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Market Outlook

India Research
February 23, 2012

Dealers Diary
Indian markets are expected to open in the red tracking negative cues worldwide. The Asian stocks have opened in the red following uninspired economic and corporate earnings news which added to the cautious sentiments. European stocks closed lower on Wednesday, as worse than expected German service and manufacturing data combined with additional Greek rating cuts weighed on equities. Fitch has downgraded Greece's credit rating to 'C' from 'CCC' following Eurozone agreement on a second bailout for the country. Also Fitch mentioned that chances of a default are highly likely in the near term. The weakness on Wall Street was partly due to the release of a report showing a contraction in private sector activity in the eurozone, which added to recent concerns about a recession. However another report showing a notable increase in existing home sales in the month of January provided support to the markets. Meanwhile, investors are likely to keep a close eye on the US Labor Department's report on weekly jobless claims which is expected to edge up to 355,000 in the week ended February 18th from the previous week's 348,000.

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 (%)



(1.5) (283.4) 18,145 (1.8) (101.8) (3.5) (228.7) (3.2) (233.1) (0.8) (50.7) (2.7) (216.2) 5,505 6,376 6,969 6,328 7,753

(3.8) (490.0) 12,349 (1.6) (159.8) 10,171 (4.3) (543.4) 12,115 (0.8) 0.5
Chg (%)

(69.2) 28.1

8,773 6,285

(0.2) (0.5) (0.2) 1.0 0.3 (1.0) 0.9

(27.0) 12,939 (15.4) (11.7) 91.0 (29.5) 22.2 2,933 5,917 9,554 2,996 2,404

Markets Today
The trend deciding level for the day is 18,255/5,542 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,414 18,683/5,593 5,681 levels. However, if NIFTY trades below 18,255/5,542 levels for the first half-an-hour of trade then it may correct up to 17,986 17,827/5,454 5,404 levels.
Indices SENSEX NIFTY S2 17,827 5,404 S1 17,986 5,454 PIVOT 18,255 5,542 R1 18,414 5,593 R2 18,683 5,681

70.6 21,549

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%)



0.9 1.3 (3.0) (3.1)

0.6 0.1 (1.2) (1.1)

$60.1 $11.3 $38.6 $34.6

News Analysis

IOB to receive `1,978cr form GOI, LIC Result Preview: Ranbaxy Labs, ABB, Aventis Pharmaceuticals - 4QCY2011
Refer detailed news analysis on the following page

Advances / Declines Advances Declines



769 2,208 106

242 1,293 37

Net Inflows (February 21, 2012)

` cr FII MFs Purch 4,094 634 Sales 2,599 972 Net 1,495 (338) MTD 15,311 (1,683) YTD 26,392 (3,537)


Volumes (` cr) BSE NSE

3,853 18,502

FII Derivatives (February 22, 2012)

` cr
Index Futures Stock Futures

Purch 6,881 9,859

Sales 7,228 10,555

Net (347) (696)

Open Interest 22,165 32,720

Gainers / Losers
Gainers Company
Tata Comm. Coromandel Int. Gitanjali Gems Sun TV Network Container Corp.

Losers Company
Lanco Infratech United Spirits GMR Infra. IRB Infra. Voltas

Price (`)
254 276 406 331 1,015

chg (%)
6.7 3.2 3.2 2.8 2.6

Price (`)
20 571 29 186 103

chg (%)
(16.8) (14.3) (11.5) (10.8) (10.5)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

IOB to receive `1,978cr form GOI, LIC

Indian Overseas Bank (IOB) is expected to receive capital infusion worth `1,675cr from Government of India (GOI) and `303cr from Life Insurance Company (LIC). The bank will be issuing equity shares up to 171,232,876 to GOI and 30,937,467 to LIC against this capital infusion. The capital infusion will be at fixed price of `97.82 per equity share (including premium of `87.82). The tier-I ratio which stands at a low 6.7% (excluding 9M profits) as of 3QFY2012 is expect to be propelled up on account of this capital infusion. We currently have a Neutral recommendation on the stock.

Result Preview - 4QCY2011 Ranbaxy Laboratories

For the quarter, Ranbaxy is expected to report sales and profit of `2,900cr and net profit of `589cr, respectively. OPM is expected to come in around 33.2%. Results would be driven by Lipitor sales. We maintain our Neutral view on the stock.

For 4QCY2011, we expect ABB India (ABB) to post strong top-line growth of 16.4% yoy to `2,412cr, driven by the company's balanced performance across all segments. EBITDA margin is likely witness a sharp uptick of 352bp yoy to 5.1% (4QCY2010 margins were suppressed by higher provisioning on account of rural electrification projects). Also, on a qoq basis, we expect margins to improve by ~120bp. Aided by strong revenue growth and an extremely low base of the prior-year period, ABB's bottom line is expected to jump eight-fold to `61.9cr. At CMP the stock trades at rich valuations of 48.1x CY2012E EPS. We maintain Sell on the stock.

Aventis Pharmaceuticals
For the quarter, Aventis is expected to report sales and net profit growth of 15.7% yoy and 39.7%, respectively. Thus, the company is expected to end the quarter with net sales and profit of `332cr and `40.3cr, respectively. OPM is expected to come in at 13.5%, an expansion of 640bp yoy. We maintain our Reduce rating on the stock with a target of `1,937.

February 23, 2012

Market Outlook | India Research

Quarterly Bloomberg Brokers Consensus Estimates

Ranbaxy - Consolidated (23/02/2012)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4QCY11E 2,811 597 21.2 285 4QCY10 2,066 (174) -8.4 (94) y-o-y (%) 36 3QCY11 2,023 174 8.6 (457) q-o-q (%) 39 243

Economic and Political News

OMOs better tool to ease liquidity: PMEAC Decontrol urea prices, raise excise duty: PMEAC Government planning 63,000MW nuclear power capacity by 2032

Corporate News

Chinese banks to refinance `6,000cr RCOM debt BPCL to up Saudi imports in FY2013, cut Iran volumes Hero MotoCorp partners with US firm, Erik Buell Racing (EBR) State Bank of India to bail out Kingfisher US to import cancer drug from Sun Pharma

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

Results Calendar
23/02/2012 Ranbaxy, ABB, Gujarat Gas, Aventis

February 23, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800



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February 23, 2012