The markets in India cooled off after strong gains the previous session, with the key indices like the Sensex and Nifty closing lower by 1.1% each. Some sectors like metals declined more sharply, with the metal index down 2.6%. Select pharma and infrastructure stocks gained, but overall it was a weak market day with declines widespread across sectors. Technical indicators suggest the markets may see further weakness in the near term if indices remain below key support levels in early trade.

1. Market Outlook
India Research
May 12, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The markets cooled off after strong run-up in the previous session. The markets BSE Sensex -1.1% (189.0) 17,142
opened in green, touching its intra-day high, in line with strong gains of US and Nifty -1.1% (57.4) 5,136
few Asian markets. However, the indices slipped within moments of opening MID CAP -1.0% (69.6) 6,929
and slipped in the red. Except for a minor attempt of pull-back in the SMALL CAP -0.9% (76.3) 8,872
mid-session, markets remained weak for the day. All the sectoral indices on the BSE HC -1.6% (84.4) 5,217
BSE closed in the red. The Sensex and Nifty closed lower by 1.1% each. The BSE BSE PSU -0.9% (83.2) 8,963
Mid-cap and the Small-cap indices too closed lower by 1.0% each, indicating a BANKEX -0.3% (37.0) 10,884
market wide weakness. Among the front-liners, M&M, HDFC Bank, and Hero AUTO -0.4% (31.6) 7,733
Honda were up by 0-2%, while Reliance Infra, Reliance Comm, Tata Steel, METAL -2.6% (435.1) 16,494
Hindalco and Bharti Airtel were down by 3-5%. In the mid-cap segment, OIL & GAS -1.1% (116.4) 10,013
National Fertilizers, Sobha Developers, Essar Ship Ports, RCF and Petronet LNG BSE IT -0.9% (47.8) 5,228
were up by 4-12%, while Piramal Health, Bajaj Hindustan, Gee Kay Finance,
Shree renuka Sugar and Jindal Saw were down by 4-7%.
Global Indices Chg (%) (Pts) (Close)
Dow Jones -0.3% (36.9) 10,748
Markets Today NASDAQ 0.0% 0.6 2,375
FTSE -1.0% (53.2) 5,334
The trend deciding level for the day is 17208 / 5156 levels. If NIFTY trades
above this level during the first half-an-hour of trade then we may witness a Nikkei -1.1% (119.6) 10,411
further rally up to 17312-17483 / 5186 - 5237 levels. However, if NIFTY trades Hang Seng -1.4% (280.1) 20,147
below 17208 / 515 levels for the first half-an-hour of trade then it may correct Straits Times -0.8% (22.8) 2,858
up to 17038 - 16934 / 5106 – 5076 levels. Shanghai Com -1.9% (51.2) 2,648
Indices S2 S1 R1 R2 Indian ADRs Chg (%) (Pts) (Close)
SENSEX 16,934 17,038 17,312 17,483 Infosys -1.6% (0.9) $59.1
NIFTY Wipro -1.1% (0.2) $22.0
5,076 5,106 5,186 5,237
Satyam -3.0% (0.2) $5.1
News Analysis ICICI Bank -3.8% (1.6) $40.8
HDFC Bank -1.0% (1.5) $148.1
Cadila enters into supply agreement with Abbott
IVRCL bags three orders worth Rs823cr
Advances / Declines BSE NSE
Result Reviews: Hindalco, Jain Irrigation, Ranbaxy
Advances 1,083 391
Refer detailed news analysis on the following page.
Declines 1,793 928
Unchanged 83 39
Net Inflows (May 7, 2010)
Rs cr Purch Sales Net MTD YTD
FII Volumes (Rs cr)
2,856 4,446 (1,590) (3,74) 26,136
MFs 826 702 124 (534) (7,762) BSE 4,219
NSE 12,657
FII Derivatives (May 11, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 2,587 2,504 83 12,497
Stock Futures 1,125 1,369 (243) 29,409
Gainers / Losers
Gainers Losers
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
Essar Ship Ports 88 4.6 Piramal Health 509 (7.4)
Petronet LNG 84 3.7 Bajaj Hind 109 (6.6)
Chambal Fert 61 3.0 Idea Cellular 60 (5.3)
Mcleod Russel 220 2.4 Reliance Infra 1,010 (5.0)
Indian Hotels 114 2.1 Reliance Comm 147 (5.0)
1
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2. Market Outlook | India Research
Cadila enters into supply agreement with Abbott
Cadila and Abbott have entered into a strategic alliance under which Cadila will supply 24
branded generics products to Abbott for 15 emerging markets. The agreement also has an
option for additional 40 products to be included over the term of the collaboration. The
deal is likely to commercialise in CY2012. We expect the deal to be positive as it would
enable Cadila to leverage its strong product pipeline and manufacturing capabilities. At
Rs576, the stock is trading at 18.8x FY2011E and 14.5x FY2012E earnings. We continue
to recommend a Buy on the stock with a Target Price of Rs634.
IVRCL bags three orders worth Rs823cr
IVRCL Infrastructures and Projects Ltd (IVRCL) has bagged three orders amounting to
Rs823cr. The projects are spread across areas of Transportation, Water projects and
Building Construction and are expected to be finished within a time frame ranging
between 24-30months. The Outstanding Order Book of IVRCL stands at around
Rs21,500cr or 3.6x its FY2010E revenues. We have valued IVRCL on an SOTP basis,
valuing its core construction business at a FY2012E Target P/E of 14x, whereas its stake in
Hindustan-Dorr Oliver and IVR Prime have been valued on a MCap basis. We maintain a
Buy on the Stock with a Target Price of Rs240.
Result Reviews
Hindalco
Hindalco’s standalone Top-line increased by 45.3% yoy and 1.4% qoq to Rs5,358cr which
was lower than our estimate on account of lower copper production due to a shutdown of
its smelter. Copper cathode production was lower by 14% yoy and 16.2% qoq to 74,734
tonnes. EBITDA increased by 165.8% yoy to Rs835cr as margins expanded by 707bp on
account of higher LME prices. Net income was sharply ahead of our estimates by 36.5%
on account of a) lower interest expense and b) tax write back of Rs113cr.
For FY2010, Net sales increased by 7.5% yoy to Rs19,408cr on back of higher volumes,
better product mix and better realizations. EBITDA de-grew by 2.8% as margins contracted
by 162bp to 15.2% on account of higher raw material costs. Other income declined by
59.2% yoy to Rs260cr on account of low treasury corpus as the company repaid its bridge
loan. Consequently, Net income de-grew by 14.1% yoy to Rs1,916cr. We feel the company
is well placed to benefit from its ongoing aluminium expansion plans, lower cost at its new
plants and turnaround at Novelis. We maintain a Buy on the stock with a SOTP Target
Price of Rs208.
Jain Irrigation
Jain Irrigation declared its 4QFY2010 results. On a standalone basis, the company
reported a Top-line growth of 37% yoy to Rs959cr (Rs699cr), largely aided by a strong
growth witness in Micro Irrigation Systems segment. In terms of Earnings, the company
reported a Net Profit of Rs117cr (Rs11cr), however post adjustment for forex gain adj PAT
stands at Rs83cr (Rs33cr), which was slightly ahead of our estimate of Rs75cr. While,
currently we have a Neutral rating on the stock, we would revise our estimates and rating
post earnings call.
May 12, 2010 2

