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Market Outlook 04 01 11

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					                                                                                                                            Market Outlook
                                                                                                                                            India Research
                                                                                                                                             January 4, 2011

Dealer’s Diary                                                                                                   Domestic Indices      Chg (%)       (Pts)   (Close)
                                                                                                                 BSE Sensex              0.3%       52.0 20,561
The market surged at the onset of the first trading session of 2011, scaling                                     Nifty                   0.4%       23.1      6,158
seven-week high as strong auto sales for December 2010 and higher Asian                                          MID CAP                 0.9%       70.5      7,873
stocks bolstered sentiments; however, the market pared gains to hit fresh
                                                                                                                 SMALL CAP               1.8%      174.7      9,845
intraday lows in late trade as profit taking emerged. Banking, metal and
                                                                                                                 BSE HC                  0.4%       29.2      6,763
consumer durables stocks climbed. The market breadth was strong. A bout of
                                                                                                                 BSE PSU                 0.6%       55.7      9,516
volatility was witnessed in early afternoon trade as the key benchmark indices
                                                                                                                 BANKEX                  0.6%       74.6 13,454
recovered from their lower levels after hitting fresh intraday lows. The Sensex
and Nifty closed with gains of 0.3% and 0.4%, respectively. Mid and small-cap                                    AUTO                   -0.2%      (17.2) 10,218
indices outperformed the Sensex, closing up by 0.9% and 1.8%, respectively.                                      METAL                   2.1%      363.6 17,960
Among the front liners, Tata Steel, Sterlite Inds., Reliance Infra, Jaiprakash                                   OIL & GAS               0.0%       (2.6) 10,599
Associates and RCOM gained 2–4%, while Bajaj Auto, Wipro, NTPC, TCS and                                          BSE IT                 -0.1%       (7.8)     6,817
RIL lost 0–4%. Among mid caps, Jindal South, NCC, Fresenius Kabi, Polaris                                        Global Indices        Chg (%)       (Pts)   (Close)
Software and Escorts gained 7–11%, while Gammon Infra, Shree Ashtavinayak                                        Dow Jones                0.8%      93.2     11,671
Cine Vision, Blue Dart, Money Matters and KGN Inds. lost 3–5%.                                                   NASDAQ                   1.5%      38.7      2,692
                                                                                                                 FTSE                    -1.2%    (71.1)      5,900
Markets Today
                                                                                                                 Nikkei                  -1.1% (115.6)       10,229
The trend deciding level for the day is 20,586/6,161 levels. If NIFTY trades                                     Hang Seng                1.7%    400.6      23,436
above this level during the first half-an-hour of trade then we may witness a                                    Straits Times            1.4%      45.7      3,236
further rally up to 20,640–20,719/6,175-6,192 levels. However, if NIFTY                                          Shanghai Com             1.8%      48.5      2,808
trades below 20,586/6,161 levels for the first half-an-hour of trade then it may
correct up to 20,506 -20,452/6,144-6,130 levels.
                                                                                                                 Indian ADRs           Chg (%)      (Pts)    (Close)
  Indices                       S2                         S1                  R1                   R2           Infosys                  1.9%       1.5      $77.5
                                                                                                                 Wipro                    1.0%       0.2      $15.6
  SENSEX                     20,452                   20,506                  20,640               20,719
                                                                                                                 ICICI Bank               0.9%       0.5      $51.1
  NIFTY                       6,130                    6,144                  6,175                6,192
                                                                                                                 HDFC Bank                1.4%       2.4     $169.5

News Analysis
                                                                                                                 Advances / Declines               BSE          NSE
        Auto sales numbers – December 2010
                                                                                                                 Advances                        2,030        1,074
        Cement Dispatch numbers - December 2010
                                                                                                                 Declines                         878           339
        Lupin settles litigations over Lunesta
                                                                                                                 Unchanged                        164               37
        KEC International secures orders worth `980cr
Refer detailed news analysis on the following page
                                                                                                                 Volumes (` cr)
  Net Inflows (December 31, 2010)
                                                                                                                 BSE                                          3,447
  ` cr              Purch         Sales                                Net             MTD               YTD
  FII                    1,929               1,312                     617            1,476         133,089      NSE                                         10,739

  MFs                       271                505                    (234)           1,460         (27,470)

  FII Derivatives (January 03, 2011)
                                                                                                       Open
  ` cr                                       Purch                    Sales             Net
                                                                                                     Interest
  Index Futures                               786                      868              (82)         12,629
  Stock Futures                               791                  1,087               (296)         34,761

  Gainers / Losers
                            Gainers                                                     Losers
                                                 chg                                                      chg
  Company                    Price (`)                          Company                Price (`)
                                                 (%)                                                       (%)
  NCC                             152            8.0            Bajaj Auto               1,477           (4.2)
  Godrej Inds                     204                6.5        United Phos                169           (2.4)
  Guj NRE Coke                       69              6.0        KSK Energy                 132           (1.8)
  Bosch                        6,658                 5.4        REC                        293           (1.8)                                                  1
  JP Power                           56              5.2        Union Bank                 341           (1.8)

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

                  Auto sales numbers – December 2010

                  Hero Honda (HH)
                  HH sold 501,111 units (375,838) during the month, registering better-than-expected yoy
                  growth of 33.3%. On mom basis, volumes were up by 18.9%. Refreshed product ranges,
                  new product launches and innovative branding and marketing initiatives continued to drive
                  the company’s volume performance.

