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Large Cap CMP

Bharti Airtel* Rs.365

BHEL Rs.2,590

DLF Rs.388

1 TRADING PICK FROM 3

CMP: Current Market Price MBP: Maximum Buying Price

1st October 2010

Since Largre & Mid Cap shares are available at reasonable valuation , we have not recommended any stockfrom Small Cap segment.

Bharti Airtel 365

CMP

(*): New -entry

Mid Cap CMPING Vysya(*) Rs.402

Nagarjuna Const(*) Rs.158

Sesa Goa(*) Rs.344

1 TRADING PICK FROM 3 CMP

Sesa Goa 344

(Large Cap)

MOSt MutualFidelity India Growth Fund

Birla SunLife Mid Cap Plan A

Reliance RSF - Equity (Multi Cap)

(Mid Cap)

MOSt Options StrategyStrategy: Nifty Bull Call Ladder (*)

Strategy: IDBI Bull Spread (*)

Strategy: GAIL Bull Spread(*)

(Moderately Bullish)



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1st October 2010TELECOM

CMP (Rs.) 365

MBP (Rs.) 375

Face Value 5

Equity Shares (Mn) 3797

52-Week Range (H/L) 467 / 230

M.Cap. (Rs b) 1,386.2

Bharti Airtel

FY10 FY11E FY12E

EPS (Rs) 23.7 18.3 22.7

P/E (x) 15.4 20.0 16.1

Bharti Airtel Limited is India's largest integrated and the first private telecom services providerwith a footprint in all the 23 telecom circles.

Recent Developments:

US$10b free cash by FY14: Bharti has been impacted by competitive pressures in thedomestic market and uncertainty on Africa acquisition and 3G spectrum payouts. However,with peak coverage capex and 3G payments through, Bharti's India business is poised togenerate substantial free cash. While the acquired Africa business would remain in aninvestment mode, we expect it to be self-sustaining. Bharti is set to enter a period ofsustained high FCF - we expect >US$10b cumulative free cash generation by FY14 andestimate FCF of Rs28/share in FY12 and Rs37/share in FY13 from India and South Asia.

Domestic business bouncing back: While Bharti has been impacted by high competition,it has been able to defend domestic revenue market share as well as win back subscribers.While risk of another price war remains, we expect pricing pressure to be relatively benign.Bharti would be soon launching 3G services; incremental 3G revenue is likely to contribute~5% to mobile segment by FY13. We estimate mobile revenue CAGR of 14% over FY10-12v/s 7% growth in FY10

Turnaround in Africa business would be key: Bharti would soon launch Airtel brand,

finalize outsourcing arrangements (IT outsourcing deal with IBM announced recently) andcomplete integration process for Africa business. While there is low risk of negative surprises,the extent of improvement in cost structure and market elasticity will determine theachievement of US$5b revenue/US$2b EBITDA target set out for FY13 (we model US$4.4brevenue/US$1.6b EBITDA).

Valuation & View

We are upgrading our SOTP-based target price to Rs430 - Rs488/share for India & SA

business. We maintain Buy.

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1st October 2010Feb

ENGINEERING

CMP (Rs.) 2,590

MBP (Rs.) 2640

Face Value 10

Equity Shares (Mn) 489.5

52-Week Range (H/L) 2,603 / 2,105

M.Cap. (Rs b) 1,267.9

BHEL BHEL is India's dominant producer of power and industrial machinery and a leading EPCcompany, established in the late 1950s as the government's wholly-owned subsidiary. Postdivestment, the government currently has an equity stake of 67.7%.

It has an annual installed capacity of 6,000MW. It has formed a tie-up with Alstom and analliance with Siemens to the manufacture of super-critical 800MW boilers and turbines.


Draft Cabinet note circulated by Power Ministry recommends imposing import duty of 5%,CVD of 10% and SAD of 4%, implying effective import duty of around 20%, on powerequipment imported under all categories. Presently, imported power equipment for projectsof over 1000MW is exempt from all duties under the Mega Power Policy. Domestic

manufacturers will also have to pay CVD and SAD. The difference in duties on importedand domestic equipments will be 6-7%.

The Power Ministry also recommends doing away with 15% price preference to domesticmanufacturers. BHEL has never used this preference in many years. BHEL stands to benefitfrom these recommendations, as the price difference between BHEL and Chinese sets willsubstantially reduce. This will encourage domestic power generators to source equipmentfrom local manufacturers like BHEL & L&T.

