1. Market Outlook
India Research
June 7, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The benchmark indices opened in red, taking cues from weak Asian markets. BSE Sensex 0.6% 95.4 17,118
The markets traded in a narrow range hitting intraday low in the morning Nifty 0.5% 25.0 5,136
session. However, recovery ensued in early afternoon trade, taking markets past
MID CAP 0.2% 14.7 6,890
previous day’s close. The market extended gains to hit fresh intraday highs in
SMALL CAP 0.1% 12.8 8,640
mid-afternoon trade, led by recovery in Asian markets and firm opening of
BSE HC -0.0% (2.1) 5,509
European stocks. The indices pared gains in late trading after hitting a three-
week high. Auto, banking, realty, IT and FMCG stocks gained for the day. The BSE PSU -0.1% (7.3) 9,171
Sensex and Nifty closed up by 0.6% and 0.5%, respectively. Mid-cap and small- BANKEX 0.8% 86.3 10,773
cap indices underperformed the Sensex and closed up by 0.2% each. Among AUTO 0.6% 49.2 7,894
the front-liners, Maruti, SBI, Reliance Communication, ITC and Hindustan METAL -0.2% (36.0) 14,790
Unilever were up by 2–3%, while ONGC, HDFC Bank, Tata Power, BHEL and OIL & GAS -0.1% (13.1) 10,150
Jindal Steel were down by 1–2%. In the mid-cap segment, Purvankara, TVS BSE IT 0.9% 48.8 5,296
Motor, HT Media, Dish TV and Welcorp were up by 5–7%, while Gee Kay
Finance, Redington, Mahindra Holiday, Core Projects and Marico were down by Global Indices Chg (%) (Pts) (Close)
3–5%. Dow Jones -3.2% (323.3) 9,932
Markets Today NASDAQ -3.6% (83.9) 2,219
FTSE -1.6% (85.2) 5,126
The trend deciding level for the day is 17077/5125 levels. If NIFTY trades
Nikkei -0.1% (13.0) 9,901
above this level during the first half-an-hour of trade then we may witness a
Hang Seng -0.0% (6.6) 19,780
further rally up to 17191 – 17264/5158 – 5181 levels. However, if NIFTY
trades below 17077/5125 levels for the first half-an-hour of trade then it may Straits Times 0.5% 13.0 2,807
correct up to 17004 – 16891/ 5102 – 5069 levels. Shanghai Com 0.0% 0.9 2,553
Indices S2 S1 R1 R2 Indian ADRs Chg (%) (Pts) (Close)
Infosys -1.7% (1.0) $57.8
SENSEX 16,891 17,004 17,191 17,264
Wipro -4.7% (1.0) $20.6
NIFTY 5,069 5,102 5,158 5,181
Satyam -4.6% (0.2) $5.0
News Analysis ICICI Bank -2.3% (0.9) $36.3
HDFC Bank -2.8% (4.0) $138.0
 FM directs listed companies to have 25% Public Float
 Ashok Leyland – May 2010 sales volume Advances / Declines BSE NSE
Refer detailed news analysis on the following page.
Advances 1,379 634
Net Inflows (June 3, 2010) Declines 1,478 676
Rs cr Purch Sales Net MTD YTD Unchanged 97 43
FII 2,186 1,693 493 (107) 20,429
MFs 566 580 (13) (13) (7,143) Volumes (Rs cr)
BSE 3,547
FII Derivatives (June 4, 2010)
Open NSE 11,282
Rs cr Purch Sales Net
Interest
Index Futures 1,232 1,096 136 12,996
Stock Futures 1,084 754 330 26,511
Gainers / Losers
Gainers Losers
Price Price
Company Chg (%) Company Chg (%)
(Rs) (Rs)
Welcorp 231 5.3 Sesa Goa 369 (3.3)
Essar Oil 129 4.4 Mcleod Russel 183 (2.9)
Patni Comp 599 3.7 Gujarat NRE 59 (2.7)
Aditya Birla N 749 3.4 Glenmark Phar 258 (2.6)
United Phos 187 3.3 Jubilant Org 346 (2.4)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 0109965391

2. Market Outlook | India Research
FM directs listed companies to have 25% Public Float
In the recent amendment to the Securities Contracts Rules, the Finance Ministry has
directed all listed companies to achieve a minimum threshold of 25% public holding
through an annual addition of not less than 5% over a period of three years either via offer
for sale or issue of fresh shares.
Salient features:
a) For new listing, if the post issue capital of the company calculated at offer price is more
than Rs 4,000cr, the company may be allowed to go public with 10% public shareholding
and comply with the 25% public shareholding requirement by increasing its public
shareholding by at least 5% per annum.
b) For companies whose draft offer document is pending with the Securities and Exchange
Board of India (SEBI) on or before these amendments would have to comply with the 25%
public shareholding requirement by increasing its public shareholding by at least 5% per
annum, irrespective of the amount of post issue capital of the company calculated at offer
price.
c) Every listed company shall maintain public shareholding of at least 25%. If the public
shareholding in a listed company falls below 25% at any time, such a company shall bring
the public shareholding to 25% within a maximum period of 12 months from the date of
such fall.
Impact Analysis
The guidelines are a move in the positive direction as it would widen investor participation
in the equity markets as well as enhance the process of price discovery in the markets.
There are almost 190 companies where the promoter holding is more than the stipulated
80%. At current prices, the amount to be raised by these companies would be around
Rs1.5lakh cr, with around 80% of the same being accounted by the PSU companies. The
notification could result in many MNC companies, where the threshold limit is higher than
75%, opting for delisting. In terms of absorption of the same by the stock markets, we
believe that the directive will not exert significant pressure. To draw the point, if we observe
the change in the BSE-500 (which accounts for 93% of the overall market capitalisation of
the market) in terms of the Index value and the change in the market capitalization during
FY2003-10, the BSE - 500 index has increased 6.5x in value terms, while market
capitalization has increased 11.5x in the mentioned period. Thus, the rise in market cap
has been accounted by the issue of new paper. Our estimates suggest, on an average,
new issues to the tune of around 8% of the market cap has been absorbed very year.
Going ahead post the current notification, the quantum money to be raised would be
around 0.8% of overall market cap every year, which we believe can sail through without
much impact on overall markets.
June 7, 2010 2

3. Market Outlook | India Research
Ashok Leyland – May 2010 sales volume
Ashok Leyland reported total volume of 6,502 units in May 2010, up 229% yoy and flat
mom. Sequentially, passenger carrier was up 3%, whereas the truck segment declined 2%.
Exports, though on a lower base, increased 3.7% mom. Management is now confident of
registering 85,000–87,000 units for FY2011. We recommend Neutral on the stock.
Economic and Political News
 ArcelorMittal signs US $6.4bn MoU for a 6MT steel plant in Karnataka
 Tata Group-Sasol JV plans to invest US $10bn in a coal-to-liquid project in Orissa
 Tea exports up by 20% in January-April
Corporate News
 Reliance Comm. Board clears 26% stake sale
 Ceat buys the remaining 45.2% stake in Sri Lankan investment arm
 Aqua Logistics completes buyout of three Hong Kong companies
 Welspun Corp. bags Rs700cr orders for pipes
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
June 7, 2010 3

4. Market Outlook | India Research
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June 7, 2010 4