Mid & small caps steal the show

Indices in the Indian stock market held on to their gains during the closing stages of the day and as a consequence, managed to end the session marginally in the positive. BSE-Sensex edged higher by around 76 points whereas NSE-Nifty logged in gains of around 24 points. BSE Midcap and BSE Small cap indices fared better than their larger counterparts and closed the day with gains of 0.8% and 0.7% each. On the Sensex, three stocks gained for every two that ended the session in the red.

Asian indices closed mixed today whereas Europe is trading mostly in the green currently. The rupee was trading at Rs 45 to the dollar at the time of writing.

GAIL, India's largest gas transmission and distribution company, announced today that it has received the board's approval to foray into natural gas-based power generation. The company will set up its first power plant at Uran in Maharashtra and will invest Rs 8 bn for the same. The plant will have a total capacity of around 250 MW. It is also planning to set up power projects of similar capacity in other states like Madhya Pradesh, Uttar Pradesh and Gujarat. Put together, these four plants would require 2.5 m standard cubic metres of gas a day. Since domestic gas supply is limited, gas may well have to be imported by the company. The company is discussing with PTC India to facilitate power trading and is in the process of signing a power purchase agreement with the state power department. The stock closed higher by 1% on the bourses today.

Maruti Suzuki, India's largest passenger vehicles manufacturer also closed higher by 1% today. This was despite the workers' strike at its Manesar plant entering its fourth day today. It should be noted that the company had yesterday sacked 11 employees at the plant for allegedly inciting others to strike work. Around 2,000 workers of the company have been on strike since Saturday, resulting into a loss of production of around 1,800 units as on yesterday. In value terms, the loss is estimated to be around Rs 1 bn. As per reports, the management of the company is looking at a long-term solution for such issues and is looking at working on a unit-wise holding union model. Practiced internationally in many countries, it consists of having individual holding unions at every plant to look into their own factory related problems.

Indian stock markets move into green
01:30 pm

The Indian stock market gained during the previous two hours of trade due to buying interests in the heavyweights and are now trading in the green. Most of the sectoral indices are trading firm. Stocks from the realty, healthcare, software and oil & gas space are leading the pack of gainers, while those from the capital goods are trading weak.

The BSE-Sensex is trading up by 76 points, while NSE-Nifty is trading 23 points above the dotted line. BSE Midcap and BSE Small cap> indices are up 0.6% and 0.4% respectively. The rupee is trading at 44.95 to the US dollar.

Software stocks are trading mixed with Tech Mahindra, Infosys and Tata Consultancy Services (TCS) leading the pack of gainers. However, Mahindra Satyam and Wipro are trading firm. As per a leading financial daily, IT (Information Technology) major Wipro is now looking to move into the business of developing platforms and products, including developing IP ( intellectual property ). Currently, the company business model is mainly service driven. The focus of the company would be differentiating itself from competitors with the help of new products and services. However, the company has no plan to set up a separate organization for these initiatives.

The company has formed a technology executive council (TEC) and a technology business council (TBC) to ramp up the future growth of its business. The members of the council are based across the world and will meet formally on quarterly basis. The members are technology leaders identified from across horizontal service lines and verticals.

Power stocks are trading mixed as well with Jaiprakash Power, PTC India and Reliance Infrastructure leading the pack of gainers. However, Gujarat Industries Power and Tata Power are trading weak. As per a leading financial daily, the national coal distribution policy, which is almost three years old may get overhauled. As per the coal minister, the ever growing demand of coal from power sector has made the mineral's supply very limited to other sectors. The new policy will help to manage the widening demand supply gap and depleting production of Coal India. If coal ministry has its way, then soon a new distribution policy may be in place. It will serve comprehensive coal linkage needs of core and non-core sectors by introducing flexibility in coal supply to meet the growing demands of these sectors and promote energy security.

Midcap stocks in the limelight
11:30 am

Indian stock markets continue to trade flat as investors remain cautious. Stocks from the realty and pharma space are trading firm while stocks from the capital goods and FMCG space are trading weak.

The BSE-Sensex is trading down by 5 points while NSE-Nifty is trading 2 points below the dotted line. BSE Midcap and BSE Small cap indicies are up by 0.3% each. The rupee is trading at 44.95 to the US dollar.

Energy stocks are trading mixed with Castrol and Essar Oil trading firm while Chennai Petroleum and Gujarat State Petronet are trading weak. As per a leading financial daily, Indraprastha Gas Ltd (IGL)-a venture of GAIL (India) Ltd, Bharat Petroleum Corp. Ltd and the Delhi government has increased prices of compressed natural gas (CNG). This is because the cost of sourcing gas is rising and the company has been feeling the pressure on its profits. India is currently facing a shortage of gas. Hence city gas distribution companies such as IGL are sourcing higher priced regasified liquefied natural gas (RLNG) to meet incremental demand. It may be noted that IGL has taken a price hike of about 55% for CNG in the last 18 months to negate the impact of the rising cost of RLNG. After the latest hike, the consumer price of CNG in Delhi would increase by 50 p per kg to Rs 29.80 per kg and by 55 p per kg in Noida, Greater Noida and Ghaziabad to Rs 33.40 per kg. The company put up a decent result for the quarter ended March 2011 (4QFY11). IGL's top line grew by 76% YoY as a result of higher volumes and realizations. However, net profits grew by only 34% YoY due to fall in gross spreads as a result of higher gas costs.

