Momentum sustains till the end

Indian stock markets end the days with gains of about 1% led by strength in Reliance Industries and a rebound in other heavyweights such as Sun Pharmaceutical Industries and Hindustan Unilever Limited (HUL). The Sensex ended higher by 322 points and the NSE-Nifty ended higher by 104 points. The BSE Mid Cap and BSE Small Cap ended the day trading higher by 1.30% and 0.86% respectively.

Asian markets finished on a negative note at the most recent closing prices. Nikkei and Hang Seng lost 1.19% and 0.99% respectively. The rupee was trading at 63.54 against the US$ in the post noon session.

Stocks from the auto-ancillaries space ended the day on a mixed note. Bosch is planning to invest Rs 4 bn in its present Chennai facility which currently manufactures front loading washing machines. The facility has a capacity to manufacture about 300,000 units a year and is spread over an area of 42 acres. The company is now planning to manufacture other products at this facility and utilize the entire plant in the process. The stock of Bosch has ended the day on an encouraging note.

Stocks in the hotel sector ended the day on a mixed note. Indian Hotels is aiming to open 14 new properties in India and abroad this year. This will be twice the inventory the company is set to open as compared to the last year, pushing its inventory to nearly 17,500 rooms with 145 properties as compared to 15,751 rooms with 131 hotels at present. Indian Hotels is also making efforts to bring down its overall debt levels in order to reduce the interest burden. US and European hotel owners have introduced a variety of brands, in order to cater to demand at every level. This has put pressure on every hotel operating abroad, including those belonging to Indian Hotels. The stock of Indian Hotel has nevertheless closed the day on a firm note.

Indian markets bounce back
01:30 pm

After opening the day on a negative note, the Indian Indices have gained momentum and are trading higher in the post noon trading session. Sectoral indices are trading on a mixed note with stocks from the energy and FMCG sectors leading the gains.

The BSE-Sensex is trading higher by 230 points (up 0.8%) and the NSE-Nifty is trading higher by 67 points (up 0.8%). The S&P BSE Midcap index is trading up 0.8% and the S&P BSE Smallcap index is trading up 0.6%. Commodity prices are trading on a positive note. Gold prices, per 10 grams, are hovering at Rs 24,658 levels. Silver, per kilogram, is trading at Rs 33,761 levels. The rupee is trading at 63.54 to the US dollar.

Banking stocks are trading on a mixed note with United Bank of India and Bank of Maharashtra witnessing maximum selling pressure. As per a leading financial daily, IDBI Bank is eyeing to raise Rs 260 bn through a mix of equity and bonds to fund its business growth. Out of this Rs 60 bn will be issued by the way of equity shares in such a way that the central government shall at all times hold not less than 51% of the paid-up capital of the bank. Further, the remaining Rs 200 bn is planned to be raised from bonds in one or more tranches during the current fiscal. Currently the stock of IDBI bank is trading up by 0.6%.

Most of the stocks in the automobile space are trading positively with Force Motors and Mahindra & Mahindra leading the gainers. Eicher Motors has reported its results for the second quarter ended June 30, 2015. The company has reported a 37.7% rise in its net profit on a YoY (year-on-year) basis. For the concerned period the company's total income has increased by 44.8% on a YoY basis. On the consolidated basis, the company has reported 40.9% YoY rise in its net profit after tax and minority interest. Presently the stock of Eicher Motors is trading down by 1.2%.

Indian stock markets surge upwards
11:30 am

After opening the day on a lower note, markets have extended gains aided by the index heavyweights such as Reliance Industries and ITC. Buying interest is seen in pharma banking and auto stocks.

The BSE-Sensex is trading up by 208 points (0.74%) and the NSE-Nifty is trading up by 64 points (0.75%). The BSE Mid Cap index is trading up by 82 points (0.74%), while the BSE Small Cap index is trading up by 79 points (0.67%). The rupee is trading at 63.54 to the US dollar. Gold and Silver are trading at Rs 24,635 per 10 grams & Rs 33,693 per kilogram respectively.

Stocks in Telecom sector are trading on a mixed note with AGC Networks leading the winners and Tata Teleservices leading the losers. Bharti Airtel, India's largest telecom firm said that it had no plans to exit the Africa operations and would continue to invest in the region. The statement came a day after it entered into a pact with France Orange for selling its four subsidiaries. Airtel has operations in 17 markets in Africa. It has 8.73 m subscribers in Africa. The company stated that they remain fully committed to the Africa operations and they will continue to invest in its growth and building a profitable business and accordingly they have no plan to exit. Stock of Bharti Airtel is trading down by 1.2%.

