INDIA

Eye on India
Facts fight back
Event
Q2FY14 earnings preview: Its not so bad, after all. Our analysts predict

revenue growth of 10% YoY and EBITDA growth of 11% with EBITDA margins expanding ~40bps. PAT growth is expected to be more muted at 3% due to a high interest burden and mark to market losses on forex. The market is geared up for a washed out quarter and this could surprise.
Export oriented sectors dominate: IT sector is a standout, followed by

Macquarie Top 10 Focus List

Company Ticker Price Rec. (Rs) TP (Rs) Upside 52% 45% 40% 24% 22% 19% 19% 18% 17% 10%

Autos (Tata Motors), Media, Pharma and Consumer. Cement sector is expected to be the worst performer. Buy HCL Tech, Ranbaxy, Tata Steel and Reliance on results. Sell Ambuja Cement, Ultratech and SBI.

Ranbaxy RBXY IN OP 362 550 JSPL JSP IN OP 241 350 L&T LT IN OP 828 1163 ITC ITC IN OP 338 421 Idea Cellular IDEA IN OP 176 215 Coal India COAL IN OP 303 360 ICICI Bank ICICIBC IN OP 938 1115 HCL Tech HCLT IN OP 1104 1300 M&M MM IN OP 851 1000 Tata Motors TTMT IN OP 345 380 Source: Macquarie Research, Oct 2013; Prices as of close on Oct 3, 2013

Impact
Revenue growth to buck the trend: After 5 quarters of downtrend in

revenue growth, we estimate revenue growth to clock 10% growth driven by all round good performance by sectors except Cement and Infra. IT sector is the leader with 23% revenue growth, but Autos, Media, Consumer, Pharma and Properties etc may show revenue growth in mid teens. Clearly both exports and rural demand is doing much better than expected.
EBITDA margins remain stable: EBITDA margins have largely stabilised

Key Index Performance (%)

Index/Sector YTD 5-Day -0.1 2.6 1.6 1.2 1.0 0.9 -0.1 -0.1 -0.5 -1.2 -1.3 -1.7 -2.2 SENSEX 30 Index 2.3 BSE IT Index 41.3 Auto Index -0.5 Healthcare Index 18.0 BSE Banks Index -19.1 BSE Realty Index -42.0 Consumer Dur. Index -23.7 Oil & Gas Index -2.1 Capital Goods Index -26.3 Metal Index -22.2 NSE Infra Index -15.1 BSE FMCG Index 14.6 Power Index -23.1 Source: Bloomberg, Macquarie Research, Oct 2013; Prices as of close on Oct 3, 2013

around 20% level. Despite the low demand, companies have done well to hold on to operating margins. Rupee depreciation has come as a blessing in disguise and companies are looking to export the surplus production to beat low domestic demand.
Net profit lagging behind: Net profit growth has been scraping the bottom as

companies deal with forex MTM losses as well as rising interest costs. However, with the rupee now looking to stabilise, we expect net profit growth to be stronger from Q3.
Selective earnings upgrades: The overall market is still witnessing earnings

Fund flows
US$ m Latest 1W (Oct 1) Total 1M Total YTD Total FII -14 -59 1904 13389 Domestic MFs -65 -39 -467 -2991 FII Net Stock Futures -32 -77 -685 3015 FII Net Index Futures 38 47 1348 -952 FII Net Derivative Buys 92 21 66 10686 Source: Bloomberg, Macquarie Research, Oct 2013

downgrades with earnings revision ratio well below 1. Cement and Banks, including the private sector, are going through a sharp downgrade cycle. However, a few bright spots can be found in IT, Pharma and Telecom. Media and Metals & Mining sectors are also seeing some upgrades.
Standout stocks: HCL Tech, Idea Cellular, Sun Pharma and Reliance

Industries are seeing EPS upgrades, while Maruti, SBI, BHEL and SAIL continue to see sharp downgrades.

Outlook
Markets can gain momentum with results: Infosys kick starts the results

Analyst(s)
Rakesh Arora, CFA +91 22 6720 4093 rakesh.arora@macquarie.com Arjun Bhattacharya +91 22 6720 4095 arjun.bhattacharya@macquarie.com

on 11th and will likely set a positive tone for the market. Exports are picking up and so is rural demand. Whether Modi mania translates into votes in the upcoming state elections is the key question in Nov. Overall, the market seems set to continue its upward journey. Buy on the dips.

4 October 2013

Macquarie Capital Securities India (Pvt) Ltd Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website www.macquarie.com.au/disclosures.

Macquarie Research

Eye on India

For the quarter ended September 2013, our analysts are estimating 10% YoY revenue growth,

11% YoY EBITDA growth and 3% YoY PAT growth for our coverage universe (ex oil & gas). The large divergence in bottom-line growth vis--vis top-line and operating income growth suggests that high interest costs and impact from currency volatility may have had a role to play. In particular, stocks with maximum impact below the operating level are Adani Power, JSW Steel and SBI (due to higher provisions). Excluding these, profit growth improves to 6.3% yoy.
Overall, only 4 sectors are expected to contribute significantly to overall net profit growth these

are telecom, IT, consumer and autos. Amongst financials, PSU banks are expected to be a drag on growth with a 6% decline in profits while private banks are expected to show 12% increase in profits. On the negative side, cement, power (Adani, NTPC), real estate and pharma (CIPLA, Ranbaxy, Wockhardt) would likely be the worst performing sectors on profit growth. Amongst these, only cement is expected to show a decline in revenues on a yoy basis.
Our analysts are forecasting EBITDA margins (ex oil & gas, fin) to improve by ~40bps, with

positive contribution primarily from power, media, telecom, consumer, autos, IT and metals and negative contribution from real estate, cement, pharma, and infra/capital goods.
For Sensex, we expect aggregate revenue and EBITDA to grow at 10% YoY while profits are

expected to grow 2%, dragged down by M&M, BHEL, JSPL, CIPLA, ONGC, SBI and NTPC with maximum impact from the last 3 stocks. Excluding these three, profit growth improves dramatically to 10% yoy. For Sensex too, EBITDA margins (ex-ONGC, GAIL, financials) are expected to be flat compared to the previous year.

Fig 1 Estimated Q2FY14 Revenue Growth by sector (Macquarie coverage ex-Oil & gas)
25% 20% 16% 15% 15% 10% 6% 5% 0% -5% -10% -7%
IT Au to s M ed Fi na ia nc ia Pr ls op er C on ty su m e Ph r ar m a Po w Te er le co m M In fra eta ls /C ap G ds C To em e ta l ( nt ex -O il)

Fig 2 Estimated Q2FY14 PAT Growth by sector (Macquarie coverage ex-Oil & gas)
40%

23%
Revenue Growth (% yoy)

30% 20%

29% 21% 16% 14% 3%

PAT Growth (% yoy)

13%

12% 12%

10% 5% 4% 1%

10% 10% 0% -1% -10% -20% -30%

ec om

3%

-3%

-6% -12% -14% -17% -23%

Source: Company data, Macquarie Research, October 2013

Source: Company data, Macquarie Research, October 2013

Fig 3 Estimated Q2FY14 EBITDA Growth (% yoy) (Macquarie coverage ex-Oil & gas)
30% 20% 10% 0% -10% -20% -21% -30%
IT Au to s M ed C on ia su m er Po w Fi er na nc ia Te ls le co m M et al Ph s ar m a Pr op In fra er ty /C ap G ds C To em e ta l ( nt ex -O il)

Fig 4 Estimated Q2FY14 Change in EBITDA Margin (Macquarie coverage ex-Oil & gas, Financials)
300 207 200 178 142 112
Change in EBITDA Margins (yoy, bps)

27% 25% 24% 17% 13%

EBITDA Growth (% yoy)

10% 10% 6% 3% 2%

11%

100 0 -100

-8%

-200 -300 -400

Po w er M ed ia Au to s om C on su m er ec IT

Source: Company data, Macquarie Research, October 2013

Source: Company data, Macquarie Research, October 2013

4 October 2013

M In fra eta ls /C ap G ds Ph ar m a C em en t To Pr op ta l( er ex ty -O il, Fi n)

Te l

on IT su m er Au t o Fi na s nc ia ls M ed ia M In fra eta ls /C ap G ds Ph ar m a Pr op er ty Po w er C To em e ta l ( nt ex -O il)

95 83 32 36 -129 -163 -333 -354

Te l

Macquarie Research

Eye on India

Top-line weakness continues to offset stabilising margins

Fig 5 Quarterly Revenue and PAT Growth - Macquarie Coverage Universe (ex-Oil & Gas)
% yoy 30% 25% 20% 15% 10% 5% 0% Jun10 Sep10 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Mar13 Jun13 Sep13
Revenue Growth PAT Growth

Source: Macquarie Research, October 2013

Fig 6 Quarterly EBITDA Margins - Macquarie Coverage Universe (ex-Oil & Gas, Fin)
24.0% EBITDA Margins (ex-Oil & Gas, Financials) 23.0% 22.6% 22.0% 21.0% 20.0% 19.0% 18.0% 17.0% Jun10 Sep10 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Mar13 Jun13 Sep13 20.4% 19.5% 19.8% 22.3% 21.3% 21.6% 20.5% 20.7% 19.8% 19.4% 20.4% 20.6% 20.0%

Source: Company data, Macquarie Research, October 2013

Fig 7 Trend in Revenue, EBITDA and PAT BSE-100 (ex Oil, Fin), 4Q Rolling
4Q Rolling, % yoy 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% Net Profit Growth (lhs) Revenue Growth (lhs) 4Q Rolling, % EBITDA Margin (rhs) 19.0% 18.0% 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0%

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Jun-05

Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

Oct-12

Source: Company data, Macquarie Research, October 2013

4 October 2013

Jun-13

Macquarie Research

Eye on India

while currency impact and interest costs dent bottom-line growth

Fig 8 Nifty earnings vs currency movements
Nifty Qtr Earnings Growth (% yoy, LHS) 60.0% 50.0% 40.0 40.0% 30.0% 20.0% 10.0% 0.0% 55.0 -10.0% -20.0% Dec-01 Jun-03 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 60.0
-50.0 -100.0 -150.0 Jun-08 Mar-09 Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 INR appreciating -4.0 -8.0

Fig 9
400.0

Volatile currency fuelling forex losses

INR depreciating Forex Loss (lhs, Rs bn) Change in INR/USD (rhs) 16.0 12.0 8.0 4.0 0.0 20.0

INR/USD (RHS, Qtr Avg)

35.0

350.0 300.0 250.0 200.0

45.0

150.0 100.0

50.0

50.0 0.0

Source: Capitaline, Bloomberg, Macquarie Research, October 2013

Source: Capitaline, Bloomberg, Macquarie Research, October 2013

Fig 10 BSE-100 (ex-Fin) Interest Expense Growth

120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% -40.0% -60.0% Mar-02 BSE-100 (ex-Fin) Interest Expense growth

Sep-03

Mar-05

Sep-06

Mar-08

Sep-09

Mar-11

Sep-12

Source: Capitaline, Macquarie Research, October 2013

4 October 2013

Macquarie Research

Eye on India

leading to earnings downgrades

Net Revisions Ratio (x) = (Total Upgrades) / (Total Downgrades)

