Saturday, February 28, 2009

>Sunil Hitech Engineers (ANGEL BROKING)

Sunil Hitech Engineers
Initial Coverage..........

Price Rs63
Target Price Rs111
Investment Period 12 months

* Substantial Power capacity addition to throw up immense opportunities: India's Eleventh Five-Year Plan Target for Power generation capacity addition stands at 78,577MW. Even after providing for slippages, actual capacity addition is expected to be in excess of 50,000MW. The power capacity addition is expected to throw up opportunities in excess of Rs1,00,000cr for players in the BOP space over FY2007-12E.

* Robust Order Book Position: During 9MFY2009, the company received orders worth Rs887cr. As of December 31, 2008, SHEL had a strong Order Book position of Rs1,298cr or 4x its FY2008 Revenue. This strong Order Book position provides high Revenue visibility for the company over the next two years.

* Proven execution capabilities: In its two-decade long presence in the BOP space, the company has established a strong track record of timely and successful execution of projects. The company has personnel from reputed companies like BHEL on its Board, which gives a fair idea of its excellent execution capabilities. Its clients include NTPC, BHEL and various state electricity boards (SEBs).

To see full report: Sunil Hitech

>F&O Indicators (ANAGRAM)

To see report: F&O 27-02-2009

>Derivative Strategy (MICROSEC)



* Nifty opened flat to weak but fell to test a low of 2735 in early trade. It recovered from there and a late surge helped it close higher by 0.84%. However, the breadth of the market was negative.

* Inflation for the week ended 14th Feb came at 3.36%

* Nifty Call options of strike 2800 added 22254 lots to open interest while Put options of strike 2700 had a build up of 31790 lots. Put options of strike 2500 also added 25290 lots to open interest.

* Nifty Put Call ratio (OI) stands at 1.17 with the total open interest in Call options at 1,038,639 lots and that in Put options at 1,215,329 lots

* Ultratech Cement, Mphasis BFL, Chambal Fertilizers, Hero Honda Motors, Infosys
Technologies, NTPC and Cipla Ltd look good

* Volatility Index fell by 4.94% from 41.94 to 39.87.

To see full report: Derivative Strategy

>Rollover Analysis (ANAGRAM)



Rollover for the February series stood as 76%, the same as that of January series. This rollover of 76% os also in line with the last three months's average rollover of 77%. Range bound movement was seen in Nifty throughout the series where it moved within 5% range from the closing of January series and finally settled with a loss of 1.4%. This came on the back of a 3.2% cut witnessed in the January series.


We are starting March series with the total OI of 96 Cr shares as against 91 Cr shares with which we started February series. If we consider only stock futures, OI at the beginning of March series is at 83 Cr shares as against 84 Cr last month. Although in number of shares, rollover is same as that of last month, it is sharply lower in terms of number of contracts. We are starting March series with OI of 4.5 lakh contracts as against 11.9 lakh contracts last months. Higher Margin requirement due to the rise in lot sizes (Average rise of 3 times) and low risk appetite is the major reason for the lower rollover by the Retail players. This lower participation, we believe, would reduce the volume in terms of number of contracts. However, overall volume would not be affected as even if only 1 trader out of three traders trades, the overall volume in value terms remains same. The segment which will be hit hardest on the back of this rise in lot sizes is the stock option segment where liquidity is already a major issue as lower number of contracts would increase the bid-ask spread and thereby the impact cost of trade.

To see full report: Rollover Analysis 27-02-2009

>Weekly Review (INDIA INFOLINE)


* In a highly eventful week, the bulls managed to hold their own, thanks largely to the latest tax cuts announced by the government to spur demand. The Government also announced fresh measures for recession-hit export sectors. Expectations of interest rate cuts escalated after inflation hit a 14-month low of 3.36%. This helped the BSE-30 Sensex to post marginal gain of 0.5% to 8.892. The NSE Nifty added 1% to shut shop at 2,764. The bulls shrugged off weak Q3 GDP data, which missed market expectations.

* Auto stocks rallied this week, after the Government announced a 2% cut in excise duty and service tax. IT stocks also managed to notch up some gains after the Indian Rupee fell to a new record low below Rs 51 against the US Dollar. At the same time, banking and realty stocks ended up on the losing side for the week.

* Economic reports from across the globe continued to haunt the major equity markets. Top companies like GM and RBS announced massive losses, Japan's trade deficit reached a record level and its industrial production dropped 10%. Sales of existing US homes fell 5.3% to 12 year low. The Chinese stock market tumbled 7.9% snapping its rally.

To see full report: Weekly Review 27-02-2009

Friday, February 27, 2009

>Daily Market Preview (MARWADI FINANCIAL)


* The Indian Federal Government seems to be at full action (through interim policies) to revive the economy. The sops and incent ives announced in the past few days for the industry as well consumer will definitely have positive impact in times to come. It would be crucial to watch quarterly GDP numbers during the day.

* We expect market to hold on its gain on the back of smooth rollover and short covering witness on the settlement day. However 2800-2820 will be crucial resistance for the market. We are positive on Auto, Cap-goods and FMCG sectors.

To see full report: Market Preview 27-02-2009


To see report: F&O 27-02-2009

>Telecom Sector (INDIA INFOLINE)


January 2009 saw the highest monthly subcriber additions ever anywhere in the world. Reliance Communications powered wireless growth of over 15 mn subscribers with a 180% mom surge in user additions. This came on the back of its pan-India GSM foray from Jan'09. Idea-Spice combine added 2 mn subscribers, a jump of 34% mom, the best since Sep'08. Bharti maintained its 2.7 mn add rate, similar to levels seen in the past several months. However, smaller operators like Airtel continued to decline inpace of user additions on a monthly basis.

Although RCOM has doubled its share of subcriber additions, its ARPUs need to be watched for any adverse impact of such a spurt in subcriber growth. Retain bharti as the preferred BUY in the sector.

Rcom powers wireless growth; adds 5 mn subcribers in a month
From Jan'09, Rcom launched its GSM services in 14 circles, making it the first pan-India dual network operator. The company garnered nearly 5mn subcribers in a span of 30 days driven by aggresivepricing strategy. For instance, it offered free minutes and GSM SIM available at one-time charge of Rs 25 in the city of Mumbai. Rcom subcriber additions jumped 180% mom on its earlier run rate of about 1.75 mn/month. It represents the highest ever monthly wireless additions by an operator anywhere in the world except China.

