Mid, smallcaps in favour today
Closing

After trading range bound for the majority of the day, Indian equity markets closed on a weak note as selling activity intensified in the final hour of trade. Stocks across the board ended on a mixed note with those from the IT, power and consumer durables' space leading the gains; while metal, realty and oil and gas stocks were not in favour. Vedanta turned out to be the biggest loser today. The BSE-Sensex slipped and closed down by about 58 points while the NSE-Nifty closed down by 14 points. On the other hand, the S&P BSE Midcap and the S&P BSE Smallcap indices closed on a firm note and were up by 0.5% and 0.2% respectively.

Asian markets ended mixed. The Shanghai Composite gained 1.14% and the Nikkei 225 rose 0.42%. The Hang Seng lost 0.37%. European markets opened weak with France leading the downfall. The rupee was trading weak at 64.89 against the US$ in the afternoon session.

According to a leading financial daily, HCL Technologies (HCL) has entered into a Letter of Intent with the Volvo Group for undertaking an outsourcing engagement for its IT infrastructure and operations services. Reportedly, the total contract period is for a length of five years. In addition, HCL would be acquiring from the Volvo Group, its external IT business relating to provision of IT infrastructure, mainframe services and application operation services for an all cash consideration of Swedish Krona (SEK) 1.1 bn (US$138 million). Volvo Group derived revenue of SEK 1.6 bn (US$ 190 million) from external customers during last twelve months.

While all of the IT majors have outperformed the Indian benchmark in the first nine months of 2015, HCL Tech has outperformed its peers. The underperformer has been TCS whose stock has barely moved, though it has managed to do better than the Sensex.

Mining stocks languished in red today with Vedanta Ltd and NMDC Ltd bearing majority of the brunt. According to a leading economic daily, Vedanta Ltd is eying to achieve its target of 5.5 million tonnes (MT) iron ore exports by March next year as it prepares to bid for ore in government run auctions. The company's iron ore division is expecting to mine 5.5MT of fresh iron ore from its mines in Goa. Goa still has about 5 MT of already-mined iron ore to be sold in auctions. The low grade ore is not used by domestic steel makers, and most of it will be exported by March 2016.

Reportedly, Vedanta is in the process of shipping 88,000 tonnes of the steelmaking ingredient to China, with other customers there eager for cargoes. Vedanta bought the iron ore being shipped to China in state auctions in the past month and hopes to purchase more. The scrip of Vedanta closed the trading day down by 6.4% on the BSE.


Power stocks lead the gainers
01:30 pm

After opening the day on a flat note, the Indian Indices are presently trading above the dotted line. Most sectoral indices are trading mixed with stocks from the power and auto sectors leading the gainers. However metal stocks are trading weak.

The BSE-Sensex is trading up 60 points (up 0.2%) and the NSE-Nifty is trading up 18 points (up 0.2%). The S&P BSE Midcap index is trading up 0.8% and the S&P BSE Smallcap index is trading up 0.6%. Commodity prices are trading mixed. Gold prices, per 10 grams, are trading at Rs 27,010 levels. Silver price, per kilogram, gained about 0.48% or Rs 176 and is trading at Rs 37,114 levels. Crude oil is trading in red with loss of 0.1% and is trading at Rs 3,048 per barrel. The rupee is trading at 64.87 to the US$.

Cement stocks are trading on a mixed note with ACC Ltd and The Ramco Cements witnessing maximum selling pressure. India's leading cement producer UltraTech Cement has reported its results for the quarter ended September 2015. Total revenues of the company rose 4% YoY to Rs 60.13 billion in the July-September quarter. The growth was driven by a 4% rise in the domestic cement sales which grew from 10.4 million tonnes in the July-September 2014 quarter to 10.8 million tonnes in the latest quarter. The company reported a 3% growth in its consolidated net profit on a YoY basis.

The company's tepid growth during the quarter reflects the weak demand scenario in the cement industry. While the cement demand recovery has been slow given the sluggishness in the overall economy, the company is expecting demand for cement to pick up in the second half of 2015-16. We'll be putting up a detailed analysis of the company's results later today (subscription required).

Presently the scrip of the company is trading up by 0.5%.

Stocks in the automobile space are trading on a positive note with Tata Motors and Tube Investments leading the gains. As per a leading financial daily, Maruti Suzuki India has launched a variant of its mid-sized sedan Ciaz. The petrol variant in the category is priced at Rs 9.2 lakh while the smart hybrid diesel option is tagged at Rs 10.28 lakh.

As the company stated, Ciaz has emerged as one of its strong brands. It has strengthened the position of the company in the mid-size premium sedan segment. Since its first launch in October last year, Ciaz has seen sales of over 56,000 units.

Maruti Suzuki India is India's largest passenger car company and accounts for over 50% of the domestic car market. Stock of the company is presently trading up by 0.7%.


Markets trade near the dotted line
11:30 am

After opening the day on a flat note, the Indian Indices continued to trade close to the dotted line. Sectoral indices were trading on a mixed note with stocks from the consumer durables, auto and capital goods sectors witnessing maximum buying interest. However metal stocks were leading the losses.

The BSE-Sensex is trading up by 13 points (0.05%) and the NSE-Nifty is trading up by 4 points (0.04%). The S&P BSE Midcap index and the S&P BSE Smallcap index are trading in the green, up by 0.7% and 0.6% respectively. At the time of writing, the rupee stood at 64.93 to the US$.

Stocks in the energy sector are trading on a mixed note with Cairn India and Gujarat State Petronet Ltd leading the losses. As per a leading financial daily, state owned Oil & Natural Gas Corporation (ONGC) is in talks with Adani-Welspun Exploration Ltd (Adani-Welspun) to buy a stake in the latter's oil block in the western offshore region off the coast of Mumbai.

