Market Outlook 13th December 2011

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Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1

Market OutlookIndia Research

December 13, 2011

Dealer’s Diary

Indian markets are expected to open in red taking cues from gap down opening

in most of the Asian markets and negative closing in the global marketsyesterday. The Indian markets fell sharply for a third consecutive session

yesterday after data showed that the domestic IIP shrank by 5.1% yoy for October

2011, well below estimates.

Globally, US and European markets closed on a negative note yesterday as

troubling remarks by Moody's and Fitch ratings agencies led to renewed concerns

about Europe. These rating agencies raised some questions regarding the

agreement reached by European policymakers last Friday and whether it will

address the ongoing debt crisis.

The markets today would be closely watching out for the Fed policy meeting

scheduled today which is likely focus on a plan to reveal the direction of interest

rates more explicitly. As such no announcements are expected to be made today in this meeting but this will lay the ground for the new communications strategy

which could be unveiled in January 2012. Also, retail sales data of the US for

November 2011 (estimated at 0.5%) will be on the radar.

Markets Today The trend deciding level for the day is 16,024 / 4,810 levels. If NIFTY trades

above this level during the first half-an-hour of trade then we may witness a

further rally up to 16,207 – 16,544 / 4,865 – 4,965 levels. However, if NIFTY

trades below 16,024 / 4,810 levels for the first half-an-hour of trade then it may

correct up to 15,687 – 15,503 / 4,710 – 4,655 levels.

Indices S2 S1 R1 R2

SENSEX 15,503 15,687 16,207 16,544 NIFTY 4,655 4,710 4,865 4,965

News Analysis Industrial production (IIP) contracts by 5.1% yoy in October 2011

GAIL signs agreement for LNG supplies

Refer detailed news analysis on the following page

Net Inflows (December 09, 2011)

` cr Purch Sales Net MTD YTD

FII 1,770 2,062 (292) 1,811 (2,213)

MFs 341 561 (221) (145) 5,801

FII Derivatives (December 12, 2011)

` cr Purch Sales Net Open Interest

Index Futures 1,629 1,864 (235) 11,451

Stock Futures 1,469 1,346 123 24,512

Gainers / Losers

Gainers Losers

Company Price (`) chg (%) Company Price (`) chg (%)

Wipro 415 2.6 Essar Oil 60 (10.9)

Aurobindo Pharma 91 1.7 United Brew 411 (10.7)

Glenmark Pharma 308 1.1 Chambal Fert 84 (8.2)

Pipavav Defence 68 1.0 Power Finance 149 (8.2)

Infosys 2,731 0.9 Sintex Inds 86 (7.9)

Domestic Indices Chg (%) (Pts) (Close)

BSE Sensex (2.1) (343.1) 15,870

Nifty (2.1) (102.1) 4,765MID CAP (1.9) (106.9) 5,514

SMALL CAP (1.5) (93.0) 5,960

BSE HC (0.9) (50.7) 5,908

BSE PSU (2.8) (190.2) 6,654

BANKEX (3.0) (302.4) 9,855

AUTO (2.6) (217.3) 8,304

METAL (4.1) (431.6) 9,989

OIL & GAS (2.8) (224.7) 7,797

BSE IT 1.0 54.3 5,788

Global Indices Chg (%) (Pts) (Close)

Dow Jones (1.3) (162.9) 12,021

NASDAQ (1.3) (34.6) 2,612

FTSE (1.8) (101.4) 5,428

Nikkei 1.4 117.4 8,654

Hang Seng (0.1) (10.6) 18,576

Straits Times 0.3 7.1 2,702

Shanghai Com (1.0) (23.7) 2,292

Indian ADRs Chg (%) (Pts) (Close)

Infosys (1.7) (0.9) $51.6

Wipro (0.7) (0.1) $10.4

ICICI Bank (7.1) (2.0) $26.3

HDFC Bank (5.2) (1.5) $26.8

Advances / Declines BSE NSE

Advances 798

Declines 1,943 1,153

Unchanged 121 49

Volumes (` cr)

