Weekly review 16-10-10

Weekly Review
October 16, 2010

Markets witness correction FII activity
(Rs crore)
Markets ended in the red for the second time in a row in a week characterised Cash Futures Net
As on (Equity) Activity
by high volatility. The Sensex ended the week lower by 0.6%, while the S&P
CNX Nifty fell by 0.7%. The BSE mid-cap index followed suit, falling 0.2%. Oct 08 808 (1,036) (550)

However, the BSE small-cap index ended the week positive, gaining 1.1%. Oct 11 1,111 (597) 726

The broader markets witnessed fluctuating sentiment through the week, Oct 12 700 (897) (547)
gaining a healthy 2.2% during the first half. However, markets ended the Oct 13 3,100 (1,004) 1,894
week on a weak note, losing 2.7% over the last two days of the week. Oct 14 2,894 (606) 2,223
The decline was led by the BSE capital goods and BSE PSU indices, which Net 8,614 (4,141) 3,745
fell by 2.1% and 1.6%, respectively. However, the BSE metal index registered
a marginal gain of 0.6% amidst falling markets.
Mutual Fund activity (Equity)
BSE Capital Goods – Dips on weak IIP numbers (Rs crore)
During the week, the BSE capital goods index witnessed erosion of 2.1% on As on Purchases Sales Net Activity

the back of disappointing IIP numbers for August 2010. The IIP fell to 5.6% Oct 07 354 908 (553)

(10.6% year-ago period) mainly due to the decline in the capital goods Oct 08 437 697 (260)

index, which contracted to (2.6%) as compared to 9.2% for the Oct 11 421 758 (337)
year-ago period and 72% for July 2010. On a stock-specific basis, Oct 12 750 1,102 (352)
Jyoti Structures lost nearly 6%, while BGR Energy fell over 4%. Other stocks Oct 13 583 983 (399)
in our capital goods universe lost ~3% during the week. Despite
Net 2,545 4,447 (1,902)
underperforming the broad-based Sensex, valuations of the stocks
comprising the capital goods index continue to trade at a premium to the
Sensex, thereby offering meagre upside from current levels. In such a Global Indices
scenario, we prefer a stock-specific approach. KEC, Jyoti Structures and Indices Oct. Oct. Weekly YTD
08, 10 15, 10 (% chg)
Bluestar figure among our preferred picks.
BSE 30 20,250 20,125 (0.6) 15.2
Inside This Weekly
NSE 6103 6063 (0.7) 16.6
IL&FS Transportation Networks - Initiating Coverage: IL&FS Transportation
Transportation
Nasdaq 2,402 2,469 2.8 8.8
Networks (ITNL), an established surface transportation player, is a pure play
DOW 11,007 11,063 0.5 6.1
on the emerging opportunities in the road segment. We have valued ITNL
Nikkei 9,589 9,500 (0.9) (9.9)
on an SOTP basis - by assigning 7.5x EV/EBITDA to its standalone business
HangSeng 22,944 23,758 3.5 8.6
and valuing its investments on DCF/Mcap/BV basis - and have arrived at a
Target Price of `358, which implies an upside of 13.4% from current levels. Straits Times 3,153 3,204 1.6 10.6

rating.
We initiate coverage on the stock with an Accumulate rating. Shanghai Composite 2,739 2,971 8.5 (9.3)

KLSE Composite 1,481 1,490 0.6 17.1
Coal India - Offer for sale: Coal India, a Navratna company, is the world’s
largest coal producer. The company accounts for nearly 82% of India’s total Jakarta Composite 3,547 3,597 1.4 41.9

coal production. At the lower and upper price band, the stock will trade at KOSPI Composite 1,897 1,902 0.3 13.0

5.8x and 6.7x FY2012E EV/EBITDA, respectively. We recommend Subscribe
DCF-based
to the issue with a DCF-based fair value of `294.
Sectoral Watch
Infosys: 2QFY2011 Result Update: Infosys reported revenue of `6,947cr,
Indices Oct. Oct. Weekly YTD
up12.1% qoq, on the back of strong volume growth, higher revenue
08, 10 15, 10 (% chg)
productivity with better business mix and favourable cross-currency
BANKEX 14,185 14,049 (1.0) 40.1
movement. EBITDA margins improved by 165bp qoq to 33.3% on the back
BSE AUTO 9,701 9,752 0.5 31.1
of better utilisation and favourable currency movement negating the effect
of higher onshore effort. We expect Infosys’ revenue, EBITDA and PAT to BSE IT 6,053 6,075 0.4 17.1

witness CAGRs of 21.8%,17.0% and 13.8% over FY2010-12E, respectively. BSE PSU 10,499 10,332 (1.6) 8.4

At the CMP of `3,076, the stock is trading at 21.7x FY2012E EPS, close to its
intrinsic value and at par with its historical P/E multiple of 22x. Hence,
we maintain our Neutral rating on the stock.

Please refer to important disclosures at the end of this report

Fundamental Focus | October 16, 2010
Focus

IL&FS Transportation Networks - Accumulate Price - `316
Target Price - `358

Initiating Coverage

Numero Uno We have valued ITNL on SOTP basis - by assigning 7.5x
EV/EBITDA to its standalone business and valued its investments
IL&FS Transportation Networks (ITNL), an established surface
on DCF/Mcap/BV basis - and arrived at a target price of `358,
transportation player, is a pure play on the emerging
which implies an upside of 13.4% from current levels.
opportunities in the road segment.
On standalone basis, the company derives its income from
Market leader with diversified presence: ITNL has highest
advisory fees and C&EPC work. We are expecting the company
coverage among peers with ~7,500 lane km (22 projects) with
to post a CAGR of 125.9% and 19.4% on the top-line and
a project capitalisation of ~`14,673cr (adjusted for its share),
bottom-line front over FY2010-12E. We have valued this
which we believe gives it an edge in bidding for new projects in
business on EV/EBITDA basis given the balance sheet is loaded
terms of technical capability and experience. Moreover, these
with debt and have applied a similar multiple for its peers like
projects are geographically spread out and bi-furcated into toll
IVRCL, NCC, HCC etc. We thus arrive at a value of
and annuity, which cushions its revenues due to limited exposure
`159/share for the standalone business. We have valued the
to any one region or project.
existing BOT projects of ITNL at `151/share based on the net
ITNL in sweet spot to capitalise on emerging opportunities: present value (NPV) of the cash flows to equity. We have assumed
ITNL is well poised to leverage on the growing opportunities in cost of equity at 14% for all the projects. Other key assumptions
the road segment owing to its: 1) strong parentage, include interest cost at ~10-11% p.a. and traffic and toll growth
2) experienced management; 3) unique business model; and for toll projects at 5% p.a. It should be noted that we have
4) favourable developments at NHAI. valued Noida Toll Bridge on Mcap basis fetching a value of
Favourable industry dynamics: We expect NHAI to award `6.5/share. We have valued Gurgaon Metro, Vansh Nimay
~33,500km over FY2011-15 in line with its set target of project and Elsamex on P/BV basis fetching values of
constructing 20km/day. The expressways and mega highway `1.1/share, `0.7/share and `24.7/share respectively. Hence,
projects also offer opportunity to the tune of `62,600cr. we initiate coverage on the stock with an Accumulate rating
SOTP Target Price
and a SOTP Target Price of `358/share.
Financial Outlook
We expect ITNL to post CAGR of 59% in consolidated top-line Key Financials (Consolidated)
over FY2010-12E owing to its recent order winning spree and Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E
bidding pipeline. However, given the increasing share of low- Net Sales 1,225 2,403 3,480 6,071
margin C&EPC in consolidated top-line, we expect EBITDA
% chg 238.9 96.1 44.8 74.5
margins to normalise to 19.8% in FY2012E from 33.1% in
FY2010. During the mentioned period, we estimate the Profit
Adj. Net Profit 26.2 344.4 424.3 502.8
company's bottom-line to log a CAGR 21%. % chg (71.9) 1,212.8 23.2 18.5

