India Morning Note - Keynote Capitals (February-25-'11)

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Views on markets today

·      Indian shares tumbled 3% yesterday in their biggest one-day fall in almost 16 months as the Libyan turmoil sent oil prices to their highest in nearly 2-½ years and threatened global economic growth. Weak global cues because of political turmoil in the Middle East and nearby region, rising food and fuel inflation and expiry of monthly derivatives contracts worsened the trading sentiment. All sectoral indices closed negative with banks, consumer durables, capital goods and auto stocks were major losers. Metal stocks also fell as pressure grew on base metals from the economic threat posed by surging oil prices. Aurobindo Pharma plunged 16.8% after US FDA banned imports from its unit that makes cephalosporin injectables and orals.

·      Market breadth was weak at ~0.29x as investors sold large cap stocks. FIIs sold equities worth `27.02bn while domestic institutions bought equities of `10.29bn.

·      Asian markets are mostly positive today showing a short recovery as the rise in crude oil prices halted at $100 levels. Both the Nikkei and the Hang Seng rebounded after a 4-day losing streak.

·      We expect a positive opening for the Indian markets after yesterday’s sharp drop. Higher dependence about the crude oil for India and the Middle East uncertainties has led the investors to avoid taking long positions. Railway budget today and the Union Budget on Monday may keep markets volatile. Inflation is a major worry for the investors.

Key events today

·      Closing of IPO of Fineotex Chemical Ltd. (subscribed 0.77x as of February 24, 5PM)

Economic and Corporate Developments

·      Food inflation rose to 11.49% for the week ended February 12 from 11.05% in the previous week.

·      Exports from SEZs stood at `2.23tn in the April-December 2010 period, a rise of 47%, compared with `1.52tn in the same period of the last financial year.

·      The Commerce Ministry has sought a Plan outlay of `20bn for itself in the Union Budget 2011-12, up from `16.8bn in 2010-11.