Markets see sharp decline

After remaining close to the dotted line for most part of the day, the Indian equity markets saw a sharp fall in final hours of trade. While the BSE-Sensex today closed lower by 350 points, the NSE-Nifty closed lower by 116 points. Midcaps and Smallcaps too saw a similar trend today. While the BSE Mid Cap index closed the day lower by 2.4%, the BSE Small Cap index closed the day lower by 2.7%. Sectoral indices too closed the day on a negative note, with consumer durables and power stocks being the top losers today.

As regards global markets, Asian indices too closed on a weak note today with Japan leading the list of losers. The rupee was trading at Rs 61.47 to the dollar at the time of writing.

Power stocks have closed the day on a weak note with the losers being led by the stocks of Reliance Infra and Jaiprkash Power. As per a leading business daily, the stock of fuel at 103 coal based thermal power stations in India hit a new low in 25 years at 7.2 m tonnes. This is on the back of the fact that Coal India and its subsidiaries have once again failed to meet their production targets. This stock of 7.2 m tonnes of coal is made up of 6.6 m tonnes of indigenous coal and 706 tonnes of imported coal. In fact, reports suggest that even the country's largest thermal power producer National Thermal Power Corporation (NTPC) may currently have only 0-1 day of coal stocks at some of its plants, which makes the situation extremely precarious for electricity supply in the country.

Energy companie ended the day on a weak note. However, oil marketing companies namely Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd. and Indian Oil Corporation (IOC) registered strong intra-day gains after a fall in global crude prices. A fall in prices is likely to result in over-recovery. For diesel, the over recovery is likely to be Rs 3.56 per litre during the second half of October. The same was Rs 1.9 per litre in the previous fortnight. With the recovery burden coming down as OMCs are making profit on sale of diesel, government's subsidy share will also reduce. And this may help the exchequer to achieve its fiscal deficit target.

Indian stock markets under pressure
01:30 pm

The Indian stock markets extended losses during the previous two hours of trade led by heavy selling activity across the market segment. Among the broader market segment, BSE Smallcap is leading the losers. Sectoral stocks of consumer durables and metals are leading among the pack of losers, whereas stocks from FMCG and pharma were among the few sectors trading firm today.

The BSE-Sensex is trading down by 102 points and the NSE-Nifty is trading down by 37 points. The BSE Mid Cap index is trading down 0.6% and the BSE Small Cap index is trading down 0.8% today. The rupee is trading at 61.10 to the US dollar.

Power stocks are trading on a mixed note today. NHPC and Adani Power are leading the stock of gainers, whereas Indiabulls Power and KSK Energy are trading in the red today. As per a leading business daily, the country's largest state run power producer NTPC is expediting its plan to enter into the distribution businesses. The company has long stayed away from the power distribution business. However, it plans to bid for distribution rights in cities which are opening up for private players. Currently very few cities at present have private distributors along with joint venture with public utilities. Many states in a bid to incorporate efficiency are opening up the segment for private players or with public partnership. NTPC sees this as an opportunity of participating in the bids. The stock of NTPC is trading lower by 0.6% at the time of writing.

Domestic pharma stocks are trading mixed with Wockhardt and Indoco Remedies being among major gainers. However, Dishman Pharma and Natco Pharma are the biggest losers today. As per a leading financial daily, Ranbaxy Laboratories has agreed to pay $39.7 m for the settlement of its litigation pertaining to Texas Medicaid. Texas Medicaid is a US federal-state healthcare programme for the poor. The claims in the litigation are related to historical pricing data of drugs reported by Ranbaxy to Texas Medicaid. Ranbaxy will be making the payments in tranches through August 2015. Ranbaxy stock is currently trading up 0.3%.

FMCG stocks among the top gainers
11:30 am

After opening flat, the Indian Indices have struggled to find any direction during the morning trading session. FMCG stocks are witnessing the maximum buying interest while consumer durables and metal stocks are trading in the red.

The BSE-Sensex is trading down 10 points. The NSE-Nifty is trading down 5 points. The BSE Mid Cap index is trading down 0.1% and the BSE Small Cap index is trading down 0.3%%. The rupee is trading at 61.47 to the US dollar.

MNC pharma companies are trading mixed with Abbott India leading the gainers and Novartis India being among the leading losers in the pack. As per the financial daily, the drug pricing regulator has demanded penalty of Rs 3 bn on Novartis India for overcharging consumers on the sale of its leading selling brand Voveran. The said drug is indicated for pain. However as per the reports, the company did not confirm the quantum of the total penalty by the drug regulator, termed the notice as "erroneous and entirely misconceived". In its recent press release the company will be challenging both the basis of the demand as well as the entire quantum of the demand. Reportedly, according to IMS Health annual data, Voveran, has annual sales of about Rs 2.2 bn, and is among the top 10 brands in the domestic drug market. While Novartis has already filled the petition in Delhi high court, any negative verdict can hamper the profits of this company given the pharma companies already facing various challenges.

