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Market Outlook India Research

July 19, 2010

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

Dealer’s Diary

The key benchmark indices opened on a negative note taking cues from weak overnight US markets and early Asian indices. However, volatility was evident early on as markets gyrated in a narrow range in the morning session. The markets traded upwards in mid-afternoon session with positive opening from European indices. However, markets continued to witness sharp swings in the last session, with a buying spree helping markets to close the session at the day’s high. The Sensex and Nifty ended the losing trend of the past two sessions to close up by 0.3% each, while BSE mid-cap and small-cap indices ended the session up by 0.4% and 0.7%, respectively. Among the front liners, TCS, Tata Motors, ICICI Bank, Reliance Comm. and ONGC were up nearly by 1–6%, while M&M, HDFC Bank, RIL, HDFC and Jindal Steel declined by 1–2%. Among mid-caps, UTV Software, Edelweiss, Rallis India, Tulip Telecom and Rajesh Exports were up by 6–8%, while Honeywell Auto, Sterlite Tech, Graphite India, Bayer Corp. and JSL were down by 2–7%.

Markets Today

The trend deciding level for the day is 17943 / 5390 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17993 – 18031 / 5405 – 5417 levels. However, if NIFTY trades below 17943 / 5390 levels for the first half-an-hour of trade then it may correct up to 17905 – 17855 / 5378 – 5363 levels

Indices S2 S1 R1 R2

SENSEX 17,855 17,905 17,993 18,031 NIFTY 5,363 5,378 5,405 5,417

News Analysis

Kesoram Industries – Initiating Coverage Shiv-Vani Oil and Gas Exploration Services raises US$ 75mn via FCCB Result Review: Rallis India Result Previews: Aventis Pharma, Concor, Crompton Greaves, HDFC Bank,

PTC, Sesa Goa Refer detailed news analysis on the following page.

Net Inflows (July 15, 2010) Rs cr Purch Sales Net MTD YTD

FII 4,230 3,669 561 8,284 39,361

MFs 284 991 (707) (1,246) (9,785)

FII Derivatives (July 16, 2010)

Rs cr Purch Sales Net Open

Interest

Index Futures 1,108 1,538 (430) 16,979

Stock Futures 1,611 1,426 185 31,455

Gainers / Losers

Gainers Losers

Company Price (Rs)

Chg (%) Company Price (Rs)

Chg (%)

TCS 832 6.2 Amtek Auto 190 (2.1)

Godrej Ind 187 5.2 M&M 604 (2.1)

IFCI 61 5.2 Engineers India 340 (1.8)

Mcleod Russel 233 4.7 IDBI Bank 122 (1.7)

Yes Bank 299 4.4 Neyveli Lignite 159 (1.5)

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

BSE Sensex 0.3% 46.4 17,956

Nifty 0.3% 15.1 5,394

MID CAP 0.4% 32.7 7,398

SMALL CAP 0.7% 62.2 9,443

BSE HC 0.4% 23.3 5,729

BSE PSU 0.1% 14.0 9,389

BANKEX 0.8% 91.7 11,396

AUTO -0.1% (6.3) 8,337

METAL -0.2% (29.0) 14,910

OIL & GAS -0.4% (39.2) 10,523

BSE IT 1.8% 99.1 5,459

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

Dow Jones -2.5% (261.4) 10,098

NASDAQ -3.1% (70.0) 2,179

FTSE -1.0% (52.4) 5,159

Nikkei -2.9% (277.2) 9,408

Hang Seng 0.0% (5.5) 20,250

Straits Times 0.5% 14.1 2,958

Shanghai Com 0.0% (0.0) 2,424

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

Infosys -1.8% (1.0) $58.3

Wipro -4.3% (0.6) $12.3

Satyam -2.1% (0.1) $5.0

ICICI Bank -2.8% (1.1) $37.6

HDFC Bank -2.9% (4.3) $144.1

Advances / Declines BSE NSE

Advances 1,609 747

Declines 1,340 574

Unchanged 93 55

Volumes (Rs cr)

BSE 4,308

NSE 13,425

July 19, 2010 2

Market Outlook | India Research

Kesoram Industries – Initiating Coverage Kesoram Industries (Kesoram) is a diversified player with presence in cement and tyre manufacturing. The company has a total cement capacity of 7.3mtpa at two locations, viz. Sedam (5.7mtpa) in Karnataka and Karimnagar (1.6mtpa) in Andhra Pradesh. In tyres, the company currently has a total installed capacity of 823tpd, which is expected to increase to 988tpd in FY2011E. The company’s cement and tyre businesses are currently trading at attractive valuations coupled with being at a substantial discount to their peers and replacement costs. The cement business is valued at EV/tonne of US $65, which is at a considerable discount to the replacement costs of US$80/tonne. This gives an implied enterprise valuation of Rs1.4cr/tpd to the tyre business, which is at 35–63% discount to the peers such as Apollo Tyres (Rs3.8cr/tpd) and Ceat (Rs2.3cr/tpd). We Initiate Coverage on the stock with a Buy recommendation and an SOTP Target Price of Rs437, implying an upside of 46% from current levels. Shiv-Vani Oil and Gas Exploration Services raises US $75mn via FCCB Shiv Vani Oil & Gas Exploration Services (SOGES) has raised US $75mn through an FCCB issue. The FCCB has a maturity period exceeding 5 years, i.e. August, 17, 2015, and has a coupon-rate of 5% p.a. The conversion price of the FCCB is fixed at a price of Rs515.6/share, around 9.3% higher than the current stock price. The FCCB issues follow the placement made to Franklin Templeton in March this year. The funds raised will be used for international expansion, in R&D and for working capital needs. SOGES is trying to develop capabilities in specialised services, which companies like Schlumberger Ltd. possess. The recent news reports have indicated that SOGES is likely to buy a US-based company to get the required technology to further consolidate its presence in the oil and gas exploration services businesses and the ticket size for the same could be around US $50mn. SOGES lacks expertise in the offshore oil and gas services and is an onshore service provider. Thus, an acquisition to get the offshore technological know-how would strength the business model and will open up new growth avenues for the company. FCCB could result in dilution of 14.8% of the current equity base. The issuance is likely to adversely impact the EPS by around Rs2.7/share; however, the same is likely to be offset via the increase in revenue and profitability via the overseas acquisition. However, ascertaining the impact of the same is not possible at the current juncture as we await more information on the likely overseas acquisition and its exact impact on the company's financials. Awaiting more clarity on the impending overseas acquisition, we keep the stock under review.

