Profit booking in final hour

After trading in the green for most part of the day, the Indian markets dipped below the dotted line towards the end as selling activity increased in the final hour of trade. The BSE-Sensex closed the day lower by about 125 points, while the NSE-Nifty ended with losses of about 33 points. While weakness was seen in certain sectors such as consumer durables and metal, those from the healthcare and FMCG space led the pack of gainers. Midcaps and smallcaps ended the day on a negative note as well with the S&P BSE Midcap and S&P BSE Smallcap indices closing lower by about 0.5% and 0.6% respectively

European markets are mixed today. The CAC 40 is up 1.18% while the FTSE 100 gains 0.48%. The DAX is down by about 0.22%. Asian markets finished broadly higher with shares in China leading the region. The Shanghai Composite is up 2.48% while Japan's Nikkei 225 is up 0.28% and Hong Kong's Hang Seng is up 0.23%.The rupee was trading weak by 4 paise at 63.63 in the afternoon session against the US$.

Stocks of Hindustan Unilever emerged as the top performing stocks in the Sensex pack after it was reported that the company may consider acquiring Kerala-based ayurvedic hair and skin care brand Indulekha for Rs 5 bn. The planned acquisition will be the company's first since acquiring the cooked shrimp and pasteurized crabmeat business of the Amalgam Group of Companies in 2003. Hindustan Unilever had earlier exited the hair oil business by selling Nihar brand to Marico in 2006. Indulekha, however, is a new generation ayurvedic solutions business that could gel with HUL's Ayush services business, which is a relatively small business as compared to the size of its other big brands. The FMCG major has also launched value-added premium specialized hair oils under Dove.

Stocks in the engineering sector ended the trading day on a mixed note. According to a leading financial daily, Crompton Greaves has entered into a long term alliance with SOGO, a European competitor in consumer appliances. The Spanish consumer appliances company is engaged in the marketing and worldwide sales of kitchen and home appliances and personal care products under the brand name of SOGO since 1981. This alliance enables Crompton to offer a new range of high performance kitchen appliances to the Indian consumer. Reportedly, through this alliance Crompton will leverage SOGO's robust cost effective supply chain to introduce the new range of products through its well established distribution network with a target of reaching 9000 premium retail counters.

Indian markets extend gains
01:30 pm

Indian Markets are trading positively in the post noon trading session. Sectoral indices are trading on a mixed note with stocks from the engineering and FMCG sectors leading the gains. However, aluminum stocks are witnessing selling pressure.

The BSE-Sensex is trading up 97 points (up 0.3%) and the NSE-Nifty is trading up 30 points (up 0.3%). The BSE Mid Cap index is trading up 0.2% and the BSE Small Cap index is trading up 0.3%. On the commodity front, gold prices, per 10 grams, are trading at Rs 26,597 levels. Silver price, per kilogram is trading at Rs 36,056 levels. Per barrel crude oil is available at Rs 3,914. The rupee is trading at 63.62 to the US dollar.

Capital market regulator Securities and Exchange Board of India (SEBI) has eased the framework for start-ups in the country to raise capital from the stock market. SEBI has laid a different platform for such companies where they do not have to specify the exact end-use of such funds and resort to traditional metrics to justify the price at which they were selling shares. Further SEBI has also halved the time required between listing and closing of an initial public offering (IPO) to six days as against the current timeline of twelve days. This will be applicable for all public issues coming after January 1, 2016.

Automobile stocks are trading on a mixed note with TVS Motors and Mahindra & Mahindra bearing the maximum burnt. As per a leading financial daily, the high profile joint venture (JV) between Ashok Leyland and Nissan Motors, in which Ashok Leyland has 51% stake, is witnessing increased losses. This was because of the sharp drop in sales, write offs and a severe pruning in product portfolio. The company has made an impairment provision of Rs 2 bn out of total investment of Rs 5 bn in three Nissan JV entities. The after tax loss for Ashok Leyland Nissan Vehicles Ltd jumped to Rs 7.9 bn as against 1.7 bn in the previous fiscal. The stock of Ashok Leyland is currently trading down by 1.4%.

Indian stock markets inch upwards
11:30 am

After opening the day in the green the Indian stock market indices have surged upwards. Buying interest is seen in Pharmaceutical sector.

The BSE-Sensex is trading up by 83 points (0.30%) and the NSE-Nifty is trading up by 22 points (0.27%). The S&P BSE Midcap index is trading up by 0.18%, while the S&P BSE Smallcap index is trading up by 0.27% today. The rupee is trading at 63.68 to the US dollar. Gold and Silver are trading at Rs 26,644 per 10 grams & Rs 36,091 per kilogram respectively.