Telecom stocks are trading mixed today. While Reliance Communications is leading the gainers; Tata Communications is among the top losers. As per a leading financial daily, the telecom commission has cleared the way for pan-India full mobile number portability (MNP). The telecom commission is the highest decision making body in the Department of Telecom (DoT). The measure is to be implemented by 31 March 2015. This will clear the way for a simplified experience for consumers. This will allow users to keep the same number when they change circles or their operators. MNP is currently available within the same circle only. This move can be expected to benefit incumbents like Bharti Airtel, Vodafone and Idea Cellular in the long term.

Indian share markets open flat
09:30 am

The major Asian stock markets have opened the day on a weak note with the markets in Japan (down 1.9%) and Singapore (down 1.1%) leading the losses. The Indian share markets have opened the day on a flat note. The sectoral indices have opened mixed with stocks in the energy and capital goods sector leading the losses. However, auto and realty sector indices were trading firm.

The Sensex today is up by around 17 points (0.1%), while the NSE-Nifty is up by about 18 points (0.2%). Mid and small cap stocks have also opened on a flat note with the BSE Mid Cap and BSE Small Cap indices up by around 3 points each. The rupee is currently trading at Rs 61.63 to the US dollar.

Steel stocks have opened the day mainly on mixed note with Tata Steel and Bhushan Steel Ltd leading the gains. However, Tata Sponge Ltd and Tayo Rolls Ltd were facing selling pressure. As per a leading financial daily, Tata Steel Ltd is in talks with the Swiss investment firm Klesch Group to sell a part of its European assets, including mills in northern England and Scotland. The division employees about 6,500 people in Britain and Europe. The decision has been taken in wake of weak prices and poor market sentiments. As per the management, the company will now deploy its resources mainly on strip products activities, where it has greater cross-European production and technological synergies. The management has declined to give a value for the potential sale or to reveal losses by the division.

Telecom stocks have opened the day mainly in the red with ADC India Communications Ltd and AGC Networks Ltd leading the pack of losers. However, Reliance Communications Ltd and Idea Cellular were trading in the green. As per a leading financial daily, Telecom Regulatory Authority of India (TRAI) has suggested a 10% hike in the base price for spectrum in the 1800 megahertz (MHz) band across the country. TRAI has based its valuation on the price discovered in the last auction of airwaves in February. It has recommended that the minimum price for 1MHz of spectrum in the 1800MHz band be set at Rs 21.4 bn. For spectrum in the more efficient 900MHz band, the regulator has set a base price of Rs 30 bn per MHz in the 18 circles where the airwaves will be auctioned. It has further said that that the government should allow telecom operators that offer services based on the more popular GSM technology standard to use the 800MHz band. The latter is currently reserved for operators using the rival CDMA standard. The government, which has so far raised Rs.1.8 trillion through four spectrum auctions, expects to start the next auction in the 800MHz, 900MHz and 1800MHz bands from 3 February 2015.

Raising fresh capital could get easier

Even in the age of globalization, when it comes to foreign listing, corporates have a long way to go. The trend has not caught up so far with just 6% of the total listed companies falling under the category of foreign companies. Again, of the 55 global indices, only a few claim to be home of these foreign firms.

Indian companies are no different. One must note while Indian companies do have securities listed overseas, these are mainly in the form of depository receipts with the underlying equity shares listed on the domestic stock markets, and not a full equity float. Earlier, it was mandatory for Indian companies to list in the domestic market before getting listed abroad. However, the rules have been relaxed by the market regulator, keeping in mind the needs of Indian economy. Indian companies have been provided a 2 year window during which they can sell shares abroad before doing so in the Indian markets.

To make the most of this opportunity, foreign stock exchanges have started wooing Indian companies. The Indian sectors that have shown such interest are technology, biotech, medical, consumer goods, food production and infrastructure sectors. As per an article in Livemint, Tokyo Stock Exchange and the SIX Swiss Exchange have been meeting Indian firms, enticing them with benefits of listing abroad.

Some of these markets, such as Switzerland offer good opportunity for these firms with access to individuals with high net worth and huge assets under management. Others like Tokyo stock exchange will make the cost of raising capital relatively lesser for these companies. Not to mention the benefit of less demanding legal procedures as compared to domestic markets. Some of the companies are likely to benefit from better understanding and benchmarking of business models in the developed markets which will lead to better price discovery. No wonder Indian companies are excited about the offer. Now when a lot of companies are operating across the world and own assets globally, listing businesses separately could be the next step for them. To conclude, we believe it is a positive development that will make capital raising easier for Indian firms companies and help in better price discovery.