A project report On

Sectoral Study of Stock Market

Submitted to : Submitted by:

Kotak Securities Ltd. Prachi Jain

Summer Trainee

Employee Id- ITO995

MBA- Lucknow University

(2011-2013)

DECLARATION

I, Ms Prachi Jain do hereby declare that the project report titled Sectoral study of Stock market is a genuine research work undertaken by me and it has not been published anywhere earlier and thereby I take full responsibility of the report.

Signature Name of the student

Date Department of business Administration Lucknow University, Lucknow

ACKNOWLEDGEMENT

I would like to thank Kotak Securities, Lucknow for giving me an opportunity to undergo summer training in their company. My deep-rooted respect and sincere gratitude to Mr. Saurabh Agarwal (Vice President), Mr. Sameer Agarwal, who in-spite of their busy schedule listened to my problems and suggested prompt solution. For the success of the project, other than efforts of parents, guidance as a crucial input is required. This acknowledgement is an attempt at expressing my sincere

gratitude to the person without whom this study would not have been the success it has turned to be. I wish to express our sincere thanks to my mentor who helped me in planning and executing the work in time. His valuable suggestions during the course of summer internship are greatly acknowledged.

EXECUTIVE SUMMARY

CHAPTER - 1
INTRODUCTION

This project is done to study different sector of the stock market and how the companies under the sector are affected by various factors, like, union budget, current market position, demand and etc. This is done with reference to an analytical study of Indian stock market. This project was done during summer training in Kotak Securities, Lucknow, is an Indias best broking house. It has focused on strengthening its presence in the rapidly expanding retail broking market. India is a developing country. Nowadays many people are interested to invest in financial markets especially on equities to get high returns, and to save tax in honest way. Equities are playing

a major role in contribution of capital to the business from the beginning. Since the introduction of shares concept, large numbers of investors are showing interest to invest in stock market.

MEANING OF SCRIP In language of stock market, scrip means the name of the company by which the company recognizes into the stock market. There were 23 stock exchanges in security market. In all these stock exchanges, there were number of scrip in the stock market. But in present these all stock exchanges are merged with NSE AND BSE. So that all scripts are listed only under two stock changes.In NSE around 1830 scripts of equity are listed and overall 11360 scrip are listed. There is one another stock exchange otcel (Over the Counter Exchange of India). It is used only for over the counter trading. Before a year, when all exchange were separate; then rules and regulation of listing agreement were different in stock exchanges such as for the listing in NSE, company has to require more than Rs 10 crores net worth and also company has to paid dividend to their shareholder continuously for last three years. MEANING OF SECTOR There are many companies or scrip that manufacturer the same products and provide services are specified under the particular name that called Industry or Sector. There are many other different kinds of industries, and often organized into different classes or variety of industrial classifications its called Sector. Example-. HLL specified under the FMCG sector, Infoysys, Wipro under the IT sector. There are many sectors in which many types of scrip are listed. Few sectors among these are as follows. Automobiles Bank Consumer durables Capital goods FMCG Health care IT Metal Oil & gas Power

PSU Realty

In this report, I have studied on five sectors which are :-

Automobile sector Banking sector Oil & Gas sector FMCG sector I.T sector

NEED OF THE STUDY

To start any business capital plays major role. Capital can be acquired in two ways by issuing shares or by taking debt from financial institutions or borrowing money from financial institutions. The owners of the company have to pay regular interest and principal amount at the end.

Stock is ownership in a company, with each share of stock representing a tiny piece of ownership. The more shares you own, the more of the company you own. The more shares you own, the more dividends you earn when the company makes a profit. In the financial world, ownership is called Equity.

Investors invest the money in stock market, especially in sector indices, and gain more profits.

The sector investments and funds have received attention and more popularity in the recent. Performance of the economy influences industry sector returns differently and changes over time periods. This study attempts to contribute to this specific area of diversification and optimization using data from the Indian capital market. This study focuses on BSE and NSE Sector Indices.

OBJECTIVE OF THE STUDY

The objective of this project is to deeply analyze different sector of stock market for investment purpose by monitoring the growth rate and performance on the basis of historical data.

Primary objectives: Detailed analysis of 5 sector selected, i.e, FMCG, Bank, Automobile, Oil & Gas and I.T. Suggesting as to which companys shares would be best for an investor to invest. To forecast the future direction of prices through the study of past market data.

 Understanding, analyzing and providing a valid explanation both theoretically and technically.
I had keen interest to enrich my knowledge in stock market. Giving conclusion and recommendation.

Secondary Objectives : To find out the current position of the company of the selected sector Understand the capital market and its functioning To compare theoretical knowledge with actual industry practice. To improve the investor knowledge and market proficiency

SCOPE OF THE STUDY

The scope of the study is identified after and during the study is conducted. The project is based on tools like fundamental analysis and ratio analysis. Further, the study is based on information of last quarterly and yearly performance. The analysis is made by taking into consideration five companies i.e. TATA Motors, HDFC bank, Infosys, ONGC, HUL. The scope is limited to only the fundamental analysis of the chosen stocks. It helped me in learning the market dynamics, study the movement of share prices and to give a proper justification for the same, theoretically and technically.

CHAPTER 2

INDUSTRY PROFILE

INDIAN SECURITIES MARKET- OVERVIEW

The Indian Securities Market, considered one of the most promising emerging markets, is among the top eight markets of the world. Transfer of resources from those with idle resources to other who have a productive need can be achieved through the securities markets. Securities Markets is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc. Further, it performs an important role of enabling corporate, entrepreneurs to raise resources for their companies and business ventures through public issues. Transfer of resources from those having idle resources (investors) to others who have a need for them (corporates) is most efficiently achieved through the securities market.

Stated formally, securities markets provide channels for reallocation of savings to investments and entrepreneurship. Savings are linked to investments by a variety of intermediaries, through a range of financial products, called Securities. Securities are defined in the Securities Contract (Regulation) Act, 1956 as: Shares, scrips stocks, bonds, debentures, debenture stock . Government securities Rights or interest in securities.

Component of securities market

Securities shares, bonds, debentures, futures, options, mutual fund units Intermediaries- brokers, sub- brokers, custodians, share transfer agents, merchant bankers Issuers of securities- companies, bodies corporate, government, financial institutions, mutual funds, banks Investors- individual, companies, mutual funds, financial institution, financial institution investors(FII), Market regulators- SEBI, RBI( to some extent), Department of companies affairs

Market Segments
The securities market has two interdependent and inseparable segments, namely, the new issues (primary) market and the stock (secondary) market. The primary market provides the channel for the creation and sale of new securities, while the secondary market deals in the securities that were issued previously. The securities issued in the primary market are issued by public limited companies or by government agencies. The resources in this kind of market are mobilized either through a public issue or through a private placement route. If anybody can subscribe for the issue, it is a public issue; if the issue is made available only to a select group of people, it is known as private placement. There are two major types of issuers of securitiescorporate entities, who issue mainly debt and equity instruments, and the government (central as well as state), which issues debt securities (dated securities and treasury bills).The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risks and returns.

Once new securities are issued in the primary market, they are traded in the stock (secondary) market. The secondary market operates through two mediums, namely, the over-the-counter (OTC) market and the exchange-traded market. The OTC markets are informal markets where trades are negotiated. Most of the trades in government securities take place in the OTC market. All the spot trades where securities are traded for immediate delivery and payment occur in the OTC market. The other option is to trade using the infrastructure provided by the stock exchanges. The exchanges in India follow a systematic settlement period. All the trades taking place over a trading cycle (day = T) are settled together after a certain time (T + 2 day). The trades executed on exchanges are cleared and settled by a clearing corporation. The clearing corporation acts as a counterparty and guarantees settlement. A variant of the secondary market is the forward market, where securities are traded for future delivery and payment. A variant of the forward market is the Futures and Options market. Presently, only two exchanges in Indiathe National Stock Exchange of India Ltd. (NSE) and the Bombay Stock Exchange (BSE)provide trading in Futures and Options.

Regulators in Securities Market

Few key agencies have a significant regulatory influence, direct or indirect, over the securities markets are currently as follows: The Company Law Board(CLB), which is responsible for the of the companies act, 1956 The Reserve Bank of India (RBI), which is primarily responsible for the supervision of banks, money market, and government securities market. The Securities and Exchange Board of India (SEBI), which is responsible for the regulation of capital market The Department of Economic Affairs (DEA), an arm of the government, which is concerned with the orderly functioning of the financial market as whole The Department of Company Affair (DCA), an arm of the government, which is responsible for the administration of corporate bodies.

The securities market includes:

Equity Debt ,and Derivatives

Indian Equity Market

The market in which shares are issued and traded, either though exchanges or over- the- counters markets. Also known as the stock market, it is one the most vital area of the market economy because it give company access to capital and investor a slice of ownership in a company with the potential to realize gains based on its future performance. Publicly traded equities form the significant source of capital for the firms, and equity market are the key part of the processing of allocating capital among competing uses in our economy. Through issuances of equities, companies enable a broad set of investors to share in the risk and reward of economic activities. EQUITY INVESTMENT Equity investments generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations. How to invest in Equity Shares? Investors can buy equity shares of a company from Security market that is from Primary market or Secondary market. The primary market provides the channel for sale of new securities. Primary market provides opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their requirements of investment and/or discharge some obligation. Investors can buy shares of a company through IPO (Initial Public Offering) when it is first time issued to the public. Once shares are issued to the public it is traded in the secondary market. Stock exchange only acts as facilitator for trading of equity shares. Anyone who wishes to buy shares of a company can buy it from an existing shareholder of a company. Why should one invest in Equity in particular? When you buy a share of a company you become a shareholder in that Company .Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term. Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment. However, this does not mean all equity investments would guarantee similar high returns. Equities are high risk investments. One needs to study them carefully before investing.