ARPUs need to be watched for Rcom
Rcom almost doubled its share of user additions mom in Jan'09 and accordingly Bharti and Vodafone Essar together lost nearly 12ppts in their share of subscriber additions. Indeed every operator, barring Spice, reported a drop in its share of wireless growth. Incremental growth is likely to accrue from rural areas of most players. Hence, we believe, Q4 FY09 ARPUs for Rcom could indicateif a volume-based growth is coming at the expense of much lower revenue/user. Further, the impact of any significant migration from Rcom CDMA to its GSM platform remains to be seen.

To see full report: Telecom Sector

>Welspun Gujarat (INDIA INFOLINE)

CMP Rs 65 Target 69

Order flows have dried; undermining visibility beyond FY10E
The sharp global slow down led by the exacerbation of financial crisis has caused sharp correction in commodity prices over the last six months. Global crude oil market which experts feared was on the verge of supply deficit some time back is in a state of huge surplus now. Waning cash flows has led to deferment in capital expenditure of crude oil producing companies. We do not expect fresh order inflows before the end of FY10, when crude prices are expected to bounce back. Surplus crude oil capacity will lead to lower E&P and transportation spending in the near term. Export orders form a majority of Welspun Gujarat Stahl Rohren (WGL) order book. We expect situation with respect to slowdown in fresh export orders witnessed during Q3 FY09 to worsen further for the company.

Surplus capacity to further depress EBITDA per ton
The five leading domestic pipe manufacturers have increased their capacity by 34.8% yoy in FY08 and are expected to add further 8.7% in FY09. The reduction in export orders would lead to a surplus capacity for domestic manufacturers. As a result, these companies would try to outbid each other in the domestic tenders to be opened by GAIL> We expect EBITDA per ton for the sector to shrink 40-50% in FY10. WGL's EBITDA per ton is expected to fall from Rs 11000 in Q3 FY09 to Rs 5,500 per ton in FY10E.

To see full report: WELSPUN

Thursday, February 26, 2009

>Real Estate (CITI)


Construction Cos Suggest Payment Delays, Lower Visibility on
Execution, Focus Shifting from Real Estate to Infra Orders

* Developers delaying payments — Our channel checks with key construction companies B.L.Kashyap, Ahluwalia Contracts, Simplex Infra, with ~18-78% of their order books in property development, show the liquidity crunch facing developers resulted in significant payment delays to construction companies. The situation was worrying in 3QFY09 but a few saw improvement in Jan-Feb’09 after lower rates/new restr norms for real estate loans; outlook still tough.

* Slowing execution, particularly comm projects — Most construction companies have taken a conscious decision to slow execution of projects where they face sizeable payment delays. For projects, particularly IT SEZ/retail, that are in early construction stages/yet to be leased, developers have asked contractors to go slow due to weak demand. Most believe near-term recovery is unlikely.

* Focus shifting from real estate to infra orders — With incremental order flows from real estate sector slowing as most new launches have been put on hold and payment delays are a worry, some construction contractors are focusing on raising the proportion of government and infra orders where visibility is better.

To see full report: Real Estate

>Market Insight (RELIGARE)


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)

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

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


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

Wednesday, February 25, 2009

>Market Insight (Religare)


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

>HCL Technologies (MERRILL LYNCH)

HCL Technologies - Underperform

A long haul, yet,Underperform

# Earnings decline in FY10; Underperform

We reset our dated estimates & Price Objective established prior to Sep 08 and the Axon acquisition. While an 8% dividend yield could limit downside, we rate the stock Underperform given forecast earnings decline next year, on near term cyclical pressures, restructuring in BPO and steep margin dilution led by Axon. We forecast flattish FY11 EPS, on expiry of tax holiday. Longer term, we are positive on the strategic steps to position itself in growth markets and tighten operations. Our PO of Rs100 is at 7x FY10E EPS, at 20% discount to TCS, on relative brand and risks.

# Near term earnings challenges
We forecast a modest decline in organic revs in FY09 & FY10 (Jun yr end) due to cyclical pressures, with an estimated 40-50% of revs, across enterprise solutions, R&D services & application development, being exposed to cuts in discretionary IT spending. BPO, another 10% of revs, is also in restructuring mode from voicework to transaction processing. We forecast over 500bps margin decline over FY08-10 (prior to intangibles writeoff & stock comp) due to dilution from Axon and BPO acquisitions, hedging losses, weak European currencies & pricing cuts.

# Longer term, promising strategic moves
Longer term, we believe Axon significantly boosts HCLT’s position in SAP consulting, Europe, and new verticals like utilities. Also the US$1bn deal wins last quarter endorse a strengthening position in ‘run the business’ IT deals, though these will likely take 6 to 9 months to ramp, in our view. HCLT has also steadily improved bill-rates, utilization and lowered attrition over the last 3 years. Key upside risks: Faster than expected ramp of deals won and tax holiday extension,
which could boost FY11 earnings by 15 to 20%.

To see full report: HCL

>India Natural Gas (CITI)

India Natural Gas - Industry Flash

KG Gas – GAIL, GSPL to Benefit from Initial Allocation

* KG gas – prospective allocation — Recent press reports (Financial Express) have enlisted the gas-based urea units that would be allocated ~14mmscmd of initial KG gas. The press (Hindu) also indicates that commercial sales will commence by Apr at a rate of 15-20mmscmd and ramp up to 40 by Jul/Aug.

* Who gets what — As per the press reports, RCF has been allocated 3.0mmscmd of initial KG gas, followed by Kribhco and IFFCO (2.3 each), Nagarjuna Fert (1.5), Chambal (1.1), and others (see Figure 1 for breakdown).

* GAIL a beneficiary — Of the 13.7mmscmd of allocated fertilizer vols, 7.0 is expected to flow through GAIL’s core HBJ/DVPL/GREP pipelines and another 4.6 through its pipelines in AP, Mah. Coupled with 1.4 of vols allocated to Dabhol, our forecast of 17mmscmd of KG vols for GAIL in FY10E looks reasonable. Further, we assume just 2mmscmd flowing through HBJ and 15 through non-HBJ pipelines. The better-than-forecast mix of HBJ:non-HBJ vols provides cushion to our earnings, given HBJ tariffs are higher than non-HBJ.

