07 January 2011

BoA ML: India Strategy 3QFY11 Preview: Growth still driven by JLR, commodities

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India Strategy
3QFY11 Preview: Growth still driven by JLR, commodities


Sectors (click on sector name for details)



Sectors (click on sector name above for details)

Bank Of America ML: Utilities/ Power: 3QFY11 Preview India

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Utilities
Potential Result Outperformer: Adani Power
Potential Result Underperformers: NTPC, JP Power

In the Utility sector, markets will likely be focused on the extent of fall in merchant
power rates and progress on future plans such as expansion in generation
capacity, update on new IPP projects and AT&C loss reduction in New Delhi JVs
of Reliance and Tata Power.

BoA ML: Telecom : 3QFY11 Preview India

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Telecom
Potential Result Outperformer: Bharti
Potential Result Underperformer: Reliance Com


Result Expectations – Key Highlights
No major upside drivers this quarter: Prima facie, 3Q FY11 is likely to be a
strong quarter for the industry due to a combination of stronger net adds and
modest attrition in revenue per minute. For the majors (Bharti, RCom and Idea)
collectively, we forecast 3Q FY11E wireless revenues for India to grow ~5-6%
QoQ vs 0% QoQ growth witnessed in 2Q FY11.

BoA ML: Real Estate: 3QFY11 Preview India

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Real Estate
Potential Result Outperformer: DLF
Potential Result Underperformer: IBREL


Result Expectations – Key Highlights
We expect revenue growth to pick up pace QoQ as well as YoY as most of the
projects launched in 2009 are now expected to start flowing in the revenues.
EBITDA margins are expected to show improvement as price realizations in 2010
have been 10-20% higher than 2009 while construction costs have remained
stable. The focus will likely be on cash flows from operations and pre-sales
volumes in the seasonally strong 3Q. While the pre-sale volumes are expected to
show improvement compared to 2Q for most of the developers, 3Q is unlikely to
be a blockbuster qtr as developers held back new launches in hope of improving
realizations and lesser bandwidth on execution. We do expect cash surplus
leading to lower leverage across developers as execution is expected to pick up
pace post monsoon.

BoA ML: Oil & Gas, Petrochemicals: 3QFY11 Preview India

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Oil & Gas, Petrochemicals
Potential Result Outperformers: ONGC, Reliance
Potential Result Underperformers:

􀂄 ONGC marker crude Bonny Light up 16% YoY and 13% QoQ at
US$88/bbl: Brent price at US$86.9/bbl is up 16% YoY and 14% QoQ in 3Q
FY11. ONGC’s marker crude Bonny Light at US$88.4/bbl is up 16% YoY in
3Q FY11 from US$76.3/bbl in 3Q FY10. Bonny Light is also up 13% QoQ
vis-à-vis US$78.1/bbl in 2Q FY11.

BoA ML: Metals: 3QFY11 Preview India

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Metals
Potential Result Outperformer: Nalco
Potential Result Underperformer: Tata Steel


In the Dec Q on a QoQ basis, we expect aggregate profit to increase 21%,
EBITDA to grow 18% and sales to grow 1%. We expect profits to grow 15% and
EBITDA to grow 7% on a YoY basis. We expect base metal companies to benefit
from increase in base metal prices during 3Q – Al and Zn LME were up 15%QoQ
during 3Q. In steel companies, we expect domestic realizations to be marginally
higher QoQ, but this will be partially offset by higher raw material costs.

BoA ML: Pharmaceuticals: 3QFY11 Preview India

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Pharmaceuticals
Potential Result Outperformers: Lupin, Cadila, Divis
Potential Result Underperformer: GSK

Growth momentum sustains; US, India to be key drivers
We expect most of our coverage universe to report strong growth on a yoy basis.
Seasonally weak quarter for domestic formulations may result in a tepid QoQ
performance. US and India should be the key growth drivers for most companies,
aided by new product approvals. Gradual revival of growth momentum in
emerging markets would further aid topline growth. Stability in forex rates should
limit forex gains/losses except on realized contracts. Overall for the sector
(excluding Ranbaxy, Piramal), we expect average sales growth of 17% YoY,
EBITDA growth of 27% YoY for our coverage universe, primarily led by Dr
Reddy’s (niche launches).

