Markets maintain the momentum

Maintaining the buoyancy, Indian equity markets continued to gain momentum in the afternoon trading session. Backed by foreign institutional buying and gains in Asian stocks, the Indian benchmark indices closed the day on a positive note. Stocks from sectors such as capital goods and metals posted healthy gains today. However, the BSE Small Cap index was down by 0.07% and the BSE Mid Cap index was seen up by 0.4% respectively. The BSE Sensex closed higher by 40 points and the NSE-Nifty was up by 12 points.

On the global front, most of the Asian indices closed the day on an optimistic note and most of the European indices too opened the day on a firm note. The rupee was trading at Rs 60.13 to the dollar at the time of writing.

Barring few such as Strides Arcolab, Cadila Healthcare and Piramal Enterprises, stocks from the Indian Pharma sector closed the day on a weak note. Stocks such as Indoco Remedies and Glenmark Pharma led the pack of losers today.

As per a leading financial daily, India's generic drug manufacturers are under scrutiny once again. The Regulator has emphasized upon quality over price. It is believed that the recent regulatory warnings are expected to attach a new premium on manufacturers who would demonstrate strong quality over time and contain supply disruptions. Few Indian pharmaceutical companies have already faced setbacks. Ranbaxy laboratories had faced imports ban from all the Indian plants by FDA. This was due to constant production quality lapses. Also, the US health regulator had banned medicines made at one of the plants of Sun Pharmaceuticals Industries Ltd. Even Dr Redyy's Laboratories Ltd and Wockhardt Ltd have been involved in recent major product recalls. Therefore, such regulatory warnings for Indian pharmaceutical industry will add a new emphasis on quality of medicines.

Barring Indian Bank and United Bank of India, stocks from the PSU banks sector closed the day on a firm note with Bank of Maharashtra and Bank of Baroda leading the pack of gainers. As per a leading business daily, the consortium of lenders led by State Bank of India (SBI) is expected to declare ailing Kingfisher Airlines (KFA) a willful defaulter. Once the audit report from Ernst and Young confirms misallocation of funds by KFA, then the banks forming part of consortium would declare it as a willful defaulter. SBI has already provided fully for the KFA exposure. Of the total consortium lending of Rs 70 bn, banks have been able to recover merely 6 bn through sale of pledged shares. While the recovery efforts are still underway, the banks are currently battling 14 cases against KFA in various debt recovery tribunals. Besides SBI, Bank of Baroda, Indian Overseas Bank and Punjab National Bank were part of the consortium lending to KFA.

Indian share markets remain buoyant
01:30 pm

Indian share markets pared gains but continued to remain buoyant in the post-noon trading session. Barring IT, FMCG and pharma, all the sectoral indices are trading in the green. Metal, oil & gas and capital goods stocks are the biggest gainers.

BSE-Sensex is up 54 points and NSE-Nifty is trading 18 points up. Both BSE Mid Cap and BSE Small Cap indices are trading up by 0.5%. The rupee is trading at 60.2 to the US dollar.

Most of the FMCG stocks are trading in the green with Gillette and Kokuyo Camilin being the major gainers whereas Lakshmi Energy and Bata India are a few stocks trading in the red. As per a leading financial daily, value added hair oil segment is witnessing increased competition with multinational companies vying with each other to enter this segment. The value added hair oil segment has grown bigger than the coconut hair oil segment and commands a 58% share in the Rs 81 bn hair oil market. Besides being priced at a premium, value added hair oils are growing faster than coconut hair oils thereby attracting multinational companies. After FMCG behemoth, Hindustan Unilever launched premium hair oil Dove Elixir last year, French major L'Oreal has launched Six Oil Nourish recently. Even domestic companies have increased focus on this segment. Marico wants to increase sales contribution from ayurvedic hair oils. Even Bajaj Corp and Dabur are pushing value added hair oil products aggressively.

Majority of the mining stocks are trading in the green with Sesa Sterlite and Coal India being among major gainers. As per a leading financial daily, Coal India Ltd (CIL) will be adding 25,000 workmen over the next five years whereas 75,000 workmen are scheduled to retire during this period. The net reduction of 50,000 workmen is expected to double productivity per employee and reduce cost of production by 10%. For CIL, wages and salaries is the single largest component in the cost of production and stands at around 46% after the recent wage hike. Even the average age of the employees will fall from 50 to 45 years over the next five years. Presently, CIL has a staff strength of 3.45 lakh out of which 40,000 are officers and the rest are workmen. Coal India stock is currently up 2.2%.

Markets remain range bound
11:30 am

The Indian stock markets continued to trade higher led by sustained buying activity across index heavyweights, although trading was largely within a range during the last two hours of trade. Majority of the sectoral indices are trading on a positive note, barring a few like FMCG and healthcare stocks. The stocks from realty and metal sectors are leading the pack of gainers.

The BSE-Sensex is trading higher 89 points and the NSE-Nifty is trading higher 29 points. The BSE Mid Cap index is trading up by 0.8% and the BSE Small Cap index is trading up 0.7%. The rupee is trading at 60.49 to the US dollar.

