MarketStrategy-DiwaliSpecial-Oct2011

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Market Strategy
Diwali Special

Rise and fall of expectations
Dear Friends, On behalf of all Angels, let me wish you all a Very Happy Diwali and a prosperous New Year! Well friends, we are currently going through tumultuous times once again in a short span of three years and many of you might be wondering where the markets are headed from here in the backdrop of all the global concerns. According to

Dinesh Thakkar

me, to put these events in perspective, we need to look back in history. The Indian markets have undergone a sea change during the last decade, in tandem with the unfolding emerging India growth story but, as they say, the more things change, the more they remain the same. The history of the Indian markets in the last decade can be characterised as the rise and fall of expectations. What a super bull cycle it was from January 2003 to January 2008; the Sensex alone went up six times (a compounded return of almost 45%) and expectations were raging higher and higher. Basically, as our GDP growth trajectory moved up from around 6% levels to 8-9%, due to the resulting scarcity of capital created by this sudden structural change, the return on equity for Sensex companies increased to a high 22%. When such a major change in the growth trajectory is happening in an economy, companies are reacting to the ever-evolving situation and naturally this cannot happen in a smooth, non-disruptive fashion i.e. not every sector would be equally geared up for such kind of acceleration in the economy's growth potential, for instance, agriculture or mining. But, markets were continuing to extrapolate much higher earnings growth for Corporate India than the GDP growth, valuing the Sensex itself at a high 25 times price to earnings. Naturally, as history has shown, bull runs built on such high expectations are usually followed by a painful period of consolidation – something we have been experiencing in the last three odd years. The problems of supply-side constraints had been rearing their head in 2007 before the crisis as well, but then the crisis happened; and by default, we did not have to confront this issue then. But now again, the supply constraints in our economy for achieving 8-9% GDP growth have been confronting the markets; and this time, I think markets have come to terms with the fact that, in light of such constraints, India's GDP growth is likely to be more like 7-7.5% in the near term rather than the aspired 9%+, till we can break the shackles of these supply constraints, which will require serious reforms.
Please refer to important disclosures at the end of this report.

1

Market Strategy
Diwali Special

In the meanwhile, the Sensex is trading at a decent valuation of around 12.5 times earnings, which in my view is a fair valuation level for the Sensex in light of the revised growth expectations for the Indian economy. There may be a few more months of misery, as the Greek 'tragedy' plays itself out. But, from January 2011, domestic inflation is likely to subside as the RBI's tightening as well as the high base effect starts playing out, further aided by lower global commodity prices due to the slower growth in developed economies – a boon in disguise for a country like India. Markets then will also start looking at FY2013 earnings, which are likely to grow by 16-18%. On the base of FY2013 earnings, markets are trading at around 12.5 times earnings, which is close to the current bond yield and well below average valuation levels, which in my opinion is a decent valuation to invest in equities. The fact of the matter is that by the time information regarding the changed scenario (i.e., India's GDP growth is likely to be restricted to 7-7.5% due to our near-term supply constraints) has been well understood and acknowledged, the pain in the markets has also been largely done with. So, it is not advisable to wait for further correction to time the bottom to perfection, because the bottom from these levels in any case will not be far. In fact, global markets, which used to trade at much higher 18-20x P/E levels before the crisis, are now trading at 10-12x P/E and look close to the bottom. Ultimately, an investor needs to focus on valuations because they are critical to making consistent returns in equities. Just like Arjuna had to focus on the bird's eye to get his aim right, an equity investor must always focus on this key aspect of valuations! Overall, friends, we must keep in mind that India is in a sweet spot when it comes to emerging markets because of our enviable combination of young population, low finance penetration and low productivity, all of which provide a platform for consistent improvement and growth for several decades to come. Equity investments are the best way to benefit from this growth potential in my view, as history has shown that over a longer period, equities have given investors the highest compounded returns amongst all asset classes. Also, FII investors on an average are bound to be net buyers of Indian eqities in the longer run, even if recently we have gone through a bout of FII selling. Even if India receives US$7bn-9bn of FII inflows, it can make a world of difference to valuations. So, rather than worry too much about near-term noises on various macro-economic issues, you should bear in mind these basic underlying principles and look to invest regularly in equities to average out the volatility that is inherent in equity markets, so that you can benefit from healthy compounded returns in the longer term. And, always remember that the fruits of success are after all borne from the seeds of patience! Warm regards,

Dinesh Thakkar

October 2011

Please refer to important disclosures at the end of this report.

2

Market Strategy
Diwali Special

No debt shall do us apart!
Dear Friends, Wish you all a very a Happy Diwali! I know the markets have of late been range-bound, so it is my pleasure to write to you on this joyous occasion to brighten your view of the current situation. Let us first dive into what the brouhaha is all about. Essentially, the world has suddenly gotten worried about the ability of the most Lalit Thakkar developed economies in the world to pay back their debts. But, in reality, is this the right way to look at the debt crisis in Europe? As I understand, increasing public debt is going to be a common occurrence in the US and Europe (and for that matter, Japan) in the coming decades. Does that mean these countries are going to go into a perpetual decline because of their high public debt? In my view, debt is not the problem. Eventually, demographics will determine the future outlook for these countries. Japan has been increasing its debt since the nineties and now public debt stands at 220% of its GDP much higher than any country in the , world. Yet, interest rates in Japan are close to zero. The US is incurring a 10%+ fiscal deficit and its public debt is 95% of GDP which is likely , to increase in the coming decades. Again, interest rates are less than 3%. So, why do neither of these countries have to face a high inflation or interest rate problem in spite of their high fiscal deficits? To understand this, let us first take a hypothetical example of a society that never undertakes any fiscal deficit. Also, its citizens maintain a 20% savings rate to create a bulwark for their old age. But this society, for some reason, has lost interest in giving birth to a new generation. This country is in fact heading towards a gargantuan disaster, even though its population has saved adequately for old age and never incurred fiscal deficits. Assuming that the population retires in one go, imagine what will happen to such an economy – true, people will have money, but who will serve them? Who will provide them food and other necessities? Who will run the factories and hospitals? There will be such hyperinflation that the savings that were meant to take care of the twenty-odd years of retirement will not even be able to buy goods for one week. In comparison to this, let us assume another society whose savings rate is 20% and whose government (let's say for the wrong reasons) is running a fiscal deficit of 3%. As long as this society believes in life and a natural birth cycle, the government will be able to better serve its people, even though the country might maintain a debt to GDP ratio of 200%. Japan is, in fact, able to maintain a public debt of 220% of GDP and yet keep interest rates low, because the high savings culture of Japan’s citizens exceeds the amount of private investment required in their economy and their government can incur fiscal deficits without worrying about domestic inflation or pressure from other countries to reduce debt.

October 2011

Please refer to important disclosures at the end of this report.

3

Market Strategy
Diwali Special

In case of the US, the reserve currency status of the dollar has proven to be an even bigger privilege. Due to the willingness of emerging economies to accumulate forex reserves in the form of US dollars and US government bonds, in spite of having one of the lowest savings rates and highest fiscal and current account deficits amongst all developed economies, the US still enjoys very low interest rates! But, let me take it one step further. What if there wasn't just one country like the US that had the privilege of having a reserve currency, but instead there was only one currency across the world and there were no economic borders between countries? What if in such a world, there was a situation of unemployment? It follows, in my view, that even in such a case, if the common government incurred a fiscal deficit and monetised this fiscal deficit by printing currency in order to keep its interest costs low, it would not lead to inflation so long as that economy was running below its full potential and 5-10% of its working age population was unemployed i.e., so long as there is a deflationary situation in the economy due to excess capacity, printing of currency to provide fiscal stimulus will not lead to inflation. In fact, developed economies inherently do not have an inflation problem – after all, they already have very low savings and high leverage, resulting in high consumption already, and yet their supply exceeds demand. This is my understanding, but I acknowledge a nagging worry that excess debt can boomerang. However, in a situation where a bubble was already created (circa 2008), the excess 10-15% capacity created during the bubble can take 10-15 years to be absorbed in developed economies which grow at about 1-2% p.a. on an average. In the interim, to lessen the pain, especially given high leverage and high unemployment, I believe quantitative easing is the only near-term solution. So, if that is the case with large developed economies, what about the high public debt of the weaker Eurozone countries? The problem with these countries is that they neither have high savings like Japan nor do they have the ability to print currency like the US, on account of being a coalition of separate governments with different fiscal policies rather than a single fiscal entity. Clearly, they have only two choices – either the coalition needs to print Euros to bail out these countries or the Euro needs to be disintegrated, so that these countries can float their own devalued currencies and increase exports to solve their economic problems. If the Eurozone finally accepts the second alternative, it will mean that the US dollar will become the sole reserve currency in the world. In that scenario, the US would be the only major country running a current account deficit that will enable the corresponding current account surplus countries with undervalued currencies such as China to create employment and GDP growth in their own economies. In turn, the US will be in a position to incur large fiscal deficits to stimulate demand in its own economy and provide dollar liquidity to the world, since other countries in the world including the Eurozone become unable and unwilling to tackle excess capacity by incurring fiscal deficits. That said, looking at the latest situation, with the UK setting a precedent with a £75bn quantitative easing package, it looks like Eurozone leaders too will bail out the weaker countries in the near term. Coming back to India, in my view, 7-7.5% GDP growth is still a pretty healthy growth rate and the current valuations of about 12.5x-13x FY2013 P/E for the Sensex factor in this new normal for India. So, rather than worrying about high public debt in developed countries, in my view, one should consider allocating funds into Indian equities, as from these levels they are set to give healthy returns to long-term investors. The time-tested vows still hold true – Only death can do us apart, no debt can do us apart! Warm regards,

Lalit Thakkar October 2011
Please refer to important disclosures at the end of this report.

4

Market Strategy
Diwali Special

October 2011

Please refer to important disclosures at the end of this report.

