Market Outlook

India Research
April 13, 2012

Dealers Diary
The Indian markets are expected to open in green tracking positive opening in most of the Asian markets. Asian markets ended on a positive note yesterday as a decrease in Italian and Spanish bond yields and remarks by an ECB official that indicated the ECB could resume bond purchases through its securities markets program. The U.S. markets rallied yesterday as investors entertained thoughts of further stimulus from global central banks, and embraced lower borrowing costs in Europe and the assumption that Chinas economy is headed for a soft landing after its lower-than-expected GDP data at 8.1% (earlier 8.9%). The strength was partly in reaction to report showing a significantly narrower than expected U.S. trade deficit to US$46.0bn in February from US$52.5bn in January. Meanwhile a report from the Labor Department showed a notable increase in initial jobless claims to 380,000 in the week ended April 7 (previous week - 367,000). The Indian benchmark indices rose notably yesterday, joining a global rally, as easing concerns over Europe's debt crisis helped investors shrug off domestic data showing lower-than-expected IIP data (4.1%). The markets will now closely watch out for WPI inflation data for March 2012 (Bloomberg estimate 6.65%) and RBI monetary policy review due to be released next week. Markets Today The trend deciding level for the day is 17,335 / 5,271 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,393 17,453 / 5,296 5,315 levels. However, if NIFTY trades below 17,335 / 5,271 levels for the first half-an-hour of trade then it may correct up to 17,275 17,217 / 5,252 5,228 levels.
Indices SENSEX NIFTY S2 17,217 5,228 S1 17,275 5,252 PIVOT 17,335 5,271 R1 17,393 5,296 R2 17,453 5,315

Domestic Indices BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT Global Indices Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com

Chg (%)

(Pts)

(Close)

0.8 1.0 0.9 1.0 0.0 0.7 1.6 1.3 2.2 0.5 (1.2)
Chg (%)

133.2 17,333 50.0 53.6 68.2 0.1 48.8 5,277 6,384 6,842 6,626 7,307

191.2 11,980 124.7 10,110 235.5 10,956 40.3 (68.9)

(Pts)

7,941 5,923
(Close)

1.4 1.3 1.3 0.7 0.9 1.1 1.8

Chg (%)

181.2 12,987 39.1 75.7 66.1 31.7 41.9

(Pts)

3,056 5,710 9,525 2,978 2,351

(Close)

186.7 20,327

Indian ADRs

INFY WIT IBN HDB

Advances / Declines Advances Declines Unchanged

0.5 0.6 1.8 2.0

0.3 0.1 0.6 0.7

BSE

$56.8 $10.8 $34.8 $34.1

NSE

News Analysis
IIP growth at 4.1% for February Coal royalty increased to 14% ad valorem ABB wins `75cr order from DMRC 4QFY2012 Result Preview - Infosys
Refer detailed news analysis on the following page

1,694 1,135 129

936 490 80

Net Inflows (April 11, 2012)

` cr FII MFs ` cr
Index Futures Stock Futures

Purch 1,932 491

Sales 2,303 641 Purch 1,237 1,102 Gainers

Net (372) (150) Sales 1,044 1,089 Net 193 13

MTD (1159) (634)

YTD 44,167 (6,207) Open Interest 9,737 22,880 Losers

Volumes (` cr) BSE NSE

2,236 10,707

FII Derivatives (April 12, 2012)

Gainers / Losers
Company
Max India Shree Renuka Sugar Rajesh Exports Alstom Projects Jindal Steel

Price (`)
204 33 135 364 510

chg (%)
8.3 6.1 5.0 5.0 4.9

Company
HDIL Indraprastha Gas United Brew Jet Air India Godrej Industries

Price (`)
83 221 494 349 265

chg (%)
(4.6) (4.1) (3.8) (2.8) (2.4)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

