India Morning Note - Keynote Capitals (March-21-'11)

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Views on markets today

·      Indian markets continued losing streak and closed negative on Friday as investors sold stocks, including blue-chip Reliance Industries, on rising political uncertainties and concerns that surging oil prices due to the ongoing tensions in the Middle East will stoke inflation and lead to even higher interest rates. All sectoral indices closed negative with oil & gas, auto, real estate and consumer durables stocks were major losers. State-run oil marketing companies declined as oil rose more than $2 a barrel, after the United Nations approved military action to contain Libyan leader Muammar Gaddafi, heightening geopolitical tensions in the oil-rich Middle East. Bank stocks extended losses for the second session after the central bank raised interest rates on Thursday for the eighth time in 12 months. Reliance Industries closed down 3.71% after the company said that the oil regulator that gas production from its KG Basin block could be lower than earlier estimates.

·      Market breadth was weak at ~0.58x as investors sold large cap stocks. FIIs sold equities worth `5.23bn while domestic institutions bought equities of `2.96bn.

·      Asian markets are up today following the rally in the US markets on Friday. Hong Kong shares advanced today led by the banks and energy shares while the Japanese markets are closed today.

·      We expect a positive opening for the Indian markets as the global cues are firm. However, attack on Libya and the Japanese nuclear disaster may keep markets volatile today.

Economic and Corporate Developments

·      India's foreign exchange reserves have dropped by US$755mn to US$301.84bn, due tp reduction in foreign currency assets (FCAs) for the week ended March 11.

·      Iron Ore prices set to drop on the back of demand cut by Japan Steel companies accounting for about 13% of global iron consumption

·      Indian GSM telecom operators added 14.7mn new subscribers in February, lifting the all-India cellular subscriber base above 555mn.