group4 ivm project final (1)

8/2/2019 Group4 IVM Project Final (1)

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Investment Management

Project Report On

Plausible Investment Portfolio of Any Investor

Submitted to

Dr. Raju Indukuri

Submitted BySecC2DE/Group4

Sahil Malhotra 2010195

Sanchit Kumar 2010199

Vaibhav Garg 2010279

Anuj Bindlish 2010288

Anshul Jain 2010297


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.Client Information

Name: Mrs. Nidhi Poddar

Age: 29 Years

Sex: Female

Marital Status: Marr ied

Birthdate:14th jan 1981

Profession: Teaching Services

Financial Background

Assets:

House: 35lak

Land: 8 laks

Teaching Institute:40 lak

Car: 15lack

Other deposits: 2lak

Total Assets 100lak

Loans:

Car loan :5 lacks

House loan:15 laks

Other short and medium term loans:3.5 laks

Loan Amount23.5lacks


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Investment History

Invested Money: Rs.80.00 lacs

Returns in Past: Average Annualized Return of 20%

Past Investment Type: Realty market (immoveable properties such as Land, etc.), Mutual

Funds, Stocks, Insurance, Deposits, etc.

Investment Interest

Preferred Type of Investment : Gold, Stocks, Commodities and Mutual Funds.

Investment Objectives

Accumulation of assets and liquidity for future

Risk Taking Ability

Medium

Duration of Investment

More than five years, long term investment

3-5 years ,medium term investment

Short term investment-six months-2years

Preferred Sectors

Pharmaceutical, real estate, Information Technology , Gold, banking sectors

Size of Investment Rs . 08.00 lacks in total over a period of time


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Economic Analysis

Quick Overview

INDIA'S MACROECONOMIC INDICATORSINDICATORS 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

GDP (atcurrent prices,US$ bn)

837.2 947.0 1231.0 1222.0 1317.0 1529.0#

GDP Growth(at constantprices, %)

9.5 9.7 9.2 6.7 7.4e 8.5#

Agriculture &allied

5.2 3.7 4.7 1.6 0.2e 4.5#

Industry 9.3 12.7 9.5 3.9 8.5e 9.7#

Services 11.1 10.2 10.5 9.8 9.3e 8.9#

Sectoral Share in GDP (%)

Agriculture &allied

18.1 17.2 16.4 15.7 14.6e -

Industry 27.9 28.7 28.8 28.0 28.5e -

Services 53.9 54.2 54.8 56.3 56.9e -

Inflation rate(WPI, annualavg. %)

4.4 5.4 4.7 8.3 9.9 (Mar '10) 9.97 ( Jul '10)

Gross FiscalDeficit ( % ofGDP)

4.1 3.5 2.7 6.0e 6.7e -

Exchange Rate(Rs/US$, avg.)

44.3 45.3 40.2 45.9 47.4 46.81 (Aug 26)

Exchange Rate(Rs/Euro, avg.)

53.9 58.1 57.0 65.1 67.1 59.45 (Aug 26)

Exports (US$

bn)

103.1 126.4 163.1 185.3 178.7 50.8 (Apr-Jun)

% change 23.4 22.6 29.0 13.6 -3.6 32.7 (Apr-Jun)^

Imports (US$bn)

149.2 185.7 251.7 303.7 286.8 83.0 (Apr-Jun)

% change 33.8 24.5 35.5 20.7 -5.6 34.2 (Apr-Jun)^

Trade Balance(US $ bn)

-46.1 -59.3 -88.5 -118.4 -108.2 -32.3 (Apr-Jun)

ServicesExports (US$bn)

57.7 73.8 90.3 101.7 93.8 -

SoftwareExports (US$bn)

23.6 31.3 40.3 46.3 49.7 -

ServicesImports (US$

bn)

34.5 44.3 51.5 52.0 59.6 -

ServicesBalance ( US$bn)

23.2 29.5 38.9 49.6 34.2 -

CurrentAccount

Balance (US$bn)

-9.9 -9.6 -15.7 -28.7 -38.4 -

CAB aspercentage of

-1.2 -1.1 -1.3 -2.4 -2.9 -


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GDP (%)

ForexReserves (US$bn)

151.6 199.2 309.7 252.0 277.0 282.8 (Aug 13)

External Debt(US $ bn)

139.1 172.4 224.4 224.5 261.5 -

External Debt to

GDP Ratio (%)

17.3 18.2 18.1 20.5 18.9 -

Short TermDebt / TotalDebt (%)

14.1 16.3 20.4 19.3 20.1 -

Total DebtService Ratio(%)

10.1 4.7 4.8 4.6 5.5 -

ForeignInvestmentInflows (US$bn)

21.5 29.8 62.1 21.3 69.6 10.4 (Apr-Jun)

FDI ( US$ bn) 9.0 22.8 34.8 35.2 37.2 5.8 (Apr-Jun)

GDRs/ADRs(US$ bn)

2.6 3.8 6.6 1.2 3.3 1.0 (Apr-Jun)

FIIs (net) (US$

bn)

9.9 3.2 20.3 -15.0 29.0 3.5 (Apr-Jun)

FDI Outflows(US$ bn)(Actual)

6.1 13.1 18.7 16.2 10.3 -

Memo Items: 2006 2007 2008 2009e 2010P 2011P

Global GDP (%change)

5.1 5.2 3.0 -0.6 4.6 4.3

World Merch.Trade (Vol., %change)

8.8 6.5 2.4 -11.8 8.0 6.2

Source: Economic Survey, Various issues; Union Budget, RBI Monthly Bulletin, Annual Report & Weekly Statistical Supplement;

Ministry of Finance; Ministry of Commerce & Industry; CSO; Institute of International Finance (IIF); EIU; NASSCOM; WEO, IMF. eestimates; - Not available; ^ Growth o ver corresponding period of previous year. P Projections.

# PM Economic Advisory Council's projections.

Note: (a) Debt-service ratio is the proportion of gross debt service payments to External Current Receipts (net of official transfers).

(b) Short term debt coverage increased beginning with the quarter ended March 2005, with the inclusion of (i) suppliers' credits up to 180 days and

(ii) investment by Foreign Institutional Investors (FII) in short-term debt instruments.


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Economy vis--vis Industry Outlook

TELECOM: The tide has once again turned in favor of telecom companies, reeling under the

impact of intense competition and rock-bottom tariffs. Most frontline operators have raised

tariffs in the past few weeks which should gradually help stabilize their existing 2G operations

.Besides, the lure of 3G services is strong given the rapidly rising sales of smart phones andtablets. This may help valuation of telecom operators rise once again after a two year lull.

Currently TELECOM sector contributes 2.1 % of GDP.

Banking: banking Industry is highly influenced by the inflation and it reflects to economic and financial

scenario of a country. Banking stocks though reflect the true sentiment of the market yet it is highly

dependent on the monetary policy of a country. Rising in inflation tends to increase the interest rate which

adversely reflects on the stock prices. Though the stocks are highly volatile at this juncture, in the long

run when the inflation is tamed, we will see a rise in the stock. The future of the industry is also bright as

per recent reports which predict that the Indian Banking industry would be third largest by 2025 and also

expansion in the rural areas will help banks to foray into untapped market giving rise to its profitability.

As our investor has a outlook of four to five years in future we strongly recommend Banking stocks for

his portfolio as it would not only help him to be part of the success story but also help him make money

by investing.


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Indian Infrastructure Brief Overview

The strong level of economic growth achieved in India in recent years has led to an expansion ofindustry, commerce and per-capita income, which, in turn, have fuelled the demand for

infrastructure services. India is one of the largest and most dynamic infrastructure and project

finance markets in the world with the total number of project based Special Purpose Vehicles(SPVs) at around 800, according to Ratings Agency Fitch.

India's infrastructure financing requirements and the new manufacturing policy being fina lisedwill open up US$ 1 trillion opportunities for global investors over the next five years, according

to Economic Affairs Secretary R Gopalan. The infrastructure sector accounts for 26.7 percent ofIndia's industrial output.

Indian Infrastructure Size and Growth

The investment in infrastructure is expected to increase to 8.37 per cent in the final year of the

11th Plan and likely to touch 10 per cent of GDP in the 12th Five Year Plan (2012-2017). Withthe increasing investment, the share of private sector in the total investment on infrastructure hasincreased rapidly. The contribution of private sector in total infrastructure investment in each of

the first two years of 11th Plan (2007-2012) was around 34 per cent. This is higher than the 11thPlan target of 30 per cent and 25 per cent achieved in 10th Plan period. It is expected to rise to 36per cent by the end of 11th Plan and 50 per cent during the 12th Plan (2012-2017).

The government has played a pivotal role in making Indian infrastructure sector an attractiveinvestment destination for both domestic and foreign players. Steps taken by the governmentsuch as - opening up the sector to private players, liberalising foreign investment norms and huge

spending on projects like National Highway Development Project (NHDP), National Maritime

Development Programme (NMDP) et all- have given a stupendous impetus to the sector in thepast few years.

