India Morning Note - Keynote Capitals (May-17-'11)

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Views on markets today

·      Indian markets continued to remain sluggish and closed on negative note yesterday with banking stocks such as ICICI Bank and mortgage lender HDFC among the major losers after data showed inflation in April rose more than forecast, reinforcing expectations of more interest rate increases. Petrol price hike by state-run oil refiners by `5 a litre also fuel inflation concern. The market sentiment was also hit by weaker overseas markets as European shares touched their lowest in more than a week on renewed jitters about the region's debt crisis. Except pharma and consumer durable, all sectoral indices closed negative with real estate, metal, banks and FMCG were major losers. Auto companies such as M&M and Bajaj Auto fell 2.6% and 2.8%, respectively, after state-run refiners raised petrol prices steeply.         Glenmark Pharmaceuticals gained 11.7% after the company has signed an out-licensing deal with France's Sanofi to develop and market a monoclonal antibody. While Gammon Infrastructure Projects rose 4.8% after the company said that its board would meet on May 19 to consider rights issue of shares.

·      Market breadth was weak at ~0.61x as investors sold large cap stocks. Both the FIIs and domestic institutions bought equities worth `47.07Cr and `3.41Cr respectively.

·      Asian markets are lower today after a sharp decline in the US markets overnight. Japanese shares declined after the recent disaster at the Tepco-owned Fukushima Daiichi power plant and fall in the automobile stocks. The Hang Seng witnessed a gap down opening.

·      We expect Indian markets to open with a decline today following the cues from the Asian markets and due to weak sentiments after yesterday's announcement of the monthly inflation. Though inflation for the month April 2011 eased to 8.66% from 9.04% in March the recent petrol price hike and anticipated rise in the diesel prices may keep inflation on a higher side.

Economic and Corporate Developments

·      Annual inflation for April decreased to 8.66% from 8.98% in March.