) (5.7) (4.5) Sebi Registration No: INB 010996539

Please refer to important disclosures at the end of this report

Market Outlook | India Research

Result Reviews Hero MotoCorp

Hero MotoCorp (HMCL) reported better-than-expected results for 2QFY2012, aided by strong volume performance on the domestic front and expansion in its operating margin. Net sales for the quarter registered in-line growth of 28.1% yoy (2.6% qoq) to `5,829cr, led by volume growth of 20.1% yoy (1% qoq) and a 6.8% yoy (1.6% qoq) increase in average net realization. HMCL posted its highest-ever volume performance in 2QFY2012 on the back of a 19.3% and 32% yoy increase in motorcycle and scooter sales, respectively. Net average realization improved to `37,456/vehicle, driven by price increases and improved product mix. The companys EBITDA margin (adjusted for change in accounting for royalty payments) came in above expectations at 12.7%, reporting an expansion of 145bp qoq, primarily due to lower raw-material expenses. Other operating expenses, however, increased by ~70bp qoq, probably on account of higher advertising and marketing spend. Led by better-than-expected operating performance and lower tax rate, net profit registered strong growth of 19.4% yoy (8.2% qoq) to `604cr. We believe at the CMP of `1,985, HMCL is fairly valued at 15.4x FY2013E earnings (historical multiple 15x). Thus, we maintain our Neutral rating on the stock. We shall come up with a detailed result update post the earnings call with management.

HCL Technologies 1QFY2012

HCL Technologies reported its 1QFY2012 results, which were lower than street as well as our expectations. USD revenue came in at US$1,002.2mn, up 4.1% qoq, on the back of modest 5.1% qoq volume growth. The companys revenue growth was led by modest volume growth of 4.0% in core software services and USD revenue growth of 5.8% qoq in constant currency terms in infrastructure services. In INR terms, revenue came in at `4,651cr, up 8.2% qoq. The companys EBIT margin declined by 112bp qoq to 14.3%, negatively impacted by 200bp and 53bp qoq due to salary increments given during the quarter and lower SG&A costs. PAT came in at `497cr, negatively impacted by `18cr forex loss, which led to lower other income. The company remains one of our top picks among tier-I IT companies. We remain positive on the stock and will be releasing a detailed update shortly.

Petronet LNG
Petronet LNG reported a stellar performance for 2QFY2012. The companys net sales increased by 75.5% yoy to `5,367cr, driven by increased sales volumes as well as realization. The companys total volumes increased by 35.4% yoy to 135TBTU, while average realization increased by 29.7% yoy to `397/mmbtu. Average cost, on the other hand, also increased by 29.1% yoy to `356/mmbtu. Further, other expenditure increased by 278.1% yoy to `99cr. Hence, EBITDA increased by 64.5% yoy to `448cr. Other income increased by 8.2% yoy to `20cr, while tax rate decreased to 30.8% in 2QFY2012, compared to 32.3% in 2QFY2011. Hence, net profit grew by 98.5% yoy to `260cr. Currently, the stock is under review
October 19, 2011

Market Outlook | India Research

CRISIL 3QCY2011
CRISIL registered strong top-line growth in 3QCY2011. The companys net sales grew by 38.3% yoy to `220cr on the back of strong growth of 48.0% yoy in its research segment to `111cr (`75cr). The rating segment also registered modest 14.3% yoy growth to `84cr (`73cr). CRISIL reported a 281bp yoy expansion in OPM to 38.1% (35.3%), largely on account of a decline in staff cost as a percentage of sales, which declined by 227bp yoy. Net profit declined by 20.2% yoy to `60cr (`75cr). The sharp decline in PAT was due to lower other income during the quarter, which declined by 88.1% yoy to `5cr from `44cr in 3QCY2010. The company has announced another round of buy back of shares. The company will be purchasing shares directly from the market with a maximum price of `1,000/share and up to an aggregate amount of `80cr. With current market capitalization of `5,956cr, the company will only be able to buy back 1.3% (assuming CMP of `839/share) of the total shares, which will not have any significant impact on our estimates. We continue to maintain our Neutral recommendation on the stock. We will be coming with an updated report post management interaction.

