Market Outlook by mnmgroup


									                                                                                                                              Market Outlook
                                                                                                                                             India Research
                                                                                                                                            February 29, 2012

                                                                                                                   Domestic Indices      Chg (%)       (Pts)   (Close)
 Dealer’s Diary
 Indian Markets are expected to open in the green taking cues from the SGX Nifty                                   BSE Sensex                1.6     285.4 17,731

 and Asian markets which are trading higher in the opening trade.                                                  Nifty                     1.9      97.7     5,379
                                                                                                                   MID CAP                   3.4     207.9     6,317
 The US Markets edged up higher on Tuesday buoyed by a report from the
                                                                                                                   SMALL CAP                 2.8     184.3     6,818
 Conference Board showing a substantial improvement in consumer confidence in
                                                                                                                   BSE HC                    1.1      69.3     6,315
 the month of February. The strong consumer confidence numbers for February
                                                                                                                   BSE PSU                   3.0     222.2     7,649
 over shadowed the 4% drop in consumer durables orders for the month of
                                                                                                                   BANKEX                    3.9     455.8 12,045
 January. US markets were also boosted by optimism about the impact of the
                                                                                                                   AUTO                      3.0     295.2     9,995
 European Central Bank's long term refinancing operation announcement
                                                                                                                   METAL                     3.4     393.7 11,880
 which is due today. Dow Jones closed higher than 13,000 for the first time
                                                                                                                   OIL & GAS                 1.3     109.7     8,497
 since May 2008. The major European markets which saw some volatility during
                                                                                                                   BSE IT                  (0.6)     (34.4)    6,144
 the course of the day, ended the day on the upside.
                                                                                                                   Global Indices        Chg (%)       (Pts)   (Close)
 Indian markets closed positively on Tuesday after snapping the four day losing                                    Dow Jones                 0.2      23.6 13,005
 streak. The markets would be tracking the GDP figures for 3QFY2012 due to be
                                                                                                                   NASDAQ                    0.7      20.6     2,987
 released today.
                                                                                                                   FTSE                      0.2      12.4     5,928
 Markets Today                                                                                                     Nikkei                    0.9      88.6     9,723
 The trend deciding level for the day is 17,679 / 5,358 levels. If NIFTY trades above                              Hang Seng                 1.7     350.9 21,569
 this level during the first half-an-hour of trade then we may witness a further rally                             Straits Times             0.8      23.0     2,970
 up to 17,828 – 17,926 / 5,409 – 5,442 levels. However, if NIFTY trades below                                      Shanghai Com              0.2       4.8     2,452
 17,679 / 5,358 levels for the first half-an-hour of trade then it may correct up to
 17,582 – 17,433 / 5,324 – 5,273 levels.
                                                                                                                   Indian ADRs           Chg (%)       (Pts)   (Close)
 Indices                   S2                 S1              PIVOT               R1                   R2          Infosys                 (0.4)      (0.2)    $58.5
 SENSEX                 17,433               17,582           17,679           17,828              17,926          Wipro                   (1.1)      (0.1)    $11.0
 NIFTY                   5,273               5,324            5,358             5,409              5,442           ICICI Bank                1.7       0.6     $36.7
                                                                                                                   HDFC Bank                 3.1       1.0     $34.8
 News Analysis
        Nedgroup Insurance selects TCS BaNCS Insurance for policy administration
                                                                                                                   Advances / Declines               BSE          NSE
        JSW Steel reports January production numbers
                                                                                                                   Advances                        2,140       1,240
        Infotech Enterprises – Analyst meet update
                                                                                                                   Declines                         764          234
        Result Review – Bosch, Abbot
 Refer detailed news analysis on the following page                                                                Unchanged                        116            44
 Net Inflows (February 27, 2012)
   ` cr                         Purch              Sales              Net              MTD                  YTD    Volumes (` cr)
   FII                          3,079            3,622              (542)         23,710            34,791
                                                                                                                   BSE                                          2,816
   MFs                          1,660                 960             700         (1,866)              (3721)
                                                                                                                   NSE                                         13,991

 FII Derivatives (February 28, 2012)
   ` cr                                               Purch      Sales          Net           Open Interest
   Index Futures                                   2,479        1,538           940                 13,192
   Stock Futures                                   1,842        2,334          (492)                27,974

 Gainers / Losers
                                        Gainers                                               Losers
   Company                       Price (`)      chg (%)       Company                  Price (`)    chg (%)
   Indiabulls Fin                     223             14.8    Cairn India                    367        (2.5)
   HDIL                               113             13.8    TCS                        1,228          (1.8)
   IFCI                                 44            12.0    Container Corp                 982        (1.4)
   IRB Infra                          188             11.5    ABB                            822        (1.0)
   Reliance Infra                     603             11.5    Wipro                          420        (0.9)

Please refer to important disclosures at the end of this report                                                   Sebi Registration No: INB 010996539              1
                                                              Market Outlook | India Research

                    Nedgroup Insurance selects TCS BaNCS Insurance for policy

                    TCS announced that its universal financial services platform, TCS BaNCS, has
                    been selected by Nedgroup Insurance Company, a South Africa-based short-term
                    insurer specializing in homeowner’s cover, personal accident, vehicle-related
                    covers and other value-added insurance products. TCS BaNCS Insurance, part of
                    TCS BaNCS, will serve as the new policy administration system for Nedgropup’s
                    short-term insurance services. TCS BaNCS serves the top banks in Africa through
                    banking and capital markets suite of solutions; this will be TCS BaNCS’ first
                    insurance customer in Africa. We maintain our Accumulate recommendation on
                    the stock.