India's infrastructure sector output grew 5.3 percent in May from a year earlier, slightly higherthan an annual growth of 5.2 percent in April, according to government data. During April-May,output rose 4.9 percent from 7.9 percent a year ago.


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Indian Roads

India built about 1,800 kilometres (km) of roads in the fiscal year 2010-11. The government hasannounced constructing 35,000 km of highways by 2014 for which it has estimated an

investment of over US$ 67 billion. A major chunk of this is expected from the private sector.

During 2010-11, 50 road projects of 5,060 km were awarded, while around 15,450 kms ofnational highways have been completed under the NHDP until March 31, 2011.

Also, the Road Transport and Highways Ministry has requested the World Bank for financing

the projects that include conversion of 20,000 km of state highways into national highways,besides upgrading 17,000 km of the latter.

Seven projects involving widening of roads in five states were approved by a panel in the

Finance Ministry at an estimated cost of US$ 1.69 billion and will be built under public-private-partnership (PPP) mode. The Public Private Partnership Appraisal Committee (PPPAC) chaired

by R Gopalan, Secretary of Department of Economic Affairs, granted the approvals, according tothe official statement.

Meanwhile, the Indian government will award a record 7,300 km of road building contracts in2011 worth about US$ 12 billion, said J.N. Singh, member finance at National Highways

Authority of India (NHAI).

Indian Ports

India is going global with its maritime ambitions. The government is setting up Indian PortsGlobala dedicated company like Dubai Port International and Singapore's PSA International

that will invest and acquire stakes in overseas ports and container terminals. To begin with, thecash-rich port trusts that are owned by the government will pump in US$ 556 million into IndiaPorts Global, which will initially act as the shipping ministry's investment arm. The company

will then leverage this amount to raise another US$ 1 billion from the market by issuing tax-freebonds, officials involved with the initiative said. The capacity of Indian ports during 2010-11

crossed 1 billion tonnes per annum. Foreign direct investment (FDI) inflow into ports has been


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registered at US$ 1.64 billion from April 2000 to April 2011


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Power Generation:

The Eleventh Plan (2007-12) called for the addition of 78,000 MW of power from all sources. It

is unlikely that this target will be realised, though a late surge during the past few years has

resulted in the rapid addition of generating capacity. It is envisioned that the final capacity

addition at the end of the Eleventh Plan will be somewhere between 60,000 and 65,000 MW.The Twelfth F ive-Year Plan (2012-17) is even more ambitious, calling for the addition of over

100,000 MW of power. Planners are confident of realising this target given that the policy

reforms of the Electricity Act would have had time to play out, leading to greater private sector

participation is concerned. Indeed, private sector participation in power generation is expected to

increase from 10% during the Eleventh Plan to 34% during the Twelfth plan. Thus while the

government is heavily investing in ramping up the capacities of the state-owned National

Thermal Power Corporation (NTPC) and the National Hydro Power Corporation (NHPC), which

until now were the predominant thermal and hydro power producers, respectively, power sector

liberalisation has led to a rapid increase in the number of private-sector players and a resultant

decrease in the share of power produced by state-owned enterprises.


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Health Services : There is a saying whether economic downturn or upturn when people are sick they

would still visit a doctor. This is an industry which is not affected by the economic scenario hence we can

say that it is a defensive stock. Indian health industry is highly untapped and it has a lot of scope for

expansion beyond tiered one city where it is concentrated at present. The healthcare sector, anticipated to

reach USD 75 billion by 2012 is expected to grow at 7.4 per cent. The healthcare industry would continue

to lead 13 industry sectors in the country in generating new jobs in 2011, a Ma Foi Randstad EmploymentTrends survey said.


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Oil and Gas : Market linked pricing of petrol has helped oil and gas companies to reduce their losses

which has in turn helped them to have a good steady performance in their stock prices. This industry is

highly dependent on exploration and refining which demand high initial cost. There is lot of risk involved

in these explorations because there is high uncertainty in initial finding and actual realization of the

quantity of oil or gas finding in the field. Though there is high cost there is also high incentive involved as

India is a energy hungry country and much of demand is met by imports. The refineries are dependentupon imports from Gulf countries and are highly dependent upon international crude prices. We have seen

lots of efforts from the Government in ensuring the profitability of these companies and deregulation of

prices.

As our investor is not risk averse we recommend him to include these stocks in portfolio as they are high

return stocks.


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Industry Analysis

This analysis makes an investor aware of all happenings in the industry or sector for example, IT,

Banking, Automobile, etc, which would be helpful in understanding future functioning andperformance of specific industries and respective companies. In specific following are the

important areas where an investor or analyst can get an idea of the industry environment after

doing a qualitative industry analysis

Stages of Industry Life Cycle

Prices of the products and services

Demand and Supply Condition

New Investments

Level of competition

Regulatory environment

Herfindahl index

The Herfindahl index is a measure of industry concentration. It was developed to provide an

alternative measure of the relative market control of the largest firms to that found with the four-

firm and eight-firm concentration ratios. The Herfindahl index is named after Orris C.

Herfindahl, the economist first credited with using it to analyze industry concentration. However,

upon further review, another economist, Albert O. Hirschman, was found to have used this index

earlier. As such, it is often termed the Herfindahl-Hirschman Index.

The Herfindahl Formula

The formula for calculating the Herfindahl index (HI) is:

HI = (Share 1)^2 + (Share 2)^2 + (Share 3)^2 + ... + (Share n)^2

We would look the analysis as

I. Why did we chose the following industry
http://pop_dsp%28%27pop_gls.pl/?k=industry%27,500,400)http://pop_dsp%28%27pop_gls.pl/?k=industry%27,500,400)http://pop_dsp%28%27pop_gls.pl/?k=industry%27,500,400)


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PharmaceuticalsThe Indian Pharmaceutical industry is highly fragmented with about 24,000 players (around 330 in the

organised sector). The top ten companies make up for more than a third of the market . The Indian

pharma industry grew by a robust 17% YoY in 2009 to '401 bn (approx. US$ 8.5 bn). It accounts for

about 1% of the world's pharma industry in value terms and 8% in volume terms.

Indian pharma companies also have a large chunk of their revenues coming from exports. While some

are focusing on the generics market in the US, Europe and semi-regulated markets, others are focusing on

custom manufacturing for innovator companies. Biopharmaceuticals is also increasingly becoming an

area of interest given the complexity in manufacture and limited competition.

The R&D spend of the top five companies is about 5% to 10% of revenues. Some Indian companies

entered into collaboration and partnership agreements with innovator companies, others have out-licensed

their molecules for milestone payments. Hiving off R&D units into separate companies has also

become a preferred option for many Indian pharma players. That said, given that the research

pipelines of Big Pharma are drying up, they have now begun to dabble in generics. In this regard, these

innovator companies are either buying out Indian firms or are forging alliances with them.

Key Points

Supply Higher for traditional therapeutic segments, which is typical of a developing

market. Relatively lower for lifestyle segment.

Demand Very high for certain therapeutic segments. Will change as life expectancy,

literacy increases.

Barriers to entry Licensing, distribution network, patents, plant approval by regulatory authority.

Bargaining power of

suppliers

Distributors are increasingly pushing generic products to earn higher margins.

Bargaining power of

customers

High, a fragmented industry has ensured that there is widespread competition in

almost all product segments. (Currently also protected by the DPCO).

Competition High. Very fragmented industry with the top 300 (of 24,000 manufacturing units)


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players accounting for 85% of sales value. Consolidation is likely to intensify.

FY10

In the domestic market, FY10 was a decent year for the pharmaceutical industry with most of the top

players managing to clock a double-digit growth.

Continuing with the trend last year, MNC companies did well during FY10/CY09 too. On an average,

they were able to clocktopline growth in the range of 10% to 13%. On the margin front, performance

was mixed. While GSK Pharma and Novartis witnessed an expansion in operating margins, Aventis and

Pfizer witnessed declines. Aventis was impacted by the termination of the agreement with Novartis

Vaccines for the sale of the anti-rabies vaccine 'Rabipur'.

Prospects

In the longer run, domestic companies would face fresh competition from MNCs, as they would make

aggressive new launches. However, the latter would most likely be subject to price negotiation.

Drugs having estimated sales of over US$ 108 bn are expected to go off patent between CY09 and CY13.

With the governments in the developed markets looking to cut down healthcare costs by facilitating a

speedy introduction of generic drugs into the market, domestic pharma companies will stand to

benefit. The life style segments such as cardiovascular, anti-diabetes and anti-depressants will continue to

be lucrative and fast growing owing to increased urbanisation and change in lifestyles. Growth in

domestic sales in the future will depend on the ability of companies to align their product portfolio

towards the chronic segment.

