Sensex regains 20k

Indian equity markets started the day on a positive note and continued the upward trend as the day progressed. Markets extended gains in the afternoon session on back of buying witnessed in Auto shares. The rupee rose to a two-week high as expectations for a narrower trade deficit and receding concerns about Syria helped the currency continue its recent recovery from record lows hit last month. All the sectoral indices ended the day in green. Auto, FMCG and Gas and Capital Goods sectors were the leading pack of gainers. While the BSE Sensex closed higher by 727 points, the NSE-Nifty closed higher by 216 points. BSE Mid Cap and the BSE Small Cap closed on a positive note.

As regards global markets, Asian indices closed in the green. European indices have opened in the green. The rupee was trading at Rs 64.3 to the dollar at the time of writing.

According to a leading financial daily, Tata Motors has entered into the Indonesian automotive industry with the launch of three Tata passenger vehicles; the Tata Vista hatchback, the Tata Aria crossover multi-purpose vehicle and the Tata Safari Storme sports utility vehicle. Apart from the products, the company is setting up a decent network of sales and service outlets. The company is also introducing five 3S (sales, service and spare parts) dealers to Indonesia and 4 more will come up by December 2013 and they hope to have a total of 15 dealerships by March 2014, Apart from these set ups, they are setting up around 40 additional workshops by March 2014 which will offer customers service almost at their door steps. The company also launched its flagship 24x1 parts program wherein the company is committing that if it can't supply a part within 24 hours, it will be offered free of cost to the customer.

According to a leading financial daily, ONGC and Oil India are unlikely to buy an 11% stake being shed by Malaysian state firm Petronas in Venezuela's Petrocarabob petroleum project. ONGC may not want to up its share as it is already seeking to raise debt to fund recent acquisitions in Mozambique. Oil India, ONGC, Indian Oil and Spain's Repsol are all partners in a consortium with Petronas that holds a 40% stake in the project. All of the companies involved in the project, including PDVSA, have pre-emption rights to the Petronas stake. ONGC has an 11% stake in the project while Oil India and Indian Oil Corp hold 3.5% each.

Capital goods stocks lead among gainers
01:30 pm

Indian equity markets continued to trade in the positive territory during the post noon trading session. All the sectoral indices are trading in green. The most noticeable upward movement is being witnessed in the stocks from capital goods and auto sectors.

BSE-Sensex is up by 523 points and NSE-Nifty is trading up by 158 points. While BSE Mid Cap is trading up by 1.0%, BSE Small Cap index is trading up by 1.07%. The rupee is trading at 64.19 to the US dollar.

Majority of the automobile stocks are trading in the green with Tata Motors and Eicher Motors being the biggest gainers. As per a leading financial daily, after nine consecutive months of downfall, sales of domestic passenger cars grew by 15.4% YoY to 1.33 lakh units in August. However, as per Society of Indian Automobile Manufacturers (SIAM), the growth has come on a low base arising due to the month-long lock-out at Maruti Suzuki's Manesar plant last year. According to SIAM, the domestic automobile market continues to face tough conditions with demand remaining sluggish on account of high interest rates and fuel costs. The association feels that the positive growth in August is unlikely to be sustained in September with the recovery expected only over the next couple of quarters and FY14 ending on a negative note.

In August, Maruti Suzuki doubled its domestic car sales to 63,499 units mainly as its car sales were adversely impacted last year by the lockout following a violent labour unrest. Hyundai Motors clocked a marginal rise to 28,281 units during the month. However, Tata Motors and Mahindra & Mahindra saw their sales fall by 50.6% and 25.5% respectively for the month.

Most of the Indian pharma stocks are trading in the green with Panacea Biotech and Wockhardt Ltd being amongst the leading gainers. As per the financial daily, Avanir pharmaceuticals, a US based company has entered into patent litigation settlement with Wockhardt Ltd. The said settlement is for its drug Nuedexta. In 2011, Wockhardt had filed an ANDA (abbreviated new drug application) along with a paragraph IV (Para IV). Wockhardt had challenged various patents of Nuedexta drug, in US. However both the companies have now entered into settlement. The settlement agreement grants Wockhardt the right to begin selling a generic version of Nuedexta on July 30, 2026, or earlier under certain circumstances. Both the companies will also be filing a stipulation and a court order for dismissal of the litigation. Wockhardt was trading up by 20% at the time of writing

Indian indices extend their gains
11:30 am

After a good start, the Indian stock markets have extended their gains in the morning session. All sectors are trading in the green with the Banking and FMCG stocks leading the gainers.

The BSE Sensex is up 535 points and the NSE-Nifty is trading up 163 points. The BSE Mid Cap index is trading up 1.2% and the BSE Small Cap index is trading up 1.1% The Rupee is trading at 64.29 to the US Dollar.

