Sensex closes marginally down (0.05%) for the week

Buoyed by gains in few sectors such as technology, metals and private banks, Indian markets closed the day in the green. The indices stood higher in the last hour of trade supported by buying in heavy weights. Underperforming benchmark indices, the BSE Small Cap index was down by 0.03% but the BSE Mid Cap was up by 0.1%. The BSE Sensex closed higher by 174 points and the NSE-Nifty was seen up by 47 points.

On the global front, barring Japan and Singapore markets, all other Asian indices closed the day on an optimistic note and most of the European indices too opened the day on a positive note. The rupee was trading at Rs 62.19 to the dollar at the time of writing.

Inflation data for the month of January 2014 was announced recently. And the same seems to be in a cooling off mode. As reported, inflation as measured by the wholesale price index (WPI) came in at a figure of 5.05%. This is the lowest figure in about eight months. During the preceding month i.e. December 2013, the figure stood at 6.16%. A key reason for the decline in the same is lower vegetable prices, which declined sharply on a month on month basis. As per data, food inflation reduced sharply to 8.8% as against 13.86% reported in December 2013. Vegetable inflation in specific reduced at a very sharp rate, falling to 16.6% - which is still high in absolute terms - as compared to 57.33% in the month of December 2013. With this announcement, the focus has come back to the RBI and its stance on interest rates. However, in the recent past RBI governor Dr. Rajan has strongly hinted that the focus over the short to medium would be on curbing inflation levels, rather than propping up growth levels.

Stocks from the PSU banks sector closed the day on a mixed note with Indian Bank and United Bank of India leading the pack of losers whereas stocks such as Andhra Bank and IDBI Bank were leading the pack of gainers.

As per leading financial news daily, India's largest lender, State Bank of India (SBI) announced disappointing earnings performance for 3QFY14. The profitability for the quarter fell 34.2% YoY to Rs 22.3 bn on account of higher provisions and expenses. The net interest income increased 13.3% YoY to Rs 126.4 bn from Rs 111.5 bn a year ago. The expense for the quarter jumped 20% YoY to Rs 314 bn while other income was up by 15.5% YoY to Rs 41.9 bn same quarter a year ago. The employee expenses stood on the higher side and jumped 35% YoY to Rs 58.7 bn primarily due to higher provisions for salary and pension. The domestic net interest margins stood at 3.5% during 3QFY14. The gross NPAs increased to 5.7% during 3QFY14 as against 5.6% in 2QFY14 while net NPA rose to 3.2% from 2.9% during the same period a year ago. The provision coverage ratio declined to 58.3% from 60.2% on sequential basis. The total advances for the company grew 17.3% YoY and the deposits grew 16.4% YoY during 3QFY14.

Indian share markets remain buoyant
01:30 pm

Indian share markets continued to trade higher in the post-noon trading session. Majority of the sectoral indices are trading in the red with metal, capital goods and pharma stocks being the biggest losers. IT, oil & gas and consumer durable are a few stocks trading in the green.

BSE-Sensex is up 52 points and NSE-Nifty is trading 13 points up. BSE Mid Cap and BSE Small Cap indices are trading down marginally. The rupee is trading at 62.3 to the US dollar.

Most of the large cap software stocks are trading on a positive note today. HCL Infosystems and TCS are among the major gainers on the bourses. As per a leading business daily, Infosys plans to hire about 200 MBAs from the top tier global B-schools. Besides the US, the company would also focus on recruitment of MBAs from Europe, Asia Pacific region and Australia given its high geographic mix of revenues from these regions. Where the company has lot of technical skills but not business skills, the move is expected to strengthen Infosys business consultancy and client engagement. The company has not hired any global MBAs over the past 4 years and the current hiring is a largest ever global recruitment drive by any Indian company. Infosys's stock currently is trading higher by 1.2% today.

Indian pharma stocks are trading mixed with Ipca Labs and Indoco Remedies leading among major gainers and Orchid Chemicals and Cipla being major losers. As per a leading financial daily, Dr Reddy's Laboratories (DRL) is planning to spend more than Rs 10 bn in capital expenditure in FY15. While DRL spent Rs 2.3 bn on capital expenditure in December 2013 quarter, the company expects to spend Rs 2 bn in March 2014 quarter. The company's research & development expenses in December 2013 quarter accounted for 8.4% of its revenues as compared to 7.1% of sales in the year-ago quarter. DRL's revenues in 3QFY14 grew by an impressive 23% YoY largely led by the strong 41% YoY growth in the global generics business. DRL's stock is currently trading down 1.4%.

IT and energy stocks lead the gains
11:30 am

After opening in the green, the Indian indices are trading above the dotted line in the morning session. The buying interest is highest in software and energy stocks. The selling pressure is the highest in mining and engineering stocks.

