sharekhan valueguide dec2013

December 2013 Sharekhan ValueGuide2

Sharekhan ValueGuide December 20133

After the Diwali fireworksthe Indian stock markettook a breather inNovember this year. Ithas resumed the uptrendin the initial part ofDecember on the back ofsome encouragingeconomic data points (especially the upsurge in exports, moderation ingold imports and the significant narrowing down of the current accountdeficit) and a supportive global environment (most developed marketsare hitting a new high).

REGULAR FEATURESReport Card 4Earnings Guide I

TECHNICALSSensex 26

Stock Ideas 11Stock Updates 12Sharekhan Special 23Viewpoint 26

From Sharekhan’s Desk EQUITY

2013 ends with a bang FUNDAMENTALS

DERIVATIVESView 27

TECHNICALS

Crude Oil 28Gold 29Silver 29

FUNDAMENTALSCopper 29Lead 29Zinc 30

Gold 31Silver 31Crude Oil 31

Copper 32Natural gas 32Cardamom 32

TECHNICALS

FUNDAMENTALS

USD-INR 34EUR-INR 34

GBP-INR 34JPY-INR 34

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COMMODITY

CURRENCY

PMS DESKProPrime - Top Equity 35ProPrime - Diversified Equity 36ProTech - IndexFutures Fund 37ProTech - Trailing Stops 38

MUTUAL FUNDS DESK

Top MF Picks (equity) 41

Top SIP Fund Picks 42

RESEARCH BASED EQUITY PRODUCTS

Top Picks basket 07Switch Ideas 12

INR-GBP 33INR-JPY 33

ADVISORY DESK

MID Trades 37

INR-USD 33INR-EUR 33

Derivative Ideas 37

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CONTENTS

REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON DECEMBER 06, 2013)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 06-DEC-13 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

AUTOMOBILES

Apollo Tyres Buy 79.5 86.0 101.6 54.6 6.4 21.2 -13.0 -8.2 6.5 9.6 -19.4 -16.4Ashok Leyland Hold 16.3 18.0 29.0 11.8 -11.4 26.3 -29.2 -38.7 -11.3 14.2 -34.4 -44.2Bajaj Auto Hold 1950.0 2342.0 2229.0 1656.0 -7.3 2.1 13.1 3.0 -7.2 -7.7 4.8 -6.2M&M Buy 945.3 1122.0 1025.9 740.2 4.2 21.5 -2.9 3.0 4.2 9.9 -10.0 -6.2Maruti Suzuki Hold 1701.5 ** 1777.0 1215.0 4.7 30.8 9.0 15.7 4.8 18.3 1.0 5.4BSE Auto Index 12297.4 12413.0 9656.4 -0.4 17.5 12.4 15.1 -0.3 6.3 4.1 4.8BANKS & FINANCE

Allahabad Bank Hold 93.5 109.0 191.1 64.8 -4.2 29.6 -21.3 -37.4 -4.2 17.2 -27.1 -43.0Andhra Bank Reduce 62.4 55.0 130.0 47.2 -9.0 20.6 -25.1 -42.0 -9.0 9.0 -30.6 -47.2Axis (UTI) Bank Buy 1279.8 1450.0 1549.9 763.4 1.2 33.9 -8.9 -5.7 1.3 21.0 -15.6 -14.1Bajaj Finserv Hold 738.3 ** 968.0 561.0 9.8 28.5 10.7 -18.0 9.8 16.1 2.5 -25.3Bank of Baroda Buy 684.0 735.0 899.7 429.3 0.9 33.3 5.0 -11.5 1.0 20.5 -2.7 -19.4Bank of India Hold 220.4 230.0 393.0 126.5 -8.7 49.5 -22.2 -22.2 -8.7 35.2 -28.0 -29.2CanFin Homes Buy 150.2 220.0 187.9 102.0 -1.9 27.2 6.9 4.5 -1.8 15.0 -1.0 -4.8Capital First Hold 155.8 170.0 224.0 109.5 -7.3 0.3 0.7 -29.0 -7.2 -9.3 -6.7 -35.4Corp Bank Reduce 268.7 260.0 495.3 239.6 -15.7 6.5 -30.2 -34.9 -15.7 -3.7 -35.4 -40.7Federal Bank Buy 79.0 87.0 110.2 44.3 -8.3 42.7 -12.7 -16.8 -8.2 29.0 -19.1 -24.2HDFC Hold 813.8 865.0 931.4 632.2 -3.7 10.3 -0.5 0.2 -3.7 -0.3 -7.8 -8.7HDFC Bank Hold 682.7 712.0 727.3 528.0 1.8 12.9 0.9 0.2 1.8 2.1 -6.6 -8.8ICICI Bank � Buy 1143.9 1195.0 1238.4 756.9 3.6 27.1 0.1 3.1 3.7 14.9 -7.3 -6.1IDBI Bank Reduce 66.6 62.0 118.4 52.3 -7.7 15.8 -10.7 -35.8 -7.6 4.7 -17.3 -41.5Punjab National Bank Buy 596.9 620.0 922.1 400.2 -0.2 31.5 -21.0 -25.8 -0.1 18.9 -26.9 -32.5SBI Hold 1859.6 1950.0 2551.7 1452.7 -1.1 13.3 -8.7 -16.7 -1.0 2.4 -15.4 -24.2Union Bank of India Hold 127.5 150.0 288.0 97.0 -9.7 11.0 -41.0 -48.3 -9.7 0.3 -45.4 -53.0Yes Bank Buy 391.9 422.0 547.7 216.1 5.1 37.4 -20.9 -11.2 5.2 24.2 -26.8 -19.2BSE Bank Index 13363.7 15335.9 9535.8 1.2 20.7 -4.7 -4.2 1.3 9.2 -11.7 -12.8CONSUMER GOODS

Bajaj Corp Hold 227.8 270.0 287.2 206.3 -7.5 -7.1 -18.6 4.5 -7.5 -16.0 -24.6 -4.8GSK Consumers Hold 4624.1 4886.0 6347.8 3482.3 0.3 8.0 -20.6 23.8 0.4 -2.4 -26.5 12.7Godrej Consumer Products Hold 827.2 875.0 978.0 679.0 1.8 3.1 -4.4 16.3 1.9 -6.8 -11.5 5.9Hindustan Unilever Reduce 559.7 540.0 725.0 432.2 -5.1 -9.2 -2.4 8.4 -5.1 -17.9 -9.6 -1.3ITC � Buy 311.1 369.0 380.0 272.1 -3.2 -1.1 -7.6 5.2 -3.1 -10.6 -14.4 -4.2Jyothy Laboratories Buy 197.6 260.0 220.7 138.8 6.3 37.5 0.4 9.1 6.3 24.3 -7.0 -0.7Marico Buy 214.0 236.0 251.7 190.0 3.8 5.2 -7.1 -0.1 3.9 -4.9 -13.9 -9.0Mcleod Russel India Buy 290.0 330.0 387.0 237.7 7.0 9.5 -3.4 -16.6 7.0 -1.0 -10.5 -24.1TGBL (Tata Tea) Buy 146.2 166.0 174.4 121.6 -12.5 -0.4 -0.7 -10.0 -12.4 -9.9 -8.1 -18.0Zydus Wellness Hold 541.1 626.0 755.0 415.2 -1.3 4.8 -10.2 19.2 -1.2 -5.2 -16.8 8.5BSE FMCG Index 6382.2 7600.1 5570.0 -3.9 -1.4 -5.1 6.7 -3.8 -10.9 -12.1 -2.8IT / IT SERVICES

CMC Hold 1357.6 1500.0 1523.0 1091.2 0.3 6.5 15.0 22.5 0.4 -3.7 6.5 11.6HCL Technologies � Buy 1126.6 1350.0 1178.5 608.1 0.7 8.9 52.8 74.8 0.8 -1.5 41.6 59.2Infosys Buy 3325.8 3770.0 3448.0 2186.0 2.6 12.2 37.0 43.2 2.7 1.5 26.9 30.4NIIT Technologies Hold 333.1 ** 344.0 234.3 18.5 13.9 32.1 23.7 18.6 3.0 22.4 12.7Persistent Systems Hold 852.0 950.0 907.1 475.3 6.3 46.9 66.3 78.0 6.3 32.8 54.0 62.1Tata Consultancy Services � Buy 2000.3 2600.0 2258.9 1197.0 -2.7 0.0 37.2 55.5 -2.6 -9.6 27.0 41.6Wipro Buy 493.8 580.0 519.8 314.9 2.7 5.1 53.8 47.9 2.7 -5.0 42.5 34.7BSE IT Index 8421.5 8812.1 5496.0 1.0 7.6 40.4 48.0 1.0 -2.7 30.0 34.8CAPITAL GOODS / POWER

Bharat Heavy Electricals Hold 171.4 ** 247.8 100.2 20.5 27.0 -9.8 -25.4 20.5 14.8 -16.5 -32.1CESC Buy 396.7 450.0 407.9 252.5 3.3 27.2 20.0 25.9 3.4 15.0 11.2 14.6Crompton Greaves Hold 129.7 ** 131.3 71.7 13.9 52.1 42.3 6.9 14.0 37.5 31.8 -2.6Greaves Cotton Buy 67.1 85.0 87.0 53.0 3.1 15.3 -2.2 -12.4 3.1 4.3 -9.4 -20.3Kalpataru Power Transmission Buy 93.4 115.0 106.9 56.0 12.6 54.2 31.0 11.0 12.7 39.4 21.4 1.1PTC India Buy 62.9 70.0 81.3 33.2 7.0 35.8 12.6 -12.9 7.1 22.8 4.3 -20.7Thermax Reduce 672.9 527.0 695.0 526.0 7.5 23.5 16.9 13.0 7.6 11.7 8.3 2.9V-Guard Industries Hold 482.6 520.0 590.5 405.0 -0.6 -6.6 1.0 -8.4 -0.6 -15.5 -6.5 -16.5BSE Power Index 1706.2 2046.1 1315.6 3.2 18.6 -2.9 -14.5 3.3 7.2 -10.1 -22.1BSE Capital Goods Index 10279.2 11385.1 6718.8 10.8 41.3 9.8 -7.2 10.9 27.7 1.7 -15.5

REPORT CARDEQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON DECEMBER 06, 2013)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 06-DEC13 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

� In Top Picks basket ** Price target under review

INFRASTRUCTURE / REAL ESTATE

Gayatri Projects Buy 60.3 155.0 130.6 46.0 9.5 13.8 -13.7 -46.0 9.6 2.9 -20.1 -50.8ITNL Buy 134.9 201.0 228.9 97.1 7.1 17.3 -20.9 -29.0 7.2 6.0 -26.7 -35.3IRB Infra Buy 99.2 110.0 147.0 51.9 1.7 53.6 -12.7 -25.3 1.8 38.9 -19.2 -32.0Jaiprakash Associates Reduce 55.3 40.0 106.8 28.4 12.0 47.4 -16.5 -44.5 12.1 33.3 -22.6 -49.4Larsen & Toubro � Buy 1096.4 1140.0 1132.7 677.2 12.3 49.3 16.5 -0.7 12.4 35.0 8.0 -9.6Pratibha Industries Hold 24.5 29.0 58.7 16.8 2.7 34.1 -31.4 -51.2 2.8 21.3 -36.4 -55.5Punj Lloyd Hold 28.7 ** 64.1 20.1 -0.9 27.8 -36.6 -50.8 -0.8 15.6 -41.3 -55.2Unity Infraprojects Buy 25.4 30.0 49.9 16.1 1.4 41.1 -11.9 -44.5 1.5 27.6 -18.4 -49.5CNX Infra Index 2518.4 2684.7 1829.8 4.4 26.1 6.7 -4.3 4.4 14.0 -1.1 -12.8BSE Real Estate Index 1365.6 2326.8 1126.8 -1.8 12.4 -18.9 -34.3 -1.7 1.7 -24.8 -40.1OIL & GAS

Oil India Buy 462.1 650.0 629.9 415.0 -1.6 8.4 -19.1 9.1 -1.5 -1.9 -25.0 -0.7Reliance Industries � Buy 866.7 1010.0 955.0 763.9 -4.3 1.0 8.6 5.8 -4.2 -8.7 0.6 -3.7Selan Exploration Technology Buy 314.8 365.0 339.9 197.4 1.2 19.3 19.6 6.6 1.2 7.9 10.8 -3.0BSE Oil and Gas Index 8733.1 9890.9 7552.2 -2.2 4.1 1.6 4.8 -2.1 -5.9 -5.9 -4.6PHARMACEUTICALS

Aurobindo Pharma � Buy 306.2 388.0 312.0 127.2 26.2 61.1 63.1 57.3 26.3 45.7 51.0 43.2Cipla Buy 388.8 490.0 450.4 354.0 -7.9 -7.4 3.7 -6.0 -7.8 -16.3 -3.9 -14.4Cadila Healthcare Buy 736.5 886.0 924.6 629.0 4.8 13.5 -4.9 -13.0 4.9 2.6 -11.9 -20.8Dishman Pharma Buy 87.0 130.0 122.8 37.1 13.2 100.5 24.9 -27.5 13.3 81.3 15.7 -33.9Divi's Labs Buy 1138.5 1265.0 1198.0 905.0 15.4 17.5 18.7 -1.1 15.5 6.2 9.9 -9.9Glenmark Pharmaceuticals Hold 525.1 600.0 613.4 430.1 0.1 2.7 -11.8 25.1 0.2 -7.1 -18.3 14.0Ipca Laboratories Hold 649.8 732.0 744.4 440.4 -3.9 -7.9 8.6 42.0 -3.8 -16.8 0.6 29.3Lupin Buy 857.9 978.0 946.4 567.7 -2.3 -0.1 12.0 43.9 -2.3 -9.6 3.8 31.0Sun Pharma � Buy 581.3 654.0 651.9 347.0 -2.6 11.7 11.7 64.9 -2.5 1.0 3.5 50.2Torrent Pharma Hold 494.1 ** 512.0 323.5 -0.6 13.1 20.9 46.7 -0.6 2.2 11.9 33.6BSE Health Care Index 9510.6 9979.8 7718.6 -0.8 4.9 5.9 19.7 -0.7 -5.2 -1.9 9.0AGRI-INPUTS

Tata Chemicals Hold 271.6 308.0 381.5 233.2 0.2 12.4 -6.8 -17.7 0.2 1.7 -13.7 -25.1UPL Buy 169.6 180.0 175.5 111.0 -0.6 22.7 2.1 37.4 -0.6 10.9 -5.4 25.1BUILDING MATERIALS

Grasim Hold 2728.3 2818.0 3300.1 2105.7 -3.2 17.2 -1.9 -17.4 -3.2 5.9 -9.1 -24.8India Cements Hold 58.1 65.0 95.1 43.0 4.7 21.6 -8.2 -32.3 4.8 9.9 -15.0 -38.3The Ramco Cements Hold 175.0 ** 273.5 135.2 -3.4 8.5 -25.3 -17.0 -3.3 -1.9 -30.8 -24.4Shree Cement Hold 4296.2 4500.0 5384.4 3400.1 -1.9 13.3 -7.9 0.9 -1.9 2.4 -14.7 -8.1UltraTech Cement Hold 1881.4 2009.0 2069.1 1402.4 -4.1 21.6 1.4 -3.7 -4.0 9.9 -6.0 -12.3DISCRETIONARY CONSUMPTION

Eros International Media Buy 168.8 ** 230.1 106.5 -0.6 37.9 4.3 -20.5 -0.6 24.7 -3.3 -27.6Indian Hotel Company Hold 50.2 61.0 68.2 37.5 -6.4 5.7 -2.9 -23.5 -6.3 -4.4 -10.0 -30.4KKCL Hold 1110.0 1277.0 1162.0 645.1 12.5 55.9 26.8 57.0 12.6 41.0 17.4 43.0Raymond Buy 277.2 387.0 488.9 175.5 1.2 47.0 -2.0 -40.2 1.2 32.9 -9.2 -45.5Relaxo Footwear Hold 177.7 196.0 218.0 94.0 3.2 24.1 32.5 14.1 3.3 12.2 22.8 3.9Speciality Restaurants Buy 120.5 200.0 195.9 101.0 -3.9 -5.8 -30.7 -33.5 -3.8 -14.8 -35.8 -39.4Sun TV Network Buy 371.7 515.0 494.9 324.5 -16.4 -5.8 -12.5 -8.9 -16.3 -14.9 -19.0 -17.0Zee Entertainment � Buy 272.4 300.0 284.9 194.3 -5.0 17.0 14.1 26.5 -4.9 5.8 5.7 15.2DIVERSIFIED / MISCELLANEOUS

Aditya Birla Nuvo Buy 1239.8 1325.0 1291.0 930.0 -0.3 9.8 18.8 12.3 -0.2 -0.7 10.0 2.2Bajaj Holdings Buy 875.9 1464.0 1058.3 743.8 3.4 10.1 -2.5 1.1 3.4 -0.5 -9.7 -7.9Bharti Airtel � Buy 332.4 395.0 373.8 266.6 -6.7 13.2 10.9 1.8 -6.7 2.4 2.7 -7.3Bharat Electronics Buy 1046.3 1485.0 1380.0 1041.6 -2.1 -9.4 -20.3 -11.3 -2.1 -18.1 -26.2 -19.2Gateway Distriparks Buy 127.6 149.0 147.0 98.1 6.8 20.8 11.1 4.2 6.9 9.2 2.9 -5.1Max India Buy 212.0 296.0 273.0 150.2 11.2 42.6 6.0 -12.3 11.2 29.0 -1.8 -20.1Ratnamani Metals and Tubes Hold 130.1 170.0 162.1 116.1 7.1 5.4 -6.9 4.5 7.2 -4.7 -13.7 -4.9BSE500 Index 7694.7 7792.7 6301.3 0.0 12.7 4.6 3.5 0.1 1.9 -3.1 -5.8CNX500 INDEX 4830.8 4877.7 3937.7 0.2 13.2 4.5 3.8 0.3 2.3 -3.2 -5.4CNXMCAP INDEX 7766.5 8859.4 6330.8 0.0 15.1 -0.4 -5.4 0.1 4.1 -7.8 -13.8

2013 ends with a bang

FROM SHAREKHAN’S DESK

an’s

desk After the Diwali fireworks the Indian stock market took a breather in November this year.

It has resumed the uptrend in the initial part of December on the back of some encouraging

economic data points (especially the upsurge in exports, moderation in gold imports and

the significant narrowing down of the current account deficit) and a supportive global

environment (most developed markets are hitting a new high). But the big push to the

investor sentiment has emerged from the spectacular show by Bharatiya Janata Party (BJP),

the main opposition party in the country, in the assembly elections of the four key states of

India, ie New Delhi, Rajasthan, Madhya Pradesh and Chhattisgarh. It has raised hopes

that the May 2014 general election may lead to a change of guard at the centre. Both India

Inc and the Street are favourably inclined to BJP coming to power at the centre. The party’s

prime ministerial candidate, Narendra Modi, is perceived as a decisive leader with pro-

growth and pro-industry credentials. The euphoria has finally pushed the benchmark indices

towards a new high after a gap of close to six years. This is exactly what we had anticipated

and indicated in the editorial of the last issue of the ValueGuide.

Though December is traditionally a good month for the Indian equity market, but the

sustenance of the current rally would be influenced by some important events ahead. The

Reserve Bank of India is scheduled to announce its policy review on December 18 and

containing inflation trends would be high on its agenda, given the uncomfortable level of

consumer inflation (Consumer Price Index) in spite of a good monsoon and agricultural

output. The Consumer Price Index has climbed up to 10.6% while the Wholesale Price

Index is at an eight-month high of 7%, giving rise to fears that the Indian central bank may

hike the repo rates by another 25 basis points at the forthcoming meeting. The apex bank

has already hiked the repo rates at the previous two meetings despite the sharp moderation

in the economic growth and the tight liquidity adversely affecting the already sagging

investment cycle.

Meanwhile, around the same time as the RBI will ponder its options to combat inflation,

another central bank several miles away will hold a two-day meeting to decide the fate of

the US fiscal stimulus. Over a period of two days, December 17 and 18, the US Federal

Reserve will take stock of the US economy and will be keenly watched by the financial

markets the world over for its stance on the tapering of the quantitative easing (QE)

programme. The easy liquidity condition globally caused by QE is seen as a key support for

the foreign inflow driven Indian equity market. The foreign institutional investors have

pumped in close to Rs99,500 crore into the Indian equity market this year so far whereas

the domestic institutions have been net sellers due to redemption pressure from the retail

investors.

The benchmark indices are set to deliver a high double-digit return in 2013 as well and

make it another year of good returns after 2012. However, the broader markets (CNX

Mid-cap Index and CNX Small-cap Index) still trade at a significant discount (30-40%) to

their respective all-time highs and many investors are saddled with losses due to an

unreasonably high exposure to this segment. The trend highlights the importance of having

quality companies in one’s investment portfolio for stable and consistent returns.�

Sharekhan Top Picks

SHAREKHAN TOP PICKS

After a smart rally of close to 15% in the benchmark indices, the

Sensex and the Nifty, during the two-month period of September

and October 2013, the equity market took a breather in November,

ahead of the assembly polls in four key states of the country in

central and north India. The Sensex and the Nifty moved in a fairly

narrow range throughout the month and ended with a loss of close

to 1.6% each since our last update on the Top Picks basket published

on November 1, 2013. The Top Picks basket underperformed the

market marginally and ended with a loss of 1.9% in the same period.

Interestingly, the CNX Mid-cap Index outperformed the benchmark

indices with a gain of 1.3% indicating stock pickers are exploring

value in the quality mid-cap space.

* CMP as on December 02, 2013

NAME CMP* PER ROE (%) PRICE UPSIDE(RS) FY13 FY14E FY15E FY13 FY14E FY15E TARGET (RS) (%)

Aurobindo Pharma 304 19.4 11.4 9.7 18.5 27.5 26.2 388 28%

Bharti Airtel 332 58.3 29.7 21.7 7.9 4.6 6.0 395 19%

HCL Technologies 1,132 19.5 13.6 12.0 36.1 39.1 33.7 1,350 19%

ICICI Bank 1,089 15.1 14.0 11.8 13.1 12.9 14.0 1,195 10%

ITC 320 34.0 28.8 24.2 45.4 46.3 46.5 369 15%

Larsen & Toubro 1,067 20.5 18.8 17.1 16.5 14.5 14.2 1,140 7%

Reliance Industries 855 13.2 13.3 11.7 11.0 9.8 10.0 1,010 18%

Selan Exploration 314 11.7 11.2 7.7 20.3 18.4 22.6 365 16%

Sun Pharma 596 41.1 26.8 23.7 25.4 27.6 24.8 654 10%

TCS 2,014 28.3 20.3 17.0 33.1 35.6 33.4 2,600 29%

Zee Entertainment Enterprises 268 35.8 29.2 25.1 19.6 20.8 21.3 300 12%

ABSOLUTE OUTPERFORMANCE CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS IN %)

This month, we are making two changes, we are introducing ITC

and Aurobindo Pharma into the Top Picks basket in place of HDFC

Bank and Bajaj Corp. The introduction of ITC is purely driven by

the fact that the recent correction in the stock offers a decent entry

point for investors in ITC with a scope for high double-digit gains

over the next few quarters. So it is rotation among the defensive

stocks in place of HDFC Bank, which is an equally good stock but

has relatively lesser upside to our price target as compared with

ITC. Aurobindo Pharma is coming in place of Bajaj Corp (which is

facing head winds on volume growth front), as the former is still

among the most attractively valued mid-cap pharmaceutical stocks

(in spite of the sharp run-up in its price recently) and has certain

near-term triggers in place.�

YTDCY2013

CY2012 CY2011 CY2010 CY2009 SinceInception

(Jan2009)Sharekhan (Top Picks) Sensex Nifty

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS

Sharekhan Sensex Nif ty

NAME CMP PER ROE (%) PRICE UPSIDE(RS) FY13 FY14E FY15E FY13 FY14E FY15E TARGET (RS) (%)

AUROBINDO PHARMA 304 19.4 11.4 9.7 18.5 27.5 26.2 388 28%

Remarks: � Aurobindo Pharma is set to rebound with the USFDA clearing two of its manufacturing facilities (including one greenfield facility) andremoving import-alert on Unit-VI facility. The clearance will help the company to ramp up its product list in the USA, thanks to a strongproduct pipeline built over a period. With the expected increase in the export-led business after the resolution of the USFDA issues, thefavourable tilt in the revenue mix is likely to boost the margin, resulting in a relatively much better growth in earnings as compared withrevenues.

� The company has seen a significant shift from the competition infested tablet and capsule business to a less crowded market ofinjectibles. The management is also likely to focus on hormonal, oncology, ophthalmic, penems and peptide-based products, whichwill bring the next spin of growth in the next two to three years.

