Market Outlook

India Research
April 17, 2012

Dealers Diary
The Indian markets are expected to open in red tracking weak Asian markets. Indian shares rose modestly on Monday, as a marginal drop in wholesale price inflation and lower commodity prices spurred hopes that more policy easing is in the pipeline. Global cues were mixed, with most Asian markets falling on concerns over Europe's sovereign debt crisis and the slowing global growth, while European shares gained ground after recent steep losses. US stocks also showed a mixed performance on Monday following the release of a mixed batch of US economic data. Uncertainty about the outlook for corporate earnings also impacted trading along with renewed concerns about the European debt crisis. India's headline inflation eased slightly to 6.9% in March 2012 from 7.0% in the previous month, helped by a softening in prices of manufactured goods, fruits and protein-based items, reinforcing expectations the central bank will cut interest rates for the first time in three years in its policy meeting today.

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 (%)

(Pts)

(Close)

0.3 0.4 0.8 0.6 0.0 0.4 1.2 1.3 0.4 (0.3) (0.5)
Chg (%)

56.4 17,151 18.8 51.0 38.0 1.0 31.9 5,226 6,389 6,837 6,695 7,321

144.4 12,029 132.7 10,289 44.0 10,959 (21.2) (26.5)

(Pts)

7,960 5,378
(Close)

0.6 (0.8) 0.3 (0.4) 0.1 (0.1)

Chg (%)

71.8 12,921 (22.9) 14.5 2,988 5,666 9,471 2,992 2,357

(Close)

Markets Today
The trend deciding level for the day is 17,111 / 5,214 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,213 17,274 / 5,245 5,264 levels. However, if NIFTY trades below 17,111 / 5,214 levels for the first half-an-hour of trade then it may correct up to 17,050 16,948 / 5,195 5,164 levels.
Indices SENSEX NIFTY S2 16,948 5,164 S1 17,050 5,195 PIVOT 17,111 5,214 R1 17,213 5,245 R2 17,274 5,264

(1.7) (167.4) 4.3 (2.1)

(Pts)

(90.4) 20,611

Indian ADRs

INFY WIT IBN HDB

Advances / Declines Advances Declines Unchanged

(3.4) (1.8) 0.6 0.1

(1.7) (0.2) 0.2 0.0

BSE

$47.5 $9.8 $33.5 $33.1

NSE

News Analysis
Monetary Policy Preview and WPI - March 2012 Coal India to sign FSAs with low penalty clause TTMTs March 2012 global sales up strongly by 26.1% ABB to invest `250cr to expand power products manufacturing base in India 4QFY2012 Result Review Crisil, MindTree
Refer detailed news analysis on the following page

1,551 1,223 133

813 621 70

Net Inflows (April 13, 2012)

` cr FII MFs ` cr
Index Futures Stock Futures

Purch 2,691 677

Sales 2,519 415 Purch 1,336 1,534 Gainers

Net 172 262 Sales 1,669 1,432 Net (334) 102

MTD (803) (372)

YTD 44,523 (5,945) Open Interest 9,684 23,113 Losers

Volumes (` cr) BSE NSE

1,800 8,967

FII Derivatives (April 16, 2012)

Gainers / Losers
Company
Aurobindo Phar Dena Bank HDIL Havells India Uco Bank

Price (`)
127 101 87 586 86

chg (%)
8.6 5.0 5.0 4.5 4.3

Company
Gujarat State Pet Nestle India IVRCL LTD Ultratech Cem Glaxosmithkl Cons

Price (`)
68 4,783 71 1,443 2,763

chg (%)
(2.8) (2.7) (2.6) (2.3) (2.3)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Primary inflation rises as manufacturing inflation eases further