To see full report: ING

>India Steel (RBS)

India Steel Sector

A tentative Recovery.....

Our visits to the Indian steel producers suggest that they are expecting a recovery in sales volumes, though prices remain weak. The government could raise import barriers further, protecting the industry from import competition. Demand-boosting measures, however, may take longer to execute.

* Production recovering and prices stabilising

The Indian steelmakers have raised production volumes from the low levels of Nov-Dec and they expect sales volumes to improve qoq in the Jan quarter. However, sales volumes could still be down yoy. The volume recovery has so far not led to a price recovery, though prices have stabilised in February after a continuous decline over Sept 2008-Jan 2009. A strong price recovery looks very unlikely, as visibility remains low.

* Government actions may aid industry, but timing in question
The government has announced several measures to protect the domestic steel industry, and we see the possibility of more, such as a further rise in import tariffs. Currently, however, we highlight the risk of delays, in decision-making and execution, due to the upcoming elections (probably in May/Jun 2009).

* Costs should decline, leading to EBITDA improvements
The possibility of lower input costs is well known, particularly for imported coking-coal contracts, as new prices (which we forecast will be 60% lower) are to become effective from July. Efforts to renegotiate prices for remaining contract volumes for Jan-Jun 2009 are ongoing, and any success would be positive. This should boost margins for domestic steelmakers, which have remained profitable during the price downturn.

To see full report: India steel

Tuesday, February 24, 2009

>Daily Market Preview (MARWADI FINANCIAL)


#Mayhem continues and world markets are sinking with increased volatility (VIX at 50+). We believe that there can still be more pain in Indian markets too as these are times of adjustments in the deteriorating economic scenario and hence lower P/E band.

#We feel Nifty may see some short covering at around 2650 level which is expected to be short lived. We therefore suggest being on cash and selling Index on bounce to hedge the portfolio.

To see full report: Market Preview 24-02-2009


To see report: F&O Report 24-02-2009

>Tech Mahindra - BUY (INDIABULLS)

Tech Mahindra Ltd. - BUY

Attractive valuation despite near-term headwinds

Tech Mahindra (TM) reported a disappointing performance for the quarter ended December 2008 as revenues went down 2.8% qoq to Rs. 11.3 bn, owing to a 3% decline in the sales volume. In USD terms, revenues declined substantially by 14% qoq due to a sharp depreciation in the GBP vis-à-vis the USD. The EBITDA margin improved slightly by 10 bps qoq to 28.1% after adjusting for a one-time tax reversal of Rs. 673 mn in the last quarter. Although we have cut our target price to Rs. 309 because of the deteriorating demand outlook and high revenue concentration, we maintain a Buy rating on the stock. This is attributed largely to TM’s large order book and strong balance sheet. Besides, we believe that the current price correction to the stock is overdone.

Strong revenue visibility: TM maintains a healthy order book of USD 2.5 bn over the next 3–4 years, including approximately USD 2 bn of deals from British Telecom (BT). This provides strong revenue visibility for the near-tomedium term. However, we remain concerned about the possible delays in the ramp-ups from BT due to the deteriorating performance of its various operating segments. Moreover, the new deals inflow is likely to remain poor, adversely affecting the volume growth.

To see full report : TECH MAHINDRA

>Union Bank of India - BUY (LKP SHARES)

Union Bank of India - BUY

Investment Rationale

# Strong profitability: UBI has reported operating profit at Rs.8.5bn, a growth of 34% yoy. NII increased to Rs.11bn, a strong growth of 50% yoy thus resulting in robust operating and net profits. PAT was reported at Rs.6.7bn growing by 84%. We are impressed by the NIMs reported at 3.22% vis-à-vis 2.7% a year ago, an increase of 52bps due to significant pricing power as well as credit growth.

# Asset quality: Looking at the trend over past five quarters for the company, the asset quality has consistently shown improvement which gives us further comfort as this would enable lower provision requirements going ahead. Currently, the provision coverage ratio stands at 92%, giving good strength to bank’s balance sheet. Higher provision coverage ratios in excess of 90 per cent and lower net NPA ratio at 0.14 per cent would keep it on strong footing in terms of
asset quality. The provision coverage ratio is expected to be in the range of 85-90 % going forward, which would help contain net NPAs at lower levels of ~ 0.3 %.

# Business Growth: UBI has been able to maintain an average pace of growth at 23% over past 5 quarters, in line with the industry growth. However, going forward with the prevailing slowdown, we expect the credit growth to slow down to ~ 20% for next two years. CASA, as a % of total business mix stood at 30% vis-à-vis 33% last year. We believe UBI shall be able to maintain this healthy CASA ratio, thus able to leverage NIMs at close to ~3% going forward.

# Ratios: This bank has been able to maintain robust return ratios on equity and assets. RoA stands at 1.92% up from 1.31% yoy. RoE has also significantly improved from 26.11% to 39.15% in Q309. We expect UBI to maintain healthy return ratios going forward as well.

To see full report : UBI

>Alstom Projects - HOLD (INDIABULLS)

ALSTOM Projects India Ltd. - Hold

# Revenue growth will decline in the near term:
APIL has not received any substantial new orders in FY09. Given that most of the orders for the 11th Five-Year plan have already been awarded, we expect the order book to decline in the upcoming quarters. As a result,
we have maintained our revenue contraction to the tune of 15–18% and 4–6% for FY10 and FY11, respectively. Thereafter, we expect revenues to surge, given the potential of the power sector in India.

# Non-conventional energy to act as a catalyst: India has always remained a power deficit country. There is a growing need to not only develop the conventional sources of energy but also develop nonconventional sources such as nuclear and hydro power. The country plans to increase its nuclear power generation from the current 4,100 MW to 52,000 MW by 2020 and APIL is expected to be a major beneficiary of this exercise. This is because we believe that the Company is well equipped to manufacture nuclear equipment by using its existing plant in Vadodara, Gujarat, which manufactures hydroelectric power generating components at present.

