Wipro : HOLD

Q1FY12 Guidance Low; Execution Holds Key

Muted Q4FY11 performance, tepid Q1FY12E guidance & ongoing mgmt restructuring (which we expect to take 2-4 qtrs to reflect in financials) lead us to lower our FY12E EPS est. by ~3% to ~Rs 24; we introduce FY13E EPS est. at ~Rs 28. We now assign a lower target FY12E PE of 18x (vs. 19x earlier) to account for lower organic revenue growth in FY12E (~19% YoY vs. 23% earlier). Our revised TP of Rs. 438 implies a 3% downside, resulting in a HOLD reco at these levels. 

Key Highlights

• Q1FY12E guidance is lower: Wipro’s Q1FY12E topline guidance at USD 1.39–1.42 bn implies a QoQ growth of -0.5% to +1.5%. This guidance is lower vs. Infosys’ guidance at ~2.6% to 3.6% QoQ for Q1FY12. Project completions in Q4FY11 (BPO in telecom vertical) and seasonally strong Q4 for India/ Middle East (~9% in Q4FY11) also account for muted Q1 guidance vs. peers, in addition to the ongoing mgmt restructuring.
• Earnings growth to remain under pressure over the next qtrs: H1FY12E is expected to be weak given: 1) muted topline growth in Q1 and 2) margin pressure from full quarter impact of salary hikes in Q2 (offshore: 12-15% and onsite: 3-4%). While SAIC acquisition (with annualrevenue run rate of ~USD 165 mn for 4/6 months in H1FY12) would add ~3% to topline, its lower NPMs of ~6% would imply just ~1% contribution to PAT.

A back-ended growth in FY12E; execution holds the key for EPS/ PE upgrade: Revenue visibility in H2FY12E is supported by:

1) traction in revenues from SAIC (~3% rev share),

2) the recent tie-up with Temenos in BFSI vertical for Europe,

3) a strong 68 client addns in Q4, and

4) client mining in existing clients. Higher fresher hiring in FY12E vs. FY11 (targeted at ~67–70% of the total gross hiring vs. ~50% in FY11) is a key margin lever in addition to utz. (Q4 utz. ex-trainees at 79.7%, ample headroom given peak levels of 84.5%).

However, a low Q1 implies pressure on remaining quarters of FY12E to deliver above industry/peer growth. Additionally, higher-than-peers wage hikes (eff. 1 June’11) and higher tax rates would imply a lower EPS growth QoQ even if topline growth is better. Thus, execution holds key for any EPS / PE upgrades.

Elgi Equipments : BUY

Elgi equipment’s Q4FY11 performance

Elgi Equipments reported net revenue of Rs. 243 cr. (20% YoY, 2% QoQ), EBITDA of Rs. 29 cr. (3% YoY, 20% QoQ) and adj. PAT of Rs. 18 cr. (2% YoY, 30% QoQ). EBITDA margin stood at 12% (195 bps YoY, 330 bps QoQ). 

Key Highlights 

• Revenue growth and margin under pressure in compressors: The compressor segment revenue stood at Rs. 202 crores, growing by 14% YoY and was flat QoQ. EBIT margin dropped by 225 bps YoY and 335 bps QoQ to 11.5% due to product mix issues and higher other costs. Slowdown in demand in the water well business has hampered the growth in the compressor segment.
• Steady growth in automotive equipment segment: Automotive equipment segment’s revenue grew by impressive 30% YoY to Rs. 31 crores. The margin declined by 65 bps YoY to 9.9%.
• EBITDA margin squeezed: EBITDA margin deteriorated by 195 bps YoY and 330 bps QoQ to 12% largely on account of increase in employee cost, product mix issues and debtor write off. Also, certain capital expenditure has been expensed under revenue expenditure in Q4.

Valuation

We are reducing our revenue estimate by 10% on account of lower guidance by the company vis-à-vis our estimates. We have also reduced our EPS est. by 15.5% to Rs. 6.3 for FY12E. We maintain BUY on the stock with target price of Rs. 100 (based on 16x FY12E EPS), implying 16% upside.

