1. Market Outlook
India Research
May 19, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
Volatility was high right from the onset of the trading session. The benchmark BSE Sensex 0.2% 40.2 16,876
indices edged lower in early trade on weak Asian stocks. The market cut losses Nifty 0.1% 6.3 5,066
in morning trade after hitting a fresh intraday low. However, the market MID CAP 0.4% 29.3 6,957
weakened once again after turning positive for a brief period in mid-morning
SMALL CAP 0.7% 62.4 8,813
trade when it hit a fresh intraday high. Gains in European stocks pushed the
BSE HC -0.1% (5.5) 5,390
market further higher, with the Sensex touching the psychological 17,000 level
BSE PSU 0.3% 29.5 8,936
in afternoon trade. However, the market came off the higher level amid intense
BANKEX -0.2% (22.9) 10,768
volatility in late trade. Consumer durables, capital goods and IT stocks gained.
Oil exploration stocks rose as crude oil prices rebounded from 5 month lows. AUTO -0.4% (33.6) 7,660
Auto stocks were mixed. Metal stocks fell. The Sensex and Nifty closed higher METAL -1.9% (302.8) 15,565
0.2% and 0.1%, respectively. The BSE Mid-cap and the Small-cap indices closed OIL & GAS 0.7% 68.5 9,758
up 0.4% and 0.7%, respectively. Among the front-liners, L&T, RCom, ONGC, BSE IT 0.1% 7.0 5,159
Wipro and Grasim were up by 2-3%, while Tata Motors, Sterlite, HDFC Bank,
ICICI Bank and Tata Power were down by 1-2%. Global Indices Chg (%) (Pts) (Close)
Dow Jones -1.1% (114.9) 10,511
Markets Today NASDAQ -1.6% (37.0) 2,317
The trend deciding level for the day is 16873 / 5065 levels. If NIFTY trades FTSE 0.9% 44.8 5,307
above this level during the first half-an-hour of trade then we may witness a Nikkei 0.1% 6.9 10,243
further rally up to 17003 – 17130 / 5106 – 5146 levels. However, if NIFTY Hang Seng 1.2% 229.7 19,945
trades below 16873 / 5065 levels for the first half-an-hour of trade then it may Straits Times 0.4% 10.7 2,844
correct up to 16746 – 16617 / 5025 – 4984 levels. Shanghai Com 1.4% 34.9 2,595
Indices S2 S1 R1 R2 Indian ADRs Chg (%) (Pts) (Close)
SENSEX Infosys -0.7% (0.4) $57.5
16,617 16,746 17,003 17,130
Wipro -0.6% (0.1) $21.1
NIFTY 4,984 5,025 5,106 5,146
Satyam -2.1% (0.1) $5.0
ICICI Bank -3.9% (1.5) $38.0
News Analysis HDFC Bank -2.7% (2.7) $140.0
Bank of Rajasthan to merge with ICICI Bank
Results Reviews: JK Lakshmi Cement, Motherson Sumi Systems Advances / Declines BSE NSE
Refer detailed news analysis on the following page. Advances 1,641 739
Declines 1,200 560
Net Inflows (May 17, 2010) Unchanged 95 46
Rs cr Purch Sales Net MTD YTD
FII 1,784 2,816 (1,032) (4,045) 25,665
Volumes (Rs cr)
MFs 592 798 (206) (887) (8,115)
BSE 4,422
FII Derivatives (May 18, 2010) NSE 12,888
Open
Rs cr Purch Sales Net
Interest
Index Futures 2,721 2,264 457 14,050
Stock Futures 2,633 2,252 381 29,881
Gainers / Losers
Gainers Losers
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
Essar Ship Ports 91 6.9 Bajaj Finserv. 486 (9.2)
Federal Bank 307 5.0 Rolta India 163 (5.4)
BEML 1,045 4.8 Sesa Goa 369 (5.1)
Indusind Bank 188 4.6 Hindustan Zinc 1,013 (3.9)
Sintex Ind. 300 4.3 Zee Ent. 296 (3.6)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 0109965391

