Selling intensifies in final hour

The Indian stocks ended the day on a weak note with the market further declining during the final hour of trade. The BSE-Sensex closed with losses of about 185 points or 0.8%. The NSE-Nifty closed lower by about 64 points or 0.9%. Barring stocks from the consumer durables and power spaces, losses were seen across the board. Information technology and realty stocks were amongst the least preferred today. The BSE Mid Cap and BSE Small Cap indices ended the day on a weak note as well, with the indices closing lower by about 0.1% each.

Stock markets in other parts of Asia ended the day on a weak note with Japan, China and Hong Kong closing lower by about 2.9%, 0.9 and 1.1% respectively. The rupee was trading at Rs 60.04 to the dollar at the time of writing.

Stocks of information technology companies ended the day on a weak note with HCL Technologies, Tech Mahindra and Infosys leading the losses. As reported by a leading business daily, IT major HCL Technologies won a contract worth US$ 400 m (Rs 24 bn) from DNB Bank ASA, a bank based in Norway. The scope of work would be to manage the bank's IT infrastructure services and application operations on a global scale. As per the company, it will migrate and transform the bank's infrastructure from its existing IT partner and will create two new data centres in Norway. This deal will provide a fillip to the company's infrastructure management and enterprise application system divisions, areas which grew by 4.1% and 2.6% on a quarter on quarter basis i.e. in comparison to the preceding quarter ended December 2013. However, despite announcement of this development, the stock of HCL Technologies ended lower by about 4.7%.

Stocks of real estate companies ended the day on a weak note led by HDIL, Unitech and Godrej Properties. As reported by a leading business daily, property prices have fallen by as much as 20-30% in Indian metros over the past year. Apart from the seemingly inflated prices that have led to lower demand, the reasons for the price declines are working capital pressures for the developers, especially at a time when the buyers have disappeared. As per HDFC Chairman Deepak Parekh, secondary sales have slowed down and prices in the segment have come down. Not to mention the uncertainty over the economy and the run up to May 16, the date the elections results get announced. There have been reports that unsold inventory levels have risen from 650,000 apartments in the quarter through December to 700,000 at the end of March 2014.

What is your view on real estate market in India? Do you expect volumes to rise post elections? Do share your views on the Equitymaster Club.

IT stocks out of favour
01:30 pm

Persistent selling in index heavyweights has led to the Indian share markets slipping further in the post-noon trading session. Most of the sectoral indices are trading in the green with consumer durables, power and pharma being the major gainers. Only IT, auto and realty stocks are trading in the red.

BSE-Sensex is down 116 points and NSE-Nifty is trading 36 points down. BSE Mid Cap is trading 0.4% up and BSE Small Cap index is trading up by 0.3%. The rupee is trading at 59.9 to the US dollar.

Most of the paint stocks are trading in the red with Berger Paints and Akzo Noble being among major losers. Only Jenson & Nicholson and Kansai Nerolac are trading in the green. As per a leading financial daily, Asian Paints shut its oldest plant in Bhandup, Mumbai with effect from 5th May 2014. The plant, with an installed capacity of 30,000 kl per annum, had started operations in 1958 and manufactured decorative paints. The company had earlier acquired controlling stake of its rival Berger Paints and currently has an installed capacity of nine lakh kl per annum. Asian Paints has six other plants located in Gujarat, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Haryana and Maharashtra. The company manufactures industrial paints in Gujarat and Maharashtra and also has two plants in Tamil Nadu and Gujarat to manufacture industrial chemicals. Asian Paints stock is trading down 0.4% currently.

Auto stocks are trading mixed today. Ashok Leyland and Eicher Motors are leading the stock of gainers, while Maruti is trading weak. As per the proposed Mandatory Vehicle Recall Policy, government is considering penalties on auto manufacturers based on vehicles recalled. Penalty will be proportional to the number of vehicles recalled. So, larger the number of vehicles recalled, larger the amount of penalty. Currently, there is no specific recall policy and automobile manufacturers recall vehicles based on the manufacturing defects. The move comes as the incidence of recalls is rising in the industry and government plans to formulate a policy that would act as a deterrent against erring manufacturers. Besides, the number of vehicles recalled, safety is another important aspect that would determine the penalty imposed. However, industry has criticised the policy citing that vehicle recalls are global practices so as to correct any faulty parts. And the penalty could be proposed for companies that deliberately hide such manufacturing defects and concede the defect when found by authorities. However, distinction between the two is difficult.

Indian markets continue to slide
11:30 am

After opening in the red, the Indian Indices have continued the downward trend in the last two hours of trading. Selling is witnessed in IT and metal stocks; while Engineering and Oil & Gas are leading the gainers.

The BSE-Sensex is trading down 90 points and the NSE-Nifty is trading down 28 points. The BSE Mid Cap index is trading up 0.5% and the BSE Small Cap index is trading up 0.4% today. The rupee is trading at 60.05 to the US dollar.

