Market Outlook - 27 August 2010


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Market Outlook - 27 August 2010

  1. 1. Market Outlook India Research August 27, 2010 Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close) The benchmark indices opened in the green amidst positive trend across Asian BSE Sensex 0.3% 46.7 18,226 markets and overnight gains in US markets. The markets continued to trade in Nifty 0.3% 15.5 5,478 the positive zone in the morning trade, thereafter, as FMCG and banking stocks MID CAP -0.1% (6.9) 7,708 witnessed strong buying momentum. However, indices remained range bound SMALL CAP 0.1% 7.9 9,768 at the onset of the afternoon trade, but soon extended morning gains following BSE HC 0.0% (2.1) 5,579 firm opening of the European markets. A sharp slide was witnessed in late BSE PSU 0.5% 50.7 9,726 afternoon trade as markets turned volatile and traded in the red ahead of the BANKEX 0.5% 59.0 12,475 expiry of August futures. Finally, markets closed marginally higher with the AUTO 0.2% 18.1 8,784 Sensex and Nifty closing up 0.3% each. BSE mid-cap ended lower by 0.1%, METAL 0.0% (3.4) 14,991 while BSE small-cap was up 0.1%. Among the front liners, NTPC, DLF, ITC, SBI and HDFC gained 1-3%, while RCOM, Sterlite, RIL, HUL and OIL & GAS -0.6% (61.5) 10,056 JP Associates lost 0-3%. Among mid caps, Eicher Motors, Essar Shipping, BSE IT 0.0% (1.2) 5,509 Indusind Bank, Astrazeneca Pharma and FDC gained 3-14%, while Global Indices Chg (%) (Pts) (Close) State Bank of Mysore, State Bank of Travanacore, State Bank of Bikaner and Dow Jones -0.7% (74.3) 9,986 Jaipur, MVL and Wockhardt declined 4-10%. NASDAQ -1.1% (22.8) 2,119 FTSE 0.9% 46.4 5,156 Markets Today Nikkei 0.7% 61.1 8,906 The trend deciding level for the day is 18216 / 5473 levels. If NIFTY trades Hang Seng -0.1% (22.9) 20,612 above this level during the first half-an-hour of trade then we may witness a Straits Times 0.0% (0.7) 2,926 further rally up to 18272 – 18317 / 5491 - 5505 levels. However, if NIFTY Shanghai Com 0.3% 6.9 2,603 trades below 18216 / 5473 levels for the first half-an-hour of trade then it may correct up to 18170 – 18114 / 5460 - 5441 levels. Indian ADRs Chg (%) (Pts) (Close) Indices S2 S1 R1 R2 Infosys -0.7% (0.4) $58.3 SENSEX 18,114 18,170 18,272 18,317 Wipro -2.9% (0.4) $12.6 NIFTY 5,441 5,460 5,491 5,505 Satyam 0.2% 0.0 $4.5 ICICI Bank -0.3% (0.1) $41.4 News Analysis HDFC Bank -1.3% (2.1) $159.7 TVS Motor to invest Rs200cr on capacity expansion RIL to ink a deal with DE Shaw to launch a US $700mn-800mn infra fund Advances / Declines BSE NSE Refer detailed news analysis on the following page. Advances 1,328 577 Net Inflows (August 25, 2010) Declines 1,588 798 Rs cr Purch Sales Net MTD YTD Unchanged 118 55 FII 2,559 2,850 (290) 11,291 58,985 MFs 438 857 (419) (2,868) (15,813) Volumes (Rs cr) FII Derivatives (August 26, 2010) BSE 4,863 Open NSE 16,539 Rs cr Purch Sales Net Interest Index Futures 3,925 4,163 (238) 15,764 Stock Futures 7,363 7,580 (217) 33,946 Gainers / Losers Gainers Losers Price chg Price chg Company Company (Rs) (%) (Rs) (%) Crompton Gr. 305 5.8 Deccan Chron. 128 (4.0) Essar Shipping 99 5.0 Amtek Auto 178 (3.3) Indusind Bank 226 3.8 Tech Mahindra 673 (3.3) Nestle 3,076 3.7 IB Real Estate 174 (3.1) Power Grid 105 2.5 Adani Ent. 629 (3.0) 1 Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
  2. 2. Market Outlook | India Research TVS Motor to invest Rs200cr on capacity expansion TVS Motor plans to invest Rs200cr by April 2011 to increase its two-wheeler production capacity to 28 lakh units from the present 21 lakh units. With the company operating at high utilisation levels, capacity expansion is being carried out to meet the surge in demand in the two-wheeler space. Moreover, demand for TVS Jive and TVS Wego continues to remain robust, which has enabled the company to ramp up its production. We expect overall two-wheeler demand to increase at a 12% CAGR over FY2010-12E. We estimate TVS Motor to post a 23% CAGR in its top line and around 64% CAGR in net profit over FY2010-12E, aided by around 16% CAGR in volume and improving operating performance due to change in product mix and better operating leverage. At the CMP of Rs141, TVS Motor is trading at 19.6x FY2011E and 14.4x FY2012E earnings. We believe the recent run-up in stock price factors in the higher volume and earnings growth expected over FY2010-12E. We continue to maintain our Neutral rating on the stock. RIL to ink a deal with DE Shaw to launch a US $700mn-800mn infra fund After telecommunications, Mukesh Ambani is getting into another of his brother’s territories— financial services. RIL is close to inking a deal with global hedge fund DE Shaw to launch a US $700mn–$800mn infrastructure fund. Apart from a PE fund, the two players are also looking at other areas such as carbon trading. No financial terms of the tie-up were available, but it is said that officials from DE Shaw’s global headquarters met Mukesh Ambani last week to work out the details. Interestingly, Mukesh Ambani is said to be on the board of DE Shaw India. Recently, Mukesh Ambani and his younger brother Anil Ambani scrapped a pact in May 2010 that had earlier prevented them from entering each other’s businesses. As a result, sectors such as telecom, power and financial services were open to Mukesh Ambani. We believe this is a step further towards exploring newer avenues to deploy surplus cash. We maintain Buy on RIL with a Target Price of Rs1,260. August 27, 2010 2
  3. 3. Market Outlook | India Research Economic and Political News Direct tax provisions cleared by Union Cabinet Commerce Ministry turns down rubber import duty cut Natural gas availability in India to increase by 52% by 2013-14 Investment in real estate to touch US $300bn in 2010 Food inflation eases to 10.05% Monsoon rains 29% above normal in the past week Government to soon notify fuel efficiency standards Corporate News Tata Motors to raise up to Rs4,700cr: CEO ONGC to start gas production from KG Basin block in 2016-17 Sona Koyo plans Rs80cr expansion by January 2011 Source: Economic Times, Business Standard, Business Line, Financial Express, Mint Events for the day C&C Construction Dividends, Results Havells India Dividends, Results HCL Infosystems Dividends, Results Titagarh Wagons Issue of Warrants August 27, 2010 3
  4. 4. Market Outlook | India Research Research Team Tel: 022-4040 3800 E-mail: Website: DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report. Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059. Tel : (022) 3952 4568 / 4040 3800 Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302 August 27, 2010 4