1. Market Outlook
India Research
October 18, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices edged lower amid a bout of volatility in early trade. BSE Sensex -1.8% (372.6) 20,125
The market came off the lower level after hitting the day’s low in morning trade Nifty -1.9% (114.7) 6,063
and moved in a narrow range later. Weakness persisted in mid-afternoon MID CAP -1.2% (102.8) 8,312
trade. The market slumped to a fresh intraday low in early afternoon trade and SMALL CAP -0.7% (78.8) 10,630
slumped to the day’s low on heavy selling in late trade. The Sensex and Nifty BSE HC -1.1% (72.2) 6,302
closed down by 1.8% and 1.9%, respectively. BSE mid-cap and small-cap BSE PSU -1.4% (141.4) 10,332
indices performed slightly better than the key benchmark indices, closing below BANKEX -1.9% (273.5) 14,049
1.2% and 0.7%, respectively. Among the front liners, NTPC gained 0.4%, while AUTO -2.0% (199.0) 9,752
Wipro, TCS, Infosys, Hero Honda and Bharti Airtel lost 3–4%. Among mid caps,
METAL -1.5% (262.6) 17,493
JM Financial, Rashtriya Chemicals, Chambal Fertilizers, PTC India and
OIL & GAS -1.4% (154.1) 10,693
Raymond gained 3–6%, while Infotech Enterprises, IVRCL Infra, UTV Software,
BSE IT -3.3% (204.1) 6,075
Hathway Cables and Man Infra lost 3–6%.
Global Indices Chg (%) (Pts) (Close)
Markets Today Dow Jones -0.3% (31.8) 11,063
The trend deciding level for the day is 20330/6105 levels. If NIFTY trades NASDAQ 1.4% 33.3 2,469
above this level during the first half-an-hour of trade then we may witness a
FTSE -0.4% (23.8) 5,703
further rally up to 20570–20818/6159-6255 levels. However, if NIFTY trades
Nikkei -0.9% (83.3) 9,500
below 20330 / 6105 levels for the first half-an-hour of trade then it may correct
up to 20082–19843/6008-5954 levels. Hang Seng -0.4% (94.5) 23,758
Straits Times 0.3% 9.3 3,204
Indices S2 S1 R1 R2 Shanghai Com 3.2% 91.5 2,971
SENSEX 19,842 20,082 20,570 20,818
NIFTY 5,954 6,008 6,159 6,255 Indian ADRs Chg (%) (Pts) (Close)
Infosys 3.3% 2.3 $71.2
Wipro 2.7% 0.4 $16.2
News Analysis
Satyam 1.9% 0.1 $3.8
Tata Motors’ global sales grow 19% in September 2010 ICICI Bank 2.3% 1.2 $52.6
Dr. Reddy’s gets approval for generic Prevacid HDFC Bank 2.2% 4.0 $188.5
ABG Shipyard bags orders worth `370cr
2QFY2011 Result Review: Infosys Advances / Declines BSE NSE
2QFY2011 Result Previews: L&T , Sesa Goa Advances 950 314
Declines 2,077 1,076
Refer detailed news analysis on the following page. Unchanged 84 36
Net Inflows (October 14, 2010)
` cr Purch Sales Net MTD YTD Volumes (` cr)
FII 5,492 2,598 2,894 17,453 105,775 BSE 5,293
MFs 583 983 (399) (3,661) (26,690) NSE 16,030
FII Derivatives (October 15, 2010)
Open
` cr Purch Sales Net
Interest
Index Futures 1,313 1,839 (526) 15,753
Stock Futures 1,381 2,044 (663) 44,313
Gainers / Losers
Gainers Losers
chg chg
Company Price (`) Company Price (`)
(%) (%)
Chambal Fert 93 3.3 Castrol India 464 (5.5)
PTC India 124 2.7 LIC Housing Fin 1,380 (5.4)
Areva T&D 313 2.3 IVRCL Infra 153 (5.2)
Tata Tele 25 2.1 Rural Elect Corp 361 (4.3)
Vijaya Bank 106 1.6 SBI 3,165 (3.0) 1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Tata Motors’ global sales grow 19% in September 2010
Tata Motors reported its global sales numbers for September 2010, which increased by
19% yoy to 86,996 units. Growth was led by strong growth in commercial and passenger
vehicle sales.
During the month, sales of commercial vehicles grew 18% yoy to 40,961 units and sales of
passenger vehicles grew by 21% yoy to 46,035 units in September 2010. Sales of luxury
brands Jaguar and Land Rover (JLR) maintained a strong traction, posting 16% yoy growth
to 19,528 units. Jaguar sales stood at 4,861 units, up 10% yoy; while Land Rover sales
grew by 19% yoy to 14,667 units. JLR continues to see robust demand in the UK, the US,
China and Russia. Moreover, with global sales witnessing strong growth, Tata Motors now
plans to retain all the three JLR plants in the UK against its earlier plan to consolidate its
operations in the region and shut one of its plants.
We expect Tata Motors to post healthy volume growth going ahead. We continue to
maintain our Accumulate rating on the stock with an SOTP Target Price of `1,214.
We value the core business at `490, implying 6.5x FY2012E EV/EBITDA and P/E of 13x
FY2012E EPS. Our embedded value of the subsidiaries and investments in Tata Motors'
books (including JLR) works out to `724/share.
Dr. Reddy’s gets approval for generic Prevacid
Dr. Reddy’s (DRL) has received US FDA approval for generic Prevacid (Lansoprazole)
delayed-release capsules (15mg and 30mg). The company plans to launch the drug
shortly in the US market. The approval is positive for the company as the product would be
a limited competition opportunity for the company (Teva, Mylan, Sandoz and other generic
players) for the next 12–15 months. We expect the product to contribute an NPV of `25 per
share. We remain Neutral on the stock at these levels.
ABG Shipyard bags orders worth `370cr
ABG Shipyard Ltd. (ABG) has bagged orders worth approximately US $82.5mn (`370cr)
from Halul Offshore Services Company (HOSC) of Qatar (US $65mn) and Manravi Spa
(Manravi) of Italy (US $17.5mn). As per the order, ABG will construct a 91-metre
twin-screw diving support vessel for HOSC and a 63.8-metre twin-screw 82T bollard pull
anchor handling tug supply vessel (AHTSV) for Marnavi.
With these two orders, ABG’s total unexecuted order book stands at more than `8,000cr
(~5.0x FY2010 sales) and is executable by FY2014E. Moreover, in 1HFY2011, the
company delivered four AHTSVs to different clients and three interceptor boats to the
Indian coast guard in 1HFY2011.
Further, ABG has completed the acquisition of Western India Shipyard (WISL) by acquiring
an incremental 40.6% stake in the company from ICICI Bank in off-market deals, taking its
stake to 60.3%. The deal is a part of the Scheme of Arrangement & Compromise between
WISL and its secured lenders, approved by the Bombay High Court in January 2010. WISL,
which has been making losses since its inception in 1996, had posted profit of about `66cr
for the first time in 4QFY2010 and profit of `5.8cr in 1QFY2011.
At the CMP, ABG is trading at 8.1x FY2012E earnings, 7.9x FY2012E EV/EBITDA and 1.4x
FY2012E P/BV. We maintain our Neutral rating on the stock.
October 18, 2010 2