To see full report: ALSTOM PROJECTS

Monday, February 23, 2009

>Bombay Rayon Fashions Ltd - BUY (MERRILL LYNCH)

Strong growth despite unfavorable macro

Earnings, PO cut on worsening macro outlook:
We have cut FY10E EPS by 5% and FY11E by 14%, primarily to factor-in lower
Guru sales, as management has stalled its growth plans, following global
slowdown. We keep FY09E EPS unchanged, given the in-line 3Q results. PO is
reduced to Rs225 (from Rs270) to reflect both earnings cut and higher risks
(implied FY10E PE of 7x vs 8x earlier). The stock has corrected sharply in last
few months and valuations look attractive at 3x FY10E PE. Maintain Buy.

EPS growth still strong led by new capacities:
We expect EPS growth of 32% in FY10 helped by new capacities coming onstream
by March’09. These capacities would enjoy several fiscal benefits making
them globally cost competitive, which should help BRFL gain market share.
Management had aggressive plans for expansion of Guru operations which have
now been put in the back burner. After the sharp cut in Guru’s estimates, it now
accounts for less than 5% of BRFL’s consolidated EBIDTA versus 9% earlier.

To see full report: Bombay Rayon



Extremely tight liquidity conditions affected loan book growth in Q3 FY09
Yes Bank, a new generation indian private bank, has delievered robust growth in its loan book (100% + yoy) over the past three years. The exceptional growth was driven by its aggressive stance and focused knowledge-based corporate banking strategy. However, over the past few quarters, the loan book growth has decelerated significantly (base effect catching up). In Q3 FY09, there was a marked slowdown with the loan book growing by a mere 27% yoy - against average 75% yoy in previous six quarters. More importantly, the loan book declined by 5% qoq. Bank attributed Q3 FY09 performance to exceptional liquidity conditions during Oc--Nov '08. Primarily wholesale funded (with CASA at just ~9 %), Yes bank was more affected than other banks with depositis declining by 6% qoq.

Qoq growth in loan book to resume from Q4 FY09.
Bank expects loan book to grow sequentially in Q4 FY09 but accedes that growth may not reach earlier levels given the deterioration in credit environment and waning credit demand. Loan book growth would be driven by new clients acquired during Q3 FY09. The bank was successful in breaking into some large corporate clients during the tight liquidity period of Oct-Nov '08. Going forward, it intends to churn its loan portfolio and prioritize funds towards those clients where the opportunity for cross-selling is maximum. We reckon that loan book could increase by 6-7% qoq in Q4 and therefore full-year growth could be in the range of 23-25% yoy.

To see full report: YES BANK

>TCS (ICICI Securities)


# Non-discretionary volume under some pressure. TCS is witnessing ramp-down
requests from some clients in Auto and Telecom verticals, with lower number of
support hours for maintaining systems. Though such requests are limited, it can be
inferred that the demand downside is not behind us. However, project cancellations
have not increased versus that in Q3FY09, with the start of new deals won in
Q3FY09. Retail vertical has been showing better signs of outsourcing.

# Delay in ’09 IT budget with increased discussion on pricing. TCS expects ’09 IT
budget finalisation to be delayed by two months versus the earlier expectation of
January ’09. The company is witnessing increased requests for rate decline, which
may result in like-to-like billing rate cut as the upside to non-linear execution model
may be limited (fixed price contribution at 45.5%, the highest among peers).

To see full report: TCS



Core transmission business to witness robust growth

India's gas demand is expected to register a strong growth driven by current under utilization of gas-based capacities in the power, fertilizer and other industries. Additional gas-based capacities in these sectors will only shore up demand. The demand-supply gap is set to reduce the commencement of production from fields of ONGC and GSPC would further reduce the gap. This would need higher transmission capacity. Gail, being the nodal tansmission agency in the country would be the key beneficiary as its capacity would double over the next five years.

CGD and E&P businesses to be value accretive
GAIL is planning to set up city gas distribution projects in 20 cities over the next two years. Despite price cuts of petrol abd diesel, economics still favor CNG as an auto fuel. We believe, this venture would be margin accretive for GAIL.To further extend its value chain, GAIL has increased its presence in exploration and production sector. It currently has 30 E&P and three CBM blocks. Few discoveries have been made, but it will take couple of years before they achieve any scale. On a longer term perspective, this business would be value accretive for GAIL.

To see full report: GAIL

Sunday, February 22, 2009


Re-financing by Dec the key issue; E&P capex outlook stays grim

What's changed
Aban needs to re-finance about US$169mn of existing debt in FY10E, and
US$148mn out of that before Dec’09 in order to honour the bullet
payments of Norwegian Kroner (NOK) bonds (from Sinvest) maturing on
22 Dec 2009. This has become the key issue for the company since we
believe Aban has limited options to raise finance by other means in the
current environment.

Moreover, four of Aban’s assets are currently lying idle owing to major
cutbacks in E&P capex globally. Another four of Aban’s assets will be
coming out of contracts in the next six months, increasing the risk of lower
utilisation of assets and pushing up the amount of re-financing needed.

We believe that Aban stock is now effectively a binary option, with part of
the street viewing that Aban’s cash flows will weaken to a point where refinancing
will look difficult. We, however, believe that it is possible that
Aban will get re-financing, though this could be expensive in the current
environment. News-flow on this remains critical for re-rating of the stock.

