India Morning Note - Keynote Capitals (February-16-'11)

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Views on markets today

·      Indian markets ended volatile session on positive note for 3rd consecutive session on sustained buying by foreign funds and retail investors. Interest rate sensitive banking and auto stocks extended recent strong gains on a view that the monetary tightening from the RBI is over as inflation is easing. Buying activities in oil & gas, banks, auto and power stocks led the markets to recover from early loss and close positive. However, profit booking was seen in capital goods, real estate, IT and pharma stocks after a sharp run seen in previous two days. Reliance Communications closed 4.2% higher despite a 57% drop in December-quarter profit, its sixth straight quarterly fall, hit by lower call prices and debt servicing costs. Jaiprakash Power Ventures gained 1.7% after it is planning to raise `35bn through a follow-on share sale or issue of global depositary receipts.

·      Market breadth was strong at ~1.21x as investors bought large cap stocks. FIIs bought equities worth `2.33bn while domestic institutions sold equities of `1.67bn.

·      Asian markets are mixed today as the weak yen against dollar supported the Nikkei and property shares pulled down the Hang Seng.

·      We expect a flat opening for the Indian markets as the cues from the global markets are uncertain. We expect lack of volume in the markets ahead of the weekly inflation data tomorrow as the investors are very concerned about rising food prices.

Economic and Corporate Developments

·      A 21-member JPC on the 2G spectrum allocation and some other aspects of the telecom policy is likely to be announced two days ahead of Budget session.

·      India will sign a Comprehensive Economic Partnership Agreement with Japan, setting the stage for free bilateral trade of goods and services.

·      Government will bear up to 50% of the subsidy burden of oil PSUs.