India Strategy

6th Apr, 2011

India Strategy
6th Apr, 2011 MONTHLY SNAPSHOT

Key Highlights
 Indian stock market surged during Mar-11, with Nifty P ric e M o v em ent o f N ifty & CN X5 0 0

registering a stupendous rise of 9.38% and CNX 500 10%

increased by 8.93%. 8%

6%
 Inflation concerns, fiscal worries, higher oil and other
4%
commodity prices, Natural calamities (Japan) and
2%
expectations of negative earnings momentum have
weighed on Indian stock market during the first half 0%

on Mar-11. However, these developments seem to have

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-M

-M

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-M

-M
M

M
1-

4-

7-
factored in as market witnessed a spectacular rally

10

13

16

19

22

25

28

31
during the last two weeks. Encouraging macro- Nifty CNX 500

economic data, positive global cues and heavy buying

BSE Sectoral Performance
by foreign funds boosted sentiments. Sentiments
20%
towards the market also improved due to the deal of
International Paper and Andhra Pradesh Paper which 15%

is likely to re-rate companies in manufacturing sectors 10%

like Paper, Cement, Textiles, Sugar and Chemicals. 5%

0%

 Monthly returns of major BSE Sectoral Indices are: -5%

IT +7.23%, Oil & Gas +8.26%

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1-

4-

7-

10

13

16

19

22

25

28

31
Realty +17.93%, Auto +12.58%,
REALTY METAL POWER BANK
Bank +12.33%, Metal +5.29% and OIL & GAS AUTO IT

Power + 7.48%. 2
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011 SMART MONEY

Domestic and Foreign Institution

 FIIs were net buyer of INR6897.8 crs in equity FII Statistics

segment in the month of Mar-11. In FY11 they were 1760 30
the net buyers of INR110,120.70cr compared to 1740
1720
20

T o ta l FI I

No o f FI I
additi o n
INR110,219.8 cr for FY10. 1700
1680
10
0
1660
1640 -10
 DIIs were net buyers of INR57.71 cr in the month of 1620
1600
-20
Mar-11. In FY11 they were the net sellers of 1580 -30

INR18,349.82 crs whereas they were net buyers of

9
9
9

3. 1
11
9
9

0
0
0
0
0
0
. 0 00

. 0 01
. 0 01
. 0 00
. 0 00
. 0 00
. 1 00

. 0 01
. 0 01
. 0 01
. 0 01
. 1 01

20
31 1.2
31 3.2
31 5.2
30 7.2
30 9.2
31 1.2

31 1.2
31 1.2
30 3.2
30 5.2
30 7.2
30 9.2
INR24,178.18 cr for FY10.

.0
31
Total FII FII Addition

FII Flo w ( INR in Crs) DI I Flo w (I N R in Crs) M F Flo w (IN R in Crs)

50000
80000
40000 22000
60000 17000
30000
40000 20000 12000
20000 10000 7000
2000
0 0
-3000
-20000 -10000
-8000
-20000

.11
.10

.10

.10

.10

.10

.10

.11
.10

.10

.10

.10

.10

.10

.11

.11

.10

.10

.10

.10

.10

.10

.11

.11

.01

.03

.05

.07

.09

.11

.01

.03
.01

.03

.05

.07

.09

.11

.01

.03

.01

.03

.05

.07

.09

.11

.01

.03

29

31

31

30

30

30

31

31
29

31

31

30

30

30

31

31

29

31

31

30

30

30

31

31

Buy Sell Net Buy Sell Net

Buy Sell Net

3
Source: NSE, SEBI, Bloomberg, Microsec Research
India Strategy
6th Apr, 2011

Global Markets Returns

P a rtic ula rs 1M % 3M % 6M % 1YR % 3 YR %

NSE S&P CNX NIFTY INDEX 9.38 (4.90) (3.25) 11.14 23.22

BSE SENSEX 30 INDEX 9.10 (5.19) (3.11) 10.94 24.29

KOSPI INDEX 8.63 2.72 12.49 24.45 23.63

PSEi - PHILIPPINE SE IDX 7.66 (3.48) (1.10) 28.25 35.87

RUSSIAN RTS INDEX $ 3.56 15.24 35.31 29.74 (0.67)

FTSE STRAITS TIMES INDEX 3.17 (2.64) 0.27 7.56 3.27

DOW JONES INDUS. AVG 1.02 6.68 14.48 13.76 0.72

BRAZIL BOVESPA INDEX 0.97 (1.83) (2.00) (3.31) 11.60

TAIWAN TAIEX INDEX 0.97 (3.22) 5.41 9.64 1.29

HANG SENG INDEX 0.81 2.14 5.23 10.77 2.97

SHANGHAI SE COMPOSITE 0.79 4.27 10.26 (5.82) (15.68)

MEXICO IPC INDEX 0.51 (3.48) 11.64 11.86 20.37

S&P 500 INDEX 0.08 5.62 16.39 13.58 0.42

NASDAQ COMPOSITE INDEX (0.20) 4.67 17.23 15.80 21.84

FTSE 100 INDEX (0.99) 0.59 6.95 4.49 4.08

CAC 40 INDEX (2.75) 5.06 7.59 0.58 (15.08)

DAX INDEX (3.09) 1.93 13.14 14.53 7.84
NIKKEI 225 (8.18) (4.63) 4.12 (12.04) (22.12)

