Markets bounce back

The Indian stock market ended on a positive note during the week, amidst sessions marked by volatility, with the Sensex and Nifty ending higher by 1.5% and 1.3%, respectively. BSE mid-cap and BSE small-cap indices continued to outperform their large-cap counterparts and closed higher by 1.7% and 2.5%, respectively, during the week. The market opened the week on a positive note and mostly traded above the 18,000 mark during the week. Factors such as strong sales reported by auto firms for July 2010, decent set of numbers from banking stocks and revival of the monsoons kept the sentiment positive during the week. However, worries that the Central Bank might raise interest rate again in a mid-quarter policy review also weighed on investors' sentiment. On the sectoral front, most of the sectoral indices ended in green, with the BSE IT index and BSE Bankex gaining the maximum of 3.0% and 2.2%, respectively.

BSE IT index up 3%, outperforms the Sensex

 The BSE IT index gained 3% over the previous week, outperforming the Sensex, which gained 1.5%. The weekly momentum of the BSE IT index gathered strength, with IT companies viz. Wipro, HCL Tech, Mphasis, TCS, Infosys and Tech Mahindra gaining 5.4%, 5.0%, 4.8%, 2.9%, 2.7% and 2.7%, respectively. This was despite the 0.8% appreciation in average INR v/s US Dollar during the week. The surge in the index can be attributed to strong operational results posted by some of these companies for the quarter ended June 2010, specifically TCS and Wipro amongst Indian IT companies, while the MNC IT company Cognizant delivered robust operational profitability for the quarter. Most of these companies have exhibited a positive IT demand environment and are witnessing a pick-up in discretionary IT spends, which would strongly drive their volume growth in the coming quarters. We remain positive on the sector.

Aditya Birla Nuvo - Quick take: Aditya Birla Nuvo (ABNL) is a diversified conglomerate and the holding company of several subsidiaries. We have valued ABNL on an SOTP basis and assigned 20% conglomerate discount. We recommend Buy on the stock with a Target Price of Rs1,166.

ICICI Bank -1QFY2011 Result Update: ICICI Bank's net profit increased 16.8% yoy, which was in line with our estimates. The key positive of the results was a sharp declining trend in slippages from retail loans for the fifth consecutive quarter and a huge reduction in NPA provisioning burden. We maintain Buy on the stock with a Target Price of Rs1,163.

Alembic -1QFY2011 Result Update: Alembic reported below expectation numbers for 1QFY2011, impacted by a decline in API exports. Domestic formulation sales grew by 5.5% yoy on the back of the restructuring exercise undertaken by the company over the last one year, which improved working capital management, resulting in lower debt levels. We maintain Buy on the stock with a Target Price of Rs74.