Market Outlook

India Research
December 20, 2011

Dealers Diary
Indian markets are expected to open on a positive note following firm opening in most of the Asian markets today. The domestic bourses ended with loses for the fourth day in a row yesterday, as data showing sustained selling by foreign funds over the past few days and ongoing worries about euro-zone sovereign debt crisis continued to weigh on markets. Global cues remained weak. European bourses closed on a mixed note after ECB offered no clear indication that it was in mood to step up government bond purchases of troubled eurozone nations. US markets ended with losses, as lingering concerns about the financial situation in Europe weighed on the markets once again. The domestic markets are gripped with pessimism as ongoing headwinds on the macro front are just elongating the improvement in investor sentiment. Key policies and reform required to push economic progress are being keenly awaited by the financial markets in order to give them a much needed fillip. The markets will closely track cues from domestic as well global front in coming days to find direction.

Domestic Indices BSE Sensex Nifty MID CAP SMALL CAP BSE HC BSE PSU BANKEX AUTO METAL OIL & GAS BSE IT Global Indices Dow Jones NASDAQ FTSE Nikkei Hang Seng Straits Times Shanghai Com

Chg (%) (0.7) (0.8) (2.0) (2.5) (0.9) (1.6) (3.1) 0.2 (0.8) 1.0 (1.0) Chg (%) (0.8) (1.3) (0.4) (1.3) (1.2) (1.6) (0.3)

(Pts) (112.0) (38.5) (105.2) (142.2) (51.0) (102.1) (290.3) 17.7 (73.9) 74.0 (54.6) (Pts) (100.1) (32.2) (22.4) (105.6) (215.2) (41.1) (6.6)

(Close) 15,379 4,613 5,172 5,546 5,822 6,327 9,131 8,125 9,609 7,750 5,658 (Close) 11,766 2,523 5,365 8,296 18,070 2,618 2,218

Markets Today
The trend deciding level for the day is 15,337 / 4,597 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,483 15,586 / 4,639 4,665 levels. However, if NIFTY trades below 15,337 / 4,597 levels for the first half-an-hour of trade then it may correct up to 15,233 15,087 / 4,572 4,530 levels.
Indices SENSEX NIFTY S2
15,087 4,530

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) (1.9) (3.8) (3.6) (1.8)

(Pts) (1.0) (0.4) (0.9) (0.5)

(Close) $49.4 $9.7 $24.4 $24.8

S1
15,233 4,572

R1
15,483 4,639

R2
15,586 4,665

News Analysis
Cabinet clears the Food Security bill; subsidy bill to add to fiscal deficit woes Orchid gets US$100 mn ECB to redeem bonds
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 726 2,066 91

NSE 265 1,229 43

Net Inflows (December 16, 2011)

` cr FII MFs ` cr Index Futures Stock Futures Purch
2,270 369

Sales
2,420 480

Net
(150) (111)

MTD
571 (353)

YTD
(3,453) 5,593

Volumes (` cr) BSE NSE 1,844 9,869

FII Derivatives (December 19, 2011)

Purch
2,125 2,022

Sales
3,132 2,049

Net
(1,007) (28)

Open Interest
12,323 24,946

Gainers / Losers
Gainers Company
Shree Renuka Sugar Tata Motors Cairn India Lanco Infra GVK Power

Losers Company
Bata India Allahabad Bank Gujarat NRE Coke Biocon Jain Irrigation

Price (`)
25 180 310 9 10

chg (%)
5.4 4.4 4.2 4.1 4.1

Price (`)
505 131 15 243 86

chg (%)
(11.2) (7.3) (7.2) (6.8) (6.7)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Cabinet clears the Food Security Bill; Subsidy Bill to add to fiscal deficit woes
Aiming to provide food security to the poor, the Cabinet has approved the Food Security Bill, which after clearing rounds of the parliament and standing committee will consciously detail all the proposals and come out with a final report by the monsoon session. The scheme is expected to cover 75% of rural and 50% of urban populace, of which 46% rural and 28% urban population will be classified as priority and the rest as general category. The priority category will be entitled to get 7kg of food grains a month. Rice would be provided at `3/kg, wheat at `2/kg and coarse grains such as bajra, jowar and ragi at `1/kg. The general category is entitled to get 3-4 kg a month at 50% of minimum support price. The bill is expected to be hit hard by financial repercussions; different numerical tallies have surfaced. The Food Ministry estimates that once the law is implemented, the food subsidy bill will increase by `27,663cr to `95000cr. In contrast, some media reports claimed the subsidy bill to amplify by ~`51,000cr. However, considering the subsidy bill of `61,000cr for FY2011, we believe the food subsidy bill would augment by ~`34,000cr, thereby enlarging the fiscal deficit tally for FY2012 by an equivalent amount. The overall cost to implement this reform, as estimated by the Agriculture Ministry, is expected to be `2,00,000cr, which includes cost of enhanced food grain production, storage facilities and distribution channels. Discussions and debates apart, in our view, although the bill envisages improving the coverage of food security among a broader section of the needy and deprived population whether or not the government be able to radically improve the distribution mechanism remains the key, failure of which can just add this gigantic sum to an uneconomical expenditure.

Orchid gets US$100 mn ECB to redeem bonds

Orchid Chemicals and Pharmaceuticals Ltd has been sanctioned US$100mn (~ `532cr) by way of external commercial borrowings (ECBs) by a consortium of Indian banks to redeem its outstanding foreign currency convertible bonds (FCCBs) of US$117mn (`622cr) due in February 2012. According to the company, it will use the ECB and internal accruals to redeem the outstanding FCCBs. The total redemption value is US$167mn (`888cr). We believe that this move of the company is positive and will remove concerns over the redemption of FCCBs. Orchid chemicals would also benefit from the depreciation of rupee as over 85% of the companys sales come from exports and are billed in USD. We maintain our Buy rating on the stock with a target price of `270.

December 20, 2011

Market Outlook | India Research

Economic and Political News

FM to review status of large infra projects tomorrow Govt. plans to award 19 port projects on PPP basis by March-end CBDT to focus on big corporates to meet tax targets Parliament passes bill to digitalize cable TV IIFCL plans to float US$1bn infrastructure debt fund by February Govt asks cash-rich PSUs to issue bonus shares

Corporate News
RBI allows MFIs to raise US$10m through ECBs UCO Bank reschedules Haryana discom (UHBVN) loan of `887cr Mahindra to unveil Ssangyong vehicles at Auto Expo in Delhi next month Muthoot Finance to raise `600cr via debentures Hilton eyes 50 hotels in India in five years Efforts being made by banks to help Kingfisher, says SBI chairman

Source: Economic Times, Business Standard, Business Line, Financial Express, Mint

December 20, 2011

Market Outlook | India Research

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E-mail: research@angelbroking.com

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December 20, 2011