4
Source: Bloomberg, Microsec Research Note: Returns are as on 31st March, 2011
India Strategy
6th Apr, 2011

Global Markets Valuation

Current PE FY1 2 E FY1 2 E FY1 3 E FY1 3 E Current PB FY1 2 E FY1 2 E FY1 3 E FY1 3 E
EPS ratio EPS PE EPS PE BV Ratio BV PB BVP S PB
I N DI AN M ARK E TS
SENSEX 1,122.89 17.32 1,267.61 15.34 1,489.37 13.06 5,785.06 3.40 6,327.29 2.69 8,423.95 2.34
NIFTY 336.56 17.33 386.74 15.08 452.84 12.88 1,778.69 3.31 1,941.53 2.63 2,567.61 2.28
U .S. M ARK E TS
DOW JONES 868.71 14.22 970.17 12.75 1,081.64 11.42 4,406.24 2.80 4,889.37 2.53 5,474.13 2.26
NASDAQ 94.22 29.47 157.59 17.71 191.30 14.52 989.75 2.81 NA NA 1,154.07 2.41
S&P 500 85.32 15.57 96.97 13.71 110.40 12.03 577.36 2.30 630.49 2.11 696.33 1.91
M EXICO 2,102.63 17.70 2,516.38 14.77 2,747.04 13.55 13,937.24 2.67 15,538.44 2.39 17,110.79 2.17
BRAZIL 5,887.82 11.56 6,266.85 10.82 7,290.58 9.33 39,934.97 1.70 44,366.80 1.53 48,428.59 1.40
E U ROP E AN M ARK E TS
FTSE 409.09 NA 569.51 10.51 632.96 9.38 3,154.43 1.88 3,476.42 1.71 3,889.43 1.53
CAC 333.42 11.99 383.57 10.42 429.39 9.31 3,093.40 1.29 3,205.36 1.25 3,452.16 1.16
DAX 548.80 NA 641.68 10.98 730.77 9.64 4,622.03 1.52 4,880.61 1.44 5,321.99 1.32
RUSSIAN RTS 211.50 9.65 30,981.00 6.56 329.23 6.20 1,503.48 1.36 1,714.35 1.19 2,035.94 1.00
ASI AN M ARK E TS
NIKKEI 552.40 NA 667.74 16.74 805.57 12.11 7,634.08 1.28 7,965.66 1.22 9,034.15 1.08
HANG SENG 1,860.12 12.65 1,890.41 12.44 2,127.01 11.06 12,751.74 1.85 13,980.17 1.68 15,287.43 1.54
SINGAPORE 285.14 10.89 219.66 14.31 242.94 12.78 1,938.05 1.60 1,972.76 1.57 2,149.14 1.45
SHANGHAI 173.31 16.90 214.08 13.72 256.41 11.42 1,113.91 2.63 1,367.15 2.14 1,615.82 1.81
KOSPI 77.28 27.26 200.25 NA 226.62 NA 1,533.21 1.37 1,540.52 1.37 1,709.66 1.23
PHILIPPINE SE 305.91 13.26 308.43 13.13 343.17 11.82 1,732.50 2.34 1,974.76 2.05 2,194.90 1.85

Note: Data as on 31st March 2011 #Microsec estimated Sensex FY12 EPS at INR1272
5
Source: Bloomberg Note: FTSE, DAX & KOSPI index P/E data has discrepancies, Global markets EPS are based on Calendar year
India Strategy
6th Apr, 2011

MSCI India performance against other emerging markets

 Over the past 3 years, MSCI India P/E commanded premium over MSCI Emerging Markets. Since Feb 09’,
Indian markets were at par with the Emerging Markets and are gaining momentum post Jan 10’. Currently,
MSCI India Market and Emerging Markets P/E gap has been contracting and India is commanding only a
marginal premium.

 On a monthly basis, relative returns of MSCI Indian Market have outperformed the MSCI Emerging Markets.
MSCI India increased 9.44%, whereas MSCI EM rose 4.10% in absolute terms over the last one month.

India Premium t o MSCI EM Relat ive Ret urns ( %)

35 11%
30 9%
25 7%
20 5%
15 3%
10 1%
5 -1%
0 -3%
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J u -08

J u -10
J u -09
No 0 8

No 0 9

No 1 0
M r- 0 8

J an -0 8

M r- 0 9

J an -0 9

M r- 1 0

J an -1 0

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Se -08

Se -09

Se -10
M -08

M -09

M -10

M -11
-1

-M

-M
-M

-M

-M

-M
-M

-M
p-

p-

p-
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ay

1-

4-

7-
v

v
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J an
a

28

31
16

19

22

25
10

13
MSCI EM MSCI IN MSCI EM MSCI IN
6
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011

MSCI Sectoral Performance

 MSCI India all sectors outperformed the U.S. and Global peers on monthly basis, while on quarterly basis all
MSCI India sectors closed in negative territory.

 MSCI India Consumer Staple, Finance, Healthcare and IT have outperformed USA and Global sectors on
yearly basis.

India USA Global

1 M (%) 3 M (%) 1 Yr (%) 1 M (%) 3 M (%) 1 Yr (%) 1 M (%) 3 M (%) 1 Yr (%)
Consumer Staple 1.71 (7.24) 18.84 1.38 2.13 7.33 0.53 1.05 7.62

Energy 6.28 (2.52) (1.16) 1.71 16.29 36.14 0.65 13.53 26.35

Finance 13.50 (3.67) 13.56 (2.20) 3.15 3.47 (3.18) 4.33 2.70

HealthCare 5.94 (8.99) 8.08 1.83 5.78 3.84 0.35 3.74 3.30

Industrial 8.29 (9.53) 1.51 1.32 7.97 20.03 0.50 6.13 18.69

IT 5.60 (5.51) 24.22 (2.23) 3.31 11.08 (3.09) 2.31 8.29

Material 6.92 (8.69) (9.71) 1.53 4.23 22.35 (0.56) 1.32 18.72

Telecom 28.06 (24.46) (35.98) 4.84 2.97 21.42 2.22 6.45 17.11

Utility 8.82 (11.74) (14.99) 0.20 2.57 8.41 (3.91) 0.82 0.52

Source: Bloomberg, Microsec Research Note: Data as on 31st March 2011

India Strategy
6th Apr, 2011

Twin Pillars of Emerging Markets

PM I
I N DI A CH I N A
 India and China registered PMI (Purchasing
Managers Index) value of 57.9 and 53.4 M ar-11 57.9 53.4
respectively for the month of Mar 11’. In FY10-11 Feb-11 57.9 52.2
Jan-11 56.8 52.9
India’s PMI has outperformed China in all 12
Dec-10 56.7 53.9
months. Nov-10 58.4 55.2
Oct-10 57.2 54.7