It is important for investors to note that while equity shares give highest return as compared to other investment avenues it also carries highest risk therefore it is important to find real value or intrinsic value of the security before investing in it. The intrinsic value of a security being higher than the securitys market value represents a time to buy. If the value of the security is lower than its market price, investors should sell it. Advantages of investing in equity : Good alternative investment Lends diversification to the portfolio Investment with high return over a longer period Tax efficient Dividend income from shares is tax free

Stock Exchanges
A stock exchange is an entity which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock Exchanges are an organised marketplace, either corporation or mutual organisation, where members of the organisation gather to trade company stocks or other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors which, as in all free markets, affect the price of stocks. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or overthe-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities. List of Stock Exchanges in India:

National Stock Exchange of India Limited (NSE). Bombay Stock Exchange Limited (BSE) and Regional stock exchanges (23)

National Stock Exchange of India Limited (NSE)

The National Stock Exchange of India Limited (NSE), is a Mumbai based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. NSE has a market capitalization of around US$985 billion and over 1,646 listings as of December 2011. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. The Futures and Options trading system of NSE, called NEAT-F&O trading system, provides a fully automated screen based trading for S&P CNX Nifty futures on a nationwide basis and an online monitoring and surveillance mechanism. It supports an order-driven market and provides complete transparency of trading operations. Currently, NSE has the following major segments of the capital market: Equities Equities Indices Mutual Funds Exchange Traded Funds Initial Public Offerings Security Lending and Borrowing Scheme Derivatives Equity Derivatives Currency Derivatives

Interest Rate Futures

Debt

Retail Debt Market Wholesale Debt Market Corporate Bonds

Indices of NSE
NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including: Major indices S&P CNX Nifty CNX Nifty Junior CNX 100 CNX 200 S&P CNX 500 CNX Midcap Nifty Midcap 50 CNX Smallcap Index S&P CNX Defty S&P CNX Nifty Divident CNX Midcap 200 India Vix Sectoral Indices CNX Auto Index CNX Bank Index CNX Energy Index CNX Finance Index CNX FMCG Index CNX IT Index CNX Media Index CNX Metal Index CNX MNC Index CNX Pharma Index CNX PSU Bank Index CNX Realty Index S&P CNX Industry Indice

Bombay Stock Exchange Limited (BSE)

BSE is a stock exchange located on Dalal Street, Mumbai and is the oldest stock exchange in Asia. The equity market capitalization of the companies listed on the BSE was US$1 trillion as of December 2011, making it the 6th largest stock exchange in Asia and the 14th largest in the world. The BSE has the largest number of listed companies in the world. BSE is widely recognized due to its pivotal and pre-eminent role in the development of the Indian capital market. As of March 2012, there are over 5,133 listed Indian companies and over 8,196 scrips on the stock exchange, the Bombay Stock Exchange has a significant trading volume. The BSE SENSEX, also called "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for the majority of the equity trading in India. While both have similar total market capitalization (about USD 1.6 trillion), share volume in NSE is typically two times that of BSE.

Indices of BSE
Major indices SENSEX MIDCAP SMLCAP BSE-100 BSE-200 BSE-500

Sectoral indices HC CD OIL&GAS BANKEX FMCG PSU AUTO

POWER CG TECK REALTY METAL IT

FACTORS AFFECTING THE STOCK MARKET

1. DEMAND AND SUPPLY
The price is directly affected by the trend of stock market trading. When more people are buying a certain stock, the price of that stock increases and when more people are selling he stock, the price of that particular stock falls. Now it is difficult to predict the trend of the market but your stock broker can give you fair idea of the ongoing trend of the market but be careful before you blindly follow the advice .

2. NEWS
News is undoubtedly a huge factor when it comes to stock price. Positive news about a company can increase buying interest in the market while a negative press release can ruin the prospect of

a stock. Having said that, you must always remember that often times, despite amazingly good news, a stock can show least movement. It is the overall performance of the company that matters more than news. It is always wise to take a wait and watch policy in a volatile market or when there is mixed reaction about a particular stock.

3. MARKET CAPITAL
If you are trying to guess the worth of a company from the price of the stock, you are making a huge mistake. It is the market capitalization of the company, rather than the stock, that is more important when it comes to determining the worth of the company. You need to multiply the stock price with the total number of outstanding stocks in the market to get the market cap of a company and that is the worth of the company.

4. EARNING PER SHARE

Earning per share is the profit that the company made per share on the last quarter. It is mandatory for every public company to publish the quarterly report that states the earning per share of the company. This is perhaps the most important factor for deciding the health of any company and they influence the buying tendency in the market resulting in the increase in the price of that particular stock. So, if you want to make a profitable investment, you need to keep watch on the quarterly reports that the companies and scrutinize the possibilities before buying stocks of particular stock.

5. PRICE/EARNING RATIO
Price/Earning ratio or the P/E ratio gives you fair idea of how a companys share price compares to its earnings. If the price of the share is too much lower than the earning of the company, the stock is undervalued and it has the potential to rise in the near future. On the other hand, if the price is way too much higher than the actual earning of the company and then the stock is said to overvalued and the price can fall at any point.

6. ECONOMIC FACTORS
: Corporate earnings and news, political news, and general market sentiment can all move the market. But economic factors have the most influence on long-term market performance. Of all the economic indicators, the three most significant to stock market investors are inflation, gross domestic product (GDP), and labor market data.
Inflation- Inflation is a significant indicator for securities markets because it determines

how much of the real value of an investment is being lost, and the rate of return you need to compensate for that erosion. For example, if inflation is at 3% this year, and your investment also increases by 3%, in real terms you have just managed to stay even. And to take on market risk, most individuals require a risk premium above and beyond the inflation rate. So investors who buy stocks do so expecting they will get a return equal to (or better than) that risk premium adjusted by the inflation rate. So the higher the inflation rate, the higher nominal return is needed for a stock price to remain the same. There are many causes of inflation. From a supply-demand standpoint, it can be due to increased demand for a particular product, from an increase in a companys cost of supplies, or from limited supplies (like OPEC members restricting oil supplies), or even just due to fear that supplies might be limited at some point in the future. But the single most important determinant of inflation is the output gap, which is the balance between supply and demand in the economy.

But the effect inflation has on the stock market is even more complicated than that. The main impact of inflation on stock prices actually comes from the effect it has on a companys earnings. Low inflation keeps a companys costs down, and increases profits. So all other things being equal, (a favorite phrase of all economists), low inflation is better for the market than high inflation. Gross Domestic Product(GDP) While GDP is an important component in inflation, it is also important as an economic indicator in its own right. When compared to the previous years reading, it tells you how fast the economy is growing (or contracting). GDP is the dollar value of all goods and services produced by a given country during a certain period. It is measured by either adding all of the income earned in an economy, or by all the spending in an economy. Both measures should be roughly equal. Gross domestic income includes wages and salaries, corporate profits, interest collected by lenders, and taxes collected by governments.GDP domestic expenditures includes consumer spending, housing investment, government spending, business spending (investment in factories, equipment, and inventory), as well as foreign spending on our exports minus our spending on their imports. Any significant change in the GDP, either up or down, can have a major effect on investing sentiment. If investors believe the economy is improving (and corporate earnings along with it) they are more likely to pay more for a given stock. If there is a decline in GDP (or investors expect a decline) they would be willing to pay less for a given stock, leading to a decline in the stock market.

 The Labour Market: The final major factor influencing the economy is the labour market. The key indicators most investors focus on are total employment and the unemployment rate. US citizens who are already working represent the employed, while those who are actively looking for work, but havent found it yet, are the unemployed. The unemployment rate does not include people without jobs who are not looking for jobs, such are tirees or just people who are discouraged and have given up trying to find a job. Before we conclude this discussion on share prices, I would say that that there are so many other reasons behind the fall or rise of the share price. Especially there are stock specific factors that also play its part in the price of the stock. So, it is always important that you do your research well and stock trading on the basis of your research and information that you get from your broker.

CHAPTER 3
COMPANY PROFILE

The Kotak Mahindra Group:-

Kotak Mahindra is one of India's leading banking and financial services organizations, offering a wide range of financial services that encompass every sphere of life. Kotak Mahindra Finance Ltd became the first non-ban

 From commercial banking, to stock broking, to mutual funds, to life insurance, to in-

vestment banking, the group caters to the diverse financial needs of individuals and corporate sector. Consolidated net worth of approximately US$ 2.5 billion as on June 30, 2011 The group has a net worth of over Rs. 100.6 billion and has a distribution network of branches, franchisees, representative offices and satellite offices across cities and towns in India, and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore servicing around 8 million customer accounts.

Kotak Group Products & Services:

Bank Life Insurance Mutual Fund Car Finance Securities Institutional Equities Investment Banking Kotak Mahindra International Kotak Private Equity Kotak Realty Fund

Milestone of Kotak

Kotak Securities Ltd.

 Kotak Securities Limited, a 100 % subsidiary of Kotak Mahindra Bank, is the stock broking and distribution arm of the Kotak Mahindra Group. One of the oldest broking houses in India, its operations include stock broking and distribution of various financial products. It is a corporate member of both the Bombay Stock Exchange and the National Stock Exchange of India. Kotak Securities was founded in 1994 and is headquartered in Mumbai, India. The firm has a wide network of more than 1400 branches, franchisees representative offices, and satellite offices across 448 cities in India and offices in New York, London, Dubai, Mauritius and Singapore. Kotak Securities Limited has Rs. 1,202 crore of Assets Under Management (AUM) as of 31st Dec, 2011. Kotak Securities offerings include stock broking through the branch and Internet, Investments in IPO, Mutual funds and Portfolio management service.

Vision statement
The global Indian financial services brand- our customer will enjoy the benefits of dealing with a global Indian brand that best understands their needs and delivers customized pragmatic solution across multiple platforms. We will be a world class Indian financial service group. Our technology and best practices will be benchmarked along international lines while our understanding of customers will be uniquely Indian. We will be more than repository of our customers savings. We the group will be a single window to every financial services in a customers universe. The most preferred employer in financial services- a culture of empowerment and a spirit of enterprise attracts bright minds with an entrepreneurial streak to join us. Working with a home grown, professionally managed company, which has partnerships with international leaders, give our people a perspective that is universal as well as unique. The most trusted financial service company we will create an ethos of trust across all our constituents. Adhering to high standards of compliance and corporate governance will be an integral part of building trust. Value creation- value creation rather than size alone will be our business driver.

COMPANY PROFILE OF KOTAK

REGISTERED OFFICE Kotak Securities Ltd. 1st Floor, Bakhtawar Nariman Point Mumbai - 400021 Phone No.:022 66341100 CORPORATE OFFICE Kotak Securities Ltd. 2nd Floor, Nirlon House Dr. Annie Besant Road, Worli Mumbai - 400025 Phone No.: 022 - 66529191 BRANCH OFFICE Kotak Securities Ltd. 1-2 Gr. Floor, Commerce house, Habibullah Estate 11 M.G. Marg, Hazratganj Lucknow-226001 Phone no.: 05224102813 Kotak securities website: www.kotaksecurities.com

CHAIRMAN Mr Uday S. Kotak

DIRECTORS

 MrShivaji Dam Mr C. Jayaram

MANAGING DIRECTOR D. Kannan

RISK MANAGEMENT COMMITTEE (BOARD) Mr C. Jayaram (Chairman) Mr Narayan S.A. Mr D. Kannan

RISK MANAGEMENT COMMITTEE (OPERATIONS) Mr. D. Kannan Mr.TrivikramKamath Mr.MukulRathi

Milestones
1995: The brokerage and distribution businesses of Kotak Mahindra Bank are incorporated into a separate company named Kotak Securities. 2000: Kotak Securities launches its online broking site (wwww.kotaksecurities.com). Also, the company commences private equity activity by setting up Kotak Mahindra Venture Capital Fund. 2006: Kotak Securities Launches Kotak Flat 2007: Kotak lines up PMS based on small caps. 2008: Kotak Securities launches a GEMS portfolio.

