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Indian stock market morning report by Keynote Capitals (May 21, 2009, Thursday, 7.00 a.m. GMT)

Views on markets today

- After Monday's rally, the action quickly shifted away from large cap stocks yesterday, which were down on profit taking. In contrast, mid and small cap stocks saw a major upmove. Consumer durables, metal stocks rallied while bank, technology and oil and gas stocks dragged markets down.

- Market breadth was substantially positive at almost 9x. However, strong breadth was not reflected in broad indices like the Sensex. FIIs sold equities worth Rs986Cr and domestic institutions were net buyers of Rs5Cr.

- Asian markets are negative today on the weak overnight close of the US markets after the Fed's statement that it expects a full recovery in the US to be 5-6 years away. The Fed's statement severely impacted global markets. Exporter and technology stocks dropped as the JPY climbed to a fresh 2-month high against the USD.

- Indian markets may see a cautious opening, following cues from global markets. Inflation data is to be announced today. We expect market to move sideways during the session.

Economic and Corporate Developments

- The Indian Rupee (INR) rose for a straight 4th day to 47.47/48 per dollar this morning, marginally above yesterday's close of 47.75/77. It has gained 4.8% in the last four days.

- NYMEX Crude Oil (CL) is currently trading at $61.45 per barrel.

- Grasim Industries expects demand for cement to grow, on higher infrastructure spending by the Government. India needs about $500bn over five years to overhaul its infrastructure.

- Foreign investors are aggressively renewing their interest in the Indian real estate sector. Overseas investors such as Fidelity, HSBC, TPG and Moor Capital yesterday lapped up the entire Rs2656Cr QIP of Indiabulls Real Estate @ Rs185 per share.

Buzzing Stocks

- Reliance Power has won a contract to build 4 hydroelectric power projects of 2,520MW in Arunachal Pradesh worth over Rs180bn, to be completed by 2017.

- Jain Irrigation has bagged a Rs65Cr construction order for survey, investigation, planning, designing, supply and execution of Balh Valley irrigation project in Himachal Pradesh.

- Texmaco bags 3,455 wagon orders from Railways.

- PNB will divest a 26% stake in its housing finance arm, PNB Housing Finance Company.

- Vinati Organics (VOL) is backward integrating into manufacture of Isobutylene (IB), a key raw material for 2-Acrylamido 2 Methyl Propane Sulfonic Acid (ATBS). Currently Isobutylene is imported from Europe and Taiwan. Thus VOL will be saving significant logistics costs. Capex for the above project is Rs40Cr and the project is expected to go on stream by end of FY10.

Results to be announced today
Bajaj Holdings, Bajaj Auto, Federal Bank, IRB Infrastructure, Varun Shipping, Nitin Fire Protection

Performance Highlights - Global Hedge Funds industry (April 2009)

- The hedge fund industry saw gross inflows of $15bn in April, up from $12bn and $4bn in March and February respectively.

- Net redemptions of $25bn, down from a monthly average of $65bn for the preceding six months, bringing industry assets to $1.3tn.

- Hedge funds up 3.9% YTD, while the DJIA is down 6.9% as at end April.

US markets

The US markets ended lower 0.6% as banking and technology stocks pulled back and comments from the US Federal Reserve dampened the market's optimism. The FOMC minutes revealed a pessimistic Fed who expects deepening unemployment and a slower recovery than many forecast. In fresh quarterly forecasts, the Fed projected the US economy would contract between 1.3% and 2% this year, with the unemployment rate rising to between 9.2% and 9.6%. The minutes from the April FOMC meeting indicated that participants project a contraction for real GDP this year, and that committee members believe the near-term economic outlook has weakened relative to the projections made in January. However, a recovery in sales and production is still expected to begin in the second half of this year.

Financial stocks closed the session with a 2.4% loss. Though Bank of America showed strength after announcing that it raised $13.5bn through a previously announced share offering following government stress tests, banks were among the sectors weakest performers. Consumer finance companies down 3.5% amid continued concern that new rules are in order for credit card companies. Following the Senate's approval yesterday, the House of Representatives approved a bill imposing changes for the credit card industry.

Events lined up for the day include Jobless Claims and Leading Indicators.