Market Outlook

India Research
October 18, 2011

Dealers Diary
The Indian markets are expected to edge lower with negative bias on the back of weak global cues and negative opening in most of the Asian markets in the early market trade. The domestic benchmark indices fell modestly yesterday as profit taking happened after recent sharp gains and caution ahead of the onset of the corporate earnings season. Global cues depicted weakness as US and European indices closed in red. US bourses fell sharply over reports citing weakness in the US manufacturing sector as well as fragile health of the major banks. Concerns over the eurozone debt crises also loomed as cautious comments from EU leaders signaled worries. On the domestic front, corporate earnings season has gained momentum and will vouch for the direction of the markets in addition to the developments on the global front.

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 (%) (0.3) (0.3) (0.0) 0.2 (0.1) (0.7) 0.6 1.6 (0.1) (2.3) (0.5) Chg (%) (2.1) (2.0) (0.5) 1.5 2.0 1.3 0.4

(Pts) (57.6) (14.1) (0.4) 15.0 (8.0) (51.7) 66.4 139.4 (12.9) (202.5) (28.4) (Pts) (247.5) (52.9) (29.7) 131.6 34.8 9.0

(Close) 17,025 5,118 6,189 6,923 5,893 7,409 11,131 8,989 11,314 8,657 5,670 (Close) 11,397 2,615 5,437 8,880 2,779 2,440

Markets Today
The trend deciding level for the day is 17,047/5,121 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,166 17,308 / 5,157 5,197 levels. However, if NIFTY trades below 17,047/5,121 levels for the first half-an-hour of trade then it may correct up to 16,906 16,787 / 5,082 5,045 levels.
Indices SENSEX NIFTY S2 16,787 5,045 S1 16,906 5,082 R1 17,166 5,157 R2 17,308 5,197

372.2 18,874

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) (3.4) (1.3) (1.3) 0.2

(Pts) (2.0) (0.1) (0.5) 0.1

(Close) $55.1 $9.8 $36.3 $31.2

News Analysis
2QFY2012 Result Reviews TCS, HDFC, SIB, Persistent Systems, MindTree 2QFY2012 Result Previews HCL Tech, Hero MotoCorp
Refer detailed news analysis on the following page

Net Inflows (October 14, 2011)

` cr FII MFs Purch 1547 430 Sales 1630 512 Net (83) (82) MTD (531) 595 YTD (2,484) 6,093

Advances / Declines Advances Declines Unchanged

BSE 1,320 1,432 126

NSE 691 775 57

FII Derivatives (October 17, 2011)

` cr Index Futures Stock Futures Purch 1,833 2,330 Sales 1,692 2,635 Net 141 (306) Open Interest 13,727 28,216
Volumes (` cr) BSE NSE 2,445 9,143

Gainers / Losers
Gainers Company JP Power Petronet LNG Crompton Greaves Tata Motors Cairn India Price (`) 38 164 168 188 298 chg (%) 5.3 5.1 4.8 4.5 3.7 Company Indian Oil Corp Jindal Saw IVRCL Ltd RIL JSW Steel Losers Price (`) 293 133 37 833 579 chg (%) (4.3) (4.1) (3.9) (3.9) (3.7)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Result Reviews TCS

TCS reported its 2QFY2012 numbers, which were lower than streets expect, ation on the revenue front; however, the company outperformed on the operating front. TCS reported revenue of US$2,525mn, up 4.7% qoq, on the back of robust volume growth of 6.25% qoq. The companys revenue was negatively impacted by 95bp qoq due to lower price realization. In rupee terms, revenue came in at `11,633cr, up 7.7% qoq. EBIT margin improved by 94bp qoq to 27.1%, aided by INR depreciation against USD qoq, which absorbed the negative impact due to promotions during the quarter. PAT came in at `2,439cr, negatively impacted by lower other income of `99.7cr as against `289cr in 1QFY2012. The company added 35 new clients during the quarter, of which two were added in the US$100mn+ revenue bracket. The company closed 10 large deals in 2QFY2012. Hiring remained robust with gross and net addition of 20,349 and 12,580 employees, respectively. Management continues to remain with the gross hiring target of 60,000 employees for FY2012. The company remains our top pick amongst tier-I IT companies because of its diversified portfolio on all fronts service wise, industry exposure wise as well as geography wise. The stock is currently under review.

