Metal, 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 140 points or 0.5%, while the NSE-Nifty closed higher by about 26 points or 0.3%. Stocks from the metal, capital goods and realty spaces were amongst the key gainers today. Midcaps and smallcaps closed the day on a flat note.

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 62.25 to the dollar.

Auto ancillary stocks ended the day on a mixed note with Sundaram Clayton and Munjal Showa leading the gains while SKF India and Bosch closed with losses. Bharat Forge ended the day on a firm note today. One of the key reasons for the stock being in favour today was the announcement of the company's 51:49 JV with Israel's Rafael Advanced Defence Systems for manufacturing high-tech defense components. This deal has come within months of the government allowing 49% FDI in defense manufacturing sector. As per a leading business daily, this venture will make Spike anti-tank guided missiles for the Indian armed forces and would involve technology transfer from the Israeli JV partner firm. The fact that Rafael has been working with Indian defense for about two decades will be an advantage. As per the company's management, it will be looking to scale up investments in this JV over time.

Paint companies ended the day on a firm note with Asian Paints and Berger Paints leading the gains. As reported by the Hindu Business Line, Berger Paints is looking to set up an industrial coatings plant in Russia, for which it has signed an MoU with the Government of Stavropol Region, Russian Federation. The company will be conducting a feasibility test for the same. The initial capacity is expected to be 3,000 tonnes a year; which will be able to scale up to as much as 50,000 tonnes. As per the company's management, it would be spending about US$ 5 m on the same. The region where the company is planning to setup a plant is an industrial area, which also has an automobile manufacturing facility. About 6 hectares of land will be allocated to the company. Land cost for the company will not be too high given that the government would be giving it on a long term lease. Overseas business for Berger Paints is not very substantial at the moment. It contributes to about 5% of the company's revenues. The company has plants in Nepal, Bangladesh and Poland.

Indian Markets trade flat
01:30 pm

Indian Indices are trading flat in the post noon session. Sectoral indices are trading on a mixed note today with IT and consumer durable stocks leading the gainers. FMCG, power and banking stocks witnessed maximum selling pressure.

BSE-Sensex is down 40 points and NSE-Nifty is trading 25 points down. BSE Small Cap and BSE Small Cap index are also trading down marginally. The rupee is trading at 62.24 to the US dollar.

Barring KSK Energy, Adani Power and CESC Ltd, majority of the power stocks are trading in the red. According to a leading financial daily, country's largest power producer NTPC will invest close to US$ 10 bn for executing green energy projects in the next five years as part of government's plans to provide thrust to clean electricity generation. The company in a statement said that it will add 10,000 MW to its existing capacity of 43,143 MW through solar projects in the next five years. Currently, the company has 110 MW of renewable power projects which generated 100 million units of electricity during the current fiscal, so far. Recently, NTPC signed a term loan agreement of Rs 100 bn and Rs 20 bn with state-run SBI and Bank of Baroda, respectively, for partially funding its capital expenditure

Cement stocks are trading on a negative note. Birla Corp. and India Cements are the leading losers. According to a leading financial daily, Holcim-Lafarge is planning to merge ACC, Ambuja and Lafarge India. Reportedly, the company plans to merge ACC, Ambuja and Lafarge India units into one listed entity to create the largest cement company in India. Combined capacity of the 3 subsidiaries will be 70 m tonnes of cement. Seemingly, the plan is still at a nascent stage. ACC and Ambuja Cement were trading down by 1.5% and 2% respectively on the BSE.

Indian Indices slip into the red
11:30 am

After opening the day on a positive note, Indian equity markets dropped below the dotted line during the previous two hours of trade. Barring stocks from Metal, IT sector and capital goods sectors, sectoral indices are trading in the red. FMCG and banking stocks are the leading losers.

The BSE-Sensex is down by 110 points and NSE-Nifty is down by 52 points. BSE Mid Cap index and BSE Small Cap index are trading down by 0.4%. The rupee is trading at 62.24 to the US dollar.

