Sensex at 19 month high

Indian indices touched a 19 month high today on account of hopes that the government would break the logjam in the parliament on the contention over Retail FDI. A vote on this reform is expected to take place today. The benchmark indices reacted positively to this move. The Indian stock markets closed positive today after seeing solid gains. Sectoral indices mainly in the realty and banking space ended higher. IT stocks however saw some losses. While the BSE-Sensex ended higher by around 328 points, gains on the NSE-Nifty came in at 97 points (1.7%). The smaller indices while also positive, fared slightly worse. The BSE Mid Cap closed 1.3% higher while the BSE Small Cap closed 0.45% higher.

Other major Asian indices (except China) closed positive whereas Europe is also trading in the green currently. The rupee was trading at Rs 54.81 to the dollar at the time of writing.

Mahindra & Mahindra's (M&M) bid for the iconic sports car maker Aston Martin has now got support from the worker's union Unite. The union has formally expressed support for the bid from the Indian vehicle manufacturer. Unite is common to both Aston Martin and Jaguar Land Rover (JLR), the luxury car maker owned by the Tata group company, Tata Motors. However the union's only concern with M&M intent to take control of Aston Martin is that it may affect the car maker's current healthy relationship with JLR for testing and parts sourcing. This is given that Mahindra and Tata are competitors. Aston Martin's Kuwaiti owner, Investment Dar, wants to sell the company for at least what it paid plus a commitment of a subsequent equity injection, or $1.1 billion for the whole company. Although Aston Martin's product portfolio doesn't really go with what M&M is well known for i.e. utility vehicles, jeeps and tractors, it would help the company in achieving its ambition of being a global player. Mahindra's offer is unlikely to top US$ 400 m (Rs. 22 bn), and a deal could be sealed as soon as this week.

The government has so far raised Rs 9.3 bn through disinvestment in PSUs during the current fiscal. It is working towards achieving the Rs 300 bn target set for the year, however this seems like a tall task since only achieved 3% of its target. During the current fiscal, the government disinvested 10% in National Buildings Construction Corp (NBCC) and 5.58% of Hindustan Copper (HCL) out of its shareholding and realised an amount of Rs 1.2 bn and Rs 8.1respectively totalling to Rs 9.3 bn. Pricing and timing of the issues is something that the Government has not been very good at judging by historical records. It usually waits till the end of the year to try and meet its mammoth targets. A few more divestments in the pipeline include a 12.15% sale in National Aluminium Co Ltd (NALCO), 9.33% in trading firm MMTC Ltd and 10%in explorer Oil India Ltd.

Realty, auto stocks lead gains today
01:30 pm

The Indian markets continued to trade well above the dotted line during the post noon trading session. Buying activity is being witnessed in stocks across the board barring those from the IT space. Realty and auto stocks are currently leading the pack of gainers.

The Sensex today is trading higher by about 230 points (up 1.2%), while the NSE-Nifty is trading higher by about 70 points (up 1.2%). Stocks from the midcap and smallcap spaces are trading firm with the BSE Mid Cap and BSE Small Cap indices up by about 1.1% and 0.5% respectively. The rupee is trading at 55.21 to the US dollar.

Auto stocks are currently trading firm led by Escorts, Tata Motors and Bajaj Auto. A leading business daily has reported that Tata Motors will be halting production at its Jamshedpur plant for a period of three days. This closure would be starting today. Citing that the news has been officially confirmed by the company spokesperson, the business daily has mentioned the reason for the same to be the poor demand of commercial vehicles. The company is looking at avoiding situation of inventory pile-up at the dealers' end and as such is adjusting production towards the same. The company reputedly produced a total of 5,000 vehicles in the last month, a figure half of what is the usually production number. It must be kept in mind that this is the third block closure by the company this year.

Real estate stocks are currently trading firm led by HDIL, Unitech and Sobha Developers. A leading business daily has reported that real estate major DLF is close to signing a deal to sell of its hotel chain, Aman Resorts. DLF would however retain Aman's Delhi property. This deal would is expected to fetch the company a sum of US$ 325 m (about Rs 18 bn). It may however be noted that the company has not officially confirmed this development. This move is part of DLF's plan to focus on the core business and sell off non-core assets to reduce the debt burden on its books. The total debt on the company's book stands at Rs 232 bn as of September 2012. The company's divestment target in the mid-term is Rs 100 bn. The FY13 target for the same is Rs 50 bn.

Indian equity markets cross 19,000
11:30 am

Indian equity markets continued to trade strong over the last two hours of trade on back of heavy buying activity witnessed across industry heavyweights. Realty and Auto stocks witnessed maximum buying interest while IT stocks witnessed maximum selling pressure.

The Sensex today is up by 221 points, while the NSE-Nifty today is up by 62 points. BSE Mid Cap index and the BSE Small Cap index are up by 0.77% and 0.64% respectively. The rupee is trading at 55.33 to the US dollar.

