Indian markets close flat
Closing

The unexpected rate hike announcement from the Reserve Bank of India in its monetary policy review led to a slump in Indian equity markets today. After a day-long volatile trading session, the markets closed on a flat note. Banking stocks stood weaker post the policy review and witnessed maximum selling pressures. That said, the BSE Mid Cap and BSE Small Cap stocks were in favor and the respective indices stood tad higher by 0.01% and 0.14% respectively. The BSE-Sensex closed lower by 24 points and the NSE-Nifty was seen down by 10 points.

On the global front, the Asian indices closed the day on a mixed note and most of the European indices opened the day in green. The rupee was trading at Rs 62.64 to the dollar at the time of writing.

Stocks from the automobile sector closed the day on a mixed note with Maruti Suzuki and Tube Investments leading the pack of losers whereas Escorts and Tata Motors were leading the pack of gainers.

As per leading financial news daily, India's biggest car maker, Maruti Suzuki, announced its earnings performance for the third quarter of FY14. The company reported a whopping 36% rise in profits driven by strong operational performance. On sequential basis, the profits grew 1.6% YoY. Due to Suzuki Powertrain merger, the YoY numbers are not comparable. The company Board has also decided to expand its manufacturing facilities in Gujarat. The board approved for purchase of land in Mehsana district of Gujarat after more than two years. On account of tepid market conditions, the expansion plans were on hold. The expansion plans will be implemented through a 100% Suzuki. Moreover, the Suzuki subsidiary will not sell vehicles manufactured in this plant to anybody else. Rather this subsidiary will produce vehicles as per the Maruti Suzuki requirements and will be sold to the company only.

Stocks from the Indian Pharma sector closed the day on a mixed note with Piramal Enterprises and Lupin Ltd leading the pack of losers and IPCA Labs and Glenmark Pharma leading the pack of gainers.

As per leading financial news daily, IPCA Labs declare its third quarter 2014 earnings today. The company reported 58% YoY growth in net profits and 18.8% YoY growth in total income from operations. According to the company statement, the Income from its domestic formulations business grew 16% to Rs 2.5 bn and exports rose 19% to Rs 5.3 bn YoY. The active pharmaceutical ingredients business in India recorded 12% YoY growth at Rs 419 m and exports of the same grew 16% YoY to Rs 1451 m during 3QFY14. On the operational front, the earnings before interest, tax, depreciation and amortisation jumped 37.3% YoY to Rs 2.17 bn and margin expanded 350 bps to 26.1% in the quarter gone by. IPCA Labs reported forex loss of Rs 24 m during 3QFY14 as against loss of Rs 186 m a year ago. The other income rose from Rs 39.7 m to Rs 54.2 m YoY during 3QFY14.

Indian share markets turn positive
01:30 pm

Indian share markets managed to bounce back after slipping in the red post the rate hike, but continue to trade close to the dotted line in the post-noon trading session. Barring IT, banking and Pharma stocks, all the sectoral indices are trading in the green with metal, realty and oil and gas stocks being the biggest gainers.

BSE-Sensex is up 9 points and NSE-Nifty is trading marginally up. BSE Mid Cap is trading 0.3% up and BSE Small Cap index is trading up by 0.35%. The rupee is trading at 62.8 to the US dollar.

Majority of the auto stocks are trading in the green with Tata Motors and Bajaj Auto among major gainers. Ashok Leyland and Hero MotoCorp are among the few stocks trading in the red. As per a leading financial daily, Mahindra & Mahindra's subsidiary, Mahindra Trucks and Buses (MTB) plans to foray into the intermediate commercial vehicle (ICV)segment. The company already has a presence in heavy commercial and light commercial vehicles. The company has said that it will invest Rs 3 bn to develop a new ICV and additionally invest Rs 2 bn to refurbish its range of light commercial vehicles over the next one and half years. The new ICV will be ground-up vehicle and developed in-house in a period of 30 months. M&M stock is currently trading up by 1.1%.

Most of the steel stocks are trading firm with Tata Steel and JSW Steel leading the pack of gainers. However, Tata Sponge and Tayo Rolls are among the few stocks trading in the red. As per a leading business daily, JSW Steel will be hiking steel prices by 1-2% from February. Reportedly, the price-hike is likely to be mainly in value-added steel such as cold-rolled, galvanized and colour coated materials used in consumer durables. The hike comes on the back of the company suffering a hit of Rs900-1000 per tonne on the cost of production in December 2013. Steep rise in domestic ore prices is prompting steel producers without access to captive mines to increase steel prices. Other factors such as rupee depreciation and differential between domestic and international prices have also led to the price-hike.

Markets trade lower after RBI rate hike
11:30 am

After opening firm note, the Indian indices are trading below the dotted line in the morning session after the Reserve Bank of India (RBI) hiked he benchmark repo rate by 0.25%. The buying interest is the highest in metal and auto stocks. The selling pressure is the highest in banking and software stocks.

The BSE-Sensex is trading down 40 points and the NSE-Nifty is trading down 18 points. The BSE Mid Cap index is trading up 0.2% and the BSE Small Cap index is trading up 0.3%. The rupee is trading at 62.95 to the US dollar.

