India Note - Keynote Capitals (April-6-'11)

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Views on markets today

·      Indian markets ended choppy trade in flat to negative note yesterday on profit-booking as high crude oil prices raised investor concerns about inflation and hike in interest rates, amid weak markets globally. Sharp rise in crude oil prices has been a concern as investors fear rising commodity prices could erode corporate profit margins. However, the markets bounced back from day's low in the last hour of trade and ended on a flat note. The broad market depicted strength as a number of small-cap and mid-cap stocks extended recent gains. The downward movement was mainly led by selling pressure in oil & gas, FMCG and banks stocks while consumer durable, metal, real estate and IT stocks witnessed some buying activities which led the market to recover in the last hour of trade. Sesa Goa gained 6.5% after India's top court overturned a ban on iron ore shipments from Karnataka state that accounts for about a quarter of the country's ore exports.

·      Market breadth was strong at ~2.11x as investors bought small and mid cap stocks. FIIs bought equities worth `7.23bn while domestic institutions sold equities of `5.28bn.

·      Asian markets were mixed today after lackluster US markets overnight. Japanese stocks fall led by the banks as Japan's nuclear crisis remained unresolved, and ahead of a policy announcement from the Bank of Japan on Thursday. The Hang Seng is up after a weak opening with gains in the insurance stocks.

·      We expect a flat but negative biased opening for the Indian markets as the Asian markets are directionless. Worries regarding 2G scam may keep telecom stocks under scanner. L&T may see a good momentum as it has achieved the financial closure for the `16375Cr Hyderabad Metro Rail Project.

Economic and Corporate Developments

·      The seasonally adjusted HSBC Markit Business Activity index, based on a survey of over 450 companies, fell to 58.8 in March from February's 60.2.

·      As per ADB’s Outlook 2011, ndia's economy will remain robust over the next two years although growth is expected to moderate in FY2011 as slower external demand and tighter fiscal and monetary policies weigh on expansion, and as high oil prices remain a threat.