Market Outlook

India Research
April 16, 2012

Dealers Diary
The Indian markets are expected to open in the negative terrain tracking weak Global cues. Shares fell sharply in early Monday trading in Asia, after a surge in Spanish borrowing costs pummeled global equity markets late last week. US stocks moved sharply lower over the course of the trading day on Friday, giving back some ground after posting strong gains in the two previous sessions. Renewed concerns about corporate earnings and the global economy contributed to the weakness in the markets. In European markets, Spanish stocks plunged to a three-year low on Friday, leading European stock markets lower, while disappointing growth data from China also undercut the buying appetite of investors. Shares dipped deeper into negative territory in afternoon trade after a surprise decline in a US consumer-sentiment gauge. Indian shares fell sharply on Friday, with technology stocks coming under pressure, after Infosys warned of a challenging year ahead. Weak cues from European markets after two days of gains also weighed on the market. The markets will now closely watch out for WPI inflation data for March 2012 (Bloomberg estimate 6.65%) and RBI monetary policy review due to be tomorrow. Markets Today The trend deciding level for the day is 17,173 / 5,233 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,319 17,544 / 5,281 5,355 levels. However, if NIFTY trades below 17,173 / 5,233 levels for the first half-an-hour of trade then it may correct up to 16,948 16,802 / 5,160 5,112 levels.
Indices SENSEX NIFTY S2 16,802 5,112 S1 16,948 5,160 PIVOT 17,173 5,233 R1 17,319 5,281 R2 17,544 5,355

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 (%)

(Pts)

(Close)

(1.4) (238.1) 17,095 (1.3) (0.7) (0.6) 1.0 (0.3) (0.8) 0.5 (0.4) 0.5
Chg (%)

(69.4) (46.0) (43.0) 68.2 (18.1)

5,207 6,338 6,799 6,694 7,289

(95.8) 11,884 46.0 10,156 (41.3) 10,915 40.4

(Pts)

7,981 5,404
(Close)

(8.8) (518.8)

(1.1) (137.0) 12,850 (1.5) (1.0) 1.2 1.8 0.3 0.4

Chg (%)

(44.2) (58.7) 113.2 9.7 8.3

(Pts)

3,011 5,652 9,638 2,988 2,359

(Close)

373.7 20,701

Indian ADRs

INFY WIT IBN HDB

Advances / Declines Advances Declines Unchanged

(13.4) (7.2) (4.3) (2.9)

(7.6) (0.8) (1.5) (1.0)

BSE

$49.2 $10.0 $33.3 $33.1

NSE

News Analysis
Supreme Court defers lifting of mining ban in Karnataka 4QFY2012 Result Review - Infosys 4QFY2012 Result Preview - MindTree
Refer detailed news analysis on the following page

1,208 1,615 123

502 941 65

Net Inflows (April 12, 2012)

` cr FII MFs ` cr
Index Futures Stock Futures

Purch 2,095 677

Sales 1,911 415 Purch 2,053 1,930 Gainers

Net 184 262 Sales 1,839 2,034 Net 215 (105)

MTD (975) (372)

YTD 44,351 (5,945) Open Interest 9,631 22,899 Losers

Volumes (` cr) BSE NSE

2,962 13,283

FII Derivatives (April 13, 2012)

Gainers / Losers
Company
JSW Steel Kotak Mah Bank Rajesh Exports Dr Reddys Lab Sun Pharma

Price (`)
737 580 138 1,740 586

chg (%)
4.2 2.8 2.7 2.7 2.5

Company
Infosys Max India TCS India Infoline Punj Lloyd

Price (`)
2,403 193 1,070 62 55

chg (%)
(12.6) (5.5) (5.5) (5.5) (4.7)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Supreme Court defers lifting of mining ban in Karnataka

