Market Outlook

India Research
December 23, 2011

Dealers Diary
Indian markets are expected to open on a positive note following a gap up opening in most of the Asian markets today. The domestic bourses rose for the second day in a row, primarily due to data on easing of domestic food inflation, and partly due to firming up of European stocks in early trade. Global cues firmed up slightly. European bourses closed on a firm note as Italy's Senate passed sweeping austerity measures. US markets too ended with mild gains after economic data indicated gradual improvement in the economy. The number of Americans filing new claims for jobless benefits hit a 3-1/2 year low last week, bolstering the views of economy gaining momentum. The surge in the domestic markets is mainly attributable to positive investor sentiment mood buoyed by falling inflation which has been on the rising spree since past several months. Food inflation fell sharply to a near four-year low as prices of essential commodities declined. The markets will closely track the developments on the domestic front; RBI is likely be more watchful now as moderating inflation is likely to resolve the predicament of trimming interest rates in order to support growth. Nonetheless, one cannot rule out the pessimism surrounding the policy paralysis on the macro front which, in tandem with weakening of global cues, can reverse the market directions.

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 (%) 0.8 0.9 0.8 0.7 0.7 1.7 2.3 1.7 0.5 1.1 (1.2) Chg (%) 0.5 0.8 1.3 (0.8) (0.2) (0.3) (0.2)

(Pts) 40.7 40.3 38.7 37.8 110.0 213.5 133.8 50.4 85.1 (69.3) (Pts) 61.9 21.5 67.2 (64.8) (38.2) (8.5) (4.9)

(Close) 4,734 5,182 5,556 5,879 6,464 9,630 8,263 9,572 8,011 5,680 (Close) 12,170 2,599 5,457 8,395 18,378 2,665 2,186

128.2 15,813

Markets Today

The trend deciding level for the day is 15,707 / 4,702 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,941 16,069 / 4,772 4,810 levels. However, if NIFTY trades below 15,707 / 4,702 levels for the first half-an-hour of trade then it may correct up to 15,579 15,345 / 4,664 4,595 levels.
Indices SENSEX NIFTY S2
15,345 4,595

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) 3.5 1.6 4.5 0.9

(Pts) 1.7 0.2 1.2 0.2

(Close) $51.1 $10.0 $27.1 $26.2

S1
15,579 4,664

R1
15,941 4,772

R2
16,069 4,810

News Analysis
Euro update - ECB lends 489bn to EU for three years Govt. asks Bharti, Vodafone, Idea to stop 3G roaming pacts Yes Bank raises savings rate to 7% for balances above `1lakh
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 1,547 1,149 147

NSE 880 591 75

Net Inflows (December 21, 2011)

` cr FII MFs ` cr Index Futures Stock Futures Purch
2,214 637

Sales
2,251 436

Net
(37) 202

MTD
(297) (81)

YTD
(4,321) 5,864

Volumes (` cr) BSE NSE 2,039 9,551

FII Derivatives (December 22, 2011)

Purch
2,646 4,414

Sales
2,348 4,746

Net
298 (332)

Open Interest
11,194 26,930

Gainers / Losers
Gainers Company
Hindustan Copper JP Infratech Ashok Leyland MMTC Apollo Tyres

Losers Company
Mphasis REC Aditya Birla Nuvo Shriram Trans. Glenmark Pharma

Price (`)
172 38 23 497 61

chg (%)
15.7 11.4 11.2 10.9 9.6

Price (`)
313 154 746 448 273

chg (%)
(4.9) (3.9) (3.7) (3.6) (2.7)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Euro update - ECB lends 489bn to EU for three years

The ECB, in a bold move, has came out to lend Eurozone banks and offered 489bn for three years in its latest attempt to keep credit flowing into the economy during the sovereign debt crisis. Europes debt crisis has increased the risk of government and bank defaults, making institutions wary of lending to each other and driving up the cost of credit. Hence, the ECB is trying to ensure that banks have access to cheap cash for the medium term so that they can keep lending to companies and households. In addition to long-term loans, the ECB has widened a pool of collateral, which banks can use to secure these funds.

Govt. asks Bharti, Vodafone, Idea to stop 3G roaming pacts

The Telecom Ministry has asked service providers to discontinue their 3G roaming agreements and is contemplating imposing penalty on them. The decision comes after the unanimous view of telecom regulator TRAI, Law Ministry and DoT that such roaming agreement was in violation of the telecom licenses. Leading operators like Bharti Airtel, Vodafone and Idea Cellular had entered into an agreement with one another to offer 3G mobile services in circles in which they could not succeed in getting spectrum in the auction held last year. The issue pertains to the pact among major service providers, including Bharti Airtel, Vodafone and Idea Cellular, for providing 3G roaming network on a pan-India basis. Other service providers like Tata Teleservices and Aircel had also entered into similar agreements to offer services in six circles. However, they have already discontinued the arrangement. The DoT had sought a legal opinion on this matter and the Law Ministry had supported the DoT's view. In an internal note, the DoT had said the roaming agreement among telecom companies for 3G services would lead to a significant loss of revenue to the government. Telecom players continue to remain haunted by the regulatory issue on the sector. We maintain our Neutral view on the sector.

Yes Bank raises savings rate to 7% for balances above `1lakh

Private sector lender Yes Bank has raised the saving account interest rate for balance above `1 lakhs to 7% from 6%. Yes bank, had earlier hiked saving deposit rates to 6% from 4% on October 25, on a day when the Reserve Bank of India announced to deregulate saving deposit rates. Kotak Mahindra Bank had also hiked saving deposit rates to 6%. We do not expect larger banks to follow suit since Yes banks smaller distribution risk does not pose threat to the bigger banks market share. However the development is positive for Yes Bank as it will help garner CASA deposits which will be at cheaper cost anyways as compared to its wholesale borrowings. At the CMP, Yes Bank is trading at 1.6x FY2013E ABV. We maintain our Buy recommendation on the stock with a target price of `314.

December 23, 2011

Market Outlook | India Research

Economic and Political News

Food inflation plunges to four-year low of 1.81% Current account deficit may widen more, says RBI RBI may lower GDP projection for FY2012 says RBI chief Parliamentary panel for options trading in commodity mkt NHAI to launch `10,000cr tax-free bonds issue on Dec 28

Corporate News
Banking system stable, weak spots in economy, says RBI Expert panel for cap on future mining activity in Goa Coal Ministry seeks report on progress of captive blocks in 3QFY2012 New telcos join hands, seek spectrum up to 6.2 MHz Strides gets USFDA nod for facility, cancer drug Punj Lloyd bags `285cr road project in Kenya

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

December 23, 2011

Market Outlook | India Research

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E-mail: research@angelbroking.com

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December 23, 2011