Fig 11
3.00 2.50 2.00 1.50 1.00 0.50

Earnings Revisions Ratio for BSE-100 Index

Net Revisions Ratio (x) = (Total Upgrades) / (Total Downgrades)

EPS Revisions Ratio (BSE-100) 3-Month Moving Average

0.00 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13

Source: FactSet, Macquarie Research, October 2013

Fig 12
1.80 1.60

Autos

Fig 13

Media

1.40
Autos

1.20 1.00 0.80 0.60 0.40

Media 3 Month Moving Average

1.40
3 Month Moving Average

1.20 1.00 0.80 0.60 0.40 0.20 0.00 Aug-11

0.20 0.00 Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

Source: FactSet, Macquarie Research, October 2013

Fig 14
4.00

Consumer Staples

Fig 15
1.60 1.40

Energy

Energy 3 Month Moving Average

3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Aug-11

Consumer Staples 3 Month Moving Average

1.20 1.00 0.80 0.60 0.40 0.20 0.00 Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

Source: FactSet, Macquarie Research, October 2013

4 October 2013

Macquarie Research

Eye on India

Fig 16
1.20

Real Estate

Fig 17

Private Sector Banks

5.00 1.00
Real Estate 3 Month Moving Average

4.50 4.00

Private Banks 3 Month Moving Average

0.80

3.50 3.00 2.50 2.00

0.60

0.40 1.50 0.20 1.00 0.50 0.00 Aug-11 0.00 Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

Source: FactSet, Macquarie Research, October 2013

Fig 18

PSU Banks

Fig 19

NBFCs

1.20 1.00 0.80 0.60 0.40 0.20 0.00 Aug-11

PSU Banks 3 Month Moving Average

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Aug-11

NBFCs 3 Month Moving Average

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

Source: FactSet, Macquarie Research, October 2013

Fig 20

Healthcare

Fig 21
1.20

Industrials

2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Aug-11 0.00 Aug-11
Health Care 3 Month Moving Average

1.00
Industrials 3 Month Moving Average

0.80

0.60

0.40

0.20

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

Source: FactSet, Macquarie Research, October 2013

4 October 2013

Macquarie Research

Eye on India

Fig 22

Information Technology

Fig 23
5.00

Cement

18.00 4.50 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Aug-11
Information Technology 3 Month Moving Average

Cement 3 Month Moving Average

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

Source: FactSet, Macquarie Research, October 2013

Fig 24
1.20 1.00

Metals and Mining

Fig 25

Telecom

2.50
Telecom 3 Month Moving Average

2.00
Metals & Mining

0.80 0.60

3 Month Moving Average

1.50

1.00 0.40 0.20 0.00 Aug-11 0.50

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

0.00 Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

Source: FactSet, Macquarie Research, October 2013

Fig 26

Utilities

1.60 1.40
Utilities

1.20 1.00 0.80 0.60 0.40 0.20 0.00 Aug-11

3 Month Moving Average

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: FactSet, Macquarie Research, October 2013

4 October 2013

Macquarie Research

Eye on India

Fig 27
Company

Coverage Stocks with high Positive and Negative 3-Month % EPS Revisions
Bloomberg Code 3M % EPS Revision 3M Stock Perf Mkt Cap (US$ m) Rating Price Price Target

POSITIVE REVISIONS Large Cap (>US$2bn) HCL Technologies Idea Cellular Sun Pharmaceuticals Wipro Tata Consultancy Services Cairn India Infosys Technologies Reliance Industries Lupin Tata Motors HCLT IN IDEA IN SUNP IN WPRO IN TCS IN CAIR IN INFO IN RIL IN LPC IN TTMT IN 20.6% 16.1% 11.5% 11.3% 10.7% 10.3% 8.6% 3.8% 3.5% 3.0% 45.4% 21.8% 19.6% 38.0% 35.7% 11.5% 24.2% -4.2% 10.8% 19.0% 12435 9416 20106 19298 64027 10082 28067 44167 6231 17940 Outperform Outperform Outperform Neutral Outperform Outperform Outperform Outperform Neutral Outperform 1104 176 601 485 2024 327 3039 846 861 345 1300 215 675 480 2200 378 3550 1100 860 380

Mid Cap (between US$500m and US$2bn) MindTree MTCL IN Hexaware Technologies HEXW IN D.B. Corp. DBCL IN Reliance Capital RCAPT IN Mphasis MPHL IN Small Cap (below US$500m) Welspun Corp Punj Lloyd Gujarat Pipavav Port Aban Offshore Persistent Systems NEGATIVE REVISIONS Large Cap (>US$2bn) JSW Steel Maruti Suzuki India Bharat Heavy Electricals State Bank of India Steel Authority of India Jindal Steel and Power Indian Oil Siemens India Tata Power Ranbaxy Laboratories JSTL IN MSIL IN BHEL IN SBIN IN SAIL IN JSP IN IOCL IN SIEM IN TPWR IN RBXY IN

19.2% 15.9% 8.7% 5.6% 4.8%

49.4% 47.2% 5.8% -9.0% 23.3%

838 623 751 1304 1556

Outperform Outperform Outperform Outperform Outperform

1247 129 253 329 458

1250 150 310 430 500

WLCO IN PUNJ IN GPPV IN ABAN IN PSYS IN

403.7% 42.1% 15.3% 9.2% 6.6%

-33.6% -34.3% 0.0% -12.5% 27.9%

130 129 359 158 416

Outperform Underperform Outperform Neutral Neutral

31 24 46 225 643

59 17 59 222 620

-14.7% -15.1% -15.9% -16.1% -16.6% -16.9% -20.8% -24.1% -24.9% -42.5%

15.6% -12.0% -19.6% -17.7% 4.8% 7.7% -12.0% -13.9% -8.2% 11.6%

2978 6895 5687 18348 3655 3637 8161 2834 3112 2475

Outperform Neutral Underperform Neutral Neutral Outperform Outperform Underperform Outperform Outperform

762 1412 144 1659 55 241 208 492 81 362

850 1350 133 1550 48 350 300 386 95 550

Mid Cap (between US$500m and US$2bn) Union Bank of India UNBK IN Wockhardt WPL IN L&T Finance Holdings Ltd LTFH IN Unitech UT IN ABB India ABB IN IDBI IDBI IN Canara Bank CBK IN Jaiprakash Associates JPA IN Ashok Leyland AL IN Adani Power ADANI IN Small Cap (below US$500m) Nagarjuna Construction Co Indiabulls Real Estate Godrej Properties Jaypee Infratech Jubilant Lifesciences Limited Anant Raj Industries Jindal Saw Limited Gujarat NRE Coke HDIL India Cements

-13.2% -14.0% -14.0% -15.7% -20.9% -22.3% -24.6% -44.1% -105.3% -247.9%

-39.9% -56.0% -17.2% -29.9% -11.0% -17.0% -38.7% -32.6% -27.1% -22.2%

1117 835 1843 689 1895 1320 1687 1347 647 1541

Underperform Neutral Underperform Underperform Underperform Underperform Underperform Underperform Outperform Underperform

116 472 66 16 553 61 236 38 15 33

80 750 49 12 380 40 167 38 15 26

NJCC IN IBREL IN GPL IN JPIN IN JOL IN ARCP IN JSAW IN GNC IN HDIL IN ICEM IN

-10.0% -10.1% -10.2% -13.0% -16.1% -16.3% -17.3% -17.9% -23.0% -29.6%

-32.4% -17.5% -27.5% -33.5% -41.7% -24.2% -26.8% -8.3% -6.1% -11.4%

77 389 490 370 204 200 201 133 264 264

Underperform Underperform Outperform Outperform Outperform Outperform Outperform Outperform Outperform Neutral

19 57 361 17 79 42 45 13 39 53

14 48 506 27 100 120 76 18 43 45

Source: FactSet, Macquarie Research, October 2013

4 October 2013

4 October 2013 9

Macquarie Research

Fig 28

Q2FY14 Estimates by Company

Q2FY14E Net sales (Rs m) % chg (YoY) % chg (QoQ) -23% 6% 10% 9% -7% 23% 24% 16% 7% 4% -2% -9% -12% 0% 15% 7% Q2FY14E 381 10,678 1,650 6,378 11,021 10,028 71,900 112,036 EBITDA (Rs m) % chg (YoY) % chg (QoQ) -89% 17% 48% 34% -14% 97% 35% 25% 64% 6% -1% -11% -21% -14% 16% 5% Q2FY14E (1,160) 8,508 900 4,916 8,231 5,004 26,822 53,222 PAT (Rs m) % chg (YoY) -181% 15% 36% 12% -16% 120% 29% 14% % chg (QoQ) 15% 6% -3% -10% -10% -21% 55% 16%

Company name Automobiles Ashok Leyland Bajaj Auto Eicher Motors Ltd. Hero MotoCorp Mahindra & Mahindra Maruti Suzuki India Tata Motors Total Banks** Axis Bank Bank of Baroda Bank of India Canara Bank HDFC Bank HDFC ICICI Bank IDBI IndusInd Bank Ltd. IDFC Kotak Mahindra Bank L&T Finance Holdings Ltd LIC Housing Finance Mahindra & Mahindra Fin. Services Power Finance Punjab National Bank Reliance Capital Rural Electrification Shriram Transport Finance State Bank of India Union Bank of India Yes Bank Total Cement Ambuja Cements Associated Cements Grasim Industries India Cements Ultratech Cements Total Infrastructure ABB India Adani Ports and SEZ Bharat Heavy Electricals Crompton Greaves India Cummins India Gujarat Pipavav Port Jaiprakash Associates Larsen & Toubro Nagarjuna Construction Company

25,368 50,849 16,300 55,947 85,848 99,540 540,068 873,920

46,746 40,485 35,880 29,503 60,539 21,220 60,226 22,452 10,526 8,362 26,098 5,247 5,099 6,911 18,824 49,936 15,654 16,881 9,981 159,982 26,163 10,252 686,967

19% 10% 16% 15% 19% 22% 11% 16% 31% -2% 1% 32% 25% 20% 28% 10% -16% 25% 10% 12% 9% 28% 13%

1% -2% -3% -9% -5% 18% -4% 2% -8% -18% -4% 6% 1% 2% 2% -5% 19% -4% 1% 0% -2% -7% -2%

26,193 24,527 19,891 15,526 29,972 19,606 34,242 13,571 5,602 6,936 6,298 3,577 4,270 4,484 18,387 26,684 1,960 16,008 7,638 74,291 13,020 6,202 378,883

20% 3% 7% 21% 41% 23% 7% 15% 33% -4% -20% 36% 26% 20% 28% 5% -64% 25% 7% 1% 2% 28% 10%

-8% 0% -9% -18% -9% 20% -10% 3% -13% -21% -43% 22% -3% 2% 1% -10% 30% -3% 4% -2% -8% -9% -6%

13,463 11,120 7,625 6,874 18,162 13,888 21,824 3,900 2,996 4,266 3,953 1,752 2,975 2,332 12,656 11,504 1,515 11,303 3,342 28,572 4,949 3,452 192,425

20% -15% 153% 4% 16% 21% 12% -19% 20% -10% -22% 22% 22% 21% 22% 8% -62% 18% -1% -22% -11% 13% 3%

-4% -5% -21% -13% -1% 18% -4% 27% -11% -23% -38% 21% -4% 14% 6% -10% 19% -2% -2% -12% -12% -14% -6%

