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In This Issue
Market Outlook for the month Equity Market Outlook Derivatives & Commodities Market Outlook Large Cap and Mid Cap Investment Ideas Model Advisory Portfolios Recommended Funds key product to Successful Investing

MOSt

September 2012

Key Highlights for the Month

FIIs continued to be buyers with inflow of `9,712cr Monsoon has gained momentum, still 12% below normal Metal Sector to underperform due to falling international commodities prices Dear Investor, The Nifty for the month of August broke out of its range above 5350 and made a high of 5448, but, was unable to hold on to higher levels and reversed to close 29 points higher at 5259 level. FIIs continued to be buyers with inflow of `9,712cr, while DII were sellers to the extent of `1,600cr. The Monsoon session of parliament was a stalled after coal allocation report tabled by CAG. Overall expectation of reforms was completely washed out in this drama with no major bill being passed. On the positive side monsoon has picked momentum, as per IMD it is 12% below normal against 19% last month. Quarterly GDP data came in at 5.5%, and July inflation at 6.9%, a 32 month low surprised market positively. FED policy meet towards end of month kept the possibility of QE3 open. 1QFY13 Earning Review aggregate performance were in line with estimates, companies in our universe that beat estimates outnumber the laggards by over 1.5:1. This has been led by Financials, Healthcare and Cement. For FY13 Sensex EPS is expected to grow 8% to 1,213 and FY14 EPS to grow 14% to 1,380. Post results we have downgraded Bharti Airtel to Neutral and maintain underperformer view on Metal Sector largely due to falling commodities prices, we have sell rating on Tata Steel, JSW Steel & SAIL.

Market at a glance
Index Sensex Nifty FTSE 100 Dow Nasdaq Hang Sang 31-Aug-12 17,430 5,259 5,711 13,091 3,067 19,483 MoM (%) 1.1 0.6 1.3 0.6 4.3 -1.6 YoY (%) 4.5 5.2 -1.8 12.7 18.9 -5.1

Economic Pulse
Key Indicators IIP (Jun) WPI (July) 10 Year Yield USD/ INR Crude ($) Gold (10 gms) Current Month -1.80% 6.87% 8.24% 55.41 114.57 30735 Change 2.40% 7.25% 8.24% 55.7 104.92 30199

Rikesh Parikh - Vice President

Way Forward
RBI meet on Sept 17th in backdrop of inflation below 7% and manufacturing growth at just 0.2% in overall GDP growth keeps expectation of rate cut alive. Shome committee recomending GAAR to be deferred by 3 years and Mauritius tax treaty to be continued, if accepted, would bring some confidence back among FII's.

Thought for the month

Threats
Logjam in parliament due to Coalgate reports and its impact on companies. Brent Crude price rebounding back to $114.50 will put a strain on fiscal condition.

Opportunities
Continuation of FII flow to lend support as market is trading below its historical valuation. Pick up in monsoon will lend support to sustenance of rural consumption theme.

September 2012

wealth
Equity Market Outlook
Technical Outlook

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Equity Market Outlook

Markets & Our Recommendations

MOSL's Recommendations
Sell positions could be made below 5200 for a potential of 5030 & a stop above 5315. Long positions could be made above 5350 for a potential of 5450 & a stop below 5295.

Nifty for the month of August ended with a gain of 29 points. After opening flat, index moved above its important resistance point of 5350 but failed to sustain and close above the same. After reporting a high around 5450 i.e. 76.4% retracement of the fall from 5630-4770, it was unable to sustain and reversed back into its trading range. On the weekly chart, weakness was indicated by the formation of a shooting star pattern which was confirmed with a break below 5360. Next support area for the index on the short term scale is around 5200 which is the gap area on the daily chart with medium term support at 5030. On the upside, 5450 can turn into a strong resistance and a move above it could induce sustainable advances possibly backed with good momentum. The seasonality effect on Nifty indicates that post August market has higher odds of entering a directional trend which could last throughout the calendar year. Vix has been quoting at the lower band and uptick from the same can be supportive to the seasonality effect. Monthly chart failed to close above the hurdle of 5350 Resistance for Nifty is placed at 5450 with support at 5030 Seasonality chart indicates directional movement post August Outperformance should continue in Pharma, FMCG and Media

Nifty

5450 5030

BANK NIFTY
Banking has been underperforming in relative terms Relative strength chart is placed at a verge of breakdown Immediate support is placed at 9900 Band of 10300-10350 can act as an exhaustion area Breach of support can lead to the thrust of 9650
10650 9000