 2009: Kotak Securities launches online trading in currency derivatives

Awards :

Best Broker in India by Finance Asia for 2010 and 2009 Best Brokerage Firm in India by Asia money in 2009, 2008, 2007 & 2006 UTI MF CNBC TV18 Financial Advisor Awards - Best Performing Equity Broker (National) for the year 2009 and 2008 Best Brokerage Firm in India by Asia money three times in a row from 2006 to 2008 Best Performing Equity Broker in India in the CNBC Financial Advisor Awards 2008 Leading Equity House in India in Thomson Extel Surveys Awards, 2007 Prime Ranking Award for Largest Distributor of IPOs in 2004 Euro moneyAward for Best Equities House In India in 2005

Financial Report of Kotak Securities

Benefits of Kotak Securities

Caters to the investment need of the employees by providing tailor made investment solution Provides exclusive offers to the employees Dedicated Relationship Manager- means they provide fast and well organized response Dedicated Call Centre means faster access Organize Investment and tax planning seminar(on request)

Why Kotak Securities :

 Right partner-

stability

exceptional research

innovators

centralised risk management

kotak securities
value

robust technology

service

Stability: We are a subsidiary of Kotak Mahindra Bank and one of the oldest and largest stock broking firms in the Industry. We have been the first and only NBFC to receive the license to be converted into a bank. Innovators in the Industry: We have been the first in providing many products and services which have now become industry standards.

First to provide Margin Financing to the customers First to enable investing in IPOs and Mutual Funds on the phone Providing SMS alerts before execution of depository transactions Launching of Mobile application to track portfolio AutoInvest - A systematic investing plan in Equities and Mutual fund Provision of margin against securities automatically against shares in your Demat account

Value: Whether you are a customer with a small or large wallet size, you can expect us to bring value to you in every form. Quality Research Quick trade execution Low brokerages Accounts that suit your investment profile Risk Profiler Superior Customer Service Service: We believe in high standards of service and that's precisely what we offer. It's an honour to be awarded the most customer responsive company award in the Financial Institution sector by AVAYA GlobalConnect Award both in 2006 and 2007. Robust Technology: We have developed our own proprietary trading platform which is robust and among the best in the industry. We have more than 150 technology professionals constantly working on upgrading and speeding up all our systems. Centralised Risk Management System: Unlike many other players we have a centralised risk management system. This allows us to offer the same levels of service to customers across all locations. Exceptional Research: Unlike most other competitors we have our own in house research team. Our in house research team is among the best in the industry and they have years of experience in the financial markets. They scan through the plethora of stocks and find the scrips that have a high potential of providing you good returns.

Competitors of Kotak Securities

India Bulls AnandRathi Securities ICICI Securities Sharekhan India Infoline Religare Securities

Offering of Kotak Securities

Instrument types:-

Derivatives:f&o, foreign indices

Fixed deposits and bonds

Equity

Instrument type

Currency derivatives

Mutual fund

Equity Derivatives: future & option, Foreign indices Mutual fund Currency derivatives Fixed deposits and bonds

Share trading platforms:- Every investor has own style of investing is comfortable with different type of trading tools. Understanding the investor need and available technologies Kotak Securities creates and provides multiple platforms that would enhance trading experience of every investor. Below are the various platforms that our customers can use as per their convenience:

 Value added trading services:- Going above and beyond your basic need of of transactions in equities, we offer you a plethora of Value Added Services. When you choose any of Kotak Securities Trading accounts, the combination of our research, trading platforms and communication channels enable us to deliver a higher value to you. Our specialised services like TradeSmart,Research on SMS and E-mail subscription constantly gives you stock ideas that you can benefit from. Our services ensure that your end-toend trading needs are satisfied. Below are the various Value Added Services we have for you: Super Mutliple Twin Advantage BSNT Portfolio Tracker SMS Alert Subsciption Trade Smart

Product Portfolio of Kotak Securities

I. Offline II. Online

Offline product
Customers who require personalized assistance and services for their investments should open an offline account. Types of offline accounts :Type of Account Nature of Services Demat Holding Type NORMAL ACCOUNT Only dealer assisted Trading a/c services offered Demat with K-Sec or any other depository participant

SECURITY MARGIN A/C

Ability to leverage existing stock holdings to avail limits

Dmat with K-Sec with POA on Demat in Favor of K-Sec Dmat with K-Sec with POA on Dmat in favor of K-Sec

SEBI MARGIN FUNDING

Ability to leverage cash position to purchase greater buying limit

Online product
TRINITY ACCOUNT :Trinity Account is a unique integrated account that helps to enjoy the benefits of an Online Trading Account Bank Account Demat Account on a single platform for your securities transaction. This account gives you a convenience of fund transfer and online trading with our multiple logins. The investors get all the three different account with single entity.

BENEFITS OF TRINITY ACCOUNT:

Single application to open three different account i.e. Bank Account, Demat A/c & Online Trading Account.

Get all the three different account with single entity. 2 in 1 Account 3 in 1 ( Trinity ) Account Banks to Link
Kotak , Axis , HDFC , Citi, IndusInd, Kotak Mahindra Bank ICICI , SBI

Fund transfer facility

Manual transfer done via payment gateway

No manual transfer required Direct fund transfer possible Unlimited transfer

Payment Gateway Fund transfer through payment gateway

Limits on fund transfer

Limited transfer

VARIOUS PLANS OFFERED BY KOTAK SECURITIES

Gateway- Flat Gateway Green channel- Flexi Advance fee Autoinvest KPC

GREENWAY- FLAT
It is an ideal plan for beginners in the stock market that gives beginners the flexibility to trade from anywhere at any time through the internet or call and trade facility

750 a/c opening fee

0.49% deliver brokerage

Gateway Flat

0.049% intra - day

10000 initial margin

GATEWAY GREEN CHANNEL- FLEXI

It is an ideal for seasoned investors. This is a flexible plan where charges reduce proportionally based on the monthly volume traded. They provide SMS alerts, research report, free news and market updates. Best feature of Kotak gateway is call and trade facility.

750 a/c opening fee

0.59% delivery brokerage

Gateway Green Channel

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CHAPTER - 4

RESEARCH METHODOLOGY

Research Methodology is a systematic and objective study of a particular problem. The Research Methodology process involves a number of inter-related activities. Research design or research methodology is the procedure of collecting, analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion.

Title of the study

Sectoral study of stock market

Research Design
In my topic I have selected exploratory research design because my study is based on past data and data are collected from secondary sources and need to be describing these data.

Sources of Data Collection

To meet the objective of the project, a lot of data was required to be collected from varied sources.

Primary sources

Those data which are collected at first hand by the researcher especially for the purpose of the study, are known as primary data. Primary data was collected with the help of the Equity Advisors.

Secondary sources
In my topic I have use past data which are available at secondary sources. Secondary data means data that are already available. The secondary data was collected through : Corporate resources, Journal, Books Internet sources Statistical reports etc

Sample size
One company from selected five sector are taken for study FMCG sector- HUL I.T sector- Infosys Banking sector- HDFC bank Automobile sector- Tata Motors Oil & Gas sector- ONGC

Statistical tools used

Simple tools like Bar graph Tabulation Line diagram

CHAPTER- 5
Sectoral Study of Stock Market

As a part of this project, I am assigned the work to study any 5 sectors in the Indian Stock Market, for the time period between 1st May 2012 to 31st May 2012. I have selected to study the following sectors: 1. 2. 3. 4. 5. Automobile Sector Information Technology (IT) Sector Fast Moving Consumer Goods (FMCG) Sector Banking Sector Infrastructure Sector

These sectors are chosen on the basis of: The popularity among investors Their sensitivity to economic scenario These sectors are among major sectors of Indian Economy

Economic overview for 1QFY 2013 : Domestically, apart from earnings, progression of the monsoon season will be closely tracked for assessing the outlook on GDP growth and food inflation and the consequential impact on monetary policy. Globally, outcome of the EU summit has corroborated that policymakers over there are committed to handling sovereign debt crisis in an orderly fashion.

I have concentrated on one company of each sector for the month of May. Following are the selected companies :

Automobile Sector Information Technology (IT) Sector Fast Moving Consumer Goods (FMCG) Sector Banking Sector Oil and Gas -

Tata Motors Infosys HUL HDFC Bank ONGC

These companies have been chosen on the basis of their:

Earnings growth Price/earnings ratio Dividends Market cap or size Industry Relative strength volume of shares traded daily

Automobile sector in India

The automotive industry in India is one of the largest in the world and one of the fastest growing globally. India's passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 4.7 million units in 2010 The automobile sector of India is the seventh largest in the world. In a year, the country manufactures about 2.6 million cars making up an identifiable chunk in the worlds annual production of about 73 million cars in a year. The country is the largest manufacturer of motorcycles and the fifth largest producer of commercial vehicles. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 5 million by 2015 and more than 9 million by 2020.[6] By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads.

Major Manufacturers in Automobile Industry

Maruti Udyog Ltd. General Motors India Ford India Ltd. Eicher Motors Bajaj Auto Daewoo Motors India Hero Motors Hindustan Motors Hyundai Motor India Ltd. Royal Enfield Motors Tata Motors TVS Motors DC Designs Swaraj Mazda Ltd

Sector outlook for 2012 : Positive Going forward we expect sales growth for two wheelers to moderate on account of a demanding base effect. We expect a recovery in car demand in the second half of CY2012 as interest rates and inflationary pressures begin to moderate. Improvement in CV typically lags consumer driven sectors such as cars and hence we do not expect any meaningful improvement in M&H CV demand during CY2012. Top Pick :- Tata Motors, Maruti . The automobile sector is likely to witness a muted performance in the first quarter of the current fiscal, with the volume growth of most manufacturers having taken a hit during the April-June 12 period. High fuel costs and expensive loans have kept buyers at bay and the same is reflected in the quarterly sales figures reported by various automobile manufacturers, especially in passenger car and two-wheeler segments.

Union budget 2012-2013 : impact analysis

Increase in the excise duty on diesel-driven cars with length exceeding 4,000 mm and engine capacity under 1,500 cc from 22% to 24%, and on diesel-driven vehicles having length exceeding 4,000 mm and engine capacity exceeding 1,500 cc from 22% plus ` 15,000 to 27%. Increase in the excise duty on petrol/LPG/CNG-driven cars, with length not exceeding 4,000 mm and engine capacity not exceeding 1,200 cc from 10% to 12% and on dieseldriven vehicles having length not exceeding 4,000 mm and engine capacity not exceeding 1,500 cc from 10% to 12%. Reduction in the excise duty from 10% to 6% on replacement batteries for supply to electric vehicle manufacturers who are registered with IREDA or any State Nodal Agency notified for the purpose by the Ministry of New & Renewable Energy for Central finance assistance till March 31, 2013. Building of commercial vehicle bodies to attract an ad valorem duty of 3% as against the earlier specific rate of ` 10,000 on chassis. Reduction in the excise duty from 10% to 6% on specified parts of hybrid vehicles including battery pack, battery charger, AC/DC motor, AC/DC motor controller, engine for HV, transaxle for HV, power control unit, control ECU for HV, generator, brake system for recovering, energy monitor and electric compressor. Increase in the basic customs duty from 60% to 75% on completely built units of large cars/MUVs/SUVs with engine capacity exceeding 3,000 cc for petrol and 2,500 cc for diesel, and whose value exceeds US$ 40,000 per vehicle.

