India Morning Note - Keynote Capitals (June-14-'11)

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Views on markets today

·      Indian markets ended on flat note, yesterday as the market sentiments was cautious ahead of inflation data as investors prepared themselves for a tighter monetary policy this week. It is expected that the RBI may lift interest rates this week to control accelerating inflation, curbing growth. However, the markets recovered all its loses on positive European markets. Investors are waiting for monthly inflation data for May, advance quarterly taxes that companies will pay and the RBI’s policy review, which will provide more cues in the near term. The recovery was mainly led by gain in consumer durable, power, capital goods and pharma stocks while, metal, oil & gas, real estate and FMCG stocks witnessed some selling pressure and restrict the market to close positive. Reliance Industries declined 1.84% on reports oil regulator DGH has refused to accredit three natural gas discoveries made by the company at its KG-D 6 block, where revival of the sagging output depends on production from new finds. Punj Lloyd jumped 7.7% after it said its group got a contract worth `6.78bn from Nuclear Power Corporation of India.         

·      Market breadth was marginally strong at ~1.04x as investors bought large cap stocks. FIIs sold equities worth `3.04bn while domestic institutions bought equities of `27.34Cr.

·      Asian markets are flat to positive today after a weak opening. The Hong Kong shares pared early losses after China's consumer inflation data came in roughly in line with expectations. Japanese shares are trading volatile.

·      We expect a flat but positive biased opening for the Indian markets in line with the Asian markets. However, markets may turn volatile ahead of the inflation today and credit policy of the RBI soon this week.

Key events today

·      Announcement of monthly Inflation data for May

·      Listing of IPO of VMS Industries Ltd. (BSE code: 533427), issue price: `40 per share.

Economic and Corporate Developments

·      Farm credit flow surpassed the target by about 14% to `4,265bn during FY11. The govt. had set the target of farm credit disbursal at `3,750bn during the year.