 On a sequential basis, India's PMI was unchanged Sep-10 55.1 53.8

Aug-10 57.2 51.7
at 57.9 in Mar from Feb, the highest since Nov 10’, Jul-10 57.6 51.2
while during the same period, China’s PMI Jun-10 57.3 52.1
increased from 52.2 in Feb to 53.4 in Mar. The M ay-10 59.0 53.9
Apr-10 57.2 55.7
Mar 11’ figure is the first gain after three
M ar-10 57.8 55.1
consecutive months of decline since Dec 10’.
Rela t ive Perf o rma nce ( %)
12%
 China’s HSCEI increased by 5.04% and domestic
market (Shanghai composite) increased by 0.79% 8%

in the last one month. In comparison, Nifty 4%

substantially outperformed the former indices 0%

during the same period. Nifty increased by 9.38% -4%
during Mar 11’.
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1-

4-

7-

10

13

16

19

22

25

28

31
NIFTY HSCEI SHANGHAI
Source: Bloomberg, Microsec Research
 Fe J an
b

-2%
2%
6%
10%
14%
18%
22%

-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
M -08
6th Apr, 2011

A p -08 a
r- M r-0 8
J u 08 ay
n -
India Strategy

A u -08 J u 08
g Se 8
l -0
Oc -0 8
t p
De -0 8 N o -0 8
c- v
Fe 0 8 J an -0 8
b M -09
A p -09 a

Source: Bloomberg, Microsec Research

r M r-0 9
J u -09 ay
n-
A u 09 J u -09
g l
Oc -0 9 Se -09
t p-
No 0 9
De -0 9
c- v
Fe 0 9 J an -0 9

Expor t Tr e nd (y- o- y %)
b
IIP Tr e nd (y- o- y %)

M -10
A p -10
r- a
J u 10 M r-1 0
n- ay
A u 10 J u -10
g l-
Oc -1 0 Se 10
t p-
No 1 0
De -1 0
c- v
Fe 1 0 J an -1 0
b- -1
11 1

Fe Fe
b b

-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
-2%
0%
2%
4%
6%
8%
10%
12%

A p - 08 A -08
pr
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-
J u - 08 n-
n- Au 08
A u 08
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O cg - 0 8 O -0 8
ct
D e t -0 8 De -0 8
c c
F e -0 8 Fe -0 8
b- b-
A p 09 A 09
pr
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-
J u - 09
n n-
Au 09
India’s Key Economic Indicators

A u - 09
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O cg - 0 9 Oc -0 9
t
D e t -0 9 De -0 9
c c-
Fe 0 9
F e -0 9 b
b-
Import Trend (y-o -y %)

A p 10 A -10
pr
Inflation Tr e nd (y- o- y %)

r -
J u - 10 Ju 10
n
A u - 10
n-
Au 10
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O c -1 0 Oc -1 0
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D e t -1 0 D -1 0
c ec
F e -1 0 Fe -1 0
b- b-
11 11
9
India Strategy
6th Apr, 2011 Global Key Economic Indicators

Contd…
 In their first joint intervention since 2000, the G-7 countries sold the yen to control Japan's currency as it’s
strength was hurting Japan's recovery after the Mar 11 natural disasters.

 The U.S. Federal Reserve in its FOMC meeting, decided to maintain benchmark interest rate in the range of
0-0.25%. It noted that the U.S. economy is on a firmer footing and overall conditions in the labour market
appears to be improving gradually.

 The U.S. GDP growth rate for the Q4 of 2010 was revised up to 3.1%, from 2.8% reported earlier.

 The U.S. Industrial Production declined 0.1% in Feb 10’ after having risen 0.3% in Jan.

 The U.S. Unemployment Rate slipped to a two-year low of 8.8% in Mar 11’ from 8.9% in Feb.

 The U.S. Pending Home Sales rebounded sharply in Feb 11’, after showing a decline in the previous two
months. The Pending Home Sales index rose 2.1% to 90.8 from 88.9 in Jan 11’. However, the sale of Newly
Built U.S. Homes hit its lowest level in Feb 11’ since records began in 1963. Only 250,000 New Homes were
sold in Feb, on a seasonally-adjusted annualized basis. Sales were down 17% from Jan, the third monthly fall
in a row. The U.S. Existing Home Sales also fell 9.6% in Feb from the previous month.

 Japan’s economy contracted more than initially estimated in Q4 of 2010. GDP shrank at an annualized 1.3%
rate, more than the 1.1% contraction reported earlier.

 The U.K. GDP growth rate for Q4 of 2010 was revised to -0.5% from earlier estimate of 0.6% fall.
10
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011 LME Base metals

Aluminium Co p per
3,000 120,000 12,000 600,000
2,500 100,000 10,000 500,000
2,000 80,000 8,000 400,000
1,500 60,000 6,000 300,000
1,000 40,000 4,000 200,000
500 20,000
2,000 100,000
0 0
0 0

No 9

J an 9

Ju 0

No 0

J an 0

1
Au 9

Au 0
Ju 9

M 0

M 1
0

1
0
0

-1

1
1

-1
-1

-1
r-0
09

09

10

10

1
09

10

n-

n-
g-
v-

g-
v-
0

1
9

ar

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-1

-1
-1

-1
r-0

n-

n-
g-

v-

g-

v-

Ap
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J an

J an
Au

Au
Ap

No

No
Ju

Ju
M

M
Inventories (MT) LME 3 MO (USD) Inventories (MT) LME 3 MO (USD)