Outlook and Valuation FDEPS (`) 1.4 17.7 21.8 25.9
EBITDA Margin (%) 15.8 33.1 26.7 19.8
There has been strong focus on re-vitalising the road sector
particularly since the re-election of the UPA government in May P/E (x) 234.0 17.8 14.5 12.2
2009. MORTH has set itself the target of constructing RoAE (%) 2.8 26.2 22.5 22.1
20km/day as well as introduced policy reforms to encourage RoACE (%) 5.6 17.9 12.6 9.6
more private participation in the sector. We believe that all such
P/BV (x) 6.7 3.6 3.0 2.5
changes in the positive direction have encouraged more
participation from the private sector. Therefore, we are bullish EV/Sales (x) 6.4 3.7 3.3 2.9

on the prospects of the road sector and would like to bet on the EV/EBITDA (x) 40.5 11.2 12.4 14.5
market leaders to seize the opportunity. Source: Company, Angel Research; Price as on October 12, 2010

Research Analyst - Shailesh Kanani/Nitin Arora

For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 2

Focus

Coal India - Subscribe

Offer for sale

Co(a)llateral growth mines, which have significantly lower production cost
(US $11/tonne), accounts for 90% of its total production as
Coal India (CIL), a Navratna company, is the world's largest
compared to underground mines, which have a higher
coal producer. The company accounts for nearly 82% of India's
production cost of US $59/tonne.
total coal production. We recommend Subscribe to the issue
DCF-based
with a DCF-based fair value of `294.
294. Key risks to CIL's earnings and our estimates: 1) Regulatory
hurdles causing a delay in production ramp-up; 2) infrastructure
Enjoys largest reserves and production base: CIL has the world's
bottlenecks; 3) amendments in the mining policy, which require
largest coal reserves, at 19bn tonnes, as per JORC's guidelines.
sharing of profits; and 4) ongoing environmental debate on
The company's proved reserves stand high at 11bn tonnes,
'Go/No Go' regions.
constituting 56.2% of its total reserves. CIL, the biggest coal
producer globally, produced 431mn tonnes of coal in FY2010. Valuation:
Outlook and Valuation:
supply, CIL:
Domestic coal demand outpacing supply, favourable for CIL: At the lower price band, CIL will trade at 8.2x and 5.8x FY2011E
Demand is likely to witness a 10.6% CAGR over FY2010-15E and FY2012E EV/EBITDA; while at the upper band, it will trade
as the power sector, which accounts for nearly 75% of the total at 9.3x and 6.7x its FY2011E and FY2012E EV/EBITDA.
coal demand, is likely to see an exponential growth as ~60MW On the P/E basis, the company will trade at 13.5x and 11.2x
of thermal capacity gets added over FY2010-15E. With FY2011E and FY2012E earnings; while at the upper band,
production expected to post an 8.6% CAGR over the same it will trade at 14.7x and 12.2x its FY2011E and FY2012E
period, lagging demand, India will remain structurally deficient earnings. We have arrived at a fair value of `294 using the
in coal, thus placing CIL in a favourable position. DCF methodology and have assumed a discounting rate of
13.9% and perpetual growth of 3%.
Increasing focus on capacity expansion: In addition to 32
projects that were implemented in FY2010, 25 projects with a
capacity of 47.5mn tonnes are expected to become operational
by the end of FY2012E. Further, 20 projects with a capacity of
Key Financials (Consolidated)
33.3mn tonnes are expected to come on stream during the
Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E
12th Five Year Plan. Moreover, CIL plans to set up additional
20 coal beneficiation facilities with a proposed capacity of Net sales 40,811 46,684 50,183 55,971
111.1mn tonnes. % chg 17.9 14.4 7.5 11.5

Significant leeway to increase prices: CIL sells raw coal at a Net profit 4,063 9,834 10,518 12,712
~63% discount to global prices. We expect blended realisations % chg (5.2) 142.1 7.0 20.9
to increase at a 6.1% CAGR over FY2010-15E on account of EPS (`) 6.4 15.6 16.7 20.1
a) a 5.1% CAGR increase in raw coal's notified price over
EBITDA (%) 6.0 22.0 23.5 26.7
FY2010-15E, b) increased proportion of beneficiated coal sales,
P/E (x) 38.1 15.7 14.7 12.2
which commands a ~120% premium over the notified coal
P/BV (x) 8.1 6.0 4.7 3.7
price and c) gradual increase in e-auction sales volumes from
11.6% of raw coal sales in FY2010 to 12.5% in FY2012E, where RoE (%) 22.4 43.8 35.7 33.8
realised price is likely to be ~60% higher than the notified price. RoCE (%) 3.6 34.5 31.1 32.1

Competitive cost structure: CIL is one of the lowest-cost coal EV/Sales (x) 3.1 2.5 2.2 1.8
producers in the world, with an average blended cost of EV/EBITDA (x) 51.7 11.5 9.3 6.7
US $16/tonne. This is because CIL's production from open cast Source: Company, Angel Research; Ratio calculated at the upper price band

Research Analyst - Paresh Jain/Pooja Jain


Focus

Axis Bank - Accumulate Price - `1,563
Target Price - `1,705
2QFY2011 Result Update

Performance Highlights restructured assets till 2QFY2011, however declined to `2,061cr
(1.7% of gross customer assets) from `2,151cr in 1QFY2011.
Particulars 2QFY11 1QFY11 % chg 2QFY10 % chg
(` cr) (qoq) (yoy) Reasonable non-interest income growth: Fee income registered
NII 1,615 1,514 6.7 1,150 40.5 18% yoy growth to `849cr (`719cr) during 2QFY2011, with
Pre-Prov Profit 1,486 1,450 2.5 1,306 13.8 strong contribution from the corporate segment. Fee income
PAT 735 742 (0.9) 532 38.3 from large and mid-corporate credit (including infrastructure)
Source: Company, Angel Research
grew 54% yoy, followed by capital markets (23% yoy), treasury
Axis Bank has announced its 2QFY2011 results wherein it and debt and capital markets (12% yoy) and retail business
registered net profit growth of 38.3% on a yoy basis to `735cr, (7% yoy).
which was marginally better than our estimate of `706cr mainly Outlook and Valuation
on account of the better-than-estimated other income. Strong
At the CMP the stock is trading at 2.9x FY2012E ABV. Our
,
operating performance and stable asset quality were the key
Target P/ABV multiple of 3.2x on FY2012 estimates, is at a
positives of the result.
20% discount to our Target P/ABV multiple of 4.0x for HDFC
Advances and Deposits growth above industry: Advances Bank, keeping in mind the relatively higher credit and market
increased by a moderate 1.8% sequentially (by a robust 36.5% risks. However, we believe that going ahead as Axis Bank
yoy) to `1,10,593cr, while deposits increased to `1,56,887cr, establishes a longer and more credible track record of pricing
a robust growth of 35.7% yoy and 6.4% sequentially, well above and managing risks, this gap vis-à-vis HDFC Bank could
the industry growth rate. The advances growth was driven by narrow down.
the large and mid-corporate segment (mainly infrastructure, IT
We remain positive on the bank and believe that it deserves
and ITES, cement and metals), which increased by ~59.0%
premium valuations on account of its attractive CASA franchise,
yoy. Consequently, the NII of the bank recorded a growth of
multiple sources of sustainable fee income, strong growth
40.5% yoy and 6.7% sequentially.
outlook and A-list management. We maintain an Accumulate
The deposit growth was driven by the 11.5% qoq growth in recommendation on the stock, with a Target Price of `1,705,
Target Price
current account balances. The CASA ratio of the bank improved implying an upside of 9.1% from current levels.
to 41.5% from 40.2% in 1QFY2011, but it was lower than
Key Financials (Standalone)
42.8% registered in 2QFY2010. On the positive side, the daily
average balances of savings deposits grew 40.9% yoy, while Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E
those of the current account deposits grew by 35.5% yoy. NII 3,686 5,004 6,491 8,174
Reported NIM at 3.68%, registered a marginal decline of 3bp % chg 42.6 35.8 29.7 25.9
on account of increase in cost of funds in the system as a whole. Profit
Net Profit 1,815 2,515 3,158 4,223
Asset quality stable: The gross slippage during the quarter stood % chg 69.5 38.5 25.6 33.7
at `446cr, indicating an annualised slippage ratio of 1.7% NIM (%) 3.0 3.1 3.3 3.3
slightly higher than slippage ratio of 1QFY2011 (1.6%) but
EPS (`) 50.6 62.1 77.9 104.2
lower than that of FY2010, which was at 2.2%. Gross NPAs
P/E (x) 30.9 25.2 20.1 15.0
increased by 1.6% sequentially to `1,362cr, while net NPAs
P/ABV (x) 5.6 4.0 3.4 2.9
declined marginally on a sequential basis by `4cr to `409cr.
Gross and net NPA ratios of the bank were stable at 1.1% and RoA (%) 1.4 1.5 1.5 1.6
0.3%, respectively. The bank restructured loans aggregating RoE (%) 19.1 19.2 18.3 21.1
`60cr during 2QFY2011 (`30cr in 1QFY2011). The cumulative Source: Company, Angel Research; Price as on October 14, 2010