5

Market Strategy
Diwali Special

Top Picks
Company
Large Cap Ashok Leyland Axis Bank Cipla ICICI Bank Larsen & Toubro Lupin Reliance Industries United Phosphorus Mid Cap Goodyear Greenply Hitachi Ineos ABS Jagran Prakashan MRF Siyaram Silk Mills Tata Sponge 295 204 158 616 105 6,695 279 305 380 311 212 702 148 7,904 422 429 25 1,095 286 860 1,444 464 850 133 31 1,426 369 1,146 1,857 593 1,099 180

CMP (`)

TP (`)

Near term macro concerns getting addressed; valuations reasonable
Indian markets have fallen in tandem with peers on heightened global macro concerns over the past few months. Uncertain global macro environment, moderating domestic growth with persistently higher inflation and associated policy rate hikes by the RBI have overshadowed the reasonable valuations of domestic equities. The key triggers for Indian equities in the short-term are likely to be in the form of a) peaking of the domestic inflation and interest rate cycle and b) restoration of some degree of certainty in global markets on the back of structural reforms in the Eurozone. In the near term, cooling global commodity and energy prices also bode well for the Indian economy and are likely to lead to peaking out of the WPI inflation in January 2012. As inflation peaks out, we expect the interest rate cycle to peak out with expected policy rate cuts from CY2012 to stimulate the moderating domestic growth momentum. Valuation-wise also, the Sensex is trading at c.13.5x one-year forward earnings (c.12.5x based on FY2013E) which is a considerable c.20% discount to its five-year average. Our 12 month Sensex target is 19,150, implying an upside of c.13% from current levels. Inflation expected to head south on the back of lower global commodity and energy prices: In spite of slowing domestic growth, inflation has stubbornly remained above the RBI's indicated comfort level for 21 consecutive months. In fact, the latest WPI reading approached the double-digit mark (at 9.8%) and is likely to stay high till December 2011 which may force the RBI to persevere with its anti-inflationary stance in CY2011. However, going forward, we expect inflationary pressures to ease off considerably and WPI inflation to fall below 9%-mark in 1QCY2012, due

Note: Investment period - 12 Months BSE Sensex (16,958) and Price as on October 12, 2011

Angel Portfolio
Sector
Auto & Ancillaries Banking 29.0

Weight (%)
6.0

Stocks
Ashok Leyland, MRF ICICI Bank, Axis Bank, SBI, HDFC Bank

to lower global commodity and energy prices. Hence, from January 2012 at the latest, we see a meaningful case for the RBI to take a pause, especially considering the signs of slowdown on the domestic growth front evident from slowing GDP growth rates, tepid IIP growth, moderating trend in PMI, declining vehicle sales and expected moderation in export growth. Eurozone: Structural problems remain; EFSF fund large enough to avert a sudden financial shock: Eurozone countries face problems over mounting sovereign debt crisis concerns. The International Monetary Fund (IMF) has further cut its GDP growth projections, especially for PIIGS countries (Portugal, Ireland, Italy, Greece and Spain). Having said that, the EFSF (European Financial Stability Facility), in our view - which is similar to the TARP fund of the US Fed that restored confidence in the financial markets after the Lehman crisis - has the wherewithal to achieve an objective similar to the US Federal Reserve’s bailout fund (TARP). The Eurozone countries have ratified the increase in the EFSF to Eur750bn (US$1tn). This is substantial in our view - in fact, it exceeds the entire public debt of the PIG (Portugal, Ireland & Greece) countries. Depreciation of INR likely to aid exports: Although exports growth faces headwinds on account of a weaker demand scenario due to slower global growth, the recent sharp depreciation (c.11% depreciation since August 1) of INR vs. USD is expected to counter this to an extent by improving the competitiveness of Indian exporters. In fact, as compared to the sharp depreciation of INR, the Chinese Yuan has actually appreciated marginally over the same period.
Please refer to important disclosures at the end of this report.

Cap Goods & Infra FMCG Media Metals

8.0

L&T, LMW

3.0 3.0 6.0

ITC Jagran Prakashan Tata Steel, Tata Sponge

Oil & Gas Pharma & Agrichem Software Others

12.0 12.0

Reliance Industries Cipla, Lupin, United Phosphorus

12.0 Infosys, TCS, Mphasis 9.0 Hitachi, Ineos ABS, Siyaram Silk

October 2011

6

Market Strategy
Diwali Special

Inflation expected to head south on the back of lower global commodity and energy prices
In spite of slowing domestic growth, inflation has stubbornly remained above the RBI's indicated comfort level of 5-5.5% for 21 consecutive months. In fact, headline WPI inflation in August 2011 approached the double- digit mark at 9.8%. The acceleration in core (non-food manufacturing) inflation in August 2011 indicated the persistence of inflationary pressures, which in the RBI's words has remained high, generalised and much above its comfort zone. High inflation readings are likely to force the RBI to persevere with its hawkish stance, considering the RBI's unequivocal guidance of change in stance only if the inflation trajectory shows a downward movement. However, the recent sharp fall in global commodity and energy prices following the Fed's abstinence from adopting quantitative easing (QE)-III and weaker global demand prospects are likely to aid in pulling down headline inflation to at least the 8-9% band from January 2012 and is likely to be a meaningful case for the RBI to pause and even think of cuts depending on the domestic growth scenario and international macro environment.

lower cost funding provided to the PIG countries, an immediate default can be avoided. Then, the admittedly gradual process of rectifying the other imbalances can be undertaken in these nations. In our view, the EFSF fund - which is similar to the TARP fund of the US Federal Reserve that restored confidence in the financial markets after the Lehman Crisis - has the wherewithal to achieve this objective. The Eurozone countries have ratified the increase in the EFSF to Eur750bn (US$1tn). This is substantial in our view - in fact, it exceeds the entire public debt of the PIG countries. The problem with the Eurozone as against the US is that there are structural issues facing the Eurozone due to the inherent conflict between common monetary policy and independent fiscal policies of member countries. These issues do not have any simple quick-fix solution and will take some time to be resolved. But this is already reflected in the low valuation levels that equities are trading at across the world. However, we believe the probability of a sudden, large financial shock on the lines of the Lehman bankruptcy appears lower due to the large EFSF fund and shows the larger commitment of leading Eurozone members to avert a major crisis.

Exhibit 1: Fall in Reuters CRB to drive inflation lower
50.0 40.0 30.0 20.0 10.0 Apr-07 Oct-07 Jan-08 Apr-08 Oct-08 Jan-09 Apr-09 Oct-09 Jan-10 Apr-10 Oct-10 Jan-11 Apr-11 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11

12.0 10.0 8.0 6.0 4.0 2.0 YoY rise in Avg Reuters CRB Index (%) WPI inflation 3 month lag (%, RHS) (2.0)

Exhibit 2: Global macro snapshot
Country Germany France Italy Spain Netherlands Belgium Austria Greece Finland Portugal Ireland Slovak Rep. Luxembourg Slovenia Cyprus Malta Euro Rgn. PIIGS PIG US UK Japan GDP USD bn 3,316 2,583 2,055 1,410 783 466 377 305 239 229 204 87 55 48 23 8 12,189 4,204 739 14,527 2,250 5,459 Inv. Savings Fiscal Public Current Inv. (%)deficit rate (%)deficit (%) Debt (%) a/c (%) rate (%) 22.8 17.3 16.7 18.5 25.4 20.2 25.1 4.1 21.9 8.9 10.1 20.2 25.1 22.2 11.4 15.7 19.2 15.6 7.2 12.5 11.8 23.8 (3.3) (7.7) (4.6) (9.2) (5.2) (4.6) (4.1) (9.6) (2.8) (7.3) (32.2) (8.2) (1.7) (5.2) (5.4) (3.8) (6.1) (8.0) (15.1) (10.3) (10.2) (9.2) 80.0 84.3 119.0 60.1 63.7 97.1 69.9 142.0 48.4 83.3 96.1 42.0 16.6 37.2 61.7 67.0 85.0 97.9 111.1 94.4 75.5 220.0 5.3 (2.1) (3.5) (4.5) 7.1 1.2 3.2 (10.4) 3.1 (9.9) (0.7) (3.4) 7.7 (1.2) (7.0) (0.6) 0.1 (4.5) (7.6) (3.2) (3.2) 3.6 17.5 19.3 20.2 23.0 18.3 19.0 22.0 14.6 18.7 18.8 10.8 23.7 17.3 23.4 18.4 16.4 19.1 20.2 14.8 15.7 15.0 20.2

(10.0) (20.0) (30.0) (40.0) (50.0) (60.0)

Source: MOSPI, Bloomberg, Angel Research; Note: WPI inflation forecasted figures from September 2011 based on historical correlation with Reuters CRB Index

Eurozone: Structural problems remain; EFSF fund large enough to avert a sudden financial shock
Eurozone countries face problems over mounting sovereign debt crisis concerns. The International Monetary Fund (IMF) has further cut its GDP growth projections, especially for PIIGS countries. Having said that, the total public debt of Greece, Ireland and Portugal is about US$820bn. These three are clearly the ones with multiple macro-economic problems such as low savings, high current and fiscal deficits and high public debt. Increase in the cost of their public debt has created a self-fulfilling vicious downward spiral. For Italy and Spain, the fact remains that both these are substantially larger and more robust economies than the former three and the issues ailing them are neither multiple nor as onerous. So, provided confidence can be restored and

Source: IMF, Angel Research

October 2011

Please refer to important disclosures at the end of this report.

7

Market Strategy
Diwali Special

Depreciation of INR likely to aid exports
Although exports growth faces headwinds on account of a weaker demand scenario due to slower global growth, the recent sharp depreciation (c.11% depreciation since August 1) of INR vs. USD is expected to improve the competitiveness of Indian exporters. As compared to the sharp depreciation of INR, the Chinese Yuan has actually appreciated marginally over the same period, thereby bettering the competitiveness of Indian products.