 Lithium ion batteries imported for the manufacture of battery packs for supply to electric
or hybrid vehicle manufacturers to enjoy full exemption from basic customs duty and special CVD with concessional excise duty/CVD of 6%.

1QFY 2013 RESULT : Tata Motors to drive the otherwise tepid performance for the sector; monsoon progression to be tracked for two wheeler companies and MM sales: Auto numbers need to be looked at, ex-Tata Motors, where Jaguar remains a huge swing factor. On the back of healthy volume growth (8-10% during 1QFY2013 in the domestic auto industry) and increased net average realization, we expect our auto coverage companies ex-Tata Motors to report 16.4% yoy revenue growth. Earnings are, however, expected to grow by only 6.3% yoy, dragged down by Maruti. In any case, apart from earnings trends, markets will also continue to track the monsoon progression for assessing the outlook for two-wheeler and tractor sales, and any disappointment on this front (too early to take a call yet) is likely to weigh down on twowheeler stocks and Mahindra & Mahindra (MM). The domestic automotive industry witnessed healthy volume growth of ~10% YTD in FY2013 despite unrelenting macro headwinds (mainly slowdown in economic activity and high fuel prices), which continued to hamper overall growth. Volume growth during the period was driven by strong momentum in the light commercial vehicle (LCV) and utility vehicle (UV) segments, which registered robust growth of ~20% and ~27% yoy, respectively. However, other industry segments viz. passenger cars (PC), tractors and medium and heavy commercial vehicles (MHCV) continued to reel under the pressure of demand slowdown. While domestic MHCV volumes declined by 11% yoy during the period, led by slowdown in industrial activity, PC volumes grew moderately by ~3% yoy, impacted by a steep increase in taxes by various state governments and hike in petrol prices (effective hike of 2.7/liter) since April 2012.

Growth ahead
Passenger vehicles: We expect lower 10.9% CAGR for PVs over the next two years. The growth would be driven by: New launches as witnessed from the XUV500 from M&M, the good response to the New Swift and the New Dzire, as well as expected positive response for Marutis Ertiga. New launches/ refreshed launches are expected from all the major OEMs. Dieselization the demand for diesel vehicles is likely to remain strong, as long as the differential between diesel and petrol prices in India sustains. Petrol vehicle sales are ex-

pected to stagnate, while diesel vehicle growth would continue, subject to capacity constraints. Exports launches of export-oriented models are expected to increase. Hence, overall production for PVs is likely to register a higher growth rate than domestic demand. Constraining factors high fuel prices, higher cost of ownership, high penetration in urban regions and postponement of purchases due to poor economic conditions are factors that are responsible for the lowering of the growth rate. Two wheelers: We estimate lower CAGR of 11.16% for two wheelers over the next two years. The growth is expected to be driven by: New launches as witnessed from the good growth of Hero Motocorps monthly volumes in 2H FY12 on refreshed launches (Glamour, Karizma, Passion Pro) will also be helped by the new Impulse, Maestro (scooter) and Ignitor, going forward. Bajajs upcoming New Pulsar and New Discover should help improve its volume growth rates and market share. Exports likely to be driven by the foray into new regions globally, particularly in regions with low per-capita penetration.

Commercial vehicles: We expect lower CAGR of 12.4% for commercial vehicles, mainly driven by good LCV volume growth over the next two years. The growth in CVs would be driven by: Road infra projects The National Highway Authority of Indias (NHAI) FY12 target is the awarding of 7,300km. Till Feb 12 FY12 ytd, ~4,382km had been awarded (ytd ~`410bn). Some of this will spill over, providing some visibility. Demand for CVs from roadbuilding and infrastructure activities is a crucial component currently, considering the mining ban in Karnataka and Goa as well as the general economic activity slowdown and delayed capex programs. Exports Export orders are expected to be steady on the ongoing fleet renewal in Europe. New launches and entry of new players an improved product mix has helped Eichers market share, the New Prima has generated increasing sales for Tata Motors and The Dost has helped Ashok Leylands volumes markedly. Dealers expect players like MAN, Scania and Bharat Forge to make their presence felt, going forward.

Tractors: We expect tractors to grow at a CAGR of 5% over the next two years. This growth would be driven by:

 Labour shortage shortage of cheap labour is a key factor expected to drive farm mechanization and is expected to arise mainly from a choice of alternative professions due to higher rural income from non-agricultural sources. Increased availability of power availability of adequate farm power is crucial for timely farm operations, as well as to increase productivity. Hence, the government has increased its emphasis to enhance food production through higher minimum support prices for crops, higher allocation of power for farm purposes, productivity-awareness programmes and farm subsidies. Additional usages increased use of tractors for haulage and nonagricultural applications. Better finance penetration tractor financing attracts lower interest rates and higher bank participation, as it continues to enjoy priority lending status.

TATA MOTORS

Tata Motors Limited formerly TELCO, is an Indian multinational automotive corporation headquartered in Mumbai, India. It is the eighteenth largest motor vehicle manufacturing company in the world by volume. Part of the Tata Group. Its products include passenger cars, trucks, vans and coaches. Tata Motors has been ranked 314th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012. Tata Motors Limited is India's largest automobile company, with consolidated revenues of INR 1,65,654 crores (USD 32.5 billion) in 2011-12. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. It is the world's fourth largest truck and bus manufacturer. Originally a manufacturer of locomotives, the company manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which ended in 1969. In 2010, Tata Motors surpassed Reliance to win the coveted title of 'India's most valuable brand' in an annual survey conducted by Brand Finance and The Economic Times. Tata Motors was ranked as India's 3rd Most Reputed Car manufacturer in the Reputation Benchmark Study - Auto (Cars) Sector, launched in April 2012.

Tata Motors is a cross-listed company. Its stock trades on:

Bombay Stock Exchange New York Stock Exchange. National stock exchange

Public Traded as: NSE: TATAMOTORS BSE: 500570 NYSE: TTM

CNX AUTO

: 52 week high- 4,505.15 52 week low3,292.70

TATA MOTORS : 52 week high- 1,081.50 52 week low- 137.55

Type Industry Founded Founder(s) Headquarter Area served Key people Products

Parents Subsidiaries

Public Automotive 1945 Jamshed ji Tata Mumbai, Maharastra, India Worldwide Ratan Tata( Chairman) Ravi Kant( Vice-chairman) Automobile Commercial vehicles Automotive parts TATA group Jaguar Land Rover (JLR) Tata Daewoo Commercial vehicle company (TDCV ) TATA Hispano

Share holding pattern (%) :-

Domestic Promoters General Public others Total Institution Foreign Others Total Pie chart

34.71 7.39 1.73 43.83 10.40 44.86 .91 100 %

Share Holding %
Others, 0.91

Domestic Foreign, 44.86 Domestic, 43.83 Institution Foreign Others

Institution, 10.4

Stock price and volume movement

Key fundamentals
Fundamentals Market Capitalization ( Rscr ) Book Value/ Share Debt / Equity P/E Dividend Yield % EPS Return on Net Worth Current Ratio Quick Ratio Interest Cover 71593 60.74 0.79 60.47 1.82 6.74 9.46 0.77 0.53 3.70

1Q FY 2013:- update
TTMT reported a 3% yoy (flat mom) decline in total volumes to 64,341 units, led by a 20.9% yoy (14.4% mom) decrease in PV sales. The CV segment grew by 6.3% yoy (7% mom), driven by continued buoyancy in the LCV segment, which registered strong 24.9% yoy (7.4% mom) growth. The MHCV segment, however, registered a steep decline of 21.5% yoy (up 5.9% mom) mainly due to slowdown in industrial activity. The PV segment witnessed a steep decline, led by a 35% and 46% yoy dip in Indica and Indigo sales, respectively. The Sumo/Safari/Aria/Venture range performed better, posting 5% yoy growth. Nano sales increased by 3% yoy during the month. Meanwhile, TTMT suspended production of trucks at its Jamshedpur plant for three days in June to avoid piling up of inventory. Tata Motors sales trend

CV segment monthly sales trend

PV segment- monthly sales trend

Investment argument
Downside risks Global growth slowdown: Our base-case scenario assumes slow and steady GDP growth in Europe and the United States. If either economic growth in developed economies is weaker than expected or economies slip into recession, there could be significant downside risks to our earnings estimates. Slower-than-expected growth in China: Slower-than-expected growth in China volumes could lead to downside risks to our earnings estimates. Sharper-than-expected slowdown in MHCV industry volumes: If MHCV industry volumes slow more sharply than our expectation of flat volumes in FY13, there could be downside risks to our estimates. Increase in petrol prices impacts PC demand Upside risks Success of new launches: There are quite a few new launches planned over the next two to three years. We have not factored any significant increases in volumes from these models in our estimates. If the models are successful, there could be upside risks to our estimates. Favourable currency movements: JLR is a net importer of raw materials from Europe, and therefore, it gains if the euro depreciates vis--vis the GBP. Similarly, due to exports, JLR gains if the CNY and USD appreciate against the GBP. There could be upside risks to our margin estimates if either the euro depreciates or the USD/CNY appreciates against the GBP. Demand for LCVs in India is likely to remain robust, despite slowdown in M&HCV demand. We model volume growth of 14% for the CV business in FY13.

Passenger vehicle segment is expected to continue its growth momentum. With low car penetration levels in India, the upside potential for growth is tremendous. M&CV volumes in domestic business are also expected to be under pressure for at least another 6 months, impact of which would be diluted by strong LCV volume growth. JLR volumes are expected to remain strong over long term driven by strong growth in US, China and Russia.

Outlook : We believe long-term structural growth drivers of the Indian automobile industry such as GDP growth (leading to increasing affluence of rural and urban consumers), favorable demographics, low penetration levels, entry of global players and easy availability of finance are intact, which should support a 12-14% CAGR in auto volumes over FY201214E. Prefer stocks that have strong fundamentals, high exposure to rural and exports markets and command superior pricing power.

Reccomondation
BUY
CMP :- 243 Target Price :- 305 Investment Period :- 12 months

Information Technology Sector in India

The Information technology industry in India has gained a brand identity as a knowledge economy due to its IT and ITES sector. The ITITES industry has two major components: IT Services and business process outsourcing (BPO). The growth in the service sector in India has been led by the ITITES sector, contributing substantially to increase in GDP, employment, and exports. The sector has increased its contribution to India's GDP from 1.2% in FY1998 to 7.5% in FY2012. According to NASSCOM, the ITBPO sector in India aggregated revenues of US$100 billion in FY2012, where export and domestic revenue stood at US$69.1 billion and US$31.7 billion respectively, growing by over 9%. The major cities that account for about nearly 90% of this sectors exports are Bangalore,Delhi, Mumbai, Chennai, Hyderabad, Pune, Kolkata and Coimbatore. Export dominate the ITITES industry, and constitute about 77% of the total industry revenue. Though the ITITES sector is export driven, the domestic market is also significant with a robust revenue growth. The industrys share of total Indian exports (merchandise plus services) increased from less than 4% in FY1998 to about 25% in FY2012.

