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Indian stock market morning report by Keynote Capitals (October 6, 2008, Monday, 6.00 a.m. GMT)

Economic and Corporate Developments

- The rupee continues to hit new lows. It fell to its lowest level since April 2003 this morning, to 47.30/32 per USD, down from Friday's close of 47.0750/0850.

- 2G licence fees have been cut up to 33%. Large telcos such as Airtel, Reliance Communications and BSNL are likely to benefit. Only telcos covering 95% of Residential Area in a state stand to gain.

- Cement shipments of ACC in September grew by 7.7%, from 1.55mn tonnes in September 2007 to 1.67mn tonnes. Domestic cement makers may enjoy some relief from rising input costs in next 2-3 months, as ocean freight rates have declined. Ambuja Cement, Grasim, UltraTech, Madras Cements, India Cements and Binani will be among the beneficiaries, as their coal requirement is substantially met by imports.

- Aban Offshore has received an order for the continued deployment of the rig Deep Driller 3 offshore Malaysia for a 4 year period in continuation of its present contract, which is expected to end early this month. The estimated revenues from the contract would be approx $241mn (Rs1133Cr).

- Garware Offshore Services has posted a 92% rise in net profit for June quarter.

- HCL Technologies’ consolidated net income for the June quarter fell 71% on forex losses of around Rs300Cr.

- Opto Circuits (India) reported a 61.7% growth y-o-y, in its net profit for the June quarter.

- Knowledge process outsourcing (KPO) firm eClerx Services has accepted a cure amount of around Rs2.6Cr of the dues of Rs4.50Cr, as the full and final payment by a US client that recently filed for bankruptcy.

- Consolidated Construction Consortium has bagged the Chennai Airport Project worth Rs1212Cr, from Airport Authority of India (AAI), in tie up with Herve Pomerleau International, Canada.

- Xchanging Plc, a UK based provider of back-office services has agreed to buy 75% of Cambridge Solutions for Rs688Cr in stock and cash. The UK firm will pay Rs371Cr in cash and 15.2mn of its shares.

Key events today

- Listing of 20 Microns (NSE: 20MICRONS, BSE Scrip Code: 533022)

US markets overnight

The US markets ended down 1.5% in spite of the House of Representatives approving the revised $700mn bailout package. The Fed is likely to work closely with the Treasury on new initiatives and would use its powers for the economy. The US President said the ultimate cost to taxpayer would be far less than the initial layout and added that government intervention was clearly necessary. Unemployment report showed 1,59,000 people lost their jobs in September. Construction, manufacturing & retail shed the most jobs while healthcare & government added workers. Crude oil price was little changed settling at $93.88/barrel amid skepticism that the bailout package will keep the US from falling into a recession, curbing demand.

Views on markets today

Asian markets have opened weak today due to increasing worries of the global financial crisis spreading to Germany, Europe's largest economy. Back home, Sebi has called a meeting to discuss the impact of financial turbulence on Indian capital markets. It is expected to ease PN norms to bolster capital inflows, which have been slowing down over the last few months. However on the positive side, easing crude prices and inflation are the positives for Indian markets, which may help the RBI postpone another interest rate hike. We expect the markets to trade with a negative bias, amidst high volatility due to weak global markets.

Technical view

Every upturn has much sharper downturn for the Sensex, which is still in process to find the bottom. Last Friday, it closed down 4% and recorded 2nd consecutive weekly loss. Daily charts indicate the weakness to continue today as well. We expect it to touch its bottom of 12200 today which it recorded in the last week. We advise short term investors to avoid any long positions.