BHEL'S Order backlog at the end of 1QFY11 was Rs1,480b, a book-to-bill ratio of 4.4x TTM,providing the best revenue visibility in our engineering universe. We expect earnings andrevenue CAGR of 22% and 24% respectively with margin expansion of 160bp at 22.1%over FY10-12.

After capacity expansion to 20GW by 2012, BHEL's capacity will be at par with its Chineseand Korean counterparts, giving BHEL muscle to compete, execute and deliver on time.

Our EPS estimates for BHEL are Rs119 for FY11 and Rs147 for FY12. Our price target is

Rs2,934, an upside of 19% from current levels. Maintain Buy.

FY10 FY11E FY12E

EPS (Rs) 95.7 119.3 146.7

P/E (x) 27.1 21.7 17.6

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1st October 2010REAL ESTATE

CMP (Rs.) 388

MBP (Rs.) 400

Face Value 2


52-Week Range (H/L) 490 / 251

M.Cap. (Rs b) 658.1

DLF DLF is one of the largest and most respected real estate companies in India. The companyhas developed many well known urban colonies in Delhi, including South Extension, GreaterKailash, Kailash Colony and Hauz Khas. Since inception, DLF has developed ~224msf,

including 22 urban colonies and an integrated 3,000-acre township in Gurgaon, called DLFCity.

DLF has ~55msf under construction and expects delivery of ~30msf during FY12/FY13.Delivery in FY11 is expected to remain low at ~4msf, and deliveries in 1QFY11 stood at~1.3msf. We model delivery of ~4msf in FY11 and ~12msf in FY12.

2QFY11 could witness further repayment of preferential capital of ~Rs11b. During 1QFY11,DLF repaid CCPs worth Rs28.9b and currently CCPs worth Rs16b are outstanding. We have

assumed repayment of preferential shares/ CCPs of Rs31b in FY11 and Rs14b in FY12.DLF hopes to achieve residential sales of 15-18msf and lease 3-4msf commercial officespace in FY11. We model sales of ~16msf in FY11 and commercial leases of ~3msf. DLFhas guided for operating cash flow of ~Rs20-25b in FY11, we are currently modelingoperating cash flows of Rs30b in FY11.

DLF has no plans to exit Aman Resort in the medium term, and termed news regarding saleof Aman resort speculative. It is seeking strategic partner for the entity. DLF continues tomaintain its guidance of asset sales of Rs25-27b within 12-15 months that it shared in Mar-10. Asset sales in 1QFY11 was Rs2.9b, and we model asset sales of Rs18.5b in FY11.

Management mentioned that their plans on value housing would be contingent on goodmargins (did not specify the threshold levels). DLF is hopeful of introduction of Governmentsops in the near future to attract companies to value housing vertical. We have assumedsales of ~5msf of value housing in FY11.

Valuation and view:

We expect DLF to benefit significantly from the expected revival in the commercial andretail verticals. A successful REIT listing at an attractive cap rate would be a key near termcatalyst for the stock. Maintain Buy.

FY10 FY11E FY12E

EPS (Rs) 10.2 11.7 15.8

P/E (x) 38.0 33.3 24.6

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1st October 2010BANKING

ING VysyaCMP (Rs.) 402

MBP (Rs.) 415

Face Value 10


52-Week Range (H/L) 413 / 235

M.Cap. (Rs b) 48.4

ING Vysya Bank (IVB, earlier known as Vysya Bank) is one of India's oldest private sector

banks with operating history of 80 years. As of June 2010, it had branch network of 495and customer base of 2 million.

Key Investment Arguments:

ING Vysya Bank (IVB) is turning around rapidly with RoA improving from -0.3% in FY05 to0.7% in FY10 and further to 1% by FY12E. As legacy issues subside, we believe IVB is all setto accelerate loan growth and improve market share.

Operating leverage to boost RoA:

IVB's focus on raising branch and employee productivity is leading to improvement in cost

to core income (C/I) ratio and RoA. Productivity has improved in the last 3-4 years, butremains lower than peers

Fall in credit cost to drive earnings growth:

In FY10, credit cost rose to 1.3% (vs FY04-09 average of 0.6%), led by

1. Higher slippages from unsecured personal loans,

2. Conservative restructuring policy, and

3. Improving coverage ratio. We expect credit cost to fall to 1% in FY11 and 0.8% in FY12on the back of lower unsecured personal loans and improved economic scenario.