Research Analyst - Vaibhav Agrawal/Amit Rane/Shrinivas Bhutda


Focus

Infotech Enterprises - Accumulate Price - `175
Target Price - `184

Performance Highlights The UTG segment is also back to strong growth after declining
for more than two quarters. Though the 15.8% volume growth
Y/E March 2QFY11 1QFY11 (qoq) 2QFY10 (yoy)
was on the back of 9.4% coming in from Wellsco's acquisition,
(` cr) % chg % chg
Net revenue 295.5 253.0 16.8 237.3 24.5 organically the company grew by 6.3% qoq. This is primarily
EBITDA margin (%) 15.5 16.0 (50)bp 21.7 (620)bp because the company's top two clients grew by over 20% qoq.
PAT 33.1 32.9 0.8 35.2 (5.9) In fact, going forward, IEL expects growth to be persistent in
Source: Company, Angel Research the UTG segment.
Strong volume-led revenue growth: For 2QFY2011, Infotech
volume-led
Outlook and valuation
Enterprises (IEL) reported 16.8% qoq revenue growth to
`295.5cr. Growth was led by qoq volume growth of 15.8% For FY2011, IEL has raised its net hiring target from 1,678
and 13.0% in the utility, telecom and government (UTG) and (end of 1QFY2011) to 2,775 on the back of higher demand
the engineering and mechanical (EMI) segments, respectively. for engineering services by hi-tech and heavy engineering
Growth in the UTG segment was impressive because of the industries. We expect IEL to record a 24.5% revenue CAGR
9.4% qoq volume growth due to Wellsco's acquisition (integrated over FY2010-12E on the back of strong inorganic growth due
since August 9, 2010) and 6.4% organic growth. to Daxon and Wellsco acquisitions aiding growth, while net
profit growth will be subdued at a 4.4% CAGR mainly on account
Disappointing operational performance: IEL's EBITDA margin
of lower orbit for operating margins. Thus, we recommend
dipped by 50bp to 15.5% due to grid-correction exercise to
Target Price
Accumulate on IEL with a Target Price of `184, valuing the
retain talent, which escalated cost, impacting margins by 166bp.
stock at 11x FY2012E EPS of `16.8 i.e., at 50% discount to
16.8
This, in addition to the integration of Wellsco (with EBITDA
Infosys' target multiple of 22x.
margin ~8% lower than IEL's average), took away gains that
came in from strong volume growth as well as cross-currency
benefit.
Strong growth momentum in EMI continues with UTG back on
the growth path: IEL is witnessing strong deal discussions in
Net sales 889.8 953.1 1,190.8 1,478.3
North America and Europe. In the EMI segment, IEL along with
% chg 32.0 7.1 24.9 24.1
aerospace (57% to revenue) verticals like heavy engineering
(10% to revenue) and hi-tech (11% to revenue) is gaining strong Net profit 92.4 170.9 151.3 186.4
momentum. Thus, the nature of spend in the EMI segment is % chg 6.5 85.0 (11.4) 23.2
becoming more broad-based, resulting in robust volume EBITDA margin (%) 20.1 21.9 16.4 17.3
growth. Some of the new long-term projects in the EMI segment, (`
FDEPS (`) 8.6 15.4 13.6 16.8
such as the Hamilton Sunstrand, Seawell (engineering support
P/E (x) 20.3 11.4 12.8 10.4
services for its drilling operations) and the recently signed US-
P/BV (x) 2.4 2.1 1.9 1.6
based Westinghouse (for providing nuclear energy-related
network) projects, are expected to witness strong ramp-ups with ROE (%) 12.8 20.4 15.5 16.4
qoq growth of over 30% in the Hamilton Sunstrand project and ROCE (%) 17.5 19.4 15.1 17.3
triple-digit growth in each of the latter two projects. Moreover, EV/Sales (x) 1.8 1.6 1.3 1.0
IEL is witnessing deal discussions, which are larger in size
EV/EBITDA (x) 8.9 7.3 7.7 5.6
typically demanding 100-200 people instead of 30-40 billable Source: Company, Angel Research; Price as on October 14, 2010; Note: *FDEPS
resources few quarters back. for FY2009 and FY2010 adjusted for 1:1 bonus effective June 12, 2010

Research Analyst - Srishti Anand


Focus

Infosys - Neutral Price - `3,076
Target Price - `184

Performance Highlights The company signed off TCV of US $872mn in 1HFY2011.
Also, the early indications got from clients on the budgets for
CY2011 is flat-to-positive. This has resulted in the company
(` cr) % chg % chg
Net Revenue 6,947 6,198 12.1 5,585 24.4
getting aggressive in hiring getting laterals on board for
EBITDA Margins (%) 33.3 31.7 165bp 34.5 (120)bp immediate pent up work and creating capacity by hiring freshers
PAT 1,737 1,488 16.7 1,535 13.2 to meet the increasing deal pipeline. Thus, the company
Source: Company, Angel Research; IFRS financials in rupee term increased its FY2011 hiring target yet again from 30,000 at
Double-digit growth backed by persistent volume growth &
Double- the start of the year and 36,000 at the end of 1QFY2011 to
better business mix: Infosys's reported revenues for 2QFY2011, 40,000 in 2QFY2011.
which was way ahead of street as well as our expectation. Valuation: At a macro level, the indicators point towards bleak
Revenues stood at US $1,496mn with a 10.2% qoq growth outlook, but at the client level the company is witnessing
backed by volume growth of 7.2%, cross-currency benefit of increasing propensity to spend on the change-the-business
0.7% as well as better business mix (higher component of initiatives. We expect the company to record robust 25.6% CAGR
discretionary services like consulting & package implementation, in US$ revenues over FY2010-12. However, margin headwinds
product engineering & system integration) aiding revenue are expected to persist due to necessities like competitive wage
productivity by 2.5% qoq. hikes & promotion, higher onshore component in near-term
Operating margins rebound: EBITDA margins rebounded by with flat pricing situation as well as stronger rupee against the
165bp qoq to 33.3% on strong utilisation absorbing the previous USD. EBIDTA and PAT CAGR are expected to be subdued at
quarter's wage hike effect and favourable currency negating 17.0% and 13.8% over FY2010-12, respectively. At `3,076,
the effect of higher onshore effort. the stock is trading at fair valuations of 21.7x FY2012E earnings
and at par with historical 5-year average PE of 22x. Hence, we
FY2011 guidance revised upwards: Infosys has revised its
remain Neutral on the stock.
FY2011 revenue growth guidance from the earlier growth of
19-21% to 24-25% yoy at US $5.95-6.0bn, and EPS growth
from the earlier 5.2-9.6% to 10.4-12.2% yoy in US dollar terms. Key Financials (Consolidated, IFRS)
This is the first quarter ever when the company had incremental
revenues of more than US $100mn qoq, whereas in FY2010 it
Net sales 21,693 22,742 27,690 33,728
was only US $141mn, envisaging return of discretionary
spending. % chg 30.0 4.8 21.8 21.8

