Profit booking drags largecap stocks
Closing

The benchmark indices in the Indian stock market opened in the positive today. However as the session progressed, they moved into negative territory. Mid-session, the indices managed to come off their day's lows. However, a negative closing could not be avoided and the markets ended the trading session in the red. The BSE-Sensex traded lower by around 106 points (0.5%) whereas NSE-Nifty closed lower by 20 points (0.4%). BSE Midcap and BSE Small cap indices on the other hand had a better outing, bucking the trend and closed higher by 0.4% and 0.8% respectively. The market breadth still remained positive with the advance to decline ratio on the Sensex being in favour of the former.

Asian indices closed mixed today, with China seeing some strong gains while Europe is trading in the green currently. Rupee was trading at Rs 44.2 to the dollar at the time of writing.

Bank stocks had a rough day on the bourses, with IOB being one of the few banks seeing some gains. Oriental Bank of Commerce closed lower. In a meeting with the RBI today, Bank CEOs urged the central bank not to deregulate the savings bank rate. This rate is currently fixed at 3.5%. With ever increasing inflation rates, depositors are losing the value of their money kept in savings accounts. The savings rate is currently the only bank rate which is still regulated. However, irrespective of the benefits to the common man, bankers are totally opposed to the idea of deregulation.

They believe that in such uncertain times, making this rate market driven will lead to a lot of instability in the market. Also, since saving accounts form a significant portion of total deposits, and higher rates could seriously impact bank's profitability. Bankers believe that this rate provides a sort of anchor, which the common man is aware of, and it becomes cumbersome to shift from savings to fixed deposits etc. With such vehement protests, the RBI may defer its decision, but it still does not solve the common man's problem.

NTPC, a leading player in the power utility space announced its provisional results for the quarter ended March 2011 (4QFY11) with its sales rising by 18% for the quarter. It also reported higher profits, which rose 24% YoY (year on year) versus the previous quarter. However, for the full year FY11, profit growth remained pretty much flat, rising just 1.1%. The company approved capital expenditure of Rs 264 bn for FY12. It also plans to add 4,320 MW megawatts of capacity during the period. It aims to generate 235 bsn units of power in FY12. NTPC's current installed capacity stands at around 34,194 MW. On the back of a strong set of quarterly numbers, the stock closed up by around 1.8% for the day.

Recovery from day's lows
01:30 pm

The benchmark indices in the Indian stock market recouped some of their losses in the past two hours but continued to trade in the red. Stocks from the realty and consumer durables space are trading firm while stocks from IT and telecom space are trading weak.

The BSE-Sensex is down by 45 points while NSE-Nifty is trading 12 points below the dotted line. However, BSE Midcap and BSE Small cap indices are up by 0.7% and 0.8% respectively. The rupee is trading at 44.21 to the US dollar.

Most of the Power sector stocks are trading positive with PTC India Ltd and GVK Power leading the gains. However, NHPC and Tata Power are trading weak. As per a leading financial daily, Reliance Infra has stated plans to continue with its 7.2 km sea link between Worli and Haji Ali in Mumbai. The company is going ahead as per provisions of a contractual agreement between Maharashtra State Road Development Corporation (MSRDC) and its SPV Reliance Sea Link One Pvt Ltd. However, the state Government has plans to explore a coastal road proposition instead which will cost around Rs 5 bn. The Government has sought approval from environment ministry for the same. This would be much cheaper than the sea link. The final call on the matter will be taken by the Cabinet subcommittee chaired by chief minister. In a separate development, Mr. Anil P. Gupta will be taking charge of infrastructure division of Reliance infra. The move is as per company’s strategy to expand in high growth sectors like roads, airports, sea links, metro, real estate and SEZ development. Mr. Gupta has worked as the President of Honeywell International Ltd. The stock is trading in the green.

Energy stocks are trading mixed with Indraprastha Gas and BPCL leading the gains. However, Gujarat State Petronet and Cairn India are trading weak. As per a leading financial daily, ONGC will be outsourcing gas production activities at 40 marginally-filled and isolated wells in Krishna-Godavari (KG)basin to other companies on production sharing basis. The company is making this move to make gas production economically viable (at current gas price of US$ 4.20 per mmbtu and 60% of the international price for oil) in the areas where the output pressure has fallen below 700 PSI. This is the basic minimum pressure limit required to connect to GAIL pipeline.

The company has also expressed the possibility of getting 40-60% of the gas produced by the private operators depending upon the well. As per industry analysts, these wells could have a further production potential of 10,000 to 20,000 cubic meters of gas for a period of 2-5 years. The company also said that the previous investments made by ONGC in these marginal fields have been recovered and it plans to outsource fields in Western Offshore basin as well. The KG Onshore provides ONGC with a turnover of around Rs 10 bn and produces around 950-980 tons per day of oil and 38 mmscmd of gas with value added products of 67,000 tons per annum.

Mid, Smallcaps in the limelight
11:30 am

Indian stock markets pared their opening gains on the back of profit booking in heavy weights and traded in the red over the last two hours of trade. Stocks from the FMCG and IT space are trading weak, while stocks from the realty and consumer durable space are trading firm.

The BSE-Sensex is down by 69 points while NSE-Nifty is trading 26 points below the dotted line. BSE Midcap index is up by 0.3% while BSE Small cap index is trading 0.4% above yesterday’s closing. The rupee is trading at 44.25 to the US dollar.