Exhibit 5: Sensex one-year forward P/E (x)
27.0 24.0 21.0 18.0 15.0 12.0 9.0 6.0

Apr-01

Apr-02

Apr-03

Apr-99

Apr-04

Apr-05

Apr-96

Apr-98

Apr-06

Apr-97

Apr-00

Apr-07

Apr-08

Apr-09

Sensex 1 year forward P/E

15 year Avg

5 year Avg

Exhibit 3: Competitive advantage for Indian exporters
Particulars USD-INR USD-CNY 12- Oct-11 12-Oct Oct-11 48.96 6.36 Since Aug 1 (%) 11.1 (1.1) 12.2 3M chg (%) 1Y chg (%) 9.5 (1.7) 11.2 9.6 (4.7) 14.3

Source: Bloomberg, Angel Research

Exhibit 6: Earnings yield vs. bond yield (%)
13.0 11.0 9.0 7.0 5.0 3.0

Net benefit for Indian exporters
Source: Bloomberg, Angel Research

In fact, Indian exports growth has been robust off late with monthly exports growth zooming to 44% in August 2011. The recent better competitive positioning due to the currency depreciation is likely to aid future exports growth. Though the exports growth may not sustain at the exceptionally high current levels given prospects of a slower global growth, we expect it to remain at decent levels. Exhibit 4: Exports growth at multi-year high
35 30 25 20 20.0 15 10 5 (20.0) (40.0) 80.0 60.0 40.0

Jul-01

Apr-10
Jul-10

Apr-02

Oct-03

Jan-03

Oct-06

Oct-00

Earnings Yield

10Yr G-Sec Yield

Source: Bloomberg, Angel Research

India Exports (USD bn)

3M rolling yoy growth (%, RHS)

Source: Bloomberg, Angel Research

Valuations reasonable though macro worries could remain an overhang in the short term
Indian markets have fallen c.17% in CY2011YTD and have underperformed world markets by c.9% due to concerns of higher inflation and higher interest rates. Based on one-year forward earnings, the Sensex is trading at c.13.5x (c.12.5x based on FY2013E earnings) which is a considerable c.20% discount to its five-year average.

We remain confident on the long-term prospects of the Indian growth story due to benefits of demographic dividend, a primarily internal consumption-driven economy, its relative better positioning globally, reasonable earnings growth trajectory and reasonable valuations vis-à-vis India's structurally positive outlook. In the near-term as well, cooling global commodity and energy prices also bode well for the Indian economy and are likely to lead to peaking out of the WPI inflation cycle in September 2011. Inflation is likely to see meaningful deceleration from December 2011. As inflation peaks out, we expect the interest rate cycle to peak out with expected policy rate cuts from CY2012 in order to stimulate the moderating domestic growth momentum. Our 12 month Sensex target is 19,150, arrived at by assigning a conservative multiple of 14x FY2013E earnings. Our target implies an upside of c.13% from current levels. Consistent with our view that the correction in the Sensex and broader markets, especially cyclicals, factors in the negatives and on expectations that domestic inflation and interest rates are close to peak, our Top Picks and Model Portfolio reflect an overweight stance on large banks in the BFSI space as well as other cyclicals such as Ashok Leyland and L&T. We also recommend buys on midcaps with strong brands or entry barrier businesses such as United Phosphorus, Jagran Prakashan, Siyaram Silk and Hitachi amongst others.

Aug-95

Aug-96

Aug-97

Aug-98

Aug-99

Aug-00

Aug-01

Aug-02

Aug-03

Aug-04

Aug-05

Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

October 2011

Aug-11

Oct-09

Apr-99

Jan-06

Jan-00

Apr-08

Jan-09

Apr-05

Apr-11

Jul-04

Jul-07

Apr-11

Please refer to important disclosures at the end of this report.

8

Market Strategy
Diwali Special

Top Picks

October 2011

Please refer to important disclosures at the end of this report.

9

Market Strategy
Diwali Special

Ashok Leyland (ALL)

(CMP: `25/ TP: `31/ Upside: 25%)

M&HCV demand has witnessed a slowdown in recent times due to high interest rates and slowdown in industrial activity; however, we believe M&HCV demand is near its trough. With interest rates expected to cool down from CY2012, we expect pick-up in industrial activity, leading to a rebound in M&HCV sales. Thus, we expect ALL’s volume growth to rebound from ~4% in FY2012E to ~12% in FY2013E. The new tax-free facility at Pantnagar is relatively more profitable, with profitability estimated to be ~25% higher (cost savings of ~`35,000/vehicle) than that of existing plants. ALL plans to ramp the production to ~35,000 vehicles in FY2012 from 12,800 in FY2011. We expect these benefits to partially offset the impact of raw-material cost pressures, enabling ALL to maintain its OPM at 10-11%. Currently, the stock is trading at attractive levels of 9.6x FY2013E earnings. We maintain our Buy recommendation with a target price of `31, valuing the stock at 12x FY2013E earnings.
Y/E March FY2012E FY2013E Sales ( ` cr) 12,344 OPM (%) 9.6 PAT ( ` cr) 524 688 EPS (`) 2.0 2.6 RoE ( %) 13.1 16.2 P/E (x) 12.6 9.6 P/BV EV/EBITDA P/BV EV/EBITDA (x) 2.4 2.1 (x) 7.1 5.9 EV/Sales (x) 0.7 0.6

14,178 10.1

Axis Bank

(CMP: `1,095/ TP: `1,426/ Upside: 30%)

Axis Bank has increased its CASA market share multi-fold over the last eight years (4.2% as of FY2011) on the back of robust branch and ATM network expansion. In fact, the bank opened 400 branches in FY2011 itself (41.4% yoy). Going forward as well, annual addition of 250+ branches is expected to lead to a 30-50bp increment in CASA market share every year. Fee income contribution across a spectrum of services has been a meaningful 2.0% of assets (almost twice the level in PSBs) over FY2009-11. We expect Axis Bank to raise capital in the next 12-18 months as the bank’s capital adequacy at the end of 1QFY2012 stood at 9.4% (Axis Bank had last raised capital in 2QFY2010, when its tier-1 CAR was 9.4%). Dilution is likely to be book-accretive and will aid in further enhancing the bank's credit market share going forward. Axis Bank is trading at 1.8x FY2013E ABV (~44% discount to HDFC Bank). The bank's ALM position vis-à-vis HDFC Bank is currently a disadvantage; however, with the interest rate cycle close to its peak, in our view, the bank will also benefit more once interest rates cool off a bit in CY2012. Hence, we maintain our Buy view on the stock with a target price of `1,426.
Y/E March FY2012E FY2013E Op Inc. ( ` cr) 12,562 15,664 NIM (%) 2.8 2.9 PAT ( ` cr) 4,072 5,074 EPS (`) 96.0 ABV ABV ( `) 528.1 RoA (%) 1.5 1.5 RoE (%) 19.7 20.8 P/E (x) 11.4 9.2 P/ABV P/ABV (x) 2.1 1.8

119.6 619.8

October 2011

Please refer to important disclosures at the end of this report. 10

Market Strategy
Diwali Special

Cipla

(CMP: `286/ TP: `369/ Upside: 29%)

Cipla is one of the largest players in the domestic formulations market, with a market share of around 5%, contributing 46% to the total turnover in FY2011. Cipla's distribution network in India consists of a field force of around 7,000 employees. The company plans to increase its focus on domestic markets with new therapies such as oncology and neuro-psychiatry in the offering. Exports, which contributed 52% to the company's total turnover in FY2011, would continue to drive the company's growth. In the US, Cipla has entered into a partnership with 22 players and has cumulative 64 approved ANDAs, of which 35 have been launched, while 46 are pending for approval. Since FY2006, Cipla has incurred capex of `2,500cr (71% of GFA) for upgrading its existing manufacturing facility as well as setting up new facilities in Sikkim and Indore. With significant capex been incurred and with most of the facilities commercialised, management expects Cipla's return ratios to improve as productivity level increases. Hence, we maintain our Buy rating on the stock with a target price of `369.
Y/E March FY2012E FY2013E Sales ( ` cr) 7,006 8,164 OPM (%) 20.0 21.2 PAT ( ` cr) 997 1324 EPS (`) 14.9 18.4 RoE ( %) 16.8 18.2 P/E (x) 19.1 15.5 P/BV EV/EBITDA P/BV EV/EBITDA (x) 3.0 2.6 (x) 16.5 13.2 EV/Sales (x) 3.3 2.8

ICICI Bank

(CMP: `860/ TP: `1,146/ Upside: 33%)

ICICI Bank's substantial branch expansion (from 955 branches at the end of 3QFY2008 to 2,533 branches as of 1QFY2012) and strong capital adequacy at 19.6% (tier-1 at 13.4%) have positioned it to gain CASA and credit market share, respectively. The bank improved its market share of savings deposits by 10bp in FY2011 compared to FY2010, capturing a substantial 5.8% incremental market share. The bank has been able to increase its CASA ratio to 45% as of FY2011 and, contrary to the overall trend in the sector, we expect this favourable change in the bank's liability mix to improve its NIM to ~2.6% by FY2013. The bank's asset quality continues to show further improvement, with a declining trend in additions to gross as well as net NPAs. We expect the reduction in risk profile of advances (and the consequent lower yield on advances) to result in a ~30bp decline in NPA provisioning costs by 2013E over FY2011. The stock is trading at attractive valuations of 1.6x FY2013E P/ABV. Hence, 1,146, we maintain our Buy view on the stock with a target price of `1,146 valuing the core bank at 2.2x FY2013E P/ABV and assigning a value of `191 to its subsidiaries.
Y/E March FY2012E FY2013E Op Inc. ( ` cr) 17,884 22,445 NIM (%) 2.5 2.6 PAT ( ` cr) 6,258 7,937 EPS (`) 54.3 68.9 ABV ABV ( `) 508.8 547.7 RoA (%) 1.4 1.4 RoE (%) 13.4 15.6 P/E (x) 15.8 12.5 P/ABV P/ABV (x) 1.7 1.6

October 2011

Please refer to important disclosures at the end of this report. 11

Market Strategy
Diwali Special

L&T

(CMP: `1,444/ TP: `1,857/ Upside:29%)

L&T stock has underperformed BSE Sensex by ~11% in the last three months, owing to factors such as slowing order inflows and rising competition (especially in the BTG equipment segment), leading to fears of slippage on order inflow guidance. Also, L&T lost the public sector shipyard, Mazagon dock, for defence and naval ships and failed to win the recent ONGC pipeline tenders. We believe that although L&T would find it difficult to meet its aggressive guidance (growth of 15-20%), it is better placed than its peers on a number of counts (such as diversification and balance sheet strength). Further, management commentary indicates that apart from the power segment, other segments (read infra and export front) are witnessing good traction. We have already factored in slippages on the order inflow front and even after factoring them, we note that order booking is much higher compared to the revenue. We believe L&T is best placed to benefit from the gradual recovery in the capex cycle, given its diverse exposure to sectors, strong balance sheet and cash flow generation as compared to its peers, which grapple with issues like strained cash flow, high leverage and limited net worth and technological capabilities. Due to the recent correction, the stock is trading at PE of 13x FY2013E earnings, adjusted for subsidiary value, which is lower than its historical PE of 15-20x. Hence, Buy. we believe the recent correction provides a good opportunity to Buy.
Y/E March FY2012E FY2013E Sales ( ` cr) OPM (%) PAT ( ` cr) 3,965 4,736 EPS (`) 64.4 76.9 RoE ( %) 16.9 17.6 P/E (x) 22.4 18.8 P/BV EV/EBITDA P/BV EV/EBITDA (x) 3.5 3.1 (x) 15.2 12.7 EV/Sales (x) 1.8 1.5

