HSBC: Equity Insights Quarterly: A calmer third year

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Equity Insights Quarterly
A calmer third year
􀀗 With double-digit earnings growth and no more PE derating,
we expect the global equities index to rise 11% this year
􀀗 A more stable economic environment suggests stockpicking
and investment themes will matter more than macro factors
􀀗 We stick to our preference for emerging markets

Indian IPOs Grey Market Premium: Jan 8, 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	4 to 5
Midvalley entertainment	64 to 70	6 to 7

Buy Siemens- FY10 Annual Report takeaways:: Religare Research

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Siemens Ltd
FY10 Annual Report takeaways
Key takeaways from Siemens (SIEM) FY10 annual report are as follows:
Signs of improvement in working capital management: During the year, working
capital requirements for SIEM fell on account of improvement in both, its debtor
and creditor positions, even as (a) inventories (69 days) were at their highest
levels in the last five years, (b) advances from customers declined, despite an
increase in order inflows in FY10.

Upstream Oil Companies discounting 50% sharing of under-recoveries:: Kotak Securities

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Energy
India
Stocks discounting 50% sharing of under-recoveries. We believe the current stock
prices of ONGC and OIL are discounting a very unlikely scenario of upstream companies
bearing 50% of the gross under-recoveries. We would advise investors to make use of
the recent correction in stock prices to buy these stocks given potential upside of
19-22% to our 12-month target prices. We upgrade OIL to BUY from ADD and
maintain our BUY rating on ONGC. We have revised our earnings assumptions to reflect
(1) higher crude oil prices, (2) higher under-recoveries and (3) new exchange rate
assumptions.

ICICI Securities: Cement: Tepid demand weighs on volume growth…

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Tepid demand weighs on volume growth… 
Cement majors posted subdued volume growth
The total cement volume is expected to grow by ~5.3% YoY in December
2010 as the six major companies, holding ~50% of the total cement
capacity, reported a 5% increase in dispatches for the month. On an MoM
basis, the overall volume of the six companies was up ~21%. The
positive growth during the month came on the back of marginal growth in
cement demand from the infrastructure segment as the monsoon season
is nearing its end.

JPMorgan: India 2011 - What do we worry about?

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• Indian economy and the equity market have stepped into 2011
facing some powerful headwinds. Government policy will have to
deal with these decisively early in the year. In this report, we
highlight a few key macro risks for Indian equity investors.

UBS- Oil & Natural Gas Corp : Diesel price hike delay poses risk to our PT

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UBS Investment Research
Oil & Natural Gas Corporation
Diesel price hike delay poses risk to our PT


􀂄 Key catalyst for stock performance likely to be delayed
We upgraded the stock to Buy on 13 December on higher oil prices and
expectation of favourable government action on royalty payments for MBA fields.
A modest hike in diesel price is one of the key catalysts for the recent upgrade.
However, the expected diesel hike has not yet happened and given the rising food
inflation, we believe that the probability of a further delay has increased. Food
inflation has risen to a 10-week high of 14.4% and any hike in diesel prices (4.7%
weight in WPI) will translate into higher food prices.

Kotak Securities: OIL & GAS - Q3FY11 preview

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OIL & GAS
As per IEA's December 2010 outlook, the demand for crude oil has
increased due to exceptional cold winter weather in Q3FY11 leading prices
to two year highs at over USD$90/bbl.
EIA's Demand Outlook: Global oil product demand is revised up by 130
kbopd to 87.4 Mn bopd in 2010, and by 260 kbopd to 88.8 Mn bopd in
2011, on stronger data from OECD North America and non-OECD Asia.
Growth in 2010 (+2.5 Mn bopd y-o-y) is largely driven by buoyant gasoil
demand, notably in 3Q10, but expansion should slow to +1.3 Mn bopd in
2011 as temporarily supportive factors fade.

Kotak Securities: METALS & MINING- Q3FY11 preview

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METALS & MINING
n Fed announces QE2 on 3 Nov 2010 - We have a positive view on steel, metals
& mining stocks post official US Fed announcement of quantitative easing
which envisaged buying $600bn in new purchases and reinvesting $250bn to
$300bn of the proceeds from maturing mortgage backed securities over eight
months up to June 2011. We believe this is likely to not only support global
demand but also likely to flush enough liquidity to appreciate various asset
classes including industrial commodities like steel, base metals and ferrous commodities.
n PMI data has improved and stabilized – Purchase Manager Indices (PMI)
data for key geographies China, Europe and US was been hovering between ~
53 to 55 levels and that is supportive of the global commodity demand.

Kotak Securities: Media: Q3FY11 preview

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MEDIA
Advertisement expenditures in 3QFY11 will likely be strong on account of
the festival season and renewed vigor in consumption. Year -on - year
growth shall also benefit from a favorable base effect, as Dussehra fell in
2QFY10. We expect advertising revenues to grow at a robust 20-30% y/y
across companies under our coverage universe. Print media companies
under our coverage are likely to continue showing declines in circulation
revenues, on account of heightened competitive intensity in Jharkhand and
UP. Rise in newsprint prices as well as higher consumption of newsprint
(rising circulation across newspaper companies) shall impact margins of the
companies negatively. We expect ENIL to register strong growth on the
back of a strong top-line as well as lower expenses, while UTV shall likely
register declines in PAT on account of lower margins on new films.

