Market Outlook

India Research
December 29, 2011

Dealers Diary
Indian markets are expected to open with a negative bias tracking cues from Asian markets today and drop in US markets on Wednesday. Asian stocks dropped for a third day, with the regional benchmark index heading to the first annual drop since 2008, after a surge in the European Central Banks balance sheet highlighted risks of the debt crisis and economic slowdown. US stocks moved sharply lower over the course of the trading day on Wednesday, as traders expressed renewed concerns about the European debt crisis. Italy passed the first part of its final bond test of the year with flying colours on Wednesday, as short term borrowing costs halved in a EUR9bn auction that saw appetite for Italian debt rise. Italy sold EUR9bn of six-month bills at an average rate of 3.25%, down from euro-era highs of 6.50% at a similar auction last month. The successful auctions saw yields on benchmark 10-year Italian bonds fall 22bp to 6.67%. Another closely-watched sale of three, six and ten year bonds will be held on Thursday. The auction was the first since the European Central Bank (ECB) offered EUR489bn in cheap three year loans to euro zone banks in an attempt to prevent a full-scale credit crunch.

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 (%) (0.9) (0.9) (1.1) (1.1) (0.1) (0.8) (2.0) (1.1) (2.1) (1.6) (0.1) Chg (%) (1.1) (1.3) (0.1) (0.2) (0.6) (0.3) 0.2

(Pts) (146.1) (44.7) (55.2) (63.5) (4.2) (47.8) (188.3) (90.8) (195.7) (129.7) (4.1) (Pts) (139.9) (35.2) (5.3) (16.9) (110.5) (7.4) 3.8

(Close) 15,728 4,706 5,137 5,587 5,833 6,337 9,304 8,209 9,335 7,848 5,778 (Close) 12,151 2,590 5,507 8,424 18,519 2,666 2,170

Markets Today
The trend deciding level for the day is 15,761/4,716 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,85515,982/4,746 4,786 levels. However, if NIFTY trades below 15,761 / 4,716 levels for the first half-an-hour of trade then it may correct up to 15,63415,539/4,6764,645 levels.
Indices SENSEX NIFTY S2 15,539 4,645 S1 15,634 4,676 R1 15,855 4,746 R2 15,982 4,786

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) (0.7) (0.6) (3.3) (1.7)

(Pts) (0.3) (0.1) (0.9) (0.4)

(Close) $51.0 $10.1 $26.0 $25.9

News Analysis
Credit growth falls to 20-month low of 17.1% yoy Punj Lloyd bags highway project worth `1,050cr
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 1,055 1,667 123

NSE 450 978 66

Net Inflows (December 27, 2011)

` cr FII MFs Purch
1,047 157

Sales
683 150

Net
364 7

MTD
405 463

YTD
(3,619) 6,409 Volumes (` cr) BSE NSE 1,280 6,218

FII Derivatives (December 28, 2011)

` cr Index Futures Stock Futures Purch
4,243 5,236

Sales
4,061 5,248

Net
182 (12)

Open Interest
13,081 27,172

Gainers / Losers
Gainers Company
Jain Irrigation IFCI NTPC Lupin BHEL

Losers Company
Adani Power Jindal Steel Apollo Hospital Sintex Inds Oriental Bank

Price (`)
94 25 161 436 246

chg (%)
9.8 6.3 2.7 2.5 2.3

Price (`)
62 455 564 64 201

chg (%)
(7.5) (7.1) (6.8) (6.6) (6.4)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Credit growth falls to 20-month low of 17.1% yoy

Growth in bank credit of Scheduled Commercial Banks (SCBs) fell to a 20-month low (although on a high base) on a fortnightly basis to 17.1% yoy. Credit offtake during the fortnight was `31,562cr compared to an average of `28,300cr over the past three fortnights. Overall deposits in the system fell by `37,469cr during the fortnight; however, due to a low base (14.9% yoy growth as of December, 17 2010), deposit growth managed to rise just above the 18% mark (18.03%). The spread between credit and deposit growth, which turned negative last fortnight (as of December 2, 2011) for the first time since March 2010 narrowed further to negative 0.9%. Overall systemic credit-todeposit ratio remained elevated at 74.2% levels. YTD in FY2012 credit offtake has declined by 17.9% yoy, while deposit mobilization has risen by 49.3% yoy.

Punj Lloyd bags highway project worth `1,050cr

Punj Lloyd has received the letter of intent from GMR Projects Pvt. Ltd. for undertaking design and EPC of 124km of six lane of Chittorgarh bypass to Udaipur in Rajasthan. The project, worth `1,050cr, forms part of Phase-V of the National Highways Development Programme of the NHAI for upgrading the existing four-lane section to six lane. The project has been awarded on a turnkey fixed EPC price basis with an expected construction period of 36 months. With this order, the companys total outstanding order book stands at ~`28,725cr (3.7x FY2011 revenue). We maintain our Neutral view on the stock on account of various overhangs uncertainty over receivable claims, stretched working capital, auditor qualifications and increasing leverage on the balance sheet.

Economic and Political News

Anna Hazare calls off three-day fast midway India, Japan sign US$15bn currency swap deal Oil ministry wants EGoM to approve gas supply cuts Coal Ministry calls meet to expedite captive mines development

Corporate News
Govt. to ask Sterlite for formal plan for buying 49% residual stake in Balco Oil Ministry refers RILs marketing margin issue to EGoM TVS to launch automatic transmission two-wheelers in 2013 RPower commissions another 300MW unit at Rosa
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint,

December 29, 2011

Market Outlook | India Research

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December 29, 2011