Tech heavyweights spoil the show

Failing to keep up with the momentum, IT heavy weights and banks reported maximum selling pressures in the last hour of trade. Consequently, the Indian equity markets closed the day on a pessimistic note. Stocks from the oil and gas and Auto sectors posted healthy gains today. The BSE Small Cap and the BSE Mid Cap indices were down by 0.2% and 0.6% respectively. The BSE-Sensex closed lower by 82 points and the NSE-Nifty was down by 24 points.

On the global front, Asian indices closed the day on a mixed note and European indices too opened the day on a mixed note. The rupee was trading at Rs 61.09 to the dollar at the time of writing.

The stocks from the Finance space closed the day today on a mixed note. Stocks such as Power Finance Corporation and Indiabulls Financial Services were leading the pack of gainers, whereas SREI Infra Finance and IFCI led the pack of losers.

As per a leading financial daily, the rating agency ICRA expects the credit growth for retail NBFCs to halve in 2013-14. The credit growth is expected to halve to 8-10% in FY14 as against 19% growth in FY13. During 9mFY14, the retail credit has grown by mere 5% as against 15% reported same period a year ago. The issues encumbered by segments such as commercial vehicle (CV), construction equipment (CE) and gold loans have hampered the credit growth of retail NBFCs. Delay in projects and mining issues have added to the difficulties of the CV and CE sectors. Further regulatory policies have restricted the gold loan demand adding to the woes of retail NBFCs. Besides, the asset quality concerns for retail NBFCs linger with NPAs moving up to 4.3% during the quarter ended December 2013 as against 3.5% in March 2013. The agency also expects the restructured assets for retail-NBFCs to hover in the range of 1.25-1.5% going forward.

Barring few such as AGC Networks, Mahanagar Telephone Nigam Limited (MTNL), Bharti Airtel, stocks from the Telecom sector closed the day on a weak note with Reliance Communications and Tata Communications leading the pack of losers.

The telecom user base numbers were announced for the month of January 2014 recently. On a month on month basis, the total telecom user base grew by 0.75%, as per telecom regulator - Telecom Regulatory Authority of India (TRAI). The share of urban telecom users stood at 59.86% as compared to 60% earlier, thereby indicating the addition largely coming from rural parts of the country. The monthly increase in rural subscriber base grew at 1.17% as compared to 0.47% for urban users. As for the wireless subscriber base, the same increased to 893.3 m as compared to 886.3 m in December 2013. Bharti Airtel added the maximum number of users during the month, adding 2.4 m users to its subscriber base, followed by Vodafone which added 1.78 m users during the month. The two companies had a total market share of 22.5% and 18.16% respectively. Idea Cellular on the other hand added 1.5 m users, while Reliance Communications added 0.4 m users. As for broadband numbers, the telecom regulator reported that top five broadband service providers constitute 82.57% of market share of total broadband subscribers.

Energy & banking stocks, major gainers
01:30 pm

Indian share markets continued to remain firm in the post-noon trading session. Barring IT and pharma, all the sectoral indices are trading in the green with oil & gas, banking and engineering stocks being the biggest gainers.

BSE-Sensex is up 81 points and NSE-Nifty is trading 30 points up. BSE Mid Cap is trading 0.7% up and BSE Small Cap is trading up by 0.6%. The rupee is trading at 61.0 to the US dollar.

As per a leading financial daily, the index of industrial production (IIP) bounced back recording a growth of 0.1% in January. Backed by higher power generation and increased mining output, IIP returned to the growth track after contracting for three straight months. However, the manufacturing sector remained dismal recording a contraction of 0.7% in January as compared to a 2.7% growth in the year-ago period. For the cumulative period April 2013- January 2014, IIP remained static vis-a-vis a 1% growth clocked in the corresponding period last year.

Most of the large IT stocks are trading in the green with Moser Baer and Tech Mahindra being the biggest gainers whereas Infosys is the biggest loser. As per a leading financial daily, both BSE and NSE have approved the merger of Mahindra Engineering Services with Tech Mahindra, saying that the amalgamation does not violate securities laws norm. The Boards of the two companies had given a go-ahead for the amalgamation in November 2013 itself. The no-objection approval has a validity period of six months and in this stipulated time-frame; the company would have to file the scheme with the High Court for further clearance. Tech Mahindra's stock is trading up by 0.9%.

Broad based buying in markets
11:30 am

After opening firm, the Indian indices are trading well above the dotted line in the morning session. Apart from software and pharma stocks, all sectoral indices are trading in the green. The buying interest is highest auto and banking stocks.

The BSE-Sensex is trading up 90 points and the NSE-Nifty is trading up 30 points. The BSE Mid Cap index is trading up 0.6% and the BSE Small Cap index is trading up 0.5%. The rupee is trading at 60.95 to the US dollar.

