Keynote Capitals (June-27-'11) Views on markets today

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Views on markets today

·      Indian markets raced to attain their highest closing level in almost 1-1/2-week and closed significantly higher on Friday on support from global markets that displayed some relief after Greece reached an agreement with the European Union and the International Monetary Fund for an austerity plan to avoid a debt default. Except consumer durables, all sectoral indices closed higher with real estate, metal, IT and capital goods stocks were major gainers. Infrastructure and construction shares surged after the government said it has finalized the broad structure for setting up the planned $11bn infrastructure debt fund that is aimed at financing the massive overhaul of the country's creaky infrastructure. Sugar producers rose for the second day after the government on Thursday allowed another 500,000 tonnes of sugar exports. Hero Honda Motors surged over 6% after the company said its promoter group firm Hero Investments revoked 3.46Cr pledged shares. State-run oil marketing companies Indian Oil, BPCL and HPCL, which would benefit from any increase in fuel prices, were up between 2.46-6.14%. SpiceJet gained 19.85% after the company said it has sought the central bank's approval to raise $270mn from Canada's export finance agency Export Development Canada (EDC) for aircraft purchases.

·      Market breadth was strong at ~2.33x as investors bought large cap stocks. FIIs bought equities worth `8.90bn while domestic institutions sold equities of `4.86bn.

·      Asian markets are declined today as the energy stocks along with banks lost ground with declining oil prices. This is inline with the drop in US markets on Friday.

·      We expect weak openings for the Indian markets as the cues from Asian markets are not encouraging as well as fear of rising inflation increases among the investors.

Key events today

·      Opening of the IPO of Readymade Steel India Ltd. (price band `90-108 per share), closes June 29.

Economic and Corporate Developments

·      Describing the government's decision to raise prices of diesel, cooking gas and kerosene as inevitable, the Prime Minister's economic advisor today said that it would push inflation into the double-digit zone.