Most PSU banks stocks are trading lower today. Bank of India and Canara Bank are among the stocks leading the losses. The Reserve Bank of India (RBI), in its monetary policy today has announced an interest rate hike. It has increased the benchmark lending rate, the repo rate, by 0.25% from 7.75% to 8%. It has left the cash reserve ratio (CRR) unchanged at 4%. RBI governor Raghuram Rajan has pointed to high inflation, especially consumer price inflation as the reason for this decision. However he has also stated that keeping in mind the weak economic growth environment, the RBI might reduce interest rates if inflation levels were to come down.

Most Indian pharma stocks are trading on a positive note. Dishman Pharma and Glenmark Pharma are leading among the stocks leading the gainers. As per a leading business daily, Cadila Healthcare has decided to exit its Japanese business. The company has been operating in Japan through its 100% wholly owned subsidiary. Recently, Cadila undertook a portfolio and business strategy review and the move of exiting Japanese operation was triggered after of the same. The company has been operating in Japan after it acquired 100% stake in Tokyo based Nippon Universal in 2007. It may be noted that all of the company's exports markets grew during 1HFY14 except the Japanese operation which declined by 10.3% YoY. The company's operations are spread across developed countries like US, Europe, Japan and over 25 emerging markets. Cadila Healthcare is trading higher by 0.6% today.

Indian share markets open firm
09:30 am

Barring Taiwan (down 1.6%), all major Asian stock markets have opened the day on a firm note with Malaysia (up 0.3%) and Indonesia (up 0.4%) leading the gains. The Indian share markets have opened the day on a positive note. Stocks in the realty and consumer durables space are leading the gains.

The Sensex today is up by around 59 points (0.3%), while the NSE-Nifty is down by around 18 points (0.3%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.9% each. The rupee is currently trading at Rs 63.10 to the US dollar.

FMCG stocks have opened the day on a mixed note with Hindustan Unilever Ltd (HUL) and Lakshmi Energy leading the losses. However, Godrej Consumer Products Ltd (GCPL) and Dabur India are trading in the green. FMCG major Hindustan Unilever has announced its results for the third quarter of the financial year 2013-14 (3QFY14). The company's sales stood at Rs 70,378 m during the quarter, higher by 9.4% year-on-year (YoY). Operating profits increased by 12.7% YoY to Rs 12,268 m. Operating profit margins improved from 16.4% in 3QFY13 to 17% in 3QFY14. Depreciation charges and interest expenses increased by 8.7% YoY and 141.7% YoY respectively. At the bottomline level, net profit increased by 21.9% YoY to Rs 10,623 m. Net profit margins expanded from 13.1% in 3QFY13 to 14.7% in 3QFY14.

Credit rating stocks have opened the day on a firm note with ICRA Ltd, CRISIL Ltd and Credit Analysis and Research Ltd (CARE) trading in the green. Credit rating agency ICRA has announced its results for the third quarter of the financial year 2013-14 (3QFY14). The company's sales stood at Rs 425 m during the quarter, higher by 10.6% year-on-year (YoY). Operating profits increased by 20% YoY to Rs 186 m. Operating profit margins improved from 40.3% in 3QFY13 to 43.8% in 3QFY14. At the bottomline level, net profit increased by 15.6% YoY to Rs 122 m. Net profit margins expanded from 27.4% in 3QFY13 to 28.6% in 3QFY14. During the nine month period ended December 2013 (9MFY14), sales and net profits increased by 10.7% YoY and 20.8% YoY respectively.

Davos meet echoes tough times for EMs
Pre-Open

The 2014 World Economic Forum meeting in Davos came to an end last week. It is an annual gathering where top honchos from across the world discuss economy and business. The general consensus in this year's meeting was that while growth was returning to the developed world, thanks to money printing exercise of central banks, the unemployment problem was getting chronic. Also, most echoed views that political uncertainty in emerging markets would make the growth recovery process more challenging.

But what may come in as a major surprise for many - Most honchos believed that the developed markets including US are likely to outperform the emerging markets in the year ahead. The very fact that Fed has decided to taper indicates that the US economy is recovering. Tapering would also reduce liquidity inflow into emerging markets. Recovery in US and reduced money flow into emerging markets may lead to outperformance by developed markets. Also, since most emerging markets are facing political uncertainty and policy paralysis, corporate honchos are not upbeat about their performance.

However, this does not indicate that the recovery road for the developed world will be smooth. A part of this recovery is due to the loose monetary policies of the West. And such policies can fuel hyperinflation if sustained for long. Unemployment is another issue which the West has to address for the growth chart to tread northwards.

It won't be easy to eradicate unemployment considering the fact that business confidence is low amongst corporates. Lack of necessary skill sets is another problem which the West is currently facing. So, say even if the business confidence improves in the future (once corporates increase their spending), the unemployment situation will continue to persist as most of the workforce may lack necessary skill sets to get jobs. Improving the education standards and having skill development programs in place is the way through which the unemployment situation can be improved.