Market Outlook 050912

Market Outlook
September 5, 2012
Dealers Diary
Indian markets are expected to open lower following negative opening in the SGX Nifty and most of the Asian markets. The US markets overcame early weakness on Tuesday and finished the session with a mixed performance. Investors initially reacted negatively to the latest batch of economic reports. According to a closely-watched industry survey, U.S. manufacturing activity fell in August at the fastest pace since 2009. Europe remains a concern as Moody's has warned of a possible downgrade of the European Union's credit rating. The debt rating agency downgraded its outlook on the region to negative from stable. This followed negative outlooks given to EU heavyweights as Germany and France. Meanwhile, Indian shares rebounded from early losses to end modestly higher on Tuesday, supported by gains in heavyweight Reliance Industries and automakers despite mixed sales numbers for August.
Domestic Indices
Chg (%)
(Pts)
(Close)
BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT
Global Indices
0.3 0.4 0.5 0.4 (0.0) 0.6 0.5 0.6 0.8 1.2 (0.1)
Chg (%)
56.5 17,441 20.3 31.8 25.3 (3.1) 38.2 57.9 80.0 97.3 (2.7)
(Pts)
5,274 6,042 6,423 7,467 6,975 9,335 9,710 8,243 5,732

(Close)
60.1 11,502
Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com
Indian ADRs
(0.4) 0.3 (1.5) (0.1) (0.2) (0.8)

Chg (%)
(54.9) 13,036 8.1 (86.4) (8.4) (5.7) (15.5)

(Pts)
Markets Today
The trend deciding level for the day is 17,401 / 5,262 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,493 17,545 / 5,291 5,307 levels. However, if NIFTY trades below 17,401 / 5,262 levels for the first half-an-hour of trade then it may correct up to 17,349 17,256 / 5,245 5,217 levels.
Indices SENSEX NIFTY S2 17,256 5,217 S1 17,349 5,245 PIVOT 17,401 5,262 R1 17,493 5,291 R2 17,545 5,307
3,075 5,672 8,776 3,012 2,044

(Close)
(0.7) (129.3) 19,430
INFY WIT IBN HDB

Advances / Declines
(0.8) 0.4 1.6 (0.2)
(0.3) 0.0 0.5 (0.1)

BSE
$42.2 $7.8 $33.1 $33.5

NSE
News Analysis
Cement dispatches August 2012 CAG report blames for GAIL for unduly benefiting private power companies Tech Mahindra acquires Hutchison Global Services for US$87.1mn South Indian Bank is raising US $ 79mn by share sale S. Kumars Nationwide clarification
Refer detailed news analysis on the following page
Advances Declines Unchanged

Volumes (` cr)
1,531 1,242 137
814 591 102
Net Inflows (September 3, 2012)

` cr FII MFs Purch 1,666 281 Sales 1,713 431 Net (47) (150) MTD (47) (150) YTD 62,964 (9,584)
BSE NSE
1,635 7,812
FII Derivatives (September 3, 2012)

` cr Index Futures Stock Futures Purch 624 1,013 Sales 941 1,420 Net (317) (407) Open Interest 9,962 24,180
Gainers / Losers
Gainers Company
Indiabulls Real Est Torrent Power Opto Circuits Dish TV India Indiabulls Fin
Losers Company
Castrol India Wockhardt Bajaj Holdings Amtek Auto Oracle Fin
Price (`)
45 157 128 70 196
chg (%)
7.6 6.9 6.8 6.4 6.2
Price (`)
285 1,185 751 90 2,968
chg (%)
(3.2) (2.9) (2.3) (2.2) (2.1)
www.angelbroking.com
Market Outlook
September 5, 2012
Cement dispatches August 2012

For August 2012 ACC posted a 6.9% yoy decline in its dispatches to 1.75mn tonne (1.88mn tonne). The south west monsoon picked up in the month of August after remaining weak in June and July, resulting in lower cement demand. We remain neutral on ACC.
CAG report blames for GAIL for unduly benefiting private power companies
CAG, in a report, has blamed GAIL for giving undue advantage amounting to `246cr to private power companies by supplying natural gas at subsidized rates. The report states that GAIL supplied natural gas at subsidized rates to ineligible power producers who were generating and supplying electricity to their consumers at commercial rates. It stated that this was a violation of the Oil Ministry's directives which require that the government administered gas was meant only for power companies generating electricity for supply to the Grid for distribution through public utilities. As per CAG, this led to under recovery of `246cr in Gas Pool Account and undue benefit to private producers. It also criticized GAIL for failure to check subsidized gas being used by fertilizer companies for manufacturing nonfertilizer products. Further, CAG blamed GAIL for its failure to recover `30cr from Reliance Industries in penalties for over-drawing gas for one month. As of now, we do not expect a significant impact on GAILs financials due to this report. However, until further clarity emerges, we maintain our Neutral view on GAIL.
Tech Mahindra acquires Hutchison Global Services for US$87.1mn

