Oil stocks shine on Indian bourses

Changes in pricing policies helped the gains in oil stocks push benchmark indices in Indian stock markets higher today. As a result Indian markets led the pack of few gainers in the Asian region. While the BSE Sensex closed higher by around 146 points, the NSE-Nifty closed higher by 37 points. While the BSE Mid Cap clocked marginal gains, the BSE Small Cap closed below the dotted line.

As regards global markets, most Asian indices closed mixed today while European indices have opened lower. The rupee was placed at Rs 54.34 to the dollar at the time of writing.

Yes Bank declared its results for the third quarter and first nine months of financial year 2012-13 (9mFY13) yesterday. The bank has reported a 35% YoY and 33% YoY growth in net interest income and net profits respectively in 9mFY13. Net interest income grows 35% YoY in 1HFY13 on the back of 22% YoY growth in advances. Other income grew by 49% YoY in 9mFY13 due to robust growth in fee income. Net interest margin remained stable at 2.9% due to rise in proportion of CASA deposits. The bank's bottomline grew 33% YoY in 9mFY13 despite higher provisioning. Further, capital adequacy ratio (CAR) remained comfortable at 18% (Tier 1- 9.0%), while gross NPA was low at 0.17% of advances(NPA coverage 79.6%).

As per a business daily, the government has cleared the proposal to grant 'Maharatna' status to Bharat Heavy Electricals (BHEL). The government has, however, suggested BHEL to look for new avenues for growth, including new business areas such as solar energy.

Meanwhile the company has won a major contract for the electro-mechanical equipment package for a Hydroelectric project in Bhutan. The order envisages manufacture, supply, erection and commissioning of the electro-mechanical equipment for the 720 MW project. The value of the contract is in the range of Rs 7.3 bn to Rs 7.5 bn. Bhutan is one of the key export territories of BHEL, where it has a predominant presence since the last 25 years in the power generation segment.

IT & realty stocks propel gains
01:30 pm

Indian equity markets strengthened further during the post noon trading session on the back of sustained buying activity across index heavyweights. Stocks from the realty, IT and oil and gas sectors are leading the pack of gainers, while those from the metal and capital goods sectors are amongst the top underperformers.

The BSE-Sensex is up by 95 points and the NSE-Nifty is trading up by 25 points. While the BSE Mid Cap is trading up by 0.09%, the BSE Small Cap index is trading up by 0.06%. The rupee is trading at 54.69 to the US dollar.

Most of the pharma stocks are trading mixed with IPCA Labs and Ajanta Pharma being among the top gainers while Shasun and Dishman Pharma are among the losers. Perrigo, a US based company, has launched betamethasone valerate foam 0.12% under 180-days exclusivity. It is the generic equivalent Luxiq foam 0.12%. As per the sources, Cipla was among the defendants and was sued by the innovator for the said product. This signifies there must be some arrangement with Cipla for supply of drug or its API. In 2005, Cipla had signed a deal with Pentech Pharma for supply of generic drugs, where the names of the drugs remained undisclosed. Pentech Pharma was later acquired by Perrigo. The brand size of Luxiq Foam 0.12% is US$ 40 m. The product belongs to GSK Plc's company, Stiefel Laboratories. The drug is indicated for the relief of corticosteroid-responsive skin conditions of the scalp or scalp psoriasis. Cipla is trading down by 1%.

Technology stocks are trading on a positive note with HCL Technologies, Mahindra Satyam and Wipro leading the gains. HCL Technologies has declared its second quarter results (the company has a June year ending) for the financial year 2012-2013 (2QFY13). The company witnessed a 3% QoQ growth in its revenues (in rupee terms). This was on the back of a 3% QoQ growth in volumes. The company reported a muted growth of 0.3% QoQ growth in software services and a 10.2% QoQ growth in infrastructure services during the quarter. The BPO segment witnessed a tepid growth of 1.1% QoQ. The company's operating margins improved to 22.6% as compared to the 22.2% in the previous quarter (quarter ended September 2012). Net profits grew by 9% QoQ during the quarter. The company has announced an interim dividend of Rs 2 per share. The company has added 39 new clients during the quarter. Attrition rates for software services declined marginally to 13.6% as compared to 13.4% in the previous quarter (September 2012). The stock is trading up by 4.8%.

Indian markets build on gains
11:30 am

Indian equity markets continued to trade in the positive during the previous two hours of trade. Sectoral indices traded mixed with IT and energy stocks emerging as top gainers while metal and capital goods stocks witnessed selling pressure.

The BSE-Sensex is trading higher by 60 points and NSE-Nifty is trading up by 17 points. Both the BSE Mid Cap and BSE Small Cap indices are trading flat at the moment. The rupee is trading at 54.61 to the US dollar.

