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Market Outlook

India Research
March 09, 2010

Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)


Political uncertainty weighed on the market sentiments with Samajwadi Party BSE Sensex 0.6% 108.1 17,103
and Rashtriya Janata Dal deciding to withdraw support to the ruling UPA Nifty 0.7% 35.3 5,124
government. Shares of SBI and its associate banks surged after the Finance MID CAP 0.7% 47.9 6,783
Minister introduced a bill in the Lok Sabha to allow the bank to raise more
SMALL CAP 1.1% 92.9 8,592
capital from the market. The Sensex and the Nifty closed the trading session in
BSE HC 0.9% 45.6 5,095
green with gains of 0.6% and 0.7% respectively. The BSE Mid-cap and Small-
BSE PSU -0.0% (3.2) 9,321
cap indices outperformed the benchmark indices and closed in green with gains
BANKEX 1.1% 111.4 10,310
of 0.7% and 1.1% respectively. Among the front-liners, M&M, Hero Honda, ITC,
ICICI Bank and ACC were up by 2-4%, while Bharti Airtel, HUL, Reliance Infra, AUTO 1.8% 134.9 7,688
Hindalco and Reliance Communication were down by 1-2%. In the Mid-cap METAL -0.1% (12.8) 17,547
segment, Future Capital, Mahindra Holidays, Emami, Bombay Dyeing and State OIL & GAS 0.1% 4.6 9,772
Bank of Bikaner were up by 7-15%, while Britannia, Pipavav Shipyard, Deccan BSE IT 0.7% 36.8 5,265
Chronicle, Indiabulls Finance and Oriental Bank were down by 3-7%.
Global Indices Chg (%) (Pts) (Close)
Markets Today Dow Jones -0.1% (13.7) 10,552
The trend deciding level for the day is 17108 / 5121 levels. If NIFTY trades NASDAQ 0.3% 5.9 2,332
above this level during the first half-an-hour of trade then we may witness a FTSE 0.1% 7.0 5,607
further rally up to 17182 – 17261/ 5150 – 5176 levels. However, if NIFTY Nikkei -0.2% (25.8) 10,560
trades below 17108 / 5121levels for the first half-an-hour of trade then it may
Hang Seng -0.2% (43.3) 21,154
correct up to 17029 – 16956/ 5095– 5066 levels.
Straits Times -0.1% (2.5) 2,832
Shanghai Com -0.8% (23.0) 3,030
Indices S2 S1 R1 R2
SENSEX 16,956 17,029 17,182 17,261 Indian ADRs Chg (%) (Pts) (Close)
NIFTY 5,066 5,095 5,150 5,176 Infosys 0.5% 0.3 $59.9
Wipro 1.1% 0.3 $22.9
News Analysis Satyam 0.4% 0.0 $5.7
„ NMDC FPO- Recommend Avoid ICICI Bank -0.5% (0.2) $40.8
„ Nagarjuna Constructions bags Orders worth Rs1,221cr HDFC Bank -0.2% (0.2) $126.9
„ Wipro signs a strategic contract with Financial Intelligence Unit.
Refer detailed news analysis on the following page. Advances / Declines BSE NSE
Advances 1,750 816
Net Inflows (Mar 04, 2010)
Declines 1,115 473
Rs cr Purch Sales Net MTD YTD
Unchanged 87 37
FII 2,585 1,893 692 3,240 4,217
MFs 503 854 (351) (448) (2,458)
Volumes (Rs cr)
FII Derivatives (Mar 08, 2010)
BSE 5,112
Open
Rs cr Purch Sales Net NSE 15,198
Interest
Index Futures 765 478 287 10,677
Stock Futures 1,046 878 168 25,838
Gainers / Losers
Gainers Losers

Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)

Bombay Dyeing 579 6.9 DCHL 164 -3.5


Essar Oil 149 6.4 NMDC 401 -3.4
Lanco Infra. 52 6.4 Indiabulls Fin 109 -3.1
Aban Offshore 1,307 5.6 Oriental Bank 300 -3.0
Ambuja Cem. 115 5.5 Max India 209 -2.6

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

NMDC FPO- Recommend Avoid

NMDC Follow on Public offer (FPO) opens on 10th March’10 and closes on 12th March’10.
The FPO entails issue of 33.2cr equity shares priced in the band of Rs300-350. The
company will raise between Rs9,900-11,600cr depending on the cut-off price. The issue of
33cr equity share by Government of India (GoI) represents 8.38% of the total outstanding
share capital of the company. Retail Investors are entitled for a 5% discount of the issue
price. Post the issue the government holding will be around 90% of the total share capital.
The company will not receive the offer proceeds as it is a part of Government divestment
plan.

NMDC, India’s leading iron ore producer benefits from huge iron ore reserves, better
quality ore and low cost advantage. At the lower price band, NMDC is trading at 12.6x
and 9.6x FY2011E and FY2012E EV/EBITDA while at the upper band it is trading at 15.1x
and 11.5x its FY2011E and FY2012E EV/EBITDA. In comparison to Sesa Goa (only listed
domestic iron ore company), which is trading at 7.8x and 6.4x FY2011E and FY2012E
EV/EBITDA, we feel that the FPO pricing is overpriced. We recommend an Avoid on the
FPO.

Nagarjuna Constructions bags Orders worth Rs1,221cr

Nagarjuna Construction (NCC) has secured orders aggregating to Rs1,221cr. The work
orders are spread across verticals of Road construction, turnkey electrical works and
building construction and are to be completed over a span of next 12-30months. The
Order Book of NCC stands at Rs16,600cr or 3.5x its FY2010E revenues. At the CMP of
Rs163, the stock trades at 16.4x FY2012E Earnings and 1.7x FY2012E P/BV.
We recommend an Accumulate on the Stock with a Target Price of Rs186.

Wipro signs a strategic contract with Financial Intelligence Unit, India

Wipro Infotech, the India and West Asia IT business of Wipro Ltd, has won a turnkey
project from the Financial Intelligence Unit (FIU), ministry of finance. Wipro has been
selected through an open and stringent bidding process. The value of the deal is expected
to be just under Rs100cr. As part of the project, Wipro will implement Financial Intelligence
Network (FINnet) for FIU. The scope of services includes development of the portal, data-
warehousing, analytical application and ERP implementation, at the data centre and
disaster recovery site. The project is scheduled to be completed in 24 months in different
phases with a further service period of 36 months. FINnet will enhance the efficiency and
effectiveness in the FIUs core function of collection, analysis and dissemination of financial
information to ensure substantially higher productivity and effective monitoring in all areas
of FIUs work. The project assumes significance in the light of growing economic crimes
within the country and the government's efforts to arrest it. This win is very crucial for Wipro
in light of the IT e-governance related budget allocation done by the finance ministry for
FY2010E-11E, wherein Wipro has likelihood of winning other key projects in this space.
We maintain an Accumulate on the stock.

March 09, 2010 2


Market Outlook | India Research

Economic and Political News

„ Govt. to reduce stake in SBI from 59.4% to 51%


„ RBI drafting new norms for NBFCs
„ Andra Pradesh to get Jute Park, set to attract investments worth Rs500cr

Corporate News

„ ICICI bank sells Prabhadevi property for Rs3.7cr


„ PE firm Sequoia may pick up 9.4% in CARE
„ Daimler looking to exit Tata Motors via market

March 09, 2010 3


Market Outlook | India Research

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March 09, 2010 4