Lacklustre end to the day

While the markets recovered most of the losses by the time it shut shop for the day, a positive ending could not materialise. As a consequence, indices in the Indian stock markets closed virtually flat today. BSE-Sensex ended lower to the tune of 35 points, NSE-Nifty remained nearly unchanged. BSE Mid cap and BSE Small cap indices managed to buck the trend as they inched higher by 0.6% and 1.4% respectively. The advance to decline ratio remained pretty even on the Sensex though.

Asian indices closed mostly lower today whereas a mixed trend is being seen across Europe currently. The rupee was trading at Rs 52.6 to the dollar at the time of writing.

While the New Year did bring some cheer in the form of positive ending for the very first week of the year, the markets still have a very long way to go if they were to make new highs. The indications of the same coming any time soon though are very remote indeed. With a good deal of state elections round the corner, it is unlikely that the Government would risk meaningful reforms and this would prevent the economy from picking up steam. Things are not very bright on the international front as well. Furthermore, with positive economic news globally hardly eliciting any response from investors, additional downside looks more a possibility than a significant upside. However, it is important to add that the current time is a good period for investors to lock in attractive long term returns that will result from the India growth story.

Close on the heels of reporting a 20% YoY increase in sales in December, CV major Ashok Leyland found itself in the midst of another positive development. The company has introduced India's first 37-tonne haulage truck with the highest payload of up to 27 tonnes. It is believed that the truck is best suited for applications like construction, ready mix concrete, boom pumps and stone marble. Important to add that high tonnage trucks has become a huge business opportunity in the past few years with almost all truck manufacturers driving into it with full speed. Better economies of scale and improvement in road infrastructure has led to such a development. Thus, Ashok Leyland aims to capture a part of the same through its latest launch. The stock had a flat closing in today's trade.

Also closing flat was Cadila Healthcare, one of India's largest domestic pharma companies. There are news doing the rounds that the company has signed a letter of intent with a biotech company, Microbix Biosystems Inc to market a thrombolytic drug, Urokinase in the north American markets. As per the terms, Zydus will provide the funding that will be required to re-launch the drug in US and Canada and also milestone based payments. The expected market potential of the drug in US alone is expected to reach US$ 400 m by the year 2020. The definitive agreement between the two firms is expected to be signed over the next few months.

Indian stock markets pare losses
01:30 pm

Indian stock markets pared losses in the last two trading hours but continued to trade in the red. Majority of the sectoral indices are trading in the positive with Private Sector Units (PSU) and realty stocks leading the pack of gainers. FMCG and banking stocks were amongst the few sectors trading in the red.

The BSE-Sensex is trading down 63 points and NSE-Nifty is trading down 13 points. BSE Mid cap and BSE Small cap indices are up by 0.4% and 1.1% respectively. The rupee is trading at 52.73 to the US dollar.

Majority of the power stocks are trading in the green with GVK Power, Reliance Power and PTC India Ltd being the biggest gainers. As per a leading financial daily, Tata Power has started generating power from 800 MW super-critical unit 1 of the Mundra Ultra Mega Power Project (UMPP). The project at Mundra will have five units of 800 MW each and generate 4,000 MW of overall power. The first unit was slated to begin commissioning by September 2011. Of the four UMPP projects awarded so far, the remaining three in Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand) have been bagged by Reliance Power. Tata Power stock is up 1.1%.

Stocks from the engineering sector are trading mixed with Bharat Bijlee and Finolex Cables leading the pack of gainers and Kalpataru Power and Jain Irrigation trading the weakest. As per a leading financial daily, Larsen And Toubro (L&T) is planning to be more aggressive in contracting new orders. At a time when the order inflows for the construction industry are slowing down, the company is planning to go for more international orders. As part of the plan, the company intends to set up new offices and hire more people. Besides looking at the Gulf region, the company is eyeing other economies. It has recently opened its offices in Istanbul in Turkey to bag orders from CIS (Commonwealth of Independent States) countries. The company is looking forward to orders from the hydrocarbons sector as well for which it may open offices in Saudi Arabia and Australia. Besides, the company is boosting manpower to secure more orders from South American economies apart from Brazil.

Metal stocks lead the downfall
11:30 am

Indian stock markets indices are trading weak over the last two hours of trade. Metal and Auto stocks witnessed maximum selling pressure while power and pharma stocks witnessed maximum buying interest.

The BSE-Sensex is down by 134 points, while the NSE-Nifty is down 39 points. BSE Mid Cap index is down by 0.04% while the BSE Small Cap index is up by 0.76% respectively. The rupee is trading at 52.90 to the US dollar.