Bank of Baroda : BUY

Asset Quality Disappoints

Bank of Baroda (BoB) reported PAT of Rs 12.9 bn (up 57% YoY), above our expectations, led by strong core income and lower taxes. Net interest income rose 50% YoY led by advances growth of 31% YoY and margin expansion of 48 bps YoY. Margins also impressed sequentially (up 25 bps), driven by improvement in domestic margins. Core fee income impressed with 24% YoY growth. Tax expenses were lower (down 82% YoY), due to higher provisioning made in earlier quarters and income tax refund (~Rs 480 mn adjusted in Q4FY11). Slippages for the year were at ~1.1%. Gross and Net NPAs were up by 31% YoY during the quarter, however, provisioning coverage improved marginally to 75%. 

Key highlights

• Credit growth (31% YoY) was led by overseas credit (up 37% YoY) and domestic retail loan growth (up 34% YoY). Domestic CASA ratio came-off a bit to 34.4% (from 35% in Dec-10), as a result of higher growth in term deposits during the quarter.  
• During FY11, BoB has provided Rs 3.65 bn on a/c of pension liability of existing employees & 100% of such liability of Rs 5.5 bn towards retired employees. The remaining pension liability for existing employees (of Rs 14.6 bn) is to be provided equally over next 4 yrs.
• C/I  ratio  increased  to  44%  (38%  in  Dec-10)  led  by  higher  staff expenses (up 86% YoY), which rose due to additional burden of pension and gratuity liabilities.

Maintain BUY with revised TP of Rs 1,065  

BOB maintained strong growth momentum (total business up 28% YoY), with advances and deposits growing equitably. Despite higher slippages, mgmt seemed confident of maintaining strong asset quality going forward. We have revised our EPS estimates upwards by 9% for FY12E. On the back of healthy growth rates, strong margins and higher return ratios, we reiterate our BUY rating with a TP of Rs 1,065 (1.8x FY12E ABV and 8x FY12E EPS) – upside of 17% from CMP of Rs 916.

Biocon Ltd : BUY

Q4 In-Line; Margins to Improve Post AXICORP

Biocon’s Q4FY11 result was largely in-line with expectations. Sales grew 7% YoY to Rs 7.0 bn and net profit was up 25% YoY to Rs 1.0 bn. Biocon has announced that it would be divesting its 78% stake in its German subsidiary, AxiCorp for ~EUR 40 mn. 

The company had acquired AxiCorp stake in 2008 with a view to monetize its insulin portfolio in Germany/ Europe. Post the deal with Pfizer in Oct’10, it plans to use Pfizer’s platform and is hence exiting the low-margin AxiCorp business. We believe this will lead to margin expansion.  

Key Highlights

• Sales – Up 7% YoY to Rs 7.0 bn. Biopharma grew 14% to Rs 3.8 bn led by robust growth in domestic branded formulations, immunosuppressants, insulin (steady growth in ROW) and statins (Atorvastatin and Rosuvastatin). Licensing income at Rs 320 mn was up 56% YoY from Rs 205 mn in Q4FY10, largely driven by income under Pfizer deal. Ex-licensing income, Biopharma sales rose 11% to Rs 3.5 bn during the qtr. CRAMS grew 20% to Rs 887 mn. However, AxiCorp continued to decline– fell 6% to Rs 2.3 bn.   
• EBITDA  – Margin rose slightly by 61 bps YoY to 20.5% led by: (a) higher licensing income; (b) drop in other expenses (as some expenses are reimbursed by co-developers); and (c) lower contribution from low-margin AxiCorp, despite 27% rise in staff cost.
• PAT – Up 25% YoY to Rs 1.0 bn owing to higher EBITDA and other income and lower tax (9.8% vs. 14.5% in Q4FY10).
• Margins to improve post Axicorp divestiture – Axicorp reported 6% YoY decline in revenues to Rs 2.3 bn led by 16% rebate imposed by German Government. Margins continued to be under pressure with EBITDA margin of 6% and net margin of 3%. We thus believe that divestment of AxiCorp would significantly improve Biocon’s margins going ahead. However, field force expansion in domestic market (to hire 1,000 MRs over FY12) and higher R&D cost (to go up by 20-25% in FY12E) will continue to put pressure on EBITDA margin.
• Expects Pfizer sales to begin in Q2FY12 – Biocon expects that Pfizer would begin comarketing insulin in India from Q2FY12. Further, it expects to complete the clinical trials of Recombinant Human Insulin (RHI) in Europe by 2011 and file by mid-2012. 
• Tax rate – The Company has guided for +20% tax rate for FY12E (vs. 16.1% in FY11).

