Strategy for Investment

May 27, 2011

From lows of October 2008 to a to a high of 21109 in November 2010 rally in Sensex is the result of strong earnings and ROE, ROCE and EBITDA margin expansion with consequent high FII inflow. Retail has not participated in this rally and only 30% of the nifty stocks crossing its previous high price.

Indian markets witnessed significant change in Nifty sectoral weights from December 2008 to May 2011. In December 2008 sector having more weightage were Oil and Gas (24.5%), Power (13.7%), Telecom (11.6%) whereas trend now shows Financial Services (26.2%), IT Services (14.2%), Oil and Gas (14.1%), Metals (8.1) and Automobiles and parts (7.5%).

Indian markets are predominantly driven by FII inflows, weaker inflows from FIIs since beginning of CY11 led by further correction in the market. Indian markets sharp upward move from 5400 to 6312 from September 2010 to first week of November.

Commodities price performance

All commodities are trading this year above their average price.

Commodity	Price/unit	CMP	Avg yearly price
Crude Oil	USD/barrel	100	85
Aluminum	USD/MT	2490	2280
Copper	USD/MT	9050	8088
Iron Ore	USD/MT	188	159
Gold	USD/y oz.	1512	1281
Silver	USD/t oz.	35	24
Coal	USD/t oz.	121	99
Cement	Rs/bag	278	243

Macro Economic factors are also affecting markets

Inflation remains a key concern for the economy. Rate hike of 50bps is expected in June Policy. Any further hike beyond 50bps will start affecting growth rate.

Crude oil moving up and has pass US$100 mark which increases fiscal deficit as well as inflation, also affecting profitability of Oil marketing companies.

Scams and Corruption charges are affecting investor’s sentiments

In near term market is expected to remain range bound or can go further down but it could serve as an opportunity for long term investors to buy at every lower levels with view of more than one year.

TREND FOR MARKET EXPECTED NEXT WEEK

28^th May 2011

DEBT MARKET

Kotak Mahindra Mutual Fund to launch two debt plans next week

The new fund offer of Kotak Fixed Maturity Plan Series 48 (272-day) will be open from May 31-Jun 2, and that of Kotak Fixed Maturity Plan Series 49 (370-day) will open on Jun 2 and close on Jun 8.

Other features of both schemes:

* Options: Growth and dividend;

* Minimum application: 5,000 rupees and in multiples of

10 rupees each thereafter;

* Load: Nil;

* Performance benchmark index: CRISIL Short Term Bond Index;

* Fund managers: Deepak Agarwal and Abhishek Bisen.

EQUITY MARKET

Indian Market outlook seems to be positive with banking shares expected to lead the upside rally as short covering can value buying can be expected in this sector after sharp correction. Last two days positive rally can be viewed as technical upmove as fundamentally market trend is still negative due to high inflation and rising interest rates.

Investors will look at India's gross domestic product estimates for Jan-Mar and revised estimates for 2010-11 expected to be released Tuesday—and also monsoon data for week will decide future trend of market.

Overall Resistance for net week for Nifty is seen at 5520 and support at around 5400.

Bharat Petroleum Corp, Hindalco Industries, Mahindra & Mahindra, Oil and Natural Gas Corp, Reliance Capital, and Reliance Communications will also detail their quarterly earnings on Monday.

Sun Pharmaceutical Industries will detail its result on Saturday.

Shares of upstream companies and oil market companies may be supported on expectations of a diesel price hike ahead of the Empowered Group of Ministers' meet on Jun 9.

IT Stocks Outlook:

An Infosys employee in the US had filed a complaint saying the company had violated visa norms by sending employees on B1 visas to work full-time in the US for long durations. So shares of most information technology companies are seen range-bound with a negative bias next week.

Shares of other sector bellwethers such as Tata Consultancy Services Ltd,

and Wipro Ltd also fell 2.6% and 1.2%, respectively. However, the Mahindra

Group-owned Tech Mahindra Ltd and Satyam Computer Services Ltd rose over 2%

each during the week.