Power stocks are trading strong led by Reliance Power and Neyveli Lignite. According to a leading financial daily, National Thermal Power Corporation (NTPC) is planning to enter into power distribution business across the country. The company is in early stages of internal discussion and is exploring the option whether to enter the power distribution business through a license route or franchise route. Entering into new stream of business will be done through its wholly-owned subsidiary NTPC Electric Supply Company Ltd (NESCL). The company has been planning to enter the power distribution segment for quite some time but did not have any success earlier. It had earlier proposed to set up distribution networks in Kanpur, Patna and Mangalore among others, but the plan could not materialize. However, no investment has been earmarked for the new venture.

Hotel stocks are trading mixed today. While Oriental Hotels and Country Club are in the green, Indian Hotels and EIH are trading weak. As per a leading daily, Indian Hotels' Taj Group is likely to announce a new brand soon. The new brand will be a category between their Gateway and Ginger range of hotels. It may be noted here that Ginger is a chain of budget hotels with room rates of Rs 2500 while average room rates for Gateway are Rs 5000- Rs 7000. Gateway range has not taken off well. In the wake of international brands venturing into the Indian hospitality space, the Indian hotel companies like Indian Hotels and ITC are ramping up their products.

Indian stock markets open in red
09:30 am

Asian stock markets have opened the day on a weak note. Barring China (up 1.4%), the other major stock market were in red. Markets in Korea (down 1.3%), Singapore (down 0.8%) and Hong Kong (down 0.8%) are leading the pack of losers. The Indian stock markets have opened the day on a weak note as well. Stocks in the banking and FMCG space are leading the losses.

The BSE-Sensex is trading lower by 161 points (1.0%) and the NSE-Nifty is lower by around 50 points (1.1%). Mid cap stocks have opened the day in the red as well with the BSE Mid cap down by 0.2%. However, small cap stocks are trading in the green with the BSE Small cap index up by 0.1%. The rupee is trading at 52.84 to the US dollar.

Power stocks have opened the day on a mixed note with Reliance Power and Torrent Power trading in the green while Suzlon Energy is trading in the red. Northern Coalfields (NCL), a state run company has decided to surrender some of its land to Reliance Power. This land is required to mine two blocks attached to the Sasan Ultra Mega power project. This will give Reliance Power a benefit of over Rs 60 bn which will accrue to it over its life time. The coal mined from the fields of Moher, Amlohri and Chhatrasal block will fuel Reliance Power's Sasan and Chitrangi projects. Both these projects are being constructed in Madhya Pradesh and are of 4,000 mw each. The total investment by Reliance Power for this project is around Rs 360 bn.

Auto stocks have opened the day on a weak note with Ashok Leyland and Tata Motors (Telco) leading the losses. After the successful launch of XUV, Mahindra & Mahindra's (M&M) Vice Chairman, Mr Anand Mahindra, has announced that the home made utility vehicle is in the process of developing new SUVs (sports utility vehicles). These SUVs will be made in partnerships with its Korean partner, Ssangyong. This will bring a pipeline of future launches in the SUV category. M&M is also trying to give a thrust to its 2-wheeler and heavy commercial segments which have not been successful so far. Mr Mahindra further said that M&M is a marathon player indicating that they are in this industry for a long haul.

Ignoring this threat is a big risk

Right now, the entire world economy is engulfed into a financial crisis of sorts. The western world is paying the price for living beyond its means while emerging economies are facing a confidence/liquidity crisis as investors are seeking protection in safe haven assets. Deeming that prolonged existence of this crisis would threaten the world economy, policymakers across the world are busy chalking out a solution for the same. But if a London-based institute for international affairs is to be believed poor disaster management policies against natural calamities and not financial irregularities are the biggest threats to the world economy. The report goes on to say that the world economy is severely under-prepared for dealing with natural calamities putting human welfare at significant risk.

While it is true that preparing for extreme cases like tsunami and earthquake require greater scientific know-how and huge investment support which all countries can't afford. But what seems to be surprising is that many countries across the world are vulnerable to even predictable natural disasters and extreme weather conditions.

Take the case of cyclone Thane for instance that hit the coast of Tamil Nadu recently. While the rescue operations are being conducted and various relief packages too have been announced the administrative machinery has failed miserably in reaching out to the people on time. Restoration to normalcy may also take longer than usual as post disaster management services are progressing at a snail pace.

We believe that in order to deal with such events a clear contingency schedule is required. However, considering that such schedules don't happen to be on the priority list of the government they get discarded at the base level itself. True that Government's are engaged in various other political and budgetary obligations but, it's high time a serious consideration is given to disaster management services as well. And if not it can prove to be a major crisis for the world economy, far bigger than the current financial crisis, threatening the very existence of mankind on this planet.