1. Market Outlook
India Research
August 19, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The benchmark indices opened flat in early morning trades and remained BSE Sensex 1.2% 208.3 18,257
range bound through the morning session. The Sensex gained towards late Nifty 1.2% 65.0 5,479
morning trades and ruled positive through the post noon session. Towards MID CAP 0.9% 65.6 7,760
close, markets surged as buying was witnessed in the IT, auto, metal and SMALL CAP 0.7% 68.2 9,787
banking counters. The Sensex and Nifty ended with gains of 1.2% each. The BSE HC 1.0% 53.9 5,532
BSE mid- and small-cap indices closed 0.9% and 0.7% higher, respectively. BSE PSU 0.5% 44.9 9,735
Among the front-liners, Hindalco, Tata Motors, HDFC, HDFC Bank and ONGC BANKEX 1.2% 141.7 12,389
gained 2–5%, while RCOM, RIL, M&M, Cipla and NTPC lost 0–1%. Among the AUTO 1.3% 111.5 8,873
mid caps, Gujarat Narmada Valley, State Bank of Mysore, GSFC and State
METAL 1.4% 215.9 15,293
Bank of Travancore gained 7–9%, while Thomas Cook, Simplex Infra and
OIL & GAS 0.3% 27.1 10,073
Edelweiss Cap declined 4–5%.
BSE IT 2.0% 106.8 5,568
Markets Today Global Indices Chg (%) (Pts) (Close)
Dow Jones 0.1% 9.7 10,416
The trend deciding level for the day is 18204/5461 levels. If NIFTY trades NASDAQ 0.3% 6.3 2,216
above this level during the first half-an-hour of trade then we may witness a FTSE -0.9% (47.7) 5,303
further rally up to 18340–18422/5506–5533 levels. However, if NIFTY trades
Nikkei 0.9% 78.9 9,241
below 18204/5461 levels for the first half-an-hour of trade then it may correct
up to 18121–17985/5435–5390 levels. Hang Seng -0.5% (114.7) 21,023
Straits Times -0.1% (4.0) 2,919
Indices S2 S1 R1 R2 Shanghai Com -0.2% (5.6) 2,666
SENSEX 17,985 18,121 18,340 18,422
NIFTY 5,390 5,435 5,506 5,533 Indian ADRs Chg (%) (Pts) (Close)
Infosys 1.2% 0.7 $60.4
News Analysis Wipro 1.2% 0.2 $13.6
Satyam -0.2% (0.0) $4.7
NTPC – BHEL JV to foray into the EPC-BoP segment
ICICI Bank 0.5% 0.2 $41.8
ONGC may seek management control of Cairn's Rajasthan fields HDFC Bank 4.5% 7.1 $166.5
M&M to launch new models in Sri Lanka
Refer detailed news analysis on the following page.
Advances / Declines BSE NSE
Net Inflows (August 17, 2010)
Advances 1,667 802
Rs cr Purch Sales Net MTD YTD
Declines 1,318 549
FII 3,153 2,637 516 6,268 54,209
Unchanged 100 46
MFs 565 730 (170) (1,432) (14,055)
FII Derivatives (August 18, 2010) Volumes (Rs cr)
Open BSE 5,527
Rs cr Purch Sales Net
Interest
NSE 15,389
Index Futures 1,831 1,314 517 17,970
Stock Futures 3,147 2,952 194 38,220
Gainers / Losers
Gainers Losers
Price Price
Company chg (%) Company chg (%)
(Rs) (Rs)
Hind Oil Explo 248 8.1 Essar Shipping 104 (3.5)
Chambal Fert 72 6.8 Suzlon 50 (3.3)
Hindalco 176 4.6 Havells India 792 (2.9)
Aurobindo Phrm 1,007 4.6 Oriental Bank 426 (2.4)
GMR Infra 63 4.4 Nalco 411 (2.3)
1
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2. Market Outlook | India Research
NTPC – BHEL JV to foray into the EPC-BoP segment
The formation of NTPC-BHEL Power Projects Private Limited (NBPPL), the 50:50
joint venture (JV) between India’s largest power producer NTPC and India’s largest power
equipment maker BHEL, is expected to significantly increase the domestic manufacturing
capacities in the Balance of Plant (BoP) segment. At present, the limited number of BoP
vendors in India may not be able to effectively support the 100GW capacity additions
planned over the next 6 – 7 years. We believe that the scheduled commencement of
operations at NBPPL’s manufacturing facilities from FY2014 would help in mitigating the
anticipated shortage in the BoP segment.
