1. Market Outlook
India Research
June 4, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The benchmark indices opened on a firm note as positive US housing data and BSE Sensex 1.7% 280.5 17,022
robust services sector data in India for May 2010 boosted investor sentiment. Nifty 1.8% 90.6 5,111
The Sensex moved past the psychological 17,000 level in morning trade. Later,
MID CAP 1.1% 74.5 6,875
the market extended gains in mid-morning trade. The market breadth was
SMALL CAP 1.2% 98.1 8,628
strong and all sectoral indices were in the positive zone. However, the market
BSE HC 0.2% 9.4 5,511
pared gains after hitting a fresh intraday high in afternoon trade. In late trade,
the market moved in a narrow range. The Sensex and Nifty closed up by 1.7% BSE PSU 1.2% 113.2 9,179
and 1.8%, respectively. Mid-cap and small-cap indices underperformed the BANKEX 2.0% 208.6 10,687
Sensex and closed up by 1.1% and 1.2%, respectively. Among the front-liners, AUTO 1.5% 117.0 7,845
Reliance Communication, Hindustan Unilever, Tata Motors, HDFC Bank and METAL 1.3% 196.2 14,826
Sterlite were up by 3-6%. In the mid-cap segment, Havells India, Atlas Copco, OIL & GAS 1.7% 170.9 10,163
Redington India, Hindustan Construction and Trent were up by 6-12%, while BSE IT 1.7% 87.0 5,248
Gee Kay Finance, Core projects, Shriram City, Shree Renuka Sugars and Jain
Irrigation were down by 2-5%. Global Indices Chg (%) (Pts) (Close)
Dow Jones 0.1% 5.7 10,225
Markets Today
NASDAQ 1.0% 22.0 2,303
The trend deciding level for the day is 16960 / 5085 levels. If NIFTY trades FTSE 1.2% 60.0 5,211
above this level during the first half-an-hour of trade then we may witness a
Nikkei 3.2% 311.0 9,914
further rally up to 17135 – 17247 / 5151 – 5191 levels. However, if NIFTY
Hang Seng 1.6% 314.9 19,787
trades below 16960 / 5085 levels for the first half-an-hour of trade then it may
correct up to 16848 – 16674 / 5045 – 4980 levels. Straits Times 2.4% 65.9 2,793
Shanghai Com -0.7% (18.8) 2,553
Indices S2 S1 R1 R2
Indian ADRs Chg (%) (Pts) (Close)
SENSEX 16,674 16,848 17,135 17,247
Infosys 0.5% 0.3 $58.8
NIFTY 4,980 5,045 5,151 5,191 Wipro 2.1% 0.4 $21.6
News Analysis Satyam 3.5% 0.2 $5.3
ICICI Bank 0.9% 0.3 $37.1
 Godrej Consumer acquires Argencos in Latin America HDFC Bank 0.3% 0.5 $142.0
 HUL to consider buyback of shares
 United Phosphorus: Acquisition of DuPont’s Mancozeb business Advances / Declines BSE NSE
Refer detailed news analysis on the following page. Advances 1,903 991
Declines 956 328
Net Inflows (June 2, 2010)
Unchanged 99 37
Rs cr Purch Sales Net MTD YTD
FII 2,223 2,351 (128) (600) 19,935
Volumes (Rs cr)
MFs 566 580 (13) (13) (7,143)
BSE 3,755
FII Derivatives (June 3, 2010)
NSE 12,061
Open
Rs cr Purch Sales Net
Interest
Index Futures 2,688 906 (1,782) 12,961
Stock Futures 1,195 721 474 26,216
Gainers / Losers
Gainers Losers
Price Price
Company Chg (%) Company Chg (%)
(Rs) (Rs)
Havells India 638 12.3 Engineers India 327 (3.2)
Union Bank 316 8.5 Shree Renuka 62 (2.1)
Hind. Const. 118 7.6 Jain Irrigation 1,037 (2.1)
Tech Mahindra 715 6.8 Hindustan Oil 193 (1.7)
RCom. 164 6.4 KSK Energy 178 (1.4)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 0109965391

