Market Outlook

India Research
December 30, 2011

Dealers Diary
Indian markets are expected to open in the green following positive cues from Asian markets today and gains in US markets on Thursday. Asia markets mostly rose in Friday trading, as rising US home sales signaled the worlds largest economy is weathering Europes debt crisis however investors await China manufacturing data due out later in the day. US markets after moving sharply lower over the course of the previous session, showed a strong move back to the upside during trading on Thursday. The markets benefited from a positive reaction to a batch of largely upbeat US economic data. European shares advanced on Thursday as upbeat data from the United States helped fuel a low-volume rally in the afternoon, although volatility also rose as investors hedged against lingering uncertainty in the euro zone. Indian shares edged lower on Thursday, tracking mixed Asian cues on heightened worries that Europe's debt crisis may weigh on global growth. Also, traders were offloading long positions because of the expiry of monthly derivative contracts yesterday.

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 (%) (1.2) (1.3) (0.4) (0.7) 0.2 (0.5) (0.9) (0.5) 0.2 (2.6) (0.8) Chg (%) 1.1 0.9 1.1 (0.3) (0.7) 0.2 0.2

(Pts) (183.9) (59.6) (18.2) (41.6) 11.3 (34.1) (83.0) (38.7) 21.9 (206.0) (47.8) (Pts) 23.8 59.4 (24.7) (120.8) 6.5 3.6

(Close) 15,544 4,646 5,119 5,545 5,844 6,303 9,221 8,170 9,357 7,642 5,731 (Close) 2,614 5,567 8,399 18,398 2,673 2,174

135.6 12,287

Markets Today
The trend deciding level for the day is 15,595 / 4,662 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,674 15,804 / 4,686 4,725 levels. However, if NIFTY trades below 15,595 / 4,662 levels for the first half-an-hour of trade then it may correct up to 15,465 15,385 / 4,623 4,600 levels.
Indices SENSEX NIFTY S2 15,385 4,600 S1 15,465 4,623 R1 15,674 4,686 R2 15,804 4,725

Indian ADRs Infosys Wipro ICICI Bank HDFC Bank

Chg (%) 0.6 (0.1) 1.1 (0.2)

(Pts) 0.3 (0.0) 0.3 (0.1)

(Close) $51.3 $10.1 $26.3 $25.9

News Analysis
Union Bank of India cuts base rate marginally DLF sells Pune SEZ to Blackstone
Refer detailed news analysis on the following page

Advances / Declines Advances Declines Unchanged

BSE 1,151 1,528 131

NSE 501 935 59

Net Inflows (December 28, 2011)

` cr FII MFs Purch
1,238 157

Sales
1,068 150

Net
170 7

MTD
575 463

YTD
(3,449) 6,409

Volumes (` cr) BSE NSE 1,478 8,926

FII Derivatives (December 29, 2011)

` cr Index Futures Stock Futures Purch
3,465 5,096

Sales
3,571 5,228

Net
(106) (132)

Open Interest
9,194 22,209

Gainers / Losers
Gainers Company
JP Infratec Exide Inds MRF National Alum BOB

Losers Company
Suzlon Energy United Spirits IFCI Jain Irrigation HDIL

Price (`)
40 107 6,912 50 682

chg (%)
15.2 5.5 4.4 3.6 3.4

Price (`)
18 513 24 89 54

chg (%)
(7.8) (6.3) (5.9) (5.8) (5.2)

Please refer to important disclosures at the end of this report

Sebi Registration No: INB 010996539

Market Outlook | India Research

Union Bank of India cuts base rate marginally

Public sector lender Union Bank of India (UBI) has cut its base rate marginally by 10bp to 10.65% with effect from December 26, 2011. The move follows Reserve Bank of Indias pause in its previous monetary policy review on December 16, 2011. The RBI had given clear indications that the interest rate cycle had peaked and was likely to reverse from now on. However, we do not expect other banks to follow suit as the deposit rates continue to remain high and systemic liquidity continues to be extremely tight. The overnight LAF borrowings by the banks from the RBI have been well in excess of `1,00,000cr for about a fortnight now. The move is likely to be bit of negative for UBI. Having said that valuations at 0.7x FY2013E ABV are at a substantial discount to its historic trading range of 0.951.50x with a median of 1.30x one year forward ABV. Hence, we maintain our Buy recommendation on the stock with a revised target price of `198, implying an upside of ~20% from current levels.

DLF sells Pune SEZ to Blackstone

DLF, which was seeking approval from the Board of Approvals for SEZs to sell the shares of its IT SEZ in Pune in which it owned a 67% stake, has finally sold it to PE player Blackstone for an estimated amount of `810cr, after obtaining all necessary approvals. The company is expected to receive around `540cr and the rest will go to Hubtown Ltd. (Ackruti City), which owned a 23% stake in the joint venture. The company plans to utilize the entire amount to reduce its debt, which stood at `25,450cr at the end of 2QFY2012. The transaction is in-line with DLF's objective of divesting its non-strategic assets. We continue to maintain our Neutral rating on the stock.

Economic and Political News

Lokpal again loses to politics, bill deferred NHAIs land buys to hit record 10,000 hectares this fiscal Ministry against coal price pooling Government may seek `40,000cr more borrowing

Corporate News
India, EU close to deal on auto duty cuts in FTA Union Bank reduces base rate marginally to 10.65% Dr. Reddy's launches orthopedic product Coal mines to power companies on tariff basis
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint,

December 30, 2011

Market Outlook | India Research

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December 30, 2011