Major informational technology service provider

Tata Consultancy Services Infosys Cognizant Wipro HCL Technologies

Sector Outlook for 2012 : Cautiously positive Lot would depend on how the global economies shape up. A deeper crisis in Euro zone can lead to significant pressure for Indian IT services companies. Demand in US has remained strong so far but any macro shock to the slowly recovering economy will have a

detrimental impact on IT demand. While weakening currency will provide some cushion to the profits, strength in demand will remain the main catalyst. Top pick:- TCS, KPIT Cummins Our IT coverage universe witnessed subdued revenue growth during 4QFY2012 due to the cyclical soft nature of the quarter coupled with additional macro uncertainties. All this led to delay in project ramp-ups and slowdown in the near-term demand scenario. Muted volume growth, stable pricing environment and slightly negative cross-currency movement led to subdued USD revenue growth of -1.9% to 2.5%.

Union budget 2012-2013 : impact analysis

Introduction of advance pricing agreement (APA) in the Finance Bill of 2012. Central plan outlay by the Department of Information Technology (DIT) increased by 86.7% to Rs 53.6 bn. Rs 391.1 bn to be spent on modernisation of signaling system of railways. A National Information Utility (NIU) for the computerisation of Public Distribution System (PDS) is being created. It is expected to become operational by December 2012. Marginally Positive :- Provision regarding implementation of APAs to be introduced in Finance Bill 2012 will help in addressing concerns over the certainty of transfer pricing arrangements. Proposal to improve service tax refunds process as well as enhance the scope for input credits for service tax will benefit the IT-ITeS sector since substantial amount of cash flow is tied up in refund claims. The central plan outlay for DIT growing by 86.7%, allocation of funds for modernising signaling system of railways and creating a NIU for computerisation of PDS will have a positive impact on the IT sector. The industry was expecting to see the revival of tax benefits under the STPI scheme. However, there was no mention in respect of extension of this clause. Thus, the overall Budget has a marginally positive impact on the sector.

1QY FY 2013 Result

Cyclically a healthy quarter with modest volume growth - Traditionally, 1Q is a strong quarter for IT companies as client budgets on the kind of discretionary, operational and capital spending freeze by 4Q and budget flush start happening in 1Q. However, we expect 1QFY2013 to be better than 4QFY2012, but not as good as traditionally 1Q is, due to unstable macros and economic uncertainty across developed economies because of which clients are delaying the incremental budget flush from their end. INR revenue growth to stand tall, courtesy INR depreciation- 1QFY2013 witnessed one of the most volatile seasons as far as the currency is concerned. During 1QFY2013, INR depreciated by ~8% qoq against USD, which will result in a surge in INR revenue growth vs. USD revenue growth and boost the operating margins of IT players by 100250bp qoq. USD revenue to grow, but at a slower pace- The cross-currency movement, which had proved to be a boon during 2QFY2011-1QFY2012, has turned into a bane since the last couple of quarters. In 1QFY2013 again, it turned negative for IT companies with the

USD appreciating by 2.0% against Euro. This will have an impact of 0.4-0.7% qoq on USD revenue of tier-I IT companies. Margins to enhance - We expect EBITDA margin of all Indian IT companies to improve because of sharp INR depreciation against USD. Infosys and HCL Tech are expected to record 181bp and 248bp qoq expansion in their EBITDA margin to 34.4% and 20.9%, respectively. On the other hand, EBITDA margin of TCS is expected to slip by 28bp qoq to 29.2% due to negative impact of wage hikes given during the quarter effective from April 2012. Wipro is expected to show a marginal rise of 18bp qoq in its EBITDA margin, despite huge gains from INR depreciation, to24.0% because of wage hikes given from June 2012

INFOSYS

Infosys Limited formerly Infosys Technologies Limited, is an Indian provider of business consulting, technology, engineering and outsourcing services. Its headquartered in Bangalore, India. It has offices in 30 countries and development centers in India, US, China, Australia, UK, Canada, Japan and many other countries. Infosys takes pride in building strategic long-term client relationships. 99.1% of our revenues come from existing customers (Q1 FY 13).Infosys gives back to the community through the Infosys Foundation that funds learning and education. The company services more than 650 clients across various verticals, such as financial services, manufacturing, telecom, retail and healthcare. Infosys has the widest portfolio of service offerings amongst Indian IT companies, spanning across the entire IT service value chain - from traditional application development and maintenance to consulting and package implementation to products and platforms.

Infosys is a cross-listed company. Its stock trades on: Bombay Stock Exchange New York Stock Exchange. NASDAQ

Public Traded as: NSE: INFY BSE: 500209 NASDAQ: INFY

 CNX IT

: 52 week high52 week low-

Infosys :

52 week high- 2990.00 52 week low- 2163.00

Type Industry Founder(s)

Headquarter Area served Services Divisions

Public IT Services, IT Consultancy N.R Narayana Murty Nandan Nilekani N.S Raghavan S.Gopalakrishnan S.D Shibulal K Dinesh Ashok Arora Bangalore, India Worldwide IT, Business Consulting and outsourcing services Infosys BPO, Infosys China

Share holding pattern :-

Domestic Promoters General Public Others Total Institutions Foreign Others Total 16.04 12.96 34.23 11.88 53.37 .52 100

Share Holding %
Others, 0.52

Domestic, 34.23 Foreign, 53.37

Domestic Institutions Foreign Others

Institutions, 11.88

stock price and volume movement

Key fundamentals
Fundamentals Market Capitalization ( Rscr ) Book Value/ Share Debt / Equity P/E Dividend Yield % EPS Return on Net Worth Current Ratio Quick Ratio Interest Cover 127341.50 518.2 0.00 14.91826 2.11946 148.65 31.22 5.11 5.02 9523.00

1Q FY 2013:- update For 1QFY2013, Infosys reported revenue of US$1,752mn, down 1.1% qoq, impacted due to 3.7% qoq decline in pricing and a hit of US$15mn as a one-time reversal in a transformation project from a European utilities client. EBITDA margin declined by 181bp qoq to 30.8%, despite having benefits from ~8% qoq INR depreciation against USD because operating margins were impacted adversely by pricing decline (co-attributing the decline to change in business mix with some sporadic pricing resets in FSI) and US$15mn of revenue reversal on account of a project cancellation. In the constant currency terms also, the company has not been able to meet its dollar revenue guidance of 0-1% qoq growth. Revenue in constant currency (CC) terms came in at US$1,763mn, down 0.4% qoq. Billing rates in CC terms decreased by 3.2% qoq as offshore pricing declined 3.2% qoq, while onsite CC billing rates were down 2.8% qoq. One key positive thing was that the companys volumes grew at a modest pace by 2.7% qoq led by 2.9% offshore volume growth and 2.3% onsite volume growth. In INR terms, revenue came in at `9,616cr, up 8.6% qoq, aided by ~8% qoq INR depreciation against the USD in 1QFY2013.

 In terms of geographies, revenue decline was primarily led by Europe, which posted 7.2% qoq decline in revenues in CC terms. Revenue from North America grew by 1.7% qoq in CC terms, while revenues from India and Rest of the World declined by 5.0% and 2.2% qoq, respectively in CC terms.

 The companys EBITDA and EBIT margin declined by 181bp and 190bp qoq to 30.8% and 28.0%, respectively, despite having considerable benefits from ~8% qoq INR depreciation against USD. Operating margins of the company were impacted adversely by ~3.7% qoq decline in revenue productivity (3.1% qoq in CC terms, with co attributing the decline to change in business mix with some sporadic pricing resets in BFSI) and US$15mn of revenue reversal on account of a project cancellation. Management indicated that they expect EBIT margin to go down by 50-100bp in FY2013 which does not factor any wage hike.

Investment argument: Management commentary has turned extremely cautious for the next years budget flush pattern. Also, the company is witnessing delays in ramp-ups of the deals being signed. This is clearly reflected in managements disappointing FY2013 guidance of atleast 5% yoy growth from 8-10% earlier, tad lower than our estimate of 6-8%.

In addition, the management has stopped issuing quarterly guidance citing uncertainly in demand environment which clearly indicates challenging visibility in business volumes and managements future expectation. Post 1.1% decline in USD revenue in 1QFY2012, the company requires ~3% ask rate in 2Q-4QFY2013 to achieve 5% growth in FY2013, which at current scenario of companys performance, looks a bit stretched Hence, we have assumed moderation in demand going forward in FY2013 and have built in a USD revenue growth of 4.8% for FY2013. Over FY2012-14E, we expect USD and INR revenue CAGR of 7.1% and 11.2%, respectively. On the EBIT margin front, for FY2013, the management expects it to go down by 50-100bp yoy in FY2013 which does not factor in the wage hike. Despite giving no salary hikes, the company posted 190bp cut on the EBIT margin. If the company announces wage hike later in this year, there will be further pressure on the margin but currently we are not factoring wage hike impact in our estimates of FY2013. We expect EBIT margin to decline by 17bp yoy to 28.8% for FY2013. Over FY2012 14E, we expect a CAGR of 11.4% and 9.5% in EBIT and PAT, respectively. At the CMP of `2,265, the stock is trading at 14.0x FY2013E and 13.0x FY2014E EPS. We value the company at 14.5x FY2014E of `174.5 which is significant discounts to its peak valuations as well as to Sensex.

Outlook
Indian offshoring has been vindicated with global clients and service providers making India their base for IT enabled solutions. India still has less than 5% of the global IT market. We are positive on the sector from a long term perspective. With developed economies slowing, attrition and sharper currency appreciation is a key concern. Niche IT/ITeS services companies with strong business models are likely to be better placed to face uncertainties in the near term.

Reccomondation ACCUMULATE
CMP :- 2265 Target Price :- 2530 Investment Period :- 12 months

Oil and Gas sector in India

The country is Asia's third-largest oil consumer and world's fifth largest energy consumer. According to the International Energy Agency (IEA), hydrocarbons account for the majority of India's energy consumption while coal and oil satisfy about two-thirds of the same. Natural gas accounts for 7 per cent share, which is expected to increase with the discovery of new gas deposits. The Indian oil and gas sector is one of the six core industries and has very substantial forward integration with the entire economy.

Major Oil and Gas companies in India

Indian Oil Corporation India (IOL) Oil and Natural Gas Corporation Limited (ONGC) Bharat Petroleum Reliance Petroleum Limited Hindustan Petroleum Corporation Oil India Limited

Sector outlook for 2012

Negative
The under-recoveries on subsidized fuels remain high due to a sharp depreciation of the rupee which has made imports costlier. A weak government fiscal situation has meant that Rs 300 billion of cash reimbursements promised to Oil Marketing Companies are yet to be disbursed, which has caused the working capital requirements (and hence interest costs) to balloon. While the government has stuck to 33% sharing by upstream firms for H1FY12, with the ONGC FPO being delayed there is the likelihood of a higher share being borne by ONGC/Oil India/GAIL in H2FY12E, which could hurt net realizations. A push towards reforms may be the catalyst needed for stocks to re-rate.

Union budget 2012-2013 : impact analysis

Increase in cess from the current level of Rs 2,500/tonne to Rs 4,500/tonne.

