The document provides an analysis and outlook of the Indian stock market and various companies. It includes the following key points: 1) The Indian stock market indices ended the day with gains of 2% as foreign funds invested in the IPO of Coal India, boosting sentiments. 2) In the coming session, the market may see further gains if indices trade above certain threshold levels in the first half hour, or declines if below those levels. 3) Summaries of quarterly results from companies like TCS, Ambuja Cement, and ACC are provided, along with previews of upcoming results from Wipro and Bank of India.

1. Market Outlook
India Research
October 22, 2010
Dealer’s Diary
Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices opened in green and extended gains in morning
BSE Sensex 2.0% 388.4 20,261
trade, mirroring European stocks and US index futures. The market surged in
Nifty 2.0% 119.4 6,102
afternoon trade, with the Sensex scaling fresh intraday high on the back of
MID CAP 1.4% 113.7 8,403
initial gains extended by Reliance and heavy bidding by foreign funds in the
initial public offer of Coal India, which boosted sentiments. The market SMALL CAP 1.0% 109.7 10,692
continued its buoyant performance to end the day in green. The Sensex and BSE HC 1.8% 111.8 6,480
Nifty closed the trade with gains of 2% each. BSE mid-cap and small-cap BSE PSU 1.5% 155.5 10,422
indices also closed with gains of 1.4% and 1.0%, respectively. Among the front BANKEX 2.1% 290.4 14,152
liners, Hindalco, Bharti Airtel, HUL, ITC and Cipla gained 4–5%, while NTPC AUTO 1.0% 96.2 9,807
lost 0.1%. Among mid caps, GSFC, United Phosphorus, Central Bank, METAL 2.0% 338.9 17,231
Indiabulls Financial Services and Zuari Industries gained 6–8%, while Indiabulls OIL & GAS 2.0% 218.8 10,973
Power, Sterlite Technologies, Clariant Chemicals, Money Matters Financial BSE IT 0.9% 53.3 6,061
Services and JM Financial lost 3–6%. Global Indices Chg (%) (Pts) (Close)
Markets Today Dow Jones 0.3% 38.6 11,147
The trend deciding level for the day is 20142/6031 levels. If NIFTY trades NASDAQ 0.1% 2.3 2,460
above this level during the first half-an-hour of trade then we may witness a FTSE 0.5% 28.9 5,758
further rally up to 20412–20563/6184–6266 levels. However, if NIFTY trades Nikkei -0.1% (5.1) 9,376
below 20142/6031 levels for the first half-an-hour of trade then it may correct
Hang Seng 0.4% 93.0 23,649
up to 19991–19721/5949–5796 levels.
Straits Times -0.5% (15.6) 3,164
Indices S2 S1 R1 R2 Shanghai Com -0.7% (20.4) 2,984
SENSEX 19,721 19,991 20,412 20,563
NIFTY 5,796 5,949 6,184 6,266 Indian ADRs Chg (%) (Pts) (Close)
Infosys 0.9% 0.6 $67.4
News Analysis Wipro 1.2% 0.2 $16.5
ITC faces labour unrest at its Haridwar facility ICICI Bank 2.8% 1.4 $51.6
HDFC Bank -0.8% (1.5) $177.8
2QFY2011 Result Reviews: TCS, Ambuja Cement, ACC, Corporation Bank,
TVS Motor, South Indian Bank
2QFY2011 Result Previews: Wipro, Bank of India, Indian Bank, Piramal Advances / Declines BSE NSE
Healthcare, Ipca, FAG Bearings, NIIT Advances 1,905 986
Refer detailed news analysis on the following page
Declines 1,087 392
Net Inflows (October 20, 2010)
Unchanged 105 52
` cr Purch Sales Net MTD YTD
FII 3,103 2,292 811 20,075 1,08,397
Volumes (` cr)
MFs 522 472 50 (5,605) (28,634)
BSE 4,822
FII Derivatives (October 21, 2010) NSE 15,437
Open
` cr Purch Sales Net
Interest
Index Futures 2,554 1,439 1,115 16,021
Stock Futures 4,021 4,187 (166) 45,330
Gainers / Losers
Gainers Losers
chg chg
Company Price (`) Company Price (`)
(%) (%)
Canara Bank 704 7.1 Ib Power 29 (5.7)
United Phos 205 7.1 KSK Energy 169 (1.7)
Indiabulls 190 6.7 Bombay Dyeing 616 (1.3)
Indian Bank 301 5.5 Oil India 1,441 (1.1)
Mundra Port 173 5.3 Praj Industries 71 (0.1)
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
ITC faces labour unrest at its Haridwar facility
ITC, which is expanding its manufacturing facility at Haridwar, is facing labour unrest.
