Realty and banking stocks surge

While the Indian markets witnessed some pressure towards the end, they still ended the day comfortably in the green. The BSE-Sensex ended the day higher by about 201 points, while the NSE-Nifty ended higher by about 83 points. Stocks from the banking and realty spaces were amongst the most preferred, while those from the FMCG and capital goods sectors were amongst the underperformers. Mid and smallcap stocks too seemed to be in favor today with the BSE Mid Cap and BSE Small Cap indices ending the day higher by about 0.9% and 1.1% respectively.

Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.38% and the Hang Seng rose 0.30%. The Nikkei 225 lost 1.96%. European markets are broadly lower today with shares in Germany off the most. The rupee strengthened against the US$ and was trading at 65.92 in the afternoon session.

According to a leading financial daily, Larsen & Toubro (L&T) has received an order worth around Rs 17 bn from Marubeni Corporation, Japan, for setting up the Bibiyana III 400 MW Combined Cycle Power Plant Project of Bangladesh Power Development Board (BPDB). BPDB awarded the EPC contract for setting up the 400 MW gas based power plant project to Marubeni Corporation of Japan, which in turn awarded the EPC sub-contract to the company on turnkey basis. This plant will be located at Nabiganj Upzila in Habiganj District of Sylhet Division, in the north-eastern sector of Bangladesh, at a distance of approximately 130 km by road from Agartala in India. The company's scope of work includes design, detailed engineering, supply, installation and commissioning of the complete power plant on turnkey basis. The plant will incorporate state-of-the-art advanced class gas turbine and generator from Mitsubishi Hitachi Power Systems, Japan, and high efficiency steam turbine and generator from Fuji Electric company, Japan, which will be procured by the company.

Buying activity was witnessed across majority of IT sector with Tech Mahindra and Hexaware Technologies leading the gains. According to a leading financial daily, Infosys Finacle, part of EdgeVerve Systems, a product subsidiary of Infosys has entered into strategic tie-up with Qantas Credit Union whereby the later has chosen Infosys Finacle to improve its customer's digital experience, as part of their business transformation strategy. Qantas Credit Union is leveraging the flexibility of Infosys Finacle's 'software-as-a-service' model to provide its members with the latest banking services, without the significant overhead costs often associated with complete legacy technology upgrade.

Indian markets inch upwards
01:30 pm

After opening the day on a firm note, the Indian Indices added to their early gains in the post noon trading session. Sectoral indices are trading on a positive note with stocks from the banking and auto sectors leading the gains.

The BSE-Sensex is trading up 441 points (up 1.7%) and the NSE-Nifty is trading up 136 points (up 1.7%). The BSE Mid Cap index is trading up by 1.5% and the BSE Small Cap index is trading up 1.3%. Gold prices, per 10 grams, are trading at Rs 26,322 levels. Silver price, per kilogram, is trading at Rs 35,991 levels. Crude oil is trading at Rs 3,058 per barrel. The rupee is trading at 65.74 to the US dollar.

Stocks in the power space are trading on an encouraging note with CESC Ltd and Torrent Power Ltd leading the gains. As per an article in Livemint, Power Grid Corporation of India Ltd reported that its shareholders have granted approval to raise up to Rs 140 bn through issuance of bonds in 2016-17. According to the proposal, the company will be raising the funds in eight tranches and each tranche shall be of up to Rs 20 bn. As stated, these funds will be utilized for capital expenditure and for providing loans to wholly owned projects and special purpose vehicles acquired by the company. Stock of the company is presently trading up by 1.2%.

Cement stocks are trading positively with India Cements and The Ramco Cements leading the gainers. As per a leading financial daily, UltraTech Cement has got environment ministry's clearance to expand its capacity at Awarpur plant in Maharashtra which would entail an investment of Rs 2.4 bn. For this, the company has proposed to raise production of clinker, a raw material for cement manufacture, to 4.5 million tonnes per annum (MTPA) from the existing 3.30 MTPA. The company has been asked to comply with specific conditions like developing green belt over 33% of the total project area, installing air monitoring devices and continuous stack monitoring of facilities to monitor gaseous emissions. Currently the stock of UltraTech is trading up by 2.1% on the BSE.

Sensex up over 400 points
11:30 am

The Indian markets have added to their early gains and are currently trading strong. Most of the sectoral indices are trading positively with stocks from the banking and pharma sectors leading the gains.

The BSE-Sensex is trading up 451 points (up 1.7%) and the NSE-Nifty is trading up 134 points (up 1.7%). The BSE Mid Cap index is trading up by 1.7% while the BSE Small Cap index is trading up 1.5%. The rupee is trading at 65.98 to the US dollar.

