Indian stocks end on a flat note

After a volatile day of trading, the Indian stock markets ended the day on a flat note. The BSE-Sensex closed higher by about 30 points or 0.1%, while the NSE-Nifty ended higher by about 5 points or 0.1%. Stocks from the FMCG and pharmaceutical spaces were amongst the top performers today, while those from the oil & gas and energy spaces were least in demand. The BSE Mid Cap and BSE Small Cap indices ended the day on a flat note as well.

Stock markets in other parts of Asia ended on a weak note with Japan, China and Hong Kong down by about 2.6%, 0.2% and 1.7% respectively. The rupee was trading at Rs 61.09 to the dollar at the time of writing.

FMCG stocks ended the day on a strong note with ITC and Godrej Consumer leading the pack of gainers. FMCG stocks have been under pressure off late on the back of concerns related to volume growth, which is expected to remain weak in short run. The demand slowdown has not bottomed out as yet. Hindustan Unilever (HUL), the FMCG giant registered a volume growth of mere 4% in 3QFY14. It is expected that the coming quarter may mirror a similar subdued performance. Moreover, while urban growth continues to remain weak, the growth volumes in rural markets have started witnessing early signs of de-growth. Weak consumer sentiments and input-cost inflation deterred the margins of the FMCG companies.

Export numbers for the month of February 2014 came below expectations. The numbers reported a first decline in a period of eight months. And with this, concerns over the future have started to erupt given the strengthening of the Rupee in recent times. As reported by the Business Standard, exports declined by 3.7% YoY to US$ 25.7 bn during the month of February 2014. As for the 11 month period ended February 2014, exports are up by 4.8% YoY to US$ 282.8 bn. Petroleum, engineering, gems and jewellery - which constitute of nearly 57% of the export basket (in February 2014) - reported a decline in trade during the month. India had set an export target of US$ 325 bn for the full year FY14. However, given that the 11 month figure is way below expectations, the chances of meeting the target seem minimal.

India share markets remain buoyant
01:30 pm

After opening weak and then rebounding, Indian share markets remained positive in the post-noon trading session. Sectoral indices are trading mixed with pharma, consumer durables and FMCG stocks being the biggest gainers whereas oil and gas, auto and capital goods are among major losers.

BSE-Sensex is up 21 points and NSE-Nifty is trading up 7 points. Both BSE Mid Cap and BSE Small Cap indices are trading up by 0.1%. The rupee is trading at 61.1 to the US dollar.

Most of the hotel stocks are trading in the green with Taj GVK and Indian Hotels being the biggest gainers. As per a leading financial daily, Indian Hotels Company Ltd (IHCL) will make provisions to the tune of Rs 4 bn in its standalone financials and Rs 1 bn in its consolidated financials for FY14 due to diminution in the value of its long-term investments. As per the company, sustained depression in the macroeconomic environment in the domestic and overseas markets has resulted in decline in fair value of long term investments and consequent erosion in net worth. IHCL has earlier booked losses of Rs 3.7 bn on investments in luxury hotel chain, Orient-Express Hotels (OEH) as well as written off Rs 3.7 bn. In November 2013, the company did not go ahead with its $1.8 bn offer to acquire OEH. On a consolidated basis, for the nine month ended December 2013, the company reported 9% YoY increase in net sales and a net loss of Rs 3.9 bn as compared to Rs 411 m net loss in the same period last year. IHCL's stock is currently trading up by 1.8%.

Indian Pharma stocks are trading on a mixed note today. While Sun Pharma is among the top gainers, Cadila Healthcare and IPCA Labs are trading weak. As per a leading business daily, Sun Pharma's subsidiary Caraco has received US Food and Drug Administration (USFDA's) approval for marketing of the drug, Risperidone used in the treatment of schizophrenia (a mental disorder). This would allow Caraco to market Risperidone oral tablet in the US. The company received approval despite various customer complaints against it in the US recently. The complaints earlier prompted the company to voluntarily recall 2,528 bottles of metformin, generic version of diabetes drug Glumetza from the US market. The stock of Sun Pharma is among the top gainers in the Sensex today. It is trading up by 3.7% today.

FMCG, Pharma stocks lead the gains
11:30 am

After opening weak, the Indian indices are trading above the dotted line in the morning session. The buying interest is highest pharma and FMCG stocks. The selling pressure is highest in engineering and auto stocks.

The BSE-Sensex is trading up 60 points and the NSE-Nifty is trading up 10 points. The BSE Mid Cap index is trading up 0.4% and the BSE Small Cap index is trading up 0.3%. The rupee is trading at 61.11 to the US dollar.

Most software stocks are trading higher today. Tata Consultancy Services (TCS) and Wipro are among the stocks leading the gainers. India's second largest software firm, Infosys, has successfully completed the implementation of its Core Banking Solution (CBS), Finacle, for the General Post Office (GPO) at Nagpur. The post office will use the software to implement some banking functions that it is currently providing. This is the fourth GPO that has implemented Finacle CBS recently. Gondia, Itwari and Khamgaon GPOs have done the same earlier. India Post is looking to improve its domain knowledge in the banking space as it has applied for a banking license with the Reserve Bank of India (RBI). The software will also be used across ATM machines that the postal department will install at its locations. Infosys is trading flat today.