Lower EPS estimates; Maintain BUY

We reduce our FY12E EPS by 21% to Rs 16.0 to factor in divestment of AxiCorp and higher staff and R&D costs. Further, we introduce FY13E EPS at Rs 21.0. We maintain BUY rating on the stock with a lower TP of Rs 413, valuing the base biz at Rs 378/share (18xFY13E EPS, to capture the upside potential from the Pfizer deal), and ~Rs 35/share for the USD 200 mn payment received from Pfizer.

Dabur India : HOLD

Steady Performance

Dabur India Ltd (DIL) reported consol net revenue of Rs 11.1 bn (up 31% YoY), EBITDA of Rs 2.1 bn (up 27% YoY) & adj. PAT of Rs 1.5 bn (up 9% YoY) in Q4FY11, marginally below our expectations. Revenue growth in Q4 was driven by 9% volume growth, 5% price hike & 16% due to Hobi & Namaste acquisitions. 

Key Highlights  

• Sales growth outlook:  The mgmt has guided for ~10% vol growth & 5% pricing led growth in FY12E for the dom. biz. We expect the dom. business to grow at a similar rate but consolidated sales growth will be higher due to the Hobi & Namaste acquisitions. Consol growth expected at 31% in FY12E & 15% in FY13E. 
• Consumer Care Division (~67% of sales)  grew 15% YoY in FY11 led by health supplements (23% YoY), foods seg (28% YoY) & home care (32% YoY). Mkting initiatives in Hair care has led to improved growth (11% in Q4 vs. 5% for 9mFY11). Shampoo category is suffering due to increased competition. DIL improved the value proposition in Shampoos by offering 40% more vols (effected in Jan ‘11). We expect this division to grow at 15% over the next 2 yrs.
• EBITDA margins have remained flat (at 18.8% in FY11) for the standalone business despite rising RM cost pressures, mainly due to reduced ASP spends. On a consol basis, gross margins have declined by 100 bps YoY (to 53.3%) in FY11E while EBITDA margins have remained flat at 18.5%. For FY12E, we expect both rising RM costs & increased ASP spends to result in subdued margins.  We forecast a 60 bps decline in gross margins in FY12E to 53.1% due torise in RM costs. EBITDA margins expected at 18.2% in FY12E & 18.5% in FY13E.
• Int’l biz (17% of Rev, excl. Hobi & Namaste) grew 18% YoY in FY11: Growth was 22% in constant currency terms. N. Africa, Levant & Nigeria have been the fastest growing regions. The political turmoil in the MENA region did impact growth in Q4FY11 & management expects some near-term pressures (impacts ~7%-15% of int’l biz revenues). We have reduced our growth rate assumptions for the int’l biz to 19% for FY12E (vs. 23% earlier) & 18% for FY13E (vs. 20% earlier).
• Inorganic growth: Hobi & Namaste contributed ~4% to DIL’s consolidated sales in FY11. With consolidation for the full year in FY12E, this will go up to 13%.  Namaste witnessed an improvement in operating margins during the quarter (16% vs. prior avg ~13%), due to top-line driven operating leverage. Management hopes to maintain these margin levels, by rationalizing manufacturing & distributions costs.

