Markets close at all time high

Indian equity markets started the day on a positive note and never looked back. The benchmark indices hit fresh 35 month high as foreign institutional investors continued to pump in dollars ahead of the US Federal Reserve meet. Pharma, FMCG and Power stocks were the leading pack of gainers. While the BSE-Sensex closed higher by 104 points, the NSE-Nifty closed higher by 30 points. BSE Mid Cap and the BSE Small Cap closed on a positive note.

As regards global markets, Asian indices closed in the green. European indices have also opened in the green. The rupee was trading at Rs 61.3 to the dollar at the time of writing.

Shriram Transport Finance (STFC) has announced its result for the quarter ended September 2013 (2QFY14). The institution grew its income from operations by 23% YoY but the profits declined 3% YoY during 2QFY14. The profits for the first half of FY14 grew by 2% YoY. Higher provisions marred the profitability of the company. Income from operations grows 23% YoY in 2QFY14 with a healthy growth in on-book assets of 28%. Net interest margins moved down to 6.9% in 1HFY14 from higher levels of 7.6% in 1HFY13. While other income shot up substantially, the net income from securitization fell drastically during 2QFY14. Gross NPAs inched upwards to 3.3% from 2.9% earlier, while the net NPA ratio increased to 0.7% in 2QFY14 from 0.6% in 2QFY13. The cost-income ratio was marked at 25% for the second quarter FY14.

Lupin has announced results for the quarter ended September 2013 (2QFY13). Net sales grew by 18% to Rs 26,315 m. during 2QFY14, up from Rs 22,393 m in 2QFY13. EBITDA margin grew by 42% to Rs 7,410 m. during 2QFY14, up from Rs 5,202 m in 2QFY13. Net profit grew by 40% to Rs 4,062 m. during 2QFY14, up from Rs. 2,905 m in 2QFY13. USA and Europe formulation sales (including IP) grew by 31% to Rs 11,089 m. during 2QFY14, contributing 42% to overall company sales. US brands business contributed 10% of total US sales, whereas the generics business contributed 90%. The Indian formulations business contributed 25% of the company's overall revenues for the quarter. The company's India formulation business grew by 9% recording revenues of Rs 6,635 m. during 2QFY14.

Indian indices continue to trade in green
01:30 pm

The Indian markets have expanded gains during the post noon trading session. Barring stocks from metal, oil and gas, auto and capital goods, all the sectoral indices are trading in green. The most noticeable upward movement is witnessed in the stocks from realty and healthcare sectors.

BSE-Sensex is up by 75 points and NSE-Nifty is trading up by 23 points. While BSE Mid Cap is trading up by 0.45% BSE Small Cap index is trading up by 0.86%. The rupee is trading at 61.43 to the US dollar.

Majority of the cement stocks are trading in the red with Birla Corp and Shree Cement being the major losers. However, Mangalam Cement and Heidelberg Cement are among the few stocks trading in the green. As per a leading financial daily, Securities Exchange Board of India (SEBI) has approved the restructuring of parent Holcim India's stake in Ambuja Cements. As a part of the restructuring process, Holcim India will merge Ambuja Cements with itself in a cash and share deal worth Rs 145 bn. Under this process, Holcim India's stake of over 50% in ACC will be transferred to Ambuja at a price of Rs 35 bn while shares will be issued by Ambuja for the rest. Post merger, Holcim India's stake in Ambuja will rise to 61.39% from a little over 50%. According to Ambuja Cement, the entre restructuring exercise will be completed by June 2014 after acquiring shareholder's approval. The company has also applied for approval from the Gujarat and Delhi High Courts and Foreign Investment Promotion Board. Ambuja Cement is expected to make savings as a result of a common management structure post the restructuring. Ambuja Cement is currently trading down by 1.2%.

Majority of the are trading in green with Tata Teleservices and Tata Communications leading the pack of gainers. Bharti Airtel has declared September quarter results. The consolidated sales were up by 10% YoY. The mobile subscriber base in India has increased by 4% YoY during the quarter while the total subscriber base increased by 7% YoY. The operating margins of the company improved by 1.4% YoY to 32% for the quarter. However, the positive effect on operating level was mitigated by increase in the interest costs and higher tax expenses. The increase in interest costs was on back of forex losses and mark-to-market losses on investments. Thus, the profits declined by 29% YoY during the quarter.

Banking stocks lead the rally
11:30 am

After opening in the green, the Indian Indices are trading positive in the morning session amid outperformance in mid and small cap stocks. The buying interest is the highest in Banking and Pharma stocks.

The BSE-Sensex is up 55 points and the NSE-Nifty is trading up 15 points. The BSE Mid Cap index is trading up 0.5% and the BSE Small Cap index is trading up 0.7%. The Rupee is trading at 61.45 to the US Dollar.

Most Steel stocks are trading positive today. Jindal Saw and Tata Steel are among the stocks leading the gainers. India's leading steel company, Tata Steel has announced further restructuring of its European operations. The restructuring pertains to its long products business in the United Kingdom (U.K) which produces tubes, rails and rods. The prolonged slowdown in steel demand in Europe since 2007 has resulted in this restructuring. The company confirmed that these proposals would affect the employment of up to 500 people. The sites in the U.K that would be affected are Scunthorpe, Workington and Teesside. The demand for the products manufactured at the Scunthorpe site, in particular, has been facing a serious downturn. Tata Steel, which is Europe's second largest steel producer, has faced a slowdown in steel demand since 2007. This was the same year that it acquired Corus steel in the U.K. Tata Steel is trading up 1.4% today.

