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Views on markets today
· Indian markets tumbled to four-month closing lows in volatile trade on Friday after accelerating monthly inflation cemented rate hike fears. Negative European markets and fall in US index futures after China's central bank raised lenders' reserve requirements by 50 basis points also led the markets to edge lower. Leading banks like, SBI, ICICI Bank and HDFC Bank closed down between 1.6-4.2% as a potential rate hike by the RBI may dampen loan demand in the country. All sectoral indices closed negative with real estate, banks, metal and auto were major loser. Tata Coffee jumped 20% after US-based Starbucks signed a pact with the company to buy coffee from India and explore opening retail stores in the country.
· Market breadth was weak at ~0.45x as investors sold large cap stocks. FIIs sold equities worth `7.48bn while domestic institutions bought equities of `2.9bn.
· Asian markets are mixed today as Japanese shares are rising on strong US markets on Friday while the Hang Seng is flat on account of weak Chinese shares. Hong Kong shares edged lower after a positive opening Monday, as mainland Chinese banks and property developers dropped after the Chinese central bank raised their reserve requirements by another 0.5 percentage points on Friday.
· We expect a positive opening for the Indian markets after a sharp sell of last week. The markets may see some short recovery today as the investors may buy some shares on lower sides. However, we believe sentiments are not still strong due to pressure from the domestic economy as the inflation is still high.
Economic and Corporate Developments
· WPI based monthly inflation shot up to 8.43% in December from 7.48% in the previous month as prices of certain food and non-food items continued to show an upward trend.
· Oil marketing companies has raised petrol price by `2.50-2.54/Litre.
· Cement Industry calls for reduced value-added tax with other building materials.
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