Tech Mahindra has announced the acquisition of a 100% stake in Hutchison Global Services (HGS) for US$87.1mn, payable upfront. The company will fund this through debt and internal cash. The acquired company, HGS, had US$20mn of cash in its books. So on a net basis the cost of acquisition for Tech Mahindra comes out to be US$67.1mn. HGS offers back-office and customer-service support to the group's mobile firm in the UK and Ireland as well as its joint venture with Vodafone Group PLC in Australia. It has a staff of about 11,500 employed across facilities in the western cities of Mumbai and Pune. It posted annual revenue of US$160mn with operating margins in mid teens. As part of the deal, clients of HGS have committed to procure services worth US$845mn over a five-year period, and have agreed to HGS being their exclusive provider of certain agreed services in India. This deal will start adding to Tech Mahindras sales and earnings from the coming quarter. The management has indicated that this deal will be EPS accretive for the company. HGS provides customer lifecycle operations to clients in the UK, Ireland and Australia and has an associate base of over 11,500 employees. HGS operates in Mumbai and Pune and is among the largest captives in the telecom domain. As per Tech Mahindra, this acquisition will provide significant enhancement of the companys expertise in the customer management space and will be a key component of strategic plans going forward. It added that this deal will also enable Tech Mahindra to leverage the acquired capabilities and scale for
Market Outlook
September 5, 2012
expanding the scope of their existing services to other parts of the Hutchison group and to other customers and verticals. This deal will give a boost to Tech Mahindras revenue at a time when the company is facing problems due to drop of sales from BT. But this deal will be operating margin dilutive for Tech Mahindra as BPO business has lower margins than other IT services. Along with this deal, the company has signed a separate outsourcing deal with Hutchison UK. This deal will be EPS accretive for Tech Mahindra. We maintain our positive stance on Tech Mahindra and keep estimates under review.
South Indian Bank is raising US $ 79mn by share sale

As per media reports, South Indian Bank is raising US$79mn (`440cr) by selling shares to institutional investors. The floor price for the share sale has been set at `22.13. Earlier the bank has said in July that it is planning to raise a sum of `500cr through sale of shares. The bank has Tier-I CAR at 10.9% and total CAR at 13.16% as of 1QFY2013. At the current market price, the stock is trading at 0.9x FY2014E ABV. We recommend a Buy rating on the stock with a target price of `25.
S. Kumars Nationwide clarification

As per media news, on Monday, the Ministry of Corporate Affairs had said that the Serious Fraud Investigation Office (SFIO) has received complaints about alleged violation of corporate governance and other norms by S. Kumars Nationwide and the matter is being examined by the Registrar of Companies (RoC). Meanwhile, the companys management clarified the matter by informing BSE that it had received a letter from RoC, Mumbai, asking for comments and clarifications on certain issues raised by an individual. It said the matters raised by the individual are frivolous and baseless. The company also said that there is no other review being conducted by any government or regulatory authority with regard to this matter.
Economic and Political News

Pressure on PM mounts as CBI books 5 Allottees in coalgate probe DoT panel wants foreign players to set up local servers Hotel rates up on strong demand from tourists: Study
Corporate News
ITC keen to bid for Delhis Mansingh Hotel RCOM hopes to seal tower biz sale next year Jet Airways, Air India hike fuel surcharge on domestic flights
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

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Market Outlook

5,274 6,042 6,423 7,467 6,975 9,335 9,710 8,243 5,732

(0.4) 0.3 (1.5) (0.1) (0.2) (0.8)

(54.9) 13,036 8.1 (86.4) (8.4) (5.7) (15.5)

3,075 5,672 8,776 3,012 2,044

(0.7) (129.3) 19,430

INFY WIT IBN HDB

(0.8) 0.4 1.6 (0.2)

(0.3) 0.0 0.5 (0.1)

$42.2 $7.8 $33.1 $33.5

Advances Declines Unchanged

1,531 1,242 137

814 591 102

Net Inflows (September 3, 2012)

FII Derivatives (September 3, 2012)

Cement dispatches August 2012

Tech Mahindra acquires Hutchison Global Services for US$87.1mn

South Indian Bank is raising US $ 79mn by share sale

S. Kumars Nationwide clarification

Economic and Political News

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