Markets end marginally lower during the week

Markets ended marginally negative during the week, amidst sessions marked by volatility, with the Sensex and the Nifty ending lower by 0.3% each. BSE mid-cap index also witnessed a negligible fall of 0.1% during the week while BSE small-cap index ended flat, marginally outperforming their large-cap counterparts. The week witnessed mixed investor sentiment with positive global cues and robust IIP data cheering investors, while concerns over the cyclone delaying the monsoon acting as a deterrent in the initial part of the week. On the sectoral front, most of the major sectoral indices ended in red, with the BSE realty index losing the maximum of 4% followed by the BSE IT index losing 2.5%. However, BSE auto index gained the maximum of 1.6%, followed by the BSE healthcare index rising 1.5%.

BSE Auto Index - M&M and Bajaj Auto outperform

Robust May 2010 vehicle sales triggered BSE auto index to outshine consecutively in the second week of June with a gain of 1.6%, outperforming the BSE Sensex that declined 0.3%. Growth was largely driven by heavyweights M&M and Bajaj Auto, having weightage of 19.6% and 12.4%, respectively. M&M increased 3.3% during the week on the back of prediction of normal monsoon by the Meteorological Department. Bajaj Auto gained 5% on account of robust sales growth in May. Other index members, including Maruti and Hero Honda, also posted steady gains of 1-2% during the week, aided by strong volume numbers. However, CV majors such as Tata Motors and Ashok Leyland recorded marginal declines of 0.9% and 2.2%, respectively. We remain positive on the Indian auto sector. We estimate overall auto volumes to register a CAGR of around 10% over FY2010-12E, aided by improved economic environment for the sector. We remain overweight on Maruti Suzuki, M&M and Tata Motors.

Hotel Leela Venture (HLVL) - Initiating Coverage: HLVL is one of the key players in the premium segment of the hospitality industry in India. We estimate HLVL’s Top-line and PAT to register CAGRs of 41.6% and 57.9%, respectively, over FY2010-12E. Although HLVL’s financials are currently recovering, we believe EV/Room is the ideal parameter for valuing the company on which it is expensive as compared to its peers. Hence, we Initiate Coverage on the stock with a Neutral view.

RIL - Event Update: RIL has announced the acquisition of Infotel Broadband Services (P) Ltd promoted by Nahata Group. Key factors to watch out for RIL will be the execution and ramp-up of the broadband foray. At 1.8x FY2012E P/BV, we believe that RIL is relatively undervalued at current levels. We maintain a Buy view on RIL, with a Target Price of Rs1,260.

Orchid Chemicals - Event Update: Orchid Chemicals has announced entering into an agreement to acquire Karalex Pharma, the US-based generic marketing and sales service company, through an all-cash deal. We maintain a Neutral view on the stock.