52,765 12.0 64,569 12.0

Lupin

(CMP: `464/ TP: `593/ Upside:28%)

Lupin is one of the highest filers in the Indian pharmaceuticals industry. As of FY2011, the company’s cumulative filings stood at 148, of which 48 have been approved. Lupin plans to launch 10 products in the US in FY2012 and another 80 products over the next three years. Overall, we expect the US market to post a CAGR of 28.8% over FY2011-13E. In the oral contraceptive (OC) segment, Lupin has filed 22 ANDAs and expects to get approvals from 2HFY2012. As per management, the OC segment is expected to contribute US$100mn to the company's top line over the next 2-3 years. Lupin continues to make strides in the Indian market. Currently, Lupin ranks No.5, climbing up from being No.11 six years ago. Lupin has been the fastest growing company among the top five companies in the domestic formulation space, registering a strong CAGR of 20% over the last three years. Management has given a revenue guidance of US$3bn by FY2013-14. We expect Lupin's net sales to grow at a 20.4% CAGR to `8,272cr and earnings to grow at a 24.0% CAGR to `29.7/share over FY2011-13E. Currently, the stock is trading at 20.7x and 15.6x FY2012E and FY2013E earnings, respectively. Based on the above-mentioned triggers, we maintain our positive outlook on the company and recommend a Buy rating on the stock with a target price of `593.
Y/E March FY2012E FY2013E Sales ( ` cr) 6,817 8,272 OPM (%) 18.3 19.7 PAT ( ` cr) 997 1,324 EPS (`) 22.4 29.7 RoE ( %) 28.2 30.8 P/E (x) 20.7 15.6 P/BV EV/EBITDA P/BV EV/EBITDA (x) 5.5 4.3 (x) 17.2 12.9 EV/Sales (x) 3.2 2.6

October 2011

Please refer to important disclosures at the end of this report. 12

Market Strategy
Diwali Special

Reliance Industries

(CMP: `850/ TP: `1,099/ Upside: 29%)

Reliance Industries’ (RIL) upstream segment still has significant upside in store, considering the huge untapped resources. Although RIL is producing natural gas below its potential 80mmscmd from KG-D6 due to constraints over reservoir pressure, we believe that the company will ramp up its production over the medium term with the help of BP’s technical expertise. RIL has recently concluded several three-year exploration phases on the prospective eastern coast, and it is expected to commence the development phase soon. RIL expects to commence significant E&P activities from CY2014. RIL has been eyeing inorganic routes for diversifying its asset portfolio by entering into newer ventures on the back of significant cash pile and treasury stocks. Initiatives such as shale gas acquisitions with in-place reserves of ~12TCF could prove to be a potential trigger for the stock in the long term. Over the last five years, RIL has traded at an average one-year forward PE of 17.7x, while currently it is trading at PE of 12.5x FY2012E and 10.6x FY2013E. On a P/B basis, the stock trades at 1.5x FY2012E and 1.3x FY2013E earnings. We 1,099. maintain our Buy recommendation on the stock with a target price of `1,099.
Y/E March Sales ( ` cr) OPM (%) PAT ( ` cr) 22,241 26,151 EPS (`) 68.0 79.9 RoE ( %) 13.6 14.1 P/E (x) 12.5 10.6 P/BV EV/EBITDA P/BV EV/EBITDA (x) 1.5 1.3 (x) 6.4 5.4 EV/Sales (x) 0.8 0.8

FY2012E 3,10,994 13.2 FY2013E 3,14,718 14.9

United Phosphorous

(CMP: `133/ TP: `180/ Upside:35%)

United Phosphorus (UPL) figures among the top five generic agrichemical players in the world, with a presence across major markets like the US, EU, Latin America and India. The total off-patent market is worth US$29bn, of which mere US$16bn is currently being catered by generic players. Furthermore, 61% of the same is controlled by the five largest generic players, including UPL. Given the high entry barriers by way of high investments, entry of new players is restricted. Thus, amidst this scenario and on account of having a low-cost base, we believe UPL enjoys an edge over competition and is placed in a sweet spot to leverage the upcoming opportunities in the global generic space. Over FY2011-13E, we expect UPL to post a 13% and 14% CAGR in sales and PAT, respectively. At current valuations of 8.3x FY2013E EPS, the stock is attractively valued compared to its global and domestic peers (18x) and historic average (15x). Hence, we maintain our Buy rating on the stock with a target price of `180.
Y/E March FY2012E FY2013E Sales ( ` cr) 6,935 7,424 OPM (%) 19.7 19.7 PAT ( ` cr) 688 740 EPS (`) 14.9 16.0 RoE ( %) 17.1 16.1 P/E (x) 8.9 8.3 P/BV EV/EBITDA P/BV EV/EBITDA (x) 1.4 1.3 (x) 6.0 5.8 EV/Sales (x) 1.0 1.0

October 2011

Please refer to important disclosures at the end of this report. 13

Market Strategy
Diwali Special

Goodyear India

(CMP: `295/ TP: `380/ Upside: 29%)

Goodyear India, a subsidiary of Goodyear Tire and Rubber Company, USA, is the sixth largest tyre manufacturing company in India having an overall market share of 5.5%. The company is a dominant player in the tractor tyre segment with a ~28% market share. The company supplies tyres to high-end car brands and has a brand name in the commodity business with stupendous RoIC of 413% for CY2010 in comparison to less than 20% for its listed peers. The company has announced the sale of a piece of land located in Ballabgarh, Fraidabad, after obtaining necessary approvals, which may give an upside trigger to the stock. At the CMP of `295, the stock is trading at PE of 6.2x its CY2012E EPS and P/B of 1.6x for CY2012E. The company is expected to have cash reserves of `360cr for CY2012E, excluding cash from sale of land. We maintain our Buy rating on the CY2012E. stock with a target price of `380 and target PE of 8x for CY2012E.
Y/E December CY2011E CY2012E Sales ( ` cr) 1510 1744 OPM (%) 8.0 9.7 PAT ( ` cr) 75 110 EPS (`) 32.5 47.7 RoIC ( %) 398.3 333.1 P/E (x) 9.1 6.2 P/BV EV/EBITDA P/BV EV/EBITDA (x) 2.1 1.6 (x) 3.4 1.9 EV/Sales (x) 0.3 0.2

Greenply

(CMP: `204/ TP: `311/ Upside:53%)

Greenply Industries is a leading plywood and laminates brand, supported by ad spend as high as 4.0% of sales (around 10% of laminates revenue). The company also has the largest distribution network of over 15,000 dealers in the industry. The company increased its laminates capacity by 88% in FY2010 and is witnessing strong demand for its products. The company achieved 98% capacity utilisation in 1QFY2012 and ended FY2011 with 94% capacity utilisation. We expect utilisation to further improve to 110% in FY2012, which will boost its revenue going ahead. The company forayed into the lucrative, high-growth MDF market in FY2011, with the largest MDF plant in India (1,80,000m3/year capacity). The MDF opportunity is especially huge as it constitutes 20% of wood panel consumption in India, while plywood constitutes 80% – the reverse holds true globally. In 4QFY2011, the segment reported first-time revenue of around `32cr, which further improved to `46cr in 1QFY2012 due to higher utilisation, which increased to 49.3% for the quarter. We expect the segment to achieve 45% capacity utilisation by FY2012, which would further bolster the company’s revenue and improve its margin. Currently, the stock is trading at 5.2x FY2013E earnings, which is at the lower end of its historical average of 4.3x-17.0x one-year forward EPS. We maintain our Buy rating on the stock with a target price of `311.
Y/E March FY2012E FY2013E Sales ( ` cr) 1,426 1,574 OPM (%) 12.5 13.0 PAT ( ` cr) 69 95 EPS (`) 28.4 38.8 RoE ( %) 19.3 21.7 P/E (x) 7.2 5.2 P/BV EV/EBITDA P/BV EV/EBITDA (x) 1.3 1.0 (x) 5.6 4.5 EV/Sales (x) 0.7 0.6

October 2011

Please refer to important disclosures at the end of this report. 14

Market Strategy
Diwali Special

Hitachi Home and Life Solutions

(CMP: `158/ TP: `212/ Upside: 34%)

Hitachi Home and Life Sciences (HHLS) is a subsidiary of Japan's Hitachi Appliances, which holds a 68% stake in the company. HHLS manufactures and sells air conditioners and is engaged in the trading of refrigerators, washing machines and chillers. The company is the market leader in the telecom air conditioner segment, with a 42% market share. The air conditioner industry in India is expected to grow at a CAGR of 15% over FY2011-15E due to rising per capita income, which would lead to increased penetration levels from 3% in FY2011 to 5% by FY2015E. HHLS, which caters to the premium segment, has recently entered the low-price home air conditioning segment by launching Kaze. The company currently has 2,000 showrooms, which are expected to increase to 3,000 going forward. We expect the company's revenue to grow at a CAGR of 16.7% over FY2011-13E and profit to grow at a CAGR of 17.6% to `41cr in FY2013E. At the CMP of `158, the stock is trading at PE of 8.9x its FY2013E EPS and P/B of 1.6x for FY2013E. We maintain our Buy recommendation on the stock with a target price of `212, FY2013E. based on target PE of 12x for FY2013E.
Y/E March FY2012E FY2013E Sales ( ` cr) 871 1040 OPM (%) 6.0 7.1 PAT ( ` cr) 28 41 EPS (`) 12.0 17.7 RoE ( %) 14.0 17.4 P/E (x) 13.2 8.9 P/BV EV/EBITDA P/BV EV/EBITDA (x) 1.8 1.6 (x) 8.3 5.8 EV/Sales (x) 0.5 0.4

Ineos ABS (India)

(CMP: `616/ TP: `702/ Upside: 15%)

