India Morning Note - Keynote Capitals (November-2-'10)

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Views on markets today

·      Indian markets closed on positive note yesterday ahead of credit policy on surge in domestic manufacturing activity and tracking firm Asian stocks after China's manufacturing expanded at the fastest pace in six months in October, indicating the economy can bear more gains in the yuan and interest-rate increases to cool price pressures. Strong October auto sales and forecast-beating results from energy conglomerate Reliance Industries also helped the sentiment. All sectoral indices closed positive with consumer durable, banks, real estate and capital goods were major gainers.

·      Market breadth was strong at ~1.81x as investors bought large cap stocks. FIIs bought equities worth `7.11bn while domestic institutions sold equities of `71.3Cr.

·      Asian markets are trading lower today  ahead of a widely-anticipated U.S. Federal Reserve meeting this week. Both the Nikkei and the Hang Seng showed a weak opening.

·      We expect the Indian markets to open cautious as the Asian markets are weak. The Reserve Bank of India (RBI) cautioned on Monday that inflation is still above its comfort level, adding to expectations that it will raise interest rates for the sixth time this year at its monetary policy review on Tuesday will further keep pressure on the markets.

Key events today

·      Announcement of Credit Policy by RBI

Economic and Corporate Developments

·      Exports grew 23% yoy to touch a two-year high of US$18bn in September. Imports grew at a faster pace of 26.1% to US$27bn.

·      SEZ exports grew by 56% during April to September 2010.

Buzzing Stocks

·       RIL raises polyester yarn prices by Rs3 from Nov1, 2010.

·       Religare Enterprises is in advance talks to buy 60% stake in Ajay Piramal’s private equity and fund management venture - Indiareit Fund Advisors for Rs1.8bn.

·       HCL Tech and multinational distributor of IT products, Ingram Micro are in talks to buy a controlling stake in Sonata Software.

·       SBI plans to hold on to its rates even if the Reserve Bank raises key policy rates in its mid-term review of the annual policy.

·       IOB has raised US$75mn from Standard Chartered and Deutsche Bank as a line of credit. The money will be used to expand the bank’s overseas credit portfolio.

·       Visa Steel to build 1.25mt steel plant, 1,00,000 tonne manganese alloy plant along with a 300 MW power plant in Madhya Pradesh at an estimated cost of Rs40.3bn.

·       JSW Energy plans Rs33bn expansion of its existing capacity of 860 mw at Vijaynagar, Karnataka by 660 mw.