Strong finish to the day

Indian equity markets started the day on a positive note and continued this trend throughout the day. Benchmark share indices ended near their day's high after a surge in late trades. Pharma and IT stocks were the biggest gainers. While the BSE Sensex closed higher by 88 points, the NSE-Nifty closed higher by 25 points. BSE Mid Cap and the BSE Small Cap closed on a positive note.

As regards global markets, Asian indices closed in the green. European indices have opened in the red. The rupee was trading at Rs 62.2 to the dollar at the time of writing.

Ranbaxy Laboratories and Teva Pharmaceutical Industries have settled claims with the New York Attorney General that an agreement between the two drugmakers unlawfully restricted competition. Under the terms of the settlement, the two generic drug makers will end a 2010 agreement of not challenging each other's rights to sell certain drugs exclusively in the United States. Teva and Ranbaxy will pay the New York state US $300,000 and have agreed to refrain from similar agreements in the future. The settlement concludes an investigation into the agreement relating to atorvastatin calcium, the generic version of Pfizer Inc's Lipitor - a drug used to treat high cholesterol.

Most of the big steel companies stayed away from Goa's first e-auction of iron ore following the ban on mining in September 2012. Goa's Directorate of Mines & Geology (DMG) is holding a weekly auction to sell the 15 mt of iron-ore that is lying idle in jetties and ports across the state, since September 2012. While steel majors shied away from the auction, the auction saw high participation from mine owners themselves, in addition to exporters. Out of 0.53 million tonne (mt) of ore put up for this week's auction, all, except a small amount of 1,200 tonne, was sold out. Most of the big steel companies stayed away due to low quality of ore and higher transportation cost. Prices of iron-ore in Goa are higher than Karnataka. It would not make economic sense for them to buy this low grade iron ore and transport long-distance across the country.

Indian share markets remain buoyant
01:30 pm

Indian share markets continued to trade higher in the post-noon trading session. Sectoral indices are trading mixed with consumer durable, capital goods and pharma stocks being the biggest gainers whereas metal, power and auto are among the few stocks trading in the red.

BSE-Sensex is up 31 points and NSE-Nifty is trading 8 points up. BSE Mid Cap is trading 0.2% down and BSE Small Cap index is trading up by 0.5%. The rupee is trading at 62.2 to the US dollar.

As per a leading financial daily, SEBI in its discussion paper has proposed that the top 200 companies by market capitalization would be required to file Annual Information Memorandum (AIM) every year. The AIM would provide consolidated information about companies in a single document and will come into effect from 1st April 2014. The AIM document will essentially provide vital details about the company such as history, promoters, contact information, key managerial personnel, business & industry description, capital structure, market price, financial statements, management discussion & analysis, utilization of issue proceeds, industry regulations and policies, legal information and any other material information of the preceding year. This is likely to improve the transparency level in the stock markets.

Majority of the food stocks are trading in the green with Tata Coffee and Godfrey Phillips being among major gainers. As per a leading financial daily, Nestle announced its results for the quarter ended December 2013. The company clocked a 4.7% increase in revenue in 4QCY14 on a 3.7% YoY rise in domestic sales and 21% YoY jump in export turnover. However, operating margin contracted by 2.5% YoY due to a faster rise in raw material costs and other expenses. At the net level, Nestle has been able to limit contraction in profit margin to 0.5% aided by a steep rise in other income earned and lower provisioning. For the full year 2013, the company reported a 9% growth in topline and a subdued 4.6% increase in net profits. The company has declared a final dividend of Rs 12.5 per equity share of face value of Rs 10. The total dividend declared in CY13 adds up to Rs 48.5 per share. Nestle's stock is currently trading up by 0.9%.

Pharma stocks lead the gains
11:30 am

After opening firm, the Indian Indices are trading above the dotted line in the morning session. The buying interest is highest in pharma stocks. The selling pressure is the highest in metal stocks.

The BSE Sensex is trading up 50 points and the NSE-Nifty is trading up 14 points. The BSE Mid Cap index is trading up 0.4% and the BSE Small Cap index is trading up 0.7%. The rupee is trading at 62.20 to the US dollar.

Most mining stocks are trading lower today. While Sesa Sterlite and Hindustan Zinc are among the stocks leading the gainers. Manganese Ore (MOIL) has announced results for 3QFY14. The company has reported a 15.5% YoY rise in sales. For 9MFY14, revenues grew by 4.1%. Volumes were up 2.7% YoY and realizations were up 7.3% YoY in the quarter. The company managed to keep costs like wages and administrative expenses in check. The operating profit grew by 19.1% YoY in the quarter. Other income also jumped by 77.8% YoY. A higher tax rate for the quarter did not dampen the bottomline performance too much. The net profit grew by 38.8% YoY. The net margin improved from 50% in 3QFY13 to 60% in 3QFY14. MOIL is trading flat today.

