Sensex sinks ahead of Xmas

After trading in the negative territory during post noon trading session, the Indian equity markets lost further ground and closed in the red. While the BSE-Sensex today closed lower by 298 points, the NSE-Nifty closed lower by 93 points. However, Midcaps and Smallcaps closed in the green today. The BSE Mid Cap index was up by 0.15% while the BSE Small Cap index closed higher by 0.02%. oil and gas and IT stocks were the biggest losers today.

As regards global markets, Asian pack closed strong today. The rupee was trading at Rs 63.5 odd levels to the dollar at the time of writing.

Auto stocks have ended the day on a mixed note. 2014 has been a dismal year for the auto industry in general. Excluding two wheelers, both commercial & passenger vehicle volumes either declined or grew marginally. However, it seems that the next year i.e. 2015 will get a considerable head start in terms of volumes as quite a few new launches are expected to hit the street. For instance, Maruti is planning to launch a new SUV next year. An LCV is also expected from this auto major next year. Again, Hyundai is planning to launch a new compact SUV while Nissan and Renault have plans to launch a multi-purpose vehicle (MPV) in 2015. Considering a slew of launches planned in 2015 volumes are expected to get a huge tailwind.

Coal India and GAIL have signed an agreement to invest Rs 90 bn in a plant whereby they shall convert coal into gas and use it as a fuel to manufacture fertilizer. These two companies along with RCF and Fertlizer Corp of India shall develop the plant in Odisha by 2019. It is estimated that the plant will produce 1.3 million tonnes of urea and other fertilizers annually. Considering that India is deficient in urea production the new plant will certainly help bridge the deficit gap.

Indian share markets slip further
01:30 pm

Indian share markets fell further in the post-noon trading session. Barring realty & auto, all the sectoral indices are trading in the red. oil and gas and IT stocks are the biggest losers today.

BSE-Sensex is down 131 points and NSE-Nifty is trading 37 points down. BSE Mid Cap is trading 0.3% up and BSE Small Cap index is trading up by 0.1%. The rupee is trading at 63.44 to the US dollar.

Majority of the energy stocks are trading negative with Indraprastha Gas and Gujarat Gas being the biggest losers. As per a leading financial daily, Indian Oil Corporation (IOC) has announced plans to invest Rs 68 bn in capacity expansion and improvement in fuel quality at the Gujarat refinery unit. The company would be investing Rs 50 bn in scaling up capacity from 13.7 m metric tonnes to 18 m metric tonnes. The balance Rs 18 bn would be spent on making the refined end-product compliant with low-sulphur Bharat Stage (BS IV and BS V) norms. Even the new capacity being added will be compliant with the latest fuel norms. The capacity expansion project will be completed by 2020 while the fuel quality enhancement project will be completed by April 2017. The shift towards cleaner fuels is likely to boost the company's gross refining margins. IOC stock is presently trading down 2.4%.

Domestic pharma stocks are trading mixed with Torrent Pharma and Cadial Healthcare being the biggest gainers whereas Biocon and Panacea Biotech are the biggest losers. As per a leading daily, Cipla has won an order valued at 2 bn rand for HIV drugs from the South African government. The order has been bagged by the company's South African subsidiary Cipla Medpro. The three year contract is part of the South African government's 2015-17 National ARV tender. The contract will be implemented from 1st April 2015. This is the third tender won by Cipla Medpro in the last one year. The company had earlier bagged a R280 million state therapeutic drug tender in August 2014 and a R345 million national respiratory tender in June 2014. Cipla stock is trading up marginally.

Energy stocks weigh down markets
11:30 am

After opening flat, the Indian Indices have not found a clear direction in the morning trading session. While Auto stocks are leading the gainers; energy stocks are leading the losers.

The BSE-Sensex is trading down 33 points. The NSE-Nifty is trading down 7 points. The BSE Mid Cap index is trading up 0.3% and the BSE Small Cap index is trading up 0.2%. The rupee is trading at 63.44 to the US dollar.

Software stocks are trading mixed today. While HCL Technologies is leading the gainers; Wipro is leading the losers. As per a leading financial daily, India's second largest IT firm Infosys, has begun to aggressively market its leading banking software Finacle in the US, Europe Middle East and Africa. The software already has a dominant market share among banks in India. However, only about one-third of Finacle's revenues come from developed nations and Infosys is looking to increase this share. Finacle is used by banks on 84 countries and caters to 450 m customers. Infosys is trading up 0.4% today.

