1. Market Outlook
India Research
September 9, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The benchmark indices opened negative following weak trading cues from the BSE Sensex 0.1% 21.6 18,667
Asian indices and overnight US markets. While the markets continued trading Nifty 0.1% 3.9 5,608
weak in the morning session, they recouped losses amidst volatility to trade in MID CAP 0.3% 27.2 7,996
positive zone by the beginning of the afternoon session. The indices touched SMALL CAP 0.6% 59.4 10,216
intra-day highs mid-session before a sharp sell-off took the markets past the BSE HC 0.4% 21.8 5,688
previous close in the red. However, markets once again recovered in the final BSE PSU 0.2% 24.4 9,979
session and managed to close flat for the day. The auto, FMCG and capital BANKEX 0.1% 17.7 12,706
goods stocks fell, while IT and real estate counters reversed earlier losses. The AUTO -0.2% (17.5) 9,079
Sensex and Nifty closed with marginal gains of 0.1% each. The BSE mid- and METAL 0.4% 58.7 16,066
small-cap indices gained 0.3% and 0.6%, respectively. Among the front-liners, OIL & GAS -0.2% (20.3) 10,203
ACC, Bharti Airtel, SBI, HUL and Sterlite Industries gained 2–3%, while Reliance BSE IT 0.6% 31.9 5,650
Infra, ITC, ICICI Bank, HDFC Bank and Maruti Suzuki lost 1-2%. Among the
Global Indices Chg (%) (Pts) (Close)
mid-caps, Britannia Inds, Zuari Inds, Monsanto India, Gammo Infra and Core
Dow Jones 0.4% 46.3 10,387
Projects gained 6-4%, while Prakash Inds, Motherson Sumi, Prism Cement and
Madras Cements lost 4 -13%. NASDAQ 0.9% 20.0 2,229
FTSE 0.4% 21.9 5,430
Markets Today Nikkei -2.2% (201.4) 9,025
Hang Seng -1.5% (312.9) 21,089
The trend deciding level for the day is 18643 / 5600 levels. If NIFTY trades Straits Times -0.8% (24.7) 3,011
above this level during the first half-an-hour of trade then we may witness a Shanghai Com -0.1% (3.1) 2,695
further rally up to 18745 – 18823 / 5633 – 5658 levels. However, if NIFTY
trades below 18643 / 5600 levels for the first half-an-hour of trade then it may
correct up to 18565 – 18462 / 5575 - 5543 levels. Indian ADRs Chg (%) (Pts) (Close)
Infosys 1.3% 0.8 $61.6
Indices S2 S1 R1 R2 Wipro 0.9% 0.1 $13.1
SENSEX 18,462 18,565 18,745 18,823 Satyam 0.0% - $5.3
NIFTY 5,543 5,575 5,633 5,658 ICICI Bank 2.3% 1.0 $44.4
HDFC Bank 1.0% 1.6 $165.1
News Analysis
Advances / Declines BSE NSE
Sun Pharma receives favourable judgement in Taro saga
Advances 1,632 1,022
SpiceJet to go international
Declines 1,380 795
Prakash Industries – Update
Refer detailed news analysis on the following page. Unchanged 92 42
Net Inflows (September 07, 2010)
Volumes (Rs cr)
Rs cr Purch Sales Net MTD YTD
BSE 6,160
FII 2,650 2,449 201 2,940 62,322
NSE 14,112
MFs 753 366 387 633 (15,482)
FII Derivatives (September 08, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 1,066 1,653 (587) 18,183
Stock Futures 1,052 1,110 (58) 37,540
Gainers / Losers
Gainers Losers
Price chg Price chg
Company Company
(Rs) (%) (Rs) (%)
IDBI Bank 134 5.3 Madras Cement 115 (3.7)
Max India 164 5.3 IOC 413 (2.7)
Bajaj Holding 852 4.0 India Cement 113 (2.6)
Anant Raj 141 3.8 775 (2.5) 1
Reliance Capital
Oil India 1,548 3.7 Financial Tech 1,371 (2.3)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Sun Pharma receives favourable judgement in Taro saga
Sun Pharma has received favourable judgement from Israel Supreme Court which upheld
Tel-Aviv district court ruling dismissing the appeal by Taro Pharmaceutical Industries Ltd.
(Taro), holding that the Israeli special tender offer (STO) rules do not apply to the tender
offer by Sun Pharma to purchase all outstanding shares of Taro for US $7.75 per share in
cash. The three-judge bench of the Supreme Court said there were no legal or moral
grounds which require Sun to comply with the STO rules. The Court declared that its ruling
in favour of Sun Pharma was dictated by concerns of fairness, good faith and commercial
stability and affirmed the District Court's finding that Taro and its directors had acted in
bad faith. The Court also awarded Sun expenses. Thus the open tender offer is now
scheduled to expire on September 14, 2010. Further Sun will provide a subsequent
offering period of not less than ten business days nor more than 20 business days
following the expiration date.
We view this development as positive as Sun Pharma is inching closer to complete Taro
acquisition, though the future course of action by Taro promoters (holds 11.5% stake with
41% voting rights) is still uncertain. Sun Pharma has so far acquired 36.6% stake in Taro at
a total cost of US$ 105 mn. We expect Sun to now convert remaining 3.7mn warrants
thereby increasing its stake to 42.2%. On the valuation front, we have valued Taro at Rs85
(1x Mcap/Sales given the uncertainty over Taro’s financials) per share. The stock is trading
at 24.5x FY2011E and 20.7x FY2012E core earnings. We recommend Neutral on the
stock with a Fair Value of Rs1,781 (Rs1,696 per share for core business and Rs85 for
Taro).
SpiceJet to go international
SpiceJet is expected to start its international operations with flight to Kathmandu and
Colombo from October 7 and 9, 2010 respectively. The company shall operate six flights
to Kathmandu and daily flights to Colombo. The company is expected to generate around
10-12% of the total revenues from international operations with the one-way fares for the
two sectors being pegged at a minimum of Rs3,160 for Delhi-Kathmandu and Rs1,331 for
Chennai-Colombo. We have a Neutral recommendation on SpiceJet.
Prakash Industries – Update
Media reports have indicated that Prakash Industries is engaged in illegal coal mining
activities. In response, the management has challenged the veracity of the allegations and
issued a notice to the stock exchanges stating that coal mine is used for its sponge iron
facility and midlings are used by its 75MW captive power plant. To meet its additional
requirement of coal for expanded sponge iron capacity, the company buys coal through
e-auction route. Further, the company has also stated that extraction of coal, its quality,
grade and usage are being verified every year by Office of coal controller, Government of
India and State mining department. We maintain a Buy rating on the stock and would view
the correction as an opportunity, for long term investors.
September 9, 2010 2

3. Market Outlook | India Research
Economic and Political News
Will snatch back undeveloped coal blocks, issuing notices: Govt
M&A activity slows down in August to US $4.2bn
India protests Ohio offshoring ban
India's basmati rice exports to jump 9% in 2010-11 season
Corporate News
Indosolar fixes IPO price band at Rs29-32
Hindustan Copper to form JV with Hutti Gold Mines for reviving copper mining activities
BHEL to form JV with Kerala govt to acquire a unit of Kerala Electrical & Allied Engg Co.
Tata Steel raises Rs700cr from selling shares of Tata Motors & Tata Power to Tata Inds
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
September 9, 2010 3

4. Market Outlook | India Research
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