BSE 1,824

NSE 9,322



Market Outlook | India Research

December 13, 2011 2

Industrial production (IIP) contracts by 5.1% yoy in October 2011

First industrial production contraction in 27 months: India’s industrial output

growth slipped into the negative territory for the first time since June 2009,

suggesting the entrenchment of the slowdown in the domestic economy. Industrial

production contracted by 5.1% yoy, from a slightly upwardly revised 2.0% growth

registered in September 2011 and robust 11.4% yoy growth witnessed in October

2010. Industrial production contraction was at the lower end of street expectations.

Median expectation from the survey was of a slight (0.7%) contraction in the

industrial production. The sharp contraction can be partly attributed to a) the sharp

growth witnessed in the year-ago period (high base effect), b) the festive season

and c) sharp contraction in the highly volatile capital goods production data. The

12-month rolling industrial production growth has been on a declining trend since

November 2010, and it slipped further to just 5.3%. Even YTD growth more thanhalved to just 3.5% yoy as compared to 8.7% yoy during April-October 2010.

Manufacturing industrial production tumbles by 6.0% yoy: The manufacturing

sector’s production, which accounts for ~75% of the overall industrial production,

contracted by a rather sharp 6.0% yoy, the sharpest contraction since March 2009.

In terms of industries, 13 of the 22 industry groups (15 out of 22 in August 2011)

in the manufacturing sector registered positive growth during October 2011.

Mining production (which accounts for 14.2% of industrial production) continued to

register a decline in production for the third straight month in a row. The mining

sector’s production fell by 7.2% compared to a downwardly revised 7.0% decline

in September 2011. The only constituent, according to use-based classification, toremain in the positive growth region was electricity, registering 5.6% yoy growth as

compared to 9.0% yoy growth in September 2011.

Capital goods production data continues to be highly volatile, declines by steep

~26%: As per use-based data, all the categories registered a decline in production

as compared to a year-ago period. Production of basic goods declined albeit by a

marginal 0.1% compared to downward revised 4.0% growth in September 2011

and robust 9.8% growth in October 2010. Volatile capital goods production

contracted by rather steep 25.5% yoy, the sharpest contraction in more than five

years. Production of intermediate goods fell by 4.7% yoy. In spite of the festive

season in October 2011, consumer goods production declined, albeit slightly (by 0.8% yoy).

Do not expect further policy rate hikes in the current rate cycle: The sharp

contraction in industrial production data coupled with the set of moderating

economic data (GDP growth at sub-7% levels, slowing export growth etc.) clearly

point to the entrenchment of the slowdown witnessed over the past few quarters.

The RBI in its latest monetary policy review had also acknowledged the fact of

moderating economic growth and had hinted at a low probability of policy rate

action in its forthcoming review of the monetary policy. On the basis of our

expectation of moderation in inflation from December 2011 (on the basis of

weaker demand prospects due to slower global growth) and the considerably

slower economic growth trends, we do not expect further hike in policy rates in the

current interest rate cycle.




December 13, 2011 3

GAIL signs agreement for LNG supplies

GAIL has signed a Sales and Purchase Agreement (SPA) to buy 3.5mn tonnesof LNG per year for 20 years with US-based Sabine Pass Liquefaction. The

supplies are expected to commence from CY2016. The pricing of gas will bebased on contractual provisions on a Henry Hub (US gas benchmark) basisafter transfer of custody on FOB. This move is a part of GAIL's long-termstrategy to secure gas supplies to meet the rising demand in India. This dealwill not have a major impact on GAIL's financials over the next two years.Hence, we maintain our estimates and recommend a Buy rating on the stockwith a target price of `499.

Economic and Political News

2G case: CBI files charge sheet against Ravi Ruia, Anshuman Ruia of EssarGroup

Farmer Groups to meet Manmohan Singh to press for FDI in retail

Four big-ticket bills expected to come for discussion in Cabinet meeting today

Government to free diesel and LPG prices after weighing impact

Rupee hits new record low of 52.84 per dollar

Corporate News

Infosys employees working extra hours to meet revenue targets

M&M plans to set up an assembly plant in Southeast Asia

Sri Lankan bank selects Polaris' Intellect CBS system

Suzlon Group wins 35MW UK contracts Source: Economic Times, Business Standard, Business Line, Financial Express, Mint




December 13, 2011 4

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Market Outlook 13th December 2011

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