India leads gainers in Asia

Select heavyweights in telecom, banking, auto and power sectors cornered most of the gains in the benchmark indices in Indian stock markets today. Positive sentiments backed by the decision to defer GAAR tax ruling and enthusing set of December quarter results boosted markets. While the BSE Sensex closed higher by around 80 points, the NSE-Nifty closed higher by 33 points. While the BSE Mid Cap clocked marginal gains, the BSE Small Cap closed below the dotted line.

As regards global markets, most Asian indices closed higher today while European indices have opened lower. The rupee was placed at Rs 54.59 to the dollar at the time of writing.

Axis Bank declared the results for the third quarter and first nine months of financial year 2012-13 (9mFY13). The bank has reported 19% YoY growth in net interest income and 22% YoY growth in net profits for the nine month period. Net interest income grew by 19% YoY during 9mFY13 on the back of 21% YoY growth in advances. The net interest margins (NIM), however, slipped to 3.6% in 9mFY13 from 3.8% in 9mFY12 due to fall in yields over the past two quarters. The average NIMs over the past 5 fiscals has been above 3.3%. Axis Bank's net profits grew by 22% YoY in 9mFY13 despite rise in provisions and slower growth in fees (15% YoY).Net NPAs were stable at 0.3% of advances at the end of 9mFY13, gross NPAs at 1.1% of advances. Also the capital adequacy ratio (CAR) was on firmer footing at 13.7% at the end of December 2012, excluding net profit for 9mFY13 (Tier 1 capital at 9.0%).

As per a business daily, passenger car major Maruti Suzuki plans to increase the prices of its vehicles across models by up to Rs 20,000 with immediate effect. This is to offset pressure of adverse currency fluctuation. Last month too, the company had announced a price increase of 1-3%.Although this may hurt volume growth in the near term, the price hike has been necessitated due to increasing pressure on margins following the adverse currency fluctuation. In 2QFY13, the company's volumes were down 9% YoY as it was impacted by the labour unrest and riots at its plant at Manesar, resulting in lockout for a certain period. While volumes in the domestic market fell by 6% YoY, those in the export markets dropped 32% YoY.

Indian share markets remain volatile
01:30 pm

Indian share markets have been barely trading above the dotted line in the post noon trading session. Majority of the sectoral indices are trading positive with realty, auto and FMCG being the biggest gainers. Metal, oil and gas and power stocks are among the handful of stocks trading in red.

BSE-Sensex is up 5 points and NSE-Nifty is trading by 4 points. Both BSE Mid Cap and BSE Small Cap indices are trading up by 0.2% each. The rupee is trading at 54.6 to the US dollar.

Majority of FMCG stocks are trading mixed with Lakshmi Energy and Henkel India among the leading gainers whereas Gillette India and Hindustan Unilever (HUL) are the biggest losers. According to a leading financial daily, FMCG companies are raising prices of personal care & household products by 5-15% to compensate for slowing offtake and to maintain margins. HUL hiked prices of soap brands Lux & Rexona by 11% and 16%, respectively. The FMCG major also upped the price of its Fair & Lovely skin cream by 13%. Procter & Gamble raised the prices of Head & Shoulders shampoo and Ariel detergent by 5% each. Colgate increased the prices of Max Fresh & Active salt toothpastes by 5% and 13.5%, respectively. These price-hikes have been effected despite softening price of commodities such as palm oil and coconut oil. High inflation has adversely impacted discretionary consumer spend. In September 2012 quarter, HUL reported a tepid 7% volume growth whereas Marico's Saffola brand reported single-digit rise in offtake. Therefore the latest price-hikes are seen as a measure to maintain earnings growth. As per Marico, the last two quarters of FY13 are expected to be challenging in the wake of slowdown in discretionary sales as the impact precipitates with a lag effect.

Most of the Banking stocks are trading in green with Yes Bank and South Ind Bank among the top gainers. As per the financial daily, India's private-sector banks Yes Bank Ltd. and Indus Ind Bank Ltd. are negotiating to acquire the Indian retail assets of UK based, Royal Bank of Scotland Group PLC, (RBS). The said development comes after; RBS failed to strike a similar deal with HSBC and had thus called it off in November 2012. Reportedly, RBS is looking to sell off the said asset since the last two years. RBS has 31 branches in India with a deposit base of Rs 130.4 bn and a loan book of Rs 125.4 bn.Bad loans comprise of 0.74% of the advances as of March 2012. Over the past few years, deposits and advances of RBS in India have shrunk, as it was in the process of selling its Indian Retail operations. Indus Ind and Yes Bank were trading up by 0.35% and 2.96% respectively.

Indian markets continue in the green
11:30 am

Indian equity markets have continued in green during the previous two hours of trade. The most noticeable upward movement has been witnessed in the Real Estate sector while the Oil and Gas sector is facing maximum selling pressures.

Sensex today is up by 39 points and NSE-Nifty is up by 13 points. BSE Mid Cap and BSE Small Cap indices are trading higher by 0.57% and 0.4% respectively. The rupee is trading at 54.54 to the US dollar.

