India Morning Note - Keynote Capitals (January-31-'11)

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Views on markets today

·      Indian markets fall for the third straight day to their lowest level in four-and-a-half months on Friday as heavy selling by foreign funds, weak global markets and fears of more rate hikes from the RBI to tame inflation weighed on the sentiment. The worst hit were stocks from interest rate sensitive sectors like realty and auto on concerns that rising interest rates would hit sales adversely. All sectoral indices closed negative with real estate, consumer durables, auto and capital goods were major loser. Auto shares such as M&M, Tata Motors, Maruti Suzuki and Bajaj Auto fell between 2.1 to 6% as higher borrowing costs are expected to squeeze consumer spending. HDFC Bank bucked the trend and rallied as much as 1.8%, a day after the bank posted better-than-expected quarterly earnings.

·      Market breadth was weak at ~0.21x as investors sold large cap stocks. FIIs sold equities worth `7.06bn while domestic institutions bought equities of `81.24Cr.

·      Asian markets are sharply down today following their US counterparts as the investors concerned over unrest in Egypt. Drop in the Hang Seng was led by the aviation and bank stocks.

·      We expect a weak opening for the Indian markets as the cues from the global markets are bad. The investors are already worried about the domestic turmoil regarding the prices while the Egyptian event will add to the risk averseness.

Economic and Corporate Developments

·      According to Trade Minister, India will consider cutting import duties on more food products if needed to curb high food inflation.

·      With the inauguration of three major projects with a total capacity of 15 MTPA implemented at Ennore Port, Indian port sector crosses one billion tonne capacity.