India Morning Note - Keynote Capitals (February-15-'11)

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Views on markets today

·      Indian markets surged biggest single day gain in nine months and closed positive yesterday as easing inflation and end of turmoil in Egypt encouraged investors to buy fundamentally sound stocks that were recently beaten down on poor sentiment. Global markets were mostly higher on positive China's trade data and as Egypt worries faded. Easing inflation in January 2011 eased worries of further monetary tightening by the RBI also aided rally. . All sectoral indices closed positive with capital goods, auto, metal and consumer durables stocks led the gain. Tata Motors gained 5.6% as the surging sales of its luxury Jaguar and Land Rover unit helped quadruple third-quarter profit. L&T advanced 6.7% as the company bagged a `11bn power plant order from Gujarat State Electricity Corp.

·      Market breadth was strong at ~4.96x as investors bought large cap stocks. Both FIIs and domestic institutions bought equities worth `1.47bn and `1.09bn, respectively.

·      Asian shares are mixed today after flat US markets yesteday. Japanese stocks are flat, with some auto shares benefiting from a softening of the yen. Hong Kong shares declined early Tuesday, pulling back after advancing in the previous two sessions on mixed cues from the US markets and despite a lower-than-expected reading of China's consumer price index for January.

·      We expect a flat opening for the Indian markets taking the cues from the Asian markets. While global markets are firm the inflation also moderated which may improve confidence of the investors. However, the Union Budget may be the important event to look for.

Economic and Corporate Developments

·      WPI based Inflation eased slightly in January on some moderation in manufactured products to 8.23% as against 8.43% in December from a year earlier.

·      Govt. may allow FDI of upto 74% in broadcasting company and may also allow FM to air news if they agree to be regulated.