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Introduction

Over the last few months, we have talked at length aboutSensex@MRP and how it can help you get importantinsights into the state of the market; whether the marketis geng irratonally exuberant or not. Infact according tothe latest quarterly figures, Sensex@MRP stands at 19295

just 200 points above the Sensex which has just crossed19000 (as this report is being wrien) for the first tmesince January 2008. However, over the last few weeks wehave been flooded by requests to extend the concept to

what seems a more favored index by our readers theNify. So, without further ado, we bring to you the muchawaited Nify@MRP.

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3/11

1. Revisiting the Basics

2. Nifty@MRP as on September 2010

3. What do the earnings reveal?

4. What should we as investors do?

5. The Nifty Scorecard

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Content

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4/11

Before we get into the nitty-grittys of Nifty@MRP, lets just

quickly revisit the concept of Sensex@MRP. Sensex@MRP has

been our effort to make sense of the benchmark index Sensex.

Considering that the Sensex stocks are the top traded stocks of

the country, we can expect them to be traded at their MRPs the

maximum price that you should be willing to pay for a stock

which is dependent on the earnings capacity of the company.

Thus, Sensex@MRP gives an indication of whether the Sensex

is fairly valued or whether irrationality is driving the markets.

However, as mentioned before, quite a few people tend to followNifty more than the Sensex. Nifty is composed of 50 of the top

companies on the NSE whereas the Sensex comprises of 30 top

companies on BSE. All the Sensex 30 companies are part of the

Nifty. Thus Nifty is a broader market index as well as more

liquid.

Revisiting the Basics

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5/11

The free float market capitalization at the MRP of the individual

stocks as computed by us at MoneyWorks4me.com and using

share data as on 31st August 2010 is Rs. 17,50,682.98 Cr.

Using the index divisor 289.80 (as on 31st August 2010),

Nifty@MRP comes out to 6041.

This week opened strongly with the market rallying and Nifty

crossing 5700 to end the day at 5760. Considering this, Nifty is

just 281 points or 4.65% below the Nifty@MRP, re-affirming thesame conclusion as Sensex@MRP The market is moving

close to its MRP i.e. its fair value.

Free Float Mkt. Cap. using MRP 17,50,682.98

Index Divisor 289.80

Nify@MRP 6041

Nifty@MRP as on September 2010


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6/11

Thus, a fairly large number of companies have suffered on the

profitability front. This when as much as 42 companies reported

an increase in Net Sales for the June 2010 quarter as compared

to June 2009. Clearly, the companies have suffered on the

expenditure front finding it difficult to manage costs.

The reason why we are a bit

skeptical about the rise in Nifty

over the last few months is

because the earnings have not

been spectacular to justify such

a movement, alone.

An analysis of the earnings for

the Nifty companies reveals

that on a Y-o-Y basis as much

as 23 companies reported a

fall in earnings whereas 27

companies reported an

increase.

What do the earnings reveal?


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7/11

The best performing sectors (check table The Nifty Scorecard for

the June 2010 quarter) amongst the Nifty companies were sectors

like Auto, Banks and Information Technology companies which

recorded good growth in both Net Sales as well as Net Profits.

The Auto industry continued to witness increased demand for the

products. Banks like SBI, HDFC bank also managed to record an

impressive performance driven by the recovering economy and

favourable monetary policy. The IT sector also witnessed a revival

in fortunes from last year getting good business from domestic aswell as global markets. Cairn India was the top performer notching

364% growth as far as Net Sales is concerned however it suffered

greatly on the Net Profit front. Sterlite Inds. claimed the top spot as

far as profitability is concerned notching a Y-o-Y growth of 272%

driven by higher volumes in zinc and copper and better margins.

The companies which recorded the worst performance were led,

quite predictably, by Telecom majors, Reliance Communications

and Bharti Airtel. The Power and Infrastructure sector also

continued its woes with majors like Tata Power, JP Associates and

Reliance Infra recording a disappointing performance.

What do the earnings reveal?


