1. Market Outlook
India Research
April 21, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices eked out small gains, snapping last five days' losses, BSE Sensex 0.3% 59.9 17,461
after the Reserve Bank of India (RBI) announced a small increase in repo rate, Nifty 0.5% 26.4 5,230
reverse repo rate and CRR by 25 bp each against expected 25 to 50 bp hike at MID CAP 1.4% 96.6 7,048
a monetary policy review. The hike in CRR is effective from 24 April, 2010 while
SMALL CAP 1.6% 140.6 9,023
repo and reverse repo rate hikes are applicable immediately. The market
BSE HC 0.4% 21.6 5,319
moved in a tight range in morning trade ahead of the RBI policy review and
BSE PSU 1.5% 130.6 8,928
surged to hit fresh intraday high soon after the RBI's policy statement in
BANKEX 1.5% 161.1 10,680
mid-morning trade. The market trimmed gains after hitting a fresh intraday
high in early afternoon trade. The market pared gains amid intense volatility in AUTO 1.2% 89.0 7,596
mid-afternoon trade. Firm global stocks also supported the domestic bourses. METAL 0.4% 67.3 17,907
Interest rate sensitive banking, auto and realty stocks rose. But IT stocks fell. The OIL & GAS 0.5% 53.6 9,946
Sensex and Nifty closed up by 0.3% and 0.5% respectively, while BSE Mid-cap BSE IT -1.3% (69.4) 5,367
and Small-cap indices were also up by 1.4% and 1.6% respectively.
Global Indices Chg (%) (Pts) (Close)
Markets Today Dow Jones 0.2% 25.0 11,117
The trend deciding level for the day is 17468 / 5232 levels. If NIFTY trades NASDAQ 0.8% 20.2 2,500
above this level during the first half-an-hour of trade then we may witness a FTSE 1.0% 55.8 5,784
further rally up to 17541 – 17633 / 5255 – 5281 levels. However, if NIFTY Nikkei -0.1% (8.1) 10,901
trades below 17468 / 5232 levels for the first half-an-hour of trade then it may
Hang Seng 1.0% 218.2 21,623
correct up to 17376 – 17303 / 5207 – 5183 levels.
Straits Times 0.7% 20.4 2,981
Shanghai Com -0.0% (0.8) 2,980
Indices S2 S1 R1 R2
SENSEX 17,303 17,376 17,541 17,633 Indian ADRs Chg (%) (Pts) (Close)
NIFTY 5,183 5,207 5,255 5,281 Infosys 0.8% 0.5 $62.2
Wipro 1.2% 0.3 $23.5
News Analysis
Satyam 0.6% 0.0 $5.4
RBI move in-line with expectations ICICI Bank 4.1% 1.7 $42.7
4QFY2010 Results Reviews: Axis Bank HDFC Bank 0.9% 1.3 $147.3
4QFY2010E Results Previews: Hindustan Zinc, TVS Motors
3QFY2010E Results Previews: HCL Tech Advances / Declines BSE NSE
Refer detailed news analysis on the following page. Advances 2,085 1,058
Declines 811 257
Net Inflows (Apr 19, 2010) Unchanged 84 36
Rs cr Purch Sales Net MTD YTD
FII 1,748 2,233 (476) 4,952 24,762 Volumes (Rs cr)
MFs 411 531 (120) (1,946) (7,764) BSE 4,631
FII Derivatives (Apr 20, 2010) NSE 14,108
Open
Rs cr Purch Sales Net
Interest
Index Futures 1,515 1,945 (430) 14,445
Stock Futures 2,776 2,191 585 30,703
Gainers / Losers
Gainers Losers
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
Jain Irrigation 1,030 7.7 Bharat Elect. 2,096 -4.5
Andhra Bank 116 6.9 Max India 212 -2.1
Sintex Ind. 310 5.5 HPCL 310 -2.0
Deccan Chron. 162 5.4 Apollo Hosp. 728 -1.5
Madras Cem. 128 5.3 Indian Oil Corp 294 -1.4
1
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2. Market Outlook | India Research
RBI move in-line with expectations
The 25bp hikes by the RBI in the Repo, Reverse Repo and CRR were in line with our
expectations that a very gradual monetary tightening is what is required at this juncture,
which will continue over the next 18-24 months. We do not see any urgent need for
monetary tightening on account of two reasons. One, excluding inflation related to crops
and fuel which is basically supply-driven, other inflation is well within comfortable levels of
about 4.7%. Secondly, on account of the high current account deficit, forex reserves have
not been increasing much over the last couple of quarters, due to which there is no
situation of surging liquidity that needs to be sterilized. Though growth in money supply is
sedate at present, it is expected to increase going forward, given that domestic credit
demand is reviving, government borrowing is set to resume in the coming first half of
FY2011 and reviving US corporate earnings growth could lead to further increase in FDI
and FII inflows, even as software and other exports are also showing signs of reviving. As
a result, we believe the RBI will remain alert for any sharp increase in inflationary pressures
and has ample tools in its hands to anchor inflationary expectations and keep the higher
GDP growth trajectory on a stable footing. Interest rates are almost 300 basis points lower
compared to the peak in the previous cycle, so there is enough headroom for them to
increase before we have to worry about GDP growth being affected. Also, in line with this,
while we expect lending and deposit rates to move upwards over the coming year, we
believe credit demand will be strong enough for banks to comfortably pass on rising
lending rates to customers. RBI also indicated to credit growth of 20% during FY2011E
which is in-line with our expectations. Among other measures to improve the flow of credit
to infrastructure sector, RBI has allowed banks to classify investments in infrastructure
bonds under Held for Maturity (HTM) category, which was earlier classified as AFS. We
maintain positive view on banking sector and our top picks are ICICI Bank, Axis Bank,
HDFC Bank and SBI.
4QFY2010 Results Reviews
Axis Bank
Axis Bank announced its 4QFY10 results yesterday, registering a net profit growth of 32%
yoy better than our expectations of 14% mainly due to lower provisions than estimated
towards NPAs during the quarter on account of lower slippages of Rs247cr in 4QFY2010
as against Rs421cr during 4QFY2009. The core performance of the bank was in-line with
our expectations with NII growth of 41%, which was driven by advances growth of 27.9%
yoy. The strong pick in advances growth was on account of surge in year-end priority
sector lending and increase in drawdown from sanctions. The bank added 86 branches
and 238 ATMs during 4QFY2010, taking the total network to 1035 branches and 4293
ATM. The Gross and Net NPA ratio of the bank stood at 1.1% and 0.4%, respectively, with
a reasonable provision coverage ratio of 72%. The bank plans to open 200 branches in
FY2011E and is targeting and advances growth of 25% during FY2011E. The CASA ratio
of the bank improved sequentially to 46.7% in 4QFY2010. The stock is currently trading at
2.3x FY2012E ABV. We maintain a Buy rating on the stock on account of superior earnings
quality, profitability and growth expectations over FY2010-12E. We value the stock at 2.8x
FY2012E ABV to arrive at a target price of 1,448.
April 21, 2010 2