July 19, 2010 3

Market Outlook | India Research Result Reviews Rallis India Rallis India declared its 1QFY2011 results, with revenue growth of 22% to Rs203cr, which was ahead of our estimate of Rs193cr. However, EBITDA margins at 11.6% were below our estimates of 13%, hence overall profit came in at lower than the estimate. Total reported PAT for the quarter came in at Rs14.8cr against Rs9cr (1QFY2010), growth of 57.5% yoy. We currently have a Neutral rating on the stock, which would be revised post the management meet.

Result Previews

Aventis Pharma Aventis Pharma is slated to announce its 2QCY2010 results. Net sales are expected to increase by 10.3% to Rs275.7cr (Rs249.9cr) with OPM estimated to contract to 18.3% (21.2%). As a result, net profit is expected to remain flat at Rs48.2cr (Rs47.1cr) on the back of lower OPM. The stock is currently trading at 24.8x CY2010E and 21.7x CY2011E earnings. We recommend Sell on the stock with a target price of Rs1,658. Container Corporation of India Concor is scheduled to announce its 1QFY2011 results today. The rail container operator is expected to report top-line growth of 7.7% yoy to Rs977cr, on account of low base and improvement in container volumes in the Exim segment. We expect Concor’s OPM to decline by 2,731bp yoy to 25.5%, driven by the continued trend of higher empties and inability to pass on rail freight expenses. Consequently, we expect net profit to decline marginally by 1.9% to Rs197.0cr. At the CMP, the stock is trading at 19.4x its FY2012E EPS of Rs72.6. We maintain our Reduce rating on the stock with a target price of Rs1,194. Crompton Greaves Crompton Greaves is scheduled to announce its 1QFY2011 results. Net sales are expected to increase by 10% yoy to Rs2,416cr (Rs2,198cr) with OPM estimated to expand to 12.6% (11.2%). Net profit is expected to increase by 20.6% yoy to Rs193cr (Rs160cr) on the back of improved operating margin. The stock is currently trading at 19.8x FY2011E and 17.63x FY2012E earnings. We maintain a Buy view on the stock with a target price of Rs307. HDFC Bank HDFC Bank is scheduled to announce its 1QFY2011 results. We expect the bank to report healthy NII growth of 26% yoy. However, NIMs of the bank are expected to decline sequentially by 25bp during 1QFY2011 on account of interest payment on savings accounts on a daily basis. The operating profit of the bank is expected to register 5% yoy growth. Net profit is expected to increase by 33% on a yoy basis to Rs806cr. At the CMP, the stock is trading at valuations of 3.3x FY2012E ABV of Rs629.6. We have an Accumulate rating on the stock, valuing it at 3.5x FY2012E ABV (at the higher end of its five-year range) to arrive at a 12-month target price of Rs2,204.

July 19, 2010 4

Market Outlook | India Research PTC PTC is slated to announce its 1QFY2011 results. We expect the company to record a 44.9% yoy decline in its standalone top line to Rs1,307cr. We expect the company to trade 3,350MU of power during the quarter, resulting in a decrease of 20.3% yoy. We have assumed an average realisation of Rs3.9/unit. We expect the company's net profit to decline by 48.1% yoy to Rs17.3cr. We maintain a Buy rating on the stock with a target price of Rs136. Sesa Goa Sesa Goa is slated to announce its 1QFY2011 results today. We expect the company’s top line to grow by 141.7% yoy to Rs2,445cr on account of higher realisations. Consequently, on the operating front, EBITDA margin is expected to expand by 1,521bp yoy to 60.0%. Hence, the bottom line is expected to grow by 183.4% yoy to Rs1,197cr. We maintain a Neutral rating on the stock.

July 19, 2010 5

Market Outlook | India Research

Economic and Political News

12.3mn new GSM subscribers added in June: COAI

Delhi government slashes VAT on diesel from 20.0% to 12.5%

IRDA backs FM panel on regulatory tiffs

Corporate News

Reliance Infra inks pact with NHAI for Rs30bn Delhi-Agra highway

Diamond Power secures order worth Rs332cr

Tata Steel arm sells 27% stake in Malaysian firm for US $72mn

Om Metals Infraprojects bags Rs300cr road order from the Government of Rajasthan Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Events for the day

Aventis Pharma Dividend, Results Bayer Crop Results Container Corp Dividend, Results Crompton Greaves Results HDFC Bank Results Jindal Saw Dividend, Results Midday Multi-media Results PTC India Results Sesa Goa Results Whirlpool Results

July 19, 2010 6

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

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