Selling pressure takes toll

The Indian markets opened the day's proceedings on a firm note and traded within a range for a larger part of the morning session. However, the afternoon session saw selling pressure intensify across index heavyweights thereby pushing the indices deeper into the red. There was no respite in the final trading hour either and the indices closed well below the dotted line. The BSE-Sensex closed lower by 256 points, while the NSE-Nifty ended lower by 79 points. Losses were largest in oil and gas, banking and FMCG stocks. The BSE Mid Cap index and the BSE Small Cap index were not spared either and closed lower by about 0.9% and 0.3% respectively.

Most Asian stocks ended the day on a firm note, while most stocks in Europe were also trading in the green. The rupee was trading at Rs 62.22 to the dollar at the time of writing.

Auto ancillary stocks closed in the red today with the key losers being Amara Raja Batteries, Amtek Auto and Sundaram Clayton. As per a leading business daily, Bharat Forge has bagged a multi-year contract with Boeing Commercial Airplane to supply titanium forgings for wing components for the next-generation 737 and 737 MAX. Under the agreement, Bharat Forge will begin supplying pre-machined forgings from its facilities in Pune and Baramati to Boeing in the first quarter of 2016. It must be noted that Bharat Forge has been working on reducing its dependence on the auto segment. Accordingly, the company has entered into the highly lucrative non-automotive forgings market in a big way, where it will cater to the needs of industries like conventional and non-conventional energy, aerospace, oil and gas exploration, infrastructure and metals and mining. With respect to aerospace specifically, Bharat Forge is targeting revenues in excess of US$ 100 m per annum from this sector.

Most pharma stocks also closed weak today with the key losers being Cadila Healthcare, Lupin and Elder Pharma. As per a leading business daily, the USFDA has raised concerns with respect to production processes at Lupin's Pithampur plant in India. The US regulator has accordingly issued the company Form 483 and has pointed out 6 observations with respect to the plant. Typically, when a pharma company gets issued a Form 483, it means that it can still continue to sell products from that plant to the US market. But it needs to address the concerns raised by the US FDA. Failure to do so could lead to the US regulator issuing a warning letter and in more serious cases, issue an import alert. As far as Lupin is concerned, the company has received one drug approval and two site-transfer approvals from the Pithampur plant since the FDA audit.

Indian share markets remain buoyant
01:30 pm

Indian share markets continued to hover well above the dotted line in the post noon trading session. Power and IT stocks are trading in the green while consumer durables and oil & gas stocks were leading the pack of losers.

BSE-Sensex is trading up by 99 points while NSE-Nifty is up by 20 points up. BSE Mid Cap and BSE Small Cap indices are also trading up by 0.44% and 0.68% respectively. The rupee is trading at 62.19 to the US dollar.

Majority of the auto stocks are trading in the green. Ashok Leyland and M&M are the biggest gainers while Mahindra Scooters and Eicher Motors are trading the weakest. According to a leading financial daily, Ashok Leyland, a flagship company of Hinduja Group inaugurated its state of the art workshop in Riyadh in Saudi Arabia. This is the sixth outlet opened by Ashok Leyland in the area. According to the company's Managing Director, the company intends to add three more workshops in the coming year along with their channel partner Western Auto. Middle East is one of the biggest markets for Ashok Leyland. On the occasion, the company delivered 150 buses to customers through Western Auto.

Private banking stocks are trading on a positive note. Federal Bank and J&K Bank are the leading gainers. However, Axis Bank and Karnataka Bank are the leading losers. According to a leading financial daily, the Competition Commission of India has approved the proposed merger of Kotak Mahindra Bank and ING Vyasa Bank. Kotak Mahindra had announced the buyout of ING Vysya Bank in an all-stock deal in November last year. As per the order, the merger scheme provides that for every 1,000 shares held by the shareholders of ING Vysya, 725 shares of Kotak will be allotted to the shareholders of ING Vysya. Reportedly, the merger would make Kotak the fourth largest lending bank in the country. Kotak Mahindra was trading up by 1.6% on the BSE at the time of the writing.

Indian markets trade flat
11:30 am

After opening the day on a positive note, Indian markets have given up the early gains and are trading around the dotted line. Sectoral Indices are trading mixed. Realty and Consumer Durables stocks are the leading losers while IT and Capital goods stocks are witnessing the largest buying activity.

The BSE-Sensex is up 58 points and NSE-Nifty is up by 8 points. BSE Mid Cap index is trading up by 0.3% and the BSE Small Cap index is trading up by 0.5%. The rupee is trading at 62.19 to the US dollar.

