India Morning Note - Keynote Capitals (February-2-'11)

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Views on markets today

·      Indian markets ended 5th consecutive session in deep red and hit five-month lows yesterday after rising world oil prices triggered by concerns the political turmoil in Egypt could spill over to the Middle East and selling by foreign funds weighed on the market sentiment. Concerns about high inflation, surging global commodity prices and fears of slowing corporate earnings have spooked Indian stocks in the recent past. Auto sales in India grew a record 31% in 2010, driven by a burgeoning middle class, but hike in interest rates, rising fuel and vehicles costs are expected to slow sales growth this year. All the sectoral indices closed in the red with realty, auto and capital goods space worst hit. DLF fell ~1.4% to after it gave a cautious near-term outlook on rising borrowing costs and reported a drop in quarterly earnings.

·      Market breadth was weak at ~0.48x as investors sold large cap stocks. FIIs sold equities worth `10.36bn while domestic institutions bought equities of `6.3bn.

·      Asian markets were higher today after strong gains in the US markets, with robust US economic numbers helping to boost tech plays in Japan. Hong Kong shares jumped higher early Wednesday, with banks and property developers advanced in the wake of solid overnight gains.

·      We expect a positive opening for the Indian markets today as the concerns regarding Egypt are eased and the global markets are positive today. However, we may see some resistance on the upside as the investors may be waiting for the inflation concerns to be eased out.

Economic and Corporate Developments

·      Exports of goods from India are likely to exceed the government’s target of US$200bn by the end of this financial year, driven by a number of incentives being offered since the global financial downturn.

·      The Centre has approved subsidy payment of Rs80bn to public sector oil marketing companies (OMCs) for the losses incurred by them on the sale of diesel, LPG and kerosene during the third quarter.