Most of the IT stocks are trading higher today. Infosys and HCL Tech are among the top gainers. According to a leading business daily, India's second largest software company Infosys, is strengthening its infrastructure management services (IMS) division. This is a service line that has aided the industry's growth even during uncertain times. An improvement in IMS is expected to improve revenues from the Business IT Services (BITS) segment. BITS contributes 61% of revenues for Infosys. Soon after assuming charge as executive chairman in June, N R Narayana Murthy had acknowledged a lack of concentration in winning large deals in the BITS segment. This was largely due to a lack of focus towards the IMS space. The company has been unable to bag large deals in the IMS space earlier since it used to focus only remote infrastructure management. It did not provide end-to-end solutions. However this seems to be changing now as Infosys is developing its IMS capabilities and has managed to bag a few big deals. They include deals from Harley Davidson, Ricoh, India Post and BMW.

IMS contributed only 6.9% of revenues for Infosys in FY13. Other large IT companies derive anywhere between 15-25% of their revenues from IMS. Infosys is trading up 2.4% today.

All private banks are trading positive today. Yes Bank and Axis Bank are leading the gainers. Axis bank has rallied 6.5% today from its previous close after the Reserve Bank of India (RBI) lifted the ban on foreign investors buying into the Bank. The ban was lifted as there was a fall in foreign shareholdings in the bank below the prescribed limit of 49%; which is a threshold limit stipulated under the extant Foreign Direct Investment (FDI) Policy. RBI on August 16th, 2013 had banned further buying of shares in Axis Bank through stock exchanges in India by foreign Investors since the foreign shareholding limit of 49% had been crossed.

Indian share markets open firm
09:30 am

Barring Taiwan (down 0.4%), all major Asian stock markets have opened the day on a firm note with Indonesia (up 2.1%) and Japan (up 1.1%) leading the gains. The Indian share market indices have also opened the day on a positive note. Stocks in the banking and realty space are leading the gains.

The Sensex today is up by around 383 points (2%), while the NSE-Nifty is up by around 119 point (2.1%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 1.2% and 1.1% respectively. The rupee is currently trading at Rs 65.24 to the US dollar.

Telecom stocks have opened the day on a firm note with Bharti Airtel, Mahangar Telephone Nigam Ltd (MTNL) and Idea Cellular leading the gains. As per a leading financial daily, the Telecom Regulatory Authority of India (TRAI) has proposed up to 60% reduction in the base price, or the minimum auction price, for mobile phone spectrum that will be auctioned in the near future. The reduction in base price has been a result of tepid interest from telecom companies in the previous two auctions. TRAI has recommended Rs 14.96 bn per MHz as the floor price for pan-India spectrum in the 1800 MHz band. This is a reduction of 37% from the March auction price of Rs 23.79 bn. For the 900-MHz spectrum, a reduction of nearly 60% in the base price has been recommended. Delhi's base price has been pegged at Rs 1.75 bn, down nearly 55% from its March levels. Mumbai's base price has been pegged at Rs 1.65 bn, nearly 57% lower.

Power stocks have also opened the day on a firm note with Jaiprakash Power, Reliance Infra and JSW Energy leading the gains. As per a leading financial daily, India's largest power producer National Thermal Power Corporation (NTPC) has lost potential revenue of Rs 32 bn during the first five months of the financial year 2013-14 (FY14). On account of the lower demand from the state electricity boards (SEBs), the company was not able to supply almost 16 bn units of energy. This is a significant jump from 3 bn units in the previous fiscal. In other words, about 4,000-5,000 MW or 10-12% of the company's installed capacity is lying unutilized. It must be noted that most of the state utilities have cut down their demand owing to critical cash crunch. As such, they are unwilling to incur further losses by selling power cheaper than the cost price.

The proposed BRIC currency fund

The world is expecting the US Federal Reserve to start tapering its quantitative easing program soon. In anticipation of this, investors have withdrawn funds from many developing economies, leading to depreciations across a range of developing country currencies. India and Indonesia have been the worst affected with their currencies falling more than 15%. The sharp falls have threatened to create wider economic instability and prompted some central banks to raise their benchmark interest rates and intervene directly in foreign exchange markets.

In order to protect their interest, BRICS nations have agreed to set up a US $100 bn foreign currency reserve pool to counter the impact of a pull-out by foreign investors when the US Federal Reserve starts tapering its quantitative easing program. China, holder of the world's largest foreign exchange reserves, will contribute the lion's share of the currency pool. China would contribute US$ 41 bn towards the currency reserve pool. Brazil, India and Russia would contribute US$ 18 bn each to the fund, while South Africa would contribute US$ 5 bn.

However, the proposed currency fund will take some time to take shape. The technical details of the proposed fund still need to be worked out. And thus it is unlikely that the fund will be in place soon enough to temper the effects of an expected pullback of US monetary stimulus.

BRICS have a total of US$ 4.4 trillion in currency reserves and 43% of the global population, but not the appropriate financial influence which is why they need to further work together in order to create the tools necessary to counter those of the developed world. All five countries have felt the negative impacts of the policies pursued by the US Federal Reserve, the Bank of Japan and the European Central Bank.

The creation of the US$ 100 bn fund is another powerful step in the right direction in order to limit the negative impacts on currency pairs due to the decisions made by the US, Japan and the EU. It will allow BRICS to bring more stability to forex markets or at least limit the impact or duration of it.