Indian equity markets tank

Indian equity markets continued their losing streak. Benchmark indices opened the day's proceeding on a positive note but took a sudden downward turn in the afternoon trade, as rupee slipped to another record low of 64.44/$. The rupee hit a record low as heavy dollar buying from large state-run banks along with demand from custodian banks hurt the local currency. While the BSE-Sensex closed lower by 340 points, the NSE-Nifty closed lower by 98 points. BSE Mid Cap and the BSE Small Cap closed on a negative note. Realty and Metal stocks were the biggest losers.

As regards global markets, Asian indices closed mixed. European indices have also opened in the red. The rupee was trading at Rs 64.23 to the dollar at the time of writing.

According to a leading financial daily, National Aluminium Company Ltd. (NALCO) is planning to raise its alumina exports by 40% to 1.4 million tonne this fiscal year. The fall in the rupee has helped Nalco to raise its exports. The overseas shipments of Nalco, India's largest exporter of alumina, could raise about USD $400 m based on current prices. Nalco plans to raise its alumina output by about 19% to 2.15 million tonne for the fiscal year ending March 2014. Its output of aluminium, produced by smelting alumina, would be about 300,000 tonne, out of which about 35-40% would be exported.

According to a leading financial daily, retail inflation for farm and rural workers has come down in July, even as prices of food items and cloth remained high. According to the data released by the Labour Bureau, the inflation based on food index of Consumer Price Index- Agriculture Labour (CPI-AL) and Consumer Price Index-Rural Labour (CPI-RL) stood at 13.84% and 13.80%, respectively. The all India retail inflation index for farm and rural workers in July increased by 11 points each to stand at 740 points and 741 points respectively. The rise in index varied from state to state. In case of farm workers, the index recorded an increase that varied between 4 to 18 points in various states. Karnataka with 822 points topped the index table, whereas Himachal Pradesh with the index level of 583 points was at the bottom.

Indian share markets slip in red
01:30 pm

RBI's liquidity balm lost its impact with the Indian share markets slipping in the red in the post-noon trading session. Sectoral indices are trading mixed with banking, consumer durables and capital goods stocks being the biggest gainers. However, metal, IT and FMCG stocks are trading in the red.

BSE-Sensex is down 34 points and NSE-Nifty is trading marginally up. BSE Mid Cap is trading up 0.3% and BSE Small Cap index is trading up 0.6%%. The rupee is trading at 63.4 to the US dollar.

Majority of the energy stocks are trading mixed, with MRPL and Oil India being the major gainers and Petronet LNG and Cairn India being the biggest losers. As per a leading financial daily, Castrol India has said that a new engine oil Castrol RX Super Max Fuel saver developed jointly with Tata Motors can help bring down fuel consumption by as much as 1.5%. This can enable truck operators to make annual savings of upto Rs 20,000 in fuel costs. The new engine oil has been jointly developed by the two companies over a four year development period at a cost of over $USD 1 m and is priced at Rs 389 per litre. The two companies will remain associated in the marketing and sales of the engine oil. This is the first time that an engine oil has been endorsed by an automobile company. The stock of Castrol is trading up by 1.2%.

Indian pharma Stocks are trading in mixed, with Glenmark Pharmaceuticals and Elder Pharmaceuticals being the leading gainers and Ranbaxy Ltd and Natco Pharma among the leading losers. Alchemia, who is manufacturing partner of Dr Reddys for fondaparinux, has released an update on the product performance. Fondaparinux is one of the important products in Dr Reddy's portfolio. Dr Reddy has approx 23% of the market share in the US. The company's retail market share now stands at 53%. Net sales for the quarter ended June was $12.2 m, up by 34% YoY. Further, the sales of the product have also witnessed improvement on Q-o-Q basis on the back of volume growth and better pricing. Recently the product got approval in Canada. The market size of this geography is very small of approx $ 2.9 m. Going forward the sales of fondaparinux is expected to increase aided by launches in new territories and improvement in the cost of production. Dr Reddy's stock is currently trading down by 1.1%.

Key indices show recovery
11:30 am

After opening firm Indian share markets have continued their recovery after the RBI's announcement that it will buy bonds and ease out bond-holding rules for banks in order to ease liquidity. The sectoral indices are trading mixed with BSE Banker and Capital Goods index being the leading indices in green; while software companies continue to remain in the red.

BSE-Sensex is up 146 points and NSE-Nifty is trading up 50 points. BSE Mid Cap is trading up 1.4% and BSE Small Cap index is trading up 1.2%. The rupee is trading at 63.3 to the US dollar at the time of writing.

Most of the Auto stocks are trading positive today. M&M and Bajaj Auto are leading the gainers, while Ashok Leyland and Mah. Scooters are the only stocks in red. According to a leading business daily, Hero Motor Corp is expediting its efforts to become technologically independent. It has successfully test-fired at least two new home-grown engines- 100 cc engine and a 250 cc engine. Earlier, the company was reliant on Honda for sourcing engines. This testing is a part of its process of coming up with several new launches in next few months. It is noteworthy that over 80% of its bike volumes come from 110cc and sub 110cc models. The company has three technology partners - AVL of Austria, Erik Buell Racing (EBR) of the US and EE of Italy. The company is also setting up a world-class technology & integrated R&D Centre at Kukas, Jaipur. The stock of Hero is trading 1.67% up today

All the stocks in the banking index are trading higher today. Yes Bank is up 13.7% and IndusInd Bank is up 10%. The country's largest bank State Bank of India (SBI) is close to a decision to merge one of its subsidiaries with itself. The bank is looking to take the final decision by the end of September. The merger proposal will then be sent for regulatory approvals. While announcing the first quarter earnings, Chairman Pratip Chaudhuri had said the bank was in advanced stage of a decision and the name of the entity for merger would be finalised by September.

