India Morning Note - Keynote Capitals (January-25-'11)

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Views on markets today

·      Indian markets ended in the positive note yesterday ahead of the RBI’s monetary policy review meeting and January series F&O expiry. Banking stocks led the gains on better than-expected earnings. Interest rate sensitive real estate stocks saw mixed trend ahead of the Reserve Bank of India's monetary policy. Banks, capital goods and auto stocks led the upmove while pharmaceuticals and oil & gas stocks lagged behind. Reliance Industries declined on concerns about slow ramp up in gas production from the KG-D6 field due to technical and other issues.

·      Market breadth was strong at ~1.45x as investors bought large cap stocks. Both FIIs and domestic institutions bought equities worth `63.95Cr and `2.36bn, respectively.

·      Asian markets are up after the strong overnight close of the US markets. Both the Japanese and the Hong Kong shares are up today.

·      We expect a strong opening for the Indian markets today led by IT stocks as the US Commerce Department said on Monday it was easing restrictions of exports of high-technology goods to India in recognition of the two countries' stronger economic and national security ties. However, the investors are waiting for the credit policy to be announced today by the RBI.

Key events today

·      Announcement of monetary policy by the RBI

Economic and Corporate Developments

·      India’s gross domestic product (GDP) is expected to grow 8.7% in the year, according to the Reserve Bank of India’s professional forecasters’ survey conducted in December.

·      The finance ministry will provide just a third of the Rs300bn sought by the fertiliser ministry to meet higher subsidy payouts.

·      Law and order issues, technical glitches and equipment supply delays may force the government to scale down the power generation capacity addition target for the XIth Five-Year Plan once again to 55,000 MW from 62,000 MW earlier.