Zinc Lead
3,000 800,000 3000 350000
2,500 700,000 2500 300000
600,000 250000
2,000 500,000 2000
200000
1,500 400,000 1500
300,000 150000
1,000 1000 100000
200,000
500 100,000 500 50000
0 0 0 0
J u 09

Oc 0 9

Oc 0

J an 0

J u -09

J u -10
De 0 9

No 0
A u 09

Fe 9

A u 10

Oc 0 9

A p r-1 0

O c -1 0

De v-1 0

1
A p 10

D e -0 9

N o t -1 0
Ju 0

M 11

J u 09

J an -0 9

F e -1 0
Se -09

A u l-10

M 11
M r-10
M -10
1

-1
t -1
0

r -1

-1
-
n-
g-

n-
g-

v-
t-

b-
c-

n-

p-

b-
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g
l

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t
c

c
a
M

Inventories (MT) LME 3 MO (USD) Inventories (MT) LME 3 MO (USD)

11
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011

Contd…

 India’s Commercial Vehicles sales increased by 10.5% YoY to 64,057 units in Feb 11’ against 60,753 units in
the previous month. Medium & Heavy Commercial Vehicles (M&HCVs) registered growth at 11.4% YoY
and Light Commercial Vehicles grew at 9.7% YoY.

 In the month of Feb 11’, Tourist Arrivals in India increased by 15.10% YoY to 6.92 lakh against 5.38 lakh in
the month of Jan 11’.

Co m mercial v ehicle sales (y-o -y%) Tourist Arrivals

200% 25.00% 800000
20.00% 700000
150%
15.00% 600000
100% 10.00%
500000
5.00%
400000
50% 0.00%
300000
-5.00%
0% 200000
-10.00%
-50% -15.00% 100000
-20.00% 0
-100%

0
08

09

10
08

09

10

11
t -0

t -1
t -0
n-

n-

n-
b-

b-

b-

b-
O -0 8

Oc -0 9

O -1 0
D -0 8

D -0 9

D -1 0
Fe -0 8

Fe -0 9

Fe -1 0
A 08

A 09

A 10
A -08

Ap -09

A -10

11
J u 08

J u 09

J u 10

Oc

Oc

Oc
Ju

Ju

Ju
Fe

Fe

Fe

Fe
n-

n-

n-

b-
-

r-

-
ug

ug

ug
pr

pr
b

b
ct

ct
ec

ec

ec
Fe

Tourist Arrivals Tourist Arrivals (YoY%)

12
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011 Trade Balance & Currency

Tr ade Balance  Despite the robust exports numbers, India’s trade

0 deficit did not improve in Feb 11’ as non-oil imports
-2 also jumped. Moreover, high oil prices, if sustained, are
-4 likely to widen the trade deficit in coming months. In
-6
-8
Feb 11’ trade deficit increased to USD8.10 billion vis-
-10 à-vis USD7.98 billion in the previous month. Trade
-12 deficit was USD10.41 billion in the same month of last
-14 year. In INR terms, trade deficit increased to
-16
-18
INR368,220 million against INR362,300 million in Jan
11’. The overall trade deficit for the period Apr-Feb
Oc 0 8

Oc 0 9

Oc 1 0
D e -0 8

D e -0 9

D e -1 0
A u -08

Fe 0 8

A u -09

Fe 0 9

A u -10

Fe 1 0
A p -08

A p 09

A p 10

11
J u 08

J u 09

J u 10
FY10-11 was USD97.07 billion (INR4,429,000 million)
g-

g-

g-
b-

b-

b-
r-

c-

r-

c-

r-

c-
n

n
b

t
Fe

compared with USD100.25 billion (INR4,755,600

million) for the corresponding period of last year.
Fo rex Reserv es v s U SD-I N R
 In Mar 11’, India’s rupee appreciated for the second
55 350
Fo rex R eserv e ($ bn)
consecutive month on capital inflows. On a Monthly
50 300 basis, INR appreciated by 1.51% against USD from
USD-I NR

45.2708 to 44.5850. Fund inflows are also helping to

45 250
offset the risks raised from the higher oil prices.
40 200

35 150
 India’s foreign-exchange reserves fell by USD24
million to USD303.48 billion in the week ended Mar
16 un
-A l
-A l

4 - pr

8- ug
25 ug

29 Dec

11 Dec
-N t
6- Sep

-M n

-M b

25, 11’. Foreign-currency assets dropped by USD29

18 ov

3 1 ov
27 -Ju

ar
23 ar
14 -J u

1 9 Oc

25 -Fe
12 -Ja

-A
J
N
-
3

-
-

million to USD273.69 billion, while India’s gold

Forex Reserve ($bn) USDINR reserves remained unchanged at USD22.14 billion.
13
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011

Government Bond Yields

 Indian federal bond yields were range bound throughout Mar’ 11 as absence of fresh triggers held traders
back from taking large positions, but there was demand from banks to boost valuations before the financial
year closing. The central bank will announce its annual monetary policy for the next fiscal year on May 3 and
the data would be crucial for cementing expectations of a 25 basis points hike in key rates.
 The government has announced that they would borrow INR2.5 trillion (USD56 billion), or 60 percent of its
FY11-12 year borrowing target of INR4.17 trillion (USD93 billion), by end-Sep 11’, slightly below market
expectations. This means yield would be in a range of 7.8-8.2 for the next 6 months too.