We are not making any significant change to our EPS estimates – 1% reduction for both FY12E & FY13E. The stock currently trades at 25x 1-yr fwd EPS, close to its 5-yr median. We value the stock at 24x FY12E EPS with a 1-yr target price of Rs 96. HOLD rating

Exide Industries : BUY

Margins Recover as Capacity Constraints Ease

Exide Industries’ (Exide) Q4 performance was above expectations with strong 17% QoQ revenue growth (vs. est. of 7%) aided by a 217 bps improvement in EBITDA margins QoQ to 17.4% (after adjusting for Rs 200 mn towards gain on loan repaid). Margins have expanded on higher vols and an improved product mix due with easing capacity constraints.  

Key Highlights 

• Exide reported revenue of Rs 12.2 bn (up 17% QoQ, up 19% YoY), EBITDA of Rs 2.1 bn (up 34% QoQ, 2% YoY) and adj. PAT of Rs 1.43 bn (up 15% QoQ and 7% YoY) in Q4FY11.  
• Exide’s product mix (replacement: OEM) at 1.25:1 has marginally improved over Q3 (1.17:1). We expect this to improve  further  as  new  capacities  come  on  stream  in Q1  and Q3 of FY12. The co. has taken price increases of ~5% in Q4 and 3% in April-11, within the replacement market. 
• Performance of the industrial business remains muted for Q4 as well. The mgmt expects the industrial vertical to start improving from Q1FY12 onwards on higher seasonal demand for inverters. 
• Losses in FY11 from investments in ING Vyasa life insurance have reduced sharply to Rs 350 mn (vs. Rs 683 mn in FY10). We understand that this is due to a higher contribution from renewal premiums being collected. 

Upgrading est on higher volume growth. Maintain BUY rating

With increased available capacities and strong volume outlook for the replacement market (~20% volume growth), we raise our FY12 revenue est by 4%. On the other hand, we have tempered our profitability est marginally to 20.5% (vs. 20.8%) on higher lead prices. Our resultant FY12E EPS is higher by 2% at Rs 9.1.

Our revised TP of Rs 167 is based on 16x FY12E core earnings (incl smeltors) + Rs 16/ share as value of insurance. We maintain our BUY rating on the stock.

ICICI Bank : BUY

Waning Provision Expenses & Robust NII Spur PAT

ICICI Bank’s PAT grew 44% YoY, in-line with our estimates, mainly due to a decline in provision expenses (down 61% YoY) and robust net interest income growth (23% YoY). Decline in provision expenses was mainly due to improved asset quality (gross NPA declined 1.5% QoQ). Advances growth maintained its momentum (up 5% QoQ) and supported margins at 2.7% (improved 10 bps QoQ). However, improvement in NIMs is mainly due to premature withdrawal of deposits; adjusting for this, NIM would have declined by ~6 bps QoQ. Deposits grew 4% QoQ while CASA ratio improved 90 bps QoQ to 45.1%. The bank continued to re-deploy funds from lower yielding investment book towards incremental advances, which will support NIMs in ensuing quarters. Other income declined by 13% YoY; however, fee income rose 18% YoY in-line with credit growth.

Zero net addition to NPAs:  Asset quality improved as gross NPAs shrunk by 1.5% QoQ to Rs 100 bn. Moreover, ICICI has shored up its provision coverage ratio to 76% (vs. 71.8% in Dec-

10) much above the regulatory requirement. Higher coverage will provide cushion to the bank’s profit in difficult times (maintains ~Rs 4 bn of excess provisions). Going forward, we expect that the credit cost will remain low & will support profitability.

