1. Market Outlook
India Research
July 13, 2011
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex -1.7% (309.8) 18,412
High intraday volatility was the order of the day as the key benchmark indices Nifty -1.6% (90.0) 5,526
tumbled as world stocks fell on growing fears about the spreading of the MID CAP -1.1% (75.9) 6,898
eurozone debt crisis to large European economies such as Italy and Spain.
SMALL CAP -0.9% (78.1) 8,262
Volatility ruled the roost in mid-morning trade as the market reacted to
BSE HC -0.5% (31.5) 6,400
disappointing industrial production growth data and reports of a Cabinet
BSE PSU -0.3% (27.1) 8,469
reshuffle by the PM. The key benchmark indices slumped to two-week lows in
BANKEX -1.0% (132.9) 12,608
afternoon trade as European shares tumbled in opening trade. Weakness
continued in mid-afternoon trade. The market remained volatile in late trade AUTO -2.3% (204.3) 8,893
with the Sensex and Nifty reporting losses of 1.7% and 1.6%, respectively. METAL -1.9% (276.8) 14,456
The mid-cap and small-cap indices closed down by 1.1% and 0.9%, OIL & GAS -0.4% (32.5) 9,000
respectively. Among the front runners, ONGC and HUL gained 0–1%, while BSE IT -2.7% (166.8) 5,925
Infosys, DLF, M&M, Jindal Steel and Reliance Infra lost 3–4%. Among mid caps, Global Indices Chg (%) (Pts) (Close)
Anant Raj Inds, SKS Microfinance, Wockhardt, SpiceJet and Honeywell Auto Dow Jones -0.5% (58.9) 12,447
gained 4–10%, while HDIL, Jain Irrigation, Shree Renuka Sugar, KGN Inds and NASDAQ -0.7% (20.7) 2,782
Whirlpool lost 5–6%.
FTSE -1.0% (60.2) 5,869
Markets Today Nikkei -1.4% (143.6) 9,926
Hang Seng -3.1% (684.1) 21,663
The trend deciding level for the day is 18,442/5,534 levels. If NIFTY trades Straits Times -1.3% (40.0) 3,077
above this level during the first half-an-hour of trade then we may witness a
Shanghai Com -1.7% (48.1) 2,755
further rally up to 18,558–18,705/5,572-5,618 levels. However, if NIFTY
trades below 18,442/5,534 levels for the first half-an-hour of trade then it may
correct up to 18,296–18,180/5,489-5451 levels. Indian ADRs Chg (%) (Pts) (Close)
Infosys -5.6% (3.7) $61.4
Indices S2 S1 R1 R2
Wipro -2.7% (0.4) $12.9
SENSEX 18,180 18,296 18,558 18,705 ICICI Bank -0.5% (0.3) $46.8
NIFTY 5,451 5,489 5,572 5,618 HDFC Bank -1.4% (2.5) $173.6
News Analysis
Advances / Declines BSE NSE
IIP growth moderates to 5.6% in May 2011
Bharti, IBM ink 10-year agreement for IT solutions in Africa Advances 946 358
Mphasis' client Santander shifts call centres out of India Declines 1,848 1,070
1QFY2012 Result Review - Infosys Unchanged 137 52
Refer detailed news analysis on the following page
Net Inflows (July 11, 2011) Volumes (` cr)
` cr Purch Sales Net MTD YTD
BSE 2,250
FII 1,914 1,440 474 6,905 8,227
NSE 10,955
MFs 275 320 (45) (42) 3,083
FII Derivatives (July 12, 2011)
Open
` cr Purch Sales Net
Interest
Index Futures 2,619 3,264 (645) 13,135
Stock Futures 1,160 1,537 (377) 31,032
Gainers / Losers
Gainers Losers
Company Price (`) chg (%) Company Price (`) chg (%)
Anant Raj Inds 84 10.4 Lanco Infra 23 (5.7)
JSW Energy 71 4.8 HDIL 160 (5.5)
Gujarat NRE Coke 46 2.5 Mphasis 431 (5.4)
Glenmark Pharma 314 2.4 Jain Irrigation 172 (5.0) 1
Coal India 365 2.3 Shree Renuka Sug. 71 (5.0)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
IIP growth moderates to 5.6% in May 2011
The pace of industrial production moderated further in May 2011, with IIP growth slowing
to 5.6% from a downwardly revised 5.8% in April 2011. The latest IIP print was well below
Bloomberg’s median forecast of 8.5%.
Growth in manufacturing production, which accounts for 80% of the industrial production,
slowed to 5.6% (vs. 6.3% in April 2011 and 8.9% in May 2010). In terms of industries, 14
of the 22 industry groups in the manufacturing sector registered positive growth during
May 2011. Mining production growth was muted at 1.4% (1.3% in April 2011) compared
to strong 7.8% growth in May 2010. Growth in electricity picked up sharply to 10.3% from
6.5% in April 2011 and 6.2% in May 2010.