Valuation & View:

Over FY10-13, we expect core operating profits CAGR of 26% and EPS CAGR of 33% on theback of (1) strong loan growth, (2) stable margins, (3) operating leverage, and (4) lowercredit cost. RoA is expected to improve from 0.7% in FY10 to ~1% by FY13 and RoE from11.6% in FY10 to ~17% by FY13. High growth coupled with improving return ratios will

lead to re-rating. We initiate coverage with a Buy rating and a target price of Rs475(2x P/BV FY12).

FY10 FY11E FY12E

EPS (Rs) 18.5 26.2 34.5

ABV 173.3 197.5 226.6

P/ABV 2.3 2.0 1.8

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INFRASTRUCTURE 1st October 2010

Nagarjuna ConstCMP (Rs.) 158

MBP (Rs.) 165

Face Value 2


52-Week Range (H/L) 197 / 132

M.Cap. (Rs b) 40.6

Nagarjuna Construction Company (NCC) is a Hyderabad-based construction company,and has its origins from the partnership business Nagarjuna Construction Corporationestablished in 1978. The company has a fairly diversified business mix with a presenceacross roads, buildings, water, irrigation, hydro power etc.


NCC reported 1QFY11 at Rs10.9b (up 8.6% YoY) and were below estimates ofRs12.1b (up 20.7% YoY). EBIDTA margins stood at 9.7% (down 58bp YoY) and werelower than estimates of 10.2%. Net Profit stood at Rs414m (up 8.3% YoY) and wasbelow estimates of Rs493m.

The management stated that execution impact was largely seasonal, and maintained

FY11 guidance of consolidated revenues at Rs73b, standalone revenues at Rs58b (up21% YoY), international construction business Rs10.5b (up 15% YoY), etc. Marginsare also expected to sustain / improve marginally.

There have been further delays in terms of road BOT projects commissioning:

Orai-Bhognipur in Aug 2010, vs earlier expectations of July 2010; Meerut-Muzaffarpurin Sept 2010, vs earlier June 2010 and Pondicherry - Tindivinam in Dec 2010 (unchanged).As compared to the original estimates, the project delays have been ~12-20 months.

Toll revenues have also been lower than estimates, with toll collections in BangaloreElevated road at Rs1.5m/day vs earlier estimate of Rs2.2m/day. Meerut-Muzaffarpurproject which is likely to commence tolling in Sept 2010 is already in the process ofdebt restructuring, given the cost escalations and lower traffic estimates.

NCC is better placed due to its well diversified order book and continuous efforts toadd new business verticals. NCC's Dubai real estate development project constructionhas been stalled; and the company is evaluating various options.

Valuation and view:We expect EPS of Rs11.7 in FY11 (up 26.7% YoY) and Rs14.3 in FY12 (up 22.5% YoY).We Maintain Buy, with SOTP based price target of Rs204/sh

FY10 FY11E FY12E

EPS (Rs) 9.2 11.7 14.3

P/E (x) 17.1 13.5 11.0

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METALS 1st October 2010

Sesa GoaCMP (Rs.) 344

MBP (Rs.) 360

Face Value 1


52-Week Range (H/L) 494 / 260

M.Cap. (Rs b) 285.5

Sesa Goa is India's largest private iron ore miner, with reserves of over 207m ton. It is

aggressively ramping up production to capitalize on the rising price trend. Globaliron ore prices have been trending up over the last few years


Sesa Goa has announced its intention of acquiring 20% equity of Cairn India as partof Vedanta plc's acquisition of 51-60% stake in Cairn India

Permanent equity value loss of US$600-660m due to huge US$3-3.3b investment inun-related business

Sesa will be the vehicle for Vedanta's 20% open offer to minority share holders at

Rs355/share of Cairn. This will require funds of Rs134.7b (US$2.9b).

If Sesa is unable to gain entire 20% equity in open offer, Vedanta Plc will meet theshortfall by supplying Cairn India's shares at cost i.e. Rs405. This will increase therequired funds to a maximum of Rs153.7b (US$3.3b).

It is also likely that investors will view the investment as non-core business and startattaching holding company discount, which will result in permanent market cap loss

of up to US$600-660m.