HDFC
For 2QFY2012, HDFCs loan book grew by healthy 19.5% yoy and 2.3% qoq to `126,992cr. Approvals in 2QFY2012 stood at `24,426cr (up 18% yoy), while disbursements in 2QFY2012 stood at `20,825cr (up 19.0% yoy). The spread on loans over the cost of borrowings stood at 2.29% for 1HFY2012 compared to 2.34% for 1HFY2011. HDFCs NII increased by 14.1% yoy, while PAT came in at `971cr, registering a growth of 20.2% yoy. HDFCs asset quality continued to be stable during 2QFY2012, with gross NPA ratio falling by 4bp yoy to 0.82%. On a six-month overdue basis, gross NPA ratio stood at 0.53%. Gross NPA increased by 16.3% yoy to `1,063cr during 2QFY2012. HDFC continued to maintain a 100% provision coverage ratio for 2QFY2012, similar to the last quarter. During 2QFY2012, an amount of `255cr (net of deferred tax) was utilized from the additional reserve to meet the additional provisions consequent to changes in provisioning norms mainly on standard assets (0.4% standard provisioning required on housing loans as well). At the CMP, HDFCs core business (after adjusting `225/share towards value of the subsidiaries) is trading at 4.2x FY2013E ABV of `106.9 (including subsidiaries, the stock is also trading at 4.2x FY2013E ABV of `159). We recommend Neutral on the stock.

October 18, 2011

Market Outlook | India Research

South Indian Bank

South Indian Bank (SIB) reported healthy net profit growth of 24.4% yoy (15.1% qoq) to `95cr, above our (`83cr) and streets estimates (`88cr). NIM expansion along with lower slippages was the key highlight of the results. During 2QFY2012, the banks business growth moderated in-line with overall industry trends; however, it remained comfortably ahead of the industry. Advances grew by 3.9% qoq vis--vis marginal 0.2% growth for the industry (up to September 23, 2011). Deposits showed traction, rising by 4.5% qoq as compared to 0.8% growth for the industry. The banks CASA deposits grew by relatively lower 3.5% qoq, leading to a marginal 20bp qoq compression in CASA ratio to 21.3% (down from 23.9% in 2QFY2011). With the pass-through of higher interest rates and a larger share of higher-yielding gold loans, the bank was able to improve its yield on advances further by 36bp qoq and 150bp yoy to 12.1% (for 1HFY2012). With wholesale funding costs remaining benign, the banks cost of deposits went up only marginally (6bp qoq), leading to a healthy ~50bp qoq expansion in calculated NIM (for 2QFY2012). Asset quality of the bank improved during 2QFY2012, with absolute gross and net NPAs declining by 2.5% qoq and 8.2% qoq, respectively, and provision coverage ratio excluding technical write-offs improving to 74.7%. Slippages surprised positively, coming in at just 0.5% (annualized) vis--vis 0.8% in 2QFY2012 in spite of deterioration in the economic growth outlook over the past few quarters. The banks capital adequacy remained healthy at 13.5%. The stock is trading at 1.2x FY2013E ABV. The stock rating is currently under review.

Persistent Systems
Persistent Systems reported its 2QFY2012 results, which were in-line with our as well as streets estimates on the revenue front; however, the company outperformed on the operating and profitability fronts. Dollar revenue came in at US$51.5mn, up 3.1% qoq. In rupee terms, revenue came in at `238.2cr, up 6.4% qoq. Despite giving wage hikes from July 1, 2011, the company managed to report almost flat gross margin qoq at 37.2% because of higher rupee realization and wage hikes not given to the entire employee base. The company managed to pull its EBITDA margin by 112bp qoq to 19.0% on the back of lower SG&A expenses. PAT for the quarter stood at `32.4cr, up 17.6% qoq, aided by tax write-backs. The stock is currently under review and we will be releasing a detailed result update shortly.

MindTree
MindTree reported its 2QFY2012 results, which outperformed streets as well as our expectations on all fronts. Dollar revenue came in at US$101.3mn, up 9.5% qoq, majorly led by volume growth of 6.1% qoq and increased onsite as well as offshore billing rates. In rupee terms, revenue came in at `457cr, up 10.6% qoq. EBITDA margin improved by 174bp qoq to 12.9% because of higher operating leverage. PAT stood higher at `54.5cr, up 57.9% qoq, aided by forex gain of `17cr. We continue to be positive on the stock and will be releasing a detailed result update shortly.

October 18, 2011

Market Outlook | India Research

Result Previews HCL Technologies 1QFY2012

HCL Technologies is slated to announce its 1QFY2012 numbers. We expect the company to post revenue of US$1,022mn, with 6.1% qoq growth, led by robust volume growth of 6.9% qoq. In rupee terms, revenue is expected to grow by 8.6% qoq to `4,671cr. EBITDA margin is expected to decline by 200bp qoq to 16.5% because of negative impact of wage hikes given from July 1, 2011. PAT is expected to come in at `495cr. The company is one of our preferred picks in the IT sector. We maintain our Buy rating on the stock with a target price of `558.

