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Market Outlook India Research August 19, 2010

Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

Dealer’s Diary The benchmark indices opened flat in early morning trades and remained range bound through the morning session. The Sensex gained towards late morning trades and ruled positive through the post noon session. Towards close, markets surged as buying was witnessed in the IT, auto, metal and banking counters. The Sensex and Nifty ended with gains of 1.2% each. The BSE mid- and small-cap indices closed 0.9% and 0.7% higher, respectively. Among the front-liners, Hindalco, Tata Motors, HDFC, HDFC Bank and ONGC gained 2–5%, while RCOM, RIL, M&M, Cipla and NTPC lost 0–1%. Among the mid caps, Gujarat Narmada Valley, State Bank of Mysore, GSFC and State Bank of Travancore gained 7–9%, while Thomas Cook, Simplex Infra and Edelweiss Cap declined 4–5%.

Markets Today The trend deciding level for the day is 18204/5461 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18340–18422/5506–5533 levels. However, if NIFTY trades below 18204/5461 levels for the first half-an-hour of trade then it may correct up to 18121–17985/5435–5390 levels.

Indices S2 S1 R1 R2

SENSEX 17,985 18,121 18,340 18,422

NIFTY 5,390 5,435 5,506 5,533

News Analysis

NTPC – BHEL JV to foray into the EPC-BoP segment ONGC may seek management control of Cairn's Rajasthan fields M&M to launch new models in Sri Lanka

Refer detailed news analysis on the following page.

Net Inflows (August 17, 2010) Rs cr Purch Sales Net MTD YTD

FII 3,153 2,637 516 6,268 54,209

MFs 565 730 (170) (1,432) (14,055) FII Derivatives (August 18, 2010)

Rs cr Purch Sales Net Open

Interest

Index Futures 1,831 1,314 517 17,970

Stock Futures 3,147 2,952 194 38,220

Gainers / Losers

Gainers Losers

Company Price (Rs)

chg (%) Company Price (Rs)

chg (%)

Hind Oil Explo 248 8.1 Essar Shipping 104 (3.5)

Chambal Fert 72 6.8 Suzlon 50 (3.3)

Hindalco 176 4.6 Havells India 792 (2.9)

Aurobindo Phrm 1,007 4.6 Oriental Bank 426 (2.4)

GMR Infra 63 4.4 Nalco 411 (2.3)

Domestic Indices Chg (%) (Pts) (Close)

BSE Sensex 1.2% 208.3 18,257

Nifty 1.2% 65.0 5,479

MID CAP 0.9% 65.6 7,760

SMALL CAP 0.7% 68.2 9,787

BSE HC 1.0% 53.9 5,532

BSE PSU 0.5% 44.9 9,735

BANKEX 1.2% 141.7 12,389

AUTO 1.3% 111.5 8,873

METAL 1.4% 215.9 15,293

OIL & GAS 0.3% 27.1 10,073

BSE IT 2.0% 106.8 5,568

Global Indices Chg (%) (Pts) (Close)

Dow Jones 0.1% 9.7 10,416

NASDAQ 0.3% 6.3 2,216

FTSE -0.9% (47.7) 5,303

Nikkei 0.9% 78.9 9,241

Hang Seng -0.5% (114.7) 21,023

Straits Times -0.1% (4.0) 2,919

Shanghai Com -0.2% (5.6) 2,666

Indian ADRs Chg (%) (Pts) (Close)

Infosys 1.2% 0.7 $60.4

Wipro 1.2% 0.2 $13.6

Satyam -0.2% (0.0) $4.7

ICICI Bank 0.5% 0.2 $41.8

HDFC Bank 4.5% 7.1 $166.5

Advances / Declines BSE NSE

Advances 1,667 802

Declines 1,318 549

Unchanged 100 46

Volumes (Rs cr)