3. Market Outlook | India Research
4QFY2010E Results Previews
Hindustan Zinc
Hindustan Zinc is slated to announce its 4QFY2010 results. The company is expected to
register a 81.1% yoy jump in top-line to Rs2,334cr mainly on account of higher realisation.
Consequently, on the operating front, EBITDA margins are expected to expand by 1,690bp
to 62%. Hence, the bottom-line is expected to grow by 124% yoy to Rs1,235cr. We
maintain an Accumulate on the stock.
HCL Tech - 3QFY10E
We expect HCL Tech to witness 1.1% qoq growth in revenues to Rs3,068cr in 3QFY10E
(June FY) backed by volumes as 1.6% Rupee appreciation vis-à-vis US dollar during the
quarter would restrict the further growth in revenues. The EBIDTA margins are expected to
contract by 20bp on account of higher manpower intake with improved business
environment; however the net profit is expected to be up by 1.2% qoq to Rs301cr. We
maintain Accumulate on the stock.
TVS Motor
TVS Motor is slated to announce its 4QFY2010E result today. We expect the company’s
top-line to grow by 39% yoy to Rs1,240cr on account of about 27.8% yoy growth in
volumes and higher realisations. On the operating front, the EBITDA margin is expected to
expand by 264bp yoy to 6.1%. Hence, the bottom-line is expected to grow by 138.2% yoy
to Rs34.8cr. The stock rating is under review.
April 21, 2010 3

4. Market Outlook | India Research
Economic and Political News
RBI guidelines on new banking licences by July’10 end
Car loans rise 18% to Rs33,000cr in 2009-10
SEBI seeks more information on FII investment structure
Cotton exports halted to cool domestic prices
Corporate News
Daiichi not to convert Ranbaxy warrants
Rail damages hits NMDC iron ore supplies from Chattisgarh
IFC (part of the World Bank group) to invest Rs330cr in IDFC
Dena Bank seeks Rs1,300cr from Government
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
HCL Tech Dividend, Results
Hindustan Zinc Dividend, Results
Piramal Healthcare Dividend, Results
Infotech Enterprises Dividend, Results
Polaris Software Dividend, Results
United Spirits Results
TVS Motor Results
Pennar Results
Zee News Results
April 21, 2010 4

5. Market Outlook | India Research
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April 21, 2010 5