25,118 20,343 58,274 44,516 12,251 160,503

-2% -6% -11% -5% 2% -7%

-10% -13% -15% -10% 3% -12%

3,782 3,608 11,041 8,139 1,646 28,215

-13% -30% -19% -19% -41% -21%

-13% -27% -13% -22% -2% -17%

2,439 2,207 4,939 4,059 (24) 13,620

1% -27% -20% -26% -104% -23%

-5% -32% -19% -40% -109% -28%

19,000 13,980 90,000 32,166 10,326 1,166 34,767 141,094 14,000

6% 33% -18% 10% -5% 24% 16% 7% 5%

10% -5% 35% 2% 4% -4% 5% 12% 2%

1,140 8,947 12,176 1,608 1,755 520 8,279 12,657 1,120

18% 25% -36% 18% -12% 31% 2% -10% 0%

37% -5% 213% 11% 9% -5% 6% 18% 3%

563 4,438 8,173 881 1,451 304 622 8,772 111

9% 74% -36% 109% -10% 114% -50% 1% 38%

40% 6% 76% 47% -6% -14% 238% 16% 5%

Eye on India

4 October 2013 10

Macquarie Research

Fig 28

Q2FY14 Estimates by Company

Q2FY14E Net sales (Rs m) % chg (YoY) % chg (QoQ) 3% 10% 5% 1% -7% 40% 45% 14% Q2FY14E 2,800 2,042 1,250 54,293 EBITDA (Rs m) % chg (YoY) % chg (QoQ) 2% 1 3% -8% 5% 34 54% 33% Q2FY14E 190 1,044 882 27,430 PAT (Rs m) % chg (YoY) 206% 215% -3% -6% % chg (QoQ) -53% 127% 76% 30%

Company name Punj Lloyd Siemens India Thermax Total Consumer Dabur Emami Godrej Consumer Products Ltd. Hindustan Unilever ITC Marico United Spirits Total Information Technology HCL Technologies Hexaware Technologies Infosys Technologies Mindtree Mphasis Persistent Systems Rolta India Tata Consultancy Services Wipro Total Metals Hindalco Industries National Aluminium Company Hindustan Zinc Coal India Gujarat NRE Coke NMDC Jindal Steel and Power JSW Steel Tata Steel Steel Authority of India Total Petroleum Aban Offshore Bharat Petroleum Cairn India Essar Oil Ltd. GAIL India Hindustan Petroleum Indian Oil Oil and Natural Gas Corporation Oil India Petronet LNG Reliance Industries Total 28,000 37,127 12,501 434,127

17,566 4,075 19,204 69,419 80,938 12,870 24,164 228,236

15% 13% 20% 10% 12% 11% 8% 12%

7% 6% 11% 2% 9% -7% 9% 6%

3,166 780 2,754 10,919 31,738 1,745 3,314 54,416

18% 22% 11% 12% 19% 15% 23% 17%

29% 32% 22% 1% 15% -24% 13% 11%

2,355 730 1,813 8,370 21,574 1,065 1,312 37,220

16% 19% 15% 4% 17% 24% 113% 16%

32% 26% 27% -5% 14% -31% 36% 9%

78,965 6,106 127,233 7,609 16,784 4,071 6,279 208,292 105,353 560,691

30% 20% 29% 28% 28% 25% 34% 33% -1% 23%

14% 14% 13% 17% 9% 14% 3% 16% 8% 13%

18,862 1,485 33,971 1,598 3,137 957 2,418 62,417 23,179 148,024

40% 35% 18% 21% 16% 7% 14% 41% 8% 27%

16% 17% 14% 34% 12% 23% 6% 21% 15% 17%

13,065 1,061 26,698 1,198 2,133 518 665 44,410 17,636 107,385

48% 26% 13% 66% 2% 16% 5% 26% 10% 21%

8% 8% 12% -12% 11% -9% -38% 17% 9% 12%

68,020 14,955 32,690 152,194 3,686 24,049 40,987 103,510 342,741 118,805 901,636

10% -6% 16% 4% 11% -8% -12% 9% 1% 11% 4%

18% -3% 11% -8% 13% -16% -27% 2% 5% 18% 2%

4,379 2,216 17,330 27,010 643 16,237 13,119 17,418 31,755 9,170 139,278

-15% 1022% 24% -6% -41% -16% -17% 17% 37% -4% 6%

8% 72% 19% -32% 778% -15% -14% 0% -14% 14% -11%

3,249 1,680 17,524 30,748 (77) 14,202 5,237 1,268 2,407 4,658 80,897

-9% 3415% 14% 0% -146% -15% -37% -82% 166% -14% -3%

-31% 5% 6% -18% -309% -10% -31% 132% -79% 3% -15%

9,863 666,399 50,900 259,190 133,160 529,780 1,278,893 227,088 25,584 108,286 1,004,333 4,293,476

3% 17% 15% 23% 16% 8% 21% 14% 2% 45% 11% 16%

11% 13% 25% 15% 3% 2% 16% 18% 22% 29% 15% 14%

5,313 16,639 37,612 4,196 16,475 (7,805) 46,231 114,088 11,584 4,210 72,390 320,933

9% -69% 10% -60% 7% -127% -60% 10% -8% 4% -6% -30%

11% 78% 29% -52% 9% -13% 497% 34% 42% 6% -8% 43%

848 9,539 31,744 (5,083) 9,129 (15,905) 17,874 46,957 8,358 2,412 53,912 159,784

72% -81% 37% -584% -7% -168% -81% -20% -12% -23% 0% -52%

13% 535% 2% -197% 13% -9% 151% 17% 37% 7% 5% 78%

Eye on India

4 October 2013 11

Macquarie Research

Fig 28

Q2FY14 Estimates by Company

Q2FY14E Net sales (Rs m) % chg (YoY) % chg (QoQ) 3% 8% 7% -8% 17% 16% 6% 3% 1% -11% -4% 2% -5% -3% Q2FY14E 6,000 3,269 7,914 40,783 31,320 20,139 109,424 EBITDA (Rs m) % chg (YoY) % chg (QoQ) 242% 5% 37% -8% 17% 33% 13% 15% 2% -14% -5% 2% -3% -2% Q2FY14E (7,000) 1,358 2,745 24,870 11,203 2,307 35,483 PAT (Rs m) % chg (YoY) -69% 0% 52% -21% 10% 17% -17% % chg (QoQ) 42% 4% -24% -2% 8% 301% 29%

Company name Power Adani Power CESC Limited JSW Energy NTPC Power Grid Corporation of India Tata Power Total Properties Anant Raj Industries DLF Godrej Properties HDIL Indiabulls Real Estate Jaypee Infratech Oberoi Realty Omaxe Phoenix Mills Prestige Estates Sobha Developers Unitech Total Telecom Bharti Airtel Idea Cellular Total Media Dish TV India D.B. Corp. HT Media Jagran Prakashan Zee Entertainment Enterprises Zee News Total Pharma Apollo Hospitals Cipla Dr. Reddy's Laboratories Fortis Healthcare Glaxosmithkline Pharmaceuticals Glenmark Pharmaceuticals Jubilant Lifesciences Limited Lupin Piramal Enterprises Ranbaxy Laboratories Sun Pharmaceuticals Wockhardt Total

26,000 14,527 22,116 150,783 36,221 88,957 338,605

961 21,415 2,560 2,327 5,500 7,347 2,577 4,155 731 5,000 4,480 6,737 63,789

-30% 5% 10% -10% 61% 4% 0% -10% 10% 107% 8% 25% 12%

20% -7% 27% 54% 8% -4% 18% 3% 5% 0% -3% 18% 2%

336 8,031 640 2,327 1,650 3,606 1,417 623 512 1,300 1,344 1,010 22,796

-53% 8% -11% -30% 36% 0% -5% 10% 17% 79% 5% 24% 2%

15% -12% 58% 11% 12% 5% 6% 11% 8% 1% -3% 34% 1%

222 1,171 330 388 899 893 1,066 236 392 838 552 798 7,785

-56% -15% 1% -72% 179% -51% -14% 5% 19% 83% 10% 62% -14%

15% -35% -16% 139% 24% 10% 5% 24% -6% -3% 10% 27% 1%

204,665 64,080 268,745

1% 21% 5%

1% -2% 0%

65,493 19,865 85,358

3% 40% 10%

1% -4% -1%

8,161 4,221 12,382

13% 76% 29%

18% -9% 8%

6,016 4,536 5,414 4,108 10,937 820 31,832

13% 20% 6% 28% 15% 17% 15%

4% 1% 0% 7% 12% 6% 6%

1,504 1,179 731 1,007 2,953 113 7,486

-3% 37% 29% 29% 36% 44% 24%

23% -11% -6% -1% 1% 21% 2%

(284) 694 427 612 2,245 72 3,766

-175% 43% 28% -12% 20% 74% -1%

6% -9% -10% 3% 0% 37% -2%

9,200 23,450 32,000 12,300 6,485 14,857 13,650 26,600 9,800 27,000 37,835 12,150 227,827

10% 7% 10% -18% -4% 18% 11% 16% 14% 2% 42% -10% 12%

3% -6% 12% 4% 0% 20% 1% 7% 1% 3% 8% -11% 4%

1,520 5,630 7,000 500 1,235 3,107 2,355 6,375 1,425 3,025 16,735 3,230 52,637

6% -17% 2% -76% -40% 27% -10% 24% 95% -13% 42% -38% 4%

4% -19% 21% 55% 1% 22% 1% 8% -2% 15% 8% -23% 4%

845 4,040 4,250 (715) 1,050 1,852 750 4,350 (955) 1,490 12,595 2,440 31,992

2% -19% 3% -151% -38% 47% -27% 50% -4% -80% 45% -46% -12%

7% -16% 18% 34% 11% 32% 8% 8% 35% 128% 1% -25% 33%

Eye on India

4 October 2013 12

Macquarie Research

Fig 28

Q2FY14 Estimates by Company

Q2FY14E Net sales (Rs m) % chg (YoY) % chg (QoQ) 13% 10% 8% 4% Q2FY14E 1,513,280 1,192,347 EBITDA (Rs m) % chg (YoY) % chg (QoQ) -1% 11% 7% 0% Q2FY14E 763,392 603,608 PAT (Rs m) % chg (YoY) -17% 3.0% % chg (QoQ) 12% 2%

Company name Macquarie's total universe Macquarie's total universe (excl Oil & Gas) Source: Macquarie Research, October 2013 9,067,855 4,774,379