As per use-based data, basic goods recorded growth of 7.2% compared to 6.1% in May
2010 and 6.9% growth in April 2011. Capital goods’ performance cooled off to 5.9%
compared to 7.3% (revised from 14.5%) growth in April 2011. Consumer durables
continued to report slower growth trend witnessed in April 2011, with growth of 5.2%;
overall consumer goods grew by 5.4% during May 2011.
The moderating growth trend is in-line with the RBI’s target of reducing demand-side
inflationary pressures even if it means sacrificing a bit of short-term growth. Though
elevated inflation numbers may prompt the RBI to persist with one or two more hikes in its
repo rates, overall looking at the signs of cooling global commodity prices, moderating
food inflation, weakening domestic demand, slowing credit off-take and higher deposit
mobilisation, we believe both inflation and interest rates are likely to start cooling off from
2HFY2012.
Bharti, IBM ink 10-year agreement for IT solutions in Africa
Bharti Airtel (Bharti) has signed a 10-year agreement with IBM to provide IT solutions to its
employees across 16 African countries. IBM will provide a standard operating
environment, help desk and desk-side support to enhance employee efficiency and
convenience. The deal size has not been disclosed. This is in addition to a partnership
signed in late 2010 between the two sides to manage the computing technology and
services to power Bharti’s mobile communications network spanning 16 African countries.
As part of the new agreement, IBM will provide end-user services to Bharti’s employees
across Africa, in French and English. The consolidation of Bharti's helpdesks is expected to
bring about greater cost savings and efficiencies through streamlining of the processes for
addressing IT operational issues. We maintain our Neutral rating on the stock.
Mphasis' client Santander shifts call centres out of India
Santander, a UK-based financial services firm, has decided to stop outsourcing services to
Mphasis and shift all its Indian call centres for retail banking customers back home.
Santander announced that it is recalling outsourced work from India back to the UK
following complaints by customers over their frustration in dealing with offshore
employees. Santander has hired an additional 500 UK staff to handle the estimated 1.5mn
calls each month. The new staff is fully trained and is now available to take calls. In total,
Santander's UK call centres employ 2,500 staff. Santander is a wholly owned unit of
Spain's Banco Santander S.A. This client contributes 2–3% to Mphasis’ BPO revenue
(~i.e.US$5mn annually) and is not amongst its top clients. This contract is expected to
cease from August 2011 (i.e. from 4QFY2011).
We expect this to have a marginal impact on the company’s earning’s estimate. The stock
is currently under review.
July 13, 2011 2

3. Market Outlook | India Research
1QFY2012 Result Review
Infosys
For 1QFY2012, Infosys reported revenue of US$1,671mn, up 4.3% qoq, primarily on the
back of decent 4.0% qoq volume growth. The 4.0% qoq volume growth was mainly driven
by 6.8% qoq growth in onsite volumes; offshore volumes grew by 2.7% qoq. Pricing
remained stable during the quarter. The cross-currency movement benefited USD revenue
by 1.2% qoq. In INR terms, revenue came in at `7,485cr, registering 3.2% qoq growth.
The company’s EBITDA and EBIT margins declined by 298bp and 291bp qoq to 29.1%
and 26.1%, respectively, due to wage hikes given in 1QFY2012 (10–12% for offshore
employees and 2–3% for onsite employees) effective from April 1, 2011. Also, EBIT margin
got negatively impacted by 40bp qoq due to INR appreciation against USD. PAT stood at
`1,722cr, down 5.4% qoq.
The FY2012 USD revenue growth guidance was left unchanged at 18–20% yoy to
US$7.13bn–7.25bn. For 2QFY2012, Infosys has guided for 3.5–5.0% qoq growth in USD
revenue to US$1.730bn–1.755bn, which is lower than our expectations. EPS guidance for
FY2012 increased to US$2.88–2.92, 10.0–11.5% yoy growth vs. the previous guidance of
8–10% yoy growth. We recommend Accumulate rating on the stock with target price of
`3,200.
Economic and Political News
Borrowing in FY2012 not to exceed `4.17lakh crores: Finance Minister
PM axes seven ministers, inducts eight new faces in minor cabinet reshuffle
Finance Ministry okays 6 PPP road projects worth `9,774cr
NHAI seeks to bypass green nod for land
Corporate News
HCL may buy out DLF stake in Insurance JV
M&M plans to enter non-life insurance space
Lavasa not ready to accept MoEF pre-conditions for hill city
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Bajaj Finserv Results
Bajaj Finance Results
MPS Results
July 13, 2011 3

4. Market Outlook | India Research
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