The key Indian stock market indices declined on August 26, 2010. The Sensex closed down 0.7% and the Nifty closed down 0.8%. Mid-cap and small-cap stocks also witnessed declines. Hotel room tariffs are expected to increase 10-15% starting in September due to an anticipated rise in tourist traffic for the winter season. Cipla's management expects the company's revenues to grow 7-10% in fiscal year 2011 and plans to spend over Rs. 1,000 crore on expansions and investments in biotechnology.

1. Market Outlook
India Research
August 26, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The markets edged lower at the onset of the trading session, following weak BSE Sensex -0.7% (132.0) 18,180
cues from the Asian markets. The Sensex hit a fresh intraday low in morning Nifty -0.8% (42.8) 5,462
trade as the market extended initial losses. A strong intraday rebound was MID CAP -1.5% (117.0) 7,715
witnessed in afternoon trade as European indices opened in the green; SMALL CAP -1.4% (141.1) 9,760
however, the markets came off the higher levels later. A sharp slide in late trade BSE HC -1.3% (74.2) 5,581
pushed the key benchmark indices to the day's lows at the fag end of the
BSE PSU -0.6% (61.9) 9,675
trading session. The Sensex closed down by 0.7% and the Nifty closed down by
BANKEX -1.0% (121.9) 12,416
0.8%. BSE mid-cap and BSE small-cap also witnessed declines and closed down
AUTO -1.4% (128.2) 8,766
by 1.5% and 1.4%, respectively. Among the front liners, Sterlite Industries,
METAL -1.2% (186.7) 14,995
ONGC, ITC, TCS and Infosys gained 0–1%, while DLF, Tata Steel, Hindalco,
Cipla and Hero Honda lost 2–4%. Among mid caps, FDC, Ruchi Soya, Brigade OIL & GAS -0.6% (56.8) 10,118
Enterprises, Oriental Bank of Commerce and BASF India gained 2–7%, while BF BSE IT 0.0% 0.4 5,511
Utilities, State Bank of Travancore, EIH, State Bank of Bikaner and Jaipur and Global Indices Chg (%) (Pts) (Close)
IBN18 Broadcast declined 6–10%. Dow Jones 0.2% 19.6 10,060
NASDAQ 0.8% 17.8 2,142
Markets Today
FTSE -0.9% (46.6) 5,109
The trend deciding level for the day is 18216 / 5574 levels. If NIFTY trades Nikkei -1.7% (149.8) 8,845
above this level during the first half-an-hour of trade then we may witness a Hang Seng -0.1% (23.7) 20,635
further rally up to 18276 – 18372 / 5495 – 5527 levels. However, if NIFTY
Straits Times 0.1% 3.7 2,927
trades below 18216 / 5574 levels for the first half-an-hour of trade then it may
Shanghai Com -2.0% (53.7) 2,597
correct up to 18120 – 18060 / 5441 - 5420 levels.
Indices S2 S1 R1 R2 Indian ADRs Chg (%) (Pts) (Close)
SENSEX 18,060 18,120 18,276 18,372 Infosys 0.2% 0.1 $58.7
NIFTY 5,420 5,441 5,495 5,527 Wipro 0.1% 0.0 $12.9
Satyam -0.2% (0.0) $4.5
News Analysis ICICI Bank -1.4% (0.6) $41.5
HDFC Bank -0.1% (0.1) $161.8
Hotel room tariffs set to increase
Cipla – AGM key takeaways
Refer detailed news analysis on the following page. Advances / Declines BSE NSE
Net Inflows (August 24, 2010) Advances 839 265
Rs cr Purch Sales Net MTD YTD Declines 2,109 1,112
FII 4,786 3,883 903 11,581 59,275 Unchanged 115 23
MFs 483 1,124 (641) (2,374) (15,319)
Volumes (Rs cr)
FII Derivatives (August 25, 2010)
Open BSE 5,751
Rs cr Purch Sales Net
Interest NSE 14,278
Index Futures 6,578 7,466 (888) 19,110
Stock Futures 8,524 8,812 (288) 38,697
Gainers / Losers
Gainers Losers
Price chg Price chg
Company Company
(Rs) (%) (Rs) (%)
NALCO 422 5.4 IRB Infra 294 (4.7)
Idea Cellular 70 2.8 Jai Corp 263 (4.7)
Oriental Bank 436 2.7 Bombay Dye. 597 (4.5)
Patni Comp. 540 2.3 Indiabulls Fin. 137 (4.3)
Jubilant Org. 351 2.2 Shriram Transp. 755 (4.3)
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Hotel room tariffs set to increase
With the onset of the key winter season, hoteliers are planning to increase the average
room rates (ARRs) by ~10–15% from September 2010 as they expect tourist traffic to
improve. Hotels in India traditionally increase rates before the crucial winter season every
year. However, the economic slowdown and the terrorist attacks in the country in 2008
had reduced the number of travelers over the last two seasons, resulting in ARRs crashing
by ~25–30% on the back of lower occupancy levels. As per hoteliers, considering the level
of 2008–09 as the benchmark, the industry is inching closer to those levels in terms of
booking volumes. Even though demand in the leisure travel segment may take longer to
revive, demand from the business segment, besides local tourists, is likely to push up
occupancy rates (ORs). ORs are expected to rise to ~70% during the upcoming season
(October 2010–March 2011), thereby providing opportunity to hoteliers to firm up their
ARRs. We expect TAJ GVK to be one of the prime beneficiaries of these changing
dynamics. Hence, we continue to maintain Buy on the stock with a Target Price of Rs240.
Cipla – AGM key takeaways
We attended the 74th Annual General Meeting (AGM) of Cipla. Following are the key
takeaways from the AGM:
• For FY2011, management expects the company’s top line to grow by 7–10%.
• In order to maintain the company’s leading position in the pharma industry,
management plans to incur in excess of Rs1,000cr on the capex front in the near
future for expanding the company’s existing API facilities (Patalganga, Kurkumbh and
Bengaluru); setting up an R&D centre at Patalganga and expanding the existing centre
at Vikhroli; and investment in biotechnology (India and China) and stem cell therapy.
• On the biotechnology front, management expects to launch the first biosimilar product
in early CY2012.
• Management has also announced the acquisition of domestic pharma company
Meditab Specialties for a consideration of Rs133.4cr. Meditab Specialities has
small and mid-size formulation facilities at multiple locations. This acquisition will help
Cipla consolidate its business in various countries, including China and Africa.
The stock is currently trading at 22.4x FY2011E and 18.0x FY2012E earnings.
We maintain Buy on the stock with a Target Price of Rs360.
August 26, 2010 2

3. Market Outlook | India Research
Economic and Political News
India to speed up trade talks with EU, Japan and Malaysia
Rs50,000cr infrastructure fund to be set up by early next fiscal: Montek Singh Ahluwalia
State firms not to counterbid for Cairn: Oil Ministry
Inflation a major concern: RBI
Corporate News
State Bank of Mysore to come with rights issue at Rs540/share with 3:10 ratio
Cummins India plans Rs750cr ramp-up
Mahindra & Mahindra to complete Ssangyong acquisition in 4 months
Religare promoters make 20% open offer in the firm at Rs457/share
Royalty rates on radio to shift to revenue sharing from fixed fee regime
Piramal Healthcare plans to sell Thane land: Reports
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Event for the day
Bajaj Corp. Results
August 26, 2010 3

4. Market Outlook | India Research
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