>Market Insight (RELIGARE)

MARKET OUTLOOK

Dow closed in the positive but Asian markets are mixed. Our quarterly GDP numbers are likely to come out tomorrow, which will play a crucial role in determining the short-term trend of the market. Market expectation for GDP growth is 6.1% against 7.6% last quarter. We believe that our market is in the consolidation phase, but the situation globally continues to remain bad. We therefore continue to remain bearish on the market. For the day, we expect market to open flat to positive and expect some profit booking at higher levels.

• Dow : Negative
• Asia: Mixed
• Day’s view: Negative

To see full report: Market Insight 26-02-2009

>Nestle Ltd - Buy (INDIA INFOLINE)

NESTLE Ltd. - BUY
CMP 1480 Target 1816

Best play on the India consumersiation story
india is witnessing a major shift in consumer taste in favour of packaged foods aided by increased oenetration of organized retail. Nestle with its among brand equity, well diversified product portfolio and aggresive low price strategy is well poised to be a major beneficiary from India's consumerisation story. Despite the current weakening economic environment, Nestle has managed to record over 20% growth for consecutive seven quarters. We believe, the growth momentum would continue as pricing power and continuous innovation would enable Nestle to increase its market share in the near term. We expect the company to witness revenue CAGR of 16% over
F12/08-10E.

Enjoys pricing power
Nestle's well-diversified product portfolio includes some of the best-knowns brands globally. Its major brands - Maggi, Nestle, Nescafe and Kit Kat are amongst the top brands in India. Compared to other FMCG players, Nestle is less exposed to regional competition as the manufacturing process in most of its product categories is technology intensive. We believe, Nestle's strategy of increasing premium priced brand variants coupled with selective price hikes would fuel margin expansion.

To see full report: Nestle

>Sugar Sector Update (LKP SHARES)

….sweet gains on shortage

INVESTMENT ARGUMENT

• Steep drop in sugar production this season in India: Given the opening inventory of 8mt and production of 16.5mt we believe that India would need to import 2mt of sugar given the consumption of 23mt if there has to be a closing inventory of at least 3.5mt which is a stock to use of 15% - a steep drop from the levels of 45% witnessed in FY'07 and 35% seen in FY'08.

• Even a production of 20mt next fiscal would not help: With this opening inventory of 3.5mt even if production next season were to touch 20mt the scenario would just about match our consumption and India would still need to import at least 2.5mt to maintain a minimum closing inventory of 3.5mt and the stock to use ratio of 15%.

• Sugar gets sweeter: Lower cane cultivation owing to attractiveness of alternate crops and poor recovery of 9% in the state of UP has led to diversion of cane to gud and khandsari leading to firming up of sugar prices. Yields have declined in both the ratoon crop as well as the plant crop and the lower sucrose content in the cane has impacted recovery as well.

• Sugarcane prices driven politically: Given the fact that mills in UP have to pay significantly higher prices for cane compared to peers in southern parts of the country, we expect UP based mills to face a double whammy of higher cane costs and shortage of cane.

• South based sugar mills would benefit : South based mills crush longer and pay less for the cane and the cane availability is not as bad as that in UP, AP and Maharashtra.

To see full report: Sugar Sector

>Market Insight (Religare)

MARKET OUTLOOK

The Dow closed positive; all Asian markets are up as well. Yesterday, our market recovered from its losses as the government announced duty cuts worth Rs 300bn which are likely to be followed by an interest rate cut by the Central Bank. This is a positive step by the government just before going into election and will help fire up the economy. For the day we are positive on the market.

• Dow: Positive
• Asia: Positive
• Day’s view: Positive

To see full report: Market Insight 25-02-2009