1. Market Outlook
India Research
July 23, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices saw a subdued start on weak global cues. Asian BSE Sensex 0.8% 135.9 18,113
stocks fell after US Federal Reserve Chairman Ben Bernanke said the US Nifty 0.8% 42.6 5,442
economic outlook was unusually uncertain; however, indices recovered in early MID CAP 0.4% 30.2 7,457
afternoon trade as US index futures reversed initial losses. Rally in European SMALL CAP 0.3% 25.2 9,491
stocks and US index futures triggered a strong rally on domestic bourses during BSE HC 0.2% 12.3 5,656
the latter part of the trading session, with the Sensex and Nifty closing up by BSE PSU 0.7% 68.5 9,554
0.8%. BSE mid-cap and small-cap gained 0.4% and 0.3%, respectively. Among BANKEX 0.7% 80.2 11,460
the front liners, M&M, Bharti Airtel, Jaiprakash Associates, Tata Steel and Tata AUTO 1.2% 103.3 8,431
Motors gained between 2–3%, while ACC, Reliance Infra, Maruti Suzuki, Tata METAL 1.3% 196.8 15,627
Power and Infosys lost between 0–1%. Among mid caps, United Breweries, OIL & GAS 0.5% 52.7 10,575
United Breweries Holdings, ING Vysya Bank, Den Network and National BSE IT -0.1% (7.2) 5,457
Fertilizers were up by 5–20%, while Gee Kay Finance, Prism Cement, J&K Bank,
Global Indices Chg (%) (Pts) (Close)
KS Oils and Uco Bank declined by 3–5%.
Dow Jones 2.0% 201.8 10,322
NASDAQ 2.7% 58.6 2,246
Markets Today
FTSE 1.9% 99.2 5,314
The trend deciding level for the day is 18040 / 5420 levels. If Nifty trades
above this level during the first half-an-hour of trade then we may witness a Nikkei -0.6% (58.0) 9,221
further rally up to 18201 – 18288 / 5469 – 5495 levels. However, if NIFTY Hang Seng 0.5% 102.5 20,590
trades below 18040 / 5420 levels for the first half-an-hour of trade then it may Straits Times 1.0% 29.6 2,956
correct up to 17953 – 17792 / 5394 – 5345 levels Shanghai Com 1.1% 27.0 2,562
Indices S2 S1 R1 R2
Indian ADRs Chg (%) (Pts) (Close)
SENSEX 17,792 17,953 18,201 18,288 Infosys 3.4% 2.0 $60.0
NIFTY 5,345 5,394 5,469 5,495 Wipro 4.9% 0.6 $13.3
Satyam 0.6% 0.0 $5.0
News Analysis
ICICI Bank 3.2% 1.2 $39.0
HDFC Bank 3.0% 4.4 $152.8
Result Reviews: ACC, Ambuja, Bajaj Auto, DRL, Gujarat Gas, Idea, Indoco,
ITC, PNB
Result Previews: Areva T&D, BHEL, CESC, FAG, JP Associates, Wipro Advances / Declines BSE NSE
Refer detailed news analysis on the following page. Advances 1,546 701
Declines 1,362 648
Net Inflows (July 21, 2010) Unchanged 106 61
Rs cr Purch Sales Net MTD YTD
FII 2,361 2,043 319 9,938 41,015 Volumes (Rs cr)
MFs 574 775 (201) (1,979) (10,518) BSE 4,344
NSE 13,389
FII Derivatives (July 22, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 1,540 1,508 32 18,008
Stock Futures 3,921 4,049 (128) 35,130
Gainers / Losers
Gainers Losers
Price Price Chg
Company Chg (%) Company
(Rs) (Rs) (%)
Bombay Dye 538 4.7 UCO Bank 86 (2.9)
Sintex 366 3.7 Mcleod Russel 225 (2.2)
JSW Energy 129 3.5 GTL 442 (2.1)
1
Biocon India 331 3.3 Kotak Bank 769 (2.0)
Gail India 475 3.3 Sun TV 443 (2.0)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Result Reviews
ACC – 2QCY2010
ACC’s top line declined by 2.9% on a yoy basis in 2QCY2010, in line with our estimates.
The decline was on account of a 2.8% fall in dispatches to 5.27mn tonnes coupled with flat
realisations at Rs3,834/tonne. Dispatches declined due to unavailability of rail wagons and
delay in the stabilisation of new plants. On the operating front, the company’s margins fell
by 768bp on a yoy basis and stood at 29.4% (37.1%) on account of increased raw
material, freight and power costs. On the bottom-line front, net profit declined by 26.1%
yoy to Rs359cr, primarily because of the 23% decline in operating profits and due to a
22.7% increase in depreciation costs to Rs96.2cr. We continue to remain Neutral on the
stock.