Pharma stocks are trading firm led by Cadila Healthcare and Strides Arcolab. As per a leading financial daily, Dr Reddy's Laboratories has launched 3 new generic products in the US. These products are Donepezil Hydrochloride tablets, Venlafaxine Hydrochloride extended release capsules and Letrozole tablets. Donepezil Hydrochloride tablets are generic versions of Eisai R&D Management Co's Aricept tablets. As per IMS Health, Aricept had a combined US sale of approximately US$ 2.3 bn for the twelve months ended March 31, 2011. Venlafaxine Hydrochloride extended release capsules are generic versions of Wyeth, LLC's Effexor XR extended release capsules. Effexor XR also had combined sales in the US of US$ 2.3 bn for the same period. On the other hand, Letrozole tablets which are generic versions of Novartis Corporations Femara tablets had brand sales of nearly US$ 702 m in the US market for twelve months ended March 31, 2011. This is a huge positive for the company and will considerably augment its sales from the highly competitive US generics market. It must be noted that the company is aiming to achieve overall revenues of US$ 3 bn by FY13 and the US is expected to be a key growth driver towards achieving this goal.

Indian stock markets open weak
09:30 am

Asian stock markets have opened the day on a mixed note. Stock markets in South Korea (down 1%), Indonesia (down 0.2%) and Hong Kong (down 0.8%) are in the red whereas China (up 0.1%) and Japan (up 0.03%) are trading in the green. The Indian stock markets have opened the day on a weak note. Stocks in the auto and FMCG space are leading the losses. However, technology and healthcare stocks are trading marginally in the green.

The BSE-Sensex is trading lower by 54 points (0.3%) and the NSE-Nifty is down by around 15 points (0.3%). But Midcap and small cap stocks are trading in the green, with the BSE Midcap and BSE Small cap indices marginally up by 0.1% and 0.2% respectively. The rupee is trading at 44.76 to the US dollar.

Cement stocks have opened the day on a mixed note with ACC and Birla Corp trading in the red whereas Ambuja Cement and JK Lakshmi Cement are trading in the green. Cement leader, Ambuja Cements, a Holcim Group company, acquired 85 per cent stake in a company named Dang Cement Industries located in Nepal. The transaction was value at Rs 191.3 m. After the acquisition, Dang Cement has become a subsidiary of Ambuja Cements. The company has the option to further add a 5 per cent stake. Dang Cement also holds limestone mining lease in Nepal but the business activity on this front is not yet being carried out. With this acquisition, Ambuja Cements would be able to get a presence within Nepal. The annual cement demand in Nepal is about 3 million tones. Most of this is met through imports from India.

Auto stocks have opened the day on a weak note with Bajaj Auto and Maruti trading in the red. Two and three wheeler manufacturer Bajaj Auto explained the nitty-gritty of the passenger car platform it is building for Renault-Nissan. Rajiv Bajaj, managing director of Bajaj Auto said that this platform will have multiple uses and will be profitable even without the Renault-Nissan deal. The same car platform can also be used to manufacture 3-wheelers, vans and even commercial vehicles. So the cars produced would be an icing on the cake. The cars produced on this platform would be sold under the brand name, Renault-Nissan throughout the world. There have been fears that Bajaj may lose huge sums of money invested in the car production if the plan does not materialize.

India's infrastructure woes continue

If quizzed on what is the biggest problem that India currently faces, the unanimous response will be infrastructure. Indeed, poor state of infrastructure has been the bane of India's economic development. Therefore, what has been commendable is the pace at which India's economy has grown over the past few years despite various infrastructural bottlenecks. However, while the going so far has been good, India cannot afford to rest on its laurels and will have to display a bit more willpower in ramping up its state of infrastructure. Especially if it wants to sustain growth in GDP at 9% plus.

The progress so far has been far from satisfactory. Take the power sector for instance. According to the Power Minister, India will miss its capacity addition aim for the five-year plan period until the end of March 2012 by 17%. The reasons are many and include problems of land acquisition, issues relating to coal supply and environmental clearances. Coal shortage has been a big problem for India's power sector despite the country having one of the world's largest coal reserves. And one of the reasons for the same has been the standoff with the Ministry of Environment with respect to undertaking coal mining projects in forest areas. Indeed, such shortages do not augur well for an economy which is growing at a brisk pace and is exhibiting a ravenous appetite for energy.

The power sector is not the only one where hurdles lie. The government has not been able to deliver on its promises of building roads and highways too. The same problems affecting the power sector are a deterrent to the building of roads as well. The most common problem for all these infrastructure projects has been land acquisition as there is a great deal of murkiness as far as land rights are concerned. Land reforms have also not really taken off largely due to vested interests of politicians, developers and the like.

In the long term, there is huge scope and potential for the growth of power and roads as the demand in India for energy and goods is immense. But how the Indian government chooses to tackle the same will set the course for India's growth in the coming years. And if the government decides to do nothing significant about it, then one will have to wait and see how long the country can continue to sustain the buoyancy of its current economic growth.