Indices lose momentum in final hour

The Indian stock markets started the day on a positive note, but this momentum did not last throughout the session. Profit booking took toll and wiped out the gains in the final hours of trade. The BSE-Sensex closed in the negative, lower by around 30 points (0.15%). The NSE-Nifty closed lower by around 12 points (down 0.2%). The smaller indices had a much worse day on the bourses. The BSE Mid Cap index and the BSE Small Cap 0.8% and 0.7% lower respectively. Most sectoral indices closed in the red today with PSU banks and healthcare leading the losses. On the other hand only auto stocks closed positive.

As regards global markets, Asian indices had a mixed outing today. European indices also opened the day on a mixed note. The rupee was trading at Rs 53.19 to the dollar at the time of writing.

The Indian government is expected to spend Rs 368 bn on IT products and services in 2013, a 10.5% increase over the Rs 333 bn spent in 2012, according to research firm Gartner. This includes spending by government organizations on internal IT (including personnel), hardware, software, external IT services and telecommunications. Telecommunications, which includes telecom and networking equipment and services, is expected to remain the largest overall spending category and is expected to grow 6.8% in 2013 to reach Rs 118 bn in 2013, up from Rs 111 bn in 2012. The software sector is expected to register the highest growth rate of IT spends, increasing 18% in 2013, led by investments in desktop software and infrastructure software. The government aims to invest more than Rs 200 bn in expanding broadband penetration. The electronic chip making project, digitisation of academic databases across educational institutions, vehicle registrations, driving licence databases etc are all expected to be major focus areas. The IT sector is expected to indirectly benefit from government projects like Unique Identification Authority of India (UIDAI), launch of the National Optical Fibre Network and computerisation of commercial taxes in states. Mindtree and Tata Consultancy Services (TCS) have been seeing some project wins in this space.

Leading financier in the infrastructure space Infrastructure Development Finance Company (IDFC) announced its results for the 9 month period ended December '2012. Its consolidated income from operations grew 31% YoY in 3QFY13 and by 28% YoY in 9mFY13, on the back of 22% YoY growth in advances. Disbursements increased by 4.5% YoY, but sanctions fell by 13% YoY in 9mFY13 on account of a slowdown in infrastructure activity. However, cumulatively sanctions were up by 12% YoY. Overall asset management revenues were flat in 9mFY13, total asset under management (AUM) stands at Rs 298 bn at the end of December 2012. While the mutual fund contributed to some of the growth, fees from the alternatives business faltered. Net interest margins (NIM) decreased marginally to 4.2% from 4.3% earlier. Other income saw an almost 89% fall YoY in 3QFY13 and an 80% fall YoY in 9mFY13, on account of the sale of a stake in IDFC Asset Management Company seen in the previous quarter last year. Bottom-line grew by 19% YoY in 3QFY13 and by 7.5% in YoY 9mFY13 on the back of higher net interest income but lower other income made profit growth seem relatively muted. The capital adequacy ratio stood at a robust 22.5% at the end of 9mFY13 (Tier-1 ratio of 20.2%). Continued thrust on government reforms and speedier implementation will help spur growth for IDFC going forward.

Indian share markets trade firm
01:30 pm

Indian share markets continued to trade strongly in the post noon trading session. Majority of the sectoral indices are trading positive with realty, auto and banking stocks leading in gains. Pharma, power and technology stocks are among the biggest losers.

BSE-Sensex is up 84 points and NSE-Nifty is trading up by 20 points. While BSE Mid Cap is down by 0.1%, BSE Small Cap index is up by a similar magnitude. The rupee is trading at 52.9 to the US dollar.

Most of the investment & finance stocks are trading in green with IFCI and Power Finance Corp being the biggest gainers. However, Infrastructure Development Finance Company (IDFC) and Indiabulls Financial Services are facing selling pressure. As per a leading financial daily, housing finance company HDFC is planning to raise external commercial borrowings to the tune of USD 500 m before March-end 2013. The company is awaiting approval from Reserve Bank of India (RBI). In FY13, RBI allowed builders to raise ECB up to USD 1 bn for low-cost affordable housing projects. Even Housing finance companies (HFCs) and National Housing Bank (NHB) can tap the ECB route for low-cost housing units. HDFC saw loan disbursements of around Rs 120 bn in the affordable homes segment in 2012. HDFC stock is currently up 2.2%.

Most of the foreign pharma stocks are trading in green with Sanofi India and Novartis being the major gainers. According to a leading financial daily, GlaxoSmithKline Pharmaceuticals (GSK Pharma) will be entering a deal with a multinational company to enter a new product line. As per the company, launching niche products from portfolios of other drug majors through in-licensing deals will continue to remain the company's strategy to grow operations locally. GSK Pharma currently has alliances with Daiichi-Sankyo for hypertension drug Olmesartan Medoxomil and with Astellas for anti-fungal drug Micafungin. The stock is currently trading up 0.6%.

Indian share mkts build on initial gains
11:30 am

Indian share markets built on initial gains and continued to trade positively during the last two hours of trade. Sectoral indices are mostly trading firm led by realty and auto stocks.

The BSE-Sensex is trading higher by 94 points and NSE-Nifty is trading up by 26 points. BSE Mid Cap and BSE Small Cap indices are trading up by 0.3% and 0.4% respectively. The rupee is trading at 53.04 to the US dollar.

