1. Market Outlook
India Research
July 5, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The market opened in green in early trade tracking Asian stocks. However, the BSE Sensex -0.3% (48.4) 17,461
benchmark indices slipped into the red in morning trade and hit a fresh Nifty -0.3% (14.3) 5,237
intraday low. The market recovered in early afternoon trade and moved MID CAP -0.0% (2.9) 7,118
between positive and negative zone and edged higher in the late afternoon. The SMALL CAP 0.3% 22.7 9,104
key benchmark indices fell in late trade as investors resorted to profit taking BSE HC -0.1% (7.2) 5,708
ahead of the weekend. The Sensex and Nifty closed flat, down by 0.3% each. BSE PSU 0.0% (0.3) 9,445
BSE mid-cap index too closed flat, however, the small-cap index faired BANKEX 0.2% 20.2 10,664
marginally better as it closed with gain of 0.3%. Wipro, TCS, NTPC, Hindalco AUTO -0.4% (36.1) 8,184
and Maruti Suzuki were up by 1-3%, while Sterlite Industries, M&M, BHEL, METAL -0.5% (72.8) 14,382
Infosys and HUL declined by 1-2%. Among mid-caps Monnet Ispat, GSPC, OIL & GAS -0.5% (48.9) 10,717
Jubilant FoodWorks, IGL and Trent were up by 5-17%, while MVL, Vijaya Bank, BSE IT -0.4% (18.7) 5,238
Gee Kay Finance, HCL Infosystems and Fresensius Kabi Oncology were down
by 4-8%.
Global Indices Chg (%) (Pts) (Close)
Dow Jones -0.5% (46.1) 9,686
Markets Today
NASDAQ -0.5% (9.6) 2,092
The trend deciding level for the day is 17496/5247 levels. If NIFTY trades FTSE 0.7% 32.3 4,838
above this level during the first half-an-hour of trade then we may witness a Nikkei 0.1% 12.1 9,204
further rally up to 17564 –17668/5268–5298 levels. However, if NIFTY trades Hang Seng -1.1% (223.7) 19,905
below 17496/ 5247 levels for the first half-an-hour of trade then it may correct Straits Times 0.9% 23.8 2844
up to 17392– 17323/5216 – 5195 levels. Shanghai Com 0.4% 9.1 2383
Indices S2 S1 R1 R2
Indian ADRs Chg (%) (Pts) (Close)
SENSEX 17,323 17,392 17,564 17,668
Infosys -0.4% (0.2) $58.9
NIFTY 5,195 5,216 5,268 5,298 Wipro -0.5% (0.1) $11.9
Satyam -2.4% (0.1) $4.9
News Analysis ICICI Bank -0.5% (0.2) $35.8
HDFC Bank -1.1% (1.5) $142.0
Hindustan Media Ventures IPO- Recommend ‘Subscribe’
RBI hikes repo and reverse repo rates by 25bp
RNRL to merge with Rpower; Share swap ratio fixed at 4:1 Advances / Declines BSE NSE
Refer detailed news analysis on the following page.
Advances 1,466 630
Declines 1,449 690
Net Inflows (July 01, 2010)
Unchanged 102 53
Rs cr Purch Sales Net MTD YTD
FII 4,750 4,213 537 537 30,820
MFs 649 560 89 (1,088) (8,218) Volumes (Rs cr)
BSE 4,555
FII Derivatives (July 02, 2010) NSE 11,828
Open
Rs cr Purch Sales Net
Interest
Index Futures 1,251 1,714 (463) 18,185
Stock Futures 773 892 (119) 28,799
Gainers / Losers
Gainers Losers
Price Price
Company Chg (%) Company Chg (%)
(Rs) (Rs)
Engineers Ind 361 11.6 Vijaya Bank 61 (5.0)
MRPL 83 8.7 HCL Tech 353 (3.0)
Federal Bank 330 4.1 REC 294 (2.8)
Concor 1,383 3.7 Dabur 202 (2.8)
Jai Corp 254 3.6 Idea 58 (2.7)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 0109965391

