Market Outlook

India Research
November 21, 2011
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 (%) (0.6) (0.6) (1.0) (1.9) 0.2 (1.0) (0.9) (1.2) (1.3) 0.0 (0.7) Chg (%) 0.2 (0.6) (1.1) (1.2) (1.7) (1.7) (1.9) (Pts) (90.2) (29.0) (59.5) (119.4) 11.4 (71.9) (89.0) (103.6) (137.7) 0.6 (39.7) (Pts) 25.4 (15.5) (60.2) (104.7) (326.2) (47.9) (46.5) (Close) 16,372 4,906 5,716 6,182 5,919 6,834 10,161 8,538 10,433 8,299 5,614 (Close) 11,796 2,573 5,363 8,375 18,491 2,730 2,417

Dealers Diary
Indian markets are expected to edge lower tracing weakness in Asian markets. The domestic indices declined on Friday for the third consecutive week as weakening trend in global markets on concerns over the euro zone debt crisis continued to spook investors. Global markets remained largely weak. European bourses closed lower on Friday on the prolonged sovereign debt crises. Concerns also brewed on growing rift between Germany and France over ECBs involvement on fixing the debt crises partially weigh on the markets. Major US indices closed on a mixed note following developments in the Euro-zone. On the domestic front, earnings season have ended on a mixed note. Nonetheless, markets are captured with negative sentiments owing to hardened business environment. In addition, Europes economic roller-coaster will remain as an overhang. Investors will also watch out for US home sales data which will partially indicate the health of US economy.

Markets Today
The trend deciding level for the day is 16,311/ 4,887 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,457 16,543 / 4,935 4,965 levels. However, if NIFTY trades below 16,311/ 4,887 levels for the first half-an-hour of trade then it may correct up to 16,225 16,079 / 4,875 4,809 levels.
Indices SENSEX NIFTY S2 16,079 4,809 S1 16,225 4,857 R1 16,457 4,935 R2 16,543 4,965

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) (0.6) 0.2 0.6 (0.0)

(Pts) (0.3) 0.0 0.2 (0.0)

(Close) $53.1 $9.5 $29.9 $27.9

News Analysis
Infra 2QFY2012 Result Review Three mega infra projects gets clearance
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 882 1,989 108

NSE 410 1,079 41

Net Inflows (November 17, 2011)

` cr FII MFs Purch 1,933 441 Sales 2,094 344 Net (161) 98 MTD 875 (474) YTD 1,390 4,662

Volumes (` cr) BSE NSE 2,378 10,735

FII Derivatives (November 18, 2011)

` cr Index Futures Stock Futures Purch 2,930 3,964 Sales 3,578 3,979 Net (648) (15) Open Interest 16,631 29,206

Gainers / Losers
Gainers Company Shree Renuka Sug Pantaloon Retl HPCL GVK Power Thermax Price (`) 35 198 297 11 450 chg (%) 9.2 8.4 6.3 5.8 4.8 Company Pipavav Defence Amtek Auto IVRCL LTD IFCI Suzlon Energy Losers Price (`) 56 95 32 23 24 chg (%) (20.0) (13.8) (11.8) (8.5) (7.0)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Infra 2QFY2012 Result Review

Decent top-line growth + Lower EBITDAM/high interest cost = Bottom-line decline: Most infrastructure players (10 companies chosen for this analysis) witnessed decent yoy growth (average 17.3%) on the top-line front in 2QFY2012. We had mentioned in our 1QFY2012 note that sluggish performance on the execution front could be a worrying sign for C&EPC companies given the headwinds faced by the sector, but 2QFY2012s better-than-expected performance on the top-line front has been heartening. EBITDAM for the quarter broadly remained under pressure, owing to high commodity prices and inflationary pressures. Consistent hike in repo rates by the RBI (in order to contain inflation) accentuated the already high interest cost for companies in the sector. On the earnings front, high interest cost (owing to a high interest rate regime and increased debt levels) coupled with EBITDAM compression resulted in a decline in the bottom line for most companies under our coverage. Valuations continue to remain at abysmal levels; Lack of catalyst in sight + Persistent headwinds = Subdued performance to continue: Stock prices of infrastructure companies continued to take a beating on the bourses, bringing the stocks to very attractive levels on the valuation screen, even on subdued earnings estimates. However, lack of positive news flow from companies per se and persistent headwinds faced by the industry such as high interest rates, policy inaction, slower-than-anticipated revival in industrial capex led to underperformance of infrastructure stocks on the bourses. Therefore, given no visible signs of reversal of trends, we continue with our view that the performance of the sector will remain subdued. We prefer to remain selective: We believe that stock-specific approach would yield higher returns given the disparity among these companies and changing dynamics affecting them positively/negatively. Hence, in the current uncertain times, we remain positive on companies having 1) a comfortable leverage position (L&T and Sadbhav); 2) strong order book position (L&T and IVRCL); 3) undemanding valuations (IVRCL); 4) superior return ratios (L&T and Sadbhav); and 5) less dependence on capital markets for raising equity for funding projects (L&T and Sadbhav). Hence, we maintain L&T, IVRCL and Sadbhav as our top picks in the C&EPC space and recommend IRB in the development space after its recent fall, which has brought the stock to attractive levels.

Three mega infra projects gets clearance; L&Ts Hyderabad Metro one of them
The government has given regulatory clearances to three mega infrastructure projects involving an investment of `25,000cr. These are the first among a few projects the government has shortlisted to be put on a fast track. The projects cleared include Hinduja National Power Corporation Ltd. in Vishakhapatnam, L&T Metro Rail (Hyderabad) Ltd. and Simhapuri Expressways Ltd. (Andhra Pradesh). These projects had been held up because of regulatory bottlenecks. However, L&Ts metro project (about `16,000cr) is still facing some land acquisition issues, but these clearances would certainly help to expedite the project. The early clearance of the projects would lead to enhancement of order book for all the companies in the infrastructure space. The finance minister is reviewing the implementation of infrastructure projects valued >`100cr, which we believe is a step in the right direction.
November 21, 2011

Market Outlook | India Research

Economic and Political News

India-China bilateral trade may touch US$100bn by 2013 FDI see 77% yoy jump in 1HFY2012 Spices export up by 29% in values terms in 1HFY2012

Corporate News
Excise duty on diesel cars likely to be raised in the Budget RIL gets clean chit for capex till FY 2008 in KG-D6 Govt. nudges LIC to buy 10% stake in Kingfisher

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

November 21, 2011

Market Outlook | India Research

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E-mail: research@angelbroking.com

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November 21, 2011