Eye on India

4 October 2013 13

Macquarie Research

Fig 29

Macquarie Coverage Universe

Bloomberg Ticker Current Target Price Price (Rs) (Rs) 1,105 525 174 236 802 636 938 61 95 399 700 66 198 264 134 471 329 193 1,660 571 116 311 1,215 340 115 167 730 750 1,115 40 135 485 785 49 192 183 130 340 430 157 1,550 645 80 400 Upside/ Downside 10% -35% -34% -29% -9% 18% 19% -35% 43% 22% 12% -26% -3% -31% -3% -28% 31% -19% -7% 13% -31% 29% Mkt cap (US$m) 8,328 3,522 1,655 1,657 19,873 24,097 17,271 1,309 2,286 3,367 8,629 1,827 1,607 2,399 2,827 2,664 1,299 3,063 18,160 2,087 1,105 1,790 6 mths avg turnover (US$m) 57.87 14.06 5.79 8.02 51.14 40.91 73.25 2.11 19.40 18.54 10.42 2.69 12.85 7.54 8.25 12.70 30.94 5.95 81.25 8.41 7.26 45.93 PER (x) FY14E FY15E 8.9 7.3 6.0 5.0 21.8 18.8 11.7 5.3 8.3 16.9 20.9 16.7 8.1 14.0 4.2 4.3 15.9 6.0 7.5 8.0 4.5 7.9 7.6 5.9 4.2 3.8 18.2 15.0 9.9 4.4 7.6 13.9 17.5 13.4 6.7 11.7 3.9 3.2 13.7 4.8 6.2 7.0 3.4 6.0 P/BV (x) FY14E FY15E 1.4 0.7 0.4 0.4 4.5 3.5 1.5 0.4 1.0 2.4 2.8 1.9 1.3 2.8 0.6 0.5 0.7 1.0 0.8 1.5 0.4 1.6 1.2 0.6 0.4 0.4 4.0 3.0 1.3 0.4 0.9 2.1 2.4 1.6 1.1 2.3 0.6 0.4 0.6 0.9 0.8 1.3 0.4 1.3 ROE (FY14E) % 16.3 9.2 7.7 8.1 21.5 20.5 13.2 8.2 12.0 15.2 15.0 11.8 17.9 21.4 16.2 11.4 4.2 17.3 11.7 20.4 9.5 22.4 2 Yr EPS CAGR % 15 -9 -5 -2 19 23 14 -1 1 16 17 29 20 30 0 4 -17 2 0 16 -3 19

Sector (Analyst)

Rating Outperform Underperform Underperform Underperform Underperform Outperform Outperform Underperform Outperform Outperform Outperform Underperform Underperform Underperform Outperform Underperform Outperform Neutral Neutral Neutral Underperform Outperform

Banks (Suresh Ganapathy/Parag Jariwala) Axis Bank AXSB IN Bank of Baroda BOB IN Bank of India BOI IN Canara bank CBK IN HDFC HDFC IN HDFC Bank HDFCB IN ICICI Bank ICICIBC IN IDBI IDBI IN IDFC IDFC IN Indusind Bank IIB IN Kotak Mahindra Bank KMB IN L&T Finance Holdings LTFH IN LIC Housing Finance LICHF IN Mahindra & Mahindra Fin. MMFS IN Services Power Finance Corp POWF IN Punjab National Bank PNB IN Reliance Capital RCAPT IN Rural Electrification RECL IN SBI SBIN IN Shriram Transport SHTF IN Finance Union Bank UNBK IN Yes Bank YES IN Cement (Rakesh Arora/Sumangal Nevatia) ACC ACC IN Ambuja Cements ACEM IN Grasim Industries GRASIM IN India Cements ICEM IN Ultratech Cements UTCEM IN

1,140 191 2,716 53 1,892

999 137 3,407 45 1,381

-12% -28% 25% -15% -27%

3,428 4,702 3,989 261 8,330

5.98 8.16 3.24 1.19 6.78

14.1 16.0 9.6 10.8 18.9

13.0 14.2 8.2 6.5 15.3

2.4 2.7 1.1 0.4 2.9

2.2 2.4 1.0 0.4 2.5

18.0 17.8 12.5 3.7 16.7

12 17 8 12 12

Underperform Underperform Outperform Neutral Underperform

Construction (Inderjeetsingh Bhatia/Amit Sinha) ABB India ABB IN 552 Adani Ports and SEZ ADSEZ IN 141 BHEL BHEL IN 144 Crompton Greaves India CRG IN 91 GMR Infrastructure GMRI IN 22 Gujarat Pipavav Port GPPV IN 46 GVK Power & GVKP IN 7 Infrastructure J.P. Associates JPA IN 38 Larsen & Toubro LT IN 829 Nagarjuna Construction NJCC IN 19 Punj Lloyd PUNJ IN 24 Siemens India SIEM IN 492

380 180 133 90 25 59 9 38 1,163 14 17 386

-31% 28% -8% -1% 11% 29% 34% 1% 40% -25% -29% -22%

1,881 4,663 5,616 941 1,409 353 163 1,336 12,256 76 128 2,815

1.26 5.45 15.46 3.94 2.84 0.27 0.45 27.69 41.39 0.55 2.86 3.21

25.5 16.2 9.3 14.8 (27.6) 9.5 (9.0) 16.0 14.5 7.1 9.5 25.5

20.1 13.3 10.8 9.7 27.5 8.8 8.7 10.7 10.4 6.9 6.4 20.2

3.5 3.3 1.1 1.5 1.0 1.4 0.3 0.6 2.0 0.2 0.3 3.3

3.0 2.7 1.0 1.3 0.9 1.2 0.3 0.6 1.8 0.2 0.3 2.9

14.4 23.5 12.0 10.6 -3.5 15.8 -3.5 3.9 16.6 2.5 2.8 13.5

28 17 -30 167 nmf 28 nmf 28 52 11 nmf 34

Underperform Outperform Underperform Neutral Outperform Outperform Outperform Underperform Outperform Underperform Underperform Underperform

Eye on India

4 October 2013 14

Macquarie Research

Fig 29

Macquarie Coverage Universe

Bloomberg Ticker Current Target Price Price (Rs) (Rs) 1,300 150 3,550 1,250 500 620 86 2,200 480 Upside/ Downside 21% 17% 18% 4% 10% -2% 53% 13% 2% Mkt cap (US$m) 12,337 619 27,850 826 1,538 411 146 63,699 19,186 6 mths avg turnover (US$m) 20.08 5.16 58.60 1.04 0.96 0.31 0.36 41.19 16.05 PER (x) FY14E FY15E 14.0 8.2 15.2 11.4 9.6 10.9 3.6 22.2 15.6 11.7 7.7 13.3 9.9 8.4 10.4 3.5 18.4 14.2 P/BV (x) FY14E FY15E 4.1 2.3 3.7 3.2 1.7 2.2 0.4 8.2 3.7 3.1 1.9 3.0 2.5 1.5 1.9 0.3 6.3 3.3 ROE (FY14E) % 33.4 30.3 26.3 30.7 19.1 21.4 11.6 39.9 25.3 2 Yr EPS CAGR % 27 11 17 24 21 15 -9 24 21

Sector (Analyst)

Rating Outperform Outperform Outperform Outperform Outperform Neutral Outperform Outperform Neutral

Information Technology (Nitin Mohta/Atul Soni) HCL Technologies HCLT IN 1,072 Hexaware HEXW IN 129 Infosys Technologies INFO IN 3,015 Mindtree MTCL IN 1,198 Mphasis MPHL IN 454 Persistent PSYS IN 631 Rolta India RLTA IN 56 TCS TCS IN 1,946 Wipro WPRO IN 471 Media (Nitin Mohta/Atul Soni) DB Corp DBCL IN Dish TV DITV IN HT Media HTML IN Jagran Prakashan JAGP IN Zee Entertainment Z IN Zee News ZEEN IN Metals (Rakesh Arora/Sumangal Nevatia) Coal India COAL IN Gujarat NRE Coke GNC IN Hindalco HNDL IN Hindustan Zinc HZ IN Jindal Steel & Power JSP IN JSW Steel JSTL IN NALCO NACL IN NMDC NMDC IN SAIL SAIL IN Tata Steel TATA IN Oil & Gas (Abhishek Agarwal) Aban Offshore ABAN IN Bharat Petroleum BPCL IN Cairn India CAIR IN Essar Oil ESOIL IN GAIL GAIL IN Hindustan Petroleum HPCL IN Indian Oil Corp IOCL IN Oil & Natural Gas Corp. ONGC IN Oil India OINL IN Petronet LNG PLNG IN Reliance Industries RIL IN

253 53 85 80 246 12

310 75 120 90 300 17

22% 42% 42% 12% 22% 39%

735 904 319 431 3,770 46

0.30 3.83 0.23 0.18 10.40 0.07

15.5 (102.6) 10.2 11.9 25.2 14.2

13.7 29.5 8.5 10.7 20.1 9.4

3.9 (26.7) 1.1 2.3 4.9 1.2

3.4 (281.0) 1.0 2.0 3.9 1.1

27.0 29.9 11.6 20.9 21.4 9.0

25 nmf 18 -4 27 12

Outperform Outperform Outperform Neutral Outperform Outperform

302 13 116 134 241 763 33 124 55 286

360 18 145 152 350 850 24 153 48 335

19% 37% 25% 13% 45% 11% -28% 23% -12% 17%

30,694 127 3,534 9,072 3,582 2,970 1,383 7,881 3,602 4,463

13.04 0.13 13.86 1.99 15.41 14.09 0.23 5.63 3.51 30.59

10.3 12.1 9.0 7.9 7.8 9.6 13.8 7.7 11.8 9.0

8.9 2.7 7.1 7.2 4.9 8.5 11.3 7.1 10.1 6.7

3.1 0.4 0.6 1.5 0.9 0.9 0.7 1.6 0.5 0.8

2.7 0.4 0.6 1.3 0.8 0.9 0.7 1.5 0.5 0.7

32.9 4.4 7.3 20.5 12.8 10.4 5.2 22.1 4.5 8.7

11 33 1 8 25 9 15 5 -6 253

Outperform Outperform Outperform Outperform Outperform Outperform Underperform Outperform Neutral Outperform

225 335 327 54 333 191 208 267 459 121 847

222 421 378 96 390 255 300 360 650 96 1,100

-2% 26% 16% 79% 17% 34% 44% 35% 42% -21% 30%

157 3,871 9,991 1,163 6,763 1,034 8,030 36,471 4,397 1,453 43,645

1.46 7.88 11.66 1.70 5.94 4.25 2.38 20.95 4.53 2.08 52.62

3.0 15.7 5.2 4.5 9.8 7.0 6.8 8.0 6.9 10.0 11.1

2.2 11.5 5.4 3.1 8.7 4.3 6.0 6.6 6.1 8.6 10.2

0.3 1.4 1.1 1.3 1.3 0.5 0.7 1.6 1.3 2.0 1.2

0.3 1.3 0.9 0.9 1.2 0.4 0.7 1.4 1.1 1.7 1.1

8.3 9.1 21.8 38.1 14.3 6.7 11.3 19.1 19.8 20.2 11.7

72 -1 2 nmf 6 158 38 20 12 -4 9

Neutral Outperform Outperform Outperform Outperform Outperform Outperform Outperform Outperform Underperform Outperform

Pharmaceuticals (Abhishek Singhal/Kumar Saurabh) Apollo Hospitals APHS IN 909 Cipla CIPLA IN 436 Dr. Reddys Labs DRRD IN 2,430 Fortis Healthcare FORH IN 98 GlaxoSmithKline Pharma GLXO IN 2,467 Glenmark GNP IN 539 Jubilant JOL IN 79

