>Trade Winds (KARVY)

20 April 2009 to 26 April 2009

Investors during the great Indian elections
With the world’s largest democracy going to the polls, there has been tremendous volatilityin the stock markets. Without a clear winner in sight, the uncertainty about the policies ofthe new government has become a cause of concern for investors in the stock markets,particularly after having witnessed the market crash on May 17, 2004, during the post-electionand pre-government formation process. This time, the election environment is quite chargedup with three camps—UPA, NDA, and the Third Front—fi ghting intensely for the hotseat. As a result, volatility in the stock markets is set to rise to unprecedented levels. At thisjuncture, investors should be very cautious while trading in the stock markets.On the other hand, investors are also looking forward to participating in the global stockmarket rally. The unprecedented stimulus packages announced by major economies acrossthe globe are working and there are signs that the pace of global economic recession in theUS, China and EU is easing. The recent corporate earnings announcements have exceededmarket estimates—Wells Fargo, JPMorgan, Citicorp, and Hewlett-Packard announcedbetter-than-expected earnings, triggering a rally in the global stock markets.Given the need to participate in the global stock market rally and the major concern ofvolatility during the election process, we believe derivatives would be the right solution insuch a scenario. Futures and options come in handy, wherein investors can participate inthe stock market rally while handling the volatility during the election process. Investorswith holdings in the cash market can use put options to partially hedge their portfoliosfor a limited period. They can remove the hedge once clarity emerges about the newgovernment and its policies. Also, investors can buy call options which give them the rightto participate in the rally, and at the same time, limit the downside risk. Moreover, futuresand options hybrid strategies, such as long straddle and long strangle, can be used untilthe new government is in place. Overall, all kinds of investors can benefi t from the use ofoptions during these volatile days.

To see full report: TRADE_WINDS

>Infosys Technologies (ELARA CAPITAL)

Key Highlights

Infosys today declared full year FY09 and Q4Fy09 results with consolidated income of Rs 21,693 crores (up 30.0% YoY0 and Rs 5,635 crores (down 2.65 QoQ and up 24.1% YoY) respectively. EBITDA of Rs 7,195 crores (up 37.4% YoY) and Rs 1,891 crores (down 6.9% QoQ and up 27.9% YoY) respectively, and PAT of Rs 5,988 crores (up 28.5% YoY0) and Rs 1,613 crores (down 1.7% QoQ and up 29.1% YoY) respectively.

* Negative Growth in Q4 FY09 Revenue was led by volume decline of 0.94% QoQ (decrease of 0.77% in offshore volumes and decrease o1.4% in onsite volumes), currency depreciation (INR/USD) of 4.1% QoQ qand pricing in constant currency terms declined 2.1% QoQ (decline of 3% in offshore and decline of 1% in onsite). The companies expects the pricing decline in the range of 6% - 6.5% in FY10.

* Operating Profit Margins for the full year FY09 improved 180 bps. The margins for Q4 FY09 increased 110 bps YoY but declined by 150 bps QoQ. The improvement was led by reduction in selling & marketing expenses and general & administrative expenses as a percentage of sales to 5.09% and 7.51% in FY09 against 5.49% and 7.97% in FY08.

* PAT margins for the full year FY09 were stable with an improvement of 20 bps. The margins for Q4 FY09 improved 70 bps with higher non-operating income of Rs 252 crores. The management expects a likely fall of 200 bps in the PAT margins. The Eps increases to Rs 104.6 for full year FY09 from Rs 8.15 in FY08, YoY growth of 28.4%.

To see full report: INFOSYS

>Indian IT services (CITI)

4QFY09 Preview: Muted Quarter; FY10 Outlook in Focus

* Infosys FY10 guidance in focus; “buy side” expecting ~2.5% revenue decline — Investor focus will be on Infosys’ FY10 guidance. We believe the company is likely to guide to a revenue ($-term) decline of ~3-5% YoY – which is not too different from buy-side expectations of ~2.5% decline, as per our recent investor survey. With the quarter end exchange rate at ~Rs50.5/$, our analysis suggests that Infosys is likely to guide to flattish EPS (for details see:

* Most challenging quarter for Indian IT till date — 4Q will be the first quarter of revenue declines (even in constant-currency terms) across the board. Pricing should come under further pressure – a trend likely to continue over the next few quarters. We expect Tier-I companies to report ~2-3% QoQ revenue decline ($- terms). INR depreciation should partly offset the pricing-related margin pressures.

* Another quarter of significant currency moves — The sharp currency moves witnessed in 4Q (not as sharp as 3Q though) will result in: (1) Negative impact on $-term revenue growth due to the adverse movement of $ against GBP. (2) Positive impact of depreciating INR (against $) on the margins of companies. (3) Forex losses on account of hedge positions.

* Focus on margin defence — In our recent conversations, Tier-I companies seemed confident on maintaining margins in FY10 due to: (1) Offshore shift of revenues; (2) Lower variable payouts; (3) Favorable INR; and (4) Lower travel/communication costs, etc.

* Infosys best placed for depreciating INR; HCLT for appreciating INR — Due to lower quantum of hedges and no losses on balance sheet, Infosys is relatively better placed in a depreciating INR environment. On the flip side, HCL Tech has huge losses (~$207m at end of Dec’08) on its balance sheet and benefits more if INR appreciates.

* Sharp run-up leaves room for disappointment — From a near-term point of view, the sharp rally over the last month or so leaves little room for disappointment. Demand environment remains very challenging with no signs of recovery yet. Longer term, we wait for stability in business before becoming more positive on the sector.

To see full report: INDIAN IT SERVICES

>Pantaloon Retail (ANGEL BROKING)

PRIL masters the sustenance mantra

Same Store Sales growth sustains in March 2009

Pantaloons Retail's (PRIL) Standalone registered positive yoy Same Store Sales (SSS) growth in March 2009, indicating sustenance of growth and consumer confidence. The Value and Lifestyle Retailing Segments of PRIL Standalone registered yoy SSS growth of 5.3% and 4.3% respectively, in March 2009. The Home Retailing continued to register negative yoy SSS growth for the fifth consecutive month, at -10.3% in March09.

It may be noted here that in March 2009, all the three retailing segments of PRIL
Consolidated sustained yoy SSS growth at February 2009 levels, when the Value, Lifestyle and Home Retailing clocked yoy SSS growth of 5.3%, 4.4% and -10.2%, respectively. This indicates that consumer footfalls are being sustained and is expected to go up in the future following indications of revival of the economy, albeit at a sluggish pace. We believe that this sustenance of SSS growth was on account of regular promotions and discounts offered by PRIL through 3QFY2009 (June-ending).

To see full report: PANTALOON RETAIL