Valuation and view:

We arrive at SOTP of Rs376 (Rs270 for core business and Rs106 for Cairn) despite EPSaccretive transaction.

We believe iron ore fundamentals are strong. Though there is an upside of only 17%at current stock price, the SOTP is sensitive to iron ore prices and ranges up to Rs578.

Maintain Buy.

FY10 FY11E FY12E

EPS (Rs) 31.6 62.2 68.7

P/E (x) 10.9 5.5 5.0

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Large Cap

Bharti Airtel 365

Mid Cap

Sesa Goa 344

1st October 20101 TRADING PICK FROM 3

02 January 2010

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1st October 2010

Bharti Airte

CMP : 365Stop Loss : 335

Target : 425

TELECOM

Bharti Tele has been in consolidation for the last 8 months and has given breakout at 335.Since then the stock has maintained the upward momentum and is continuously tradingabove 10 Days Moving Averages which is showing immense strength. Traders can buy thestock at current level for the Target of 425. The Stop-Loss for the same shall be 335, which is

50 Days Moving Average.

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1st October 2010

Sesa Goa

CMP : 344Stop Loss : 324

Target : 378

METALS

Since April 2010 stock was in the down trend and made Double Bottom around 308. Afterconsolidation stock has started making Higher Tops and Higher Bottoms and closed aboveboth 10 DMA and 50 DMA. Considering the momentum, the stock may approach 200 DMA

placed at 378. Now, Traders can buy Sesa Goa at current level with Stop-Loss of 324 for the

Target of 378.

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MOSt Mutual 1st October 2010

(Large Cap)

MOSt Mutual

Fidelity India Growth Fund

Birla SunLife Mid Cap Plan A

Reliance RSF - Equity (Multi Cap)

(Mid Cap)

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Latest NAV (Gr): Rs. 12.90 (Sep 30, 10)

Latest NAV (Div): Rs. 12.90 (Sep 30, 10)

Fund Category: Equity Diversified

Type: Open Ended

Exit Load (%): 1% (< 365 days)

Inception Date: 23-Oct-07

Net Assets (Rs. Cr.): 371.30 (31-Aug10)

At a Glance

Top 5 Holdings 28.83%

No. of Stocks 48

Exposure to Sensex 50.44%

Exposure to Nifty 58.36%

Portfolio PE Trailing 24.6Expense Ratio 2.30 (30-Jun-10)

Fund Manager

Dividends Declared

NAV Movement

Style Box Analysis

Comparative Performance

Scheme Objective

It aims to grow from investment

opportunities in stocks in India and

companies listed internationally

benefitting from the Indian economy.The Fund will follow 'bottom-up' stock

selection approach.

Scheme Analysis

The Fund was launched in 2007 keeping

in mind of India's gro-wth potential and

expanding economy; however, it metwith the economic meltdown which also

affected its performance. While it lost

51.54% in its worst period (14/02/08-13/

01/08), it returned 118.21% dramatically

in the period (09/03/09 -11/03/10). Its

bottom-up selection process has helped

the fund in selecting some quality stocks.The fund has major exposures in Banks

(18.46%), Petro & Gas (12.78%) & Softw-

are (12.15%). It clocked 32.93% and 36%

in 1-year and 2-year category against

category avg of 25.62% and 29.39%

resp.

Portfolio Attributes

1st October 2010Fidelity India Growth Fund (Large-Cap)

Sandeep Kothari (Since 10/07) & Subramanian

B (Since 12/08)

- -

- -

- -

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Fidelity IndiaG r o w t h Fund BSE 2 0 0

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Entry Load (%): Nil


Inception Date: 3-Oct-02

Net Assets (Rs. Cr.): 1917.96 (31-Aug-10)

At a Glance


No. of Stocks 61

Exposure to BSE 200 55.91%

Exposure to CNX 500 73.17%

Portfolio PE Trailing 25.95

Expense Ratio 2.00 (31-Mar-10)

Fund Manager

Dividends Declared

NAV Movement

Style Box Analysis


Scheme Objective

The scheme aims to generate long-term

growth of capital at controlled level of

risk by investing primarily in mid-cap

stocks, to generate returns higher than a

fund focussed on large and liquid stocks.

