India Morning Note - Keynote Capitals (December-14-'10)

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Views on markets today

·        Indian markets extended its gain and closed positive in a volatile trade yesterday taking support from global markets. Global markets rose as Chinese shares vaulted on relief that Beijing refrained from raising interest rates over the weekend. The markets slipped into negative after positive opening but recovered in late trading session as European markets rose in early trade. Reliance Comm. gained ~2% after it announced the launch of its third-generation (3G) mobile services in four cities. The company said it would cover all its 13 zones by next March. Except FMCG, all sectoral indices closed positive with real estate, metal, power and capital goods stocks were major gainers.

·        Market breadth was strong at ~2.24x as investors bought large cap stocks. FIIs sold equities worth `2.87bn while domestic institutions bought equities of `3.34bn.

·        Asian markets gained today as optimism that China would not aggressively head off growth. However, profit-taking offset the rally. A slightly stronger yen against the dollar encouraged investors to book profits after Japanese shares. Many investors had feared China would raise interest rates to slow growth, but instead it merely increased the amount of extra capital top banks must hold.

·        We expect Indian markets to start with positive bias as the Asian markets are positive today. However, after a 2 day rally the markets may see some profit taking.

Economic and Corporate Developments

·        The declining trend in FDI inflows intensified further in October with funds coming into the country through this route falling 40% to $1.39bn compared to $2.33bn a year ago. Cumulatively, for April-October 2010, the decline is of the order of over 25% to $14.91bn, compared to $19.95bn in the corresponding period last year.

·        The government will take a decision on diesel prices on December 22 as oil firms are losing revenue of Rs4.80 a litre because global crude oil prices.