India Morning Note - Keynote Capitals (February-28-'11)

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Views on markets today

·      Indian markets snaps three-day losses streak amid intense volatility ahead of Union Budget as the government's Economic Survey for 2010-11 tabled in the parliament noted that deepening the reform process would hold the key to sustaining the fiscal consolidation process. The market recovered after the government's forecast of 9% economic growth for the year ending March 2012 offset a populist rail budget where passenger fares were kept unchanged. Firm global markets after oil price jitters ease also supported Indian markets. The upward movement was mainly led by gain in FMCG, bank, auto and consumer durables stocks while IT, capital goods, power and oil & gas stocks witnessed some selling pressure.

·      Market breadth was however weak at ~0.81x as investors sold large cap stocks. FIIs sold equities worth `5.61bn while domestic institutions bought equities of `5.55bn.

·      Asian stock markets were mostly lower today as a surge in oil prices amid continued worries over the turmoil in the Middle East, and news China is targeting lower growth over the next five years dampened sentiment.

·      We expect a weak opening for the Indian markets tracking the Asian markets and caution ahead of the Union Budget. The markets may remain highly volatile today.

Key events today

·      Announcement of Union Budget

Economic and Corporate Developments

·      Foreign exchange reserves went up by $2bn to $301bn, the highest level since August 2008, in the week ended February 18.

Highlights of Economic Survey 2010-11:

·      Economy expected to grow at 8.6% in 2010-11 and 9% in next fiscal year

·      Gross Fiscal Deficit stands at 4.8% of GDP down from 6.3% last year.

·      Industrial output grows by 8.6%; manufacturing sector registers 9.1% growth.

·      Exports in April-December 2010 up by 29.5 %

·      Imports in April-December 2010 up by 19%

·      Trade gap narrowed to $82.01bn in April-December 2010