Smallcaps lose out today

The Indian equity markets witnessed an extremely choppy session in the latter half of the day, dipping into negative territory at one point but recovering to close the day with healthy gains. In fact, the BSE Sensex ended the day very close to its all time high of 26,190 points. While the BSE Sensex today closed higher by 121 points, the NSE-Nifty closed higher by 28 points. BSE Mid Cap closed the day flat, smallcaps lost out. The BSE Small Cap index closed the day lower, recording a decrease of 0.63%. IT and consumer durable stocks were the biggest gainers today.

As regards global markets, Asian indices closed on a positive note today, with the Japan being the only one to see a decline. Singapore and Hong Kong were amongst the biggest gainers. The rupee was trading at Rs 60.18 to the dollar at the time of writing.

Capital goods stocks on the whole ended the day marginally higher. Thermax and Elgi Equipments were the biggest gainers. Elecon Engineering and BEML found themselves on the losing end today. As per a leading business daily, Thermax is planning to increase its focus on its international business. This, in a bid to diversify away from and thus de-risk its business from the ups and downs of the domestic capital goods industry. Though the company already has significant exports (to the tune of Rs 10 bn annually), going ahead the management is looking at setting up independent subsidiaries in other geographies abroad like South East Asia, Middle East and Africa. This will help the company participate more aggressively in these markets.

In a move that could help banks, especially the PSU's, the finance ministry is thinking of providing an exemption to them from the mandated corporate social responsibility (CSR) spend which is required as per the companies act. The act requires companies to spend at least 2% of their average net profits over the preceding three years on CSR activities. It is applicable to companies that have turnover of Rs 10 bn or more, or net worth of Rs 5 bn or more, or profits of Rs 50 m or more. Since most banks have profits in excess of Rs 50 m most of them were mandated to spend on CSR. However, the finance ministry feels since the overall economy is not doing well banks should be exempted from mandatory spending. We believe this will certainly help banks as quite a few of them are facing capital challenges.

Midcap & smallcap, out of favour
01:30 pm

Indian share markets continued to trade strong in the post-noon trading session. Majority of the sectoral indices are trading in the red with realty and power stocks being the biggest losers. IT and capital goods stocks are among the major gainers.

BSE-Sensex is up 81 points and NSE-Nifty is trading 16 points up. BSE Mid Cap is trading 0.2% down and BSE Small Cap index is trading down by 0.6%. The rupee is trading at 60.13 to the US dollar.

Most of the hotel stocks, barring Oriental Hotels, are trading in the red with Hotel Leela and Taj GVK being the major gainers. As per a leading financial daily, the Rs 10 bn rights issue of Tata Group company Indian Hotels Company Ltd (IHCL) will open on 4th August and close on 20th August. The rights issue will offer around 182 m convertible debentures for Rs 55 per unit to existing shareholders. Every shareholder of IHCL holding 40 equity shares will be eligible for nine compulsorily convertible debentures of the company. As per the offer document, IHCL plans to utilize Rs 5.5 bn from funds raised to repay debt while Rs 1.3 bn will be used for renovation/refurbishment of existing hotels and Rs 700 m will be used to finance construction of Vivanta by Taj at Guwahati. The balance proceeds of Rs 2.4 bn will be used for general corporate purposes. IHCL stock is currently trading down by 1.3%.

Private banking stocks are trading mixed. ICICI Bank and Dhanlaxmi Bank are leading the pack of gainers, while ING Vysya Bank and DCB Bank are trading on a weak note. As per a leading business daily, RBI has relaxed norms for banks on loans against jewellery. The country's central bank has removed the Rs 1 lakh ceiling on loans against jewellery where borrower repays all dues with interest in one go at loan maturity i.e. a bullet repayment. In the latest circular, RBI has left it to banks to decide the ceiling and quantum of loans against pledged jewellery used for non-agricultural purpose. However, it had capped the tenure for bullet repayments of such loan at 12 months. The apex bank has also kept the loan to value (LTV) ratio of such loans unchanged at 75% throughout the loan tenure which include current value of gold jewellery and accrued interest. The higher loan ceiling will help banks to enhance their gold jewellery loan portfolio which are generally of ticket size above Rs 1 lakh.

IT stocks lead the gainers
11:30 am

After opening firm, the Indian stock markets have given up most of the gains in morning session. Among the sectoral indices, maximum buying activity is witnessed in Software and Banking stocks, while Energy and FMCG stocks are at the receiving end.

The BSE-Sensex is trading up 39 points. The NSE-Nifty is trading up 5 points. The BSE Mid Cap index is trading down 0.2% and the BSE Small Cap index is trading down 0.6%. The rupee is trading at 60.16 to the US dollar.

