Sensex ends flat for the week

Although buying interest in select auto, commodity and pharma stocks helped the indices in Indian equity markets top gainers in Asia today, the indices ended flat week on week. While the BSE-Sensex closed higher by around 183 points, gains on the NSE-Nifty came in at around 54 points. The BSE Mid Cap and BSE Small Cap indices also gained around 1% each.

Asian indices across the board closed higher today while Europe is trading in the negative currently. The rupee was placed at Rs 52.68 to the dollar at the time of writing.

As per a business daily, the government is planning to list Coal India's subsidiaries South-eastern Coalfields (SECL) and Mahanadi Coalfields (MCL). Of late the government has been pushing for reforms in the coal sector and is also favouring restructuring of Coal Indi's businesses. The Ministry has called for fresh meet to resolve fuel supply agreements (FSA) logjam and will review progress on coal block auctions. Meanwhile, Coal India, which came under attack for falling output from its mines, has decided to modernise its existing machineries. It is also looking at outsourcing its greenfield open-cast mines and washeries to experienced private players to achieve the 12th Plan production targets. The company has set a target to mine 615 mt of coal in the terminal year of 12th Plan (2016-17), up from 436.10 mt in 2012-13.

Larsen and Toubro Construction (L&T Construction), the wholly owned subsidiary of Larsen and Toubro (L&T) has bagged orders worth Rs 21 bn across various business segments in September 2012. In the buildings & factories segment, the company has bagged new orders worth Rs 16.5 bn. A major order has been received for the construction of multistoried residential towers in Mumbai from a leading developer. New order has been also been secured for design and construction of a hospital building and additional works from ongoing projects across India. Further, L&T Construction has secured orders aggregating Rs 4.8 bn from various ongoing projects in the infrastructure space.

L&T's management has reiterated its guidance of 15-20% growth in both revenues and order inflows for FY13. It plans to raise its revenues from the international operations amidst slowdown in the domestic markets. It may be noted that the strategy is progressing well with the company looking to further improve its market share in Middle East.

Markets remain range bound
01:30 pm

The Indian equity markets continued to trade in the positive territory, albeit in a range bound manner during the post noon trading session. Stocks across the board are in favor today with those from the auto and metal spaces leading the pack of gainers. Healthcare and banking stocks are amongst the top underperforming stocks at the moment.

The Sensex today is trading higher by about 240 points (up 1.3%), while the NSE-Nifty is trading higher by about 60 points (up 1%). Stocks from the midcap and smallcap spaces also traded firm with the BSE Mid Cap and BSE Small Cap indices trading up by over 1% each. The rupee is trading at 52.68 to the US dollar.

Banking stocks are currently trading firm led by Bank of Baroda, Union Bank and Andhra Bank. The stock of Yes Bank is trading higher today. Gains in the stock seem to be on account of the private lender receiving the approval of the Reserve Bank of India to foray into securities broking business. As per the bank's management, it would roll out services in FY14. This service would add to the bank's product offerings and offer synergies to its retail savings and loan offerings. As per the bank this service would be well positioned to offer its retail clients a complete suite of banking services, including savings, investments, wealth and loan products. Dr. Rana Kapoor, Yes Bank's founder, managing director and chief executive officer is of the view that post the success of the Yes Bank's 6% and 7% savings account interest rate proposition, it can now be complemented by the retail broking services.

Stocks of information technology companies are trading firm led by Financial Technologies, Tech Mahindra and Tata Consultancy Services (TCS). As per a leading financial daily, Mahindra Satyam has launched in-vehicle infontainment solution globally. The solution offers seamless connectivity between a smartphone and in-vehicle infotainment system to provide functionalities such as navigation and multimedia capabilities. According to the company, the solution provides the rear-seat passenger complete entertainment and enterprise solutions package enabling him to be constantly connected to home as well as office. The networked or 'smart' vehicle will enable the passenger to shop, pay bills, check email, watch videos, access news and social media, and be connected always. The passenger can also enjoy a host of other services such as access to public utilities, emergency services and financial institutions. Depending upon the success of the 'Connected Vehicle Concept', Mahindra Satyam plans to integrate other value-added services such as speech recognition, text-to-speech technology, gesture recognition, health monitoring and driving pattern tracking into the system.

Auto stocks lead the rally
11:30 am

Indian equity markets continues to trade strong over the last two hours of trade on back of heavy buying activity witnessed across industry heavyweights. Auto and metal stocks witnessed maximum buying interest.

The Sensex today is up by 263 points, while the NSE-Nifty today is up by 77 points. BSE Mid Cap index and the BSE Small Cap index are up by 1.33% and 1.05%. The rupee is trading at 52.70 to the US dollar.

