India Morning Note - Keynote Capitals (February-8-'11)

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Views on markets today

·        Indian markets ended volatile trading session on flat note yesterday on firm global markets and after the government estimated economic growth for the current financial year at 8.6% against that of 8% a year ago. Gains in European markets and a slide in crude oil prices to one-week low also improved the markets sentiments. However, late profit booking eroded early gains and led the market to flat closing. Buying activity in real estate, FMCG, oil & gas and power stocks led the markets to recover while selling pressure in pharma, capital goods and consumer durables stocks restrict the markets to close flat. Lanco Infratech and Punj Lloyd shed nearly 4% and 2%, respectively, ahead of their quarterly earnings announcement while Bhushan Steel gained 1% after the company’s October-December net profit rose 23.3%.

·        Market breadth was weak at ~0.68x as investors sold small and mid cap stocks. Both FIIs and domestic institutions sold equities worth `65.47Cr and `12.4Cr, respectively.

·        Asian markets are mostly positive today as Japan’s current-account surplus widened to 1.195tn yen ($14.5bn) in December, up just over 30% from the same time last year beating investor expectations, with expanding exports helping drive the growth. Japan's Nikkei average hit a new nine-month peak on Tuesday, extending gains for a third straight day, as investors pile into riskier assets in developed economies on hopes for a steady economic recovery. The Hang Seng is volatile trading with a moderate decline.

·        We expect a good start for the Indian markets as global markets are positive. However, investors caution about the tight liquidity, drying FII money and worries over increasing interest rates due to inflation may resist markets to stay at higher levels.

Economic and Corporate Developments

·        As per the government, the economy is set to expand 8.6% in the fiscal year ending March compared with 8% in the previous year.