Power, engg aid in final hour surge

The Indian markets ended the day on a firm note as buying activity picked up during the final hour of trade. The BSE-Sensex closed higher by about 270 points or 1%, while the NSE-Nifty closed higher by about 85 points or 1%. Gains were seen in stocks across the board, with power and engineering stocks leading the pack of gainers, while FMCG stocks were out of favour today. Midcaps and smallcaps closed the day on a firm note, with their respective indices up by about 1.1% and 1.3% respectively.

Asian stocks ended the day on a firm note; stocks in Europe were trading positive at the time of writing. The rupee was trading at Rs 62.43 to the dollar.

Power stocks closed the day on a firm note led by Adani Power, Reliance Infra and NHPC. Power Grid Corporation of India (PGCIL) closed the day on a firm note as it announced a good set of results during the quarter ended December 2014. The company's profits rose by 18% YoY on the back of similar growth in total income. Growth was led by the company transmission business, wherein revenues grew by over 20% YoY. Revenues from the telecom business were up by about 15% YoY. However, its consulting business was under pressure as revenues fell by a fourth during the quarter. The stock of PGCIL closed higher by about 3% today. Over the last year, the stock has outperformed Sensex as gains in the former stood at about 52% as compared to the index's gain of about 40%. However, in the six months gone by, returns have been similar with both the comparables up by about 10%.

Stocks of aluminium companies ended the day on a firm note with Hindalco and Nalco gaining by about 2.4% and 0.4% respectively. Hindalco announced its results for the quarter ended December 2014 recently. The company reported a 7.5% YoY growth in profits during the quarter. This was on the back of an 18% YoY growth in revenues. Higher realisations and volumes led to this strong growth in revenues. As per the company, the availability of coal was a problem that it was facing, thereby finding it difficult to ramp up production for new aluminium projects. As such, it was looking for faster resolution of this matter. As reported by a business daily, the company has placed bids for 15 coal blocks in the latest round of auctions.

Indian Equity Markets slip
01:30 pm

Indian equity markets fell well below the dotted line in the post-noon trading session. Sectoral indices are trading mixed. Stocks from banking, Metal and Oil & Gas sector witnessed maximum selling activity. Auto and Power stocks are the leading gainers.

BSE-Sensex is down 100 points and NSE-Nifty is trading 18 points down. BSE Mid Cap is trading up by 0.7 % and BSE Small Cap index is trading up by 1%. The rupee is trading at 62.15 to the US dollar.

Textile stocks are trading mixed today. Bombay Dyeing and Arvind Ltd are the leading gainers while Alok Industries and Vardhaman Holding are leading losers. According to a leading financial daily, Aditya Birla Chemicals (ABCIL), a part of Aditya Birla Group will merge with Grasim Industries. It is to be noted that Grasim Industries is also a flagship company of Aditya Birla Group. Reportedly under the approved swap ratio, ABCIL shareholders will receive one equity share with a face value of Rs10 in Grasim for every sixteen shares held in ABCIL. Grasim will issue 1.46 m additional shares, which will increase its share capital to Rs 933 m. The proposed merger of Aditya Birla Group's Chlor-Alkali business into Grasim will strengthen its existing portfolio of VFY, caustic soda and allied chemicals according to statement issued by Grasim Industries. Grasim Industries is currently trading flat.

Barring Tata Motors and Bajaj Auto, automobile stocks are trading on a positive note. According to a leading financial daily, Tata Motors plans on having 10-15 new platforms next financial year for launching commercial vehicles. The company expects to spend Rs 12-15 bn on the commercial vehicle business next year. Reportedly the company is looking at a 10% growth next year across various categories. The company has rolled out 100,000 units of Tata Ace Zip Micro truck since its inception four years back. Tata Motors is currently trading down by 0.8%.

Indian markets trade flat
11:30 am

After opening in the green, Indian markets are trading just below the dotted line during the last two hours of trade. Majority of the sectoral indices are trading on a positive note. Stocks from the realty and auto sectors are the biggest winners while banking and FMCG stocks witnessed maximum selling pressure.

The BSE-Sensex is down by 30 points and NSE-Nifty is up by 5 points. BSE Mid Cap index and BSE Small Cap index are trading up by 1%. The rupee is trading at 62.15 to the US dollar.

