1. Market Outlook
India Research
May 17, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The market remained volatile throughout the day. It moved into the positive BSE Sensex -1.6% (271.3) 16,995
zone soon after an initial slide triggered by weak Asian stocks. The market Nifty -1.7% (85.4) 5,094
pared its gains later, after hitting a fresh intraday high. A weak opening of MID CAP -1.1% (76.9) 6,942
European markets dragged the key indices to fresh intraday lows in afternoon
SMALL CAP -1.4% (124.1) 8,810
trade. The market cut its losses in mid-afternoon trade but slumped again in
BSE HC 0.1% 7.7 5,367
late trade. The Sensex and Nifty closed down by 1.6% and 1.7%, respectively.
BSE PSU -1.1% (98.8) 8,934
The BSE Mid-cap and Small-cap indices closed lower by 1.1% and 1.4%,
BANKEX -1.8% (204.0) 10,846
respectively. Among the front-liners, Bharti Airtel, ITC, Grasim and ACC were
up by 0-2%, while Tata Steel, SBI, Sterlite, Hindalco and JP Associates were AUTO -1.2% (96.5) 7,792
down by 3-5%. In the mid-cap segment, BF Utlities, Sun Pharma Advanced METAL -3.5% (573.8) 15,892
Research, Godrej Industries, Bajaj Finserv and MRF were up by 4-11%, while OIL & GAS -2.0% (196.4) 9,872
Aban Offshore, Hindustan Oil, Jubilant Foodworks, Hindusthan National Glass BSE IT -1.2% (61.7) 5,246
and Simplex Infrastructure were down by 5-18%.
Global Indices Chg (%) (Pts) (Close)
Markets Today
Dow Jones -1.5% (162.8) 10,620
The trend deciding level for the day is 17083 / 5119 levels. If NIFTY trades NASDAQ -2.0% (47.5) 2,347
above this level during the first half-an-hour of trade then we may witness a FTSE -3.1% (170.9) 5,263
further rally up to 17241 – 17488 / 5167 – 5241 levels. However, if NIFTY Nikkei -1.5% (158.0) 10,463
trades below 17083 / 5119 levels for the first half-an-hour of trade then it
Hang Seng -1.4% (277.0) 20,145
may correct up to 16836 – 16677 / 5045 – 4997 levels.
Straits Times -0.4% (12.7) 2,855
Indices S2 S1 R1 R2 Shanghai Com -0.5% (13.9) 2,697
SENSEX 16,677 16,836 17,241 17,488
NIFTY 4,997 5,045 5,167 5,241 Indian ADRs Chg (%) (Pts) (Close)
Infosys -3.0% (1.8) $57.9
News Analysis Wipro -2.0% (0.4) $21.6
Results Reviews: DLF, Deccan Chronicle, Electrosteel Castings, Nalco, Satyam -2.5% (0.1) $5.1
McNally Bharat, Shiv-Vani Oil and Gas ICICI Bank -4.1% (1.7) $39.2
Results Previews: GAIL, NTPC HDFC Bank -1.6% (2.4) $146.4
Refer detailed news analysis on the following page.
Advances / Declines BSE NSE
Net Inflows (May 13, 2010)
Advances 834 259
Rs cr Purch Sales Net MTD YTD
Declines 2,063 1,058
FII 2,515 2,429 85 (2,809) 26,902 Unchanged 82 35
MFs 827 633 193 (681) (7,910)
FII Derivatives (May 14, 2010) Volumes (Rs cr)
Open BSE 3,970
Rs cr Purch Sales Net
Interest
NSE 13,072
Index Futures 1,792 3,216 1,424 13,971
Stock Futures 1,466 1,895 429 29,324
Gainers / Losers
Gainers Losers
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
Godrej Inds 165 5.4 Aban Offshore 831 (18.3)
Bajaj Finserv 538 5.2 Hindustan Oil 200 (6.3)
MRF 7,439 4.4 JSW Steel 1,194 (5.4)
Shriram Trans 567 3.8 Sesa Goa 376 (4.7)
Sun TV 440 3.5 Tata Steel 549 (4.7)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 0109965391

2. Market Outlook | India Research
4QFY2010 Result Reviews
DLF
DLF reported its 4QFY2010 results, which were marginally below our expectations.