Return of large quality deals Net profit 5,990 6,219 6,787 8,085
% chg 28.6 3.8 9.1 19.1
The nature of spend has seen a tectonic shift in 1HFY2011
compared to FY2010. In FY2010, when the macro environment EBITDA margin (%) 33.2 34.5 32.4 32.0
was at the trough, the IT spend that was taking place was more FDEPS(`) 104.6 109.5 118.9 141.7
on run-the-business, whereas spend related to P/E(x) 29.4 28.1 25.9 21.7
change-the-business had completely dried up. In 1HFY2011, P/BV(x) 9.2 7.3 6.6 5.3
clients returned to spending on initiatives to drive efficiencies
RoE (%) 34.5 28.7 26.7 27.0
as well as invest for the future, which involves spend on
RoCE (%) 32.1 27.7 27.5 28.3
transformation engagements, client facing applications, R&D
engineering services for earliest go-to-market, and collaborate EV/Sales(x) 7.8 7.2 5.8 4.6
platforms. This has resulted in comeback of large, multi-year EV/EBITDA(x) 23.4 20.9 18.0 14.4
transformational deals with typical size of US $100-300mn. Source: Company, Angel Research; Price as on October 15, 2010;

Research Analyst - Srishti Anand


Focus

Sintex Industries - Accumulate Price - `424
Target Price - `458

Performance Highlights Resetting the FCCB conversion price: Sintex has reset the FCCB
conversion price to `493/share from `580/share, pursuant to
the terms and conditions of the bonds. Due to the resetting of
(` cr) % chg % chg
Net sales 923 911 1.4 715 29.0 the conversion price, on full conversion of FCCBs, the company
EBITDA 172 137 24.9 131 31.4 has to issue 1,84,97,464 equity shares of `2 each instead of
OPM (%) 18.6 15.1 350bp 18.2 34bp 1,57,22,844 equity shares of `2 each as per the original
PA
Adj. PAT 100 79 26.7 65 54.0
conversion price. Post conversion, the dilution will be 12.0%
Source: Company, Angel Research
and promoter's stake would come down to 30%.
For 2QFY2011, Sintex posted strong revenue and profit growth Outlook and valuation
of 29.0% and 54.0%, respectively, significantly above our
We have upgraded our earnings estimates for FY2011E and
estimates. Growth was mainly led by the monolithic segment
FY2012E by 3.4% and 8.0%, respectively. At `424, the stock is
and international subsidiaries. The working capital cycle
trading at 11.1x FY2012E earnings and 2.2x FY2012E BV.
remained stretched during 2QFY2011 due to higher billing
Historically, Sintex has traded at 13.0x its one-year forward
from the monolithic segment and is expected to remain higher.
average P/E, which makes current valuations attractive. Sintex's
Management reiterated its strong outlook for the domestic plastic
fundamentals have also strengthened with strong revenue
segment and has guided for potential acquisition in the
visibility and demand in the domestic plastic segment. We We
monolithic segment in 2HFY2011. Due to the recent run-up in
Target Price
maintain Accumulate on the stock, with a revised Target Price
the stock (28% over the last three months), we recommend
of `458 (12.0x FY2012E EPS).
Accumulate on the stock.

Monolithic segment and international subsidiaries drive
profitability: Sintex's consolidated net sales grew by 29.0% yoy
to `923cr. This was mainly due to strong revenue growth in the
monolithic segment (108% yoy), international subsidiaries
(27% yoy), Bright Autoplast (50%) and textile segment (24%).
Consolidated operating profit stood at `172cr, up 31.4% yoy. Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E
OPM stood at 18.6%, up 34bp yoy, due to higher contribution Net sales 3,136 3,319 4,099 5,053
from the high-margin monolithic segment. In 2QFY2011, Sintex % chg 35.5 5.9 23.5 23.3
booked one-time MTM profit (on FCCB) of `16cr under other Net profit 325 329 402 517
income and an interest expense of `4cr as one-time settlement
% chg 41.2 1.2 22.3 28.5
with ONGC. Consequently, PAT stood at `100cr.
EBITDA (%) 16.6 16.2 16.9 17.9
Working capital management will be a challenging task: The
EPS (`) 24.0 24.3 29.7 38.2
company's debtor days have gone up from 94 days in FY2009
P/E (x) 17.7 17.5 14.3 11.1
to 111 days in FY2010 in the event of increasing revenue
contribution from the monolithic segment. Further, creditor and P/BV (x) 3.9 3.4 2.8 2.2

other liabilities have gone down from 82 days in FY2009 to 67 RoE (%) 20.3 18.5 19.0 20.3
days in FY2010. This has put pressure on the working capital RoCE (%) 13.9 12.5 14.5 17.3
cycle. We expect revenue contribution from the monolithic EV/Sales (x) 2.1 2.2 1.9 1.4
segment to increase from 21% in FY2010 to 30% in FY2012,
EV/EBITDA (x) 12.8 13.4 11.0 8.1
which will keep high working capital cycles.
Source: Company, Angel Research; Price as on October 12, 2010

Research Analyst - Param Desai/Mihir Salot


Technical Picks | October 16, 2010

Time / Price-wise correction on the cards

Sensex (20125) / Nifty (6062)

In our previous Weekly report, we had mentioned that as the Exhibit 1: Sensex Daily chart
long as indices manage to hold 19730 / 5920 levels and cross
the high of the Shooting Star - 20707 / 6222 - then there is a
strong possibility of them testing all-time highs in the coming
weeks. The week began on a positive note and momentum on
the upside led the indices to cross the high of the Shooting Star
and register a fresh 52-week high of 20854 / 6284 where
profit booking emerged. The Sensex ended with net loss of
0.6%, whereas the Nifty lost 0.7% vis-à-vis the previous week.

Pattern Formation Source: Falcon

On the Daily chart, we are observing that prices are near
chart
Exhibit 2:Sensex Weekly chart
to the 20-days EMA (20087 / 6045 level). Normally, the said Shooting Star

moving average acts as a decent support. Hence, a bounce
from current levels cannot be ruled out (Refer Exhibit No.1).

On the Weekly chart after a Spinning Top, we are now
chart,
witnessing a "Shooting Star", which is a top reversal pattern.
The high of the Shooting Star 20854 / 6284 now becomes the
initial resistance for the market (Refer Exhibit No.2).

Future Outlook
The coming week is likely to witness a Time or Price-wise Source: Falcon
correction. On the Daily chart, if the prices hold the 20-days
EMA (20087 / 6045), there is a possibility that the high of the
"Shooting Star" (20854 / 6284) could be tested. In this case,
we may witness sideways Time-wise correction/consolidation.
On the other side, if the prices breach and close below the
20-days EMA (20087 / 6045 level) we may witness a
price-wise correction. In such a scenario, the indices may test
the Fibonacci retracement levels of 19693 - 19328 / 5925 -
5814 of the entire up-move which started from 17819 to
20854 / 5348 to 6284 levels.