Other highlights

• Growth gaining momentum:  ICICI’s balance sheet grew by 12% YoY (highest since 4QFY08) by focusing on lower risk but profitable business opportunities. The bank has envisaged fresh policy focusing towards improving corporate share in total credit at the start of FY11 and has successfully achieved it. SME and rural portfolio grew by 20% QoQ and 37% QoQ respectively which aided total advances growth at 5% QoQ. Unsecured retail book continue to contract; however, high growth in auto loan segment supported 6% QoQ growth in retail credit. Going forward, we expect a business growth of ~19% YoY for FY12E (management guidance – 20%) with significant contribution coming from corporate and mid corporate segments.
• CASA share improves: CASA ratio inched up to 45.1% (44.2% in Dec-10), despite higher term deposits rate during the quarter. Sequentially, current account deposits grew 10% while saving deposits grew 4% QoQ. Despite improving CASA ICICI Bank share, cost of deposits increased by 30 bps QoQ, which is mainly due to increase in term deposits rate.
• Re-pricing benefit to cushion NIM: In FY12E, ~75% of term deposits will be repriced likely at a higher rate against ~70% of total advances. This, coupled with falling share of international business, would likely to support margins in FY12E at current levels of ~2.6%.  Moreover, in 1HFY12, we expect NIMs to  contract marginally due to high disbursement towards agriculture sector in 4QFY11 (to meet priority sector lending norms). 
• Healthy fee income growth, treasury losses drag other income:  Other income declined by 13% YoY and 6% QoQ mainly due to treasury loss of Rs 1.9 bn. ICICI has booked ~Rs 1 bn of MTM losses in security receipts during the quarter. The bank  has  also  booked  some  MTM  losses  on  its  equity  and  G-Sec  portfolios  during the quarter (of ~Rs 0.9 bn). However, fees income growth at 18% YoY was in-line with the credit growth, mainly supported by revenues from corporate and SME advances. Going forward, we expect fees income growth to remain in-line with the credit growth.
• Higher staff expenses: Staff expenses grew by 47% YoY to Rs 8.5 bn mainly due to the bonuses paid and consideration of entire employee expenses of erstwhile BoR. This, along with decline in other income, led to an increase in cost to income ratio (up 216 bps QoQ) to 44.5% 
• Healthy CAR: The bank maintains a total CAR at 19.5% and Tier-I ratio at 13.1%. We expect return ratios to improve further, driven  by  robust  profit  growth  and increasing coverage. Management expects its credit cost at ~1% in the long term.

Insurance highlights: 

• Life insurance business remained under strain as reported APE declined by 26% YoY to Rs 39.8 bn. NBAP margins also continued to decline (~15.6% for 4QFY11 and 17.9% for full year), which was in-line with our estimates. Going forward, we have build in NBAP margins at ~15% for FY12E, and assumed 15% YoY APE growth.  
• ICICI Lombard General Insurance was required to provide ~Rs 2.7 bn towards  reserve for IMTPP (Indian Motor Third Party Pool) losses at 153% against 122-127% earlier (retrospectively from March-08). This has led to an impact of Rs 2.7 bn  in ICICI Lombard’s PAT. Due to this, the general insurance subsidiary reported a loss of Rs 800 mn in FY11. 

Valuations

Improving business momentum, robust asset quality, healthy margins, consistent fees income growth are the key highlights of ICICI’s 4Q result. NIMs, though improved 10 bps QoQ, likely to moderate in 1HFY12E (due to rising cost of deposits) and will be maintained at current levels in FY12E (due to re-pricing benefits and rising domestic advances share). ICICI has improved its coverage ratio to 76%, thereby creating cushion for future slippages. We expect calibrated business growth, lower credit cost and stable NIM for FY12E, will provide sufficient traction to

PAT growth (~17% YoY) – resulting in better return ratios. We reiterate our BUY rating with a target price of Rs 1,324 [2.5 x FY12E Adj. BV (adjusting for value and cost of investment) + Rs 331 value of investments]

JSW Energy : HOLD

FY11: Hit by Higher Fuel Costs & Execution Delays

JSW’s key FY11 highlights include: (a) sharp rise in imported spot coal prices (up from ~USD 75 to 110/tone); (b) stable merchant realizations at ~Rs 5/kWh; (c) issues with coal supply from

Indonesian fixed-priced contracts (resulting in higher dependence on spot market to ~85% from ~60% anticipated earlier); (d) execution delays in Ratnagiri (1,200 MW) & Barmer (1,080 MW) plants; (e) “under-review” status of the ~USD 400 mn bid to acquire CIC, due to regulatory hassles; and (f) worrisome rise in receivables to 65 days vs.avg. of 30 days for gencos.