Contract manufacturing and research (CRAMS) is expected to gain momentum going forward. India's

competitive strengths in research services include English-language competency, availability of low

cost skilled doctors and scientists, large patient population with diverse disease characteristics and

adherence to international quality standards. As for contract manufacturing, both global innovators and

generic majors are finding it profitable to outsource production. Although there has been a considerable

slowdown in this area, the scenario is expected to improve going forward as the pressure to prune costs

increases.

The efforts of global innovators to entrench in the domestic market intensified with Abbott Laboratories

buying out the domestic formulations business of Piramal Healthcare. Thus, with Daiichi also having

acquired a majority stake in Ranbaxy, 2 of the top 3 players in the Indian market are MNCs.

Herfindahl index-The presentHerfindahl index is 0.07


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CementThe Indian cement industry is the 2nd largest market after China. It had a total capacity of about 260m

tonnes (MT) in FY10. Consolidation has taken place with the top five players alone controlling over

60% of the total industry capacity. However, the balance capacity still remains quite fragmented.

Despite the fact that the Indian cement industry has clocked production of more than 100 MT for the last

five years, registering a growth of nearly 9% to 10%, there exists tremendous scope for growth in the

Indian cement industry in the long term. Considering the government's thrust on infrastructure long

term demand remains intact.

Given the high potential for growth, quite a few foreign transnationals have been eyeing the Indian

markets and are planning to acquire domestic companies. Already, while companies like Lafarge,

Heidelberg and Italicementi have made a couple of acquisitions, Holcim has increased stake in domestic

companies Ambuja Cements and ACC to gain full control. The global players put together account for

a quarter share of the domestic market. During the first half of FY11, UltraTech Cement merged itself

with Samruddhi Cement to become the largest cement company in the country. Considering the long term

growth story, fair valuations, fragmented structure of the industry and low gearing, another wave of

consolidation would not come as a surprise.

Key Points

Supply The demand-supply situation is tightly balanced, supply being marginally higher.

Demand Housing sector acts as the principal growth driver for cement. However, recently

industr ial and infrastructure sectors have also emerged as demand drivers.

Barriers to entry High capital costs and long gestation periods. Access to limestone reserves (key

input) also acts as a significant entry barrier.

Bargaining power

of suppliers

Licensing of coal and limestone reserves, supply of power from the state grid etc are

all controlled by a single entity, which is the government.

Bargaining power

of customers

Cement is a commodity business and sales volumes mostly depend upon the

distribution reach of the company. However, things are changing and few brands

have started commanding a premium on account of better quality perception.

Competition Intense competition with players expanding reach and achieving pan India presence.


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FY10

In FY10 the industry added nearly 50 MT of capacity taking the total capacity to nearly 260 MTPA.

While the demand was steady during the fiscal, average industry realisations (average price per bag of

cement) witnessed a modest growth. The growth in realisations slowed down as additional capacities

coming on stream resulted in oversupply.

Owing to the general economic slowdown financial institutions tightened their credit norms. This led to a

credit crunch and impacted upcoming real estate, infrastructure and other projects. With that, demand for

cement moderated. However, stimulus packages announced by the government and agricultural income

gave a fillip to the demand for the commodity.

Prospects

The cement industry is likely to maintain its growth momentum and continue growing at around

8% to 9% in the medium to long term. Government initiatives in the infrastructure sector and thehousing sector are likely to be the main growth drivers.

During the first half of FY11, a series of huge capacity expansions (through the brownfield or greenfield

route) against a corresponding poor offtake in cement demand due to subdued construction activity

created excess supply, thus putting downward pressure on realisations. This has been coupled with

significant rises in input costs, especially prices of coal and petroleum products. As a result, both the

topline and bottomline have been badly hit.

Good agricultural income will support demand for the commodity despite slowdown in the real estate

sector. The importance of the housing sector in cement demand can be gauged from the fact that housing

sector consumes almost 60%-70% of the country's cement.

In the Budget 2010, the government increased the excise duty from 8% to 10% on cement and clinker.

However, the government has also increased budgetary allocation for roads under NHDP. Further, with

more incentives being spelled out for the infrastructure and housing sector, cement manufacturers

will continue to benefit. The budget measures such as increasing excise duties have proved to be futile

and in the future too, we believe that it is the market dynamics that will determine these variables. Going

forward, we believe the government's initiatives in the infrastructure and housing sectors are likely

to be the main drivers of growth for the industry in the long run.

Herfindahl index-The presentHerfindahl index Is 0.062


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AutomobileThe Indian automobile segment can be divided into several segments viz. two-wheelers (motorcycles

geared and ungeared scooters and mopeds), three wheelers, commercial vehicles (light, medium and

heavy), passenger cars, utility vehicles (UVs) and tractors.

Demand is linked to economic growth and rise in income levels. While the industry is highly capital

intensive in nature in case of four-wheelers, capital intensity is a lot less for two-wheelers. Though three-

wheelers and tractors have low barriers to entry in terms of technology, four wheelers is technology

intensive. Costs involved in branding, distribution network and spare parts availability increase entry

barriers. With the Indian market moving towards complying with global standards, capital expenditure

will rise to take into account future s afety regulations.

As compared to their global counterparts, both the two-wheeler as well as four wheeler segments are

relatively lesser fragmented. Foreign majors are eyeing the Indian market. As a result, pricing power

is likely to diminish going forward.

Automobile majors increase profitability by selling more units. As number of units sold increases,

average cost of selling an incremental unit comes down. This is because the industry has a high fixed

cost component. This is the key reason why operating efficiency through increased localization of

components and maximizing output per employee is of significance.

Key PointsSupply The Indian automobile market has some amount of excess capacity.

Demand Largely cyclical in nature and dependent upon economic growth and per capita income.

Seasonality is also a vital factor.

Barriers to entry High capital costs, technology, distribution network, and availability of auto

components.

Bargaining power of suppliers Low, due to stiff competition.

Bargaining power of customers Very high, due to availability of options.

Competition High. Expected to increase even further.

FY10

A total of 9.4 m two-wheelers were sold in India in FY10, a growth of a strong 27% over the previous

year. Motorcycles accounted for 78% of the total two wheelers sold. Although economic growth came in
http://www.equitymaster.com/detail.asp?date=6/25/2009&story=1&title=Indian-auto-majors-in-drivers-seathttp://www.equitymaster.com/5MinWrapUp/detail.asp?date=6/30/2009&story=3http://www.equitymaster.com/5MinWrapUp/detail.asp?date=6/30/2009&story=3http://www.equitymaster.com/detail.asp?date=6/25/2009&story=1&title=Indian-auto-majors-in-drivers-seat


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much below than 9%, low interest rate, availability of credit and a low based effect helped two wheeler

sales to grow strongly. The 3-wheeler segment also performed well as domestic volumes improved 26%

YoY, led by 31% growth in passenger carriers. The goods segment on the other hand grew more than

11%.

The medium and heavy commercial vehicles (M/HCVs) segment saw its volumes grow by a huge

34%.This came on the back of 37% drop in volumes in the previous year, the industrys second in eight

years. High cost of borrowings and economic slowdown affected growth in FY09, the reversal of these

factors helped growth in FY10. LCVs on the other hand, outperformed their HCV peers as LCVs

volumes increased at an even better rate of 43%. The growth in the segment was largely propelled by

low tonnage vehicles of the likes of Ace, the sub one tonner from Tata Motors .

Domestic volumes grew by 32% for tractors as against a marginal growth in the previous year. Sales of

passenger vehicles increased by 26% in FY10, primarily due to availability of finance and low interest

rates. Utility Vehicles also logged in a strong growth of 21% in FY10.

Prospects

The government spending on infrastructure in roads and airports and higher GDP growth in the future will

benefit the auto sector in general. We expect a slew of launches in the Segment 'B' and Segment 'C' of

passenger cars. Utility vehicle segment is expected to grow at around 8% to 9% in the long-term.

In the 2-wheeler segment, motorcycles are expected to witness a flurry of new model launches. Though

the market size is expected to grow by 10% to 12%, competitive pressure could keep prices and margins

under control. TVS, Honda and Hero Honda are poised to benefit from higher demand for ungeared

scooters in the urban and rural markets.

Riding the wave of structural changes taking place in the country, the tractor industry has registered good

growth in FY10 despite sub-par monsoons. The longer-term picture is impressive in light of poor

mechanisation levels in the countrys farm sector and the thrust of the government on improving rural

infrastructure.

With an estimated 40% of CVs plying on the roads 10 years old, demand for HCVs is expected to grow

by 7% to 8% over the long term. The privatisation of select state transport undertakings bodes well for

the bus segment.