Result Previews HDFC Bank

HDFC Bank is expected to announce a healthy performance for 2QFY2012. We expect the bank to report reasonable NII growth of 18.0% yoy to `2,982cr on the back of sequentially stable NIM. Non-interest income is expected to register growth of 22.0% yoy, leading to operating income growth of 19.1% yoy. Due to relatively faster rise in operating expenses, pre-provision profit is expected to grow by relatively lower 16.8% yoy. However, provisions are expected to decline by 22.9% yoy, leading to healthy net profit growth of 30.3% yoy to `1,188cr. At the CMP, the stock is trading at attractive valuations of 3.2x FY2013E P/ABV, in our view. We maintain our Accumulate recommendation on the stock with a target price of `517.

Hindustan Zinc
Hindustan Zinc is slated to announce its 2QFY2012 results. The companys top line is expected to register 22.2% yoy growth to `2,643cr on account of higher sales volume and realisation. However, the companys EBITDA margin is expected to contract by 200bp yoy to 50.0% on account of higher costs. Nevertheless, the bottom line is expected to grow by 33.3% yoy to `1,265cr. We maintain our Buy view on the stock with a target price of `156.

October 19, 2011

Market Outlook | India Research

Crompton Greaves
Crompton Greaves is scheduled to announce its 2QFY2012 results. The company is expected to report muted top-line growth of 6.0% yoy to `2,542cr, attributable to the power system segment, which has remained a drag since the past few quarters. The companys EBITDA margin is expected to witness a steep contraction of ~490bp yoy to 9% on account of high input costs and pricing pressures. Interest cost is also expected to post a two-fold increase on a yoy basis. Lower revenue coupled with operational weakness is expected to drive down PAT by whopping 45.8% yoy to `115.8cr. Currently, we continue to remain Neutral on the stock.

Infotech Enterprises
Infotech Enterprises is slated to announce its 2QFY2012 results. We expect the company to post revenue of US$80.1mn, up 3.4% qoq, majorly led by volume growth. In INR terms, revenue is expected to come in at `366cr, up 5.6% qoq. EBITDA margin is expected to expand by 106bp qoq to 13.6%. PAT is expected to come in at `29cr. We maintain our Neutral view on the stock.

Alembic Pharmaceuticals
For 2QFY2012, Alembic Pharmaceuticals net sales are expected to be come in at `317cr. The company is expected to report OPM of 14.0%. Net profit is expected to come in at ~`23.4cr. At the CMP, the stock is trading at 8.4x FY2012E and 6.9x FY2013E earnings. We maintain our Buy recommendation on the stock with a target price of `65.

Quarterly Bloomberg Brokers Estimates

Crompton Greaves Ltd. - Consolidated (19/10/2011)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 2,594 238 9 144 2QFY11 2,398 333 14 214 yoy (%) 8.2 (28.6) (32.5) 1QFY12 2,438 182 7 79 qoq (%) 6.4 30.9 81.3

HDFC Bank Ltd. (19/10/2011)

Particulars (` cr) Net profit 2QFY12E 1,179 2QFY11 912 yoy (%) 29.2 1QFY12 1,085 qoq (%) 8.6

Bajaj Auto Ltd. (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 5,073 975 19 767 2QFY11 4,181 897 21 682 yoy (%) 21.3 8.7 12.5 1QFY12 4,587 911 20 711 qoq (%) 10.6 7 7.9

October 19, 2011

Market Outlook | India Research

Cairn India Ltd. - Consolidated (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 3,390 2,532 75 1,212 2QFY11 2,686 2,132 79 1,585 yoy (%) 26.2 18.8 (23.5) 1QFY12 3,713 3,156 85 2,727 qoq (%) (8.7) (19.8) (55.5)

