Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
1
Market Outloo
India Research
March 22, 2012
Dealer’s Diary
The Indian markets are expected to open flat tracing mixed cues from the openingtrades in most of the Asian bourses.Globally, US bourses showed a lack of direction throughout the trading session onWednesday and ended on a mixed note, as traders seemed reluctant to make anysignificant moves following the substantial advance seen over the past severalmonths, which had lifted the major averages to multi-year highs. Traders seemedlargely hesitant to cash in on the recent gains amid expectations that stocks couldleg up further on more upbeat data hinting continued recovery of the U.S.economy. Most of the European bourses on Wednesday ended with modest gainsas Bernanke comments on state of European Financial situation and U.K budgetspeech weighed heavily on the sentiments.Meanwhile Indian bourses edged higher on Wednesday to end at nearly one weekclosing high, defying major Asian indices on account of broad based buying ofIndian shares amid concerns that weakening government finance may sloweconomic growth.
Markets Today
The trend deciding level for the day is 17,500/ 5,331 levels. If NIFTY trades abovethis level during the first half-an-hour of trade then we may witness a further rallyup to 17,724 – 17,847 / 5,406 – 5,447 levels. However, if NIFTY trades below17,500 / 5,331 levels for the first half-an-hour of trade then it may correct up to17,377 – 17,153 / 5,215 – 52,90 levels.
Indices S2 S1 PIVOT R1 R2
SENSEX 17,153 17,377 17,500 17,724 17,847NIFTY 5,215 5,290 5,331 5,406 5,447
News Analysis
JLR finalizes JV to manufacture and sell vehicles in China
UltraTech Cement may buy Adhunik MSP Cement's plant for
`
700cr
Tech Mahindra and Mahindra Satyam announce merger
detailed news analysis on the following page
Net Inflows (March 20, 2012)
`
cr Purch Sales Net MTD YTD
FII 2,121 1,926 196 7,815 44,113MFs 600 690 (90) (993) (5,020)
FII Derivatives (March 21, 2012)
`
cr Purch Sales Net Open Interest
Index Futures
1,838 2,827 (989) 16,340
Stock Futures
2,448 2,511 (64) 31,100
Gainers / Losers
Gainers LosersCompany Price (
`
)
chg (%)
Company Price (
`
)
chg (%)
Century Tex 347
10.8
Engineers India 267
(1.6)
MRF 10,579
9.2
Hindalco Inds 137
(1.0)
HDIL 102
8.6
Pipavav Defence 80
(1.0)
Jubl Food 1,123
8.0
Oracle Fin 2,588
(1.0)
Godrej Inds 254
7.6
Adani Ports 131
(0.9)
Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex
1.7
285.5 17,602
Nifty
1.7
90.1 5,365
MID CAP
2.0
123.4 6,459
SMALL CAP
1.2
81.8 6,712
BSE HC
1.1
72.5 6,493
BSE PSU
1.3
97.3 7,476
BANKEX
2.4
289.4 12,126
AUTO
1.3
133.9 10,099
METAL
1.7
199.3 11,665
OIL & GAS
0.6
52.0 8,238
BSE IT
1.7
98.5 6,085
Global Indices
Chg (%)
(Pts) (Close)
Dow Jones
(0.4)
(45.6) 13,125
NASDAQ
0.0
1.2 3,075
FTSE
0.0
0.5 5,892
Nikkei
(0.6)
(55.5) 10,087
Hang Seng
(0.2)
(31.6) 20,857
Straits Times
0.1
2.9 3,006
Shanghai Com
0.1
1.4 2,378
Indian ADRs
Chg (%)
(Pts) (Close)
INFY
0.2
0.1 $57.7WIT
1.0
0.1 $10.9IBN
2.2
0.8 $37.0HDB
1.5
0.5 $33.8
Advances / Declines BSE NSE
Advances
1,764 1,025
Declines
1,158 402
Unchanged
114 83
Volumes (
`
cr)
BSE
3,302
NSE
13,199
Market
Outlook
|
India
Research
March 22, 2012
2
JLR finalizes JV to manufacture and sell vehicles in China
Jaguar Land Rover (
JLR
) has finalized a joint venture (JV) agreement with China’sChery Automobile Company to manufacture and sell JLR vehicles in China. TheChinese JV, subject to regulatory approval, will also manufacture engines and setup a research and development facility in the country. As per media sources, theJV will be located close to Shanghai in Changshu city and will initially make LandRover SUVs, followed by Jaguars in the second phase. We see this as animportant development for JLR as it will give the company a production base inthe world’s fastest growing luxury car market. Further, JLR continues to witness anextremely strong growth in China due to which the share of China in total JLRsales has risen from 10% in FY2010 to 17% in 3QFY2012. Additionally, thisshould boost the company’s prospects as it is in the middle of a rapid dealernetwork expansion in China and targets to increase the count to 150 from 100currently.
