Markets witness a shaky finish

The Indian equity markets lost ground in the final hours of trade. While the BSE Sensex today closed higher by 17 points, the NSE-Nifty closed lower by 7 points. Midcaps and Smallcaps closed the day on a weak note. While the BSE Mid Cap index closed lower by 0.6%, the BSE Small Cap index closed the day lower by 0.4%. Metals and realty stocks were the biggest losers today.

As regards global markets, Asian indices closed on a mixed note today, with the Hong Kong and Japanese markets posting gains. The rupee was trading at Rs 60.42 to the dollar at the time of writing.

Banking stocks have ended the day on a weak note. Dhanlaxmi Bank and Karnataka Bank closed the day with the biggest declines . As per a leading business daily, deposit growth at Indian banks has picked up pace. This comes on the back of two consecutive months of subdued deposit growth. Bank deposits rose almost 14% YoY in the fortnight to 8th August. One of the reasons for this is that investments in debt mutual fund products flowed to deposits as the government changed the taxation structure on the former in the Union Budget gone by. A strong deposit growth may help banks lower their deposit rates. This may further lead to lower lending rates too. A lowering of deposit rates also lead to lower cost of funds for banks.

Energy stocks too ended the day on a weak note. Hindustan Petroleum Corporation Limited (HPCL) and Indian Oil Corporation Limited (IOC) were among the losers today, while ONGC ended the day on a positive note. As per a leading business daily, IOC's Paradip refinery could take almost a decade to breakeven due to a substantial escalation in project costs. This project has been long delayed and is finally slated to be commissioned by the end of 2014. It is expected to produce 110 m barrels per annum when operating at its peak capacity. Note that a refinery usually takes 4 to 5 years to break even, and IOC could take almost twice the amount of time to break even on this project due to the delay.

Software leads market gains
01:30 pm

Indian stock markets continued to trade on a higher note during the previous two hours of trade led by continuous buying activity among the index heavyweights. Small cap stocks led the gainers. Among the sectoral indices, barring metals, almost all are trading on a firm note. Software stocks are leading the pack of gainers.

The BSE-Sensex is trading up by 175 points and the NSE-Nifty is trading up by 45 points. The BSE Mid Cap index is trading higher 0.4% and the BSE Small Cap index is trading higher 0.7% today. The rupee is trading at 60.43 to the US dollar.

Energy stocks are trading on a mixed note. While Chennai Petroleum and ONGC are leading the pack of gainers, Castrol India and Gail are trading in the red. As per a leading business daily, Gail is planning Rs 100 bn pipeline project which will enable CNG and PNG services in Varanasi and other 16 eastern cities. The project will involve laying of 2,050 km pipeline which will connect Jagdishpur in UP and West Bengal along with various interconnecting cities in the midway. Gail already has its main pipeline connecting Gujarat to UP via Madhya Pradesh. The proposed new pipeline will extend its reach forming West-East national gas grid. Besides CNG & PNG based transport vehicles, the new pipeline will help revive the sick and defunct fertilizer plants in the region through gas supply which is a cheaper feedstock than naphtha. It will also help in providing gas supply to refineries, steel and power plants in the region.

Most of the automobile stocks are trading in the green led by Maharashtra Scooters and Maruti Suzuki. As per a leading financial daily, Bajaj Auto has said that it will continue to remain focused on the motorcycle segment with brand strategy revolving around its two brands Discover and Pulsar. The sales of the company's Discover range of motor cycle have been hit due to higher competition from Honda Motorcycle and Scooter India and Hero Motocorp. As per Society of India Automobile Manufacturers (SIAM), Bajaj Auto's sales for the period April-July 2014 fell by 15% YoY to 6.15 lakh units and its market share has fallen from 21.7% to 16.9% in the same period. The company does not want to enter the scooter segment that has been witnessing brisk volume growth in the past few years. As per Bajaj Auto, it does not want to spread itself thin by re-entering the scooter market that is non-lucrative but instead wants to focus on expanding presence in the overseas markets. Bajaj Auto stock is currently trading down by 0.3%.

Indian markets build on gains
11:30 am

After opening firm, the Indian Indices have well remained above the dotted line in the morning session. Apart from stocks in the metal sector, all other sectoral indices are trading in the green.

The BSE-Sensex is trading up 184 points. The NSE-Nifty is trading up 42 points. The BSE Mid Cap index is trading up 0.4% and the BSE Small Cap index is trading up 0.6%. The rupee is trading at 60.45 to the US dollar.

The Reserve Bank of India (RBI), has issued a circular stating that all domestic credit cards transactions must follow the two step additional verification process. Some domestic credit card transactions have so far avoided the additional verification using an overseas payments system. This allowed the final settlement to be done in a foreign bank and in many cases was not being settled in Indian rupees. The RBI has said that all such transactions will now have to be routed through a domestic bank and should be settled in rupees. All the banking and financial institutions operating in India, will have to comply with the new rules until October 31st 2014.