To see full report: ABAN

>India Property (HSBC)


Demand revival efforts unlikely to show
results in a hurry

# Fiscal stimulus unlikely to help property
markets in the near to medium term

# Changing housing finance dynamics
could further delay recovery hopes

# Reiterate our negative outlook on India
property market. DLF and Unitech –
both rated UW(V) – are our top sells

India property dynamics

# Near-term benefits unlikely, as customer willingness to buy is low

# HFCs are gaining market share from banks despite exercising
pricing power, but have limited ability to increase the market

# New launches to remain affected over the next two quarter

To see full report: India Property

>Weekly F&O Indicators (ANAGRAM)

To see full report: F&O Indicators 20-02-2009

>Currency Weekly Update (ANAGRAM)

To see full report: Currency Update 21-02-2009

Saturday, February 21, 2009

>Weekly Market Recap (RELIGARE)

Indian Bourses remained turbulent this week mirroring weak
global sentiments. Disappointment from the interim general
budget for 2009-10 pulled the market sharply as there were no
sector specific benefits for the industry hit by the global economic
slowdown. The BSE Sensex registered a loss of 8.2% whereas the
Nifty registered a loss of 7.2%. The Foreign Institutional Investors
(FIIs) were net sellers to the tune of Rs. 1,349 crore and the
Mutual Funds were net sellers to the tune of Rs. 675 crore.
The annual wholesale price index (WPI) based inflation rate fell to
a 13 month low, dipping below the 4% mark mainly on account
of declining global crude oil prices. The year on year WPI inflation
rose to 3.92% for week ended February 7 down from the previous
week's annual rise of 4.39%.

To see full report: Weekly Market Review

>India Infrastructure (JP MORGAN)

Actual spend lagging target

# Capex in key infrastructure sectors seems to be lagging 11th Plan targetsonly~
25% has been allocated till FY09: From the budget documents of FY08
and 09, we compiled capex for key central government infrastructure projects.
So far, actual spends have been ~10-20% lower than budgeted, with the
underachievement more pronounced in FY09. The government plans step up
spends by ~33% in FY10, but execution and funding would be key.

# Power sector: 20% slippage in 11th Plan target of 78GW likely, in our
view: From a separate document released by the power ministry, we believe it is
realistic to expect 63GW power capacity addition during the 11th Plan. The
document points to potential slippage of 2GW for NTPC (OW) and 1.3GW for
Reliance Power (UW). The document gives a relatively clean chit to BHEL,
which is responsible only for 13% of the slippage, whereas delayed ordering
of balance of plants accounts for 54% of the slippage in thermal capacity

To see full report: India Infrastructure

>Reliance Communications (MERRILL LYNCH)

Good news, but not enough

# Strong sub additions in Jan; pace likely to continue in Feb
Reliance Com reported 5mn new subscriber additions in Jan ’09, the first
subscriber reporting since the Co’s nationwide launch of GSM services. While the
CDMA-GSM split of RCom’s Jan additions is not yet available, the numbers mark
a strong improvement vs the Co’s ~1.8mn net adds (CDMA & GSM) in Dec ’08.

# No visible impact on adds of other operators – a surprise

From an industry standpoint, a key surprise to us is that none of the other
operators have reported any slowdown in their net adds for Jan '09 despite
stronger growth by RCom. While exact numbers for the industry are awaited, it
seems like the wireless industry added ~15mn subs in Jan '09 vs ~11mn in Dec
'08. This market expansion is surprising to us given that RCom’s early stage GSM
coverage would be mostly in towns where other operators already have coverage.

RCom revises up prices; coverage expansion to help
RCom has reportedly revised up the price points of its promotional GSM offer
from Rs25/subscription to Rs49/subscription plus a mandatory recharge voucher
of ~Rs50-60. The promotional/free talk-time has also been cut to ~Rs4 per day
versus Rs5-10/day earlier. The upward price revisions will likely taper RCom’s
subscriber additions over next 3-4 months but any immediate impact on Feb net
adds is unlikely due to the Co’s expanding network coverage on GSM. By end-
Jan, RCom offered GSM services in ~14000 towns vs ~11000 towns at the start.

To see full report: RCOM

>Hexaware Technologies Ltd. (MERRILL LYNCH)

Dismal outlook; Underperform

# Dismal 1Q guidance, Retain Underperform
Though results were in line we were surprised by very sharp revenue decline
guided for 1Q at a negative 16% QoQ with outlook being the weakest announced
so far. This likely reflects high exposure to discretionary spends such as ERP
(~29% revs, -18% QoQ). We cut estimates by 5% to factor 17% cut in USD
revenues as reflected by weak 1Q revenue guidance and offset by higher margins
due to rupee depreciation. Cut PO by 5% to Rs21 at 5x CY09E, downside risk of
28%. Cash & equivalents of Rs19/share could provide support to the stock.

# Bleak outlook; 4Q margin expansion unsustainable
Management highlighted that macro environment has worsened in 4Q; with
clients across board rationalizing IT spends. Expects 1Q revenues to decline 14-
17% QoQ in constant currency terms. We expect margins to decline by at least
600bps during 1Q. Also MTM losses in balance sheet increased to Rs1.2bn from
Rs1bn QoQ and likely to impact CY09/10e profits if weak rupee persists.

Inline 4Q results ; Margin expands ~464bps
Revenues grew 4% QoQ to US$64.4mn in constant currency terms inline with its
guidance. EBITDA margins expanded by 464bps, partly driven by rupee
depreciation, SG&A efficiencies and targeted improvement in utilization levels.
Profit growth of 49% QoQ was lower than expected and was impacted by higher
forex loss during the quarter.

To see full report : Hexaware Technologies

Friday, February 20, 2009


# The stimulus measures taken in last few months seem to be working in
India as there have been some early sign of pick up in economic activity
both on rural as well as industrial side . But by no mean we can say that
it’s a bottoming out of economic slow down as there are still some
stress areas such as export, job markets and credit-flow.

# We believe that continued FII selling and down turn trend in overseas
markets will put pressure on Indian equities and market can still be in a
narrow range of 2700 -2840 with negative bias.

To see full report: Market Preview 20-02-2009


To see full report: F&O 19-02-2009

>India Cement Sector (HSBC)

India Cement Sector
High dispatch growth an aberration to the trend

# High 8% dispatch growth in January primarily due to low
base effect and strong growth in the north

# January dispatch growth in south and west at 4-year lows;
strong short-term growth likely, long-term outlook sluggish

# Remain cautious on the sector; our key Underweight (V)
stocks are ACC, Ambuja Cements and India Cements

To see full report: India Cement Sector

>Derivative Strategies (INDIABULLS)

To read full report : Derivative Strategies 19-02-2009

Thursday, February 19, 2009

The season for mea culpa(An interesting Reading from First Global)

Hand it to Ramalinga…now suddenly, there are companies that are coming out and saying the unspeakable…no, not that they cooked their books or that they rode tigers on the weekends or some such thing…but that they had essentially lied to the public for the past many months, when swirlingrumors of their business troubles first emerged.