3. Market Outlook | India Research
Result Review – 2QFY2011
Infosys
During 2QFY2011, Infosys reported revenue of `6,947cr, up12.1% qoq, on the back of
strong volume growth, higher revenue productivity with better business mix and favourable
cross-currency movement. EBITDA margins improved by 165bp qoq to 33.3% on the back
of better utilisation and favourable currency movement negating the effect of higher
onshore effort. We expect Infosys’ revenue, EBITDA and PAT to witness CAGRs of
21.8%,17.0% and 13.8% over FY2010-12E, respectively. At the CMP of `3,076, the stock
is trading at 21.7x FY2012E EPS, close to its intrinsic value and at par with its historical P/E
multiple of 22x. Hence, we maintain our Neutral rating on the stock.
Result Previews – 2QFY2011
L&T
Larsen & Toubro (L&T) is expected to announce its 2QFY2011 results. We expect L&T to
post modest top-line growth of 11.5% to `8,829cr on the back of good monsoons. On the
operating margin front, performance is expected to be better with a 135bp yoy increase to
11.4%, which is expected due to higher contribution from the MIP and E&E segments.
Net profit is expected to register 13.5% yoy growth to `637cr. The stock has seen a sharp
run-up in the recent times, and its premium over peers, which have underperformed, has
enhanced, thereby resulting in limited upside from current levels. Therefore, in light of the
rich valuations that the stock is trading at, we maintain our Neutral view.
Sesa Goa
Sesa Goa is slated to announce its 2QFY2011 results. We expect the company’s top line to
grow by 90.1% yoy to `1,024cr on account of higher realisations (up 67% yoy). Sales
volume for the quarter stood at 2mn tonnes as compared to 1.6mn tonnes in 2QFY2010.
On the operating front, EBITDA margin is expected at 52.1% as compared to 28.3% in
2QFY2010. Hence, the bottom line is expected to grow by 193.8% yoy to `489cr.
We maintain a Neutral rating on the stock.
October 18, 2010 3

4. Market Outlook | India Research
Economic and Political News
PM to raise visa issue, outsourcing with Obama
34 blocks put up for auctions under Nelp-IX
Ministry of Environment and Forest panel on Posco to submit report on Oct. 18
Corporate News
JLR to invest in UK, keep all three auto plants
SBI to raise `1,000cr via Tier-II bonds
NTPC yet to acquire land for two proposed super thermal power projects
Moser Baer to set up US $11.5mn organic LED facility
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Bajaj Finserv Results
Camlin Results
Essar Oil Results
HDFC Results
Indiabulls Securities Results
ING Vysya Bank Results
L&T Results
NIIT Technologies Results
Parsvnath Developers Stock split
Sesa Goa Results
Supreme Industries Stock split
Zydus Wellness Results
October 18, 2010 4

5. Market Outlook | India Research
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October 18, 2010 5