India Note - Keynote Capitals (March-31-'11

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Views on markets today

·      Indian markets continued winning streak for the seventh straight day and closed positive yesterday on steady FII inflows, firm global cues on hopes the global economy is recovering and falling crude oil prices eased concerns of inflation. Except FMCG, all sectoral indices closed positive with consumer durables, real estate, pharma and banks stocks were major gainers. IT stocks were in demand on recent upbeat economic data in the US, the key market for Indian software exporters. Interest rate sensitive real estate shares gained as cooling crude oil prices eased worries of a steep interest rate hike by the RBI to cool rising inflation. Paper stocks soared after US paper and packaging company International Paper Co. intended to buy a majority stake in India's third-largest paper company Andhra Pradesh Paper Mills for about $257mn in cash. Andhra Pradesh Paper jumped 20% while West Coast Paper Mills and Ballarpur Industries gained 17.1% and 16.4%, respectively.

·      Market breadth was strong at ~2.57x as investors bought large cap stocks. FIIs bought equities worth `7.39bn while domestic institutions sold equities of `6.15bn.

·      Asian markets are mixed today as the Nikkei is moderately declined in the morning session while the Hang Seng is up.  Japanese stocks lost early gains to turn negative as gains for financials and some exporters failed to offset weakness linked to post-quake production problems. The Hang Seng is up on account of strong banking stocks.

·      We expect a flat start for the Indian markets due to directionless Asian markets. The markets may see some volatility due to the inflation numbers to be announced today.

Key events today

·      Announcement of food and fuel price inflation data

Economic and Corporate Developments

·      Agriculture minister demand cut in onion export price to US$175/t.

·      Iron ore export down by 18% to 10.13mn tons in February.