Late buying fuels Indian indices

Indian stock markets languished in the red for the larger part of the day today. However, buying activity at lower levels intensified in the late afternoon session and pushed the indices into the positive. This momentum was maintained in the final trading hour as well and the Indian stock market indices closed above the dotted line. While the BSE-Sensex closed higher by around 35 points (up 0.2%), the NSE-Nifty closed higher by around 8 points (up 0.2%). The BSE Mid cap closed flat, while the BSE Small cap closed marginally into the positive. While gains were largely seen in IT and FMCG stocks, healthcare and Oil and gas indices closed into the red.

As regards global markets, most Asian indices closed into the red today while most European indices have opened weak. The rupee was trading at Rs 51.46 to the dollar at the time of writing.

As per a leading business daily, metals major National Aluminium Company Ltd. (NALCO) is set to finalise a deal with a miner, possibly with the Muara Enim mine in Indonesia for supply of coal to its US$ 3.8 bn aluminium-cum-power project in Indonesia. This project entails setting up a 5 m tonnes per annum (MTPA) aluminium smelter and a 1,250-MW power plant in Indonesia. Five coal miners had responded to Nalco's bid and two of them had fulfilled the criteria. Funding is not a problem for Nalco given that the company has cash balance of Rs 45 bn with no debt. The Indonesia project will be managed through a special purpose vehicle (SPV), in which Nalco will have a controlling stake.

Nalco's investment would be 15% of the total project cost, while the JV partners would fund 15% and the remaining 70% would come through loans. The project would be developed in around 4 years. It must be noted that Nalco has outlined investments of around 579 bn by 2020 which will be for expansion. This includes the setting up of two large aluminium smelters in India and abroad. The stock, along with its peer Hindustan Aluminium Company (Hindalco), closed lower today.

Auto stocks closed mixed today. While Tata Motors and Maruti Suzuki found favour, Bajaj Auto and TVS Motors were at the receiving end. Jaguar Land Rover (JLR), which was bought by Tata Motors in 2008 from Ford Motor Company, plans to invest aggressively in new products and technology over the next 3-5 years. This is despite the fact that growth in the developed countries especially Europe has slowed down. It must be noted that in 2QFY12, Tata Motors' consolidated revenues grew by 27% YoY and this was largely attributed to the healthy growth in JLR's revenues (up 34% YoY). Global wholesale volumes for JLR during the quarter witnessed a growth of 23% YoY. While Jaguar volumes decreased by 7% YoY, Land Rover volumes increased by 34% YoY. Growth was largely led by China. Going forward, JLR is banking on growth from emerging markets such as India, China, South America and Russia with products such as Range Rover Evoque, Sport, Discovery and XJ. Further, while recovery in its traditional markets such as UK, North America and Europe will certainly fuel volumes, challenges will mount if the slowdown continues through 2012.

Indian markets continue in the red
01:30 pm

Indian stock market indices continue to trade below the dotted line. Oil and gas and banking stocks witnessed maximum selling pressure while IT and FMCG stocks witnessed maximum buying interest.

The BSE-Sensex is down by 32 points, while the NSE-Nifty is down 21 points. BSE Mid cap index is down by 0.48% and the BSE Small Cap index is up by 0.06% respectively. The rupee is trading at 51.50 to the US dollar.

All Public sector banking stocks have been trading in the red led by Vijaya Bank and United Bank of India. As per a leading financial daily, State Bank Of India (SBI) has slashed its home loan processing fees in order to increase its market share. The new fees structure will be followed from January 11, 2012. For loans above Rs 75 lakh, the bank will charge just Rs 10,000 versus Rs 20,000 charged earlier. For loans between Rs 30 lakh to 75 lakh, the fee has been cut to Rs 6,500 from Rs 10,000 earlier. However, for loans below Rs 30 lakh, the fees will be unchanged. It is likely that the other banks will follow SBI's step.

The bank has recently taken some major decisions regarding its operations. It has decided to increase rate on car loans by 50 basis points. The new rate will be in line with the industry standards. Besides, it plans to grow its microfinance portfolio by 50% in the fourth quarter. The bank aims to increase its sectoral exposure to Rs 13 bn -Rs 14 bn from Rs 9 bn by the end of the current fiscal year.

Telecom stocks have been trading mixed with Bharti Airtel and Idea Cellular leading the gainers and Reliance Communications leading the pack of losers.

As per a leading financial daily, Bharti Airtel has collected and outsourced the complete advertising inventory in the country to Mogae Media. The deal is first of its kind in Indian telecom industry. The company has outsourced all of its advertising, inventory management and mobile commerce initiatives. This means that Mogae Media will sell all possible advertising space on Mobile, DTH and broadband services of Airtel and run its end to end mobile commerce initiative. This will include giving special offers, discounts, and freebies to subscribers and negotiating deals with companies. The management has refused to share the financial details of the deal. As per the industry sources, the deal will work on a revenue-sharing model.

Indian stock markets trade weak
11:30 am

Indian stock market indices traded weak over the last two hours of trade. Oil and gas and banking stocks witnessed maximum selling pressure while IT and FMCG stocks witnessed maximum buying interest.