Automobile stocks are trading mixed today. Escorts and Eicher Motors Ltd are leading the gainers. TVS Motors and Bajaj Auto are leading the losers. According to a survey by JD Power; an American market research firm, the Indian tractor market is going to grow at a compounded annual growth rate of 8-9% for the next five years. As per the research, lower penetration levels will be the main catalysts for growth. Also, the growth will lead to increase in demand for foreign tractors. A key finding of the survey is that at least 80% of the farmers conveyed that they will consider buying a different brand of tractor than they currently owned. This will boost sales of foreign manufacturers such as Kubota Case New Holland, AGCO and John Deere. In turn, it may also pose stiff competition to domestic manufacturers such as Mahindra & Mahindra, Escorts Ltd and Tata Motors.

FMCG stocks are trading mixed today. Bata India and Marico Ltd are leading the gainers. Emami Ltd and Godrej Consumer are leading the losers. Dabur India Ltd. has planned a capex of Rs 3.5 bn on capacity expansion for FY15. The company expects the consumer market to come out of the downtrend in the next two quarters. The capex will be Dabur's largest manufacturing investment in a single financial year and is double fold as compared to its average annual capex of Rs 1.5-2 bn. The company aims to use the capex to focus on innovation and expansion of business across categories and geographies. Dabur is trading flat today.

Indian share markets open in the red
09:30 am

Barring Indonesia (up 0.2%), the major Asian stock markets have opened the day in the red with stock markets in Japan (down 2.4%) and Hong Kong(down 1.1%) leading the losses. The Indian share markets have also opened the day on a weak note. The sectoral indices have opened mixed with stocks in banking and metal space leading the losses. However, stocks in consumer durables and energy space were witnessing gains.

The Sensex today is down by around 18 points (0.1%), while the NSE-Nifty is down by about 7 points (0.1%). However, the midcap and smallcap stocks have opened in the green with BSE Mid Cap and BSE Small Cap indices up by around 0.4% each. The rupee is currently trading at Rs 60.06 to the US dollar.

Retail stocks have opened mixed with Provogue (I) Ltd and Future Retail Ltd leading the gains. However, Koutons Retail Ltd and Zodiac Cloth were facing selling pressure. Titan Industries Ltd has announced results for the quarter ending March 2014. The company has reported an increase of 7.5% year on year (YoY) in the net sales during the quarter. Overall expenses during the quarter grew by 7% YoY. As per the management, 2013-14 was a challenging year on account of a weak economic environment. The regulatory changes during the year also had an adverse impact on the company's jewellery business. The net profits for the quarter grew 11.6% YoY. The management has said that the company will continue to invest in strategic initiatives taking into account its long term growth plans.

Telecom stocks have opened the day on a mixed note with Bharti Airtel Ltd and ITI Ltd leading the losses. However, Idea Cellular and Himachal Futuristic Ltd were witnessing gains. As per a leading financial daily, Bharti Airtel has sought permission of the telecom department to merge its broadband wireless access (BWA) services in four circles of Delhi, Mumbai, Haryana and Kerala with its mobile operations in the corresponding service areas. In its letter to the telecom department, the company has expressed wish to merge the internet service provider licence of Airtel Broadband Services Pvt Ltd along with the corresponding BWA spectrum with the USAL permits in the four circles. The move comes a fortnight after the company received a nod from the Bombay High court to merge its internet service provider licence with its unified access service permit (UASL).

A tough challenge for India ahead!

What is the biggest challenge for India? The country that claims the largest share of youth population is not able to provide them enough job opportunities to use their potential. The much hyped demographic dividend not just seems difficult to cash on, but is in danger of becoming a huge liability for lack of enough employment opportunities. It is true that the slowdown in the economy has overall impacted job creation. Low demand and high inflation are pressurizing margins making companies wary of hiring new people. While this is a cyclical phenomenon, we are more worried about the structural and regulatory impediments.

Coming to regulatory roadblocks, India is not a business friendly nation. Corruption and delays in procedures have held in check the entrepreneurship potential in the country. The archaic labour laws have further distorted the job market with contractual employment.

And lack of enough jobs to absorb youngsters is not the only problem. Majority of India's population still thrives on farm income; the share of which has gone down in the GDP. Low productivity is another issue we need to deal with. The job opportunities in the manufacturing sector are declining due to mechanization, thus putting more pressure on the service sector to absorb the working population.

Will a new Government be able to make a difference in the domestic job scenario? As mentioned in an article in Business Standard, not only will it need to create new jobs, but also raise the share of formal jobs. Further, for creating new jobs, the Government will need to invest in infrastructure and logistics such as power supply, road, and rail and sea transportation. However, even if these steps are taken by the Government, the results won't be reflected immediately. This is because it will take some time for investment cycle to kick off after sustained reforms.