Edelweiss: Pantaloon Retail - festivals perk up sales; valuations attractive; Buy

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Pantaloon Retail (PF IN, INR 372, Buy)

We recently met the management of Pantaloon Retail (PRIL) to address key investor concerns. Following are the key takeaways from our interaction:

n  Gradual restructuring underway

PRIL has completed the listing of Future Mall Management and has merged Home Solutions Retail India Limited (HSRIL) into itself. Company is also planning to hive off Future Capital by September 2011. However, demerger of the insurance arm is contingent on approval of Insurance Regulatory and Development Authority (IRDA). Promoters on board provide strategic vision and all key functions are now being run by professionals with relevant experience.

Kotak Securities: INFORMATION TECHNOLOGY- Q3FY11 preview

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INFORMATION TECHNOLOGY
We expect companies under our coverage to report a sequential revenue
growth of 2.4%, largely driven by volumes. Volumes for the Top 4
companies are expected to rise by 5% - 8%, which is impressive in the
backdrop of a seasonally soft quarter. Average realizations are expected to
remain stable. While cross currency volatility should help, the appreciation
of rupee v/s USD and GBP should set off those gains.
EBIDTA margins are expected to be marginally lower as cost efficiencies
and scale benefits nullify the impact of rupee appreciation. With the
quarter - end rupee / USD exchange rate being almost at the 2QFY11 end
levels, we expect minor forex losses / gains for the quarter. The average
rate is also very near to the 2QFY11 end rate.

Kotak Securities: Banking Q3FY11 preview

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BANKING
Strong quarter along with mounting risks
q We expect strong core performance during Q3FY11 for banks under our
coverage aided by low base of last year. Net Interest Income (NII) is expected
to register a robust growth of 26.6% YoY during Q3FY11 on
back of strong credit growth and YoY improvement in NIMs. However,
net income growth for banks under our coverage is likely to be slightly
moderate at 16.7% YoY on back of lower treasury gains and higher provisions.

Kotak Securities: CONSTRUCTION - Q3FY11 preview

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CONSTRUCTION
Construction sector performance during 9MFY11 had been impacted by
lower than expected order inflows as well as lower than expected
execution during H1FY11. Order inflow was expected to ramp up from
beginning of H2FY11, but due to delays in award activity from NHAI, state
governments as well as from private sector, order inflows so far have
lagged our estimates. However, construction company managements are
quite confident of significant ramp up during Q4FY11 in terms of order
inflow. Along with this, several other issues such as cancellation of
environmental clearance, income tax raids, bribery or corporate governance
issues have impacted few construction companies' stock performance.

Kotak Securities: CAPITAL GOODS & POWER Q3FY11 preview

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CAPITAL GOODS & POWER
Reflecting the buoyant mood in the economy, the capital goods index,
which is barometer of the growth in the sector has posted decent gains in
the current fiscal. For the month of October 2010, capital goods index rose
22% yoy. With the economic growth rates being revised upwards, the
prospects of Capital Goods sector has definitely improved. However, the
question remains how strong is the capital goods cycle. Management
commentary indicates that order enquiries have been continuously
improving, but we are nowhere closer to the boom in capital goods that
we saw in 2007-08.
Several factors are pulling back the growth of the sector including
increasing delays in project activity due to longer time on land acquisition
and environmental clearance. Sluggish decision making is also stalling the
growth in infrastructure activity. This happens to be the case in road
building and Oil and Gas. Competitive scenario has also increased with
several large orders being placed with the Chinese. In Transmission and
Distribution equipment, availability of unutilized capacity is leading to
margin erosion and higher capital engagement. Another concern is
inflation which has negative implications for sector in terms of slowdown
in investment activity as well as increase in costs. Material prices have also
inched up, which is an important parameter to monitor.

Royal Bank of Scotland :India Strategy – Treading water?

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We expect the Indian equity markets to end 2011 essentially unchanged from current levels, as
high inflation and oil prices and a wide current account deficit moderate investor enthusiasm.


2011 year-end target of 800-850 for MSCI India (-1 to +5% price return for full year)
We expect a weak macro environment and moderating foreign investor flows to lead to significant
multiple compression, offsetting the impact of earnings growth. At 800, the lower end of our
estimate for 2011, MSCI India would trade at 14.8x 12M forward RBS EPS estimates vs 17.4x at
the end of 2010. Current aggregate consensus earnings growth expectations per Bloomberg
assume significant margin expansion. We are less optimistic; our EPS estimates are 5-8% below
consensus.

