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Market Outlook 180912

Market Outlook 180912

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Published by Angel Broking

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Published by: Angel Broking on Sep 18, 2012
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Market Outlook 
September 18, 2012
Market Outlook 
September 18, 2012
Dealer’s Diary 
The Indian markets are expected to open in the green tracking positive cues fromthe Asian markets. The Reserve Bank of India (RBI) in its mid quarter monetary policy review slashed the cash reserve ratio (CRR) by 25bp from 4.75% to 4.50%,while maintaining the key policy rates unchanged.The U.S. markets ended on a negative note on Monday after last week’s rally dueto profit booking and disappointing manufacturing data, but selling pressureremained relatively subdued limiting the downside for the markets. The New YorkFederal Reserve report showed that conditions for New York manufacturers havedeteriorated at an accelerated rate in the month of September with index falling toa negative 10.41 in September from a negative 5.85 in August.Indian shares extended their recent steep gains on Monday as the government'sdecision last week to raise diesel prices and relax norms for foreign directinvestment in the retail, aviation, broadcasting and power sectors cheeredinvestors. Going ahead, traders are likely to keep an eye on a report on UShomebuilder confidence in September.
Markets Today 
The trend deciding level for the day is 18,579/5,616 levels. If NIFTY trades abovethis level during the first half-an-hour of trade then we may witness a further rally up to 18,678 – 18,814/5,646 – 5,683 levels. However, if NIFTY trades below18,579/5,616 levels for the first half-an-hour of trade then it may correct up to18,444 – 18,345/5,579 – 5,549 levels.
18,345 18,444 18,579 18,678 18,814NIFTY
5,549 5,579 5,616 5,646 5,683
News Analysis
Reserve bank maintains status quo on repo rate, reduces CRR by 25 bps
Government likely to raise LPG cap from 6 to 10 cylinders
TTMT reports 11.2% yoy growth in global sales for August 2012
Tech Mahindra buys 51% stake in Comviva for
BGR Energy wins
1,901cr contract from Damodar Valley Corporation
Refer detailed news analysis on the following page
Net Inflows (September 14, 2012)
cr Purch Sales Net MTD YTD
FII 5,340 2,483 2,857 5,633 61,821MFs 823 1,025 (202) (150) (8,344)
FII Derivatives (September 17, 2012)
cr Purch Sales Net Open Interest
Index Futures 3,288 2,166 1,122 12,628Stock Futures 3,272 2,844 428 27,605
Gainers / Losers
Gainers LosersCompany Price (
chg (%)
Company Price (
chg (%)
Pantaloon Retail 188
Hexaware Tech. 128
GVK Power 13
ITC 253
TCS 1,341
GMR Infra. 24
Dr Reddy’s Lab 1,671
Lanco Infra. 12
HPCL 288
Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex
78.0 18,542Nifty 
32.4 5,610MID CAP
71.1 6,316SMALL CAP
74.5 6,698BSE HC
(135.9) 7,386BSE PSU
66.7 7,247BANKEX 
394.5 12,583 AUTO
179.5 10,125METAL
150.8 10,521OIL & GAS
169.7 8,887BSE IT
(197.4) 6,006
Global Indices
Chg (%)
(Pts) (Close)
Dow Jones
(40.3) 13,553NASDAQ
(5.3) 3,179FTSE
(22.0) 5,894Nikkei
164.2 9,159Hang Seng
28.3 20,658Straits Times
8.3 3,079Shanghai Com
(45.4) 2,079
Indian ADRs
Chg (%)
(Pts) (Close)
0.0 $48.2 WIT
(0.1) $8.9IBN
0.9 $39.1HDB
(0.1) $37.0
Advances / Declines BSE NSE
 Advances 1,628
Declines 1,262
Unchanged 117
Volumes (
BSE 3,172NSE 18,236
Market Outlook 
September 18, 2012
Reserve bank maintains status quo on repo rate, reducesCRR by 25 bps
The Reserve Bank of India (RBI) in its Mid Quarter Monetary Policy Review slashedthe cash reserve ratio (CRR) by 25 basis points (bps) from 4.75% to 4.50%. The RBImaintained its key policy rate – the repo rate unchanged at 8.0%, in line withmarket expectations. Consequently, the reverse repo rate remains at 7.0% and themarginal standing facility (MSF) rate and bank rate remain unchanged at 9.0%.The statutory liquidity ratio (SLR) stands at 23% of banks’ net demand and timeliabilities (NDTL).The reduction in CRR, effective from September 22, 2012, is expected to injectabout
17,000cr of primary liquidity in the banking system. Although liquidity conditions are comfortable, the RBI expects a pick-up in credit demand on accountof the combined impact of outflows from advance tax payment and currency demand due to onset of the festival season.Through a reduction in the CRR, while maintaining the repo rate, we believe, theRBI has signaled that even as it continues to ensure availability of adequateliquidity to the productive sectors of the economy, management of inflation is itstop-priority. We believe that upside risks to inflation will persist in the near-term due to supply-side constraints in agriculture, revision in minimum support prices (MSP) of kharifcrops and a rise in core inflation. Coupled with these factors, an increase in globalliquidity