Revenues grew by 77.7% yoy to Rs1,994cr, driven by an improvement in volumes and
pricing in residential segment, albeit on low base; however, it declined by 1.6% qoq.
Operating margins came in at 50.1%, higher by 851bp qoq and 3,637bp yoy, on account
of revenue recognition from the Shivaji Road project in Delhi, where margins were in the
mid-40s. Tax rate stood at 31.8% in 4QFY2010, against 0% in 4QFY2009 and 26.6% in
3QFY2010. Consequently, reported PAT came in at Rs426cr, up by 168% yoy (down 8.9%
qoq). The DLF-DAL integration and purchase of Compulsorily Convertible Preference
shares (CCPS), which were earlier issued by DAL to SC Asia to the tune of Rs 3,085cr, have
sustainably increased the gross debt level. The re-rating of the stock hinges on a recovery
in the commercial leasing segment, non-core assets sales and successful new launches,
which can hive off the high-debt level. We believe current valuations factor in near-term
growth opportunities. Hence, we recommend a Neutral on stock.
Deccan Chronicle Holdings
Deccan Chronicle Holdings (DCHL) posted muted results this quarter, with a Top-line
growth of 6.3% yoy to Rs191.7cr (Rs180.3cr), below our estimates of a ~16% yoy growth
to Rs210cr, on account of the political turmoil in Andhra Pradesh (Telangana region).The
company reported weak Earnings, registering a decline of 20.2% yoy to Rs6.5cr (Rs8.1cr),
as the Tax expenditure and depreciation increased by 189% yoy to Rs57.9cr and 32.9%
yoy to Rs12.6cr, respectively. On the operating front, DCHL reported a Gross Margin
expansion of 2,752bp yoy (benign newsprint prices), driving operating margin expansion
of 1,900bp yoy. After the muted 4QFY2010 results, we maintain a Buy on the stock, with a
revised Target Price of Rs193 (Rs216), based on 12x FY2012E Standalone EPS of Rs13.4,
and Rs32 per share value for the IPL Franchise (25% discount to the floor price of US
$225mn set for IPL 4 Auctions).
Electrosteel Castings
The standalone net revenue came in at Rs315cr, down 35% yoy, primarily on account of
the blast furnace shutdown. During the quarter, total expenses as a % of Net revenues
increased substantially to 94.9%, as compared to 82.7%. Power and Fuel as % of net
revenue came in at 8.1% yoy (5.1%), staff costs were higher at 9.2% (5.5%), and other
expenses were at 31.9% (26.9%). However, higher other operating income (up 137.6% yoy
to Rs31cr) partly offset the negative impact of higher costs. Consequently, EBITDA de-grew
by 51.7% yoy to Rs47cr and EBITDA margins came in at 14.8% (as compared to 20% last
year). The poor operating performance reflected in the bottom-line and the Net profit
came in at Rs21cr, a decline of 54.4% yoy. We maintain a Buy on the stock, with a Target
Price of Rs72.
NALCO
Nalco’s net revenue increased by 47.3% yoy and 15.7% qoq to Rs1,686.3cr, higher than
our ours and consensus estimates. The growth in the top-line was mainly driven by higher
realisations and an increase in electricity sales. EBITDA margins expanded by 2,496bp yoy
and 1,239bp qoq, due to a substantial reduction in raw material and power costs.
Consequently, net profit increased by 371.5% and 152.3% qoq to Rs391.5cr, ahead of
ours and consensus estimates. We believe that NALCO is trading at rich valuations, as
compared to its peers like Hindalco and Sterlite. We maintain a Sell on the stock, with a
Target Price of Rs316.
May 17, 2010 2

3. Market Outlook | India Research
McNally Bharat
McNally Bharat (MBE) declared its stand alone numbers. Sales for the quarter increased by
19% to Rs562cr, while EBITDA improved by 130bp to 7.3%. Interest costs for the quarter
declined by 53% yoy, due to which adj. PAT grew by 142% to Rs24cr (from Rs10cr).
