1. Market Outlook
India Research
August 23, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
A bout of volatility was witnessed at the onset of the trading session as the key BSE Sensex -0.3% (53.1) 18,402
benchmark indices cut losses, soon after an initial slide. However, the intra-day Nifty -0.2% (9.6) 5,531
recovery proved short-lived as the Sensex once again lost ground in morning MID CAP -0.1% (9.7) 7,821
trade, tracking weak Asian stocks. The market once again came off the lows in SMALL CAP 0.1% 11.9 9,876
mid-morning trade as index heavyweight RIL bounced back. The market soon BSE HC 0.7% 41.8 5,611
slipped into the red. Stocks moved in a narrow range in afternoon trade. The
BSE PSU -0.2% (22.3) 9,707
market remained subdued in mid-afternoon trade as European stocks reversed
BANKEX -0.8% (99.8) 12,527
initial gains. Weakness persisted on the bourses in late trade. The Sensex and
AUTO -0.2% (17.6) 8,875
Nifty closed down by 0.3% and 0.2%, respectively. While, the BSE mid-cap
METAL -0.1% (14.7) 15,426
index declined 0.1%, BSE small-cap index closed with gains of 0.1%. Among the
front liners, DLF, L&T, Cipla, RIL and Hero Honda gained 1–4%, while Tata OIL & GAS 0.8% 83.0 10,209
Motors, ICICI Bank, Wipro, HUL and ITC lost 1–3%. Among mid caps, BSE IT -0.9% (52.2) 5,517
Wockhardt, Jubilant Foodworks, BF Utilities, Gammon India and Brigade Global Indices Chg (%) (Pts) (Close)
Enterprises gained 7–10%, while Chennai Petro, MVL, GSFC, HCC and Dow Jones -0.6% (57.6) 10,214
Hindustan Oil declined by 4–7%. NASDAQ 0.0% 0.8 2,180
FTSE -0.3% (16.0) 5,195
Markets Today
Nikkei -2.0% (183.3) 9,179
The trend deciding level for the day is 18409 / 5530 levels. If NIFTY trades Hang Seng -0.4% (90.6) 20,982
above this level during the first half-an-hour of trade then we may witness a
Straits Times -0.4% (10.3) 2,936
further rally up to 18457 – 18512 / 5547 – 5563 levels. However, if NIFTY
Shanghai Com -1.7% (45.7) 2,642
trades below 18409 / 5530 levels for the first half-an-hour of trade then it may
correct up to 18354 – 18306 / 5514 – 5497 levels.
Indian ADRs Chg (%) (Pts) (Close)
Indices S2 S1 R1 R2 Infosys -0.1% (0.0) $59.6
SENSEX 18,306 18,354 18,457 18,512 Wipro 0.2% 0.0 $13.4
NIFTY Satyam 0.0% - $4.6
5,497 5,514 5,547 5,563
ICICI Bank 0.1% 0.1 $42.5
News Analysis HDFC Bank -1.5% (2.6) $165.8
IPO Note: Gujarat Pipavav Port Ltd.
Terminating coverage on Zee News, TV Today, Balaji, Inox and Cinemax Advances / Declines BSE NSE
JK Tyre to increase tyre prices by 4–5% in September Advances 1,353 595
Refer detailed news analysis on the following page. Declines 1,602 751
Net Inflows (August 19, 2010) Unchanged 116 53
Rs cr Purch Sales Net MTD YTD
FII 7,201 4,546 2655 9,964 57,658 Volumes (Rs cr)
MFs 740 721 19 (1,482) (14,427) BSE 5,231
FII Derivatives (August 20, 2010) NSE 14,197
Open
Rs cr Purch Sales Net
Interest
Index Futures 1,183 1,964 (781) 18,684
Stock Futures 3,519 3,652 (133) 39,395
Gainers / Losers
Gainers Losers
Price chg Price chg
Company Company
(Rs) (%) (Rs) (%)
Shriram Trans 769 5.0 Hind Const 64 (4.0)
KSK Energy 168 4.2 Hind Oil Expl 247 (3.8)
Financial Tech 1,407 3.9 Jain Irrigation 1,203 (3.6)
Ranbaxy Labs 493 3.6 Yes Bank 332 (3.2)
DLF 333 3.6 Indusind Bank 223 (2.8) 1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
IPO Note: Gujarat Pipavav Port Ltd.
