market outlook 8th december 2011

8/3/2019 Market Outlook 8th December 2011

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Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1

Market OutlooIndia Research

December 8, 2011

Dealer’s Diary

Indian markets are expected to open in the red following negative cues from the

Asian markets. Asian stocks were trading lower as investors prefer to wait for theresults of the crucial European summit (to be held on Friday) on the region’s

sovereign debt crisis before taking any calls on the markets.

Uncertainty about the financial situation in Europe contributed to the lackluster

performance on Wednesday in both the US and European markets. While, S&P

revealed that it had placed its 'AAA' long-term issuer credit rating on the EU on

credit watch with negative implications, positive news flow from the Federal

Reserve which released a report showing that consumer credit increased roughly

in line with estimates in October, kept the US markets balanced.

The Indian government finally surrendered to the pressures from the opposition

and announced a hold on FDI in retail until a consensus is reached. With the

monetary policy approaching (16th December, 2011), Indian markets will watch

out for the weekly inflation data due today. Further, global investors would also

watch out for the outcome of ECB’s monetary policy meet scheduled today.

Markets Today

The trend deciding level for the day is 16,887/ 5,065 levels. If NIFTY trades

above this level during the first half-an-hour of trade then we may witness a

further rally up to 16,993 – 17,110/5,097 – 5,132 levels. However, if NIFTY

trades below 16,887/5,065 levels for the first half-an-hour of trade then it maycorrect up to 16,771 – 16,665/ 5,030 – 4,998 levels.

Indices S2 S1 R1 R2

SENSEX 16,665 16,771 16,993 17,110

NIFTY 4,998 5,030 5,097 5,132

News Analysis FDI in retail put on hold; parliament finally begins business Coal India lowers production target Larsen and Toubro bags orders worth `2,700cr ONGC issues NOC for sale of Cairn India to Vedanta Ranbaxy launches Caduet in the US market Sesa Goa acquires additional 1.5% stake in Cairn India

Refer detailed news analysis on the following page

Net Inflows (December 05, 2011)

` cr Purch Sales Net MTD YTD

FII 1,513 1,301 212 1,829 (2,195)

MFs 271 186 85 4 5,950

FII Derivatives (December 07, 2011)

` cr Purch Sales Net Open Interest

Index Futures 2,006 1,466 540 13,804

Stock Futures 1,362 1,592 (230) 26,136

Gainers / Losers

Gainers Losers

Company Price (̀ ) chg (%) Company Price (̀ ) chg (%)

Indiabulls Fin. 153 12.4 Idea Cellular 92 (5.9)

United Breweries 434 7.5 Petronet LNG 160 (4.2)

Pantaloon Retail 198 6.3 Lupin 451 (4.0)

CESC 261 4.7 Indraprastha Gas 386 (3.7)

JP Power 39 4.7 Shree Renuka Sugar 31 (3.6)

Domestic Indices Chg (%) (Pts) (Close)

BSE Sensex 0.4 71.7 16,877

Nifty 0.5 23.5 5,063MID CAP 0.2 11.3 5,772

SMALL CAP 0.2 12.5 6,208

BSE HC (1.5) (93.3) 6,007

BSE PSU (0.4) (24.9) 7,069

BANKEX 0.0 0.5 10,553

AUTO 0.5 40.1 8,864

METAL 0.2 26.0 10,842

OIL & GAS 0.5 41.1 8,441

BSE IT 1.4 81.6 5,809

Global Indices Chg (%) (Pts) (Close)

Dow Jones 0.4 46.2 12,196

NASDAQ (0.0) (0.4) 2,649

FTSE (0.4) (21.8) 5,547

Nikkei 1.7 147.0 8,722

Hang Seng 1.6 298.4 19,241

Straits Times 1.2 33.3 2,783

Shanghai Com 0.3 6.8 2,333

Indian ADRs Chg (%) (Pts) (Close)

Infosys 0.3 0.1 $52.9

Wipro 0.1 0.0 $10.2

ICICI Bank (0.8) (0.2) $30.0

HDFC Bank (1.0) (0.3) $28.5

Advances / Declines BSE NSE

Advances 1,451 778

Declines 1,362 692

Unchanged 113 71

Volumes (̀ cr)

BSE 3,093

NSE 10,564



Market Outlook | India Research

December 8, 2011 2

FDI in retail put on hold; parliament finally begins business

After a series of endless debates over the FDI in retail, the UPA government has

final ly surrendered to opposition parties and has announced a hold on FDI in retail

till a consensus is reached among various stakeholders. Consequently, political

parties applauded the move and paved the way for normal functioning of the two

houses after 10 days. Nonetheless, there was criticism from Congress quarters that

the government's move was ill-timed as it could have been taken before or after

the winter session. Post suspension, Congress ally NCP backed the decision but

said it was adventurous to think that the government could steamroll its UPA

constituents.

While the political heat has turned down considerably, industry bodies, including

Associated Chambers of Commerce and Industry of India (ASSOCHAM) and

Federation of Indian Chambers of Commerce and Industry's (FICCI), have

expressed disappointment over the government's decision. It is been viewed as a

case of missed opportunity, wherein the move has a potential to generate over

10mn new jobs in three years, curb agricultural wastages, benefit farmers with

better remuneration for their produce and lower the prices of many commodities

for consumers. With many important reforms lined up (FDI in civil aviation and

passage of the insurance, pension fund and banking reforms bills), key UPA

leaders feel some of these proposals may now be difficult to push through.