Most of the software stocks are trading firm with Infosys and NIIT India leading the pack. According to a leading financial daily, ICA Gruppen, Sweden's largest retailer has decided to opt for Infosys to manage its IT operations. As per the terms of the agreement, Infosys will provide services across application and infrastructure maintenance to drive operational efficiency and ensure IT projects add significance to the company. The agreement expands on the existing partnership between Infosys and ICA Gruppen with the Swedish Company doubling the percentage of its IT operation provided by Infosys. Infosys is currently trading higher by about 0.9%.

Paint stocks are trading weak today. Asian Paints and Jenson & Nicholson are the leading losers while Kensai Nerolac and AKZO Nobel are marginally trading up. According to a leading financial daily, Berger International Limited, a Singapore based subsidiary of Asian Paints has completed the acquisition of Ethiopian firm Kadisco Paint and Adhesive. The acquisition is considered to be worth US$ 18.95 m, which has been done in cash. Berger International has acquired a 51% stake in the firm pending approvals from the governing authorities in Ethiopia. Asian Paints is currently trading lower by 1.2% on the BSE.

Indian markets open in the green
09:30 am

The major Asian equity markets have opened the day on mixed note with Singapore market (down 0.8%) and Korea market (down 0.4%) leading the losses. However, stock markets in Japan (up 1.9%) and Hong Kong (up 0.6%) have opened on a positive note. The Indian markets have also opened in green. Among the sectoral indices, stocks from realty and auto are the leading gainers while stocks from metal and FMCG are facing selling pressures

BSE-Sensex currently trading higher by about 18 points (up0.07%), while the NSE-Nifty is higher by about 14 points (up 0.17%). Both Midcap and small caps have opened firm. The BSE Mid Cap and BSE Small Cap are up by 0.51 % and 0.67% respectively. The rupee was trading at Rs 61.41 to the dollar.

Majority of the Indian Pharma stocks have opened in green with Aurobindo pharma and Panacea biotech being the leading gainers in the pack. As per the financial daily, the big pharma companies US have urged the government to change its policies on intellectual property rights (IPR), which are believed to be not in line with the global norms. Reportedly IPR issues for the drugs in India have long been under various discussions, though both countries are now working over the matter to resolve the differences.

Automobile stocks have opened the day on a firm note led by Escorts and Mahindra scooters. As per a financial daily, Mahindra and Mahindra (M&M) is in process of purchasing majority stake in Pipavav defense and offshore engineering for the sum of Rs 30 bn at Rs 66 per share. This will be a three phase deal. Reportedly, Mahindra Defence Systems (MDS), which is part of M&M actively supplies various types of launchers for ships, different types of systems and components to customers other than the Indian Navy. The company will be purchasing 19% stake in the first phase of purchase.

Are we paying too much importance to quarterly earnings?

The earning season has kickstarted and is in full swing. And while the performance so far has been mixed, the reaction of investors seems to be quite skewed. For markets seem to be disregarding dismal performance, even a slight improvement is being interpreted as a milestone indicating better road ahead. As stocks like Wipro and Nalco have witnessed a surge of more than 7% in a day reacting to positive quarter performance, it is time to question investors' attitude.

Instances like these suggest that stock markets are being irrationally exuberant, not missing any excuse to rise even more. While long term performance depends upon a company's ability to generate cash in the long term and dividends, it is the obsession with interim performance that determines valuations than the fundamentals. And one can hardly blame the retail investors, when even investment managers and analysts are seen to adjust their views every quarter in line with reported quarterly earnings, and overlooking the long term prospects. And while this may suit them since risk of going against common market perception outweighs the reward of being right, retail investors are unlikely to make the most equity investing by following this approach. Further, as we all know,interim earnings , with so much scope of manipulation by the management, can hardly be a parameter to judge company's worth.

With a lot of companies yet to declare results, we will not be surprised to see more of such cases. However, long term investors should understand that a good performance in one quarter is not going to change the fundamentals and hence long term valuations of a company. As such, they would do well to follow a disciplined investing approach and not get distracted by the noise in the markets. And the best to achieve that could be to invest in companies with strong and lasting moats and efficient managements.