Wholesale price-based inflation for March 2012 came in at 6.9% yoy, marginally lower than 7.0% yoy levels registered in February 2012. Inflation levels of January 2012 were revised upwards from 6.55% yoy to 6.89% yoy. March 2012 inflation levels of 6.9% yoy were above Bloombergs estimate of 6.7%. Core (non-food manufacturing) inflation, which the RBI tracks closely, came in at 4.5% yoy as against 5.5% yoy in February 2012. Primary articles inflation came in at high 9.6% yoy, ~330bp higher than 6.3% yoy witnessed in February 2012. Food articles inflation, which had risen back to 6.1% yoy in February, after falling into the negative territory (negative 0.5% yoy) in January 2012 for the first time since the inception of the new base year (200405), jumped further to 9.9% yoy for March 2012. The mom annualized growth in food inflation index stood at 28.1% as against 7.5% registered in February 2012. Non-food articles inflation, which was as high as 18.2% yoy in August 2011, came in at negative 1.2% yoy (-2.6% yoy in February, 2012). However, over February 2012, non-food articles index rose by 1.3% mom (annualized growth of 15.4%) on account of higher prices of gaur seed, soyabean, groundnut seed, raw rubber and sunflower and niger seed amongst others. Inflation for minerals registered a marginal uptick to 28.6% yoy compared to 25.3% yoy registered in February 2012. Fuel and power inflation (10.4% yoy) moderated further during March 2012, witnessing a decline of 243bp over February 2012. Coal index (0.4% yoy compared to 9.6% yoy for February 2012) and electricity index remained unchanged on mom basis. Mineral oil inflation also moderated further to 14.5% yoy levels (lowest in 19 months). Although electricity tariff hikes across different states are yet to be accounted for in inflation levels, we expect RBI to have already factored the same in its calculations and, hence, do not expect any possible deviation in RBIs monetary policy decisions based on the possible uptick in electricity inflation index. Fuel hikes are also already on the cards; however, with global outlook remaining grim, any further rise in fuel inflation levels is, hence, in our view, expected to be capped. Manufactured products, which have a weightage of ~65% in overall WPI inflation, eased further to 4.9% yoy (lowest levels in more than two years) from 5.7% yoy levels in February 2012. Annualized mom growth in manufacturing index stood at 4.2% and even the six-month annualized figure was at low 4.7% levels. Core inflation (4.5% yoy for March 2012 compared to average of 7.3% yoy in FY2012), which the RBI tracks closely for its monetary policy decisions, has been on a declining trend over the last six months, thus strengthening the markets expectation of a repo rate cut in the forthcoming monetary policy.

April 17, 2012

Market Outlook | India Research

Monetary Policy Preview

The slowdown in growth indicators has accentuated over the last couple of quarters, indicating that the negative effect of tight monetary stance on growth has intensified, and we believe RBI now needs to step in and use the more decisive signaling repo rate cuts to address growth concerns. Inflation levels seem to be on a downward trajectory (particularly manufacturing inflation levels); and even after factoring in price hikes in electricity and oil, we expect inflation levels to moderate further down by 150bp in FY2013. Moderation in inflation levels, in our view, provides RBI with the headroom to cut repo rates and, hence, we expect an overall 50-75bp repo rate cut during FY2013, which could possibly begin with a 25bp repo rate cut in the forthcoming monetary policy.

Coal India to sign FSAs with low penalty clause

The board of Coal India Ltd. (CIL) has agreed to sign fuel supply agreements (FSAs) with power plants to meet 80% of power plants' requirements. However, CIL will pay penalty of only 0.01% of the value of the shortfall in supplies after three years compared to 10% of the value of the shortfall for its previously signed FSAs. Also, CIL stated that it will not lower e-auction sales volumes. Further, the board has not decided whether it will import coal in case of a shortfall. However, we believe there could be a cut in supplies to non-power companies, such as steel, sponge iron and cement players, to meet the new FSA supplies. CIL charges higher prices to non-power companies compared to its FSA prices and, hence, its margins could be hit if it cuts supplies to non-power companies to meet its new FSA supplies. We maintain our Neutral view on the stock.

TTMTs March 2012 global sales up strongly by 26.1%

Tata Motors (TTMT) reported robust global volume growth of 26.1% yoy (9.7% mom) to 139,655 units for March 2012, led by strong growth in the passenger vehicle business. Global commercial vehicle (CV) volumes grew by healthy 12.3% yoy (10.3% mom), driven by growth in domestic CV sales. Global passenger vehicle volumes grew strongly by 40.6% yoy (9.2% mom) on the back of strong domestic and continued momentum in Jaguar and Land Rover (JLR) performance. Wholesale volumes of JLR posted 51.3% yoy (13.1% mom) growth in volumes to 36,471 units, led by 41.6% (26.4% mom) and 53.1% yoy (11.1% mom) growth in Jaguar and Land Rover volumes, respectively. We expect JLR to sustain its volume performance going ahead, led largely by the success of Evoque and strong growth trajectory in China. At the current market price of `300, the stock is trading at 7.0x and 4.2x FY2014E earnings and EV/EBITDA, respectively. Due to the recent run-up in the stock price, we recommend Accumulate on the stock with an SOTP-based target price of `328.

April 17, 2012

Market Outlook | India Research

ABB to invest `250cr to manufacturing base in India

expand

power

products

ABB will invest `250cr to build new facilities in India to manufacture high-voltage power products and transformers. The expansion is part of ABBs strategy to develop, manufacture and market products that meet the needs of Indian customers, as well as serve as an export hub. The facilities will be located in Savli, near Vadodara, Gujarat, and would produce high-voltage gas-insulated switchgear (GIS) and PASS (plug and switch system) hybrid switchgear as well as dry-type and oil immersed distribution transformers. The facilities are expected to be operational by the end of CY2012. We maintain our Sell recommendation on the stock with a target price of `503.