Auto stocks are trading on a mixed note with Tata Motors and Escorts leading the gains while Hero Motocorp and Force Motors are facing selling pressures. According to a leading financial daily, Karl Slym, Managing Director of Tata Motors has initiated a major restructuring exercise to become the second largest car maker in sales by 2020. The Company has also come up with a common vision statement for its two segments: commercial vehicles and passenger cars instead of continuing with the earlier norm of continuing with separate vision statements for the two segments. The Company is also moving towards a strategy to integrate sourcing within the two business verticals. Karl Slym also shared the key weakness areas and its strategy to change. According to him, lack of new or refreshed products and poor perception about quality of products are impacting the sales of passenger cars. The Company is thus focusing on investing in product development, the fruits of which will take at least two years.

Engineering stocks are also continuing on a mixed note with Finolex Cables and Punj Lloyd leading the gains, while AIA Engineering and Everest Kanto Cylinder emerging as the worst losers. Avantha Group company, Crompton Greaves has entered into a deal to buy Karma Industries, a Himachal Pradesh based CFL manufacturing company for a sum of Rs 145 million. This will be the twelfth acquisition that the Company has made since 2005. The new business will form a part of Crompton's consumer business division and will double the Company's CFL manufacturing capacity, thereby reinforcing Crompton's presence in the rapidly growing Indian consumer market. The new facility can manufacture 2 million lamps per month, providing immediate capacity and offering a complete range of CFL lamps.

Indian share markets open firm
09:30 am

The major Asian stock markets have opened the day on a mixed note with stock markets in Taiwan (down 0.9%) and South Korea (down 0.7%) leading the losses. However, the stock markets in Japan (up 0.9%) and China (up 0.4%) have opened in the green. The Indian share market indices have opened the day on a firm note. Stocks in the consumer durables and IT space are leading the gains. However, FMCG and pharma stocks have opened in the red.

The Sensex today is up by around 27 points (0.1%), while the NSE-Nifty is up by around 2 points (0.03%). Mid and small cap stocks are trading in the green with the BSE Mid Cap index and the BSE Small Cap index up by around 0.3% and 0.2% respectively. The rupee is trading at Rs 54.34 to the US dollar.

Auto stocks have opened the day mainly in green with Mahindra & Mahindra Ltd and Maruti Suzuki Ltd leading the gains. However, TVS Motors Ltd and Hero MotoCorp Ltd are facing selling pressure. As per a leading financial daily, India's largest two-wheeler manufacturer Hero MotoCorp Ltd will invest Rs 9.5 bn in Rajasthan. The company will invest this amount to commission its fourth production unit, a global parts centre (GPC) and an integrated state-of-the-art research & development (R&D) facility in the state. While the two-wheeler manufacturing unit would be set up on a 47-acre site at Neemrana at an investment of Rs 4 bn, the GPC would come up at the same location at an investment of Rs 1.5 bn. The manufacturing facility would have capacity to roll out 750,000 units a year. Besides, the company has earmarked an investment of Rs 4 bn to set up an integrated R&D centre at Kukas near Jaipur. As per the company management, both the factory and the parts centre will become operational by the end of FY14. Meanwhile, the company has been grappling with labour disquiet at its Gurgaon facility where wage negotiations have been on for the past six months.

As per a leading financial daily, the government has deferred the implementation of controversial tax-avoidance rules, also known as General Anti Avoidance Rule (GAAR) until 2016. The move has brought relief to the markets and industry. It is likely to stimulate business confidence of investors, which had taken a beating with the introduction of tax proposal. It is important to note here that the GAAR rules intend to clamp down tax avoidance by denying tax benefits to any arrangement made with sole aim to avoid tax.

Is China led commodity bull run over?

Chinese demand for commodities has been buoyant over the last 2 decades or so. In fact, it is believed that the current commodity price boom is a result of Chinese demand. But what exactly drives the demand for commodities? Once we get to know the demand drivers we can link it to the Chinese demographics and try to understand why the demand potential is so high from this dragon nation.

Basically, there are 3-4 factors that essentially drive commodity demand. First is increasing urbanisation. Second is rising population and third is decreasing poverty. It is common sense that rapid urbanisation leads to increasing commodity demand. And we all are aware about the rapid urbanisation that took place in China in the past. In the last two decades, China also witnessed huge population expansion which drove the demand for agricultural commodities. Poverty rates have also been on a decline (drives agricultural commodities and promotes urbanisation). All these factors created a perfect scenario for a commodity bull run driven by China.

But will this run continue in the future as well? In other words, will the Chinese demand remain intact?

In order to answer this question let's once again re-visit those very factors that drove commodity demand for China. Then we can analyse how China's demographics have changed now for the commodity demand to witness any shift. For one, it may be noted that most of the urbanisation has already taken place in China. Further, population has also been brought under control. Also, with poverty rates eradicating at a fairly decent pace in the recent past the scope of further eradication seems limited. This will have a direct impact on prices of agricultural commodities.

Thus, it appears that the China factor will longer be enough for the commodity bull run to continue from here on. May be, other countries like India, will have to witness a paradigm shift with respect to the internal architecture on policy making. This can lead to rapid urbanisation and eradication of poverty. Only then can the commodity prices regain their north bound journey.