IT stocks outperform today

The Indian equity markets reclaimed lost ground in the final hours of trade. While the BSE Sensex closed higher today by 139 points, the NSE-Nifty closed higher by 43 points. Midcaps and Smallcaps underperformed the benchmark indices today. While the BSE Mid Cap index closed higher by 0.2%, the BSE Small Cap index closed the day higher by 0.3%. Barring consumer durable stocks, most sectoral indices posted gains, with IT stocks being the top gainers today.

As regards global markets, Asian indices closed on a mixed note today, with the Korean and Hong Kong markets posting the biggest gains. The rupee was trading at Rs 60.95 to the dollar at the time of writing.

As per a leading international daily, in a move to provide stimulus to the economy, the central bank of China is set to infuse $81 bn into its five biggest government owned banks. This is to counter slowing growth in the dragon nation, which has seen a series of weak economic data come out in recent months. China's economy has increasingly shown evidence of slowing down with metrics like industrial production and foreign direct investment hitting multi year lows during the month of August. With the goal of lifting business confidence and investment, the five lenders that seem slated to receive the stimulus are the Industrial & Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China and Bank of Communications.

Steel stocks have closed the day on a mixed note. Bhushan Steel and JSW steel were the biggest gainers while SAIL ended the day on a losing note. As per news reports, Tata Steel plans to raise US$4 bn of debt from foreign banks. The money will be raised to refinance the existing debt which the company had taken to buy Corus. It may be noted that at the company's AGM last month the CFO had stated that the company might raise US$5-5.5 bn as a part of its debt refinancing exercise. Accordingly the company raised US$ 1.5 bn through bond issuance recently. And US$ 4 bn is in the pipeline. Raising money from foreign markets is obviously cheap as the interest rates are low. This is likely to result in significant cost savings and help in the bottomline growth.

Mid & small cap defy trend
01:30 pm

Indian stock markets continued to trade in the positive territory during the previous two trading hours on account of persistent buying activity among the index heavyweights. However, it pared gains from the day's high level. In terms of broader markets, the mid and small cap indices defied the trend and are trading in the red. The sectoral indices of IT and FMCG stocks are leading the pack of gainers, whereas consumer durables stocks is trailing in the red today.

The BSE-Sensex is trading up by 62 points and the NSE-Nifty is trading up by 20 points. However, the BSE Mid Cap index is trading down by 0.4% and the BSE Small Cap index is trading down 0.3% today. The rupee is trading at 60.95 to the US dollar.

Most of the public sector banks are trading in the green led by Vijaya Bank and Indian Overseas Bank. As per a leading financial daily, State Bank of India (SBI) has cut down the interest rates on term deposits, having maturity of one to three years, by 0.25% to 8.75%. As per the bank, it was saddled with excess liquidity with not enough credit demand to match and so the deposit rates are being lowered to adjust asset liability management. The bank has also reduced the loan rates for companies recently. This move by the country's largest lender is likely to trigger deposit rate cuts by other banks also. SBI stock is currently trading up marginally.

Pharma stocks are trading mixed today. Dishman Pharma and Wockhardt Ltd. are leading the pack of gainers, whereas Torrent Pharma and Indoco Remedies are witnessing selling pressure. As per a leading business daily, Aurobindo Pharma has received a final approval from the US Food & Drug Administration (USFDA) for manufacturing and marketing of Amoxicillin for oral suspension. The drug is used for the treatment of infections due to susceptible Betalactamase - negative strains of designated microorganisms. It is the generic equivalent of the reference listed drug product (RLD) Amoxicillin for oral suspension belonging to Teva Pharmaceutical. As per the data from industry body IMS, the drug is expected to have market size of US$ 19 m for the 12 months period ending July 2014. The stock of Aurobindo Pharma is trading higher by over 1% today.

IT stocks lead among gainers
11:30 am

After opening firm, the benchmark Indian indices have continued to trade strong during the morning trading session. Majority of sectoral indices are trading in green with software and realty stocks being the leading gainers in the pack.

The BSE-Sensex is trading up 134 points. The NSE-Nifty is trading up 42 points. The BSE Mid Cap index is trading down 0.10% while the BSE Small Cap index is trading up 0.39%. The rupee is trading at 61.10 to the US dollar.

Most software stocks are trading higher today. Infosys and Wipro are leading the gainers. As per a leading business daily, India's second largest software firm Infosys, has begun working with top Japanese retailer Muji, to develop an interactive software platform for its 2 m customers. Infosys will deploy its proprietary platform InteractEdge, to help the retailer realise real-time insights into consumer behavior. Muji has nearly 600 retail stores in Japan and is looking to enhance its online presence. InteractEdge will help the firm generate higher sales through personalised product recommendations by understanding its customer's preferences better. The financial details of this transaction were not disclosed. Japan is currently not a big market for Infosys but the IT firm is looking to expand its presence in the country. Infosys is currently trading up 1.6%.