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Indian Automobile Industry has seen a phenomenal growth in the past 20 years and is one of the

core industries of the growing Indian Economy. This has happened due to a lot of positive

factors like

Friendly and favorable government economical policies

Rise in Agriculture and Industrial Output

Rise in per capita income (individual)

Better Roads and Infrastructure leads to higher Auto demand

Rising Midd le Class and Working Class ( higher buying power)

Availability of Easy Finance Schemes for purchasing Automotive

By 2016 the size of the Indian automobile industry is expected to grow by 13%, to reach a mark

of USD $ 120-159 billion. Presently, India is the 2nd largest two wheeler market in the world

and fourth largest commercial vehicle market worldwide . India is the 11th largest market in the

passenger car segment globally which is expected to become the 7th largest market by 2016.

Indian Economy is growing at a rate of little over 8.5% GDP and is expected to do even better in

the time to come. Along a rising economy, rising middle class income, rising purchasing power,

easy finance options at low interest rates, all together is going to provide substantial growth to

this sector by boosting demand for both two wheelers as well as four wheelers.

This makes the Indian Automotive sector one of the most promising sector to invest from the

Indian Economy and Stock Market. Be with this sector for few years to come and you will make

money.


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BankingInfluenced by the global financial turmoil and repercussion of the subprime crisis, the global banking

sector has been witness to some of the largest and best known names succumb to multi-billion dollar

write-offs and face near bankruptcy. However, the Indian banking sector has been well shielded by the

central bank and has managed to sail through most of the crisis with relative ease. Having said that, the

latent demand for credit (both from the food and non food segments) and structural reforms have paved

the way for a change in the dynamics of the sector itself. Besides gearing up for the compliance with

Basel II accord, the sector is also looking forward to consolidation and investments on the FDI front.

Public sector banks have been very proactive in their restructuring initiatives be it in technology

implementation or pruning their loss assets. While the likes of SBI have made already attempts towards

consolidation, others are keen to take off in that direction.

On the liabilities side, with better penetration in the semi urban and rural areas the banks garnered a

higher proportion of low cost deposits thereby economising on the cost of funds.

Apart from streamlining their processes through technology initiatives such as ATMs, telephone banking,

online banking and web based products, banks also resorted to cross selling of financial products such as

credit cards, mutual funds and insurance policies to augment their fee based income.

Key Points

Supply Liquidity is controlled by the Reserve Bank of India (RBI).

Demand India is a growing economy and demand for credit is high though it could be cyclical.

Barriers to entry Licensing requirement, investment in technology and branch network.

Bargaining power of suppliers High during periods of tight liquidity. Trade unions in public sector

banks can be anti reforms. Depositors may invest elsewhere if interest rates fall.

Bargaining power of customers For good creditworthy borrowers bargaining power is high due to the

availability of large number of banks


22/60

Competition High- There are public sector banks, private sector and foreign banks along with non

banking finance companies competing in similar business segments.

FY10

After a difficult FY09 Indian banks managed to grow their balance sheets in FY10 albeit at a lower

average rate than that projected by the RBI. The monetary stimuli (reduction in repo rate, cash reserve

ratio (CRR) and statutory liquidity ratio (SLR) offered to the banks by the RBI early in the fiscal made it

easier to sustain margins. Indian banks grew their advances and deposits by 16.9% YoY and 17.2%

YoY respectively in FY10. The growth was mainly driven by a expansion in low cost deposits and

growth in agricultural and large corporate credit..

In the retail portfolio, while home loans grew by 11% YoY, personal loans enjoyed a much smaller

growth of 6% YoY due to bank's reluctance towards uncollateralized credit. Credit card outstanding infact dropped by 27% YoY.

Indian banks, however, enjoyed higher levels of money supply, credit and deposits as a percentage

of GDP in FY10 as compared to that in FY09 showing improved maturity in the financial sector.

Despite poor pricing power, lower cost of funds helped Indian banks grow their net interest margins

in FY10. While few like ICICI Bank chose to reduce their balance sheet size, most entities chose to

reasonably grow their franchise as well as assets.

Some PSU banks may witness some capital infusion from the government in FY11.

Prospects

With banks having complied with Basel II and having sufficient capital in their books; it will be a

challenge to deploy the same safely and profitably in the event of persistence of economic slowdown.

Banks are likely to concentrate more on non funded income in this scenario.

Banks, especially the private sector ones, are likely to face penetration concerns. The lack of credit

penetration and the geographic concentration of bank credit is evident from the fact that 5 states having

the highest proportion of per capita credit enjoy 55% of the total credit disbursals in the country.

RBI's roadmap for the entry of foreign banks and the acquisition of stake by the foreign entities in Indian

private banks has been deferred for the time being. However, the tussle for higher market share in the

already fragmented sector is only set to aggravate.


23/60

The proposal for Cabinet's approval to allow PSU banks to bring down the government's stake in them

below the stipulated 51%, which is yet to be tabled, can help the bank raise substantial capital without

borrowing at high rates and give the entities an opportunity to enhance their capital adequacy ratios

besides competing with their private sector peers.

Banking industry is said to be a mirror of an economys health. A Sound banking system serves

as a significant trade enabler to the country. During the recent global crisis, Indian banking

industry came out with flying colors on the back of stringent stipulations laid down the Central

bank.

With the opening up of the sector in early Nineties by the government, the industry ha s received

a significant boost by the emergence of the private sector banks which increased competitiveness

and enhanced the level of banking facilities to a top notch level.

However, during the recent global recession, even the lagging public sector banks have made a

big come back on the back of large up gradations to suit the hi-tech services provided by the

private sector and foreign banks.

For a sustained economic growth for the country, unmatched banking and financial services is a

must in order to facilitate the increasing need of swift and hassle-free transactions. Banking

sector is an enabler to the economic growth.

The credit growth has picked up over the last few months and is expected to remain strong with

improved economic conditions and pick-up in corporate demand. The interest rates are also

expected to go up in the short term which favors banks. Loans are reprised immediately.

Therefore, the net interest margins (NIM) are likely to go up.

A higher NIM along with loan growth results in improved earnings in the medium to long terms.

So it is sensible o invest in banking industry.

Herfindahl index-The herfindalh index is 0.034.
http://trak.in/tags/business/2009/02/03/17-indian-banks-in-the-global-500-list/http://trak.in/tags/business/2010/02/15/nokia-yes-bank-innovative-mobile-money-services-indian-consumers/http://trak.in/?s=global+recessionhttp://trak.in/tags/business/2010/02/15/nokia-yes-bank-innovative-mobile-money-services-indian-consumers/http://trak.in/tags/business/2010/02/15/nokia-yes-bank-innovative-mobile-money-services-indian-consumers/http://trak.in/?s=global+recessionhttp://trak.in/tags/business/2010/02/15/nokia-yes-bank-innovative-mobile-money-services-indian-consumers/http://trak.in/tags/business/2009/02/03/17-indian-banks-in-the-global-500-list/


24/60

TelecomIndia's teledensity has improved from under 4% in March 2001 to around 53% by the end of March 2010.

Cellular telephony has emerged as the fastest growing segment in the Indian telecom industry. The mobile

subscriber base (GSM and CDMA combined) has grown from under 2 m at the end of FY00 to touch 584

m at the end of March 2010 (average annual growth of nearly 76% for mobile subscribers during

this ten year period). Tariff reduction and decline in handset costs has helped the segment to gain in

scale.

As far as broadband connections (>=256 kbps) are concerned, India currently has a subscriber base of 8.8

m. Broadband connection base has grown at an average annual growth rate of 40% since 2008. The

auction for broadband wireless license and spectrum has concluded recently. The government is expected

to allocate spectrum before the end of this year. This will further boost the broadband penetration in the

country.

Key Points

Supply Intense competition has resulted in prompt service to the subscribers.

Demand Given the low tariff environment and relatively low rural and semi urban penetration levels,

demand will continue to remain higher in the foreseeable future across all the segments.

Barriers to entry High capital investments, well-established players who have a nationwide network,license fee, continuously evolving technology and lowest tariffs in the world.

Bargaining power of suppliers Improved competitive scenario and commoditisation of telecom services

has led to reduced bargaining power for services providers.

Bargaining power of customers A wide variety of choices available to customers both in fixed as well

as mobile telephony has resulted in increased bargaining power for the customers.

Competition Competition has intensified with the entry of new cellular players in circles. Reduced tariffs

have hurt all operator


25/60

FY10

FY10 saw the continuance of strong growth for the Indian telecom market, which witnessed a 45% YoY

increase in its subscriber base during the 12-month period. At the end of March 2010, the country's

total telecom subscriber base (fixed plus mobile) stood at about 621 m. The tele-density level stood at

about 53% by the end of the fiscal.

Growth remained robust in the GSM mobile space. GSM added 87 m subscribers during the year. After a

strong 50% YoY increase in subscriptions during FY09, the GSM industry recorded another good

performance during FY10, growing subscriber base by 22% YoY to about 479 m.