Exide Industries Ltd. (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 1,239 216 17 150 2QFY11 1,127 245 22 213 yoy (%) 10 (11.8) (29.4) 1QFY12 1,244 222 18 163 qoq (%) (0.4) (2.6) (7.9)

UltraTech Cement Ltd. (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 3,936 684 17 371 2QFY11 3,215 438 14 116 yoy (%) 22.4 56.3 220.7 1QFY12 4,365 1,227 28 683 qoq (%) (9.8) (44.3) (45.7)

Yes Bank Ltd. (20/10/2011)

Particulars (` cr) Net profit 2QFY12E 217 2QFY11 176 yoy (%) 23 1QFY12 216 qoq (%) 0.3

Asian Paints Ltd. Consolidated (21/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 2,262 374 17 248 2QFY11 1,811 331 18 215 yoy (%) 24.9 12.9 15.4 1QFY12 2,260 392 17 264 qoq (%) 0.1 (4.6) (6.0)

Federal Bank Ltd. (21/10/2011)

Particulars (` cr) Net profit 2QFY12E 162 2QFY11 140 yoy (%) 15.2 1QFY12 146 qoq (%) 10.6

IDBI Bank Ltd. (21/10/2011)

Particulars (` cr) Net profit 2QFY12E 414 2QFY11 429 yoy (%) (3.5) 1QFY12 335 qoq (%) 23.5

October 19, 2011

Market Outlook | India Research

JSW Steel Ltd. Consolidated (21/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 7,144 1,008 14 196 2QFY11 5,908 1,023 17 373 yoy (%) 20.9 (1.4) (47.4) 1QFY12 7,432 1,435 19 485 qoq (%) (3.9) (29.7) (59.5)

Larsen & Toubro Ltd. (21/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 10,979 1,169 11 705 2QFY11 9,261 1,006 11 765 yoy (%) 18.6 16.3 (7.9) 1QFY12 9,483 1,126 12 746 qoq (%) 15.8 3.8 (5.6)

United Phosphorus Ltd. Consolidated (21/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 1,610 311 19 121 2QFY11 1,225 233 19 115 yoy (%) 31.5 33.5 5.9 1QFY12 1,822 345 19 184 qoq (%) (11.6) (10.0) (34.1)

Economic and Political News

Finance Min. and RBI to consider higher FII investment cap on govt. debt soon Inflation to remain under pressure until December: Finance Ministry India to grant internet license to Qualcomm India seeks Malaysian investment in the infrastructure sector M Karunanidhi slams Jayalalithaa on Koodankulam nuclear plant issue

Corporate News
Tata Motors plans bus, truck assembly lines in Latin America, South East Asia Coal India Ltd. asks government to lower FY2012 production target to 448MT Essar Energy to supply 300MW to Bihar from Tori-I project SAT orders Sahara to refund `24,029cr in six weeks

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
19/10/2011 Rallis, Crompton Greaves, HDFC Bank, Infotech Enterprises, Hind. Zinc, Indraprasth Gas Bajaj Auto, Exide Industries, FAG Bearings, Thermax, UltraTech Cement, IDBI Bank, Yes Bank, Hexaware, KPIT Cummins, D B 20/10/2011 Corp, Indoco Remedies United Phosphorus, Hind. Const., Larsen & Toubro, Federal Bank, Indiabulls Fin., Asian Paints, Godrej Consumer, NIIT, HT 21/10/2011 Media, PVR, JSW Steel , GIPCL, Idea Cellular Blue Star, Suzlon Energy, Axis Bank, Bank of Maharashtra, Syndicate Bank, Jagran Prakashan, Sarda Energy, Siyaram Silk Mills, 22/10/2011 Grasim Inds, Power Grid Corpn 24/10/2011 Jyoti Structures, Sadbhav Engg., Union Bank, ITC, Sterlite Inds, GAIL, Titan Inds.

October 19, 2011

Market Outlook | India Research

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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October 19, 2011