Ineos ABS India, an 83% subsidiary of Ineos Global, is India's leading manufacturer of an engineering plastic named acrylonitrile butadiene styrene (ABS). INEOS and BASF have formed a 50-50 joint venture, which is to include INEOS ABS, INEOS NOVA, styrene, ABS and polystyrene businesses of BASF to form a new business - Styrolution. Since there will be a change in indirect control of INEOS ABS, we believe this may lead to an open offer in the next one year. The company has expanded its capacity from 60k tpa (tonnes per annum) to 80k tpa in 2011 for the production of ABS resins. The company is further planning to expand its capacity for ABS production to 110k tpa and for SAN production to 100k tpa, which is expected to add to the company's top line. At `616, the stock is trading at attractive valuations of 16x and 14x for CY2011E and CY2012E earnings, respectively. We recommend a Buy view on the stock with a target price to `702, based on target PE of 16x and implied EV/Sales of 1.1x for CY2012E. CY2012E.
Y/E December CY2011E CY2012E Sales ( ` cr) 896 1049 OPM (%) 11.3 11.2 PAT ( ` cr) 68 77 EPS (`) 39 44 RoE ( %) 17 17 P/E (x) 16.0 14.0 P/BV EV/EBITDA P/BV EV/EBITDA (x) 2.8 2.4 (x) 9.5 8.6 EV/Sales (x) 1.1 1.0

October 2011

Please refer to important disclosures at the end of this report. 15

Market Strategy
Diwali Special

Jagran Prakashan

(CMP: `105/ TP: `148/ Upside:41%)

Jagran Prakashan (JPL) continues to remain the leader in UP and stands at No. 2 in Bihar, with a readership of ~5.4cr and covering ~70% of Hindi speaking readers. Also, the company's presence in tier-II cities provides an opportunity to create a strong foothold in the faster growing markets. The company successfully launched Punjabi Jagran (now JPL caters to five different languages). JPL launched the 11th edition of The Inquilab, the largest read Urdu newspaper in UP and New Delhi through its subsidiary Mid-Day Infomedia Ltd. Moreover, City Plus launched four more editions, now totaling 30 editions. We expect JPL to post a 9% CAGR in its top line over FY2011-13E, driven by the ~10% CAGR in advertising revenue and a ~3% CAGR in circulation revenue. The other businesses and MML are estimated to record a CAGR of ~11% and 13%, respectively, during the mentioned period on better traction. In terms of earnings, we expect JPL to report a CAGR of 10% over FY2011-13E, driven by top-line growth, various cost-curtailment measures and improving profitability in the nascent businesses. The underperformance of the stock and attractive valuations (at the CMP the stock , trades at 13.1x FY2013E EPS) provide a good entry point for investors. Hence, we maintain our Buy view on the stock with a target price of `148.
Y/E March FY2012E FY2013E Sales ( ` cr) 1,339 1,453 OPM (%) 29.4 29.5 PAT ( ` cr) 227 253 EPS (`) 7.2 8.0 RoE ( %) 32.2 34.4 P/E (x) 14.6 13.1 P/BV EV/EBITDA P/BV EV/EBITDA (x) 4.7 4.3 (x) 8.7 8.0 EV/Sales (x) 2.4 2.2

MRF

(CMP: `6,695/ TP: `7,904/ Upside:18%)

MRF Ltd. (MRF) is a market leader in the tyre industry, with a ~30% market share. The company has a strong presence across all tyre categories. The shift in technology to radialisation from cross-ply tyres is expected to increase margins in the long run due to higher realisations for radial tyres by 20-25% as compared to cross-ply tyres. The company's profit is expected to bounce back in SY2012E to `419cr from `292cr in SY2011E due to a 17% increase in revenue in SY2012E and stable rubber prices, which constitute ~69% of the raw-material cost. At the CMP of `6,695, the stock is trading at PE of 6.8x its SY2012E EPS and P/B of 1.2x for SY2012E. We maintain our Buy rating on the stock with a target price of SY2012E. `7,904 and target PE of 8x for SY2012E.
Y/E Sept. SY2011E SY2012E Sales ( ` cr) 10,026 11,743 OPM (%) 8.1 9.7 PAT ( ` cr) 292 419 EPS (`) 688 988 RoE ( %) 14.9 17.8 P/E (x) 9.7 6.8 P/BV EV/EBITDA P/BV EV/EBITDA (x) 1.4 1.2 (x) 6.1 4.5 EV/Sales (x) 0.5 0.4

October 2011

Please refer to important disclosures at the end of this report. 16

Market Strategy
Diwali Special

Siyaram Silk Mills

(CMP: `279 / TP: `422/ Upside:51%)

Siyaram Silk Mills (SSML) has built a strong brand presence in the country through continuous advertisement and brand-building efforts over the past 30 years (SSML spends 3-5% of its net sales on advertising). The company has created a niche for itself in a highly competitive industry. The company enjoys a strong brand presence across the country, with brands such as Siyaram, Mistair, J Hampstead and Oxemberg in its kitty. The company is expanding the capacity of its fabric division by over 50% (adding 286 looms) in a phased manner over FY2011-13. The company will also add 400 stitching machines to its ready-made garments (RMG) division by 2QFY2012, which will result in 23% volume growth by FY2012E. The RMG and yarn divisions have been reporting improved utilisation rates on the back of strong growth. The yarn division, which achieved ~57% utilisation in FY2011, is expected to further improve to 80% by FY2012E. The RMG division also achieved optimum utilisation in FY2011. Higher utilisation will further aid revenue growth and will help the company to maintain its margins going forward. Currently, the stock is attractively placed at 4.0x FY2013E earnings, compared to its historical median of 6x one-year forward EPS. We maintain our Buy recommendation on the stock with a target price of `422, valuing the stock at 6x FY2013E earnings.
Y/E March FY2012E FY2013E Sales ( ` cr) 982 1,150 OPM (%) 12.2 11.6 PAT ( ` cr) 61 66 EPS (`) 65.1 70.4 RoE ( %) 25.0 22.3 P/E (x) 4.3 4.0 P/BV EV/EBITDA P/BV EV/EBITDA (x) 1.0 0.8 (x) 5.0 4.4 EV/Sales (x) 0.6 0.5

Tata Sponge Iron

(CMP: `305/ TP: `429/ Upside: 41%)

Tata Sponge Iron (TSIL) is an associate company of Tata Steel, which holds a 39.7% stake in the company. TSIL is a leading manufacturer of sponge iron, which is used as a raw material in steel manufacturing, with an installed capacity of 3,90,000mtpa (metric tonnes per annum) and a 26MW captive power plant. The company gets 100% supplies of iron ore from Tata Steel at a 20-25% discount from market prices, thus leading to at least 5% higher margins from other non-integrated sponge iron players. TSIL has a 45% stake in Talcher coal block in Orissa, with estimated reserves of 120mn tonnes for captive consumption. The company has deposited money for the first phase of land acquisition with the Orissa government. Forest clearance for the block is pending. At the CMP of `305, the stock is trading at PE of 4.3x its FY2013E earnings and P/B of 0.7x for FY2013E. The company is debt-free with cash reserves of `299cr and RoIC of 62.2% for FY2013E. We maintain our Buy rating on the stock with a FY2013E. target price of `429 and target PE of 6x for FY2013E.
Y/E March FY2012E FY2013E Sales ( ` cr) 813 820 OPM (%) 20.5 20.8 PAT ( ` cr) 109 110 EPS (`) 71.0 71.5 RoE ( %) 66.2 62.2 P/E (x) 4.3 4.3 P/BV EV/EBITDA P/BV EV/EBITDA (x) 0.8 0.7 (x) 1.2 0.8 EV/Sales (x) 0.2 0.2

October 2011

Please refer to important disclosures at the end of this report. 17

Market Strategy
Diwali Special

Angel Model Portfolio
BSE 100 Sector
Auto & Ancillaries Ashok Leyland MRF BFSI ICICI Bank Axis Bank SBI HDFC Bank Capital Goods & Infrastructure L&T LMW Cement FMCG ITC Media Jagran Prakashan Metals Tata Steel Tata Sponge Oil & Gas Reliance Industries Pharma & Agrichem Cipla Lupin United Phosporus Power Real Estate Software Infosys TCS Mphasis Telecom Others Hitachi Ineos ABS Siyaram Silk 158 616 279 212 702 422 2,681 1,079 340 2,836 1,179 382 286 464 133 369 593 180 850 1,099 444 305 614 429 105 148 204 205 1,444 1,938 1,857 2,780 860 1,095 1,872 467 1,146 1,426 2,335 517 25 6,695 31 7,904

Angel Weightage (%)
6.0 3.0 3.0 29.0 12.0 9.0 5.0 3.0 8.0 5.0 3.0 0.0 3.0 3.0 3.0 3.0 6.0 3.0 3.0 12.0 12.0 12.0 5.0 4.0 3.0 0.0 0.0 12.0 5.0 4.0 3.0 0.0 9.0 3.0 3.0 3.0

Company

CMP (`)

Target Price (`)

Weightage (%)
7.4 0.2 0.0 25.6 5.1 1.5 2.6 4.4 8.7 4.0 0.0 2.5 10.5 5.7 0.3 0.0 7.2 1.5 0.0 13.1 7.7 5.3 0.8 0.6 0.2 3.9 0.7 11.5 6.6 3.2 0.0 3.3 0.0 0.0 0.0 0.0

Stance
Underweight Overweight Overweight Overweight Overweight Overweight Overweight Underweight Underweight Overweight Overweight Underweight Underweight Underweight Overweight Overweight Underweight Overweight Overweight Underweight Overweight Overweight Overweight Overweight Overweight Underweight Underweight Overweight Underweight Overweight Overweight Underweight Overweight Overweight Overweight Overweight

