India Morning Note - Keynote Capitals (February-24-'11)

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Views on markets today

·      Indian markets ended on negative note for second consecutive session yesterday as wary traders booked profits in the last hour of trade ahead of February series expiry and budget session. Weak global cues and inflation concerns due to rising crude oil prices also weighed sentiments. Except oil & gas and auto, all sectoral indices closed negative with bank, IT, real estate and consumer durables were major losers. Bank stocks led the decline on worries of increasing inflationary pressures made a case for a tighter monetary policy stance by the central bank. Reliance Industries gained ~1% after the report that Canada's Niko Resources can raise its stake to 13% from 10% in the key gas producing KG D6 block, off India's east coast.

·      Market breadth was weak at ~0.74x as investors sold large cap stocks. FIIs sold equities worth `5.54bn while domestic institutions bought equities of `3.52bn.

·      Asian shares are mixed today reacting to soaring crude prices raise fears about global growth. Most of the markets recovered from their day's lows. The Hang Seng is positive while the Nikkei is weak today.

·      We expect a weak opening for the Indian markets amid the uncertain cues from the Asian markets. In our view, investors will remain cautious ahead of the important budget session starting with the railway budget tomorrow and Union budget on Monday. Markets may remain volatile today due to weekly inflation data release.

Key events today

·      Announcement of food and fuel price inflation data

·      Closing of IPO of Sudar Garments Ltd. (subscribed 0.75x as of February 23, 5PM)

·      Closing of IPO of Acropetal Technologies Ltd. (subscribed 0.58x as of February 23, 5PM)

Economic and Corporate Developments

·      In view of its continuing robust growth, Citi expects India is expected to be the world's largest economy by 2050, surpassing China and the US.