India Morning Note - Keynote Capitals (February-4-'11)

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Views on markets today

·      Indian markets advances for second consecutive day and closed positive yesterday due to aggressive value buying in the recently beaten stocks and indications of a steady global economic recovery. However, the market shrugged off data showing spike in food and fuel inflation. Food inflation had accelerated to its highest level since Dec. 25 on rising prices of onions and petrol, straining headline inflation and strengthening a case for more monetary tightening. Realty and infrastructure firms led the rise as investors saw value in the beaten down sector, which has been roiled by rising borrowing costs and commodity prices while Sugar stocks surged on firm global sugar prices. Ambuja Cements rallied over 3% after good quarterly numbers.

·      Market breadth was strong at ~1.7x as investors bought large cap stocks. FIIs bought equities worth `5.38bn while domestic institutions sold equities of `45.45Cr.

·      Asian markets are positive today tracking the cues from the US markets overnight. Japanese stocks are up on strong earnings from the blue chip companies.

·      We expect a positive opening for the Indian markets following the Asian markets today. However, higher inflation that announced yesterday may become a reason for profit taking by investors. Only positive is that the economists are of  the view that onion prices may have peaked and in a near term inflation may come down.

Economic and Corporate Developments

·      Food inflation jumped to 17.05% for the week ended 22 January 2011, its highest level since 25 December 2010. Food inflation for the previous week stood at 15.57%. The fuel price index climbed 11.61%, higher that previous week's 10.87% rise.

·      Over 1.1mn mobile users have opted for MNP within a fortnight of the facility becoming available.

·      India may need to import 142mn tons of coal next year to bridge the estimated shortfall in domestic production.