Positive close for Indian indices

Indian equity markets remained in the positive territory throughout the trading session today. The benchmark indices traded well above the dotted line for most of today's session on the back of sustained buying across index heavyweights. However, selling activity intensified in the final hour of trade and indices pared some of its gains; albeit closed the day in green. While the BSE-Sensex today closed higher by 77 points, the NSE-Nifty closed higher by 24 points. The Smallcaps and midcap were in favour today. The BSE Mid Cap and BSE Small Cap indices closed higher by 2.31% and 2.11% respectively. Barring stocks from IT sector, all the other sectoral indices closed in green.

As regards global markets, Asian indices closed mixed today while European indices have opened weak. The rupee was trading at Rs 58.49 to the dollar at the time of writing.

Majority of Automobile stocks have closed the day on a mixed note. TVS and Maruti were among the leading gainers, while Mahindra and Mahindra and Tata motors were the leading losers. As per the financial daily, the Society of Indian Automobile Manufacturers ( SIAM) has given data pertaining to top 10 selling Indian car brands for the month of April. As per this data, Maruti Suzuki's five cars are in this top 10 list. The cars which form part of this top 10 list. The company's compact sedan Dzire was the second best selling car. M&M continued to top the list with its top selling brand Bolero.

Since some time, the automobile industry has been witnessing growth pressures. The volume off take has been bit disappointing for many of the automobile companies. Now the government is also looking forward for crash test norms which will bring some architectural changes in the models. Ofcourse this will push up the prices of the cars. In already challenging scenario, these norms will put more pressure. So which companies will be able to stay on the top 10 list that will also depend on these aspects.

The Indian pharma stocks have closed the day on the mixed note, on the other hand MNC pharma stocks have closed in green today. Among the Indian pharma stocks, Elder pharma and Ipca were among the leading gainers while among the MNC pharma stocks Merck and Pfizer were the leading gainers. Maximum selling pressures was witnessed in Dishman pharma and Biocon Ltd. As per the financial daily, the Indian drug pricing regulator is looking to lower the prices of various drugs in cancer and HIV therapies. Other therapies like diabetes, cardiovascular. tuberculosis and malaria drug prices might also be lowered. Reportedly, the National Pharmaceutical Pricing Authority (NPPA) is considering benchmarking prices of the most expensive brands for the above categories to the average price of their respective categories. Last year, the, the government brought into force a new market price linked method and brought down the prices of prices of 652 essential drug formulations. Both MNC and Indian pharma companies were impacted because of this pricing policy, as the companies had to bring down the price of the drugs covered in the national list of essential medicines (NLEM) at the price stated by government. MNC pharma companies were got more impacted due to the pricing policy, as these companies have various top selling brands and more expensive than the other companies.

While it will still take time for new drugs to come under the pricing control, but do you believe the MNC pharma companies are facing more pressures than the Indian pharma companies? Share your views on Club Equitymaster.

Consumer durables fuels Indian markets
01:30 pm

Indian markets continued to scale higher on the back of continuous buying activity among the index heavyweights during the previous two hours of trade. Stocks from the consumer durables and realty space are leading the gainers, while software stocks are trading weak.

The BSE-Sensex is trading up by 205 points and the NSE-Nifty is trading up by 57 points. The BSE Mid Cap index is trading up 2.4% and the BSE Small Cap index is trading up 2.5% today. The rupee is trading at 58.57 to the US dollar.

Indian pharma stocks are trading mixed. Orchid Chemicals and IPCA Labs are trading firm, while Dishman Pharma is trading lower. As per a leading business daily, Sun Pharma has received a warning letter from the USFDA. According to the US drug regulator, the company's initial response on tackling data integrity violation lacks sufficient corrective actions. It may be noted that the regulator has sent an import alert to Sun Pharma's Karkhadi plant in Gujarat for deviation from good manufacturing practices (GMP) norms in manufacturing of APIs (active pharmaceutical ingredients) that go in to the making of medicines. The company is expected to respond to the matter in due course. Notably, Karkhadi plant's contribution to the company's total sales is negligible. However, till the issue is rectified, the regulator is expected to withhold new applications for the US market from this plant. The move comes at a time when Sun Pharma is seeking to merge the troubled drug maker Ranbaxy with itself.

Retailing stocks are trading mixed today. While Provogue and Zodiac Clothing are trading firm, Shopper's Stop is trading weak. As per a financial daily, Titan's youth fashion brand, Fastrack has shelved its plans to expand into newer segments like footwear and apparels. Footwear category has become competitive as several brands have entered into the space of late. Apart from international brands, some apparel makers have also ventured into the footwear category. Not to mention E-commerce that has further added to the competition. The scenario is no different for the apparels segment, which has also become crowded. The company wants to venture into areas where there is relatively less brand presence so as to increase presence and growth. In the previous year, it had entered into helmets where there are fewer brands. This year it instead plans to increase its range of watches and focus on retail. Fastrack plans to add 74 new stores this fiscal taking its strength to 220. Titan is trading up 7% today.

Indian markets continue to rise
11:30 am

After opening in the green, the Indian indices have continued their upward trend in the last two hours of the trading session. Heavy buying is seen in Realty and Consumer Durables stocks.

The BSE-Sensex is trading up 181 points and the NSE-Nifty is trading up 35 points. The BSE Mid Cap index is trading up 2.1%, while the BSE Small Cap index is trading up 2.3% today. The rupee is trading at 58.56 to the US dollar.

