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Indian stock market daily morning report (January 25, 2012, Wednesday)

Contributed by Keynote Capitals

By Keynote Capitals

Views on markets today

- Indian markets rallied ~1.5% yesterday to their highest close in 10 weeks, bucking the trend in Asia and Europe markets, as the Reserve Bank of India (RBI) cut cash reserve ratio (CRR) by 50 basis points and indicated its focus has shifted to growth from prices. The RBI cut cash reserve requirements for banks by 50 basis points to ease tight liquidity, signalling a policy shift towards reviving growth after nearly two years of fighting inflation. The market rose on hopes that a cut in the CRR will soon lead to softening of interest rates. Indian markets rose in contrast to global markets, with European shares opening lower after the region's finance ministers rejected an offer by private creditors to restructure their Greek debt, raising the spectre of a messy default. All sectoral indices closed on positive note with interest rate sensitive sector like capital goods, bank, auto and metal stocks were major gainers. Banks led the gains after the Reserve Bank of India cut the cash reserve ratio, or the proportion of deposits that commercial banks must keep with the RBI, to ease tight liquidity. Top lender State bank of India rose 5.2%, while ICICI Bank gained 3.7%. Smaller rival HDFC Bank closed 1% higher. Reliance Industries gained 1.6% after the company said it will open its share buyback from Feb. 1, and close the offer on Jan. 19 next year. Coal India dropped sharply as the coal minister said that Coal India will implement a new pricing mechanism by the month-end but will ensure this will not result in higher prices for power producers.

- Market breadth was marginally strong at ~1.09x as investors bought large cap stocks. On provisional basis, FIIs bought equities worth `8.01bn while domestic institutions sold equities of Rs.2.62bn.

- Asian stocks rose today, after euro-zone surprised markets with expansion in the purchasing manager's index and Apple Inc. reported strong earnings.

- We expect a positive opening for the Indian markets today, following the Asian markets and CRR cut by the RBI yesterday. However, F&O expiry today may create a volatile session.

Economic and Corporate Developments

- The IMF chopped its 2012 forecast for global growth to 3.3% from 4% just three months ago, saying the outlook had deteriorated in most regions. It projected world growth would strengthen to 3.9% in 2013.

- The Reserve Bank of India reduced CRR by half a percentage point.

Buzzing Stocks

- JSW Steel has finalised a Rs.2,140Cr investment plan in its subsidiary JSW Ispat Steel Ltd to set up a coke oven, a pellet plant and a cold rolling mill.

- GMR Infrastructure has withdrawn its bid to modernise and expand an airport in Croatia, but is preparing to bid on similar projects in Brazil, a company official said.

- The Competition Commission of India (CCI) has approved the proposed amalgamation of IVRCL Assets and Holdings with parent IVRCL and the demerger of its real estate business into a new company.

- ITC is understood to be gearing up to invest up to Rs.1,000Cr in the FMCG segment in the next four years which will include setting up new facilities and enhancing existing capacities.

- Strides Arcolab has sold its entire stake in its Australian subsidiary Ascent Pharmahealth to Watson Pharmaceuticals for 375 million Australian dollars (over Rs.1,970Cr).

US markets

U.S. stocks closed with losses, as investors mulled a European standoff over Greece’s debt and the latest slew of earnings.

The Dow Jones Industrial Average closed down 33.07 points, or 0.3%, to 12,675.75. The S&P 500 index SPX - 0.10% declined 1.35 point, or 0.1%, to 1,314.65. The Nasdaq Composite COMP +0.09% rose 2.47 points, 0.1%, to 2,786.64.