Mid & small caps bear the brunt

After trading in the negative territory during the post noon trading session, the Indian equity markets failed to recoup losses and closed in the red. While the BSE Sensex today closed lower by 324 points, the NSE-Nifty closed lower by 109 points. Midcaps and Smallcaps too closed on a weak note today. While the BSE Mid Cap index closed lower by 3.4%, the BSE Small Cap index was down by 4%. Realty and power stocks were the biggest losers today.

As regards global markets, Asian indices also closed weak today with the exception of Korea. The rupee was trading at Rs 61.08 to the dollar at the time of writing.

Aluminum stocks ended the day on a weak note today. Hindalco has decided to postpone its share sale plan to institutional investors worth Rs 50 bn. As per news reports, uncertainty over access to cheap raw materials was one of the reasons for postponing the sale which was supposed take place this month. The company needs access to coal for its smelting process. However, after the Supreme Court declared some coal mines as illegal, Hindalco's access to coal may get restricted as the company was part-owner in one of the mines whose license has been cancelled. As a result, the company would have to obtain coal from outside which may not be cost effective. As such, citing raw material availability concerns, it has decided to postpone its share sale plan.

Energy stocks closed on a weak note today. IOC and HPCL were the biggest losers. Diesel prices were awaiting a cut of Rs 0.35 per litre for the first time in 5 years as global crude prices have declined. However, the government has decided to hold on to the rates amidst a pending decision on de-regulation. With a fall in global crude prices, the under recovery situation is improving. In fact, in the second half of September we may well an over-recovery. In other words, profit on sale of diesel as against a loss. As such, a cut in the prices was imminent. However, the government has decided to wait for the formal decision on de-regulation before affecting this cut.

Realty & energy out of favour
01:30 pm

Indian share markets slipped deeper in the red in the post-noon trading session. Majority of the sectoral indices are trading in the red with realty and energy stocks being the biggest losers. FMCG and IT are among the few stocks trading in the green.

BSE-Sensex is down 154 points and NSE-Nifty is trading 61 points down. BSE Mid Cap is trading 2% down and BSE Small Cap index is trading down by 2.3%. The rupee is trading at 61.07 to the US dollar.

Most of the domestic pharma stocks are trading in the green with Piramal Enterprises and Panacea Biotech being the biggest gainers whereas Indoco Remedies and J B Chemicals are trading in the red. As per a leading financial daily Cadila Healthcare has signed a non-exclusive licensing agreement with Gilead Life Sciences Inc for the manufacture of generic drugs used for the treatment of chronic Hepatitis C. The generic drugs namely sofosbuvir and ledapasvir are distributed in 90 developing countries, including India. Under the licensing agreement, Cadila Healthcare will receive a complete technology transfer for the manufacturing process from Gilead. Cadila Healthcare will set its own prices for the generic product and pay a royalty to Gilead on the sales. Cadila Healthcare stock is currently trading up 1.9%.

Most power stocks are trading on a weak note today led by CESC LTD. and National Hydroelectric Power Corp. (NHPC Ltd). However, Indiabulls Power is among the few stocks trading firm. As per a leading business daily, NTPC is expected to enter an agreement with Andhra Pradesh (AP) government for setting up of a major solar power generation park of about 1000 MW. Two other companies, Solar Energy Corporation and NTPC Vidyut Vyapar Nigam are also set to sign separate agreements with the AP government for setting up of 1000 MW solar power parks. For this solar project NTPC has been allotted 5,500 acres of land from the state government. NTPC is expected to invest Rs 70 bn for the solar project. The stock of NTPC is trading by down by 1% today.

Indian markets trade flat
11:30 am

After opening weak, the benchmark Indian Indices have remained marginally below the dotted line in the morning session and are currently trading flat. The pharma index is the biggest gainer on the bourses; while banks, auto and energy stocks are leading the losers.

The BSE-Sensex is trading down 20 points. The NSE-Nifty is trading down 10 points. The BSE Mid Cap index is trading up 0.3% and the BSE Small Cap index is trading up 0.7%. The rupee is trading at 61.15 to the US dollar.

Most software stocks are trading higher today. HCL technologies and Wipro are leading the gainers. India's third largest software firm, Wipro, has won a software contract from the Saudi Electricity Company (SEC) of Saudi Arabia, the largest power utility in the Middle East. The contract was won by Wipro Arabia the Middle East arm of the firm. The contract relates to the implementation and roll out of the SAP based ERP system for the plant maintenance and project system functionality. Wipro is expected to complete the project in 10 months. The financial details of the contract were not disclosed. Wipro is currently trading up 0.6%.