During FY10, India's mobile subscriber base grew by 49% YoY, from 392 m to 584 m, while the

fixed subscriber base declined by about 3%, from 37.9 m to about 36.9 m.

Prospects

As far as the fixed line business goes, the low penetration levels in the country and the increasing

demand for data based services such as the Internet will act as major catalysts in the growth of this

segment. The PSUs will however continue to retain their dominant position. This is on account of high

capital investments required in setting up a nationwide network.

Increasing choice and one of the lower tariffs in the world have made the cellular services in India an

attractive proposition for the average consumer. The segment's subscriber base has grown by over 49%

YoY in FY10. As per Pricewaterhouse Coopers, India's mobile subscriber base is expected to exceed

1 bn by 2014 and will be driven by additions in the rural areas. India's rural tele-density for mobile

subscribers currently stands at 32.7%.

During FY10, the Government completed the auction of 3G as well as the Broadband Wireless Access

(BWA) spectrum auctions. The final price for a pan India 3G spectrum stood at a whopping '16,751

crores. As a result, there was no single operator with a pan India license.

During the year the Telecom Regulatory Authority of India (TRAI) also proposed new guidelines for

charging spectrum fee and for mergers and acquisitions in the sector.

Mobile number portability (MNP) which allows subscribers to switch networks without changing the

number has lead to an increase in churn in the sector with each operator vying for subscriber attention to

their own networks. In addition to this, the government has allocated 3G spectrum later during the year.

The operators have started rolling out 3G services in almost all circles and are growing at good pace.


26/60

The Indian steel industry has witnessed steady growth, on the back of various initiatives taken by

the Government of India. The soaring demand from different sectors, such as, infrastructure, real

estate and automobile has put the steel industry in India on the world map.

Some of the growth drivers helping the sector to grow are:

Abundant availability of iron ore in the country with states such as Orissa, Jharkhand and

Chhattisgarh are rich in iron ore reserves. The National Minerals Development

Corporation (NMDC) plans to expand its iron ore production capacity from its existing

capacity of 30 million tonnes per annum (MTPA) to 50 MTPA by 201415 through the

capacity expansion of current mines as well as by setting up new mines.

The country has well established facilities for the production of steel.

Market Size

Steel industry is of great significance to the economic growth of the country. India has been

ranked the worlds fifth largest producer of crude steel in 2009 and is projected to become the

worlds second largest producer by 20152016, with a production volume of 54.5 million tonnes

(MT). Various states have signed around 222 memorandums of understanding (MoUs), with a

projected capacity of about 275.7 MT and an investment of more than US$ 229 b illion.

The Eleventh Five Year Plan (20072012) has allocated investments worth US$ 490 billion for

the infrastructure sector, comprising power, roads, highways, railways, ports, airports, mining

and irrigation. Steel giants such as JSW Steel and Tata Steel are investing to enhance the

capacities of products such as TMT bars (rebars) and many more.

Government Initiatives

The Indian Government has laid more importance on infrastructure development in the

Union Budget 2011. This would help in development of highways, ports, power projects,

bridges and others, which will therefore increase the demand for steel.


27/60

With effect from May 24, 1992 steel industry was incorporated in the list of high

priority industries for automatic approval for foreign equity investment up to 51 per cent.

This limit has since been increased to 100 per cent.

Import duties on key steel-making raw materials, comprising of mineral products, ores

and concentrates have seen noteworthy reductions in successive budgets during the last

few years.

The government introduced special economic zones (SEZs) in June 2005, with the plan

of creating internationally competitive regions. Steel plants operating in SEZs receive

some advantages like tax holiday; they can freely source inputs domestically or externally

without any specific approval or duty payable.


Steel Industry:

The Indian steel industry has witnessed steady growth, on the back of various initiatives taken by

the Government of India. The soaring demand from different sectors, such as, infrastructure, real

estate and automobile has put the steel industry in India on the world map.

Some of the growth drivers helping the sector to grow are:

Abundant availability of iron ore in the country with states such as Orissa, Jharkhand and

Chhattisgarh are rich in iron ore reserves. The National Minerals Development

Corporation (NMDC) plans to expand its iron ore production capacity from its existing

capacity of 30 million tonnes per annum (MTPA) to 50 MTPA by 201415 through the

capacity expansion of current mines as well as by setting up new mines. The country has well estab lished facilities for the production of steel.

Market Size


28/60

Steel industry is of great significance to the economic growth of the country. India has been

ranked the worlds fifth largest producer of crude steel in 2009 and is projected to become the

worlds second largest producer by 20152016, with a production volume of 54.5 million tonnes

(MT). Various states have signed around 222 memorandums of understanding (MoUs), with a

projected capacity of about 275.7 MT and an investment of more than US$ 229 b illion.

The Eleventh Five Year Plan (20072012) has allocated investments worth US$ 490 billion for

the infrastructure sector, comprising power, roads, highways, railways, ports, airports, mining

and irrigation. Steel giants such as JSW Steel and Tata Steel are investing to enhance the

capacities of products such as TMT bars (rebars) and many more.

Government Initiatives

The Indian Government has laid more importance on infrastructure development in the

Union Budget 2011. This would help in development of highways, ports, power projects,

bridges and others, which will therefore increase the demand for steel.

With effect from May 24, 1992 steel industry was incorporated in the list of high

priority industries for automatic approval for foreign equity investme nt up to 51 per cent.

This limit has since been increased to 100 per cent.

Import duties on key steel-making raw materials, comprising of mineral products, oresand concentrates have seen noteworthy reductions in successive budgets during the last

few years.

The government introduced special economic zones (SEZs) in June 2005, with the plan

of creating internationally competitive regions. Steel plants operating in SEZs receive

some advantages like tax holiday; they can freely source inputs domestically or externally

without any specific approval or duty payable.

Indian Steel Industry: Road Ahead

The Indian crude steel production will grow at a compound annual growth rate (CAGR) of

around 10 per cent during 2010-2013, according to a research report by RNCOS titled, Indian


29/60

Steel Industry Outlook to 2012.Additionally, various initiatives have been taken by the

Government to boost economic growth, by injecting funds in industries such as construction,

infrastructure, automobile, and power. This will provide an impetus for growth for the steel

industry in future. The report also states that steel consumption in India is expected to grow

considerably in coming years. Another report by Global Consultancy firm Ernst & Young states

that India would have annual production capac ity of 101 MT in 2011-12.

Herfindahl index-Value of Herfindahl index for Indian Steel Industry is .170.It implies that the

competition in the steel industry is medium to high and high concentration.

Company Analysis

TELECOM INDUSTRY

Top Telecom companies in India are :

Bharti Airtel ROE 14.7% Beta:

IDEA Cellular 8.4%

Reliance Comm.

TATA Comm.

Bharti Airtel

Bharti Airtel is the largest mobile telephony operator in the GSM space with 22% share

of the Indian wireless market (as at the end of June 2010). The company, apart from

being the largest player in the mobile segment with subscribers in all the 22- telecom

circles of the country, also provides varied services like fixed line, broadband and retailinternet access. Bharti's network spans over 440,023 non-census towns and villages in

India. During the period FY05 to FY10, the company grew its sales and profits at

compounded annual rates of 39% and 50% respectively.

BHARTI AIRTEL Financial Summary


30/60

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 373,521 418,472 594,672

Sales Growth - 12.0 42.1Gross profit margin 40.2 40.0 33.5PAT 78,590 90,610 71,673Dividend per share 2.00 1.00 1.00Dividend payout 4.8 4.2 5.3

RoCE 22.7 24.2 11.3

RoNW 27.0 21.5 14.7Debt to equity ratio 0.3 0.2 1.1Mkt Cap 1,388,563 1,469,644 1,196,222

Mkt Cap / Sales 3.7 3.5 2.

P/E Ratio (09/09/2011) 27.2

EPS (Rs.) (09/09/2011) 14.69

IDEA CELLULARIdea was originally incorporated as Birla Communications Limited, with the license to provide cellular

services in Maharashtra and Gujarat. Post an acquisition of stake by AT&T and the Tata Group, thecompany was renamed Birla-Tata-AT&T, with operations spread in Andhra Pradesh and Chhattisgarh.

The company seeking brand positioning changed its name to Idea Cellular Limited in 2001. The company

has, in the past few years, seen exponential growth in terms of additions to its subscriber base. Idea

currently caters to 11 circles in India, effectively covering around 57% of the countrys population.

