Markets end on a firm note

The Indian stock markets ended the day on a positive note. The BSE-Sensex closed up by 183 points (0.7%) while NSE-Nifty closed higher by about 44 points (0.5%). However, it seemed that mid and smallcaps stocks were no in favour as the S&P BSE Midcap index closed lower by 0.3%, while S&P BSE Smallcap index ended down by 0.4%. Among sectoral indices, banking and healthcare stocks were leading the gains, while capital goods and auto stocks were least favoured. At the time of writing, the rupee was trading at 64.89 to the US$.

Asian markets finished in green at the most recent closing prices. Nikkei 225 and Shanghai Composite gained 2.1% and 1.3% respectively. European markets have started their day on an encouraging note. The DAX and CAC 40 are trading higher by 2.1% and 1.8% respectively. The rupee was trading at 64.9 against the US$ in the afternoon session.

Idea Cellular reported its numbers for the quarter ended September 2015. The revenues of the company grew by 14.8% to Rs 86.9 bn on a YoY basis. Growth came in from the non-voice services' segment. However, company witnessed a decline in voice usage. It stated that the voice minutes usage declined by 3.2% YoY to 189.5 billion on a sequential basis.

Further, pressure was also seen on the 'mobile data' segment front. The company witnessed pressure on realizations; there was an 11.7% drop in average price realization in the data business. It is expected that the launch of Reliance Jio's services will further add to the pressure.

Idea has written to investors, stating that there would be pressure on the mobile data realization rate as the competition intensifies. However, net profits of the company grew by 7% to Rs 8 bn on a YoY basis. The stock of the company ended the day on a dismal note (down 7.3%) on the BSE.

As per a leading economic daily, Cairn India has declared its results for the second quarter ended September30, 2015. The company profits plunged by 70.5% for the concerned period on a YoY basis. This drab outcome was on the back of dipping oil prices which have touched their lowest levels in about six years.

As reported, the company sold oil at an average price of US$ 43.7 per barrel during the quarter. The same came in lower by 53% as against US$ 92.1 a year ago. As a result of which, the company's revenue fell 44% YoY at Rs 22.42 billion in the concerned quarter.

As regards the lower crude oil price environment, the company said that it is actively engaging with the government along with other industry players on various strategic issues. Some of those include a revision of the cess charged on oil production to be in-line with crude prices, PSC Extension policy and fair price realization of domestically produced hydrocarbons. The stock ended higher by 2.7% today.

FMCG Stocks Lead the Gains
01:30 pm

After trading on a positive note during the morning session, the Indian Indices have maintained their positive bias by trading firm in the post noon trading session too. Most of the sectoral indices are trading positively with stocks from the banking and FMCG sectors leading the gainers. However, capital goods stocks are witnessing maximum selling pressure.

The BSE-Sensex is trading up by 177 points (up 0.7%) and the NSE-Nifty is trading up by 44 points (up 0.5%). The S&P BSE Midcap index is trading flat while the S&P BSE Smallcap index is trading up by 0.1%. Gold prices, per 10 grams, are trading at Rs 26,974 levels. Silver price, per kilogram is trading at Rs 37,219 levels. Crude oil is trading at Rs 2,982 per barrel. The rupee is trading at 64.88 to the US$.

Stocks in the automobile space are trading on a mixed note with Maharashtra Scooters and Force Motors leading the gains. According to a leading financial daily, Bajaj Auto is set to launch four new motorcycles in the domestic market. This is in undertaken in line with its plan to capture over 22% share in the domestic motorcycle segment by the end of this fiscal.

To initiate this, the company will be expanding its Avenger range of cruiser bikes through introduction of three new models this month. Besides, it is going to launch a completely new model in the fourth quarter of this fiscal. The same will be in the mid-segment of the motorcycle market.

In April-September of this fiscal, Bajaj Auto sold 9,55,148 units. This was a marginal increase from 9,52,492 units a year ago. Total industry domestic sales motorcycles sales during the period stood at 53,64,391 units, down 4.06% on a YoY basis.

Scrip of Bajaj Auto is trading up by around 0.6%.

Pharma stocks are trading firm with Piramal Enterprises and Panacea Biotech witnessing maximum buying interest. As per an article in Economic Times, pharma firm Cadila Healthcare has announced its results for the second quarter ended September 30, 2015-16. The company posted a robust 40.56% YoY jump in its consolidated net profits to Rs 3,909 million.

Total income for the company stood at Rs 24,831 million for the concerned period as against Rs 21,226 million reported in the corresponding period a year ago. Further, standalone net profit stood at Rs 6,140 million for the quarter as compared to Rs 3,656 million in the year-ago period.

As reported, the consolidated results included a consideration of Rs 200.3 million (US$ 3 million) received by Zydus Pharmaceuticals (USA) Inc, a wholly owned subsidiary of the company. The same funds were received on account of sale and transfer of ownership interest in certain Abbreviated New Drug Applications (ANDAs) for generic drug products.

Presently the stock of the company is trading up by 2.3%.

Indian Markets Trade in the Green
11:30 am

After opening firm, the Indian Markets continued to trade positively. Sectoral indices are trading on a positive note with stocks from the banking, pharma and oil and gas sectors leading the gains. However, capital goods stocks are witnessing selling pressure.

The BSE-Sensex is trading up 210 points (up 0.8%) and the NSE-Nifty is trading up 53 points (up 0.6%). The S&P BSE Midcap index and the S&P BSE Smallcap index are also trading in the green, both up by 0.4%. The rupee is trading at 64.87 to the US$.

Automobile stocks are trading mixed with Maharashtra Scooters and Force Motors leading the gains. As per a leading financial daily, the country's largest two-wheeler maker Hero MotoCorp is all set to enter three new countries - Argentina, Mexico and Nigeria by the end of this financial year. This is in line with the company's strategy that will help in widening its footprint across global markets.