Scheme Analysis

Sanjay Chawla (Since Sept 2007)


1st October 2010Birla SunLife Mid Cap Plan A (Mid-Cap)

Its value-based approach sometimes acts

as a dampener in bull run but provides

an excellent downside protection. It has

provi-ded excellent returns in the recent

upside. In 1-year category, it has

delivered 40.89% against the category

average of 33.65%. In other categories

too, it has bitten its benchmark. The Fund

Manager is bullish on Banks, Auto,

Pharma & Engineering. Recently it cutsits exposure in Power stocks. The top 10

holdings comprise of 29.93% of total net

assets. The favorite stocks are Shriram

Transport Finance (3.46%), Exide (3.31%)

& Yes Bank (3.25%).

16-Jul-10 15%

29-Jan-10 25%

31-Jul-09 15%

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CN X M i d c a p

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6Months 1Year 2Ye ars 3Years

BirlaSu n

Life

Mid

Cap

Fund

Plan

A

CNX Midcap

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Entry Load (%): Nil


Inception Date: 9-Jun-05

Net Assets (Rs. Cr.): 3111.97 (31-Aug-10)

At a Glance


No. of Stocks 42

Exposure to Sensex 33.41%

Exposure to Nifty 40.04%

Portfolio PE Trailing 30.48

Expense Ratio 1.86 (30-Aug-10)

Fund Manager

24-Jul-09 50.0%

- -

- -

Dividends Declared

NAV Movement

Style Box Analysis


Scheme Objective

It aims to generate consistent returns by

actively investing atleast 80% of its assets

in equity or equity related securities and

remaining 20 % of its assets in debt and

money market instruments with an

average maturity of 5 to 10 years.

Scheme Analysis

Omprakash Kuckien (Since Nov 2007)


1st October 2010Reliance RSF - Equity (Multi-Cap)

Since Kuckien joined as Fund Manager,

the fund has performed well in allcategories. His bets proved well in up

market in 2007 and provided 92.98%

against category average of 59.56%. In

downside, he resorted to high cash levels

which protected the fund from a massive

fall. In 2008, the fund gave (-)54.61%

against category return of (-)55.27%. TheFund has 12.79% exposure in banks. The

other sectors where the FM is bullish is

Oil&Gas, Softwares, Pharma etc. In 1-

year and 3-year category, the fund has

returned 30% and 20% against category

average of 26% and 7% respectively.

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6M onths 1Year 2Years 3Years

RelianceRS F

Equity

BSE100

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1st October 2010OPTIONS STRATEGY

MOSt Options Strategy

Strategy: Nifty Bull Call Ladder (*)

Strategy: IDBI Bull Spread (*)

Strategy: GAIL Bull Spread(*)




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BUY/SELL SCRIP SERIES OPTION STRIKE PRICE RECO PRICE

BUY NIFTY OCT CE 6200 `119 - 121

SELL NIFTY OCT CE 6300 ` 75 - 77

SELL NIFTY OCT CE 6400 ` 45 - 47

Pay Off on Expiry

Strategy: Nifty Bull Call Ladder

View : Moderately Bullish

Rationale : 1. . If Nifty adds another 5-6% and sustains the best money will be made

2. In Case the markets give up we may not lose any money

3. The only way we may incur loss is if the Nifty ends up beyond the all time high of 6357, which is a remotepossibility.

Premium Inflow : ` 100 (per spread)

Margin :` 38,000 (Approx)

BREAK EVEN POINT MAXIMUM PROFIT MAXIMUM LOSS

6502 ` 5,100 Between 6300-6400 Unlimited Above 6502

Strategy

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BUY IDBI OCT CA 160 `6 - 7

SELL IDBI OCT CA 170 `3 - 4

Pay Off on Expiry

Strategy: IDBI Bull Spread

Strategy


Rationale : 1.Long Rollovers with MoM increment in futures.

2.Sustaining above the heaviest build up call creating head room for the upside.

Premium Outflow : 6,000 (per Spread)

Margin : 42,000 (Approx.)


163 `14,000 Above 170 `6,000 Below 160

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BUY GAIL OCT CA 500 `13 - 15

SELL GAIL OCT CA 520 `7 - 9

Strategy: GAIL Bull Spread

Strategy


Rationale : 1.Long build up in futures.

2. Buying in ATM calls.

Premium Outflow : 3,000 (per Spread)

Margin : 32,000 (Approx.)

Pay Off on Expiry


506 `7,000 Above 520 `3,000 Below 500

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most 3x3 - 1st october 2010

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