market outlook 21.11.11

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Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1

Market OutlookIndia Research

November 21, 2011

Dealer’s Diary

Indian markets are expected to edge lower tracing weakness in Asian markets.The domestic indices declined on Friday for the third consecutive week as

weakening trend in global markets on concerns over the euro zone debt crisis

continued to spook investors.

Global markets remained largely weak. European bourses closed lower on

Friday on the prolonged sovereign debt crises. Concerns also brewed on growing

rift between Germany and France over ECB’s involvement on fixing the debt

crises partially weigh on the markets. Major US indices closed on a mixed note

following developments in the Euro-zone.

On the domestic front, earnings season have ended on a mixed note.

Nonetheless, markets are captured with negative sentiments owing to hardenedbusiness environment. In addition, Europe’s economic roller-coaster will remain

as an overhang. Investors will also watch out for US home sales data which will

partially indicate the health of US economy.

Markets Today

The trend deciding level for the day is 16,311/ 4,887 levels. If NIFTY trades

above this level during the first half-an-hour of trade then we may witness a

further rally up to 16,457 – 16,543 / 4,935 – 4,965 levels. However, if NIFTY

trades below 16,311/ 4,887 levels for the first half-an-hour of trade then it may

correct up to 16,225 – 16,079 / 4,875 – 4,809 levels.

Indices S2 S1 R1 R2

SENSEX 16,079 16,225 16,457 16,543

NIFTY 4,809 4,857 4,935 4,965

News Analysis Infra 2QFY2012 Result Review

Three mega infra projects gets clearance

Refer detailed news analysis on the following page

Net Inflows (November 17, 2011)

` cr Purch Sales Net MTD YTD

FII 1,933 2,094 (161) 875 1,390

MFs 441 344 98 (474) 4,662

FII Derivatives (November 18, 2011)

` cr Purch Sales Net Open Interest

Index Futures 2,930 3,578 (648) 16,631

Stock Futures 3,964 3,979 (15) 29,206

Gainers / Losers

Gainers Losers

Company Price (`) chg (%) Company Price (`) chg (%)

Shree Renuka Sug 35 9.2 Pipavav Defence 56 (20.0)

Pantaloon Retl 198 8.4 Amtek Auto 95 (13.8)

HPCL 297 6.3 IVRCL LTD 32 (11.8)

GVK Power 11 5.8 IFCI 23 (8.5)

Thermax 450 4.8 Suzlon Energy 24 (7.0)

Domestic Indices Chg (%) (Pts) (Close)

BSE Sensex (0.6) (90.2) 16,372

Nifty (0.6) (29.0) 4,906MID CAP (1.0) (59.5) 5,716

SMALL CAP (1.9) (119.4) 6,182

BSE HC 0.2 11.4 5,919

BSE PSU (1.0) (71.9) 6,834

BANKEX (0.9) (89.0) 10,161

AUTO (1.2) (103.6) 8,538

METAL (1.3) (137.7) 10,433

OIL & GAS 0.0 0.6 8,299

BSE IT (0.7) (39.7) 5,614

Global Indices Chg (%) (Pts) (Close)

Dow Jones 0.2 25.4 11,796

NASDAQ (0.6) (15.5) 2,573

FTSE (1.1) (60.2) 5,363

Nikkei (1.2) (104.7) 8,375

Hang Seng (1.7) (326.2) 18,491

Straits Times (1.7) (47.9) 2,730

Shanghai Com (1.9) (46.5) 2,417

Indian ADRs Chg (%) (Pts) (Close)

Infosys (0.6) (0.3) $53.1

Wipro 0.2 0.0 $9.5

ICICI Bank 0.6 0.2 $29.9

HDFC Bank (0.0) (0.0) $27.9

Advances / Declines BSE NSE

Advances 882

Declines 1,989 1,079

Unchanged 108 41

Volumes (` cr)

BSE 2,378

NSE 10,735



Market Outlook | India Research

November 21, 2011 2

Infra 2QFY2012 Result Review

Decent top-line growth + Lower EBITDAM/high interest cost = Bottom-line decline:

Most infrastructure players (10 companies chosen for this analysis) witnesseddecent yoy growth (average 17.3%) on the top-line front in 2QFY2012. We had

mentioned in our 1QFY2012 note that sluggish performance on the execution

front could be a worrying sign for C&EPC companies given the headwinds faced

by the sector, but 2QFY2012’s better-than-expected performance on the top-line

front has been heartening. EBITDAM for the quarter broadly remained under

pressure, owing to high commodity prices and inflationary pressures. Consistent

hike in repo rates by the RBI (in order to contain inflation) accentuated the already

high interest cost for companies in the sector. On the earnings front, high interest

cost (owing to a high interest rate regime and increased debt levels) coupled with

EBITDAM compression resulted in a decline in the bottom line for most companies

under our coverage.

Valuations continue to remain at abysmal levels; Lack of catalyst in sight +

Persistent headwinds = Subdued performance to continue: Stock prices of

infrastructure companies continued to take a beating on the bourses, bringing the

stocks to very attractive levels on the valuation screen, even on subdued earnings

estimates. However, lack of positive news flow from companies per se and

persistent headwinds faced by the industry – such as high interest rates, policy

inaction, slower-than-anticipated revival in industrial capex – led to

underperformance of infrastructure stocks on the bourses. Therefore, given no

visible signs of reversal of trends, we continue with our view that the performance

of the sector will remain subdued.

We prefer to remain selective: We believe that stock-specific approach would yield

higher returns given the disparity among these companies and changing dynamics

affecting them positively/negatively. Hence, in the current uncertain times, we

remain positive on companies having 1) a comfortable leverage position (L&T and

Sadbhav); 2) strong order book position (L&T and IVRCL); 3) undemanding

valuations (IVRCL); 4) superior return ratios (L&T and Sadbhav); and 5) less

dependence on capital markets for raising equity for funding projects (L&T and

Sadbhav). Hence, we maintain L&T, IVRCL and Sadbhav as our top picks in the

C&EPC space and recommend IRB in the development space after its recent fall,

which has brought the stock to attractive levels.

Three mega infra projects gets clearance; L&T’s HyderabadMetro one of them

The government has given regulatory clearances to three mega infrastructure

projects involving an investment of ` 25,000cr. These are the first among a few

projects the government has shortlisted to be put on a fast track. The projects

cleared include Hinduja National Power Corporation Ltd. in Vishakhapatnam, L&T

Metro Rail (Hyderabad) Ltd. and Simhapuri Expressways Ltd. (Andhra Pradesh).

These projects had been held up because of regulatory bottlenecks. However,

L&T’s metro project (about ` 16,000cr) is still facing some land acquisition issues,

but these clearances would certainly help to expedite the project. The early clearance of the projects would lead to enhancement of order book for all the

companies in the infrastructure space. The finance minister is reviewing the

implementation of infrastructure projects valued > ` 100cr, which we believe is a

step in the right direction.




November 21, 2011 3

Economic and Political News

India-China bilateral trade may touch US$100bn by 2013

FDI see 77% yoy jump in 1HFY2012

Spices export up by 29% in values terms in 1HFY2012

Corporate News

Excise duty on diesel cars likely to be raised in the Budget

RIL gets clean chit for capex till FY 2008 in KG-D6

Govt. nudges LIC to buy 10% stake in Kingfisher Source: Economic Times, Business Standard, Business Line, Financial Express, Mint




November 21, 2011 4

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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market outlook 21.11.11

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