Sensex closes lower

Led by overseas institutional selling, the Indian markets closed today on a weak note. Lack of clarity on GAAR, hike in core WPI and fall in rupee on account of dollar demand from oil marketing companies, all of which took a toll on the broader indices. Stocks from sectors such as consumer durables and IT have witnessed maximum selling pressure. Both the BSE Mid Cap and the BSE Small Cap indices lost steam and were down by 0.02% and 0.47% respectively. The BSE Sensex closed lower by 17 points. The NSE-Nifty too was seen down by 6 points.

On the global front, most of the Asian indices have closed the day on a firm note. So also, the European indices have been witnessing optimistic performance. The rupee was trading at Rs 60.14 to the dollar at the time of writing.

Power sector stocks today have closed the day on a mixed note. While stocks like Tata Power and PTC India Ltd have lead the pack of gainers, stocks of GVK Power & Infra and Neyveli Lignite have lead the pack of losers.

According to a leading daily, Central Electricity Regulatory Commission (CERC) has rejected NTPC's plea for change in 2014-19 tariff reforms. The company had contested CERC tariff regulations for 2014-2019.

NTPC had made a presentation pertaining to the ramifications of these tariff regulations that would get implemented in the aforesaid period. But CERC is bound by duty to put out these regulations. On account of deviations from the methodologies and changes made to calorific value, NTPC was likely to forgo profits of Rs 12 bn to 13 bn marring its profitability. While the case is still stuck at High Court Level, NTPC will have no option but to adhere to the norms. While the stock has already taken a beating, it was down today by 0.7%.

According to a leading daily, the Wholesale Price Index (WPI) data for the month of June has come in lower than expected at 5.43% as against 6.01% in May. This data also happens to be at a four-month low on the back of lower food inflation. However, the core inflation for the month of June is seen higher at 3.9% as against 3.8% month-on-month basis. Therefore, a rate cut from the Reserve Bank of India may not be likely. Additionally, the nation is also facing a drought-like situation thanks to the deficient monsoons. In its maiden Union Budget 2014-15, Finance Ministry Arun Jaitley had allocated additional funds to battle out inflationary pressures. Therefore, it remains to be seen how the government fights its way out.

Indian stock markets pare losses
01:30 pm

Indian stock markets have pared most of its losses on account of buying from index heavy weights during the previous two hours of trade. Gains are led by the stocks from power and energy sectors, whereas consumer durables and software sectors are leading the pack of losers.

The BSE-Sensex is trading up by 5 points and the NSE-Nifty is trading up 2 points. The BSE Mid Cap index is trading marginally up by 0.1% and the BSE Small Cap index is trading down 0.5% today. The rupee is trading at 60.01 to the US dollar.

Food & tobacco stocks are trading mixed today. While Tata Global Beverages and Godfrey Phillips are trading firm, Wadala Commodities is trading weak. As per a leading business daily, tobacco major ITC's hotel division is planning to acquire its first luxury property in Goa. The company is close to acquiring the Ramada Caravela Beach Resort from Advani Hotels & Resorts for about Rs 7 bn. The property is currently managed by US headquartered Wyndham Worldwide. About 33% of the hotel's rooms have been renovated in last October. The property is closer to the beach and has more than 1 lakh sq ft of additional FSI (floor space index) available as per Advani Hotels FY13 annual report, which will help further expansion or adding of new services to the property. However, ITC has refrained from commenting on the discussion to public as yet. The move will help ITC get its readymade hotel in Goa, which is one of the top tourism destinations as getting land there for new projects is not easy. ITC is trading down 0.7% today.

Majority of the power stocks are trading in the green led by KSK Energy and CESC Ltd. As per a leading financial daily, Tata Power has sought shareholder's approval for increasing its borrowing limit to Rs 270 bn as well as raising Rs 70 bn through issue of non-convertible debentures. The funds will be utilized by the company for its aggressive growth plans in the fields of generation, transmission, distribution and fuel securitization. Tata Power is currently executing various thermal, hydro and renewable energy projects and these entail high capital expenditure that need to be financed by debt and equity. Tata Power is also required to re-finance Foreign Currency Convertible Bonds of Rs 20 bn that are maturing in November 2014. As per the company, non-convertible debentures issued on private placement basis are a major source of borrowings. The borrowings of the company currently aggregate up to Rs 110 bn. Tata Power has an installed electricity generation capacity of more than 8,500 MW. Tata Power stock is currently trading up by 1.5%.

Indian stock markets remain lackluster
11:30 am

After opening in the red Indian equity markets continue to trade below the dotted line. Sectoral indices are trading mixed with IT and FMCG stocks being among the leading losers. However stocks from Power and Realty sectors are among the leading gainers.

The BSE-Sensex is trading down 46 points. The NSE-Nifty is trading down 9 points. The BSE Mid Cap index is trading down 0.12% and the BSE Small Cap index is trading down 0.29%. The rupee is trading at 59.97 to the US dollar.