� We expect the revenues and profit to grow at a CAGR of 17% and 41% over FY2013-15 respectively. Currently, the stock is trading at11.4x and 9.7x FY2014E and FY2015E earnings respectively. Our price target price of Rs388 implies 10x average estimated earningsfor FY2015E and FY2016E.

BHARTI AIRTEL 332 58.3 29.7 21.7 7.9 4.6 6.0 395 19%

Remarks: � The Indian telecom environment is turning favourable with a drop in the competitive intensity and the benefits of consolidation flowingto the incumbent players, as visible in the financial results of the players for the past two quarters.

� The Q2FY2014 results of the Indian business of Bharti Airtel exhibited a strong pricing power (+1% QoQ), with a robust data revenuegrowth, aided by a 110-basis-point sequential margin expansion in the India mobile business.

� The strong performance indicators along with a positive management commentary on maintaining pricing discipline and headroomahead for price increases make us stick to our estimates and rating

� In the wake of the improving business fundamentals, relatively less harsh regulatory moves, and the impending mergers and acquisitionsin the sector, we maintain our positive stance on Bharti Airtel, with a price target of Rs395 (valued at 7.5x FY2015 EV/EBITDA).

HCL TECHNOLOGIES 1,132 19.5 13.6 12.0 36.1 39.1 33.7 1,350 19%

Remarks: � HCL Technologies is an IT services company providing software-led IT solutions, remote infrastructure management services andBPO services. The company has a leading position in remote infrastructure management services which has helped it win large IToutsourcing contracts. Through the Axon PLC acquisition, the company has gained a strong SAP consulting footing.

� In the current environment, we believe HCL Tech is well placed in terms of its business strategy of consciously targeting the re-bidmarket. The results of the same are evident in its consistent outperformance in terms of volume and revenue growth. The companyhas allayed the apprehensions on the margin front by consistently improving its margins despite head winds.

� The management acknowledged the potential threat of the impending US immigration bill and expressed concern over the outplacementclause in the current form (we, therefore, hope for some dilution in the final bill). Nevertheless, among the top four IT companies, HCLTech is relatively better placed, as around 50% of its total workforce in the USA holds the H1-L1 visa against a higher percentage ofsuch visa holders for TCS, Infosys and Wipro.

� In view of an improved operating environment coupled with decent earnings predictability driven by a $4-billion-plus order book, stablemargins and sustainable momentum in the IMS vertical, we continue to recommend a Buy on it with a price target of Rs1,350.

ICICI BANK 1,089 15.1 14.0 11.8 13.1 12.9 14.0 1,195 10%

Remarks: � ICICI Bank continues to report a strong growth in earnings led by a growth in advances and expansion in margins (2.9% in FY2013).We expect its advances to grow at 17.6% CAGR over FY2013-15. This should lead to a 16.9% CAGR growth in the net interest income(NII) in the same period.

� ICICI Bank’s asset quality remains stable as its non-performing assets (NPAs) have declined in the past several quarters led by acontraction in slippages. This has led to a sharp reduction in the provisions and an increase in the profitability. Going forward, weexpect the asset quality pressures to be within the manageable limits leading to a healthy the profit growth.

� Led by a pick-up in the business growth and an improvement in the margins, the RoE is likely to expand to 14.0% by FY2015 while theRoA is likely to improve to 1.6%. This would be driven by a 12.7 % growth (CAGR) in the profit over FY2013-15.

� The stock trades at 1.6x FY2015E BV. Moreover, given the improvement in the profitability led by lower NPA provisions, a healthygrowth in the core income and improved operating metrics, we recommend Buy with a price target of Rs1,195.

SHAREKHAN TOP PICKS EQUITY FUNDAMENTALS

ITC 320 34.0 28.8 24.2 45.4 46.3 46.5 369 15%

Remarks: � ITC’s cigarette business, which contributes around 60% of revenues, continues to be a cash cow for the company. The companyendeavours to make a mark in the Indian FMCG market and with successful brands such as Bingo, Sunfeast and Aashirwaad, ITC isalready is reckoned among the best in the industry. With the new portfolio of personal care products gaining market share, its FMCGbusiness promises to compete with the likes of Hindustan Unilever and Procter & Gamble.

� The Government of India has increased the excise duty on cigarettes by about 20% in the finance budget. ITC has already taken aprice increase of about 18% in its cigarette portfolio which would help in maintaining the cigarette business’ margins at around 30%.However, a significant price increase would put pressure on the cigarette business’ sales volume in the near term.

� ITC’s other businesses of hotels, agri-products, and paper, paperboard and packaging, are expected to provide a good support to therevenues and profitability in the long run.

� An increase in the taxation and the government’s intention to curb the consumption of tobacco products remain the key risks to ITC’scigarette business over the longer term.

� We expect ITC’s bottom line to grow at a CAGR of close to over FY2013-15. At the current market price, the stock trades at 24.2x itsFY2015E earnings, which is lower than the current valuation of some of the mid-cap FMCG stocks and above 30% discount to someof its closest large-cap peers. We like the stock from a longer-term perspective and retain it as one of our top picks in the FMCG space.

LARSEN & TOUBRO 1,067 20.5 18.8 17.1 16.5 14.5 14.2 1,140 7%

Remarks: � Larsen & Toubro (L&T), the largest engineering and construction company in India, is a direct beneficiary of the strong domesticinfrastructure development and industrial capex boom.

� L&T continues to impress us with its good execution skills, reporting decent numbers throughout despite the slowdown in the industrialcapex cycle. Also, we have seen order inflow traction in recent quarters which enhances the revenue visibility.

� Despite challenges like deferral of award decisions and stiff competition, the company has given a robust guidance of ~15% growth inthe future. Moreover, monetisation of assets would help the company to improve the RoE.

� A sound execution track record, a healthy order book and a strong performance of its subsidiaries reinforce our faith in L&T.

� At the CMP, the stock is trading at 17.1x its FY2015E earnings.

RELIANCE INDUSTRIES 855 13.2 13.3 11.7 11.0 9.8 10.0 1,010 18%

Remarks: � Reliance Industries Ltd (RIL) has a strong presence in the refining, petrochemical and upstream exploration businesses. The refiningdivision of the company is the highest contributor to the company’s earnings and is operating efficiently with a better gross refiningmargin (GRM) compared with its peers in the domestic market due to the ability of its plant to refine more of heavier crude. However,the gas production from the Krishna-Godavari-D6 field has fallen significantly in the last two years. With the government approval foradditional capex in its allocated gas fields; we believe production will improve going ahead.

� Though there is uncertainty prevailing on gas production and pricing of gas from the KG-D6, the traction in volume from shale gasassets is playing positively for the company. Moreover, the petrochemical and refinery businesses are on the driving seat and contributingthe lion’s share of the profitability. Hence, the uncertainty related to the domestic gas production and pricing are likely to limit theimpact.

� The key concerns remain in terms of a lower than expected GRM, profitability of the petrochemical division and the company’s inabilityto address the issue of falling gas output in the near term.

� At the current market price the stock is trading at a PE of 11.7x its FY2015E EPS.

SELAN EXPLORATION 314 11.7 11.2 7.7 20.3 18.4 22.6 365 16%

Remarks: � Selan Exploration (Selan), has rights to develop five small discovered (minimal exploration risk) oil fields (Bakrol, Lohar, Indrora,Karjisan and Ognaj) in Cambay Basin (Gujarat) with proven oil & gas reserves.

� Recently Selan received approvals from the Directorate General of Hydrocarbons (DGH) for developing two wells in Indrora, two wellsin Lohar field and one well in Karjisan. Further, there are seven more wells for which approvals are pending (six wells in Bakrol and onewell in Karjisan). Therefore, we expect production ramp-up to start soon which would percolate to the earnings. Moreover, the companywould benefit from the rupee’s depreciation.

� We like its debt-free position, significant cash on books (which is 24% of the market capitalization) and ability to generate RoE around20%. At the current market price the stock is trading at 7.7x its FY2015E earnings and 3.5x its EBITDA.

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS

SUN PHARMA 596 41.1 26.8 23.7 25.4 27.6 24.8 654 10%

Remarks: � The combination of Sun Pharma, Taro Pharma, Dusa Pharma and the generic business of URL Pharma offers an excellent businessmodel for Sun Pharma, as was reflected in the 40% Y-o-Y revenue growth and 39% Y-o-Y profit growth in FY2013.

� Though pricing pressure in some of the products of Taro Pharma may restrict the growth in the USA, but we expect a better performancefrom Sun Pharma going forward mainly driven by (1) the contribution from the newly acquired Dusa Pharma and URL Pharma in theUSA; (2) launch of generic Prandin under 180-days exclusivity; (3) better traction in sales of Doxil in the absence of key competitors;and (4) the launch of other key generic products in the USA and the emerging markets including India. We expect 23% and 32%revenue and PAT growth (CAGR) respectively over FY2013-15 on an organic basis. With a strong cash balance, Sun Pharma is wellpositioned to capitalise on the growth opportunities and inorganic initiatives. Its debt-free balance sheet insulates it from the negativeimpact of the volatility in the currency market.

� Currently Sun Pharma is trading at 26.8x and 23.7x FY2014E EPS and FY2015E EPS respectively. We maintain our Buy recommendationon the stock, with a price target of Rs654 (post-bonus shares).

TCS 2,014 28.3 20.3 17.0 33.1 35.6 33.4 2,600 29%

Remarks: � TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in mostservice offerings and has further consolidated its position as a full service player by delivering a robust financial and operationalperformance consistently in the last two years.

� The consistency and predictability of the earnings performance has put the company in the top of its league. Moreover, the quality ofits performance has also been quite impressive, ie it has been able to report a broad-based growth in all its service lines, geographiesand verticals consistently over the past two years, thereby justifying its position as a full service player in the IT industry.

� Going ahead too, we believe the company is well positioned to capitalise on to the opportunities that the marketplace has to offer dueto its scale.

� At the current market price of Rs2,108, the stock is trading at 20.3x FY2014 EPS of Rs99.1 and 17.0x FY2015 EPS of Rs118.3. Wemaintain our Buy recommendation on the stock with a price target of Rs2,600.

ZEE ENTERTAINMENT 268 35.8 29.2 25.1 19.6 20.8 21.3 300 12%

Remarks: � Among the key stakeholders of the domestic TV industry, we expect the broadcasters to be the prime beneficiary of the mandatorydigitisation process initiated by the government. The broadcasters would benefit from higher subscription revenues at the least incrementalcapex as the subscriber declaration improves in the cable industry.

� On completion of 20 years of operations, ZEEL has issued redeemable preference shares (RPS) aggregating Rs2,000 crore (6%preference dividend) for eight years. The RPS will be issued at a ratio of 21 RPSs for every equity share. The RPS will be redeemablefrom the fourth year till the eighth year.

� ZEEL’s management acknowledged that the recent TRAI recommendation of capping the advertisement time at 12 minutes per hourwould have an adverse impact on its advertisement volume. The company will take adequate hikes in the advertisement rates in orderto negate the impact of reduced volumes. Thus, we expect a very minimal impact on the blended advertisement growth in FY2014 andFY2015.

� We believe ZEEL will be the major beneficiary of the digitisation process in the years to come which coupled with a strong balancesheet and high return ratios makes it a compelling long-term growth story. We maintain our Buy rating on ZEEL with a price target ofRs300.

SHAREKHAN TOP PICKS EQUITY FUNDAMENTALS

Sun rises in the southCOMPANY DETAILS

Price target: Rs515

Market cap: Rs14,463 cr

52-week high/low: Rs494/327

NSE volume (no. of shares): 0.9 lakh

BSE code: 532733

NSE code: SUNTV

Sharekhan code: SUNTV

Free float (no. of shares): 9.9 cr

PRICE CHART

SHAREHOLDING PATTERN

(%) 1m 3m 6m 12m

Absolute -14.1 -11.3 -10.2 -8.1

Relative -12.9 -20.0 -15.8 -16.3to Sensex

PRICE PERFORMANCE

BUY CMP: RS367 DECEMBER 03, 2013

KEY POINTS� Dominant force, undisputed leader of south India: Sun TV Network (Sun TV) is

the undisputed leader in the south Indian entertainment market. With 32 out of the

total 66 TV channels present in the market, a leading viewership share and a 30%

market share of the total south Indian advertisement market, Sun TV enjoys a

dominant position in the south Indian broadcasting market. It has a very healthy

operating profit margin (OPM) corridor of 70%, EBIT margin of 51% and dividend

pay-out of more than 50%.

� Digitisation benefits yet to accrue, huge upside potential: Among the key stakeholders

of the TV industry, TV broadcasters are expected to be the prime beneficiaries of

the mandatory digitisation process initiated by the government. The actual benefits

of the digitisation process are likely to be seen beyond FY2015 with almost a six-

fold increase in the ARPU of the cable subscribers from Rs4 currently to Rs15-20

(post-DAS regime). The full DAS regime will provide incremental potential upside

of around Rs650-750 crore to the subscription revenues, driven by (a) an

improvement in subscriber reporting (under-reporting is rampant currently); (b) a

four- to five-fold increase in the ARPU from the current levels; and (c) an increase

in broadcasters’ ARPU share with an improvement in subscriber reporting.

� Healthy earnings with strong return ratios: We expect Sun TV to deliver a 16%

compound average growth rate (CAGR) in the stand-alone top line over FY2013-

16. We have built a margin decline of 140 basis points over FY2013-16 and expect

the net income to grow at a CAGR of 15% over FY2013-16. We expect the return

on equity to improve to 28% by FY2016 and the dividend pay-out to remain healthy

at around 53% of the consolidated net income.

� Valuation—deserves re-rating, bright future prospects: At the current market price

of Rs367, the stock trades at 18.2x, 15.5x and 13.4x based on the earnings estimates

for FY2014, FY2015 and FY2016 respectively. Sun TV enjoys an industry-leading

margin profile, leadership position in its key market, strong dividend pay-out, and

healthy balance sheet and return ratios. Hence, it deserves a much better valuation.

We value Sun TV at 21.5x FY2015E earnings, our target multiple is based on a

25% discount to ZEEL. We initiate coverage on Sun TV with a Buy rating and

price target of Rs515.�

SUN TV NETWORK

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding

or having a postition in the companies mentioned in the article.

STOCK IDEA EQUITY FUNDAMENTALS

For detailed report, please visit the Research section of our website, sharekhan.com.

VALUATIONSParticulars FY2012 FY2013 FY2014E FY2015E FY2016ERevenues (Rs cr) 1,847.2 1,923.0 2,260.7 2,603 2,980.5Y-o-Y growth (%) -8.3 4.1 17.6 15.1 14.5EBITDA margins (%) 76.6 73.3 71.3 72.1 71.9EBIT margins (%) 50.9 50.3 49 50.1 50.5Net profit (Rs cr) 692.9 709.6 793.1 933.9 1,077.2Y-o-Y growth (%) -10 2.4 11.8 17.7 15.3EPS (Rs) 17.6 18 20.1 23.7 27.3PE (x) 20.9 20.4 18.2 15.5 13.4EV/EBITDA (x) 10.0 10.0 8.5 7.1 5.9RoE (%) 29.1 26.8 26.7 27.7 28.1RoCE (%) 40.0 37.0 37.6 39.1 39.8

Source: Company, Sharekhan Research

Public & Others5%

Promoters76%

Non-promoter corporate

Institutions2%

Foreign16%

Closure of switch call from HUL to Colgate-Palmolive Indiawith absolute gain of 10%

KEY POINTS� Close switch call with around 10% absolute return and 5%

outperformance compared with the Nifty: Within the initiationperiod of two months our Switch Idea to shift from HindustanUnilever Ltd (HUL) to Colgate-Palmolive India (Colgate;released on September 24, 2013) has given a positive return ofabout 10% till date while the broader market has moved up by5% in the same period. In the past two months, the stock priceof HUL has corrected by 10% because of the persistentslowdown in the premium categories. The stock has also beenaffected by the concerns voiced by the parent company, Unilever,over HUL’s lower growth in the emerging markets in the nearterm. On the other hand, Colgate’s stock price has remainedstable on the bourses despite the hovering concern over thesustenance of its market share in the domestic toothpaste market.In recent times, its market share has been threatened by theentry of a multinational, ie Procter & Gamble, and theaggression shown by the other players in the toothpaste segment.Thus, with 10% absolute return in less than two months andabout 5% outperformance over the broader market indices, weclose our switch call because of the belief that the downside inthe HUL stock price is capped at the current levels.

� HUL’s trading premium over Colgate has narrowed down to14%: Two months ago, HUL was trading at a valuation premiumof 34% to Colgate, which had prompted us to come out with aSwitch Idea along with the fundamental reasoning. In the past

SWITCH IDEAEQUITY FUNDAMENTALS

SHAREKHAN SPECIAL OCTOBER 06, 2008FMCG DECEMBER 03, 2013

Good performance in Q2 led by lifestyleand telecom verticals

COMPANY DETAILS

Price target: Rs1,325

52 week high/low: Rs1,290/930

BSE code: 500303

NSE code: ABIRLANUVO

Sharekhan code: ABIRLANUVO

(%) 1m 3m 6m 12m

Absolute -6.5 -1.1 9.0 25.0

Relative to Sensex -5.5 -7.9 6.6 13.3

PRICE PERFORMANCE

BUY CMP: RS1,174 NOVEMBER 13, 2013ADITYA BIRLA NUVO

RESULT HIGHLIGHTS� Good results, led by lifestyle and telecom verticals: Aditya Birla Nuvo (ABN) reported

overall good results for the quarter with consolidated top line, operating profit and netprofit growing by 0.9%, 19.7% and 2.3% YoY respectively. On a normalised basis,the consolidated results posted a growth of 10%, 26% and 13% in the revenues; earningsbefore interest, tax, depreciation and amortisation (EBITDA); and net profit YoYrespectively for the quarter. The normalised results are computed excluding thePantaloons business that got merged with ABN in July 2013 and excluding the carbonblack business that was sold off in April 2013.

� Key management takeaways: The management maintained its capital expenditureguidance of Rs650 crore for FY2014 and guided for a slightly higher net debt/EBITDA(currently at 2.1x) owing to higher subsidy in the agri business. On the life insurancefront, it expects the business to stabilise by the end of FY2014. On the non-bankingfinancial companies business, it continued with its stance to grow the book.

� Maintain Buy: ABN is amongst the top five players in the insurance, asset managementand telecom segments. Given the diverse businesses in which ABN is present, we valuethe company on a sum-of-the-parts basis and then adjust it with the company’sconsolidated debt to arrive at a price target. We retain our Buy rating on the stock witha price target of Rs1,325.�

Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article. For detailed report, please visit the Research section of our website, sharekhan.com.

two months the valuation premium has narrowed down to 14%providing a limited risk-reward ratio from the current levels. Thedrop in the valuation premium of HUL over Colgate can beattributed to a double-digit drop in HUL’s stock price.

� HUL to find support around the current levels: HUL is currentlytrading at about 32x its FY2015E earnings, which is nearingour one-year target multiple of 30x. Though it will take sometime for the company to see a substantial improvement in thefinancial performance, but we do not see the stock pricedropping significantly from the current levels. On the other hand,the management of the company has enhanced its focus andtaken decisive steps to improve the sales volume of the companyin the coming quarters. Consequently, any improvement in thesales volume growth of the domestic consumer business of HULwould give a sentimental boost to the stock price.�

SWITCH PERFORMANCESwitch call 24-Sep-13 3-Dec-13 Gain / LossSell HUL 643 579 10.0Buy Colgate India 1275 1274 -0.1Gain / (Loss) 9.9Nifty 5892.5 6201.9 5.3

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or

having a position in the companies mentioned in the article.

Foreign20%

Institutions14%

Promoters53%

Public & Others10%

Strong Q2 results; upgraded to Buy as Cooper Tiredeal on backburner now

COMPANY DETAILS

Price target: Rs86

52 week high/low: Rs102/55

BSE code: 500877

NSE code: APOLLOTYRE

Sharekhan code: APOLLOTYRE

(%) 1m 3m 6m 12m

Absolute 11.4 20.9 -20.3 -6.3

Relative to Sensex 11.5 10.5 -22.9 -15.9

PRICE PERFORMANCE

BUY CMP: RS70 NOVEMBER 12, 2013APOLLO TYRES

KEY POINTS� Q2FY2014 results ahead of estimates on account of lower material cost: Apollo Tyres

Ltd (ATL)’s Q2FY2014 revenues at Rs3,433.5 crore were in line with our estimates.However, a reduction in the material cost due to lower rubber prices boosted theoperating performance during the quarter. ATL reported a margin of 12.3%, which is300 basis points ahead of our estimate. A lower than expected taxation further boostedthe profit. ATL reported a profit after tax (PAT) of Rs219.5 crore, which is significantlyahead of our estimate of Rs115.4 crore.

� Demand pressure to sustain in near term: The demand in the domestic as well as theSouth African market, which together constitute about 70% of the overall revenues ofthe company, is expected to remain subdued. Sluggish commercial vehicle sales in thedomestic market and weak automotive sales in South Africa would maintain the pressureon the demand.

� Raw material outlook stable; margin improvement to sustain: ATL expects the rawmaterial cost to stabilise at the current levels. We expect the margin to sustain at higherlevels on account of the benign raw material prices.

� Valuation—upgraded to Buy on earnings upgrades and lower probability of CooperTire acquisition: We have fine-tuned our earnings estimates for FY2014 and FY2015 tofactor in the margin improvement achieved on the back of the subdued raw materialprices. The proposal to acquire Cooper Tire had led to a sharp contraction in the valuationmultiple for ATL. Moreover, the valuation gap between ATL and its peers like Ceat hasnarrowed down significantly. However, given the lower probability of the Cooper Tiredeal going through, we have revised the price target for ATL to Rs86 at 5.5x (price/earnings multiple of FY2015E earnings) and upgrade the recommendation to Buy.�

holding or having a postition in the companies mentioned in the article.For detailed report, please visit the Research section of our website, sharekhan.com.

Price target revised to Rs314COMPANY DETAILS

Price target: Rs314

BSE code: 524804

NSE code: AUROPHARMA

Sharekhan code: AUROPHARMA

(%) 1m 3m 6m 12m

Absolute 14.1 50.9 23.0 36.9

Relative to Sensex 8.9 34.8 15.9 22.3

PRICE PERFORMANCE

BUY CMP: RS268 NOVEMBER 11, 2013AUROBINDO PHARMA

RESULT HIGHLIGHTS� Bumper Q2FY2014: Aurobindo Pharma (Aurobindo) reported a 27.6% Y-o-Y rise in

net sales to Rs1,914 crore in Q2FY2014 on the back of strong sales in the USA (up72% YoY) and healthy sales of active pharmaceutical ingredients (APIs) related tosemi-synthetic penicillin (SSP) and anti-retroviral drugs (ARV), which grew by 32%YoY and 27% YoY respectively. Though a favourable currency did play a positiverole, but the base business itself grew in the key markets like the USA, where thecompany witnessed expansion in market share of its key products. The operating profitmargin (OPM) surprised us positively with an expansion of 622 basis points YoY to22.9% during the quarter. The net profit excluding the foreign exchange (forex) lossrose by 189.4% YoY to Rs303 crore during the quarter which is significantly betterthan our estimate. However, including the forex of loss of Rs68.3 crore (verses a forexgain of Rs117.7 crore in Q2FY2013) the reported net profit showed an expansion of5.6% YoY to Rs235 crore.

� We revise earnings estimates and price target to Rs314; maintain Buy: The managementis confident of achieving a revenue growth of over 20% in the base business while theEBIDTA margin is likely to improve to 20% in FY2014 from 15% in FY2013. Werevise our earnings estimates up by 28% and 18% for FY2014 and FY2015 respectively.Accordingly, our price target stands revised up by 18% to Rs314 (10x EPS for FY2015).We maintain our Buy rating on the stock.�

STOCK UPDATEEQUITY FUNDAMENTALS

Promoters45%

Govt2%

Foreign33%

Non promoter corp5%

Institutions2%

Public & Others13%

Promoters54%

Institutions12%

Foreign20%

Public and others10%

Upgraded to BuyCOMPANY DETAILS

Price target: Rs395

BSE code: 532454

NSE code: BHARTIARTL

Sharekhan code: BHARTIARTL

(%) 1m 3m 6m 12m

Absolute 2.0 -1.0 11.8 14.0

Relative to Sensex 3.6 -6.0 7.2 -1.5

PRICE PERFORMANCE

BUY CMP: RS343 NOVEMBER 20, 2013BHARTI AIRTEL

RESULT HIGHLIGHTS� Stock correction provides opportunity: Since our last update on Bharti Airtel published

on October 30, 2013, the stock has declined by around 5% and currently providesaround 15% upside to our price target of Rs395. We believe that the market has punishedthe company for its poor performance in Africa and the high dollar-denominated loansin its balance sheet. We believe the concerns are overdone and that going forward theoperations in Africa are likely to stabilise and grow, albeit at a lower pace as againstthe level of high double-digit growth envisaged by the management earlier.

