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Market Outlook India Research

June 30, 2010

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

Dealer’s Diary

The market opened marginally in red after taking cues from weak Asian indices. The market continued to slide throughout the session, with expectations of a slowdown in Chinese economic growth. The market slipped further in afternoon session, as weak opening by European indices added to the negative sentiment. However, the market found support at intraday low in the final session, as investors engaged in value buying. Metal stocks tumbled after the Conference Board in China corrected down its April 2010 gauge for the outlook of China's economy. The Sensex and Nifty closed with gains of 1.4% and 1.5%, respectively. However, BSE mid-cap and small-cap indices fared better as they fell by just 0.7% and 0.6%, respectively. Among the front-liners, L&T, Bharti Airtel and ONGC were up by nearly 0.2%, while Hindalco, Reliance Comm., Tata Steel, Reliance Infra and Jindal Steel were down by 3–4%. Among mid-caps, Astrazeneca Pharma, TVS Motor, JM Financial, ING Vysya Bank and IBN18 Broadband were up by 5–20%, while Hathway Cable, Max India, Edelweiss Capital, EID Parry and Rajesh Exports declined by 4–8%. Markets Today

The trend deciding level for the day is 17593 / 5275 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17719 – 17905 / 5315 – 5374 levels. However, if NIFTY trades below 17593 / 5275 levels for the first half-an-hour of trade then it may correct up to 17407 – 17280 / 5217 – 5177 levels

Indices S2 S1 R1 R2

SENSEX 17,280 17,407 17,719 17,905 NIFTY 5,177 5,217 5,315 5,374

News Analysis

Four PSU banks announce their base rates

Alembic demerges pharma business

Refer detailed news analysis on the following page.

Net Inflows (June 28, 2010) Rs cr Purch Sales Net MTD YTD

FII 2,254 1,374 880 10,685 31,253 MFs 707 990 (283) (589) (8,021)

FII Derivatives (June 29, 2010)

Rs cr Purch Sales Net Open

Interest

Index Futures 1,329 2,788 (1,458) 17,348 Stock Futures 899 1,275 (376) 27,468

Gainers / Losers Gainers Losers

Company Price (Rs) Chg (%) Company

Price (Rs) Chg (%)

Aban Offshore 822 4.0 Max India 157 (5.0)

Bajaj Finserv 438 3.1 Aditya Birla 758 (4.8)

Oil India 1,431 2.8 Ultratech Cem 879 (4.8)

Indusind Bank 206 2.7 Hindalco 144 (4.4)

PFC 296 2.7 Balrampur Chini 83 (3.9)

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

BSE Sensex -1.4% (240.2) 17,534

Nifty -1.5% (77.4) 5,256

MID CAP -0.7% (46.8) 7,116

SMALL CAP -0.6% (56.2) 9,032

BSE HC -1.0% (55.7) 5,733

BSE PSU -0.7% (66.4) 9,452

BANKEX -1.5% (159.5) 10,684

AUTO -0.8% (70.6) 8,235

METAL -2.7% (411.6) 14,635

OIL & GAS -1.3% (146.2) 10,700

BSE IT -0.8% (40.6) 5,323

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

Dow Jones -2.6% (268.2) 9,870

NASDAQ -3.8% (85.5) 2,135

FTSE -3.1% (157.5) 4,914

Nikkei -1.3% (123.3) 9,571

Hang Seng -2.3% (477.8) 20,249

Straits Times -1.4% (39.6) 2,830

Shanghai Com -4.3% (108.2) 2,427

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

Infosys -3.5% (2.2) $59.9

Wipro -4.5% (0.6) $12.1

Satyam 0.0% - $5.2

ICICI Bank -4.5% (1.7) $36.3

HDFC Bank -3.5% (5.1) $142.4

Advances / Declines BSE NSE

Advances 1,109 391

Declines 1,804 939

Unchanged 88 39

Volumes (Rs cr)

BSE 4,523

NSE 13,190

June 30, 2010 2

Market Outlook | India Research

Four PSU banks announce their base rates State Bank of India (SBI) has announced its base rate (the minimum lending rate) at 7.5%, in line with the expected 7.5–8% range. Among other PSU banks, Punjab National Bank, Bank of Baroda and Union Bank have set their base rate at 8% per year, with effect from July 1, 2010. All banks are required to announce the base rate on or before July 1, 2010. Banks with a higher CASA are expected to announce a base rate towards the lower end to gain market share. There is some apprehension that the base rate system may raise the effective cost of borrowings for corporates. However, this is unlikely because corporates have access to multiple sources of funds and, hence, the effective borrowing rates will be determined by market competition. The other point of note is that banks have been allowed to change this base rate as required at any point of time over the next six months till December 31, 2010. This indicates that the RBI has taken an experimental route, allowing banks to tweak models and parameters over this period to determine the most-efficient formula, which best responds to changes in the environment, including monetary policy moves. This would be in line with the RBI’s stated underlying objective of ensuring lending rates respond more efficiently and predictably to monetary policy changes through the base rate mechanism compared to the earlier BPLR system. We maintain our positive view on the sector and our top picks are ICICI Bank, HDFC Bank, Axis Bank, SBI among large caps and Federal Bank, Dena Bank among midcap banks. Alembic demerges pharma business Alembic has announced the demerger of its pharma business into a separate subsidiary company named Alembic Pharma. The company has proposed to demerge its domestic formulation, international generic and API businesses, which reported a combined turnover of Rs1,022cr (90% of total turnover) and PBT of Rs68cr (154% of total PBT) in FY2010, to the subsidiary company Alembic Pharma. Alembic will retain its Vadodara manufacturing facility (Penicillin G business—loss of Rs24cr in FY2010) along with the power infrastructure (16MW used for internal consumption) and land assets at Vadodara (100 acres). Under the arrangement, shareholders of Alembic would receive one equity share of Alembic Pharma in the ratio of 1:1. The company plans to list Alembic Pharma post the demerger. The demerger is positive as it would allow the two companies to focus on their respective core businesses, would insulate pharma business from the price volatility of Penicillin G business, could attract a distinct set of investors for different businesses and potentially unlock value of its land bank at Vadodara. The stock is under review.

June 30, 2010 3

Market Outlook | India Research

Economic and Political News

Rajasthan Electronics & Instruments Ltd., a JV of the Central and Rajasthan government, received Rs300cr order to set up solar power packs in Rajasthan

Safeguard duty on soda ash imports extended

National Advisory Council meet likely to meet Food Security Bill

Corporate News

Uflex to invest Rs1,150cr in two years on capacity expansion

ONGC to sign 17 new oil and gas block contracts

Vascon Engg. to develop over 10mn sq. ft. in FY2011

Pantaloon Retail allots 1cr warrants to promoters Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Events for the day Gateway Distriparks Dividend, Results

June 30, 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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