1,190 480 2,600 115 2,000 770 100

31% 10% 7% 17% -19% 43% 26%

2,030 5,602 6,631 723 3,364 2,341 202

5.37 9.69 13.17 0.61 1.13 4.85 0.23

32.4 21.2 22.8 134.9 31.0 17.4 3.4

25.6 18.1 18.7 35.2 27.5 15.0 2.5

4.2 3.3 4.7 1.0 9.1 4.1 0.4

3.6 2.9 3.8 1.0 8.2 3.3 0.4

13.5 16.9 22.5 0.8 30.5 25.7 14.0

29 13 18 nmf 13 26 15

Outperform Outperform Outperform Outperform Underperform Outperform Outperform

Eye on India

4 October 2013 15

Macquarie Research

Fig 29

Macquarie Coverage Universe

Bloomberg Ticker LPC IN PIEL IN RBXY IN STR IN SUNP IN WPL IN Current Target Price Price (Rs) (Rs) 861 570 362 867 601 473 860 600 550 1,200 675 750 Upside/ Downside 0% 5% 52% 38% 12% 59% Mkt cap (US$m) 6,167 1,571 2,438 822 20,059 827 6 mths avg turnover (US$m) 15.31 0.67 18.72 3.73 19.20 11.01 PER (x) FY14E FY15E 23.9 213.1 4.6 21.7 47.5 4.4 20.0 58.6 10.7 18.1 22.3 4.1 P/BV (x) FY14E FY15E 5.8 0.9 1.8 1.0 8.0 1.3 4.6 0.9 1.6 0.9 6.2 1.0 ROE (FY14E) % 27.4 0.4 15.7 4.8 32.0 36.1 2 Yr EPS CAGR % 21 nmf 40 33 25 -8

Sector (Analyst) Lupin Piramal Ranbaxy Strides Arcolab Sun Pharma Wockhardt

Rating Neutral Neutral Outperform Outperform Outperform Neutral

Properties (Abhishek Bhandari) Anant Raj ARCP IN DLF DLFU IN Godrej Properties GPL IN HDIL HDIL IN Indiabulls Real Estate IBREL IN Jaypee Infratech JPIN IN Oberoi Realty OBER IN Omaxe OAXE IN Phoenix Mills PHNX IN Prestige Estates PEPL IN Sobha Developers SOBHA IN Unitech UT IN Consumer (Amit Mishra) Dabur DABUR IN Emami HMN IN Godrej Consumer GCPL IN Hindustan Unilever HUVR IN ITC ITC IN Marico Industries MRCO IN United Spirits UNSP IN

42 139 361 39 57 17 171 138 226 117 291 16

120 202 506 43 48 27 234 118 261 175 378 12

186% 45% 40% 10% -15% 64% 37% -14% 16% 49% 30% -27%

199 3,955 575 260 386 370 899 382 526 662 456 683

0.94 29.71 0.23 14.11 7.43 0.46 0.43 0.84 0.27 0.70 0.84 13.33

7.0 23.3 15.0 2.4 7.2 6.7 11.1 12.1 16.4 11.2 8.5 6.6

8.2 18.6 11.5 2.0 7.0 8.3 6.6 5.1 10.8 10.1 6.8 8.3

0.3 0.8 1.5 0.1 0.3 0.3 1.2 1.1 1.7 1.3 1.2 0.4

0.3 0.8 1.3 0.1 0.3 0.3 1.1 0.9 1.5 1.2 1.1 0.3

4.4 3.7 12.9 6.4 4.5 5.2 11.6 9.5 10.8 12.7 14.8 5.5

-3 30 38 26 40 -37 30 51 90 17 39 29

Outperform Outperform Outperform Outperform Underperform Outperform Outperform Underperform Outperform Outperform Outperform Underperform

170 496 847 610 339 212 2,490

180 560 950 650 421 240 1,500

6% 13% 12% 7% 24% 13% -40%

4,714 1,774 4,633 21,139 43,085 2,195 5,853

4.25 2.04 3.63 29.50 41.79 1.33 58.22

32.0 29.8 35.5 36.0 29.9 30.6 60.9

28.2 24.7 27.2 32.5 24.8 26.4 41.2

11.3 11.4 7.5 45.4 10.5 5.9 4.2

9.3 9.1 6.5 44.7 9.6 5.0 3.9

39.0 42.8 22.7 127.0 36.9 20.8 8.9

14 20 26 10 19 18 140

Neutral Outperform Outperform Neutral Outperform Outperform Underperform

Telecom (Abhishek Singhal/Kumar Saurabh) Bharti Airtel BHARTI IN 324 Idea Cellular IDEA IN 176 Autos (Amit Mishra) Ashok Leyland Bajaj Auto Eicher Motors Hero Honda Mahindra & Mahindra Maruti Suzuki Tata Motors

425 215

31% 22%

20,690 9,286

24.94 13.73

30.7 32.3

23.4 23.2

2.1 3.6

2.0 3.1

7.6 11.8

52 58

Outperform Outperform

AL IN BJAUT IN EIM IN HMCL IN MM IN MSIL IN TTMT IN

15 2,119 3,606 2,031 852 1,412 346

15 1,620 4,320 1,950 1,000 1,350 380

-1% -24% 20% -4% 17% -4% 10%

641 9,753 1,569 6,480 8,401 6,843 17,553

1.82 13.19 1.77 12.10 20.95 16.60 42.96

(12.2) 17.7 17.2 20.2 17.6 17.7 8.1

(92.5) 15.7 13.3 14.7 16.0 16.0 6.7

1.0 6.3 4.1 7.2 3.2 2.1 2.2

1.0 5.3 3.4 6.0 2.8 1.9 1.7

-7.7 39.4 25.5 37.8 19.1 12.3 31.0

nmf 13 34.8 14 -0.2 2.9 25

Outperform Underperform Outperform Neutral Outperform Neutral Outperform

Power (Inderjeet Bhatia/Amit Sinha) Adani Power ADANI IN CESC CESC IN JSW Energy JSW IN NTPC NTPC IN Power Grid Corporation PWGR IN Tata Power TPWR IN

33 349 45 144 100 81

26 383 57 187 123 95

-22% 10% 27% 30% 23% 17%

1,518 692 1,183 18,998 7,404 3,079

2.84 1.35 1.71 11.31 6.33 4.68

(8.1) 6.7 6.6 10.6 11.8 15.0

26.0 6.3 8.4 9.8 10.0 9.4

1.5 0.6 1.0 1.5 1.5 1.6

1.5 0.6 0.9 1.4 1.4 1.5

-22.5 9.6 16.5 14.7 14.5 11.8

nmf 5 -8 9 8 67

Underperform Outperform Outperform Outperform Outperform Outperform

Eye on India

Source: Bloomberg, Macquarie Research, October 2013; Prices as of October 3, 2013 close

Macquarie Research

Eye on India

Top 10 and Model Portfolio Performance

Fig 30 Macquarie Top 10 stock list
Market cap (US$ m) 30,608 12,325 17,340 9,334 42,914 3,604 12,277 8,397 2,434 17,609 156,842 718,852 547,810 643,988 % return since % Return added (7 Day) -7.2 20.8 -11.4 5.5 -4.1 -65.5 -33.2 -7.2 -13.4 68.7 -7.1 4.7 8.7 7.3 -0.5 5.0 -0.9 1.6 -3.0 2.3 -0.1 0.0 7.5 0.7 1.3 0.7 0.0 0.5 % Return (1 month) 15.8 7.9 19.7 17.2 12.7 9.8 19.3 10.9 -11.4 16.3 12.5 8.7 9.1 10.6 Macquarie % Return FY14E PER FY14E P/BV FY14E EPS (3 months) (Macq est) (Macq est) Growth % 1.9 NA -10.8 NA NA 7.7 -11.8 NA NA 16.8 -3.8 1.7 2.1 0.7 10.3 14.0 11.7 32.3 29.9 7.8 13.7 17.6 14.5 8.1 16.0 3.1 4.1 1.5 3.6 10.5 0.9 2.0 3.2 1.8 2.2 3.3 6.8 35.7 11.0 78.6 17.7 -0.5 74.7 -9.7 43.4 30.1 28.8 Expected FY14 ROE 32.9 33.4 13.2 11.8 36.9 12.8 16.6 19.1 15.7 31.0 22.3

Company Coal India HCL Technologies ICICI Bank Idea Cellular ITC Jindal Steel and Power Larsen & Toubro Mahindra & Mahindra Ranbaxy Laboratories Tata Motors Top-10 Focus List Aggregate* MSCI India Sensex Nifty

Note: Average returns are equal-weighted and there are no transaction costs involved. Source: Bloomberg, Macquarie Research, October 2013; Prices as of October 3, 2013 close

Fig 31
Date

Past changes to Top-10 List

Stocks Replaced Mahindra & Mahindra Ltd Tata Power Co Ltd TCS Dr. Reddy's Power Finance GAIL Glenmark Tata Motors Tata Steel JSW Steel ICICI Bank ITC BPCL Mahindra & Mahindra Ltd Reliance Industries Infosys TCS Maruti Hindustan Unilever ICICI Bank HDFC Bank Dr Reddy's DLF Maruti SBI Bharti Axis Bank NTPC Date when Stock was added 24/08/2010 24/08/2010 24/08/2010 24/08/2010 12/11/2010 24/08/2010 26/11/2010 12/11/2010 24/08/2010 30/05/2011 24/08/2010 24/08/2010 30/05/2011 30/05/2011 12/01/2011 12/11/2010 10/05/2012 12/01/2012 28/11/2011 29/06/2012 25/08/2011 30/05/2011 14-01-2013 27-09-2012 14-01-2013 25-08-2011 14-01-2013 10-05-2012 Profit Booked (%) 25.5 7.5 21.3 35.0 -11.0 -2.7 -16.8 -13.6 12.8 -14.6 -16.7 22.9 -18.0 4.0 -33.0 -22.0 2.8 11.5 38.0 31.8 50.9 21.0 -27.8 13.1 -23.5 -18.0 -38.6 -12.5 Stocks Added Tata Motors Power Finance Corp Infosys Glenmark Reliance Ind. BPCL Dr. Reddy's Mahindra & Mahindra Ltd JSW Steel Bharti HDFC Bank Hindustan Unilever Coal India Maruti NTPC TCS ICICI bank Tata Motors Maruti Axis Bank SBI DLF ITC M&M Ltd ICICI bank Idea Cellular HCL tech Ranbaxy

12/11/2010 12/11/2010 12/11/2010 26/11/2010 12/01/2011 30/05/2011 30/05/2011 30/05/2011 30/05/2011 25/08/2011 25/08/2011 28/11/2011 12/01/2012 12/01/2012 10/05/2012 10/05/2012 29/06/2012 26/07/2012 27/09/2012 14/01/2013 14/01/2013 14/01/2013 11-07-2013 11-07-2013 11-07-2013 19-08-2013 29-08-2013 29-08-2013

Source: Macquarie Research, October 2013

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Fig 32 Top 10 Stock Performance

125 120 115 110 105 100 95 90 85 80 Aug-10

Index, Aug 24, 2010 =100

Top-10 Focus List MSCI India

Dec-10

Apr-11

Aug-11

Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Source: Bloomberg, Macquarie Research, October 2013

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Fig 33

Performance of stocks included in model portfolio (%)