McNally Sayaji, a Subsidiary of MBE, also declared its numbers. Sales for the quarter
increased by 68% to Rs126cr, while EBITDA declined by 130bp to 16.4%. PAT for the
quarter increased by 42% to Rs10.5cr. If we were to add up the FY2010 numbers of MBE
and MSE, the sales stood at Rs1,727cr, while total adj. PAT came in at Rs68.6cr, which is
higher than our estimate of Rs63.7cr (including the international subsidiary). Currently, we
have a Buy rating on the stock, with a Target Price of Rs467. We maintain the same and
would revise the same after the earnings’ call with management.
Shiv-Vani Oil and Gas
Shiv-Vani Oil and Gas (SOGES) announced its results over the weekend. Company’s top-
line and bottom-line increased during the quarter and it could be attributed to rig
deployment over the last one year. Company’s top-line increased by 27% yoy to Rs299cr
(Rs236cr). Contract expenditure during the quarter fell by 2.3% yoy to Rs57.2cr (Rs58.5cr),
whereas total operating expenditure increased by mere 2.6% yoy to Rs147.9cr (Rs144.1cr).
OPM during the quarter expanded by 1174bp yoy to 50.6% (38.9%), resulting in EBITDA
increasing by robust 65.4% yoy to Rs152cr (Rs92cr). Other income was mere Rs0.8cr
(Rs16.3cr), whereas Depreciation and interest expenditure increased by robust 80.3% to
Rs32.2cr (Rs17.8cr) and 117% yoy to Rs58.6cr (Rs27cr), respectively. On account of lower
tax rate and exceptional loss of Rs6.5cr in 4QFY2009, PAT during the quarter registered a
robust growth 52.3% yoy to Rs47cr (Rs30.8cr). However, EPS grew at a lower rate of
44.3% yoy to Rs10.1 (Rs7) on account of equity dilution during the quarter. During the
quarter, company allotted 24,57,895 equity shares at a premium of Rs370 to M/s
Templeton Strategic Emerging Markets Fund by way of preferential allotment. The stock is
currently under review.
Result Previews
GAIL
GAIL is expected to announce its 4QFY2010 results today. GAIL's performance during the
quarter is likely to be driven by increased transmission of KG gas volumes and improved
performance in the petrochemical segment. However, performance of the LPG & Liquid
Hydrocarbon Segment is likely to be weak. Thus, GAIL's overall performance is likely to be
strong for the quarter. We expect company to report top-line growth of 10.2% yoy to
Rs6,728cr (Rs6,104cr). Margin is expected to contract by 124bp yoy to 14.4% (15.7%)
during the quarter. On the bottom-line front, we expect company to report growth of
13.1% yoy to Rs713cr (Rs630cr). We maintain a Buy on the stock, with a target price of
Rs553.
NTPC
NTPC is slated to announce its results today. We expect the company’s net sales to grow by
4.2% yoy to Rs11,927cr, aided by a 5.0% growth in volumes. The operating profit of the
company is expected to grow by 23.3% to Rs2,737cr, primarily due to a decline in fuel
costs. However, we estimate the company's net profit to de-grow by 13.2% to Rs1,834cr,
due to a higher tax expense. We maintain an Accumulate on the stock, with a Target Price
of Rs230.
May 17, 2010 3

4. Market Outlook | India Research
Economic and Political News
Telcos may have to raise Rs50,000cr to fund 3G rollout
MMRDA needs Rs1.13lakh cr investment for infra development
Major infra sectors miss output targets in FY'10: Govt. report
Three firms shortlisted for CIL's US $ 2bn overseas projects
Corporate News
ONGC, OIL subsidy burden rises 42% in one quarter
Jindal Power may launch Rs7,200cr IPO by June-July
RIL signs MoU with Russian firm to make butyl rubber
SLDC snubs Tata Power, supports R-Infra
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
GAIL Dividend, Results
Godrej Properties Results
JK Paper Results
Karnataka bank Results
L&T Results
Mudra Port Dividend, Results, Stock Splits
Network Results
NTPC Dividend, Results
SEL Manufacturing Results
May 17, 2010 4

5. Market Outlook | India Research
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