Power stocks are trading mostly in the red led by Satluj Jal Vidyut and Tata Power. According to a leading daily, the distribution arm of Tata Powers is seeking revision in tariffs. With the same objective in mind, it has approached the Maharashtra Electricity Regulatory Commission (MERC) to increase existing average tariff over a period of next three years. They are suggesting revision of existing tariff of Rs 5.97 per unit to Rs 6.75 per unit for 2013-14, Rs 7.39 per unit for 2014-15 and Rs 8.05 per unit for 2015-16 at a rate of 10.46% annually. We may note here that this hike has become necessary due to rise in fuel prices. Also, the power company has not effected any price hikes in last 3 years despite costs incurred towards developing Tata Power's own last mile Low Tension (LT) network in Mumbai and incurrence of wheeling charges.

Automobile stocks are trading firm led by Tata Motors and Ashok Leyland. As per a leading daily, Hero MotoCorp posted highest ever monthly sales in the month of January. The sales have grown by 7.21% from 5,20,272 units in January 2012 to 5,57,797 units in January this year. This is on the back of good response towards their new motorcycle launches like Ignitor and Passion X-Pro. Also, the scooter segment especially Pleasure and Maestro are outperforming the industry. We may note here that earlier in May 2012, the company had recorded sales of 5,56,644 units which was so far the highest sales figure. In the meanwhile, Hero has begun construction of its 4th manufacturing plant and the Global Parts Centre at Neemrana in Rajasthan. The two-wheeler company plans to invest Rs 5.5 bn towards these facilities.

Indian share markets open firm
09:30 am

Asian stock markets have opened the day on a firm note with stock markets in Japan (up 0.8%) and Taiwan (up 0.8%) leading the gains. The Indian share market indices have opened the day on a firm note. Stocks in the consumer durables and banking space are leading the gains.

The Sensex today is up by around 73 points (0.4%), while the NSE-Nifty is up by around 25 points (0.4%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.5% each. The rupee is trading at Rs 52.98 to the US dollar.

Engineering stocks have opened the day on a firm note with Alstom Projects and KSB Pumps leading the gains. As per a leading financial daily, state-run power equipment manufacturer Bharat Heavy Electricals Ltd (BHEL) has been granted 'Maharatna' status by the Government of India. The reasons the company was able to achieve this status is because of consistent high performance and fulfillment of required eligibility criteria. As per the guidelines, a company must have an average turnover of Rs 250 bn and average net profits of over Rs 50 bn during the last three years as well as a net worth of over Rs 150 bn. It is worth noting that the Maharatna status enables a firm to take investment decisions of up to Rs 50 bn without seeking the government's approval. The company has said that the Maharatna status will help it realise its long term objectives and achieve a turnover of Rs 1 trillion by financial year 2016-17 (FY17).

Cement stocks have opened the day on a firm note with Birla Corporation and UltraTech Cement leading the gains. As per a leading financial daily, India's largest cement manufacturer UltraTech Cement has initiated talks to acquire an incomplete 6.7 million tonne cement plant in Gujarat that is owned by ABG Cement (ABGCL). It is said that the company has engaged in three rounds of negotiations so far. It must be noted that Axis Capital, the investment banking arm of Axis Bank, is advising UltraTech Cement on the deal. As per the daily, the Aditya Birla Group-owned company has offered about Rs 46.6 bn which values the plant at Rs USD 130 per tonne. However, ABG is said to be demanding Rs 50.08 bn, valuing the plant at USD 156 per tonne. As of June 2012, ABGCL had invested Rs 25.25 bn in the cement plant. The total estimated cost of the project is Rs 30.28 bn. The plant is expected to be operational by the fourth quarter of 2013-14 (4QFY14).

Govt well equipped for disinvestment targets

It was less than a year ago when the Life Insurance Corporation of India (LIC) was in the news for the wrong reasons. The headlines making rounds back then revolved around the safety of the insurer's policyholders considering that it had bailed out some of the government's disinvestment programs. Stating that it believed in the long term prospects of the companies it invested in, LIC seemed to defend its actions. However, private investors believed otherwise. Pricing issues and the poor prospects were cited as reasons for lack of private investor participation.

In the year till date, the government has raised only Rs 67 bn through disinvestments. The target for the fiscal year FY13 was set at Rs 300 bn. The government recently announced it expects to raise Rs 270 bn this fiscal. As such, the government expects to raise about Rs 200 bn over the next two months. Last year, it raised Rs 140 bn, a small amount as compared to a full year target of Rs 400 bn.

With such large amounts to be raised this year, the cash strapped government - with its back against the wall - would not want to take any chances. containing the fiscal deficit - which stands at 5.3% of the GDP - is high on the government's agenda. And the divestment plan is one of the many key aspects towards doing the same.

The government is offering shares of major public sector undertakings such as Oil India, National Thermal Power Corporation (NTPC) and Bharat Heavy Electricals (BHEL) for sale. Certain reforms have been announced in recent times which would favour the long term prospects of some of these companies. Also, with Oil India's offer for sale price being at a discount to the price as of 30th January, the government seems to have addressed the concerns relating to the pricing issues as well. While one would assume these two developments would be good enough factors for generating private investor interest and participation, the government does not seem to want to take chances.

LIC's key role

LIC is expected to be the early bidder for these issues. This move is expected to act as an assurance, thereby drawing the skeptical investors towards these issues. With cash funds to the tune of Rs 250 bn generated from sale proceeds (as against Rs 170 bn last year) LIC itself is well prepared for the endeavour.

All one can gauge from these developments is that this time around the government with the help of LIC has take adequate steps to ensure that the disinvestment target is well achieved.