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Indian stock market morning report by Keynote Capitals (November 11, 2008, Tuesday, 7.00 a.m. GMT)

Economic and Corporate Developments

- China's inflation cooled to the slowest pace in 17 months, making further interest-rate cuts more likely. Export orders at the recently concluded Canton Trade Fair in China declined by 17.5% over the fair held this spring and by 16% from the autumn fair last year.

- Goldman Sachs has cut India’s GDP growth estimate from 9% to 6.7% for FY09 and from 7% to 5.8% for FY10.

- The rupee opened weaker this morning at 47.65/68 per USD, compared with yesterday's close of 47.35/37, due to a fall in Asian stock markets.

- As per preliminary data, India’s exports declined by 15% in October, for the first time since 2003. This is on account of declining demand from the US and European Union.

- Automobile sales in October fell by 14.42%, dragging the overall sales growth of the industry in the first 7 months of the current financial year to 5.64%.

- Larsen & Toubro’s consortium with Scomi Engineering Bhd, Malaysia, has won an order worth Rs2460Cr, for the prestigious monorail project from the Mumbai Metropolitan Region Development Authority. The project is to be completed in 30 months.

- Bharat Forge is forming a JV with Alstom to manufacture equipment for power plants. Bharat Forge has in the meantime deferred its Rs400Cr rights issue due to worsening market conditions.

- IVRCL Infrastructures & Projects has got an irrigation project worth Rs893Cr from the state of Andhra Pradesh.

- GEI Industrial has bagged orders worth Rs 24.50Cr from the Oil and Gas Sector.

US markets yesterday

The US markets ended down 0.8% on concerns regarding financials and automakers. Bankruptcy of Circuit City overshadowed news of the massive Chinese bailout package and restructuring of AIG’s government bailout. China would spend $586bn, equal to 18% of its GDP, in a plan to support its domestic economy and restore global economic health. The two-year package will target a broad range of industries including housing, infrastructure and health care. AIG rose 8% on news that its bailout by the US government has been amended, to include an expansion in aid to $150bn from $123bn and better loan terms. The move is meant to give AIG more time to sell assets after losing $24.5bn in the 3Q, and stands to reassure investors that the insurance giant will be able to satisfy its counterparty obligations. Despite the strength in AIG, the financial sector declined by 4.4%, along with weakness in Goldman Sachs, after Barclays stated that it may post its 1st loss since going public. Goldman had its 4Q earnings estimate cut to a loss of $2.50 per share from a profit of $2.71 at Barclays. The financial market turmoil and slowdown in consumer spending is taking a toll on retailers. Circuit City filed for Chapter 11 bankruptcy protection due to stiff competition and financial market disruptions that limited the retailer's access to credit. On a positive note, McDonald continues to benefit from its relatively low-price offerings. The company said October US same-store sales increased by 5.4% and global same-store sales rose by 8.2%.

Views on markets today

Asian markets are down today, shedding gains from the previous session, following the weak cues from the US markets. The worries in the Asian financial stocks are amply highlighted by the revamped bailout deal for insurance giant AIG. The Nikkei again dropped down to below 9000 levels while the Hang Seng is weak too.

Indian markets were positive yesterday as well. FIIs bought Rs300Cr Nifty futures; however the volumes remain low. The increase in deliverable volumes of the top 10 traded stocks on both exchanges yesterday (from 17% on Friday to 37%), is a major positive. However, the Indian economy seems to reflect the global recession. Indian merchandise exports recorded a dip of 15% in October, for the first time in the last five years. The government expects the situation to continue or even deteriorate in the coming months. Auto sales recorded a 14.4% fall in October. Industry expects November and December months would also remain weak.

A few stocks are likely to be under focus today. As per news reports, RIL may miss the projects deadlines by one month due to credit crisis. Though the delay is marginal, it may increase the bearish sentiments in the stock. Satyam has announced the acquisition of Motorola's software unit in Malaysia (128 employees). The software development unit is the part of Motorola's home and networks mobility business and focuses on network management system development. A consortium of L&T and Malaysian giant Scomi Engineering got the approval of the country's first monorail project which would be built in Mumbai by mid-2011. In other news, Bharat Forge defers its Rs400Cr rights issue and plans a Rs400Cr debenture issue. We may see weakness initially in the markets, following cues from the Asian markets.