Sectoral Highlights
Sector Pharma Media FMCG Metal
#Technical view for 1 month perspective

Our Views Positive Positive Positive Negative

Top Pick Glenmark Zee Ltd Tata Global Tata Steel

Recommendation# Buy above 435 Buy above 170 Buy above 134 Sell below 355

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September 2012

wealth
Derivatives Market Outlook
3 Aug Series witnessed Total Rollovers of 81% (6m-avg 82%), Nifty rollovers of 61% (6m-avg 62%). Total Open Interest at the start of Sep'12 expiry is `930.6bn as against `916.2bn at the start of Aug'12 expiry. 3 Stocks which have witnessed rise in near month OI over the last 3 expirys include Bharti Airtel, SBI whereas stocks which have witnessed drop in near month OI over the last 3 expirys include Tata Steel, Maruti. Stocks witnessing drop in near month OI series after rising for the last 3 series include Bhel, ICICI Bank, BPCL whereas stocks with rise in near month OI after falling for the last 3 months is Petronet, Mcleod Russel. 3 In Sept series for Nifty, highest Call OI is at 5500 strike with 7 mn shares and highest Put OI is at 5200 strike with 7.2 mn shares.

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Derivatives Market Outlook Commodities Market Outlook

Markets & Our Recommendations

Our Recommendation
INDEX: NIFTY Strategy Premium Outflow Span margin : : : LOT SIZE: 50 Bear Spread `2,600/- (Per Pair) `14,000/- (approx)

Pay off Profile On Expiry

Break Even Point 5248 Maximum Profit 7400 Maximum Loss 2600

Strategy of the Month

Strategy Trade View : Bear Spread : Buy Nifty 5300 Put & Sell Nifty 5100 Put. : Nifty failed to sustain above 5400 level and has formed shooting star pattern on weekly chart which is bearish in nature. Highest OI built up for Nifty for Sept Series is between 5200 to 5000 level indicating mar ket to take support in that range.

Commodities Market Outlook

3 Lead which is mainly used in batteries closed with a positive note for the second straight month and is expected to continue its positive bias in the short-run. It is seen that London Metal Exchange (LME) lead stocks have dropped steeply in the past two weeks of August. Available stocks in LME registered warehouses have slumped by around 92,000 tons, or 32%, since Aug. 13. The draw downs are partly due to the fact that battery makers in Southeast Asia are scrambling to get supplies of high-grade lead, at 99.9% purity, after a drop-off in production from Japan and in exports from China. 3 Taking the above facts in to consideration, we expect upside in lead prices in short term, but the ongoing worries of slowdown in China which is a major consumer of metal may cap the gains.

Our Recommendation
Commodity Gold Copper Crude Turmeric 1 month Return 5.04% 0.47% 9.12% 5.92% Buy Sell Buy Buy Buy Buy

Pick of the Month - Lead Lead

Commodity Lead
Data as on 31st August 2012

CMP 107

Stop Loss 103

Target 117

Duration 1 Month

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September 2012

wealth
Large Cap Investment Ideas

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Large Cap Investment Ideas Mid Cap Investment Ideas

Must Act

3 JSW Steel (JSTL) has expanded its capacityMarket & Our Recommendation 6x to 10mtpa through brownfield expansions.

With the acquisition of Ispat Industries and Salem Steel, it controls 14mtpa capacity.

JSW Steel
CMP*: Target: `694 `542
SELL

3 JSW Steel post merger with JSW Ispat will have net debt of `362bn by March 2013 and

net debt/equity of 2.3x.

3 We will be more comfortable if JSW Steel rejigs its strategy to focus on deleveraging

rather than pursuing aggressive growth. Stock is trading at expensive FY14 valuation of 6.9x EV/EBITDA and 12.6x P/E. Reiterate SELL.
3 Tata Steel (TATA), the lowest cost steel producer in India, has become the sixth largest

steel maker in the world after the acquisition of Corus.

Tata Steel
CMP*: Target: `361 `244
SELL

3 TSE operational issues have now been largely resolved. However, the European steel

demand has weakened further and prices are lower. We expect both volumes and prices to be under pressure in 2Q and 3Q for TSE.
3 We expect Tata Steel India's margin to shrink to USD278/ton in FY13 and USD251/t in

FY14 (vs USD347/t in FY12). We have cut consolidated FY14 EPS by 9% to `46.4. Stock is trading at FY14 EV/EBITDA of 6.5x. Reiterate SELL.

