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

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Views on markets today

·      Indian markets ended on lower note on Friday reacting to earthquake and tsunami waves in Japan, weak US economic data and protests in the middle-east. The earthquake in Japan weakened sentiment further already affected by tensions in the Middle East and North Africa. The market also shrugged off better-than-expected industrial output data. Except oil & gas and FMCG, all sectoral indices closed lower with metals, IT, power and capital goods were major losers. IT stocks were dropped on concerns over weak economic data from the United States. Idea Cellular tumbled 1.9% after the telecoms ministry asked the company to explain why its license in Punjab should not be cancelled after it failed to meet network rollout requirements while Escorts firmed 3.1% after Bank of America-Merrill Lynch initiated coverage on the stock with a "buy" rating and a price target of `166.

·      Market breadth was weak at ~0.48x as investors sold large cap stocks. FIIs sold equities worth `2.43bn while domestic institutions bought equities of `1.12bn.

·      Asian shares are negative today reacting to the Friday's disaster in Japan and fears of that nuclear radiation could compound the tragedy. Both the Nikkei and the Hang Seng are down today. The Nikkei is almost 5% down.

·      We expect a weak opening for the Indian markets today following the cues from the other Asian markets. Increasing global uncertainties due to unrest in West Asia and earthquakes in Japan keep investors risk averse. Besides that the expectations that the RBI may increase interest rates this week can push the markets further down.

Economic and Corporate Developments

·      Index of industrial production (IIP) rose 3.7% in January 2011, higher than market expectations. Manufacturing output which constitutes about 80% of the industrial production rose an annual 3.3% in January 2011.

·      Foreign exchange reserves increased by US$1.8bn to US$285.1 billion for the week ended March 4.