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Market Outlook India Research

July 19, 2011

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

Dealer’s Diary The market edged lower in early trade as US index futures dropped. A bout of volatility was witnessed as the key benchmark indices pared gains after hitting fresh intraday highs in morning trade. The market regained the positive terrain after slipping into red once again in mid-morning trade. The market once again slipped into red in early afternoon trade as most Asian stocks fell. The market hit a fresh intraday low in afternoon trade as European shares dropped in early trade. The market hovered in red in mid-afternoon trade. Volatility ruled the roost in late trade as the market hit a fresh intraday low. The Sensex and Nifty closed with losses of 0.3% each. The mid-cap index ended higher by 0.2%, while the small-cap index closed with gains of 0.4%. Among the front runners, Hindalco Industries, BHEL, Tata Power, HDFC Bank and HDFC gained 1–3%, while TCS, Tata Motors, Cipla, Mahindra & Mahindra and RCom lost 1–2%. Among mid caps, Himadri Chemicals, Godfrey Phillips, Sujana Towers, TTK Prestige and Alstom Projects gained 6–14%, while KGN Industries, Amtek Auto, GTL, Motilal Oswal and Zydus Wellness lost 3–5%.

Markets Today

The trend deciding level for the day is 18,533/5,572 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,597 – 18,686/5,592 – 5,617 levels. However, if NIFTY trades below 18,533/5,572 levels for the first half-an-hour of trade then it may correct up to 18,444 – 18,380/5,546 – 5,526 levels.

Indices S2 S1 R1 R2

SENSEX 18,380 18,444 18,597 18,686

NIFTY 5,526 5,546 5,592 5,617

News Analysis

Motherson Sumi to pay €141.5mn to acquire 80% stake in Peguform 1QFY2012 Result Preview – HDFC Bank, Cadila Healthcare, Crompton

Greaves, Ashok Leyland Refer detailed news analysis on the following page

Net Inflows (July 15, 2011) ` cr Purch Sales Net MTD YTD

FII 1,657 1,512 145 6,620 9,290

MFs 282 361 (79) 320 3,546

FII Derivatives (July 18, 2011)

` cr Purch Sales Net Open

Interest

Index Futures 1,258 1,107 151 12,265

Stock Futures 1,300 1,445 (144) 32,365

Gainers / Losers Gainers Losers

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

Tata Comm. 215 5.1 Amtek Auto 154 (3.5)

NCC 84 4.4 GTL 86 (3.2)

Videocon Ind. 199 4.4 Shree Renuka 70 (2.0)

Gujarat NRE Coke 48 4.3 TCS 1,125 (2.0)

Godrej Inds 227 4.1 Tata Motors 1,016 (1.9)

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

BSE Sensex -0.3% (54.9) 18,507

Nifty -0.3% (14.1) 5,567

MID CAP 0.2% 15.5 7,022

SMALL CAP 0.4% 30.7 8,394

BSE HC -0.8% (52.3) 6,466

BSE PSU 0.2% 20.5 8,563

BANKEX 0.0% (1.7) 12,845

AUTO -1.0% (93.2) 8,900

METAL 0.5% 69.8 14,680

OIL & GAS -0.3% (29.2) 9,092

BSE IT -0.8% (47.2) 5,809

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

Dow Jones -0.8% (94.6) 12,385

NASDAQ -0.9% (24.7) 2,765

FTSE -1.6% (90.9) 5,753

Nikkei 0.4% 38.4 9,974

Hang Seng -0.3% (70.6) 21,805

Straits Times -0.2% (5.3) 3,079

Shanghai Com -0.1% (3.5) 2,817

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

Infosys -1.2% (0.8) $60.6

Wipro -1.3% (0.2) $12.6

ICICI Bank -1.7% (0.8) $46.5

HDFC Bank -0.2% (0.4) $177.6

Advances / Declines BSE NSE

Advances 1,546 766

Declines 1,322 682

Unchanged 144 66

Volumes (` cr)

