Selling pressure takes toll

Indian equity markets languished in the red for the larger part of the trading session today. While the indices began the day's proceedings on a positive note, selling pressure intensified across index heavyweights in the ensuing hours pushing them into the red. There was no respite in the final trading hour as well and the indices closed well below the dotted line. While the Sensex today closed lower by 73 points, the NSE-Nifty today closed lower by 22 points. The BSE Mid Cap and the BSE Small Cap, however, bucked the trend and closed higher by 1% and 0.5% respectively. Losses were largely seen in IT and oil & gas stocks.

As regards global markets, Asian indices closed mixed today while European indices have opened in the red. The rupee was trading at Rs 54.76 to the dollar at the time of writing.

Food stocks closed mixed today. While Britannia and VST Industries found favour, ITC and Nestle closed in the red. As per a leading business daily, FMCG major ITC is in the process of expanding operations by commissioning fresh capacity to address the growing business opportunity in the packaging segment. Demand for packaging is expected to be driven by the need for differentiated products as well as rising demand from the rural segment. ITC intends to leverage its multiple packaging platforms to expand in both the domestic and export markets. The company has been investing in contemporary technologies in both flexible and paperboard packaging at its Haridwar and Chennai facilities. It must be noted that the packaging sector in India has been growing at a compounded annual growth rate of around 16%. It is also one of the fastest growing packaging markets in the world. Hence, this is an opportunity which ITC intends to capitalise on going forward.

As per a leading business daily, the government expects the Indian economy to grow between 5.7-5.9% in the current fiscal. This is lower than 7.6% projected in the Economic Survey. This estimate has come out in the Mid-Year Economic Review tabled in Parliament. But for this to happen, the GDP would have to grow by atleast 6% in the second half of FY13. The scenario has not been too enthusing during the first half with growth slowing to around 5.5% during both the quarters. Inflation not having come down to the desired levels, the Reserve Bank of India (RBI) has been reluctant to cut interest rates. Thus, a combination of firm interest rates and high fuel prices has also impacted the profitability of Indian companies. The government is also burdened with a rising fiscal deficit. Unless it comes out with a meaningful long term solution to cut down deficit and do away with bottlenecks on the supply side, inflation would continue to pose a problem.

IT, telecom stocks not in favour today
01:30 pm

The Indian markets continued to languish in the red during the post noon trading session. Heavyweights from the telecom and IT sectors are amongst the top underperformers at the moment, while those in the metal and realty spaces are finding favour from investors.

The Sensex today is trading lower by about 50 points (down 0.3%), while NSE-Nifty is trading lower by about 15 points (down 0.2%). Stocks from the midcap and small spaces are however in favour today with the BSE Mid Cap and the BSE Small Cap indices up by 0.6% each. The rupee is trading at 54.69 to the US dollar.

Auto stocks are currently trading on a high note with the stocks of Maruti Suzuki, Bajaj Auto and Mahindra & Mahindra leading the pack of gainers. As per a leading daily, the Tata Group Chairman, Mr Ratan Tata has stated that he does not plan to move the production of Jaguar and Land Rover (JLR) to India. The reason for this is the tax structure. The taxes and duties in India make assembly even costlier than imports. Instead Tata Motors are planning to set up a plant in China to manufacture these cars which will be exported all over the world. Currently JLR does not have the scale of manufacturing. It is able to sell 1,000 Jaguar cars a year. As per Mr Tata manufacturing needs to be expanded by nearly four to five times to justify Tata Motors' investment.

Telecom stocks are currently trading weak with Bharti Airtel and Idea Cellular leading the losses. As reported by a business daily, the GSM Association believes that India is no more an attractive telecom market for global players. A key factor for the same is the uncertain regulatory environment. The body's rationale behind the same is that quite a few foreign acquisitions and investments are taking place across the globe, but there is no focus on India, especially compared to how it was a few years ago. Further, the companies in India are themselves looking to expand operations in countries across the world, despite the overalls lowdown, which is another indication towards the same. Some of foreign opportunities include Burma, a region that is attracting a lot of interest.

Mid and Small caps buck the trend
11:30 am

Indian equity markets continued to trade flat over the previous two hours of trade. Metal and Auto stocks witnessed maximum buying interest, while FMCG and IT stocks witnessed maximum selling pressure.

The Sensex today is down by 20 points, while the NSE-Nifty today is down by 6 points. BSE Mid Cap index and the BSE Small Cap index are up by 0.55% and 0.64% respectively. The rupee is trading at 54.53 to the US dollar.

Hotel stocks are trading weak led by Country Club and EIH Limited. According to a leading financial daily, Vivanta by Taj Hotels and Resorts, owned and managed by Indian Hotel Company Limited (IHCL) has expanded its network by adding a new property in Karnataka's hill station - Madikeri. This hotel is the 25th property in the Vivanta portfolio since the brand was launched in 2010. It is located at an altitude of 4,000 ft, within 180 acres of subtropical rainforest. The new hotel has 63 rooms and villas and presidential Nirvana Suite. Vivanta by Taj - Madikeri, Coorg is the 4th Vivanta Hotel to be launched in 2012.

