Power, realty stocks spoil the party

Indian stocks took a beating during the final trading session with the BSE-Sensex slipping into the red before hovering around the dotted line at the time of closing. The index however ended with gains of about 23 points or 0.1%. The NSE-Nifty closed lower by about 8 points or 0.1%. Stocks from the real estate and power sectors were not in favour today, while those from the information technology and automobiles spaces were in demand. The BSE Mid Cap and BSE Small Cap indices ended the day on a weak note as well, with the indices closing lower by over 2% each.

Stock markets in other parts of Asia ended the day on a firm note with Japan and China closing higher by about 1% and 0.3% respectively. The rupee was trading at Rs 58.58 to the dollar at the time of writing.

Stocks of automobile companies ended the day on a firm note with Mahindra and Mahindra and Tata Motors leading the pack. As reported by a leading business daily, the demand for diesel variants of vehicles has been diminishing and that of petrol variants are now being preferred again. In FY14, it is believed that 58% of the cars sold were petrol cars. In the same year, the demand for diesel vehicles declined by 14% YoY. The narrowing gap between the prices of the two fuels is one reason. It also seems that buyers are not willing to pay higher prices for diesel vehicles given the same. There are also expectations of the new government increasing diesel prices - especially at a time when the Rupee has strengthened against the Dollar thereby giving a good opportunity to pass on prices. The estimated fuel subsidy in FY15 is Rs 1.1 trillion as compared to Rs 1.4 trillion in FY14. The decline would largely be due to the stronger currency coupled with the fall in diesel consumption.

Stocks from the banking space ended the day on a weak note with Union Bank, Bank of India and Bank of Baroda leading the pack of losers. As reported by a leading business daily, many public sector banks - which have been under pressure for not taking any action against the NPAs - have been increasingly selling assets of defaulters to asset reconstruction companies (ARCS). Just to give some examples, Indian Bank assigned assets worth about Rs 6.7 bn to ARCs in FY14. Bank of India sold Rs 10.7 bn worth of assets, while Canara Bank sold close to Rs 7 bn of bad loans during the year. It is believed that India's largest bank SBI sold nearly Rs 50 bn worth of poor assets. In total, assets of about Rs 500 bn have seemingly been offered by banks to ARCs. A year ago, this figure stood at Rs 120 bn. It is believed that banks have been taking such actions due to the RBI's pressure of taking early action to clean up their books. The increase in such volumes also seems to be on account of ARCs offering better prices as banks are willing to accept delayed payments. It may however be noted that the total value of bad loans in the PSU banking system stands at about Rs 2 trillion. As such, whether this trend will continue or not will depend on the collection rate of the ARCs.

Indian markets continue to surge
01:30 pm

Indian markets continued to zoom ahead on account of persistent buying among the index heavyweights during the previous two hours of trading session. Stocks from capital goods and power sectors are leading the gainers, while consumer durables stocks are trading weak.

The BSE Sensex is trading up by 414 points and the NSE-Nifty is trading up by 112 points. The BSE Mid Cap is trading up 0.7% and the BSE Small Cap index is trading up 0.8% today. The rupee is trading at 58.58 to the US dollar.

Energy stocks are trading mixed. Cairn India and ONGC are leading the stock of gainers, while Chennai Petroleum is trading weak. As per a leading business daily, Cairn India is seeking extension of its prolific, Rajasthan oil fields from government and state own firm ONGC as current term of the block will end in 2020. In the absence of extension the fields may be returned to ONGC once cost is recovered, as per the Rajasthan production sharing contract (PSC). It may be noted that ONGC is licensee for the assets and pays royalty not just for its 30% stake but also for Cairn's 70% interest. The assets include three oil fields and a heated pipeline that carries crude from oil fields to refineries in Gujarat. Cairn earlier resorted to extension till 2040, the economic life of the assets, but later sought for 10 years till 2030. However, the Rajasthan PSC provides 5 years extension after 2020. As per the sources, ONGC might not agree to extension as it would than own 100% of the assets.

Indian Pharma stocks are trading mixed today. While Dishman Pharma is leading stock of gainers, Divi's Laboratories and Strides Arcolab are trading weak. As per a leading business daily, Sun Pharma received some relief after Andhra Pradesh high court has removed stay on its acquisition of Ranbaxy. The court had put stay on the deal as it was reviewing allegation of insider trading by a group of investors seeking probe. At US$ 4 bn, the merger is considered to be largest in the Indian pharma and will create Sun Pharma as the world's 4th largest drug maker. However, both firms are facing import bans on their plants by drug regulator, US FDA for marketing their drug in the US. Both, Sun Pharma and Ranbaxy are trading higher by 1.5% each.

Indian markets continue to rally
11:30 am

After opening positive; the Indian indices have continued to rally in the last two hours of the trading session. Auto, Capital Goods and Power stocks are leading the gainers.

The BSE-Sensex is trading up 334 points and the NSE-Nifty is trading up 96 points. The BSE Mid Cap index is trading up 1.5%, while the BSE Small Cap index is trading up 1.7% today. The rupee is trading at 58.41 to the US dollar.