Hero MotoCorp
Hero MotoCorp is slated to announce its 2QFY2012 results. We expect the companys top line to grow strongly by 28% yoy to `5,754cr, driven by 20% yoy growth in volumes and a ~6% increase in average net realization, led by price increases. Sequentially, operating margin (adjusted for change in accounting for royalty payments) is expected to remain flat at 11.2%; however, margin is expected to decline by 219bp yoy due to raw-material cost pressures and higher marketing and advertising spends. As a result, we expect the bottom line to grow at a slower pace of 10% yoy to `557cr. The stock rating is under review.

Quarterly Bloomberg Brokers Estimates

HCL Tech Ltd. - Consolidated (18/10/2011)
Particulars (` cr) Net sales Net profit 2QFY12E 4,707 495 2QFY11 3,736 333 yoy (%) 26.0 48.5 1QFY12 7,623 771 qoq (%) (38.3) (35.9)

Hero Moto Corp Ltd. (18/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 5,756 771 13 560 2QFY11 4,511 608 13 506 yoy (%) 27.6 26.8 10.7 1QFY12 5,638 906 16 558 qoq (%) 2.1 (14.9) 0.3

Jindal Steel & Power Ltd. - Consolidated (18/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 3,792 1,639 43 902 2QFY11 3,078 1,502 49 894 yoy (%) 23.2 9.1 0.9 1QFY12 3,940 1,626 41 919 qoq (%) (3.7) 0.8 (1.8)

October 18, 2011

Market Outlook | India Research

Indusind Bank Ltd. (18/10/2011)

Particulars (` cr) Net profit 2QFY12E 187 2QFY11 133 yoy (%) 40.5 1QFY12 180 qoq (%) 3.9

Crompton Greaves Ltd. - Consolidated (19/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 2,594 238 9 144 2QFY11 2,398 333 14 214 yoy (%) 8.2 (28.6) (32.5) 1QFY12 2,438 182 7 79 qoq (%) 6.4 30.9 81.3

HDFC Bank Ltd. (19/10/2011)

Particulars (` cr) Net profit 2QFY12E 1,179 2QFY11 912 yoy (%) 29.2 1QFY12 1,085 qoq (%) 8.6

Bajaj Auto Ltd. (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 5,073 975 19 767 2QFY11 4,181 897 21 682 yoy (%) 21.3 8.7 12.5 1QFY12 4,587 911 20 711 qoq (%) 10.6 7 7.9

Cairn India Ltd. - Consolidated (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 3,390 2,532 75 1,212 2QFY11 2,686 2,132 79 1,585 yoy (%) 26.2 18.8 (23.5) 1QFY12 3,713 3,156 85 2,727 qoq (%) (8.7) (19.8) (55.5)

Exide Industries Ltd. (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 1,239 216 17 150 2QFY11 1,127 245 22 213 yoy (%) 10 (11.8) (29.4) 1QFY12 1,244 222 18 163 qoq (%) (0.4) (2.6) (7.9)

UltraTech Cement Ltd. (20/10/2011)

Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY12E 3,936 684 17 371 2QFY11 3,215 438 14 116 yoy (%) 22.4 56.3 220.7 1QFY12 4,365 1,227 28 683 qoq (%) (9.8) (44.3) (45.7)

October 18, 2011

Market Outlook | India Research

Yes Bank Ltd. (20/10/2011)

Particulars (` cr) Net profit 2QFY12E 217 2QFY11 176 yoy (%) 23 1QFY12 216 qoq (%) 0.3

Economic and Political News

Exim Bank to provide US$27.5mn line of credit to Senegal FDI Cap for broadcasting sector set to rise. MoEF shortlist four sectors for clean technology front.

Corporate News
ONGC ready to supply gas to two thermal projects Jubilant Life Sciences' FY2012 capex pegged at `500cr Areva T&D India wins a 420kV GIS substation contract worth `58cr from BHEL MOIL's JVs with SAIL, RINL likely by next fiscal

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

Results Calendar
18/10/2011 19/10/2011 20/10/2011 21/10/2011 22/10/2011 HCL Tech, Hero Motocorp, Jindal Steel and Power, Patni Computer, Petronet LNG Hindustan Zinc, Crompton Greaves, HDFC Bank, Infotech, Indraprastha Gas UltraTech, FAG Bearings, Yes Bank, Hexaware, KPIT Cummins, D B Corp Indiabulls Fin., Asian Paints, Godrej Consumer, HT Media, PVR, JSW Steel , GIPCL, Idea Cellular Suzlon Energy, Bank of Maharashtra, Syndicate Bank, Jagran Prakashan, Siyaram Silk Mills, Grasim Inds

October 18, 2011

Market Outlook | India Research

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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October 18, 2011