The BSE-Sensex is trading up 44 points and the NSE-Nifty is trading up 12 points. The BSE Mid Cap index is trading up 0.3% and the BSE Small Cap index is trading up 0.2%. The rupee is trading at 62.31 to the US dollar.

Most telecom stocks are trading higher today. Idea Cellular and Bharti Airtel are among the stocks leading the gainers. The 2G telecom spectrum auctions have finally come to an end. After 10 days of fierce bidding, the total amount that the government will collect will be Rs 611.62 bn. The incumbent GSM operators, Vodafone, Bharti Airtel and Idea Cellular have managed to retain the spectrum that they held, in the crucial 900 MHz band, in Delhi, Mumbai and Kolkata. However they have had to pay a steep price for the same due to competition from Reliance Jio. The new entrant has won spectrum, in the 1,800 MHz band, in 14 circles. Reliance Jio will now launch voice services along with 4G services, as it now has spectrum for both.

Aluminum stocks are trading mixed today. While Nalco is trading higher; Hindalco is trading lower. Hindalco has announced results for 3QFY14. The company's topline increased by only 5.5% YoY due to lower volumes. However due to lower input costs (as a percentage of sales), the operating profits increased by 8.1% YoY. The other income came in sharply lower by 35.8% YoY. This was largely the reason for a decline in net profits by 23% YoY. Higher tax expenses which rose by 23% YoY also hurt the bottomline. The weak demand environment as well as lower prices for the commodity affected the company's performance in the quarter. Hindalco is trading down 1.2% today.

Indian share markets open firm
09:30 am

Barring Singapore (down 0.2%) and Japan (down 1.2%), major Asian stock markets have opened the day on a positive note with stock markets in South Korea (up 0.8%) and Taiwan (up 0.8%) leading the gains. The Indian share markets have also opened the day on a firm note. Stocks in the healthcare and auto space are leading the gains.

The Sensex today is up by around 59 points (0.3%), while the NSE-Nifty is up by around 16 points (0.3%). The midcap and smallcap stocks have also opened in the green with the BSE Mid Cap and BSE Small Cap indices trading higher by 0.3% and 0.4% respectively. The rupee is currently trading at Rs 62.42 to the US dollar.

Indian pharma stocks have opened the day on a firm note with Panacea Biotech and Orchid Chemicals leading the gains. India's third largest drugmaker by sales Sun Pharmaceutical Industries Ltd has announced the results for the quarter ended December 2013. During the quarter, the company's consolidated net sales increased by 50.3% YoY to Rs 42,866 m. At the operating level, the company reported a profit of Rs 20,009 m, a rise of 57% YoY. Operating profit margins expanded from 44.5% in 3QFY13 to 46.4% in 3QFY14. At the bottomline level, consolidated net profit for the quarter was higher by 73.7% YoY at Rs 15,311 m.

Oil & gas stocks have opened the day on a mixed note with Castrol India Ltd and Chennai Petroleum Corporation Ltd leading the gains. However, Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Ltd (BPCL) area trading weak. BPCL has announced its financial result for the quarter ended December 2013. During the quarter, the company's net sales stood at Rs 647,676 m, marginally higher by 3.8% YoY. At the operating level, the company reported a loss of Rs 9,158 m during the quarter as against a profit of Rs 22,873 m in 3QFY13. Other income declined by 37.6% YoY to Rs 2,508 m. At the bottomline level, the company reported a net loss of Rs 10,889 m as against a net profit of Rs 16,476 m in 3QFY13.

Pension money to give real estate a new life

Scarcity of funds is a major issue with real estate developers. With interest rates rising and banks unwilling to lend, traditional financing options have been exhausted. In such a tight liquid environment the sector seems to have found a new lease of life in the form of debt financing by overseas pension funds. As per news reports, the financing arm of Canada's pension fund has entered into a strategic alliance with an Indian conglomerate to provide debt financing for residential projects in India.

Corporate governance has been a grey area for real estate. Rampant corruption and poor transparency levels have eluded the sector of long term money. Hence, the entry of Canadian Pension Fund has come in as a big surprise. It has opened up a financing option other than banks for real estate developers who were starved of cash until now.

The fund will typically provide debt finance to local developers in affiliation with its alliance partner in India. And the finance will be typically used for purchase of land. In India, financing land purchase through bank loans is generally not permitted. Hence, the fund will create a niche for itself in this area.

Entry of pension funds is a good sign for the real estate sector. Now the developers will have access to long term funds. It may be noted that large residential projects have long duration. Hence, access to long term finance was a key issue. With the entry of pension funds, long term financing constraint will be resolved to an extent.

Pension funds typically have low risk tolerance as their priority is to meet the employee obligations that accrue during the period of service. Thus, they prefer to invest in domestic assets and that too which are very safe in nature. However, the fact that serious long term money is chasing asset classes that too real estate is a sign that global risk aversion has decreased. It also indicates that overseas investors are increasingly looking at better return opportunities abroad.