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Market Outlook 110712

Market Outlook 110712

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Published by Angel Broking

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Published by: Angel Broking on Jul 11, 2012
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Market Outlook 
 
July 11, 2012
 
 www.angelbroking.com
 
Market Outlook 
 
July 11, 2012
Dealer’s Diary 
The Indian markets are expected to open in the red mirroring the SGX Nifty and Asian stocks which are trading lower in the opening trade. Asian stocks fell a fifthday, with the regional benchmark headed for its longest losing streak since May,amid concern a deepening global economic slowdown will weigh on earnings.The US markets opened strong in Tuesday’s trading session but eventually endedin the red. The early strength among stocks was partly due to a positive reaction tothe latest news out of Europe, including a report showing an unexpected increasein U.K. manufacturing output in the month of May. News that Eurozone financeministers agreed to provide the Spanish banking sector with up to £30bn by theend of the month also generated some positive sentiment, with Spain given anextra year to achieve its deficit reduction target. However, stocks moved sharply lower over the course of the trading day as disappointing guidance from some wellknown companies overshadowed the relatively positive news out of EuropeMeanwhile, Indian shares rallied on Tuesday, shrugging off mixed Asian cues asthe rupee rebounded and euro area finance ministers agreed on the terms of abailout for Spain's troubled banks.
Markets Today 
The trend deciding level for the day is 17,558 / 5,326 levels. If NIFTY trades abovethis level during the first half-an-hour of trade then we may witness a further rally up to 17,692 – 17,765 / 5,368 – 5,390 levels. However, if NIFTY trades below17,558 / 5,326 levels for the first half-an-hour of trade then it may correct up to17,485 – 17,351 / 5,304 – 5,262 levels.
Indices S2 S1 PIVOT R1 R2
SENSEX 
17,351
 
17,485
 
17,558
 
17,692
 
17,765
 NIFTY
5,262
 
5,304
 
5,326
 
5,368
 
5,390
 
News Analysis
 
L&T acquires Malaysia-based Henikwon Corporation
 
Lavasa’s request to confer infrastructure status on its loans rejected by RBI
 
1QFY2013 Result Previews- HDFC Ltd.
Refer detailed news analysis on the following page
 
Net Inflows (July 9, 2012)
`
cr Purch Sales Net MTD YTD
FII 1,609 1,274 336 2,261 48,255MFs 250 621 (371) (1105) (6,950)
FII Derivatives (July  10, 2012)
`
cr Purch Sales Net Open Interest
Index Futures
1,445 1,652 (207) 14,437
Stock Futures
1,368 1,278 91 26,010
Gainers / Losers
Gainers LosersCompany Price (
`
)
chg (%)
Company Price (
`
)
chg (%)
Punj Lloyd 59 7.6 Zee Entert 143 (1.7)Reliance Comm 71 6.6 Pidilite Inds 164 (1.6)Indiabulls Real Est 63 5.3 Cadila Health 763 (1.4)EIH 85 5.2 United Spirits 718(1.3)Rajesh Exports 141 5.0 Pipavav Defence 82 (1.3)
Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex
1.3
226.4 17,618
Nifty 
1.3
70.2 5,345
MID CAP
1.1
68.5 6,307
SMALL CAP
0.8
54.8 6,805
BSE HC
0.9
58.3 6,955
BSE PSU
0.8
61.0 7,369
BANKEX 
1.5
187.1 12,361
 AUTO
1.6
151.7 9,533
METAL
1.5
160.2 10,992
OIL & GAS
0.9
71.9 8,090
BSE IT
0.6
35.1 5,686
Global Indices
Chg (%)
(Pts) (Close)
Dow Jones
(0.7)
(83.2) 12,653
NASDAQ
(1.0)
(29.4) 2,902
FTSE
0.7
36.7 5,664
Nikkei
(0.4)
(39.2) 8,858
Hang Seng
(0.2)
(31.7) 19,396
Straits Times
1.2
35.5 2,965
Shanghai Com
(0.3)
(6.4) 2,164
Indian ADRs
Chg (%)
(Pts) (Close)
INFY
(1.2)
(0.5) $43.5 WIT
(0.8)
(0.1) $8.5IBN
0.8
0.3 $33.6HDB
0.7
0.2 $33.7
Advances / Declines BSE NSE
 Advances
1,713 949
Declines
1,189 491
Unchanged
113 81
Volumes (
`
cr)
BSE 2,004NSE 9,514
 