                    JSW Steel reports January production numbers

                    JSW Steel’s January 2012 crude steel production grew by 39% yoy and 5% qoq to
                    0.8mn tonnes. The company has iron ore inventory, which could last for another
                    4-5 months. The company is awaiting the Supreme Court’s decision to
                    lift/partially lift the mining ban in Karnataka. We maintain our Neutral view on
                    the stock.

                    Infotech Enterprises – Analyst meet update

                    We recently attended the analyst meet of Infotech Enterprises (Infotech) held at
                    Hyderabad. The meet focused on giving investors an idea about the company’s
                    systems and processes through presentation by various business heads, sub-
                    vertical heads and demo of a range of company’s projects. The major take away
                    from the meet was that the company is on the right track in terms of making
                    investments to strengthen its product portfolio and is taking initiatives to improve
                    its financial metrics. Infotech’s performance over the past six quarters has been
                    mixed, with operational margins being the major disappointment, which the
                    company is now focusing to improve.

                    Focus on systems and process to provide scalability: During the meet, Mr. BVR
                    Mohan Reddy, Infotech’s Chairman and Managing Director, highlighted that the
                    company is now focusing on strengthening its leadership along with improving its
                    systems and processes and making them scalable. Further, the company will take
                    in SAP integration, as currently three of the company’s subsidiaries are operating
                    independently. Along with integrating processes, Infotech is trying to expand its
                    footprint in other addressable markets with existing clients.

                    Healthy market opportunity: As per Zinnov Consulting, a leading IT consulting
                    firm, the engineering market is expected to reach US$40bn by 2020 from
                    US$10.4bn currently (led by industries such as aerospace, automotive, consumer
                    electronics and telecom). Infotech, being a leader in the aerospace and telecom
                    engineering spaces, has strong relationships with clients in these areas and,
                    hence, can capitalize on this opportunity.

                    Focus on improving client mining: Infotech’s management is currently focusing on
                    adding and increasing its wallet share from ‘must have’ accounts across its target

February 29, 2012                                                                                      2
                                                             Market Outlook | India Research

                    verticals. The company is doing this by changing the incentive structure of
                    customer-facing roles and is investing considerably to improve client mining and
                    account management skills.

                    Outlook and valuation: Infotech has been witnessing a 5.2% CQGR in its USD
                    revenue over 2QFY2011–3QFY2012 because of inorganic growth due to the
                    acquisition of Daxcon and Wellsco. Further, the company has witnessed price
                    increases from some of its selective clients, which instills confidence in the
                    company’s performance going ahead. Thus, over FY2011-13E, we expect the
                    company to post a USD and INR revenue CAGR of 17.6% and 23.2%,

                    Infotech has been consistently underperforming on the operating margin front,
                    which the company is now focused to address by levers such as improving
                    utilization level, rationalizing SG&A expenses and shifting more work offshore.
                    This year, management expects the company’s operating margin to exit at ~17%,
                    which can be easily achieved now, given the sharp INR depreciation. We expect
                    EBITDA and PAT CAGR to be at 30.0% and 16.6% (lower due to tax rate moving
                    to 33% from 17% in FY2011), respectively, over FY2011-13E.

                    At the CMP of `144, Infotech is trading at 8.4x FY2013E EPS of `17.1. We
                    maintain our Accumulate recommendation on the stock with a revised target price
                    of `162.

                    Result Review – 4QCY2011

                    For 4QCY2011, Bosch registered a strong 33.5% yoy jump in net profit to
                    `281cr driven by significant increase in other income and lower than expected
                    depreciation expense. Top-line grew by an healthy 8.3% yoy to `2,040cr.The
                    company’s EBITDA margin witnessed a 109bp yoy expansion to 17.5% led by
                    decline in staff cost and other expenditure due to which operating profit jumped
                    15.6% yoy to `357cr. The stock rating in currently under review.

                    Abbott India

                    For 4QCY2011, Abbott India Ltd. (AIL) reported a ~6% qoq decline in its revenue
                    to `386cr, 10% below our estimate of `424cr. For CY2011, the company's top
                    line came in at `1,477cr, marginally lower than our estimate of `1,516cr. The
                    company's results are not comparable to the previous year’s results on account of
                    its amalgamation with Solvay Pharma India Ltd. (SPIL) during the year.

                    During the quarter, EBITDA margin came in at 11.9%, 106bp lower than our
                    estimate of 13% on account of higher other income, which includes integration
                    and amalgamation expenses; and stamp duty. Net profit stood at `120cr, 11%
                    below our expectation of `135cr. We have slightly revised our earnings estimate
                    downwards and expect the company's net profit to post a CAGR of ~30% over

                    We maintain our Buy rating on the stock with a revised target price of `1,721,
                    based on a target PE of 18x its CY2013E earnings.

February 29, 2012                                                                                   3
                                                                            Market Outlook | India Research

                    Economic and Political News
                        Higher import duty will hurt sector: Private power companies to PM
                        January infra output reduces to 0.5% yoy
                        Rising crude oil prices disturbing: Finance Minister

                    Corporate News
                        ONGC, GAIL may offer `9,800cr for Cove
                        IOC gets state permit to draw river water for refinery
                        GMR Infra in talks to sell US$200mn in road assets
                        Essar Oil loses `302cr insurance claim
                    Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

February 29, 2012                                                                                        4
                                                                                                 Market Outlook | India Research

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February 29, 2012                                                                                                                           5

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