Majority of the steel stocks are trading higher today. Steel Authority of India (SAIL) and Jindal Steel are leading among the stock of gainers. As per a leading business daily, steel major Tata Steel has sold its 25 acres land parcel located in the western suburbs of Mumbai for a sum of Rs 11.55 bn through e-auction. The company opted for real estate developer Oberoi Realty, which emerged as the highest bidder for the process of auction. The participant for the auction included various well known developers. Tata Steel had launched the process for sale during December last year. The proceeds would help the company to lower its debt burden as well as fund expansion. The stock of Tata Steel is trading up by 1.8%, while Oberoi Realty is trading up by as much as 12% today.

Finance stocks are trading higher today. Motilal Oswal and Srei Infrastructure are leading the pack of gainers, while JM Financial is trading lower. As per a leading business daily, the Election Commission (EC) is likely to give conditional nod to RBI's proposal to issue fresh bank licences today. Notably, with Lok Sabha election's model code of conduct in place, it is mandatory to seek EC's permission before announcing any major policy decisions. So RBI moved for EC's clearance after the poll dates were announced on March 5. The commission could either defer the decision or give the clearance with conditions. The condition could include barring the prospective licensees not to advertise in newspaper and preventing them from making donations to any political parties. Couple of non-banking finance firms who have applied, are awaiting their bank licences after the RBI's Bimal Jalan Committee scrutinized 25 applications and gave its recommendations by the end of February 2014. Therefore, all eyes are now on the RBI and the final list of applicants who would be allotted the bank licenses.

Indian equity markets open in the green
09:30 am

The major Asian stock markets have opened the day on a firm note with the stock markets in South Korea (up 1.1%) and Hong Kong (up 1.1%) leading the gains. The Indian equity markets have also opened the day on a firm note. Barring software and healthcare, the sectoral indices have opened firm with stocks in the realty and metal space leading the gains.

The Sensex today is up by around 75 points (0.4%), while the NSE-Nifty is up by about 25 points (0.4%). The mid and small cap stocks have opened in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.6% each. The rupee is currently trading at Rs 61.24 to the US dollar.

Auto stocks have opened the day mainly in the green with Tata Motors Ltd and Ashok Leyland Ltd leading the pack of gainers. As per a leading financial daily, Tata Motors Ltd is considering increasing the prices of its products from the next month. This will be in order to offset high input and operational costs and unstable forex situation. The company is likely to increase the price of its commercial vehicles portfolio by about 1%. Already, it has stated that it is also mulling increasing prices of its passenger vehicles by 1%-2 %. In another development, the company is expected to launch two new cars - Bolt and Zest by July 2014. Both the cars are expected to cost between Rs 5-7 lakhs.

Energy stocks have opened the day on a mixed note with GAIL (India) Ltd and Indian Oil Corporation Ltd leading the gains. However, Jindal Drill Ltd and Oil India Ltd were leading the losses. As per a leading financial daily, Oil and Natural Gas Corporation Ltd (ONGC) and Russian state-controlled company Rosneft, the world's top listed oil producer by output may join forces to supply oil to India over the long term. At a time when European Nations are threatening to cut their reliance on Russian oil and gas over its annexation of Crimea, Russian officials are trying to seek alliances in the East. Roseneft has also agreed with ONGC to join forces for Rosneft's yet-to-be built liquefied natural gas (LNG) plant in Russia to the benefit of Indian consumers. However, no additional details have been shared regarding the cooperation with ONGC.

It's time for reforms in labor market

India's restrictive labour laws have always been a roadblock for India Inc. One of the most challenging laws for regular employers has been the Industrial Dispute Act. To give you an insight, the act requires employees to be on a regular payroll. Further, as per the act, there needs to be a prior permission from the Government before laying off an employee when the workforce is more than 100.

However, the employers have found a short term solution for the issue by hiring more contract workers. As per an article in Livemint, contract employees account for 34% of the total work force. The sample for the companies considered under survey comprises of 82 listed firms that account for 64% of market capitalization and 46% of the revenues. The trend is more prominent in cement, auto and energy sectors with around 46% share of contract workers. However, in the services segment that needs specialized skills, the share is just 8%.

While this trend has given some sense of power to corporates, the effect has been quite opposite on the power of the labour union. As per the Labour Bureau Statistics, the number of industrial disputes has fallen quite drastically since 1990. However, this does not mean that labour conditions have become better. It's just that their influence and bargaining power have suffered.

An article in Livemint presents an interesting example of the impact of the trend. Recently, the management at Toyota Kirloskar did not entertain employees' demand for higher wages. This is because the management apparently ran the plant using contract workers even during the lockout. Hence, the management's will prevailed as it used contract labour against the regular one. However, it was quite a different case than that of Maruti Suzuki. In the latter case, both the categories joined hands in their demand for offering regular employment to contract workers. It is important to note here that both the events have are related to the auto sector. It is a sector where the share of contract workers stands at around 47% in the total workforce.

Given the lack of opportunities in the job market and huge young population of India, it is likely that the two groups will weaken the labour union's power rather than strengthening it. But will this be beneficial for the corporates and Indian economy in the long run? We don't think so. While the companies may have found temporary solutions by relying on contract labor, the practice adversely impacts employers' investment in human capital and deprives organizations of rich experience of long term regular employees. It also does not guarantee job security for the employees. It is time that the Government reforms labour laws and comes up with a long term solution that benefits all the stakeholders.