Markets see final hour surge

The Indian stock markets initially opened the day on a weak note. The key indices continued to trade range-bound till the afternoon session. Post this, indices moved higher and continued on their upward trajectory. Ultimately the indices finished well in the positive backed by buying interest in auto and tech stocks. The BSE-Sensex closed positive, higher by around 161 points (0.84%). The NSE-Nifty closed higher by around 45 points (0.77%). The smaller indices also had a positive day on the bourses. The BSE Mid Cap closed 0.48% higher and the BSE Small Cap index closed 0.85% higher. consumer durables and metal stocks witnessed profit booking.

As regards global markets, Asian indices had a mixed outing today. European indices also opened the day mixed. The rupee was trading at Rs 54.60 to the dollar at the time of writing.

Telecom operator, Bharti Airtel has started a process to sell up to 25% stake in its DTH (direct to home) TV. The company is expecting a valuation of US$ 800 m. If it sells a 1/4th stake this will amount to US$ 200 m. Bharti Airtel has already signed a non-disclosure agreement (NDA) with at least seven strategic and private equity players for the stake sale, according to a leading business daily. This includes American DTH players such as Comcast and Liberty Global. Private equity players such as KKR, Providence and Bain Capital also seem to be in the running. Bharti's DTH business has pan India operations and 7.9 m customers. The market leader Dish TV has almost double the subscriber base of 15 m while Tata Sky has 10 m subscribers. In 3QFY13 the revenues of the DTH arm of Bharti Aitrtel was at Rs 4.3 bn, EBITDA stood at Rs 147 m with 3.4% EBITDA Margin, average ARPU of US$ 3.4/month for the quarter.

According to provisional data from the Reserve Bank of India (RBI), credit growth for banks was sluggish at the end of 10 months in FY13. So far this fiscal; banks' advances grew around 9.2% YoY, compared with 11.8% in the same period last year. Deposit growth was also around 7.6% YoY compared with 11.7% in the same period a year ago. The RBI has projected deposit growth at 15% and credit growth at 16% for FY13. With regards to new banking licenses, the RBI has said that it would publish clarifications regarding the revised rules on banking licenses on its website. All queries would need to be sent by April 10th 2013, post which clarifications would be issued by the central bank. If everything goes according to plan 2013 could usher in the first set of new banks into India since Yes Bank in 2004.

Indian share markets remain volatile
01:30 pm

Indian share markets fluctuated around the dotted line in the post-noon trading session. Majority of the sectoral indices are trading negative with metal, oil and gas and consumer and durables stocks being the biggest losers. IT, capital goods and realty are among the major gainers.

BSE-Sensex is down 18 points and NSE-Nifty is trading down by 10 points. While BSE Mid Cap is flat, BSE Small Cap index is trading up by 0.2%. The rupee is trading at 54.7 to the US dollar.

Power stocks are trading mixed with India Bulls Power and CESC leading in gains. However, Reliance Infra and PTC Indiaare trading in red. As per a leading financial daily, Tata Power's 4,000 MW Ultra Mega Power Project (UMPP) in Mundra has become fully operational after the fifth unit of 800 MW capacity was synchronized recently. The first four units of similar capacities were commissioned between March 2012 and February 2013. With the 4,000 MW plant based on super critical fully operational, the company's total capacity scaled up to 8,500 MW, out of which the thermal generation capacity stands at 7,647 MW. The company had earlier entered into an agreement to source coal supplies for its Mundra UMMP from Indonesia at below market prices. But its coal pricing has run into rough weather after Indonesia benchmarked all its coal exports to international prices. Consequently, Tata Power has been demanding an increase of 80 paise on the power purchase agreement tariff of Rs 2.55 entered by it previously. The Central Electricity Regulatory Commission (CERC) will come out with a decision on the company's petition for hiking tariff on the electricity generated at the Mundra plant. Tata Power stock is marginally up.

Real estate stocks are trading mixed, with Wellspun Projects and Gammon India being the major gainers and Phonenix Mill and Housing Dev Infra being the top losers. As per a leading financial daily, DLF announced that its board has approved issuance of fresh equity shares. This step was taken to meet the Securities and Exchange Board of India (SEBI) norms which require minimum 25% of public share holding. Thus promoters will dilute their share holding, which currently stands at 78.6%. Reportedly DLF is likely to offer over 80 m shares, which will be worth Rs 21 bn at current market price. The raised funds would be utilized to bring down the debt that stood at Rs 213 bn as at the end of December 2012. Further, the board has approved to offer the equity shares by way of Institutional Placement Programme (IPP) and/or any method prescribed and approved by SEBI. However this is subject to shareholders' approval. The stock of DLF was trading up by 1.9%

Indian share markets shed initial gains
11:30 am

Indian share markets shed initial gains and traded flat during the previous two hours of trade. Sectoral indices traded mixed with IT and capital goods stocks leading the gains while metal and energy stocks witnessed selling pressure.

The BSE-Sensex and NSE-Nifty are trading flat presently. However, BSE Mid Cap and BSE Small Cap indices are trading higher by 0.2% and 0.3% respectively. The rupee is trading at 54.65 to the US dollar.