The strike is against a decision of suspension of an employee on disciplinary grounds.
The strike, which started on Monday, has hampered production. However, we are not
aware of the complete details. Management and the workers on strike are set to meet on
Saturday to resolve the issue.
Investment in the factory is worth `300cr–`400cr, for the expansion of business in
consumer care and food items. The Uttarakhand government has allotted eight-nine acres
to ITC to expand the facility. We maintain our Neutral view on the stock.
Result Reviews – 2QFY2011
TCS
TCS reported its 2QFY2011 numbers, which were way ahead of street as well as our
expectations on the revenue as well as profitability fronts. The company’s revenue stood at
US $2,004mn (v/s our expectation of US $1,927mn), reporting 11.7% qoq growth. This is
the first quarter ever when the company registered an incremental revenue of US $210mn
qoq (against Infosys at US $111mn). Strong growth was possible on the back of volume
growth of 11.2% (v/s our expectation of 8.1%). EBIT margins expanded by 86bp qoq (v/s
our expectation of flat growth) to historic high of 28%. The company managed to counter
the 166bp negative impact of promotion and variable allowances by productivity gains of
95bp, SG&A efficiency gains of 54bp and favourable exchange impact of 103bp. PAT
stood at `2,106cr (v/s our estimate of `1,990cr), posting 14% qoq growth. The company
remains our top pick amongst Tier-I IT companies because of its diversified portfolio on all
fronts service wise, industry exposure wise as well as geography wise. At the CMP of `986,
the stock is trading at 21x FY12E EPS of `47, with 5% upside to our target of `1,032.
We remain positive on the stock and will be revising our estimates upwards post the
conference call.
Ambuja – 3QCY2010
Ambuja’s standalone top line declined by 2.9% yoy, which was in line with our estimates.
The decline was despite a 6.1% yoy increase in despatches to 4.4mn tonnes, aided by
capacity additions. Thus, the top-line decline was on account of an 8.5% yoy decline in
realisations to `3,595/tonne. On the operating front, the company’s OPM declined by
1,174bp yoy to 19.1% on account of lower realisation and higher import of high-cost
imported coal and pet coke. Coal imports increased due to lower availability of domestic
linkage coal. Further, increased production of clinker during the quarter resulted in a 38%
increase in power costs, thereby lowering the operating margin. The bottom line declined
by 52.2% yoy to `152cr, well below our estimates. At the current levels, the stock is trading
at an EV/EBITDA of 9x and EV/tonne of US $160 based on CY2011E estimates.
We remain Neutral on the stock.
October 22, 2010 2

3. Market Outlook | India Research
ACC – 3QCY2010
ACC’s 3QCY2010 standalone net sales declined by 16.9% yoy and were in line with our
estimates. The decline was on the back of the 3.7% fall in despatches to 4.83mn tonnes
coupled with a 13.8% yoy fall in realisations to `3,390/tonne. Despatches declined due to
severe monsoons and floods in various parts of the country. The volume of cement
despatches was also partially affected due to the shutdown in Wadi-II for Kiln expansion,
which lasted for most of the quarter. On the operating front, the company’s margins fell by
a huge 2,223bp yoy to 13.5% (35.7%) on account of the fall in realisation and increased
slag, fly ash and power costs. The company’s substantial presence in the southern region
dented its realisations, as price hikes carried out in September did not have much impact
on overall quarterly realisations. Net profit declined by 77.0% yoy to `100cr, primarily on
account of the 62.8% drop in operating profits and higher depreciation and interest costs.
We remain Neutral on the stock.