� Upgraded to Buy: Taking cognisance of the improving business fundamentals, thereceding regulatory roadblocks and the recent price correction, we upgrade our ratingon Bharti Airtel from Hold to Buy, maintaining our price target of Rs395. Our pricetarget provides an upside of about 15% from the current levels. At the current marketprice the stock is trading at FY2015E enterprise value/earnings before interest, tax,depreciation and amortisation of 6.9x.�

Upgraded to Buy on strong Q2 results andimproving outlook for subsidiaries

COMPANY DETAILS

Price target: Rs450

BSE code: 500084

NSE code: CESC

Sharekhan code: CESC

(%) 1m 3m 6m 12m

Absolute 15.9 23.8 30.1 45.9

PRICE PERFORMANCE

BUY CMP: RS391 NOVEMBER 12, 2013CESC

RESULT HIGHLIGHTS� Results beat estimates on higher tariff; PAT grew by 26%: CESC reported a very healthy

set of numbers for Q2FY2014 and the numbers are much ahead of our as well as theStreet’s estimates. The reported PAT was 23% higher than estimated and sales were16% ahead of our estimate due to an 11% higher than estimated tariff. The benefit ofthe tariff revision also percolated to the bottom line and the net profit grew by 26%YoY and 31% QoQ to Rs171 crore in Q2FY2014.

� Healthy operational performance of subsidiaries: The store-level profitability of Spencer’simproved to 5.1% (against 4.7% in Q2FY2013) along with a healthy same-store salesgrowth of 12.4% YoY in Q2FY2014. Further, First Source Ltd (FSL), in which CESChad acquired a 56.8% stake last year, is doing well. At the end of Q2FY2014 CESClaunched a shopping mall which is fully booked and is expected to earn a net profit ofaround Rs16 crore annually.

� View—upgraded to Buy and price target revised upward: We remain positive on CESCand retain the stock as our top pick in the utility space due to the steady improvementin its retail subsidiary. We like the way the FSL acquisition is shaping up, which islikely to add value to the parent company sooner or later. Hence, we have incorporatedFSL in our sum-of-the-parts valuation and revised our price target to Rs450 from Rs385earlier and upgraded the recommendation from Hold to Buy.�

STOCK UPDATE EQUITY FUNDAMENTALS

Promoters52%

Foreign21%

Institutions18%

Others9%

Institutions9%

Promoters65%

Foreign21%

Public & Others1%

Price target: Rs110

52-week high/low: Rs126/72

BSE code: 500093

NSE code: CROMPGREAVE

Sharekhan code: CROMPGREAVE

(%) 1m 3m 6m 12m

Absolute 14.1 21.9 9.7 -5.3

Relative to Sensex 8.9 8.9 3.4 -15.3

PRICE PERFORMANCE

HOLD CMP: RS105 NOVEMBER 11, 2013CROMPTON GREAVES

RESULT HIGHLIGHTS� Reported numbers largely in line with estimates; gradual recovery in international

operation continues: For Q2FY2014 Crompton Greaves Ltd (CGL) reported slightlybetter numbers at the operating level compared with our estimate, with a tad highermargin of 5%. Though a higher other income supported the operating performance,but due to higher than estimated depreciation (includes a forex impact of around Rs9crore) and tax outgo, the consolidated profit after tax was 7% lower than our estimate.We would like to highlight that the international subsidiaries reported a profit at theoperating level after four quarters, as the operation in Hungary is stable now; however,the recovery in the other subsidiaries is likely to be slower than expected.

� View—turnaround of subsidiaries at net level remains critical; retain Hold: Themanagement retained its top line guidance of a double-digit growth in FY2014 andsounded optimistic regarding an improving market condition in Europe leading to animprovement in the profitability of the international subsidiaries by the end of theyear. In our view, though the international subsidiaries moving to the profit zone at theoperating level after four quarters is a positive signal, but the likely continuation of thelosses of the US and Canadian subsidiaries remains a concern among investors. Currentlythe stock is trading at 22x FY2014E and 12x its FY2015E earnings, pricing in thepositive developments. Thus, it is advisable to take advantage of the recent run-up inthe stock price and book partial profits. However, we retain our Hold rating with aprice target of Rs110.�

Price target upgraded to Rs1,265COMPANY DETAILS

BSE code: 532488

NSE code: DIVISLAB

Sharekhan code: DIVISLAB

(%) 1m 3m 6m 12m

Absolute -4.7 5.8 -7.8 -12.4

Relative to Sensex -9.0 -5.5 -13.1 -21.8

PRICE PERFORMANCE

BUY CMP: RS1,102 NOVEMBER 11, 2013DIVI'S LABORATORIES

RESULT HIGHLIGHTS� Q2FY2014 performance stronger than expected: Riding on favourable currency

movement and an uptick in the contract research and manufacturing services (CRAMS)business, Divi’s Laboratories (Divi’s) has reported a 19.7% Y-o-Y rise in net revenuesto Rs566 crore in Q2FY2014. Its operating profit jumped by 470 basis points YoY to43.8% in the same period. The adjusted net profit expanded by 25.2% YoY to Rs174crore. The company provided Rs31.2 crore for foreign exchange (forex) gains duringthe quarter as compared with a forex loss of Rs20.8 crore in Q2FY2013. This resultedin the reported net profit jumping by 73.7% YoY to Rs204.9 crore. The adjusted netprofit is 27% higher than our estimate of Rs136 crore, primarily due to a better thanexpected operating profit margin (OPM).

� Outlook remains strong—we fine-tune estimates and upgrade price target to Rs1,265:After witnessing a weak performance in the previous two quarters, the company seemsto have bottomed out. Though the benefits arising out of the depreciation of the rupeeagainst the major international currencies may not sustain, but we believe animprovement in the product mix (a higher proportion of revenues from the CRAMSsegment) and the commercialisation of the additional production blocks (expected inFY2015) would help Divi’s achieve a sustainable growth. Taking our cues from theH1FY2014 performance, we have revised our earnings estimates upwards by 7% and2.8% for FY2014 and FY2015 respectively. Accordingly, our price target standsupgraded to Rs1,265, which implies 19x FY2015E earnings. We maintain our Buyrating on the stock.�

Foreign17%Promoters

Institutions13%

11%Public and

others8%

Promoters42%

FII17%

DII24%

Others17%

Price target revised to Rs4,886COMPANY DETAILS

52 week high/low: Rs6,020/2,980

NSE volume (no. of shares): 29,577

BSE code: 500676

NSE code: GSKCONS

Sharekhan code: GSKCONS

(%) 1m 3m 6m 12m

Absolute 9.9 17.6 17.6 57.2

PRICE PERFORMANCE

HOLD CMP: RS4,677 NOVEMBER 7, 2013GLAXOSMITHKLINE CONSUMER HEALTHCARE

RESULT HIGHLIGHTS� Operating performance largely in line with expectations, bottom line grows in mid

teens on higher non-core income: GSK Consumer posted a decent performance inQ3CY2013 with the revenues growing by 17.4% and the PAT growing by 14% YoY.The highlight of the quarter was a 12% growth YoY in the company’s sales volume(domestic volume grew by 10%) which was ahead of our as well as the Street’sexpectations for the quarter. Horlicks and Boost registered a value growth of 16%YoY (a volume growth of 9.7% YoY) and 19% YoY (volume growth of 11.6% YoY)respectively in Q3CY2013. The packaged foods segment delivered a stellar performancewith a 24% Y-o-Y value growth while Horlicks Oats improved its ranking to two fromthree earlier in the Indian market. The exports grew strong by 50% YoY while CSD’ssales grew by 30% YoY on account of a low base of Q3CY2012. The strategic sourcingof key raw materials and renewed focus on cost control helped the company to maintainthe GPM at 62.9% despite an increase in the prices of the key agri-inputs.

� Maintained Hold due to premium valuation: The company has changed its financialyear end from December 2013 to March 2014. Accordingly, we have incorporated 15months’ numbers for FY2014 and introduced our earnings estimate for FY2015 in thisnote. We now value the stock on FY2015 earnings estimate. As a result, our pricetarget has also been revised to Rs4,886 (valued at 32x FY2015E EPS of Rs152.7). Dueto limited upside from the current level we maintain our Hold recommendation on thestock. At the current market price the stock trades 30.6x its FY2015E EPS of Rs 152.7.�

Price target revised to Rs201; Buy maintainedCOMPANY DETAILS

Price target: Rs201

BSE code: 533177

NSE code: IL&FSTRANS

Sharekhan code: IL&FSTRANS

(%) 1m 3m 6m 12m

Absolute 2.0 -9.4 -33.2 -35.6

Relative to Sensex 3.1 -15.6 -34.7 -41.6

PRICE PERFORMANCE

BUY CMP: RS111 NOVEMBER 13, 2013IL&FS TRANSPORTATION NETWORKS

RESULT HIGHLIGHTS� Revenues lower than expected due to lower construction income: In Q2FY2014, the

consolidated revenues of IL&FS Transportation Networks Ltd (ITNL) declined by2.2% YoY to Rs1,341 crore led by lower than expected construction revenues. Theconstruction revenues declined by 19.9% YoY to Rs737 crore. However, the revenuesfrom the operational build-operate-transfer (BOT) assets grew at a robust rate of 22%.

� Favourable revenue mix boosts margins: The operating profit margin (OPM) improvedby 419 basis points YoY to 37.2%, which was higher than our estimate. Consequently,the EBITDA grew by 10.2% YoY to Rs499.1 crore.

� Decline in PBT on account of a surge in interest and depreciation charges, and a lowerother income: Though the company reported an increase in the OPM, but a huge surgein the interest charge (up 29.3% YoY) and depreciation charge (up 54.6% YoY) coupledwith a decrease in the other income (down 26.7% YoY) led to a 31.1% decline YoY inthe profit before tax to Rs135.5 crore.

� Estimates revised downwards for FY2014 and FY2015: We have revised our net salesestimates for FY2014 and FY2015 downwards after factoring in the lower constructionrevenues reported for Q2FY2014. Further, our net profit estimates for FY2014 andFY2015 stand revised downwards.

� Maintain Buy with a revised price target of Rs201: Our sum-of-the-parts based pricetarget has been revised downwards to Rs201. We have maintained our Buy rating onthe stock.�

Promoters73%

Public & others21%

Institutions3%

Promoters72%

FIIs12%

Domestic institutions

Others15%

Price target: Rs65

BSE code: 530005

NSE code: INDIACEM

Sharekhan code: INDIACEM

(%) 1m 3m 6m 12m

Absolute 8.3 27.9 -33.0 -39.9

PRICE PERFORMANCE

HOLD CMP: RS53 NOVEMBER 7, 2013INDIA CEMENTS

RESULT HIGHLIGHTS� Unfavourable demand environment affects revenues: In Q2FY2014 the net sales of

India Cements declined by 3.3% year on year (YoY) to Rs1,086 crore. The revenuesfrom the cement division declined by 8% YoY to Rs1,010.2 crore largely on accountof a decline in the volume (down 2.8%) and a lower blended cement realisation (down5%) during the quarter. The realisation declined on account of a sharp correction incement prices in the southern market in July 2013 due to poor offtake of cement.

� Lower realisation along with higher other expenses dents margin: On the margin front,an 8% correction in the average cement realisation coupled with a 9% increase in thecost of production YoY to Rs3,928 per tonne resulted in a 651-basis-point contractionin the operating profit margin (OPM) to 11.7%. The company posted a loss of Rs23crore for the quarter which includes foreign exchange (forex) translation charges to thetune of Rs23.6 crore (against a forex gain of Rs10 crore during Q2FY2013). Adjustingfor the same, the net profit stands at Rs1.1 crore (down 98.2% YoY), which is muchlower than our as well as the Street’s expectations.

� Hold maintained with a revised price target of Rs65: We are downgrading our earningsestimates for FY2014 and FY2015 mainly to incorporate the impact of the sluggishdemand environment in the southern market and the increased cost of production.Consequently, the revised earnings per share estimates for FY2014 and FY2015 are nowRs3.7 and Rs6.9 respectively. Further, a likely increase in the supply from the upcomingcapacity could put downward pressure on cement prices. Therefore, we have revised ourprice target downwards to Rs65 and maintained our Hold recommendation on the stock.�

Price target: Rs110

BSE code: 532947

NSE code: IRB

Sharekhan code: IRB

(%) 1m 3m 6m 12m

Absolute 5.7 13.2 -26.5 -31.0

PRICE PERFORMANCE

BUY CMP: RS88 NOVEMBER 14, 2013IRB INFRASTRUCTURE DEVELOPERS

RESULT HIGHLIGHTS� Construction and BOT segments drive revenues; higher interest and depreciation charges

affect profitability: In Q2FY2014, IRB Infrastructure Developers (IRB)’s consolidatedrevenues grew by 11.1% YoY to Rs939 crore led by a Y-o-Y growth of 11.5% and10.2% in the construction and build-own-transfer (BOT) segments respectively. Theoperating profit margin (OPM) remained flat at 44.9% as against 45.0% in Q2FY2013.During the quarter, the depreciation charge increased by 12.0% YoY and the interestexpense grew by 19.0% YoY coupled with a higher effective tax rate. Consequently,the consolidated net profit declined by 11.7% to Rs107 crore.

� Construction segment registers a strong performance: The construction vertical posteda growth of 11.5% YoY in revenues to Rs666 crore led by the execution of theAhmedabad-Vadodara, Amritsar-Pathankot and Tumkur-Chitradurga projects.

� BOT division continues its stable performance: The BOT division continued to put upa stable performance with the revenues rising by 10% YoY to Rs273 crore. The growthwas largely led by toll revenues in the Surat-Dahisar project.

� Estimates for FY2014 and FY2015 revised downwards: We have revised our estimatesfor FY2014 and FY2015 downwards after factoring in the lower than expected tollcollection and a lower construction income.

� Maintain Buy with revised price target of Rs110: On account of a revision in the trafficgrowth in a couple of BOT projects and a lower construction income, we have loweredour price target to Rs110. We maintain our Buy recommendation on the stock.�

MF & FI36%

Foreign13%

Promoter28%

Public & others23%

FII24%

Promoters62%

Public & others10%

Institutions4%

Downgraded to Reduce; balance sheet concernsto weigh on valuation

COMPANY DETAILS

Price target: Rs40

BSE code: 532532

NSE code: JPASSOCIAT

Sharekhan code: JPASSOCIAT

(%) 1m 3m 6m 12m

Absolute 14.2 60.9 -37.3 -49.5

PRICE PERFORMANCE

REDUCE CMP: RS48 NOVEMBER 20, 2013JAIPRAKASH ASSOCIATES

RESULT HIGHLIGHTS� Q2 results driven by construction business: JP Associates Ltd (JAL) reported a net sales

growth of 5.6% to Rs3,149 crore, which was primarily driven by the constructiondivision (revenues up 12.6% to Rs1,453 crore) with flattish cement revenues and adecline in the revenues of the power division (down 17.8%). In addition to the mutedrevenue growth, the pressure on the margin and higher interest charge led to a declineof 47% in the adjusted earnings.

� Ballooning debt could trigger additional distress actions: In the last quarter, to deleveragethe balance sheet the company sold part of its cement business at a steep discount to thedeals done in the cement sector. Given the huge debt burden of Rs25,000 crore on itsstand-alone balance sheet, we would not be surprised if the company resorts to moresimilar actions and exits some real estate or power assets at a discount to the fair value.

� Outlook—remains muted for all its business segments; earnings estimate downgradedwith scope for further downgrades: The highly stretched balance sheet in the prevailingtough business environment would continue to create uncertainty and weigh on itsvaluations. Moreover, the outlook for its key businesses of construction, real estateand power remain challenging prompting us to revise downwards the estimates forFY2014 and FY2015.

� View—recent steep appreciation offers opportunity to exit: We remain cautious anddowngrade our rating on the stock to Reduce with a price target of Rs40.�

Price target revised to Rs1,046; maintain BuyCOMPANY DETAILS

BSE code: 500520

NSE code: M&M

Sharekhan code: M&M

(%) 1m 3m 6m 12m

Absolute 0.8 2.2 -7.7 -1.4

PRICE PERFORMANCE

BUY CMP: RS895 NOVEMBER 13, 2013MAHINDRA & MAHINDRA

KEY POINTS� Q2FY2014 results beat estimates due to strong operating performance: The Q2FY2014

results of Mahindra and Mahindra (M&M) were ahead of our as well as the Street’sestimates on the back of a robust operating performance. The revenues at Rs8,660.4crore were in line with estimate. However, the operating profit margin (OPM) at 14.5%was ahead of our estimate of 12.6%. Cost-control initiatives, subdued commodityprices and a richer product mix led to the better than expected operating performance.Lower taxation (tax/profit before tax [PBT] at 21.2%) boosted the profitability. M&Mreported a profit after tax (PAT) of Rs1,027.6 crore, which was significantly above ourestimate of Rs842 crore.

� Ssangyong Motors reports profit for the second consecutive quarter: The Koreansubsidiary of Mahindra & Mahindra (M&M), Ssangyong Motor Company (SYMC),reported another quarter of profits and sustained the turnaround in its operations.During Q3CY2013, SYMC reported profit of 1.5 billion Korean Won as compared toa loss of 13.7 billion Korean Won in Q3CY2012.

� Valuation—M&M remains our preferred pick with a price target of Rs1,122: M&M’sfarm division would continue to drive the volume growth in FY2014 and beyond, withthe expectations of a revival in the automobile segment also in FY2015. The subsidiaries,namely SYMC and Tech Mahindra, have also shown a marked improvement in theirperformance and add to the overall valuation of the consolidated entity. We retain ourBuy rating on M&M with a revised price target of Rs1,122. The stock is our preferredpick in the automotive space.�

Institutions17%

Bodies corporate

Foreign38%

Promoters25%

Public & Others14%

FII25%

Institutions10%

Public & others20%

Promoters45%

Strong performance in tough environmentCOMPANY DETAILS

Price target: Rs296

BSE code: 500271

NSE code: MAX

Sharekhan code: MAX

(%) 1m 3m 6m 12m

Absolute 4.5 5.8 -14.0 -15.8

Relative to Sensex -0.2 -5.5 -18.9 -24.8

PRICE PERFORMANCE

BUY CMP: RS186 NOVEMBER 11, 2013MAX INDIA

RESULT HIGHLIGHTS� Max India’s APE saw a growth of 13.0% YoY compared with a 7% growth recorded

by the other private insurance players in Q2FY2014. As a result, the GWP grew by7.8% YoY to Rs1,679 crore. The operating expense ratio also declined to 18.3%,contributing a 19.3% Y-o-Y growth to the shareholders’ PBT.

� In Q2FY2014, Max Healthcare’s revenues were up by 28.2% YoY due to an increasein the number of operational beds and a rise in the average occupancy. The EBITDAgrew substantially to Rs31 crore as the EBITDA drag from the new hospitals declinedsignificantly.

� Max Bupa registered a GWP of Rs71 crore in Q2FY2014. The conservation ratioimproved to 83%. The company has tied up with Deutsche Bank for bank assuranceand is looking forward to more such tie-ups to boost sales.

� MSPs’ revenues increased by 8.3% YoY while its PBT increased to Rs5.2 crore. Anincrease in the prices contributed to the jump in the revenues and margins during thequarter.

Valuations and outlook: In the healthcare business, the company has invested in expandingits facilities which will increase its profitability. The life insurance business is alreadyprofitable with a high solvency ratio and the company has a treasury corpus of Rs340crore, which should be sufficient to fund the healthcare business, health insurance businessand the other businesses. We maintain our SOTP based price target of Rs296 and Buyrating on the stock.�

Retain Buy on attractive dividend yield and valuationCOMPANY DETAILS

Price target: Rs650

BSE code: 533106

NSE code: OIL

Sharekhan code: OIL

(%) 1m 3m 6m 12m

Absolute -0.3 -2.1 -16.2 4.1

PRICE PERFORMANCE

BUY CMP: RS460 NOVEMBER 13, 2013OIL INDIA

RESULT HIGHLIGHTS� Operating performance largely in line with expectations; profit dented by higher

depreciation charge: In Q2FY2014, Oil India Ltd (OIL) reported a net sales growth of12.6% YoY, which is in line with our estimate, and an EBITDA growth of 8% YoY,which is ahead of expectations. The operating performance was driven by a better netrealisation (aided by a weaker rupee and a stable subsidy share of under-recoveries at13.2%) and a healthy sequential improvement in the production volume. However,the higher than expected depreciation, depletion and amortisation (DD&A) cost ofRs465 crore (against an estimate of Rs281 crore) pushed down the profit after tax(PAT) by 6% in Q2FY2014. Due to a sharp rise in the provisioning for dry wells, theDD&A cost moved up by 82% YoY and 75% QoQ during Q2FY2014.

� Production of oil and gas to stabilise: The company’s oil production fell by 5% YoYbecause of bandh and blockades in Assam but improved by 1.5% QoQ. Moreover, ithas risen in the past few months after the weak production figures in July this year. Theproduction of natural gas also improved sequentially by 1.4% to 0.67 billion cubicmetre, though it remained lower by 3.6% YoY.

� Retain Buy; attractive valuation and dividend yield of 6%: We remain positive on thestock due to the company’s huge reserves and a healthy reserve/replacement ratio whichindicates stable revenue visibility. Moreover, favourable policy actions (gradual de-regulation of diesel price and revision in the price of natural gas) would play as positivetriggers for the stock. We have yet to incorporate the likely benefit; which could providefurther upside to our earnings estimates. We retain our Buy recommendation and pricetarget of Rs650 (average of PE and EV-EBITDA method). Also, at the current price thestock provides a very healthy dividend yield of around 6%.�

Public & others15%

FII10%

Promoters68%

Promoter39%

Foreign28%

MF & FI24%

Public & others

Maintain Hold, with a revised price target of Rs950COMPANY DETAILS

Price target: Rs950

BSE code: 533179

NSE code: PERSISTENT

Sharekhan code: PERSISTENT

(%) 1m 3m 6m 12m

Absolute 11.6 59.3 75.3 89.6

PRICE PERFORMANCE

HOLD CMP: RS872 NOVEMBER 27, 2013PERSISTENT SYSTEMS

We recently interacted with Rohit Kamat, chief financial officer of Persistent Systems Ltd(PSL), to understand the current state of the business environment and also understand theupside opportunity to the margin profile of the company in the mid to long-term period.

� The management’s comments on the demand environment remain positive, backed bya secular cyclical recovery in its largest geography, a larger acceptability of emergingtechnologies (SMAC: social, mobility, cloud and analytics; more so on cloud and mobility[majority of PSL’s SMAC revenues are attained from these two areas]) and strongmomentum in the intellectual property (IP) led revenues. These factors will help PSL tocomfortably surpass the upper end of the Nasscom growth expectation (14%) forFY2014. More importantly, the management has more than 60% business visibilityfor FY2015, given the confidence about the spending of its larger clients.

� The management indicated at a margin corridor of 24-25% for the next two quarters.The company will continue to maintain the best margin profile in the mid-capinformation technology space.

� In the last one year the price-earnings ratio has already been re-rated from 8.6x to 12xcurrently, which captures most of the positives. In view of our interaction with themanagement on the earnings visibility, we have increased our earnings estimates forFY2014 and FY2015, and also introduced our FY2016 estimate.

� Considering the limited material upside in the near to medium term, we maintain ourHold rating on the stock and roll over our target PE multiple to November 2014 arrivingat a revised 12-month price target of Rs950.�

Positive triggers unfolding; Buy withrevised price target of Rs70

COMPANY DETAILS

Price target: Rs70

BSE code: 532524

NSE code: PTC

Sharekhan code: PTC

(%) 1m 3m 6m 12m

Absolute 4.9 26.6 -2.6 -13.5

PRICE PERFORMANCE

BUY CMP: RS58 NOVEMBER 18, 2013PTC INDIA

RESULT HIGHLIGHTS� Q2 results much ahead of expectations on better margin and hefty dividend income:

PTC India (PTC) reported a stellar set of numbers for Q2FY2014 recording a netprofit growth of 39% YoY and 109% QoQ, much ahead of our as well as the Street’sexpectations. The operating profit of Rs68 crore was significantly above our estimateof Rs44 crore due to a better trading margin earned (7 paise per unit against ourestimate of 6 paise per unit) and lower than estimated other expenses (around Rs9crore lower). Below the operating level, it reported other income of Rs19 crore, whichis better than our estimate, as the company received dividend to the tune of Rs13.5crore from PTC Financial Services (PTC Financial; a subsidiary) in this quarter.Consequently, the profit after tax was Rs62 crore against our estimate of Rs35 crore.