Automobiles stocks are trading mixed today. While Hero Motocorp and Maruti Suzuki are leading the losses, Ashok Leyland and TVS Motors are leading the gainers. As per a leading business daily, two wheelers majors have reduced their product's price across vehicles after the announcement of the cut in excise duty in the interim budget 2014-2015. The cut in excise duty was 4% in the two wheelers and small and commercial vehicles which provided relief to the automobile industry. The companies like Hero MotoCorp and Honda Motorcycle and Scooter India have reduced vehicle prices by as much as Rs 4,500 and Rs 7,600 respectively, with an immediate effect. They have passed on the entire benefits of excise cut to their customers across India. The move is expected to help the growth in their volumes and it may be noted that both these companies have over 60% of market share in the Indian two wheeler market.

Indian share markets open firm
09:30 am

Asian stock markets have opened the day on a mixed note with South Korea (down 0.5%) and Japan (down 0.5%) leading the losses. However, markets in China (up 0.6%) and Singapore (up 0.5%) are trading in the green. The Indian share markets have opened the day on a firm note. Stocks in the healthcare and information technology space are leading the gains.

The Sensex today is up by around 50 points (0.2%), while the NSE-Nifty is up by around 14 points (0.2%). The midcap and smallcap stocks have also opened in the green with the BSE Mid Cap and BSE Small Cap indices trading higher by 0.5% each. The rupee is currently trading at Rs 62.42 to the US dollar.

Oil & gas stocks have opened the day on a mixed note with Castrol India Ltd and Chennai Petroleum Corporation Ltd (CPCL) leading the gains. However, Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Ltd (BPCL) are trading in the red. As per a leading financial daily, ONGC Videsh Ltd (OVL), the fully owned overseas subsidiary of Oil and Natural Gas Corporation (ONGC), has inked contracts with Oil India Ltd (OIL) to explore oil and gas in two areas in Bangladeshi waters. On Monday, an equal joint venture between the two entities signed production sharing contracts (PSC) for shallow water blocks SS-04 and SS-09 in Bangladesh. Under this contract, OVL and OIL will spend US$ 103.2 million during the initial exploration of the two blocks. It must be noted that the Bangladesh government had launched the Offshore Bidding Round in December 2012. OVL and OIL had formed a consortium (50:50) and had participated in this bidding round. Later in August 2013, the consortium was official notified as the winner of two shallow water blocks.

MNC pharma stocks have mainly opened the day on a firm note with Pfizer and Abbott India leading the gains. Glaxosmithkline Pharmaceuticals Ltd has announced the results for the quarter ended December 2013. During the quarter, the company's net sales declined by 4% YoY to Rs 6,306 m. At the operating level, profits plunged by 39.9% YoY to Rs 1,182 m. Operating profit margins contracted from 29.7% in 4QFY13 to 18.6% in 4QFY14. At the bottomline level, net profit for the quarter was lower by 15.6% YoY at Rs 1,169 m. Net profit margin declined from 20.9% in 4QFY13 to 18.3% in 4QFY14.

Budget : A balancing act

The finance minister presented the vote on account budget in Parliament on Monday. As expected, there were no big announcements. Excise/customs duty on automobiles was reduced a bit. But otherwise the budget was an exercise to balance the income and expenditure of the government. In this context, it was right to not expect anything significant from the finance minister.

The most intriguing aspect of the budget was the government achieving the self imposed target on the fiscal deficit front. The fiscal deficit had been pegged at 4.8% of GDP for FY14. The revised estimate in the budget now pegs it at 4.6% of GDP. How was this achieved? A close look at the details of the budget, tells us the entire story.

As per the Economic Times, the fiscal deficit has been kept in check because of massive cuts in planned expenditure. Here are just two examples. The revised estimate states that the total central plan outlay will be lower by Rs 660 bn in FY14, compared to the original budgeted estimate. Also, the central government's support to the states and union territories has been cut by Rs 171.25 bn.

What about the revenue side? The vote on account budget estimates that gross tax revenues would be lower by 769.64 bn, compared to the original budgeted estimate. This clearly shows that the government has achieved its target by curtailing its expenditure. Thus, the money which was to be spent for infrastructure development has been postponed. This is sure to hurt the economy in the long term.

In addition to all this, the finance minister has also resorted to a few tricks. These include pushing petroleum subsidy payments earmarked for oil marketing companies to the next financial year and not providing the statement of taxes foregone in the budget. This is a statement of the probable loss in revenues, due to the cuts in the indirect taxes that have been announced.

All in all, the vote on account budget had all the characteristics of a fine balancing act. While the finance minister can claim to have improved the economic situation in the country, the reality is totally different. The next government could face a full blown economic crisis if the problems left behind by the UPA are not dealt with quickly.