Corporation Bank
Corporation Bank announced its 2QFY2011 results. The bank registered moderate net
profit growth of 20.6% yoy to `352cr, above our estimates of `303cr, mainly on account of
lower provisioning expenses and lower tax rate than built in by us. Advances grew strongly
by 7.7% qoq and 32.7% yoy compared to marginal industry qoq growth of ~0.6%, while
deposits increased by 6.5% qoq and 19.8% yoy compared to ~1.6% sequential industry
growth. This led to a 42.0% yoy increase in NII, in line with our estimates. Calculated NIM
declined marginally by 3bp sequentially to 2.58%. Operating costs increased by 35.9% yoy
and 7.2% qoq to `368cr. The cost-to-income ratio stood at 39.1%, substantially higher
than its eight-quarter average of 35.3%. Gross and net NPA ratios stood at 1.05% (1.11%
in 1QFY2011) and 0.39% (0.43% in 1QFY2011), respectively, implying a provision
coverage ratio of 78.5%, including write-offs (76.7% in 1QFY2011). The bank’s CAR
continued to be healthy at 14.5% with Tier-I at 8.3%.
At the CMP, the stock is trading at 1.33x FY2012E ABV, which is close to our target
multiple 1.30x FY2012E ABV for the bank. Hence, we maintain a Neutral recommendation
on the stock.
TVS Motor
For 2QFY2011, TVS Motor (TVSM) reported 43% yoy top-line growth to `1,616cr, which
was marginally above our expectation of `1,587cr and largely aided by ~33.4% yoy jump
in volumes. Net average realisation for the quarter was up 6.8% yoy at `30,285 (`28,349
in 2QFY2010), largely due to richer product mix and higher motorcycle and three-wheeler
volumes during the quarter. On the operating front, EBITDA margin came in 15bp below
our estimate at 6.7%, a jump of 20bp qoq and 117bp yoy. Raw-material cost for the
quarter increased by almost 200bp yoy. However, about 285bp yoy saving of other
expenditure helped the company to perform better at the EBITDA level. Net profit grew
123.1% yoy to `54.8cr (`24.6cr in 2QFY2010), as against our estimate of `52.1cr, largely
aided by improved operating performance and lower interest cost for 2QFY2011.
At current levels, the stock is trading at 17x FY2011E and 13x FY2012E earnings.
We maintain our Neutral view on the stock. At present, our fair value for the stock works
out to be `76.
October 22, 2010 3

4. Market Outlook | India Research
South Indian Bank
South Indian Bank announced its 2QFY2011 results. The bank registered moderate net
profit growth of 6.1% yoy to `77cr, above our estimates of `63cr, mainly on account of
better-than-estimated operating performance both on the NII and non-interest income
fronts. Advances grew by healthy 4.9% qoq and 35.7% yoy, while deposits increased by
7.4% qoq and by 27.3% yoy. This resulted in 19.4% yoy growth in NII. On a sequential
basis, calculated NIMs suggest a ~35bp improvement. Gross and net NPA ratios stood at
1.27% (1.33% in 1QFY2011) and 0.38% (0.39% in 1QFY2011), respectively, implying a
provision coverage ratio of 70.5%, excluding write-offs (71.0% in 1QFY2011). The bank’s
CAR continued to be healthy at 15.9%. We would be revising our estimates post interaction
with the management.
At the CMP, the stock is trading at 1.6x FY2012E ABV, which we believe is expensive
relative to peers and its own historical range. Hence, we maintain a Neutral
recommendation on the stock.
Result Previews – 2QFY2011
Wipro
Wipro is set to announce its 2QFY2011 results. We expect the company to post IT services
revenue of US $1,286mn with 6.8% qoq growth. Growth is expected on the back of
volume growth of 6.1% and cross-currency benefit of 0.7%. Overall, at the consolidated
level, we expect the company to record strong revenue growth of 13% qoq at `8,177cr on
the back of strong growth in its IT products segment. EBIT margins are expected to dip by
34bp to 19.7% because of the ramp-up in the thin-margin IT products business. PAT is
expected to come in at `1,352cr, reporting 2.5% qoq growth. At the CMP, the stock is
trading at 18.3x FY2012 EPS of `25.7. The stock is currently under review.
