Weekly Review----March 8, 2010

Markets on the upswing
The Indian stock markets gave thumbs up to the budget and took a sharp upswing during the current week of trade, with both the benchmark indices, the BSE Sensex and the NSE Nifty, each ending higher by 3.4%, respectively. The BSE Mid- and Small-Cap indices were back into the limelight (both the indices ending higher by 5.3% and 5.4%, respectively), outperforming their large cap counterparts. On the sectoral front, all the major sectoral indices ended in the green, with the BSE Metal index gaining the maximum of 7.1%, followed by the BSE Realty and Auto indices.
BSE Metal Index - rolls ahead
The BSE Metal Index gained 7.1% over the previous week, outperforming the Sensex by 3.7%, on the back of an increase in metal prices. The domestic steel companies hiked steel prices by 2-3%, to pass on the excise duty hike of 2%. JSW Steel, Jindal Steel, Tata Steel and SAIL outperformed the Sensex by 8.3%, 6.7%, 4.2% and 3.9%, respectively. During the week, JSW steel rose by 11.7%, as the company reported a 69% yoy rise in crude steel production, on the back of strong domestic demand, while Tata Steel sold its stake in Chindu Chemicals (unit of Corus). Sesa Goa gained 11.7% over the previous week, on the back of an increase in spot iron ore prices and positive sentimental impact of the NMDC FPO. Among the Non-Ferrous pack, Hindustan Zinc, Nalco, Sterlite and Hindalco gained 9.4%, 4.0%, 3.8% and 3.3%, respectively, due to strong base metals prices on the LME. Our top picks in the sector are JSW Steel, Tata Steel and Sterlite.
Balrampur Chini Millls (BRCM) - Initiating Coverage: We expect sugar prices to rule firm in SY2010E, which would in turn result in a higher switch-over to sugar in Brazil and an increase in cane acreage in India. As a result, supply would ease and prices are expected to soften in SY2011E. We expect BRCM's profitability to peak in SY2010E and decline in SY2011E. We e Initiate Coverage on the stock, with a Neutral recommendation.
DQ Entertainment (International) - IPO Note: DQE (International) is an animation services and production company, focused on both the Indian and International markets. At the upper band of Rs80, the market capitalisation post issue for DQE would stand at Rs634cr, which equates to rich valuations - P/E of 20.3x, P/BV of 1.6x and EV/Sales of 2.6x FY2012E estimates. We recommend a Neutral view on the issue.
Tata Motors - 3QFY2010 Consolidated Result Update: TML reported consolidated Net Sales of Rs26,044cr (Rs17,703cr) for 3QFY2010. The company registered a stellar recovery in 3QFY2010 and reported a Net Profit of Rs650.3cr (Net Loss of Rs2,599cr in 3QFY2009). This was mainly due to the good turnaround performance registered by the company's key subsidiaries, including JLR. We maintain a Buy, with a revised Target Price rice of Rs942 (Rs859).