Stocks in Steel sector are trading on a mixed note with Jindal Saw leading the winners and Tata Sponge leading the losers. Tata Steel has sought shareholder approval to raise up to Rs 100 bn through sale of securities. The sale of securities could be in the form private offerings in domestic or international market or through an issuance of shares, bonds, debentures and warrants. Tata Steel said the financial markets are very dynamic in nature and it is hard to predict when and which market may provide them with windows of opportunity to raise capital that is cost-effective, has better terms and can help lengthen its maturity profile. It also stated the issues will be structured in a manner such that the additional ordinary share capital that may be issued under resolution would not be more than 5% of the paid-up ordinary share capital of the company. Stock of Tata Steel is trading down by 0.5%

Indian markets open in red
09:30 am

The major Asian stock markets have opened the day on a weak note with markets in Hong Kong (down 1.1%) and Japan (down 1%) bearing the maximum burnt. Further stock markets in US and Europe also closed their session red. In commodity markets, Gold is trading at Rs 24,896 per 10 grams, down 0.5% while Silver is trading down by 0.4%.

Indian markets have opened the trading session on a negative note today. BSE Sensex is trading lower by 54 points (down 0.2%) and NSE-Nifty is trading lower by 10 points (down 0.1%). BSE Mid Cap and BSE Small Cap index indices are trading marginally up. The rupee is trading at 63.54 per US dollar.

Automobile stocks have opened the day on a mixed note. According to financial times, Maruti Suzuki has achieved a milestone by outgrowing the Suzuki Motor in market value. The company's stock has surged 65% in the past year that swelled its market capitalization to US$19.73 bn. while the Japanese parent Suzuki is valued at US$19 bn. Meanwhile, Maruti has been given a free hand to develop business in Africa and Latin America by using the existing dealer network of Suzuki. The stock of company has opened in the green.

Power stocks have also opened the day on a mixed note. According to business times, Tata Power is planning to sell its 30% stake in Arutmin mine in Indonesia. This step comes after the company has been witnessing some challenges due to crash in the coal prices. Further, the company is also working on the debt restructuring plans with lenders. The transaction is to help Tata Power cut its massive consolidated debt which has rose to Rs 408 bn as on March 2015. Due to this, the company has sought to refinance its loans of Rs 100 bn which were taken for Mundra project in Gujarat. Stock of Tata Power has opened the day marginally down.

Why moats are so important

A moat is a competitive advantage that one company has over the other companies in the same industry. The term was coined by the renowned investor Warren Buffett.

The wider the moat, the company would enjoy larger and more sustainable profits over its competitors. A well-known brand name, pricing power and a large market share leading to economies of scale are some of the moats which would allow companies to enjoy high returns over the long term.

Let us take the example of Eicher Motors to understand this. 'Royal Enfield' is the premium motorcycle brand of Eicher Motors. Royal Enfield largely caters to the mid-sized 250 cc to 499 cc segment. The major part of their sales comes from the 250-350 cc bikes such as 'classic', 'thunderbird' and 'bullet'. They enjoy a 99.5% market share as per the data reported by Society of Indian Automobile Manufacturers. The brand was selling 50,000 bikes in the year 2010 and in 2014 the figure touched 3,00,000. The volumes have increased nearly by six times over the past five years. So the strong brand name and a dominant market share have created a strong economic moat for Eicher Motors.

However, there would be certain companies wherein it would be difficult to understand the industry and find out the economic moat of the same. For example, it would be difficult to find the moat involved in the technology sector as it is difficult to understand the sector. This was the case with Berkshire Hathaway led by the iconic CEO Warren Buffett. The company did not have much exposure to the technology stocks, till recently when it increased its stake in International Business Machines Corp (IBM) and currently it occupies the 3rd most valuable spot in the company's portfolio. Buffett in an interview to CNBC stated that he knew a lot less about the technology sector as compared to the consumer or the financial sector. The moat he stated while choosing IBM over other rivals was the hybrid cloud that the company offered, large and well established set of clients, dividend payout ratio and high switching costs.

High switching cost is also an economic moat. Switching costs are those one-time inconveniences or expenses a customer incurs in order to switch over from one product to another. If you've ever taken the time to move all of your account information from one bank to another, you know what a hassle it can be. Similar is the case in the technology sector wherein moving to another technology involves high cost of training and hardware to suit the new software requirements. This plays an important moat in the technology sector and that was possibly one of the reasons why Berkshire Hathaway invested in IBM as it has well established client base.