Key Analyst meets takeaways

• Fuel: Blended fuel cost for FY11 stood at ~Rs 2.6/ unit (vs. Rs 1.9/ unit in FY10) and the mgmt expects it to remain in the range of Rs 2.6-2.8/ unit in FY12. During FY11, JSW sourced ~90% of its requirements from spot markets. To ensure stability in fuel sourcing, JSW is also looking to enter LT contracts with Indonesian suppliers for ~50% of its requirements. It expects price range of ~USD 50 (~4,000 GCV) to ~USD 90 (~5,500 GCV) for the same. The supplies from captive lignite mines in Rajasthan to commence from Q1FY12, thus reducing its dependence on imported coal requirements.
• Realizations:  For Q4, merchant was at Rs 4.71/unit while for FY11 it was at Rs 4.95/unit. Mgmt guided for moderation in merchant tariff and expects it to be in the range of Rs 4.5-4.75/ unit in FY12.
• Execution: At Ratnagiri (4x300 MW) project, the bottleneck in transmission has now been resolved and the mgmt expects commissioning of Unit 3&4 by Q1 and Q2FY12 resp. Further, at Rajasthan (8x135MW), the key bottleneck in captive lignite mines is also resolved & expects full commissioning progressively by end FY12. For captive-mine based Chhattisgarh (1,320 MW) and W. B. (300 MW) projects, mgmt expect construction to start by H2FY12.

HOLD with a Target price of Rs 74

We are concerned on the increased volatility in coal prices, as ~85% of coal requirement is from spot mkt. JSW is scouting for smaller mines (50-100 MMT) in Indonesia and currently has ~USD 225 mn cash. A successful acquisition would lead to re-rating of the stock.

LIC Housing Finance : BUY

Impressive Performance

LICHF reported a strong set of numbers with net profit rising 47% YoY. Healthy net interest income (up 61% YoY) was driven by improvement in margins (up 15 bps YoY to 3.45%) and aboveindustry loan growth of 34% YoY. Non interest income included Rs 0.3 bn of profit on investment in Realty fund. Operating cost structure saw improvement, with cost-to-income ratio improving to 13.5% (down 414 bps YoY). Asset quality improved with absolute Gross NPAs falling sequentially by 23%.

Key highlights

• Biz momentum was maintained with sanctions rising 25% and disbursements rising 34% YoY, driven primarily by ‘Individuals’ biz segment (which saw 37% YoY growth in sanctions and 71% YoY rise in disbursements). 
• Lending towards non-individual segment slowed down in Dec’10; however, mgmt maintains that this segment will resume its normal growth trajectory going forward. 
• LICHF has guided for NIM of ~2.7% (vs. 3.45% in Q4FY11 which are not sustainable) & Advances growth of ~25% in FY12E which we believe are achievable. LICHF will look to raise equity capital in H2FY12. We have built in Rs15 bn of equity dilution in FY12E at a price of Rs 225 in our estimates.

Maintain BUY with a revised TP of Rs 270

LICHF has been able to demonstrate strong growth in core operational performance along with substantial improvement in asset quality (despite stiff competition in the housing loan space).

