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Sharekhan ValueGuide [October 08, 2012]  Sharekhan www.sharekhan.com

Summary of Contents  EQUITY FUNDAMENTALS THE STOCK IDEAS REPORT CARD FROM SHAREKHAN'S DESK Booster dose from policy makers  Policy makers from across the globe were expected to take critical decisions in September 2012 that were to provide direction to the equity markets globally, and sure enough they did. As European Central Bank, US Federal Reserve and the Chinese government announced stimulus measures one after another in a coordinated effort to support the sagging global economy, the market gained strength and moved closer to the higher end of its multi-month trading range (the Nifty level of 4600-5600). The booster dose for the Indian equity market, however, came from our own government, which shaking off months of policy inertia announced a series of policy measures in a surprise move last month. SPECIAL REPORT High on cocktail of policy measures   The equity markets are celebrating the recent flurry of policy measures. Another round of liquidity infusion by the central bankers in Europe and the USA is soothing investor nerves and unleashing a "risk-on" rally globally. In India also, the government has finally shaken off the policy inertia and announced some critical policy steps to curtail the bloating subsidy bill and attract foreign inflows in the retail and aviation sectors. The developments have come as an unexpected pleasant surprise and the domestic market has accordingly reacted with a sharp appreciation of close to 7-8% in the past one week. Nifty-within kissing distance of the higher end of range and the highs made earlier this year: Contrary to general pessimism and the bearish consensus view, we had always been convinced that the benchmark index (Nifty) would remain within its multi-month trading range (4600-5600) with an upward bias. Driven by the recent events, the Nifty has surged ahead touching the higher end of the range and tested the recent highs (at least on an intra-day basis). In the absolute near term, the equity market could give up some of the recent gains on account of profit booking and the growing political uncertainties domestically. However, we believe that the bias remains positive and the probability of the benchmark indices breaking out of their range has increased substantially now. The caveat is the that the government should follow up the recent moves with more policy actions and take corrective steps to support the key sectors such as power and small and medium enterprises as well as the other troubled sectors. Thus, the idea should be to buy on corrective pull-backs.  Risk/concerns: The stock market rally could lose steam if the crude oil prices remain at uncomfortable alleviated levels on the back of QE3-inducted speculative interest in commodities. Domestically, the ability of the government to move forward with reforms despite the discontent among allies and the growing pressure from the opposition on the government over the corruption charges would influence investor sentiments. SHAREKHAN TOP PICKS Sharekhan top picks  STOCK IDEAS CMC: Leveraging on its pedigree Persistent Systems: Persistently innovating Relaxo Footwears: Catch this Flite SWITCH IDEA Construction: Closure of switch call from ITNL to IRB with 18.5% returns STOCK UPDATES Apollo Tyres: Price target revised to Rs105 Bank of India: Margins likely to improve but asset quality worries remain Bharat Heavy Electricals: Maintain Hold with price target of Rs260 Cadila Healthcare: Price target revised to Rs1,064 Deepak Fertilisers & Petrochemicals Corporation: Annual report review Eros International Media: Annual report review GAIL India: Annual report review  Godrej Consumer Products: Annual report review; price target revised to Rs726 Grasim Industries: Price target revised to Rs3,405 Housing Development Finance Corporation: Growing steadily despite competition  India Cements: Downgraded to Hold; price target revised to Rs95 Infosys: Wait is over, Infosys' first major acquisition  Larsen & Toubro: Annual report review; price target revised to Rs1,627  Marico: Price target revised to Rs201 Mcleod Russel India: Downgraded to Hold; price target revised to Rs356 Punj Lloyd: Management meet highlights Tata Consultancy Services: Downgraded to Hold Torrent Pharmaceuticals: Growth revives SHAREKHAN SPECIAL Q2FY2013 Banking earnings preview Q2FY2013 IT earnings preview SECTOR UPDATES Automobiles: Forex gains for auto sector, impact on FY2013 earnings  Pharmaceuticals: New drug pricing policy-less severe than anticipated VIEWPOINT Aurobindo Pharma: Concerns abating  EQUITY TECHNICALS  Sensex: Higher tops, higher bottoms  EQUITY DERIVATIVES  Derivative view: Riding on reforms  COMMODITY FUNDAMENTALS  Macro-economy Crude oil: Tumbles on SPR release fears, rising US inventories Precious metals: Boosted by QE3 speculations Base metals: Possibility of a correction in short term Major economic events in October 2012   COMMODITY TECHNICALS  Gold: Above Golden ratio Silver: Aiming higher Crude oil: A vertical fall Copper: Near key resistance Lead: Pull-back matured Nickel: Sub-division  CURRENCY FUNDAMENTALS  Currency market: Reforms unleashed, liquidity tap flowing  INR-USD CMP: Rs52.56 (spot) INR-GBP CMP: Rs84.92 (spot) INR-EUR CMP: Rs67.85 (spot) INR-JPY CMP: Rs67.35 (spot)   CURRENCY TECHNICALS  USD-INR: Expecting recovery GBP-INR: Approaching channel support EUR-INR: Scope for a bounce JPY-INR: Potential for a pause  PMS DESK Sharekhan PMS funds: Fund manager's view and product performance ProPrime-Top Equity ProPrime-Diversified Equity ProTech-Diversified ProTech-Nifty Thrifty ProTech-Trailing Stops  ADVISORY DESK  Monthly performance of Advisory products MID Trades Derivative Ideas  MUTUAL FUNDS DESK  MF PICKS Sharekhan's top mutual fund picks (equity)  Sharekhan's top SIP fund picks  EARNINGS GUIDE Click here to read report: Sharekhan ValueGuide     Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.