Mid Cap Investment Ideas

3 The largest organized player in footwear with one of the best balance sheet and

return ratios in the industry.

3 Excellent proxy to play consumer demand in India, which will ensure good stock

Bata India
CMP*: Target: `888 `1,025
BUY

performance in the short run because of investor's flight to safety due to prevailing uncertainty in the economy.
3 Strong cash flows will ensure strong addition of stores through internal accruals -

This is helping transform the company into a marketing entity rather than a producer.
3 BUY with a 12 month target of `1025 (27x CY13E) for 15% upside.

3 GMDC has lignite mines with ~15cr tonnes of reserves. Lignite, Bauxite and Power

were 76%, 5% and 18% of revenues.

3 GMDC is the only company in Gujarat licensed to sell lignite and enjoys good visibil-

GMDC
CMP*: Target: `190 `232
BUY

ity of volume and pricing growth because of lack of competition.

3 Healthy EBIDTA margin of ~45% and very strong cash generation. 3 At current price of `190, the stock is quoting at a P/E of 10x on FY13e earings. 3 BUY with a target of `232 (12.5xFY13E).

*Data as on 31st August 2012

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September 2012

wealth
MOSt Value Scrip
ICICI Bank Dr Reddy SBI Maruti HCL Tech L&T Sintex Industries Coal India CESC Hindalco Oberoi Realty Cash Total

MOSt

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MOSt Value MOSt Velocity MOSt Mid-Cap

Build a Portfolio
Model Advisory Portfolio for Investors MBP
920 1680 1875 1150 550 1350 55 355 310 110 230

Wtg.
10 10 10 10 10 10 5 5 5 5 5 15 100

Sectoral Allocation

For Whom

Long Term Investors to a year

Investment Duration For few months Risk Profile

Defensive Investors

Whats In
Coal India

Whats Out
Infosys Reliance

MOSt Velocity 10 Scrip

SBI Dr Reddy Engineers India JP Associates HDFC Ltd Hindalco Oberoi Realty NIIT Tech JSW Energy GMDC Ltd PFC Ltd Cash Total

Model Advisory Portfolio for Positional Traders Wtg.

7.50 7.50 7.50 7.50 7.50 5.00 5.00 5.00 5.00 5.00 5.00 32.50 100.0

MBP
1875 1680 215 70 740 110 230 280 48 195 165

Sectoral Allocation

For Whom

Medium Term Investors horizon

Investment Duration Few months Risk Profile

Moderate Investors

MOSt Mid CapScrip

Eicher Motors Madras Cement Bajaj Finance GMDC Emami NIIT Technologies Allahabad Bank Engineers India VST Industries Mcleod Russel Total

Model Portfolio for Aggressive Investors MBP

2150 180 1070 195 490 280 125 215 1700 320

Wtg.
12.45 12.40 11.55 11.25 10.62 10.31 9.98 9.46 6.51 5.48 100

Sectoral Allocation

For Whom

Long Term Investors to a year

Investment Duration For few months Risk Profile

Aggressive Investors

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September 2012

wealth
MOSt PMS
Value Strategy
Scrips

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Managed Funds

Top Holdings in Value Strategy

% Holdings
12.17 10.95 10.10 8.13 7.99 HDFC Bank Ltd Bosch Ltd Nestle India Ltd. Hero Motocorp Ltd. HDFC Ltd

The Strategy aims to benefit from the Long term compounding effect on investments done in good businesses, run by great business managers for superior wealth creation. Value Strategy has the investment style of buying Undervalued stock & Sell overvalued stocks, irrespective of Index Movements. Since Inception Value Strategy has delivered CAGR returns of 27.70 % Vs. 19.04 % of S&P CNX Nifty. Money multiplied by 10 times in just 9+ years. `1 Cr invested in Value PMS in March 2003 is worth `10.07crs vs. 5.20crs in S&P CNX Nifty. More than Double the returns compared to Benchmark. In last 3 years, Value Strategy has delivered 9.72% annualized returns vs. 4.09% of CNX Nifty.

Sector Allocation
Banking & Finance Auto & Auto Ancillaries FMCG Pharmaceuticals Infotech

(%)
26.52 23.73 15.15 10.34 7.18
Data as on 31st August 2012

MOSt PMS
NTDOP Strategy

Top Holdings in NTDOP Strategy

Scrips
Page Industries Ltd. Bosch Ltd. Bajaj Finance Eicher Motors Ltd. Glaxo Consumer.

