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Indian stock market morning report by Keynote Capitals (June 25, 2009, Thursday, 7.00 a.m. GMT)

Views on markets today

- Indian markets recovered sharply after a weak opening, on the strong opening of European markets. Power, capital goods, pharma and real estate stocks led the rally. Market breadth was strong at around 2x led by large cap stocks.

- FIIs continued to sell equities, and yesterday sold equities worth Rs792Cr. However, domestic institutions bought equities worth Rs728Cr. Trading volumes were lackluster on both exchanges. Weak deliverable volumes on the NSE (17% for top 10 traded stocks) were led by Reliance Capital, Reliance Natural Resources and Educomp Solutions, while Reliance Industries and ICICI Bank witnessed strong deliverable volumes.

- Asian markets are up today led by mining and technology companies, as the US Federal Reserve said the pace of economic contraction is slowing and South Korea raised its gross domestic product forecast. Optimism that the Government stimulus measures worldwide would revive the global economy has pushed the Asian markets to higher levels.

- We expect Indian markets to open higher today, led by the strong Asian markets and supported by shortcovering on the last day of monthly derivatives contracts. However, the Government's expectations of a below-normal monsoon for the first time in four years may weigh down on the investor sentiment. A few stocks would remain in focus, such as ONGC which reported an unexpected 16% drop in March quarter profit. But the firm has a bullish outlook for the current fiscal year, partly because of possible deregulation of fuel prices. Tata Steel will be watched ahead of its financial results.

Economic and Corporate Developments

- The rupee (INR) latest quote: 48.55 per USD

- NYMEX Crude Oil (CL) is currently trading at $68.80 per barrel.

- Inflation data for the week ended June 13 to be declared today. Last week the number was -1.61%.

- Interest rates clearly appear to be headed south. India’s largest bank State Bank of India has revised the benchmark prime lending rate (PLR) by 50 bps from 12.25% p.a. to 11.75% p.a. effective 29th June, 2009.

Results to be announced today
Unitech, Matrix Labs, Mirc Electronics, Zylog Systems

US markets

The US markets were up earlier in the day after treasury auction and better than expected durable-goods report, but gave up its gains and ended in red 0.3% after Fed said it expected to keep interest rates exceptionally low for an extended period. The Fed met expectation of keeping interest rates unchanged. Their statement was slightly more positive on the economy discounting the inflation threat. They stated that the recession is abating and did not change their bond purchase program. However, rumors of a Bernanke/Fed cover up during the Bank of America/Merrill Lynch merger weighed heavily on shares.

Economic data

Durable goods orders for May showed a surprise 1.8% increase and durable goods less transportation increased a better-than-expected 1.1%.

May new home sales data were released, which showed an annualized rate of 342,000 units, below the 360,000 unit consensus. Given the revisions to the prior month, new home sales were down 0.6% month-over-month versus an expected increase of 2.3%.

Economic data set to be released today

Initial jobless claims

First quarter GDP number