Pharma Stocks Outlook:

Pharmaceutical shares are seen trading in a range next week with a slight upward bias on strong fundamentals and also as sector is considered as defensive so may not witness profit booking.

This week, Aurobindo Pharma, Cadila, Ranbaxy Laboratories and Strides were among the domestic pharmaceutical companies that gained due to approvals to sell drugs in the world's largest drug market.

Indian generic drug companies are set to reap huge benefits as drugs with annual sales of $147 bln are likely to go off-patent in the next five years, of which drugs with sales of $34 bln will lose patents this year itself.

Cement Stocks Outlook:

Shares of major cement companies are seen range-bound next week with a negative bias as sentiment remains weak after companies cut prices in some regions due to low demand and also dispatches data will be announced by cement manufactures. Cement prices were reduced by around 15 rupees per 50-kg bag in Gujarat over the last two weeks, and by 5 rupees in Delhi. Further correction in prices as monsoon sets in mid-June.

This week, shares of UltraTech Cement Ltd, ACC Ltd, and Shree Cement Ltd remained flat. Madras Cements Ltd and India Cements Ltd declined 2% and 1%, respectively, while Ambuja Cements Ltd rose nearly 4%.

FMCG Stocks Outlook

Shares of fast moving consumer goods companies are seen to be trading in a narrow range next week with a positive bias as sector is considered as defensive sector.

Among fast moving consumer goods companies, shares of Colgate Palmolive India Ltd will be in focus next week as the company will announce its Jan-Mar earnings on Monday.

Market Expectation: Limited Upside

25^th May 25, 2011

There are doubts about the strength of the global economy due to European debt problems. Investor should be careful and invest in markets only when global environment seems to be comfortable for taking risk. Indian markets continued to trend lower. The Nifty closed at 5,348, down 46 points on Wednesday while the Sensex tanked 160 points to shut shop at 17,850, this due to weakness in front liners like DLF, Infosys and Reliance which added to the woes tugging the market to a two-month low. Nifty has broken crucial support of 5350 in today’s trade and is expected to be volatile tomorrow with more bias on downside. Earnings from automobile major Tata Motors will be eyed. Experts expect the company to report Jan-Mar consolidated net profit of 26.50 bln rupees, up 9% sequentially.

Equity Estimate for next week

21^st May 2011

Domestic Indices are seen trading up on short covering ahead of May expiry on Thursday but gains could be kept in check due to profit booking. Nifty range could be 5380-5560. Stock specific stock movement will continue to flow in.

Companies that are due to report Jan-Mar earnings next week are Bharat Heavy Electricals, GAIL (India), DLF, Cairn India, Tata Steel, Tata Motors, Reliance Infrastructure and Reliance Power. BHEL and GAIL (India) will take cues from their earnings due Monday.

The downside in upstream companies will be less, were down last week due to government raised their oil subsidy burden for 2010-11 (Apr – Mar).

The Empowered Group of Ministers meet to mull diesel price hike, which is likely to take place next week, will also look forward.

Telecom Sector is expected to face volatility next week with Reliance Communication seen facing selling pressure. Top pick in sector can turn out to be Bharti Airtel which can also act as defensive on fall of market.

Steel Sector is expected to be down next week as stocks are not facing lack of buying interest. “Considering the market conditions, SAIL has reduced its fund rising target to 60 bln rupees from 80 bln rupees earlier," the official had said. Shares of SAIL have fallen about 18% over the last one month. As for other steel companies such as JSW Steel and Bhushan Steel, they are likely to face a shortage in iron ore supply, as on May 13 the Karnataka government had asked miners to halt all mining activities, including transportation of mined material.

Capital Goods Sector is expected to rangebound, focus will be on BHEL as it will post its numbers on Monday. Bhel has been consistenly de – rated in the past four – five quarters owing to concerns like order intake slow down, intensifying competition, limited long term revenue visibility.