The key Indian stock market indices opened lower taking cues from weak global markets but recovered later in the day. The Sensex and Nifty ended the session up 0.3% each. Several companies are scheduled to announce quarterly results today including Aventis Pharma, Container Corp, Crompton Greaves, HDFC Bank, and Sesa Goa. The report provides expectations for the results and stock price forecasts for some of these companies. It also summarizes recent corporate deals and economic news in India.

1. Market Outlook
India Research
July 19, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices opened on a negative note taking cues from weak
BSE Sensex 0.3% 46.4 17,956
overnight US markets and early Asian indices. However, volatility was evident
early on as markets gyrated in a narrow range in the morning session. The Nifty 0.3% 15.1 5,394
markets traded upwards in mid-afternoon session with positive opening from MID CAP 0.4% 32.7 7,398
European indices. However, markets continued to witness sharp swings in the SMALL CAP 0.7% 62.2 9,443
last session, with a buying spree helping markets to close the session at the BSE HC 0.4% 23.3 5,729
day’s high. The Sensex and Nifty ended the losing trend of the past two sessions BSE PSU 0.1% 14.0 9,389
to close up by 0.3% each, while BSE mid-cap and small-cap indices ended the BANKEX 0.8% 91.7 11,396
session up by 0.4% and 0.7%, respectively. Among the front liners, TCS, Tata AUTO -0.1% (6.3) 8,337
Motors, ICICI Bank, Reliance Comm. and ONGC were up nearly by 1–6%, METAL -0.2% (29.0) 14,910
while M&M, HDFC Bank, RIL, HDFC and Jindal Steel declined by 1–2%. Among OIL & GAS -0.4% (39.2) 10,523
mid-caps, UTV Software, Edelweiss, Rallis India, Tulip Telecom and Rajesh BSE IT 1.8% 99.1 5,459
Exports were up by 6–8%, while Honeywell Auto, Sterlite Tech, Graphite India, Global Indices Chg (%) (Pts) (Close)
Bayer Corp. and JSL were down by 2–7%.
Dow Jones -2.5% (261.4) 10,098
Markets Today NASDAQ -3.1% (70.0) 2,179
The trend deciding level for the day is 17943 / 5390 levels. If NIFTY trades FTSE -1.0% (52.4) 5,159
above this level during the first half-an-hour of trade then we may witness a Nikkei -2.9% (277.2) 9,408
further rally up to 17993 – 18031 / 5405 – 5417 levels. However, if NIFTY Hang Seng 0.0% (5.5) 20,250
trades below 17943 / 5390 levels for the first half-an-hour of trade then it may
Straits Times 0.5% 14.1 2,958
correct up to 17905 – 17855 / 5378 – 5363 levels
Shanghai Com 0.0% (0.0) 2,424
Indices S2 S1 R1 R2
SENSEX 17,855 17,905 17,993 18,031
Indian ADRs Chg (%) (Pts) (Close)
NIFTY 5,363 5,378 5,405 5,417 Infosys -1.8% (1.0) $58.3
Wipro -4.3% (0.6) $12.3
News Analysis
Satyam -2.1% (0.1) $5.0
Kesoram Industries – Initiating Coverage ICICI Bank -2.8% (1.1) $37.6
Shiv-Vani Oil and Gas Exploration Services raises US$ 75mn via FCCB HDFC Bank -2.9% (4.3) $144.1
Result Review: Rallis India
Result Previews: Aventis Pharma, Concor, Crompton Greaves, HDFC Bank,
Advances / Declines BSE NSE
PTC, Sesa Goa
Refer detailed news analysis on the following page.
Advances 1,609 747
Declines 1,340 574
Net Inflows (July 15, 2010)
Unchanged 93 55
Rs cr Purch Sales Net MTD YTD
FII 4,230 3,669 561 8,284 39,361
Volumes (Rs cr)
MFs 284 991 (707) (1,246) (9,785)
BSE 4,308
FII Derivatives (July 16, 2010)
Open NSE 13,425
Rs cr Purch Sales Net
Interest
Index Futures 1,108 1,538 (430) 16,979
Stock Futures 1,611 1,426 185 31,455
Gainers / Losers
Gainers Losers
Price Price
Company Chg (%) Company Chg (%)
(Rs) (Rs)
TCS 832 6.2 Amtek Auto 190 (2.1)
Godrej Ind 187 5.2 M&M 604 (2.1)
IFCI 61 5.2 Engineers India 340 (1.8)
Mcleod Russel 233 4.7 IDBI Bank 122 (1.7)
Yes Bank 299 4.4 Neyveli Lignite 159 (1.5)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 0109965391

