Copyright 2010 | All Rights Reserved

MoneyWorks4me.com
TM

Introduction

Over the last few months, we have talked at length about

Sensex@MRP and how it can help you get important
insights into the state of the market; whether the market
is getting irrationally exuberant or not. Infact according to
the latest quarterly figures, Sensex@MRP stands at 19295
just 200 points above the Sensex which has just crossed
19000 (as this report is being written) for the first time
since January 2008. However, over the last few weeks we
have been flooded by requests to extend the concept to
what seems a more favored index by our readers – the
Nifty. So, without further ado, we bring to you the much
awaited Nifty@MRP.

http://www.moneyworks4me.com
 MoneyWorks4me.com
TM

Content

1. Revisiting the Basics 1

2. Nifty@MRP as on September 2010 2

3. What do the earnings reveal? 3

4. What should we as investors do? 5

5. The Nifty Scorecard 6

http://www.moneyworks4me.com
 MoneyWorks4me.com
TM

Revisiting the Basics

Before we get into the nitty-gritty’s of Nifty@MRP, let’s just

quickly revisit the concept of Sensex@MRP. Sensex@MRP has
been our effort to make sense of the benchmark index Sensex.
Considering that the Sensex stocks are the top traded stocks of
the country, we can expect them to be traded at their MRPs –the
maximum price that you should be willing to pay for a stock
which is dependent on the earnings capacity of the company.
Thus, Sensex@MRP gives an indication of whether the Sensex
is fairly valued or whether irrationality is driving the markets.
However, as mentioned before, quite a few people tend to follow
Nifty more than the Sensex. Nifty is composed of 50 of the top
companies on the NSE whereas the Sensex comprises of 30 top
companies on BSE. All the Sensex 30 companies are part of the
Nifty. Thus Nifty is a broader market index as well as more
liquid.

http://www.moneyworks4me.com 1
 MoneyWorks4me.com
TM

Nifty@MRP as on September 2010

The free float market capitalization at the MRP of the individual

stocks as computed by us at MoneyWorks4me.com and using
share data as on 31st August 2010 is Rs. 17,50,682.98 Cr.
Using the index divisor 289.80 (as on 31st August 2010),
Nifty@MRP comes out to 6041.

Free Float Mkt. Cap. using MRP 17,50,682.98

Index Divisor 289.80

Nifty@MRP 6041

This week opened strongly with the market rallying and Nifty
crossing 5700 to end the day at 5760. Considering this, Nifty is
just 281 points or 4.65% below the Nifty@MRP, re-affirming the
same conclusion as Sensex@MRP – The market is moving
close to its MRP i.e. its fair value.

http://www.moneyworks4me.com 2
 MoneyWorks4me.com
TM

What do the earnings reveal?

The reason why we are a bit

skeptical about the rise in Nifty
over the last few months is
because the earnings have not
been spectacular to justify such
a movement, alone.
An analysis of the earnings for
the Nifty companies reveals
that on a Y-o-Y basis as much
as 23 companies reported a
fall in earnings whereas 27
companies reported an
increase.

Thus, a fairly large number of companies have suffered on the

profitability front. This when as much as 42 companies reported
an increase in Net Sales for the June 2010 quarter as compared
to June 2009. Clearly, the companies have suffered on the
expenditure front finding it difficult to manage costs.

http://www.moneyworks4me.com 3
 MoneyWorks4me.com
TM

What do the earnings reveal?

The best performing sectors (check table ‘The Nifty Scorecard for
the June 2010 quarter’) amongst the Nifty companies were sectors
like Auto, Banks and Information Technology companies which
recorded good growth in both Net Sales as well as Net Profits.

The Auto industry continued to witness increased demand for the

products. Banks like SBI, HDFC bank also managed to record an
impressive performance driven by the recovering economy and
favourable monetary policy. The IT sector also witnessed a revival
in fortunes from last year getting good business from domestic as
well as global markets. Cairn India was the top performer notching
364% growth as far as Net Sales is concerned however it suffered
greatly on the Net Profit front. Sterlite Inds. claimed the top spot as
far as profitability is concerned notching a Y-o-Y growth of 272%
driven by higher volumes in zinc and copper and better margins.

