Buying intensifies in later hours

After a strong show yesterday, Indian stock markets began the day's proceedings on a cautious note. The indices languished in the red for the larger part of the day. However, buying at lower levels intensified in the later hours and pushed the indices above the dotted line enabling them to close well into the positive. While the BSE-Sensex closed higher by around 128 points (up 1%), the NSE-Nifty closed higher by around 41 points (up 1%). The BSE Mid Cap and the BSE Small Cap also did well to notch gains of 1% each. Gains were largely seen in banking and oil and gas stocks.

As regards global markets, Asian indices closed mixed today while the European indices have opened in the green. The rupee was trading at Rs 52.71 to the dollar at the time of writing.

Most pharma stocks closed firm today and the key gainers here were Ranbaxy, Cadila Healthcare and Biocon. As per a leading business daily, Clinigene, the contract research subsidiary of Biocon, has inked a collaborative agreement with a Seattle based company Pacific Biomarkers to address the speciality biomarker and high-end clinical trial laboratory needs of the global pharmaceutical and biotech industry. Biomarkers are traceable substances that are introduced into an organism as a means to examine its functions. Contract research is an important part of Biocon's business model and these services are provided by both the company's subsidiaries namely Syngene and Clinigene. This business grew by a healthy 20% YoY in 1HFY12 and accounted for around 22% of Biocon's overall sales. Although Syngene accounts for a larger share of Biocon's total contract research revenues, the latter expects Clinigene's performance to also ramp up going forward and more tie-ups such as these will help Clinigene attain that goal.

As per a leading business daily, there was some relief on the food inflation front as it eased sharply to 1.81% in the week ended December 10, from an annual 4.35% rise in the previous week. This was largely due to the high base effect of the previous year and a sharp slide in vegetables and cereals. This is the lowest rate of WPI-based food inflation since the week ended February 9, 2008, when it was recorded at 2.26%. While onions were down over 49% YoY during the week under review, potatoes fell by over 34%. Wheat prices also came down by 4.21%, while vegetables were cheaper by 26.37%. However, there was a rise in pulses (up 14% YoY) and protein based items such as milk, eggs, meat and fish. However, whether this trend will continue in the coming months and help in taming overall inflation remains to be seen. The Reserve Bank Of India (RBI) had undertaken 13 successive rate hikes in the past which did not do much in bringing overall inflation down as it hovered around 9% for a year. The central bank expects inflation to moderate to 7% by March 2012.

Indian stock markets lose further ground
01:30 pm

Indian stock market continued to sink lower over the last two hours of the trade. Barring pharma and FMCG, all sectors were trading in the red led by Metals and IT.

The BSE-Sensex is trading down 149 points and NSE-Nifty is trading down 43 points. BSE Mid Cap and BSE Small Cap indices are trading down by 0.54% and 0.57% respectively. The rupee is trading at 52.79 to the US dollar.

Energy sector is trading mixed with Indian Oil Corporation (IOC) and Gujarat state Petronet Ltd leading the gainers while Mangalore Refinery and Petrochemicals Ltd. (MRPL) and Essar Oil are trading weak. As per a leading financial daily, the Petroleum and Natural Gas Regulatory Board (PNGRB) is pushing for gas prices to be deregulated to attract private investment and incentivize oil companies to invest in exploration and ramp up the production. It is important to note here that majority of domestic gas production is priced at US$ 4.2 per unit, which is not even one third of imported Regasified Liquefied Natural Gas (RLNG). The regulated pricing for domestic gas supplies and the disparity with respect to imported gas has made city gas distribution (CGD) unviable, thus delaying CGD projects. The senior official from the board has expressed the possibility that the Government could go for a pricing model wherein different sectors will have separate price discoveries, reflecting the true demand. However, there has been no input from petroleum ministry regarding this. Earlier, the ministry had suggested that deregulation of gas pricing was a complex issue and refused to give any definite time frame for the same.

Power stocks are mainly trading in the red with Reliance Infra and Gujarat Industrial Power Company leading the pack of losers. As per a leading financial daily, National Thermal Power Corporation (NTPC) is seeking long term coal import tie ups to compensate for the shortfall from domestic coal supplies. Besides, it will excavate its own mines to get coal at reduced prices. Currently having a capacity of over 34,000 Megawatts (MW), the company targets to generate about 70,000 MW by 2017. The management has not disclosed the names of the companies with whom it is negotiating. It may also explore the option of using long term Re-gasified Liquefied Natural Gas (R-LNG) at lower prices.

IT stocks lead the downfall
11:30 am

Indian stock markets indices traded weak over the last two hours of trade. IT and Metal stocks witnessed maximum selling pressure while FMCG and Pharma stocks witnessed maximum buying interest.

The BSE-Sensex is down by 123 points, while the NSE-Nifty is down 30 points. BSE Mid Cap index and the BSE Small Cap index are down by 0.46% and 0.57% respectively. The rupee is trading at 52.70 to the US dollar.