Government Bond Yield Curve

10.5
9.00
9.5
8.00
8.5
7.00
7.5
(% ) 6.00
6.5
5.00
5.5
4.00
4.5
3.00
1 - y-0 8

1 - -0 9

1 - y-1 0
No 8

No 9

No 0
1 - v -0 8

1 - v -0 9

1 - -1 0
1 - l - 08

1 - l - 09

1 - l - 10
M 8

M 9

M 0

1
1 - n - 08

M 9

1 - n - 10

M 1
1 - p -0

1 - p -0

1 - p -1
1 - a r-0

1 - a r-0

1 - a r-1

-1
1 - n- 0

1- -1
ay

ar
v
Ja n

1
2
3
4
5
7
8
9
Ju

Ju

Ju
a

10
15
20
25
30
Se

Se

Se

3m
6m
Ja

Ja

Ja
M

M
1-

GIND3YR Index GIND5YR Index 4/1/10 3/31/11

GIND10YR Index GIND30YR Index

14
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011 OUTLOOK

Going Forward
 We believe markets may consolidate at these levels before Forward PE Band
7000
making an upward move in the second half of the year, aided
6000
by better clarity on the investment cycle, visible steps by the
5000
government on controlling inflation and outcomes of
4000
upcoming state elections. Further, Union Budget 2011-12
3000
proposed allocation would kick-start on ground in FY12 to
propel further growth. We believe the moves by the 2000

government on policy measures may fuel growth in future, 1000

for instance the moves towards the New Manufacturing 0

31-Mar-04 31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10 31-Mar-11
Policy and the UID program is likely to fuel growth.
Price 21x 18x 15x 12x 9X 6x
 Given most of the bad news such as high inflation, fiscal
worries, higher oil prices, Natural calamities (Japan) and 1400 1,2671 ,2 7 2 30
negative earnings momentum seem factored in, we believe it 1200
1,123 1 ,1 1 6
25
is time to look at selective mid-cap companies. The appetite 947 945
1000 809 20
of global companies to buy Indian companies has fuelled 800
interest in equities once again. US based International Paper 600
15
buyout of Andhra Paper, BP’s stake buy RIL exploration 400
10
interests are signals of appetite in Indian companies. 200 5

 Indian markets may trade in a range of 14-15.50x FY12E 0 0

price to earnings in the medium term perspective, which FY08 FY09 FY10 FY11E FY12E
means Nifty levels of 5600-5980 for the month of April-11. Sensex EPS (Bloomberg) EPS (Microsec)

Buy Tata Motors, SBI, SAIL, Tata Chemicals and ITC in large P/E P/E Microsec

cap and IFCI, DCW, Mirza Tanners in mid cap. 15

Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011 Sectoral Valuation

Projections
Auto m o b ile
P /E (x) P /B V (x) E V/E B I T DA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
Hero Honda M otors 13.12 11.48 5.08 3.98 11.41 9.65
M ahindra & M ahindra 13.19 11.29 2.90 2.33 8.37 8.16
M aruti Suzuki India 13.15 10.88 2.18 1.83 7.17 6.09
Tata M otors 7.92 7.02 2.70 2.02 5.38 4.78
Average 11.85 10.17 3.22 2.54 8.08 7.17

Cem ent
P /E (x) P /BV (x) E V/E B I T DA (x)
Co m p a ny CY 1 1 CY 1 2 CY 1 1 CY 1 2 CY 1 1 CY 1 2
ACC 19.27 16.4 2.92 2.64 10.48 9.04
Ambuja Cements 18.23 16.33 2.83 2.59 10.10 9.17
Ultratech Cement (FY) 18.24 15.43 2.56 2.24 9.02 7.7
Average 18.58 16.05 2.77 2.49 9.87 8.64

M eta ls
P /E (x) P /B V (x) E V/E B I T DA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
Hindalco Industries 10.33 8.82 1.48 1.32 6.05 5.18
JSW Steel 8.97 6.9 1.12 0.94 6.47 5.49
Tata Steel 8.26 6.46 1.61 1.31 6.21 5.35
NALCO 12.23 10.84 1.43 1.25 9.41 8.75
SAIL 10.32 9.10 1.63 1.45 5.68 4.67
Sterlite Industries 7.80 6.91 1.23 1.1 4.45 3.67
Average 9.65 8.17 1.42 1.23 6.38 5.52
16
India Strategy
6th Apr, 2011

Projections
O il & Ga s
P /E (x) P /B V (x) E V/E B I T DA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
BPCL 11.47 10.03 1.33 1.21 8.18 7.17
Cairn India 7.66 6.54 1.42 1.2 5.94 5.2
GAIL 13.98 12.65 2.58 2.3 8.28 7.38
ONGC 8.79 8.97 1.7 1.69 4.28 4.06
Reliance Industries 14.12 12.22 1.87 1.66 9.08 8.03
HPCL 7.64 7.10 0.85 0.80 7.06 6.23
IOC 8.46 7.97 1.27 1.14 6.52 6.08
Average 10.30 9.35 1.57 1.43 7.05 6.31
P o wer
P /E (x) P /B V (x) E V/E BI T DA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
NTPC 16.02 14.21 2.15 1.97 10.82 9.13
NHPC 15.70 12.68 1.12 1.05 10.06 8.46
Tata Power 13.62 12.38 2.06 1.79 8.19 6.92
Power Grid Corp. 14.76 12.27 1.83 1.67 9.72 7.93
Average 15.03 12.89 1.79 1.62 9.70 8.11

Rea lty
P /E (x) P /BV (x) E V/E BI TDA (x)
Co m pa ny FY1 2 FY 1 3 FY1 2 FY1 3 FY 1 2 FY1 3
DLF 19.53 15.7 1.55 1.45 13.79 11.61
Unitech 10.66 8.21 0.83 0.75 10.31 8.06
Average 15.10 11.96 1.19 1.10 12.05 9.84 17
India Strategy
6th Apr, 2011