Sugar stocks are trading mixed today. While Oudh Sugar Mills is leading the gainers; Shree Renuka Sugars leading the losers. As per a leading financial daily, the government is considering giving flexibility to state governments to fix the PDS rate for sugar. After sugar prices were decontrolled in April 2013, the state governments were buying sugar from the open market for the public distribution system (PDS). This is currently sold at Rs 13.5 at ration shops. Due to the rise in the open market rate, state governments have been demanding flexibility in setting the PDS price. The government is now considering this demand. The impact on the sugar companies can be expected after some final policy is released by the government on this issue.

Indian share markets open firm
09:30 am

Barring China (down 0.5%), most of the major Asian stock markets have opened the day on a firm note with stock markets in Singapore (up 0.5%) and Japan (up 0.4%) leading the gains. The Indian share markets have opened the day on a firm note. Barring the metal and realty indices, all sectoral indices are trading firm with banking and pharma indices leading the gains.

The Sensex today is up by around 145 points (0.6%), while the NSE-Nifty is up by about 37 points (0.5%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap BSE Small Cap indices up by around 0.4% and 0.7% respectively. The rupee is currently trading at Rs 60.44 to the US dollar.

Auto sector stocks have mainly opened the day on a positive note with Maharashtra Scooters and Force Motors leading the gains. As per a leading financial daily, Maruti Suzuki is looking forward to launch light commercial vehicles (LCV) in the coming year. Reportedly, the company is expecting the sales of the vehicles to increase on the back of economic recovery in the country. This in turn will help in attaining its sales target of 3 million units from the current sales of 1.2 million units. As the company is working towards its expansion plans, it is looking to increase the number of new model launches in all the three categories viz. diesel, petrol and CNG. Further the company will also take necessary steps in training people and address the infrastructure needs. Over and above, the company is also working towards the R&D needs in order to achive its sales target of 3 million cars. The company is looking forward to set up a plant in Gujarat.

Telecom stocks have opened the day on a firm note with ADC India and Himachal Futuristic leading the gains. As per a leading financial daily, Idea Cellular has launched mobile wallet service in Mumbai during the month of July 2014. This service allows customers to do various transactions like mobile recharge, bill payments and money transfers. Reportedly, its competitors viz. Bharti Airtel, Tata Teleservices and Vodafone are already offering this service. Going forward the company is looking to expand other services such as shopping and ticketing transactions. Further, the company will also launch this service in other parts of the country.

Green shoots of recovery?

There has been enormous hunger for growth for past couple of years. The endemic problems in the Indian economy have contained the growth prospects for quite some time now. However, it seems tides have turned. And turned for the better! Indian economy seems ushering to be ushering into a new growth era.

Clearly, optimism is in the air! Our honorable finance secretary Arvind Mayaram witnesses green shoots of economic recovery . Gross domestic product (GDP) at 5.8% for FY15 - that's what he anticipates. He prefers and advises to shun the myopic views. And foresees Indian economic woes receding sooner than later! Mayaram's expectations stem from the early signs of revival in the industrial sector. He makes no bones about the fact that the recent government measures would help step-up the economic growth. India's economic growth has languished below 5% in each of the last two financial years.

This coupled with expeditious execution would pull the economy out of woods. Moreover, softening inflation would also deter central bank from holding interest rates high, believes Mr Mayaram!

Remember Raghuram Rajan's statements in the recent credit policy? "RBI will not hold interest rates high any longer than is necessary and if disinflation proceeds as warranted, there will eventually be room to cut rates." Now that's the icing on the cake! For interest rate cuts would boost the credit growth and in turn would set the investment cycle rolling.

Our finance secretary is equally confident of the India's promising contribution to the global economy. His GDP estimate of 5.8% quite clearly surpasses the central bank projection of 5.5% growth. The uptick in industrial output indicative of the corporate order book picking up corroborates Mayaram's buoyant views. Another positive development is the growth in the passenger vehicle sales for third consecutive month. It is a prime indicator of the health of the economy. Furthermore, the lowering of the subsidy burden in concurrence with the welfare programs over next two to three years would decisively spur the much required growth. He also believes that the government is confident of containing the current account deficit to below 2.5% of GDP in FY15.

With these concrete developments in place, the finance secretary expects India to establish its credibility globally. Not just the officials, but even economists widely believe that economy will expand over 5% in the April-June quarter of this fiscal itself. These evaluations definitely indicate a sharp turnaround for Indian economy by the end of this fiscal. In short, the green shoots are visible. Also, the intent of the newly formed reformist government is quite vivid. Effective measures are being taken to eradicate supply constraints and propel growth. However, for any stable positive trend, the country will need to witness a lot of action on the reforms and policy front. And there is further the issue of corruption and crony capitalism to deal with. We hope this optimism is transformed into pragmatism and we get to see some on the ground level changes.