Most of the power stocks are trading positive today. Neyveli Lignite and Reliance Power are leading the gainers. According to a leading business daily; Tata Power is focusing on overseas opportunities in South East Asia and SAARC regions. Tata Power aims to have 18,000 MW generation capacity by 2022 as well as additional 4,000 MW of distribution networks. The company currently has an installed generation capacity of 8,560 MW and have projects having capacity of nearly 850 MW under execution. Tata Power is developing wind and hydro projects in Africa, Bhutan and Georgia, among others. The company has deployed resources in the above mentioned regional geographies to understand the market dynamics and tap the potential opportunities. Tata Power is trading 3% up today.

Most software stocks are trading higher today. HCL technologies and Tech Mahindra are leading the gainers. As per a leading financial daily, India's third largest software firm Wipro has decided to be more aggressive in bidding for deals in the Energy and Utilities industry. Currently this vertical contributes about 16% of Wipro's revenue. The company sees this as a recession proof industry. Thus the management would prefer that contributes a higher percentage of revenue. Demand for IT services from this industry is high in the developed world where end consumers are free to choose their electricity provider. Demand from this vertical had held up relatively well in the last recession. In this industry, Wipro competes with Tata Consultancy Services (TCS), Accenture, IBM and Capgemini globally. Wipro is trading up 1.3% today.

Indian share markets open in the green
09:30 am

The major Asian stock markets have opened the day on a mixed note with stock markets in Japan (up 0.5%) and Singapore (up 0.4%) leading the gains. However, stock markets in Hong Kong (down 0.2%) and Korea (down 0.3%) have opened in the red. The Indian share markets have opened the day on a firm note. All sectoral indices have opened in the green with the stocks in the realty, capital goods and auto space leading the gains.

The Sensex today is up by around 270 points (1.1%), while the NSE-Nifty is up by about 63 points (0.9%). The midcap and smallcap stocks have also opened in the green with BSE Mid Cap and BSE Small Cap indices up by around 0.9% and 1.3% respectively. The rupee is currently trading at Rs 58.42 to the US dollar.

Food stocks have opened mainly in the green with Tata Global Beverages Ltd and Ruchi Soya Industries Ltd leading the gains. However, Golden Tobacco Ltd has opened in the red. ITC has announced results for the quarter ended March 2014. The company has reported net revenue growth of 12% YoY. The cigarette business was the main driver, contributing nearly 79 % of the pre-tax profit for the quarter. This was despite a year-on-year decline in volume sales. The company's non cigarette business grew 13% YoY. The net profits for the quarter were up by a little over 18% YoY. However, sequentially, the bottomline declined by 4.5% QoQ. The company has declared a dividend of Rs 6 per share for FY14, up from last year's dividend of Rs 5.25 per share.

Mining stocks have opened the day mainly in the green with MOIL Ltd and Gujarat NRE Coke Ltd leading the gains. The country's top manganese ore producer MOIL Ltd has reported results for the quarter ended March 2014. The revenues during the quarter were up 9.4% YoY. The revenues from the mining products witnessed a growth of 13.6% during the quarter while revenues from manufacturing and power grew 3 times on a year on year basis. The total expenditure during the quarter declined by 16.9% YoY. The net profits for the quarter were up 35.7% YoY, mainly on account of growth in sales and decline in expenses. For FY14, the sales and net profits were up 5.7% YoY and 18% YoY respectively.

Financial inclusion-need of the hour

Fathom this! 50% people in our society do not have bank accounts. And 90% of them do not have access to bank credit. What more? 99% do not have access to capital account. After years of introducing inclusive banking initiatives in the country, limited number of people have access to formal banking services. These can be categorized into two groups. Ones that are financially excluded and the others who are underserved! Financially excluded are the ones who do not have access to basic banking facilities. And financially underserved have traditional bank accounts but lack any access to electronic payment modes. This is indeed disheartening!

Poverty and exclusion have adversely impacted India's socio-economic conditions. Financial inclusion is a gateway for the unbanked masses that constitute the bottom of the social pyramid to the whole new world of banking that can make their lives comfortable and productive. Well not mentioning the fact that it opens a whole new untapped market into the hinterland for the lenders too. And banks being central to the financial system have tremendous potential to drive the economic recovery. But what's stopping them to do so? Well there remain quite a good number of challenges here.

A recent research study by a renowned market research firm has some revealing results. Firstly, it comes as a shock that the financially underserved and the excluded class largely fall into the age group of 35-38 years. This age group is ideally the working group contributing to the GDP of the nation. But invariably they might fail to do so as they stand devoid of basic banking services. Secondly, much of the financially excluded class has no sufficient sums to open a bank account. Many a times they cannot afford the high bank account fees too. Then there are others who despite possessing a mobile phone have not heard of mobile banking practices. There are few others who are averse to technological changes. The consumer benefits derived from having a bank account are quite large. But many are yet to realize this fact. Lack of education is therefore the biggest barrier in achieving the financial inclusion in our nation.

Over the past five years, the Reserve Bank of India has pursued the agenda of financial inclusion as a priority. Quite lucidly RBI puts forth the definition of financial inclusion. "It is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost in a fair and transparent manner by regulated, mainstream institutional players".

Financial inclusion per se can lead to economic recovery. How? Financial inclusion helps in getting the unbanked into the formal banking system, channelize their savings, boost investments by making available the credit and thus give a fillip to the economy. Undoubtedly, the objective of financial inclusion if met would prove a win-win situation for all. And this would also place Indian banks on a surer footing on a global platform in terms of financial stability and sustainability.

Do you think financial inclusion can help attain financial stability and boost economic recovery? If yes, share your views on Equitymaster Club.