2. Market Outlook | India Research
Kesoram Industries – Initiating Coverage
Kesoram Industries (Kesoram) is a diversified player with presence in cement and tyre
manufacturing. The company has a total cement capacity of 7.3mtpa at two locations, viz.
Sedam (5.7mtpa) in Karnataka and Karimnagar (1.6mtpa) in Andhra Pradesh. In tyres, the
company currently has a total installed capacity of 823tpd, which is expected to increase to
988tpd in FY2011E. The company’s cement and tyre businesses are currently trading at
attractive valuations coupled with being at a substantial discount to their peers and
replacement costs. The cement business is valued at EV/tonne of US $65, which is at a
considerable discount to the replacement costs of US$80/tonne. This gives an implied
enterprise valuation of Rs1.4cr/tpd to the tyre business, which is at 35–63% discount to the
peers such as Apollo Tyres (Rs3.8cr/tpd) and Ceat (Rs2.3cr/tpd). We Initiate Coverage on
the stock with a Buy recommendation and an SOTP Target Price of Rs437, implying an
upside of 46% from current levels.
Shiv-Vani Oil and Gas Exploration Services raises US $75mn via FCCB
Shiv Vani Oil & Gas Exploration Services (SOGES) has raised US $75mn through an FCCB
issue. The FCCB has a maturity period exceeding 5 years, i.e. August, 17, 2015, and has
a coupon-rate of 5% p.a. The conversion price of the FCCB is fixed at a price of
Rs515.6/share, around 9.3% higher than the current stock price. The FCCB issues follow
the placement made to Franklin Templeton in March this year. The funds raised will be
used for international expansion, in R&D and for working capital needs. SOGES is trying to
develop capabilities in specialised services, which companies like Schlumberger Ltd.
possess. The recent news reports have indicated that SOGES is likely to buy a US-based
company to get the required technology to further consolidate its presence in the oil and
gas exploration services businesses and the ticket size for the same could be around
US $50mn. SOGES lacks expertise in the offshore oil and gas services and is an onshore
service provider. Thus, an acquisition to get the offshore technological know-how would
strength the business model and will open up new growth avenues for the company. FCCB
could result in dilution of 14.8% of the current equity base. The issuance is likely to
adversely impact the EPS by around Rs2.7/share; however, the same is likely to be offset
via the increase in revenue and profitability via the overseas acquisition. However,
ascertaining the impact of the same is not possible at the current juncture as we await
more information on the likely overseas acquisition and its exact impact on the company's
financials. Awaiting more clarity on the impending overseas acquisition, we keep the stock
under review.
July 19, 2010 2