IDEA CELLULAR Financial Summary

1231/03/2008

1231/03/2009

1231/03/2010

Net Sales 67,200 101,313 123,979

Sales Growth - 50.8 22.4

Gross profit margin 33.2 27.4 27.2

PAT 10,423 8,815 9,540

PAT Growth - -15.4 8.2


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Dividend per share 0.00 0.00 0.00

Dividend payout 0.0 0.0 0.0

RoCE 17.2 9.4 9.6

RoNW 29.5 6.7 8.4

Debt to equity ratio 1.5 0.5 0.6

Mkt Cap 276,713 229,407 229,339

Mkt Cap / Sales 4.1 2.3 1.8

P/E Ratio (09/09/2011) 37.8

EPS (Rs.) (09/09/2011) 2.65

RELIANCE COMM (RCOM)

Reliance Communication Ltd. (RCL) is the second largest private sector mobile telephone operator inIndia with a wireless (CDMA and GSM) subscriber base of nearly 50 m. The business of the company isspread across three segments - Global, Enterprise and Personal. The 'Global' business caters to voiceand data market. In the voice market, RCL is the carrier of national and international voice traffic fortelecom operators, telecom service providers and its internal customers. The data business owns thelargest private submarine cable system in the world, which carries data across six continents. The'Enterprise' segment serves 750 of the top 1,000 enterprises in India, by offering a wide array of productsthat comprise of voice, data, Internet, and IT infrastructure management services. The 'Personal'segment offers voice, data and value added services for the individual consumers and enterprises, via itsCDMA and GSM-based mobile and fixed wireless services.

RELIANCE COMM Financial Summary

1231/03/2008

1231/03/2009

1231/03/2010

Net Sales 188,274 222,505 214,964Sales Growth - 18.2 -3.4


PAT 56,377 60,450 46,549

PAT Growth - 7.2 -23.0



32/60


RoCE 16.6 11.6 10.6

RoNW 19.5 14.3 10.8


Mkt Cap 1,272,474 760,595 521,168


P/E Ratio (09/09/2011) 14.9

EPS (Rs.) (09/09/2011) 6.01

TATA COMM. (VSNL)

Tata Communications (erstwhile VSNL) is the largest and incumbent international long distance (ILD)telephony services operator in the country. Being the pioneer of Internet services in the country, VSNLprovides international telecommunication services, operates a network of earth stations, switches,submarine cable systems and value added service nodes to provide international telephony, telex andtelegraph and Internet services. The company also operates DLD (domestic long distance) andbroadband services in the country.

TATA COMM. Financial Summary

1231/03/2008

1231/03/2009

1231/03/2010

Net Sales 82,974 99,632 110,256



PAT 103 3,159 -5,977

PAT Growth - 2,967.0 -289.2


Dividend payout 1,245.1 40.6 0.0

RoCE 4.5 8.1 -1.7

RoNW 0.2 6.3 -13.1


33/60


Mkt Cap 163,020 128,963 131,670


P/E Ratio (09/09/2011) -9.90

EPS (Rs.) (09/09/2011) -24.90

Companys considered

Bharti and Idea Cellular

BANKING INDUSTRY

Top Banking companies in India are :

State Bank of India (SBI) ROE 12.8%

ICICI Bank

HDFC Bank ROE - 15.6%

Punjab National Bank

State Bank of India (SBI)

SBI is India's largest banking company in the country with an asset size of over Rs 9 trillion (Rs

9,000 bn). Although the bank's loan book is largely skewed towards corporate (52% of total

advances in FY10), the retail side is also fast catching up. SBI has a network of over 12,600

branches and 16,300 ATMs across the country.

SBI Financial Summary

12

31/03/2009

12

31/03/2010

12

31/03/2011

Gross profit margin 2.7 -9.0 -0.9

PAT 109,552 117,338 106,850

PAT Growth - 7.1 -8.9




34/60

RoA 0.8 0.8 0.6

RoNW 16.0 14.9 13.6

Net NPAs 1.8 1.7 1.6

Mkt Cap 867,881 1,104,691 1,755,747

P/E Ratio (09/09/2011) 13.2

EPS (Rs.) (09/09/2011) 154.03

ICICI Bank

ICICI Bank is amongst the few Indian banks that actually reduced their share of India's

total non-food credit disbursements from 9.6% in FY08 to 6.6% in FY10. Being the

second largest bank in the country after SBI in terms of asset size, the bank had a

franchise of over 5,220 ATMs and 1,707 branches at the end of March 2010. Retail

assets constituted 44% of advances in FY10, down from 59% in FY08.

ICICI BANK Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Gross profit margin -50.8 -60.7 -68.4

PAT 35,770 46,703 60,933

PAT Growth - 30.6 30.5



RoA 0.7 1.0 1.1RoNW 8.2 9.5 11.4

Net NPAs 2.1 2.1 1.1

Mkt Cap 675,676 729,591 1,197,151



35/60

P/E Ratio (09/09/2011) 18.2

EPS (Rs.) (09/09/2011) 50.41

HDFC BankWith 3.6% share of India's total non-food credit disbursements in FY10, HDFC Bank is

the second largest private sector bank in the country (after ICICI Bank) in terms of asset

size. At the end of March 2010, it had a franchise of 4,232 ATMs and 1,725 branches.

Retail assets constituted 60% of advances in FY10. The bank is focusing on loan

origination in the retail, SME (small and medium enterprises) and agriculture segments

and on non-fund based products and services. Its group companies, HDFC Standard

Life (insurance), HDFC AMC (mutual funds) and HDFC Securities (equities) add

scalability to the bank's offerings.

HDFC BANK Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011


PAT 22,490 30,036 39,926

PAT Growth - 33.6 32.9Dividend per share 10.00 12.00 16.50


RoA 1.2 1.3 1.4

RoNW 15.5 14.3 16.0

Net NPAs 0.6 0.3 0.2

Mkt Cap 499,609 672,420 1,000,878


P/E Ratio (09/09/2011) 29.3

EPS (Rs.) (09/09/2011) 16.55


36/60

Punjab National Bank

Punjab National Bank is the third largest banking entity in the country (in terms of asset

size) with 4.6% share of the total credit disbursals at the end of FY10. An operating

overhaul in terms of asset quality and retention of high margins has helped the bank

position itself favourably amongst its peers and marginally enhance its share this fiscal.

Thereon, adequate capital, high NPA coverage and interest rate insulation has pegged

the bank amongst the frontrunners in the public sector banking space.

PNB Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011


PAT 31,970 39,726 45,748




RoA 1.3 1.3 1.2

RoNW 21.4 21.9 20.9

Net NPAs 0.2 0.5 0.9Mkt Cap 136,525 222,444 348,649


P/E Ratio (09/09/2011) 6.8

EPS (Rs.) (09/09/2011) 140.64

Companys Considered: State Bank and HDFC Bank


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PHARMA INDUSTRY

Top Pharma companies in India are :

Ranbaxy ROE 26.7%

Dr Reddy's Laboratories

Cipla

Sun Pharma Industries ROE 19.6%

RANBAXY

Ranbaxy is the largest Indian pharmaceutical company (in terms of revenues). The

company manufactures and markets generic formulations and APIs in India and

geographies across the world namely the US, Europe, Japan, Latin America, Asia,

Africa and Russia among others. In 2008, the promoters of the company sold their stake

to the Japanese company Daiichi Sankyo for a consideration of ` 737 per share. Daiichi

Sankyo now has a 64% stake in Ranbaxy.

RANBAXY LAB Financial Summary

1231/12/2008

1231/12/2009

1231/12/2010

Net Sales 74,140 75,971 89,608



PAT -9,512 2,965 14,967

PAT Growth - - 404.8



RoCE -17.6 15.2 32.4

RoNW -22.1 6.8 26.7


Mkt Cap 163,524 141,051 208,204



38/60

P/E Ratio (09/09/2011) 34.5

EPS (Rs.) (09/09/2011) 14.72

Dr Reddy's Laboratories

Dr. Reddy's Laboratories is a leading Indian pharmaceutical company, with presence

across the pharmaceutical value chain. The company derives revenues from APIs (21%

of sales), formulations (32%), generics (28%) and the rest from custom pharmaceutical

services, critical care and biotechnology businesses.

DR. REDDY`S Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 69,006 70,310 74,233



PAT -9,172 3,189 9,989

PAT Growth - - 213.2


Dividend payout -11.5 59.6 19.1

RoCE -12.7 16.1 26.4

RoNW -26.0 8.5 24.8


Mkt Cap 92,322 151,458 255,144


P/E Ratio (09/09/2011) 21.7

EPS (Rs.) (09/09/2011) 68.29


39/60

CIPLA

Cipla is among the top three companies in the domestic retail market (ORG survey) and has presence informulations and bulk drugs manufacturing. All the bulk drug manufacturing facilities of the company havebeen approved by the US FDA and the formulation facilities have been approved by regulatory authoritiesin the UK, South Africa and Australia and other international agencies. Cipla has strategic alliances withmajor global generic companies such as Watson, Mylan, Barr and Teva/Ivax for supply of bulk drugs andhas a very wide product range in the domestic market.