The Supreme Court (SC) has stated that it will not relax its order banning mining operations in Karnataka unless recommended by Central Empowered Committee (CEC). The SC also stated that iron ore mining companies should complete the clean-up and land reclamation if they want the ban to be lifted. However, the SC accepted the recommendations of CEC to allow continuation of mining operations by NMDC. The SC is scheduled to hear further hearing on the case on April 20, 2012. Earlier CEC had recommended to allow category A mines (45) to commence mining operations. However, it recommended that a mining company will be liable for depositing penalty, compensation, as payable for the mining leases classified under category B for committing minor illegalities. It also prescribed a ceiling of 25mn tonnes on total production of iron ore from all the mining leases in Bellary and a ceiling of 5mn tonnes for production of iron ore from all the mining leases in Chitradurga and Tumkur districts. Karnataka produced ~45mn tonnes (1/5th of Indias production) before the ban. CEC had also recommended completion of new and detailed Reclamation and Rehabilitation (R&R) plans before miners were allowed to resume operations. Although there is lack of clarity on the timelines for completion of R&R plans, we believe it could take another 2-5 months for the mines to commence commercial production. We await further clarity on the timelines of commencement of operations from the mines in Karnataka. Meanwhile, we maintain our Neutral view on JSW Steel. We maintain our Accumulate ratings on NMDC and Sesa Goa with target prices of `185 and `206, respectively.

Result Review
Infosys
For 4QFY2012, Infosys results came in lower than our as well as streets expectations on the revenue as well as operating front; however, the companys profit came in-line with expectations because of higher other income. USD revenue came in at US$1,771mn, down 1.9% qoq, due to a 1.5% qoq decline in volume. This was majorly because of ramp down in certain projects in the financial services industry, especially in North America geography. In INR terms, revenue came in at `8,852cr, registering a 4.8% qoq decline. The companys EBITDA and EBIT declined by 108bp and 128bp on a qoq basis to 32.6% and 29.9%, respectively, largely because of gaining from INR depreciation. PAT came in at `2,316cr, aided by other income of `652cr in 4QFY2012 as against `422cr in 3QFY2012. The most disappointing factor in Infosys result was FY2013 USD revenue growth guidance of 8-10% against expectations of 12-15%. The guidance for the full year is even below IT industry bodys Nasscom forecast of 11-14%. Management indicated that it is because of uncertain global economy and currency volatility. In addition, management has given tepid revenue guidance of almost flat qoq at US$1,771mn-1,789mn for 1QFY2013. If Infosys meets its

April 16, 2012

Market Outlook | India Research

1QFY2013 guidance, then to achieve its full year FY2013 guidance, the company requires above 4.2% qoq USD revenue growth each quarter from 2QFY2012. We believe this clearly indicates challenging visibility in business volumes and managements future expectation. Guidance numbers also indicate that management is banking on back-ended growth, which makes us cautious as the second half of every fiscal year is typically slow. Hence, we have assumed moderation in demand going forward in FY2013 and have built in USD revenue CAGR of 11.4% over FY2012-14E. We maintain our Buy recommendation on the stock with a target price of `2,792.

Result Preview
MindTree
MindTree is slated to announce its 4QFY2012 results. We expect the company to post revenue of US$105mn, up 1.4% qoq. In INR terms, revenue is expected to come in at `528cr, up 1.6% qoq. EBITDA margin is expected to expand by 44bp qoq to 17.7%. PAT is expected to come in at `55cr. We maintain our Buy rating on the stock with a target price of `569.

Quarterly Bloomberg Brokers Consensus Estimates

HCL Tech Ltd. - Consolidated (18/04/2012)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4Q FY12E 5,290 949 17.9 523 4Q FY11 4,138 717 17.3 468 11.8 y-o-y (%) 27.8 32.4 3Q FY12 5,245 970 18.5 573 (8.7) q-o-q (%) 0.9 (2.2)

HDFC Bank Ltd. - (18/04/2012)

Particulars (` cr) Net profit 4QFY12E 1,460 4QFY11 1,115 yoy (%) 30.9 3QFY12 1,430 qoq (%) 2.1

April 16, 2012

Market Outlook | India Research

Economic and Political News

FDI in services up 62% in April-Jan last fiscal Government to allow foreign direct investment from Pakistan India achieves US$300bn exports target for FY2012 Sugar production to fall 9.8% in FY13: CMIE

Corporate News
Air India invites merchant bankers to raise $1 bn Nalco plans `18,000cr investment in Odisha smelter Hotel Leela expects debt recast in late April Shipping Ministry seeks revival of subsidy for shipbuilders
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
16/04/2012 18/04/2012 19/04/2012

20/04/2012 21/04/2012 23/04/2012

Crisil, MindTree HDFC Bank, HCL Tech, Infotech Enterprises Hind Zinc, Ambuja Cements, ACC, IndusInd Bank Cairn India, FAG Bearings IDBI Bank TCS, UltraTech Cement, Rallis

April 16, 2012

Market Outlook | India Research

Research Team Tel: 022 - 39357800

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

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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April 16, 2012