This would be negative for Indian crude oil producers (mainly Cairn India and ONGC) as cess is deducted from the realized crude price. Rs43,737cr of petroleum subsidies have been provided for FY2013. Would be insufficient if crude oil stays at current levels (above US$115/bbl) or retail prices are not revised upwards. Under recoveries are expected to amount to Rs 130,000cr in FY2013. It could also mean higher subsidy burden for upstream oil companies (ONGC and Oil India). Customs duty on LNG import has been abolished from the current level of 5%. This would be marginally positive for city gas distributors such as Gujarat Gas. Union Budget 2012-13 is negative for the oil and gas sector. The budget pegged the government's share of petroleum subsidy at only Rs 43,737cr for FY2013, which would be insufficient if Brent crude stays at current levels (above US$115/bbl) or diesel and LPG cylinder prices are not revised upwards. The government's share of subsidy for FY2012 is expected to be `68,533cr, which is in-line with our expectation of `65,000cr, although it is significantly above the government's target of Rs 23,696cr. The budget proposes to increase cess for oil producers from Rs2,500/tonne to Rs 4,500/tonne, which will be negative for Cairn India and ONGC. In light of this event, we lower Cairn India's FY2013 EPS estimate by 10.7% to `46.3. Thus, our target price stands reduced to Rs 332 (previous target price `367). We recommend Neutral on the stock. For ONGC, we lower our FY2013 EPS estimate by 10.3% to Rs 30.2 and lower our target price to Rs 316 (previous target price Rs 324). However, we note that any increase in prices of diesel and LPG will lower its share of subsidy burden and as such it will be positive for ONGC. We maintain our Buy view on the stock.

1QY FY 2013 Result

During 1QFY2013, average Brent crude oil price fell by 8.7% qoq on account of adverse news flow from the troubled Eurozone. Further, average WTI crude oil price decreased by 9.3%, broadly reflecting the fall in Brent crude oil price. Henry Hub natural gas price declined by 5.6% qoq due to rising production of shale gas (thus rising inventories) and warmer summer. However, Asian spot LNG prices continued to remain high on account of demand-supply mismatch in Asia. Prices of petrochemical products, on the other hand, remained flat on a qoq basis during 1QFY2013.

 During April and May 2012, Indian crude oil basket for oil prices stood at US$118/bbl and US$108/bbl, respectively. Despite INR depreciation against the USD, the steep decline has resulted in lower under-recoveries for oil marketing companies (OMCs) on account of selling diesel, kerosene and domestic LPG at subsidized rates. During the first half of June 2012, OMCs continued to lose `446cr per day compared to `563cr per day in April 2012. OMCs continued to lose `10.2/liter, `30.5/liter and `396/cylinder on diesel, kerosene and domestic LPG, respectively, during the first half of June 2012.

Brent crude oil price declined to US$98/bbl as on June 29, 2012, compared to US$125/bbl on March 30, 2012. WTI crude decreased to average US$93/bbl in 1QFY2013 compared to US$103/bbl in 4QFY2012, in-line with the decrease in Brent crude oil price. Adverse news flow from the troubled Eurozone led to a steep decline in crude prices during the quarter. Oil supply across the world continued to improve in 1QFY2013 on account of higher production from OPEC and non-OPEC countries.

During May 2012, the central government raised petrol price by massive (~10%) Rs 7.54/liter in order to recover losses to OMCs, which were selling petrol at lower prices. Without this hike, OMCs would stand to lose Rs 8,000cr in FY2013. However,during

June 2012, the government had lowered petrol price by 2.02/liter and 2.40/liter, in-line with the decline in global crude oil prices. During 1QFY2013, BSE Oil and Gas (O&G) Index recorded a moderate decrease of 0.5%, although BSE Sensex was positive by 0.1%. After a rise during 4QFY2012, oil and gas stocks again fell during April and May 2012, in-line with the fall in broader markets. However, the stocks increased during June 2012. Cairn India stock fell steeply on June 29, 2012, after Cairn Energy sold its 3.5% stake by way of bulk deal in the open market. RIL stock fell during April and May 2012, but increased in June 2012 due to the ongoing buyback program by promoters. GAIL stock declined during 1QFY2013, reflecting the decrease in KG-D6 gas production and higher international gas prices. ONGC was the outperformer in the oil and gas sector. The stock increased substantially in June 2012, after it posted better-than-expected 4QFY2012 results.

Oil and Gas Natural Corporation Limited (ONGC)

Oil and Natural Gas Corporation Limited (ONGC), is an Indian multinational oil and gas company headquartered in Dehradun, India. It is one of the largest Asia-based oil and gas exploration and production companies, and produces around 77% of India's crude oil (equivalent to around 30% of the country's total demand) and around 81% of its natural gas. It is one of the largest publicly traded companies by market capitalization in India.[3] ONGC has been ranked 357th in the Fortune Global 500 list of the world's biggest corporations for the year 2012. It is also among the Top 250 Global Energy Company by Platts ONGC has established more than 7 Billion Tonnes of in-place hydrocarbon reserves in the country. In fact, six out of seven producing basins in India have been discovered by ONGC. ONGC produces more than 1.27 million Barrels of Oil Equivalent (BOE) per day. It also contributes over three million tonnes per annum of Value-Added-Products including LPG, C2 - C3, Naphtha, MS, HSD, Aviation Fuel, SKO etc. ONGC was founded on 14 August 1956 by the Indian state, which currently holds a 74.14% equity stake. It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins of India, and owns and operates over 11,000 kilometers of pipelines in the country. Its international subsidiary ONGC Videsh currently has projects in 15 countries. ONGC as an integrated Oil & Gas Corporate has developed in-house capability in all aspects of exploration and production business i.e., Acquisition, Processing & Interpretation (API) of Seismic data, drilling, work-over and well stimulation operations, engineering & construction, production, processing, refining, transportation, marketing, applied R&D and training, etc.

ONGC is a cross-listed company. Its stock trades on:

Bombay Stock Exchange New York Stock Exchange.

Public Traded as:

NSE: ONGC BSE: 500312

CNX ENERGY

: 52 week high52 week low-

ONGC

: 52 week high52 week low-

Type Industry Founded Headquarter Key people Products Owner(s)

Public Oil and Gas 14 August 1956 Tel Bhavan, Dehradun ,India Sudhir Vasudeva (Chairman and MD) Petroleum ,Natural gas and petrochemicals Government of India

Shareholding pattern :Domestic Promoters/Director General Public Others Total Institutions Foreign Others Total 69.23 1.80 13.54 84.57 10.06 5.33 .04 100

Share holding %
Foreign, 5.33 Institution, 10.06 Domestic Institution Foreign Domestic, 84.57 Others Others, 0.04

Stock price and value movement

Key fundamentals

Fundamentals Market Capitalization ( Rscr ) Book Value/ Share Debt / Equity P/E Dividend Yield % EPS Return on Net Worth Current Ratio Quick Ratio Interest Cover

240451.7654
130.66 0.18 10.46741 3.11333 26.85 20.48 1.36 1.20 4.13

1QY FY 2013 Result : Q1FY13 is expected to be a weak quarter for the Oil & Gas sector primarily due to huge losses expected by the oil marketing companies (OMCs), pending reimbursement by the Central Government. The gas distribution companies also see a weak quarter due to rising gas costs in the country and lower domestic gas supply. In Q1FY13, light crude oil price declined 17.5% QoQ (and 11.0% YoY) to close at $85.0 per barrel driven by concerns on demand growth due to weak global economy. Brent crude prices fell 20.4% in the quarter. However, the USD/INR appreciated a significant 10.1% QoQ (25.9% YoY) to close at Rs. 56.3/USD resulting in a net ~8% QoQ drop in light crude prices in Rupee terms. Singapore GRM contracted ~13% QoQ (~ -22% YoY) to ~$6.7/bbl driven by lower gasoil (~Diesel) and kerosene crack spread, partially offset by higher gasoline (Petrol) and naphtha crack margin. Singapore GRM is the lowest in 6 quarters. Lower Singapore GRM is a negative for refiners like Reliance Industries, Essar Oil and MRPL. We expect the industrys total under-recoveries to increase to ~Rs. 475 bn in Q1FY13 from ~430 bn in Q4FY12. We estimate Q1 diesel subsidy of ~Rs. 290 bn and LPG and kerosene subsidy of ~Rs. 180bn. Upstream companies, downstream companies and OMCs are estimated to bear ~33%(~Rs. 157 bn), ~35% (~Rs. 166 bn) and ~32% (~Rs. 152 bn) of the subsidy respectively. This could result in OMCs reporting losses in Q1FY13. Further, KG-D6 gas volume declined to ~32.5 mmscmd in Q1FY13 from ~49 mmscmd in Q1FY12 and ~35.9 mmscmd in Q4FY12, which is likely to hit transmission volume for pipeline companies apart from revenues of Reliance. This has led to higher import of costlier priced LNG from global markets. Hence, large gas transportation companies would report muted volume growth YoY. City gas distribution (CGD) companies would report lower profitability growth QoQ on account of the weak rupee and high LNG prices. ONGCs standalone top line increased by 22.2% yoy to `18,819cr mainly on the back of higher realization. Net crude oil realization stood at US$44.3/bbl in 4QFY2012 compared to US$38.8/bbl in 4QFY2011 and US$44.7/bbl in 3QFY2012. Net realization was higher than our estimates as the Oil Ministry reduced ONGCs contribution to 78% of upstream burden compared to historical average of 81%. For FY2012, net realization stood at US$54.7/bbl compared to US$53.77/bbl in FY2011.

 EBITDA increases by 45.2% yoy: The companys EBITDA margin improved by 974bp yoy to 61.5% and EBITDA increased by 45.2% yoy to Rs 11,577cr mainly on account of higher realization.

Other income lifts PAT growth: During the quarter, depreciation and amortization expenses increased by only 2.5% yoy to `4,906cr and other income increased by 69.6% yoy to Rs 993cr. Consequently, reported net profit increased by 102.2% yoyto Rs 5,644cr. Adjusted PAT grew by 102.3% yoy to Rs 5,646cr during the quarter.

Investment argument
ONGC aims to increase gas production from North Tapti, B193 and 28 cluster, B22 cluster WO series cluster, B46 cluster, cluster 7 and B series. The company aims to increase its production to 27.0bcm in FY2013 from 25.5bcm in FY2012. As far as oil is concerned, ONGCs existing oil fields are matured and, thus, production from these fields is declining. Nevertheless, management expects incremental oil production from marginal fields (including D1 extension, B193 cluster, B22 clusters, North Tapti, WO series and B46 cluster), which will help arrest the decline in crude production. Although OVLs production decreased from 9.5mtoe in FY2011 to 8.8mtoe in FY12, we expect OVLs volume growth to increase at a CAGR of 10.2% during FY2012-14, with incremental productions from Myanmar, Sakhalin-1 and Venezuela coming on stream. Moreover, any increase in crude oil or gas price would improve OVLs margin, as it does not share under-recoveries. Any move by the government to rationalize subsidy would result in increased earnings predictability for the company leading to increase the valuation multiples.We currently model upstream subsidy sharing at 38.7% in FY12/FY13 estimates. ONGC has more than 50 % of the total NELP exploration acreage allotted. Of this, around 66% acreage is in high potential deep water. As bulk of this acreage is yet to be explored, we believe there is huge potential for hydrocarbon discoveries. ONGC has met with initial success in the KG block the country's and its first ultra -deep water discovery UD-1. With increased efforts towards E&P, we expect the company to report more oil and gas finds, going forward. Impressive RRR>1 for last 6 years. Production likely to be flat in short-term, however we expect volume growth in long term led by IOR/EOR, marginal fields and monetization of the discovered fields. Increased capex in the large unexplored NELP acreage could result in significant reserve accretion in future.

