India Morning Note - Keynote Capitals (June-10-'11)

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Views on markets today

·      Indian markets eased for a second day amid low volume and closed on flat to negative note yesterday as risk appetite waned on slowing growth concerns and accelerating food inflation meant more upward pressure on interest rates. The food price index rose an annual 9.01% for the week ended May 28 as against 8.06% for the previous week.

·      Banks and financial stocks led the losses as the investors remain cautious ahead of the RBI’s policy review on June 16, when it is expected to raise rates for the 10th time in 15 months.

·      Market breadth was tight at 0.99x as the selling pressure on large-cap stocks somewhat mitigated with mid-cap stocks. FIIs were net sellers with Rs25Cr while domestic institutions bought equities of Rs9Cr.

·      Asian markets are mixed today as the Japanese shares responded positively to the US trade data while the Hang Seng is down on account of weak China trade data.

·      We expect a cautious opening for the Indian markets due to directionless Asian markets. Consistent pressure from the high inflation and moderating industrial growth indicated through slowing auto demand are the major concerns and sufficient to keep investors away from the markets.

Economic and Corporate Developments

·      Food inflation rose to a two-month high of 9.01% for the week ended May 28.

·      The group of ministers on coal to speed up clearances for eight critical infrastructure projects on a priority basis. The eight projects, which will get priority treatment for clearance of coal blocks attached to them, belong to top corporate houses, including Adani, Reliance, Aditya Birla Group and Essar.

·      The June-September monsoon, that feed more than 60% of Indian farm field, is set to touch Orissa coast by June 12.