Projections
Fina nc ia ls
P /E (x) P /B V (x) RO E (%)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
SBI 10.61 8.60 1.64 1.42 16.52 17.70
ICICI Bank 18.55 15.08 2.14 1.95 12.10 13.60
Axis Bank 14.31 12.08 2.65 2.25 20.27 20.53
PNB 7.11 5.92 1.58 1.30 23.85 23.73
HDFC Bank 24.43 20.05 3.72 3.24 16.30 17.30
Average 15.00 12.35 2.35 2.03 17.81 18.57
E ngineering & Ca p ita l Go o ds
P /E (x) P /B V (x) E V/E B I TDA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
L&T 18.73 15.62 3.57 3.05 12.08 9.94
BHEL 14.75 12.77 4.06 3.29 9.30 8.18
Crompton Greaves 16.60 14.23 4.18 3.35 10.96 9.42
Siemens Ltd. (SY) 25.73 21.52 6.01 4.82 15.88 13.24
Average 18.95 16.04 4.46 3.63 12.06 10.20

Teleco m
P /E (x) P /BV (x) E V/E BI TDA (x)
Co m pa ny FY 1 2 FY1 3 FY1 2 FY1 3 FY1 2 FY1 3
Bharti Airtel Ltd. 16.32 12.65 2.43 2.07 5.35 4.53
R.Com 14.10 10.56 0.50 0.48 7.43 6.48
Idea 28.41 17.06 1.68 1.55 7.11 5.85
Average 19.61 13.42 1.54 1.37 6.63 5.62
18
India Strategy
6th Apr, 2011

Projections
I nfra struc ture & Co nstruc tio n
P /E (x) P /BV (x) E V/E BI T DA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
IVRCL Infra 7.87 8.16 0.82 0.62 6.87 5.59
HCC 13.54 7.42 1.29 NA 10.39 9.18
Punj Lloyd 12.19 8.94 0.67 0.65 6.24 5.34
Gammon India 12.15 8.92 0.71 0.66 6.84 5.99
Nagarjuna Const 5.47 4.45 0.73 0.95 4.19 4.90
GM R Infra 53.92 19.61 1.70 1.42 15.57 10.36
Average 17.52 9.58 0.99 0.86 8.35 6.89
IT
P /E (x) P /BV (x) E V/E BI T DA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
Infosys Tech. 21.64 17.88 5.64 4.57 15.22 12.77
TCS 22.74 19.16 7.31 5.75 16.47 13.88
Wipro 19.60 16.83 4.24 3.54 15.48 13.27
Average 21.33 17.96 5.73 4.62 15.72 13.31

P ha rm a
P /E (x) P /BV (x) E V/E BI TDA (x)
Co m p a ny FY 1 2 FY 1 3 FY 1 2 FY 1 3 FY 1 2 FY 1 3
Sun Pharmaceuticals 22.3 19.02 4.12 3.49 19.37 16.14
Dr. Reddy's 19.17 17.03 4.40 3.56 14.01 12.47
Cipla 20.97 18.08 3.35 2.93 15.66 13.5
Ranbaxy* 12.73 16.83 2.24 1.85 8.23 9.97
Average 18.79 17.74 3.53 2.96 14.32 13.02
19
India Strategy
6th Apr, 2011

Projections
FM CG
P /E (x) P /BV (x) E V/E BI TDA (x)
Co m pa ny FY1 2 FY 1 3 FY1 2 FY1 3 FY 1 2 FY1 3
HUL 25.86 22.58 17.85 15.44 19.16 17.12
ITC 23.55 20.34 7.37 6.53 15.19 13.10
Emami ltd. 20.56 17.49 7.09 5.84 17.30 14.58
Colgate-Palmolive 22.74 19.73 22.03 18.31 17.26 14.78
Nestle India 30.23 26.72 24.56 12.72 19.02 16.93
Dabur India 23.13 19.95 9.81 7.53 17.42 15.01
Average 24.35 21.14 14.79 11.06 17.56 15.25

20
Source: Bloomberg, Microsec Research
India Strategy
6th Apr, 2011 Performance of Microsec Research

Initiating Coverage Reports

N a m e o f the Co m p a ny Da te o f Ra ting Re c o m m e nd e d CM P Re tu r n (% )

Re p o r t P r ic e as o n 3 1 /0 3 /2 0 1 1
LI C H o u sing F ina nc e 21 Jun 08' TA/BP 278.00 1,444.00 419.42%
Cu m m ins I nd ia 4 July 08' H 228.00 687.90 201.71%
RE C Ltd . (1 9 / 0 5 / 0 9 ) 05 Sep 08' TA/BP 99.00 144.00 45.45%
O nm o b ile Glo b a l (8 / 0 4 / 0 9 ) 27 Feb 09' TA/BP 229.25 312.20 36.18%
Re lia nc e Co m m u nic a tio ns (5 / 0 9 / 0 9 ) 05 Sep 08' DC 393.95 292.05 -25.87%
I d e a (2 1 / 0 6 / 0 9 ) 21 June 08' DC 104.85 80.85 -22.89%
E m a m i Lim ite d # 26 M ay 09' TA/BP 139.00 389.00 179.86%
Do lp hin O ffsho r e (1 2 / 0 1 / 1 0 ) 26 Sep 09' TA/BP 258.00 440.00 70.54%
H im d a r i Che m ic a ls # 13 Nov 09' H 33.40 43.60 30.54%
B ha r a t E le c tr o nic s 2 Nov 09' H 1,427.85 1,683.30 17.89%
N e y v e li Lignite 4 M ay 10' H 147.45 104.05 -29.43%
Y e s B a nk 20 Feb 10' H 229.50 309.60 34.90%
H ind u stha n N a tio na l Gla ss 13 Jan 10' H 217.00 208.00 -4.15%
N I I T (3 1 /0 3 / 1 1 ) 28 Jan 10' DC 68.20 58.75 -13.86%
JSW E ne r gy 17 Jun10' H 128.35 71.65 -44.18%
Ra llis I nd ia 12 Aug 10' H 1,298.35 1,311.25 0.99%
K e w a l K ir a n (1 2 / 1 0 / 1 0 ) 18 Aug 10' TA/BP 382.00 495.00 29.58%
E sc o r ts Ltd . (0 5 / 1 0 / 1 0 ) 23 Aug 10' TA/BP 180.50 234.00 29.64%
P hillip s Ca r b o n 21 Aug 10' TA/BP 198.50 240.00 20.91%
Siy a r a m Silk (1 1 / 1 1 / 1 0 ) 24 Aug 10' TA/BP 331.00 431.00 30.21%