� Revised upward estimates and price target; maintain Buy: In view of better than estimatedperformance in the first half, we have revised upward our net profit estimates forFY2014 and FY2015 by 17% and 6% respectively. The receipt of significant receivablesfrom the Uttar Pradesh State Electricity Board would result in a significant jump in theother income. Hence, we remain positive on the stock and retain our Buy rating on it.Based on the upward revision in our net profit estimates, we have raised our sum-of-the-parts based price target to Rs70 per share from Rs65 earlier.�

Promoters38%

Institutions17%

Foreign21%

Public & Others23%

FII16%

DII46%

Others22%

Promoters16%

Earnings remained stressed thoughslippages moderated

COMPANY DETAILS

52 week high/low: Rs2,550/1,453

BSE code: 500112

NSE code: SBIN

Sharekhan code: SBIN

(%) 1m 3m 6m 12m

Absolute 1.2 4.2 -26.0 -22.1

PRICE PERFORMANCE

HOLD CMP: RS1,698 NOVEMBER 13, 2013STATE BANK OF INDIA

RESULT HIGHLIGHTS� SBI’s Q2FY2014 results came in below our estimates as its net profit declined to Rs2,375

crore led by a sharp increase in the provisions. However, the reversal of Rs302 crore ofprovisions and a lower tax rate cushioned the profits.

� The NII grew by 11.6% YoY, in line with our estimate. The NIM recovered from3.44% in Q1FY2014 to 3.48% in Q2FY2014 contributed by an improvement in theyield on advances.

� The advances grew by 19% YoY in Q2FY2014 but the CASA ratio declined to 43.58%from 44.6% in Q1FY2014.

� The slippages moderated to Rs8,365 crore while the bank restructured Rs8,585 croreof loans.

� The non-interest income declined by 2.1% YoY due to a slower growth in the feeincome and forex income. The bank opted to amortise the depreciation on investments(total Rs2,103.3 crore) over FY2014 and provided Rs701.1 crore in Q2FY2014.

Valuation and outlook: Given the weak economic environment we believe the bank willcontinue to face challenges in improving its operating performance and in maintaining itsasset quality. In addition, the carry-over of investment losses, higher opex and provisioningon NPAs will affect the earnings growth. We largely maintain our estimates and SOTP-based price target of Rs1,950 on the stock. We maintain our Hold rating on the bank as itcontinues to face asset quality challenges and its earnings profile has weakened.�

Price target: Rs166

BSE code: 500800

NSE code: TATAGLOBAL

Sharekhan code: TATAGLOBAL

(%) 1m 3m 6m 12m

Absolute -3.4 6.2 6.4 -6.9

Relative to Sensex -2.4 -1.1 4.0 -15.7

PRICE PERFORMANCE

BUY CMP: RS144 NOVEMBER 13, 2013TATA GLOBAL BEVERAGES

RESULT HIGHLIGHTS� Revenue growth moderated to low single digits: The consolidated revenues of TGBL

grew by 3.7% YoY to Rs1,933.5 crore in Q2FY2014. The lower growth can beattributed to a marginal decline in the consolidated revenues of Tata Coffee and TGBL’sunderperformance in some of the key international markets, such as Russia and theUK, during the quarter. Also, the restructuring of the Canadian business and highersales of coffee pods affected the revenue growth by 1-2% in Q2FY2014.

� Gain from benign input cost invested in advertisements: The raw tea and coffee pricesremained benign in Q2FY2014 which resulted in a 141-basis-point Y-o-Y improvementin the GPM to 51.2%. TGBL carried out incremental one-time advertisement spendingof Rs37 crore towards launches/relaunches in some of the key markets. This alongwith a lower sales growth led the OPM to decline by 48 basis points YoY to 8.2% andthe operating profit declined by 2.1% YoY to Rs157.9 crore in Q2FY2014. This alongwith a lower other income, higher interest cost and higher incidence of tax led to asignificant decline of 46% YoY in the adjusted net profit to Rs74.1 crore.

� Retained Buy because of decent upside: We have revised downwards our earningsestimates for FY2014 and FY2015 by 7% and 5% respectively to factor in the lowsingle-digit growth in H1FY2014. In line with the downward revision in our earningsestimates our revised price target stands at Rs166. In view of the decent upside and thelong-term growth prospects of the company, we retain our Buy recommendation onthe stock. At the current market price the stock is trading at 20.2x its FY2014E EPS ofRs7.2 and 17.4x its FY2015E EPS of Rs8.3.�

Promoter62%

MF & FI18%

Foreign9%

Public & others11%

Promoters35%

Foreign & Institutions

Others25%

Price target: Rs30

Market cap: Rs169 cr

BSE code: 532746

NSE code: UNITY

Sharekhan code: UNITY

(%) 1m 3m 6m 12m

Absolute 4.4 13.9 -24.5 -48.0

PRICE PERFORMANCE

BUY CMP: RS23 NOVEMBER 14, 2013UNITY INFRAPROJECTS

RESULT HIGHLIGHTS� Q2 much better than Q1; but performance muted YoY: In Q2FY2014, the net sales of

Unity Infraprojects (Unity) remained almost flat YoY at Rs402 crore, which is largelyin line with expectations. The operating profit margin (OPM) improved by 335 basispoints QoQ (but close to 180 basis points lower than the Q2FY2013 margin) to 15.8%,which is as per our expectation.

� Higher interest expenditure dents PAT: Like most construction companies, the interestcost of Unity continues to bloat with a growth of 20.2% YoY and 25.8% QoQ toRs49.1 crore in Q2FY2014. Further, the effective tax rate for the quarter stood at45.3% against 36.8% in Q2FY2013 and 33.7% in Q1FY2014 leading to a 39.0%decline in the profit after tax to Rs10.1 crore.

� Order book drops sequentially; L1 status improves: During FY2013, Unity had baggedfresh orders worth Rs1,444 crore. This along with the orders worth Rs808 crore securedin H1FY2014 took the total order book to a respectable position of Rs3,508 crore asof November 2013, which is 1.7x its FY2013 revenues.

� Earnings estimates for FY2014 and FY2015 revised downwards: We have revised ourearnings estimates downwards for FY2014 and FY2015 to factor in the lower executionof projects in the current macro-economic environment.

� Maintain Buy with a revised price target of Rs30: We maintain our Buy recommendationon the stock with a revised price target of Rs30 (4x EV/EBITDA on FY2015 estimates).�

Downgraded to Hold with a revised price target of Rs626COMPANY DETAILS

Price target: Rs626

BSE code: 531335

NSE code: ZYDUSWELL

Sharekhan code: ZYDUSWELL

(%) 1m 3m 6m 12m

Absolute 6.2 -10.0 26.9 22.3

Relative to Sensex 0.7 -18.0 16.8 7.7

PRICE PERFORMANCE

HOLD CMP: RS565 NOVEMBER 6, 2013ZYDUS WELLNESS

RESULT HIGHLIGHTS� Revenue growth moderates to single digits: In Q2FY2014 the net sales of Zydus Wellness

grew by 6.3% YoY to Rs97.1 crore. The revenue growth moderated to single digits mainlyon account of sustained pressure on the discretionary categories (largely personal care) dueto persistent inflationary pressure. However, the management has indicated that it hasenhanced focus on regaining the double-digit revenue growth trajectory by undertakingadequate media and promotional activities and expanding the distribution reach.

� GPM remains flat: The GPM stood almost flat on a Y-o-Y basis at 69.6% in Q2FY2014,largely on account of benign input prices and a better revenue mix during the quarter.Going ahead, the GPM won’t see any significant deceleration as the company is wellstocked with raw materials till March 2014. The third and fourth quarters of everyfiscal are seasonally strong for Nutralite sales. Hence, we might see a change in therevenue mix that would result in a sequential drop in the GPM.

� OPM to sustain in the 23-24% range: The higher advertisement spending and otherexpenditures resulted in a 76-basis-point drop in the OPM to 26.1% in Q2FY2014.We expect the OPM to sustain in the range of 23-24% in the coming years.

Downgraded to Hold: We have marginally revised downwards our earnings estimates forFY2014 and FY2015 to factor in the lower than expected sales of the Everyuth range ofproducts. In line with the downward revision in the earning estimates our price target hasbeen revised to Rs626. We have downgraded our rating from Buy to Hold on the stock. Atthe current market price the stock is trading at 20.9x FY2014E EPS of Rs26.9 and 17.0xFY2015E EPS of Rs33.0.�

Promoters63%

Institutions6%

Public & others29%

FIIs8%

Promoters73%

Domestic institutions

Others11%

Q2FY2014 earnings reviewSHAREKHAN SPECIAL NOVEMBER 22, 2013

KEY POINTS� Aggregate earnings growth ahead of expectations: In

Q2FY2014, the aggregate earnings of the Sensex companiesgrew by 9.9% year on year (YoY; 12.3% ex energy companies),which is ahead of expectations. Aided by currency gains and astellar performance from sector heavyweights, automobiles(Maruti Suzuki [Maruti], Mahindra and Mahindra [M&M],Tata Motors), pharmaceuticals (pharma; Sun PharmaceuticalIndustries [Sun], Dr Reddy’s Laboratories) and informationtechnology (IT) services (Tata Consultancy Services [TCS],Wipro), largely contributed to the outperformance at theaggregate level. In addition, Larsen and Toubro (L&T) and TataSteel surprised positively during the quarter.

� Disappointment from certain banking, capital goods and metalcompanies: On the negative side, the biggest disappointment inearnings growth was reported by Bharat Heavy Electricals Ltd(BHEL), State Bank of India (SBI), Bharti Airtel, HindalcoIndustries (Hindalco), Coal India Ltd (CIL) and Jindal Steeland Power Ltd (JSPL). However, SBI received a positive responsefrom the market due to improving data points on the assetquality front. Similarly, the operational metrics of Bharti Airtel’sIndian operations more than made up for the weaker thanexpected growth in the company’s earnings (partly due to foreignexchange [forex] related non-cash provisions).

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding

or having a position in the companies mentioned in the article.

SHAREKHAN SPECIAL EQUITY FUNDAMENTALS

� Positive takeaways—pick-up in revenue growth, OPM inchesup; more upgrades than downgrades in consensus estimates:The revenue growth of the Sensex companies was slightly aheadof our estimates as the revenues grew by 14.0% with only twocompanies in the Sensex reporting a decline in revenues. Someof the export-driven sectors like pharma (revenues up 32.5%YoY), IT (revenues up 28.9% YoY) and auto (revenues up22.2% YoY) reported a robust growth in revenues aided by thedepreciation in the rupee. But what’s more encouraging is thefact that the Q2 results season has put a pause on the downgradecycle (for the consensus estimate of Sensex’ earnings). What’smore, the consensus estimates for FY2014 and FY2015 haveinched up in the last four to six weeks.

� Outlook—Q2 results spark hope of better corporate earnings;but re-emergence of inflationary concerns and uncertain globalmacros to weigh on valuations: The better than expected Q2results (even in case of some of the mid-cap companies) haveboosted the possibility of an improving trend in the earningsgrowth going ahead. But inflation and the uncertain globalenvironment would continue to limit any expansion in thevaluation multiples. Currently, the Sensex trades at 14x one-year forward consensus earnings estimate (as per Bloomberg).�

TREND IN SENSEX’ (EX ENERGY) EARNINGS GROWTH—ACTUAL VS ESTIMATE

Source: Company data, Sharekhan Research

EARNINGS GROWTH BY SECTOR (%)

Source: Bloomberg, Sharekhan Research

OUTPERFORMERS UNDERPERFORMERS

SECTOR-WISE CONTRIBUTION TO SENSEX’ EARNINGS GROWTH (%)

Source: Company data, Sharekhan Research

Q2FY 11 Q2FY 12 Q2FY 13 Q2FY 14

Es timated A c tual

Axis Bank, ICICI Bank

Infosys, TCS, Wipro,

Persistent Systems

Maruti Suzuki, Tata Motors

Sun, Lupin, Aurobindo Pharma

KPTL, CESC, PTC India

GSK Consumers, Jyothy Lab, GCPL,

United Phosphorous

PNB, Union Bank, SBI

NIIT Technologies

Ashok Leyland

Cipla, Cadila Health

ITC, Tata Global Beverages

Tata Chemicals

10.59.4

-40.0 -20.0 0.0 20.0 40.0 60.0

Pharma

Pow er

MetalDiversif ied

Energy

Cap. goods

Telecom 9.9

-1.1-0.7-0.40.10.20.60.60.6

Monthly economy reviewSHAREKHAN SPECIAL NOVEMBER 28, 2013

Inflation pressure increases uncertainty over rate hikesRising inflation at both retail and wholesale levels has emerged as amajor macro-economic challenge which could compel the ReserveBank of India (RBI) to raise the rates by another 25 basis points atthe December 18 mid quarter policy review meeting. This alongwith currency volatility (due to expectations of early tapering bythe US Federal Reserve [Fed]) and fiscal deficit concerns has weighedon bond yields, which have rebounded to 8.72% levels (a high of9.1% in November 2013). On the positive side, India’s externalpositioning has improved led by the easing of trade deficit and strongforeign exchange (forex) inflows (from the concessional swapwindow, up to $25 billion had flown in till November 25, 2013).The government is contemplating cutting the planned expenditureby Rs80,000 crore to retain fiscal targets but the softening of theoil prices after the “Iran deal” could also help. Going ahead, theRBI will closely watch the Q2FY2014 gross domestic product(GDP) growth and other data releases (inflation, trade data) to takea call on the rates.

For detailed report, please visit the Research section of our website, sharekhan.com.Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

SHAREKHAN SPECIAL EQUITY FUNDAMENTALS

15.5% compared with 17.7% on October 4, 2013. On the otherhand, the deposit growth, which was lagging the credit growth,has improved to 15.4% contributed by higher term deposits.

� Global: expectations of early tapering cause jitters: The strongemployment data and improved macro numbers in the USAhave fueled expectations of an earlier than expected taperingby the Fed. This has unnerved the global markets andcontributed to depreciation in the domestic currency. However,the “Iran Deal” has led to the softening of crude oil prices andhad a positive impact on the markets.

Upcoming macro-economic data� GDP (Q2FY2014 ) on November 29, 2013

� IIP (for October 2013), trade data (for November 2013) andCPI (for November 2013)

� WPI (for November 2013) on December 16, 2013

� RBI mid-quarter policy review on December 18, 2013C.

Banking stocks outperform market in November 2013After underperforming for the past few months, the BSE Bankexhas marginally outperformed the market, as it declined by 0.02%in November this year as compared with a decline of 1.2% in theSensex in the same month. This was largely due to the beaten-downvaluations of the public sector banks (PSBs) and the better thanexpected Q2FY2014 numbers of some of PSBs (Bank of Baroda,Bank of India, Canara Bank) which raised hope of a recovery in thecoming quarters. Private banks reported better than expectednumbers for the same quarter despite a tough environment.However, asset quality pressure continues due to a slower economicgrowth and margin pressure could persist (due to a rise in the costof funds) which may limit the upside in case of the PSBs.�

SUMMARY OF KEY ECONOMIC DATA

May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

IIP (%) -2.5 -1.8 2.8 0.4 2.0 NA

WPI (%) 4.6 5.2 5.9 7.0 6.5 7.0

GDP (%) - 4.4 - - - -

3M CP rate (%) 8.5 8.4 11.8 12.7 10.0 9.1

10-year G-Sec yield (%) 7.2 7.5 8.2 8.6 8.8 8.6

Trade bal. ($ bn) -20.1 -12.3 -12.6 -10.9 -6.8 -10.6

Forex res. ($ bn) 287.9 284.6 280.2 275.5 276.3 283.0

INR/USD 56.5 59.7 61.1 66.6 62.8 61.4

KEY MACRO-ECONOMIC DATA RELEASES� September IIP grew by 2.0%, short of market estimate: In

September 2013 the Index of Industrial Production (IIP) grewby 2.0% (vs estimate of 3.5%) largely due to a decline in thecapital goods sector (down 6.8%). The August IIP growth figurehas been revised slightly downwards to 0.4% from theprovisional estimate of 0.6%.

� Inflation picks up at both WPI and CPI levels: The WholesalePrice Index (WPI)-based inflation for October 2013 inched upto an eight-month high of 7.0% while the August inflation ratewas revised upwards to 6.99%. Also, the Consumer Price Index(CPI) inflation increased to 10.06% in October from 9.84% inSeptember this year contributed by food inflation.

� Rising exports and dip in imports ease trade deficit: DuringOctober 2013, India’s trade deficit was $10.6 billion, down 47.8%year on year (YoY). This was contributed by an export growthof 13.5% YoY while the imports declined by 14.5% YoY.

� Deposit growth catches up with credit growth: With increasedactivity in the bond market, the credit growth has moderated to

BANKING SECTOR’S PERFORMANCE (AS ON DATE)

Company Absolute Relative1-mth 3-mth 1-mth 3-mth

Bank of India 15.0 52.6 16.4 33.9Punjab National Bank 6.2 14.8 7.6 0.8Kotak Mahindra Bank 6.0 21.9 7.3 7.0Bank of Baroda 2.9 33.3 4.2 17.0Canara Bank 2.8 18.2 4.1 3.7State Bank of India 2.7 16.1 4.0 1.9ICICI Bank 2.0 29.7 3.3 13.9Yes Bank 0.3 51.0 1.5 32.6HDFC Bank -2.8 16.6 -1.6 2.3Federal Bank -3.1 45.4 -1.8 27.6Indusind Bank -3.6 18.4 -2.4 3.9IDBI Bank -4.1 19.7 -2.9 5.1Union Bank of India -5.3 9.1 -4.1 -4.2Axis Bank -5.9 27.4 -4.7 11.9Bankex 0.0 23.1 1.2 8.0Sensex -1.2 13.9 0.0 0.0

mth - month

EQUITY FUNDAMENTALS

Looking beyond challenges

RANBAXY LABORATORIESVIEWPOINT NOVEMBER 21, 2013CMP: RS416

Result highlights

� Worst case seems factored in current prices; time to look at keygrowth elements: Ranbaxy Laboratories (Ranbaxy) haswitnessed a series of challenges in the recent past due to theactions of the US Food and Drug Administration (USFDA) onthree of its India-based facilities which has affected the valuationof its stock. Despite the odds, we see multiple growth triggersfor the company, such as: (1) an improvement in the baseearnings before interest, tax, depreciation and amortisation(EBIDTA) margin (due to lower expenses on remedial measures,as indicated by the management); (2) an uptick in its Indianand African businesses; (3) branded products in the USA likeAbsorica gaining further market share; (4) the performance ofthe newly launched anti-malarial drug Synriam, the newchemical entity (NCE), gaining better traction in India; and (5)an early resolution of the issues related to the facilities in Indiaat Dewas, Paonta Sahib and Mohali.

� Progress on FTF opportunity; court verdict establishesexclusivity rights on Diovan: While hearing a litigation initiatedby Mylan, a US court gave a favourable verdict for Ranbaxyestablishing the exclusivity rights on Diovan despite its inabilityto get the final approval for the abbreviated new drug application(ANDA) from the USFDA within the prescribed time frame.

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding orhaving a postition in the companies mentioned in the article.

Strong show continues, positive bias retained

TECH MAHINDRAVIEWPOINT NOVEMBER 8, 2013CMP: RS1,674

Result highlights

� A strong quarter: Tech Mahindra reported yet another strongquarter with the revenue growth comfortably ahead of theStreet’s estimate. That the company signed thirteen large dealsworth $500 million during the quarter is a pertinent indicationthat the company is making significant progress towardsleveraging its synergies with Satyam Computer Services(Satyam). The robust deal signings not only provide comfortwith regard the revenue visibility, but also indicate that thecompany has achieved the much needed scale to be invited tobidding for large deals. Additionally, the company’s outlookacross verticals, geographies and service lines remains positiveleading us to maintain our positive stance on the company.

� Revenues ahead of estimate; beat peers: Tech Mahindra reporteda 4.7% Q-o-Q (5% in constant-currency terms) revenue growthin dollar terms to $758 million versus the Street’s estimate of

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding orhaving a postition in the companies mentioned in the article.

VIEWPOINT

$746 million. The organic revenue growth was 4.2% while 0.5%growth was inorganic or contributed by the full quarter’sreconciliation of the revenues of Complex IT (a recentacquisition).

� Margin in line with expectation: The company reported a 220-basis-point improvement in the EBITDA margin to 23.3%,which was in line with the Street’s estimate.

� Forex loss and higher tax rates restrict PAT: A higher forex lossand an increase in the effective tax rate restricted the net incomegrowth for the quarter to 4.6% QoQ to Rs718 crore.

� Valuation—retain our positive bias: The stock has already runup by more than 35% in the last three months and is trading at13x FY2014 and 11.5x FY2015 consensus earnings estimates.We maintain our positive bias for Tech Mahindra and expectthe stock to see further upside in the next 12 months.�

This verdict inculcates hopes of Ranbaxy monetising Diovanand other products having exclusivity rights even if the finalapprovals are delayed by the USFDA. The company has a fewfirst-to-file (FTF) opportunities in the USA including Diovan,Valcyte and Nexium, which have the potential to change thecourse of the business for the company. The management ishopeful of capitalising the exclusivity on all three products eventhough three of the India-based facilities remain shut for remedialmeasures.

� Key risks: Apart from the delay in remedial measures at theIndia-based facilities, the key risks for Ranbaxy include: (1)patent challenges on Absorica, (2) volatility in the currency (ithas $740 million outstanding contracts), and (3) delay inapprovals from the US-based Ohm facilities.

� Valuation: The stock is currently trading at 12.8x earnings fromthe base business in FY2014E (considering a 12-month period)which is at a significant discount to Lupin (-32%) and SunPharmaceutical Industries (-46%). We have a positive bias onthe stock, though we don’t have active coverage on it.�

A new cycle begins

� The Sensex has closed above the previous swing’s high andalso formed a new all-time high, which is a very positive signfor the market.

� The index has broken out of a triangular pattern, forming adouble bottom support at around 20137. The momentumindicator is trading in the positive zone and above the zero line.

� The key support would be around 20602 and resistance wouldbe around 22200-23000 levels.

� In the short term, the index is expected to trend up till 22200with reversal around 20840.�

� The Sensex is trading above the 20-weekly moving average(WMA), ie 19937, and is expected to trend up for wave 3.

� According to the Elliott wave theory, the index has completedwaves 1 and 2, and wave 3 has already started for a minimumtarget of 23000.

� The leg on the upside as wave 3 has been confirmed as theindex has formed a new all-time high.

� On the weekly charts, the momentum indicator has given apositive crossover and is trading above the zero line.

� As the index has broken out of a range, it is now expected tocontinue the positive momentum and the strategy should be tobuy on declines with reversal around the 20-WMA, ie 19937.

� The key support would be around 19937 and resistance wouldbe around 22200-23000 levels. �

� On the monthly chart the index is trading above the 21207-15135 range and has formed a new all-time high, whichconfirms a new cycle on the upside.

� The Sensex is trading above the 20-monthly moving average,ie19044, and is expected to form a positive close on the quarterlyand monthly charts.

� The index has taken support at a long-term upward slopingtrend line, which is a very bullish sign for the market.

� The key support would be around 19044-20137 levels andresistance would be around 23000.�

Sensex: daily view

Sensex: weekly view

Sensex: monthly view

Trend Trend reversal Support Resistance Target

Up 19937 19937 23000 23000

Medium term

Trend Trend reversal Support Resistance Target

Up 20840 20840 22200 22200

Short term

EQUITY TECHNICALSTREND & VIEW

26 2September

10 16 23 30 7October

14 21 28 5November

11 18 25 2December

9 16 2

KST (1.62694)

N D 2010 M A M J J A S O N D 2011 M A M J J A S O N D 2012 M A M J J A S O N D 2013 M A M J J A S O N D 2014

10KST (4.21242)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Derivative view: Heading for higher altitudeExtending the gains of the previous Samvat the November seriesstarted the new Samvat 2070 by hitting a new life-time high abovethe mark of 6300. But the market was unable to sustain at the all-time new high for a longer period due to multiple domestic factors,such as high trade deficit, a lower than expected Index of IndustrialProduction reading, a high Wholesale Price Index and a hawkishmonetary policy. The journey in the southward direction continuedwith deep cuts but after a recovery November finally settled with aloss of almost 2%.

