Views on markets today

- Sensex stocks witnessed sharp declines yesterday led by real estate, metal, power and capital goods stocks. The correction was particularly pronounced in sectors which are interest rate sensitive. Mid and small cap stocks too corrected sharply, underperforming the Sensex. Investors remained cautious ahead of the Union Budget and avoided long positions.

- Market breadth was fairly negative at 0.4x led by the large cap stocks. Both FIIs and domestic institutions remained buyers, buying equities worth Rs108Cr and Rs198Cr respectively.

- The markets were flooded with a few economic releases and key economic numbers yesterday:
-- Infrastructure sector output grew 2.8% in May from a year earlier, slower than 5% in April. Output had risen 3.1% in the same month last year. During April-May, the output rose 3.9%, up from 2.7% in the same period last year.
-- India's fiscal deficit in April-May was at Rs907.58bn ($18.9bn), or 27.3% of the full-year target. In February, the Government had forecast fiscal deficit at Rs3.33tn or 5.5% of FY10 GDP.
-- India's current account surplus improved to $4.75bn in Q4-FY09 from a revised deficit of $13.03bn in Q3-FY09.
-- According to the Industry Secretary, India's May industrial output growth is expected to be better than April's expansion as cement and housing sectors show signs of improvement.

- The Nikkei opened on a weak note this morning after the negative overnight close of the US markets. However, the Japanese market recovered after the release of Bank of Japan's quarterly tankan survey of business sentiment showing that the outlook of large manufacturers in Japan improved for the first time since December 2006. However, the improvement was still below expectations. The Hong Kong market is closed today for the anniversary of the territory's handover to China by Britain.

- We expect a weak opening for the Indian markets, which appear to have turned cautious ahead of the budget next Monday. Both FIIs and domestic institutions have taken long positions over last few days, which is a relief. Inflation for the week ended June 20 is to be announced today. Inflation recorded a negative growth of 1.14% as per last week’s announcement.

Economic and Corporate Developments

- The rupee (INR) latest quote: 47.90 per USD

- NYMEX Crude Oil (CL) is currently trading at 70.68 per barrel.

- Consolidated PAT of Hindalco Industries for FY09 declined 78% on weak demand and derivative losses. The company proposes an issue of shares worth up to $500mn to fund expansion, to be completed in 6 to 8 weeks. Aluminium sales and prices in the June quarter were better than in the previous quarter, and the company believed the worst for the sector was behind it. Hindalco is trebling capacity to 1.7mn tonnes by 2013 at a cost of Rs250bn ($5.2bn).

Buzzing stocks

- HCC has priced its Rs4.8bn QIP issue @ Rs102.15 per share.

- Two-wheeler sales of Hero Honda Motors grew 23.7% y-o-y in June, to 365,734 nos.

- L&T has bagged two orders in Hydrocarbon sector worth Rs651Cr from HPCL Mittal Energy Ltd. and MRPL.

- Indian Oil Corporation plans an investment of over Rs600bn for raising its refining capacity to 80 million tonnes per annum by 2011-12 from 60.2 million tonnes at present.

- BHEL has bagged order worth Rs170Cr from Chennai Petroleum Corp. for setting up a 20 MW Gas Turbinebased co-generation power plant in Manali, near Chennai.

US markets
Negative sentiment from the June Consumer Confidence figure weighed heavily on the stock market leading the US markets to end in red 1.0%. Additional unexpected bad news arose from the Foreclosure arena further pushed stocks into the red. Consumer confidence and expectations readings disappointed. June consumer confidence missed expectation and came in at 49.3 and marked a decline from the previous reading. Expectations index also missed the consensus estimate. The Volatility Index VIX spiked higher for the 1st time in 6 days as traders scrambled for derivative insurance against further market declines. The financial sector shrugged off yesterday 1.1% loss to finish the quarter with a 44% gain.

Economic data to be released today

Construction Spending

ISM Manufacturing Index