Oil stocks slide in a subdued session

Not just the indices in the Indian equity markets, but those across Asia seemed to evince very little investor interest in today's session. Renewed fears about the possible failure of big banks and turbulence in global stock markets kept investors on the edge. Oil and gas and FMCG stocks in particular witnessed heavy profit booking in today's session. While the Sensex today closed higher by around 37 points, the NSE-Nifty ended 14 points higher. The BSE Mid Cap and the BSE Small Cap, however, bucked the trend and closed higher by 1% each.

As regards global markets, Asian indices closed higher today while European indices have opened in the red. The rupee was trading at Rs 54.53 to the dollar at the time of writing.

State Bank of India (SBI), the country's largest bank, has waived off the minimum balance criteria for saving bank account. Henceforth, the bank will not levy any charge for breaching minimum balance criteria. The bank has taken this step in order to increase its RETAIL customer base. This facility is available not only for new customers but also for existing customers. Initially, the bank customers had to maintain a minimum balance of Rs 1,000 in the savings account with cheque book facility. Upon failing to meet the minimum balance criteria the customers had to pay the penalty. The removal of minimum balance criterion, apart from improving customer base, will also help the bank to generate low cost deposits (Casa). This is because the savings bank account earns interest rate of just 4%. The bank had 154 m saving banks accounts as of March 2012.

CV major Ashok Leyland (All) has reported 27.9% increase in its sales in June this year. The company sold 10,244 units in June 2012 as compared to 8,009 units sold in June 2011. The surge is mainly led by the company's light commercial vehicle (LCV) range 'Dost'. The company sold 2,725 units of 'Dost' range during the month while, the company sold 7,519 units of heavy commercial vehicle range. During April-June 2012, it sold 27,585 units, up by 43.09% from 19,277 units in the corresponding period last year. It sold 20,337 units of heavy commercial vehicles and 7,248 units from the 'Dost' range.

FY12 was a mixed year for ALL. While it lost market share during the first half of the year due to various issues it faced in the southern market (where the company has a strong presence), volumes picked up strongly in the second half. The company expects to do well in the next year in terms of improving its market share as well as improving its operating performance. The company expects the M&HCV industry to grow by 6%, while the volume growth for the company to be relatively higher. ALL's management is also expecting operating margins to improve due to higher volume sales in the M&HCV segment (a relatively more profitable business). This is due to higher tax benefits on higher rollout from its Pantnagar plant. Further, it would also be able to reap full benefits of the pricing action that it took throughout FY12. The stock closed 3% higher today.

Indian share markets slip in red
01:30 pm

Led by persistent selling across heavyweights, Indian share markets fell below the dotted line in the last two trading hours. Majority of the sectoral indices are trading in the negative with IT, Oil and gas and FMCG stocks being the biggest losers. Metal, realty and auto indices are among the handful that has managed to stay afloat.

The BSE-Sensex is trading down 13 points and NSE-Nifty is trading down 10 points. However, BSE Mid Cap index and BSE Small Cap index are trading up by 0.6% and 0.5% respectively. The rupee is trading at 54.7 to the US dollar.

Majority of the energy stocks are trading in the negative with Essar Oil and MRPL being the biggest losers and Petronet LNG and Indraprastha Gas being the biggest gainers. As per a leading financial daily, Petronet LNG has announced that its 5 m tonnes per annum Kochi terminal will be commissioned by year-end. But the terminal will operate at full capacity only from 2014 onwards due to delay in linking the terminal to Bangalore and Mangalore. Land issues are causing delay in establishing connectivity with the end-users in these two cities.

Power stocks are trading mixed with Nevyeli Lignite trading the strongest and National Thermal Power Corporation (NTPC) trading the weakest. The management of Tata Power recently shared the company's plan with a leading business daily. The private power major aims at having total generation capacity of 26,000 megawatts (MW) by 2020. Of this, about one-fourth is expected to come from clean energy sources. At the same time, the company plans on tying up for securing about 50 m tonnes of coal a year. The company's management also shared its plans on setting up power plants abroad and has targeted seven countries for the same. These include South Africa and other Sub-Saharan Africa countries, Indonesia, Vietnam, Turkey and West Asia. It is believed that the company is doing a feasibility study of the market dynamics and scouting for opportunities in the same. The company is currently developing a 600 MW hydropower project in Nepal and a 114 MW hydropower project in Bhutan. After winning the 240 MW geothermal project in Indonesia in partnership with Australian company Origin Energy, Tata Power is bidding for a 10% stake in Australian based company, Geodynamics.

The management also discussed its plans on retail distribution. The company is believed to be aiming towards expanding its network in Mumbai. Tata Power is believed to have crossed the mark of 260,000 customers. In addition, its Delhi subsidiary Tata Power Delhi Distribution Ltd is continuing to perform well. The company is believed to be open to distribution opportunities in other states as well. The stock is marginally down.

Indian equity markets trade strong
11:30 am

Indian equity markets continued to trade strong over the last two hours of trade. metal and consumer durables stocks witnessed maximum buying interest, while FMCG and Oil and gas stocks witnessed maximum selling pressure.

The Sensex today is up by 41 points, while the NSE-Nifty today is up by 12 points. BSE Mid Cap index and the BSE Small Cap index are up by 0.82% and 0.71% respectively. The rupee is trading at 54.50 to the US dollar.

