Sensex 0.5% away from the 23 k mark

After starting the day on a firm note, the Indian stock markets traded in a range bound manner for the rest of the day. The BSE-Sensex closed at 22,876 points, which is higher by about 119 points and about 0.5% away from the 23,000 mark. The NSE-Nifty ended higher by about 25 points or 0.4%. While stocks from the realty and consumer durables spaces were least favoured today, engineering and banking stocks were amongst the top preferred. The BSE Mid Cap and BSE Small Cap indices ended the day on a firm note with gains of about 0.12% and 0.22% respectively.

Stock markets in other parts of Asia ended the day on a mixed note with Japan closing higher by about 1.1% while Hong Kong and China closed lower by about 1% and 0.3% respectively. The rupee was trading at Rs 61.07 to the dollar at the time of writing.

Steel stocks ended the day on a mixed note with Maharashtra Seamless and Jindal Steel trading weak, while Steel Authority of India (SAIL) and Tata Steel led the pack of gainers. As per the World Steel Association (WSA), India produced 7.25 m tonnes of steel in the month of March 2014. This takes its share to a little over 5% of global output in the month. Production volumes were higher by about 3.9% on a YoY basis, as compared to the world average growth of 2.7% YoY. China's steel production stood at a massive 70.3 m tonnes, a figure that forms nearly half of the world's steel production. However, in terms of a year on year growth, the same was higher by only 2.2%. India is the world's fourth largest steel producing nation, after China, Japan and South Korea. As per the WSA, the crude steel capacity utilisation ratio stood at 79% in March 2014.

Stocks of pharmaceutical companies ended the day on a firm note led by IPCA Labs, Ranbaxy Laboratories and Sun Pharmaceuticals. As per a leading business daily, Lupin has entered into an agreement with Yoshindo Inc., which is a Japan based pharmaceutical company to form a joint venture company named YL Biologics (YLB). This company will be conducting development of certain biosimilars - which are generic version of biotech drugs. This company will also carry out functions such as regulatory filings and obtaining marketing authorisations in Japan. As per Lupin, YLB will in-license Monoclonal Antibodies from Lupin and also partner with other companies across the globe for the Japanese market which already has a clear cut regulatory regime in place for the development and commercialisation of biologicals. As per the business daily, the Japanese biological market is valued at about US$ 12 bn (Rs 732 bn) and is believed to be growing at a pace of about 3% per annum. Monological bodies have a share of about 30% of the market; this segment is believed to be growing at a relatively faster pace of 5% annually. This is a positive development for Lupin and will further strengthen its presence in the Japanese market, which has proven to be a tough nut to crack for many other pharma companies including Cadila Healthcare.

Buoyancy continues across sectors
01:30 pm

The Indian stock markets continued to scale higher in the last two hours of trade on the back of sustained buying activity across index heavyweights. Gains were led by stocks from the capital goods and consumer durable segments. The stocks from realty sector are, however, trading marginally lower.

The BSE-Sensex is trading higher by 105 points and the NSE-Nifty is trading higher by 27 points. The BSE Mid Cap index is trading up by 0.4% and the BSE Small Cap index is trading up 0.5%. The rupee is trading at 61.07 to the US dollar.

Stocks from Food & tobacco sector are trading mixed. While VST Industries and Ruchi Soya are trading higher, Britannia is trading down. As per a leading financial daily, GSK Consumer Healthcare has said in a filing to exchanges that multi-billion dollar deal amongst its parent GlaxoSmithKline Plc (GSK) and Swiss drug major Novartis is not likely to affect the company's Indian business unit. For instance, GSK and Novartis have agreed to form a joint venture wherein OTC (over-the-counter) division of Novartis would be combined with GSK's consumer business. The joint venture in which GSK will hold 63.5% is expected to have annual sales of about US$ 10 bn. According to the filing, the JV would exclude Indian GSK Consumer, where ownership would directly be held by GSK Plc. It may be noted that the parent, GSK has earlier increased its stake to 75% in the company through an open offer of Rs 64 bn.

In a move to strengthen the Indian banking system, RBI has barred Indian manufacturing and infrastructure companies from repaying their bank loans through ECB (external commercial borrowing) route availed at the bank's overseas branches or subsidiaries. The central bank's rationale for the same is that risk remains intact in the Indian banking system when ECB is availed from banks overseas branches. RBI has also cautioned the commercial banks from issuing guarantees or letter of credit to Indian companies' overseas JV or subsidiaries for purpose other than ordinary business course of that overseas arm. It has also sought out to effectively monitor the end use of funds to overseas arms of Indian companies. This is in order to bring down the unsystematic business risk of Indian banks.

Markets at all time highs
11:30 am

After opening in green, the Indian Indices are still going strong with Sensex and Nifty reaching new record highs. Maximum buying interest is seen in Engineering and Healthcare stocks.

The BSE-Sensex is trading up 109 points and the NSE-Nifty is trading up 26 points. The BSE Mid Cap index is trading up 0.5% and the BSE Small Cap index is trading up 0.6%. The rupee is trading at 61.10 to the US dollar.