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8/11

Currently, out of the 50 Nifty companies, as many as 30

companies are quoting above their MRP. Out of the remaining 20

many are close to their MRP and thus the margin of safety is

very less. If this rally continues, it is very likely that these

companies will also cross their MRP and the Nifty will touch or

even cross the Nifty@MRP. What creates a problem is that

earnings for India Inc. are not expected to be much better in the

next quarter, than the current performance. Infact, because of the

higher base seen last year, the growth may be lowerwhichcould lead to a correction.

The Nifty@MRP reaffirms the fact that the market is close to its

fair value beyond which it will driven more by sentiments and

FIIs than the growth of earnings. The best thing to do now would

be to keep a close watch on your investments and if they are

above their MRP, be on the lookout for selling signals. We re-

iterate the view that we expressed in our report on the latest

Sensex@MRP - As individual investors right now the most

important thing to remember is:

So, what should we as

investors do?

Stay on your Guard to book profits!


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9/11

Company Name IndustryY-o-Y Growth Rate

Net Sales Net Profits

A B B Electric Equipment -3.88% -54.17%

ACC Cement & Cement Products -2.91% -26.09%Ambuja Cem. Cement & Cement Products 10.83% 20.50%

Axis Bank Banks 14.46% 32.00%

B H E L Engineering 15.80% 41.88%

B P C L Refineries 34.20% -379.77%

Bhart Airtel Telecommunicatons - Service Provider 3.13% -28.15%

Cairn India Oil Drilling & Exploraton 364.00% -330.07%Cipla Pharma 7.71% 6.50%

DLF Real Estate 55.97% 104.28%

GAIL (India) Oil Drilling & Exploraton 17.50% 35.23%

H D F C Finance - Housing -1.65% 22.95%

HCL Technologies Computers - Sofware 16.16% 23.26%

HDFC Bank Banks 7.99% 33.92%

Hero Honda Motor Auto: 2 Wheelers / 3 Wheelers11.90% -1.68%

Hind. Unilever FMCG - Personal Care 7.11% -3.43%

Hindalco Inds. Aluminium 33.02% 11.20%

I D F C Finance - Term Lending Insttutons 13.25% 31.30%

ICICI Bank Banks -18.52% 16.82%

Idea Cellular Telecommunicatons - Service Provider 28.14% -37.21%

Infosys Tech. Computers - Sofware 12.81% -2.25%

ITC Chewing Tobacco / Pan Masala / Cigarees16.13% 21.81%

Jindal Steel Steel & Steel Products 33.46% 45.20%

JP Associates Constructon 52.16% -40.38%

Kotak Mah. Bank Banks 20.01% 106.95%

The Nify Scorecard for the June

2010 quarter

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10/11

Company Name IndustryY-o-Y Growth Rate

Net Sales Net Profits

Larsen & Toubro Diversified6.42% -8.38%

M & M Auto: Passenger Cars 21.15% 40.30%

Marut Suzuki Auto: Passenger Cars 27.11% -20.25%

NTPC Power - Generaton & Supply 7.85% -16.03%

O N G C Oil Drilling & Exploraton -8.16% -24.48%

Power Grid

CorpnPower - Generaton & Supply

16.62% 28.75%

Punjab

Natl.BankBanks

16.42% 28.39%

Ranbaxy Labs. Pharma 6.27% -86.02%

Rel. Comm. Telecommunicatons - Service Provider 1.16% -232.65%

Reliance Capital Finance - Investment -73.11% -51.66%

Reliance Inds. Diversified 86.71% 32.32%

Reliance Infra. Power - Generaton & Supply -11.29% -22.21%

Reliance Power Power - Generaton & Supply 47.02% 40.62%

S A I L Steel & Steel Products 0.83% -11.56%Siemens Engineering 17.04% -17.21%

St Bk of India Banks 5.61% 25.05%

Sterlite Inds. Copper & Zinc 34.83% 272.17%

Sun

Pharma.Inds.Pharma

22.91% 165.52%

Suzlon Energy Engineering 59.84% 42.73%

Tata Motors Auto: LCVs / HCVs 63.03% 101.34%

Tata Power Co. Power - Generaton & Supply -8.76% -28.67%

Tata Steel Steel & Steel Products 16.52% 99.97%

TCS Computers - Sofware 14.29% 21.93%

Unitech Constructon 84.45% 44.10%Wipro Computers - Sofware 13.13% -7.34%

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