Steel stocks are trading strong led by Jindal Steel and JSW Steel. According to a leading financial daily, Steel Authority of India (SAIL) is planning to sign the final pact with Japan's Kobe Steel next week for a joint venture which will set up a facility to produce iron nuggets. The company is planning to invest Rs 15 bn towards the joint venture. This will be a 50-50 joint venture. The joint venture would use Iron Making Technology Mark-3 (ITmk3) for producing iron nuggets from iron ore fines and non-coking coal to use in steel-making electric arc furnaces (EAFS). The technology would be provided by Kobe Steel. A detailed project report is being jointly prepared by the two companies for setting up the 0.5 million tonne per annum (mtpa) facility at SAIL's Alloy Steel Plant (ASP) in Durgapur.

Auto stocks are trading in the green led by Ashok Leyland and Maruti Suzuki. According to a leading financial daily, Indian carmakers have cut on their production (especially of petrol vehicles to reduce inventory) but are still going ahead with new launches. All the automobile companies are lining up new models in an effort to boost sales in a slowing economy. India's largest automobile company, Maruti Suzuki decided to shut down its plant recently for over a week. However, its multipurpose vehicle Ertiga was still launched. Tata Motors is likely to launch the latest version of Safari Storme and a CNG Nano. The production however has been curtailed. As per the car manufacturers, the idea is to generate interest for newer models or upgraded vehicles.

Indian equity markets open in green
09:30 am

Barring Taiwan (down 0.1%), all the other Asian equity markets have opened the day on a positive note with indices in Japan (0.4%) and Indonesia (up 0.8%) leading the gains in the region. The Indian equity market indices have also opened the day on positive note as well. Barring Oil and gas, all sectoral indices were trading in the green with metal and Auto sector witnessing maximum gains.

The Sensex today is up by around 66 points (0.4%) and the NSE-Nifty is up by around 16 points (0.3%). Both Mid cap and Small Cap stocks are trading in the green as well with the BSE Mid Cap and BSE Small Cap indices up by around 0.6% and 0.4% respectively. The rupee is trading at Rs 54.51 to the US dollar.

Cement stocks are mainly trading in the green with JK Lakshmi Cement Ltd. and Heidelberg Cement (I) leading the pack of gainers while Samruddhi Cement and Mangalam Cement are trading weak. The key domestic cement companies have announced cement production figures for the month of June. ACC Ltd. has reported a jump of 4.2% on a year on year (YoY) basis for the month of June. The company's dispatches were also up by 2.6% YoY. On a cumulative basis, the production for first six months of calendar year 2012 was up by 5.6% YoY and dispatches grew by 5% YoY. Ambuja cement has recorded a growth of 7.9% YoY and 7.3% in the production and dispatches respectively for the month of June. For the first half year, the growth in the production and dispatches stood at 8.2% and 8.4% YoY respectively.

Engineering stocks have opened the day on a mixed note with Ingersoll Rand Ltd. and Everest Kanto Cylinder leading the pack of gainers while Alstom T&D and Blue Star were trading weak. As per latest data from market researcher GfK-Nielsen India, Voltas Ltd has piped LG in the Indian air-conditioner market. The Korean giant had dominated the leadership position in the white goods segment for over a decade. In May 2012, while Voltas' volume market share in multi-brand outlets (MBOs) of AC dealerships stood at 18.3% while that of LG declined to 17.7%. A year ago in July 2011, LG was the market leader with 22.6% share. It must be noted that MBOs are the chief sales channel, accounting for about 90% of the AC dealerships. Voltas has attributed its robust performance to price competitiveness, a strong position in the window AC market and product innovations like an all-weather AC. On this innovation, the company had spent significant marketing resources to break through the clutter.

Energy shortage blocking India's growth?

Energy security is the backbone of economic development of any country. And India is no exception. But unfortunately, the energy sector in the country seems to have been hit on multiple fronts. Right from shortage of raw materials to pricing of the final fuels, the sector is a victim of poor and irrational policies. And the macro economic conditions are only making it worse. The country is falling short in all energy sources be it coal, natural gas or crude oil and becoming more and more dependent on imports. With a depreciation in rupee, the import bill is sky rocketing and has ballooned up the fiscal deficit. On the top of it, regulated pricing and subsidy regime have brought the sector to a standstill. The half baked measures taken by the Government like increasing prices of petrol while keeping diesel prices untouched are only distorting the fuel usage patterns and doing little to tackle the problem.

The scenario in the gas sector looks equally bleak with domestic gas supply shrinking and cost of imports going up. In the state of Gujarat alone that accounts for more than a third of India's total energy consumption, a third of the production has been shut down on account shortage of power and high cost of fuels. Coal supply that happens to be the backbone of the power sector is way below the required levels and is crippling the nation's economy.

However, we have a tendency not to act till problems turn into a full blown crisis. Unless these concerns are addressed, there is no point in framing unrealistic five year plans. The core of the problem lies in ridiculously low prices of the fuel products that kill incentive to invest in energy assets. The delays in getting approvals make the situation worse. It is time that the Government bites the bullet and undertakes critical energy reforms in phases. The other option will be to become increasingly dependent on imports making the country more vulnerable to external shocks. The solution lies in aligning domestic fuel prices with those of the market prices to ensure long term energy security.