flows is likely to intensify inflationary pressures by leading to a spike incommodity prices including crude oil. Increase in diesel and LPG prices is likely tobe reflected in WPI inflation directly as well as indirectly on account of the pass-through effect in generalized inflation.Going ahead, we believe that the monetary policy stance will continue to beguided by inflationary pressures in the economy. The RBI’s policy marks a slightshift in the RBI’s tone, with some concerns regarding growth being expressed inthis policy unlike in recent policies. However, we believe the scale is still tilted infavor of inflation control rather than growth at least in the near future, a stancewhich the RBI may re-assess post December 2012.
Government likely to raise LPG cap from 6 to 10 cylinders
Media reports suggest that the government is considering a partial rollback of thecap on subsidised LPG cylinders. It is considering raising the limit on the numberof subsidized LPG cylinders from six to ten per household per year. However, lateron the finance ministry sources stated that there would not be any roll back ofsubsidized LPG cap or the diesel price hike. On September 13, 2012, the CabinetCommittee of Economic Affairs had decided to cap the number of subsidizedcylinder to six per household in a year which would have lowered Oil MarketingCompanies’ under-recoveries by approximately 
5,300cr for the remaining part ofFY2013. However, some members of the Congress and its allies (the TrinamoolCongress, NCP and DMK) are demanding a rollback of the cap on LPG cylinders.The Delhi government has already announced to raise the cap on LPG cylindersfrom six to nine for below poverty line (BPL) families. We await further clarity on
Market Outlook 
September 18, 2012
this matter. Until then, we maintain our under-recoveries estimate of
155,332crfor FY2013.
TTMT reports 11.2% yoy growth in global sales for  August 2012
Tata Motors (TTMT) reported a healthy growth of 11.2% yoy (down 4.3% mom) for August 2012 to 97,225 units driven by a 19.5% yoy (down 12.4% mom) growth inthe global passenger vehicle (PV) sales. Global commercial vehicle (CV) sales onthe other hand registered a modest growth of 4.3% yoy (4.8% mom) mainly due toweak demand in the domestic medium and heavy commercial vehicle (MHCV)segment. Global PV volumes were boosted by strong growth (up 34.8% yoy) in thedomestic passenger vehicle sales led by the
 Jaguar Land Rover (JLR)
 however, posted a lower-than-expected volume growth of 13.3% yoy (down 10.6%mom) to 24,060 units mainly on account of poor volume performance by 
 which witnessed a 13.2% yoy (sharp 27.2% mom) decline in volumes.
Land Rover
 sales too registered a slightly lower-than-expected sales growth of 18.3% yoy (down 7.7% mom) probably on account of lower production of
Range Rover
whichis set to be re-launched later in the year. We expect JLR to sustain its volume momentum (expect a ~14% volume growth inFY2013) driven by the success of the
and the
new XF 2.2
coupled with thelaunch of the new
Range Rover
and the
 Jaguar XE
in FY2013. Further, a stronggrowth in China (sales up 98% in FY2012) will also benefit the overall volumegrowth of the company. At the current market price of
278, the stock is trading at6.3x and 3.4x FY2014E earnings and EV/EBITDA, respectively.
Due to the recentrun up in the stock price we recommend Accumulate on the stock with a SOTPbased target price of
Tech Mahindra buys 51% stake in Comviva for 
Tech Mahindra has announced the acquisition of 51% stake in mobile softwareand value added services provider Comviva Technologies (Comviva) for
260cr.The new brand identity will be Mahindra Comviva. As part of this arrangement,Tech Mahindra will make an upfront payment of
125cr to buy the 51% stakefrom Bharti Group, private-equity firm Sequoia Capital and networking equipmentmaker Cisco Systems. The balance
135cr will be paid out over a period of fiveyears based on Comviva achieving mutually agreed performance target. Sequoiaheld 9% stake in Comviva and Cisco held 6%, both of whom have exited the firmafter the deal with Tech Mahindra. Tech Mahindra will buy 13% out of 22% stakeof private equity firm WestBridge.Comviva has annual revenues of ~US$70mn with operating margin in mid teens.This deal is valued at ~1.3x sales, which is modest. The topmost customer ofComviva is Bharti Airtel and it continues to remain one of their key customers evenafter promoters diluting their stake. According to the management, this acquisitionwill enhance Tech Mahindra’s capabilities in the mobile VAS domain and willprovide access to a marquee client base. It aligns well with the stated strategy ofinvesting in emerging areas like network, mobility, analytics, cloud and security and further focus on non-linear growth. Comviva was founded in 1999 as Bharti

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