Ambuja Cements
Ambuja Cements’ standalone top line grew by 10.8% yoy during the quarter, which was in
line with our estimates. Top-line growth was primarily on account of a 10.8% yoy increase
in dispatches to 5.4mn tonnes due to capacity additions. On the operating front, the
company’s OPM improved by 485bp on a yoy basis to 30.8%, primarily due to the
substantial reduction in clinker purchase on account of the commissioning of new
clinkerisation units. On the bottom-line front, the company’s net profit grew by 20.5% to
Rs391cr, in line with our estimates. We maintain a Neutral view on the stock.
Bajaj Auto
Bajaj Auto reported 66.4% yoy jump in top line to Rs3,890cr (Rs2,339cr), primarily on the
back of the substantial 70% yoy increase in total volumes. Average realisation recorded a
2.4% yoy decline, primarily due to higher contribution of low-end bikes (Discover) in the
sales mix. The company’s domestic motorcycle sales grew 71% (as against the industry
growth of 24%) in 1QFY2011. Further, higher sales of the three-wheeler segment at
99,918 units (63,242) supported healthy revenue growth. The company exported 323,899
(178,295) vehicles, an increase of 81.7% yoy, in 1QFY2011. During the quarter,
production constraints limited sales to a certain extent. The company expects motorcycle
capacity of 300,000units/month to go on stream from 2QFY2011. In terms of volume
market share, Bajaj Auto improved its position in the two-wheeler category by 524bp yoy
to 20.8% (15.5%) in 1QFY2011, largely owing to a 745bp yoy increase in market share of
the motorcycle segment to 27% (19.5%). However, the three-wheeler segment’s market
share declined to 36.4% (41.2%) in 1QFY2011. On the operating front, Bajaj Auto’s
margin expanded marginally by 50bp yoy to 20% during 1QFY2011, largely in line with
our estimates. However, the company reported a 289bp qoq decline in EBITDA margin,
largely because of the 275bp qoq increase in raw material costs, which accounted for
67.9% of net sales. The operating profit for the quarter increased by 70.6% yoy to Rs777cr
(Rs455cr), which came in line largely with our estimates. The company recorded net profit
growth of 101% yoy to Rs590cr (Rs294cr), which was higher than our expectation by 12%,
primarily owing to higher other income of Rs81.7cr (Rs23.1cr). Further, improved
operating leverage, lower depreciation, reduced tax rate and dip in exceptional items (VRS
expenditure) on a yoy basis aided bottom-line growth. Our earnings estimates and rating
are under review, which will be updated post the conference call.
July 23, 2010 2

3. Market Outlook | India Research
Dr Reddy’s Labs
Dr Reddy’s Labs (DRL) reported its 1QFY2011 results, which were primarily in line with our
estimates. As per IFRS, the company reported net sales of Rs1,683cr (Rs1,819cr), down
7.5% on the back of high base, excluding the sales of Sumatriptan in 1QFY2010, the top
line grew by 4.0%. On the global generic front, sales from US excluding Sumatriptan was
flat at Rs390cr as the company witnessed slow pick-up in new product launches (generic
version of Lotrel and Prograf). However, growth in India and Russia branded generic
markets of 16% and 36%, respectively, were ahead of our expectations. On the PSAI front,
the company reported a decline of 7.6% in net sales to Rs450cr (Rs487cr). DRL reported
gross margins of 53.0% (55.9%) for the quarter on the back of higher other expenses. The
company reported net profit of Rs210cr (Rs244cr), down 14.1% yoy but higher than
estimates on the back of lower tax charges. The stock is trading at 23.4x FY2011E and
17.7x FY2012E earnings. We recommend Neutral on the stock.
Gujarat Gas – 2QCY2010
Gujarat Gas’s results were in line with our expectations on the top-line front. Results were,
however, marginally lower than our expectation on the bottom-line front on account of
higher cost of gas (because of increased APM gas price and higher cost of LNG) and
marginally higher operating expenditure. Top line increased by 23.4% yoy to Rs419cr
(Rs339cr) as against our expectation of Rs417cr, whereas bottom line increased by 21.7%
yoy to Rs57cr (Rs47cr) as against our expectation of Rs62cr. During the quarter, volume
stood at 3.26mmscmd. Like 1QCY2010, higher gas volume was from domestic sources
(Cairn and PMT), whereas LNG volumes stood at around 0.35mmscmd. Gross spread
took a hit during the quarter and stood at Rs4.0/scm (against all-time high spread of
Rs4.3/scm registered in 1QCY2010) on account of higher cost of gas procured, despite
marginal 0.7% rupee appreciation. However, on a yoy basis, gross spread stood flat at
Rs4.0/scm. Thus, OPM was flat on a yoy basis at 22.3%, but declined by 270bp on a
sequential basis. We maintain a Neutral view on the stock.