Weight in Macquarie Portfolio Weight in MSCI Index Performance* 1m 3m 8.8 8.7 9.1 10.6 7.7 -0.6 12.7 12.5 10.9 16.3 4.2 15.8 6.1 1.9 25.6 14.1 41.1 9.3 13.1 19.7 14.2 12.5 9.8 4.9 17.2 -11.4 10.1 18.0 7.2 19.3 1.2 0.1 1.2 7.9 12.8 5.3 9.8 1.6 16.0 13.8 17.2 10.2 4.4 12.4 -3.1 1.7 2.1 0.7 -0.6 0.0 -1.1 3.7 -12.3 16.8 -4.4 1.9 -15.7 -3.8 -8.2 -10.4 -14.2 -21.7 -4.7 -10.8 -5.6 -12.4 7.4 -7.9 16.0 5.8 8.5 -12.9 -7.5 -11.8 28.8 23.7 32.3 38.8 8.9 19.4 7.7 8.0 14.9 9.6 28.0 -1.4 -7.2 0.2

Sector/Company Macquarie Model Portfolio MSCI India Sensex NIFTY Consumer Staples Hindustan Unilever Ltd ITC Ltd Consumer Discretionary Mahindra & Mahindra Ltd Tata Motors Ltd Energy Coal India Ltd Oil & Natural Gas Corp Ltd Reliance Industries Ltd Bharat Petroleum Corp Ltd Financials Axis Bank DLF Ltd HDFC Bank Ltd ICICI Bank Ltd HDFC Ltd State Bank of India Health Care Glenmark Pharma Sun Pharma Ranbaxy Laboratories Ltd Dr Reddy's Laboratories Ltd Industrials Cummins India Larsen & Toubro Ltd Information Technology Infosys Ltd Tata Consultancy Services Ltd HCL Technologies Ltd Materials NMDC Ltd Jindal Steel & Power Ltd Tata Steel Ltd Telecom. Services Bharti Airtel Ltd Idea Cellular Ltd Utilities Power Grid Corp of India Ltd NTPC Ltd

Ticker MACQ Index MXIN Index Sensex Index Nifty Index MXIN0CS Index HUVR IN Equity ITC IN Equity MXIN0CD Index MM IN Equity TTMT IN Equity MXIN0EN Index COAL IN Equity ONGC IN Equity RIL IN Equity BPCL IN Equity MXIN0FN Index AXSB IN Equity DLFU IN Equity HDFCB IN Equity ICICIBC IN Equity HDFC IN Equity SBIN IN Equity MXIN0HC Index GNP IN Equity SUNP IN Equity RBXY IN Equity DRRD IN Equity MXIN0IN Index KKC IN Equity LT IN Equity MXIN0IT Index INFO IN Equity TCS IN Equity HCLT IN Equity MXIN0MT Index NMDC IN Equity JSP IN Equity TATA IN Equity MXIN0TC Index BHARTI IN Equity IDEA IN Equity MXIN0UT Index PWGR IN Equity NTPC IN Equity

Since Added 0.5 4.7 8.7 7.3

1w 1.0 0.7 0.0 0.5 -1.6 -3.1 -3.0 1.5 0.0 0.7 0.7 -0.5 -3.8 1.0 8.4 1.1 7.1 2.6 2.4 -0.9 1.2 -0.9 0.8 3.2 3.4 7.5 -1.1 -0.3 -0.3 -0.1 2.3 0.8 4.2 5.0 0.6 -2.3 2.3 -4.7 -1.6 -3.1 1.6 -1.4 0.6 -3.9

6m -2.7 7.0 7.9 6.6 20.1 27.6 15.7 16.7 1.4 34.8 1.9 -2.1 -14.8 7.3 -11.9 -6.2 -8.2 -40.4 1.9 -5.2 5.8 -18.4 18.2 9.8 38.9 -17.8 25.5 -11.1 -17.7 -6.2 20.4 7.2 36.7 48.2 5.5 0.2 -27.1 -6.6 43.2 15.6 64.7 -1.3 -4.1 2.2

1Y -10.3 0.2 1.6 -0.7 16.6 14.9 17.9 -1.5 -9.6 9.2 -2.3 -16.0 -0.4 0.7 -5.9 -17.4 -18.9 -40.9 -7.1 -19.0 -3.7 -31.6 23.3 0.1 62.5 -28.8 32.4 -29.0 -21.1 -23.5 43.8 31.5 60.2 77.5 -17.3 -26.4 -47.7 -34.8 30.0 0.7 69.7 -16.4 -12.3 -7.5

9.3 3.7 5.6 6.5 4.0 2.5 14.2 1.5 2.1 8.5 2.1 23.3 3.0 1.0 8.3 4.0 4.5 2.5 8.5 1.2 2.5 3.0 1.8 4.5 1.5 3.0 21.5 9.5 7.0 5.0 5.7 2.1 2.9 0.7 3.5 1.5 2.0 3.0 1.6 2.0

11.5 3.1 5.2 6.1 1.9 1.8 12.6 1.0 1.5 8.5 0.4 24.9 1.9 0.4 6.8 2.7 7.9 1.6 7.3 0.0 2.5 0.4 1.8 3.6 0.0 1.8 21.5 11.1 7.1 1.6 6.3 0.0 0.7 0.7 2.6 1.4 0.8 3.7 0.9 1.1

105.6 53.5 49.3 56.2 38.5 74.3 -14.7 -7.2 -16.5 -12.5 -1.2 -7.7 -20.3 -55.4 45.1 -4.7 15.4 -9.9 78.1 6.4 63.4 5.8 7.6 -51.8 -17.3 -32.9 44.3 9.6 132.4 31.4 -25.2 6.4 -65.5 2.7 -47.6 -12.7 35.1 -38.5 -7.6 -3.7

* Returns are weighted for Model Portfolio and unweighted for individual stocks and there are no transaction costs involved; Period performance of individual stocks reflects actual price performance Source: Bloomberg, Macquarie Research, October 2013. Prices as of October 3, 2013 close.

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Market and Sector Performance

Fig 34 Performance of major benchmark and sectoral indices (%)
YTD -19.6 -24.9 1.0 -5.1 -3.5 0.1 -1.6 2.3 5 Day 1.6 1.2 0.7 0.5 0.5 0.5 0.4 -0.1 1 Month 7.3 6.0 6.7 7.9 8.1 8.5 8.1 7.0 3 Months -4.4 -2.4 2.2 0.1 0.5 1.2 1.1 2.4 6 Months -6.9 -6.4 6.5 2.8 3.8 6.0 5.2 7.3 1 Year -15.1 -23.1 3.6 -1.9 -0.2 2.1 1.4 4.3 Index/Sector Benchmark Indices Mid-Cap Index Small-Cap Index MSCI India BSE 500 Index BSE 200 Index NIFTY Index BSE 100 Index SENSEX 30 Index Sectoral Indices BSE IT Index BSE TECK Index Auto Index Healthcare Index BSE Banks Index BSE Realty Index Consumer Dur. Index Oil & Gas Index Capital Goods Index Metal Index NSE Infra Index BSE PSU Index BSE FMCG Index Power Index MSCI India Sectors Information Technology Consumer Discretionary Finance Healthcare Energy Materials Industrials Utilities Telecom Consumer Staples

41.3 32.7 -0.5 18.0 -19.1 -42.0 -23.7 -2.1 -26.3 -22.2 -15.1 -24.9 14.6 -23.1

2.6 1.8 1.6 1.2 1.0 0.9 -0.1 -0.1 -0.5 -1.2 -1.3 -1.4 -1.7 -2.2

-0.8 1.4 10.1 5.8 15.2 6.4 7.0 1.5 14.5 7.3 13.1 8.8 7.7 10.4

28.6 22.9 5.1 5.8 -10.8 -19.0 -4.3 -5.0 -11.7 13.3 -3.2 -8.1 -0.1 -5.5

19.1 19.4 17.4 17.0 -9.3 -31.1 -15.8 0.8 -10.8 1.4 0.3 -15.2 16.3 -7.6

33.7 31.1 9.0 27.4 -13.1 -37.0 -17.2 -5.4 -29.0 -19.0 -15.0 -27.0 20.9 -26.8

43.9 -0.7 -16.5 23.8 -2.0 -15.9 -28.0 -15.9 31.7 17.6

2.3 1.5 1.1 0.8 0.7 0.6 -0.3 -1.4 -1.6 -1.6

-1.4 9.8 12.9 7.0 2.0 10.6 15.4 8.9 11.0 6.8

28.3 3.6 -9.9 8.0 -3.0 10.1 -12.1 -1.8 13.3 0.2

19.0 16.4 -7.7 19.3 3.9 5.3 -11.8 -0.9 46.6 19.8

34.3 9.3 -11.0 30.8 -4.5 -11.4 -29.6 -20.0 56.6 23.5

Source: Bloomberg, Macquarie Research, October 2013. Prices as of October 3, 2013 close

Fig 35

Performance of global markets (%)

YTD 1W 0.7 0.6 0.5 0.3 -0.8 -1.1 -1.2 -1.8 -3.6 1M 6.7 6.1 7.2 3.8 3.1 1.8 2.3 -0.5 1.4 3M 2.2 9.2 9.0 16.7 6.5 4.4 5.7 0.4 -0.1 6M 6.5 1.2 -1.2 4.1 8.5 8.0 5.6 1.5 13.0 1Y 3.6 4.5 0.0 11.0 16.1 15.5 13.1 10.5 60.5 1.0 -0.5 -4.7 -1.4 15.3 18.2 9.8 9.1 36.6

MSCI India MSCI Asia ex-Japan MSCI EM MSCI China MSCI World MSCI US MSCI Europe MSCI UK MSCI Japan

Source: Bloomberg, Macquarie Research, October 2013; Prices as of October 3, 2013 close

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MSCI Sectors Performance

Fig 36
105 100 95 90 85 80 Jan-13

MSCI Consumer Discretionary

Consumer Discretionary MSCI India

Fig 37
140 130 120 110 100 90 80 Jan-13

MSCI Consumer Staples

Consumer Staples MSCI India

Mar-13

May-13

Jul-13

Sep-13

Mar-13

May-13

Jul-13

Sep-13

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

Fig 38
115 110 105 100 95 90 Jan-13

MSCI Energy
Energy MSCI India

Fig 39
110 105 100 95 90 85 80 75 70 Jan-13

MSCI Financials
Financials MSCI India

Mar-13

May-13

Jul-13

Sep-13

Mar-13

May-13

Jul-13

Sep-13

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

Fig 40
130 120 110 100 90 80 70 Jan-13

MSCI Healthcare
Healthcare MSCI India

Fig 41
110 105 100 95 90 85 80 75 70 65 60 Jan-13

MSCI Industrials
Industrials MSCI India

Mar-13

May-13

Jul-13

Sep-13

Mar-13

May-13

Jul-13

Sep-13

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

Fig 42
160 150 140 130 120 110 100 90 80 70 60 Jan-13

MSCI Information Technology

IT MSCI India

Fig 43
110 105 100 95 90 85 80 75 70 65 60 Jan-13

MSCI Materials
Materials MSCI India

Mar-13

May-13

Jul-13

Sep-13

Mar-13

May-13

Jul-13

Sep-13

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

4 October 2013

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Fig 44
140 130 120 110 100 90 80 70 60 Jan-13

MSCI Telecom
Telecom MSCI India

Fig 45
110 105 100 95 90 85 80 75 70 65 60 Jan-13

MSCI Utilities
Utilities MSCI India

Mar-13

May-13

Jul-13

Sep-13

Mar-13

May-13

Jul-13

Sep-13

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

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Market and Sector Valuations