October 2011

Please refer to important disclosures at the end of this report. 18

Market Strategy
Diwali Special

Stock Watch

October 2011

Please refer to important disclosures at the end of this report. 19

Watch Stock Watch | October 2011
Company Name Agri / Agri Chemical Rallis United Phosphorus Auto & Auto Ancillary Amara Raja Batteries Apollo Tyres Ashok Leyland Automotive Axle# Bajaj Auto Bharat Forge Bosch India* CEAT Exide Industries FAG Bearings* Hero Motocorp JK Tyre M&M Maruti Motherson Sumi Subros Tata Motors TVS Motor Banking Allahabad Bank Andhra Bank Axis Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank Corporation Bank Dena Bank Federal Bank HDFC HDFC Bank ICICI Bank IDBI Bank Indian Bank Reco CMP (`) 178 133 210 58 25 405 1,587 285 7,105 76 135 1,185 2,001 70 808 1,086 177 27 181 61 155 122 1,095 758 328 48 449 105 410 76 379 671 467 860 105 209 Target Price (`) 180 242 74 31 450 1,699 301 7,501 104 150 1,292 1,890 99 1,172 208 33 65 174 1,426 943 371 57 99 489 422 517 1,146 220 Mkt Cap (` cr) 3,468 6,138 1,795 2,944 6,612 612 45,918 6,629 22,309 259 11,496 1,969 39,964 288 49,612 31,371 6,843 165 48,811 2,903 7,386 6,802 45,158 29,665 17,927 2,291 19,882 6,764 6,067 2,547 6,480 98,677 109,234 99,102 10,343 8,965 Sales (` cr) FY12E FY13E 1,342 6,935 2,179 11,389 12,344 944 20,165 5,947 7,967 4,394 5,154 1,241 22,996 7,139 28,066 36,126 9,572 1,202 142,142 7,512 6,013 4,417 12,562 12,524 10,587 2,850 10,297 6,619 4,208 2,420 2,426 6,174 17,661 17,884 6,910 5,269 1,570 7,424 2,559 12,752 14,178 1,078 23,131 6,750 9,197 5,102 5,937 1,415 26,326 8,317 32,081 42,036 10,961 1,343 156,746 8,589 6,569 4,738 15,664 14,471 12,352 3,030 12,186 7,396 4,802 2,756 2,751 7,227 22,060 22,445 8,085 5,706 OPM (%) FY12E FY13E 18.4 19.7 13.4 9.4 9.6 12.5 19.3 14.2 18.8 3.6 17.6 19.8 13.7 4.4 12.6 7.8 9.6 8.5 12.0 6.4 2.9 3.0 2.8 2.5 2.1 2.9 2.1 2.5 1.9 2.5 3.4 3.6 4.3 2.5 1.8 3.2 17.4 19.7 13.0 9.9 10.1 12.3 18.7 14.0 18.5 4.6 17.5 18.6 14.0 5.4 12.9 8.3 9.8 8.3 11.6 6.3 2.6 2.7 2.9 2.4 2.1 2.6 2.1 2.4 1.9 2.5 3.2 3.5 4.2 2.6 1.8 3.0 EPS (`) FY12E FY13E 8.3 14.9 19.4 7.6 2.0 40.4 105.5 17.1 329.4 4.5 7.6 99.6 108.4 9.5 46.8 75.4 9.5 5.0 27.1 4.8 33.1 22.5 96.0 116.1 47.7 8.6 79.0 15.5 95.1 16.5 39.0 27.2 21.9 54.3 16.9 38.2 9.8 16.0 22.0 9.3 2.6 45.0 113.3 20.0 375.0 20.7 8.6 107.6 126.0 22.1 53.3 90.1 11.5 5.4 29.1 5.4 35.4 22.2 119.6 132.1 60.4 10.7 85.8 20.3 99.8 20.5 48.1 31.0 28.2 68.9 20.8 39.0 PER (x) FY12E FY13E 21.5 8.9 10.8 7.7 12.6 10.0 15.0 16.6 21.6 16.7 17.9 11.9 18.5 7.4 17.3 14.4 18.6 5.5 6.7 12.6 4.7 5.4 11.4 6.5 6.9 5.6 5.7 6.8 4.3 4.6 9.7 24.6 21.4 15.8 6.2 5.5 18.2 8.3 9.5 6.3 9.6 9.0 14.0 14.2 18.9 3.6 15.6 11.0 15.9 3.2 15.2 12.0 15.3 5.1 6.2 11.3 4.4 5.5 9.2 5.7 5.4 4.4 5.2 5.2 4.1 3.7 7.9 21.7 16.5 12.5 5.1 5.4 P/BV (x) FY12E FY13E 5.3 1.4 2.2 1.1 2.4 2.6 7.3 2.8 4.3 0.4 3.6 2.7 10.7 0.3 4.1 1.9 3.9 0.7 2.8 2.6 0.8 0.9 2.1 1.2 1.1 0.7 1.0 0.8 0.7 0.6 1.2 5.2 3.7 1.7 0.7 1.0 4.3 1.3 1.8 0.9 2.1 2.2 5.7 2.4 3.6 0.4 3.1 2.2 9.2 0.3 3.4 1.7 3.3 0.6 2.4 2.2 0.7 0.8 1.8 1.0 0.9 0.6 0.9 0.7 0.6 0.6 1.0 4.2 3.2 1.6 0.7 0.9 RoE (%) FY12E FY13E 27.3 17.1 22.9 12.9 13.1 27.6 54.6 18.3 20.1 2.4 21.7 25.4 64.8 4.5 25.0 14.3 21.8 12.4 43.5 19.2 19.1 18.1 19.7 20.1 15.3 13.5 18.1 14.4 18.3 14.9 12.4 38.4 18.6 13.4 12.5 19.6 25.9 16.1 21.1 14.7 16.2 26.2 45.9 18.1 19.0 10.8 21.2 22.1 62.3 10.0 24.3 14.8 23.1 12.6 41.5 20.3 17.7 15.8 20.8 19.6 17.1 15.1 17.1 14.2 16.8 16.2 13.8 34.0 20.6 15.6 13.9 17.4 EV/Sales (x) FY12E FY13E 2.5 1.0 0.8 0.5 0.7 0.7 2.0 1.2 2.4 0.3 1.9 1.3 1.5 0.3 1.5 0.7 0.8 0.3 0.5 0.4 2.0 1.0 0.7 0.4 0.6 0.6 1.6 1.0 2.0 0.3 1.6 1.0 1.2 0.3 1.3 0.5 0.7 0.3 0.4 0.3 -

Neutral Buy Buy Buy Buy Accumulate Accumulate Accumulate Accumulate Buy Accumulate Accumulate Reduce Buy Neutral Accumulate Buy Buy Neutral Accumulate Accumulate Neutral Buy Buy Accumulate Buy Neutral Reduce Buy Neutral Accumulate Neutral Accumulate Buy Neutral Accumulate

Please refer to important disclosures at the end of this report.

20

Watch Stock Watch | October 2011
Company Name IOB J & K Bank LIC Housing Finance Oriental Bank Punjab Natl.Bank South Ind.Bank St Bk of India Syndicate Bank UCO Bank Union Bank United Bank Vijaya Bank Yes Bank Capital Goods ABB* Areva* BGR Energy BHEL Blue Star Crompton Greaves Jyoti Structures KEC International LMW Thermax Cement ACC* Ambuja Cements* India Cements J K Lakshmi Cements Madras Cements UltraTech Cement Construction Consolidated Co Hind. Const. IRB Infra ITNL IVRCL Infra Jaiprakash Asso. Larsen & Toubro Madhucon Proj Nagarjuna Const. Reco Accumulate Accumulate Neutral Accumulate Accumulate Accumulate Buy Buy Neutral Buy Buy Neutral Buy Reduce Neutral Neutral Neutral Neutral Neutral Buy Buy Buy Neutral Neutral Neutral Neutral Buy Neutral Neutral Neutral Neutral Accumulate Buy Buy Accumulate Buy Buy Buy CMP (`) 98 786 229 302 991 22 1,872 103 68 248 73 55 272 680 212 343 337 219 165 63 57 1,938 433 1,140 149 77 42 97 1,110 19 28 169 200 39 75 1,444 69 57 Target Price (`) 104 843 325 1,129 24 2,335 125 286 91 321 578 90 88 2,780 54 193 259 60 85 1,857 108 82 Mkt Cap (` cr) 6,064 3,811 10,853 8,811 31,402 2,520 118,888 5,931 4,248 12,980 2,514 2,621 9,543 14,407 5,071 2,478 82,423 1,973 10,569 518 1,477 2,183 5,162 21,403 22,851 2,362 511 2,317 30,410 357 1,714 5,620 3,886 1,053 15,991 88,218 509 1,457 Sales (` cr) FY12E FY13E 6,242 7,125 2,025 2,168 1,954 2,316 5,269 5,764 16,867 18,974 1,072 1,176 56,585 65,908 5,443 5,781 4,276 4,795 8,624 9,716 2,896 3,220 2,334 2,670 2,352 2,894 7,370 4,504 5,121 51,021 3,406 10,940 2,771 5,273 2,350 5,971 9,609 8,589 3,871 1,530 2,975 17,317 2,362 4,723 3,024 4,910 5,798 15,092 52,765 1,959 5,755 8,527 5,162 4,713 57,978 3,972 12,406 3,082 6,293 2,883 6,830 11,008 9,684 4,237 1,757 3,135 19,726 2,646 5,485 3,980 6,484 6,994 17,683 64,569 2,512 6,689 OPM (%) FY12E FY13E 2.5 2.3 3.3 3.1 3.3 3.2 2.5 2.3 3.2 3.0 2.5 2.4 3.2 3.1 2.6 2.3 1.9 1.9 2.6 2.5 2.5 2.4 2.1 2.1 2.4 2.3 6.3 9.8 11.9 19.7 5.9 9.3 11.0 10.7 14.2 10.8 22.0 25.4 16.9 18.3 27.6 22.6 6.3 12.6 44.4 27.5 8.8 24.5 12.0 10.7 9.3 8.2 10.9 12.5 19.8 7.4 12.1 11.0 11.0 14.3 11.0 22.1 25.4 17.1 17.5 24.9 22.5 7.3 12.6 38.3 23.5 9.2 24.4 12.0 10.4 9.8 EPS (`) FY12E FY13E 20.9 25.1 142.6 144.4 23.7 28.8 48.2 57.2 138.9 160.7 3.0 3.1 190.3 260.0 18.8 21.8 13.1 16.3 41.9 47.6 14.1 16.6 6.0 8.2 25.7 29.6 14.7 8.0 45.6 28.2 14.5 9.9 13.6 9.7 179.3 34.9 64.9 8.4 8.1 7.8 13.3 70.8 1.5 0.7 12.5 23.9 4.2 3.7 64.4 5.8 5.5 21.4 11.4 41.6 32.0 22.1 15.3 15.1 12.6 231.7 40.8 73.9 9.5 9.9 8.0 12.4 81.5 3.6 1.2 14.0 25.3 6.1 5.3 76.9 6.8 6.7 PER (x) FY12E FY13E 4.7 3.9 5.5 5.4 9.6 7.9 6.3 5.3 7.1 6.2 7.6 7.3 9.8 7.2 5.5 4.8 5.2 4.1 5.9 5.2 5.2 4.4 9.3 6.8 10.6 9.2 46.3 26.4 7.5 12.0 15.1 16.7 4.6 5.9 10.8 12.4 17.6 17.7 9.6 5.3 7.3 15.7 12.8 41.9 13.5 8.4 9.3 20.2 22.4 11.9 10.3 31.8 18.7 8.3 10.5 9.9 10.8 4.2 4.6 8.4 10.6 15.4 15.8 7.8 5.2 7.8 13.6 5.4 23.7 12.1 7.9 6.5 14.2 18.8 10.1 8.5 P/BV (x) FY12E FY13E 0.7 0.6 1.0 0.8 2.1 1.8 0.8 0.7 1.3 1.1 1.3 1.1 1.7 1.4 0.8 0.7 0.9 0.8 1.0 0.9 0.7 0.6 0.8 0.8 2.1 1.7 5.4 4.4 2.1 3.3 3.5 2.8 0.8 1.3 2.3 3.2 2.9 2.8 0.7 0.5 1.2 2.5 0.6 1.1 2.0 1.5 0.5 1.6 3.5 0.8 0.6 4.7 3.7 1.8 2.6 2.8 2.3 0.7 1.0 1.9 2.6 2.6 2.5 0.6 0.4 1.0 2.2 0.5 1.1 1.8 1.3 0.5 1.5 3.1 0.7 0.6 RoE (%) FY12E FY13E 14.9 15.9 18.5 16.4 24.4 24.4 13.1 13.9 20.2 20.0 18.2 16.5 18.6 21.9 15.3 15.7 15.0 16.5 18.4 18.1 13.0 13.8 8.2 10.5 21.3 20.6 12.2 17.9 30.6 30.3 24.2 18.1 17.8 24.5 22.9 28.2 17.8 16.7 7.0 8.8 16.9 16.9 4.4 2.7 16.0 18.8 5.5 8.2 16.9 6.8 5.8 15.7 21.6 23.4 27.7 31.5 23.7 16.9 25.7 24.7 26.6 18.0 16.8 8.3 8.4 13.9 16.9 9.8 4.8 15.6 17.1 7.6 10.7 17.6 7.5 6.7 EV/Sales (x) FY12E FY13E 1.9 1.3 0.6 1.4 0.7 0.9 0.4 0.6 0.5 0.7 1.9 2.3 1.0 0.6 1.7 1.7 0.4 1.2 3.4 2.1 0.6 2.3 1.8 0.8 0.7 1.6 1.1 0.6 1.2 0.6 0.8 0.3 0.5 0.3 0.6 1.6 2.0 0.9 0.4 1.4 1.4 0.4 1.2 2.9 2.0 0.6 2.0 1.5 0.8 0.7