Pharma stocks are trading strong led by Natco Pharma and Cipla. According to a leading financial daily, Lupin has launched the generic version of Tricor, fenofibrate drug for cholesterol. Tricor is available in 48 mg and 145 mg and accounts for sales of US$ 1.26 bn in the US. Other Indian players also have fenofibrate products in the market in different doses. Lupin has the permission to sell the generic version in these dosages. Though Lupin has a branded fenofibrate product, named Antara, in the US market, the launch of the Tricor generic is important because the copycat drug can be launched in the same dosage/weight that the innovator company, Abbott, sells. The launch has come ahead of schedule and currently there is limited competition in the US market for this product. While the innovator continues to manufacture the product, Teva and Lupin are the only two other players making the generic version of the drug.

Software stocks are trading in the red led by Mphasis Limited and NIIT Limited. According to a leading financial daily, Tata Consultancy Services (TCS) has bagged a multi-year contract from UK government's Home Office Department to manage the technology requirements of its newly-formed Disclosure and Barring Service (DBS). The contract which has an initial tenure of 5-year is worth about US$ 232 m. This may well make it as one of the largest deals the company has bagged in the European region in the recent years. As a part of the contract, TCS would enable transformation of DBS by introducing applications and online services which will help in enhancing user experience. TCS will also build new integrated case management system to support seamless integration and information gathering between disclosure and barring services.

Indian stock markets open firm
09:30 am

Barring Indonesia (down 0.1%), all the major Asian stock markets have opened the day on a positive note led by stock markets in Japan (up 0.6%), South Korea (up 1.0%) and Hong Kong (up 1.1%). The Indian stock market indices have also opened the day in green. Barring software, all sectoral indices are witnessing gains led by the stocks in the FMCG and realty sector.

The Sensex today is up by around 140 points (0.7%), while the NSE-Nifty is up by around 37 points (0.6%). Mid and small cap stocks have opened in the green as well with BSE Mid Cap and BSE Small Cap indices up by around 0.6% each. The rupee is trading at Rs 55.47 to the US dollar.

Energy stocks have opened the day on a mixed note with Jindal Drill Ltd and Bharat Petroleum Corporation Ltd (BPCL) leading the pack of gainers. However, Oil India Ltd and Castrol Ltd were facing selling pressure. As per a leading financial daily, the Government is planning to sell all LPG cylinders and kerosene at market rates by 2013-14. It intends to directly transfer cash to the bank accounts of cooking gas (LPG) and kerosene customers irrespective of Aadhaar identification. The implementation will start with a pilot project in Andaman and Nicobar Islands by April. It is likely to be extended to the rest of the country in a year. The twin proposals are likely to discourage diversion of subsidized cylinders for commercial use and adulteration of diesel with cheap kerosene and could save the exchequer Rs 150 bn a year. The ministry is also considering raising the cap on subsidized cooking gas cylinders as it believes that six cylinders are not enough.

As per a leading financial daily, the finance ministry is considering a proposal to raise excise duty and service tax by 2% to 14% each in the Union Budget for 2013-14. Such a move could help the ministry collect around Rs 300 bn. The Budget may also see roll back of certain exemptions. The customs duty on oil is also likely to be restored (done away with in June 2011) while peak customs duty might be retained at 10%.All these steps aim to improve government's tax-to-gross domestic product (GDP) ratio. An increase in taxes may also affect growth, which had already slipped to 5.5 % in the first quarter of this financial year. In 2011-12, too, the ministry had increased excise duty and service tax by two per cent each.

Is the world not running out of oil?

Oil is a precious commodity, as suggested by its consistently rising prices. And it's not just the demand factor reflecting in price. The oil prices, more than the demand supply logic, follow speculations that are often inflationary in nature, leading to a price premium that pure economics fails to justify.

Oil being the key source of global energy needs has been a subject of major studies and theories. Peak oil theory is one such famous and interesting theory. Also a scary one. It suggests that there will be a time when oil wells will be producing oil at their maximum potential and will then signal a progressive decline leading to the supply of oil falling short of demand. Infact, some have suggested that we have already reached that peak point. But if a recent industry report is to be believed, the theory seems to be falling apart. As per the report, the offshore discoveries are likely to keep oil flowing. The companies across the globe plan to drill a total of 301 offshore wells in 2013 itself. We all know that drilling wells is one thing and discovering oil another. So keeping the margin of safety, a success rate of just 25% implies an extra supply of 23 billion barrel of oil equivalent. This is around 28% higher than the average annual production in new offshore discoveries in last 12 years.

While this eases the concerns oil availability, what is also crucial here is its impact on prices.

And we wonder if these discoveries will also lead to softening in oil prices. One must not forget that drilling costs are on the rise. Also, with increasing thrust on environmental protection, the exploration may take longer or may even turn out to be cost prohibitive. Under such circumstances, the oil companies will be interested to drill only if oil prices remain high- either for fundamental or speculative reasons. But then, there are other factors that may come into play such as availability, usage and cost of alternative sources of energy. We don't know the future. But what is certain is that crude oil with all its vagaries will continue to be an interesting topic among investors.