Gujarat Pipavav Port (GPPL) is the exclusive developer and operator of APM Terminals
Pipavav—India’s first private sector port. The company is promoted by APM Terminals
(holding 57.9% pre-issue), one of the largest container terminal operators in the world.
The port is primarily engaged in multi-cargo and multi-user operations for container, bulk
and LPG cargo.
GPPL is coming out with an IPO for Rs500cr through fresh issue of 10.4cr–11.9cr shares in
the price band of Rs42–48 per share. The issue proceeds would be utilised for prepayment
of loans, purchase of capital equipment and general corporate purpose.
Location advantages and quality infrastructure: The port is strategically located in Gujarat
(at the mouth of the Gulf of Khambhat) and provides a convenient international trade
gateway to Europe, Africa, America and the Middle East. The port offers vessel acceptance
draught of 14.5 meters, which allows navigation for bulk vessels of ~81,600 MT and
container vessels of 6,200 TEU capacities. The company owns 38.8% in a joint venture
with Indian Railways, viz. Pipavav Railways Corporation (PRCL), providing rail connectivity
to industrialised hinterland and is connected by 10km road to NH-8E.
Expensive valuations justified by substantial growth potential: At the lower band of Rs42,
GPPL commands 2.5x CY2011E P/BV, a premium to its global peers, which trade at an
average P/BV of 2.0x. However, it is at a substantial discount to the Mundra port, which
trades at 5.9x FY2012E P/BV, which we believe is justified given the latter’s larger scale,
revenue contribution from its SEZ and higher profitability growth. However, over the last
couple of years, GPPL has exhibited strong growth rates at the operating level following an
improvement in utilisation levels and growing traffic. GPPL also expects to retire high-cost
debt utilising Rs300cr from the issue proceeds resulting in reduction in interest expenses
from Rs115cr in CY2009 to Rs92cr in CY2011E. Consequently, we expect GPPL to report
profit from CY2011E. Further, management has indicated to hike container tariffs in line
with market dynamics with re-negotiation of contracts from CY2010. Consequently, we
expect GPPL to report profit from CY2011E. We recommend Subscribe to the IPO at the
lower price band with a long-term perspective.
Terminating coverage on Zee News, TV Today, Balaji, Inox and Cinemax
Due to the re-alignment of our coverage universe, we are terminating coverage on
Zee News, TV Today, Balaji Telefilms, Inox and Cinemax India. Effective the coverage
termination, the last rating issued for these stocks should not be relied upon going
forward.
JK Tyre to increase tyre prices by 4–5% in September
JK Tyre is set to increase its products prices by 4–5% in the first week of September to offset
rising input costs. The price hike comes on the back of the ~3% increase in tyre prices by
the company in July. In 1QFY2011, natural rubber prices witnessed a steep increase (up
~70% yoy), and continue to inch upwards. Currently, the prices are ruling around Rs180–
185/kg. With the increase in prices set to happen in September, the company intends to
protect its margins and offset the cost pressure on the raw-material front. On the utilisation
front, JK Tyre is operating at the 95–96% level, buoyed by robust demand from OE
makers. At the CMP of Rs175, JK Tyre is available at attractive valuations of 4.4x and 3.7x
FY2011E and FY2012E EPS, respectively. We maintain a Buy rating on the stock with a
Target Price of Rs238, at which level the stock would trade at 5x, 3.3x and 0.8x FY2012E
EPS, EV/EBITDA and P/BV, respectively.
August 23, 2010 2

3. Market Outlook | India Research
Economic and Political News
GST set to miss April 2011 deadline as the bill will not be introduced in the parliament
DTC may moderate tax rates: CBDT Chairman
Orissa to move apex court over POSCO project
Apparel exporters ask government to provide more sops in FTP
Forex reserves down by US $4.6bn to US $282.8bn for the week ending August 13
FICCI demands additional duty sops for steel exports
Corporate News
JSPL resumes implementation of steel and iron ore mine project in Bolivia
BPCL buys stake in Australian shale gas fields
Tata Steel to invest Rs1,000cr in Orissa plants
Cairn-Vedanta deal may not get ministry’s approval
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
GEI Ind Dividend, Results
Prime Focus Results, Stock Split
August 23, 2010 3

4. Market Outlook | India Research
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