The strategy aims to deliver superior returns by investing in focused themes which are part of the next Trillion Dollar GDP growth opportunity. It aims to predominantly invest in Small & Mid Cap stocks with a focus on Identifying emerging Stocks/Sectors. The strategy aims to capitalize on the themes of Consumerism, Banking & Financial Services & Infrastructure in the Indian Economy. Since Inception NTDOP Strategy has delivered annualized 7.14% returns vs. 4.24% of CNX Midcap, delivering an annualized alpha of 11.38%. In last 3 Years, NTDOP Strategy has delivered 15.33% annualized returns vs. 4.91% of CNX Midcap and generated an annualized alpha of 10.39%.

% Holdings
15.45 9.11 8.63 7.12 6.91

Sector Allocation
Auto & Auto Ancillaries Banking & Finance Textiles Engineering & Electricals FMCG

(%)
20.19 18.58 15.45 9.43 6.91
Data as on 31st August 2012

All the above figures are of a model client. Returns shown above are calculated on NAV method "Returns shown above are post fees & expenses

MOSt Mutual - Model Portfolio

AGGRESSIVE - High Risk
Scheme Name Franklin India Bluechip - G ICICI Prudential Discovery Fund - G Reliance Equity Opportunities F - G HDFC Short Term Plan - G Type E E E D

Return %
1yr 4.32 13.17 11.87 9.26 9.70 11.51 3yrs 9.01 13.61 18.14 7.63 -7.67 Wtg% 20% 15% 15% 15% 20% 15% 100

DEFENSIVE - Low Risk

Scheme Name Type E E D D D D

Return %
1yr 6.86 7.15 10.02 9.60 9.66 9.26 3yrs 11.28 11.47 8.02 8.12 7.46 7.63 Wtg% 15% 15% 20% 20% 15% 15% 100
Data as on 31st August 2012

ICICI Pru Focused Bluechip Eq F-Ret-G UTI Opportunities Fund - G Birla Sun Life Dynamic Bond F-Ret-G Templeton India STIP - G Birla Sun Life MIP II - Savings 5 - G HDFC Short Term Plan - G Total

Templeton India Income Opport F - G D DSP BlackRock MIP Fund - G Total

G: Growth , E: Equity, D: Debt

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August 2012 September 2012

wealth
Guiding Philosophy
Blue chip investing Apt diversification Rupee Cost Averaging Disciplined Investing

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Scenario Today Operatives How it works

MOSt Pyramid
Markets Range-bound
Nifty traded in a narrow range, reducing earning opportunity from passive investing

Approach
Portfolio diversification in 4-5 sectors Investment in specific blue chip stocks Investment in 4 tranches Value averaging by buying at lower levels Regular profit booking, reducing acquisition costs Strategic entry and exit @ -5% & +6% respectively

Attractive Valuations
Valuations look attractive, stocks trading below historically low price to earnings multiple

Steady Earnings Growth

Stock Picks
We conducted in-depth analysis and arrived on the below list of blue chip stocks which are market/sectoral leader with strong fundamentals: ICICI Bank SBI Dr. Reddy Coal India L&T
List is indicatives & might change with a change in research view

io ar en Sc

Op er at ive s

MOSt Pyramid

Our research predicts steady growth in earnings in the near future

y da To

Rationale
Creating short-term earning opportunities Reducing investment risk through Blue chip investing Stabilizing portfolios by investing in fundamentally good stocks

The smarter way to invest

How it works
Bullish Market Bearish Market

Please note: This is only a suggested investment strategy and in no means should be considered as a tool for guaranteed return or a Portfolio Management Service.
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For further details : Call your Relationship Manager or Contact us: +91 (022) 3089 6680 SMS: MOSL INFO <Type Your Query> to 575753 Email : info@motilaloswal.com
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Disclosure of Interest Statement: Analyst ownership of the stock: None Group/Directors ownership of the stock : Bharti Airtel, Birla Corporation, Cairn India, Coal India,GSK Pharma, Honda MotoCorp, IDFC, IOC, Marico, Nestle India, Oriental Bank, South Indian Bank, State Bank, Tata Steel Broking relationship with company covered: State Bank of India Investment Banking relationship with company covered: None Analyst Certification: The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. 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