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Indian stock market morning report by Keynote Capitals (May 28, 2009, Thursday, 7.00 a.m. GMT)

Views on markets today
- Rally in the global markets and political stability after the announcement of cabinet expansion helped markets gain yesterday. Optimism on the new packages announcement and PSU sell off led to buying in real estate, PSUs, banks and metal stocks.
- Market breadth was strong at around 5x. Both FIIs and domestic institutions were net buyers and bought equities worth Rs360Cr and Rs586Cr respectively.
- Trading volumes on both exchanges improved marginally, while strong rise in the deliverable volumes in top 10 traded stocks indicate buying interest of investors with a medium to long term view.
- In Asia, the Hong Kong and Taiwan markets are closed today. The Nikkei is down due to weakness in exporter stocks. We expect Indian markets to open positive, continuing yesterday's momentum. However, there may be profit taking amid uncertain global events.

Key events today
- Inflation data for the week ended May 16 to be announced today. Inflation for previous week was 0.61%.

Economic and Corporate Developments
- The Indian Rupee (INR) fell close to a 2-week low, to 48.08/09 per USD, well below yesterday's close of 47.70/71.
- NYMEX Crude Oil (CL) is currently trading at $62.94 per barrel.
- Dena Bank has raised Tier-I Capital funds as Perpetual Bonds (IPDI Series II) of Rs125Cr, to augment long term resources and to meet its future Capital Adequacy Ratio requirements, in the nature of Promissory Notes on Private Placement Basis. The Bonds carry a coupon of 9% p.a. payable annually.
- Novartis AG, parent company of Novartis India, is likely to revise its open offer price to buy back an additional stake of up to 39% of equity to increase its shareholding in the Indian subsidiary to 90%. The open offer price is likely to be revised from the earlier Rs 351 to between Rs 425 and Rs 450.
- Godrej Consumer Products (GCPL) has approved the acquisition of 49% stake in Godrej Sara Lee Ltd. and the merger of Godrej ConsumerBiz Pvt. Ltd. and Godrej Hygiene Care Pvt. Ltd. into itself. Godrej Hygiene Care is a 100% subsidiary of Godrej Industries Ltd. Godrej ConsumerBiz Pvt. Ltd. is a 100% subsidiary company of Godrej & Boyce Manufacturing Co. Ltd. Appointed date of the merger will be June 1, 2009. Upon merger, GCPL will issue its 10 shares to the shareholders of GCBPL for every 11 shares and 10 shares to the shareholders of GHCPL for every 11 shares.

Buzzing Stocks
- RIL strikes two more gas reserves in KG basin - May hold 9.5 Trillion cubic feel (Tcf) and 10.8 Tcf of gas reserves respectively.
- IVRCL Infrastructures & Projects has bagged orders worth Rs299Cr from the Bihar Government for construction-related works.

Results to be announced today
L&T, SAIL, M&M, Tata Power, Tata Chemicals, Chennai Petro, Nagarjuna Construction

US markets

The US markets overnight declined 2.1% as negative news from Monsanto and tanking Treasuries applied selling pressures in spite of a surprising upward spike in existing home sales. A spike in Treasury yields spurred concerns that the government's efforts to reduce interest rates would fail. The yield on the benchmark 10-year note rose above 3.7% to a fresh 2009 high.

Downside guidance from Monsanto and news that a $27bn bond exchange offer from GM proved unsuccessful led to some early weakness in stocks. Better-than-expected earnings and forecasts from several retailers helped temper the tone, making for mixed trading in the early going. Stocks moved markedly lower following an auction of 5-year government Notes carrying a 2.3% yield. That sent the benchmark 10-year Note more than one point lower, which pushed its yield above 3.7%.

Economic news

Existing home sales for April came in at an annualized rate of 4.7mn, in line with expectations. There was some disappointment in House Price Index for March, which decreased 1.1% m-o-m. It was expected to increase 0.2%.

Events for the day
- Durable Goods
- Orders
- Jobless claims
- New home sales
- OPEC meet