MARKET WIDE VS NIFTY ROLL-OVER

EQUITY DERIVATIVES

On the option front, strike of call 6400 stands with the highestnumber of shares in open interest (OI) followed by the strikes of6500 and 6600 whereas on the put side strikes of 6100 and 6000have a combined OI of 86 lakh shares with a put/call ratio between0.90 and 1.00. Ahead of some key domestic and international events,the India Volatility Index has shot up significantly. The results ofthe elections in some of the key states of the country have beenannounced already. Next, the Reserve Bank of India will meet onDecember 18 to review its monetary policy. This will be followedby the US Federal Reserve’s meet in the USA on December 17 and18. The market participants are expecting a positive outcome ofthe events lined up during the month and as the events would unfoldthe implied volatility would cool off. From the above data weconclude that the overall bias for the market is positive and in thecoming days 6400-6500 can be targeted. Hence to play this viewwe recommend forming a Bull Call Spread with a favourable risk/reward ratio.�

Top five stock options with highest open interest in the current series

STOCK OPTIONS (SHAREKHAN SCRIP CODE) OPEN INTEREST (RS CR)

SBIN 570.78INFY 459.32TATAMOTORS 330.12RELIANCE 308.67ICICIBANK 294.96

A Bull Call Spread is generally formed when an index/a stock isexpected to move in an upward direction. It is a limited profit andlimited loss strategy. A bull call spread can be constructed by buyingan out-of-the-money call option and selling even a higher strike ofout-of-the-money call option of the same index/stock andexpiration.

Strategy for the month: Bull Call Spread

PAY-OFF DIAGRAM

STOCK FUTURES (SHAREKHAN SCRIP CODE) OPEN INTEREST (RS CR)

MCDOWELL-N 1,695.29SBIN 1,120.13TCS 1,067.08INFY 915.03ICICIBANK 887.03

Top five stock futures with highest open interest in the current series

FORMATIONTYPE BUY/SELL STRIKE PREMIUM OUTFLOW

CE Buy 6400 97.0038.00CE Sell 6500 59.00

MONTHLY VIEW

Improved gross domestic product (GDP) numbers turned out to bereal saviour as on the very first day of the December series the nationalindex Nifty rose by more than 130 points during the opening belland ended with gains. The December series started the month withRs11,358 crore in Nifty futures vs Rs15,360 crore in the previousseries, Rs31,566 crore in stocks futures vs Rs28,108 crore in theprevious series, Rs58,583 crore in index options vs Rs56,422 crorein the previous series and Rs2,643 crore in stock options vs Rs2,761crore in the previous series. The roll-over in the Nifty stood at 72.75%,which is significantly higher than its three-month and six-monthaverage roll-over of 63.29% and 61.66% respectively. The market-wide roll-over stood at 82.41%, which is marginally higher than itsthree-month and six-month average roll-over of 77.87% and 78.70%respectively. Though there was a significant rise in the market, butthe roll-over cost has decreased gradually which indicates positionshave been rolled on the short side.

Strategy note: The strategy has an initial outflow of 38 points in theNifty which amounts to Rs3,800 (38*100) whereas the maximumprofit potential for the strategy is of 62.00 points, which amounts toRs6,200 (62*100). There is only one break-even point in the strategy,which is at 6438 (lower strike price [6400] + gross outflow [38.00points]).�

Commodities: Down on tapering prospects; industrials likely to recover

Key points

� All the commodities except natural gas ended lower in November

� Commodities are facing downward pressure on the possibility oftapering of QE by the Fed

� Industrial commodities are likely to do better than precious metals

� US shows slid Q3 growth (2.80%), but spending weakens

� OECD cuts global growth outlook on slowdown in emerging markets

� OECD calls Europe's crisis policy unworkable on risk of deflation,slow growth

� World Bank’s Kim sees more global impact from Fed tapering

� German trade surplus could threaten euro zone’s recovery, says EC

� French economy shrinks as businesses hold off on investment

� Euro area manufacturing expands for a fifth month led by Germany

� 'Experiment' of QE has gone on too long: Fidelity’s Richard Lewis

� Yellen signals further bond purchases until recovery strengthens

� UK growing at the fastest rate in developed world, says OECD

� UK manufacturing strengthens to the fastest in almost three years

� BoE says jobless rate may reach 7% in 2015 on robust growth

� Consumer Confidence Index in the USA decreased to 70.4 inNovember

� US budget deficit falls 24% in October

� US retail sales post best gains since July despite shutdown

� Fed QE taper likely in coming months on data, FOMC minutes say

� China’s manufacturing gauge declines for the first time in four months

� PBOC says it’s no longer in China’s interest to increase reserves

� China pledges decisive role for markets after policy summit

� China's economy doing well in Q3, premier says

� Japan tests China’s resolve with military flights in air zone

COMMODITY PRICES IN NOV 2013 (IN $)

Commodity High Low Close Mon chg %

Copper 7298.0 6910.0 7055.0 -2.7

Zinc 1967.0 1863.0 1887.0 -3.3

Lead 211.0 2063.0 2080.0 -4.8

Gold 1327.8 1225.6 1240.9 -6.2

Silver 22.1 19.6 20.0 -8.8

Crude oil 96.7 91.8 92.7 -3.8

MONTHLY CHANGE IN SHFE STOCKS (OCT-NOV 2013)

Copper Lead Zinc

Change (in tonne) -23476 2257 -14991

25-October-13 172146 85610 246522

Change (in %) -13.64 2.64 -6.08

MONTHLY CHANGE IN DOE PETROLEUM STOCKS (OCT-NOV 2013)

Crude oil Dist. Gasoline

Change in M (000' bbls) 0.01 -0.01 0.00

25-October-13 0.38 0.12 0.21

Change in (%) 1.82 -9.76 -1.40

Refinary utlisation rate was at 89.40% in the last week of November

MONTHLY CHANGE IN LME STOCKS (OCT-NOV 2013)

Copper Lead Zinc

Change (in tonne) -52325 -1550 -67750

25-October-13 476150 232925 1030000

Change (in %) -10.99 -0.67 -6.58

Note—LME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)

Macro-economy

Crude oil: Likely to rise on Libyan production loss, start of TransCanada pipelineKey points

� China’s January-October crude oil imports rise 3.4% YoY� EIA lowers WTI forecast for 2013 and 2014� US crude production beats imports for first time since 1995� IEA sees Libya, Iraq as growing risk to oil market balance� China’s October apparent oil demand rises 0.72%� Iran nuclear deal to have limited impact in near term� Iran expects nuclear agreement implementation by January 2014� OPEC November crude output falls to two-year low in survey� TransCanada to begin operating the southern leg of its Keystone XL� Start of the pipeline to Gulf Coast in January could reduce the Cushing stocks

All the commodities except natural gas closed lower in November 2013. The increasing possibility of tapering of quantitative easing (QE) by theUS Federal Reserve (Fed) as the US economic data improves, investors showing more interest in equities and concerns about China’s demandfollowing the third plenum outcome weighed on the commodities complex. Iran reaching a nuclear deal with its west counterparts also helpedpush oil lower in a knee-jerk reaction. That even the US crude oil inventories continued to bulge added to bulls’ woes. Going forward, increasingUS oil production, tepid demand and the thawing of geo-political tensions would keep the prices capped. However, the six-month interim Irandeal is unlikely to have a material impact in the short term as the comprehensive deal is yet to be reached. Crude oil prices can bounce back a bitas TransCanada Corp. said it will begin operating the southern leg of its Keystone XL pipeline to the Gulf Coast in January. This would reducethe glut at Cushing, the delivery point. Thus, WTI is likely to get a lift on Brent-WTI spread play. Supply losses in Libya (production at 15% ofits 1.5mbpd capacity) and Iraq would support the counter. Crude oil is likely to trade between $95 and $102 in the days ahead.

WTI NYMEX crude oil CMP: $96.80

MONTHLY VIEW COMMODITY FUNDAMENTALS

Gold CMP: $1,224 (SPOT)

Bullions: Gold to fall further

Silver CMP: $19.15 (SPOT)

Silver was hit hard in November and has slipped in a bear market. US Eagle silver coin sales of 2.3 million ounces in November weredown compared with 3.1 million in October and 3.2 million in November 2012. We expect silver to do better than gold on account of animproving US economy. The range is likely to be $18.15-21.10.

Copper CMP: RS445 (February Contract)

Base metals: Looking oversoldKey points

� China’s January-October copper product imports 3.67mn tonne� China’s October copper output 637,000 tonne: Statistics Bureau Data� Zinc demand exceeded production in September, ILZSG says� Lead production exceeded usage in September, ILZSG says� Chile government’s copper statistics Cochilco sees copper at average $3.14/Lb in 2014� Zinc premium steady in past month during supply talks� Zinc prices may rebound amid dearth of new mines: Chieftain Metals CEO� Codelco said to raise China copper fee 41% in 2014 as demand increases� Copper boosted by delays and China buying, Antofagasta says� Copper premium paid in the US mid-west seen rising by metal traders� Third Plenum: China's metal demand to shift towards consumer products� Shanghai banks warned of “abnormal leverage” in copper financing

Taper worries and demand concerns in near term after China’s third plenum pushed the base metal complex down. One of the factorsresponsible for weakness in copper prices might be mitigated to some extent as the expected refined copper surplus of nearly 2 lakh tonnecould be much lower or can diminish. Shanghai Futures Exchange copper inventories slid to 17-month low while London Metal Exchangestocks kept on falling at a rapid pace. Chile has increased the premium of refined copper for 2014 for both South Korea and China onrobust demand. We expect the metal to trade between Rs435 and Rs462.

Lead CMP: RS129 (December contract)As per WBMS, the refined lead market was in a shortage of 256kt for January-September 2013 vs 2012 surplus of 38.3kt. Refined leadproduction of 888,700 metric tonne exceeded usage of 878,700 tonne in September this year. Market expectation that lead would moveinto a deficit next year would support the counter. The expected range is Rs125-133 with an upside risk as the rupee can weaken.

Rallying equities and a lack of safe-haven demand, talks of the US Fed preparing to taper the stimulus, a recovering Europe and subduedinflation in the developed economies have weighed on the precious metals of late. In a supportive development, China’s net gold importsfrom Hong Kong were 129.9 tonne in October this year. The imports were a record 130 tonne in March this year. However, China’s demandis likely to be subdued in the near term. Consumers of physical gold in India who usually step up buying at these lower prices have beenhindered by tighter import regulations. Some support to the metal can come from geo-political tensions due to a stand-off between Japan andChina over the islands known as the Diaoyu in China and the Senkaku in Japan. Tepid retail demand even at a lower level is reflected fromthe fact the US Mint sales of gold bullion coins fell in November 2013. Combined US Mint sales of American Eagle and Buffalo coins fell by7% month on month to 62,000 ounces in November from 66,500 ounces in October this year. These were also down from 153,000 ouncesin the same month of 2012. We suggest selling into rallies. The range is likely to be $1,155-1,300.

Key points� GFMS sees silver-fabrication demand advancing 3.9% this year� Gold benchmarks said to be under review as UK probe widens� BofA sees gold hitting $1,100/Oz in 2014 on rates, dollar� China’s net gold imports from Hong Kong in October the second highest level on record� India’s gold jewellery exports likely to dip by 50% in FY2014: industry� HSBC looks for strong gold jewellery demand� HSBC: US mint gold coin sales fall in November despite price slump� Silver back in a bear market as prices down 20% from August settlement highs� Gold has worst November in 35 years� Iran nuclear accord also weighs on gold prices� GFMS: global gold mining production to reach a record 2,920 tonne this year� Venezuela conducts a swap deal of 1.45 million ounce with Goldman Sachs

MONTHLY VIEWCOMMODITY FUNDAMENTALS

Zinc CMP: Rs117 (December contract)

The demand for refined zinc at 1.12 million metric tonne in September exceeded the production at 1.106 million tonne, according to theInternational Lead and Zinc Study Group. As per WBMS, zinc surplus was 92kt for January-September vs 2012 surplus of 265kt. Theexpected price range is Rs114-120 with an upside risk.

Events watch: Major economic events in November 2013

CMP as on December 04, 2013

Date Region Event Survey Actual Prior Impact02-Dec-13 China HSBC/Markit Manufacturing PMI 50.5 50.8 50.9 Manufacturing continues to be in expansion mode and data tops the forecast; hence

supportive for industrial commodities02-Dec-13 Euro zone PMI Manufacturing 51.5 51.6 51.5 Data slightly better than forecast as the manufacturing sector expanded for the fifth

month in a row; supportive for the euro and industrial commodities02-Dec-13 UK PMI Manufacturing 56.1 58.4 56 UK economy continues to be the best performing developed economy. The string of

better than expected data continues to support the pound02-Dec-13 USA Markit US PMI Final 54.3 54.7 54.3 The data increases the possibility of tapering sooner than later, supportive for dollar

and bearish for the bullions04-Dec-13 Euro zone GDP SA YoY -0.40% -0.40% -0.40% Data in line with the forecast, no major impact seen; however French economy

seems to be heading towards recession, thus data would be closely watched by thetraders in future

04-Dec-13 USA Trade balance -$40.2B ($40.60) -$41.8B Exports climbing to record highs led to a narrower deficit; however, after accountingfor price influence on Q4 GDP is likely to be negligible.

05-Dec-13 UK BoE asset purchase target 375B -- 375B No change expected as the UK economy is doing well, focus would be on theassessment of the economy

05-Dec-13 Euro zone ECB announces interest rates 0.25% -- 0.25% No change expected, but there is a growing possibility that the ECB would take furthermeasures to combat risk of deflation and slow growth; thus, the press conference wouldbe a crucial event; further easing measures would weigh on the euro

05-Dec-13 USA GDP annualised QoQ 3.00% -- 2.80% Stronger than expected data would support the dollar and industrial commodities, andwould weigh on bullions tapering possible sooner than expected in that case

12/05/2013 USA Factory orders -1.00% -- 1.70% Weaker data would be bearish for the US Dollar and would support the bullions;however, the impact could be limited ahead of the US non-farm payroll report

06-Dec-13 Germany Factory orders MoM -1.00% -- 3.30% Data trailing the forecast would be bearish for euro and commodities06-Dec-13 USA Change in non-farm payrolls 183K -- 204K ADP data showing a figure of 215 indicates strong report, data beating the forecast

would be bearish for the bullions and supportive for the dollar and the industrials08-Dec-13 China Trade balance $23.62B -- $31.11B Both import and export figures need scrutiny to gauge the health of Chinese economy

as well as the global economy; lower import or disappointing export figure wouldweigh on the industrial commodities

09-Dec-13 Japan Trade balance BoP basis -- -- -¥874.8B Larger than expected deficit would be yen bearish09-Dec-13 China CPI YoY 3.20% -- 3.20% Higher than expected data would be somewhat bearish for the industrial commodities

as it would reduce the room for easing should there be a need09-Dec-13 Euro zone Sentix Investor Confidence -- -- 9.3 Better than expected number would support the euro and commodities in general10-Dec-13 China Industrial production YoY 10.00% -- 10.30% Better than expected figure would be positive for industrial commodities10-Dec-13 China Retail sales YTD YoY -- -- 13.00% Better than expected figure would be positive for industrial commodities10-Dec-13 UK Industrial production MoM -- -- 0.90% Stronger than estimated number would be supportive for the pound and industrial

commodities11-Dec-13 Japan Machine orders MoM -- -- -2.10% Data topping the forecast would support industrial commodities as Japan is a major

consumer of metals and energy12-Dec-13 Euro zone ECB publishes monthly report Focus would be the assessment of the economy and the insights into the future;

important for both the euro and commodities12-Dec-13 Euro zone Industrial production SA MoM -- -- -0.50% Better than expected data would be supportive for the euro and commodities12-Dec-13 USA Import Price Index MoM -0.70% -- -0.70% A subdued figure would be bearish for the bullions12-Dec-13 USA Retail sales advance MoM 0.30% -- 0.40% Stronger than expected data would increase the possibility of a January taper;

currently the markets expect tapering to begin in March 201413-Dec-13 USA PPI ex food and energy MoM 0.10% -- 0.20% Inflation is subdued. the data is unlikely to surprise; subdued inflation bearish for the

bullions16-Dec-13 USA Industrial production MoM -- -- -0.10% Better than expected number would support the dollar and the industrial commodities

but would weigh on the bullions17-Dec-13 Euro zone CPI MoM -- -- -0.10% Europe is facing a danger of deflation, very subdued data would be bearish for the

euro as it would increase the possibility of further easing by the ECB19-Dec-13 USA FOMC rate decision -- -- 0.25% Tapering not expected at this meeting; however, the meeting would be important for

clues to tapering Tapering cues would be bearish for the markets in general19-Dec-13 USA Existing home sales -- -- 5.12M The housing sector remains a key sector of the economy, data trailing the forecast

would be bearish for the dollar and supportive for the bullions20-Dec-13 UK GDP QoQ -- -- 0.80% Crucial for the pound, better than expected data would support the pound and

industrial commodities24-Dec-13 USA Durables ex transportation -- -- -0.10% Ex transport data strips out the volatile component, thus giving a better picture;

stronger than expected data would support the dollar and be bearish for the industrialcommodities

31-Dec-13 USA Consumer Confidence Index -- -- 70.4 A lower figure would be bullish for gold and bearish for the US Dollar

MONTHLY VIEW COMMODITY FUNDAMENTALS

Gold is near strong supports

� In the last few months gold has fallen in a three-wave manner.

� It has reached near the lower end of the medium-term fallingchannel.

� The yellow metal has multiple supports in the range of $1,200-1,180. If this range is not broken gold can start moving higher.

� The short-term momentum indicator is showing a positivedivergence and has triggered bullish crossover.

� From the short- to medium-term perspective, $1,310 and $1,361will be the key levels on the upside.

Silver likely to recover

� Silver has been falling in a medium-term falling channel for thelast few months.

� It has taken support near the lower channel line. Bulls seem tobe providing support to the white metal near the channel line.

� The short-term momentum indicator has turned bullishsuggesting that recovery can be on the cards.

� The previous low of $18.19 will act as a strong support fromthe medium-term perspective.

� On the other hand, the medium-term target will be $21.80.

Trend Trend Supports Resistances Targetreversal

Up $18.19 $18.86/18.5 $20.89/21.50 $21.80

� From a high of $112.24 NYMEX crude oil tumbled downsharply in the last few months.

� The entire fall unfolded in a channelised manner.

� However, the correction halted near the 78.6% retracementmark from where the oil started to move up.

� Recently it broke out from the falling channel.

� The short-term momentum indicators are in line with thechannel break-out.

� Thus, the low of $91.77 will act as a major support.

� The key levels on the upside are $102 and $104.50.

Up $91.77 $95.63/93 $99.50/103 $102/$104.50

Up $1,180 $1,211/1,200 $1,275/1,300 $1,310/$1,361

Crude oil escapes from the channel

TREND & VIEWCOMMODITY TECHNICALS

May June July August September October November December 2014

11501160

11701180

1190120012101220123012401250126012701280129013001310132013301340135013601370138013901400141014201430144014501460147014801490150015101520

100.0%1180

5KST (-2.47608)

June July August September October November December 2014

100.0%

SILVER [CASH] (19.6700, 19.7200, 19.1900, 19.3300, -0.34000)

10KST (-4.28632)

April May June July August September October November December 20

100.0%

104.50

LIGHT CRUDE CONTINUOUS 1000 BARRELS [NYMEX] (97.3300, 97.9900, 97.0100, 97.3800, +0.18000)

3MACD (-0.44060)

Up $3.10 $3.15/3.12 $3.30/$3.35 $3.388 /$3.55

Natural gas marching ahead smartly� In the last couple of months MCX natural gas retraced more

than 66% of the previous rise.

� The gas found support near the intermediate channel line andmoved up thereon.

� The daily momentum indicator is in line with the rise.

� Recently the gas formed a bullish outside. Thus, the level ofRs244.50 will now act as a key support.

� The immediate resistance is at Rs257.10. Once that is crossednatural gas can target Rs281, ie the equality target.

Up Rs244.50 Rs250/247 Rs257.10/275 Rs281

Cardamom poised for a fall

� NMCX cardamom is trading in a multi-month downward slop-ing channel.

� Within that channel it recently faced resistance near the upperchannel line.

� The key weekly moving averages and weekly upper BollingerBand added to the downward pressure.

� Consequently, the commodity has started to fall.

� The weekly momentum indicator has started a new cycle onthe downside from the equilibrium line.

� Thus, unless the level of Rs737 is crossed the price can fall toRs560 from the medium-term perspective.

Down Rs737 Rs616/600 Rs712/730 Rs560

Bulls fancy copper

� Copper has formed a multi-month channelised correction, whichin terms of price pattern has taken the form of a bullish flag.

� In terms of Fibonacci retracement, the correction has taken sup-port at the 61.8% retracement mark.

� The short-term momentum indicators have turned bullish.

� Thus, the red metal looks set for the next leg on the upside theequality target for which is $3.55.

� The intermediate target will be the high of $3.388.

� The level of $3.10 will act as a strong support on a closingbasis.

COMMODITY TECHNICALSTREND & VIEW

April May June July August September October November December 2014

100.0%

HG COPPER CONTINUOUS 25000 LBS [COMEX] (3.23050, 3.24050, 3.21350, 3.22950, -0.01950)

5KST (0.40508)

uly August September October November December 2014

100.0%

257.10

244.50

281NATURAL GAS MMBTU - 1 MONTH (247.000, 255.200, 244.500, 254.500, +6.60001)

MACD (6.17974)

O N D 2012 M A M J J A S O N D 2013 M A M J J A S O N D 2014 M A M

CARDAMOM 1KG - 1 MONTH (705.000, 712.700, 680.000, 680.200, -26.4000)

KST (-3.04667)

Currencies: Policy expectations will continue to dominate market sentiment

Key points

� India’s GDP expands 4.8% in second quarter of 2013-14� Inflows in India through special swap windows touch $25bn� Draghi says ECB aware that low rates pose a risk to stability� UK economic recovery “has finally taken hold”: Bank of England’s

Carney� Yen weakens as Bank of Japan to ease policy, Fed to scale back

stimulus� Bernanke signals Fed target rate to stay low after QE

CURRENCY LEVELS IN NOVEMBER 2013 (IN RS)

Currency High Low Close Monthly chg (%)

USD-INR 64.19 61.56 62.33 -1.39

EUR-INR 86.26 83.56 84.67 0.12

GBP-INR 102.21 98.70 101.09 -2.08

JPY-INR 64.50 61.24 61.35 2.64

INR-USD CMP: Rs61.75 (SPOT)The rupee fell by 1.2% against the dollar in November this year due to a rise in October retail inflation to 10.09% and strong jobs growth in theUSA despite a government shutdown. However, a fall in the trade deficit, rise in foreign exchange reserves and a hawkish Reserve Bank of India(RBI) restricted the losses in the rupee. The inflows under the foreign currency non-resident (FCNR) swap facility were more than $25 billion.The global scenario appears supportive of the rupee as deflating developed economies support the case for more monetary stimulus. The inflowswould also remain high due to the extension of the deregulated interest rates for non-resident external and FCNR deposit accounts by the RBItill January 31, 2014. The threat of quantitative easing (QE) Taper persists, though at the moment the markets do not expect the US FederalReserve to begin Taper before March 2014. Meanwhile, markets may turn euphoric on the Bharatiya Janata Party’s win in state elections andwe believe the RBI would use the resultant rally in the rupee to shore up its dollar reserves. Strong US jobs data for November may play spoilsport pushing the USD-INR to 63.30 levels. Strength in the rupee is likely to be capped around 60.00 levels.

INR-GBP CMP: Rs100.76 (SPOT)The pound rose more than 2% against the dollar finishing November 2013 at the highest level since August 2011. Sterling’s stellar rise in thepast few months has been a result of economic recovery led by strong consumer spending, which accounts for nearly two-thirds of the UK'seconomic activity. Meanwhile the Bank of England (BoE) unexpectedly said it was ending incentives for banks to provide mortgages as partof its Funding for Lending Scheme (FLS) and would focus the scheme exclusively on lending to businesses. The decision to end FLS isindicative of the central bank’s confidence in housing recovery which further bolstered the demand for the pound. However, the markets arecurrently ignoring the fact that the UK trade gap is widening due to a strong pound, though it helps in curbing imported inflation, a currentpriority of BoE. We believe that the GBP-USD pair would consolidate in the range of 1.62 to 1.648 in December 2013. We see the GBP-INRin the range of 99.50 to 103.

INR-JPY CMP: Rs60.48 (SPOT)The yen fell by more than 4% against the dollar in November 2013 as investors expect more stimulus from Bank of Japan. Foreignershave invested about $19.6 billion in stocks since the middle of November this year resulting in a 9.8% rally in the benchmark equity indexNikkei. Many believe that yen weakness is due to the resurgence of carry trades. However, high yielding currencies did not appreciatesignificantly against the dollar which contradicts the carry trade theory. So far the QE taper expectations have not rattled the risk-onsentiment. However, strong US November jobs data might result in risk aversion and rebound in the yen. We see the USD-JPY in therange of 100.00-104.00. The JPY-INR is likely to trade in the range of 58.50 to 60.60.