2. Market Outlook | India Research
Hindustan Media Ventures IPO- Recommend ‘Subscribe’
Hindustan Media Ventures (HMVL) is tapping the IPO market with an issue size of Rs270cr
and a price band of Rs162-175 per equity share, thus resulting in a public issue of 1.67cr
and 1.54cr equity shares of face value Rs10, resulting in a promoter shareholding dilution
of 23% and 21% at the lower and the upper price band, respectively. The company plans
to use the IPO proceeds for expanding its presence in new markets and for the repayment
of debt. HMVL plans to set up eight new publishing units for printing and publishing new
editions of Hindustan and expects the same to be fully operational by end of fiscal 2012.
We recommend our Subscribe view on the issue based on Hindustan’s third largest
cumulative readership base (9.9mn), dominant position in the Hindi speaking states of
Bihar/Jharkhand (readership of 4.5mn and 1.4mn, respectively) and strong infrastructure
and synergies with promoter HT Media. Our Subscribe view on the issue is based on 18x
FY2012E EPS (~10% discount to our target multiple of 20x for Jagran and DB Corp);
hence, we arrive at a fair value of Rs195, indicating an ~11% upside to the upper price
band.
RBI hikes repo and reverse repo rates by 25bp
The Reserve Bank of India (RBI) has raised the repo and reverse repo rates by 25bp each
to 5.5% and 4.0%, respectively. Up to February 2010, food and textiles were contributing
as much as 70% of the overall 9.9% WPI inflation on account of the drought-driven
increase in prices of food grains, sugar, and cotton, among others. By May 2010, their
contribution to the 10.2% WPI inflation, though on a downward trend, was still high at
57%. Oil continued to contribute 12% to overall inflation, though this is likely to increase in
the coming weeks due to the increase in petrol and diesel prices. Contribution of other
items (having 50% weightage in the WPI index) had increased to 31% in May 2010 due to
the increase in the prices of coal, metals, electricity and wood products, among others,
indicating that inflation is becoming more broad-based. Therefore, monetary tightening to
anchor inflation expectations is appropriate at this juncture. Going forward, as credit
demand is expected to sustain at least above the 19% level, banks are expected to raise
their lending and deposit rates. The expected increase in interest rates will not affect the
sector negatively, as it will be outweighed by acceleration in core earnings growth on the
back of improvement in credit growth and fee income coupled with a sharp reduction in
NPA losses. However, on a relative basis, we continue to prefer banks with a high CASA
ratio and lower-duration investment book, given the rising interest rate scenario.
July 5, 2010 2

3. Market Outlook | India Research
RNRL to merge with Rpower; Share swap ratio fixed at 4:1
The boards of Reliance Power (Rpower) and Reliance Natural Resources (RNRL) have
decided to merge RNRL with Rpower. The merger will be done on a share swap basis and
the ratio will be 4:1, which implies RNRL shareholders will get one share of Rpower for
every four shares of RNRL held by them. The share swap ratio has been fixed on an
independent valuation by KPMG, wherein RNRL has been valued at Rs7,157cr at a 31%
discount to its total market capitalization based on the closing price of its share on July 2nd
2010. This deal would result in a fresh issue of 41cr shares by Rpower as the total number
of shares outstanding of RNRL stands currently at 163cr. The total outstanding shares of of
RPower post merger would stand at 280cr.
Post the Supreme Court verdict in RIL-RNRL case, RNRL was reduced to a shell company as
it was declared that the government has the sole rights in the allocation of gas and fixing
the price for the same. Thus going ahead the company would not earn any marketing
margin which works to around Rs156cr per annum (at 0.14$/mmbtu transferred) on
28mmscmd of gas as per our estimates, which it would have earned post the
commencement of Rpower’s gas based plants. Meanwhile, as per the court orders RIL and
RNRL signed a revised gas supply master agreement on June 25, which will be at the price
determined by the government. Though, the deal is negative for RNRL shareholders in the
short term due to the unfavourable swap ratio, on a long-term basis, this deal would
compensate the RNRL shareholders by providing direct exposure to Rpower’s utility
business.
As for Rpower, RNRL will bring in prospects for gas from Coal Bed Methane (CBM) blocks,
with estimated resources of about 193 billion cubic metres. RNRL also has 10% share in an
oil and gas block in Mizoram, with an acreage of 3,619sqkm and reserve potential of up
to 28 billion cubic metre. RNRL will also bring in expertise in coal supply logistics and
shipping businesses. Despite this, we feel the the move is a negative for Rpower
shareholders, considering the 14.6% equity dilution as the merger is not expected to yield
much of synergy benefits for Rpower.
Economic and Political News
Govt. may review PSY bank’s freedom to choose auditors
FIIs invest US $2.3bn in first quarter: SEBI
Tea exports up 19% in Jan-May period
Corporate News
Shopper’s stop eyes ~Rs1,000cr revenue from Hypercity
SREI infra to raise Rs4,600cr PE fund
M&M, Adani in race to buy DLF’s stake in insurance firm
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Zee News Dividend,Results
July 5, 2010 3

4. Market Outlook | India Research
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