India Morning Note - Keynote Capitals (April-1-'11)

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Views on markets today

·      Indian markets continued upward trend for the eighth straight session, the longest stretch of upward march since last April and closed positive yesterday on steady FII inflows and easing inflation amid firm global trends. However, volatility was witnessed as investors to off-load pending positions on the last day of the month's settlement in the derivative segment. The upward movement was mainly led by gain in IT, FMCG, oil & gas and metals stocks while banks, pharma and consumer durables stocks witnessed some selling pressure. Export-led outsourcing company led the gainers on optimism over their demand outlook. TCS, Infosys Technologies and Wipro gained between 1.2% and 2.7%, respectively while metal stocks rallied on the back of firm copper prices in London on expectations of increase in demand for metals such as copper and aluminium as Japan begins redevelopment works. AP Paper Mills was locked at 20% upper circuit for second consecutive day after its deal with US based International Paper.

·      Market breadth was marginally strong at ~1.03x as investors bought large cap stocks. FIIs bought equities worth `33.24bn while domestic institutions sold equities of `17.16bn.

·      Asian markets are moderately down today tracking the weak cues from the US markets. Japanese shares declined as the investors sold exporter stocks while the Hang Seng declined after a positive opening.

·      We expect a flat but negative biased opening for the Indian markets today as the Asian markets are weak. With food inflation moderated to single digit 9.5% yesterday, we expect the investors may gain some confidence. However, rising crude prices is still a major worry.

Economic and Corporate Developments

·      Wholesale price-based food inflation reverted to single digits at 9.5% during the week ended March 19, as the rate of price rise came down in a number of essential items like vegetables and milk.

·      The government’s fiscal deficit at the end of January 2011 was `2.75tn, representing 68.6% of the budget estimate of `3.81tn for the year.