A rollback on this decision, going ahead, would be a big loss for domestic retailers

such as Pantaloons, Shoppers Stop and Trent, who had firmed up initially in the

anticipation of much required capital inflows and infrastructure.

Coal India lowers production target

Coal India (CIL) has lowered its production target for FY2012 to at least 440mn

tonnes from the previous estimate of 452mn tonnes on account of lower-than-

targeted production in 1HFY2012. CIL’s 1HFY2012 production stood at 176mn

tonnes as against its target of 196mn tonnes, as heavy rains during August –

September 2011 resulted in lower production. The decline in production target by

CIL for FY2012 is inline with our expectation. We continue to expect production of

436mn tonnes for FY2012. Although the company has not lowered its sales

volumes guidance, we continue to believe it would be challenging for CIL to meet

its sales volumes targets given the lower-than-expected production and insufficient

availability of railway rakes. We maintain our Neutral view on the stock.

Larsen and Toubro bags orders worth `2,700cr

Larsen & Toubro’s (L&T) construction arm has bagged various orders aggregating

to ` 2,700cr in October and November 2011. The company received orders worth

` 1,109cr for the construction of residential complex and warehousing facili ty in the

buildings and factories segment. In the infrastructure space, projects worth `353cr

for the construction of a viaduct and two station buildings for Kolkata Metro have

been received. The power T&D segment witnessed order inflow of `763cr for the

construction of transmission lines, electrical works including sub-stations and




December 8, 2011 3

` 200cr worth of orders from Tatweer Petroleum, Bahrain. The company also got

an order from Delhi Jal Board for `272cr for works relating to the existing water

treatment plant in Delhi. With these orders, the company’s outstanding order book

stands at ~`

1,47,389cr (3.4x FY2011 revenue), which provides good revenuevisibility.

This order booking takes the total declared orders to ~ ` 5,200cr for L&T until now

in this quarter against orders received worth `13,336cr in 3QFY2011. The drying

up of order inflows is one of the major concerns for the stock and has led to

underperformance in the recent past. However, at the CMP of ` 1,331, the stock is

trading at PE of 12.8x FY2013E earnings, after adjusting for investments, which is

below the historical trading multiple for L&T; and we believe it factors in most of

the negatives surrounding the stock. We have used the SOTP methodology to value

the company to capture all its business ini tiatives and investments/ stakes in the

different businesses. Ascribing separate values to its parent business on a P/ E basisand investments in subsidiaries on P/ E, P/ BV and mcap basis, our target price

works out to ` 1,714, which provides 28.7% upside from current levels. Hence,

we maintain our Buy recommendation on the stock.

ONGC issues NOC for sale of Cairn India to Vedanta

ONGC has issued a no-objection certificate (NOC) to Britain’s Cairn Energy for

the sale of a majority stake in its Indian unit, Cairn India, to Vedanta Resources.

Separately, the deal has also been approved by the Home Ministry. With this,

Cairn India has almost completed all the major formalities required to concludethe deal. Thus, we expect the deal closure to be announced very soon. However,

we do not foresee any changes to our financial estimates on the closure of the

deal. Hence, we maintain our Neutral view on Cairn India.

Ranbaxy launches Caduet in the US market

Ranbaxy has launched the authorized generic version of Caduet . The company has

FTF para IV on 5/ 10 mg, 20 mg, 40 mg and 80 mg. Mylan was FTF Para IV on

2.5mg and 10/40 mg and para IV on rest of the strengths. Mylan has already

launched the drug on November 30; however, Ranbaxy launched it on December6 due to delay in approval from USFDA. The drug reported sales of US$339mn in

the US in 2011. We expect the drug to contribute around `3/ share to the

company’s EPS in CY2011. We maintain our Buy recommendation on the stock

with a target price of `578.




December 8, 2011 4

Sesa Goa acquires additional 1.5% stake in Cairn India

Sesa Goa and its subsidiary, Sesa Resources, has acquired 24.3mn and

4.5mn equity shares, respectively, of Cairn India, representing ~ 1.5% of the

total paid up share capital of Cairn India from Cairn UK Holdings at an

average price of `325/ share through a block deal. With this acquisition,

Sesa Goa along with its subsidiary, Sesa Resources, holds 20% of the share

capital of Cairn India. This transaction is expected to have an insignificant

impact on Sesa Goa’s financials. We maintain our estimates and recommend

Accumulate rating on Sesa Goa with a target price of `208.

Economic and Political News

Direct Tax Code to come into force from April 1, 2012: Finance Minister

Hiring activity down marginally in November: Monster.com

Cabinet Committee clears ` 8,750cr package for West Bengal

Corporate News

SKS Microfinance plans to raise `500cr via share sale to institutional investors

HCL Infosystems bags order for 22 border check posts in Maharashtra

Moser Baer to spend US$1bn to set up solar plants in the next nine months

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




December 8, 2011 5

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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market outlook 8th december 2011

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