BoA ML: Industrials: 3QFY11 Preview India

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Industrials
Potential Result Outperformers: NA
Potential Result Underperformers: ABB, JPA, IVRC


E&C
􀂄 We expect 17%YoY growth in rec. PAT of Indian Engineering & Construction
(E&C) majors (ex-Suzlon) led by improved execution (BHEL, L&T, IVRC)
despite a) margin pressure on high base – IVRC; b) higher fixed costs (interest
and depreciation) – BHEL, IVRC, L&T, NJCC and c) higher tax – ABB, BHEL,
L&T. We expect Suzlon to materially narrow rec. loss of Rs520mn (vs Rs2.3bn
of loss in 3Q10) on rebound in domestic wind markets.

BoA ML: IT and BPO Services: 3QFY11 Preview India

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IT and BPO Services
Potential Result Outperformers: HCLT, Educomp
Potential Result Underperformer: Wipro


Strong rev growth for seasonally weak qtr
In a seasonally weak quarter with lower working days, we expect strong top-line
performance by IT services majors to continue, with a 5.5%-7% qoq growth in
USD revenue for the top vendors (vs 6-12% qoq last quarter). This builds in about
1% benefit from cross-currency. INR basis, reported revenue growth likely to be
lower at 2-3% qoq given ~4% appreciation of INR vs. USD in the quarter.

BoA ML: Consumer/FMCG: 3QFY11 Preview India

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Consumer/ FMCG

Potential Outperformers: Godrej Consumers, Radico, Pantaloon, Titan
Potential Underperformers: HUL, Colgate

We believe in Dec Q as well the Liquor and Retail companies will significantly
outperform Staples in terms of earnings growth. Strong consumer demand for
discretionary items and favorable turn in terms of margins should support sharp
earnings growth for these sectors, in our view.

BoA ML: Cement: 3QFY11 Preview India

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Cement
Potential Result Outperformer: Ambuja
Potential Result Underperformer: Shree


Result Expectations – Key Highlights
�� Profits to recover QoQ but stay weak on a YoY basis: For Oct-Dec ‘10,
we estimate sector EBITDA to decline ~29% YoY despite a sharp 59% QoQ
recovery. The YoY decline is expected to be primarily due to lower volumes
and higher operating costs. On a QoQ basis, profit recovery will be led by
improved cement prices. The sector’s overall EBITDA per ton is forecast at
~Rs647/ton, down 29% YoY but up 47% QoQ.

BoA ML: Banks/Financials: 3QFY11 Preview India

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Sector Name: India Financials
Potential Result Outperformer: BOI
Potential Result Underperformer: Union Bank


Result Expectations – Key Highlights
Banking stocks have corrected by 10-25% from their recent peaks for various
recent issues like the ‘bribery for loans’ investigation, 2G Telecom and MFI loans
concerns, liquidity concerns and pension liabilities for PSU banks. But, we believe
this is overdone and is not likely to be reflected in the oncoming 3Q earnings
season.

Bank of America Merill Lynch: Autos: India - 3QFY11 Preview

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Sector Name - Autos
Potential Result Outperformer: Apollo Tyres
Potential Result Underperformer: Bajaj Auto
Result Expectations – Key Highlights
�� We expect strong YoY growth in profit and sales aided by a low comparable
base. However, on a sequential basis, we expect decline in net profit despite
single digit growth in sales. This reflects fall in margins, impacted by high
costs related to commodity prices and currency fluctuations.