Stocks in Engineering sector are trading on a negative note with Larsen and Toubro (L&T) trading down by 0.16% and Voltas trading down by 2.51%. L&T rallied over 2% in yesterday's trade on reports that the company would list its IT service company L&T Infotech by the end of the calendar year 2015. L&T owns 100% shares of L&T Infotech, which it intends to dilute by 10-12%. L&T Infotech posted a net profit of Rs 7.6 bn and EBIDTA margins were at 20% levels for the fiscal year 2014-2015. L&T Infotech derives around 65% of its revenues from the US, another 20% from Europe and the balance from the rest of the world. L&T Infotech has shown a compounded annual growth rate (CAGR) of 27% in sales and 33% in adjusted net profits during FY 2011-2014. At the reported offer size the price to earnings valuations works out to be about 20 times.

Stocks in Automobile sector are trading on a negative note with Tata Motors trading down by 0.28% and Maruti Suzuki Ltd trading down by 0.59%. Tata Motors, India's largest automobile manufacturer announced its association with tyre manufacturer Ceat Ltd and mobile commerce platform Paytm, as new partners in Tata Motors Loyalty Programmes- Tata Delight and Tata Emperor. The partnership will enable the customers to accumulate and redeem points through transactions made on Paytm

Indian Markets open flat
09:30 am

The major Asian stock markets have opened the day on a positive note with markets in Japan (up 0.4%) and Hong Kong (up 0.1%) leading the gains. However, stock market in China (down 0.2%) is trading in the red. Stock markets in US and Europe closed their session on a positive note.

Indian stock markets have opened the session on a flat note today. BSE-Sensex and NSE-Nifty are trading marginally higher, both up by 0.1%. S&P BSE Midcap and S&P BSE Smallcap indices are trading in the green, up 0.4% and 0.3% respectively. Among the sectoral indices, stocks in financial institutions segment are witnessing selling pressure while FMCG stocks are leading the gains. The rupee is trading at 63.62 per US dollar.

Stocks in the automobile sector have opened the day on a mixed note. As per leading financial times, automotive major Mahindra and Mahindra (M&M) has launched its new small commercial vehicle Jeeto. The launch, which has several variants, was made from its Zaheerabad manufacturing plant in Telengana. Jeeto is the first product in its category with a modular range of 8 mini trucks to cater to various needs of sub-one tonne segment. It is priced at Rs 2.32 lakh and is available in S, L and X series to cater to mini truck, micro truck and 3-wheeler customers. Stock of M&M has opened the day on a negative note.

As per a financial daily, Tata Power Delhi Distribution (TPDDL), a joint venture of Tata Power has signed a memorandum of understanding (MOU) with Cluster Innovation Centre University of Delhi. This is to jointly commence research and develop projects in the area of electricity distribution of technology. TPDDL is a front runner in technologies and innovation in the field of power distribution. For the fourth quarter of 2015, Tata Power had reported a consolidated net profit of Rs 1.6 bn as against a loss of Rs 1.4 bn in the same period last year. Stock of Tata Power has opened the day in red.

Is stock broking a great business?

After many years of lull, the bulls finally came back to the Indian stock markets in the latter part of 2013 in the run up to the general elections. After the Narendra Modi-led single majority government came to power, investor enthusiasm saw a new high. Investors who had shunned the stock markets in the aftermath of the 2008 stock market crash came back to the markets in droves.

As an investor, you might be tempted to consider investing in stock broking companies given that they are direct beneficiaries of bullish sentiments and increased investor participation.

Sure, the stock broking business may have received a boost in the current market scenario. But if that is the only reason you think makes a good case for investing in brokerage businesses, then let us caution you.

Let us consider the business fundamentals of brokerage firms.

Firstly, broking is a highly commoditised business, where the intensity of competition is very high. This means practically no bargaining power.

Secondly, the business is highly cyclical. Since the business depends on trading turnover, bear markets can be tough time for brokers. Particularly, market crashes can wreck havoc to the fortunes of brokers.

Here is proof...

After the 2008 crash, many small players had to shut shop.

The ones that survived diversified into other businesses. As per an article in The Economic Times, today none of the top brokerage firms get more than 10% of their revenues from the broking business. Some areas of diversification include real estate advisory, retail lending, property loans, health cards, gold refining, trading of renewable energy certificates, and so on.

In our view, if companies are forced to diversify into unrelated businesses simply to be able to survive tough times, then the long term durability of such businesses may be highly uncertain and unreliable.

As such, we believe it is best for long term investors to keep away from such business models.