BSE 5,527

NSE 15,389

August 19, 2010 2

Market Outlook | India Research

NTPC – BHEL JV to foray into the EPC-BoP segment The formation of NTPC-BHEL Power Projects Private Limited (NBPPL), the 50:50 joint venture (JV) between India’s largest power producer NTPC and India’s largest power equipment maker BHEL, is expected to significantly increase the domestic manufacturing capacities in the Balance of Plant (BoP) segment. At present, the limited number of BoP vendors in India may not be able to effectively support the 100GW capacity additions planned over the next 6 – 7 years. We believe that the scheduled commencement of operations at NBPPL’s manufacturing facilities from FY2014 would help in mitigating the anticipated shortage in the BoP segment. Though the primary objective for setting up NBPPL is to undertake EPC contracts for power plants and the manufacture of power equipment, we understand that NBPPL would initially focus on the setting up of BoP manufacturing facilities, especially coal and ash handling plants. Recent press articles suggest that NBPPL is actively scouting for a global technology provider to support the coal and ash handling segments of the BoP-EPC projects to be taken up by the company. The foreign technology partner may also be offered a minority stake in NBPPL. Once selection of the foreign technology partner is finalised and clarity emerges on the commercial operation date (COD), we expect increasing number of BoP –EPC projects attributable to NTPC and BHEL being awarded to NBPPL. While the above developments may help in accelerating the execution of thermal power projects, it may further intensify competition in the BoP space leading to loss of pricing power and reduced profit margins for the existing and aspiring BoP players such as BGR Energy, Mcnally Bharat, Sunil Hitech and TRF. ONGC may seek management control of Cairn's Rajasthan fields As per news reports, ONGC may seek management control of the giant Rajasthan oilfields in lieu of allowing UK's Cairn Energy to sell majority stake in its Indian arm that now operates the field, to a non-oil firm, Vedanta Resources for US $8.48bn. Cairn India with 70% interest is the operator of the 6.5bn/bbl Rajasthan block and ONGC holds 30% interest and pre-emption or right of first refusal (ROFR) in case Cairn were to exit the Rajasthan assets. Though the production sharing contract (PSC) for the Rajasthan block was silent on prior government approval in case of transfer of ownership of a company having stake in the block, ONGC believes its rights flow from the joint operating agreement (JOA) for the field that provides for ROFR. The oil ministry too is keen to protect the interest of ONGC, which currently is a net loser in the Rajasthan block as it has to pay Cairn's share of royalty on crude oil to the government. ONGC is interested in getting operatorship of the Rajasthan fields together with the government compensating it for the royalty it pays on behalf of Cairn India, which would make the project viable for it. However, another set of news reports suggest that ONGC wants monetary benefit from the Vedanta resources for clearance of the deal. Given the lack of clarity and ambiguity on the issue, it will be premature to conclude anything at the current juncture. We maintain an Accumulate on ONGC, with a Target Price of Rs1,356 and maintain a Neutral view on Cairn India M&M to launch new models in Sri Lanka M&M plans to launch new models in Sri Lanka including the Maxximo to strengthen its presence in the region. It is also exploring the possibility of introducing an electric car there. Notably, the company’s recently launched truck, Mahindra GIO, has met with good response. We believe that further new launches will help M&M strengthen its product portfolio and help it leverage its presence in Sri Lanka. We maintain a Buy on the stock, with an SOTP Target Price of Rs772, wherein its core business fetches Rs533 and the value of its investments Rs239.

August 19, 2010 3

Market Outlook | India Research

Economic and Political News

RBI likely to hike policy rates in Sept review says D&B

Sebi proposes to double retail investment limit to Rs2lakh

More pension, insurance funds needed in infra: Mukherjee

Corporate News

ADAG eyes 26% stake in ICEX

Blackstone to invest $300 mn in Moser Baer Projects

Future Ventures files draft prospectus for Rs750cr IPO

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

Event for the day

Ballarpur Inds Results

August 19, 2010 4

Market Outlook | India Research Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com

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