Private banking stocks are trading mixed with Karnataka Bank and Federal Bank leading the gains while Lakshmi Vilas Bank and City Union Bank are among the top losers. According to a leading daily, Axis Bank has appointed Citigroup and JP Morgan Chase as investment bankers to raise funds of about Rs 60 bn. Further, Axis Capital has been appointed advisor for the same. This follows the board's approval received by the private sector bank to raise funds of Rs 62.2 bn by offering shares. The shares could be offered through qualified institutional placement or global depository receipts. In the meanwhile, Axis Bank recently declared results for quarter ended December 2012 and reported 19% YoY growth in net interest income and 22% YoY growth in net profits for the 9 month period.

Mining stocks are trading strong led by Gujarat NRE Coke and Coal India. According to a leading financial daily, Coal India will supply coal under the MoU route till January end. We may note here that the deadline of December 31, 2012 has been extended by a month for supply of coal to power firms. Earlier, in May the government had directed coal companies to supply fuel to power plants commissioned till 2012 through the MoU route till the fuel supply agreements (FSA) get resolved. 35 power companies have already signed the FSA with Coal India. However, National Thermal Power Corporation (NTPC) has not yet signed the FSA.

Indian share markets open firm
09:30 am

Barring Indonesia (up 0.2%), all major Asian stock markets have opened the day on a weak note with stock markets in Japan (down 1.3%) and China (down 1.1%) leading the losses. The Indian share market indices have opened the day on a firm note. Stocks in the realty and IT space are leading the gains. However, FMCG and metal stocks are trading in the red.

The Sensex today is up by around 19 points (0.1%), while the NSE-Nifty is up by around 8 points (0.1%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.4% and 0.5% respectively. The rupee is trading at Rs 54.74 to the US dollar.

Auto stocks have opened the day on a firm note with TVS Motors, Bajaj Auto and Maruti Suzuki leading the gains. India's second largest two-wheeler manufacturer Bajaj Auto has announced its financial results for the quarter ended December 2012 (3QFY13). Net operating revenue during the quarter stood at Rs 54,127.1 m, higher by 8.6% year-on-year (YoY). The company reported volume growth of about 5% during 3QFY13 with sales of about 1.12 m units. Operating profits rose by 2.8% YoY during the quarter as operating margins declined from 19.7% in 3QFY12 to 18.7% in 3QFY13. At the bottomline level, net profits stood at Rs 8,187.4 m during the period, a figure which is higher by 3% YoY.

Information technology stocks have opened the day on a firm note with HCL Technologies, Wipro and Tech Mahindra leading the pack of gainers. India's fourth largest software services provider HCL Technologies announced its financial results for the quarter ended December 2012. During the quarter, the company's revenue stood at Rs 62.7 bn, a rise of 19.6% YoY. The company reported operating profits of about Rs 14.2 bn with EBITDA (earnings before interest, tax, depreciation and amortisation) margins at 22.6%. At the bottomline level, net profits during the quarter stood at Rs 9.6 bn, higher by 68.5% YoY. It must be noted that during 3QFY13, the company won 12 multi-year multi-million dollar deals. Moreover, the company has also announced Mr Anant Gupta would be appointed as the new Chief Operating Officer, while Mr Vinit Nayar would continue as non-executive vice chairman.

Can the govt. improve capital allocation?

In the two decades since India started liberalizing its economy in 1991, it has improved supervision and regulations in the country. This helped India escape from the 2008 financial crisis relatively unscathed. However, despite the progress made so far, the Indian financial sector still confronts barriers to growth as well as challenges to stability. In the short term, financial system vulnerabilities can be easily circumvented. However, over the medium to longer term challenges still remain and the issue needs to be addressed. Besides, certain regulations put in for the safety of the financial system, may actually also be hampering growth.

The International Monetary Fund (IMF) recently released its Financial System Stability Assessment Update and questioned the role of the Indian government in the financial sector. The center owns big financial institutions such as the public sector banks, which control 70% of the Indian banking sector. The state also directs credit to certain priority sectors, controls the range of permitted activities and the availability of foreign capital. According to the IMF, this contributes to a build-up of fiscal contingent liabilities and creates a risk of misallocation of capital that may constrain economic growth. According to the agency, if the mandatory holding of government securities could be reduced it could help in proper allocation of capital. Plus greater access to both domestic and foreign sources of capital can help in improving the balance sheets of these financial institutions. Basel III norms, which are expected to be implemented over the next few years, require banks to bolster their capital base and limited access to capital can prove problematic. Plus, there should be more room for private initiative in order to increase financial inclusion in the country, in terms of tapping poor borrowers.

The IMF also questioned the Reserve Bank of India (RBI's) use of the banking system rather than government programs in meeting needs of priority sectors - agriculture, small and micro credit, education, health. It believes that the RBI, in its supervisory role should pay more attention to being prepared for the next crisis, contingency planning for the insurance and payments system, and stronger resolution powers. Overall, while the Indian central bank is doing a good job of regulating the sector, maybe the government can do a better job in allocation of capital.