It appears that the slowdown in the economy as well as the decontrol of petroleum products has had an effect on demand for fuel. India's fuel demand has risen by its slowest pace in the last 12 years. The total petroleum products demand has grown by just 0.7% YoY in FY14 to 158.197 m tonnes. This is the slowest growth seen since FY02. The main culprit was diesel which recorded a drop in consumption by 1% YoY largely due to the steady price increases. In Fy13 diesel demand had risen by 6.7% YoY. Diesel rates have increased by Rs 8.3 since Jan 2013. Even though petrol prices have been fully decontrolled, the current selling price of diesel still is about Rs 5.5 per litre lower than its production cost.

Automobile stocks are trading mixed today. Hero Motor Corp. and Force Motors are leading the gainers. Maharashtra Scooters and Tata Motors are leading the losers. According to a leading business daily, Maruti Suzuki has lost its second position in the car exports to Nissan Motors India. Nissan has moved ahead of Maruti Suzuki in terms of export numbers as its current models Mirca and the Sunny sedan has surpassed sales numbers of Maruti's top sellers like A-Star, Alto and Dzire. Nissan exported 1.16 lakh units in FY14 while Maruti's exports were restricted to 1.01 lakh cars. Hyundai Motor India retained its top slot by shipping 2.33 lakh cars in the last fiscal year. Maruti's biggest market so far has been Europe but now it would be concentrating on Middle East, Africa and the South East Asian markets for exports. The company has already started producing the left hand drive variants of its popular models like Swift, Dzire and Ertiga MPV to tap the new geographies. Maruti Suzuki is trading flat today.

Indian share markets open firm
09:30 am

Barring Japan (up 0.6%), the major Asian stock markets have opened the day in the red with stock markets in Hong Kong (down 0.7%) and Singapore (down 0.7%) leading the losses. The Indian share markets have opened the day on a positive note. Barring metal, realty and FMCG, the sectoral indices have opened in the green with stocks in the energy and capital goods sector leading the gains.

The Sensex today is up by around 100 points (0.4%), while the NSE-Nifty is up by about 22 points (0.3%). The midcap and smallcap stocks have also opened in the green with BSE Mid Cap and BSE Small Cap cap indices up by around 0.6% each. The rupee is currently trading at Rs 61.07 to the US dollar.

Private Banking stocks have opened the day on a mixed note with Dhanlaxmi Bank and Yes Bank leading the gains. However, Indusind Bank and City Union Bank were facing selling pressure. HDFC Bank has announced results for the year ended March 2014 .The bank has reported 17% YoY and 26% YoY growth in net interest income and net profits respectively in FY14. The growth in the net interest was on the back of 26% YoY growth in advances. The net interest margins (NIMs) moved up slightly to 4.4% at the end of FY14, despite the fall in CASA proportion. The other income for the year grew by 17% YoY, with fees and commissions growing at 11% YoY. The cost to income ratio dropped from 49.6% in FY13 to 45.6% in FY14. The net NPA to advances ratio moved up from 0.2% of advances in FY13 to 0.3% in FY14. Restructured loans were also 0.2% of loan book at the end of March 2014. At the end of the year, the Capital adequacy ratio (CAR) stood at 16.1%. The Board has recommended a dividend of Rs 6.85 per share.

Telecom stocks have opened mainly in the green with MTNL and Tata Teleservices Ltd leading the gains. As per the latest data released by industry body Cellular Operators Association of India (COAI), the number of mobile subscribers on GSM network grew by 1.16 % on a month on month basis to 721.93 million in March 2014. The number excludes subscribers of Reliance Communications and Tata Teleservices. These players have GSM licenses but do not report numbers to COAI. However, it is important to note here that the growth momentum has slowed down in March. The growth during the month was led by Idea Cellular Ltd, which added over 2.23 million subscribers, followed by Vodafone with 2.22 million and Bharti Airtel with 1.89 million. The latter leads GSM mobile services market with a subscriber base of 205.39 million

Is India failing to capitalize on its demographic dividend?

The Indian economy has been on a slow track for quite some time now. However, despite a lot of things going wrong, what makes the country stand apart is the huge demographic dividend it enjoys. The country is a land to the highest share of youngsters which can be a huge asset for any economy. This is because it also implies a higher proportion of working age population with respect to its entire population. However, this very strength may become a huge liability if it is not given the right opportunities.

Unfortunately, the country seems to be failing to harness the youth capital. Some of the obvious reasons are slowing economy and hence lesser employment opportunities. Other reasons are structural in nature, for e.g., lesser need of human capital with rising mechanization and automation and more expansion in service sector jobs which is less labor intensive.

What complicates the issue further is the mismatch between the available and required skills. The root cause of the same lies in a flawed education system which insists on rote learning with little application in job field. Hence, even in cases when people are qualified, they are hardly competent to take up the available jobs.

On the top of all this, we have archaic labour laws. The same restrict right sizing of manpower. In times when the markets are driven by demand and customers, these laws have taken away the flexibility from the firms in managing manpower as per the changing demand and trends. As such, firms have switched to hire contract labour. This trend of rise in the contract labour has come along with increasing labor unrest due to underlying job security.

Gradually, because of the above mentioned issues, the growth pattern in the economy is getting distorted with huge gap between rich and poor class. One should not forget that the economic disparity has been the major cause of social unrest and anarchy. If the Government fails to address these issues and to keep its youngsters employed, the much hailed demographic dividend can become the biggest liability for India.