BSE 2,643

NSE 8,277

July 19, 2011 2

Market Outlook | India Research

Motherson Sumi to pay €141.5mn to acquire 80% stake in Peguform Motherson Sumi Systems (MSSL) along with group firm Samvardhana Motherson Finance Ltd. (SMFL) has agreed to acquire 80% stake in Peguform GmbH and Peguform Iberica, SL together with 50% stake in Wethje Entwicklungs GmbH and Wethje Carbon Composite GmbH. The acquisition would be made through a joint venture company in which MSSL would hold 51% stake and SMFL would hold 49% stake. The total share consideration for the transaction is €141.5mn, of which MSSL would pay €72.2mn and the remaining would be paid by SMFL. MSSL intends to fund its share of acquisition through overseas loan. We believe the deal is attractively valued at ~5.1x and ~0.25x EV/EBITDA and EV/Sales, respectively, on CY2010 basis. We expect the deal to be positive for the company in the long run; however, low operating margins of Peguform Group (4.9% in CY2010 as against 6.5% for SMR and 11% for consolidated operations) remain a near-term concern. Currently, we are not incorporating Peguform’s acquisition into our financials as we await more information on management’s strategy and turnaround plan. At `239, MSSL is trading at rich valuations of 21x and 17.7x FY2012E and FY2013E earnings, respectively. We recommend Neutral on the stock. 1QFY2012 Result Preview HDFC Bank HDFC Bank is scheduled to announce its 1QFY2012 results. We expect the bank to report healthy NII growth of 25.9% yoy to `3,023cr, in spite of the expected NIM moderation. Non-interest income is expected to register growth of 23.1% yoy, leading to operating income growth of 25.1% yoy. Due to relatively faster rise in operating expenses, pre-provision profit is expected to grow by relatively lower 22.1% yoy. However, provisions are expected to decline marginally by 1.8% yoy, leading to healthy net profit growth of 32.2% yoy to `1,073cr. At the CMP, we believe the stock is trading at fair valuations of 3.4x FY2013E P/ABV. We maintain our Neutral recommendation on the stock. Cadila Healthcare For 1QFY2012, Cadila Healthcare (Cadila) is expected to post sales and adjusted net profit of `1,281cr and `179cr, registering yoy growth of 21.4% and 35.6%, respectively. Top-line growth would be mainly driven by domestic sales and exports. On the operating front, margins would come at 20.5%, almost similar to the 20.7% level in 1QFY2011. At the CMP, the stock trades at 25.1x FY2012E and 18.4xFY2013E earnings, respectively. We recommend Accumulate with a target price of `1,053. Crompton Greaves Crompton Greaves is scheduled to announce its 1QFY2012 results. The company’s revenue is expected to increase by 8% yoy to `2,486cr. On the operating front, we expect the margin to compress by 42bp yoy to 12.5%. Net profit is expected to decline by 4.3% yoy to `183cr. The stock is currently trading at 15.9x FY2012E and 13x FY2013E earnings. We will revisit our estimates post the conference call. Currently, we maintain our Buy rating on the stock with a target price of `300. Ashok Leyland Ashok Leyland (ALL) is slated to announce its 1QFY2012 results. We expect the company’s top line to grow modestly by 7% yoy, driven by growth in average net realisation as volumes during the quarter witnessed a 10% decline. On the operating front, EBITDA margin is expected to post a decline of 53bp yoy to 9.5%, owing to higher raw-material cost and lower operating leverage. As a result, the bottom line is expected to decline by 17% yoy to `102cr. The stock rating is under review.

July 19, 2011 3

Market Outlook | India Research Economic and Political News

IIP base revision to up FY11 GDP estimates to 8.9%: Crisil

Indian consumer confidence declines in 2QCY2011: AC Nielsen survey

MSME business confidence declines for July–September quarter: CII

Corporate News

PFC to raise `22,000cr from tax-free infrastructure bonds

L&T Finance's `1,750cr IPO to open on July 26

iGate Patni bags `133cr IT deal from US firm

Glenmark Pharmaceuticals gets USFDA nod for anti-ulcer capsules

Steel Strip Wheels bags US$33mn order from BMW

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

Events for the day Ashok Leyland Results Cadila Healthcare Results Chambal Fertilizers Results Crompton Greaves Results Greenply Industries Results HDFC Bank Results NIIT Technologies Results SKF India Results

July 19, 2011 4

Market Outlook | India Research Research Team Tel: 022-3935 7800 E-mail: research@angelbroking.com Website: www.angelbroking.com

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