Market Outlook

India Research
January 3, 2011

Dealers Diary
The key benchmark indices posted modest gains on the last day of the year as auto and bank stocks rose. The market edged higher in early trade, tracking higher Asian stocks. The key benchmark indices extended gains in morning trade. However, the market pared gains in mid-morning trade but regained strength in early afternoon trade. Banking, automobile and realty stocks helped the market regain strength amid a bout of volatility in mid-afternoon trade. The market breadth, indicating the overall health of the market, was strong. The Sensex and Nifty closed with gains of 0.6% and 0.5%, respectively. Mid and small-cap indices outperformed the Sensex, closing up by 1.1% and 1.2%, respectively. Among the front liners, RCOM, Bajaj Auto, Reliance Infra, JP Associates and SBI gained 25%, while Sterlite Inds., Jindal Steel, NTPC, BHEL and Hero Honda lost around 01%. Among mid caps, Dewan Housing, KEC International, United Breweries, Parsvnath Developers and Gammon Infra gained 69%, while Core Projects, Network18 Media, Shree Ashtavinayak Cine Vision, Apollo Hospital and Rajesh Exports lost 312%.

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 Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) 0.6% 0.5% 1.1% 1.2% 0.5% 0.6% 1.4% 0.9% 0.5% 0.5% 0.0% Chg (%) 0.1% -0.4% -1.2% 0.2% -0.7% 1.8% Chg (%) -0.4% -1.0% 0.6% -0.3%

(Pts) 32.7 88.1 117.7 35.9 60.2

(Close) 6,135 7,803 9,670 6,734 9,461

120.0 20,509

184.5 13,380 94.5 10,235 87.0 17,596 48.2 10,601 (2.8) (Pts) 7.8 (10.1) (71.1) 36.1 (22.4) 48.5 (Pts) (0.3) (0.2) 0.3 (0.5) 6,825 (Close) 11,578 2,653 5,900 10,229 23,035 3,190 2,808 (Close) $76.1 $15.5 $50.6 $167.1

Markets Today
The trend deciding level for the day is 20,474/6,122 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,58820,666/6,160-6,185 levels. However, if NIFTY trades below 20,474/6,122 levels for the first half-an-hour of trade then it may correct up to 20,39520,281/6,097-6,059 levels.
Indices SENSEX NIFTY S2 20,281 6,059 S1 20,395 6,097 R1 20,588 6,160 R2 20,666 6,185

-1.1% (115.6)

News Analysis

Advances / Declines Advances Declines Unchanged Volumes (` cr) BSE NSE

BSE 1,978 947 142

NSE 1,025 367 50

Auto sales numbers December 2010 L&T bags orders worth `2,503cr

Refer detailed news analysis on the following page

Net Inflows (December 30, 2010) ` cr Purch Sales FII MFs 4,677 271 2,324 505

Net 2,353 (234)

MTD 859 1,460

YTD 132,472 (27,470) Open Interest 12,365 34,042

3,403 11,256

FII Derivatives (December 31, 2010) ` cr Index Futures Stock Futures Gainers / Losers Gainers Company Vijaya Bank IB Real Est Central Bank Reliance Comm JSW Energy Price (`) 102 140 182 145 100 chg (%) 5.7 5.2 5.0 5.0 4.7 Company Hindustan Copp Shree Renuka Bajaj Hind GTL Balrampur Chini Losers Price (`) 330 97 119 416 88 chg (%) (7.2) (2.3) (2.3) (2.1) (1.8)
1

Purch 889 793

Sales 963 820

Net (74) (27)

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

Mahindra & Mahindra (M&M) M&M reported robust 38% yoy growth in total sales to 50,396 units (36,440) in December 2010, which came in marginally ahead of our estimates. Growth was aided by 42% and 31% yoy growth in the automotive and farm equipment segments, respectively. The farm equipment segments growth was supported by healthy performance on the domestic as well as exports front. Domestic tractor sales grew by 31% yoy to 15,135 units (11,517), while exports grew by 30% yoy to 1,199 units (922). Within the automotive segment, the four-wheeler pick-up segment grew by strong 47% yoy on the back of robust performance from GIO and Maxximo. Passenger UV sales grew by healthy 24% yoy, while Logan sales continued to post strong performance, registering growth of 191% yoy. Tata Motors (TML) TML reported healthy 31% yoy growth in total volumes in December 2010, led by 28% yoy growth in domestic vehicle sales and 68% yoy growth in export sales. The PV segment, which was impacted by the decline in Nano and Indica sales in November 2010, posted 28% yoy growth in December 2010 to 19,977 units (15,661). Nano volumes rose by 60% yoy to 5,784 units, as the company more than doubled the warranty period and offered easier financing terms to boost sales. Indica and Indigo range of vehicles reported 40% and 3% yoy growth during the month, respectively. The commercial vehicles (CV) segment posted 25% yoy growth in December 2010 on account of 35% yoy growth in LCV sales to 24,558 units. Ace family of vehicles recorded the highest-ever sales during the month. M&HCV sales stood at 17,368 units, registering growth of 14% yoy. TVS Motor (TVS) TVS reported strong 42% yoy growth, selling 171,859 units (120,913) in December 2010, led by significant demand across all product segments. While motorcycle sales grew by 24% yoy to 61,404 units (49,560), the scooter segment registered robust 94% yoy growth to 41,804 units (21,566). Three-wheeler sales continued to report healthy performance, posting 189% yoy growth to 3,500 units (1,212). Exports volume registered 10% yoy growth to 19,002 units (17,222).

L&T bags orders worth `2,503cr

Larsen & Toubro (L&T) has bagged domestic and international orders aggregating to `2,503cr. The company secured five orders worth `1,516cr in domestic markets, which include projects for laying down of transmission lines, manufacturing of electrical equipment used in energy generation and railway construction activity. The company's international segment bagged three orders for `987cr in the Middle East region for seven substation projects and 153km of transmission line projects. At `1,979 P/E of 28.2x and P/BV of 4.8x to its FY2012E on a standalone basis we believe most of the positives are factored in and, hence, we maintain our Neutral rating on the stock. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses and have arrived at a Target Price of `2,024.

January 3, 2011

Market Outlook | India Research

Economic and Political News

Infrastructure debt funds to roll out soon PMEAC raises inflation forecast for FY2011 to 6% Government plans to exempt factoring services from stamp duty, to introduce bill soon No plan to impose duty on power equipment imports India to add 45,000MW during 12th Plan

Corporate News
SBI plans units in South Korea, Sao Paulo NTPC to set up 4,000MW power project in Vizag Tata Steel, Nippon to ink `2,400cr by January end Hero Honda sells 5lakh units in December 2010
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

January 3, 2011

Market Outlook | India Research

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January 3, 2011