Grey Market Premium: SPY; C. Mahendra, Midvalley IPOs: Jan 7th, 2011

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Company Name
Offer Price
Premium
(Rs.)
(Rs.)
Shekhawati Poly Yarn
30 (Fixed)
0.5 to 1
C. Mahendra Export
95 to 110
2 to 3
Midvalley entertainment
64 to 70
4 to 5

FII & DII trading activity on NSE and BSE as on 07-Jan-2011

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FII trading activity on NSE and BSE on Capital Market Segment
The following is combined FII trading data across NSE and BSE collated on the basis of trades executed by FIIs on 07-Jan-2011.
FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
FII07-Jan-20112397.193437.93-1040.74

 
 
Domestic Institutional Investors trading activity on NSE and BSE on Capital Market Segment
The following is combined Domestic Institutional Investors trading data across NSE and BSE collated on the basis of trades executed by Banks, DFIs, Insurance, MFs and New Pension System on 07-Jan-2011.
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
CategoryDateBuy ValueSell ValueNet Value
DII07-Jan-20112179.561063.731115.83
 
--

FII DERIVATIVES STATISTICS FOR 07-Jan-2011

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FII DERIVATIVES STATISTICS FOR 07-Jan-2011 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES785342330.721194543560.3641608212214.94-1229.64
INDEX OPTIONS35849410641.182927578760.57141664141634.041880.60
STOCK FUTURES529101490.64737402118.45128730234410.32-627.82
STOCK OPTIONS19586613.1120888654.9014990453.85-41.79
      Total-18.65

Midvalley Entertainment - IPO Note (Keynote Capitals)

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Issue Highlights

Price Band                                        :     `64 - 70per share                                                                           
Minimum Bid Lot Size                      :     95 Equity Shares
Maximum Bid Lot Size                      :     2850 Equity Shares
IPO open during                               :     January 6 - 12, 2011
Book Running Lead Managers          :     Aryaman Financial Services Ltd.
To list on                                          :     NSE & BSE
IPO Grading                                      :     1 / 5 (Brickworks)
Market Cap post-listing                     :     `240Cr (based on the cap price)
Market Cap of Free-Float                   :     `150Cr (based on the cap price)


IPO of 8.6mn equity shares of `10 each, aggregating to `60Cr or $13.45mn (at the cap price).

Kotak Securities: India News Roundup: 7th January 2011

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Economy News
4 Wholesale food inflation saw a sharp increase to 18.32 per cent for the
week ended December 25(BS).
4 THE International Monetary Fund (IMF) expects Indian economy to grow
by 8.8% during the current financial year,up from 7.4% a year ago(ET).
4 Direct tax collections in the first nine months (April-December) of the
current financial year increased 19.47 per cent to touch Rs 2989.58 bn,
compared with Rs 2502.32 bn in the corresponding period of 2009-
10.(BS)

Best Performing Mutual Funds in 2010

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Equity Diversified1 year(%)
DSP-BR Micro Cap38.6
ICICI Pru Discovery26.1
SBI Emerging-Busi31.3
Can Robeco FORCE31.7
HDFC Mid-Cap Oppor31.4
Debt - Long Term1 year(%)
Birla SL GSec-LTF9.3
ICICI Pru Gilt Inv -PF5.6
Birla Dynamic Bond5.5
ICICI Pru Gilt (IP)5.2
Reliance MTF (G)5.5
Equity Tax Saving1 year(%)
HDFC Long Term Adv27.6
ICICI Pru Tax Plan23.3
Fidelity Tax Advantage28.7
HDFC Tax Saver25.7
Can Robeco Eqty Tax23.9
Debt - Short Term1 year(%)
UTI Short Term Inc5.3
Can Robeco Income4.9
IDFC SSIF-MTP-A6.7
IDFC Ultra Short Term5.6
HDFC High Inter-STP4.9
Balanced1 year(%)
HDFC Childrens Gift31.0
HDFC Prudence Fund25.9
HDFC Balanced Fund24.5
ICICI Pru CCP-Gift22.6
Reliance RSF-Bal21.6
Monthly Income Plan1 year(%)
HDFC MIP-LTP10.7
Reliance MIP8.7
ICICI Pru MIP 259.0
Birla MIP II-Wealth 257.6
Birla Monthly Income7.7
Debt - Floating Rate1 year(%)
Birla SL FRF-LTP-RP6.2
Tata Floater Fund5.7
Kotak Floater LTP5.7
HDFC Float Rate-LTP5.1
Templeton FRIF-LTP5.4