November 2013 contract price movement November 2013 contract price movement

CMP as on December 05, 2013

The euro fell against the dollar in November 2013 after the European Central Bank (ECB) cut interest rates by 25 basis points to counterthe threat of deflation. Speculations went rife that the ECB was considering multiple options which included long-term refinancingoperation and negative deposit rates in order to inflate the economy out of recession. The comments from the ECB policy makers over thepossibility of negative rates weakened the EUR-USD to 1.3294. However, the pair managed to bounce back above 1.35 levels after theECB president, Mario Draghi, refrained from indicating the possibility of negative rates and expressed concerns over the negative effectsof maintaining low rates in the economy for a prolonged period. Policy expectations remain in favour of the euro as the Fed’s QEoperation makes it appear ultra dovish against its European Union (EU) counterpart. We see the EUR-USD in the range of 1.3450 to1.3700. We see the EUR-INR in the range of 82.78 to 85.20.

CURRENCY FUNDAMENTALS

INR-EUR CMP: Rs83.80 (SPOT)

MONTHLY VIEW

102EURINR GBPINR

65USDINR JPYINR

GBP-INR: FALL AROUND THE CORNER

� The GBP-INR on its way up had crossed multiple resistances inAugust this year.

� It had registered a new all-time high of 106.984. From therethe price had seen a decent correction.

� However, recently it formed a short-term pull-back. To end thepull-back the price seems to have formed an Ending Diagonalpattern.

� The next leg down is expected to start from here. Unless thelevel of 103.25 is crossed on a closing basis, the short-termtarget will be 97.04.

Currency View Reversal Supports Resistances Target

USD-INR Down 63.90 60.93/59.50 62.64/63.48 59.70-58.69

GBP-INR Down 103.25 99.69/97.90 102.58/103 97.04

EUR-INR Down 85.92 82.97/81.00 85.24/85.57 82.41-80.00

JPY-INR Down 0.6230 0.5900/0.5850 0.6182/0.6215 0.5874-0.5610

EUR-INR: A bearish stance� In case of the EUR-INR the momentum on the way up was so

sharp that the price crossed the upper end of the long-termrising channel in August this year.

� The price also crossed the upper end of the medium-term risingchannel but faltered above the trend line.

� It turned out to be a reversal from the medium-term perspective.From there the price has tumbled till the long-term channelline, which is acting as a key support.

� Thus, from that level the price has done a channelised pull-back. The price is expected to tumble from this level once again.

� The targets on the downside are 82.41 and 80.00. The reversalof the trend can be pegged at 85.92 on a closing basis.

JPY-INR: Tumbling down� As can be seen from the adjacent chart, the JPY-INR had broken

out from the ending diagonal pattern as well as the medium-term falling channel in May this year.

� From there the price had formed a three-wave rise and achievedthe equality as well as the channel targets on the upside.

� From the high of 0.7081 the currency pair entered the correctionmode. It formed an impulse on the downside and broke thelower end of the channel.

� Recently it formed a small bounce and resumed the largerdowntrend. The targets on the downside are 0.5874 and 0.5610with reversal at 0.6230 on a closing basis.

USD-INR: Bears in control� From the high of 68.80 the USD-INR had fallen sharply in

September this year.

� Near the end of the fall it had formed an ending diagonal pattern.

� The price had broken out on the upside and formed a pull-backthereon. The pull-back had retraced 38.2% of the fall.

� From there the price has started falling once again. The fall isbreaking up into waves of lower degree.

� The key levels on the downside are 59.70 and 58.69.

� The reversal of the trend can be placed at 63.90 on a closingbasis.

CURRENCY TECHNICALSTREND & VIEW

July August September October November December 2014

100.0%

USDINR - INDIAN RUPEE (62.3700, 62.5330, 61.9020, 62.0500, -0.31000)

KST (-0.49003)

29 5 12August

19 26 2 9 16September

23 30 7October

14 21 28 4 11 18November

25 2 9 16December

23 30 62014

105.0105.5

106.0106.5107.0

107.5108.0108.5109.0

100.0%

103.25

GBPINR (102.214, 102.479, 101.120, 101.650, -0.56400)

KST (0.95788)

July August September October November December 2014

88.088.5

89.089.5

90.090.591.0

91.592.092.593.093.594.0

100.0%

EURINR (84.7350, 84.9570, 83.7840, 84.3450, -0.39600)

KST (0.04223)

May June July August September October November December 2014

100.0%

161.8%

0.6230

0.5610

0.5874

JPYINR (0.60830, 0.61000, 0.60260, 0.60620, -0.00200)

KST (-2.55278)

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1 month 1.3 -1.8 -2.0

3 month 15.0 11.7 12.9

Since inception* -3.5 15.6 14.4

Best month 11.8 11.2 12.4

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Since inception* 174.8 252.5

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*27-Aug-04

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All MID products are different from Sharekhan’s research-based technical andfundamental offerings as these essentially try to capture trading opportunities inliquid stocks where momentum is expected before or after some event including theannouncement of results or where some news/event is probable. These calls are rolledout by the Advisory Desk based on the market pulse and before generating an MID

call, all market news on the stock as well as its technical and derivative indicators are checked.

Advisory products are ideal for those who do not have time to either monitor the market tick by tick or shift through pages of research fordata or pour over complex charts to catch a trend. However, all these products require perfect discipline and money management.

MONTHLY PERFORMANCE

MID TRADESThere are five different types of MID calls.

� MID Intraday: These are long/short ideas based on fund flowand technical levels. As is apparent from the name, these callsare meant for intra-day trading. All MID Intraday calls are ac-companied by proper stop losses and probable targets.

� MID Swing: These are positional long/short ideas based on fun-damental rationale/events/news as well as market pulse. Theseideas come with proper stop losses and probable targets.

For more details on any of the Advisory Desk products write to us at info@sharekhan.com

READY FOR ROARING ADVICE

#Please note there may be some deviation in the actual performance reported in TradeTiger due to a difference in the method of closure of an idea in a particular month.

Portfolio Doctor evaluates an existing portfolio on various parameters and suggests recommendations on aregular basis to improve its performance. It is targeted at long-term investors with a portfolio value of morethan Rs10 lakh. The Portfolio Doctor service involves three simple steps:

� analysis of an existing portfolio, � realignment of the portfolio with Sharekhan’s

� creation of a Model Portfolio. recommendations

FOR INVESTORS

PORTFOLIO DOCTOR

FOR TRADERS

DERIVATIVE IDEADerivative Idea is generated by the Sharekhan Derivatives ResearchDesk based on the analysis of open interest, implied volatility andput-call ratio. It is a leveraged product and ideal for aggressivetraders. Calls in Derivative Idea are accompanied by proper stoploss, targets, time frame and quantity to execute.

� MID Derivatives: These are directional calls on options basedon the analysis of the open interest and put-call ratio in themarket. These come with proper stop losses and probabletargets.

� Alpha Delivery Picks: This is a long only, cash market deliveryproduct where ideas are rolled out based on short-term triggerswith proper fundamental rationales. These ideas have to bebought in two parts (price range is clearly defined at initiation)and come with proper stop losses and probable targets for amaximum period of two months.

Derivative Ideas performance#

Ticket size (Rs) 300,000

Month Nov 2013 YTD FY14

No. of calls 6 177

Profit and loss (Rs) 110 29,851

Returns (%) 0.04 9.95

ADVISORY DESK

MID performance#

Product MID Intraday MID Swing MID Derivatives Alpha Delivery PicksMonth Nov 2013 YTD FY14 Nov 2013 YTD FY14 Nov 2013 YTD FY14 Nov 2013 YTD FY14No. of calls 54 548 18 268 18 163 4 12Profit booked 37 352 11 155 5 95 3 11Stop loss hit 17 196 7 113 13 68 1 1Strike rate (%) 69 64 61 58 28 58 75 92

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhanfirst understand the individual’s investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggestthat you get in touch with our Mutual Fund Advisor before investing in the best funds.�

MF PICKS

SHAREKHAN’S TOP MUTUAL FUND PICKS (EQUITY) NOVEMBER 13, 2013

MUTUAL FUNDS DESK

Data as on November 08, 2013

Scheme name Star NAV (Rs) Returns (%)rating Absolute Compounded annualised

6 months 1 year 3 years 5 years Since inception

Large-cap fundsCanara Robeco Large Cap+ Fund �� 12.3 1.6 6.6 4.7 - 6.7

ICICI Prudential Focused Bluechip Equity Fund - Ret �� 19.8 6.2 11.9 3.6 22.7 13.3

Birla Sun Life Top 100 Fund �� 27.3 5.3 11.3 3.0 18.0 13.3

Birla Sun Life Frontline Equity Fund - Plan A �� 104.6 3.1 11.5 2.4 20.1 23.3

UTI Leadership Equity Fund �� 17.2 2.0 7.9 -0.7 14.1 7.3

IndicesBSE Sensex 20,666.2 3.4 9.7 -0.3 15.69 16.5

Mid-cap fundsMirae Asset Emerging Bluechip Fund �� 13.9 3.2 6.2 5.4 - 10.5

HDFC Mid-Cap Opportunities Fund �� 18.6 3.6 5.0 2.7 23.4 10.2

IDFC Premier Equity Fund - Reg �� 38.9 1.5 4.8 2.2 24.2 18.2

Franklin India Prima Fund �� 330.0 2.5 8.3 1.4 21.7 19.2

Principal Emerging Bluechip Fund �� 33.3 0.5 4.6 -2.4 - 27.3

IndicesBSE MID CAP 6,210.9 -5.0 -7.7 -10.5 13.09 20.0

Multi-cap fundsICICI Prudential Dynamic Plan �� 128.2 11.6 14.7 4.5 20.9 26.0

ICICI Prudential Top 100 Fund �� 165.1 8.3 12.9 4.1 18.4 20.0

BNP Paribas Equity Fund �� 42.2 5.4 13.4 4.1 15.9 17.1

UTI Equity Fund �� 64.7 2.4 7.1 2.4 19.2 10.9

Reliance Equity Opportunities Fund �� 41.9 -2.6 -1.1 1.7 24.4 18.1

IndicesBSE 500 7,539.5 -0.3 3.6 -3.4 15.34 14.6

Tax saving fundsAxis Long Term Equity Fund �� 16.1 5.5 12.4 6.3 - 13.2

ICICI Prudential Taxplan �� 163.5 6.9 8.9 1.9 23.2 21.7

Religare Invesco Tax Plan �� 20.4 4.1 7.7 1.5 20.3 10.9

HDFC Long Term Advantage Fund �� 156.0 4.8 11.0 0.4 19.1 23.8

Reliance Tax Saver (ELSS) Fund �� 22.8 -3.4 -3.7 -1.9 17.6 10.7

IndicesCNX500 4,725.9 -0.6 3.9 -3.0 15.35 8.4

Thematic fundsICICI Prudential Exports and Other Services Fund �� 25.6 31.0 40.5 10.1 22.7 12.5

Birla Sun Life India GenNext Fund �� 32.5 0.1 10.5 6.8 20.6 15.3

UTI India Lifestyle Fund - Growth �� 14.3 1.3 6.5 3.9 18.1 5.9

L&T India Special Situations Fund �� 21.4 0.3 4.6 1.2 18.1 10.7

Canara Robeco FORCE Fund - Reg �� 15.3 -6.0 1.1 0.4 - 10.8

IndicesS&P Nifty (CNX Nifty) 6,140.8 1.2 7.0 -0.7 15.59 14.1

Balanced funds

ICICI Prudential Balanced �� 59.1 4.2 11.0 6.8 18.1 13.5

HDFC Balanced Fund �� 65.5 4.7 5.6 4.1 20.0 15.3

FT India Balanced Fund �� 56.5 1.6 8.2 3.1 14.3 13.2

Birla Sun Life 95 �� 354.6 1.1 6.9 2.3 19.1 21.0

Reliance RSF - Balanced �� 24.9 -1.3 1.3 -0.3 18.4 11.4

Indices

Crisil Balanced Fund Index -- 0.8 6.9 2.3 13.4 12.7

MF PICKS

SHAREKHAN’S TOP SIP FUND PICKS NOVEMBER 13, 2013

MUTUAL FUNDS DESK

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhanfirst understand the individual’s investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggestthat you get in touch with our Mutual Fund Advisor before investing in the best funds.�

Data as on November 08, 2013

Investment period 1 year 3 years 5 yearsTotal amount invested (Rs) 12,000 36,000 60,000Funds would have grown to (Rs) NAV Present Avg. annual Present Avg. annual Present Avg. annual

value (Rs) return (%) value (Rs) return (%) value (Rs) return (%)

Large-cap funds

Birla Sun Life Top 100 Fund 27.3 12,901.7 8.3 42,554.9 5.9 81,306.2 6.4

Birla Sun Life Frontline Equity Fund - Plan A 104.6 12,750.0 6.9 42,512.4 5.9 81,880.9 6.5

ICICI Prudential Focused Bluechip Equity Fund - Ret 19.8 12,925.3 8.5 42,443.5 5.8 85,028.9 7.3

Reliance Equity Fund 15.5 12,672.6 6.1 41,104.8 4.6 69,976.7 3.2

UTI Leadership Equity Fund 17.2 12,578.3 5.3 40,876.4 4.4 74,764.6 4.6

BSE Sensex 20,666.2 12,699.3 6.35 40,615.2 4.2 75,284.7 4.7

Multi-cap funds

ICICI Prudential Top 100 Fund 165.1 13,050.7 9.6 42,840.5 6.1 81,694.4 6.5

UTI Equity Fund 64.7 12,594.6 5.4 41,395.7 4.9 81,220.4 6.3

Templeton India Equity Income Fund 23.4 12,483.0 4.4 40,921.8 4.5 80,840.2 6.2

Reliance Equity Opportunities Fund 41.9 12,160.5 1.5 40,243.6 3.9 85,530.0 7.5

PineBridge India Equity Fund - Std 13.7 12,561.3 5.1 39,555.8 3.3 75,525.5 4.8

BSE 500 7,539.5 12,378.3 3.4 38,765.7 2.6 71,832.4 3.7

Mid-cap funds

Franklin India Prima Fund 330.0 12,575.2 5.3 42,364.7 5.7 84,886.3 7.3

Principal Emerging Bluechip Fund 33.3 12,526.0 4.8 41,611.3 5.1 81,586.8 6.4

HDFC Mid-Cap Opportunities Fund 18.6 12,676.1 6.2 41,117.4 4.7 87,048.3 7.9

IDFC Sterling Equity Fund - Reg 21.5 12,652.8 6.0 41,101.1 4.6 83,829.2 7.0

IDFC Premier Equity Fund - Reg 38.9 12,367.7 3.4 41,090.4 4.6 85,992.7 7.6

BSE Midcap 6,210.9 11,944.3 -0.5 35,114.8 -0.8 64,240.4 1.4

Tax saving funds

ICICI Prudential Taxplan 163.5 12,952.0 8.7 41,807.2 5.3 84,443.4 7.2

Religare Invesco Tax Plan 20.4 12,726.1 6.7 41,222.7 4.7 81,284.3 6.4

HDFC Long Term Advantage Fund 156.0 12,840.6 7.7 41,109.3 4.6 81,232.6 6.4

HDFC Taxsaver 243.9 12,714.3 6.5 39,191.1 3.0 76,929.0 5.2

Reliance Tax Saver (ELSS) Fund 22.8 12,202.9 1.9 38,770.2 2.6 75,570.4 4.8

CNX Nifty 6,140.8 12,557.8 5.1 40,065.9 3.7 74,177.2 4.4

Prices as on December 06, 2013

FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY15/FY13 FY13 FY14E FY15E FY14E FY15E FY14E FY15E (Rs)

EQUITY FUNDAMENTALSEARNINGS GUIDE

Sharekhan Earnings Guide Company CMP Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%) DPS Div

(Rs) growth yield(%)

Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated

AUTOMOBILES

Apollo Tyres 79.5 12,794.6 13,323.8 14,148.7 596.9 756.4 785.6 11.9 15.0 15.6 14% 6.7 5.3 5.1 18.6 17.4 18.4 16.2 0.5 0.6

Ashok Leyland 16.3 12,481.2 11,647.9 16,201.4 148.2 (201.0) 452.6 0.6 -0.8 1.7 68% 27.1 -20.3 9.6 0.7 9.5 -4.7 10.1 0.6 3.7

Bajaj Auto 1,950.0 19,997.3 22,994.4 27,986.2 3,043.6 3,832.3 4,750.2 105.2 132.5 164.3 25% 18.5 14.7 11.9 52.0 47.8 37.7 36.6 45.0 2.3

M&M 945.3 38,356.6 39,097.6 45,238.7 3,543.8 3,713.7 3,940.3 57.7 60.3 64.0 5% 16.4 15.7 14.8 25.2 23.0 18.9 16.7 13.0 1.4

Maruti Suzuki 1,701.5 43,076.7 44,160.2 52,183.8 2,300.0 2,733.4 3,258.1 79.6 90.5 107.9 16% 21.4 18.8 15.8 17.0 18.3 13.3 14.1 8.0 0.5

BANKS & FINANCE

Allahabad Bank 93.5 6,343.3 7,286.6 8,389.4 1,185.2 1,398.2 1,652.8 23.7 28.0 33.1 18% 3.9 3.3 2.8 - - 11.8 12.7 6.0 6.4

Andhra Bank 62.4 4,804.4 5,382.5 6,200.2 1,289.1 910.0 1,180.2 23.0 16.3 21.1 -4% 2.7 3.8 3.0 - - 10.4 12.4 5.0 8.0

Axis (UTI) Bank 1,279.8 16,217.4 18,789.5 21,320.9 5,179.4 5,620.3 6,306.4 110.7 120.1 134.8 10% 11.6 10.7 9.5 - - 15.9 15.6 18.0 1.4

Bajaj Finserv 738.3 5,072.4 - - 1,573.6 - - 103.0 - - - 7.2 - - - - - - 1.5 0.2

Bank of Baroda 684.0 14,945.9 16,191.9 19,203.2 4,480.7 4,312.2 5,124.0 106.0 102.1 121.3 7% 6.4 6.7 5.6 - - 12.8 13.7 21.5 3.1

Bank of India 220.4 12,790.0 14,355.6 16,639.7 2,749.3 2,846.8 3,389.2 46.1 44.3 52.7 7% 4.8 5.0 4.2 - - 11.4 12.4 10.0 4.5

CanFin Homes 150.2 95.7 136.8 165.5 54.1 71.0 84.5 26.4 34.6 41.2 25% 5.7 4.3 3.6 - - 16.8 17.4 4.0 2.6

Capital First 155.8 245.0 311.1 410.9 41.8 47.3 91.1 5.9 6.7 12.9 48% 26.2 23.2 12.0 - - 4.8 8.8 1.8 1.2

Corp Bank 268.7 5,033.8 5,640.8 6,565.6 1,434.8 1,006.7 1,489.8 93.8 60.2 97.4 2% 2.9 4.5 2.8 - - 10.1 13.6 19.0 7.1

Federal Bank 79.0 2,639.1 2,943.5 3,450.2 842.8 762.1 942.9 9.9 8.9 11.0 6% 8.0 8.9 7.2 - - 11.4 12.9 1.8 2.3

HDFC 813.8 5,927.5 6,972.6 8,427.5 4,848.3 5,614.8 6,629.2 31.3 36.5 43.0 17% 26.0 22.3 18.9 - - 18.0 17.5 12.5 1.5

HDFC Bank 682.7 22,663.7 27,430.3 33,067.5 6,726.2 8,413.0 10,546.6 28.3 35.4 44.3 25% 24.2 19.3 15.4 - - 21.3 22.6 5.5 0.8

ICICI Bank 1,143.9 22,212.1 25,889.3 29,947.8 8,326.2 8,960.9 10,582.0 72.2 77.9 91.9 13% 15.8 14.7 12.4 - - 12.9 14.0 20.0 1.7

IDBI Bank 66.6 8,592.6 8,617.1 9,773.9 1,882.1 1,456.7 1,972.1 14.1 10.9 14.8 2% 4.7 6.1 4.5 - - 6.7 8.5 3.5 5.3

PNB 596.9 19,072.4 20,272.1 22,985.6 4,747.7 4,044.8 4,400.4 134.3 114.4 124.5 -4% 4.4 5.2 4.8 - - 11.8 11.6 27.0 4.5

SBI 1,859.6 60,366.1 65,918.7 75,300.2 14,105.0 12,210.4 14,428.0 206.2 178.5 210.9 1% 9.0 10.4 8.8 - - 11.8 12.7 41.5 2.2

UBI 127.5 10,094.9 10,762.5 12,411.8 2,158.5 1,852.2 2,274.5 36.2 31.0 38.1 3% 3.5 4.1 3.3 - - 10.4 11.7 8.0 6.3

Yes Bank 391.9 3,476.2 4,188.6 5,098.2 1,300.7 1,489.8 1,713.8 36.3 41.5 43.5 10% 10.8 9.4 9.0 - - 23.2 20.2 6.0 1.5

CONSUMER GOODS

Bajaj Corp 227.8 606.7 723.7 875.1 167.4 179.1 220.9 11.3 12.1 15.0 15% 20.2 18.8 15.2 43.1 45.5 34.5 37.5 6.5 2.9

GSK Consumers* 4,624.1 3,079.4 4,697.8 4,331.7 436.8 682.2 642.1 103.9 162.2 152.7 21% 44.5 28.5# 30.3 52.5# 49.1 34.5# 32.2 45.0 1.0

Godrej Consumer 827.2 6,390.8 7,869.1 9,599.0 667.2 861.6 1,099.2 19.6 25.3 32.3 28% 42.2 32.7 25.6 20.6 24.1 25.5 27.0 5.0 0.6

Hindustan Unilever 559.7 26,317.2 29,514.8 33,463.5 3,233.7 3,503.0 3,917.8 15.0 16.2 18.1 10% 37.3 34.5 30.9 129.3 101.5 97.2 74.1 18.5 3.3

ITC 311.1 29,901.3 33,816.4 40,450.2 7,418.4 8,734.6 10,414.8 9.4 11.1 13.2 19% 33.1 28.0 23.6 46.3 46.5 36.1 36.0 5.3 1.7

Jyothy Lab 197.6 1,106.0 1,340.8 1,616.6 16.1 77.6 135.6 1.2 4.7 8.2 161% 164.7 42.0 24.1 11.5 16.7 12.0 19.7 2.5 1.3

Marico 214.0 4,596.2 4,749.7 5,566.0 370.3 474.0 562.7 5.7 7.3 8.7 24% 37.5 29.3 24.6 23.9 26.2 21.7 21.3 1.0 0.5

Mcleod Russel 290.0 1,629.5 1,876.7 2,113.6 274.2 335.9 401.6 25.1 30.7 36.7 21% 11.6 9.4 7.9 19.2 20.1 16.7 17.6 7.0 2.4

TGBL (Tata Tea) 146.2 7,351.0 7,814.9 8,497.5 391.5 442.8 513.7 6.3 7.2 8.3 15% 23.2 20.3 17.6 10.5 11.5 8.9 9.7 2.2 1.5

Zydus Wellness 541.1 388.0 439.7 520.5 99.0 105.0 128.8 25.3 26.9 33.0 14% 21.4 20.1 16.4 38.4 36.6 35.7 33.8 6.0 1.1

IT / IT SERVICES

CMC 1,357.6 1,927.6 2,235.8 2,673.3 230.2 251.9 312.6 76.0 83.1 103.2 17% 17.9 16.3 13.2 30.6 30.4 24.0 24.4 17.5 1.3

HCL Tech** 1,126.6 25,733.7 33,735.3 37,965.5 4,098.7 5,898.2 6,684.7 58.2 83.5 94.7 28% 19.4 13.5 11.9 45.1 39.9 39.1 33.7 12.0 1.1

Infosys 3,325.8 40,352.0 51,363.5 58,609.1 9,421.0 10,627.2 12,313.3 164.7 185.8 215.3 14% 20.2 17.9 15.4 34.1 33.0 25.4 24.6 42.0 1.3

NIIT Technologies 333.1 2,021.4 2,375.6 2,716.6 213.2 245.0 270.3 35.4 40.7 44.9 13% 9.4 8.2 7.4 29.6 27.2 20.4 19.5 8.5 2.6

Persistent Systems 852.0 1,294.5 1,692.6 2,010.2 187.7 254.5 305.3 46.9 63.6 76.3 28% 18.2 13.4 11.2 30.9 31.6 22.8 22.9 9.0 1.1