2. Market Outlook | India Research
Godrej Consumer acquires Argencos in Latin America
Godrej Consumer (GCPL) has acquired another Argentinean hair care company,
Argencos, making it the company's second buyout in Latin America in less than two weeks.
Argencos is present in various hair care business segments, including colour treatment,
shampoos and conditioners via brands like Roby, 919 and L’eau Vive. A couple of weeks
ago, GCPL had acquired 100% stake in Issue Group in Argentina. While details of the deal
have not been disclosed, according to media reports, the combined revenue of the two
Argentine companies will be over US $45mn (issue had revenue of US $33mn). Hence, we
estimate the deal size to be small in the 1.5–2x sales range of US $12mn equating to
Rs80cr-120cr.
We believe the acquisition is in line with GCPL’s core strategy of 3x3 (three markets of
Asia, Africa and Latin America, present in three categories of personal wash, hair care and
home care) and is likely to be EPS accretive from the first year itself. Moreover, the
acquisition, along with the Issue Group acquisition, will provide GCPL the ideal platform
for establishing its hold in the Latin American markets. However, we are slightly cautious
over GCPL’s pace of acquisitions and its ability to manage synergies from the same.
Nonetheless, we believe these acquisitions have leapfrogged GCPL to becoming a truly
global FMCG player. We maintain Accumulate on the stock with a Target Price of Rs357
(Not modeled the current acquisition into our numbers due to lack of details).
HUL to consider buyback of shares
HUL has announced that its board would consider a buyback of shares at a meeting on
June 11. HUL has ~Rs3,200cr cash and a net worth of ~Rs2,670cr on its balance sheet.
Considering ~25% of the company’s net worth being utilised for the buyback, ~Rs670cr
may be spent. At an average price of around Rs260 (5% premium to CMP of Rs247, the
stock has already rallied ~4% on the anticipation of this announcement). The company
could buy back around 26mn of the outstanding 2,179.9mn shares or roughly 1.2% of the
equity. During 2QCY2007, HUL had undertaken buyback of shares at a price not
exceeding Rs230 per share up to an aggregate amount of Rs630cr. However, we believe
the buyback would be EPS neutral owing to reduction in other income (on account of
usage of cash). Hence, while we are enthused with the buyback announcement, we believe
the move will be purely a sentimental booster. Hence, we maintain our Neutral view on the
stock, with a fair value of Rs226 (based on 20x FY2012E EPS), owing to weak earnings
growth vis-à-vis the FMCG sector, uncertain earnings environment and significantly higher
competitive intensity.
United Phosphorus: Acquisition of DuPont’s Mancozeb business
United Phosphorus (UPL) has announced the acquisition of DuPont’s Mancozeb fungicide
business and related assets. With this acquisition, UPL will get the rights to Manzate, the
registered brand of Mancozeb’s products. Mancozeb is a fungicide and can be applied on
a wide range of crops. The acquisition will strengthen UPL’s portfolio in the fungicide
segment and market hold in geographies like North America and South America.
Management has not disclosed the size of the deal nor the sales figure for the brand.
However, we estimate it to have annualised revenue in the Rs225cr-315cr (US $50mn-
70mn) range. We estimate the acquisition to cost nearly Rs540cr. Given the acquisition is
for the brand, we believe Manzate’s OPM will be in line with that of UPL. Considering the
company’s under leverage balance sheet (0.2x), funding for the acquisition should not be
an issue. Based on this, we have revised our FY2011 and FY2012 EPS estimates upwards
by 3% and 1%, respectively. We maintain our Buy rating on the stock with a revised Target
Price of Rs228.
June 4, 2010 2

3. Market Outlook | India Research
Economic and Political News
 Government to invest US $1.7trillion in infrastructure next decade
 Government gives ONGC, OIL freedom to price natural gas
 South Korea to help India cut power T&D losses
Corporate News
 Indian Bank to raise Rs1,000cr Tier-2 capital in FY2011
 Titan eyes Rs500cr from overseas business in 5 years
 Dewan Housing raises Rs375cr through QIB issue
 Aurobindo bags US FDA nod for respiratory drug
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
June 4, 2010 3

4. Market Outlook | India Research
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June 4, 2010 4