Market Outlook

India Research
September 27, 2011

Dealers Diary
The key benchmark indices extended last week's steep losses at the onset of the new trading week on concerns about the global economic outlook. Weakness in Asian markets, triggered by reports that fresh aid for Greece may take longer than expected, dragged the stocks to their one-month lows. The market breadth lingered in the negative zone during the morning session and deepened, after it passed well below the psychological 16,000 mark. Index heavyweights L&T, Hindalco and Sterlite touched their 52-week lows. During the afternoon session, the Sensex regained 16,000 in choppy trade. It slowly recovered the lost ground and peeped above the base line just to retreat. Concerns on global outlook shadowed the gains and once again pulled back the indices. The Sensex and Nifty closed down by 0.7% each. The mid-cap and small-cap indices also lost 1.5% and 1.7%, respectively. Among the front runners, JP Associates, Bharti Airtel, ICICI Bank, DLF and Cipla gained 1-2%, while Coal India, Sterlite, Hindalco, Hero MotorCorp and Jindal Steel lost 3-5%. Among mid caps, Hathway Cables, Kirloskar Oil Engines, KGN Inds, ABG Shipyard and Himadri Chemicals gained 4-8%, while Shree global Tradefin., Hindustan Oil Exploration Company, NCC, CIFC Ltd. and Jain Irrigation lost 6-10%.

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 (%) (0.7) (0.7) (1.5) (1.7) (0.4) (1.8) (0.2) (1.1) (2.9) (1.6) 0.4 Chg (%) 2.5 1.4 0.5 (2.2) (1.5) (1.7) (1.6)

(Pts) (32.4) (91.4) (117.7) (25.0) (132.5) (91.8) (129.0) 20.8 (Pts) 33.5 22.6 (186.1) (44.5) (40.0)

(Close) 4,835 6,131 6,923 5,847 7,353 8,328 8,134 5,006 (Close) 2,517 5,089 8,374 2,654 2,393

(111.0) 16,051

(21.9) 10,739 (330.8) 11,183

272.4 11,044

Markets Today
The trend deciding level for the day is 16,020 / 4,825 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,240 16,429 / 4,891 4,946 levels. However, if NIFTY trades below 16,020 / 4,825 levels levels for the first half-an-hour of trade then it may correct up to 15,832 15,612 / 4,770 4,704 levels.
Indices SENSEX NIFTY S2 15,612 4,704 S1 15,832 4,770 R1 16,240 4,891 R2 16,429 4,946

(261.0) 17,408

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank Advances / Declines Advances Declines Unchanged Volumes (` cr) BSE NSE

Chg (%) 1.0 1.8 2.9 1.6

(Pts) 0.5 0.2 1.0 0.5 BSE 767 2,017 83

(Close) $48.7 $9.3 $35.7 $29.2 NSE 307 1,137 44

News Analysis
Refer detailed news analysis on the following page

JSW Steels production scaled down to 30% at its Vijaynagar plant BHEL FPO to come only after markets improve

Net Inflows (September 23, 2011) ` cr Purch Sales FII MFs 1,648 467 2,838 458

Net (1,190) (9)

MTD (169) (805)

YTD (977) 5,469

2,923 10,774

FII Derivatives (September 26, 2011) ` cr Index Futures Stock Futures Gainers / Losers Gainers Company BOB Indiabulls Fin Indian Bank Central Bank Jaiprakash Asso. Price (`) 803 159 207 103 69 chg (%) 3.7 3.6 3.2 2.4 2.4 Company Hindustan Oil Titan Inds NCC Hindustan Zinc Jain Irrigation Losers Price (`) 107 207 61 119 143 chg (%) (8.4) (7.3) (7.2) (5.9) (5.9) Purch 5,867 6,493 Sales 5,980 6,583 Net (113) (90) Open Interest 17,698 29,817

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Market Outlook | India Research

JSW Steels production scaled down to 30% of its capacity at Vijaynagar plant
JSW Steels 10.3mn tonne steel plant at Vijaynagar has been compelled to scale down its capacity utilisation at 30% on account of shortage of iron ore. The Supreme Court had banned iron ore mining in the Bellary, Chitradurga and Tumkur districts on account of environmental concerns during August-September 2011. However, the court had permitted NMDC to mine in Bellary region @ 1mn tonnes per month to meet the requirements of the steel industry. The court had also permitted liquidation of 25.0mn tonnes of iron ore inventory in Karnataka via e-auctions. However, production ramp-up by NMDC and inventory liquidation have still not been achieved as per targets. Hence, JSW Steel and other steel makers in the region are currently facing shortage of iron ore. Nevertheless, we believe this shortage is temporary; we expect iron ore supplies to resume sooner than later. Also, we expect JSW Steel to procure higher quantities of iron ore from other regions in case the supplies continue to remain short for an extended period. Meanwhile, we maintain our estimates for JSW Steel and our Neutral rating on the stock.

BHEL FPO likely to happen after markets improve The proposed 5% disinvestment of BHEL is likely to get delayed on account of unhealthy market conditions. While the Cabinet Committee of Economic Affairs has given in- principal approval, the bearish sentiments in the capital markets may not fetch the fair price for the stake sale. The government will go ahead with the FPO once the market condition stabilises. In addition to the long-term structural concerns on the overall financial health of the company, the FPO element has remained an overhang for the stock. We continue to remain Neutral on the stock. Economic and Political News
Govt. approves NHAI, IRFC, HUDCO and PFC to raise `300bn from tax-free bonds Farm loan to exceed target, touch `5.20lakh cr: Nabard Consumption of synthetic rubber up by 11% in June

Corporate News
Defense Ministry puts Mazagon-Pipavav JV on hold RIL's new gas finds in KG-D6 offshore block not viable at US$4.2/mmBtu price: DGH Exim Bank to raise at least `2.5bn via bonds Petronas to buy 30% stake in GMRs Singapore arm
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

September 27, 2011

Market Outlook | India Research

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September 27, 2011