2. Market Outlook | India Research
Bank of Rajasthan to merge with ICICI Bank
ICICI Bank and Bank of Rajasthan (BOR) have decided to merge. The swap ratio has been
fixed at 25:118 (25 shares of ICICI Bank for 118 shares of BoR), which would translate to
a valuation of 5.0x FY2010 ABV of Bank of Rajasthan. In our view, the main benefit of the
merger from the point-of-view of ICICI Bank would be the branch network of Bank of
Rajasthan – 463 branches at the end of March 2009, mainly located in the northern and
western regions of the country. Bank of Rajasthan was the only potential acquisition target
amongst the old private sector banks to have such a presence, while all its other peers
have largely branch networks concentrated in the south. From the valuation point-of-view,
Bank of Rajasthan looks very expensive at 5.0x FY2010 ABV. The bank delivered a net loss
of Rs10cr for 9MFY2010. Further, in such an acquisition, there is downside risk from
further NPAs from the target bank’s existing loan book.
That said, at about 3.2% of ICICI Bank’s market cap and 4.5% of Total Assets, in our view
the acquisition is too small to have any material impact on ICICI Bank. At the CMP, ICICI
Bank is trading at 1.5x its FY2012E ABV (excl. subsidiaries). We maintain a Buy on the
stock with a Target Price of Rs1,169, representing an upside of 31%.
4QFY2010 Result Reviews
JK Lakshmi Cement
JK Lakshmi’s net sales grew by 21.1% yoy to Rs443cr during 4QFY2010 aided by 21%
growth in volumes. The operating margins for the company stood at 23.2% down 760bp
on yoy basis due to fall in realizations. The company's net profit de-grew by 32.6% yoy to
Rs70cr due to higher depreciation and interest costs. The stock is under review.
Motherson Sumi Systems
For 4QFY2010, Motherson Sumi (MSSL) clocked 140.5% yoy growth in Net Sales to
Rs2,028cr (Rs843cr), which exceeded our expectation. The numbers for the quarter are not
exactly comparable, as 4QFY2009 include only one month results of Samvardhana
Motherson Visiocorp Solution (acquired during 4QFY2009). The company’s Sales growth
came largely on the back of this inorganic operation, wherein MSSL’s outside India
Revenue jumped by a significant 187.4% yoy to Rs1,306cr (Rs454cr). The company’s
Bottom-line also registered a significant increase of 84.5% yoy to Rs141.9cr (Rs76.9cr),
which again surpassed our expectation for the quarter. Net Profit recorded a substantial
jump due to favourable currency movement (helped to clock Forex gain of Rs40cr) during
the quarter.
We estimate the company to clock consolidated EPS of Rs9 for FY2011E and Rs11.1 for
FY2012E. At the CMP, the stock is trading at 15.1x FY2011E and 12.3x its FY2012E
consolidated Earnings (fully diluted). Considering the company’s prospects post
restructuring of SMR and that it is one of the few ancillary companies registering decent
numbers despite having high presence in the overseas markets, we maintain Buy on the
stock, with a Target Price of Rs167 at which level the stock would trade at 15x FY2012E
EPS.
May 19, 2010 2

3. Market Outlook | India Research
Economic and Political News
Indian Bureau of Mines suspends mining operations in 90 mines
GERC fixes tariff for biomass plants
Govt may launch Nelp-IX in July’2010
3G: Pan-India bid touches Rs16,531cr
Corporate News
Shree Renuka Sugar renegotiates Brazilian Equipav deal
BSNL to invest Rs14,800cr this year and next
Ansal to invest Rs1,500cr in complexes, Gurgaon township
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Amara Raja Dividend,Results
Everonn Dividend,Results
Entertainment Network Results
REC Dividend, Results
Pidilite Industries Dividend, Results
Shree Ganesh Jewel Dividend, Results
Visa Steel Dividend, Results
May 19, 2010 3

4. Market Outlook | India Research
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May 19, 2010 4