Traders should keep in mind that the expected
Time/Price -wise correction is a part of an uptrend and is
Time/Price
rice-wise
healthy for the market in the longer run.


Technical Picks | October 16, 2010

Weekly Pivot Levels For Nifty 50 Stocks

SCRIPS R2 R1 PIVOT
PIVO S1 S2
SENSEX 21,121 20,623 20,357 19,859 19,592
NIFTY 6,366 6,214 6,132 5,981 5,899
BANK NIFTY 13,002 12,674 12,499 12,171 11,996
A.C.C. 1,060 1,028 1,010 978 959
ABB LTD. 953 933 915 894 876
AMBUJACEM 152 145 140 134 129
AXISBANK 1,648 1,575 1,536 1,463 1,423
BHARAT PETRO 791 743 716 668 641
BHARTIARTL 366 350 340 324 314
BHEL 2,654 2,590 2,548 2,483 2,441
CAIRN 362 350 343 331 324
CIPLA 347 340 335 327 322
DLF 402 388 379 365 355
GAIL 524 512 501 488 477
HCL TECHNOLO 467 449 438 420 408
HDFC BANK 2,510 2,448 2,394 2,332 2,277
HERO HONDA 1,937 1,863 1,820 1,747 1,703
HINDALCO 225 219 213 207 201
HINDUNILVR 315 307 299 290 282
HOUS DEV FIN 926 827 761 662 597
ICICI BANK 1,188 1,157 1,137 1,105 1,086
IDEA 77 75 73 70 68
IDFC 219 212 208 201 197
INFOSYS TECH 3,309 3,193 3,122 3,005 2,934
ITC 180 176 173 168 165
JINDL STL&PO 746 728 718 700 690
JPASSOCIAT 140 135 132 127 124
KOTAK BANK 539 524 511 496 484
LT 2,157 2,073 2,008 1,923 1,858
MAH & MAH 762 736 719 693 676
MARUTI 1,618 1,568 1,525 1,476 1,433
NTPC 223 214 207 198 192
ONGC CORP. 1,412 1,376 1,354 1,318 1,296
PNB 1,383 1,344 1,321 1,282 1,260
POWERGRID 114 110 108 104 102
RANBAXY LAB. 624 603 592 571 559
RCOM 193 184 179 171 166
REL.CAPITAL 888 862 847 822 806
RELIANCE 1,098 1,069 1,052 1,023 1,007
RELINFRA 1,129 1,098 1,077 1,045 1,024
RPOWER 170 165 162 158 155
SIEMENS 857 838 825 805 792
STATE BANK 3,388 3,277 3,214 3,102 3,039
STEEL AUTHOR 234 227 223 216 212
STER 190 184 180 174 169
SUN PHARMA. 2,158 2,099 2,066 2,007 1,974
SUZLON 61 59 58 56 55
TATA POWER 1,473 1,452 1,429 1,408 1,385
TATAMOTORS 1,241 1,199 1,152 1,110 1,063
TATASTEEL 674 655 640 621 606
TCS 1,045 998 963 916 882
UNITECH LTD 105 100 96 90 86
WIPRO 518 496 478 455 437

Technical Research Team


Derivatives Review | October 16, 2010

6000-6020 is strong support zone

Nifty spot has closed at 6063 this week, against a close of 6103 last week. The Put-Call Ratio has decreased from 1.30 to 1.28 levels
and the annualized Cost of Carry (CoC) is positive 13.59 The Open Interest of Nifty Futures has increased by 3.86
13.59%. 3.86%.
Put-Call Ratio Analysis Implied Volatility Analysis
During the week, with high volatility in the market most of the The market was very volatile in the week gone by. Historical
call and put options added huge open interest. The 6000 strike volatility of Nifty has increased by 23.47% from 16.99% to
continued to be the highest open interest holder amongst put 20.97%. IV of at-the-money options has increased from 18.00%
options, and the 6200 and 6300 call options have more or to 20.00%. Some liquid counters where HV has increased
less same open interest. Though the market has witnessed a significantly are CHAMBLFERT, VIJAYABANK, WIPRO, LT and
significant negative move on Friday, build up was observed in INFOSYSTCH. Stocks where HV has decreased are GLAXO,
the 6000 put (instead of unwinding), suggesting that the level TATACOMM, RELMEDIA, PIRHEALTH and MLL.
may act as a strong support for the market. On the higher
side, the 6250-6300 is important resistance zone for the market.

Open Interest Analysis Cost-of-Carry Analysis
Total open interest of the market is `1,81,867cr against The Nifty October future is trading at a premium of 29.35 points
`1,63,792cr last week and the stock futures open interest has against the premium of 30.00 points last week and the
increased from `48,650cr to `50,994cr. Stocks where significant November future is trading at a premium of 50.70 points. Few
short build up was observed over the week are ZEEL, EXIDEIND, large-cap stocks where Cost-of-Carry is substantially high are
MUNDRAPORT, DABUR and BPCL. Few stocks where open NHPC, HINDALCO, AXISBANK, RPOWER and ITC. Stocks where
interest has reduced mainly due to Long unwinding are IFCI, Cost-of-Carry is negative are AMBUJACEM, M&M,
BHEL, ICICIBANK, SBIN and KFA. HEROHONDA, ULTRACEMCO and TATAPOWER.

Derivative Strategy

Scrip : CAIRN CMP : `337.90/- Lot Size : 1000 Expiry Date (F&O) :
28th Oct, 2010
View: Range Bound Strategy: Short Straddle Expected Payoff

Buy/Sell Qty Scrip Strike Series Option Rate Closing Price
Price Expected
Price Type (Rs.) rofit/Loss
Profit/Loss

Sell 1000 CAIRN 340 Oct Call 6.50 Rs. 310.00 (`17.00)
Sell 1000 CAIRN 340 Oct Put 6.50 Rs. 320.00 (`7.00)

LBEP:
LBEP: `327.00/- Rs. 330.00 `3.00
HBEP: `353.00/-
HBEP: Rs. 340.00 `13.00
Max. Risk: Unlimited Profit:
Max. Profit: `13,000.00/- Rs. 350.00 `3.00
If CAIRN continues to trade above HBEP and below LBEP If CAIRN closes at `340 on expiry.
Rs. 360.00 (`7.00)
NOTE: Profit can be booked before expiry if Stock moves in the desired range and time value decays.
NOTE
TE:

Scrip : NIFTY CMP : 6062.65/- Lot Size : 50 Expiry Date (F&O) :
28th Oct, 2010
View: Mildly Bullish Strategy: Long Call Ladder Expected Payoff

Buy/Sell Qty Scrip Strike Series Option Rate Price
Closing Price Expected
rofit/Loss
Profit/Loss
Price Type (Rs.)
Buy 50 NIFTY 6100 Oct Call 84.00 6000.00 (`20.00)
Sell 50 NIFTY 6200 Oct Call 44.00 6100.00 (`20.00)
Sell 50 NIFTY 6300 Oct Call 20.00 6200.00 `80.00
LBEP: 6120.00/-
LBEP:
6300.00 `80.00
HBEP: 6380.00/-
HBEP:
Max. Risk: Unlimited Profit:
Max. Profit: `4,000.00/- 6400.00 (`20.00)
INifty continues to trade above HBEP
. If Nifty closes on or between 6200 and 6300
6500.00 (`120.00)
NOTE: Profit can be booked before expiry if Nifty moves in the favorable direction and time value decays.
NOTE
TE:


