Markets gain some ground

The Indian stock markets gained ground during the current week of trade, amidst sessions marked by high volatility, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 1.3% and 1.5%, respectively. The BSE Mid- and Small-cap indices too ended in the green gaining 1.6% and 1.25, respectively. The key indices recouped a portion of the previous week's losses after the EU announced a rescue package to aid Greece. On the sectoral front, the major sectoral indices mirrored a mixed trend with the BSE Realty and Auto indices gaining the maximum of 4.1% and 3.7% respectively, while the BSE Metal and CG indices ended marginally in the red.

BSE Realty Index

The Realty Index gained 4.1% for the week, outperforming the Sensex, which was up 1.3%. The top gainers in the Realty Index were Sobha Developers (up 15%), HDIL (up 6.6%), Peninsula Land (up 6.3%), DLF (up 4.9%) and Ansal Properties (up 4.6%). The IIP grew at 13.5% (vis-a-vis 0.3% last year) in March, albeit lower than market expectations. Also, with the EU debt crisis remaining grim, market expects the Central Bank to keep its monetary tightening on hold, thus providing interest-sensitive sectors some relief.

Elecon Engineering - Initiating Coverage: Elecon Engineering (EEC) is a leading player in Material Handling Equipment turnkey solutions and Gear provider for the core sectors of the economy. EEC has also built strong domain expertise in coal handling. We believe that EEC is well placed to capitalise on the burgeoning industrial capex, primarily power. We estimate Revenues and Adj PAT to post a CAGR of 15% and 37% over FY2010-12E. At Rs79, the stock is available at attractive valuations of 8x FY2012E EPS and 5x FY2012E EV/EBITDA, respectively. We Initiate Coverage on the stock, with a Buy recommendation and Target  Price of Rs102.

GCPL - Event Update: GCPL has agreed to acquire remaining 51% stake of its JV with GSL for a consideration of Euro 185mn (Rs1,050cr) valuing GSL at Rs2,065cr. While we have not factored the deal into our numbers owing to a lack of funding details, based on our assumptions of full equity funding (10.2% dilution at CMP of Rs300), we believe the deal is likely to be EPS accretive by 8-10%. We maintain a Buy with a revised Target Price of Rs357 (Rs329)

Hindalco - 4QFY2010 Result Update: Hindalco's standalone top-line increased 45.3% yoy and 1.4% qoq to Rs5,358cr, lower than our estimate of Rs5,684cr primarily due to lower copper production. EBITDA margins expanded by 707bp yoy and 144bp qoq to 15.6%, in line with our estimates. Net income increased 147% yoy and 55.4% qoq to Rs664cr ahead of our estimate of Rs486cr due to lower interest expense and tax write back of Rs113cr. We believe that the company is well placed to benefit from its low cost capacity expansions and expected turnaround at Novelis. We maintain a Buy on the stock, with a SOTP Target Price of Rs208.