The companies which recorded the worst performance were led,

quite predictably, by Telecom majors, Reliance Communications
and Bharti Airtel. The Power and Infrastructure sector also
continued its woes with majors like Tata Power, JP Associates and
Reliance Infra recording a disappointing performance.

http://www.moneyworks4me.com 4
 MoneyWorks4me.com
TM

So, what should we as

investors do?
Currently, out of the 50 Nifty companies, as many as 30
companies are quoting above their MRP. Out of the remaining 20
many are close to their MRP and thus the margin of safety is
very less. If this rally continues, it is very likely that these
companies will also cross their MRP and the Nifty will touch or
even cross the Nifty@MRP. What creates a problem is that
earnings for India Inc. are not expected to be much better in the
next quarter, than the current performance. Infact, because of the
higher base seen last year, the growth may be lower which
could lead to a correction.

The Nifty@MRP reaffirms the fact that the market is close to its
fair value beyond which it will driven more by sentiments and
FIIs than the growth of earnings. The best thing to do now would
be to keep a close watch on your investments and if they are
above their MRP, be on the lookout for selling signals. We re-
iterate the view that we expressed in our report on the latest
Sensex@MRP - As individual investors right now the most
important thing to remember is:

“Stay on your Guard to book profits!”

http://www.moneyworks4me.com 5
 MoneyWorks4me.com
TM

The Nifty Scorecard for the June

2010 quarter
Y-o-Y Growth Rate
Company Name Industry
Net Sales Net Profits
ABB Electric Equipment -3.88% -54.17%
ACC Cement & Cement Products -2.91% -26.09%
Ambuja Cem. Cement & Cement Products 10.83% 20.50%
Axis Bank Banks 14.46% 32.00%
BHEL Engineering 15.80% 41.88%
BPCL Refineries 34.20% -379.77%
Bharti Airtel Telecommunications - Service Provider 3.13% -28.15%
Cairn India Oil Drilling & Exploration 364.00% -330.07%
Cipla Pharma 7.71% 6.50%
DLF Real Estate 55.97% 104.28%
GAIL (India) Oil Drilling & Exploration 17.50% 35.23%
HDFC Finance - Housing -1.65% 22.95%
HCL Technologies Computers - Software 16.16% 23.26%
HDFC Bank Banks 7.99% 33.92%

Hero Honda Motor Auto: 2 Wheelers / 3 Wheelers

11.90% -1.68%
Hind. Unilever FMCG - Personal Care 7.11% -3.43%
Hindalco Inds. Aluminium 33.02% 11.20%
IDFC Finance - Term Lending Institutions 13.25% 31.30%
ICICI Bank Banks -18.52% 16.82%
Idea Cellular Telecommunications - Service Provider 28.14% -37.21%
Infosys Tech. Computers - Software 12.81% -2.25%

ITC Chewing Tobacco / Pan Masala / Cigarettes

16.13% 21.81%
Jindal Steel Steel & Steel Products 33.46% 45.20%
JP Associates Construction 52.16% -40.38%
Kotak Mah. Bank Banks 20.01% 106.95%

http://www.moneyworks4me.com 6
 MoneyWorks4me.com
TM

Y-o-Y Growth Rate

Company Name Industry
Net Sales Net Profits
Larsen & Toubro Diversified
6.42% -8.38%
M&M Auto: Passenger Cars 21.15% 40.30%
Maruti Suzuki Auto: Passenger Cars 27.11% -20.25%
NTPC Power - Generation & Supply 7.85% -16.03%
ONGC Oil Drilling & Exploration -8.16% -24.48%
Power Grid
Power - Generation & Supply
Corpn 16.62% 28.75%
Punjab
Banks
Natl.Bank 16.42% 28.39%
Ranbaxy Labs. Pharma 6.27% -86.02%
Rel. Comm. Telecommunications - Service Provider 1.16% -232.65%
Reliance Capital Finance - Investment -73.11% -51.66%
Reliance Inds. Diversified 86.71% 32.32%
Reliance Infra. Power - Generation & Supply -11.29% -22.21%
Reliance Power Power - Generation & Supply 47.02% 40.62%
SAIL Steel & Steel Products 0.83% -11.56%
Siemens Engineering 17.04% -17.21%
St Bk of India Banks 5.61% 25.05%
Sterlite Inds. Copper & Zinc 34.83% 272.17%
Sun
Pharma
Pharma.Inds. 22.91% 165.52%
Suzlon Energy Engineering 59.84% 42.73%
Tata Motors Auto: LCVs / HCVs 63.03% 101.34%
Tata Power Co. Power - Generation & Supply -8.76% -28.67%
Tata Steel Steel & Steel Products 16.52% 99.97%
TCS Computers - Software 14.29% 21.93%
Unitech Construction 84.45% 44.10%
Wipro Computers - Software 13.13% -7.34%

http://www.moneyworks4me.com 7
http://www.moneyworks4me.com/

Copyright 2010 | All Rights Reserved