Markets extend gains

The Indian stock markets extended their gains during the week with the Sensex and Nifty ending higher by 0.7% and 0.8%, respectively. BSE mid-cap and small-cap indices continued their outperformance to the largecap counterparts, further extending their gains during the week by 1.1% and 1.9%, respectively. The market opened the week on a positive note, crossing the psychological mark of 18,000 on BSE index but mostly traded in a narrow range during the week. Factors such as mixed global cues, lower-than-expected growth in industrial production in May 2010 and weak monsoon reports (24% below normal) weighed on investors' sentiment during the week. On the sectoral front, the performance was mixed, as there were equal number of sectors gaining and losing, with the BSE Realty and BSE Bankex indices gaining the maximum of 6% and 3%, respectively.

Real Estate index gains 6% during the week

The Real Estate index gained 6.0% for the week, outperforming the Sensex, which was marginally up by 0.7%. Top gainers in the real estate space were Parsvnath (up 10.3%), Unitech (up 9.1%), Omaxe (up 8.9%), DLF (up 8%) and HDIL (up 5.8%). A speculation about the likelihood of government relaxing the three-year lock-in period for repatriation of foreign direct investment in the realty sector led to the rally. This, coupled with the fact that the sector has underperformed the benchmark indices in the recent past, aided the positive sentiment.

Kesoram Industries - Initiating Coverage: The company’s cement and tyre businesses are currently trading at attractive valuations coupled with being at a substantial discount to its peers and replacement costs. The cement business is valued at a EV/tonne of US $65 which is at a considerable discount to the replacement costs of US$80/tonne. This gives an implied enterprise valuation of Rs1.4cr/tpd to the tyre business , which is at 35-63% discount to the peers. We Initiate Coverage on the stock with a Buy recommendation and Target Price of Rs437.

Infosys -1QFY2011 Result Update: In rupee terms, Infosys top-line grew 4.3% qoq to Rs6,198cr backed by 7.6% qoq volumes growth, while the blended pricing was lower by 1.6% qoq. However, on account of the annual wage hike, EBIT margins fell by 178bp qoq to 28.3%, while the PAT declined by 7.0%.We maintain our Accumulate rating on the stock, with a Target Price of Rs2,900.

Axis Bank- 1QFY2011 Result Update : The Bank registered net profit growth of 32.0% on a yoy basis to Rs742cr, which is better than our estimate of Rs710cr mainly on account of the better-than-estimated net interest income (NII). Strong operating performance with stable asset quality was the key positive of the result. We maintain our Accumulate rating on the stock with a Target Price of Rs1,477.