The BSE-Sensex is down by 68 points, while the NSE-Nifty is down 29 points. BSE Mid cap index is down by 0.49% and the BSE Small cap index is up by 0.23% respectively. The rupee is trading at 51.43 to the US dollar.

Auto stocks are trading weak led by Escorts and Tata Motors (Telco). According to a leading financial daily, car companies have skipped this year's price hikes that they normally go for in January every year. Automobile companies like Maruti, Hyundai and Volkswagen have been suffering from constantly falling demand. This is mainly due to rising input costs and rupee depreciation besides the high interest rates. For the automobile industry, footfalls have fallen and car sales have become very model specific. By avoiding this price hike, the car makers have given customers a chance to buy cars at last year's prices. However, the managements state that they would soon be increasing the prices of their cars.

Power stocks are trading in the red. Jaiprakash Power and GVK Power are the biggest losers while Tata Power and Torrent Power are the biggest gainers. According to a leading financial daily, National Thermal Power Corporation (NTPC) is planning to enter retail power distribution segment. NTPC through its subsidiary NTPC Electric Supply Company Limited (NESCL) is looking at various business models, including forming joint ventures with the existing distribution companies as well as getting into franchise. The company is also looking at the possibility of retail distribution of electricity to bulk industrial consumers in upcoming mega industrial areas and special economic zones (SEZ).

Metals drag Indian stock markets
09:30 am

Asian stock markets have opened the day on a weak note. Stock markets in Japan (down 1.5%), Singapore (down 1.1%), Hong Kong (down 0.9%), and Indonesia (down 0.6%) are in the red. The Indian stock markets have opened the day on a weak note. Stocks in the metals and consumer durables space are leading the losses.

The BSE-Sensex is trading lower by 40 points (0.3%) and the NSE-Nifty is lower by around 17 points (0.4%). Mid cap and small cap stocks have opened on a mixed note, with the BSE Mid cap index down by 0.1% while BSE Small cap is up by 0.1%. The rupee is trading at Rs 51.7 to the US dollar.

Auto stocks have opened the day on a weak note with Hero MotoCorp and Bajaj Auto in the red. As per a senior official, Chennai-based TVS Motor is planning to ramp up its existing operations of manufacturing two-wheelers at Howrah in West Bengal. It plans to increase the production of motorcycles at the Uluberia plant from 1,600 units to 2.4 lakh units per annum over the next three years. The company would incur a total capex of about Rs 4 bn during this period. Currently TVS has about 100 acres of land at Uluberia which was a result of the joint venture (JV) with Mahabharat Motors of Universal Success. While the company will continue to manufacture two-wheelers on 44 acres of land, on the remaining 56 acres, the JV would set up an auto ancillary unit.

Pharma stocks have opened the day on a weak note with Aurobindo Pharma and Ranbaxy Laboratories in the red while Glenmark Pharmaceuticals in the green. Glenmark Pharmaceuticals expects the sales from its speciality business to grow at 20% in India for the next three years. The speciality division focuses on branded products. The management said that the objective of the India business is to grow 18-20% in CAGR terms. For the company, India, Russia and Brazil will remain the focus markets. The sales of the Glenmark from speciality segment stands at US$ 55 m for the second quarter ended for financial year 2011-2012. The company is planning to build its expertise over therapeutic areas like dermatology, respiratory and oncology, across all regions. Commenting on its generics business Glenmark said that it will launch 4 first-to-file opportunities in the US generics market between March 2012 and December 2016.

Good indications, but insufficient!

2011 was a bad year for economies all over the world. Indian economy was no exception. Almost nothing went right for it over the past one year. Stubborn inflation, higher interest rates, rupee depreciation, sluggish foreign investment, slowing economic growth, high oil prices, debt crisis in the developed economy and failing Euro zone were the highlights for the year 2011. Many economic experts have already started talking about growth rates below 7% for the current fiscal 2011-12.

However, recently released data on an important economic indicator pleasantly surprised most of us. We are referring to India's industrial output which rose by 5.9% YoY in the month of November as compared to a contraction of 5.1% in the month before that. As per a leading industrial index, industrial output data is expected to be robust for the month of December 2011 as well. To add to this food prices have been easing in recent times, giving an early sign that inflation has finally started to ease off. Reserve Bank Of India (RBI) has already paused rate hikes and may even consider lowering rates going forward.

No doubt, these are good signs for the health of the Indian economy. But the moot question remains. Has the Indian economy hit the bottom? Would the improvement in the macro-economic factors continue going forward?

There are some factors that we need to look at before answering these questions. The first is that the RBI has just paused on its monetary tightening. However it is still uncertain as to when it would start easing the interest rates. As per the November 2011 data, inflation was still above 9% levels. Add to this, oil prices have still not cooled off. Rupee is still depreciating vis-a-vis the US dollar. As a result, import bills would continue to remain high. On top of all this, the uncertainty in the global economic scenario would continue to hurt exports in the near term.

And there's more. In all possibilities, India is going to fail on its fiscal deficit target by a huge margin. 2014 is the election year. Considering the political drama in recent times, any chances of policy reforms are very thin.

All in all, though the recent improvement in Index of Industrial Production (IIP) is definitely a welcome sigh, but it seems we are still far away from the high growth numbers that we aim to achieve.