1. Market Outlook
India Research
July 19, 2011
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex -0.3% (54.9) 18,507
The market edged lower in early trade as US index futures dropped. A bout of Nifty -0.3% (14.1) 5,567
volatility was witnessed as the key benchmark indices pared gains after hitting MID CAP 0.2% 15.5 7,022
fresh intraday highs in morning trade. The market regained the positive terrain
SMALL CAP 0.4% 30.7 8,394
after slipping into red once again in mid-morning trade. The market once again
BSE HC -0.8% (52.3) 6,466
slipped into red in early afternoon trade as most Asian stocks fell. The market
BSE PSU 0.2% 20.5 8,563
hit a fresh intraday low in afternoon trade as European shares dropped in early
BANKEX 0.0% (1.7) 12,845
trade. The market hovered in red in mid-afternoon trade. Volatility ruled the
roost in late trade as the market hit a fresh intraday low. The Sensex and Nifty AUTO -1.0% (93.2) 8,900
closed with losses of 0.3% each. The mid-cap index ended higher by 0.2%, METAL 0.5% 69.8 14,680
while the small-cap index closed with gains of 0.4%. Among the front runners, OIL & GAS -0.3% (29.2) 9,092
Hindalco Industries, BHEL, Tata Power, HDFC Bank and HDFC gained 1–3%, BSE IT -0.8% (47.2) 5,809
while TCS, Tata Motors, Cipla, Mahindra & Mahindra and RCom lost 1–2%. Global Indices Chg (%) (Pts) (Close)
Among mid caps, Himadri Chemicals, Godfrey Phillips, Sujana Towers, Dow Jones -0.8% (94.6) 12,385
TTK Prestige and Alstom Projects gained 6–14%, while KGN Industries, Amtek NASDAQ -0.9% (24.7) 2,765
Auto, GTL, Motilal Oswal and Zydus Wellness lost 3–5%.
FTSE -1.6% (90.9) 5,753
Nikkei 0.4% 38.4 9,974
Markets Today
Hang Seng -0.3% (70.6) 21,805
The trend deciding level for the day is 18,533/5,572 levels. If NIFTY trades Straits Times -0.2% (5.3) 3,079
above this level during the first half-an-hour of trade then we may witness a Shanghai Com -0.1% (3.5) 2,817
further rally up to 18,597 – 18,686/5,592 – 5,617 levels. However, if NIFTY
trades below 18,533/5,572 levels for the first half-an-hour of trade then it may Indian ADRs Chg (%) (Pts) (Close)
correct up to 18,444 – 18,380/5,546 – 5,526 levels. Infosys -1.2% (0.8) $60.6
Indices S2 S1 R1 R2 Wipro -1.3% (0.2) $12.6
ICICI Bank -1.7% (0.8) $46.5
SENSEX 18,380 18,444 18,597 18,686
HDFC Bank -0.2% (0.4) $177.6
NIFTY 5,526 5,546 5,592 5,617
News Analysis Advances / Declines BSE NSE
Motherson Sumi to pay €141.5mn to acquire 80% stake in Peguform Advances 1,546 766
1QFY2012 Result Preview – HDFC Bank, Cadila Healthcare, Crompton Declines 1,322 682
Greaves, Ashok Leyland Unchanged 144 66
Refer detailed news analysis on the following page
Net Inflows (July 15, 2011) Volumes (` cr)
` cr Purch Sales Net MTD YTD
BSE 2,643
FII 1,657 1,512 145 6,620 9,290
NSE 8,277
MFs 282 361 (79) 320 3,546
FII Derivatives (July 18, 2011)
Open
` cr Purch Sales Net
Interest
Index Futures 1,258 1,107 151 12,265
Stock Futures 1,300 1,445 (144) 32,365
Gainers / Losers
Gainers Losers
Company Price (`) chg (%) Company Price (`) chg (%)
Tata Comm. 215 5.1 Amtek Auto 154 (3.5)
NCC 84 4.4 GTL 86 (3.2)
Videocon Ind. 199 4.4 Shree Renuka 70 (2.0)
Gujarat NRE Coke 48 4.3 TCS 1,125 (2.0) 1
Godrej Inds 227 4.1 Tata Motors 1,016 (1.9)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Motherson Sumi to pay €141.5mn to acquire 80% stake in Peguform
Motherson Sumi Systems (MSSL) along with group firm Samvardhana Motherson Finance
Ltd. (SMFL) has agreed to acquire 80% stake in Peguform GmbH and Peguform Iberica, SL
together with 50% stake in Wethje Entwicklungs GmbH and Wethje Carbon Composite
GmbH. The acquisition would be made through a joint venture company in which MSSL
would hold 51% stake and SMFL would hold 49% stake. The total share consideration for
the transaction is €141.5mn, of which MSSL would pay €72.2mn and the remaining would
be paid by SMFL. MSSL intends to fund its share of acquisition through overseas loan.