Power stocks are trading mixed today. PTC India Ltd and Jaiprakash Power are the leading gainers while Reliance Power and NHPC are trading the weakest. According to a leading financial daily, four companies, including state-run Power Grid Corporation of India have bid for two transmission projects, Gadarwara A and B worth Rs 60 bn even as seven other companies pulled out of the bids after showing interest. The four companies to bid for these projects were PGCIL, Essel Infra, Sterlite Grid and Adani Group. The Gadarwara A and B transmission lines would primarily be used to evacuate electricity generated at NTPC's power plant at Gadarwara in Narsinghpur district in Madhya Pradesh. As per the Industry sources, some of the other bidders pulled out anticipating aggressive bids by Power Grid, which bid 40-70% lower and bagged two projects last year - Unchahar Transmission and transmission projects under Northern Region Strengthening System for the northern grid. Power Grid's aggressive bids have not only discouraged serious Indian infrastructure companies but also kept foreign investors away.

Majority of the PSU Banking stocks are trading negative with Indian Overseas Bank and Canara Bank trading the weakest. According to a leading financial daily, State Bank of India (SBI) will provide finance totaling Rs 1 bn benefiting 3,000 small tea growers in the North East soon. Reportedly, finance will be provided to tea growers who have proper basic documents of their existing garden as per Tea Board of India norms. The finance will be for all sections of small growers to establish mini-bought tea leaf factories and buying vehicles for transporting green leaves.

Indian markets open in the green
09:30 am

Barring Hong Kong (down 0.03%) and Indonesia (down 0.2%), the major Asian stock markets have opened the day on a positive note with stock markets in China (up 0.7%) and Japan (up 0.6%) leading the gains. The Indian markets have opened on a firm note. The sectoral indices were trading mixed with the stocks in the consumer durables and FMCG leading the losses, while the stocks in the software and healthcare sectors witnessed buying interest.

BSE-Sensex is currently trading higher by about 73 points (up 0.3%), while the NSE-Nifty is higher by about 24 points (up 0.3%). Both midcap and small caps have opened firm with the BSE Mid Cap andBSE Small Cap indices up by 0.4% and 0.8% respectively. The rupee was trading at Rs 62.16 to the dollar.

Barring NMDC Ltd and Gujarat NRE Coke, mining stocks have opened mainly in the green with Sesa Sterlite and MMTC Ltd leading the gains. As per a leading financial daily, Hindalco Industries Ltd has bagged one more mine in the ongoing coal auction.

With this, the total number of blocks won by the firm stand at three - two in Chhattisgarh and one in Jharkhand. As per the coal secretary Mr. Anil Swarup, Hindalco is the highest bidder at Rs 3001 per tonne. It is noteworthy that the states will fetch over Rs 1 lac crore, including royalty, over the next 30 years from sale of 17 coal blocks sold so far through the ongoing auction. Out of the 19 mines put on block by the government in the first tranche of auction, 17 have been bagged by companies such as Jindal Power, Hindalco and Ultratech and others.

Automobile stocks have opened the day on a mixed note with Ashok Leyland and Maharashtra Scooters Ltd leading the gains. However, Eicher Motors Ltd and Hero Motocorp Ltd were facing selling pressure. As per a leading financial daily, Swedish luxury carmaker Volvo is in talks with Mahindra & Mahindra (M&M), Hindustan Motors (HM) and General Motors (GM) to explore the feasibility of using the manufacturing facilities of one of these auto manufacturers to locally assemble its vehicles in India. So far, the company has been selling luxury cars and SUVs in India mainly through imports. In an effort to shore up volumes, it is keen to start assembling its vehicles in India itself. As per the industry sources, unless Volvo starts assembling its vehicles in India, it is unlikely to fulfill the target to have around 15% of the luxury car market in India in about five years' time

Is this a wake-up call for emerging economies?

There is a popular saying. Make hay when the sun shines. But unfortunately, emerging economies seem to be waking up to this fact rather late. These economies had been basking in the glory of cheap money from the US Federal Reserve's quantitative easing program launched in 2008. In this rush for attracting foreign investment deals, the focus on upgrading their own domestic economies was lost somewhere. This is reflected in the fact that the safety moat of higher economic growth enjoyed by developing economies is diminishing. As per report by Adam Slater of Oxford Economics in London, the differential in gross domestic product (GDP) between advanced and developing economies has contracted to the lowest level since 1999. The growth premium enjoyed by developing economies may turn out to be a mere 1.5% as compared to 4.5% during the period 2000-2014.

Another cause of worry for emerging economies are high levels of inflation and resulting low real interest rates. As per the report, the average real interest rate of 13 major emerging economies was a mere 1% as compared to 3% since 2000. Therefore, the recent round of stimulus measures has marginally benefitted emerging markets. Emerging economies are realizing the hard realty that the party of cheap foreign inflows is finally coming to an end. Even a hike in rate by the Fed in future as the US economy gains momentum can further dampen investment flows.

For emerging economies, the only way out of this financial weakness is to pull up socks and accelerate reforms for boosting domestic growth. This would entail creating the right business environment and putting strong financial systems in place. Sadly all this hard work should have been done when emerging economies enjoyed a place of pride under the sun.