Tech blue-chips top gainers

After a brief stint in the negative territory during early trades, the benchmark indices in Indian stock markets managed to move above the dotted line and close comfortably higher today. There was significant buying interest in software, power and auto stocks. While the BSE-Sensex closed higher by around 111 points (up 0.7%), the NSE-Nifty closed higher by around 22 points. The BSE Mid cap and the BSE Small cap ended flat in today's trade. Select stocks in engineering and cement space witnessed heavy profit booking.

As regards global markets, Asian indices ended higher today while European indices have also opened weak. The rupee was trading at Rs 52.76 to the dollar at the time of writing.

Software major Tata Consultancy Services (TCS) has announced the fourth quarter results of financial year 2011-2012 (4QFY12). The company has reported a 0.4% quarter-on-quarter (QoQ) growth in its sales and a 1.6% QoQ increase in its net profits. The growth in net sales was largely driven by a good growth in volumes which was 3.3% QoQ during the quarter. For the year ended March 2012 (FY12), sales grew by 31.0% Year-0n-Year (YoY). This came on the back of a 23% YoY growth in volumes and 1.3% YoY increase in average realization during the year. The growth in revenues was 2.3% QoQ on constant currency basis. In terms of US dollar revenues, the growth in sales was 2.4% QoQ during the quarter.

Operating margins declined by 1.6% QoQ to 27.7% during the quarter as compared to 29.2% seen during the previous quarter (ending December 2011). This was mainly due to higher selling, general and administrative expenses (as a percentage of sales). For FY12, margin at operating level was slightly lower at 27.6% as compared to 28.1% in the same period last year. TCS added a net of 11,832 employees during 4QFY12 and 39,969 employees during the fiscal. The attrition rate stood at 11.1% in IT services segment, lower than the 11.7% seen during the previous quarter (3QFY12). In the BPO segment, attrition came down to 21.6% as compared to 22.6% seen during 3QFY12. The stock gained nearly 13% in today's trade and featured amongst the top gainers on the benchmark indices.

HDFC Bank, one of the country's largest private sector banks, has inked pact with US based Wells Fargo bank to enable US-based NRIs to remit funds online or through phone to their beneficiaries in India. HDFC Bank, which tries to model its business on the lines of Wells Fargo has been trying to enhance fee based contribution. The bank has been able to grow its fee income base by 24% YoY in FY12. However, the proportion of fee to total income dropped to 23% as against 25% in FY11. Further, the gain on the fee income side has been eroded by the losses on revaluation and sale of investments due to higher bond yields, the absence of which would have otherwise aided the bank's other income.

Despite a relatively muted growth of 22% YoY in loan book, HDFC Bank completed the latest fiscal (FY12) showing no other signs of pain. However, with its customer base nearing 22 m, HDFC Bank managed to once again outpace the industry average. Backed by more than 25% YoY growth in loans to retail customers, the bank has managed the balance sheet expansion.

Indian stock markets climb further
01:30 pm

Indian stock markets gained further momentum in the last two trading hours. Majority of the sectoral indices are trading positive with technology and power stocks leading the rally. Capital goods, Auto, pharma and FMCG stocks are the major losers.

The BSE-Sensex is trading up by 105 points and NSE-Nifty is trading up by 24 points. Both BSE Mid cap index and BSE Small cap indices are marginally up as well. The rupee is trading at 52.7 to the US dollar.

Majority of the energy stocks are trading positive with Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) trading the strongest while Petronet LNG is trading weak. As per a leading financial daily, India has requested Qatar to supply 3 million tonne of liquefied natural gas (LNG) on an urgent basis. The gas will be imported by Petronet LNG (PLNG) and Gas Authority Of India Ltd. (GAIL). Currently, India imports 7.5 million metric tonne per annum (MMTPA) of LNG from Ras Gas, Qatar. This is in line with a 25 year contract signed by Petronet LNG limited (PLL) in July 1999. The country now needs additional long-term tie up for 15 MMTPA of LNG. Reportedly, Qatar has expressed interest in an offer from Oil and Natural Gas Commission (ONGC) for a joint participation in exploration and production projects in third-world countries.

Most of the food stocks are trading positive with Lakshmi Energy and Tata Global Beverages being the biggest gainers. As per a leading financial daily, food major Nestle India is likely to bear an additional tax burden of Rs 1 bn in Calendar Year 2012. This is on account of higher rate of taxation. The increase would be largely due to higher payout of indirect taxes particularly the excise duty. In the Union Budget 2012-13, the government had hiked the excise duty by 2% from 10% to 12%. Nestle stock is up 0.2%.

IT stocks lead the rally
11:30 am

Indian stock market indices have managed to erase early losses and are trading strong over the last two hours of trade. IT and power stocks witnessed maximum buying interest while Oil and gas and capital goods stocks witnessed maximum selling pressure.

The BSE-Sensex is up by 60 points, while the NSE-Nifty is up by 9 points. BSE Mid cap index and the BSE Small cap index are down by 0.25% and 0.25%. The rupee is trading at 52.82 to the US dollar.

Energy stocks are trading in the red led by Reliance Industries Limited (RIL) and Oil India. According to a leading financial daily, Reliance Industries proposal to invest in survey of all discoveries made in KG-D6 gas block has been rejected by the government. Instead, they have been directed by the government to restrict pre-development expenses only to fields that have been proved to be commercially viable. RIL and its British partner BP Plc had proposed undertaking concept validation and Front End Engineering Design (FEED) for all the 16 gas discoveries surrounding the currently producing Dhirubhai-1 and 3 fields in the KG-D6 block. In all, 18 gas and one oil discovery has been made in the KG-D6 block in Bay of Bengal. Of these two gas finds, D1 and D3, and one oil, D-26, have been put on production.