Please refer to important disclosures at the end of this report.

21

Watch Stock Watch | October 2011
Company Name Patel Engg. Punj Lloyd Sadbhav Engg. Simplex Infra FMCG Asian Paints Britannia Colgate Dabur India GlaxoSmith Con* Godrej Consumer HUL ITC Marico Nestle* IT HCL Tech Hexaware Infosys Infotech Enterprises KPIT Cummins Mahindra Satyam Mindtree Mphasis& NIIT Persistent TCS Tech Mahindra Wipro Media D B Corp HT Media Jagran Prakashan PVR Sun TV Network Buy Buy Buy Accumulate Neutral 200 144 105 111 276 302 177 148 127 3,667 3,381 3,313 287 10,875 1,413 2,010 1,339 507 2,104 1,586 2,255 1,453 577 2,341 29.5 18.2 29.4 16.6 78.5 30.8 18.1 29.5 16.7 78.5 14.1 8.8 7.2 5.0 20.9 16.8 9.7 8.0 8.0 23.2 14.2 16.4 14.6 22.3 13.2 11.9 14.8 13.1 14.0 11.9 3.8 2.3 4.7 0.9 3.6 3.1 2.0 4.3 0.8 2.9 29.0 14.7 32.2 3.9 30.3 28.7 14.2 34.4 6.0 27.6 2.6 1.4 2.4 0.6 4.3 2.2 1.2 2.2 0.4 3.6 Buy Neutral Accumulate Accumulate Neutral Accumulate Accumulate Accumulate Buy Buy Accumulate Buy Accumulate 420 88 2,681 114 148 74 368 340 44 304 1,079 584 351 558 2,836 122 79 414 382 57 357 1,179 734 374 28,989 2,569 153,915 1,269 1,313 8,708 1,490 7,134 721 1,217 211,253 7,429 86,186 19,716 1,381 33,187 1,476 1,337 6,138 1,798 5,571 1,415 980 46,953 5,405 35,732 23,129 1,602 37,821 1,652 1,538 6,891 1,993 6,020 1,556 1,117 53,162 5,823 39,178 17.2 15.3 30.9 14.3 15.1 14.1 13.0 17.1 13.1 18.4 29.2 16.7 18.6 17.2 15.3 30.6 15.1 15.3 14.6 13.9 15.5 13.8 19.0 28.5 16.3 18.3 31.3 7.7 139.4 12.4 13.4 6.7 37.4 36.2 5.6 32.0 53.4 79.4 21.3 37.8 7.9 157.5 14.9 15.4 7.1 41.0 39.6 6.9 34.0 58.9 81.5 24.4 13.4 11.3 19.2 9.2 11.1 11.0 9.9 9.4 7.8 9.5 20.2 7.4 16.4 11.1 11.1 17.0 7.6 9.6 10.4 9.0 8.6 6.3 8.9 18.3 7.2 14.4 2.9 2.2 4.7 0.7 1.7 1.6 1.6 1.5 1.2 1.4 6.8 1.8 3.1 2.5 1.9 3.8 0.6 1.4 1.4 1.4 1.3 1.1 1.2 5.5 1.4 2.7 22.2 20.2 24.2 7.3 16.9 14.6 16.5 16.1 15.0 14.9 33.4 24.2 18.9 22.4 18.0 22.5 8.1 16.4 13.5 15.5 14.5 16.6 13.9 30.2 20.2 18.7 1.4 1.5 4.0 0.5 0.9 1.1 0.7 0.8 0.6 0.9 4.3 1.5 2.1 1.2 1.2 3.4 0.4 0.7 0.9 0.6 0.7 0.4 0.8 3.8 1.3 1.8 Neutral Accumulate Reduce Accumulate Neutral Accumulate Neutral Neutral Neutral Reduce 3,174 451 999 101 2,379 400 330 204 145 4,205 495 869 115 457 3,603 30,425 5,385 13,589 17,516 10,003 12,945 71,236 158,492 8,915 40,545 9,092 5,014 2,550 5,179 2,723 4,196 21,865 24,706 3,643 7,277 10,608 5,858 2,931 5,919 3,174 4,681 24,637 29,294 4,185 8,435 17.0 5.8 19.8 18.4 16.4 19.5 13.6 34.0 13.4 20.1 17.6 7.1 20.3 18.4 16.9 19.9 14.0 34.2 13.7 20.7 102.5 15.4 32.3 4.0 82.7 18.1 11.7 7.5 5.1 101.0 126.3 22.5 37.8 4.6 98.3 20.8 13.3 8.9 6.3 120.1 31.0 29.3 31.0 25.0 28.8 22.1 28.2 27.2 28.7 41.6 25.1 20.0 26.5 21.8 24.2 19.3 24.7 22.9 23.0 35.0 11.0 10.3 33.9 10.1 35.0 1.4 22.7 8.1 7.4 31.6 8.6 8.4 24.7 8.2 29.5 1.2 19.7 6.5 5.9 21.4 39.6 37.8 111.7 44.9 32.6 38.7 87.5 32.7 30.4 91.1 38.3 46.0 108.0 41.6 31.8 28.0 85.3 31.5 28.6 72.9 3.3 1.1 5.1 3.4 4.1 2.9 3.1 6.1 2.5 5.4 2.7 0.9 4.4 2.9 3.4 2.5 2.7 5.1 2.1 4.6 Reco Neutral Neutral Buy Buy CMP (`) 99 57 131 224 Target Price (`) 161 299 Mkt Cap (` cr) 694 1,891 1,960 1,110 Sales (` cr) FY12E FY13E 3,272 9,585 2,602 5,286 3,587 10,992 2,865 6,178 OPM (%) FY12E FY13E 14.2 8.3 9.8 9.6 13.1 8.4 10.4 10.0 EPS (`) FY12E FY13E 17.1 2.5 8.7 20.4 16.7 4.0 12.0 29.9 PER (x) FY12E FY13E 5.8 22.9 15.1 11.0 5.9 14.1 10.9 7.5 P/BV (x) FY12E FY13E 0.4 0.6 2.6 0.9 0.4 0.6 2.0 0.8 RoE (%) FY12E FY13E 7.9 2.7 18.7 9.0 7.3 4.3 20.5 11.9 EV/Sales (x) FY12E FY13E 0.9 0.6 0.9 0.6 0.9 0.6 0.8 0.5

Please refer to important disclosures at the end of this report.