Subhiksha, a major aspirant to the crown of India’s Wal-Mart, is a good case in point. Mr.Subraminam, an IIM-Ahmedabad graduate, Subhikhsha’s promoter, sent out a 9-page press release last week, and handed out interviews to just about any newspaper that employed a journalist. The sum and substance of this unbelievable PR campaign is that: “We are near bust. We have no money.We have unpaid salaries of Rs.180 mln or so, due since last October. We haven’t paid vendors or store rents for weeks/months. Operations are at near standstill. We are talking to PEs and Banks to raise money. We need lots of money, and it doesn’t matter whether it’s debt or equity…”

Well, well.

Read the full story  right here

>Market Insight (RELIGARE)


The Dow closed flat; all Asian markets are flat as well. Our market has corrected significantly after the interim budget as expectations were unfulfilled. The situation in the US remains grim and the recession will continue to deepen. Today, we expect the market to open flat but some profit booking in the later part of the day is not ruled out.

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

To see full report: Market Insight 19-02-2009

>Reliance Indsutries (CLSA)

Reliance Industries: Q&A with Somshankar Sinha, CLSA’s Oil & gas analyst - India

# Why should we buy Reliance now?

---The current weak stock price provides a very good opportunity to buy the stock. The stock is reacting to concerns about refining and petrochemical margins at this time, which are valid concerns to have. Profits from existing businesses will probably decline by 40% YoY next fiscal year. But there are four strong reasons to be positive about the stock. The first is that Reliance will enjoy an impressive earnings growth over the next two years, mainly due to
the contribution of new projects. The three main new undertakings will allow the overall EBITDA to rise 70% from the current levels in the next two years despite our negative view on the refining and chemical industry. We are estimating refining margins of US$4/bbl in 2009, a 60% decline YoY. Refining and petrochemical profits from existing plants will drop by roughly 50%. Together, the current and the new refinery will provide the same EBITDA as the
current refinery alone in 2008. Thus, on a per-barrel basis the EBITDA for refining will half. However, we expect 20% EPS CAGR each for the next 2 years (FY10 and FY11). This is very strong earnings growth versus global peers which will see earnings contraction with oil prices, refining margins and petrochemical margins going down.
Secondly, the earnings structure getting more diversified. Today, refining and petrochemicals contributes to 90% of the earnings but in the future upstream will contribute 50% of the EBITDA with downstream (even including the new refinery) only contributing 45%. Therefore, there will be less vulnerability to one variable with refining margins becoming much less significant. Reliance will be an integrated oil and gas player affected by oil prices, gas prices,
refining margins and chemical margins, providing more earnings stability. Think about natural gas. It will represent about 40% of total EBITDA. Unlike in many other markets, natural gas prices in India are fixed for long periods. For, Reliance they will not change for 5 years and after they change they will likely increase. So 40% of the business will be very stable. This is a clear contrast with global peers whose profits essentially depend on the global price outlook.
Third, their exploration venture is promising. We estimate more than 20bn barrels of unrisked resources; they are yet to explore the full potential. Finally we have valuation. The market seems to be ignoring the large earnings growth potential and the value of the stock is for the first time in a long time, well below its intrinsic value in our view.

# In your report you made a huge point about upstream. What’s so good about it?

--- Reliance has 400,000 sq km of oil concessions. It has currently explored 20% of one block and is going to produce in an area that is just 5% of that. This Krishna Godavari (KG)-D6 block is just about 7,500 sq km out of the total 400,000 sq km and one of the 57 blocks that it has in India and overseas. The upstream story that is making big waves is related to that one block only. An oil field in this block has already come on-stream and the main gas development from the block will be on by the end of February. But the geology extends much further and provides a huge potential for Reliance. For example, there are two more blocks adjacent to KG-D6 called MN-D4 and KG-D9 where partners indicate the potential is similar or higher than KG-D6. Drilling in those additional blocks will start in 2009. So this is not to say that the value of these two will become larger than KG-D6 very quickly but it clearly shows the potential Reliance has. Actually we have been a bit conservative till now for the upside potential and I think that we will be hearing news-flow about this from the middle of 2009. We value the existing known resources (2P + contingent) at US$20 bn. We value the exploration upside i.e. whatever is present in all the blocks (including the 56 blocks besides KG-D6) put together at about US$7.5 bn.

To see full report: CLSA

>Indian Automobiles (HSBC)

Indian Automobile Sector

# Original Equipment Manufacturers (OEMs) expect growth in
FY10 but see recovery starting from Q3FY10e

# Credit availability remains elusive; rural income has been
strong and OEMs are increasingly targeting this segment

# Retain negative stance on sector. Hero Honda remains our
key OW and Maruti Suzuki our key UW (V)

To see full report: HSBC

Wednesday, February 18, 2009

>Tricks that promoters play...... (NOBLE RESEARCH)

The tricks that promoters play at the expense of shareholders

In the wake of the Satyam-Maytas debacle, we highlight the three most common tricks that Indian promoters employ to enrich themselves at the expense of shareholders. In the currently depressed market conditions, the divergence between promoters’ goals (around boosting personal wealth) and shareholders’ objectives (around growing the value of the firm) has become sharper.Moreover, contrary to conventional wisdom, such shenanigans are not confined to small cap stocks; some of the largest companies in India have a penchant for such tricks. These tricks create the need for investors to use unconventional means,such as primary data and forensic accounting, to assess promoters’ probity.

I feel this would be a valuable reading for All the Investors

Read the full Report from Noble Research: here

Alternative link to see this report : Noble Research

DLF (DLF.BO):The road less travelled; maintain Sell(GS)

What's changed :

DLF’s below consensus 3QFY2009 results (announced on January 31) confirmed a significant slowdown in property sales and construction activity in India. As a result, we push back our medium-term development pipeline projections and lower our property price assumptions. We lower our FY2009E-FY2011E EPS by 29%-62% and cut our 12-month target price to Rs124 from Rs203. We believe the recent strength in the share price, up about 20% from its recent trough post weak 3Q numbers, presents a profit taking opportunity. We maintain Sell on DLF and our cautious stance on the India real estate sector.


