By Nitin A. Khandkar (Keynote Kapitals)

Views on markets today

- Indian markets took a sizeable hit last Friday in line with other Asian markets, on the impact of the Dubai debt issues on various European countries, coupled with uncertainties around the global markets about the global economic recovery. Even the outperforming sectors such as IT and capital goods were not spared. Banks and metals were the other sectors which contributed in the downturn.

- Market breadth was fairly weak at just over 0.3x as the investors sold shares all across the sectors.

- Asian markets are up today as concerns on the Dubai issues eased and dollar is up against the yen. Both Nikkei and Hang Seng are up over 2%.

- We expect a positive opening for the Indian markets on signs of fresh buying across the Asian markets. Also since markets were oversold Friday on the Dubai news, some short covering may be expected. The strengthening dollar may help IT and other exporter stocks to move up, while the rally in the Asian financial stocks may push up Indian banking stocks. High beta metal and real estate stocks may see short covering as they were beaten down most in the correction over the last few days.

- In a peculiar fallout of the Dubai problems, several Indian firms have frantically announced “no exposure to Dubai”. These include Unitech, Pasrvnath, Jaiprakash Associates, Punj Lloyd and Oriental Bank. These managements seem to be keen to protect their stocks from downside, while Bank of Baroda which announced n exposure of 7-8% of loan book may see selling pressure.

Economic and Corporate Developments

- The cellular telephony price war in India continues to escalate. Reliance Communications, India's No. 2 mobile operator has slashed SMS charges to just 1 paisa (Re0.01) per SMS in a new bill plan. The company also launched another plan where customers can send unlimited text messages by paying 1 rupee a day.

- According to ORG IMS market research, India’s drug retail market grew by 29.24% in value terms in October this year over the same period last year, more than double the average monthly revenue growth rate of 13-14% in the recent past.

Buzzing Stocks

- Reliance Capital plans to take a majority stake in Mumbai-based Quant Capital Group, which focuses primarily on the institutional cash equities and equities derivatives business.

- Gammon plans for yearly investment of up to Rs50bn for roads development projects and is looking to bid for 10 mega road projects worth $1 billion each by fiscal end.

- L&T and Nuclear Power Corporation has formed an Rs20bn joint venture for manufacturing of forgings, a crucial component in construction of nuclear reactors.

- Partial list of companies with some exposure to Dubai: L&T ($20-25mn), Bank of Baroda (7-8% of loan book), ICICI Bank (not stated).

- Partial list of companies claiming “no Dubai exposure”: Unitech, Pasrvnath, Jaiprakash Associates, Punj Lloyd, Oriental Bank.

US markets

Word of Dubai seeking deferment of a massive $60bn in debt, sent tremors throughout the world markets, with the US equity markets closing 1.5% lower Friday, wiping out the gains made earlier in the week. Financials (-2.8%) led the way down on Friday. The Dubai government asked creditors, which reportedly include many European banks, particularly in the UK to defer payments on some $20bn in debt coming due over the next 18 months. While the actual direct impact on the US markets may be minimal, the news acted as a nudge to those that may have already been considering locking in their gains after the incredibly strong rebound in global equity markets over the past 8 months. VIX roared to life after hitting recent yearly lows, spiking over 20% on the session indicating the nervousness has spread to America.