Market Outlook

India Research
December 28, 2011

Dealers Diary
Indian markets are expected to open with a negative bias tracking cues from Asian markets today. Asian stocks fell for a second day amid slow trading, with the regional benchmark index headed for the worst year since 2008, after a report showed U.S. housing prices fell, damping the earnings outlook for Asias exporters. Consumer confidence in the US improved by much more than anticipated in the month of December, however with many traders still enjoying the holidays, stocks turned in a lackluster performance throughout the trading day. The Conference Board's index of consumer confidence rose to 64.5 this month from 55.2 in November, beating economists' expectations for a reading of 58.3. Emergingmarket stocks dropped after profit growth at Chinas industrial companies slowed and as Italian bond yields rose above 7%, raising concerns about Europes ability to tame the debt crisis. On the domestic bourses, key benchmark indices reversed direction on Tuesday after hitting 1-1/2-week highs in mid-morning trade on concerns about upcoming 3QFY2012 corporate earnings.

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) (0.7) (0.4) (0.3) (1.2) (1.2) (0.7) (1.4) (0.6) (0.5) Chg (%) (0.0) 0.3 1.0 (0.5) 1.4 (0.1) (1.1)

(Pts) (96.8) (28.5) (35.9) (20.0) (18.9) (76.2) (117.8) (56.9) (133.4) (48.5) (29.3) (Pts) (2.7) 6.6 55.7 (38.8) (2.9) (23.9)

(Close) 15,874 4,751 5,192 5,650 5,837 6,385 9,492 8,300 9,530 7,978 5,782 (Close) 12,291 2,625 5,513 8,441 2,674 2,166

Markets Today
The trend deciding level for the day is 15,908 / 4,758 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,016 16,157 / 4,793 4,835 levels. However, if NIFTY trades below 15,908 / 4,758 levels for the first half-an-hour of trade then it may correct up to 15,766 15,658 / 4,716 4,681 levels.
Indices SENSEX NIFTY S2 15,658 4,681 S1 15,766 4,716 R1 16,016 4,793 R2 16,157 4,835

250.9 18,629

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) 0.4 0.0 (0.9) 0.3

(Pts) 0.2 0.0 (0.2) 0.1

(Close) $51.4 $10.2 $26.9 $26.4

News Analysis
RIL's KG-D6 output at a fresh low L&T, Mitsubishi to sign shipbuilding pact
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 1,184 1,477 155

NSE 578 843 70

Net Inflows (December 26, 2011)

` cr FII MFs Purch
540 637

Sales
386 436

Net
154 201

MTD
42 (81)

YTD
(3,982) 5,864 Volumes (` cr) BSE NSE 1,343 5,641

FII Derivatives (December 27, 2011)

` cr Index Futures Stock Futures Purch
2,667 3,843

Sales
2,350 3,895

Net
317 (52)

Open Interest
11,817 27,166

Gainers / Losers
Gainers Company
Reliance Comm Jain Irrigation Bajaj Finserv Ranbaxy Lab Siemens

Losers Company
Voltas Mcleod Russel Mangalore Ref India Infoline Federal Bank

Price (`)
73 86 439 413 670

chg (%)
5.0 4.3 4.3 2.8 2.6

Price (`)
77 187 54 49 336

chg (%)
(5.4) (5.2) (4.8) (4.3) (4.3)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

RIL's KG-D6 output at a fresh low

Reliance Industries (RIL) KG-D6 gas field production has fallen to a fresh low of 38.7mmscmd, as the company has shut down five wells due to water ingress. From December 11-18, 2011, gas production from the Dhirubhai-1 and 3 fields stood at 31.8mmscmd and the MA oilfield gas production stood at 6.8mmscmd. Out of the 18 wells drilled, completed and put on production in the D1 and D3 fields, five wells (A2, A10, B1, B2 and B13) had to be shut down or closed due to high water cut/sanding issues. RIL expects an output of 38.4mmcmd during December 19-31, 2011. We await further clarity on sustainable KG-D6 production in the coming quarters. Meanwhile, we maintain our estimates and maintain our Buy rating on the stock with a target price of `1,066.

L&T, Mitsubishi to sign shipbuilding pact

Larsen & Toubro's (L&T) shipbuilding arm will sign a technological and licensing agreement with Japan's Mitsubishi Heavy Industries Ltd., as both firms look for shipbuilding opportunities in emerging economies. Under the agreement, Mitsubishi will initially train engineers from L&T Shipbuilding Ltd. in building vessels and assist in procuring materials from overseas and will advise on potential expansion of L&T's shipbuilding facilities. Mitsubishi and L&T Shipbuilding will eventually jointly market and sell commercial vessels. The companies will sign a three-year agreement starting early 2012, with an option to extend it. Currently, L&T and Mitsubishi are operating two joint ventures to manufacture power-related equipment, including supercritical boilers, and steam turbines and generators, which they signed in 2007. At the CMP of `1,029, the stock is trading at PE of 10.0x FY2013E earnings, after adjusting for investments, which is below the historical trading multiple for L&T and, we believe, factors in most of the negatives surrounding the stock. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis (target multiple reduced to 16x from 18x) and investments in subsidiaries on P/E, P/BV and mcap basis, our revised target price works out to `1,453 (`1,714), which provides 41.2% upside from current levels. Hence, we maintain our Buy recommendation on the stock.

December 28, 2011

Market Outlook | India Research

Economic and Political News

Lokpal Bill passed, but no constitutional status Economy to soon revert to high growth trajectory: Finance Minister Coal imports may touch 194mn tonnes by 2017: Government Bill to raise Exim Bank capital to `10,000cr passed NHAI to roll out ETC system from 2012

Corporate News
LIC Housing Finance to raise `8,000cr in 4QFY2012 SBI-Airtel JV for financial services falls through Power companies with assured fuel may have to cap rates BHEL executes two solar power plants in Maharashtra Adani Power puts 6,500MW expansion on hold
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint,

December 28, 2011

Market Outlook | India Research

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E-mail: research@angelbroking.com

Website: www.angelbroking.com

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December 28, 2011