Energy stocks are trading in the green led by Oil and Natural Gas Corporation Ltd. (ONGC) and Cairn India. According to a leading financial daily, ONGC Teri Biotech Limited (OTBL), the joint venture between state-run explorer Oil and Natural Gas Corporation (ONGC) and The Energy and Research Institute (Teri), is planning to bid for Rs 150 bn desert oil slick clean-up contract in Kuwait. The Kuwait Oil Company has engaged a project monitoring consultant to prepare the tender specifications. The specifications could be ready by January 2013. The contract is to clear the oil slick created in the Gulf war following Iraq's invasion of Kuwait in 1990. The contract being a USD $3 bn project, OTBL might have to use ONGC's balance sheet to be eligible to bid for the project. ONGC has a 49.9% stake in OTBL, while Teri's stake is 48%.

Pharma stocks are trading strong led by Cadila Healthcare and Aurobindo Pharma. As per a leading daily, the Group of Ministers (GoM) in charge of formulating the New Pharmaceutical Pricing Policy have proposed to bring prices of around 348 drugs under government control. At present the government controls 74 drugs and their formulations through the National Pharmaceutical Pricing Authority. The GoM will send their recommendations to the cabinet for approval. This is aimed with the objective to bring drugs in National List of Essential Medicines (NLEM). The cost based formula has been discarded and the ceiling price will be calculated by using the weighted average price (WAP) of brands with over 1% market share by volume. However, the pharmaceutical industry is not happy with this decision as it may result in loss of revenues for them in the short term.

Indian share markets open firm
09:30 am

Barring Japan (down 0.9%), all major Asian stock markets have opened the day on a firm note with markets in China (up 1.0%), Malaysia (up 0.6%) and Indonesia (up 0.5%) leading the gains in the region. The Indian share market indices have also opened the day on a positive note. All sectoral indices have opened in green with stocks in the metal and auto space leading the gains.

The Sensex today is up by around 180 points (1.0%), while the NSE-Nifty is up by around 43 points (0.8%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.9% and 0.8% respectively. The rupee is trading at Rs 52.68 to the US dollar.

Power stocks have opened the day on a positive note with Tata Power and Torrent Power leading the pack of gainers. As per a leading financial daily, Power Grid Corporation of India Ltd (PGCIL) has plans to invest around Rs 13 bn for strengthening two transmission systems in the Northern region. The investment proposals have already been approved by the company's board of directors. Out of Rs 13 bn, Rs 8 bn will be spent as part of 'Northern Region System Strengthening Scheme - XXVI'. The management expects the project to commission in 30 months from the date of investment approval. Further, the company will invest Rs 5 bn for 'Northern Region System Strengthening Scheme - XXVIII' which is expected to be completed within 32 months from the investment approval date.

Auto stocks have opened the day on a firm note with Ashok Leyland, Maruti Suzuki and Tata Motors leading the pack of gainers. As per a leading financial daily, Tata Motors is planning to expand in Latin American markets by setting up an assembly facility in Mexico. For this, the company is planning to associate with a local partner which will help in building a network of suppliers. The company is likely to invest around US$ 100 m for the Mexico assembly facility. It will assemble Tata Vista, Tata Indica, Tata Manza, Tata Aria and Nano. If the company invests upto US$ 100m and pledges to build 50,000 vehicles or above, it will get some duty exemption as per the Mexican laws.

How will the liquidity wave affect India?

A third round of monetary easing, more popularly known as QE3 was announced by the US Fed earlier this month. The Chinese central bank also poured US$ 58 bn into money markets over the past few days through reverse repo agreements. China desperately needed to do something as its economy has slowed to the mort leisurely pace in the past three years. Even the Reserve Bank of India (RBI) cut its Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) this year in order to increase liquidity in the system. Unlike India, China has not yet cut the portion of deposits that commercial banks must hold as reserves. Instead the People's Bank of China has been relying on open market operations to ensure that there is enough liquidity in the system. Will the surplus liquidity in overseas markets affect India?

Well, according to RBI deputy governor Dr Gokarn, the central bank has not yet seen any fallout of the Fed's QE3 measures on Indian commodity or currency rates. In the previous round of easing, or QE2 in 2010, there was an immediate ratcheting up of oil prices. This had a direct bearing on domestic inflationary pressures. The Indian central bank responded to this by raising interest rates and continuing this onslaught for a number of months. This time around, however, a similar surge in oil prices is not expected. This is probably due to the slower growth expected in the world economy on account of a slowdown in Europe, China, and the US.

Despite this, inflation is still a worry for the Indian central bank. The RBI does not have a target rate for inflation. However it does adhere to certain benchmarks which are below 5% on the headline and around 4% on core inflation front. There are a few stress points that can affect inflation levels in the country, and surplus liquidity overseas is not chief among them. Food inflation, the rising fiscal deficit (2.5% of GDP in 2008 to nearly 6% now) and the current account deficit are major factors. The government's stance on foreign direct investment (FDI) in retail can help reduce inflation, especially food prices. If more investment in supply chain comes in, then it can help reduce wastages and keep prices lower. To conclude, inflation in India is still a concern, but QE3 or activities in China may not really be aggravating it further.