Result Review Crisil

CRISIL announced its 1QCY2012 numbers. Net sales witnessed strong growth of 28.5% yoy to `230cr (`179cr) backed by strong growth in rating and research segment. The credit rating segment registered 40.1% yoy and 19.0% qoq growth in revenue to `101cr while the research segment registered 22.9% yoy growth in revenue to `115cr. Growth in the rating segment was mainly driven by Bank Loan Rating where the company rated nearly 1,100 entities in the quarter v/s. 2,700 entities in the whole of CY2011. EBITDA increased by 41.0% yoy to `82cr (`58cr). EBITDA margin expanded by 317bp yoy to 35.8% (32.6%) largely due to decline in staff cost which came in at 40.6% of net sales v/s. 43.7% of net sales in 1QCY2011. Net profit increased by 23.9% yoy to `57cr (`46cr) while margin contracted by 92bp yoy to 24.8% (25.7%) largely due to increase in tax rate. CRISILs tax rate increased to 28.1% of PBT v/s. only 15.1% of PBT in 1QCY2011. We continue to maintain a Neutral recommendation on the stock. CRISIL is trading at 27x CY2013E earnings compared to its five year median of 22x one year forward earning.

MindTree
MindTree reported its 4QFY2012 results, which were in-line with our expectations on the revenue front, but outperformed on the operating as well as bottom line fronts. USD revenue came in at US$105mn, up merely 1.3% qoq, majorly on the back of 5.1% qoq volume growth. In INR terms, revenue came in at `526cr, up 1.2% qoq. The companys EBITDA and EBIT margin improved by 149bp and 162bp qoq to 18.7% and 15.5%, respectively. PAT stood at `69cr, up 13.6%, negatively impacted by `4cr forex loss (`2.5cr in 3QFY2012). We continue to be positive on the stock and will be releasing a detailed result update shortly.

April 17, 2012

Market Outlook | India Research

Quarterly Bloomberg Brokers Consensus Estimates

HCL Tech Ltd. - Consolidated (18/04/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4Q FY12E 5,292 952 18.0 576 4Q FY11 4,138 717 17.3 468 23.1 y-o-y (%) 27.9 32.8 3Q FY12 5,245 970 18.5 573 0.5 q-o-q (%) 0.9 (1.9)

HDFC Bank Ltd. - (18/04/2012)

Particulars (` cr) Net profit 4Q FY12E 1,460 4Q FY11 1,115 y-o-y (%) 30.9 3Q FY12 1,430 q-o-q (%) 2.1

ACC - (19/04/2012)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 1Q CY12E 2,920 642 22.0 396 1Q CY11 2,398 580 24.2 351 13 y-o-y (%) 22 11 4Q CY11 2,503 442 17.7 470 (16) q-o-q (%) 17 45

Ambuja Cement - (19/04/2012)

Particulars (` cr) Net Sales Net Profit 1Q CY12E 2,773 471 1Q CY11 2,207 407 y-o-y (%) 26 16 4Q CY11 2,329 302 q-o-q (%) 19 56

Hindustan Zinc - (19/04/2012)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4Q FY12E 2,982 1,557 52.2 1,409 4Q FY11 3,197 1,969 61.6 1,771 (20) y-o-y (%) (7) (21) 3Q FY12 2,747 1,403 51.1 1,274 11 q-o-q (%) 9 11

Indus Ind Bank - (19/04/2012)

Particulars (` cr) Net profit 4Q FY12E 215 4Q FY11 172 y-o-y (%) 25 3Q FY12 206 q-o-q (%) 4

April 17, 2012

Market Outlook | India Research

Economic and Political News

Inflation dips marginally to 6.9% in March 2012 High probability of a 25bp rate cut by RBI: Experts TRAI wants licensing powers under new unified regime Under stress, government unlikely to give exporters fresh sops

Corporate News
Vedanta Group scion picks 60% in Primex Healthcare Essel Group not planning to raise stake in IVRCL Piramal buys Bayer's potential Alzheimers drug Tata to invest 800mn in Welsh facilities
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
18/04/2012 19/04/2012

20/04/2012 21/04/2012 23/04/2012 24/04/2012

HDFC Bank, HCL Tech, Infotech Enterprises Hind Zinc, Ambuja Cements, ACC, IndusInd Bank Cairn India, FAG Bearings IDBI Bank TCS, UltraTech Cement, Rallis Sesa Goa, Petronet LNG

April 17, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800

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

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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April 17, 2012