Realty stocks steal the show

After being buoyant in the post noon trading session, the Indian equity markets held ground and ended the day on a strong note. While the BSE Sensex today closed higher by 184 points, the NSE-Nifty closed higher by 71 points. Further, Smallcaps and Midcaps were also in much demand today with both the BSE Mid Cap and BSE Small Cap indices closing higher by 1.5% and 2.1% respectively. Barring stocks from Banking and Oil & Gas, all the sectoral indices closed in green. Realty stocks closed the day with huge gains.

As regards global markets, Asian indices closed on a strong note today. The rupee was trading at Rs 59.1 to the dollar at the time of writing.

Most fertilizer stocks closed the day in the green. Chambal Fertilizers and National Fertilizers led the gains while Nagarjuna Fertilizer was the biggest loser today. In an unprecedented move the government plans to raise the urea prices by as much as 10% in order to cut the subsidy costs and manage its finances well. If implemented this would be a first major price hike in 4 years. It may be noted that urea prices are controlled by the government so that the fertilizer remains affordable to farmers. However, this has led to excessive use of urea and disturbed the soil composition.

Also, urea being a politically sensitive subject, in the past, many governments refused to tinker with its price band. As such, the decision to raise the prices now by as much as 10% has come in as a major surprise. Nonetheless, it highlights government's willingness to keep its finances under control. It may be noted that fertilizer subsidy costs have increased by almost 4 times in the last decade as the UPA government chose not to raise the prices. Fearing that the move may antagonize rural vote bank the government absorbed majority of the subsidy burden. This created a huge fiscal mess. While the decision to raise urea prices now appears sensible it would be interesting to see how the farming community reacts to the same.

Majority of the automobile stocks have closed the day on a firm note with Bajaj auto and Mahindra scooters being the top gainers in the pack. As per the financial daily, Maruti Suzuki expects to save about Rs 105 bn, as the company agrees to allow its parent company Suzuki motor corporation own an upcoming plant in Gujarat. Reportedly, the company proposes to enter into contract manufacturing agreement with Suzuki motors. The said agreement will be for 15 years and on completion of the said tenure the contract will again be extended for another 15 years, given that both the parties mutually agree to terminate the contract. In our view this is positive for the company as Maruti can utilize this huge amount for various other projects and strengthen its other verticals. The stock of Maruti closed up by 1.74% today.

Realty & metal, top gainers
01:30 pm

Indian share markets continued to remain buoyant in the post-noon trading session. Barring oil & gas, all the sectoral indices are trading in the green with realty, metal and capital goods stocks being the biggest gainers.

BSE-Sensex is up 175 points and NSE-Nifty is trading 65 points up. BSE Mid Cap is trading 1.1% up and BSE Small Cap index is trading up by 1.5%. The rupee is trading at 59.04 to the US dollar.

Food stocks are trading mixed with Golden Tobacco and Tata Coffee being the major gainers whereas GSK Consumer and Agro Tech Foods are trading in the red. As per a leading financial daily, Tata Global Beverages (TGBL) is planning to widen presence of nutrient water brand 'Tata Water Plus' pan-India. The product was introduced in 2012 in joint collaboration with Pepsico through joint venture vehicle NourishCo and is currently available in Tamil Nadu, Andhra Pradesh and Gujarat. NourishCo has three products under its portfolio namely Tata Water Plus, Tata Gluco plus and Himlayan Natural Mineral Water. The company has built an expansive pipeline of innovations that will be used to fuel growth and create new hydration solutions. Currently TGBL's water business contributes a mere 1% to overall revenues with teas still having a lion's share of 70%. TGBL stock is trading up marginally.

Majority of the energy stocks are trading mixed with Castrol and Jindal Drill being among major gainers whereas ONGC and BPCL are trading in the red. As per a leading financial daily, Gas Authority of India Ltd (GAIL) is offering liquefied natural gas (LNG) procured from US at USD$ 12-13 per million British thermal units (BTU). The company has entered into a 20-year agreement to buy 3.5 m tonnes of LNG a year from Cheniere's Sabine Pass terminal. GAIL's internal requirement stands at 1 million tons annually and the balance the company proposes to re-sell it to Indian customers at prices indexed to the US benchmark of Henry Hub prices. Currently India buys LNG from Qatar at oil-indexed prices of USD$ 13.8. The natural gas produced in India is currently priced at USD$ 4.2and is expected to double after it is revised shortly. As per GAIL, the supplies are expected to commence from FY18. GAIL stock is currently trading up by 1.1%.

Indian markets continue to scale up
11:30 am

After opening in the green the Indian indices have continued the upward trend in the last two hours of the trading session. All sectoral indices except oil and gas are trading in the green. Capital goods and Realty are leading the gainers.

The BSE-Sensex is trading up 200 points and the NSE-Nifty is trading up 73 points. The BSE Mid Cap index is trading up 1.2%, while the BSE Small Cap index is trading up 1.7% today. The rupee is trading at 59.1 to the US dollar.

