May-19-'11:: India Note - Keynote Capitals

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Views on markets today

·      Indian markets continued to remain in the negative terrain yesterday and closed to their lowest close in nearly two months as sentiments turned bearish on concerns that possible hike in diesel prices would lead to another interest rate hike by the RBI. Selling by foreign funds and rise in crude oil prices along with profit booking in State Bank of India and Reliance Industries was also put pressure on the markets as well. Except IT and FMCG, all sectoral indices closed on negative note with oil & gas, pharma, auto and real estate stocks were major losers. State-run oil refiners Indian Oil, BPCL and HPCL each fell more than 4% as global crude prices rebounded after falling for two sessions. Reliance Industries declines for the third straight session on reports the company may not be able to ramp up natural gas output from its eastern offshore D6 block for the next three years. SBI extended its decline as brokerages including Morgan Stanley, Goldman Sachs and Bank of America-Merrill Lynch cut their target price on the bank after its March-quarter profit plummeted on higher provisions, operating costs and taxes.

·      Market breadth was weak at ~0.58x as investors sold large cap stocks. FIIs sold equities worth `3.79bn while domestic institutions bought equities of `27.46Cr.

·      Asian markets are mixed today. Japanese markets are moderately lower due to below expected Japanese GDP data and appreciation in the yen. The Hang Seng is up led by the commodity shares and positive close in the US markets overnight.

·      We expect a flat but positive biased opening for the Indian markets as the cues from the global markets are favourable barring Japanese markets. However, investors may stay cautious ahead of the weekly inflation data and any rally has to face strong barriers on the upside.

Economic and Corporate Developments

·      India's gems and jewellery exports rose marginally by 4.18% to `14,268Cr during April. Exports of cut and polished diamonds have increased by 5%, while silver jewellery exports rose by around 34% in April.