Telecom stocks are trading mixed today. While Idea Cellular is leading the gainers; Bharti Airtel is leading the losses. India's largest telecom service provider, Bharti Airtel, will hike charges for its fixed line broadband internet service from next month. As per a leading news daily, the hike could be as high as 40%. The company has informed that a hike in rates was necessary due to an increase in input costs. The company is currently in the process of doubling the speed that it provides under this service from 256 kbps to 512 kbps. As of December 2013, the company had about 1.39 million fixed line broadband subscribers. Bharti Airtel is trading down 0.7% today.

Indian share markets open in the red
09:30 am

The major Asian stock markets have opened the day in the red with the stock markets in Japan (down 2.2%) and Hong Kong (down 1.7%) leading the losses. The Indian share markets have opened the day on a weak note as well. The sectoral indices have opened mixed with the stocks in the metal and capital goods space leading the losses. However, stocks in the healthcare and FMCG space were leading the gains.

The Sensex today is down by around 40 points (0.2%), while the NSE-Nifty is down by about 15 points (0.2%). The mid and small cap stocks have also opened in the red with the BSE Mid Cap and BSE Small Cap indices down by around 0.1% and 0.2% respectively. The rupee is currently trading at Rs 61.14 to the US dollar.

Telecom stocks have opened the day on a mixed note with ADC India Communications Ltd and Tata Teleservices Ltd leading the losses. However, Reliance Communications Ltd and Bharti Airtel Ltd were leading the gains. As per a leading financial daily, Idea Cellular has entered into a partnership with Gameloft, a global publisher of digital and social games. As per the arrangement, Gameloft will offer quality gaming to more than 130 million subscribers of the company. Gameloft has popular franchises like Asphalt, Modern Combat and Real Football under its portfolio. The partnership will allow Idea's subscribers to access games from the Gameloft Game Store and also through Idea's mobile portal. Idea's subscribers will also get access to new content from Gameloft's portfolio on a regular basis through Gameloft Club subscription. In separate news, the company is drawing plans to get more revenues from data services. It is aiming to increase contribution from data service segment to 25% in the next three years. Currently, the share of the segment stands at 10%-12%.

Auto stocks have opened the day mainly in the red with Maruti Suzuki Ltd and Force Motors Ltd leading the losses. As per a leading financial daily, Maruti Suzuki India Ltd is planning to use its cash reserves to buy real estate for dealers in India and build manufacturing plants for its Japanese parent Suzuki Motor Corp. in emerging markets like Latin America and Africa. As per the daily, the move is likely to disappoint investors. The company is also planning to invest a part of its reserves worth Rs 75 bn in mutual funds, debt funds and fixed maturity funds. The company's Board is yet to take a final call regarding the plan. These plans follow recent announcement by Suzuki Motor that it would invest Rs 30 bn in a plant in Gujarat and the cars thus produced will be sold to Maruti Suzuki. The company's Board will meet on 15th March 2014 to discuss its operational plans for the next fiscal year.

On the road back to a high growth rate

In terms of growth, the Indian economy has been on a downward slide in the last few years. It wasn't a long time ago when the economy was growing at about 9% a year. Now those days, seem to be history. The reasons are not hard to find. Policy paralysis, a multitude of scams, high inflation, poor job creation, delayed project clearances, bureaucratic/judicial hurdles and high interest rates have all contributed to the mess. It appears that growth will pick up only after a new government is sworn in.

However, many of the problems facing the economy are structural in nature. They won't go away just because we have a new government in New Delhi. Problems like land and labor reforms, real estate regulation, disinvestment, energy security, pricing of various goods, services and commodities and agricultural reforms are all very serious and need to be urgently addressed. A clear long term vision will be needed to tackle these issues successfully.

According to an article in the Hindu Business Line, many of the long term problems plaguing the Indian economy can be solved by corporate investment. Employment is a case in point. The software sector has created large scale employment in the country. It has improved the standard of living of many people. However, corporates won't invest in the economy unless they are offered a better environment. Only far reaching reforms, in various sectors will be able to attract corporate investment. In addition to this, several structural reforms will also be required. These pertain to reforms in the bureaucracy, judiciary and electoral politics. Infrastructure will also have to be upgraded across the country to encourage investment.

While structural reforms and corporate investment are two important aspects of getting growth back on track, there are other aspects that deserve attention too. India has many problems that are unique to the country. Therefore blindly copying western economic policies may not be a good idea. India will have to develop its share of home grown solutions for its economic problems. Another aspect is the fiscal deficit of the central government. It has been observed globally that countries fail to grow at a fast pace for very long while running high deficits. In the case of India, while individual state governments have, by and large, managed to balance their budgets, the central government has fallen woefully short in this regard.