MANSUKH DESK

During Q1FY2011, HCL Technologies reported growth across service lines, industry verticals and geographies. In the industry verticals, revenues from retail and consumer product group led with a sequential growth of 13% followed by 11.6% growth in healthcare, 10.3% growth in financial services and 8.6% growth in the manufacturing vertical. Revenues from telecom grew 10%. In service lines, revenues from custom application, infrastructure services and enterprise application services grew 15.2%, 8.5% and 6.5% respectively. At the current market price of Rs410, the stock is trading at 15.6x FY2011E and 12.4x FY2012E earnings. We continue to maintain o u r BUY recommendation on the stock with an upward revised target price of Rs440-450.

On technical perspective, stock currently in its retracement phase from the highs of Rs 455 on daily basis. Moreover entire correction from the highs of Rs 455 to the lows of Rs 367 seems to be completing at current juncture and we expect some counter actions in upcoming sessions. Moreover technical indicators i.e. RSI and MACD also revealed some buying opportunities in near term.

MANSUKH DESK

SBI came out with slightly better 2QFY11 margins, up by 25bp QoQ to 3.4% leading to 45% YoY growth in NII. High CD ratio, reduction in excess liquidity on the balance sheet, lower proportion of bulk deposits and retirement of high-cost deposits aided margin expansion. Yield on loans for 1HFY11 was 9.5% v/s 9.3% in 1QFY11 and 9.66% in FY10. This improvement was aided by an increase in BPLR during the quarter. Cost of deposits declined marginally to 5.25% in 1HFY11 v/s 5.27% in 1QFY11. Increase in deposit rates are yet to be reflected in the books. The management guided to keep NIMs robust at 3.3-3.4% in FY11. We have modeled margins to improve by 60-70bp in FY11. This will lead to NII growth of +42% in FY11, which provides a significant cushion for higher credit costs and growth in profits.

On technical viewpoint, stock currently seems to be forming a shaven bottom pattern from the lows of Rs 2790. Moreover stock has already completed its retracement arena and is well poised for a new counter move towards Rs 3400 in upcoming sessions. It's RSI and other technical indicators also suggest some buying opportunities in close proximity. Hence investors are advised to BUY this stock for a price target of Rs 3350-3400 in one month.

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