Most of the Media stocks are trading positive today. Pritish Nandy Communications and Network 18 Media are leading the gainers. ZEE Entertainment and ZEE Media Corp are leading the losers. ZEE Entertainment has declared its March quarter and annual results. Zee's total income grew 20.2% YoY to Rs 11.6 bn and net profit by 20.1% YoY to Rs 2.16 bn in 4QFY14. The advertising revenues grew by 21.5% YoY and there was a sharp increase in other revenues. The company's ad inventory fell about 12% in the quarter following the implementation of 12-minute ad cap in October 2013. The sales growth, thus, was largely on account of higher ad rates as Zee continued to gain viewership share across its various channels. ZEE Entertainment is trading 4% down today.

Software stocks are trading mixed today. While Tata Consultancy services (TCS) and Tech Mahindra are leading the gainers; Infosys and Wipro are leading the losers. As per a leading financial daily, India's largest software firm Tata Consultancy services (TCS) has won a five year software contract from the Indian Institutes of Management (IIMs). The contract is to conduct the common admission test (CAT) from this year. The contract is valued at US$ 5 million. TCS reportedly out-bid about 6 other companies to bag to deal. The IIMs have faced serious issues recently over the conduct of the CAT as several glitches were found in the software in 2012 as well as in 2013. TCS has been tasked with the responsibility to ensure the exam is conducted smoothly for the next five years. TCS is trading up 1.2% today.

Indian share markets open in the green
09:30 am

The major Asian stock markets have opened the day on a positive note with stock markets in Japan (up 1.9%) and Hong Kong (up 0.8%) leading the gains. The Indian share markets have also opened the day on a firm note. Barring healthcare and FMCG, all sectoral indices have opened in the green with the stocks in the consumer durables and metal space leading the gains.

The Sensex today is up by around 100 points (0.4%), while the NSE-Nifty is up by about 20 points (0.3%). The midcap and smallcap stocks have also opened in the green with BSE Mid Cap and BSE Small Cap indices up by around 1.0% and 1.3% respectively. The rupee is currently trading at Rs 58.59 to the US dollar.

The Reserve Bank of India (RBI) has eased gold import norms by allowing select trading houses, apart from already permitted banks, to obtain the precious metal to boost exports. It is important to note here that that it was in July last year that the RBI had imposed severe restrictions on gold imports. The step was taken in response to restrict rising current account deficit and rupee depreciation. RBI had also tied imports with exports and prescribed a 20:80 formula. However, only certain banks were allowed to procure the metal. As per a notification, star trading houses/premier trading houses (STH/PTH), which are registered as nominated agencies by the Director General of Foreign Trade (DGFT), are now allowed to import gold under 20:80 scheme. However, they will have to follow certain conditions. The relaxation in imports is in response to representations from jewelers, bullion dealers, banks, and trade bodies. The revised guidelines have come into force with immediate effect. How do you think gold will perform now that the NDA Government has taken charge. Will it continue to shine or lose its sheen? Share your views on Equitymaster Club

Auto stocks have opened mainly in the green with Bajaj Auto Ltd and Maruti Suzuki Ltd leading the gains. As per a leading financial daily, Bajaj Auto is likely to boost exports with the lifting of a three month old ban by Egypt on imports of two-wheelers and two-wheelers. The company is the biggest exporter of three-wheelers to Egypt, which is its second biggest export market, after Sri Lanka. Of the 2,50,000-2,60,000 units of three-wheelers exported in the last financial year (FY14), Egypt's contributed to around 25% to company's overall volumes. The company is the market leader in the three-wheeler space in Egypt, and accounts for around 90% of total volumes. Also, Egypt is one of the growing markets for motorcycle sales for the company. The company has received an order for around 5,500 units of three-wheelers and 3,500 units of two-wheelers for the month of June. The management expects an incremental volume of 25,000 units of three-wheelers and 20,000 units of motorcycles in FY15 from the Egypt market.

Time to overhaul the subsidy system!

Subsidies have often been targeted for a lot that has gone wrong with the Indian economy. Fuel subsidies, fertilizer subsidies and food subsidies have been the prime reason behind high fiscal deficit. Not just the Government's fiscal health, the subsidies have been a major reason for underperformance of the associated sectors, the leading example of which is oil and gas sector. But the key question here is: Can India really survive without subsidies?

For all the fiscal mess that is blamed on subsidies, there is one thing that can not be denied. India with a significant share of poor people can not remove subsidies overnight. That said, there is a lot of scope to rationalize subsidies so that they go to intended beneficiaries only.

With a new Government taking charge at the centre, it will be really interesting to watch its approach towards subsidies. It is quite clear that the existing subsidy system can not go on and a huge share needs to be redirected towards productive investments.

As suggested in an article in The Hindu Business Line, one way to tackle the issue is to differentiate good subsidies from the bad one. The latter category includes subsidies that are recurrent and do more damage than good. For e.g. fertilizer subsidies have led to over use of urea thus leading to soil imbalance. Even diesel subsidies until some time back were benefitting rich people, giving them cheap fuel to drive expensive vehicles. A phased diesel deregulation has plugged loopholes in the system to some extent. However, we have a long way to go to make subsidy system more efficient and effective.

While subsidies can not be totally eliminated considering the economic disparity in the country, the Government should consider a phased decline in the non productive subsidies. Another way to improve things is to ensure streamlined process and proper delivery system so that subsidies go only to the poor and needy people. One way of doing so could be cash transfers to the low income groups.

At the same time, productive subsidies like that on healthcare and education, sanitation, provision of clean drinking water etc should be continued.

Through its decisive mandate, the public has made it quite clear that the public wants efficient Governance and not subsidies. Hope the new Government will be able to take care of the loop holes in the existing subsidy system and bring back Indian economy to the path of stable recovery.