Most of the Telecom stocks are trading higher today. Reliance Communication and Tata Teleservices are leading the gainers. According to a leading business daily; India's third largest telecom firm Idea Cellular, has successfully completed raising funds via a Qualified Institutional Placement (qip-in-stock-market?utm_campaign=SEO-K'>QIP). The QIP was of an amount of Rs 30 bn at a floor price of Rs 136.98 per share. The issue received significant interest from financial institutions and was oversubscribed about three times. The company has raised the funds in anticipation of telecom auctions later this year. The company does not need the funds to pare down its debt as it generates sufficient cash from operations to service the same. Idea Cellular is trading up 3% today.

Most of the Power stocks are trading positive today. PGCIL and Reliance Infrastructure are leading the gainers. As per a leading business daily; NTPC has invited bids for construction of the 1,320-MW Khargone thermal project in Madhya Pradesh; estimated to cost Rs 70 bn. The bids are for an EPC (Engineering Procurement and Construction) package. The plant will have two units, each having a generation capacity of 660 MW. The company will fund the project through External Commercial Borrowings (ECB) and own resources as per the tender document issued recently. The contract award will be through international competitive bidding process having two stages i.e. techno-commercial bids and price bids. The utility has total 4,800 MW capacity in Madhya Pradesh of which some are under construction. Overall, NTPC has an installed generation capacity of 43,108 MW; which comprises of about 30% of the India's overall electricity generation. NTPC is trading flat today.

Indian share markets open firm
09:30 am

Most of the major Asian stock markets have opened on a firm note on the back of bright US jobs data that suggests improving economic momentum. The stock markets in Japan (up 0.5%) and Hong Kong (up 0.7%) were leading the gains. However, stock markets in Indonesia (down 0.4%) and Korea (down 0.1%) have opened in the red.

The Indian share markets have opened the day on a firm note. All sectoral indices have opened on a positive note with the stocks in the realty and consumer durables sector leading the gains.

The Sensex today is up by around 140 points (0.6%), while the NSE-Nifty is up by 42 points (0.6%). 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 1.1% respectively. The rupee is currently trading at Rs 58.98 to the US dollar.

Steel stocks have opened the day mainly in the green with Tayo Rolls Ltd and Maharashtra Seamless Ltd leading the gains. However, Tata Sponge Ltd and Jindal SAW Ltd have opened in the red. As per a leading financial daily, Steel Authority of India Ltd (SAIL) is close to completing a Rs 120 bn expansion plan (from 2 million tonnes to 4.5 million tonnes per annum) at its steel plant at Rourkela, Odhisha. Further, the firm is planning to more than double the capacity at the facility in the next phase, expanding it to 10.8 million tonnes per annum (MTPA). By 2025, the company aims to attain a capacity of 50 MT. As per the management, some of the schemes under this expansion plan, such as 3 MTPA hot strip mill and the beneficiation and pelletisation plant have already been tendered out.

Engineering stocks have opened the day mainly in the green with Emco Ltd and Blue Star Ltd leading the gains. As per a leading financial daily, Crompton Greaves Ltd (CG) has bagged Rs 2.4 bn contract with Spanish multinational electric utility company Iberdrola. The contract is to supply over 1 million ZIV single smart meters in a year. The order comprises single-phase and three-phase meters. It is important to note her that the regulatory framework in Spain makes it mandatory that 70 %of the analog meters are replaced by 2016 and 100 %by 2018. This will be a significant advantage for the company.

A stable rupee is the need of the hour

The year 2014 has been quite a drag for the Indian economy as it witnessed decade low growth rates during the year. High current and fiscal account deficits and falling rupee led to dismal performance across sectors.

Things could get better with the Modi government now in power. The new Government has got the single largest majority and is perceived to be reform friendly. This seems to have restored some confidence in the Indian economy. And it is quite evident from the way markets are on a tear.

However, even as we all hope for big bang reforms resulting in growth, one factor that we really need to focus on is currency stability. Huge volatility in the currency can deteriorate financial stability. Especially for India at this point of time. As per an article in Livemint, around 70% of the debt on the balance sheet of companies in BSE 500 belongs to net importers. Any depreciation in the rupee is likely to spoil their business prospects and hence debt repayment capacity. This could finally result in their credit ratings getting spoilt as well.

Also, a lot of debt for India Inc is quoted in dollars. So rupee depreciation is likely to increase their liability and their expansion plans. At a time when Indian economy is expecting a turn around, this could be a real dampener for such businesses. As such, even as we hope for faster growth and economic recovery, it should not be traded off with currency stability. In this regard, we believe, unlike the central banks around the world, Reserve Bank of India has been doing a fine job. While maintaining status quo on interest rates has not gone down well with everyone, especially India Inc, we believe that RBI should maintain its focus on inflation and currency stability. As far as growth aspect is concerned, once the supply side constraints are taken care of by the new Government, easing in interest rates can follow so as to ensure a stable economic growth.