Fundamental

• Despite some positves from the economic front, Indian markets ended lower in a largely volatile week.
  
  

• The Index of Industrial prodcution for January rose for the fisrt time in 3-months coming in at 2.4% as agaisnt expectations of 1.3% ,with the manufacturing and electricity sectors contributing to the expansion while mining de-grew for the same period.
  
  

• On the Inflation front, the CPI for Feburary came in at 10.91% as agaisnt 10.79% in the preceeding month on account of higher food prices.The WPI also inched up to 6.84% in February as against expectations of 6.67%, majorly attributed to the Fuel group price rise.A major positive was core inflation which came in at 3.8% as agaisnt expectations of 4.2%.
  
  

• Most global markets traded in the green throughout the week, with the Dow registering its 10th successive session of gains and the Nikkei nearing a 4 ½-year high. European markets are within touching distance of multi-year highs as a result of investor optimism over the 2-day EU conference held at Brussels, which will address matters like high unemployment and the need to ease austerity measures to revive economic growth.
  
  

This Week’s Market Round Up: Volatile markets end the week lower...

• Indian stock markets ended a highly volatility week in the red, with benchmark indices like the Sensex and Nifty ending with losses of 1% on a week on week basis.
  
  

• The broader markets also remained under pressure with the BSE Small-Cap index was down 2.4% during the week and the BSE Mid-Cap index down 1.6%.
  
  

• Auto, Banking and Consumer Durables were the major sectoral losers while the FMCG and Pharma Sectors were the notworthy gainers.
  
  

• Ranbaxy, Siemens, Asian Paints, HUL and Tata Power were the main gainers in the NSE during the week.
  
  

• Bajaj Auto, ICICI Bank, Hindalco, GAIL and Axis Bank were the biggest losers in the two main indices.
  
  

Market Outlook: Maintain bullish stance...

• At the current level of 19,427.56, the Sensex trades at a PE of 15.5x FY13 earnings and 13.8x FY14E earnings estimate. At 15.5x, the Sensex trades near its historical average valuation of 15.0-16.0x one-year forward earnings.
  
  

• The Indian government has moved on a number of important policy reforms in the form of FDI in retail, aviation, insurance & pension besides unleashing other measures like SEB debt restructuring and diesel price deregulation. The Union Budget has also been quite a balanced and credible one with more emphasis on fiscal correction.
  
  

• So, the Indian markets will continue to advance over the next 12-18 months, as the Government’s policy measures start to bear fruit gradually. FIIs are likely to remain positive towards the Indian equities this year also, as the RBI is set to maintain its accommodative monetary policy stance.
  
  

• We see the main Indian indices moving higher towards new all-time highs in the medium-term to long-term period.
  
  

Sectoral Outlook: Recommend mix of consumers and rate-sensitives...

• The RBI in its January policy meeting cut both the repo rate and the CRR by 25 bps each, to support economic recovery, as it acknowledged that inflation is moderating at the wholesale level due to reduced demand. Although the central bank will be encouraged by the Finance Minister’s efforts to curtail the fiscal deficit over the next 2-3 years, it might be constrained if the current account deficit (CAD) and consumer inflation remain elevated.
  
  

• We advice investors to play quality interest rate-sensitive shares like Banks and Capital Goods (ICICI Bank, J&K Bank, Bajaj Finance and L&T).
  
  

• At the same time, in consumption we recommend buying into Astral Poly, Maruti, Coromandel Fertilizers and Amara Raja Batteries.
  
  

• Other stocks we like include Mid-caps like Gateway Distriparks and Supreme Industries.
  
  

Outlook:

• The Indian market has witnessed some volatility of late, with the main indices falling immediately in the wake of the Union Budget before staging a smart rebound this week. The outlook has improved over the course of this week, with Indian shares joining the global ‘risk-on’ rally. Next week is an important one, as the Government will release data on IIP, WPI inflation, CPI inflation and Foreign Trade. Also, the markets will brace for the March 19 RBI policy meeting to see if the central bank persists with its accommodative monetary stance.
  
  

EdelStar - Buy Ranbaxy Laboratories Ltd.
CMP: Rs. 439 Target Price: Rs. 500

Time Horizon – 3 months

• Ranbaxy Laboratories (RANLAB) incorporated in 1961, is India’s largest pharma company with presence in domestic, emerging, and regulated markets. The company has strong presence in the domestic market and ranks No. 2 as per IMS. Over the years it has build a well diversified model with presence in various international markets (including LATAM, Europe, Russia, Africa, Asia, US and Canada) which renders sustainable growth to overall business. In 2008, the second generation promoters sold their stake to Daiichi Sankyo, which now owns ~64% in the company.
  
  

• Core growth to remain in double digits: The underlying growth in base sales was a robust 10% in CY12 (versus 2% reported), while overall growth was 15% (versus 9% reported). Management expects growth momentum to continue led by higher contribution from US on back of launches such as Absorica, Desvenlafaxine and Lipitor. We estimate 14% core sales CAGR over CY13-14E.

• Lumpiness in fixed costs singed margin: The lumpiness of costs from remediation efforts at effected plants and Lipitor recall resulted in an unimpressive margin performance of 3% during Q4CY12 versus 10.7% core margin in 9mCY12. We believe this is an aberration and scale up in base business will result in margin recovery Q2CY13 onwards.

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Technical

Round-up: Volatility at its best...

• After opening the week on a flat note, some buying was witnessed and the Nifty made a high of 5971. However on higher levels selling pressure was witnessed and the Nifty shed all its gain and made a low of 5791. Finally the Nifty closed at 5872 with a loss of 1.18%.

• Market breadth was mixed bag throughout the week.

• Banking stocks were the major looser during the week.

Nifty Outlook: Market to remain choppy RBI to provide direction...

• On the daily chart, the Nifty has already retraced 61.80% of the recent rally from 5663 to 5971. Besides this, oscillators are trading in a neutral range. Thus, going forward we may see lot of volatility in the market and Nifty will be trading in a broad range of 5850-6000 levels. However, a breach of this range either side will lead to a sharp upside or downside movement in the markets.