CIPLA Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 49,606 53,595 61,303



PAT 7,710 10,826 9,672

PAT Growth - 40.4 -10.7



RoCE 21.3 22.8 17.6

RoNW 17.7 18.3 14.5


Mkt Cap 151,572 230,057 267,774


P/E Ratio (09/09/2011) 24.4

EPS (Rs.) (09/09/2011) 11.91


40/60

Sun Pharma Industries

Sun Pharma holds 3.7% share of the domestic pharma market (as per the latest ORG

IMS MAT data) and has a strong presence in the lifestyle therapeutic segments. The

company started focusing on the exports market in FY02, when it increased its stake to

48% in the US-based Caraco Pharma. Currently, the stake in Caraco stands at 76%.

Exports contribute around 56% to revenues. With the help of Caraco, Sun Pharma has

been able to grow its US business, which brings in synergies by way of backward

integration in both manufacturing and R&D.

SUN PHARMA Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 42,723 40,075 57,214

Sales Growth - -6.2 42.8


PAT 18,177 13,583 18,589

PAT Growth - -25.3 36.9



RoCE 26.7 18.2 20.5RoNW 25.8 17.3 19.6


Mkt Cap 260,039 296,285 421,481


P/E Ratio (09/09/2011) 28.4

EPS (Rs.) (09/09/2011) 17.36

Companys Considered: Ranbaxy and Sun Pharma


41/60

CEMENT INDUSTRY

Top Cement companies in India are :

ACC Limited ROE 17.2%

Gujarat Ambuja Cements Limited ROE -17.2

Ultratech ROE

Shree Cement

ACC Limited

ACC is the oldest cement manufacturer in the country. The company's total capacity for

the year ended CY09 stood at 26 million tonnes (MT). With a strong dealer network,

ACC is one of the few cement companies to have a pan India presence. The company

has focused its efforts on being a cement player and has therefore exited its non-core

businesses. Ambuja Cements, one of the leading players in the industry, in consortium

with Switzerland's Holcim, has acquired 46% stake in the company.

ACC LIMITED Financial Summary

12

31/12/2008

12

31/12/2009

12

31/12/2010Net Sales 76,940 84,796 82,587

Sales Growth - 10.2 -2.6


PAT 10,996 15,639 10,775

PAT Growth - 42.2 -31.1



RoCE 32.7 36.6 21.7

RoNW 22.8 26.7 17.2Debt to equity ratio 0.1 0.1 0.1

Mkt Cap 133,159 131,136 172,073


P/E Ratio (09/09/2011) 19.7


42/60

EPS (Rs.) (09/09/2011) 53.98

Gujarat Ambuja Cements Limited

Ambuja Cements (previously known as Gujarat Ambuja) has a cement capacity of 22 m

tonnes (MT). The company, which pioneered the concept of transport of cement by sea,

is particularly strong in the northern and western markets. Holcim Mauritius, an indirect

wholly owned subsidiary of Holcim (Europe), over a period of time has acquired close to

46% stake in the company.

AMBUJA CEMENT Financial Summary

12

31/12/2008

12

31/12/2009

12

31/12/2010Net Sales 62,475 70,768 73,902



PAT 13,897 12,169 12,629

PAT Growth - -12.4 3.8



RoCE 33.4 28.0 23.7

RoNW 24.5 18.8 17.2


Mkt Cap 146,931 131,039 200,412


P/E Ratio (09/09/2011) 19.6

EPS (Rs.) (09/09/2011) 7.48


43/60

Ultratech Cement

UltraTech, an Aditya Birla Group Company and a 51% subsidiary of Grasim, has a

capacity of 23.1 MT at the end of FY10. However, once the merger with Samruddhi

Cement culminates Ultratech will catapult to being the number one cement company

with an aggregate capacity of 49 MT. The company has presence in the western,

eastern and southern regions. It also manufactures ready mix concrete (RMC) and is

the largest exporter of cement clinker. Its export markets span out around the Indian

Ocean, Africa, Europe and the Middle East.

ULTRATECH CEMENT Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 65,637 71,750 136,911



PAT 9,781 10,952 13,673




RoCE 28.9 27.7 14.2

RoNW 27.1 23.7 12.9


Mkt Cap 68,034 105,070 273,355


P/E Ratio (09/09/2011) 23

EPS (Rs.) (09/09/2011) 48.45


44/60

Shree Cement

Shree Cement, promoted by the Calcutta-based Bangur group, is North India's largest

cement producer with an installed capacity of 12 MTPA as of FY10. The company is an

efficient cement manufacturer and is the market leader in the north. It is also amongst

the least cost producers of cement in India and is almost self sufficient in meeting its

power requirements. Riding on the back of rising demand and improved realizations, the

company has been able to improve its overall performance. Taking into consideration

the rising demand, the company plans to increase its capacity to 15 MTPA by the end of

FY11.

SHREE CEMENT Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 27,106 36,321 35,119

Sales Growth - 34.0 -3.3


PAT 5,780 6,761 2,097

PAT Growth - 17.0 -69.0



RoCE 32.2 30.0 9.1

RoNW 47.8 36.9 10.6


Mkt Cap 25,747 53,758 70,499


P/E Ratio (09/09/2011) 27.5EPS (Rs.) (09/09/2011) 59.60

Companys Considered: ACC and Ambuja Cement


45/60

AUTOMOBILE INDUSTRY

Top Auto companies in India are :

Maruti Suzuki India Limited ROE 16.6%

Bajaj Auto

Hero Motocorp

Mahindra & Mahindra Limited

Maruti Suzuki India Limited

Maruti Suzuki, incorporated in 1981, is the country's largest passenger car manufacturer with a

domestic market share of 50% in FY10. While Suzuki Japan holds a 54% equity stake in the

company, the government of India has completely exited the company through a three-stage

divestment process. After remaining a near monopoly till 1992, the entry of other multinationals

and the emergence of domestic competition have resulted in the company losing market share.

However, it has been able to steady its share in the Indian passenger car segment through

aggressive capacity expansion and new product introductions.

MARUTI SUZUKI Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 206,622 295,915 368,117



PAT 12,274 26,247 23,824

PAT Growth - 113.8 -9.2



RoCE 17.3 30.2 22.2

RoNW 12.8 21.5 16.7


Mkt Cap 185,191 358,537 393,207



46/60

P/E Ratio (09/09/2011) 14.2

EPS (Rs.) (09/09/2011) 79.92

Bajaj Auto Ltd.

Bajaj Auto, with a capacity of around 4.3 m vehicles, has a 24% market share in the

two-wheeler segment. The company's sales mix (in terms of units sold) consists of

motorcycles (88%) and three-wheelers (12%). Though the company has traditionally

been a key player in the geared scooter segment, aggressive pricing coupled with a

slew of new launches has resulted in increasing market share in the motorcycle

segment from 16% in FY00 to 30% in FY10. Exports of motorcycles have played a

stellar role in increasing the market share and have grown by a stupendous 46x over

the past eight years.

BAJAJ AUTO LTD. Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 84,461 115,431 160,287



PAT 5,359 15,946 43,099

PAT Growth - 197.6 170.3Dividend per share 22.00 40.00 40.00


RoCE 28.7 79.9 107.0

RoNW 32.9 58.7 89.7


Mkt Cap 90,570 191,412 384,717


P/E Ratio (09/09/2011) 18.1

EPS (Rs.) (09/09/2011) 89.62


47/60

Hero Motocorp

Hero Honda Motors, the largest manufacturer of motorcycles in the world, is a joint venturepromoted by Hero Cycles (P) Limited and Honda Motor Company of Japan. Each partner holds26% stake in the company. The company has been solely engaged in manufacturing and saleof motorcycles. The technology agreement with Honda, which expired in 2004, has beenextended for a further period of ten years. The company ended FY10 with a close to 55%market share.

HERO MOTOCORP Financial Summary

1231/03/2008

1231/03/2009

1231/03/2010

Net Sales 103,318 123,191 157,582



PAT 9,679 12,817 22,319




RoCE 46.1 46.1 81.0RoNW 32.4 33.7 64.4


Mkt Cap 134,491 172,532 308,421


P/E Ratio (09/09/2011) 21

EPS (Rs.) (09/09/2011) 103.23


48/60

Mahindra & Mahindra Limited

Mahindra & Mahindra (M&M) is engaged in the manufacture of utility vehicles (UVs),

tractors, light commercial vehicles (LCVs) and three-wheelers. While the automotive

division comprising UVs, LCVs and three-wheelers contributed to 57% of FY10

revenues, farm equipment division accounted for 42.6% of revenues. Through

investment in its subsidiaries, M&M has interests in sectors like software, hotels, real

estate and financial services as well. While M&M had a 63.3% market share in the UV

segment in FY10, it had a 41.4% share in the tractor sector.