Most telecom stocks are trading higher today. Tata Communications and Tata Teleservices are leading the gainers. As per a leading financial daily, the Union Cabinet is all set to give the go ahead for the spectrum auctions in Feb 2015. The Notice Inviting Applications (NIA) could be issued as early as 26-27th of this month. The bidding could start on 23 Feb 2015. The 2G airwaves to be auctioned will be in the 800, 900 and 1,800 MHz bands. The 3G spectrum to be auctioned in the 2,100 MHz band will be added to the NIA later after the regulator TRAI finalizes the base price for the same.

Indian stock markets open flat
09:30 am

Barring China, majority of the Asian stock markets have opened the day on firm note with Japan (up 1.15%) and Taiwan (up 0.7%) leading the gainers. The Indian stock markets have opened flat today. Most of the sectoral indices have opened in the red with metal and realty stocks leading the pack of losers.

As we approach the end of 2014, what will be the risks the Indian markets could face in 2015? Read our edition of the 5 Minute Wrapup to know more.

The Sensex today is up by around 17 points (0.06%), while the NSE-Nifty is up by about 6 points (0.07%). The mid cap and small cap stocks have opened in the green with BSE Mid Cap index and BSE Small Cap index up by 0.08% and 0.11% respectively. The rupee is currently trading at Rs 63.40 to the US dollar.

Majority of the MNC pharma stocks have opened the day on a firm note, with Glaxosmithkline Pharma (GSK Pharma) and Novartis Ltd leading the pack of gainers. As per a financial daily, the Competition Commission of India (CCI) has given the green signal for GSK Pharma and Novartis deal. As per the deal, the UK-based parent company GlaxoSmithKline (GSK) will be acquiring the Swiss major's vaccine business, while the latter would purchase GSK's cancer drugs portfolio. The deal also involves purchase of the global human vaccines business of Novartis. Reportedly, as per the CCI, with regard to the vaccine deal, the said deal is not likely to have appreciable adverse effect on competition in India.

Majority of the automobile stocks have opened the day on a positive note with Ultratech Cement and Heildelberg Cement being the leading gainers. As per a financial daily, Ultratech Cement has entered into a deal with Jaiprakash Associates to buy two cement plants for US$ 852 m. This includes the debt component of the plants. Reportedly, both these plants are located in Madhya Pradesh. Jaiprakash has been selling assets in recent quarters to cut its heavy debt load and improve its balance sheet. For Ultratech, the deal will initially raise its cement capacity in India to 65 million tonnes per year from 60 million tones. This figure is expected to rise to 71 million tonnes a year by 2016.

End of road for India Inc in black money

When it comes to black money, India's tryst with the illegal receipts and payments has been fairly damaging to the economy. In fact as we recently wrote in The 5 Minute Wrapup, the export of illegal funds from India has grown 9 fold in the past decade. In 2012 alone, US$95 bn of black money was siphoned off from India. Though this may be less than that of China which saw US$250 bn getting shipped away, the gap has narrowed over the last 10 years. So much so that India is expected to soon catch up with China and be crowned as the black money capital of the world.

Needless to say, corruption and crony capitalism have laid the foundation of the black money crisis in India. However, the lack of corporate governance has had no small role to play in stoking the trend of corporates misusing regulatory loopholes to create black money. The capital market regulator, SEBI, too remained largely silent when case of company hoarding unaccounted cash in their offices was unearthed.

However, the regulator seems to have now woken up to smell the coffee. As per an article in Business Standard, SEBI will head a multi agency probe examining the role of over 100 companies in money laundering. Considering the number of companies involved, regulatory forces are pegging the quantum of the scam close to Rs 200 bn! SEBI's initial investigations also reveal that most of these companies exist only on paper. And the sole reason of their existence is to convert black money into white. Further, the regulator will also probe roles of traders that acted in concert with the promoters to artificially rig volumes and prices of the stocks.

Corruption, scams and actions that hurt the interest of minority shareholders have already taken a toll on the level of trust that corporate India enjoys. The regulator's actions against corporate money laundering will therefore go a long way in dissuading corrupt practices. More importantly it should ensure that the auction and allocation of natural resources like mines etc is completely transparent.

For investors it is important to remember that investing in companies with questionable managements is akin to playing with fire. Regulatory tightening will ensure that such companies trade at a huge discount to their peers. Therefore investors should not get carried away by big names but choose the companies with robust fundamentals, management integrity and sound corporate governance practices.