Idea Cellular
Idea Cellular recorded strong broad-based growth of 22.8% yoy (9.1% qoq) in its
consolidated top line in 1QFY2011. The mobility business segment grew by 21.4% yoy
(10.3% qoq) on account of robust improvement in total minutes of usage, which were up
by 69% yoy (20.5% qoq) to 82,274. The total subscriber base (including Spice) moved up
by 8% qoq to 68.9mn in 1QFY2011. The EBIDTA margin witnessed strong erosion of
458bp yoy (327bp qoq) with increased roll out in seven new circles adding up to higher
network operating costs and access charges. The tax rate was down from 9.5% in
4QFY2010 to 3.5% in 1QFY2011. Thus, mainly on account of lower operational
profitability, the bottom line declined by 32.2% yoy (24.5% qoq). The stock rating is under
review.
July 23, 2010 3

4. Market Outlook | India Research
Indoco Remedies
Indoco Remedies (Indoco) announced its 1QFY2011 result, which were below our
expectations. Net sales came in at Rs111.4cr (Rs98.3cr), up 13.3% yoy driven by the export
segment, which grew by 27.3% yoy to Rs35.8cr (Rs28.2cr). The company’s performance
was disappointing on the domestic formulation front, with growth of mere 7.0% to
Rs72.6cr (Rs67.8cr) as two of its key products Vepan and Febrex plus posted a dismal
performance. The company’s OPM came in at 15.8% (18.9%) as gross margins for the
quarter declined by 271bp to 56.3% on the back of higher raw material cost. As a result,
net profit came in at Rs14.8cr (Rs16.8cr), down 12.2% yoy. For FY2011, the company has
reiterated its guidance of 20–25% growth on the domestic formulation front and 30–35%
growth on the export front, which would result in composite top-line growth of 23–28%
with OPM in the range of 18–19%. The company plans to incur capex of Rs93cr (34% of
GFA) in FY2011. The stock is currently trading at 11.2x FY2011E and 8.1x FY2012E
earnings. We recommend Buy on the stock, as we believe the long-term drivers are intact
(domestic segment: 120 products, 1500 MR; export segment: long-term supply agreement
with Watson and Aspen), with a target price of Rs541.
ITC
ITC posted strong set of numbers for 1QFY2011, in line with our expectations. During the
quarter, top-line growth of 16% yoy to Rs4,816cr (Rs4,148cr) was aided by 12.2% yoy
growth in cigarette gross revenue (estimated decline of ~1–2% in volumes, growth driven
by ~13–15% price hikes) coupled with strong growth of 44% yoy and 32% yoy in agri-
business and non-cigarette FMCG business, respectively. Earnings grew by robust 22%
yoy to Rs1,070cr (Rs879cr), largely on account of top-line growth, a 147bp yoy decline in
tax rate and margin expansion. Operating margin expanded 111bp yoy to 33.4% (32.2%)
due to a 192bp yoy decline in other expenditure aided by a 90bp expansion in cigarettes
(driven by price hikes), ~Rs10cr yoy decline in non-cigarette FMCG losses to Rs89cr, and a
524bp yoy expansion in paperboards margins. At the CMP of Rs298, the stock is trading
at modest valuations of 21.1x FY2012E earnings (~10% discount to other FMCG
companies). However, owing to the recent run up in stock price (12% over the last three
months vis-à-vis 3% in Sensex), we retain our Neutral rating on the stock with a revised fair
value of Rs310 based on our SOTP model (in line with its historical P/E multiple of 22x
one-year forward earnings).