In addition, the company is looking to sell 2.5 lakh units in the international markets this fiscal, up 25% from 2 lakh units in the previous fiscal. Besides with that, the company is also aiming to ramp up the production capacity at its Colombian facility to 4,000 units a month, from the current capacity of around 2,500-3,000 units a month.

Along with these plans, the company has recently begun its operations at a new facility at Villa Rica in Colombia, which was built with an investment of US$ 70 million.

Presently, the company sells its products in 24 countries including Sri Lanka, Nepal, Bangladesh, Egypt and Turkey in Asia, Peru, Ecuador and Colombia in South America, among others. By 2020, the company aims to be in over 50 countries with 20 plus assembly facilities globally. The stock of the company is trading down by about 0.3%.

Stocks in the pharmaceuticals space are trading on a positive note with Cadila Healthcare and Strides Acrolab witnessing maximum buying interest. According to an article in Economic Times, Sun Pharma has settled a patent litigation with US-based Acorda Therapeutics Inc over Ampyra extended-release tablets, which is used to treat multiple sclerosis patients.

As per the settlement, it that the Indian drug major can launch its generic version of the medicine in the US by 2027. The company along with its subsidiary reported the settlement agreement. Acorda Therapeutics filed the litigation in response to Sun Pharma's submission of an Abbreviated New Drug Application (ANDA) to the US Food and Drug Administration, seeking marketing approval for a generic version of Ampyra. The scrip of Sun Pharma is trading up by 0.5% on the BSE.

Indian markets open strong
09:30 am

The major Asian stock markets have opened the day in green. Stock markets in Japan, Hong Kong and Indonesia are trading up by 2.5%, 1.3% and 1.1% respectively. The major stock indices in Europe and US ended their previous session on an encouraging note. The rupee is trading at 64.81 per US dollar.

Indian stock markets have opened the day on a firm note. BSE-Sensex is trading higher by 250 points (up 0.9%) and NSE-Nifty is trading higher by 65 points (up 0.8%). S&P BSE Midcap and S&P BSE Smallcap have moved upwards. Both the indices are trading higher by 0.7% each. Major sectoral indices have opened the day on a positive note with stocks from oil and gas, banking and engineering sector witnessing buying interest.

Biocon declared its results for the quarter ended September 2015. The company's revenue grew by 11.4% to Rs 8.6 bn on a YoY basis. Reportedly, the research service unit of the company named 'Syngene International Ltd' contributed around 33% to the overall revenues of the company.

The net profit grew by almost 200% to Rs 3 bn on a YoY basis. The spurt in the net profit was due to an extra-ordinary item. The extra-ordinary item was in relation to the gain of Rs 2 bn from selling of shares in its research service unit 'Syngene International'. Even after excluding the extra-ordinary item, 'Syngene International' contributed to around 50% of the overall profits of the company.

The company has spent Rs 570 m on research and development in the quarter. Reportedly the company's Active Pharmaceutical Ingredients (APIs) business grew by 4% YoY to Rs 4.6 bn while its Indian branded formulation business grew by 3% YoY to Rs 1.2 bn.

Tata Motor's recently stated that the company will launch the newer version of 'Range Rover Evoque' in the next month. Reportedly, the company has started accepting bookings for the same. As per an article in Business Standard, the models are priced between Rs 4.6-Rs 20.7 mn.

The Jaguar Land Rover (JLR) president stated that the response to Range Rover Evoque has been exceptional across all geographies. Further he added that the tapered roofs, muscular shoulder and striking lines set the newer version apart from its other contemporaries.

As per our auto sector analyst, Radhika Pandit, the September numbers for JLR are healthy considering that the last two quarters saw some slowdown in volumes. This was largely on account of the crisis in China, which for the last couple of years had been the fastest growing market for JLR and therefore an important growth driver. With the introduction of new models, Tata Motors expects JLR volumes to ramp up going forward. Click here for the detailed analysis of the company's results (subscription required) for the quarter ended June 2015.

CSR- A tool to convert white money into black?

The Companies Act, 2013, makes it mandatory for companies with a net worth of over Rs 5 bn or annual revenue of Rs 10 bn or net profit of Rs 50 m to formulate a Corporate Social Responsibility (CSR) committee. The committee will ensure that atleast 2% of the average profits of the preceding three years are spent on CSR activities.

CSR include activities such as promoting rural sports, nationally recognized sports, setting up homes and hostels for women, orphans and senior citizens, preventative healthcare, sanitation etc.

However, few corporates are using the CSR tool to convert white money to black. You must be wondering how?

The CSR activities are undertaken by the company itself or through any external trusts. In case the company carries out the CSR activities through external trusts there is an easy way to convert the white money to black.

Firstly, CSR spends are not required to be audited by the statutory auditors. Secondly, financials of charitable trusts also come under little scrutiny. As per an article in Economic Times, trusts are the most preferred route to launder the black money because they are not adequately governed. Unless there is specific legitimate information on the wrong doings of the trusts they are rarely scrutinized. This provides a perfect opportunity to abuse the new CSR norms. We will explain this with the help of an example.

Suppose a company has to spend Rs 1 bn on CSR activities. The company appoints an external charitable fund to undertake the CSR activities. The company will endorse the cheque in favour of the trust and the funds will flow to the trust through a legitimate banking channel. However, the charitable trusts will return the money to the company or promoters in cash after charging a commission. There is a win-win situation for both the parties. The company converts its money into black and the charitable trust gets its commission.

In one of our recent article we had explained the impact of the black money on India's Gross Domestic Product. Such activities are a big set-back for the government who wants to eliminate black money from the country. The government will have to come up with new provisions to amend the CSR law to eliminate such flaws.