Private banking stocks are trading mixed today. While City Union Bank is leading the gainers; ING Vysya Bank is leading the losers. Axis Bank, India's third largest private sector bank, has announced results for 1QFY15. The bank's Net Interest Income (NII) grew 15.5% YoY while the net profit grew by 18.3% YoY. Despite a 45.7% YoY fall in provisions, the bottomline was hampered due to higher operating costs as well as lower non-interest income. Non-interest income was down 5% YoY, while operating expenses were up by 16.8% YoY. The asset quality numbers were slightly below par. In absolute terms, gross non-performing assets (NPAs) rose 39% YoY and net NPAs rose 41% YoY. Axis Bank is trading down 1.6% today.

Indian pharma stocks are trading mixed with, Dishman pharma and Indoco remedies leading among the pack of losers while Natco pharma and Wockhardt Ltd are the leading gainers. As per the financial daily, the European pharma company GlaxoSmithKline (GSK) is looking to divest some of its mature products in its portfolio. Various generic companies including India based Lupin Ltd is planning to bid for these brands, as GSK has put some of its older products on auction. GSK is selling of various off-patent drugs which are marketed in North America and Western Europe. These drugs have total annual sales of around US$ 1.7 bn. The portfolio of drugs offered for sale includes antidepressant Paxil, migraine treatment Imitrex, Zantac for stomach acid and Zofran for nausea. While there has been no confirmation by Lupin on this aspect as of now. However, as Lupin has been looking for acquisition of lucrative brands since some time, there is fair chance of Lupin bidding for the GSK brands.

Indian share markets open firm
09:30 am

Barring Japan (down 0.1%), all major Asian stock markets have opened the day on a firm note with Hong Kong (up 0.7%) and Indonesia (up 0.9%) leading the gains. The Indian share markets have also opened the day on a positive note. All sectoral indices are trading firm with stocks from the banking and capital goods spaces leading the gains.

The Sensex today is up by around 136 points (0.5%), while the NSE-Nifty is up by about 34 points (0.4%). Mid and small cap stocks have also opened in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.7% and 0.6% respectively. The rupee is currently trading at Rs 60.16 to the US dollar.

Information technology stocks have opened the day on a firm note with Moser Baer India, Infosys and Tech Mahindra leading the gains. As per a leading financial daily, Bangalore-based IT services major Infosys has entered into a multi-year deal with automaker Daimler AG for the management of infrastructure services and data centres. In addition, it will provide e-collaboration and middleware services as well as oversee database operations. It must be noted that the agreement was inked in the second quarter of financial year 2013-14 (2QFY14). The transition was completed and steady state operations started in the first quarter of 2014-15 (1QFY15). Infosys has now successfully completed the transition to take over operation of European data centres of Daimler AG. The financial details of the deal have not been disclosed yet.

Auto ancillary stocks have opened the day on a firm note with Rico Auto, Sundaram Clayton, SKF India and Asahi India Ltd leading the gains. As per a leading financial daily, battery maker Exide Industries is planning to invest Rs 3.5 bn in the current financial year 2014-15 (FY15) to expand manufacturing capacity at its existing plants. The expansion would be mainly focused on increasing industrial battery making capacity. The company might even consider increasing automotive battery capacity in the fiscal year 2015-16 (FY16) if industry sentiments recover and demand scenario improves.

Is the World Bank losing its relevance?

In yesterday's article, we had talked about how BRICS countries are coming up with their own institution to cater to the financing needs that global institutions like IMF and World Bank have failed to meet. While the emerging economies constitute a key share in the global economy, they are feeling marginalized by the organizations such as World Bank. While this development suggests rise of new organizations with global significance, it also raises a very important question. Are the existing ones losing their relevance?

A case in point here is the World Bank. Set almost 7 decades back, the World Bank came into force post Second World War with an aim to rebuild the societies that were its victims. As the time passed, its focus changed to development work. Here, the bank's role is getting sidelined by private sector that seems to be better at catering to the needs of rising middle class in emerging economies.

The World Bank seems to have failed to match the pace of global economic changes. As a global organization, one of its key tasks was to reduce systemic risk and make the global economy more resilient to any crisis. This certainly does not seem to be the case currently. The bank has also failed to take care of the poor and marginalized one of the key areas it intended to work on. Once the BRICS bank becomes a reality it relevance is likely to shrink further.

As an article in Livemint suggests, President Jim Yong Kong seems to be aware of these challenges that the World Bank faces. While he is trying overhaul the organizational set up, the biggest block to any reform may come from internal sources. Especially because his strategy includes trimming down the budget and staff as well. While it is not going to be an easy task, we hope Mr Jim Yong Kong will not give up on his mission so that the world can witness better contribution from one of the key and oldest global financial institutions.