Volatility plagues Indian indices

Indian equity markets had a rather volatile trading session today. While the indices began the day's proceedings on a firm note, profit booking at higher levels in the subsequent hours led to the erosion of all gains. Thereafter, alternate bouts of buying and selling kept the indices oscillating to either side of Friday's close and this continued till the final trading hour. Both the BSE-Sensex and the NSE-Nifty closed flat today. The BSE Mid Cap also closed flat, while the BSE Small Cap closed marginally higher. Gains were largely seen in auto and IT stocks, while oil and gas stocks were at the receiving end.

As regards global markets, Asian indices closed mixed today while European indices have also opened mixed. The rupee was trading at Rs 53.89 to the dollar at the time of writing.

Steel stocks closed mixed today. While JSW Steel and SAIL found favour, Tata Steel closed into the red. As per a leading business daily, steel major Steel Authority of India Limited (SAIL) witnessed an adverse impact on volumes during 9mFY13. Sales were down 3% YoY during the period. This poor show was attributed to subdued demand for both long and flat products coupled with rising competition. Long products are mostly used in the construction sector, while flat steels are used in automobile and consumer goods among others. Given that these industries have been impacted by the economic slowdown, SAIL has not been spared either. As far as production figures are concerned, the company produced 9.25 m tonnes of saleable steel in 9mFY13 compared to 9.1 m tonnes in the corresponding period last fiscal.

Shriram Transport Finance announced results for the third quarter ended December 2012. Income from operations grew by 16% YoY in 3QFY13 as assets under management grew by a healthy 21%. Net interest margins decreased to 7.5% during the nine month period (8% in 9mFY12). Other income almost quadrupled during the quarter. Net profit grew by 19.4% YoY in 3QFY13 on account of higher other income. The growth came in despite the rise in interest costs. On the NPA front, gross NPAs increased to 2.89%, while the net NPA ratio increased to 0.63% in 9mFY13. The stock closed higher by 1% today.

Indian share markets remain weak
01:30 pm

As index heavyweights continued to witness selling pressure, Indian share markets continued to trade in the negative territory in the post noon trading session. Sectoral indices are trading mixed with realty, auto and banking stocks being the biggest gainers. Oil & gas, consumer durable and power stocks are trading in red.

BSE-Sensex is down 16 points and NSE-Nifty is trading down by 5 points. While BSE Mid Cap is marginally up, BSE Small Cap index is up by 0.4%. The rupee is trading at 53.8 to the US dollar.

FMCG stocks are trading mixed with Archies and Lakshmi Energy being the biggest gainers and Emami and Colgate being the biggest losers. The chairman of FMCG behemoth Hindustan Unilever (HUL) Harish Manwani, has further lent support to the company's decision to hike royalty payout to its parent company, Unilever, from 1.4% to 3.5% of sales in a phased manner until FY18. As per the chairman, the turnaround in the performance of HUL has been on account of the innovation and functional expertise of Unilever together with local insight and expertise of HUL. The chairman said that HUL's supply chain management, innovation and functional support had become more global and defended the higher royalty payments to continue deriving benefit of Unilever's scale. It may be noted that the stock has lost 13% of its market value from its peak price on concerns of margins contraction from higher royalty payouts. HUL stock is currently trading down 0.9%.

Most of the pharma Stocksare trading in green with Panacea Biotech and Biocon being among the top gainers. Glenmark Ltd has announced the approval of "Mupirocin calcium cream 2%" from USFDA. The total market size of Mupirocin Calcium cream is US$ 57 m. Glenmark is the only generic company to get the approval for this version. Though there are other companies who hold approval for Mupirocin based products, they are non-calcium based ointments. The company will be shipping the drug immediately for the US market. Mupirocin Calcium Cream is indicated for the treatment of secondarily infected traumatic skin lesions. This approval is in line with Glenmark's strategy to build expertise in the therapeutic areas across all the operating regions viz; Dermatology, Respiratory and Oncology. In the US, Glenmark has 46 ANDAs pending for approval from the USFDA. The company already holds approvals for 83 drugs. The stock was trading down by 0.8%.

Indian share mkts shed gains
11:30 am

Indian share markets fell into the red after opening today's trade on a positive note. Sectoral indices are trading mixed with realty and auto stocks leading the gains while consumer durables and energy stocks are the top losers.

The BSE-Sensex is trading lower by 11 points and NSE-Nifty is trading down by 4 points. However, BSE Mid Cap and BSE Small Cap indices are trading up by 0.2% and 0.6% respectively. The rupee is trading at 53.77 to the US dollar.

Most of the mining stocks are trading firm led by Manganese Ore India Limited (MOIL) and Ashapura Minechem. According to a leading daily, Coal India (CIL) has decided upon a production target of 492 m tonnes for FY13-14. This implies a targeted growth of 6% in output. For FY13, the coal company is looking at supplying 464 m tonnes of coal and is well poised to meet its target. However, it will depend on the production in last 2 months. We may note that CIL produces about 80% of India's coal and in the wake of shortage of fuel supply, it is under pressure to raise output. However, CIL has been facing its own problems in the form of availing environmental and regulatory approvals. Resultantly, the growth in output levels has remained nearly flat for the past two years and it missed its production target last year.