Auto stocks are trading mixed with Maharashtra Scooters and Hero MotoCorp seeing gains while Escorts and Tata Motors are witnessing selling pressure. As per a leading daily, Tata Motors is facing stiff competition from other industry players which has led to a fall in market share. Entry of new diesel cars such as Nissan Micra, Chevy Beat, Volkswagen Polo, Hyundai i20, Skoda Fabia, Ford Figo has heightened competition. Also, several global carmakers like Ford, Volkswagen, Toyota and Honda too are launching newer models in the compact car segment that have been a cause of concern. Declining sales are resulting in inventory build up for the auto company. The carmaker sold 10,613 vehicles in February, registering a 70% drop as compared to the previous year. This fall was the steepest in six years. The Tata Group company thus is taking steps to rationalize production to control the overflowing inventories. The dealers have also asked Tata Motors to reduce vehicle despatches from their plants.

Food stocks are mostly trading in the green led by Tata Global Beverages and Sterling Biotech. As per a leading daily, ITC Limited is all set to enter the Indian dairy market segment soon. The FMCG company is looking to launch a line of products in this space over the next 14 months. As per the CEO of the foods division of the FMCG company, the first set of dairy products will be shelf-stable and will include milk powder, long-life packaged milk, fortified milk, etc. ITC will face competition from existing players like Amul, Britannia and Nestle. We may note here that ITC earlier started the dairy business as part of its integrated animal husbandry programme, the firm's corporate social responsibility initiative (CSR).

Indian share markets open firm
09:30 am

Asian stock markets have opened the day on a mixed note with stock markets in Japan (up 0.5%) and Indonesia (up 0.3%) trading firm. However, markets in South Korea (down 1%) and Malaysia (down 0.1%) are facing selling pressure. The Indian share market indices have opened the day on a firm note. Stocks in the IT and capital goods space are leading the gains. However, metal and oil and gas stocks are trading in the red.

The Sensex today is up by around 15 points (0.1%), while the NSE-Nifty is up marginally by around 1 point (0.02%). Mid and small cap stocks are trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.3% each. The rupee is trading at Rs 54.82 to the US dollar.

Auto stocks have opened the day on a weak note with Escorts and Tata Motors leading the losses. As per a leading financial daily, India's leading passenger vehicle manufacturer by sales volume Maruti Suzuki is likely to set up a new factory by next quarter. The initiative would be aimed at adding capacity as well as accessing ports on the west coast of India. It is said that the company will take a final decision pertaining to the commencement of construction of the new factory at its next board meeting which is scheduled in April 2013. It must be noted that Maruti had signed an agreement to set up a manufacturing facility in Gujarat in June 2012. At present, the automaker has two factories in the country with a capacity to manufacture 1.45 m units per annum.

Mining stocks have opened the day on a weak note with MMTC Ltd and Coal India Ltd (CIL) leading the losses. As per a leading financial daily, mining giant CIL has said that it may have to decrease prices of its high quality coal. Given that prevailing global market rates are lower than those offered by CIL, consumers have been shunning high quality coal from the state-run miner. Two large consumers, namely, Damodar Valley Corporation (DVC) and Gujarat State Electricity Corporation Ltd (GSECL), have objected to the prices charged by CIL. The high quality coal, which corresponds to the A and B grades of the earlier useful heat value (UHV) system, accounts for about 18% of CIL's 435 m tonnes annual production. It is said that if prices for high quality coal are not slashed, consumers buying C-grade coal may also start raising objections.

Why are these countries buying gold?

What do South Korea, Russia and Kazakhstan have in common? Well, the central banks in each of the countries have been major gold buyers of late. South Korea being the latest to join the club. The Bank of Korea added 20 metric tons to its tally in February, raising its gold reserves by 24% to 104.4 tons. Russia and Kazakhstan expanded their store of bullion for a fourth straight month in January. Russia boosted its holdings to 970 tons in January and Kazakhstan raised its hoard to 117 tons. The World Gold Council expects central banks to continue to be strong buyers of gold in 2013 after increasing purchases in 2012 by the most in almost 50 years.

On the other hand, however, ace investor George Soros has cut his stake in the SPDR Gold Trust, the biggest gold exchange traded product (ETP) by 55% in 4QFY12. In fact ETPs had their worst month in February as strength in the US dollar and US stocks drew investors away from the precious metal.

So why are central banks buying gold even though the precious metal's prices have been volatile this year? As the US economic recovery has gathered momentum, the appetite for gold as a safe haven asset seems to have ebbed.

But these central banks certainly know better. In the midst of a potential currency war, it is gold where they can repose their trust. Plus also hedge their reserve portfolios against runaway inflation. After all, the current scenario is pretty much reminiscent of the 1930s. During that period when certain countries went off the gold standard, they gained a competitive advantage against their rivals in the form of a cheap currency. This put a lot of pressure on the other countries to abandon the gold standard as well. As result, when one country devalued its currency, the other had no option but to follow suit. Now, this forms a self-perpetuating loop of endless currency devaluation exercises.

A similar episode is being played out today in the form of more and more money printing. In such a situation, gold is the only real currency or preserve of value that is safe from the hands of central bankers. You cannot mint excessive gold the way you can print paper money. Similarly, you cannot impose capital controls on it or fix price targets. In the absence of all these factors, there is a strong likelihood that gold will continue to rule the roost. That is the reason we keep on advising our readers to hold a small percentage of their wealth in gold.