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Indian stock market morning report by Keynote Capitals (May 13, 2009, Wednesday, 7.00 a.m. GMT)

Views on markets today

- The Sensex recouped losses of last 2 days’ losses to close above the 12000 level. Following a weak opening and lackluster trading on poor IIP numbers, the Sensex rallied to close with gains of over 4%. IT, oil and gas and bank stocks helped it recover strongly.

- Market breadth was however tight at 1.3x. Buying was witnessed in large cap stocks. Both FIIs and domestic institutions were net buyers of equities worth Rs452Cr and Rs178Cr respectively. Trading volumes increased on both exchanges, from Rs136bn to Rs156bn on the NSE and from Rs44bn to Rs49bn on the BSE. However, deliverable volumes on the NSE declined moderately from 19.7% to 18.7% while it improved on the BSE from 10% to 14.9%. Reliance Industries and SBI witnessed high deliverable volumes while Reliance Capital and Tata Steel traded on weak deliverable volumes.

- The economy continued to report weak numbers. IIP growth contracted sharply by 2.3% in March, its sharpest decline in 16 years, vis-?-vis the consensus estimate of -0.25%. April exports dropped by 33% while imports declined by 35%.

- Better than expected current account surplus numbers and turnaround hopes from Nissan Motor helped the Asian markets gain today, after a cautious opening.

- We expect a positive opening for the Indian markets. Strong volumes is a major positive. However, yesterday's rally was not broad based and is attributable to buying in large cap stocks only, which is a cause for concern. We expect volatility ahead of the election results to be announced on May 16.

Economic and Corporate Developments

- The rupee (INR) is trading lower is this morning, at 49.31/32 per USD, below its previous close of 49.26/28.

- NYMEX Crude Oil (CL) is currently trading at $59.69 per barrel.

- Reflecting the economic slowdown, FMCG ad spend fell in Q4. Advertising and marketing (A&M) spending for Godrej Consumer Products (GCPL) dipped 85%, Marico’s down by 20%and Emami’s down by 7%. However Hindustan Unilever’s spending saw an increase of 3%.

Buzzing Stocks

- KEC International has bagged three orders worth Rs111Cr for power transmission related works from Transco, Abu Dhabi, Australia and from West Bengal State Transmission Co., to be completed in 18 months.

- Jindal Steel and Power finds natural gas reserves in a well in eastern Bolivia. Estimated production will be 3.5mn cubic feet per day.

US markets

Positive words from former Fed Chairman Alan Greenspan that the financial markets should continue to improve and housing may have bottomed, added to the optimistic tone of the day, leading US markets to end up 0.6%. Consumer and health care stocks rose, though weakness in technology and banks prevented larger gains. Bank of America was a laggard in the financial sector. Investors were unimpressed by news that it is selling a partial stake in China Construction Bank for $7.3bn to a consortium of buyers. Bank of New York also traded with weakness. It was the latest financial outfit to announce a secondary common stock offering.

Ford fell out of favor after it announced a common stock offering that will raise funds for general purposes and help provide for certain union obligations, but the offering is also expected to dilute existing shareholders. GM was dogged as investors become increasingly concerned about whether the company will have a restructuring plan ready for government review by June. Yesterday GM's management indicated that it is more probable that GM will need to accomplish its goals through bankruptcy.

Economic data

US trade deficit widened to $27.6bn in March, which is the first time in eight months that the deficit widened. However, the increase comes off of February's $26.1bn deficit, which was the narrowest deficit since 1999.

March trade balance report serves as another reminder that global trade continues to contract as countries around the globe grapple with the effects of the financial crisis.

Key events today
- Retailers will come into sharper focus today, when the Advance April Retail Sales data is unveiled
- Import & Export Prices
- Business Inventories