3. Market Outlook | India Research
Result Reviews
Rallis India
Rallis India declared its 1QFY2011 results, with revenue growth of 22% to Rs203cr, which
was ahead of our estimate of Rs193cr. However, EBITDA margins at 11.6% were below
our estimates of 13%, hence overall profit came in at lower than the estimate. Total
reported PAT for the quarter came in at Rs14.8cr against Rs9cr (1QFY2010), growth of
57.5% yoy. We currently have a Neutral rating on the stock, which would be revised post
the management meet.
Result Previews
Aventis Pharma
Aventis Pharma is slated to announce its 2QCY2010 results. Net sales are expected to
increase by 10.3% to Rs275.7cr (Rs249.9cr) with OPM estimated to contract to 18.3%
(21.2%). As a result, net profit is expected to remain flat at Rs48.2cr (Rs47.1cr) on the back
of lower OPM. The stock is currently trading at 24.8x CY2010E and 21.7x CY2011E
earnings. We recommend Sell on the stock with a target price of Rs1,658.
Container Corporation of India
Concor is scheduled to announce its 1QFY2011 results today. The rail container operator
is expected to report top-line growth of 7.7% yoy to Rs977cr, on account of low base and
improvement in container volumes in the Exim segment. We expect Concor’s OPM to
decline by 2,731bp yoy to 25.5%, driven by the continued trend of higher empties and
inability to pass on rail freight expenses. Consequently, we expect net profit to decline
marginally by 1.9% to Rs197.0cr. At the CMP, the stock is trading at 19.4x its FY2012E EPS
of Rs72.6. We maintain our Reduce rating on the stock with a target price of Rs1,194.
Crompton Greaves
Crompton Greaves is scheduled to announce its 1QFY2011 results. Net sales are expected
to increase by 10% yoy to Rs2,416cr (Rs2,198cr) with OPM estimated to expand to 12.6%
(11.2%). Net profit is expected to increase by 20.6% yoy to Rs193cr (Rs160cr) on the back
of improved operating margin. The stock is currently trading at 19.8x FY2011E and
17.63x FY2012E earnings. We maintain a Buy view on the stock with a target price of
Rs307.
HDFC Bank
HDFC Bank is scheduled to announce its 1QFY2011 results. We expect the bank to report
healthy NII growth of 26% yoy. However, NIMs of the bank are expected to decline
sequentially by 25bp during 1QFY2011 on account of interest payment on savings
accounts on a daily basis. The operating profit of the bank is expected to register 5% yoy
growth. Net profit is expected to increase by 33% on a yoy basis to Rs806cr. At the CMP,
the stock is trading at valuations of 3.3x FY2012E ABV of Rs629.6. We have an
Accumulate rating on the stock, valuing it at 3.5x FY2012E ABV (at the higher end of its
five-year range) to arrive at a 12-month target price of Rs2,204.
July 19, 2010 3

4. Market Outlook | India Research
PTC
PTC is slated to announce its 1QFY2011 results. We expect the company to record a
44.9% yoy decline in its standalone top line to Rs1,307cr. We expect the company to trade
3,350MU of power during the quarter, resulting in a decrease of 20.3% yoy. We have
assumed an average realisation of Rs3.9/unit. We expect the company's net profit to
decline by 48.1% yoy to Rs17.3cr. We maintain a Buy rating on the stock with a target
price of Rs136.
Sesa Goa
Sesa Goa is slated to announce its 1QFY2011 results today. We expect the company’s
top line to grow by 141.7% yoy to Rs2,445cr on account of higher realisations.
Consequently, on the operating front, EBITDA margin is expected to expand by
1,521bp yoy to 60.0%. Hence, the bottom line is expected to grow by 183.4% yoy to
Rs1,197cr. We maintain a Neutral rating on the stock.
July 19, 2010 4

5. Market Outlook | India Research
Economic and Political News
12.3mn new GSM subscribers added in June: COAI
Delhi government slashes VAT on diesel from 20.0% to 12.5%
IRDA backs FM panel on regulatory tiffs
Corporate News
Reliance Infra inks pact with NHAI for Rs30bn Delhi-Agra highway
Diamond Power secures order worth Rs332cr
Tata Steel arm sells 27% stake in Malaysian firm for US $72mn
Om Metals Infraprojects bags Rs300cr road order from the Government of Rajasthan
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Aventis Pharma Dividend, Results
Bayer Crop Results
Container Corp Dividend, Results
Crompton Greaves Results
HDFC Bank Results
Jindal Saw Dividend, Results
Midday Multi-media Results
PTC India Results
Sesa Goa Results
Whirlpool Results
July 19, 2010 5

6. Market Outlook | India Research
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July 19, 2010 6