Auto stocks are trading in the green led by Maruti Suzuki and Tube Investments. According to a leading financial daily, Mahindra and Mahindra (M&M) will start producing tractors at its new production facility at Zaheerabad in Medak district of Andhra Pradesh. For this, M&M is investing Rs 3 bn and targeting an annual production of 90,000 units. Presently too, M&M manufactures vehicles at an automobile plant at Zaheerabad. It makes products like UV (Maxx), 3-wheelers (Champion Alfa), light commercial vehicles (LCV) and buses here. The plant has a capacity of manufacturing 218 vehicles per day.

Indian share markets open flat
09:30 am

Asian stock markets have opened the day on a mixed note with stock markets in Japan (up 1.5%) and China (up 0.5%) leading the gains. However, markets in Taiwan (down 1.1%) and South Korea (down 0.5%) are facing selling pressure. The Indian share market indices have opened the day on a flat note. Stocks in the metal and healthcare space are leading the gains. However, capital goods and FMCG stocks are trading weak.

The Sensex today is marginally up by around 7 points (0.04%), while the NSE-Nifty is up by around 1 point (0.01%). Mid and small cap stocks are trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.4% and 0.5% respectively. The rupee is trading at Rs 54.54 to the US dollar.

Mining stocks have opened the day on a positive note with Gujarat NRE Coke, National Mineral Development Corporation (NMDC) and Metals and Minerals Trading Corporation of India Ltd. (MMTC) leading the gains. As per a leading financial daily, state-run mining giant Coal India Ltd (CIL) has reported a 2% year-on-year (YoY) decline in its coal output during the month of November 2012. The coal mining firm produced 37.6 million tonnes (mt) in November 2012, as against production of 38.4 mt in November 2011. The production was affected by cyclone Neelam and holidays due to the festival season. It is worth noting that work was affected for almost 10 days during the earlier part of the month on account of the cyclone. Coal off-take, on the other hand, reported an increase of 4.3% month-on-month (MoM) increase to 38.6 mt. The company's production during the April-November 2012 period stood at 265 mt, higher by 6.8% YoY. During the same period, coal off-take was higher by 8.2% YoY at 292.62 mt. In the first eight months of the financial year 2012-13, CIL has achieved about 63% of its production target of 464.1 mt and 56% of its off-take target of 470 mt.

Power stocks have opened the day on a firm note with JSW Energy, Torrent Power and Tata Power trading firm. As per a leading financial daily, private sector power firm Tata Power is expecting to complete modernisation work of one of the 500 megawatts (MW) units at its long-running Trombay thermal plant by early 2015. This 500 MW unit can currently run only on oil and gas. Shortage of gas and higher oil prices have resulted in under utilisation of this power unit. As such, the company has decided to modernise the unit so that it would allow use of coal as a fuel for power generation. It must be noted that this 500 MW unit is part of the total 1,580 MW installed capacity the Trombay thermal power plant.

Growth will have to be tapped from within

The index of industrial production (IIP) grew by 8.2% annually in October 2012. This is a sharp increase, especially when compared to output of a negative 0.7% (revised figure) of the preceding month i.e. September 2012. With the figure for the month of October being well above expectations, India's Finance Minister recently stated that this jump in production numbers reflected the emergence of 'green shoots' in the economy.

India's chief economic advisor Raghuram Rajan expressed his views on the IIP numbers. He is of the view that while the economic growth seems to be stabilizing and that the government's efforts would help strengthen the recovery, it may not be right to conclude anything from the latest released IIP data. Mr. Rajan also added that one should not be influenced by the figure considering factors like base effect (the festive season had a role to play towards the same) play a key role towards calculation of IIP numbers. Instead, one could view it from a point of stabilization.

Further, Mr. Rajan also discussed the importance and criticality of the government's attempts to revive and strengthen the economy. While the Indian economy may be influenced by growth rates of the developed nations, but growth (if any) would have to come by tapping domestic sources. With the latter, Mr. Rajan was referring to the many reforms announced by the government in recent times.

Interest rates still remain a key factor...

A key factor towards strong economic recovery and towards reviving investment sentiments would be lowering of interest rates. Following the release of the IIP numbers, there are already reports of the high likelihood of a possible reduction in interest rates by the RBI on account of the same. However, it remains to be seen given that the key concern of the RBI has been inflation levels being above the comfort zone. While WPI inflation for the month of November 2012 came in at 7.24% as compared to 9.46% during the corresponding month last year, retail inflation numbers - which were announced a few days ago - came in at 9.9%, a figure higher by about 0.24% as compared to the previous month.

All eyes on the RBI governor as the Reserve Bank of India (RBI) mid-quarter monetary policy review is due on December 18.