India Morning Note - Keynote Capitals (February-22-'11)

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Views on markets today

·      Indian markets staged a smart recovery in last trading session to close at higher level yesterday as investors bought stocks at cheaper levels and funds buying to cover their pending positions ahead of settlement in the derivatives segments. However, investors are waiting for forthcoming general budget, which could provide clues on the near-term outlook. Except auto, all sectoral indices closed positive with IT, consumer durables, oil & gas and metals were major gainers. Reliance Industries jumped more than 2% ahead of the company's announcement after trading hours of an equal joint venture with British Petroleum for sourcing and marketing of gas in India. Nestle India rose more than 3% after the company posted 80% jump in net profit October-December quarters.

·      Market breadth was however marginally weak at ~0.95x as investors sold small and mid cap stocks. Both FIIs and domestic institutions sold equities worth `2.45bn and `27.61Cr, respectively.

·      Asian shares tumbled in early trades today on mounting worries about the turmoil in the Middle East and African regions, with heightened risk aversion in the wake of Moody's downgrade of Japan's ratings outlook also hurting sentiment. Both the Nikkei and Hang Seng are down.

·      We expect a weak opening for the Indian markets today following the cues from the Asian markets. However, pre budget expectations and the deal between Reliance Industries and British Petroleum.

Economic and Corporate Developments

·      The Economic Advisory Council to the Prime Minister (PMEAC) projected the economy to grow at 8.6% in 2010-11 and 9% in 2011-12. It also said monetary and fiscal policies have to be “appropriately tightened” to protect the economy from inflation.

·      The cement industry is expected to add 23.3mn tons of capacity in 2011-12.

·      India's mining Bill which plans to make miners pay 26% of profits to local communities will be brought to parliament in this session.