Fund Focus
Mutual Fund Focus | October 16, 2010

Recommended Schemes in Equity Diversified - Large Cap
Reliance RSF - Equity - Growth
Scheme Objective Key Ratios*
The primary investment objective is to seek capital appreciation Expense Ratio (%) 1.86
and/or to generate consistent returns by actively investing in equity Portfolio Turnover (%) 74
/ equity related securities. Standard Deviation 0.51
Sharpe 0.54
Fund at a Glance
Jensen 12.82
Face Value
Value `10
*Note: Ratios are for 3 Year Period, Yearly Rolling on daily frequency on CAGR Basis
NAV (14-Oct
Oct-10)
NAV (14-Oct-10) `34.51 as on 14th October, 2010
52-W (13-Oct
Oct-10)
52-Week High (13- Oct-10) `34.81
52-W Low
52-Week Low (03-Nov-09) `23.85
Investment Analysis** (as on 14th October 2010)
Fund Category Equity - Large Cap Years Total Amount Present
SIP Present Lump sum
Type Open Ended Invested Value Present Value
Value
Load
Entry Load NIL 1 year 12,000 14,157 15,612
Load
Exit Load 1% for redemption within 1 year 3 years 36,000 58,435 52,921
Minimum Inv.Inv. `500 5 years 60,000 1,20,290 2,06,188
Inception Date 9th June 2005 **Note: SIP Investment of `1000 per month
(30-Sept
Sept-10)
AUM (30-Sept-10) `3275.32 crores
Performance Analysis (% Returns)
Benchmark Index BSE 100
60
Fund Manger Mr. Omprakash Kuckien 50.06
50

Top 10 Sectors as on 30th September 2010 40 36.17
% of Net Assets 30.18
Telecom 3.12 30 27.98 25.99
Software & Consultancy… 11.11 20.45 20.18
20 18.18 16.91
Realty 5.33
Pharma 10.98 10
4.63
Oil & Gas 10.70
0
Miscellaneous 7.56 1 Year 2 Years 3 Years 5 Years Since Inception
Current Assets 3.61
Reliance RSF - Equity - Growth BSE100
Construction & Infrastructure 3.41
Banks 13.51 Note: Returns as on October 14, 2010 on CAGR basis
Auto 7.67
Returns (%) in various market cycles
0 5 10 15 Date Reliance RSF - Equity - Growth BSE 100
Up Phase
Top 10 Holdings as on 30th September 2010
09/03/2009 - 17/10/2009 135.24 119.41
Tata Motors 2.51 % of Net Assets
27/10/2008 - 04/11/2008 16.39 24.24
HCL Technologies 2.57
Adani Enterprises 2.80 24/07/2007 - 16/10/2007 18.91 21.58
Mphasis 2.89 Down Phase
Hindalco Industries 3.01
04/11/2008 - 09/03/2009 (20.92) (22.90)
ICICI Bank 3.40
TCS 4.25 18/03/2008 - 27/10/2008 (40.85) (44.52)
ONGC 4.29 16/10/2007 - 18/03/2008 (3.97) (21.05)
SBI 4.44
Other Equities 7.56
Investment Philosophy
0 1 2 3 4 5 6 7 8
Investment may be made in listed or unlisted securities. Listed
securities refer to securities listed on any of the recognized Stock
Portfolio Attributes (30-Sept-10) Exchanges.
Large Cap (%) 53.37 Investments may be made as secondary market purchases,
Mid Cap (%) 31.46 initial public offer, rights offers private placement etc.
Small Cap (%) 4.00 The Fund would identify companies for investment, based on
Equity (%) 96.39 the following criteria amongst others:
Cash & Equivalent (%) 3.61 √ Sound Management
√ Good track record of the company
√ Potential for future growth
√ Industry economic scenario
Disclaimer - Angel Broking Ltd is not responsible for any error or inaccuracy or any losses suffered on account of information contained in this report. Data source is from MFI Explorer. Mutual
Fund investments are subjected to market risk. Please read the Statement of Additional Information and Scheme Information document carefully before investing.


Fund Focus
Mutual Fund Focus |October 16, 2010

HDFC Top 200 - Growth

Scheme Objective Key Ratios*
To generate long term capital appreciation from a portfolio of Expense Ratio (%) 1.80
equity and equity-linked instruments primarily drawn from the Portfolio Turnover (%) 34.77
companies in BSE 200 index. Standard Deviation 0.44
Sharpe 0.47
Fund at a Glance
Jensen 7.94
Face Value
Value `10
*Note: Ratios are for 3 Year Period, Yearly Rolling on daily frequency on CAGR Basis
NAV (14- Oct-10)
NAV (14-Oct
Oct-10) `228.84 as on 14th October, 2010
52-W (13-Oct
Oct-10)
52-Week High (13- Oct-10) `230.84
52-Week Low (03-Nov-09)
52-W Low `162.80 Investment Analysis** (as on 14th October 2010)
Fund Category Equity - Large Cap Years Total Amount Present
SIP Present Lump sum
Type Open Ended Invested Value Present Value
Value
Load
Entry Load NIL 1 year 12,000 14,462 15,373
Load
Exit Load 1% for redemption within 1 year 3 years 36,000 59,235 51,109
Inv.
Minimum Inv. `5000 5 years 60,000 1,14,548 1,95,337
Inception Date 11th September 1996 **Note: SIP Investment of `1000 per month

AUM (30-Sept-10)
(30-Sept
Sept-10) `9226.39 crores
Performance Analysis (% Returns)
Benchmark Index BSE 200
50 46.72
Fund Manger Mr. Prashant Jain / Mr. Anand Laddha 45
38.4
40
35
Top 10 Sectors as on 30th September 2010 30
29.02 27.61 26.71
25 22.22
Telecom 2.98 % of Net Assets 19.95
20 16.11 16.3
Software & Consultancy Services 9.1
15
Pharma 7.18 10 5.11
Oil & Gas 15.02 5
HFC 3.26 0
FMCG 5.73 1 Year 2 Years 3 Years 5 Years Since Inception
Engineering & Capital Goods 4.89 HDFC Top 200 - Growth BSE200
Consumer Durables & Electronics 3.03 Note: Returns as on October 14, 2010 on CAGR basis
Banks 24.6
Auto 5.91 Investment Philosophy
0 5 10 15 20 25 30
The investment strategy is primarily restricted to the equity stocks
Top 10 Holdings as on 30 September 2010 th of BSE 200 Index.

Tata Motors - DVR 2.51
% of Net Assets It is intended to reduce risks while maintaining steady growth.
Bharti Airtel 2.98 Stock specific risk will be minimized by investing only in those
Titan Industries 3.03
companies / industries that have been thoroughly researched
ITC 3.64
L&T 3.83 by the investment manager's research team.
ONGC 3.9
Risk will also be reduced through diversification of the portfolio
Bank of Baroda 4.17
ICICI Bank 5.42
Fund Analysis
Infosys 5.62
SBI 8.78
The fund maintains a diversified portfolio, predominantly large
0 2 4 6 8 10 cap stocks.
It invests in fundamentally strong companies for longer horizon.
Portfolio Attributes (30-Sept-10) It does not take high cash exposure.
LLarge Cap (%) 86.68
The fund is overweight on Banking and Oil & Gas and continues
to bullish on large cap IT stocks.
Mid Cap (%) 8.58
The fund has been a consistent out performer against the
Small Cap (%) 2.51
benchmark BSE 200 index.
Equity (%) 97.77
Debt (%) 0.96
Cash & Equivalent (%) 1.27

Disclaimer - Angel Broking Ltd is not responsible for any error or inaccuracy or any losses suffered on account of information contained in this report. Data source is from MFI Explorer. Mutual
Fund investments are subjected to market risk. Please read the Statement of Additional Information and Scheme Information document carefully before investing.