While MNC pharma stocks are trading in red today, the stocks from Indian pharma space are trading mixed today. Among the MNC pharma companies Sanofi Aventis is witnessing maximum selling pressures and in Indian pharma space Divis and Cadila are the leading losers. As per the financial daily, the national pricing policy authority (NPPA) has decided to bring diabetes and cardiac drugs under the pricing control. The sudden move has surprised the industry and various pharma companies especially the MNC pharma are expected to get impacted. Reportedly, the said decision comes after the Drug price control regulator (DPCO) as the regulator decides to bring under the pricing control and thus NPPA has fixed the prices of 108 formulation packs of 50 anti-diabetic and cardiovascular medicines. These drugs were not part of the list which had come under the pricing control in 2013. The drugs like Gliclazide, Glimepiride, Sitagliptin, Voglibose, Amlodipine, Telmisartan and Rosuvastatin, Heparin and Ramipril will become cheaper post this regulation. Among the various companies, Sanofi Aventis's portfolio is expected to get impacted the most. Sanofi was trading down by 8% at the time of writing

Apart from Bharti Airtel, most Telecom stocks are trading in the green with Reliance Communications leading the gainers. Most Telecom operators in the country have welcomed the proposal in the union budget regarding the setting up of National Rural Internet and Technology Mission. However, the budget did have a negative surprise for the sector. It has imposed a 10% import duty on telecom products that fall outside the Information Technology Agreement (ITA) 1 of the World Trade Organisation (WTO) pact. India had signed this agreement in March 1997. Under this pact, member countries had to allow duty free import of products falling under eight categories covering telecom, computers and semiconductors like mobile phones and electronic chips. Thus the new duty will increase the capex burden on the sector by Rs 10 bn. This will further aggravate the financial health of the sector.

Indian share markets open in the red
09:30 am

Barring Singapore (down 0.1%) and Indonesia (down 0.2%), the major Asian stock markets have opened on a positive note with stock markets in Japan (up 0.4%) and Hong Kong (up 0.4%) leading the gains.

The Indian share markets have opened the day in the red. The sectoral indices have opened mixed with consumer durables and software sector leading the losses. However, stocks in the capital goods and energy sector have opened on a firm note.

The Sensex today is down by around 52 points (0.2%), while the NSE-Nifty is down by around 16 points (0.2%). The midcap and smallcap stocks have also opened in the red with BSE Mid Cap and BSE Small Cap indices down by around 0.5% and 0.7% respectively. The rupee is currently trading at Rs 59.99 to the US dollar.

Pharma stocks have opened the day mainly in the red with Sun Pharmaceuticals Industries Ltd and Natco Pharma Ltd leading the losses. As per a leading financial daily, Sun Pharmaceutical Industries' subsidiary Caraco Pharmaceutical Laboratories has started recalling some batches of Venlafaxine Hydrochloride extended-release tablets from the US market. Venlafaxine Hydrochloride extended-release tablets are indicated for the treatment of major depressive disorder. According per the USFDA notification, the recall of 26,530 units of 30-count bottles and 14,597 units of 90-count bottles is voluntarily initiated by the company through a letter to the regulator last month under 'Class-II' classification. As per the FDA, stability results have found the product did not meet the drug release dissolution specifications.

Auto stocks have opened the day on a mixed note with TVS Motors Ltd and Escorts Ltd leading the gains. However, Tube Investments Ltd and Ashok Leyland Ltd were facing selling pressure. Tata Motors has registered 10.46% year on year (YoY) decline in global sales, including that of Jaguar Land Rover (JLR) for the month of June 2014. The auto sales volumes in June 2014 stood at 75,623 units, as compared to 84,458 units sold in the corresponding month last year. In the passenger vehicles category, the global sales of Tata Motors were at 44,239 units, versus 42,881 units in June 2013, up 3.16%. Meanwhile, sales of luxury brand Jaguar Land Rover increased 17.96% YoY, to 36,021 units in June, compared to 30,536 units in the same month last year. However, sales of commercial vehicles declined 24.51% YoY in June 2014 to 31,384 units from 41,577 units a year ago.

Was the union budget plagiarized?

The judgment day arrived as the Finance Minister Arun Jaitley presented his maiden Union Budget in the parliament. There have been different views of India Inc on the Budget presented by the finance minister.

Some experts view this budget as well defined and prudent. On the other hand, some view it as visionless. An article in Economic Times says that the Arun Jaitley's budget is more or less like that of Chidambaram's interim budget and FM has not done any major reforms.

So, the question is, given that the government's hands were tied on the fiscal front, has Mr Jaitley played a better role than his predecessor?

On the positive side, the FM has promised to take some key important steps which have been lingering since last few years. The proposal of rolling out GST further in the near future itself seems an alluring idea. Over and above that raising FDI cap in insurance and defense sectors also opened the gates for foreign investment in India. This clearly indicates government's interest in attracting long term foreign funds in key sectors. Addressing infrastructure bottlenecks and putting forward various schemes to boost agriculture growth also looked quite exciting. In short, the budget backs Modi's ideology and has proposed reforms and investments route.

The union budget has also successfully identified the key areas for India's poor fiscal and economic health. Plus the target of narrowing down the deficit to 3.1% also looks quite appealing. However, in our view the current Budget lacked detailed planning. For instance, just like his predecessor, the current FM too is relying on divestments to fund the deficit. The target seems to be achievable as the markets sentiments have improved. However, higher emphasis could have been on improving tax to GDP ratio. More attention towards tax perspective with higher clarity on retrospective taxation could have also been helpful. Plus some path-breaking reforms to curtail subsidies could too have aided to the government's fiscal deficit.