The talks are to either partner with or completely buyout block MB-OSN-2005/2 held by Adani-Welspun since 2005. The company expects this deal to be finalized by the end of the current fiscal year.

The pact between the two firms can help ONGC establish continuity among three of its other blocks located in the same region. The same will also help develop these blocks using common infrastructure. The plan is in sync with ONGC's long term plan to make western offshore its production hub. Presently the stock of the company is trading down by 1.1%.

As per a leading financial daily, the Reserve Bank of India (RBI) is going to auction the first ever 40-year government bond on Friday. This is said to be the longest tenor bond issued by India. Up till now, the 30-year bond has been recorded as the longest-duration security issued by the Indian government.

By this, the RBI will auction Rs 10,000 million worth of government securities on Friday, as reported by the central bank in its weekly notification of government bond auctions for the week. These bonds will be maturing on 26 October 2055. The development is in line with the announcement made by the government this year that it intends to issue 40-year bonds for the first time in FY15-16 and raise between Rs 50,000-80,000 million through the long-dated bonds.


Indian markets open flat
09:30 am

The major Asian stock markets have opened the day on a mixed note. Stock markets in Japan and Indonesia are trading up by 0.3% and 0.4% respectively. However markets in Hong Kong and Singapore are trading down by 0.4% and 0.2% respectively. The major stock indices in Europe and US ended their previous session in green. The rupee is trading at 64.93 per US dollar.

Indian stock markets have opened the day on a flattish note. BSE-Sensex is trading higher by 7 points (up 0.03%) and NSE-Nifty is trading lower by 6 points (down 0.07%). However S&P BSE Midcap and S&P BSE Smallcap have open in green. Both the indices are trading higher by 0.4% and 0.3% respectively. Major sectoral indices have opened the day on a mixed note with stocks from pharmaceutical and engineering witnessing buying interest. However stocks in oil and gas and telecommunication sector are the leading losers in the pack

As per an article in Livemint, Gujarat and Karnataka government has lifted the ban on Nestle's 'Maggi' noodles on Monday. The ban was imposed after the Food Safety and Standards Authority of India (FSSAI) ordered the company to withdraw the 'Maggi' noodles from the market.Nestle, thereafter had appealed in the Bombay High Court revoke this ban. Recently, the Court ruled in the favour of the company. However it asked Nestle to retest the samples of 'Maggi' at the 'National Accreditation Board for Testing and Calibration Laboratories (NABL).

Recently, three laboratories certified by NABL stated that the product is safe and the lead content was much below the permissible limits. Nestle India's Maggi noodles had earlier cleared tests in various countries including the US, UK, Singapore and Australia. Post the clearance from these two governments, it is believed that other states too will lift the ban on the noodles.

In one of our edition of the 5 Minute Wrap up, we had discussed about this controversy, as the stock of Nestle had tanked post this ban. And here is what we had written, - "Even if product quality suffers in the interim but is associated with a strong brand, the good image in mind of individuals remains intact. In the end, it all boils down to investing in wide moat companies. Bigger the brand, wider the moat". Read on to this interesting piece, where we have discussed in detail on this.

As per the financial daily, Dabur India stated that its sales from the 'Real' brand may be impacted. The impact is on account of the ongoing political tension between India and Nepal.

Since, Dabur has one of its manufacturing facilities situated in Nepal. Due to the India-Nepal border blockade the company has been unable to import the products into India. This is expected to impact the sales of its 'Real' brand in India. However the company has not quantified the impact of the same on the sales number. Dabur has also ramped-up its production in its other manufacturing facility in India and Sri Lanka in order to mitigate the loss of sales from the manufacturing unit in Nepal. The stock is trading down by 0.4%


India Inc's hiring trends disappoint
Pre-Open

How is the Indian economy faring? Is the economic recovery underway? Let's look at an economic indicator that may offer us some hint - hiring.

It appears that the hiring trend of major Indian companies is not quite encouraging. Before getting into the reasons, let's consider some data reported in Business Line.

As the financial daily reports, the headcount at 150 companies in the CNX500 index grew at a tepid 3% during 2014- 15. This is much lower compared with the 6% average rate of additions seen in the past three years. Moreover, the same trend was imitated by Nifty companies as well.

The trend in the ongoing fiscal year is not encouraging either. For example, annual job growth in the media industry settled at 28% in year ending September 2015. This was as against 59% during the same period a year ago. Hiring growth in the banking sector stood at 8% in the year ending September 2015. The same was reported at 36% during the year ending September 2014. Manufacturing and IT sector, too, saw similar trends.

What does this slowdown in hiring reflect?

  1. Economic slowdown
  2. Shift in hiring paradigm

Economic Slowdown

Amid the slow domestic economic recovery and the turmoil in the global economy, anxious employers have cut back on their hiring plans. In fact, some major companies have even witnessed a drop in their headcount. For instance, engineering major Larsen & Toubro has reported 19% reduction in its employee headcount. Tata Motors witnessed a 5% dip in employee strength. And so has been the case with State Bank of India and ICICI Bank.

The New Paradigm: Quality over Quantity

Companies have given up clinging on volume hiring. The new shift in strategy for companies is focusing on productivity. Employers are hiring experienced people. This is particularly seen in the IT sector. And they are spending well on these employees. This trend of 'quality over quantity' is being witnessed in large IT companies.

Conclusion...

We can say that companies are feeling the heat of cash crunch in the face of slow growth and stressed profit margins. In order to sustain their profitability levels, they are aiming at cost cuts in all possible ways. The trimming of the workforce is one such measure. While it may not be good news for the overall economy and particularly from a job creation point of view, but it will help companies achieve cost efficiencies and improved productivity.