Views on markets today

- Indian markets remained strong throughout Friday's trading session, following cues from the global markets and strong institutional buying.

- Banks, capital goods, consumer durables and technology stocks led the rally. Buying was witnessed in almost all sectors except FMCG.

- Institutional buying in large cap stocks helped markets record positive breadth. Market breadth was 1.4x and FIIs and domestic institutions bought equities of Rs934Cr and Rs432Cr respectively.

- Deliverable volumes in top 10 traded stocks on both the stock exchanges improved substantially, particularly due to strong deliverable volumes in oil & gas stocks. Cairn India, ONGC and Reliance Industries witnessed high deliverable volumes while Aban Offshore and Reliance Capital traded on weak deliverable volumes.

- Asian markets are down today due to weakness in the US markets on Friday. Appreciation in yen pulled exporter stocks down while electronic goods stocks down due to a sharp drop in the Panasonic stock as it is expected to report bigger than expected loss. Hang Seng also open lower today following a record contraction in the local economy and an economic slump in euro-zone countries.

- We see the victory and decisive majority of the UPA in the recently concluded Lok Sabha elections, as a major positive for the markets. All fears and uncertainties about an unstable coalition government being formed have been put to rest. The markets will expect the UPA Government to go ahead with further economic reforms. As such it is likely to be a win-win situation for the markets and the economy as a whole. In the immediate term, the markets are likely to be strong. We expect a rally of around 500 points today.

Economic and Corporate Developments

- The rupee (INR) rallied to 48.39/40 per USD, 2.1% above Friday's close of 49.41/42.

- NYMEX Crude Oil (CL) is currently trading at $56.39 per barrel.

- ATF prices continue to be on a roller-coaster ride with state-run oil firms increasing the rates by 1.8%. Indian Oil, Bharat Petroleum and Hindustan Petroleum raised the ATF price by Rs585 per kilolitre in Delhi to Rs 32,199.
- The price of Indian iron ore into China rose last week on the back of higher ocean freight rates. The price for Indian iron ore fines Fe grading 63.5% is $67-68/dry metric tonne cfr, an increase of nearly 8% from end-April.
- Power sector may finally get a booster. Rural electrification and reduction in losses to be top priority areas for the new government.

Buzzing Stocks

- Ahluwalia Contracts has bagged a contract worth Rs219.2Cr from National Building Construction (NBCC) New Delhi for constructing a hospital building, medical college and hostels.

- MTNL has earmarked Rs17.25bn capital expenditure plan for expansion of its GSM network with induction of 3G services during the current fiscal.

- Piramal Life Sciences plans to invest Rs2bn over the next two years to discover and develop new chemical entities (NCEs) and Novel Drug Delivery Systems (NDDSs).

- Unitech plans to generate Rs900Cr from the sale of 2 hotels in Gurgaon and a commercial office complex in Saket, New Delhi, by the end of June.

- Shriram Transport Finance Company plans to set up a subsidiary for equipment finance. The proposed capital for the new company is around Rs150Cr.

Results to be announced today
Dr. Reddy’s Lab, Punj Lloyd, Essar Oil, Essar Shipping, Shobha Developers

US markets last Friday

The US markets closed marginally down 0.8% as energy shares tumbled on worries about weak demand. Though the economic readings were generally in-line to slightly better-than-expected, participants are beginning to look for signs that economic conditions are actually tilting toward growth. Options for May expired this session, but that didn't seem to lift trading volume above recent averages. Less than 1.5bn shares traded hands this session.

FDIC Chairman Sheila Bair predicted that bank chief executives will be replaced in the next couple of months as the US scrutinizes financially troubled lenders. News that life insurers will have access to $22bn in TARP funds initially won support for the group. However, concern that government funds may not win higher ratings for the companies along with the recognition that many companies continue struggling with macro headwinds undercut the group's strength. Life and health insurers finished 3.5% lower. Weakness in insurers and banking issues dragged the financial sector to a 2.5% loss, which was worse than any other sector.

GM facing a probable bankruptcy filing by June 1 is telling 1,100 “underperforming” US dealers that they will be terminated as automaker starts shrinking its retail network. Retailers showed periodic strength in the wake of better-than-expected earnings from Nordstrom and JC Penney, but the group still finished 0.7% lower.

US economic data in line with expectations

April CPI met expectations by coming in flat, while Core CPI saw a stronger increase than had been expected by coming in with a 0.3% monthly increase.

Industrial production for April fell 0.5%, which wasn't quite as bad as what had been expected, and capacity utilization came in at 69.1%, moderately better-than-expected.