While rising rates & increasing real estate prices pose risk to housing demand, the mgmt is confident of maintaining above industry growth rates & healthy asset quality. However, margins will be under pressure going forward. We have revised our EPS est upwards by 4% in FY12E to factor in improving biz performance and equity dilution, resulting in 24% rise in FY12E BV. We recommend a BUY rating on the stock, with a target price of Rs 270 (2.2x FY12E ABV + Rs 2 as value of investments) – upside of 20%

Patni Computers : SELL

Twin Challenges of Growth & Integration 

Q1CY11 results of Patni Computers depict the following – Positives: 1) four new wins of USD 25-30 mn total contract value each. Negatives: 1) slow ramp-ups in key accounts; Top 10 clients de-grew ~3% QoQ leading to lower utz. rates excluding trainees at 74.5% (QoQ decline of 150 bps), & 2) near-term challenges indicated by the mgmt. Patni reported revenues of Rs 8.5 bn (3.4% QoQ &  9.4% YoY), EBITDA of Rs 1.7 bn (2.5% QoQ & 11.2% YoY) & Adj. PAT of Rs 1.2 bn (17.4% QoQ &  21.2% YoY) in Q1CY11.  

Key highlights

• Sales:  Constant currency growth in revenues was at ~3.6% largely led by volumes and stable pricing. Telecom vertical grew ~29% QoQ 
• EBITDA:  Impacted by lower utz. (blended utz. excl trainees down 150 bps QoQ). Integration exp. impacted EBITDA margins by ~70 bps.      
• PAT: Higher effective tax rate at 28% (vs.  ~18% in Q4FY10) led to ~17% QoQ decline in PAT.  New deals signings healthy; challenges include key a/c rampups:  Q1CY11 saw decent signings of four deals with multiple service offerings of USD 25-30 mn total contract value each.
• However, concerns persist on: (1) slow ramp-up in key accounts (Top 5/ Top 10 clients de-grew by ~3% QoQ), & (2) integration with iGate which may impact employee additions (Q4 saw net additions of 97) and attrition rates (~25% in Q4 on LTM basis ex. BPO). Additionally, absorption of salary hikes (offshore: 9-10%; onsite: 2-4%) would impact margins in the near-term. Higher tax rates would further lead to lower NPMs.   

Valuation

We forecast ~14% YoY growth in topline for CY11 but 28% tax rates would lead to ~7% YoY decline in PAT. Our target price of Rs 385 (at Core P/E of 9x CY11E EPS + 80% of Cash per share of ~Rs 126) implies a downside of 10% from CMP. Maintain SELL.

2nd May, 2011

The markets opened on a flat note and traded in a tight range throughout rage in the morning session. Moving sideways in the afternoon session the markets traded in the red and slipped further in the last hour to end on a weak note. Among the Sectoral indices Capital Goods, Realty and Bankex lost the most while FMCG gained. Among the Sensex stocks HUL (2.24%)&  Maruti (1.27%) were amongst the gainers while L&T (3.87%), Jindal Steel (3.57%) and ONGC(2.79%) were among the losers. The Sensex lost 157 points or 0.81% to close at 19,136 while Nifty lost 36 points or 0.62% to close at 5,750.

Total traded turnover stood at Rs 1,17,476 cr. In equities both FIIs & DIIs were net sellers of (Rs 690 cr) & DIIs (Rs 61 cr) respectively. On the derivatives side, FIIs were net sellers in Index Futures (Rs 1241 cr), Stock Futures (Rs 353 cr) and Stock Options (Rs 41 cr) while they were net buyers in Index Options (Rs 2332 cr).

The US markets ended positive led by gains in industrial stocks and strong results declared by Caterpillar offsetting weak economic data. The Dow Jones gained 47 points or 0.37% to close at 12,763 while NASDAQ closed flat at 2,874.

While most of the Asian markets are shut on account of holiday, Nikkei is trading higher by 0.97%.

The markets moved sideways throughout and closed on a weak note. The declines far outnumbered the advances. The market may open on a flat to positive note. The expectations on RBIs monetary policy review tomorrow will affect the market sentiment.

The trend deciding level for the day is 5800, If NIFTY trades above this level then we may witness a further rally up to 5840-5875-5905 levels. However, if NIFTY spot trades below 5800 levels then we may see some profit booking to initiate in market, it may correct up to 5715-5680-5650.

Stocks to focus for intraday long: Glaxo, Educomp

Stocks to focus for positional long: Glaxo (Buy 2257-2240 TGT 2310 SL 2212) – 1 Week