India Morning Note - Keynote Capitals (June-7-'11)

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Views on markets today

·      Indian markets fell for the second day on Friday amid muted world markets, weighed down by energy major Reliance Industries, which disappointed investors at its shareholders' meeting by not giving enough information on key issues. Mukesh Ambani at the company's 37th AGM said that RIL has to confront challenges arising out of higher commodity and input prices and inflationary trends. The benchmark indices is down more than 10% so far this year on foreign fund outflows, with $1.16 billion being pulled out in May alone, as investors worried rising inflation and high interest rates would hamper growth in Asia's third-largest economy. FMCG major Hindustan Unilever declined 0.81%. The stock had jumped 3.53% on Thursday on rumours US-based Procter & Gamble is contemplating a 38 billion pound bid for its European rival Unilever. Unilever Group holds 52.55% stake in Hindustan Unilever. India's largest car maker by sales Maruti Suzuki India gained 0.82%. The company said during market hours on Wednesday that total sales rose 1.9% to 1.04 lakh units in May 2011 over May 2010. Domestic sales rose 3.9% to 93,519 units. Exports fell 13% to 10,554 units.

·      Market breadth was weak at ~0.88x as investors sold large cap stocks. FIIs bought equities worth `4.45bn while domestic institutions sold equities of `3.55bn.

·      Asian markets declined on Monday, pressured by last week’s slew of disappointing US economic data, while Tepco shares plunged after a report that the firm is facing steep losses. Japan’s Nikkei Stock Average finished the morning session down 0.9%, while the Hong Kong markets closed for holidays.

·      We expect a weak opening for the Indian markets following the cues from the Asian markets. Investors may keep away from the risky assets till the global economic situation improves.

Economic and Corporate Developments

·      Forex reserves rose by US$1.7bn to US$310bn for the week ended May 27.

·      In a major overhaul of FDI norms in the content distribution space, government has put 49% of the foreign investments in DTH sector on the automatic route while increasing the overall cap to 74%.