DLF registered four years of strong profit growth since 2004. However, we believe the company may need to realign its offerings to navigate through the current property downturn. DLF has stated that it will look to launch middle-income housing projects at lower ticket sizes. With interest rates also trending lower, we believe this strategy could revive volumes.However, we expect to see few signs of a recovery till 2HCY2009 and believe the stock would be on the sidelines in the interim

Read Full report here (DLF:Goldman)

Corporate India:Handbook on qualitative factors(CS)

■ It is clear after the Satyam incident that investors should focus on corporate governance issues, particularly because of losses incurred in the past 12 months that have failed to rise to the fore. As a result, we believe qualitative factors on management competence, honesty, a focus on core competency and internal processes will be as important as reported earnings and valuations in the next few quarters.
■ We provide one-page details on companies under our coverage to look at the softer, qualitative aspects of their make-up. While we have worked on a questionnaire-based framework, our objective has been to focus more on the spirit of the exercise rather than the letter
■ Our framework analyses corporate governance on: 1) structural risks, 2) accounting risks, 3) transactional risks and 4) events/issues that raise investor concern. Through these we cover issues such as the extent of intra-group transactions, departures from conservative accounting and provide a summary of events that may have caused concerns in the past. Most of what we report as concerns is not wrong from a legal viewpoint but flags for investors what they should know.
■ We resist needlessly quantifying the qualitative parameters and creating a contrived scorecard. The purpose of the report is to provide the first snapshot of corporate governance details, rather than arrive at any comparative list of winners and losers.

Read the full report Here(Corporate India Handbook)

The tricks that promoters play at the expense of shareholders

In the wake of the Satyam-Maytas debacle, we highlight the three most common tricks that Indian promoters employ to enrich themselves at the expense of shareholders. In the currently depressed market conditions, the divergence between promoters’ goals (around boosting personal wealth) and shareholders’ objectives (around growing the value of the firm) has become sharper.Moreover, contrary to conventional wisdom, such shenanigans are not confined to small cap stocks; some of the largest companies in India have a penchant for such tricks. These tricks create the need for investors to use unconventional means,such as primary data and forensic accounting, to assess promoters’ probity.

I feel this would be a valuable reading for All the Investors

Read the full Report from Noble Research here

>Daily Market Preview (MARWADI FINANCIAL)


# The global economy gloom is taking heavy toll on equities, as they
tumbled 3-4% yesterday. Sell off in Indian markets continued after
Monday debacle on recession worries. We believe that Indian
economy has inherent strength to bounce back faster than other
economies. However, there are concerns in the short term.

# We suggest to avoid trading as markets have broken key support
levels. We reiterate that markets are at accumulation level for long
term investment. Watch for crucial support level of 2700 on Nifty.

To see full report: Market Preview 18-02-2009


To see full report: F&O 18-02-2009

>Daily Technical Report (MARWADI FINANCIAL)

Market fall around the world. All most all the global market perform in negative zone due to recessionary impact deepen. Since last two days we experience the massive sell-off in the Indian equity market. Effects of budget and global recessionary pressure come together and market comes in to bearish zone. Again today also looks same kind of situation, so we recommend to hedge the position with appropriate price put. Againcounter commodity Gold market are at a life time high rate due to safe heaven of investment.

One expectation from the central bank is that they may cut key policy rate to enhance the liquidity in the system and boost up the sentiments, so keep watch on that counters.

On technical note market looks open with gap-down and through the day will remain in the negative territory. In morning session Gap-down opening but after Gap-down recovery is possible. In morning session it is to be wait and watch strategy and stay with key support. After taking a key support short covering is possible, and conformation of that event makes fresh position.

Today sensex trade in the range of
9125-8905 And Nifty in the range of 2810-2715

To see full report: Technical Report 18-02-2009

Top Buys (Religare)


  • Cipla
  • Dishman Pharmaceuticals
  • Hindustan Zinc
  • IVRCL Infrastructure
  • Onmobile Global
  • Orient Paper & Industries
  • PSL
  • Punjab National Bank
  • Zee News

To see full report: TOP BUYS

>What's In What's Out (RELIGARE)


In January 09 AUM rose by 9.4% to Rs.461698 Cr. Top 3 gainers are LIC, IDFC and Deutsche Mutual Fund with increase in corpus of 30%, 28% & 18% respectively. On the other side Edelweiss MF AUM fell highest by around 58% followed by Bharti AXA 24% & Benchmark 16%. Religare MF also came under top 10 fund houses with higher monthly increase in AUMs
MFs have sold shares of Satyam Computer Services Ltd, Infrastructurs Development Finance Company and GVK Power & Infrastructure Ltd. Shares of Satyam were held by 17 AMC's where as Infrastructure Development Finance Company by 3 AMC's and GVK Power by 2 AMC's.
MF looked bullish on Balrampur Chini Mills Ltd as it has attracted investments by 5 AMC's. MFs also invested heavily in Corporation Bank which is held by 5 AMC's. 3 MF's have also purchased more number of shares of Power Grid Corporationof India Ltd.
MF's continued to hold earlier popular largecap stocks like Reliance Industries Ltd, ICICI Bank Ltd, State Bank of India, Bharti Airtel Ltd, Larsen & Toubro Ltd. 108 MF schemes hold more than 5% of scheme corpus in Reliance Industries Ltd.

To see full report: What's In....

Tuesday, February 17, 2009

Daily Technical Report (MARWADI FINANCIAL)

US market were closed, Asian market trading lower due to insurers capital is concern. Interim budget there is no positive sign to boost the economy and affected sector, and due to that events market slumps. Now one expectation is that RBI may be further considering the key policy rate cut to provide the further liquidity in the system, that provide some sort of relief to the market. Again the Fiscal deficit is very high so that is the cause of worry in coming times and we have to seen how this things is settle. It may chance to further depreciate the currency value also so it is the crucial things how government settle the deficit.

On technical note due weakness in the global financial market our market open with negative note and through the day will remain in the negative territory. Intraday trader have to wait for down side movement and conformation of the trend they have to make short position in intraday trading.

