After being buoyant in the post noon trading session, the Indian equity markets held ground and ended the day on a strong note. While the BSE Sensex today closed higher by 184 points, the NSE-Nifty closed higher by 71 points. Further, Smallcaps and Midcaps were also in much demand today with both the BSE Mid Cap and BSE Small Cap indices closing higher by 1.5% and 2.1% respectively. Barring stocks from Banking and Oil & Gas, all the sectoral indices closed in green. Realty stocks closed the day with huge gains.
As regards global markets, Asian indices closed on a strong note today. The rupee was trading at Rs 59.1 to the dollar at the time of writing.
Most fertilizer stocks closed the day in the green. Chambal Fertilizers and National Fertilizers led the gains while Nagarjuna Fertilizer was the biggest loser today. In an unprecedented move the government plans to raise the urea prices by as much as 10% in order to cut the subsidy costs and manage its finances well. If implemented this would be a first major price hike in 4 years. It may be noted that urea prices are controlled by the government so that the fertilizer remains affordable to farmers. However, this has led to excessive use of urea and disturbed the soil composition.
Also, urea being a politically sensitive subject, in the past, many governments refused to tinker with its price band. As such, the decision to raise the prices now by as much as 10% has come in as a major surprise. Nonetheless, it highlights government's willingness to keep its finances under control. It may be noted that fertilizer subsidy costs have increased by almost 4 times in the last decade as the UPA government chose not to raise the prices. Fearing that the move may antagonize rural vote bank the government absorbed majority of the subsidy burden. This created a huge fiscal mess. While the decision to raise urea prices now appears sensible it would be interesting to see how the farming community reacts to the same.
Majority of the automobile stocks have closed the day on a firm note with Bajaj auto and Mahindra scooters being the top gainers in the pack. As per the financial daily, Maruti Suzuki expects to save about Rs 105 bn, as the company agrees to allow its parent company Suzuki motor corporation own an upcoming plant in Gujarat. Reportedly, the company proposes to enter into contract manufacturing agreement with Suzuki motors. The said agreement will be for 15 years and on completion of the said tenure the contract will again be extended for another 15 years, given that both the parties mutually agree to terminate the contract. In our view this is positive for the company as Maruti can utilize this huge amount for various other projects and strengthen its other verticals. The stock of Maruti closed up by 1.74% today.