We believe the deal is attractively valued at ~5.1x and ~0.25x EV/EBITDA and EV/Sales,
respectively, on CY2010 basis. We expect the deal to be positive for the company in the
long run; however, low operating margins of Peguform Group (4.9% in CY2010 as
against 6.5% for SMR and 11% for consolidated operations) remain a near-term concern.
Currently, we are not incorporating Peguform’s acquisition into our financials as we await
more information on management’s strategy and turnaround plan. At `239, MSSL is
trading at rich valuations of 21x and 17.7x FY2012E and FY2013E earnings, respectively.
We recommend Neutral on the stock.
1QFY2012 Result Preview
HDFC Bank
HDFC Bank is scheduled to announce its 1QFY2012 results. We expect the bank to report
healthy NII growth of 25.9% yoy to `3,023cr, in spite of the expected NIM moderation.
Non-interest income is expected to register growth of 23.1% yoy, leading to operating
income growth of 25.1% yoy. Due to relatively faster rise in operating expenses, pre-
provision profit is expected to grow by relatively lower 22.1% yoy. However, provisions are
expected to decline marginally by 1.8% yoy, leading to healthy net profit growth of 32.2%
yoy to `1,073cr. At the CMP, we believe the stock is trading at fair valuations of 3.4x
FY2013E P/ABV. We maintain our Neutral recommendation on the stock.
Cadila Healthcare
For 1QFY2012, Cadila Healthcare (Cadila) is expected to post sales and adjusted net
profit of `1,281cr and `179cr, registering yoy growth of 21.4% and 35.6%, respectively.
Top-line growth would be mainly driven by domestic sales and exports. On the operating
front, margins would come at 20.5%, almost similar to the 20.7% level in 1QFY2011. At
the CMP, the stock trades at 25.1x FY2012E and 18.4xFY2013E earnings, respectively. We
recommend Accumulate with a target price of `1,053.
Crompton Greaves
Crompton Greaves is scheduled to announce its 1QFY2012 results. The company’s
revenue is expected to increase by 8% yoy to `2,486cr. On the operating front, we expect
the margin to compress by 42bp yoy to 12.5%. Net profit is expected to decline by 4.3%
yoy to `183cr. The stock is currently trading at 15.9x FY2012E and 13x FY2013E earnings.
We will revisit our estimates post the conference call. Currently, we maintain our Buy rating
on the stock with a target price of `300.
Ashok Leyland
Ashok Leyland (ALL) is slated to announce its 1QFY2012 results. We expect the company’s
top line to grow modestly by 7% yoy, driven by growth in average net realisation as
volumes during the quarter witnessed a 10% decline. On the operating front, EBITDA
margin is expected to post a decline of 53bp yoy to 9.5%, owing to higher raw-material
cost and lower operating leverage. As a result, the bottom line is expected to decline by
17% yoy to `102cr. The stock rating is under review.
July 19, 2011 2

3. Market Outlook | India Research
Economic and Political News
IIP base revision to up FY11 GDP estimates to 8.9%: Crisil
Indian consumer confidence declines in 2QCY2011: AC Nielsen survey
MSME business confidence declines for July–September quarter: CII
Corporate News
PFC to raise `22,000cr from tax-free infrastructure bonds
L&T Finance's `1,750cr IPO to open on July 26
iGate Patni bags `133cr IT deal from US firm
Glenmark Pharmaceuticals gets USFDA nod for anti-ulcer capsules
Steel Strip Wheels bags US$33mn order from BMW
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Ashok Leyland Results
Cadila Healthcare Results
Chambal Fertilizers Results
Crompton Greaves Results
Greenply Industries Results
HDFC Bank Results
NIIT Technologies Results
SKF India Results
July 19, 2011 3

4. Market Outlook | India Research
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