A flat end to the day

After trading weak during post noon trading session, the Indian equity markets failed to recoup losses and ended the day in the red. While the BSE Sensex today closed lower by 76 points, the NSE-Nifty closed lower by 23 points. Even Midcaps and Smallcaps followed broader market trend and closed with marginal losses. Both the BSE Mid Cap index and the BSE Small Cap index recorded losses of 0.5% each. IT and consumer durable stocks were the biggest losers today.

As regards global markets, Asian indices closed on a mixed note today. The rupee was trading at Rs 61.3 to the dollar at the time of writing.

The RBI has tightened norms for the asset reconstruction companies (ARCs) in order to bring more transparency in purchase and sale of bad loans. Henceforth, ARCs planning to buy any bad loan will have to pay 15% upfront of the said restructured asset that is being proposed to be bought. Also, they will get more time to do due diligence before bidding for such loans. In addition to this, ARCs shall also get 6 months to plan recoveries from NPAs as against a year earlier. Such sweeping changes are likely to bring in more transparency and remove imperfections prevailing in the market.

FMCG stocks have ended the day on a mixed note with Bata India and Pidilite Industries among the list of losers. As per a leading business daily, GSK Consumer's brand 'Women's Horlicks' has now become the FMCG company's fastest growing product. It's sales topped Rs 1 bn in 2013. In fact, the sales of Women's Horlicks have been growing faster than even Sensodyne toothpaste (another popular brand under the company's portfolio of products) and the company's mainstay Horlicks. This has been despite minimal spending on advertising and a relative slowdown in demand for discretionary products. As per the management, this indicates a positive change in consumer demographics towards the product. What makes this more favorable for the company is this is a premium pricing product and thus high on margins and profitability.

Energy & metal in favour today
01:30 pm

Indian share markets continued to trade on a weak note in the post-noon trading session. Barring energy and metal, all the sectoral indices are trading in the red with IT and pharma stocks being the biggest losers.

BSE-Sensex is down 96 points and NSE-Nifty is trading 22 points down. BSE Mid Cap is trading 0.5% down and BSE Small Cap index is trading up by 0.4%. The rupee is trading at 61.48 to the US dollar.

Majority of the cement stocks are trading in the red with J K Lakshmi Cement and Heidelberg Cement being the major losers whereas ACC and Ambuja Cement are among the few stocks trading in the green. As per a leading financial daily, Ultratech Cement is contemplating capital spends of Rs 37.9 bn in FY15. Under its capital expenditure plans, the company wants to add 2.9 million tonnes capacity with supporting grinding units and waste heat recovery in its subsidiary Aditya Cement Works in Rajasthan. Additionally, the company will also invest in modernizing its facility at its jetty in Gujarat. The company has earmarked capital investments of Rs 30.5 bn in FY16 and Rs 2 bn in FY17. Ultratech expects its installed capacity to rise from the present 62 million tonnes to 70 million tonnes by early next year. As per the company, its turnover is expected to reach Rs 250 bn in FY15 from Rs 200.7 bn registered in FY14. Ultratech Cement's stock is currently trading up by 1%.

Majority of the domestic pharma stocks are trading negative with J B Chemicals and Indoco Remedies posting maximum losses. As per a leading financial daily, Cadila Healthcare's listed subsidiary Zydus Cadila has received approval from US Food and Drug Administration (USFDA) to market potassium citrate extended-release tablets in the 5mEq, 10mEq and 15mEq strengths. These tablets are used in the prevention of kidney stones. As per IMS data, the estimated sales for potassium citrate ER tablets is $ 131.7 m. Cadila Healthcare presently has 94 approvals and has filed 239 abbreviated new drug applications so far. Cadila Healthcare's stock is trading up by 0.5%.

IT & Pharma drag down markets
11:30 am

After opening weak, the benchmark Indian Indices have fallen further below the dotted line in the morning session. IT and pharma stocks have borne the brunt of the selling pressure while energy and FMCG stocks are among the gainers.

The BSE-Sensex is trading down 91 points. The NSE-Nifty is trading down 28 points. The BSE Mid Cap index is trading down 0.6% and the BSE Small Cap index is trading down 0.5%. The rupee is trading at 61.46 to the US dollar.

Most Telecom stocks are trading weak today. Mahanagar Telephone Nigam Ltd (MTNL) and Tata Communications are among the leading losers. India's leading telecom tower infrastructure provider, Bharti Infratel, has announced an offer for sale (OFS). In the OFS which will close today itself, the promoter company Bharti Airtel will sell 45 m shares via a special trading window on the stock exchanges. The promoters may sell another 40 m shares over and above the original offer. This will enable Bharti Airtel to meet SEBI's rules pertaining to public shareholding. The rules state that the minimum public shareholding in listed firms should be 25%. Currently Bharti Airtel holds 79.36% stake in Bharti Infratel which must be brought down to at least 75%. The funds will also help India's leading telco reduce the debt on its books. The floor price for the OFS has been set at Rs 250 per share. Bharti Infratel is trading down 6.3% today.