22

Watch Stock Watch | October 2011
Company Name Metal Bhushan Steel Coal India Electrosteel Castings Godawari Ispat Hind. Zinc Hindalco JSW Steel MOIL Monnet Ispat Nalco NMDC Prakash Industries SAIL Sarda Energy Sesa Goa Sterlite Inds Tata Steel Oil & Gas Cairn India GAIL Gujarat Gas Gujarat State Petronet Indraprasth Gas ONGC Petronet LNG Reliance Industries Pharmaceuticals Alembic Pharma Aurobindo Pharma Aventis* Cadila Healthcare Cipla Dr Reddy's Dishman Pharma GSK Pharma* Indoco Remedies Ipca labs Lupin Orchid Chemicals Reco CMP (`) 325 339 29 112 119 133 609 257 489 63 246 49 110 125 229 120 444 283 420 421 104 426 271 160 850 41 135 2,291 750 286 60 1,531 2,053 410 247 464 169 Target Price (`) 357 35 175 156 177 717 306 549 74 230 72 139 180 253 161 614 508 117 326 172 1,099 65 217 1,937 1,053 369 96 1,920 2,182 658 358 593 270 Mkt Cap (` cr) 6,905 214,125 898 356 50,260 25,434 13,591 4,316 3,145 16,159 97,552 659 45,269 449 19,885 40,312 42,584 53,786 53,257 5,396 5,852 5,966 231,426 11,970 278,160 767 3,942 5,276 15,362 22,976 484 25,937 17,393 504 3,100 20,698 1,191 Sales (` cr) FY12E FY13E 8,109 62,487 1,900 1,774 11,538 74,701 26,862 1,032 1,973 7,670 12,197 2,219 47,903 992 8,711 34,694 130,317 15,639 34,070 2,472 1,173 2,288 126,535 19,048 310,994 1,266 4,519 1,224 5,386 7,006 1,115 8,721 2,447 587 2,207 6,817 2,143 8,486 66,674 1,966 1,916 12,679 78,657 42,558 1,060 2,960 8,680 14,027 2,312 56,016 1,070 10,012 41,698 138,260 17,900 37,916 2,734 1,259 2,723 140,194 25,001 314,718 1,395 5,243 1,401 6,604 8,164 1,282 9,584 2,788 734 2,548 8,272 2,508 OPM (%) FY12E FY13E 32.2 26.8 15.1 17.2 56.4 11.6 14.9 55.8 28.0 28.0 73.9 18.9 15.7 17.6 46.4 23.5 12.8 76.6 19.1 19.1 92.2 28.2 44.2 9.1 13.2 14.0 17.8 14.9 20.2 20.0 17.5 25.2 35.5 16.1 20.5 18.3 21.8 33.8 26.8 17.7 20.5 56.8 12.4 18.0 56.7 29.5 29.2 73.4 20.3 18.6 20.8 46.1 28.2 13.9 78.8 19.6 19.0 92.5 25.7 42.7 8.0 14.9 14.5 18.3 15.3 20.2 21.2 17.9 25.1 35.5 17.2 21.5 19.7 21.8 EPS (`) FY12E FY13E 15.7 23.2 4.1 34.2 13.9 20.9 51.7 28.9 45.9 5.6 17.8 18.6 10.6 23.3 33.3 18.2 69.5 46.0 32.1 23.4 10.2 23.5 32.0 12.1 68.0 4.9 15.5 85.6 38.5 14.9 9.9 87.9 72.0 52.9 20.0 22.4 28.4 15.8 25.2 5.1 55.0 15.4 23.2 114.9 30.9 60.4 6.3 20.3 20.8 13.4 27.7 37.4 23.3 78.8 54.8 35.6 25.9 11.1 25.1 34.4 13.3 79.9 5.9 19.1 89.9 51.3 18.4 11.7 96.0 86.9 65.8 27.5 29.7 37.3 PER (x) FY12E FY13E 20.7 14.6 7.0 3.3 8.6 6.4 11.8 8.9 10.7 11.2 13.8 2.6 10.4 5.4 6.9 6.6 6.4 6.1 13.1 18.0 10.2 18.1 8.5 13.1 12.5 8.3 8.7 26.8 19.5 19.2 6.0 17.4 28.5 7.8 12.3 20.7 6.0 20.6 13.5 5.7 2.0 7.7 5.7 5.3 8.3 8.1 9.9 12.1 2.4 8.2 4.5 6.1 5.1 5.6 5.2 11.8 16.2 9.4 17.0 7.9 12.0 10.6 6.9 7.1 25.5 14.6 15.5 5.1 15.9 23.6 6.2 9.0 15.6 4.5 P/BV (x) FY12E FY13E 0.5 4.8 0.5 0.5 1.8 0.9 0.8 1.8 1.3 1.4 4.0 0.3 1.1 0.6 1.3 0.8 0.9 1.1 2.4 5.4 2.4 4.8 1.7 3.5 1.5 2.1 1.3 4.6 5.4 3.0 0.5 4.5 7.8 1.3 2.5 5.5 1.2 0.5 3.8 0.5 0.4 1.5 0.8 0.7 1.5 1.1 1.4 3.2 0.3 1.0 0.5 1.1 0.7 0.8 0.9 2.1 4.6 2.0 3.9 1.5 2.8 1.3 1.6 1.1 4.1 4.2 2.6 0.5 3.6 6.8 1.1 2.0 4.3 1.0 RoE (%) FY12E FY13E 13.8 37.5 7.9 14.8 23.2 15.6 7.7 21.2 12.9 13.7 32.3 15.1 11.0 12.0 21.0 13.7 26.1 19.6 19.6 32.6 25.6 29.1 21.9 29.8 13.6 29.0 20.7 18.3 33.1 16.8 8.6 28.6 21.1 17.9 21.8 28.2 19.3 12.2 31.2 9.2 20.0 21.0 15.0 15.4 19.6 16.1 15.7 29.3 14.5 12.6 12.8 19.8 15.2 15.4 19.2 18.7 30.7 22.7 25.3 20.4 26.0 14.1 26.4 19.0 17.1 35.2 18.2 9.2 25.2 30.7 19.3 24.9 30.8 23.4 EV/Sales (x) FY12E FY13E 2.6 2.6 1.0 0.4 2.6 0.5 1.0 2.1 2.5 1.5 6.4 0.5 1.2 0.8 1.1 1.0 0.7 2.9 1.4 2.0 5.9 2.7 1.5 0.8 0.9 0.9 1.2 3.8 2.9 3.3 1.3 3.1 6.2 1.0 1.6 3.2 1.5 2.2 2.2 0.9 0.3 1.9 0.5 0.7 1.8 1.9 1.3 5.2 0.5 1.1 0.6 0.7 0.7 0.6 2.0 1.3 1.8 5.3 2.3 1.2 0.6 0.8 0.8 1.0 3.2 2.3 2.8 1.1 2.8 5.3 0.8 1.4 2.6 1.2

Neutral Accumulate Buy Buy Buy Buy Buy Buy Accumulate Buy Reduce Buy Buy Buy Accumulate Buy Buy Neutral Buy Neutral Accumulate Neutral Buy Accumulate Buy Buy Buy Sell Buy Buy Buy Buy Accumulate Buy Buy Buy Buy

Please refer to important disclosures at the end of this report.

23

Watch Stock Watch | October 2011
Company Name Ranbaxy* Sun Pharma Power CESC GIPCL NTPC PTC India Real Estate Anant Raj DLF HDIL Telecom Bharti Airtel Idea Cellular Rcom Others Bajaj Electrical CRISIL Finolex Cables Graphite India Greenply Page Industries Sintex Siyaram Silk Mills SpiceJet Taj GVK Reco Accumulate Accumulate Buy Buy Accumulate Neutral Buy Reduce Buy Accumulate Neutral Neutral Neutral Neutral Buy Buy Buy Neutral Buy Buy Neutral Buy CMP (`) 517 484 272 81 177 70 51 237 99 374 95 77 199 802 38 73 204 2,519 121 279 21 88 Target Price (`) 593 518 383 96 202 81 220 150 430 59 109 311 185 422 140 Mkt Cap (` cr) 21,790 49,822 3,396 1,218 146,027 2,059 1,508 40,178 4,136 142,047 31,473 15,862 1,985 5,693 577 1,424 491 2,810 3,290 262 833 553 Sales (` cr) FY12E FY13E 10,196 12,023 7,576 9,516 4,453 1,512 63,539 11,109 532 10,466 2,675 70,838 18,981 20,394 3,302 766 2,332 1,721 1,426 658 5,296 982 4,327 310 4,817 1,542 71,207 13,430 742 11,702 3,167 82,218 22,190 23,276 3,956 926 2,584 2,053 1,574 822 6,256 1,150 5,703 360 OPM (%) FY12E FY13E 17.0 24.0 30.1 31.1 24.5 28.6 24.9 2.0 54.4 43.6 50.5 33.7 26.4 33.3 8.0 34.8 8.7 22.9 12.5 18.6 18.3 12.2 0.0 40.4 23.8 27.6 25.2 1.9 54.9 44.5 54.4 35.9 27.5 34.9 9.0 35.0 8.8 25.6 13.0 18.6 17.4 11.6 2.3 40.6 EPS (`) FY12E FY13E 29.4 52.8 18.0 23.5 42.3 10.6 12.2 6.5 5.3 9.8 24.9 15.5 2.5 3.6 15.1 28.3 7.9 11.9 28.4 64.0 20.8 65.1 (0.4) 9.5 44.8 11.2 13.5 7.1 8.1 11.9 31.7 24.7 3.7 6.4 21.1 34.4 9.9 15.4 38.8 79.1 23.6 70.4 1.3 11.7 PER (x) FY12E FY13E 17.6 9.8 26.9 20.6 6.4 7.6 14.5 10.7 9.6 24.2 4.0 24.2 38.7 21.4 13.2 28.4 4.8 6.1 7.2 39.4 5.8 4.3 (56.8) 9.3 6.1 7.2 13.1 9.8 6.3 19.9 3.1 15.1 25.8 12.0 9.5 23.3 3.8 4.7 5.2 31.8 5.1 4.0 15.7 7.5 P/BV (x) FY12E FY13E 3.3 2.7 4.7 4.0 0.7 0.8 1.9 0.9 0.4 1.6 0.4 2.6 2.4 0.4 2.8 12.1 0.7 0.9 1.3 19.1 1.1 1.0 2.7 1.5 0.6 0.8 1.8 0.8 0.4 1.5 0.3 2.2 2.2 0.4 2.3 10.4 0.6 0.8 1.0 15.7 0.9 0.8 2.3 1.3 RoE (%) FY12E FY13E 20.1 25.9 18.2 20.4 11.6 11.3 13.9 8.5 4.1 6.7 10.3 10.8 6.2 1.8 22.7 46.4 15.8 14.6 19.3 55.8 19.3 25.0 17.3 11.1 11.0 14.0 8.7 6.0 7.8 11.6 14.9 8.5 3.1 26.5 47.8 17.1 17.2 21.7 56.4 18.1 22.3 15.9 18.3 EV/Sales (x) FY12E FY13E 2.1 1.6 6.2 4.9 1.2 1.4 2.7 0.1 3.9 6.0 3.1 2.8 2.3 2.2 0.6 7.1 0.2 1.1 0.7 4.4 0.9 0.6 0.3 2.2 1.0 1.2 2.6 0.1 3.1 5.5 2.6 2.3 1.9 1.7 0.5 5.8 0.2 0.9 0.6 3.5 0.7 0.5 0.2 1.7

Source: Company, Angel Research; Note: *December year end; #September year end; &October year end; Price as on October 12, 2011

Please refer to important disclosures at the end of this report.

24

Market Strategy
Diwali Special

Disclaimer
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 2011

Please refer to important disclosures at the end of this report. 25

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