Auto Ancillary stocks are trading mixed today. Bharat Forge and Sundaram Clayton are trading the strongest, while SKF India and Bosch India are trading the weakest. According to a leading financial daily, Boeing announced it had signed a multi-year contract with Pune-based Bharat Forge to supply titanium forgings. The equipment will be used in the wings of next-generation 737 and 737 MAX of the Boeing Aircrafts. Under the agreement, Bharat Forge will supply pre-machined forgings from its facilities in Pune and Baramati to Boeing in the first quarter of 2016. According to company MD Kalyani, this joint venture resolves the aspirations of 'Make in India'. Bharat Forge is currently trading up by 1.1%.

Energy stocks are trading on a positive note. MRPL and BPCL are the leading gainers. According to a leading financial daily, Indian Oil Corporation has announced it will invest Rs 7.8 bn in fuel quality up gradation projects at two key refineries along with other expansions. The Board of company last week approved an investment of Rs 18.43 bn in upgrading the 13.7 million tons Koyali refinery in Gujarat to produce Euro-IV complaint petrol and diesel. Another, Rs 13.27 bn will be spent on similar fuel quality up gradation project at Barauni refinery in Bihar. The project would help in consolidating the glycol business of IOC by producing low cost non-ethylene glycol based on refinery gas.

FMCG pack solely opens in the red
09:30 am

The major Asian stock markets have opened the day on a strong note with Japan (up 0.48%) leading the pack of gainers. The Indian markets have opened on a positive note too. Consumer durables and realty stocks are leading the pack of gainers while FMCG pack is the only one which has opened the day in the red.

BSE-Sensex is currently trading up by about 94 points (up 0.32%), while the NSE-Nifty is higher by about 19 points (up 0.17%). Both BSE Mid Cap and BSE Small Cap indices have also opened the day in green, up by 0.59% and 0.63% respectively. The rupee was trading at Rs 62.34 to the dollar at the time of writing.

As per a leading financial daily, Reserve Bank of India (RBI) has permitted nominated banks to provide gold on loan to jewellers. It is to be noted that domestic jewellers were facing liquidity constraints for the past one and half years as it was mandatory for them to make the full payment for the gold purchased due to the restrictions imposed on gold imports. According to All India Gem and Jewellery Trade Federation, the present move is likely to bring down the funding cost for jewellers as gold will be made available to them on loan by just giving bank guarantee. In addition, RBI has clarified that there would be no restrictions on the import of gold coins.

As per a leading financial daily, Lupin has launched a new version of the asthama delivery device InspiraChamber anti-static valved holding chamber (VHC) in the US market. The launch has been under a strategic licensing agreement with New Jersey-based respiratory research and development company InspiRX Inc. The launch marks Lupin's entry into the larger US inhalation and related markets. The product will be marketed along with other Lupin brands, including Suprax, Alinia for Oral suspension, Locoid Lotion and Antara.

What does negative WPI mean for India?

The inflation data for the month of January is out. And it has taken many by surprise. This is because India has reported negative WPI in the month. Until few months back, there was a clamour for rate cut. But the central government with a sharp focus on inflation and stability, did not concede. Does the negative inflation justify a case for rate cut now? Along with rate cut, another issue that economists are worried about is if India has joined the league of countries that face deflation. The latter is a matter of concern as it could imply that consumers will postpone thei r buying and manufacturers will stop investing, expecting a decline in the price levels in the economy.

However, we believe that deflation scare is not for India, at least, not yet. Unlike regions like Japan that seem to be facing deflation since ever and where deflation seems to be a self inflicted issue, recent decline in price levels in India is mainly on account of fall in fuel and commodity prices, both external factors. As far as common man is concerned, food prices still remain high and as vulnerable to monsoons as they have been in the past. Basically, the reason for price fall is not a lack of demand. Hence, we do not believe that India will witness a real deflation in the future. Instead, current circumstances offer great opportunities for India to implement and formulate much needed reforms to ensure a stable recovery path from here.

As far as further interest rate cut is concerned, we believe that retail inflation, and not whole sale price inflation will be a deciding factor for the same.And as suggested in an article in Firspost, the picture that retail inflation paints seems different .What this could imply is inefficiencies at various stages of the value chain from manufacturing to consumption. A real and stable growth seems unlikely unless these inefficiencies are sorted. Reforms, and not rate cut, is clearly the solution.