Kotak Securities: NON-BANKING FINANCE COMPANIES (NBFC) Q3FY11 preview

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NON-BANKING FINANCE COMPANIES (NBFC)
q Buoyant economic growth coupled with uptick in domestic demand will
likely continue to lead advances growth on upward trajectory during
Q2FY11
q NIMs of most of the NBFCs are expected to moderate during Q2FY11 as
the interest rates have started hardening
q Capital market intermediaries to benefit from improved volumes, however
brokerage yield to remain under pressure.
q We continue to maintain our positive outlook for the NBFC sector. Top
Picks- IDFC, IIFL.

Kotak Securities: Cement: Q3FY11 preview

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CEMENT
During Q3FY11, cement demand continued to grow at a sluggish pace and
price also remained under pressure due to lack of demand as well as impact
of incremental supplies. Price declines have been witnessed in key regions
such as North and West during November and December, however decline
was limited in southern region due to supply and pricing discipline being
exhibited by southern players.

Kotak Sec: Q3FY11 preview: AUTOMOBILE Volumes remain healthy

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AUTOMOBILE
Volumes remain healthy during the quarter
Retail demand remained strong during the festive season and that helped the
OEM's post record monthly volumes during October 2010. Volumes slowed down
post festive season in November 2010 which is a usual phenomenon. But in December,
which again is generally a lean period, dispatches improved significantly
thereby indicating continuation of momentum into 4QFY11.

Kotak Securities: India Q3FY11 RESULTS PREVIEW (December 2010 quarter)

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Q3FY11 RESULTS PREVIEW
24% revenue growth expected during the quarter
We expect stocks under our coverage (ex-banking / NBFCs) to report revenue
growth of about 24.5% on a YoY basis. This is partly helped by the scale up in
revenues of Cairn India. Ex - Oil & Gas, revenue growth is expected to be about
22%. Among others, Auto, Capital Goods and IT are expected to propel this
growth. Revenues of auto and IT companies are expected to be driven by volumes.
Higher execution levels should drive revenues of capital goods companies, though
the growth rate is not expected to match up to our coverage average. We will
watch our for execution issues, if any, in construction and capital goods sectors.
Banks / NBFCs under our coverage are expected to post a 26% rise in NII. Credit
growth for banks has picked up to 23.8% (as on December 17, 2010) v/s 11.2% in
the corresponding previous period. However, deposit mobilization is still lagging
the loan growth and has been muted at 14.8% (YoY) as on December 17, 2010.
Moreover, we expect NIM to decline marginally during Q3FY11 vis-à-vis Q2FY11, as
rise in cost of funds due to increase in deposit rates along with some hardening in
the bulk deposit rates would be only partially compensated by the increase is their
PLR/Base rates. However, banks are likely to witness improvement in their NIMs on
YoY basis due to low base in Q3FY10.

Weekly Review -Angel Broking, January 8, 2011

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Markets break the winning streak
Markets witnessed selling pressure last week after rising for three consecutive
weeks, with the Sensex and Nifty declining 4.0% and 3.7%, respectively.
Weakness was especially seen towards the latter half of the week. Food
inflation during the week came in higher than expectations increasing to
18.3% compared to 14.4% in the previous week. This sparked concerns
that the RBI may have to hike the interest rates at a much higher pace than
originally anticipated. Hence, a sell-off was seen in the markets led primarily
by the rate-sensitive sectors. The BSE mid-cap index underperformed the
large-cap index, falling by 4.3%. The BSE small-cap index was however,
relatively better losing 3.2% of its value. On the sectoral front, the BSE Auto
index lost the most ground, declining 7.3% followed by the BSE Realty index,
which ended 6.7% lower. The BSE Oil and Gas index outperformed the
other indices, losing only 0.8% of its value during the week.

Gray Market Premium: C. Mahendra Export; Shekhawati Poly Yarn; Midvalley entertainment: Jan 8th, 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	4 to 5
Midvalley entertainment	64 to 70	6 to 7

Reliance Industries (RIL) - E&P disappointment continues:: Kotak Securities

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Reliance Industries (RIL)
Energy
E&P disappointment continues, others may follow. We see the recent
disappointments in RIL’s E&P segment as reflected in (1) the abandonment of the
second exploratory well in KG D-9 block and (2) further decline in gas production from
KG D-6 block to 50 mcm/d as providing downside risks to our fair valuation of RIL’s
emerging E&P segment. We do not see any positive triggers for the stock and do not
agree with the Street’s optimism about refining and chemical cycles. We retain our
REDUCE rating with a revised SOTP-based target price of `1,055 (`1,065 previously).

Kotak Securities: Bharti Airtel - Not so fast.

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Bharti Airtel (BHARTI)
Telecom
Not so fast. We take a closer look at the risks associated with ascribing a positive NPV
to Bharti’s Africa investment. Even as the combination of top-down Africa market
growth potential and confidence in Bharti’s execution is appealing, there are potential
pitfalls to a positive NPV case, including—(1) anchoring our forecasts to the transaction
price, (2) overestimating market growth and OPM expansion potential, and (3)
underestimating competition in Africa.