Fig 46 Valuations of major benchmark and sectoral indices
PER FY14E FY15E 14.9 14.4 15.2 13.6 14.0 14.1 10.9 7.5 12.8 12.1 12.9 11.3 11.6 11.8 8.4 6.8 Price-to-Book FY14E FY15E 2.4 2.3 2.4 2.0 2.1 2.1 1.3 0.7 2.1 2.0 2.1 1.7 1.8 1.9 1.1 0.6 EV/EBITDA FY14E FY15E 8.6 8.8 9.6 9.6 9.5 9.4 9.9 NA 7.6 7.8 8.5 8.3 8.3 8.2 8.3 NA Div Yield (%) FY14E FY15E 1.7 1.7 1.6 1.7 1.7 1.7 1.9 NA 2.0 2.0 1.8 1.9 2.0 2.0 2.1 NA Index/Sector Benchmark Indices SENSEX 30 Index NIFTY Index MSCI India BSE 500 Index BSE 200 Index BSE 100 Index Mid-Cap Index Small-Cap Index Sectoral Indices BSE Realty Index BSE Banks Index Auto Index Metal Index Capital Goods Index Healthcare Index BSE IT Index BSE FMCG Index Oil & Gas Index Consumer Dur. Index Power Index BSE TECK Index NSE Infra Index MSCI India Sectors Consumer Staples Consumer Discretionary Energy Finance Healthcare Industrials Information Technology Materials Telecom Utilities

11.2 10.8 11.6 8.7 15.2 22.2 17.5 32.3 9.8 17.0 13.1 19.2 15.2

7.9 8.3 10.3 7.4 12.9 18.9 15.5 27.3 8.7 14.4 10.7 17.3 12.6

0.6 1.6 2.7 0.9 1.7 4.1 4.4 9.5 1.3 3.9 1.1 3.7 1.5

0.5 1.3 2.2 0.9 1.6 3.5 3.7 8.9 1.2 3.2 1.0 3.3 1.4

10.2 NA 6.5 3.9 10.4 15.4 12.2 22.2 6.7 17.3 9.0 11.0 9.1

8.3 NA 5.9 3.6 9.2 13.1 10.9 18.8 5.9 14.6 7.7 9.8 7.9

1.4 1.9 1.5 2.5 1.8 0.8 1.5 1.7 2.2 NA 2.1 1.3 1.5

1.7 2.2 1.7 2.7 1.9 0.9 1.7 2.0 2.5 NA 2.2 1.5 1.7

35.1 12.2 10.0 14.2 24.5 13.1 18.3 10.8 30.0 10.8

29.3 10.9 9.1 11.5 19.6 11.1 16.2 9.1 21.1 9.6

10.1 3.2 1.4 2.2 4.1 1.6 4.6 1.1 1.9 1.1

8.9 2.6 1.2 1.9 3.5 1.4 3.9 1.0 1.8 1.0

23.8 6.9 6.9 NA 16.3 9.6 13.0 4.2 7.9 8.5

20.1 6.5 6.1 NA 13.7 8.3 11.6 3.7 7.0 7.6

1.5 1.7 2.2 1.6 0.7 1.8 1.5 1.4 0.3 2.2

1.8 1.9 2.3 2.0 0.8 1.8 1.7 1.6 0.4 2.4

Source: Bloomberg, Macquarie Research, October 2013; Prices as of October 3, 2013 close

Fig 47

Valuation of global markets

PER CY13E CY14E /FY14E /FY15E Price-to-Book CY13E CY14E /FY14E /FY15E 2.4 1.4 1.5 1.6 1.5 1.9 2.4 1.8 1.2 2.1 1.3 1.3 1.5 1.4 1.8 2.2 1.7 1.2 EV/EBITDA CY13E CY14E /FY14E /FY15E 9.6 7.3 7.7 8.2 8.8 9.2 9.6 7.6 9.6 8.5 6.6 7.0 7.6 7.9 8.5 8.9 7.0 8.8 Div Yield (%) CY13E CY14E /FY14E /FY15E 1.6 3.4 2.8 3.6 2.6 2.6 2.1 3.8 2.0 1.8 3.6 3.0 3.9 2.8 2.8 2.3 4.1 2.2

MSCI India MSCI China MSCI EM MSCI Europe MSCI Asia ex-Japan MSCI World MSCI US MSCI UK MSCI Japan

15.2 9.7 11.4 13.8 12.2 14.8 15.2 12.8 14.4

12.9 8.8 10.2 12.3 10.8 13.3 13.8 11.7 13.0

Source: Bloomberg, Macquarie Research, October 2013; Prices as of October 3, 2013 close

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MSCI Sectors 12-Month Forward PER

Fig 48
35.0 30.0 25.0 20.0 15.0 10.0 5.0 2000

MSCI Consumer Discretionary

Ratio
10Y Average +1 Stdev -1 Stdev

Fig 49
40.0 35.0 30.0 25.0 20.0 15.0 10.0 2000

MSCI Consumer Staples

Ratio
10Y Average +1 Stdev -1 Stdev

2002

2004

2006

2008

2010

2012

2002

2004

2006

2008

2010

2012

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

Fig 50
23.0 19.0 15.0 11.0 7.0 3.0 2000

MSCI Energy
Ratio
10Y Average +1 Stdev -1 Stdev

Fig 51
30.0 25.0 20.0 15.0 10.0 5.0 2000

MSCI Financials
Ratio
10Y Average +1 Stdev -1 Stdev

2002

2004

2006

2008

2010

2012

2002

2004

2006

2008

2010

2012

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

Fig 52
35.0 30.0 25.0 20.0 15.0 10.0 2000

MSCI Healthcare
Ratio
10Y Average +1 Stdev -1 Stdev

Fig 53
35.0 30.0 25.0 20.0 15.0 10.0 5.0 2000

MSCI Industrials
Ratio
10Y Average +1 Stdev -1 Stdev

2002

2004

2006

2008

2010

2012

2002

2004

2006

2008

2010

2012

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

Fig 54
30.0 25.0

MSCI Information Technology

Ratio
10Y Average +1 Stdev -1 Stdev

Fig 55
15.0 13.0 11.0

MSCI Materials
Ratio
10Y Average +1 Stdev -1 Stdev

20.0 15.0 10.0 5.0 2002

9.0 7.0 5.0 3.0 2000

2004

2006

2008

2010

2012

2002

2004

2006

2008

2010

2012

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

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Fig 56
70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2000

MSCI Telecom
Ratio
10Y Average +1 Stdev -1 Stdev

Fig 57
35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2000

MSCI Utilities
Ratio
10Y Average +1 Stdev -1 Stdev

2002

2004

2006

2008

2010

2012

2002

2004

2006

2008

2010

2012

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

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Fund Flows
Fig 58 Fund Flows into Equities and Derivatives*

US$ mn FII Net Equity Inflows Domestic MFs, Net equity Investment FII Net Stocks Futures Bought FII Net Index Futures Bought FII Net Derivative Purchases

Latest -14 -65 -32 38 92

1W Total -59 -39 -77 47 21

1M Total 1904 -467 -685 1348 66

YTD Total 13389 -2991 3015 -952 10686

Source: Bloomberg, Macquarie Research, October 2013; *Data as of October 1, 2013

Fig 59 FII and Domestic Mutual Fund Inflows

US$ mn 5000 4000 3000 2000 1000 0 -1000 -2000 Jan-07
FII Net Inflows (12 week rolling, LHS) Domestic MFs, net equity purchases (12 week rolling, RHS)

US$ mn 140 120 100 80 60 40 20 0 -20 -40 -60

Oct-07

Jul-08

Apr-09

Jan-10

Oct-10

Jul-11

Apr-12

Jan-13

Source: Bloomberg, Macquarie Research, October 2013

Fig 60

FII Net Investment in Equity and Debt

FII Monthly Net Investment in Equity FII Monthly Net Investment in Debt

Fig 61

Domestic MFs Net Invt. in Equity and Debt

MF Monthly Net Investment in Equity MF Monthly Net Investment in Debt

US$ bn 6.0 4.0

25.0 20.0 15.0

US$ bn

2.0
10.0

0.0
5.0

-2.0

0.0 -5.0 -10.0 Jan-12

-4.0 -6.0 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Source: Bloomberg, Macquarie Research, October 2013

Source: Bloomberg, Macquarie Research, October 2013

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Market and Sector Earnings

Fig 62 Profile of consensus Sensex EPS estimates
FY08 FY12 FY09 FY13 FY10 FY14 FY11

1530 1430 1330 1230 1130 1030 930 830 730 Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

Source: Bloomberg, Macquarie Research, October 2013

Fig 63
3.00 2.50 2.00 1.50 1.00 0.50

4-Week Earnings Revision Ratio for the Broader Market (BSE-100 Index)
Net Revisions Ratio (x) = (Total Upgrades) / (Total Downgrades)

EPS Revisions Ratio (BSE-100) 3-Month Moving Average

0.00 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13

Source: FactSet, Macquarie Research, October 2013

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Monthly Event Calendar*

Monday 07-10-13 08-10-13 Tuesday Wednesday 09-10-2013 India Trade data for Sep India Auto Sales data from SIAM 10-10-2013 India Auto Sales data from SIAM Thursday 11-10-2013 Infosys Q2FY14 earnings India IIP data Friday

14-10-2013 Indusind Bank Q2FY14 earnings India WPI data for Sep India CPI data for Sep 21-10-2013 HDFC Ltd Q2FY14 earnings

15-10-2013 TCS Q2FY14 earnings HDFC Bank Q2FY14 earnings Indusind Bank Q2FY14 earnings 22-10-13

16-10-2013 Petronet LNG Q2FY14 earnings Mindtree Q2FY14 earnings

17-10-2013 Axis Bank Q2FY14 earnings US Housing data

18-10-13

23-10-2013 Piramal Ent. Q2FY14 earnings

24-10-13

25-10-2013 ICICI Bank Q2FY14 earnings

28-10-2013 Hind. Unilever Q2FY14 earnings Dabur Q2FY14 earnings

29-10-2013 RBI Quarterly Monetary Policy Ranbaxy Q2FY14 earnings

30-10-13

31-10-2013 India Fiscal Deficit data

01-11-2013 India PMI Mfg

*Expected date of release/announcement Source: Company data, Macquarie Research, October 2013

4 October 2013

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Macquarie Research Important disclosures:

Recommendation definitions
Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie First South - South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return

Eye on India
Volatility index definition*
This is calculated from the volatility of historical price movements. Very highhighest risk Stock should be expected to move up or down 60100% in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 4060% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 3040% in a year. Lowmedium stock should be expected to move up or down at least 2530% in a year. Low stock should be expected to move up or down at least 1525% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations

Financial definitions
All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).

