Market Outlook

India Research
October 12, 2011

Dealers Diary
The Indian markets are expected to open flat with negative bias on the back of mixed global cues and negative opening in all the Asian markets in the early market trade. The domestic benchmark indices reversed early gains to end modestly lower yesterday, as caution set in ahead of IIP data. Negative European cues also dampened investor sentiment to some extent. Globally, most of the US and European indices closed in red as caution prevailed ahead of a crucial vote in Slovakian parliament to approve the expansion of the euro zone's bailout fund. Slovakia's approval of the rescue fund will give EFSF powers to recapitalize banks and purchase bonds of troubles economies. Also, UKs industrial production number fell more-than-expected by 0.3% in August, worse than expectations of decline by 0.1%, the third consecutive month of decline. On the domestic front, the key events to watch out today will be IIP numbers for August 2011 (Bloomberg estimate 4.7%) and cues from Infosys quarterly results. On the global front, Eurozones industrial production data will also be closely watched.

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

Chg (%) (0.1) (0.1) 0.5 0.2 0.5 0.5 0.1 0.9 1.0 (0.6) (2.7) Chg (%) (0.2) 0.7 (0.1) 2.0 2.4 0.9 0.2

(Pts) (5.3) 29.3 15.1 29.1 38.6 75.8 (48.7) (145.6) (Pts) 17.0 (3.3) 168.1 24.8 3.7

(Close) 4,974 6,070 6,802 5,871 7,450 8,755 8,633 5,245 (Close) 2,583 5,396 8,774 2,693 2,349

(20.8) 16,536

14.5 10,510 108.1 11,221

(16.9) 11,416

Markets Today
The trend deciding level for the day is 16,607/4,994 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,70316,871/5,0255,076 levels. However, if NIFTY trades below 16,607/4,994 levels for the first half-an-hour of trade then it may correct up to 16,44016,344/4,9444,913 levels.
Indices SENSEX NIFTY S2 16,344 4,913 S1 16,440 4,944 R1 16,703 5,025 R2 16,871 5,076

430.5 18,142

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank Advances / Declines Advances Declines Unchanged Volumes (` cr) BSE

Chg (%) (2.2) (1.5) (1.8) (2.1)

(Pts) (1.2) (0.1) (0.6) (0.6) BSE 1,558 1,236 115

(Close) $52.7 $9.4 $34.3 $30.0 NSE 825 599 56

News Analysis
SBI likely to receive `3,000-`4,500cr capital infusion in lieu of shelving of right issue in FY2012 2QFY2012 Result Preview Infosys
Refer detailed news analysis on the following page

Net Inflows (October 10, 2011) ` cr Purch FII MFs 3,564 694

Sales 3,073 500

Net 491 153

MTD (2,227) 153

YTD (4,180) 5,651

2,710 11,460

FII Derivatives (October 11, 2011) ` cr Index Futures Stock Futures Gainers / Losers Gainers Company Jubilant Food Chambal Fert Container Corp REC Aban Offshore Price (`) 822 96 1,000 177 388 chg (%) 9.0 8.0 7.1 6.0 5.9 Company Maruti Suzuki Voltas Engineers India Neyveli Lignite Areva T&D Losers Price (`) 1,073 102 243 75 215 chg (%) (3.6) (2.8) (2.3) (2.0) (1.7) Purch 1,879 1,244 Sales 1,248 1,424 Net 631 (179) Open Interest 12,723 26,698

NSE

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

SBI likely to receive `3,000-`4,500cr capital infusion in lieu of shelving of right issue in FY2012
In a bid to achieve the prescribed 8% tier-I capital adequacy norm, Government of India is likely to infuse `3,000-`4,500cr in SBI by December 2011 or maximum by March 2012. In our view, this amount will be sufficient for achieving 8% tier-I CAR. However, according to the Financial Services Secretary, after receiving the capital infusion, the bank is unlikely to go on with its proposed rights issue in FY2012. Of the c.`12,000cr needed by SBI in order to achieve the 8% tier-I CAR, `7,500-`9,000cr is likely to be funded via internal accruals and the balance amount is likely to be infused by the government. While this infusion is expected to shore up the tier 1 CAR of the bank to c.8%, it would be still short of the benchmark 9% that most large banks currently have. While the capital adequacy ratio is expected to be an overhang on the stock in the short term, however, in the medium term considering the attractive valuations (1.0x FY2013 ABV after adjusting for value of subsidiaries) and structural positives, we maintain a buy on the bank with a target price of `2,403.

Result Preview Infosys

Infosys is slated to announce its 2QFY2012 results. We expect a modest performance by the company, with revenue at US$1,748mn vs. US$1,671mn in 1QFY2012, up 4.6% qoq, led by strong volume growth of 5.0% qoq. In rupee terms, the companys revenue is expected to grow by 6.7% qoq to `7,988cr. EBITDA margin is expected to expand by 108bp qoq to 30.2% as wage hikes given in 1QFY2012 will partially get absorbed. PAT is expected to come in at `1,851cr. Key points to watch out for are a) managements commentary on the macro picture and initial sense of client budgets for CY2012 and b) revision, if any, in dollar revenue growth guidance for FY2012. We maintain our Accumulate recommendation on the stock with a target price of `2,705.

Quarterly Bloomberg Estimates

Infosys Ltd.
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Bloomberg, Angel Research

2QFY12E 8,071 2,444 30 1,893

2QFY11 6,947 2,315 33 1,737

yoy (%) 16.2 5.6 9.0

1QFY12 7,485 2,176 29 1,722

qoq (%) 7.8 12.3 9.9

October 12, 2011

Market Outlook | India Research

Economic and Political News

Government may raise FDI cap in single-brand retail Public issue mop up in H1 of FY2012 dips 22% UK to again insist on bonds for Indian migrants

Corporate News
Aurobindo Pharma gets USFDA nod for CNS drug Dhanlaxmi Banks stock tanks 24% intraday as workers union alleges fudging of a/c Lupin launches generic birth control drug in the US NMDC to auction 3,00,000 tonnes of iron ore in Karnataka Suzlon gets order from Senok to supply 10units of S88 2.1MW wind turbine generators
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Forthcoming Results 12/10/2011 13/10/2011 14/10/2011 15/10/2011 17/10/2011

Infosys Praj Industries Bajaj Telefilms, Gateway Distriparks RIL, Oberoi Realty MindTree, Persistent, HDFC, ING Vysya Bank, TCS

October 12, 2011

Market Outlook | India Research

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

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Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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October 12, 2011