To see full report: Technical Report 17-02-2009

>Daily Market Preview (MARWADI FINANCIAL)

#The flat interim-budget presented by the acting FM yesterday was a jolt to
the market as it had higher expectations in this unconventional time. We feel
that projected revenue & fiscal deficit will further dampen the sentiment.
Markets are expected to trade weak in the morning session following the sell
off experienced yesterday coupled with weak Asian markets.

# We expect Nifty to test around 2800 levels in the near term and suggest wait
until market settle around 2750-2800 levels and then accumulate the sound
large and mid-cap companies. We advice to hedge portfolio by index option.

To see full report : Market Preview 17-02-2009

>India Strategy (MORGAN STANLEY)

India Strategy
Tracking Promoter Pledging:
What’s at Stake?

Impact on our views: The new SEBI regulations
require promoters/founders of companies to disclose the
amount of stock they have pledged. The following are
our observations:
Thus far, 293 companies have disclosed pledges on
their holdings.
At current market prices, the total value of pledged
stocks is US$6.8 billion.
This is about 1.1% of the current market cap of the
Assuming 50% margin, the bank credit to these
promoters at US$3.4 billion is 0.6% of outstanding bank

To see full report: India Strategy

>Telecom Insights (HSBC)


Bharti, Idea Cellular: Revenue market share gains continue

# Bharti’s and Idea’s pan-India revenue market share in Q3FY09
jumped by c60 basis points

# Contribution of “B” category circles on a pan-India basis
improved 60 basis points to 32.3%

# Maharashtra, UP (East), Orissa and West Bengal show the
highest revenue growth in the quarter; Bharti our top pick

To see full report: Telecom Insights

Monday, February 16, 2009

>Market Insight 16-02-2009 (RELIGARE SECURITIES)

The Dow closed negative and other markets are trading in the red. The finance minister will announce the interim budget today; expectations from this budget are high given the ongoing economic slowdown. While there is likely to be some relief for certain sectors like auto and exports, we do not anticipate major changes in policies or tax rates. The situation in the US remains grim and hence we will see more bad news before any revival is seen. We remain bearish on our market for the short term; for today we expect high volatility.

To see full report: Market Insight

>India Economics 12-02-2009 (CITI)

India Economics

Consumer Durables Drag Dec Industrial Output Down 2% YoY

# Dec Industrial production below expectations - down 2%: Industrial production
was down -2% YoY below ours (+0.1%) as well as consensus expectations
(Bloomberg at -0.4%; Reuters +1.3%). This follows the -0.3% contraction in
Oct (which was the 1st contraction since the index was constructed in 1994)
and the 1.7% growth in Nov. Cumulatively during the current fiscal (Apr-Dec),
production slowed to 3.2% v/s 9% during the same period last year and poses
some downside risks to the CSO’s FY09 advance GDP estimate of 7.1%.
# Highlights: On a sectoral basis the contraction seen in Dec was due to
manufacturing at -2.5% while electricity and mining saw growth of 1.6% and
1% respectively. As per the use-based classification, consumer goods
contracted -2.7%, with durables down -12.8% (the steepest decline since
March03). Intermediate goods remained in negative territory for the 5th month
in a row, while capital and basic goods were up 4.2% and 1.7% respectively.

# Implications – Advancement of rate cuts; fiscal measures: While we continue to
expect the RBI to cut rates by an additional 100bps-150bps in 1H2009, the
contraction in output could advance easing. Secondly, given the upcoming
elections, the govt will be coming out with its interim budget on Monday -
Feb16 instead of a regular budget. While normally changes in taxation are not
announced in an 'interim budget' we could see the poor data being used as a
reason for additional spending/tax cuts.

# Maintain FY10 GDP estimate of 5.5%: Earlier this week, the CSO pegged FY09
GDP growth at 7.1%. This was slightly higher than our estimate of 6.8%. For
FY10, we maintain our estimate of 5.5%. This factors a contraction in exports,
a further deceleration in investment growth and a moderation in consumption.

To see full report: India Economics

>Equity Weekly Watch (ANAGRAM)


The battle of the titans is on the cards. On Monday we will have the vote-on-account and the market's reaction to this interim exercise will determine whether the bulls or the bears will have the final say.

At this point of time the bulls have the balls. If you were to take stock of the open interest (OI) added in stock futures after the January expiry, you will find that it has reached 30.7%. In order to compare like against like we looked at OI addition up to expiry plus 11 sessions and found that this addition is the highest percentage terms since September 2006, when it was 32.6%.

This piece of data tells us that the markets have never added OI with so much of gusto in the past 29 months. If the markets continue to be bullish even after the VOA, then there is no looking back and we will a rocking rally. But should for any reason, the rally engine sputters and it starts going down then the positions built will ensure that we fall with equal aplomb.

Now this rally in our domestic market comes about amidst a week of discontent in global markets. Our Sensex has risen 3.7% in contrast to a 5.20% slide in the Dow. This kind of an outerperformance is rather abnormal. Another theory going in the street is that the powers that we have muzzled up the most vociferous bear on the street on Friday evening and have winked at the bulls to take the ball and run till the elections.

To see full report: Equity WW

>India Strategy (MORGAN STANLEY)

A Slow Return To “Normal” Markets

• Markets have been disrupted quite severely over the past few months. We believe the signals from some of the metrics
we track suggest that the market is returning to some sort of normalcy.
• Firstly, return tails, which are still very fat on a 12-month trailing basis, have compressed significantly on a three-month
trailing basis.
• Secondly, we have witnessed some sort of peaking in absolute volatility and relative volatility (to emerging markets) has
come down quite significantly.
• Market valuations and fundamentals (ROE) have also experienced thinning of tails.
• However, the market continues to be dominated by macro. This is most evident in the elevated correlation of returns
from individual stocks (market effect) with the market. Conversely, the average relative volatility of the stocks in our
coverage universe continues to stay at a decade low. The high market effect tells us that individual stocks are being
influenced more by market performance-related factors than by idiosyncratic or non-market performance–related issues.
• In our view, the environment is building up for stock pickers. For one, the correlation of returns between stocks and the
market is unlikely to get much higher. Secondly, valuation dispersion is at an all-time high. Combined with a high ROE
and earnings growth dispersion, the backdrop for stock pickers is actually quite good.

To see full report: India Strategy