Investment risk Ad-hocism in subsidy sharing. Acquisition of overseas assets at high valuations against stiff competition from China. Slowdown in deep water development due to technological barriers Recent development ONGC announced 3 discoveries in 4QFY12 and total 23 discoveries in FY12. ONGC declared final dividend of INR2/share for FY12, in addition to interim dividend of INR7.75/share.

Outlook
Going forward, we expect robust volume growth from OVL, which aims to increase its production at a CAGR of 10.2% during FY2012-14. Also, a concrete subsidy-sharing formula by the government could make ONGCs cash flows more predictable. The stock is currently trading at 8.3x and 8.0x FY2013E and FY2014E PE, respectively, compared to its five-year average forward PE of 10.2x.

Reccomondation BUY
CMP :- 261 Target Price :- 321 Investment period :- 12 months

Banking sector in India

Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. A bank is a financial institution that provides banking and other financial services to their customers. A bank is generally understood as an institution which provides fundamental banking services such as accepting deposits and providing loans. Banking Sector in India is one of the growing sectors with great dynamics. There are various factors which affect the share prices of Banking Companies. This report is all about how various factors (Internal and External) affect the Banking Sector Share Prices The main reasons why the banks are heavily regulated are as follows: To protect the safety of the publics savings. To control the supply of money and credit in order to achieve a nations broad economic goal. To ensure equal opportunity and fairness in the publics access to credit and other vital financial services. To promote public confidence in the financial system, so that savings are made speedily and efficiently. To avoid concentrations of financial power in the hands of a few individuals and institutions. Provide the Government with credit, tax revenues and other services. To help sectors of the economy that they have special credit needs for eg. Housing, small business and agricultural loans etc.

Major banks
State Bank of India ( SBI) Punjab National Bank( PNB) HDFC bank ICICI Bank Bank of India (BOI) Bank of Baroda Axis Bank Ltd.

Sector outlook 2012

Neutral

We expect that the combination of factors including high interest rates, hindrances to project execution, deteriorating business confidence and uncertainty about the global economy to negatively impact investment demand and consequently banking sector will witness slowdown in credit growth. At the same time, asset quality of banks is expected to deteriorate in next 12 months as debt servicing capability of corporates will be negatively impacted due to high interest rates and input prices and weak domestic & international demand

Union budget 2012-2013 : impact analysis

Capital infusion of Rs 15,888cr in PSU banks, RRBs and other financial institutions. The government is also considering creation of a financial holding company, which will raise resources to meet the capital requirements of public sector banks. Enable PSUs to grow at a healthy rate and move progressively towards meeting the more stringent tier-I CAR requirements of Basel-III. Credit flow for farmers raised from Rs 4,75,000cr to Rs5,75,000cr. Slightly negative, considering the lower yields and higher NPAs generally associated with agribased lending. Interest subvention to farmers retained and has been introduced for women SHGs to avail loans up to Rs 3lakhs at 7%, with further interest subvention of 3% on prompt payment. Could assist in reducing rural NPAs for banks Custom duty increased on standard gold imports Positive for banks as it would help channelize higher savings into financial investments, aiding the downward trajectory of interest rates. Micro Finance Institutions (Development and Regulation) Bill 2012, Pension Fund Regulatory and Development Authority Bill 2011, Banking Laws (Amendment) Bill 2011 and Insurance Laws (Amendment) Bill 2008 to be moved in this session of the parliament. Positive for the financial sector, especially the micro finance institutions sector , which has been in turmoil ever since the Andhra Pradesh government set stringent norms on lending and interest collection within the state. In our view, the budget was broadly positive for the banking sector. Healthy capital allocation of ~ Rs 16,000cr for the recapitalization of PSU banks is expected to strengthen credit growth, while specific measures such as the increase in custom duty on gold im-

ports is likely to channelize higher savings into financial investments, including bank deposits. Introduction of Microfinance Institutions Bill, which will supersede state government laws, will provide a big boost to the struggling micro finance industry. From the fiscal deficit point of view, the government refrained from having any populist measures, which will come as a sigh of relief for the banking sector. Commencement of easing monetary policy, apart from moderation in inflation, is also hinged on signs of credible fiscal consolidation, which we feel was by and large delivered in Union Budget 2012-13.

1QY FY 2013 Result

Banking stocks remained under pressure in 1QFY2013, with 19 out of 27 banks under our coverage reporting negative returns sequentially. The economic growth environment has deteriorated further; however, persistent inflation levels have restrained the RBI from undertaking aggressive rate cuts, weighing heavily on banking stocks. The RBI's OMOs have negated short-term liquidity pressures, leading to easier and cheaper access to funds at the shorter end of the interest rate curve; however, weak deposit growth has kept cost of funds elevated at the longer end. On a yoy basis, the bottom-line performance is expected to be strong at just below 30% levels, driven by strong growth at the operating front and low base effect in case of SBI. However, disecting this into sub-groups, large private banks (28.2% yoy) and SBI (129.8% yoy) are expected to outperform large PSUs excluding SBI (18.3% yoy) and mid PSU banks (0.1% yoy) comfortably. For FY2012, credit growth for the banking sector was moderate; however, deposit mobilization remained weak. Inspite of interest rates having remained elevated for quite some time now, credit growth as of June 15, 2012, held up reasonably well at 18.3% yoy, while deposit growth stood significantly lower at 14.3% yoy. Overall, the credit growth outlook is challenging for FY2013; however, a 50bp repo rate cut by the RBI and further rate cuts over FY2013, though estimated at only 50-75bp, should aid in reviving investment activities to some extent. Real interest rates for depositors remain negative (considering CPI inflation levels of ~10%) and are likely to keep deposit growth subdued. Normal monsoon levels and declining global commodity prices though, in our view, could result in marked lower inflation levels going ahead and result in higher savings and deposit mobilization.

 Margins expected to come under pressure in 1HFY2013:- Most banks, post the 50bp repo cut in the second fortnight of April, had simultaneously reduced their base rates by 25bp (in some cases spreads over base rates have also been decreased) and deposit rates by 25-50bp. Negative real interest rates (considering CPI of ~10%) are expected to keep deposit growth subdued and likely to limit the banking sector's ability to further reduce deposit rates, particularly in case of banks having a higher loan-to-deposit ratio, leading to short-term margin contractions.

HDFC Bank
HDFC Bank is the second-largest private sector bank in India with a pan-India network of 2,500 branches and 9,700+ ATMs. The bank is promoted and 23% owned by HDFC, India's largest housing finance company. HDFC Bank has been at the forefront of modern retail banking in India. The bank has pioneered the transaction banking model in India, which has enabled it to garner substantial CASA deposits as well as fee income, while the focus on retail lending (which forms more than 50% of total loans as against 20% industry average) has further helped the bank in maintaining aboveindustry margins. The bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has 1,986 branches and over 5,471 ATMs, in 996 cities in India, and all branches of the bank are linked on an online real-time basis. As of 30 September 2008 the bank had total assets of Rs.1006.82 billion. HDFC Bank is one of the Big Four banks of India, along with: State Bank of India, ICICI Bank and Punjab National Bank.

HDFC Bank is a cross-listed company. Its stock trades on: Bombay Stock Exchange New York Stock Exchange.

Public Traded as: NSE: ONGC BSE: 500312

Bank NIFTY

: 52 week high-

11,451.25

52 week low- 7,766.35

HDFC

: 52 week high- 2,583.30 52 week low- 400.25

Type Industry Founded Headquarter Owner(s) Products

Key people Area served

Public Banking August 1994 Mumbai, Maharashtra, India Aditya Puri (MD) Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth management Aditya Puri (Md) Worldwide

Shareholding pattern
Domestic Promoters/Director General Public Others Total Institutions Foreign Others Total 23.06 8.72 13.03 44.81 6.23 48.95 0.01 100

Share Holding %
Others, 0.01

Domestic Foreign, 48.95 Domestic, 44.81 Institutions Foreign Others

Institutions, 6.23

stock price and value movement

Key fundamentals
Fundamentals

Market Capitalization ( Rscr ) Book Value/ Share Debt / Equity P/E Dividend Yield % EPS Return on Net Worth Current Ratio Quick Ratio Interest Cover

135582.045 127.03 8.22 24.6572 .74426 23.34 18.69 0.50 6.89 0.79

1QY FY 2013 Result

For 1QFY2013, HDFC Bank reported healthy 30.6% yoy growth in its net profit to Rs 1,417cr, in-line with ours as well as streets estimates. Strong balance sheet growth, sequentially higher margins and stable asset quality were the key highlights of the result. HDFC Banks net advances growth was strong at 21.5% yoy, while deposit buildup was also healthy, growing by 22.0% yoy (driven by strong growth in NRE term deposits). The share of retail to overall loan book decreased from 54.8% in 4QFY2012 to 52.4% for 1QFY2013, on back of higher wholesale lending (14.9% qoq compared to 4.4% qoq in retail loans). Inspite of higher corporate lending in 1QFY2013 the margins for the bank expanded on a qoq basis by 10bp owing to shift in retail mix (strong performance on the CVCE front and decline in home loans), effect of CRR cut and decline in deposit rates particularly on the shorter end of the interest rate curve (sharp correction in CD and CP rates).

On the CASA front, the current account deposit accretion remained slow, growing at 7.4% yoy (down 8.2% qoq on account of higher CASA floats in 4QFY2012) However, the savings account growth was healthy at 18.4% yoy (up 3.6% qoq) leading to 14.2% yoy growth in CASA deposits. On account of slower CASA accretion than overall deposits, the CASA ratio of the bank declined by 310bp yoy to 46.0%. The wholesale deposits of the bank constitute ~25-30% of the fixed deposits (~15% of overall deposits).

 The bank decreased its base rate by 20bp to 9.8% on 30th June 2012, which according to the management is expected to lead to decline in margins by 4-5bp (as base rate linked loans constitute ~20-25% of total loans) The bank had added 343 branches during 4QFY2012 (558 in FY2012) of which most of the additions were done during the month of March 2012. Hence the bank only added 20 branches during 1QFY2013. The management has guided for overall 250-300 branch additions in FY2013 which would be mostly back-ended. The bank continued to grow its ATM network at strong pace by adding 796 ATMs during 1QFY2013 (1,803 in QFY2012 vs. average quarterly additions of ~400 ATMs over the past two years)

For 1QFY2013, the bank witnessed treasury gains of `67cr (compared to loss of Rs 72cr in 4QFY2012 and loss of `41cr in 1QFY2012) which allowed the bank to create higher floating provisions sequentially (`240cr in 1QFY2013 compared to `180cr in 4QFY2012 and `250cr in 1QFY2012), in our view, while maintaining a PBT growth of above 30% yoy. However, comparing the PBT on an annual basis (adjusted for treasury gains/loss and floating provisions), the PBT growth in 1QFY2013 was lower at 20.5% yoy.