                  Bajaj Auto (BAL)
                  BAL reported marginally lower-than-expected overall sales growth of 9.8% yoy to 276,803
                  units (252,004) during December 2010. The motorcycle segment posted modest 10.8%
                  yoy growth; however, on mom basis, volumes were down by 8.1%. Pulsar and Discover
                  accounted for 70% of motorcycle sales during December 2010. The three-wheeler
                  segment grew by 4.9% yoy to 33,128 units (31,575). Exports posted 4.4% yoy growth;
                  however, it continues to see logistical constraints, which are impacting growth.



                  Cement dispatch numbers – December 2010

                  Most cement players, who reported their December 2010, dispatch numbers showed a yoy
                  increase in their volumes due to better demand post the cessation of rains in most part of
                  the country. JP Associates continued to remain the top performer in terms of dispatch
                  growth. The company’s dispatches grew by 28% yoy to 1.35mn tonnes. Ambuja Cements’
                  (Ambuja) dispatches grew by 5.6% yoy to 1.83mn tonnes. ACC’s dispatches grew
                  marginally by 2.2% yoy due to heavy rains in the southern region, where the company has
                  a significant presence. We continue to remain Neutral on ACC, Ambuja, Grasim and
                  UltraTech. However, we maintain Buy on India Cements (TP: `139), Madras Cements
                  (TP: `141) and JK Lakshmi Cement (TP: `92).



                  Lupin settles litigations over Lunesta

                  Lupin’s subsidiary, Lupin Pharmaceuticals, Inc. has settled all ongoing litigation over
                  Lunesta (Eszopiclone) tablets, thereby dismissing a patent suit brought by the drug’s
                  manufacturer Dainippon Sumitomo Pharma Co. Ltd.’s subsidiary Sunovion
                  Pharmaceuticals, Inc. The settlement entitles Lupin to sell its generic version of Lunesta
                  under a license as soon as November 30, 2013 (two and a half months prior to the expiry
                  of US Patent 6,444,673). The date would be pushed back to May 31, 2014, if Sunovion
                  Pharmaceuticals obtains six months additional pediatric exclusivity for the product. Lunesta
                  reported sales of US $787mn in the 12 months ended September 2010 (IMS MAT SEP
                  2010). At the CMP, the stock trades at 26.1xFY2011E and 20.9xFY2012E earnings, we
                  remain Neutral on the stock.




January 4, 2011                                                                                             2
                                                                                          Market Outlook | India Research



                    KEC International secures orders worth `980cr

                    KEC International (KEC) has bagged orders totaling `980cr in the substation segment from
                    Kazakhstan Electricity Grid Operating Company (KEGOC) and PGCIL.

                    Valued at `942cr, the scope of the two orders received from KEGOC include rehabilitation
                    38 substations spread across the North East and South of Kazakhstan. This includes 21
                    substations of voltage levels of 1150kV, 500kV and 220kV and 17 substations of voltage
                    levels 500kV, 220kV and 110kV. These orders, the biggest-ever that the company has ever
                    got in the substation segment, will be executed over 33 months.

                    In addition, the company has obtained an order worth `38cr from PGCIL for the supply
                    and construction of 400kV substation at Baharampur, West Bengal. Post the above order
                    inflows, the company’s order accretion during the past three months aggregates to
                    `3,400cr. We maintain Buy on the stock with a Target Price of `648.




                     Economic and Political News

                    Government notifies procedures for 5lakh tonnes sugar export via OGL
                    November exports up 26.5% yoy at US $18.9bn
                    Diesel price hike may be deferred to next fiscal: PMEAC
                    ‘No-Go’ shadow on `40,000cr investments



                     Corporate News

                    Steel firms raise prices by 3–5% as input costs rise
                    RIL mulls US $ 1.2bn LNG import terminal
                    L&T bags orders worth `1,103cr in railways
                    Tata Power scraps pact with PE firm Olympus Capital
                    Dabur completes acquisition of US-based Namaste Group

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




January 4, 2011                                                                                                       3
                                                                                                                                 Market Outlook | India Research



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January 4, 2011                                                                                                                                                                   4

				
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