Majority of Hotel stocks are trading in the red with Oriental Hotels and TAJ GVK among the leading losers. The rights issue of Indian Hotels has opened today. Share holders holding 40 shares will be issued 9 Compulsorily Convertible Debentures (CCDs) if they chose to subscribe. The record date for the same has been fixed for 21st July 2014. The issue will close on 20th Aug. The CCDs will be converted to equity shares after 18 months. The company plans to raise up to Rs 10 bn to fund its capex plan. India Hotels is trading down 0.7% today.

Asian markets in the red again
09:30 am

All major Asian stock markets have opened the day in the red with stock markets in China (down 0.6%) and Hong Kong (down 0.5 %) leading the pack of losers. The Indian share markets have also opened the day on a negative note. The sectoral indices are trading mixed with the information technology index leading the losses. However, the capital goods index is trading firm.

The Sensex today is down by around 26 points (0.1%), while the NSE-Nifty is down by about 6 points (0.1%). However, mid and small cap stocks are trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.3% and 0.4% respectively. The rupee is currently trading at Rs 61.29 to the US dollar.

Public Sector Bank stocks have opened the day on a mixed note with Union Bank of India and Allahabad Bank leading the gains. However, IDBI Bank and Indian Overseas Bank are trading weak. Public sector lender IDBI Bank has announced its results for the quarter ended June 2014. During the quarter, the bank reported flat growth at the topline level with interest earned standing at Rs 67,329.8 m. Other income declined by 30.3% YoY to Rs 4,997.5 m. Owing to higher interest expended, operating income before provisions and contingencies dropped by 29.5% YoY to Rs 9,282.6 m. At the bottomline level, net profit plunged by 65.4% YoY to Rs 1,061.7 m. Net profit margin contracted from 4.6% in 1QFY14 to 1.6% in 1QFY15.

Indian Pharma stocks have mainly opened the day on a firm note with Indoco Remedies and Glenmark Pharma leading the gains. As per the financial daily, Mumbai-based pharma major Lupin has signed a marketing pact with South Korea's LG Life Sciences to launch its anti-diabetes drug in India. According to the agreement, Lupin will launch and will be responsible for the marketing and sales of LG Life Sciences' Insulin Glargine, a novel insulin analogue, under the brand name BasugineTM. It must be noted that Insulin Glargine is indicated for the treatment of adult patients with type 1 diabetes mellitus or in type 2 diabetes mellitus. This deal will help Lupin further strengthen its diabetes portfolio. As per IMS MAT data reported in the daily, the overall diabetes market size within the Indian pharmaceutical Market (IPM) stands at Rs 60.32 bn and is growing at 18% year-on-year.

Food crisis - the chronic issue

Food crisis problem is not new for India. The situation is now becoming more critical as population burden has just kept increasing. The government has now to cater to the demands of a having 1.2 billion populace.

The problem of rotting grains and starvation deaths has not been new one, in India. As per the article on Bloomberg, around 255 m people go hungry despite stock piles.

The article has also highlighted that, various sites where Food Corporation of India (FCI) stores its grains were found out of order. While at some places the food grains were found rotten on other sites the grains were left in open area, covering them with plastic sheets. Approx 40%-44% of wheat and rice is diverted from beneficiary households. These huge quantities of food grains are wasted due to lack proper storage and negligent governance.

In the recent Union Budget, the government has proposed to allocate Rs 1.15 trillion rupees towards food subsidy and Rs 729.7 billion rupees towards fertilizers subsidy. While reasonable proportion of expenditure is doled out for subsidies, but these subsidies do not seem to be utilized in the right direction. So does that mean that subsidies are not required or government should curtail subsidies?

In our view, one of the major problems on the subsidies front is that they have been misdirected to a large extent till now. The government seems to have been paying for all the inefficiencies in the system since many years. Thus it's high time for the government now, to take steps which can control this mismanaged expenditure instead of curtailing subsidies.

There is an urgent need to correct the loopholes in procurement, storage and distribution fronts for greater efficiency. And thus government needs to focus on the infrastructure needs. This in a way will keep check on rising food prices and control inflation which is one of the important challenges for the country.

While the new government has shown keen interest in the infrastructure development, we will wait and see how well the policies are implemented and steps government takes to bring an end to decade's old stigma of the country.