Indian Pharma stocks are trading mixed today. Torrent Pharma and Panacea Biotec are leading the gainers; while Divis Laboratories and J.B. Chemicals are leading the losers. Ranbaxy Laboratories' 3QCY13 results have been disappointing. The company's consolidated sales have risen by 3% YoY to Rs 27.5bn. As per the company, the sales were impacted by the new pricing policy and trade concerns in India. Also, the absence of any post exclusively sales during the quarter led to moderate growth in sales. The company reported a loss of Rs 4.5 bn; mainly as a result of write-offs this quarter because of the US regulatory enforcements at the company's Mohali facility. Also, Ranbaxy incurred a forex loss of Rs 3.6 bn this quarter; while in the previous year’s corresponding quarter it had incurred a forex gain of Rs 3.9bn. During the current quarter, the company's sales from the US market rose by just 2.6% YoY to Rs 7.9bn. In the domestic market, the company reported sales of Rs 5.7 bn; which was in line with last year's corresponding quarter. Ranbaxy is trading flat today.

Indian stock markets open in the green
09:30 am

Barring Malaysia (down 0.1%) and Indonesia (down 0.2%), the major Asian stock markets have opened the day on a positive note with Japan (up 1.2%) and Hong Kong (up 0.8%) leading the gains. Indian stock markets have also opened the day on a positive note. Barring stocks from the capital goods space, all sectoral indices have opened in the green with realty and banking space leading the gains.

The Sensex today is up by around 71 points (0.3%), while the NSE-Nifty is up by around 24 points (0.4%). Midcap and smallcap stocks have also opened in the green with the BSE Mid Cap index and the BSE Small Cap index up by around 0.5% and 0.6% respectively. The rupee is trading at 61.49 to the US Dollar.

Power stocks have opened the day mainly in the green with Jaiprakash Power Ltd and Indiabulls Power Ltd leading the gains. However, KSK Energy and Power Grid Corporation have opened in the red. The country's largest power producer National Thermal Power Croporation (NTPC) has announced results for the second quarter of the financial year 2013-1 4 (2QFY14). The company has reported a year on year (YoY) decline of 0.6% in total revenues for the quarter, while net profits declined by around 21% YoY. The company has reported a poor performance due to lower demand from state utilities and a rise in imported fuel cost thus impacting the margins. NTPC plans to double its investment target for FY14 to Rs 210 bn. Currently it has an installed generation capacity of 41,684 MW. It is likely to import about 14 million tonnes (MT) coal this financial year.

FMCG stocks have opened the day mainly in the green Archies Ltd and Pidilite Industries Ltd leading the gains. FMCG major Marico Ltd has reported results for the second quarter of the financial year 2013-14 (2QFY14). The revenues for the quarter grew by 5% on a year on year (YoY) basis. As per the management, the growth in the primary sales in the second quarter was low because of a one-time paring down of stocks in the trade (as the value growth is lagging volume growth) and inflation in distribution costs. The operating profit for the quarter was up 12% YoY. Despite a sluggish performance at the topline level, the company reported a strong operational performance with margins expanding by 210 basis points (2.1%) YoY to 15.1%. The consolidated net profits for the quarter were up 25% YoY on the back of growing volumes in its international and domestic businesses. As per the management, amid tough environment, the market share of the company is improving across categories and geographies.

Energy security is the answer to India's woes

Energy security is critical for the survival and stability of a nation. However, India cuts a sorry figure in this regard. With over 80% dependence on crude imports, the country stands vulnerable. And no amount of positive economic statistics can soothe the concerns that stem from being reliant on other nations for something as crucial as energy needs.

The high dependence on oil imports is not just a sectoral issue now. Oil imports account for highest share in the country's import bill and have to be paid in dollars. Hence, a continuous neglect of the sector has dragged the entire economy in a mess as huge fiscal deficit plagues the economy. Huge oil imports are also one of the prime reasons behind the weakness in the rupee.

In short, the fortunes of Indian economy are likely to swing in accordance with what happens to the oil prices, something we have no control over. In case the oil prices go up, we will be stuck with twin deficits, weak rupee and inflation. One may expect oil prices, already above psychological barrier of US$ 100 per barrel (versus a range of US$ 20-US$ 40 per barrel during 1980 to 2004), to only correct from here. As per the law of economics, price of a commodity depends on demand supply dynamics. In that context, it is expected that huge investment in oil production in the last decade is likely result in oil production surpassing the demand thus pulling down prices. It is also expected that oil prices may come down significantly if oil demand remains stagnant and if there is substitution by other fuels like natural gas.

However, the argument misses the structural shift that the oil sector is likely to witness in the future. As an article in Business Standard suggests, unlike in the past when oil supplies were sourced from rich regions in West Asia, in the future the sources in the US, Canada, Brazil, Venezuela are likely to contribute significantly to global supplies. The latter being highly capital intensive and oil fields in West Asia facing geo political risks, oil prices are unlikely to witness enough correction to fall back to the levels seen in the past decades from 1980 to 2004.

Irrespective of the demand supply scenario which is difficult to predict, India needs to be self reliant as far as oil requirement is concerned. This is even more important considering the high sensitivity of oil prices to speculations that more often than not take precedence over the fundamentals. But energy security will require a major overhaul in the sector's policies. This will range right from licensing, framing of contracts to market pricing of the fuels. Over the years, subsidized pricing for different fuels has disincentivized private sector and foreign players to participate. The government needs to bring in policies that make the sector viable and competitive. This will not only make the country self reliant, but also bring the fiscal health of the economy back in order.