TCS 2,000.3 62,989.5 84,515.9 101,060.3 13,941.4 19,389.3 23,153.7 71.2 99.1 118.3 29% 28.1 20.2 16.9 45.9 42.8 35.6 33.4 22.0 1.1

Wipro 493.8 37,425.6 43,966.9 50,217.3 6,136.2 7,723.5 8,851.6 24.9 31.4 35.9 20% 19.8 15.7 13.8 21.0 21.5 23.5 23.3 7.0 1.4

CAPITAL GOODS / POWER

BHEL 171.4 47,617.7 38,809.0 37,385.0 6,614.7 4,175.0 3,984.0 27.0 17.1 16.3 -22% 6.3 10.0 10.5 18.8 16.7 12.5 11.0 5.4 3.2

CESC 396.7 5,317.0 5,850.1 6,234.4 618.0 645.9 660.6 49.2 51.4 52.6 3% 8.1 7.7 7.5 8.5 8.2 9.6 9.1 7.0 1.8

Crompton Greaves 129.7 12,094.4 13,270.0 14,701.0 84.6 300.0 558.0 1.3 4.7 8.7 159% 99.7 27.6 14.9 9.7 16.3 7.9 13.4 0.4 0.3

Greaves Cotton 67.1 1,873.8 1,910.8 2,159.2 155.6 144.4 165.1 6.4 5.9 6.8 3% 10.5 11.4 9.9 24.9 25.4 17.4 17.6 1.6 2.4

Kalpataru Power 93.4 6,085.0 7,027.7 7,811.9 129.5 168.2 200.6 8.4 11.0 13.1 24% 11.1 8.5 7.1 10.9 10.9 8.3 9.1 1.5 1.6

PTC India 62.9 8,857.0 10,677.0 12,096.0 127.0 151.0 166.0 4.3 5.1 5.6 14% 14.6 12.3 11.2 8.7 9.2 6.3 6.6 1.6 2.5

Thermax 672.9 4,690.9 4,429.0 4,828.0 349.9 264.0 337.0 29.4 24.9 28.3 -2% 22.9 27.0 23.8 22.1 22.6 15.3 15.7 7.0 1.0

V-Guard Industries 482.6 1,360.2 1,625.3 1,946.1 62.9 78.9 96.8 21.1 26.4 32.4 24% 22.9 18.3 14.9 26.7 26.6 26.7 26.0 3.5 0.7

Company CMP Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%) DPS Div(Rs) growth yield

(%)FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY15/FY13 FY13 FY14E FY15E FY14E FY15E FY14E FY15E (Rs)

EQUITY FUNDAMENTALS EARNINGS GUIDE

^Marico estimates excluding Kaya’s financials

*GSK Consumer FY2014 financial numbers are estimated for 15 months as the companyd change its accounting year end to March 2014, hence not comparable

#We have annualised these ratios to make them comparable

** June Year Ended

INFRASTRUCTURE / REAL ESTATE

Gayatri Projects 60.3 2,022.2 2,199.5 2,644.6 81.6 90.9 99.3 27.0 30.1 32.9 10% 2.2 2.0 1.8 12.6 11.5 11.5 9.9 3.0 5.0

ITNL 134.9 6,644.9 6,150.5 7,347.0 520.3 440.3 431.4 26.8 22.7 22.2 -9% 5.0 6.0 6.1 10.1 10.2 11.9 11.3 4.0 3.0

IRB Infra 99.2 3,687.2 4,037.5 4,645.0 556.7 501.4 523.2 16.7 15.1 15.7 -3% 5.9 6.6 6.3 12.2 12.3 15.9 16.0 4.0 4.0

JP Associates 55.3 13,208.7 14,430.1 15,769.2 501.0 388.0 641.3 2.4 1.8 3.0 13% 23.4 30.3 18.3 10.0 9.8 5.0 6.8 0.5 0.9

Larsen & Toubro 1,096.4 74,498.0 85,537.9 94,752.4 4,790.8 5,220.4 5,752.7 52.0 56.6 62.3 9% 21.1 19.4 17.6 9.0 9.1 14.4 14.1 12.3 1.1

Pratibha Industries 24.5 2,157.5 2,554.3 2,757.1 82.7 57.9 52.2 8.2 5.1 4.6 -25% 3.0 4.8 5.3 13.1 12.8 8.6 7.1 0.6 2.5

Punj Lloyd 28.7 11,408.2 12,261.4 14,101.9 (284.7) (195.4) 68.2 -8.6 -5.9 2.1 0% -3.3 -4.9 14.0 6.8 9.3 -6.4 1.6 0.0 0.0

Unity Infraprojects 25.4 2,039.8 2,090.7 2,261.6 92.6 63.8 73.1 12.5 8.6 9.9 -11% 2.0 2.9 2.6 12.4 12.8 7.4 7.8 0.2 0.8

OIL & GAS

Oil India 462.1 9,948.0 10,357.1 11,919.1 3,588.0 3,769.8 4,385.4 59.7 62.7 73.0 11% 7.7 7.4 6.3 25.7 27.6 18.6 19.6 19.0 4.1

Reliance Industries 866.7 397,062.0 402,003.9 406,827.7 20,879.0 20,726.3 23,538.4 64.7 64.2 72.9 6% 13.4 13.5 11.9 9.9 10.3 9.8 10.0 9.0 1.0

Selan Exploration 314.8 97.1 101.7 148.3 45.2 47.2 68.9 26.9 28.1 41.0 23% 11.7 11.2 7.7 23.3 29.0 18.4 22.6 5.0 1.6

PHARMACEUTICALS

Aurobindo Pharma 306.2 5,855.3 7,167.6 8,005.0 457.3 778.3 913.0 15.7 26.7 31.4 41% 19.5 11.5 9.8 17.6 18.9 27.5 26.2 1.5 0.5

Cipla 388.8 8,279.3 9,549.1 11,364.2 1,544.9 1,594.1 2,069.9 18.7 19.9 25.8 17% 20.7 19.6 15.1 21.5 23.8 16.5 18.4 2.0 0.5

Cadila Healthcare 736.5 6,358.1 7,280.8 8,639.2 655.2 841.3 1,208.5 32.0 41.1 59.0 36% 23.0 17.9 12.5 18.9 23.5 22.4 24.9 7.5 1.0

Dishman Pharma 87.0 1,267.6 1,402.5 1,597.7 100.3 116.9 174.1 12.4 14.5 21.6 32% 7.0 6.0 4.0 11.5 14.6 10.4 13.5 1.2 1.4

Divi's Labs 1,138.5 2,139.9 2,515.2 3,133.8 590.6 727.5 883.6 44.5 54.8 66.6 22% 25.6 20.8 17.1 32.7 33.1 25.8 26.0 15.0 1.3

Glenmark Pharma 525.1 5,012.4 5,937.4 6,826.6 614.8 729.5 888.0 22.7 26.9 32.8 20% 23.1 19.5 16.0 21.4 24.0 21.3 21.0 2.0 0.4

Ipca Laboratories 649.8 2,738.8 3,172.2 3,717.0 394.7 514.3 616.0 31.3 40.8 48.8 25% 20.8 15.9 13.3 28.9 28.4 28.5 26.6 2.0 0.3

Lupin 857.9 9,461.6 11,385.5 13,534.0 1,314.2 1,698.6 2,084.5 29.4 38.0 46.6 26% 29.2 22.6 18.4 31.9 32.6 25.5 24.3 4.0 0.5

Sun Pharma 581.3 11,238.9 14,367.1 16,939.5 3,008.1 4,599.3 5,210.9 14.5 22.2 25.2 32% 40.0 26.2 23.1 36.3 34.7 27.6 24.8 5.0 0.9

Torrent Pharma 494.1 3,054.0 3,709.5 4,351.3 470.0 593.4 684.7 27.8 35.1 40.5 21% 17.8 14.1 12.2 34.9 32.8 34.7 29.7 23.0 4.7

AGRI-INPUTS

Tata Chemicals 271.6 14,718.6 15,701.3 16,745.1 652.5 559.9 669.4 25.6 22.0 26.3 1% 10.6 12.3 10.3 11.7 12.4 7.7 8.7 10.0 3.7

UPL 169.6 9,194.5 10,529.9 11,249.6 777.5 912.9 968.9 17.5 20.9 22.1 12% 9.7 8.1 7.7 17.0 16.4 17.1 15.7 2.5 1.5

BUILDING MATERIALS

Grasim 2,728.3 27,640.0 29,300.0 33,491.0 2,500.0 2,354.0 2,900.0 272.7 256.8 316.3 8% 10.0 10.6 8.6 14.7 16.1 10.5 11.2 22.5 0.8

India Cements 58.1 4,597.0 4,787.0 5,001.0 185.0 115.0 212.0 6.0 3.7 6.9 7% 9.7 15.7 8.4 5.0 7.0 3.0 5.0 2.0 3.4

The Ramco Cements 175.0 3,831.0 4,131.0 4,456.0 404.0 316.0 394.0 17.0 13.3 16.5 -1% 10.3 13.2 10.6 8.0 9.0 13.0 14.0 2.5 1.4

Shree Cement** 4,296.2 5,590.0 6,120.0 6,814.0 967.0 853.0 977.0 277.5 244.7 280.4 1% 15.5 17.6 15.3 20.0 19.0 21.0 21.0 8.0 0.2

UltraTech Cement 1,881.4 20,174.9 21,605.0 24,922.0 2,655.4 2,272.0 2,801.0 96.9 82.9 102.2 3% 19.4 22.7 18.4 16.8 18.6 13.2 14.1 8.0 0.4

DISCRETIONARY CONSUMPTION

Eros Intl. Media 168.8 1,067.9 1,082.5 1,207.0 154.4 179.3 198.4 16.8 19.5 21.6 13% 10.0 8.7 7.8 15.8 15.6 16.7 15.9 1.5 0.9

Indian Hotels 50.2 3,743.4 4,099.9 4,572.9 0.2 24.1 100.2 0.0 0.3 1.2 - - 167.3 41.8 3.0 2.7 1.1 4.7 0.8 1.6

KKCL 1,110.0 303.0 368.1 435.1 53.0 65.2 78.7 43.0 52.9 63.8 22% 25.8 21.0 17.4 30.6 33.6 24.4 26.5 17.5 1.6

Raymond 277.2 4,069.0 4,477.0 5,044.0 40.7 90.7 142.3 6.6 14.8 23.2 87% 42.0 18.7 11.9 10.2 12.6 6.4 9.4 1.0 0.4

Relaxo Footwear 177.7 1,009.8 1,196.8 1,420.9 44.8 52.2 64.1 37.3 43.5 53.4 20% 4.8 4.1 3.3 23.7 25.2 17.8 19.7 2.0 1.1

Speciality Restaurants 120.5 226.9 261.2 335.4 23.4 27.2 45.7 5.0 5.8 9.7 39% 24.1 20.8 12.4 12.6 19.7 9.1 14.0 1.0 0.8

Sun TV Network 371.7 1,923.0 2,260.7 2,603.0 709.6 793.1 933.9 18.0 20.1 23.7 15% 20.6 18.5 15.7 37.6 39.1 26.7 27.7 9.5 2.6

Zee Entertainment 272.4 3,699.6 4,186.1 4,918.0 719.6 879.1 1,030.2 7.5 9.2 10.7 19% 36.3 29.6 25.5 31.3 31.4 20.8 21.3 2.0 0.7

DIVERSIFIED / MISCELLANEOUS

Aditya Birla Nuvo 1,239.8 9,595.2 10,490.5 11,366.1 423.1 571.5 620.3 32.5 44.0 47.7 21% 38.1 28.2 26.0 9.7 9.5 7.9 7.9 6.5 0.5

Bajaj Holdings 875.9 336.9 - - 1,856.4 - - 166.8 - - - 5.3 - - - - - - 25.0 2.9

Bharti Airtel 332.4 80,311.0 85,514.0 95,519.0 2,266.0 4,494.0 6,102.0 5.7 11.2 15.3 64% 58.3 29.7 21.7 9.1 10.6 6.0 9.1 1.0 0.3

Bharat Electronics 1,046.3 6,103.9 6,240.5 6,657.9 889.9 857.6 991.8 111.2 107.2 124.0 6% 9.4 9.8 8.4 14.5 14.6 11.0 11.1 22.3 2.1

Gateway Distriparks 127.6 949.7 1,027.4 1,190.8 126.7 127.5 145.1 11.7 11.8 13.4 7% 10.9 10.8 9.5 13.7 15.6 15.8 17.2 6.0 4.7

Max India 212.0 10,624.0 - - 784.1 - - 29.5 - - - 7.2 - - - - - - 12.2 5.8

Ratnamani Metals 130.1 1,201.0 1,286.0 1,388.0 136.0 137.0 158.0 29.3 29.5 34.0 8% 4.4 4.4 3.8 23.4 22.2 19.5 19.2 4.0 3.1

Remarks

Automobiles

Apollo Tyres � Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share. The demand isexpected to remain subdued in the near term, given the sluggishness in the domestic OEM and the Europeanoperations. The margins are expected to sustain at higher levels due to subdued raw material prices. The proposalto acquire Cooper Tire had led to a sharp contraction in the valuation multiple (as a leveraged buy-out wouldhave stretched the balance sheet making debt servicing difficult in the event of a margin contraction). Moreover,the valuation gap between the company and its peers like Ceat has narrowed significantly. However, given thelower probability of the Cooper Tire deal going through, we see scope for re-rating of the stock. We have, therefore,upgraded the recommendation on the stock to Buy with a revised price target of Rs86.

Ashok Leyland � Ashok Leyland, the second largest commercial vehicle (CV) manufacturer in India, is a pure CV play. The newgreenfield facility in Pantnagar in Uttaranchal has provided strategic cost and diversification benefits. The companyhas ventured into LCV space with the launch of Dost together with Nissan and is witnessing significant ramp-upin volumes. It has also entered into construction equipment space in JV with John Deere. The MHCV volumes arecurrently under pressure due to a subdued economic environment and increased diesel prices. The heavy discountingin the MHCV space may lead to a loss in FY2014. We have a Hold recommendation on the stock with a pricetarget of Rs18.

Bajaj Auto � Bajaj Auto is a leading two-wheeler maker. It is moving up the value chain by concentrating on the executive andpremium motorcycle segments. The launch of the new Pulsar and the KTM range would help it maintain itsleadership in the premium bike segment as well as its domestic volume growth. Further, the company plans tolaunch six new Discover models which would help increase its market share in the commuter segment. Exportsremain the key for the company to drive its overall volumes.

M&M � M&M is a leading maker of tractors and utility vehicles in India. Though the automotive demand may moderatedue to moderation in the UV demand and increasing competition, but the tractor demand would recover on theback of a normal monsoon and better crop realisation. Associating with world majors in passenger cars and CVshas helped it diversify into various automobile segments. The value of its subsidiaries adds to its sum-of-the-partsvaluation. Higher farm incomes, strong rural positioning, lower vulnerability to interest rates make M&M aproxy play on food inflation.

Maruti Suzuki � Maruti Suzuki is India’s largest small carmaker. Though the demand for diesel cars is witnessing pressure due toa hike in diesel prices, but the petrol segment is witnessing recovery due to narrowing differential between petroland diesel prices. Recently the company successfully diversified into the MPV segment with the launch of Ertiga.Suzuki of Japan has also identified India as a manufacturing hub for small cars for its worldwide markets. Withthe merger of SPIL, the diesel engine manufacturing arm of the Suzuki group, we expect synergistic benefits forMaruti.

Banks & Finance

Allahabad Bank � With a wide network of over 2,200 branches spread across India, Allahabad Bank enjoys a strong hold in north andeast India. However, the bank has reported a rise in slippages resulting in deterioration of asset quality. It has relativelya higher proportion of stressed loans among its peers. In addition, the low tier-I CAR is also a cause for concern.

Andhra Bank � Andhra Bank, with a wide network of over 1,800 branches across the country, has a strong presence in southIndia especially in Andhra Pradesh. Though it is trading at an attractive valuation, the concerns on asset qualityfront and the political situation within the state could affect its operations.

Axis Bank � Axis bank continues to grow faster than the industry rate and is diversifying its book in favour of retail. Notably,the bank has maintained a delicate balance between balance sheet growth and profitability. Besides the corebanking business, the bank has forayed into the asset management business and acquired the securities andinvestment banking business of Enam Securities. We expect the earnings growth to remain reasonably strongdriven by a healthy operating performance while asset quality pressures will be manageable.

Bajaj Finserv � Bajaj Finserv is actively present in businesses such as vehicle finance, consumer finance, distribution etc, withinsurance being the dominant contributor to its revenues. It is one of the top players in the life insurance segmentand also has a sizeable presence in the general insurance segment. Its consumer finance business (Bajaj Finance)has shown a robust performance and is likely to boost the earnings of Bajaj Finserv. However, an industry-wideslowdown in the insurance sector and newer regulations could affect its profitability.

Bank of Baroda � Bank of Baroda is among the top public sector undertaking (PSU) banks having a sizeable overseas presence (100offices in 24 countries) and a strong network of over 4,200 branches across the country. It has a stronghold in thewestern and eastern parts of India. The bank’s performance metrics remain superior to that of the other PSUbanks though the asset quality trends will be the key monitorable.

Bank of India � Bank of India has a network of over 4,000 branches, spread across the country and abroad, along with a diversifiedproduct and services portfolio, and steadily growing assets. The operating performance has weakened due tomargin deterioration. Further, the rising stress on the asset quality and pressure on the margin could affect thereturn ratios.

Remarks

CanFin Homes � CanFin Homes is a housing finance company sponsored by Canara Bank. It was set up in 1987. It offers a rangeof products on housing, such as loans for home purchase, home construction, home improvement/extension andsite purchase as well as non-housing finance. The company has 70 branches of which 65% are based in southIndia. It has a loan book of around Rs5,000 crore. Its renewed focus on growth and the recent aggressive expansionof its branch network have put it on a high growth path for the next few years. We believe the operationalperformance and return ratios are improving which should lower the valuation discount to its peers.

Capital First � Capital First (the erstwhile Future Capital Holdings) has been acquired by the global private equity firm WarburgPincus (a 71.3% stake). The present management has taken several initiatives to tap the high-growth retail productsegments, like gold loans, loan against property and loan against shares. It has a strong capital adequacy ratio anda sound asset quality. Its loan book is expected to more than double to over Rs10,000 crore in the next threeyears. However, the shift to conservative accounting and investment in new business lines could affect the profitabilityover the next few quarters.

Corp Bank � Corporation Bank is a mid-sized PSU bank having a relatively higher presence in south India. The bank ispredominantly exposed to the corporate segment constituting about 50% of its book. Due to a higher dependenceon the wholesale business and a low current and savings account ratio, it lags its peers in terms of operationalperformance. Also, the rise in NPAs could keep provisioning high and weaken earnings performance.

Federal Bank � Federal Bank is the fifth largest private sector bank in India in terms of asset size and has traditionally been astrong player in south India, especially Kerala. Under the new management, the bank has taken several initiatives,which would improve the quality of its earnings and asset book. The near-term asset quality issues are manageablewhile the operating performance is steady.

HDFC � HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. Ithas interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries aregrowing faster than HDFC, the value contributed by them would be significantly higher going forward. Due todominant and consistent market share, it trades at a premium over the other NBFCs.

HDFC Bank � HDFC Bank was established in 1994 as part of the liberalisation of the Indian banking industry by the RBI. It wasone of the first banks to receive an “in-principle” approval from the RBI to set up a private sector bank. Itsrelatively high margins (compared with its peers), strong branch network and better asset quality make HDFCBank a safe bet.

ICICI Bank � ICICI Bank is India’s largest private sector bank with a network of over 3,000 branches in India and a presence inaround 18 countries. The bank has once again entered an expansionary mode after making a conscious effort tocontract its advances book due to asset quality concerns. The operating profit improved significantly and is thekey driver of the earnings growth. The bank offers substantial value unlocking opportunities from the insuranceand securities businesses.

IDBI Bank � IDBI Bank is one of leading PSU banks of India. The bank is gradually working towards improving its liabilitybase and expanding the retail book, which is likely to reflect in the form of better margins and return ratios. Dueto rising asset quality risks, low tier-I CAR and slower business growth, the stock is likely to underperform in thenear term.

PNB � Punjab National Bank has one of the best liability mixes in the banking space, with low-cost deposits constitutingaround 40% of its total deposits. This helps it to maintain one of the highest margins in the sector. A strongliability franchise and technology focus will help the bank to increase its core lending operations and fee incomerelated-businesses. In view of the weakness in the economy and relatively higher exposure to troubled sectors, theasset quality has come under stress.

SBI � State Bank of India is the largest bank of India with loan assets of over Rs10 lakh crore. The loan growth forFY2013 was above industry average while the core operating performance was largely stable. The successfulmerger of the associate banks and value unlocking from insurance business could provide further upside for theparent bank. While the bank is favourably placed in terms of liability base, the asset quality would remain a keymonitorable in the near term.

UBI � Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become thelargest retail bank. Hence, it has ramped up its manpower and infrastructure. The asset quality though initiallyshowed signs of stabilisation but has weakened which can affect the earnings performance.

Yes Bank � Yes Bank, a new generation private bank, started its operations in November 2004 and is the only greenfield bankapproved by the RBI in the last decade. The bank is promoted by Rana Kapoor and Ashok Kapur. It follows aunique business model based on knowledge banking, which offers product depth and a sustainable competitiveedge over established banking players. While the operating performance remains healthy, improvement in liabilitybase and capital mobilisation will be the key triggers for the stock.

Remarks

Consumer goods

Bajaj Corp � Bajaj Corp is the third largest player in the hair oil segment and has emerged as the dominant player in thepremium light hair oil category with its Almond Drops hair oil. With its strong brand positioning, distributionstrength and healthy balance sheet, it is well poised to ride the strong consumer demand emerging due to the risingdisposable income and growing aspirations of the Indians. Bajaj Corp, which was scouting for a strategic acquisition,recently acquired the Nomarks brand. The acquisition will add value to its product portfolio and help it upgradefrom a single-brand company to a multi-brand company, thereby improving its growth prospects.

GSK Consumers � GSK Consumer Healthcare is a leading player in the MFD segment with a close to 70% share in the domestic market.Judicious new launches and brand extensions, and the expansion of its distribution reach have helped it to stay aheadof the competition and maintain its pricing power over the years. In a bid to de-risk its business model, it has expandedits product portfolio by entering into new categories such as biscuits, noodles, energy bars, sports drinks and oats inthe recent years. With cash balance of close to Rs1,700 crore the company can invest in growth initiatives as well asreward its investors with a healthy dividend payment. The recently concluded open offer by the promoter acted asan additional trigger for the stock, which remained firm on the bourses. We maintain a Hold recommendation on thestock.

GCPL � Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide marketsegments in India. The recent acquisitions of Darling Group, Tura, Megasari and Latin American companies havehelped the company to expand its geographic footprint. We believe the decent sales volume growth in the domesticbusiness coupled with a strong growth in the Indonesian, African and Argentine businesses would help it toachieve an above 20% CAGR top line growth and above 25% bottom line growth over FY2013-15.

HUL � Hindustan Unilever is India’s largest FMCG company. The subdued volume growth due to the uncertain andinflationary environment is likely to sustain the pressure on its profitability in the near term. Overall, we expect itsbottom line to grow at a CAGR of 10% over FY2013-15. The stock’s current premium valuation does not justifythe true business fundamentals of the company. Hence we recommend a Reduce rating on the stock. In the longterm, it will be one of the key beneficiaries of the Indian consumerism story.

ITC � ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, tostrengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses someof which are at a nascent stage. Thus, the company will deliver a sustained and steady growth in the coming years.

Jyothy Labs � Jyothy Laboratories is the market leader in the fabric whitener segment in India. With the successful integration ofHenkel and the induction of a new management team led by S Raghunanadan, it is transforming itself from a one-brand wonder to an aggressive FMCG player. We expect its top line to grow at a CAGR of 21%. A strongimprovement in the OPM would help the company to achieve an exponential growth in bottom line over FY2013-16. We have a Buy rating on the stock with a price target of Rs260.

Marico � Marico is among India’s leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footingin the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of newproduct categories (especially in the beauty and wellness space) and growth through acquisitions. While the domesticproduct portfolio is likely to achieve a steady growth in volumes, the international business is now gainingmomentum on the back of an increase in distribution and strong performance by the core brands.

Mcleod Russel � Mcleod Russel is the world’s largest tea producer with an annual tea production of close to 100mn kg. With teaestates in India and Africa, it is well poised to take advantage of the current favourable global demand-supplyscenario. With the expectation of a substantial improvement in its sales realisation and a volume growth in mid tohigh single digits (in the domestic market and the international subsidiaries), the company’s consolidated top lineand earnings are expected to grow at CAGR of 14.0% and over 21.0% respectively over FY2013-15.