Currency Corner | October 16, 2010

Currencies Weekly Performance Snapshot

The currency segment traded on a volatile note in the last week. the last week, touching its new 2-year high on Thursday. Spot
The US Dollar Index (DX) continued to decline on a weekly Rupee touched a high of 43.96 against the greenback but later
basis, but pared major losses towards the end of the week. As pared some gains towards the end of the week. The domestic
per the minutes of the FOMC meeting released on Tuesday, the currency gained on the back of huge capital inflows entering
Federal Reserve would focus on easing the monetary policy to the domestic markets. FII inflows have crossed the level of
boost the economic recovery and stabilize the inflation to the `1 trillion ($22 billion) in the first time in the history and it is
consistent level. If needed it would also pump more money in expected to increase further. FII inflows in October 2010 totaled
buying the assets to accelerate the growth of the economy. `22208.80 cr. FII inflows on year to date basis stand at
Economic data from the US continued to come on the poor `106569cr (till 15th October 2010).
side reiterating that additional support would be required to
boost the stalling recovery. As per data released in the last week, Exhibit 2: Spot Rupee Weekly Price Chart
US trade deficit gap widened by 8.8% to $46.3 billion in August,
much more than the forecasts of deficit of $43.5 billion. Initial
jobless claims in US increased by 13,000 to reach 462,000 in
the last week from the previous figure of 449,000 in the prior
week. Moreover, the consumer sentiment index declined to 67.9
in October, from 68.2 in the previous month.

On the Japanese front, the Yen continued to appreciate against
the dollar. The sharp gains in the Yen are becoming a serious
Source: Telequote
issue for Japan and it seems that further intervention in the
currency market would be very sooner. The country may run Fundamental and Technical Outlook
back into deflationary issues if appropriate action is not
undertaken. Despite the Japanese willing to intervene, it is facing Latest speech by the US Federal Reserve Chairman Ben
opposition from the other economies. Japan's action, if Bernanke indicated that the central bank is set to rise hiring
implemented may prove a hurdle to the US and the Euro zone, and counter the risks related to deflation. This has been a positive
which are pressurizing China to appreciate its currency. These statement as it shows the efforts the government plans to take
factors are leading to mixed sentiments amongst the investors. in order to reduce the unemployment rate from the current
9.6%. This comment by the Fed Chairman helped to provide
Exhibit 1: Currencies Performance
support to the DX, which is deteriorating on the back of risks
Currency 16th Oct 9th Oct Chg % Chg
related to slow economic recovery. On the back of this we expect
DX 77.04 77.18 (0.14) (0.2)
sharp appreciation in the Indian Rupee to be capped and the
Euro 1.3969 1.3926 0.0043 0.3
DX to strengthen. Also, the RBI is expected to intervene in order
INR 44.1 44.42 (0.32) (0.7)
to control sharp gains in the Rupee. This expectation in the
JPY 81.44 82.13 (0.69) (0.8)
markets will also lead to weakness in the currency.
GBP 1.5992 1.5963 0.0029 0.2
Source: Telequote Exhibit 3: Technical Levels
India's inflation rises to 8.62% in September Currency Support Resistance

India's Inflation rate increased to 8.62% in September from the DX 75.25 78.82
previous of 8.5% in August. Rising inflation is raising concerns Euro 1.3579 1.4257
that the Reserve Bank of India (RBI) would further hike interest INR 43.46 45.08
rates to curb inflation. The central bank has already raised
JPY 80.04 83.06
interest rates five times in this year.
GBP 1.5602 1.6298
Indian Rupee touches a new two year high. Source: Telequote
The Indian Rupee continued to appreciate against the dollar in

Research Analyst (Commodity) - Reena Walia Nair


Commodities Center | October 16, 2010

The Yellow MARCH continues

Time and again, investors have shown immense interest in the Last week witnessed new highs……
most favorite commodity Gold. Globally, well-known financial
Spot Gold prices touched a new record high of $1,387/oz in
Guru Jim Rogers is also expecting gold to trade around
the last week. On the Indian bourses, gold prices crossed the
$2,000/oz in the coming years. In the past three years, gold
crucial Rs20,000 mark. But the percentage rise in prices was
has benefited from the rising concern over the global economy.
only 2% during the week as compared to huge gains in silver to
Going back to history it has been noted that gold prices had
the tune of 4.6%.The white metal on the other hand recorded
touched a high of $850/oz in 1980 as the Soviet invasion of
touched a high of $24.91/oz in the last week and prices on the
Afghanistan dominated the global financial markets. But prices
MCX touched a high of Rs36,937. Reasons for the rise in prices
fell thereafter as the Fed Funds rate peaked at 19% in June
have now expanded. Currently, the apprehension over the state
1991. The US Dollar (DX) strengthened sharply after a rise in
of the US and Euro Zone remain the highlight of the financial
interest rates and led to downside pressure on gold prices. The
markets and have provided a pipeline to the rise in gold prices.
recovery in gold prices was seen only after the year 2001
Interest rates in the US continue to remain at historical lows
following the 9/11 terrorist attacks. Gold prices are heading
and the US Federal Reserve is expected to enter into another
for the 10th consecutive gain this year. Supportive fundamentals
asset purchase program to the tune of $1 trillion.
by way of the ongoing economic uncertainty coupled with rise
in investment demand are leading to rise in prices. Outlook
Historical Gold Price Chart - 1971 onwards Gold continues to be the star performer across the asset classes
as it not only provides returns but also acts as a protector of
wealth. We continue to maintain a bullish outlook on gold and
the fourth-quarter of 2010 is expected to be another remark-
able period as the metal will test new highs amid financial in-
security and failure of global policymakers to resolve the same.
Demand for gold with regard to festive season in India may
not be very supportive but continuing investment demand will
offset the same. But investment in gold from the Indian rural
Source: World Gold Council perspective will continue as rural India is less exposed to differ-
ent investment avenues and asset classes. For them gold re-
Physical Gold Demand Slows Down mains the ideal form of investment and also holds traditional
Gold still remains the traditional asset from the Indian value. This year especially due to the harvest of an expected
perspective, but higher gold prices have led to reduced physical bumper summer-season crop, farmers will have more money
buying. This is clearly seen from the latest data which shows in their hands which could be directed to gold investments.
that Indian imports in September declined sharply by 17% to For the next two quarters, MCX Gold can find Resistance at
32.6 tons of gold as against 39.7 tons in the same period last 20,300-20,400 levels and Major Resistance is observed at
year. As compared to September, physical gold sales are down 21,150 levels. Gold is looking bullish as per the chart and
as Mumbai is now seeing a rise in scrap sales by 20-25%, technical indicators are showing good buying opportunity in
whereas fresh gold sales have declined 30-40%. Jewelry every correction for short as well as medium term. Support is
demand is clearly set to weaken this festive season as levels seen at 19,300 levels and then major support is observed at
around Rs20,000. A decline in retail demand is expected to be 18,850 levels. In Spot Gold prices we expect the yellow metal
offset by way of rise in investment demand as concerns over to face resistance at 1405/1435 and find support at
further quantitative easing in the US is providing upside support 1320/1270 levels in the next two quarters.
to the yellow metal. Although over a period of time, Indian
markets could get accustomed to these high prices as gold
continues to remain the most important form of traditional
investment in India.