We maintain our Accumulate recommendation on Tata Motors with atarget price of
`
308.
UltraTech Cement may buy Adhunik MSP Cement'sMeghalaya plant for
`
700cr
According to media reports, UltraTech Cement is in talks to buy north-easterncement maker Adhunik MSP Cement's Meghalaya plant for over
`
700cr. Theplant has a current capacity of 1.5mtpa and has a captive power plant of 25MW.Cement companies are rushing to build up capacities in the supply deficit north-eastern region to cash in on the anticipated surge in demand triggered by therising number of hydroelectric projects and road constructions. Currently NorthEastern region has total capacity of 5.1mtpa (including capacity owned by nonreporting CMA players), which is expected to reach 6.7mtpa by FY2013. RecentlyDalmia group had made inroads in the region by acquiring 50% stake in Calcomcement for
`
238cr.
At CMP, the stock trades at rich valuation of EV/tonne ofUS$159 on FY2013E capacity. We maintain our Neutral view on UltraTechcement.
Tech Mahindra and Mahindra Satyam announce merger
The Board of Directors of Tech Mahindra (Tech M) and Mahindra Satyam(Satyam) have approved the merger of both the companies along with theirwholly owned subsidiaries, Venturbay Consultants Pvt. Ltd., C&S SystemTechnologies Pvt. Ltd., CanvasM Technologies Ltd and Mahindra LogisoftBusiness Solutions Ltd.
Market
Outlook
|
India
Research
March 22, 2012
3
The swap ratio approved by the board of both the companies is 2:17, i.e., 2shares of Tech M (face value of
`
10 each) for every 17 shares of Satyam (facevalue of
`
2 each). The merger process could take up to nine months to completeand will be effective from April 1, 2011. The standard procedure for mergers – approvals of shareholders and courts, in this case of the Andhra Pradesh andMumbai High Courts, and so on – will follow. On a pro-forma basis, MahindraGroup will own 26.3% in the combined entity, British Telecom (BT) will own12.8%, 10.4% will be held as treasury stock, 34.4% will be held by publicshareholders of Mahindra Satyam and the balance 16.1% will be held by publicshareholders of Tech M. The intention of creating treasury stock is to allow thecompany greater liquidity when needed. This, especially in the matter ofacquisitions, is on the agenda of the both companies. Tech M will issue 10.34crnew shares, thereby increasing its outstanding shares to 23.08cr and its equitycapital to
`
230.8cr.The combined entity will have revenue run-rate of US$2.4bn+ – this size willenable the company to participate in larger deals and improve deal win rates.Tech M will now have a broader service offering. As of now, its entire revenuecomes from the telecom vertical, which has been shrinking over the past couple ofyears. After the merger, contribution from telecom would come down to sub-50%(47-48%). The combined entity will have a broad based play across industriessuch as manufacturing, BFSI, telecom, technology and media, retail, transportand logistics and lifesciences and healthcare. Also, the revenue portfolio – geography wise – will be well balanced with a diversified global footprint thatwould boast of contribution from Americas at 42%, Europe at 35% and emergingmarkets at 23%. Operational costs, too, would come down on merger synergies.Also, Tech M’s dependence on its top client BT would come down considerably asthe combined entity would derive ~17% of its revenue from BT, while Tech Mcurrently derives 35% of its revenue from BT. The combined entity would have75,000 employees, across 54 countries, and over 350 customers. Post themerger, the entity would have net cash surplus of
`
1,600cr-1,800cr.
We maintainour Accumulate recommendation on Tech Mahindra; the target price is, however,under review.
Economic and Political News
Government raises concerns over agri exports to China
Government to implement Food Security Bill by year-end, says Food Minister
RBI extends deadline for MFI provisioning norms
Corporate News
13 road projects to be awarded under OMT basis
CIL may divert fuel from PSUs to power companies: Government
ICVL to buy coal asset in Australia for
`
1,500cr
RPower gets court stay on Andhra project
GVK to cut stakes in Australia coal, rail projects
Honda hikes car prices by up to
`
94,000
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
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