Investment argument
For 1QFY2013 the banks capital adequacy stood strong at 15.5%, with tier-1 ratio at a comfortable 10.9% (~11.4% including 1QFY2013 profits). On the back of such strong CAR, we expect the bank to increase its credit market share over FY201314. Apart from traditional CEB and forex income, the bank earns substantial fee income from transaction banking, cards and third-party distribution, among others. Overall, the banks core fee income posted a 27.8% CAGR over FY200812 and stands at 1.7% of ATA for FY2012, one of the best in the sector offering another significant competitive advantage to the bank. The bank has been able to improve its asset quality consistently, as reflected in slippages, which declined from 5.2% in FY2009 to 1.0% during FY2012. Provisions to average assets also declined from 1.2% in FY2009 to 0.5% in FY2012. Importantly the bank has managed to deliver `30% earnings growth in FY2012 and 1QFY2013 even after making substantial floating rate provisions (`945cr in FY2012 and `240cr in 1QFY2013). HDFC Bank is among the most competitive banks in the sector, with an A-list management at the helm of affairs, which has one of the best track records in the sector. HDFC Bank is well positioned for high qualitative growth, with strong CAR, healthy 20%+ branch expansion and robust asset quality. On the back of this, in our view, the bank is set to further gain credit and CASA market share.

Outlook :-

Reccomondation NEUTRAL
CMP :- 587 Target Price :- Investment period :- -

FMCG Sector in India

The Indian FMCG sector is the fourth largest sector in the economy with an estimated size of Rs.1,300 billion. The sector has shown an average annual growth of about 11% per annum over the last decade. Unlike the developed markets, which are prominently dominated by few large players, Indias FMCG market is highly fragmented and a considerable part of the market comprises of unorganized players selling unbranded and unpackaged products. There are approximately 12-13 million retail stores in India, out of which 9 million are kirana stores. Indian FMCG sectors significant characteristics can be listed as strong MNC presence, well established distribution network, intense competition between the organised and unorganised players and low operational cost. Easy availability of important raw materials, cheaper labor costs and presence across the entire value chain makes India a lucrative FMCG market for MNCs.

Major FMCG Companies

Hindustan Unilever Ltd (HUL) Indian Tobacco company( ITC) Nestle India GCMMF (Amul) Dabur India Asian Paints (India) Cadbury India Britannia Industries Proctor & Gamble Hygiene and health care Marico Industries

Sector Outlook for 2012

Neutral We expect category volume growths to taper off towards their respective long term averages, because of a higher base. We foresee well diversified players to continue to weather cost pressures through supply chain efficiencies and Advertising. Top pick- ITC, Godrej consumer, HUL

Union budget 2012-2013 : impact analysis

Hike in excise duty on cigarettes (more than 65mm in length) by adding an ad valorem component of 10% to existing specific rates. The ad valorem duty would be 50% of the retail sale price declared on the pack. We had also anticipated some hike in the excise duty on cigarettes , as it was not changed in Union Budget 2011-12. We expect manufacturers to pass on this hike to consumers. Thus, we expect the impact to be Neutral for ITC, VST Industries, Godfrey Phillips. Reduction in the allocation to NREGA is negative for the FMCG sector, as it could reduce the disposable income in the hands of rural households. Negative for all FMCG players. Reduction in basic customs duty on titanium dioxide, a raw material used to manufactured paint, is positive for paint makers such as Asian Paints, Kansai Nerolac, Berger Paints and Akzo India.

1QY FY 2013 Result : For 1QFY2013, we expect our FMCG universe's revenue to grow by 18.2% yoy. Revenue growth for the quarter would primarily be driven by consistent price hikes taken by companies throughout the past year. We also expect companies to post reasonably strong growth on a yoy basis on the volume front aided by better distribution reach and new product launches. Normal monsoons will help in keeping raw-material costs (especially agri commodities) under check. Companies such as Marico, Nestle and GSK Consumer benefit from the decline in agri commodity costs. Further normal monsoon also helps in controlling food inflation. Lower food inflation, in-turn increases disposable income of buyers, resulting in better demand. However, lower rainfall resulting in below normal monsoon would be a negative for the sector. During the quarter, prices of several raw materials such as wheat, barley, coffee, cocoa, palm oil, copra and soyabean declined on a yoy basis. This is expected to boost the gross margins of FMCG companies. Although the fall in crude oil has resulted in a considerable drop in the prices of crude-related raw materials, there will be only moderate gains in INR terms due to the steep INR depreciation against USD. Average prices of coffee and cocoa witnessed a decline on a yoy basis; however, average prices of milk liquid and tea increased significantly. During the quarter, FMCG players continued to initiate price hikes, carrying on from the string of hikes announced by them in FY2012. ITC increased the prices of its cigarette brands such as Wings Navy Cut, Gold Flake Kings and Gold Flake Premium in April 2012 by 6-16% post the hike in excise duty in the budget. More importantly, the company got a reprieve when the finance bill, which was actually passed, rolled back the pro-

posal to tax cigarette on ad valorem basis. The company also increased the prices of select categories of Sunfeast biscuits. Nestle also carried out price hike of its coffee and baby food products during the quarter.

Hindustan Unilever Limited (HUL)

HUL is the largest company in the FMCG industry, with market leadership in soaps, detergents and personal care categories. It has a wide distribution network with direct reach of over 1m retail outlets. The company is a subsidiary of Anglo Dutch FMCG giant Unilever. HUL was formed in 1933 as Lever Brothers India Limited and came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and has an employee strength of over 16,500 employees and contributes to indirect employment of over 65,000 people.The company was renamed in June 2007 as Hindustan Unilever Limited. HUL is the market leader in Indian consumer products with presence in over 20 consumer categories such as soaps, tea, detergents and shampoos amongst others with over 700 million Indian consumers using its products. Seventeen of HULs brands featured in the ACNielsen Brand Equity list of 100 Most Trusted Brands Annual Survey (2011). The company also happens to have the highest number of brands in this list, with six brands featuring in the top 15 list.

HUL is a cross-listed company. Its stock trades on: Bombay Stock Exchange New York Stock Exchange.

Public Traded as: NSE: HINDUNILVR BSE: 500696 CNX FMCG

: 52 week high52 week low-

 HUL

: 52 week high- 464.00 52 week low- 309.00

Type Industry Founded Headquarter Key people Products Parent

Public Consumer goods 1932 Mumbai, Maharastra , India Harish Manwani (Chairman) Nitin Paranjpe (CEO and MD) Food, beverages, cleaning agents and personal care products Unilever Plc ( 52%)

Shareholding pattern
Domestic Promoters/Director General Public Others Total Institutions Foreign Others Total .01 14.17 5.04 19.22 8.40 72.27 .11 100

Share Holding %
Others, 0.11

Domestic, 19.22 Institutions, 8.4 Foreign, 72.27

Domestic Institutions Foreign Others

Stock price and value movement

Key fundamentals
Fundamentals Market Capitalization ( Rscr ) Book Value/ Share Debt / Equity P/E Dividend Yield % EPS Return on Net Worth Current Ratio Quick Ratio Interest Cover

98086.8465
15.88 0.00 43.41667 1.65263 10.2 87.23 .85 .43 12,163.75

4Q FY 2012:- update

HUL posted impressive top-line growth of 15.7% yoy, driven by healthy volume growth of 10%. Overall, domestic FMCG business grew by 23.4% yoy, aided by 23.6% yoy growth in the home and personal care (HPC) business and 17.3% yoy growth in the foods business. The soaps and detergent (S&D) segment posted strong revenue growth of 28.6% yoy. The personal products segment witnessed double-digit volume-led growth for the eleventh consecutive quarter. At the operating level, OPM expanded by 126bp yoy to 12.9% despite high inflation due to judicious pricing and tight cost management, thereby driving the companys cost efficiency. During the quarter, HUL posted a 20.6% yoy increase in its net profit to `687cr (`569cr). PAT on a recurring basis stood at `659cr, increasing by 35.6% yoy. Depreciation remained flat, whereas other income increased by 29.9% yoy.

During the quarter, the company reported contraction of 72bp yoy in its gross margin, while its OPM expanded by 126bp yoy. During the quarter, the company increased its ad spend and other expenses, but it was compensated by an increase in realization. This helped the company offset its gross margin pressure and improve its operating margin.

 HULs S&D segment registered 28.6% yoy growth, with all its key brands performing well. Competitive intensity in the category continued to remain high as always. On account of price hikes, the segments EBIT margin expanded by 377bp yoy. The company launched new variants in Rin and Lifebuoy. Lux continued its accelerated growth, delivering double-digit figures for the third successive quarter since its re-launch.

The personal products segment registered double-digit growth of 17.3% for the eleventh consecutive quarter. Fair & Lovely, Ponds and Vaseline posted doubledigit volume growth. The hair care and oral care segments also performed well, with hair care witnessing sustained double-digit volume growth. The toothpaste category recorded moderate growth. Hence, the segments margin expanded by 122bp yoy to 26.3%.

Investment argument
HUL has been very actively re-launching products from its existing brands and has increased the pace of new launches, targeting the mid/premium market segment (re-launched Lux, Lifebuoy and Vim in the personal products and S&D categories, respectively). This, in

our view, is positive, considering that the company will have a better control on pricing. Moreover, constant innovations have helped HUL stabilize its market share losses. However, we believe ITCs commitment to categories such as soaps, shampoos and skin care, may pose a major threat to HUL in the long run. HUL, with its iconic brands, has maintained its growth, which is impressive given the recent price hikes across categories and a strong competitive scenario, indicating a revival in consumer demand and higher growth in the mid/premium market segment. Moreover, HUL is a cash-rich, zero-debt company enjoying high RoE of ~75%. Market leader in most of the categories and has a strong brands. Wide product range across product categories with presence at all the price points. Decline in raw material prices would result in improvement in margins. Recent development :- HUL has effected price increases in its key brands of Detergents and soaps . During the quarter, the company launches were focused at personal products and processed foods as well as the relaunch of Lux range of soaps. Investment risk:- Loss in market share has forced HUL to pass on significant benefit from reduction in raw material prices. Competitive pressure has intensifies with more companies entering personal care and toilet soap and detergents which account for 80% of HUL' profit.

Outlook : Cautious view on the sector on back of the inflationary pressure in the economy. Companies with competitive position (Dabur being a follower in bigger categories) would be better placed to with stand any slowdown in a particular segment. Longer term prospects bright, given rising incomes and low penetration.

Reccomondation :NEUTRAL
CMP :- 435 Target Price :- Investment period :- -