Research Analyst (Commodity) - Reena Walia Nair



Commodities Update

Exhibit 1: Commodities Weekly Performance month of January next year. Another reason which provided support
16th Oct. 9th Oct.. % Change to the turmeric prices was the demand from the overseas and
2010 2010 domestic buyers ahead of festivals. Mentha oil continued to trade
Non Agri- Commodities (MCX)
firm for the third second consecutive week by gaining more than
Top Gainers
Lead 106.10 101.10 4.9 3% on expectations of fall in production. Also, stockists are holding
Zinc 106.00 101.30 4.6 back the stocks on anticipation of further rise in the prices. Among
Silver 36205 34701 4.3 the Edible Oil Complex Soybean surged by more than 2.9 % due
Top Losers
to price supportive fundamentals. USDA supply demand report
Natural Gas 156.60 162.50 (3.6)
Agri Commodities (NCDEX) released in the previous week helped bulls to remain in power this
Top Gainers week too. Chana prices gained more than 2.4% during the last
Turmeric 12990 12556 3.5 week on emergence of fresh demand ahead of festive seasons
Mentha 995.2 965.8 3.0
and expectations of hike in MSP of Chana. Reports of drop in
Soybean 2187 2125.5 2.9
Top Losers
Losers Chickpea (Chana) output in Canada are also supporting the prices
Castor Seed 3501 3645 (4.0) to remain firm in the Indian markets. Among the major losers,
Kapas 724.5 743 (2.5) Castor Seed and Kapas plunged the most in the previous week by
4 percent and 2.5 percent respectively due to arrival pressure. All
International Perspective:
the major mandis of India in Kapas have reported the total daily
Commodity prices traded on a volatile note in the last week taking
arrivals of around 97,000 bales. On the other hand, arrivals of
cues from the economic updates, sentiments in the global equity
Castor seed were posted at 20,000 bags in Hyderabad and 6,000
markets and most importantly, the movement in the US Dollar
bags in Gujarat. Better output expectations in both the commodities
Index (DX). The DX- a gauge against a basket of six currencies
are further supporting the bears in the domestic market. Castor
continued to depreciate in the last week. However, the DX managed
seed prices may decline further as the arrivals are expected to
to pare some losses on Friday to close at 77.04 at the end of the week.
gain momentum in the coming days. However, Kapas prices may
Silver prices gained more than 4% on the MCX in the last week, not witness much downside due to tight demand supply situation
touching a record high of Rs 36,937 on Thursday. The white metal in the international market.
prices took cues form the rise in bullion prices coupled with gains
Exhibit 2: Major Economic Data Releases this week
in the metals as silver is widely used in industrial applications. We
Date Country Indicator Forecast Previous
expect the uptrend in silver prices to continue. The gold to silver
Oct-18 US TIC Long-Term Purchases - 61.2B
ratio, which measures number of silver ounces required to buy
Oct-18 US Industrial Production m/m 0.3% 0.2%
gold has fallen to 55 levels from 64 in a single month. Currently,
Oct- 19 US Building Permits 0.58M 0.57M
the apprehension over the state of the US and Euro Zone remain
Oct-19 US Housing Starts 0.59M 0.60M
the highlight of the financial markets and have provided a pipeline
Oct- 21 China GDP q/y 9.5% 10.3%
to the rise in gold and silver prices. Interest rates in the US continue
to remain at historical lows and the Federal Reserve is expected to Outlook: We expect gold and silver prices to keep the momentum
enter into another asset purchase program to the tune of $1 trillion. in the northwards direction in this week considering the fragile
This has dented the appeal and attractiveness of the dollar to a recovery in the US, the world's largest economy. Economic updates
large extent. Natural gas prices declined sharply mainly in the in the last week are further reiterating the need to boost recovery.
later part of the week after US natural gas inventory report indicated Crude oil prices will continue to take cues from the economic
more than expected increase in inventory levels. Natural gas updates from China and the US. Base metals will take cues from
inventories increase by 91 billion cubic feet in the week ending 9th Chinese data on GDP and other economic updates to be released
October. Markets had expected an increase of 88 bcf. Natural gas in the mid week as the Asian tiger is the major driver of base metal
inventories have been constantly rising in the last couple of weeks, prices. Among the agri commodities, Edible Oil complex may
thus hurting prices. continue to trade firm tracking bullish fundamentals in the
Agri Perspective: international market. Chana prices are likely to gain on the reports
Among the agri commodities, Turmeric gained the most by 3.5 of output concerns in Canada and expectation of hike in MSP of
percent due to lower stocks till the fresh arrivals expected in the Chana in the Indian markets.

Research Analyst (Commodity) - Nalini Rao/Reena Walia Nair



Commodity Technical Report
MCX December Gold MCX December Silver
Last week, Gold prices opened the week at `19,555 per 10 Last week, Silver prices opened at `34,800 per kg initially made
grams, initially made a low of 19545, then moved sharply a low of 34,575, then moved sharply higher, but found strong
higher and as expected found strong resistance at `20,028 resistance at `36,937 levels. Later Silver prices corrected towards
levels. Later prices corrected towards 19761 levels and Gold 35,876 levels and finally ended the week with a huge gain of
prices finally closed the week at `19,864 up by `335 as `1573 to close at `36,274 as compared with previous week's
compared with previous week's close of `19,529. close of `34,701.
Trend : UP (MCX GOLD Weekly Chart) Trend : UP (MCX SILVER Weekly Chart)

Source: Telequote Source: Telequote
Key Levels For Week :
Levels For Week Key Levels For Week :
Levels For Week
S1 - 19,684 R1 - 19,950 S1 - 35,740 R1 - 36,590
S2 - 19,480 R2 - 20,290 S2 - 34,990 R2 - 37,250
Recommended Strategy: Neutrlal Recommended Strategy: Neutral

MCX November Copper MCX November Crude
Last week, Copper prices opened the week at `370 level, initially Last week Crude prices opened the week at `3738 levels initially
moved sharply lower, but found good support at `367.20 levels. moved higher, but found strong resistance at 3769 levels. Later
Later prices moved sharply higher and touched a high of 377.30 prices fell sharply and made a low of 3643 and finally ended
and finally closed the week at `375.85 up by `6.15 as compared the week at `3665 with a loss of `69 as compared with previous
with previous week's close of `369.70. week's close of `3734.

Trend : UP (MCX COPPER Weekly Chart) Trend : SIDEWAYS (MCX CRUDEOIL Weekly Chart)

Source: Telequote Source: Telequote

Key Levels For Week :
Levels For Week Key Levels For Week :
Levels For Week
S1 - 371.0 R1 - 379.40 S1 - 3616 R1 - 3713
S2 - 364.0 R2 - 384.0 S2 - 3550 R2 - 3770
Recommended Strategy: Buy MCX Copper November in the range Recommended Strategy: Neutral.
stop-loss Targeting
of 370-371 with strict stop -loss below 364 Targeting initially 380
and then 384.

Sr. Technical Analyst (Commodities) - Samson Pasam


Weekly Review

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Weekly Review

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Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angelbroking.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angelbroking.com
Vaishali Jajoo Automobile vaishali.jajoo@angelbroking.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angelbroking.com
Anand Shah FMCG , Media anand.shah@angelbroking.com
Deepak Pareek Oil & Gas deepak.pareek@angelbroking.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angelbroking.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angelbroking.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@aangelbroking.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angelbroking.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angelbroking.com
Paresh Jain Metals & Mining pareshn.jain@angelbroking.com
Amit Rane Banking amitn.rane@angelbroking.com
John Perinchery Capital Goods john.perinchery@angelbroking.com
Srishti Anand IT, Telecom srishti.anand@angelbroking.com
Jai Sharda Mid-cap jai.sharda@angelbroking.com
Sharan Lillaney Mid-cap sharanb.lillaney@angelbroking.com
Naitik Mody Mid-cap naitiky.mody@angelbroking.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angelbroking.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angelbroking.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angelbroking.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angelbroking.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angelbroking.com
Yaresh Kothari Research Associate (Automobile) yareshb.kothari@angelbroking.com
Shrinivas Bhutda Research Associate (Banking) shrinivas.bhutda@angelbroking.com
Sreekanth P .V.S Research Associate (FMCG, Media) sreekanth.s@angelbroking.com
Hemang Thaker Research Associate (Capital Goods) hemang.thaker@angelbroking.com
Nitin Arora Research Associate (Infra, Real Estate) nitin.arora@angelbroking.com
Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angelbroking.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angelbroking.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angelbroking.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angelbroking.com

Institutional Sales Team:

Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angelbroking.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angelbroking.com
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Weekly review 16-10-10

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Weekly review 16-10-10