Power stocks are trading on an encouraging note with Adani Power and Torrent Power Ltd witnessing maximum buying interest. As per a leading financial daily, 18 power plants have emerged as successful bidders in the reverse e-auction to receive Rs 17.8 bn subsidy for buying imported gas. The offered subsidy is a move that will help revive a cumulative generation capacity of 11,717.72 Mega Watts (MW). Under the plan, liquefied natural gas (LNG) will be imported and cash-strapped state power distribution companies will be financially supported to buy electricity from them. NTPC, Torrent Power, Gujarat Industries Power Co and CLP India Private Ltd were reported as the successful bidders under this auction.

Most of the software stocks are trading higher with Tech Mahindra and Wipro leading the gainers. Leading mid-tier software company Mindtree, has announced a strategic partnership with Dubai-based 'flydubai' to shape the full digital experience of travelers to Dubai. Mindtree will focus on transforming flydubai's information technology back end including electronic ticketing and real-time baggage tracking. Moreover, the agreement will also extend to other strategic business areas such as revenue management, target monitoring and improving operational efficiencies. The stock of Mindtree is presently trading up about 1.5%.

Indian markets open strong
09:30 am

The major Asian stock markets have opened the day in green. Stock markets in Singapore, China and Hong Kong are up by 0.7%, 0.5% and 0.4% respectively. The major stock indices in the European markets ended the day in green. However the benchmark indices in UK ended the previous session down by 0.7%. The benchmark stock indices in US ended their previous session up by 0.1%. The rupee is trading at 66.19 per US dollar.

Indian stock markets have surged upwards owing to the US Federal Reserves' s decision to postpone the hike in interest rates. BSE Sensex is trading up by 260 points (up 1%) and NSE-Nifty is trading up by 80 points (up 1%). Both BSE Mid Cap and BSE Small Cap have moved upward. Both the indices are trading up by 1.1% and 1% respectively. Sectoral indices have opened the day on a positive note with stocks from pharmaceutical, capital goods and banking sector witnessing maximum buying interest.

As per an article in Livemint, overseas arm of Oil and Natural Gas Corporation (ONGC); ONGC Videsh Ltd (OVL) has shown interest in acquiring another 10% stake in Russia's second largest oil-field (by production). The oilfield is owned by OAO Rosneft. If the additional stake is acquired, total stake of OVL in the oilfield will be around 25%. The stake purchase will enhance India's efforts in the area of energy security. OVL is also considering another acquisition opportunities in Russia. Rosneft claims to have the world's lowest production cost of oil at $ 2.8 per barrel. The article stated that earlier this month, OVL said that it was buying a 15% stake in Rosneft for $1.26bn. At that price, the additional 10% stake will be valued at around $840m. The stock of ONGC is trading up by 0.5%.

As per an article in Economic Times, Tata Steel Ltd will sell shares of the automaker Tata Motors Ltd worth up to $188m, according to a term sheet of the deal seen by Reuters on Friday. The shares are being offered in the range of Rs 324.50-338.05 each. The lowest price in the range; represents a discount of up to 4% to their closing price on September 16th. The stock of Tata Steel is trading up by 1.1%. However Tata Motors is trading down by 2.7%.

Fed puts rate hike on hold

In a decision that could have gone either way, the Fed decided not to raise its key interest rate in September. America's central bank hasn't raised interest rates in almost a decade and rates are stuck near zero since the depths of the financial crisis in December 2008.

The key concerns about a global economic slowdown coupled with low inflation in the U.S and volatile stock markets lowered the chances of the rate hike in the month of September. However the majority of the Fed committee members believe that there will be a rate hike in 2015. The chairman emphasized that every meeting is a live meeting and a rate hike in October is a possibility. However, in deciding when to hike rates, the Fed repeated it wanted to see some further improvement in the labour market and wanted to be reasonably confident regarding an increase in inflation.

The committee stated that it will be appropriate to raise the interest rates once they see some further improvement in the labour market. A lot of economists from chiefs of International Monetary Fund (IMF) and World Bank had urged the Fed, not to raise the rates in September.

What will be the impact of a rate hike by Fed on India? An increase in the interest rate by Fed, will result in an outflow of money from Foreign Institutional Investors (FII). The interest rates have a direct correlation with the bond yield rates. Thus a hike in the interest rates by FED will lead to an increase in the bond yield rates, subsequently resulting in FIIs to shift their money to the US treasury bonds. To add to this, as the gap between US and Indian interest rates further narrows, more FIIs would pull money out of India. As was reported recently, FIIs pulled out as much as Rs 27.90 bn (equities only) in the month of September 2015 so far.

However, long term investors need not lose sleep over such matters. It is exactly such events that provide opportunities to buy great businesses at good prices. If the Indian markets were to fall significantly due to this event in future, we at Equitymaster will be quite happy to recommend solid stocks for the long term.