Software stocks are trading mixed today. While Tata Consultancy Services (TCS) is leading the gainers, Infosys is leading the losses. India's second largest software firm, Infosys, might need a longer time to get back to an Industry level growth rate, according to Chairman N.R. Narayana Murthy. At an investor conference, he has expressed his displeasure at the problems that the company is facing. As per him, Infosys has not been able to take any advantage of the depreciation of the rupee and that operating margins will remain under pressure in the near term. He expects growth to pick up only towards the end of FY15. He also indicated that the exodus of management talent from the company may not be over by saying that many more resignations could be expected. Infosys is trading down 7% today.

Indian Pharma stocks are trading on a mixed note today. While Sun Pharma is leading the losers, Orchid Chemicals and Panacea Biotech are trading firm today. As per a leading business daily, Sun Pharma has received an import alert from USFDA (United States Food and Drug Administration) for all products manufactured at its Karkhadi plant in Gujarat. It received an import alert and effectively a ban for all its API (active pharmaceutical ingredients) and formulations that it manufactures at its Gujarat plant. It may be noted that the move comes when its subsidiary, Caraco recently received USFDA approval for marketing of the company's Risperidone, a mental disorder drug. Also that the company has recently recalled over 2,500 drug bottles from US markets after it received customer's complaints. The company's financial impact on the ban of Gujarat plant is yet to be known. The ban is the result of the detention without physical examination of drugs which have not met the good manufacturing practices, according to the USFDA norms. Further, Ranbaxy and Wockhardt are already under the USFDA scanner for numerous import alerts.

Indian share markets open firm
09:30 am

Barring Singapore (down 0.3%), the major Asian stock markets have opened the day on a positive note with stock markets in Hong Kong (up 0.5%) and Taiwan (up 0.8%) leading the gains. The Indian share markets have opened the day on a firm note. Barring software and healthcare, all sectoral indices have opened in the green with the stocks in the banking and energy sector leading the gains.

The Sensex today is up by around 20 points (0.1%), while the NSE-Nifty is up by about 11 points (0.2%). The mid and small cap stocks have also opened in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.6% and 0.4% respectively. The rupee is currently trading at Rs 61.00 to the US dollar.

The retail inflation for the month of February has been reported at 8.1%, down to 25-month low. Prior to this, the lowest consumer price inflation (CPI) was recorded in the month of January 2012 at 7.65%. For the month of January 2014, the retail inflation number stood at 8.79%. The inflation has come down mainly on account of easing onion and potato prices. As per CPI data released by the Government, the overall inflation in the food basket, including beverages, has slowed to 8.57 % in February 2014 from 9.9% in January 2014. It is to be noted here that the retail inflation has been easing for three months now. While the industry is demanding a cut in interest rates to support growth, the Reserve Bank of India (RBI) has maintained a hawkish stance to control inflation.

Mining stocks have opened the day mainly in the green with Coal India Ltd and Sesa Sterlite Ltd leading the gains. Coal India Ltd has announced that its officers will be going on a three-day strike from today to demand for settlement of pay-related issues. As per a statement issued by the company, Coal Mines Officers' Association of India has served a strike notice against non-finalization of performance related pay, new pension scheme and other demands. It is to be noted here that Coal India accounts for 80% of domestic output. The strike is likely to impact the production adversely by around 1.5 million tonnes per day and tighten domestic supplies.

Side effects of Rupee rally

The Rupee has logged the smartest gain among major emerging market currencies since touching a life-time low in late August last year. The Rupee has been largely resilient, following its drastic depreciation last year. A slew of measures by the Reserve bank of India and steps to contain current account deficit by the government have helped check the slide.

This is good news for importers, who import petroleum and edible oil, and for those looking to travel overseas. But a stronger Rupee means that those who depend on remittances from relatives abroad will get fewer rupees for every dollar. Similarly, exporters will see a dip in realization.

The Rupee rally was also due to global factors. On the global front, the Rupee has benefitted from the country being in a relatively better off position with respect to other emerging market currencies. Currencies of countries such as Russia have fallen over 10% on the back of geo political unrest and on the back of weakening economy. The Chinese economy has slowed down and could be heading for a soft landing.

While there is a basis to this optimism, there is also room for caution. It is by no means certain that the election will throw up a decisive verdict. The challenges posed by the external environment, highlighted by the crisis in Ukraine, are far from over. The US Fed could hasten the process of QE withdrawal which could put pressure on the Rupee. The looming threat from El Nino-induced weather aberrations raises fears of a fresh spike in global oil and agri-commodity prices, just when inflationary pressures are easing. All the above factors could lead to macroeconomic instability which could result in the Rupee becoming volatile.