Though the primary objective for setting up NBPPL is to undertake EPC contracts for power
plants and the manufacture of power equipment, we understand that NBPPL would initially
focus on the setting up of BoP manufacturing facilities, especially coal and ash handling
plants. Recent press articles suggest that NBPPL is actively scouting for a global technology
provider to support the coal and ash handling segments of the BoP-EPC projects to be
taken up by the company. The foreign technology partner may also be offered a minority
stake in NBPPL.
Once selection of the foreign technology partner is finalised and clarity emerges on the
commercial operation date (COD), we expect increasing number of BoP –EPC projects
attributable to NTPC and BHEL being awarded to NBPPL. While the above developments
may help in accelerating the execution of thermal power projects, it may further intensify
competition in the BoP space leading to loss of pricing power and reduced profit margins
for the existing and aspiring BoP players such as BGR Energy, Mcnally Bharat, Sunil Hitech
and TRF.
ONGC may seek management control of Cairn's Rajasthan fields
As per news reports, ONGC may seek management control of the giant Rajasthan oilfields
in lieu of allowing UK's Cairn Energy to sell majority stake in its Indian arm that now
operates the field, to a non-oil firm, Vedanta Resources for US $8.48bn. Cairn India with
70% interest is the operator of the 6.5bn/bbl Rajasthan block and ONGC holds 30%
interest and pre-emption or right of first refusal (ROFR) in case Cairn were to exit the
Rajasthan assets. Though the production sharing contract (PSC) for the Rajasthan block
was silent on prior government approval in case of transfer of ownership of a company
having stake in the block, ONGC believes its rights flow from the joint operating
agreement (JOA) for the field that provides for ROFR. The oil ministry too is keen to protect
the interest of ONGC, which currently is a net loser in the Rajasthan block as it has to pay
Cairn's share of royalty on crude oil to the government. ONGC is interested in getting
operatorship of the Rajasthan fields together with the government compensating it for the
royalty it pays on behalf of Cairn India, which would make the project viable for it.
However, another set of news reports suggest that ONGC wants monetary benefit from the
Vedanta resources for clearance of the deal. Given the lack of clarity and ambiguity on the
issue, it will be premature to conclude anything at the current juncture. We maintain an
Accumulate on ONGC, with a Target Price of Rs1,356 and maintain a Neutral view on
Cairn India
M&M to launch new models in Sri Lanka
M&M plans to launch new models in Sri Lanka including the Maxximo to strengthen its
presence in the region. It is also exploring the possibility of introducing an electric car
there. Notably, the company’s recently launched truck, Mahindra GIO, has met with good
response. We believe that further new launches will help M&M strengthen its product
portfolio and help it leverage its presence in Sri Lanka. We maintain a Buy on the stock,
with an SOTP Target Price of Rs772, wherein its core business fetches Rs533 and the value
of its investments Rs239.
August 19, 2010 2

3. Market Outlook | India Research
Economic and Political News
RBI likely to hike policy rates in Sept review says D&B
Sebi proposes to double retail investment limit to Rs2lakh
More pension, insurance funds needed in infra: Mukherjee
Corporate News
ADAG eyes 26% stake in ICEX
Blackstone to invest $300 mn in Moser Baer Projects
Future Ventures files draft prospectus for Rs750cr IPO
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Event for the day
Ballarpur Inds Results
August 19, 2010 3

4. Market Outlook | India Research
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