TGBL � Over the past few years, Tata Global Beverages (formerly Tata Tea) has transformed itself from a mere tea andcoffee company into a complete beverage maker. The recent addition of Mount Everest mineral water to itsproduct portfolio and its tie-up with Pepsico Inc to make a mark in the non-carbonated beverage space are likelyto be the new growth drivers in the long run. Also, its JV with Starbucks would help it to explore opportunities inthe coffee retailing space. Its intention to acquire companies in the USA, Europe and Russia also augurs well andwill enhance its geographical footprint.

Zydus Wellness � Zydus Wellness owns three high-growth brands, Nutralite, Sugar Free and EverYuth, in the niche health andwellness segment. It focuses on rampant growth by increasing the distribution of the existing products, scaling upthe existing product portfolio through variants and new product launches leveraging the three brands. We expectZydus Wellness’ top line and bottom line to grow at a CAGR of 16% and 14% over FY2013-15 respectively.

Remarks

IT/IT services

CMC � Over the years, CMC has gradually transformed itself from a low-margin equipment provider into a well-diversifiedIT services and solutions provider. Its joint-go-to-market strategy with TCS is also playing a big role in the businesstransformation, with CMC gaining a strong traction in the international markets. We believe CMC has already setthe stage for the next level of growth and is likely to witness a much stronger growth in the coming years.

HCL Tech � HCL Technologies is one of the leading Indian IT service vendors. It has reported consistent financial performancein the past several quarters on the back of a ramp-up in business from the large deals bagged earlier and strongmomentum in the IMS space. It continues to demonstrate a strong growth visibility with a robust backlog of dealsand successful execution with market share gain strategy through vendor churns/consolidation. We remain positiveon the company in view of its order wins and superior earnings visibility. The company remains the least affectedby the impending US immigration bill as compared with its large-cap peers.

Infosys � Infosys is India's premier IT and IT-enabled services company. Its robust performance in the September 2013 quarterand the confident commentary of its management coupled with a much better operating environment in the USA andEurope give us confidence that it will sustain the growth momentum in the coming quarters.

NIIT Tech � With its strong domain expertise in a few niche verticals and competitive advantage in terms of significantcontribution from its non-linear initiatives, NIIT Technologies is well placed to benefit from the overall improvementin the demand environment. The two significant pain points for the company, the GIS business and the insurancebusiness, have shown some signs of revival. The company has a robust deal pipeline led by its government verticalwhich comforts us on the revenue visibility front. Improvement in the margin trajectory remains the key to re-rating of the stock.

Persistent � Persistent Systems has proven expertise in the OPD space, a strong presence in the newer technologies, strength toimprove its IP base and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies.We maintain our confidence due to an optimistic management outlook driven by acceleration in the productengineering services business, new technologies and increased momentum in the IP space after consolidating theHP Client Automation revenues.

TCS � Tata Consultancy Services pioneered the IT services outsourcing business in India and is the largest IT service firmin the country. It is a leader in most service offerings and has further consolidated its leadership through theinorganic route. With a strong base it is well placed to garner incremental deals across sectors. Its consistentquarterly performance (better than peers’) coupled with the higher predictability of its earnings would keep it theStreet’s favourite counter in the IT space.

Wipro � Wipro is one of the leading Indian IT service companies. It has lagged the other IT biggies in terms of performancefor several quarters. Its September 2013 quarter performance, management outlook and better that expectedguidance of 1.8-3.6% for a seasonally weak December 2013 quarter give pertinent signs of a revival in the company.Additionally, a conducive operating environment lends support to the earnings visibility for the coming quarters.

Capital goods/Power

BHEL � Bharat Heavy Electricals, India’s biggest power equipment manufacturer, has been the prime beneficiary of the multi-fold increase in the investments made in the domestic power sector over the last few years. However, the order inflowhas been showing signs of slowing down which would remain a major concern for the company. The key challengebefore the company now would be to maintain a robust order inflow and maintain margin amid rising competition andlower order inflow. The current order book of Rs102,300 crore stands at around 2.2x FY2013 sales.

CESC � CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) whichis a strong cash generating business. Further, it is adding 1,200MW of generation capacity which would be onstream by FY2015. Moreover, CESC has a high degree of integrated status among peers. Despite that, the stock iscurrently one of the cheapest in the Indian utility space, trading at a significant discount to its book value primarilyon account of the concerns related to the losses from its retail business, Spencer’s. However, the retail business hasstarted exhibiting a store-level profit since FY2011, which is a sign of revival as per the management. Again,CESC acquired a majority stake in First Source, which is into outsourcing business. We recommend a Buy onCESC with a price target of Rs450.

Crompton Greaves � Crompton Greaves’ key businesses—industrial and power systems—hold a high potential in view of the investmentopportunities in the power transmission and distribution sector. Its consumer products segment is expected towitness a high growth. Though the domestic operations remain relatively stable, but the international operationswent through a restructuring. This has been the major disappointment in the last few quarters adding to the woesof investors. On a positive note, the restructuring in Belgium is over and the key thing to watch out is the stabilisationprocess.

RemarksRemarks

Greaves Cotton � Greaves Cotton is a mid-sized and well-diversified engineering company. Its core competencies are in diesel/petrolengines, power gensets, agro engines and pumpsets (engine segment) and construction equipment (infrastructureequipment segment). The engine business accounts for 85% of its revenues while the rest comes from infrastructureequipment. The foray in the mini tractor segment and international markets would open new growth avenues.While the subdued economic environment would put pressure on the revenues, the company is likely to outperformthe industry on the back of new product launches. We maintain our Buy recommendation on the stock with aprice target of Rs85.

Kalpataru � Kalpataru Power Transmission is a leading EPC player in the transmission & distribution space in India.Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility (also currentorder book is 2x its FY2013 sales). The OPM of the stand-alone business is likely to remain around 10%. JMCProjects (a subsidiary) is experiencing margin pressure which would affect the overall margin and return ratios ofthe company. However, on low valuation, we retain our Buy rating with a price target of Rs115.

PTC India � PTC India is a leading power trading company in India with a market share of 39% in FY2013 in the short-termtrading market. In the last few years, the company has made substantial investments in areas like power generationprojects, power project financing, which will start contributing to its earnings. There is a major positive developmentas pending receivables from UPSEB was received by the company recently and the management expects repaymentfrom TNSEB soon. Pending receivables was one of the drags in the company’s balance sheet and returns ratio. Thepolicy push for the SEB debt restructuring programme has been positive for PTC India. The company converted itshigh-risk high-margin tolling business into a moderate-margin long-term arrangement. We retain Buy due topositive developments and attractive valuation.

Thermax � The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Inc’scapex. Thermax’ group book stands at Rs6,128 crore, which is 1.3x its FY2013 consolidated revenues. However,the company has shown its ability to maintain a double-digit margin in a tough environment. The managementsounded cautious on the growth prospect and the company’s ability to sustain margins in double digits, given thecurrent environment. Hence, we maintain our Reduce rating.

V Guard Ind � V-Guard Industries is an established brand in the electrical and household goods space, particularly in southIndia. Over the years, it has successfully ramped up its operation and network to become a multi-product company.It has recently also forayed into non-south India and is particularly focusing on the tier-II and III cities where thereis a lot of pent-up demand for its products. We expect a CAGR of 24% in its earnings over FY2013-15 and RoEof 26% during this period.

Infrastructure/Real estate

Gayatri Proj � Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road andindustrial construction businesses. The order book stands at Rs7,702 crore, which is 3.8x its FY2013 revenues. Itis also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to privateequity. The company has potential to transform itself into a bigger player though we expect its net profit to remainflat over FY2013-15.

IL&FS Trans � IL&FS Transportation Networks is India’s largest player in the BOT road segment with a pan-India presence anda diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with thegeographical diversification across 12 states reduce the risk to a large extent and provide comfort. Further, astrong pedigree along with the outsourcing of civil construction activity helps it to scale up its portfolio faster.Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector.

IRB Infra � IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator inthe country with all its projects being toll based. It has an integrated business model with an in-house constructionarm which provides a competitive advantage in bidding for the larger projects and captures the entire value fromthe BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-freeand it has presence in high-growth corridors which provides healthy cash flow. Thus, it is well poised to benefitfrom the huge opportunity in the road development projects on the back of its proven execution capability and thescale of its operations.

Jaiprakash Asso � Jaiprakash Associates, India’s leading cement and construction company, is all set to reap the benefits of India’sinfrastructure spending. The company has also monetised very well the real estate properties of Yamuna Expressway.The marked improvement in the macro environment has improved accessibility to capital and thus eased theconcerns of liquidity to some extent. However, higher leverage could act as drag on the valuation.

L&T � Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of thedomestic infrastructure capex cycle. The strong potential of its international business, its sound execution track recordand bulging order book, and the strong performance of subsidiaries further reinforce our faith in it. Recent measuresplanned by the company to improve its returns ratio would augur well for the company. Hence, we remain positiveon the stock.

RemarksRemarks

Pratibha Ind � Pratibha Industries is a dominant player in water & irrigation and urban infrastructure segments. It has also diversifiedinto other high-margin areas like road BOT, power and oil & gas. The current order book stands at Rs8,000 crore,which is 3.7x its FY2013 revenues. The company is facing margin pressure and higher interest expenditure on accountof the rising debt to finance working capital needs. We currently remain cautious and await for positive developmentson debt and working capital requirements.

Punj Lloyd � Punj Lloyd is the second largest EPC player in the country (first being Larsen & Toubro) with a global presence.However, since FY2009, the profitability has come under severe pressure due to cost overruns/ liquidated damagesin some of Simon Carves (a subsidiary) projects. Thus it has put Simon Carves under administration. FurtherLibyan projects will take another few quarters to begin execution. Therefore, the successful execution of itsprojects along with debt reduction and working capital management will drive its growth as it enjoys a robustorder book.

Unity Infra � With a well-diversified order book, Unity Infrastructure is expected to be the key beneficiary of the government’sthrust on infrastructure spending. The order book remains strong at Rs3,508 crore, which is 1.7x its FY2013revenues. We expect its net profit to post a CAGR of -11% due to higher interest expenses during FY2013-15.Further, it has recently forayed into the road BOT segment and has three BOT projects under its kitty.

Oil & gas

Oil India � Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India.The total 1P (proven) and 2P (proven and probable) reserves of the company stood at 473 million barrels (mmbbls)and 941mmbbls respectively as on June 2013. In addition to the huge oil reserves, the company’s reserve-replacementratio is quite healthy at 1.6x, which implies a comfortable level of accretion of oil reserves through new discoveries.Further, it has net cash of around Rs200 per share as on March 2013 and offers healthy dividend yield, whichprovides comfort to investors. The recent policy reforms in terms of partial deregulation of diesel prices and alikely revision in gas prices augurs well for the company.

Reliance Ind � Reliance Industries holds a great promise in E&P business with gas production from the KG basin. Further, a likelyrevision in the natural gas prices will be a positive trigger. In the refining space, we expect its GRM to pick up witha likely improvement in the light-heavy crude oil price differential. The company is likely to fetch a premium overSingapore Complex’ GRM due to its superior refinery complexity and captive use of KG-D6 gas. We expect thepetrochem margins to be maintained in the medium term on an uptick in the domestic demand. Currently, the declinein gas output from the KG-D6 basin is weighing on the stock price.

Selan Exploration � Selan Exploration Technology is an oil exploration & production company with five oil fields in the oil-richCambay Basin of Gujarat. The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields arelikely to improve production. Further, it intends to explore its next field, Indrora, which is the most prolific onewith significant reserves. Based on this, we expect it to ramp up production significantly, subject to approval forthe new wells. We expect production ramp-up in FY2014 and hence we expect the earnings to grow by 23%(CAGR over FY2013-15). Therefore, we retain our Buy rating on the stock with price target of Rs365.

Pharmaceuticals

Aurobindo Pharma� Aurobindo Pharma is set to rebound with the USFDA clearing two of its manufacturing facilities (including onegreenfield facility) and removing import-alert on Unit-VI facility, which will help the company to ramp up itsproduct list in the USA, thanks to a strong product pipeline built over a period. With the expected increase in theexport-led business after resolution of the USFDA issues, the favourable tilt in the revenue mix is likely to boostthe margin, resulting in a relatively much better growth in earnings as compared with revenues. We expect therevenues and net profit to grow at a CAGR of 17% and 41% over FY2013-15 respectively.

Cadila � Cadila Healthcare’s performance in the US generic vertical is likely to improve on the back of new approvalswhich was stagnant during FY2013. Besides, its consumer business and exports to the emerging markets will helpit to achieve its target of generating revenues of $3 billion by FY2016. It got USFDA’s clearance for its Moraiyaplant in FY2013, which removes one of the vital concerns for the company. Recently, it got DCGI approval for itsfirst NCE called Lipaglyn to treat type-II diabetes; this will add value to its R&D pipeline.

Cipla � Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus ontechnology intensive products in the inhalation and nasal spray segments; (2) established front-end presence in thekey markets like South Africa and Europe; (3) developed an appetite for inorganic expansions; (4) decided to tapthe FTF opportunities through collaboration with major generic players in the regulated markets and (5) investedin future growth areas like biosimilars. Besides, Cipla’s base business growth would be fast-tracked in the quartersahead because of the optimisation of the Indore formulation plants and consolidation of Cipla Medpro inQ2FY2014.

RemarksRemarks

Dishman Pharma � Dishman Pharmaceuticals and Chemicals is a key player engaged in CRAMS and specialty chemical businesses. Ithas invested heavily over the past four years (over Rs1,000 crore capex during FY2008-11) to establish a strongfoothold in the CRAMS, API and vitamin-D businesses. After witnessing four years of sluggish performance dueto a global slowdown (that affected the CRAMS business) and heavy capex (that resulted in a sharp rise in thefixed costs), it is all set to record a strong operating performance on the back of enhanced capacities, the up cyclein the CRAMS business and a substantial reduction in the debt/equity ratio due to stronger free cash flow.

Divi’s Labs � Despite a weaker performance in Q1FY2014, we are confident of Divi’s Laboratories’ growth potential. The newDSN SEZ facility at Vishakhapatnam that started in June 2011 augurs well for the company. The company islikely to see an improvement in economies of scale which will also lead to tax benefits after USFDA approvals forthree additional production blocks expected to come in H2FY2014. A near debt-free balance sheet and strongcash flow are likely to help build a war chest for pursuing strategic investments (biosimilars) and exploit thegrowth opportunities in niche segments, like oncology and steroids for contraceptives.

Glenmark Pharma � Glenmark Pharmaceuticals exhibited an impressive operating performance during FY2013 in the core business onkey generic launches, but for higher R&D expenses and tax payments, which restricted the profit growth. Throughthe successful development and out-licencing of six molecules in a short span of eight years, it has become India’sbest play on research-led innovation. It has built a pipeline of 14 molecules and clinched six out-licencing dealsworth $1,672 million (active deals worth $938). It has received over $200 million as initial milestone payment. Itscore business has seen stupendous success due to its focus on niche specialties. Though H1FY2014 has beenrelatively a weaker, but we are confident of its long-term growth prospects.

Ipca Lab � Ipca Laboratories has successfully capitalised on its inherent strength of producing low-cost drugs to tap theexport markets. Its ongoing efforts in the branded formulations business in the emerging economies, the revival inthe UK operations, the pan-European initiatives, the likely approval of one additional product under institutionalbusiness and a significant scale-up in the US business will drive its formulation exports. It has received USFDA’sapproval for the Indore SEZ (US supplies expected in H2FY2014) which would help ramp up the sales in the USA.

Lupin � The expected ramp-up in the launch of oral contraceptives, ophthalmic products, branded franchise (with additionof in-licenced product-Alinia) in the USA and a robust pipeline of new launches in the domestic and overseasmarkets provide strong growth visibility for Lupin. Further, with an expanded field force and therapy focusedmarketing division, its formulation business in the domestic market has been performing better than the industry.The deal with Eli-Lilly to distribute human insulin would open an incremental revenue stream for Lupin in theIndian market.

Sun Pharma � The combination of Sun Pharmaceuticals, Taro, Dusa Pharma and the generic business of URL Pharma offers anexcellent business model, as has been reflected in the 40% Y-o-Y revenue growth and 39% profit growth inFY2013. Though Taro may not show a similar performance in the next quarter, but we expect a better performancefrom Sun Pharmaceuticals going forward mainly driven by (1) contribution from the newly acquired Dusa Pharmaand URL Pharma in the USA and (2) launch of key products (including generic Doxil) which is in short supply andPradin under 180-day exclusivity) in the USA and emerging markets including India. We expect 18% and 22%revenue and PAT CAGR respectively over FY2012-15 on an organic basis. With a strong cash balance, it is wellpositioned to capitalise on the growth opportunities and inorganic initiatives.

Torrent Pharma � A well-known name in the domestic formulation market, Torrent Pharmaceuticals has been investing in expandingits international presence. With the investment phase now over, it should start gaining from its internationaloperations in the USA, Russia and Brazil. The impending turnaround of its German acquisition, Heumann, willalso drive its profitability. Better field force productivity, focus on developed market and stronger balance sheetwould result in a sustainable earnings growth.

Agri-Inputs

Tata Chemicals � With a total capacity of 5.5mmtpa Tata Chemicals is the second largest soda ash producer in the world. It haspurchased 25% stake in a urea-ammonia greenfield project at Goban with investment of $290 million. Furtherchanges in urea policy are likely to benefit it further. Soda prices are likely to improve from the current levelsbecause lower cost Chinese players are also finding it tough to break even at current price. So it believes that theprice of soda may improve from here. Demand for soda ash in India and North America remains strong.

United Phos � A leading global producer of crop protection products, intermediates, specialty chemicals and other industrialchemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to cropprotection products and post-harvest activities. A diversified geography and the recent acquisition of DVA AgroBrazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Itsrevenues are likely to grow at 12-15% and EBIDTA margin is expected to remain at 18-20% in FY2014. It hasalso started to focus on premium products in agro-chemicals and will slowly stop selling commodities and low-margin products.

RemarksRemarks

Building materials

Grasim � Grasim is better placed compared with the other large players in the cement space due to its strong balance sheet,comfortable debt/equity ratio, attractive valuation and diversified business. The demand for VSF products remainsstrong in the global market and Grasim being a leading domestic player is well placed to capture the incrementaldemand. It is in the process of adding another 120,000 tonne capacity in VSF by H2FY2014 at an investment ofRs1,690 crore.

India Cements � India Cements’ installed capacity has got enhanced to 16mtpa which will result in volume growth and drive itsearnings. It is also setting up a 100MW captive power plant, which is expected to come on stream by FY2013 andbenefit the company in terms of cost savings. We believe its average cement realisation in FY2014 will remainhigher as compared with FY2013.

The Ramco Cements � The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from the capacityaddition carried out ahead of its peers in the southern region. The 3mtpa expansion will provide the much-neededvolume growth in the future. The regional demand remains lacklustre but on account of the improvement in therealisation due to supply discipline and a likely change in the market mix its profitability will improve (marginally)in FY2014.

Shree Cement � Shree Cement’s cement grinding capacity has grown to 13.5mtpa which will support its volume growth in thecoming years. It has set up 300MW power plant entirely for merchant sale which is expected to support itsrevenue growth going ahead. Thus, a volume growth of the cement division and the additional revenue accruingfrom the sale of surplus power will drive the earnings of the company.

UltraTech Cement � UltraTech Cement is India’s largest cement company with approximately 52mtpa cement capacity. It has benefitedfrom an improvement in its market mix. Further, the ramping-up of the new capacity and savings accruing fromthe new captive power plants will improve its cost efficiency.

Discretionary consumption

Eros Intl Media � Eros International Media is one of the largest integrated film studios in India with multi-platform revenue streamsand a well-established distribution network across the globe. With its proven track record, an impressive movieslate and alliance with HBO coming into foray, it is well poised to gain from the rising discretionary spending onfilm entertainment driven by the country’s favourable demographics. Thus, it is a compelling value play on theIndian media and entertainment industry.

Indian Hotels Co � Indian Hotels is the largest hotelier in India with a vast portfolio of hotel properties around the globe. Over the longterm it would benefit from the increase in tourism and corporate travel in India. Also, a turnaround in profitabilityof its overseas properties would boost its earnings.

KKCL � Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, hascreated a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is aheadof its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled witha robust balance sheet position put it in a sweet spot.

Raymond � Raymond is present in the fast-growing discretionary & lifestyle category of branded textiles and apparels. Withgrowing incomes, rise in aspirations to lead a luxurious life, greater discretionary spending and favourabledemographics, the segment of branded apparels & fabrics presents a good growth opportunity and Raymond withits brands and superior distribution set-up is very well geared to encash the same. Any development with regard tothe Thane land in the form of either joint development or disposal would lead to value unlocking and providesignificant cash to the company.

Relaxo Footwear � Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four top-of-the-mind-recall brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investmentopportunity due to its growing scale, strong brand positioning and healthy financial performance.

Speciality Rest. � Speciality Restaurants is a leading player in the fine-dining space with a portfolio of well-established brands suchas Mainland China and Oh! Calcutta. It is a good proxy on the Indian consumption story as several factors suchas demographics, increasing disposable income and the trend of nuclear families are playing in its favour.

Sun TV Network � Sun TV is the undisputed leader in the south Indian TV entertainment market. The broadcasters are one of keybeneficiaries of the mandatory digitisation process initiated by the government as its implementation is expectedto lead to a six-fold increase in ARPU of cable subscribers from Rs4 currently to Rs15-20 post-DAS regime. Thecompany also enjoys a 30% market share of the total south Indian advertising market making it one of thedominant players in the industry. Given the upside potential from the DAS regime and a gradual recovery inadvertising, we believe Sun TV’s growth prospects look favourable going ahead.

RemarksRemarks

Zee Entertainment � Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainmentcompanies. It has a bouquet of 34 channels across Hindi, regional, sports and lifestyle genres. It is best placed to benefitfrom the digital addressable system regime rolled out by the government. The recent regulatory change of capping theadvertising time on TV to 12 minutes per hour remains a neutral development for the company as it will be able toincrease its advertisement rates to negate the fall in advertisement volumes.

Diversified/Miscellaneous

Aditya Birla Nuvo � We like the strong positioning that Aditya Birla Nuvo’s businesses enjoy in their respective fields. It is amongst thetop five players in the insurance, asset management and telecom (Idea Cellular is the fastest growing telecom company,third in ranking) segments. Madura Garments, with its marquee brands, and consistent and resilient growth, is aprofitable set-up. In an improving macro-economic environment the company would be well placed to grow.

Bajaj Holdings � Bajaj Holdings & Investment Limited (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby itsmanufacturing undertaking was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business undertakingconsisting of the wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businessesand properties, assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing undertakingand the strategic business undertaking, now remain with BHIL. BHIL is a primary investment company focused onnew business opportunities. It holds more than 30% stake each in BAL and BFS. We have a Buy recommendation onthe stock with a price target of Rs1,464.

Bharti Airtel � Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industryas well as the company focusing on the quality of revenues rather than volume, better times can be expected aheadfor the sector and hence the company. The performance of the African business is slowly stabilised. We remainoptimistic on the company.

BEL � Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, is benefiting from theenhanced budgetary outlay for strengthening and modernising the country’s security. The growth in revenues is alsoexpected to be aided by the civilian and export orders. The company’s current order book of around Rs25,000 croreprovides revenue visibility for the next three to four years. The huge cash reserve would also support the stock.

GDL � With its dominant presence in the container freight station segment and recent forays into the rail freight and coldchain businesses, Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cowwhile its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largestplayers in the CFS business and has also evolved as the largest player in the rail freight business as well as the coldstorage business. The proposed capex for all the three segments will strengthen its presence in each of the segmentsand increase its pan-India presence. We expect its revenue and net profit to grow at 20% and 16% CAGR respectivelyover FY2013-15.

Max India � Max India is a unique investment opportunity providing direct exposure to two sunrise industries of insuranceand healthcare services. Max New York Life, its life insurance subsidiary, is among the leading private sectorplayers, has gained the critical mass and enjoys some of the best operating parameters in the industry. As theinsurance sector is showing signs of stablisation, the company’s favourable product mix and a strong distributionchannel will result in a healthy growth in the annual premium equivalent. As the company has turned profitableon a consolidated basis and has a treasury corpus of over Rs300 crore, it has announced a dividend of 610% inFY2013 and will continue to pay dividends in the future.

Ratnamani Metals � Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. In spite of the challengingbusiness environment due to increasing competition, the stock is attractively valued. The management has maintaineda strong outlook on the potential opportunities in the oil & gas sector.

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