India Morning Note - Keynote Capitals (February-14-'11)

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Views on markets today

·      Indian markets snapped three-day losing streak and closed above psychological levels on the back of pull-back rally post correction in the past few sessions. The markets open with modest gain but rallied in the second half of the trading on easing concern of key rate hike by the RBI after ease in the food inflation. But telecom companies continued to be under pressure after India's telecoms regulator proposed steep rises in the price of 2G mobile radio waves earlier last week. All sectoral indices closed positive with IT, oil &gas and auto stocks led the gain. Cairn India rallied 3.8% after its December quarter net profit soared seven times from a year ago, and the oil explorer said uncertainty over a deal with Vedanta deal was ending.

·      Market breadth was strong at ~2.73x as investors bought small and mid cap stocks. FIIs sold equities worth `5.37bn while domestic institutions bought equities of `5.19bn.

·      Asian stocks are positive today following the cues from the US markets on Friday and the better than expected Japanese economic data. Japan's economy contracted 1.1% in October-December on an annualized basis, however, beat forecasts which had expected a larger drop. The Hang Seng up today led by resources stocks.

·      We expect a positive opening for the Indian markets as the Asian markets are strong today and the tensions regarding Egyptian political crisis is cooling down. The investors can now shift their attention towards domestic economic developments such as inflation and the Union Budget.

Economic and Corporate Developments

·      India's exports grew by a healthy 32.5% year-on-year to $20.6bn in January, 2011 on account of increasing demand in the western markets. During April-January this fiscal, the country's shipments went up by 29.4% to $184.6bn.

·      The Reserve Bank of India (RBI) is considering setting-up a panel to study the slowdown in foreign direct investment (FDI) in the country