State banks of Bikaner and Jaipur, Mysore, Patiala and Travancore are s the possible merger candidates. The merger could cost SBI up to Rs 20 bn. SBI's total capital adequacy stood at 12.1% as of June quarter, with the core tier 1 capital at 9%. It is also expecting some capital infusion from the government this fiscal. SBI is currently ranked in the lower 60s among the top banks in the world and can grow its balance sheet size through the merger of its subsidiaries. SBI did the first amalgamation of one of its associates, State Bank of Saurashtra in 2008, followed by State Bank of Indore in August, 2010. The stock of SBI is trading 3.8% higher.

Indian stock markets open firm
09:30 am

The major Asian stock markets have opened on a mixed note with stock markets in Indonesia (up 1.2%) and China (up 0.1%) leading the gains. However, the stock markets in Hong Kong (down 1.1%) and Japan (down 0.8%) are leading the losses. The Indian stock market indices have opened the day on a firm note. Barring software, all sectoral indices have opened in the green with the stocks in capital goods and banking space leading the gains.

The Sensex today is up by around 229 points (1.3%), while the NSE-Nifty is up by around 81 points (1.5%). Midcap and small cap stocks have opened in the green as well with the BSE Mid Cap and BSE Small Cap indices up by around 1.6% and 0.9% respectively. The rupee is trading at Rs 63.27 to the US dollar.

Telecom stocks have opened the day on a mixed note with Mahanagar Telephone Nigam Ltd (MTNL) and ITI Ltd leading the gains in the sector. However, ADC India Communications Ltd and AGC Networks have opened in the red. As per a leading financial daily, the major telecom companies in India are likely to suffer on account of depreciating rupee as their dollar debt could have swelled up by Rs 73 bn- Rs 75 bn from their value at the end of June 2013. This is because Indian rupee has depreciated by around 7% against the dollar since the beginning of July 2013. Besides, the increase in the cost of paying overseas vendors for services is also likely to drag the profitability of telecom companies. It must be noted here that companies like Bharti Airtel, Reliance Communications and Idea Cellular Ltd have significant overseas debt on their balance sheets which was taken to meet capital expenditure needs, to buy 3G spectrum and acquisitions.

Engineering stocks have opened the day on a mainly in the green with Everest Kanto Cylinder Ltd and Larsen & Toubro (L&T) leading the gains in the sector. As per a leading financial daily, L&T has won an order valued around Rs 15 bn (US$250 m) from Petroleum Development Oman LLC (PDO). It is important to note here that PDO is a leading exploration and production company in the Sultanate of Oman. It accounts for 70 % of the country's crude oil production and is the sole supplier of natural gas. The engineering, procurement and construction (EPC) order is for the Yibal 3rd stage depletion compression (Y3DC) project at the Yibal-Natih gas reservoir in Oman. Its recoverable reserves are estimated at 90%. It has been in production since 1972 and has undergone a series of expansions to cater to increasing gas demand. Yibal 3rd stage facility will be installed to boost reservoir pressure. The project is likely to be completed in 39 months.

When is the right time to buy stocks?

Stock markets are under a bear grip. The BSE-Sensex has lost in excess of 1,000 points in the last three trading sessions itself. The Indian currency is making new lows every day. India's GDP growth has fallen to well under 6% now. Current account deficit is in a discomforting zone too. In short, the broader macro-economic picture is in complete disarray. And this is reflected in the performance of stock markets. However, the recent quantum (1,000 odd points in 3 days) and speed of the fall in markets is something that has been worrying investors the most. Most retail investors are witnessing losses in their portfolios.

While many might think of exiting at current levels fearing a further fall, instead there cannot be a more opportune time for buying than now. One should remember that every great investment opportunity is found in a crisis. This is because stocks trade at dirt cheap levels during such times. And this is precisely the case now. However, this does not mean that investors should go all out and buy equities now. The problem with bottom fishing is that one may encounter many value traps in the process. Thus, the key lies in overlooking the traps and focusing on value buys.

Also, it must be noted that for any investing style to prosper, time is the key. Hence, investors should invest in these markets with a long term horizon. Further, since it is very difficult to time the markets investors should opt for staggered buying in the form of systematic investment plans (SIP). Speculation in these markets can lead to a downfall. In fact, speculation can lead to a downfall in stagnant markets as well. Thus, investors should stick to long term investing philosophy despite the current market volatility and not get bogged down by near term underperformance.

Further, while investing in these uncertain times, safety of capital should be the top priority. Hence, asset allocation should remain the key focus for investors. In a nut shell, it appears that the current crisis presents an excellent opportunity to build a long term portfolio at bargain prices. While deteriorating fundamentals are equally responsible for the current fall in prices, poor market sentiments is another reason which cannot be ignored. And this presents excellent buying opportunity for the long term. However, investors should be careful while investing in such markets. They should not forget that only self discipline and patience can yield results in the long term.