Energy stocks are trading in the red. Essar Oil and Indraprastha Gas are the biggest losers while Gas Authority Of India Limited (GAIL) and Bharat Petroleum Corporation Limited (BPCL) are the biggest winners. According to a leading financial daily, Oil and Natural Gas Corporation Ltd (ONGC) will buy 10% stake of Cairn India in a gas-discovery block that sits next to Reliance Industries KG-D6 area in the Bay of Bengal. Cairn India had made four discoveries in the Krishna Godavari basin block KG-DWN-98/2 and in 2005 wanted to sell 100% of its stake in the area to ONGC. But ONGC bought only 90% as it wanted to utilise Cairn India's expertise and knowledge in exploiting the resource in the block. ONGC will pay whatever past cost Cairn India had invested in the block as past cost. Cairn's share of past cost comes to USD $47 m. ONGC proposes to invest over USD $7.3 bn to produce up to 30 million standard cubic meters per day of gas.

Aluminium stocks are trading weak led by Hindalco and Nalco. According to a leading financial daily, a consortium of three state-owned miners led by National Aluminium Company Limited (NALCO) is planning to submit expressions of interest for exploration of gold and copper reserves in Afghanistan. The consortium, which includes Hindustan Copper and Mineral Exploration Corporation has written to the union mines ministry seeking inter-ministerial coordination. The last date for submission of expression of interest is March 16, 2012 and the Afghanistan government will announce the shortlist of bidders on March 23, after which it will invite financial bids. The detailed structure of the consortium, including stakes to be held by the partners, will be decided later.

Metals drags Indian stock markets
09:30 am

Asian stock markets have opened the day on a weak note. Stock market in Japan (down 0.5%), Hong Kong (down 0.5%), China (down 0.4%) and Singapore (down 0.3%) are in the red. The Indian stock markets have opened the day on a weak note. Stocks in the Information Technology and metals space are leading the losses. However, FMCG stocks are in the green.

The BSE-Sensex is trading lower by 153 points (1%) and the NSE-Nifty is down by around 43 points (0.9%). Mid cap and small cap stocks have opened on a weak note, with the BSE Mid Cap and BSE Small Cap indices down by 0.7% and 0.5% respectively. The rupee is trading at 52.78 to the US dollar.

Pharma stocks have opened the day on a weak note with Ranbaxy and Biocon trading in the red. Indian drug maker Ranbaxy Laboratories announced yesterday that it had reached an agreement with the health regulator US Food and Drug Administration (US FDA) to lift a ban on import of drugs from some of its factories in India. This could lead the drug maker to make a payment of up to US$ 500 m as fine to the US authorities. As per a statement released by the company, it said that it had "signed a consent decree" with the USFDA and the same is subject to approval by the US District Court for the District of Maryland. Following this, the Ranbaxy's parent firm Daiichi Sankyo revised its earnings forecast and salary cuts for its directors. In 2008, the USFDA had banned 30 generic drugs produced by Ranbaxy at its Dewas unit in Madhya Pradesh, Paonta Sahib and Batamandi unit in Himachal Pradesh, on the grounds of gross violation of approved manufacturing norms.

Energy stocks have opened the day on a firm note with Coal India and Reliance Industries in the green. The decline in rupee from 45 to 53 level seems to have worked very positively for Reliance Industries. The dollar based pricing strategy of Reliance's KG Basin D6 gas fields will allow it to earn additional Rs 35/mBtu. Reliance is currently selling 40 million standard cubic meters (scm) of gas per day which in turn will result in an additional revenue of Rs 45 m per day. In the original proposal for pricing strategy by Reliance, it had quoted a rupee denominated price. However, the government changed it to dollar based pricing on the recommendation of Economic Advisory Council. The gain by Reliance due to the decline in rupee will however be indirectly paid by the consumers of gas in the form of higher payments.

Can 1.2 bn people save the economy?

One thing that India always had going for itself was its large population. The consumption needs of India's billion plus were supposedly enough to help sustain the nation. But are they really? India has been hit by bad news after bad news. Slowing GDP, lower credit offtake, and dismal IIP numbers have all disappointed markets. And now, even domestic consumption seems to have taken a turn for the worse.

Now that the festival season is drawing to a close, consumption trends have reversed. According to an article in Firstpost based on a survey by Emkay Global, inventory seems to be moving slower than usual. This is an indication of lower demand. Many popular goods in the fast moving consumer goods (FMCG) basket were tracked. The findings of the survey proved that manufacturing dates of most products was about 2.5 months old. Only milk and noodles seem to be moving quickly with recent manufacturing dates of 1.5-2 months. However, this survey was only conducted in Mumbai. With a large metro like Mumbai seeing slower consumption, the situation in smaller cities may be even worse. Even the jobs scenario has deteriorated with a worsening external environment.

Even rural areas don't seem to be in the best shape. Agricultural credit is at a decade low. Plus, agricultural non-performing assets (NPAs) have also grown. Even FMCG companies are seeing slower growth in their rural counters. Plus minimum support crop prices and spending on National Rural Employment Guarantee Act (NREGA) are not up to the mark.

Indian consumers, too, seem to be running for cover. They are not stepping out and spending as much as the economy would like them to. While this works well for their end of the month cash balances, for corporates it is another story. Companies were betting on the second half of this financial year 2011-12 (FY12) in order to counter their dismal performance in the first half. But with domestic consumption slowing, this may be a tough task for them to achieve.