IIP growth at 4.1% for February

The industrial production (IIP) growth was sluggish for the month of February, registering a growth of 4.1% yoy, which was well below the Bloomberg consensus estimates of 6.7% yoy. January IIP figures were significantly downwardly revised to 1.1% yoy from 6.8% yoy. The 12-month rolling industrial production growth, which has been on a declining trend since November 2010 (9.9%), slipped further to 4.5% yoy. The 8.5% manufacturing growth for January was downwardly revised to 1.4% yoy. For February too, the manufacturing index growth was modest at 4.0% yoy. However, on the positive side, 18 out of 22 industry groups in the manufacturing sector registered above zero growth during February 2012. Mining activity recorded expansion for the first time in 7 months, growing by 2.1% yoy. However, the growth can be partly attributed to the low base effect (6.4% mom contraction in mining activity in February 2011). Growth in electricity production which had moderated down to 3.2% yoy in January 2012, revived in February 2012, growing by 8.0% yoy. As per use-based data, growth was primarily contributed by 10.6% yoy growth in capital goods sector (low base effect created due to 10.2% mom contraction in capital goods index in February 2011) and 7.5% yoy growth in basic goods index.

Coal royalty increased to 14% ad valorem

India's Cabinet has announced to increase royalty on coal to ad valorem 14% based on its pit-head price. Currently royalty on coal is charged at the rate of 5% plus fixed charge which range from `55-130/tonne depending on the coal grade. For Coal India, the royalty is borne by it's customers and hence there will be no impact on its financials. Hence, we retain our estimates on Coal India and maintain our Neutral stance. However, this move will increase coal costs for steel, aluminium and sponge iron companies by 4-10% depending on the grade of coal purchased by them. Since steel and aluminium players sell their products at a price based on global benchmarks, the additional royalty costs will have to be absorbed by them thus affecting their margins slightly.

ABB wins `75cr order from DMRC

ABB has announced it has won an order worth `75cr from Delhi Metro Rail Corporation (DMRC). ABB is required to complete the power infrastructure for stage 1 of the east west corridor of Jaipur Mass Rapid Transport System (MRTS). The project scope includes electrification of overhead lines, provision of auxiliary substations and supply of SCADA solution. The new order contributes insignificantly to ABBs order book (less than 1% of order book, which stands at `9,129cr). We maintain our Sell recommendation on the stock with a target price of `503.

April 13, 2012

Market Outlook | India Research

Result Preview
Infosys
Infosys is slated to announce its 4QFY2012 results. We expect the company to post merely 0.3% qoq growth in USD revenue to US$1811mn on the back of qoq flat volume growth. In rupee terms, revenue is expected to come in at `9,100cr, down 2.1% qoq due to qoq ~1.2% INR appreciation against USD. EBITDA margin is expected to decline by 59bp qoq to 33.1%. PAT for the quarter is expected to come in at `2,310cr. Key points to watch out for are a) USD revenue growth guidance for FY2013, the upper end of which should exceed Nasscoms guidance of 11-14%, else it will be negative for the stock and b) managements commentary on the macro picture and scenario in decision making by clients. We maintain our Buy rating on the stock with a target price of `3,348.

Quarterly Bloomberg Brokers Consensus Estimates

Infosys Ltd Consolidated (13/04/2012)
Particulars (` cr) Net sales Net profit 4QFY12E 9,186 2,309 4QFY11 7,250 1,818 yoy (%) 27 27 3QFY12 9,298 2,372 qoq (%) (1) (3)

Economic and Political News

FDI in airlines: Cabinet to decide in a few weeks Government approves Public Procurement Bill Government approves Air India financial restructuring IIP data to have bearing on monetary policy: Pranab Mukherjee

Corporate News
Cabinet approves Neyveli's proposed JV for power project Jet Airways delays airport payments NBCC looks at overseas opportunities for expansion Suzlon Energy bags order to supply turbines to U.K.'s Renerco
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
13/04/2012 16/04/2012 18/04/2012 19/04/2012

20/04/2012

Infosys Crisil, MindTree HDFC Bank, HCL Tech, Infotech Enterprises Hind Zinc, Ambuja Cements, ACC, IndusInd Bank Cairn India, FAG Bearings

April 13, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

E-mail: [email protected]

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April 13, 2012