N o te : CM P in r e d is fr e z e d fr o m the c o v e r a ge a s o n d a te d a d ja c e nt to the c o m p a ny na m e
T A/ B P - T a r ge t Ac hie v e d & B o o k P r o fit
DC - Dr o p e d Co v e r a ge
H - H o ld
21
(# ) - Ad ju ste d p r ic e
India Strategy
6th Apr, 2011 Performance of Microsec Research (2)

Initiating Coverage Reports

` Da te o f Ra ting Re c o m m e nd e d CM P Re tu r n (% )

Re p o r t P r ic e as o n 3 1 /0 3 /2 0 1 1
GE Ship p ing (0 2 / 1 1 / 1 0 ) 24 Aug 10' TA/BP 302.00 348.00 15.23%
Co r o m a nd e l I nte r na tio na l 31 Aug 10' TA/BP 528.75 651.00 23.12%
De w a n H o u sing 8 Sep 10' H 277.50 268.10 -3.39%
Gr u h F ina nc e 8 Sep 10' H 399.00 355.05 -11.02%
E lgi E q u ip m e nt (2 6 /1 0 /1 0 ) 10 Sep 10' TA/BP 135.40 161.00 18.91%
O r ie nt P a p e r 11 Sep 10' H 61.95 55.55 -10.33%
E im c o E le c o n 15 Sep 10' H 313.20 234.30 -25.19%
O N GC 21 Sep 10' H 340.02 291.30 -14.33%
B ha r ti 21 Sep 10' H 365.50 357.40 -2.22%
M a hind r a & M a hind r a # 29 Dec 09' H 526.15 700.35 33.11%
Ad hu nik M e ta lik s Lim ite d 7 Aug 09' H 96.15 92.00 -4.32%
M ir z a I nte r na tio na l (1 1 /1 1 / 1 0 ) 30 Sep 10' TA/BP 17.00 26.00 52.94%
T u b e I nv e stm e nts 07 Oct 10' H 148.00 135.85 -8.21%
O il I nd ia 08 Oct 10' H 1490.90 1312.25 -11.98%
H P CL 08 Oct 10' H 514.55 356.55 -30.71%
IOC 08 Oct 10' H 422.35 332.85 -21.19%
B a ja j F ina nc e 29 Oct 10' H 774.45 700.00 -9.61%
I nd ia n O v e r se a s B a nk 19 Nov 10' H 155.00 143.80 -7.23%
T a ta Che m ic a l 22 Nov 10' H 378.00 342.00 -9.52%
Ad ity a B ir la N u v o 06 Dec 10' H 743.00 819.50 10.30%

N o te : CM P in r e d is fr e z e d fr o m the c o v e r a ge a s o n d a te d a d ja c e nt to the c o m p a ny na m e
T A/ B P - T a r ge t Ac hie v e d & B o o k P r o fit
DC - Dr o p e d Co v e r a ge
H - H o ld 22
(# ) - Ad ju ste d p r ic e
India Strategy
6th Apr, 2011 Performance of Microsec Research (3)

Initiating Coverage Reports

` Da te o f Ra ting Rec o m m end ed CM P Return (%)

Rep o rt P ric e a s o n 3 1 /0 3 /2 0 1 1
I DB I B a nk 07 Dec 10' H 161.00 142.45 -11.52%
I FCI 08 Dec 10' H 60.00 52.60 -12.33%
B ha ra t Fo rge 11 Dec 10' H 371.25 347.30 -6.45%
Shree Renuka 21 Dec 10' H 95.10 69.60 -26.81%
T a ta E lxsi 22 Dec 10' H 291.00 253.90 -12.75%
Sintex I nd 23 Dec 10' H 179.60 151.90 -15.42%
Dish T v 24 Jan 11' H 60.95 67.10 10.09%
RE C 10 Feb 11' H 238.00 253.70 6.60%
Whirlp o o l I nd ia (3 1 /0 3 /1 1 ) 09 M ar 11' TA/BP 238.00 274.00 15.13%
M irza I nterna tio na l 09 M ar 11' H 19.00 22.10 16.32%
E ngineers I nd ia 09 M ar 11' H 296.35 304.70 2.82%

N o te: CM P in red is frezed fro m the c o v era ge a s o n d a ted a d ja c ent to the c o m p a ny na m e

T A/B P - T a rget Ac hiev ed & B o o k P ro fit
DC - Dro p ed Co v era ge
H - Ho ld
(# ) - Ad justed p ric e

23
India Strategy
6th Apr, 2011

Brand Value Picks

N a m e o f the Co m p a ny Ra ting Reco m m ended P rice CM P Return (%)

a s o n 1 9 /0 8 /2 0 0 9 a s o n 3 1 /0 3 /1 1
Ha wkins Co o ker BP 367.00 895.25 143.94%
T TK P restige BP 157.40 2243.70 1325.48%
Greenp ly BP 120.40 196.00 62.79%
P idilite BP 70.05 149.65 113.63%
Emami BP 195.60 389.00 98.88%
Ca stro l BP 228.85 441.45 92.90%
B a ja j E lec trica ls BP 111.24 234.50 110.81%
B a ta I ndia H 162.00 391.20 141.48%
B lue Sta r BP 345.15 369.00 6.91%
Zo dia c BP 200.00 384.35 92.18%
N a v neet BP 34.88 54.60 56.54%