Majority of Indian pharma stocks are trading firm with Dishman pharma and Biocon Ltd being among the leading gainers in the pack. As per the financial daily, multinational American drug maker Gilead has entered into alliance with pharma companies to sell hepatitis generics in 90 countries. The company has signed deal with Zydus Cadila, Cipla, Strides Acrolab, Hetero, Mylan. Reportedly, Since Gilead has applied for a patent on these drugs in many countries, including India. The deal is seen as its strategic move to leverage the drugs' potential, as well as save its patent protection, which is under attack in many countries. Gilead has given rights to these companies to sell its new hepatitis C medicines sofosbuvir and ledipasvir at lower prices. Cipla has also been given exclusive API supply rights. The domestic companies are expected to benefit from this deal.

Indian share markets open in the green
09:30 am

The major Asian stock markets have opened mainly in the green with the markets in Hong Kong (up 1.1%) and Taiwan (up 1.1%) leading the gains. The Indian share markets have opened the day on a positive note. The sectoral indices are trading mixed with software and consumer durables stocks leading the gains. However, power and oil and gas indices have opened in the red.

The Sensex today is trading higher by around 45 points (0.2%), while the NSE-Nifty is up by about 18 points (0.2%). While mid cap stocks have opened flat, small cap stocks are trading firm with the BSE Small Cap index up by around 0.3%. The rupee is currently trading at Rs 61.02 to the US dollar.

Auto stocks have opened the day on a mixed note with Tube Investments and Maruti Suzuki Ltd leading with losses. However, Escorts Ltd and Force Motors Ltd were leading the gains. As per a leading financial daily, Mr. Mayank Pareek, the Chief Operating Officer (sales & marketing), Maruti Suzuki has put in his papers after serving the company for over two decades. He is a well known as the face of Maruti Suzuki and has been associated with the firm at a time when its market share peaked to its highest for the past five years. His resignation has come ahead of the company's premium sedan, Ciaz's launch, slated in October and at a time when the company is preparing to enter the light commercial vehicle segment. Further, as per the reports, Mr Pareek is likely to move to a rival company.

Indian Pharma stocks have opened the day on a mixed note with Aurobindo Pharma Ltd and Ranbaxy Laboratories Ltd leading the gains. However, J.B Chemicals Ltd and Torrent Pharma Ltd were leading the losses. As per a leading financial daily, Lupin Ltd has entered into a long-term strategic partnership with Merck Serono, the biopharmaceutical division of Merck, for executing the latter's general medicines portfolio expansion initiative in emerging markets. It will be a 10 year long agreement which couldn be renewed. As per the agreement, Lupin will develop products, provide product dossiers and supply finished products to Merck Serono. The latter will then market the products, leveraging its strong commercial and medical teams in emerging markets to bring new medicines in its portfolio to customers. In return, Lupin will receive upfront and milestone based licensing fee. None of the companies has released any financial details of the transaction. The company is also looking at expanding its presence in Russia, Turkey and China, though no definite plan is in place at the moment for the latter.

Before you ride the disinvestment theme!

The Indian stock markets have witnessed new highs this year. After a long lull, hopes of an effective Government and revival in the economy have fuelled the market sentiments. New themes are making the rounds in the markets, disinvestment in public sector firms theme being among the key ones. Now that the markets are doing well, via a stake sale in PSU firms, the Government is planning to cash on the same to make the country's financial health look better. As per an article in Livemint, reservation for retail investors will almost double. They may even be offered shares on discount. The big question is: Should investors play the disinvestment theme?

While most of the PSUs are cash free, they are facing huge Government interference because of which they have not been able to realize their true potential. As far as reforms are concerned, while there is a lot of noise, key decisions are yet to be taken. Increase in gas prices is a case in point here. A hike was expected in April 2014. Five months have passed since then, and still there is no clarity.

Similarly, other firms like Coal India Ltd and Steel Authority of India Ltd (SAIL) are grappling with issues like volume growth and internal inefficiencies. Before investors invest their hard earned money, they should keep in mind their risk appetites and the fact that in case of Government owned companies, interests of minority shareholders are often secondary to Government's intentions. As such, investors should avoid getting carried away by the common disinvestment theme. Instead, we believe that they should analyze each offer separately, and take investing decision on the basis of individual merits and risks. To conclude, successful long term investing is all about buying fundamentally strong stocks at attractive prices. Stock offers under disinvestment programme will be no exception.