>INFOTECH ENTERPRISES LIMITED (INDIA INFOLINE)

Infotech more than just survived in FY09, a year of great challenges for Indian IT industry due to recession in key global markets and high exchange rate volatility across currencies. We believe that by delivering a strong operating performance and making crucial business investments, Infotech has further differentiated itself in the mid-cap IT space. Aided by huge generation of cash during the year, the much stronger and fungible balance sheet provides opportunity for further differentiation. Post our analysis of the company's FY09 annual report, we re-rate Infotech's valuations by 1x FY11E EPS. Key takeaways of our analysis are as follows

■ Strong operating performance with 1) reported consolidated revenue growth of 4% under US GAAP despite a significantly higher cross currency hit than peers 2) 200 bps OPM expansion on toght cost control and revenue shift towards EMI segment and offshore 3) net profit growth of 8% despite making substantial provisions for unrealized forex losses.

■ FY09 witnessed large customers reposing their faith in Infotech by renewing theri relationships. Infotech also added four new image-enhancing relationships.

■ Proforma net profit stood material 6.7% below reported profit. Outstanding ESOPs represents a potential 3.2% equity dilution

To see full report: INFOTECH ENTERPRISES LIMITED

>OIL INDIA LIMITED (EDELWEISS)

ISSUE HIGHLIGHTS

• Issue opens: Monday, September 7, 2009
• Issue closes: Thursday, September 10, 2009
• Price Band: Rs. 950 - Rs. 1050
• Bid Lot: 6 Equity Shares

BUSINESS OVERVIEW
Oil India Limited is the second largest national oil and gas company in India as measured by total proved plus probable oil and natural gas reserves and production (Source: DGH). The company is primarily engaged in the exploration, development, production and transportation of crude oil and natural gas onshore in India. The company also process produced natural gas to extract LPG. They are present internationally through the exploration of crude oil and natural gas in Egypt, Gabon, Iran, Libya, Nigeria, Timor Leste and Yemen. They primarily conduct activities with respect to domestic producing blocks and exploration activities in their nomination blocks independently. They also conduct exploration activity, both in India and overseas, through joint venture arrangements and PSCs with other oil companies.

The company was incorporated as a private limited company in 1959. As of March 31, 2009, all of their estimated independent proved plus probable oil reserves, as well as 93.66% of their estimated independent natural gas reserves is located onshore in the Upper Assam basin in the states of Assam and Arunachal Pradesh. Additionally, they have independent natural gas reserves in the Jaisalmer basin in the state of Rajasthan. In addition to their independent reserves, they also have a 40% participating interest in crude oil reserves in the Kharsang fields in the Assam-Arakan basin in the state of Arunachal Pradesh. They own and operate, as a common carrier for them, ONGC and BRPL, a 1,157 kilometer cross-country crude oil pipeline.

The pipeline has the capacity to transport over 44 million barrels of crude oil annually. They transported approximately 45 million barrels of crude oil in fiscal 2009 to four public sector refineries in the North East region of India located in Digboi, Numaligarh, Guwahati and Bongaigaon. They own ten crude oil pumping stations and 17 repeater stations, spread across the states of Assam, West Bengal and Bihar. They also own and operate a 660 kilometer petroleum product pipeline connecting NRL to Siliguri in West Bengal, which was commissioned in August 2008.

The Company has interests in downstream activities through a 26% equity stake in NRL, a 10% equity stake in BCPL and a 23% equity stake in DNP Limited. They also hold a 10% equity stake in a 741 kilometer pipeline construction project in Sudan that was completed in 2005. They have the ability to provide various exploration and production-related services to the oil and gas industry, both domestically and internationally, including pipeline construction, pipeline consultancy services, drilling and well work-over services, research and development services and logging services.

As a public sector undertaking, they have been accorded "Mini Ratna Category I" status since 1997 by the GoI for their operational efficiency and financial strength. In recognition of their performance and consistent achievement of targets negotiated under the memoranda of understanding that they enter into with the GoI on an annual basis, the GoI has rated their performance as "Excellent" for fiscal 2005 and 2006 and "Very Good" for fiscal 2007 and fiscal 2008. They were also ranked as the best public sector undertaking by the Department of Public Enterprises in its annual survey for fiscal 2006.

To see full report: OIL INDIA LIMITED

>CHINESE BANKS (CITI)

Next Phase: NIM and Profitability Expansion

■ Profitability over volumes – Chinese banks have underperformed lately due to concerns over slowing loan growth. We see this current negative sentiment as a buying opportunity. Despite slowing loan growth, we believe the earnings trend remains positive due to improving loan and deposit mix, and higher rates. We see expanding NIMs as a healthier earnings driver than surging loan volumes.

■ Improving loan mix – 2H09 loan mix should improve lending shifts from discounted bills to regular loans, for an estimated yield differential of 250-300bps. This process has already begun in July with Rmb198bn contraction in discounted bills.

■ Improving deposit mix – An active A-share market should support a shift in deposits from time to demand (~150bps yield differential), helping to lower funding costs.

■ Rising interest rates – Recent increases in repo/interbank rates and bond yields are positive for NIMs across the sector. Interest rates are likely to head higher as our economists now expect lending and deposit rate hikes to begin in 2Q10.

■ Smaller banks bigger beneficiaries – Given their higher proportion of discounted bills (up to 30-40% of 1H09 loan growth), historically greater deposit mix volatility, and greater gearing to symmetrical rate hikes, smaller banks are bigger beneficiaries. We now expect NIMs for the sector to recover 10-20bps hoh in 2H09E, followed by 5-20bps yoy expansion in FY10E (no rate increase assumed), with smaller banks leading the recovery.

■ Raise TPs, Upgrade CMB to Buy – CMB and CNCB are most geared to these themes and our top picks among smaller banks. Top picks among big banks: CCB, ICBC.

To see full report: CHINESE BANKS

>HEDGE FUND ACTIVITY (GOLDMAN SACHS)

Fund re-risking: Net long exposure rises to pre-Lehman levels

■ Net long exposure rises to 31%, highest since June 2008
Hedge funds have increased net long exposure to the highest levels since June 2008, amidst improving economic data, stabilizing capital markets, and rising equity prices. Hedge funds are no longer net short Financials.

■ We estimate 7% of hedge funds have shut down since June 2008
Based on public 13-F filing information, roughly 7% of hedge funds that filed their holdings in June 2008 did not file in June 2009. These 7% of funds represented 4% of total hedge fund long equity AUM in June 2008.

■ Invest in the re-risking theme: Buy our Hedge Fund VIP List
Using the 13-F filings to identify the “stocks that matter most” to hedge funds has proven profitable in the past. Hedge fund selling pressures have abated, and hedge funds are likely to put more cash into their top positions. Falling correlation suggests that single-stock investment ideas will gain favor over a macro-driven market.

To see full report: HEDGE FUND ACTIVITY