Returns 204.14%
CN X5 0 0 3665.75 4626.45 26.21%
N ifty 4458.90 5833.75 30.83%
BP: Book Pr of it
Note : A ll BP ar e as on 31/ 03/ 11 e xce pt Emami

24
India Strategy
6th Apr, 2011

PSU Picks
N a m e o f the Co m p a ny Ra ting Rec o m m ended P ric e CM P Return (%)
a s o n 2 2 /0 9 /2 0 0 9 as o n 3 1 /0 3 /1 1
BE L BP 1434.95 1683.30 17.31%
E ngineers I ndia Ltd BP 181.67 325.30 79.06%
CO N CO R BP 1134.15 1200.05 5.81%
Ba lm er La wrie H 480.00 548.85 14.34%
BE M L BP 1100.60 681.95 -38.04%
GM DC BP 114.15 135.70 18.88%
RE C H 199.05 253.70 27.46%
I ndian Ba nk BP 161.00 232.75 44.57%

Returns 21.17%
BSE P SU 8796.38 8960.08 1.86%
N ifty 5020.20 5833.75 16.21%
BP: Book Pr ofit
Note : A ll BP ar e as on 31/ 03/ 11

25
India Strategy
6th Apr, 2011

Diwali 2010 Picks

N a m e o f the Co m p a ny Ra ting Reco m m ended P rice CM P Return (%)

a s o n 0 4 /1 1 /2 0 1 0 a s o n 3 1 /0 3 /1 1
B HE L H 2484.95 2062.65 -16.99%
JK La kshm i Cem ent H 63.40 50.75 -19.95%
Ra llis I ndia H 1440.00 1311.25 -8.94%
B a lm er La wrie H 654.15 548.85 -16.10%
Gra p hite I ndia H 93.55 93.25 -0.32%
IOC H 419.00 332.85 -20.56%
Ja y Bha ra t M a ruti H 108.00 76.95 -28.75%
M a x I ndia H 160.25 159.75 -0.31%
M irza I nterna tio na l H 19.20 22.10 15.10%
T ube I nv estm ents H 157.00 135.85 -13.47%
Va Tec h Wa ba g H 1670.00 1259.10 -24.60%

Returns -12.26%
CN X5 0 0 5170.75 4626.45 -10.53%
N ifty 6281.80 5833.75 -7.13%

26
India Strategy
6th Apr, 2011

Auto Ancillary Picks

N a m e o f the Co m pa ny Ra ting Rec o m m ended P ric e CM P Return (%)

a s o n 1 0 /1 1 /2 0 0 9 a s o n 3 1 /0 3 /1 1
Am a ra Ra ja Ba tteries H 156.35 189.75 21.36%
Apo llo Ty re H 52.15 69.55 33.37%
Bha ra t Fo rge H 272.90 347.30 27.26%
Bo sc h Ltd. H 4366.50 6708.50 53.64%
Cea t Ltd. H 155.35 102.90 -33.76%
E xide I nd H 112.30 142.75 27.11%
Federa l-M o gul Go etze H 133.85 203.00 51.66%

Returns 25.81%
CN XM CAP 6997.75 8040.15 14.90%
N ifty 4881.70 5833.75 19.50%

27
India Strategy
6th Apr, 2011 DISCLAIMER

Team Microsec Research

Contact
Analyst – Siddharth Sedani
Sutapa Roy
Email – ssedani@microsec.in
s-roy@microsec.in

Microsec Research is also accessible on

Bloomberg at
<MCLI>
FOR PRIVATE CIRCULATION ONLY

Disclaimer
The investments discussed or recommended in this report may not be suitable for all investors. Investors should use this research
as one input into formulating an investment opinion. Additional inputs should include, but are not limited to, the review of
other. This is not an offer (or solicitation of an offer) to buy/sell the securities/instruments mentioned or an official confirmation.
Microsec Capital Limited is not responsible for any error or inaccuracy or for any losses suffered on account of information
contained in this report. This report does not purport to be offer for purchase and sale of share/ units. We and our affiliates,
officers, directors, and employees, including persons involved in the preparation or issuance of this material may: (a) from time
to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be
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recommendation and related information and opinions. The same persons may have acted upon the information contained here.
No part of this material may be duplicated in any form and/or redistributed without Microsec Capital Limited’ prior written
consent.

28
India Strategy
6th Apr, 2011

Ajay Jaiswa l: President, I nv estm ent Stra tegies, Head o f Research: aja iswal@m icro sec.in

Fundam enta l Research

Name Secto rs Designatio n E m ail I D
Nitin Prakash Daga IT, Telecom & Entertainment AVP-Research npdaga@microsec.in

Naveen Vyas Midcaps AVP-Research nvyas@microsec.in

Nitesh Goenka BFSI Sr. Research Analyst ngoenka@microsec.in

Abhisek Sasmal BFSI Research Analyst asasmal@microsec.in
Sutapa Roy Economy Research Analyst s-roy@microsec.in
Gargi Deb Agriculture & Pharma Executive Research gdeb@microsec.in
Technical & Deriv ativ e Resea rch
Vinit Pagaria Derivatives & Technical VP vpagaria@microsec.in
Ranajit Saha` Technical Research Sr. Manager rksaha@microsec.in
I nstitutio nal Desk
Rajiv Lilaramani Institutional Equities Sr. Manager rlilaramani@microsec.in
Dhruva Mittal Institutional Equities M anager dmittal@microsec.in
P M S Div isio n
Siddharth Sedani PMS Research AVP ssedani@microsec.in

Sarmistha Rudra PMS Technical Research Analyst srudra@microsec.in

Research: Financial P lanning Div isio n

Shrivardhan Kedia FPD Products M anager Research skedia@microsec.in
Research-Suppo rt
Subhabrata Boral Research Support Executive sboral@microsec.in
29
India Strategy
6th Apr, 2011