1. Market Outlook
India Research
October 13, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices opened in the red following weak Asian stocks. BSE Sensex -0.7% (136.5) 20,203
Markets extended losses in mid-morning trade. Further, in the afternoon Nifty -0.7% (45.0) 6,091
session, markets fell sharply following the news of lower-than-expected MID CAP -0.5% (42.4) 8,354
industrial output numbers, which grew at 5.6% in August as compared to 10.6% SMALL CAP 0.0% (0.1) 10,649
a year ago, and negative cues from European markets. Finally, in late BSE HC 0.2% 11.5 6,336
afternoon session, the key benchmark indices partially recovered the losses and BSE PSU -0.8% (85.8) 10,468
the Sensex and Nifty each closed down by 0.7%. BSE midcap index’s BANKEX -0.4% (53.8) 14,166
performance was in line with key benchmark indices as it closed down by 0.5%, AUTO -0.1% (9.5) 9,878
while there was no change in the small-cap index. Among the front liners,
METAL -1.4% (251.8) 17,413
M&M, RCOM, TCS, ICICI Bank and Tata Motors gained 0–1%, while DLF,
OIL & GAS -0.9% (98.2) 10,847
Hindalco Inds, Jindal Steel, L&T and Jaiprakash Associates were down 1–2%.
BSE IT 0.2% 13.2 6,059
Among mid caps, MRF, Novartis India, M&M Finance, Emami and Unichem
Global Indices Chg (%) (Pts) (Close)
Lab. gained 4–7%, while CMC, JM Financial, India Infoline, Binani Cement and
Praj Industries lost 4–10%. Dow Jones 0.1% 10.1 11,020
NASDAQ 0.6% 15.6 2,418
FTSE -0.2% (10.8) 5,662
Markets Today Nikkei -2.1% (200.2) 9,389
The trend deciding level for the day is 20226 / 6098 levels. If NIFTY trades Hang Seng -0.4% (85.6) 23,122
above this level during the first half-an-hour of trade then we may witness a Straits Times -0.4% (14.0) 3,149
further rally up to 20345 – 20487 / 6138 - 6185 levels. However, if NIFTY Shanghai Com 1.2% 34.5 2,841
trades below 20226 / 6098 levels for the first half-an-hour of trade then it may
correct up to 20084 – 19965 / 6051 - 6011 levels. Indian ADRs Chg (%) (Pts) (Close)
Infosys 0.2% 0.1 $68.9
Indices S2 S1 R1 R2
Wipro 0.6% 0.1 $15.8
SENSEX 19,965 20,084 20,345 20,487
Satyam -5.9% (0.2) $3.7
NIFTY 6,011 6,051 6,138 6,185 ICICI Bank -1.1% (0.6) $51.4
HDFC Bank -0.6% (1.1) $184.5
News Analysis
Exide Industries – 2QFY2011 Result Review Advances / Declines BSE NSE
Bajaj Auto hikes two-wheeler prices from October
Advances 1,137 463
Dr. Reddy's sued by Eli Lilly over Gemcitabine
Declines 1,865 907
Refer detailed news analysis on the following page.
Unchanged 98 47
Net Inflows (October 11, 2010)
Rs cr Purch Sales Net MTD YTD
Volumes (Rs cr)
FII 3,545 2,434 1,111 10,758 99,080
BSE 5,329
MFs 437 697 (260) (2,573) (25,601)
NSE 14,892
FII Derivatives (October 12, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 829 1,180 (351) 15,731
Stock Futures 1,013 1,910 (897) 43,594
Gainers / Losers
Gainers Losers
Price chg Price chg
Company Company
(Rs) (%) (Rs) (%)
MRF 9,334 6.6 REC 381 (4.6)
Tata Tele. 24 3.5 India Infoline 119 (3.7)
United Phosph. 191 3.1 Praj Industries 75 (3.5)
Idea 73 3.0 Exide Industries 172 (3.4)
1
MTNL 67 2.8 Balrampur Chini 92 (2.2)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Exide Industries – 2QFY2011 Result Review
For 2QFY2011, Exide reported 18.6% yoy growth in net sales to Rs1,127cr (Rs951cr),
which came in below our estimates of Rs1,199cr. Growth in net sales was supported by
~15% yoy growth in volumes. On the operating front, EBITDA margins declined by 421bp
yoy and came in line with our estimates at 21.8%. Margins declined on account of the
increase in raw material costs (partially due to higher lead prices, up 6.1% yoy) and other
expenditure. However, higher other income and one-time gains of Rs46.9cr from transfer
of leasehold land helped net profit to grow by 42.3% yoy to Rs212.9cr (Rs149.7cr). Thus,
adjusting for the one-time gain of Rs46.9cr, the bottom line reported growth of 10.9% yoy
to Rs166cr as against our estimate of Rs161.4cr.
We maintain our positive outlook on the battery industry on the back of changing
demographics, which in turn will support the secular consumption growth in Indian
markets. Owing to the recent run up in the stock price, we recommend a Neutral rating on
the stock; however, investors with a long-term horizon can consider investing in the stock
at lower levels. At present our fair value for Exide works out to Rs174. Owing to Exide’s
defensive appeal and healthy and consistent fundamentals, we value its core operations at
17.3x (20% premium to historical average of 14.4x) its FY2012E earnings at Rs157. We
have valued Exide’s stake in ING Vysya Life Insurance at Rs11/share on FY2012E NBAP
and have assigned a value of Rs6/share to its lead smelters (8x FY2012E PAT). We would
be shortly releasing a detailed result update.
Bajaj Auto hikes two-wheeler prices from October
Bajaj Auto has increased the prices of its two-wheelers up to 2% from October 1, 2010
across models. Bajaj Auto's move to hike the prices of its scooters and bikes comes in the
wake of similar steps by other companies, such as Maruti Suzuki and Tata Motors, to offset
rising input costs. We maintain a neutral rating on the stock.
Dr. Reddy's sued by Eli Lilly over Gemcitabine
Dr. Reddy's has been sued by Eli Lilly in a US court on its Abbreviated New Drug
Application (ANDA) on the generic version of Gemzer (gemcitabine). Gemzer is used to
treat cancers of pancreas, lung, breasts and ovaries. In a petition filed in the court of the
Southern District of Indiana, US, Eli Lilly said the Hyderabad-based company's filing of an
ANDA for approval to manufacture a generic version of its Gemzer drug would infringe
US patent laws. Eli Lilly had obtained a patent for Gemzer in November 1995, which
would expire in November 2012. Eli Lilly is also in a legal tussle with Sun Pharma over the
same drug. It had filed an appeal in the US Court of Appeals on Sun Pharma over the
alleged patent infringement and is awaiting the judgment. We continue to remain Neutral
on Dr. Reddy’s.
October 13, 2010 2

3. Market Outlook | India Research
Economic and Political News
IIP growth plummets to 5.6% in August 2010
RBI refuses to give FDI status to optionally convertible papers
NPC plans Rs1,500cr fund for civil liability
Corporate News
Pfizer sues Lupin on anti-epilepsy drug
Lanco Infra ties up Rs1,800cr debt
Tata Motors’ US $750mn share issue subscribed 3.4 times
SCI files DRHP for Rs1,300cr FPO
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Honeywell Auto Results
Tata Metaliks Results
October 13, 2010 3

4. Market Outlook | India Research
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