Bank of India
Bank of India is scheduled to announce its 2QFY2011 results. We expect the bank to
report strong net interest income growth of 29.1% on a yoy basis to `1,820cr. Non-interest
income is expected to decline by 25.8% yoy. The cost-to-income ratio is expected to go up
sequentially by ~150bp to 40.9% from 39.4%. Growth in pre-provision profit is expected
to be a moderate 13.8% yoy. Net profit is expected to go up by a robust 96.4% on a yoy
basis to `635cr, primarily on account of lower provisioning expenses. Net profit is expected
to increase by a robust 96.4% yoy, but it is expected to decline by 12.4% qoq to `635cr. At
the CMP, the stock is trading at valuations of 1.7x FY2012E ABV. We have a Neutral rating
on the stock.
Indian Bank
Indian Bank is scheduled to announce its 2QFY2011 results. The bank is expected to post
healthy growth of 26.2% yoy in net interest income to `958cr. Non-interest income is
expected to increase by 22.1% yoy, but it is expected to come down by 18.5% sequentially.
Net profit growth is expected to be muted at 1.3% on a yoy basis and 2.3% on a qoq basis
to `377cr on account of higher provisioning expenses due to lower base. At the CMP, the
stock is trading at valuations of 1.4x FY2012E ABV. We have a Neutral rating on the stock.
October 22, 2010 4

5. Market Outlook | India Research
Piramal Healthcare
Piramal Healthcare (Piramal) is expected to post a 15.1% decline in its top line to `849cr,
as domestic business was transferred to Abbott Labs during the quarter. As a result, the
company is expected to report a 349bp contraction in OPM to 14.2%. However, on the
back of strong other income, the company is expected to report net profit of `101cr, down
mere 5.3% during the quarter. We maintain Neutral on the stock at these levels.
Ipca Laboratories
For 2QFY2011, Ipca Laboratories (Ipca) is expected to post top-line growth of 13.6% to
`487cr. The company is expected to post strong growth on the export as well as the
domestic fronts. The company is witnessing strong traction in the anti-malarial segment,
both in the domestic and export fronts. OPMs are expected to compress by 88bp to 22.6%
on the back of an increase in employee expenses. However, net profit is expected to rise by
13.5% to `73cr, driven by top-line growth and lower interest cost. We maintain our
Neutral rating on the stock at these levels.
FAG Bearings
FAG Bearings is set to announce its 3QCY2010 results. The company is expected to report
34.3% yoy growth in revenue to `274cr for the quarter. On the operating front, the
company is expected to post a 643bp yoy improvement in operating profit margin to
18.9%. Net profit is expected to increase by a substantial 95.6% yoy to `32.4cr. The stock
rating is under review.
NIIT
NIIT is set to announce its 2QFY11 results. We expect the company to post a 6% yoy
decline in revenue to `337.9cr. The decline is on the back of the high base effect of last
year, whereby the school learning solution (SLS) segment reported strong performance on
the back of execution of Gujarat government’s order. We expect 12% yoy growth in the
individual learning solution (ILS) segment and 2% yoy growth in the corporate learning
solutions (CLS) segment. EBITDA margins are expected to expand by 180bp yoy due to
better product mix in CLS and higher growth in more profitable segments like ILS. PAT is
expected to grow by 13% qoq to `295cr on the back of strong profitability. We remain
positive on the education sector and prefer this stock. At the CMP of `67.6, the stock is
trading at attractive valuation of 10.2x FY2012 EPS. The stock is currently under review.
October 22, 2010 5

6. Market Outlook | India Research
Economic and Political News
Bombay HC says 'No' to lift stay on sand mining across state
Food inflation falls to 15.53%
Gujarat to set up 12 new industrial hubs
Corporate News
Ambience plans IPO by February 2011 to raise up to `1,293 cr
Govt. scraps Vedanta's alumina refinery expansion plan
Hindustan Motors to spend `160cr to increase stake in unit
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Aptech Results
Bank of India Results
Bank of Maharashtra Results
Binani Cement Results
Binani Inds Results
Biocon Results
Chennai Petroleum Corporation Results
D B Corp Results
Dewan Housing Results
Fag Bearings Results
Finolex Inds Results
Indian Bank Results
Ipca Lab Results
Kirloskar Oil Results
Mirc Electronics Results
NIIT Results
Piramal Health Results
SKS Microfinance Results
Sobha Developers Results
Wipro Results
October 22, 2010 6

7. Market Outlook | India Research
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October 22, 2010 7