July 23, 2010 4

5. Market Outlook | India Research
Punjab National Bank
Punjab National Bank announced its 1QFY2011 results. The bank registered net profit
growth of 28.4% on a yoy basis to Rs1,068cr, which is better than our estimate of Rs908cr,
mainly on account of better-than-estimated net interest income (NII). Strong growth in
operating income and pressure on asset quality were the key highlights of the result. NII
increased 40.6% yoy and 4.8% qoq to Rs2,619cr. Non-interest income stood at Rs872cr,
down 10% yoy. Operating costs increased 10.2% yoy and 26.5% qoq to Rs1,392cr. The
cost-to-income ratio stood at 39.9% during the quarter, lower than its eight-quarter
average of 41.3%. The bank’s asset quality deteriorated during the quarter. Gross NPAs
increased by 12.4% sequentially to Rs3,614cr. Net NPAs rose sharply by 30.6% qoq to
Rs1,283cr compared to Rs982cr in 4QFY2010. The bank’s gross and net NPA ratios stood
at 1.8% (1.7% in 4QFY2010) and 0.7% (0.5% in 4QFY2010), respectively. The provision
coverage ratio declined to 64.5% compared to 69.5% in 4QFY2010 and 89.6% in
1QFY2010. The bank’s CAR decreased to 13.8% as compared to 14.2% in 4QFY2010
and 14.5% in 1QFY2010. The balance sheet details are not available yet. At the CMP, the
stock is trading at valuations of 1.4x FY2012E ABV. We believe that the bank will not be
able to sustain such high return on equity going forward (26.6% in FY2010). We have a
Reduce rating on the stock, valuing it at 1.3x FY2012E ABV (closer to the median of its
five-year range) to arrive at a 12-month target price of Rs948.
Result Previews
AREVA T&D India
Areva T&D India is scheduled to announce its 2QCY2010 results. The company’s top line
is expected to grow 16.5% yoy to Rs918cr. On the operating front, we expect the company
to register a 552bp margin compression to 8.1%. Consequently, net profit is expected to
decrease by 55.5% yoy to Rs22cr. We maintain our Neutral recommendation on the stock.
BHEL
For 1QFY2011, we expect the company to post sales and net profit of Rs6,816cr and
Rs645cr, registering yoy growth of 21.8% and 37.2%, respectively. On the operating front,
the company is expected to register a 253bp expansion in operating margin, which is
expected to be around 11.8%. We remain Neutral on the stock.
CESC
CESC is expected to announce its 1QFY2011 results. We expect the company to register
7.5% yoy growth in its standalone top line to Rs870cr, aided by increased volumes due to
the recent commissioning of the 250MW Budge-Budge plant and higher tariff charged
during the quarter. In 1QFY2011, the company charged a higher tariff of Rs4.57/unit in
the regulated area as against Rs3.91/unit in 1QFY2010. The company's standalone OPM
is expected to expand by 421bp yoy to 27.7%. We expect CESC to record 23.5% yoy
growth in its net profit to Rs130cr. We maintain a Buy on the stock with a target price of
Rs460.
July 23, 2010 5

6. Market Outlook | India Research
FAG Bearings – 2QCY10
FAG Bearings is slated to announce its 2QCY2010 results. The company is expected to
deliver 23.5% yoy growth in revenue to Rs241cr for the quarter. On the operating front,
the company is expected to post a 284bp yoy improvement in operating profit margin to
15.1%. Net profit is expected to increase by 18.5% yoy to Rs22.1cr. The stock rating is
under review.
Jaiprakash Associates
Jaiprakash Associates (JAL) is expected to announce its 1QFY2011 results. For the quarter,
we expect JAL to report a 31.7% yoy increase in its top line to Rs2,722cr, aided by cement
capacity expansion and strong pick up from the construction and EPC segments. At the
operating front, the company is expected to report a margin expansion of 610bp. JAL is
expected to post profits of Rs229cr (decline of 8%) for the quarter on the back of high
interest and depreciation costs despite strong top-line growth and margin expansion. We
maintain Buy on the stock.
Wipro
We expect Wipro to witness 2.2% qoq growth in revenue to Rs7,134cr in 1QFY2011E
backed by volumes as unfavourable cross-currency movement witnessed during
1QFY2011 would restrain further growth in revenue. The EBIDTA margin is expected to
contract by 43bp on account of higher manpower intake with improved business
environment. Thus, with lower operational profitability, we expect net profit to be down by
1.9% qoq to Rs1,213cr. We maintain Accumulate on the stock.
July 23, 2010 6

7. Market Outlook | India Research
Economic and Political News
GST to make India a US $2tr economy: Finance Minister
Government relaxes norms for setting up SEZ in small towns
Monsoon deficit pegged at 14%
Tripura tops NREGA in the country
Corporate News
PFC to raise Rs4,700cr from overseas in FY2011
Infosys Rs2,500cr SEZ to get operational by next March
Glenmark unit bags USFDA nod for generic contraceptive drug
Fortis drags Khazanah to Singapore regulator
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Allahabad Bank Results
Areva T&D Results
BHEL Results
Biocon Results
CESC Results
FAG Bearings Results
HPCL Results
IFCI Results
Jaiprakash Associates Results
Uco Bank Results
Wipro Results
July 23, 2010 7

8. Market Outlook | India Research
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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July 23, 2010 8