Friday, February 13, 2009

>Daily Market Preview (MARWADI FINANCIAL)

• Global Equities are holding on amid increased volatility as governments

world over are taking substantial measures to save respective
economies, though problem seems to be far from over . We expect
Indian markets to open firm and all eyes will be on Interim Railway
Budget which will focus on increasing demand in the economy.

• We believe Nifty has very strong support around 2800 levels and it will

have upside of 3000 in the near term. Expect action on the Cement, Steel
& Cap Goods counters today on Railway budget announcements.

To see full report: Market Preview_13th feb


To see report: F&O_13th feb

>Real Estate (MOTILAL OSWAL)

3QFY09 marked the end of all pretence by developers: While the real estate sector
has been in a downturn since September 2007, 3QFY09 would be remembered as the
quarter when most developers came out of their denial mode and acknowledged the severity
of the downturn in the real estate industry. Several companies announced drastic measures
to effectively deal with the situation: i) suspending several ongoing projects, ii) postponing
new launches, iii) recalibrating development plans etc. Most companies revised downwards
their guidance for delivery, sales and profits by 50-70%.

RBI announced a bailout package for real estate sector: Another significant event
during 3QFY09 was RBI’s bailout package for the real estate sector. RBI allowed banks
to undertake initial restructuring of commercial loans of real estate companies till June
2009, without the loans being classified as NPAs. Consequently, most real estate companies
used the window provided by RBI to refinance or reschedule their debt repayments
obligation falling due up to March 2009.

EBITDA margin down significantly: During 3QFY09, EBITDA margin was down by
~800bp on an average. EBITDA margins across key RE companies have dropped
significantly largely led by decline in realizations and higher revenue contribution from the
low margin bearing affordable housing segment (as most RE companies reclassified their
products in order to cater to the affordable homes segment).

To see full report: Real Estate

>Reliance Communications (CITI)


So What Has RCOM Achieved?

GSM net adds overcome RCOM's offer — GSM net adds (excl. RCOM) for Jan-09

was 9.3m, up from 8.1m in Dec-08. While Bharti’s net adds remained stable at
2.73m, Vodafone and Idea had significant acceleration. The net adds for the GSM
incumbents was strong across various categories (Metro/A/B/C), and even the new
launches (Idea in Bihar/Mumbai, Vod in Orissa, MP) were not affected.

What's happening in the market? — In Metro/A circles, Bharti/Vod/Idea maintained

or accelerated their net adds. This is intriguing given that RCOM’s offer would
have focused on larger cities/towns initially. Absence of any impact could be due
to (i) incumbents’ gross adds coming from semi-urban/rural areas not covered by
RCOM and (ii) RCOM’s subs coming mainly from dual-SIM owners, which does not
show up as incumbents’ churn as increasing % have lifetime validity. In any case,
churn numbers remain subjective with material variations in reporting policies.

New launches have weathered the storm too — Vod/Idea accelerated the net adds

in their new circles. Since data in new circles is mostly gross adds, it is quite
encouraging, esp. Idea’s surge in Mumbai in Jan-09 (60% of net adds) despite
being the focus of RCOM launch. While Idea’s reactionary tariffs in Mumbai seem
to have worked, we don’t see any need/motivation to replicate it elsewhere.

To see full report: RCOM