Telecom stocks are trading mixed today. While Idea Cellular is leading the gainers; Mahanagar Telephone Nigam Limited (MTNL) is leading the losers. As per a leading financial daily, the Department of Telecom (DoT) has moved the Supreme Court concerning the 3G roaming pacts between Telecom companies. The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had on 29 April 2014 overturned a government ban on telcos offering 3G mobile services beyond their licensed zones through roaming pacts TDSAT had stated that 3G roaming was in national interest as it would allow better utilisation of scarce radio frequencies. The DoT has appealed to the Supreme Court to get the ban implemented again. This case is important because the DoT had slapped a fine of Rs 12 bn on telcos like Bharti Airtel, Idea Cellular and Vodafone India for offering 3G services in the areas where they did not have a license via the roaming pacts.

Indian share markets open flat
09:30 am

Barring South Korea (up 0.4%), all major Asian stock markets have opened the day on a weak note with the markets in Singapore (down 0.6%) and Taiwan (down 0.5%) leading the losses. The Indian share markets have opened the day on a flat note. The sectoral indices are trading mixed with auto and metal indices trading in the red. However, realty and healthcare indices are leading the gains.

The Sensex today is marginally lower by around 8 points (0.03%), while the NSE-Nifty is down by about 3 points (0.03%). However, mid and small cap stocks are trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.7% and 0.9% respectively. The rupee is currently trading at Rs 60.99 to the US dollar.

Auto stocks have opened the day mainly on a weak note with Tube Investments and Tata Motors leading with losses. However, Hero MotoCorp and Ashok Leyland are trading in the green. As per a leading financial daily, India's leading two-wheeler maker Hero MotoCorp is set to be the title sponsor of the prestigious 2014 World Challenge Golf. The tournament will be hosted by the Tiger Woods Foundation from 3 to 7 December, 2014. The tournament will be rechristened the Hero World Challenge. This will not only be the company's biggest-ever association with a marquee international sports event, but also the biggest-ever worldwide sports sponsorship association for any Indian brand. It is worth noting that Hero MotoCorp is the world's largest two-wheeler company by volumes. The brand building initiative with this international event is aimed at boosting its presence and prospects in the international markets.

Aluminium stocks have opened the day in the green with Hindalco Industries and Nalco leading the gains. As per a leading financial daily, the state government of Jharkhand has shut down five bauxite mines of Hindalco Industries, the flagship company of the Aditya Birla Group. This move by the government follows allegations of illegal mining by the Shah Commission report. As per the report, the alleged illegal mining activity was causing widespread damage to the environment as well as losses to the exchequer. It is worth noting that the action against Hindalco follows similar moves by the Jharkhand government against Steel Authority of India Ltd (SAIL) and Tata Steel.

Will China bring Acche Din to the Indian Railways?

That the Modi wave has engulfed India and is moving strong is no secret. But what surprised us more is that even Asian economies are being gung ho about the Indian growth prospects ever since Modi has taken over at the helms. The leaders of Asia's three biggest economies viz; India, China and Japan have crisscrossed the region this month. Be it for strategic alliance, strengthening defence ties or pursuing new business opportunities! These neighboring nations have been abuzz with lot of activity. All thanks to the dynamic leadership at the Indian throne!

India has ushered into 68th year of Independence. However, Indian infrastructure is crying out for overhaul. Mr Modi has already signaled a proactive approach in extending relations with neighbors and bonding with bigger powers. The recent China's President's visit to India is expected to be instrumental in strengthening trade links and boost the Indian infra network.

Going by the news, railways are expected to help bind India-China ties. China is already buoyant with respect to development of Indian infrastructure. India needs high speed railways and China is quite upbeat over developing the rail system in India. A new pact is expected to be signed soon between the two. It will allow China to participate in building new rail tracks, automated signaling for faster trains and modern stations for India. Something that India's British-built rail system desperately needs! Therefore, both the nations have concrete cooperation ideas in place to build the lucrative high-speed railways in India. What more? Reports say that Chinese investment in the modernization of India's railways might amount to USD 50 bn. Further, Beijing is quite keen to invest another USD 50 bn in building India's ports, roads and river-linking projects. This will not only boost the Indian infrastructure propping up economic, but also help trim a trade deficit with India. Moreover, these commercial ties will also help recede the territorial dispute that had gained prominence in recent years.

India's relations with South Asian neighbors have been poor! Lack of trust, bureaucratic issues and procedural bottlenecks in India have allowed China to outpace India for years together. Modi's strategic shift towards building bridges with other economic powers will definitely go a long way in reviving the external affairs conduct of the Indian economy. This pragmatic approach would bear positive fruits for the nation sooner than later, we reckon. It is said that Modi's foreign policy would be far more commercially and economically focused than previous governments. And we couldn't agree more. Having said so, the focus this time should be on execution more than ever. Not to forget, the expectations from the Modi government are sky high.