Indian markets close strong

Indian markets see-sawed between moderate and robust gains but managed to stay above the dotted line for most part of today's trading session. BSE-Sensex gained about 118 points while NSE-Nifty gained about 39 points. BSE Mid Cap and BSE Small Cap were in demand in the afternoon trade and finished the day higher by 0.3% and 0.6% respectively. Among sectoral indices, Consumer Durables gained the most followed by IT and Auto sector. On the other hand, Realty and Metal stocks were least favored today.

With regards to International markets, European bond yields were down across the board and majority of the indices were in positive territory. Asian markets finished mixed, Hang Seng gained 1.96% and the Nikkei 225 rose 0.83%. The Shanghai Composite lost 1.59%.

The Indian Rupee was trading strong at Rs 63.57 against the US dollar at the time of writing.

According to a leading economic daily, State owned NTPC Ltd will call for bids from solar project developers for buying 15,000 megawatts (MW) on behalf of the ministry of new and renewable energy (MNRE) as part of governments green energy push. This is in addition to NTPC's plans to set up 10,000 MW of solar power capacity on its own. NTPC will run a reverse bidding process for procuring solar-powered electricity in dollar-denominated tariff to reduce risk. Reportedly, it will provide a purchase guarantee, making such projects bankable and help solar power eventually cost the same as that purchased from the grid. The company also plans to raise US$ 500 m each from its first global rupee and green bonds sale that is expected shortly.

Profit booking was witnessed across the mining sector with Vedanta Limited and MOIL Ltd bearing most of the brunt. According to a leading financial daily, Coal India subsidiary Mahanadi Coalfields plans to boost production from its Basundhara reserves in Orissa to 85 million tonnes (mt) from 10 mt. However, the bulk of this output will be supplied to proposed 1,600 MW plant being set up near the mine in Sundergarh District. The company is reportedly planning to set up two 800-mw super critical units and a joint venture with a company specializing in power generation. It plans to offer majority stake in the power plant to the joint venture partner, which would preferably be an entity that would want to buy power from the plant. Of the power produced, Coal India will require 700-800 mw to run its mining equipment.

Indian Indices trade positively
01:30 pm

The Indian stock markets continued to trade in the green in the post noon trading session. Sectoral indices are trading mixed with telecom and banking witnessing maximum buying interest.

The BSE-Sensex is trading up by 124 points (0.5%) while NSE-Nifty is quoting up by 37 points (0.5%). BSE Mid Cap index is trading up by 0.4% and the BSE Small Cap index is trading up by 1%. Gold prices are trading at Rs 27,403 per 10 gms and silver prices are trading at Rs 39,670 per kg. Crude oil is trading at Rs 3,781 levels. The rupee was trading at Rs 63.49 to the US dollar at the time of writing.

Steel stocks are trading mixed today with JSW Steel and Jindal Steel bearing the maximum burnt. The stock of Tata Steel slipped as much as 2.7% in the morning trade after the company announced Rs 65 bn goodwill impairment charge for the loss of value of operations in Europe, Canada and Mozambique in 2014-15. Of the total impairment charge taken in 2014-15, approximately Rs 50 bn relates to the non-cash write down for long products UK business in Europe. The impairment also includes a write down of investments in overseas raw materials projects in Mozambique, Ivory Coast and Tanconite project in Canada. Currently the stock of Tata Steel is trading down by 1.1%.

Banking stocks are also trading mixed with Bank of Maharashtra and Dena Bank being the top gainers. As per a leading financial daily, Oriental Bank of Commerce has reported a decline in gross non-performing assets for the March quarter of 2015. Gross non-performing assets of the bank as a percentage to total advances came down to 5.18%. The bank reported a net loss of Rs 1.78 bn in the quarter due to higher provisioning as compared to a net profit of 3.1 bn in the fourth quarter of last fiscal. For the full fiscal the bank's net profit dipped 56.37% on a YoY basis.

Indian markets up on global cues
09:30 am

Taking cues from record finish on Wall Street, the Indian Indices have opened the morning trade in green. The Sensex is up 120 points (up 0.44%) and the NSE-Nifty is up 36 points (up 0.44%) at 8,260. BSE Mid Cap and BSE Small Cap have also opened on a buoyant note with both the indices up by 0.5%. Barring Healthcare stocks, buying activity is witnessed across majority of the sectoral indices.

Overnight, US major indexes rallied 1% higher each on the back of calmer bond markets and a weaker dollar. Asian markets are trading on a mixed note. Australian indices and Japan's Nikkei advanced in early trade. Indian rupee gained in early trade and opened higher by 17 paise at 63.48 per dollar.

According to a leading financial daily, Power Grid Corp will invest over Rs 10 bn in the next few years for execution of two projects. The state run Power Grid will invest Rs 3.12 bn in transmission system for Ultra Mega Solar Park in Anantpur District in Andhra Pradesh. Reportedly, the company's board has also approved an investment of Rs 7.8 bn for creation of 400/220kV substations in Delhi during the 12th plan period. The company's board has also approved code of practices & procedures for fair disclosure of unpublished price sensitive information and conduct for regulating, monitoring & reporting of trading by insiders of Power Grid Corp.

Shares of automotive major Ashok Leyland have opened on a positive note after it was reported that the company would be making Rs 3 bn investment during the current financial year. The company would be investing Rs 1-1.5 bn as capital expenditure and a similar amount would be invested in joint ventures. Reportedly, the company is also planning to set up bus assembly plants in Africa, West Asia and one in India. The project would attract an investment of Rs 200 m each.

Why are markets moving like a yo-yo?

Whether you're a trader or an investor, you would not have missed the recent volatility in the markets. The benchmark indices are down nearly 10% from their recent peaks. Stocks in the broader universe are down more. But the fall hasn't been linear. The volatility is enough to give even seasoned traders a heart attack. When the indices swing like a yo-yo by 2-3% nearly every day, it's hard not to wonder why.

The reasons are many. Firstly, the Indian markets had received huge FII inflows in FY15. The weightage allocated to India by FIIs in their portfolios was also at all time highs. The run up in stock prices was largely due to last year's general election victory by the BJP. People were sure to become concerned if reforms did not come through. That is exactly what has transpired. Markets are rapidly losing hope of swift and decisive reforms.

However, what is it that can explain the volatility? As per an article in the Mint, one of the reasons is that the markets had been moving up on low volumes in the cash segment. This means that, at least in the last few months, speculation had taken over. Shorting in the F&O segment was the name of the game as far as FIIs were concerned. As the movers and shakers in the markets, FIIs who were spooked by by tax issues, chose to not only sell their holdings but also short the markets at the same time! It is the covering up of the short positions on a day to day basis that has been the major cause of the volatility.

Does this worry us? No not at all. We have been warning investors about this possibility for a while. We believe this is a much needed correction and will provide good buying opportunities for investors. However, investors would be well advised not to fall into the trap of 'buying the dip'. This sort of advice is floated by brokers who want their clients to trade even in volatile markets. We believe investors should invest in fundamentally strong companies run by competent and ethical managements when the stock price offers sufficient margin of safety. After having done that they should ignore the short term market volatility and remain invested for the long term to derive the benefits of compounding.