Automobile stocks are trading weak led by Exide Industries and Ashok Leyland. According to a leading financial daily, workers at Maruti Suzuki India's Manesar plant have demanded a five time increase in their basic salaries. The newly formed body, Maruti Suzuki Worker's Union, has submitted a list of about 20 demands to the management for consideration while finalising the three-year wage settlement agreement. The workers have also asked for linking of dearness allowance (DA) to basic pay instead of a fixed amount being given currently. Among other demands, it is understood that the workers have also asked for increasing the number of privilege and casual leaves, offer conveyance services within 100 km distance from the plant and help the employees in getting affordable accommodation.

Indian stock markets open in red
09:30 am

Barring Singapore (up 0.4%), most of the other Asian stock markets have opened the day on a negative note. Markets in China (down 1.4%), Japan (down 0.4%) and Hong Kong (down 04%) are leading the losses in the region. The Indian stock markets have opened the day on a flat note with a slight negative bias. Stocks in the technology and consumer durables sectors are witnessing gains while those in energy and FMCG sectors are seeing some losses.

The BSE-Sensex is down by around 12 points (0.07%), while the NSE-Nifty is down by around 2 points (0.04%). Small cap stocks are trading in the green as well with the BSE Small cap index up by around 0.03%. However, mid cap stocks are trading in the negative territory, with the BSE Mid cap index down by 0.2%. The rupee is trading at Rs 52.75 to the US dollar.

Telecom stocks have opened the day on a negative note with Idea Cellular and Bharti Airtel leading the pack of losers. The Telecom Regulatory Authority of India (TRAI) has proposed a steep hike in the minimum price for the 2G license auction. As per the regulator's proposal, the 2G license auction would fetch the government nearly Rs 7,000 bn of revenues. This is nearly 13 times the amount that was collected in the previous round of granting 2G licenses in 2008. The price is also nearly 1.08 times the price of the 3G spectrum, which is considered to be more valuable. The proposal has caused an outrage amongst all the telecom operators. The incumbents Bharti Airtel, Vodafone, Idea Cellular and even Reliance Communications have all united to voice their dissent for this pricing. Though the regulator's proposal will help the government's coffers and help it to meet its fiscal deficit targets. But the move will have a negative impact on health of the telecom sector.

Cement stocks have opened the day on a mixed note. On one hand Mangalam Cement and Shree Cement are witnessing selling pressure. On the other hand, stocks of India Cement and UltraTech Cement are witnessing buying interest. India's largest cement player UltraTech Cement has announced its financial results for the fourth quarter (4QFY12) and financial year ended March 2012 (FY12). During the quarter, the company's sales rose by 18.9% year-on-year (YoY). The growth was driven by 8.4% increase in sales volumes, while the remaining came on account of improvement in cement realisations. The company's operating profit rose by 22.2% YoY as operating costs moderated slightly during the period. Other income shot up by 114.9% YoY. On the other hand, interest expenses declined by 29.3% YoY. As such, the profit before tax rose by 43.3% YoY during 4QFY12. However, the effective tax rate was higher 14.9% YoY. Net profits grew in tandem with topline growth at 19.3% YoY.

Navratnas : A colossal failure

The Public sector enterprises (PSE) have been a major disappointment for the retail investors. Ironically, most of them have been have been titled 'Navratna' by the Indian Government, giving investors a false notion of safety and raising their expectations in vain. Over the last five years, most of these companies have failed to deliver both in terms of financial and stock market performance. Forget them being the global giants; they are having a hard time in operating in domestic business environment. Sample this. Out of 16 such companies, only seven have generated positive returns. So what is ailing these 'Navratnas'? The companies were kept under Government control to ensure reasonable and uniform distribution of scarce and key resources. However, Government control has altogether taken a different meaning. It now signifies lack of aggression and policy paralysis, rendering the entire business unviable. And we have diverse and enough instances to support this.

Take the oil sector for example. Both downstream companies and upstream sector lag way behind their potential with regards to financial performance. The fact that they control almost the entire market share doesn't help as they have no control over their earnings in a price regulated environment. Same is the story in the power sector. The Government is disinclined to go for a reasonable hike in power prices for the fear of losing votes. And the victim of this vote bank politics are companies like Power Finance Corporation and Rural Electrification Corp are stuck with huge pending receivables. Lack of efficient management and aggression is another reason, especially for companies like Steel Authority of India (SAIL), National Aluminium Company Ltd. (NALCO) etc. These have failed miserably in controlling costs unlike their private counterparts and have been missing the targets with respect to capacity expansion. For companies like Bharat Heavy Electricals (BHEL), limited capacity issues are reflected in shrinking order book. While the company is losing due to lack of aggression, the Chinese players are making the best of the situation by offering faster services at cheaper rates. The list of victim is long including the likes of National Mineral Development Corporation (NMDC), the largest iron producer slipping on volumes front due to infrastructural and Naxalite issues, Bharat Heavy Electricals (BHEL) dragging its heels due to slow order execution of highly complex defence deals, Shipping Corporation of India (SCI) struggling at margin front due to stagnant fleet size and Neyveli Lignite that despite being a fully integrated player is an indirect victim due to delay in payments by companies like BHEL.

With the possible exception of Power Grid Corporation, the performance of PSU's make the verdict loud and clear. Unless the Government stops undue interference , takes an active interest and overhauls the policies in the various sectors, there is little hope for the 'Navratnas'. It's time to grant them operational flexibility and let them realize their true potential. Unless that happens, investors are probably better off placing their bets elsewhere.