3. Market Outlook | India Research
Ranbaxy
Ranbaxy announced its 1QCY2010 results which were ahead of our expectation. Net Sales
came in at stellar Rs2,487cr (1,555cr) up 59.9% driven by the US region. The US sales
increased by 266% to Rs1,210cr on back of Valtrex exclusivity while Europe increased by
10% to Rs310cr and India by 6% to Rs345.2cr. On the OPM front, the company recorded
margins at 31.0% driven by exclusivity. Further, the company received US$50mn as
one-time income from Flomax settlement which buoyed the other Operating Income to
Rs280.3cr (Rs22.3cr). Ranbaxy reported strong Net profit of Rs960.5cr (loss of Rs767.3cr)
driven by Valtrex exclusivity, higher other Operating income and Forex gains. Excluding the
Forex gains, the Operational PAT came in at Rs657cr (loss of Rs26.2cr). The stock is under
review.
Economic and Political News
Growing small cities to keep inflation high in FY11: Goldman
3G auction & proposed changes in 2G spectrum pricing to fetch Rs90,000cr
Punjab & Haryana seek higher MSP for Paddy
Corporate News
Bajaj Hind to transfer thermal power project to subsidiary
DLF pulls out of Chennai IT SEZ, seeks Rs700cr refund
GSPC to merge two of its gas distribution units
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
May 12, 2010 3

4. Market Outlook | India Research
Events for the day
Bajaj Auto Dividend, Results
Bajaj Holdings Dividend, Results
Blue Star Dividend, Results
D B Realty Results
Mahindra Forge Results
Mangalore Refineries Dividend, Results
Muthoot Cap Dividend, Results
Rohit Ferro Dividend, Results
RPG Life Dividend, Results
Thermax Dividend, Results
Welspun India Results
May 12, 2010 4

5. Market Outlook | India Research
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