 
 www.angelbroking.com
Market Outlook 
July 11, 2012
L&T acquires Malaysia-based Henikwon Corporation
Larsen & Toubro's (L&T) Malaysia-based subsidiary Tamco Switchgear hasacquired electrical equipment maker Henikwon Corporation for anundisclosedamount. Based in Malaysia, Henikwon Corporation is a leadingmanufacturer of low and medium voltage busduct systems. Henikwon brand isglobally well recognized and offers high-quality products under compliance tointernational quality standards. Henikwon’s acquisition brings a string of customerbase of large corporations to Tamco. This acquisition will be complementary to thecompany’s electrical and automation portfolio and make comprehensive offeringsfor the building and infrastructure segments. It will further enhance the company’spresence in South East Asia and aid in catering to the Indian and Middle Eastmarkets. At the CMP of
 ` 
1,418, the stock is trading at PE of 14.2x FY2014E earnings, afteradjusting for investments, which is below the historical trading multiple for L&T. Wehave used the SOTP methodology to value the company to capture all its businessinitiatives and investments/stakes in the different businesses. Ascribing separatevalues to its parent business on a P/E basis and investments in subsidiaries on P/E,P/BV and mcap basis, our target price works out to
 ` 
1,553.
Owing to the recentsurge in the stock price, we recommend Accumulate on the stock.
 
Lavasa’s request to confer infrastructure status on its loansrejected by RBI
 As per media reports, RBI has rejected Lavasa’s (HCC’s subsidiary) request toconfer infrastructure status on its loans. With this rejection the company’s effort toescape the stigma of bad debt has suffered a jolt. The rejection means that thefirm cannot enter the special cell set up by banks to help ease the debt burden oftroubled companies with high-cost borrowings. It must take the difficult road ofnegotiating individually with the banks and its debt will not have any chance ofbecoming a standard asset. The
 ` 
850cr loans on Lavasa's books are now treatedas bad loans by most banks. Lavasa had sought infrastructure status from RBIsome months ago on the grounds that it would help the company join thecorporate debt restructuring cell set up by banks. This is negative for HCC as thisdevelopment is likely to cause further delay to the project.
We continue to maintainNeutral view on HCC.
Result Previews
HDFC – 1QFY2013 Result Preview (CMP:
 ` 
683/ TP: - / Upside: -)
HDFC is scheduled to announce its 1QFY2013 results today. We expect the bankto report healthy operating income growth of 20.0% yoy to
 ` 
1,568cr. Operatingexpenses are expected to grow at 28.8% yoy to
 ` 
146cr. The pre-provision profit isexpected to grow at 19.1% yoy to
 ` 
1,422cr. Provisioning expenses are expected toincrease by 119.3% yoy to
 ` 
39cr, leading to a net profit growth of 19.9% yoy to
 ` 
1,013cr. At the CMP, HDFC’s core business (after adjusting
 ` 
232/share towardsvalue of the subsidiaries) is trading at 3.6x FY2014E ABV of
 ` 
123.4 (including
 
 
 www.angelbroking.com
Market Outlook 
July 11, 2012
subsidiaries, the stock is trading at 3.8x FY2014E ABV of
 ` 
176.9). We maintainour Neutral recommendation on the stock.
Y/E Op. Inc NIM PAT EPS ABV ROA ROE P/E P/ABVMarch (
`
cr) (%) (
`
cr) (
`
) (%) (x) (x) (x) (x)
FY2013E 7,372 3.6 4,826 31.5 13.9 2.6 34.8 21.4 4.3FY2014E 8,812 3.5 5,771 37.7 15.7 2.6 32.1 17.9 3.8
Quarterly Bloomberg Brokers Consensus Estimate
HDFC Ltd - (11/07/2012)
Particulars (
`
cr)1Q FY13E 1Q FY12
y-o-y (%)
4Q FY12
q-o-q (%)
Net profit1,017 845
 20
1,326
-23
TCS Ltd - Consolidated (12/07/2012)
Particulars (
`
cr)1Q FY13E 1Q FY12
y-o-y (%)
4Q FY12
q-o-q (%)
Net sales14,680 10,797
36
12,980
13
Net profit3,233 2,408
34
2,919
11
Infosys Ltd - Consolidated (12/07/2012)
Particulars (
`
cr)1Q FY13E 1Q FY12
y-o-y (%)
4Q FY12
q-o-q (%)
Net sales9,596 7,485
 28.2
8,852
8.4
Net profit2,429 1,722
 41.1
2,316
 4.9
HDFC Bank - (13/07/2012)
Particulars (
`
cr)1Q FY13E 1Q FY12
y-o-y (%)
4Q FY12
q-o-q (%)
Net profit1,419 1,085
31
1,751
(19)
Economic and Political News
 
Power tariff in Delhi much less than major cities: Government
 
India buys Mahatma Gandhi’s archive to prevent its auction
 
Supreme court signals rethink on auction route for all natural resources
 
No service tax on NRI remittances: Govt.
Corporate News
 
SIAM lowers FY2013 car sales forecast
 
SAIL, Kobe ink pact for
 ` 
1,500cr plant in Bengal
 
Quick recovery of US$1.4bn Kingfisher debt unlikely: SBI
 
Suzlon inks 300MW equipment sale deal with ReNew Power
 Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

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