Recommendation proportions For quarter ending 30 September 2013

Outperform Neutral Underperform AU/NZ 50.56% 38.95% 10.49% Asia 56.87% 25.18% 17.94% RSA 48.78% 42.68% 8.54% USA 41.00% 54.40% 4.60% CA 61.75% 34.43% 3.83% EUR 47.10% (for US coverage by MCUSA, 5.85% of stocks followed are investment banking clients) 30.89% (for US coverage by MCUSA, 3.90% of stocks followed are investment banking clients) 22.01% (for US coverage by MCUSA, 0.00% of stocks followed are investment banking clients)

Company Specific Disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures. Analyst Certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd ABN 94 122 169 279 (AFSL No. 318062) (MGL) and its related entities (the Macquarie Group) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. 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Macquarie Research

Eye on India

distributed by Macquarie Capital (Europe) Ltd, which is authorised and regulated by the Financial Conduct Authority (No. 193905). Germany: In Germany, this research is issued and/or distributed by Macquarie Capital (Europe) Limited, Niederlassung Deutschland, which is authorised and regulated by the UK Financial Conduct Authority (No. 193905). and in Germany by BaFin. France: In France, research is issued and distributed by Macquarie Capital (Europe) Ltd, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (No. 193905). Hong Kong & Mainland China: In Hong Kong, research is issued and distributed by Macquarie Capital Securities Ltd, which is licensed and regulated by the Securities and Futures Commission. In Mainland China, Macquarie Securities (Australia) Limited Shanghai Representative Office only engages in nonbusiness operational activities excluding issuing and distributing research. 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Asia Research
Head of Equity Research
John OConnell (Global Head) Peter Redhead (Asia Head) (612) 8232 7544 (852) 3922 4836 (852) 3922 5417 (8621) 2412 9006 (9122) 6720 4084 (813) 3512 7856 (82 2) 3705 8644 (852) 3922 4774 (9122) 6720 4078 (6221) 2598 8366 (813) 3512 7476 (822) 3705 8643 (65) 6601 0981 (632) 857 0899 (632) 857 0892 (8862) 2734 7530 (662) 694 7728 (632) 857 0899 (632) 857 0892 (65) 6601 0840 (852) 3922 3557 (852) 3922 4068 (852) 3922 1147 (9122) 6720 4084 (6221) 2598 8489 (813) 3512 7392 (822) 3705 8678 (632) 857 0899 (65) 6601 0840 (662) 694 7993 (8621) 2412 9007 (852) 3922 4626 (813) 3512 7920 (852) 3922 5417 (8621) 2412 9082 (852) 3922 3585 (9122) 6720 4087 (6221) 2598 8398 (813) 3512 7871 (822) 3705 8661 (603) 2059 8993 (662) 694 7753 (852) 3922 3567 (822) 2095 7222 (813) 3512 7880 (852) 3922 3566 (852) 3922 3578 (9122) 6720 4090 (813) 3512 7875 (603) 2059 8989

Oil, Gas and Petrochemicals

James Hubbard (Asia) Aditya Suresh (Hong Kong, China) Abhishek Agarwal (India) Polina Diyachkina (Japan) Sunaina Dhanuka (Malaysia) Trevor Buchinski (Thailand) Abhishek Singhal (India) (852) 3922 1226 (852) 3922 1265 (9122) 6720 4079 (813) 3512 7886 (603) 2059 8993 (662) 694 7829 (9122) 6720 4086 (65) 6601 0838 (852) 3922 1291 (8621) 2412 9026 (852) 3922 3720 (9122) 6720 4088 (6221) 2598 8398 (603) 2059 8993 (632) 857 0890 (8862) 2734 7522 (8862) 2734 7518 (662) 694 7727 (8621) 2412 9035 (852) 3922 1302 (852) 3922 1293 (9122) 6720 4093 (852) 3922 4626 (6221) 2598 8486 (813) 3512 7886 (8862) 2734 7518 (662) 694 7982 (8862) 2734 7512 (852) 3922 3578 (9122) 6720 4090 (813) 3512 7858 (813) 3512 7877 (813) 3512 7880 (813) 3512 7854 (822) 3705 8641 (822) 3705 8659 (8862) 2734 7516 (8862) 2734 7524 (8862) 2734 7525 (813) 3512 7875 (852) 3922 4762 (6221) 2598 8486 (603) 2059 8989 (632) 857 0895 (8862) 2734 7519

Transport & Infrastructure

Janet Lewis (Asia, Japan) Bonnie Chan (Hong Kong) Nicholas Cunningham (Japan) Sunaina Dhanuka (Malaysia) Corinne Jian (Taiwan) (852) 3922 5417 (852) 3922 3898 (813) 3512 6044 (603) 2059 8993 (8862) 2734 7522 (852) 3922 1435 (9122) 6720 4087 (603) 2059 8989 (4420) 3037 4061 (4420) 3037 4271 (4420) 3037 4497 (8621) 2412 9035 (9122) 6720 4093 (813) 3512 7850 (65) 6601 0574 (612) 8232 3935 (9122) 6720 4355 (4420) 3037 4036 (852) 3922 1279 (852) 3922 5494 (852) 3922 4719 (852) 3922 4077 (813) 3512 7569 (852) 3922 3883 (852) 3922 4769 (852) 3922 1425 (813) 3512 7850 (852) 3922 1291 (852) 3922 3566 (9122) 6720 4093 (6121) 2598 8366 (822) 3705 8643 (603) 2059 8982 (632) 857 0899 (65) 6601 0182 (8862) 2734 7516 (662) 694 7753

Automobiles/Auto Parts
Janet Lewis (China) Zhixuan Lin (China) Amit Mishra (India) Clive Wiggins (Japan) Michael Sohn (Korea) Ismael Pili (Asia, Hong Kong, China) Suresh Ganapathy (India) Nicolaos Oentung (Indonesia) Alastair Macdonald (Japan) Chan Hwang (Korea) Matthew Smith (Malaysia, Singapore) Alex Pomento (Philippines) Gilbert Lopez (Philippines) Dexter Hsu (Taiwan) Passakorn Linmaneechote (Thailand)

Pharmaceuticals and Healthcare Property

Tuck Yin Soong (Asia, Singapore) David Ng (China, Hong Kong) Jeffrey Gao (China) Kai Tan (China) Abhishek Bhandari (India) Andy Lesmana (Indonesia) Sunaina Dhanuka (Malaysia) RJ Aguirre (Philippines) Corinne Jian (Taiwan) David Liao (Taiwan) Patti Tomaitrichitr (Thailand) Graeme Train (China) Elizabeth Lee (China) Matty Zhao (Hong Kong) Rakesh Arora (India) Adam Worthington (Indonesia) Riaz Hyder (Indonesia) Polina Diyachkina (Japan) David Liao (Taiwan) Chak Reungsinpinya (Thailand)

Utilities & Renewables

Gary Chiu (Asia) Inderjeetsingh Bhatia (India) Prem Jearajasingam (Malaysia)

Banks and Non-Bank Financials

Commodities
Colin Hamilton (Global) Jim Lennon Duncan Hobbs Graeme Train Rakesh Arora

Economics
Peter Eadon-Clarke (Asia, Japan) Aimee Kaye (ASEAN) Richard Gibbs (Australia) Tanvee Gupta (India)

Conglomerates
Alex Pomento (Philippines) Gilbert Lopez (Philippines) Somesh Agarwal (Singapore)

Resources / Metals and Mining

Quantitative / CPG
Gurvinder Brar (Global) Josh Holcroft (Asia). Burke Lau (Asia) Simon Rigney (Asia, Japan) Eric Yeung (Asia) Suni Kim (Japan)

Consumer and Gaming

Gary Pinge (Asia) Linda Huang (China, Hong Kong) Jamie Zhou (China, Hong Kong) Amit Mishra (India) Lyall Taylor (Indonesia) Toby Williams (Japan) HongSuk Na (Korea) Alex Pomento (Philippines) Somesh Agarwal (Singapore) Best Waiyanont (Thailand)

Strategy/Country
Viktor Shvets (Asia) Chetan Seth (Asia) Joshua van Lin (Asia Micro) Peter Eadon-Clarke (Japan) David Ng (China, Hong Kong) Jiong Shao (China) Rakesh Arora (India) Nicolaos Oentung (Indonesia) Chan Hwang (Korea) Yeonzon Yeow (Malaysia) Alex Pomento (Philippines) Conrad Werner (Singapore) Daniel Chang (Taiwan) David Gambrill (Thailand)

Technology
Jeffrey Su (Asia, Taiwan) Steve Zhang (China, Hong Kong) Nitin Mohta (India) Claudio Aritomi (Japan) Damian Thong (Japan) David Gibson (Japan) George Chang (Japan) Daniel Kim (Korea) Soyun Shin (Korea) Daniel Chang (Taiwan) Ellen Tseng (Taiwan) Tammy Lai (Taiwan)

Emerging Leaders
Jake Lynch (China, Asia) Adam Worthington (ASEAN) Michael Newman (Japan)

Industrials
Janet Lewis (Asia) Patrick Dai (China) Saiyi He (China) Inderjeetsingh Bhatia (India) Andy Lesmana (Indonesia) Kenjin Hotta (Japan) Juwon Lee (Korea) Sunaina Dhanuka (Malaysia) David Gambrill (Thailand)

Telecoms
Nathan Ramler (Asia, Japan) Danny Chu (China, Hong Kong) Riaz Hyder (Indonesia) Prem Jearajasingam (Malaysia, Singapore) Aaron Salvador (Philippines) Joseph Quinn (Taiwan)

Find our research at

Macquarie: www.macquarie.com.au/research Thomson: www.thomson.com/financial Reuters: www.knowledge.reuters.com Bloomberg: MAC GO Factset: http://www.factset.com/home.aspx CapitalIQ www.capitaliq.com Email macresearch@macquarie.com for access

Insurance
Scott Russell (Asia, Japan) Chung Jun Yun (Korea)

Software and Internet

David Gibson (Asia) Jiong Shao (China, Hong Kong) Steve Zhang (China, Hong Kong) Nitin Mohta (India) Nathan Ramler (Japan) Prem Jearajasingam (Malaysia)

Asia Sales
Regional Heads of Sales
Robin Black (Asia) Chris Gray (ASEAN) Peter Slater (Boston) Jeffrey Shiu (China & Hong Kong) Thomas Renz (Geneva) Bharat Rawla (India) Jurgan Usman (Indonesia) Miki Edelman (Japan) John Jay Lee (Korea) Ruben Boopalan (Malaysia) Gino C Rojas (Philippines) Eric Roles (New York) Paul Colaco (New York) (852) 3922 2074 (65) 6601 0288 (1 617) 598 2502 (852) 3922 2061 (41) 22 818 7712 (9122) 6720 4100 (6221) 515 1555 (813) 3512 7857 (822) 3705 9988 (603) 2059 8888 (632) 857 0861 (1 212) 231 2559 (1 212) 231 2496

Regional Heads of Sales contd

Sheila Schroeder (San Francisco) Erica Wang (Taiwan) Angus Kent (Thailand) Julien Roux (UK/Europe) Sean Alexander (Generalist) Justin Crawford (Asia) (1 415) 762 5001 (8862) 2734 7586 (662) 694 7601 (44) 20 3037 4867 (852) 3922 2101 (852) 3922 2065

Sales Trading contd

Mike Keen (UK/Europe) Chris Reale (New York) Marc Rosa (New York) Stanley Dunda (Indonesia) Suhaida Samsudin (Malaysia) Michael Santos (Philippines) Isaac Huang (Taiwan) Dominic Shore (Thailand) (44) 20 3037 4905 (1 212) 231 2555 (1 212) 231 2555 (6221) 515 1555 (603) 2059 8888 (632) 857 0813 (8862) 2734 7582 (662) 694 7707

Regional Head of Distribution Sales Trading

Adam Zaki (Asia) Phil Sellaroli (Japan) Kenneth Cheung (Singapore) (852) 3922 2002 (813) 3512 7837 (65) 6601 0288