Pharma stocks are trading mixed with Wockhardt and Strides Arcolab trading firm while Fresenius Kabi Oncology is trading weak. As per a leading financial daily, Lupin has filed a second suit against Ranbaxy Laboratories in the US. This suit has been filed to prevent Ranbaxy from launching Fenofibrate in the US. Finofibrate is a generic version of Antara, Lupin’s cholesterol lower drug. It may be recalled that last year Ranbaxy had challenged Antara’s patent that expires in 2020 and had sought approval from the American drug regulator to market its drug. However, last August Lupin sued Ranbaxy for infringing the patent. This second lawsuit pertains to a new patent which Lupin had received in January from the US patent authority. It may be noted that Lupin had acquired the rights to sell Antara in the US from Oscient Pharmaceuticals in 2009 for a consideration of US$ 38.6 m (approximately Rs 1.85 bn).

IT stocks are trading mixed with Mahindra Satyam and HCL Infosystems leading the pack of gainers. However, TCS and Wipro are trading in the red. As per a leading financial daily, Wipro is now focusing on restructuring its operations. The software company under its new CEO T K Kurien aims to create a leaner organization focused on fewer strategic bets. The company has been reorganized into 6 verticals that will have more autonomy in dealings. Wipro plans to do away with any redundancies that existed earlier when the company had a joint CEO model. It may be noted that a lot of senior employees have exited the software major post the new leadership announcement.

With this restructuring, Wipro wants to regain lost ground in sectors like healthcare and banking. Its rivals Tata Consultancy Services, Infosys and Cognizant already have 40% of their revenue coming from these sectors. In this year, banking and healthcare customers are expected to outsource projects worth $25.5 bn. Wipro wants to cash in on this growing demand from customers such as Pfizer, Eli Lily, J P Morgan and Citibank. Its revenues from traditional pure technology customers fell by 3.5% in the last quarter.

Small and midcaps open strong
09:30 am

Asian stock markets have opened the day on a mixed note. While stock markets in China (up 1.3%), Hong Kong (up 1.1%) and Singapore (up 0.8%) are the leading gainers, the markets in Japan are facing selling pressure. http://www.equitymaster.com/tm Indian stock markets have opened the day in the green. Stocks from auto and metal space are leading the gains. However, realty and FMCG stocks are trading in the red.

The BSE-Sensex is trading higher by around 53 points (0.3%), while the NSE-Nifty is up by around 13 points (0.2%). Mid and small cap stocks are also trading firm, with both the BSE Midcap index and BSE Small cap index up by 0.5% and 0.7% respectively. The rupee is trading at 44.26 to the US dollar.

Auto stocks have opened the day on a strong note with M&M, Hero Honda, Tata Motors and Maruti Suzuki leading the pack of gainers. Maruti Suzuki, the country's largest car manufacturer, has increased prices of its vehicles across all models ranging from 0.2% to 2.4%. This will translate into a minimum increase of Rs 1,100 and a maximum of Rs 9,000, depending on the model. This move has come in to offset rising input costs. This is the second time in the year 2011 that the company has raised prices of its vehicles. In January 2011, the company has hiked prices between 0.5% and 2.2%.

auto industry has been bearing the brunt on rising prices of key commodities such as copper, steel, natural rubber and palladium. Maruti Suzuki had reported an 18% decline in net profits during the quarter ended December 2010 mainly due to rising input costs.

Power stocks have opened the day mainly in the green with ABB, Suzlon Energy and GVK Power trading firm. The power minister has stated that power generation projects totaling 28,000 MW would come into operation during the current fiscal year. As per him, there are projects totaling 28,450 MW of power generation which are currently under various stages of construction. Of these nearly 76% would be driven by coal, gas and lignite. The balance would be hydro and nuclear based projects.

The government has an ambitious target of adding 62,374 MW of power generation capacity in the 5-year plan ending March 2012. Of this only 34,462 MW of capacity has been added so far. India has a major power deficit of nearly 11% (as of February 2011). The country plans to halve this deficit within the next two years. It also plans to triple the generation capacity over the next 10 years. This is essential to meet the growing power needs of the country which are driven by rapid urbanization and growing industrialization.

The 'new normal' for India
Pre-Open

The term 'new normal' is credited to renowned technology investor Roger McNamee. The man who has the reputation of being the sounding board for the likes of Bill Gates and Marc Zuckerberg. It thus goes without saying that the man coined the term to denote path breaking changes. Ones that would not be a fad but could linger for a very long time.

Later many economists, analysts and even policymakers have used the term to envision the future. However, the least expected was the Indian central banker calling higher inflation a new normal. Trends of price rises have been as cyclical as is the monsoon in India. Every four to five years the country has witnessed steep rises in price levels accompanied by monetary tightening. The quantum of rises and falls, however, has been dependant on global demand and supply. Especially, after the opening up of the economy.

The latest inflationary trend, nevertheless, has been one of the most long lasting one. Chances are that it is here to stay. At least that is what the RBI predicts. Sustained rise in commodity prices are expected due to the consumption patterns of emerging and populous economies like India and China. The RBI's interest rate hikes have had no impact whatsoever in the past 18 months. It may continue to remain unsuccessful in reining price rises though monetary measures unless the developed markets stop printing money. Which means that for a reasonable period the Indian economy will have to confront higher costs. What is more with negative real interest rates that scope for savings and investment will also deteriorate.

What the RBI is most worried about is that the inflation trend is no more restricted to food prices. In fact rise in input costs has been witnessed across sectors. Thus while companies raise prices to retain profitability, consumers may find it increasingly difficult to enhance their spending power. There can be nothing more lethal for a developing economy like runaway inflation.

Thus the RBI terming high inflation as the 'new normal' is a serious concern for those betting on high growth for the economy. The policymakers who prefer to cite higher GDP growth rates in the future to camouflage current failures would do well to take note of this.