M&M Financial Summary

1231/03/2009

1231/03/2010

1231/03/2011

Net Sales 267,563 315,686 368,424



PAT 13,614 24,785 30,797


Dividend per share 10.00 9.50 11.50Dividend payout 20.5 22.2 21.9

RoCE 15.8 21.1 18.2

RoNW 19.5 24.4 21.6


Mkt Cap 132,579 227,612 386,704


P/E Ratio (09/09/2011) 17.3

EPS (Rs.) (09/09/2011) 45.73

Companys considered: Maruti and Mahindra & Mahindra


49/60

Technical Analysis

Bharti airtel

Bharti airtel is currently trading at Rs. 400.35. Its 52 week high low is Rs. 260-444 at BSE.

From the above graph its clearly showing Exponential moving average at RS.361 ans moving

average at Rs.339. Right now it it trading way above than average and somewhat more close52week high point.

Some facts:

Pivot Point 382.9

First Support 321.1

Second Support 242.2

First resistance 461.8

Second resistance 523.6

Beta .67

Market return 18.94


50/60

Expected return-CAPM 15.33

It seems that it will move further down hence it is advisable to wait a little and then enter into a

stock after coming down

Idea Cellular:

Idea cellular is currently trading at Rs. 99. Its 52 week high low is Rs. 101-94 at BSE.

From the above graph its clearly showing moving average at Rs.70. Right now it it trading wayabove than average and somewhat more close 52week high point.

Some facts:

Pivot Point 98.75

First Support 95.8

Second Support 91.7

First resistance 102.85

Second resistance 105.8

Beta 1.02

Market return -2.5

Expected return-CAPM -2.78

Over the period it has given a negative return and also moving above average , hence it isadvisable to avoid the stock as of now

SBI:


51/60

SBI is currently trading at Rs. 1954. Its 52 week high low is Rs. 2049-1945 at BSE.

From the above graph its clearly showing moving average at Rs.2400. Right now it is tradingway below the average and somewhat more close 52week low point.

Some facts:

Pivot Point 1982

First Support 1916

Second Support 1878

First resistance 2020

Second resistance 2086

Beta 1.11

Market return 36.39


Over the period it has given a very high return and also moving way below average , hence it isadvisable to grab the stock at the earliest.

HDFC:

HDFC is currently trading at Rs. 472.75. Its 52 week high low is Rs. 485.5-471 at BSE.

From the above graph its clearly showing moving average at Rs.1600. Right now it is trading

way below the average and somewhat more close 52week low point.

Some facts:

Pivot Point 476

First Support 467

Second Support 461



Beta .95

Market return 7.18



52/60

Over the period it has given a positive return and also moving way below average , hence it is asafe optionto enter into the stock .

Ranbaxy:

Ranbaxy is currently trading at Rs. 501.45. Its 52 week high low is Rs. 517-499 at BSE.

From the above graph its clearly showing moving average at Rs.500. Right now it is trading at

moving average only.

Some facts:

Pivot Point 505

First Support 494

Second Support 487


Second resistance 524Beta .7

Market return 6.44


Over the period it has given a positive return and also moving at average , hence it is a safeoption to enter into the stock .

Sun Pharma:

Sun Pharma is currently trading at Rs. 483. Its 52 week high low is Rs. 496-477 at BSE.


53/60

From the above graph its clearly showing moving average at Rs.490. Right now it is trading atmoving average only.

Some facts:

Pivot Point 485

First Support 474

Second Support 466



Beta .32

Market return 2.03


Over the period it has given a positive return and also moving at average , hence it is a safe

option to enter into the stock .

Ambuja Cement:

Ambuja Cement is currently trading at Rs. 138. Its 52 week high low is Rs. 147-137 at BSE.

From the above graph its clearly showing moving average at Rs.137. Right now it is trading atmoving average only.

Some facts:

Pivot Point 141

First Support 134

Second Support 130



Beta .76

Market return 8.49


54/60


Over the period it has given a positive return and also moving at average , hence it is a safe

option to enter into the stock .

Maruti Suzuki Ltd:

Maruti Suzuki is currently trading at Rs. 1103. Its 52 week high low is Rs. 1149-1100 at BSE.

From the above graph its clearly showing moving average at Rs.1200. Right now it is tradingbelow average only.

Some facts:

Pivot Point 1117

First Support 1085

Second Support 1068

First resistance 1135Second resistance 1166

Beta .71

Market return 11.08


Over the period it has given a positive return and also moving at below average , hence it is agood and advisable option to enter into the stock.


55/60

Mahindra and Mahindra:

Maruti Suzuki is currently trading at Rs. 791. Its 52 week high low is Rs. 802-788 at BSE.

From the above graph its clearly showing moving average at Rs.750. Right now it is tradingabove average only.

Some facts:

Pivot Point 793

First Support 785

Second Support 779First resistance 799


Beta 1.11

Market return 7.44


Over the period it has given a positive return but also moving at above average , hence it is agood option to enter but after some time. It is expected to come down in the future.


56/60

Portfolio Selection

Portfolio

It is a collection of different investment options composed with different wightage which give

returns with an element of risk or no risk. Diversification is key to optimal risk management Analysis required because of the infinite number of portfolios of risky assets How should investors select the best risky portfolio? How could riskless assets be used?

Objectives of a portfolio

Maximize the returns and minimize the risk through diversification.

Portfolio returnIt is the return of all securities together for a given Investment size, Weightage and Time period.

PORTFOLIO ANALYSIS

Portfolio ReturnsPortfolio refers to the combination of investments owned by one investor or company at a givenpoint of time. Portfolio return is the average of returns on individual investments which are the

parts of the common portfolio.Weighted Ave rage Return for Single Period

It is the average return on an investment portfolio for a given set of individual investments,returns and period of time. If an investor invests in more than one investment it is important toassess the returns on individual investments as well as total return on total investment. Following

is the formula for Weighted Average Return (WAR), Where R is the return on individualinvestment, W is the weight or proportion of individual investment compared to total

investment and n represents number of investments in a portfolio.

nnRWRWRWRWWAR .............

332211


57/60

On the basis of above analysis we have choosen few selected industries ,which have high

potential and are expected to have a rapid growth. They are :

Telecom

Banking

Pharmaceuticals Cement

Automotive

They showed high level of potential and detailed analysis about them is already mentioned

earlier.

After choosing the best industries with diversified risk we selected the few stocks for the

portfolio based of Capital Asset Pricing Model.

Capital Asset Pricing Model is based on the assumption that risk free returns would easily

fetch a return of 8% per annum. Market return for varied stocks are averaged out for the past

six years.

This was done to remove the volatility factor from the stocks.

After going through various stocks and completing the detailed company and technical

analysis we short listed few stocks for the portfolio with varied returns and different beta.

This was done to achieve the objective of diversifying the risk and return.

Stocks are choosen on the assumption that money would be invested for at least a year.

The following stocks are choosen for the portfolio:

Bharti Airtel

State Bank of India

HDFC

Ranbaxy

Sun Pharma

Ambuja Cement

Maruti Suzuki

Mahindra and Mahindra


58/60

Now we are going to suggest few portfolio with varied weight :

Portfolio 1

Stocks Expected Return Weights

Weighted

Returns

Bharti Airtel 15.33 0.3 4.599

SBI 39.51 0.4 15.804

HDFC 7.22 0

Ranbaxy 6.9 0

Sun Pharma 6.09 0

Ambuja Cement 8.37 0.1 0.837

Maruti Sujuki 10.18 0.2 2.036

Mahindra and

Mahindra 7.38 0

Expected Wighted Average Returns 23.276

Portfolio 2


Weighted

Returns


SBI 39.51 0.2 7.902

HDFC 7.22 0

Ranbaxy 6.9 0

Sun Pharma 6.09 0

Ambuja Cement 8.37 0

Maruti Sujuki 10.18 0

Mahindra and

Mahindra 7.38 0



59/60

Portfolio 3


Weighted

Returns

Bharti Airtel 15.33 0.125 1.91625

SBI 39.51 0.125 4.93875

HDFC 7.22 0.125 0.9025

Ranbaxy 6.9 0.125 0.8625

Sun Pharma 6.09 0.125 0.76125

Ambuja Cement 8.37 0.125 1.04625

Maruti Sujuki 10.18 0.125 1.2725

Mahindra and

Mahindra 7.38 0.125 0.9225


Portfolio 4


Weighted

Returns


SBI 39.51 0.25 9.8775

HDFC 7.22 0 0

Ranbaxy 6.9 0.15 1.035

Sun Pharma 6.09 0 0




60/60

Mahindra and

Mahindra 7.38 0.1 0.738


Portfolio 5


Weighted

Returns

Bharti Airtel 15.33 0.25 3.8325

SBI 39.51 0.1 3.951

HDFC 7.22 0.1 0.722

Ranbaxy 6.9 0.1 0.69

Sun Pharma 6.09 0.1 0.609



Mahindra andMahindra 7.38 0.05 0.369


group4 ivm project final (1)

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