Automobile stocks are trading firm with TVS Motors and Hero MotoCorp being the top gainers. As per a leading daily, Ashok Leyland is looking at selling stake in some of its subsidiaries to raise Rs 5 bn. The company is aiming to use these proceeds for paying off debt to the tune of Rs 35 bn. These subsidiaries include Hinduja Leyland Finance Limited (HLFL), Albonair GmbH, Defiance Technologies and Defiance Testing & Engineering. It is also looking at offloading stake in IndusInd Bank. It may divest its stake either partially or fully in the companies. The automobile company will be carrying out these activities over the next 1 year and would start once the merger of two of its associate companies, Ashley Holdings and Ashley Investments, with Ashok Leyland are completed.

Indian share markets open in green
09:30 am

Asian stock markets have opened the day on a mixed note with stock markets in South Korea (down 0.5%), Indonesia (down 0.4%) and Japan (down 0.4%) leading the losses. However, markets in China (up 1.6%) and Hong Kong (up 0.5%) are trading firm. The Indian share market indices have opened the day on a positive note. Stocks in the auto, realty and consumer durables space are leading the gains. However, oil and gas stocks are trading in the red.

The Sensex today is up by around 20 points (0.1%), while the NSE-Nifty is up by around 6 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 0.5% and 0.7% respectively. The rupee is trading at Rs 53.85 to the US dollar.

Oil & gas stocks have opened the day on a weak note with Oil and Natural Gas Corporation (ONGC), Reliance Industries Ltd (RIL) and Indian Oil Corporation (IOC) leading the losses. As per a leading financial daily, the Defence Ministry has either withheld or withdrawn clearances for 47 oil & gas blocks. Of these 47 blocks, 14 have been classified as "No-Go" areas. KG-D6 gas fields and gas discovery area NEC-25 belonging to Reliance Industries and its partner BP plc are among the 14 oil and gas blocks that have been classified as "No-Go" areas. As such, exploration and productivity in these blocks has been barred. It is said that the other 12 blocks that have been classified as "No-Go" areas belong to state-run ONGC, Cairn India and Australia-based BHP Billiton. The main reasons that have been cited for withdrawing the clearances include being close to missile launching range, overlapping with proposed Naval base, with the Naval firing range and Air Force exercise area. The KG-D6 blocked has been included in the list because it overlaps with the proposed naval base. However, it is also said that the newly formed Cabinet Committee on Investment (CCI) is likely to consider giving clearance to 47 oil and gas blocks where the Defence Ministry has either withdrawn clearances or put stringent conditions.

PSU bank stocks have opened the day on a strong note with Indian Overseas Bank, Bank of India and Central Bank leading the gains. As per a leading financial daily, India's biggest public sector lender State Bank of India (SBI) is set to open up a second branch in China. The bank branch is scheduled to open at the port city of Tianjin, which is about 140 km from Beijing, at the end of February 2013. The branch will have a capital of about 300 m Yuan (approximately USD 50 m). SBI opened its first branch in Shanghai in 2006. It must be noted that several Indian banks have set up branches in different parts of China. The increasing trade between India and China has benefitted most of them. SBI has handled about USD 2 bn worth of trade finance. This included letters of credit for Indian and Chinese companies.

Was there a policy paralysis in India?

The market run up over the past few months has broadly occurred due to the improving market sentiments following the slew of reforms announced by the government in recent times. This is what one section of the investing community believes. With some key economic concerns being addressed in recent times, the overall belief that the 'worst may be over' only seems to have strengthened. At the same time, many are of the view that the market run up has been on account of the global liquidity situation - where in money is being channelised into relatively riskier regions such as emerging markets and ergo, India. The term 'January effect' has been making rounds as well.Not to mention that the broader market valuations were on the lower side, in mid-2012, reflecting the investors' concerns. Amongst the many concerns, a key one was the prolonged phase of policy paralysis - the period before the government began announcing the 'reforms'.

However, it seems that Mr Kamal Nath, India's Urban Development Minister, does not buy viewpoint relating to the same. Speaking at the annual World Economic Forum (WEF) meeting, Mr Nath stated that India has seen the most number of reforms - even more than those seen in Europe and the US - any country would have witnessed in recent years. He believes that the slowdown in the European region trickled down to India. But, instead people saw this as a period of paralysis. Further, responding to a question relating to why India does not see much foreign interest in its infrastructure sector amongst others, Mr Nath believes that foreign investors expect too much from India. Mr Nath has based his response on the fact that after having a period of stupendous growth, investors get disappointed with minor dips in profit growth levels.

We do not entirely buy Mr Nath's argument. Yes, while the government may have suggested many reforms, a handful of the major ones have not been implemented or have been deferred (on a regular basis). While coming up with good policies is one aspect, implementation and execution of the same is key. Not to mention the fact that the investor concerns also move up in times of difficulty given the poor credit ratings (and hence the riskiness attached to it) of India. With growth levels of the country dipping by a third coupled with the concerns related to fiscal issues and the upcoming elections, foreign investors would be concerned about others aspects to protect their interests as well.