Saturday, July 4, 2009

Closing Bell 29 Jun 2009

Closing Bell 29 Jun 2009

The Indian markets gave up the huge gains they had registered during the second half of today’s trading session, and closed on a flat note as selling activity intensified during the fag end. The BSE Sensex and NSE Nifty ended higher by around 10 points each. However, the stocks from the BSE mid-cap and BSE small-cap indices ended strong, up by around 1.2% and 1.5% respectively. Buying activity was witnessed in stocks from the metal, realty and banking spaces, while stocks from auto and software spaces ended on a negative note. The overall advance to decline ratio was poised at 1.7 to 1 on the BSE.

Most of the other Asian markets ended the day on a weak note. The European indices are currently trading in the green. The Rupee was trading at 48.15 against the US Dollar at the time of writing.

As per a leading business, realty majors, DLF and Unitech plan to restart some of their Mumbai based projects, which were earlier halted on account of poor demand and liquidity problems. DLF has restarted construction at NTC mill in Lower Parel on a 17.5 acres land. The company has re-planned to develop largely commercial establishments along with residential apartments from its earlier plans for a retail-cum-entertainment centre. Unitech, on the other hand, has a number of slum redevelopment projects and plans to focus on the development of affordable housing in the city. It may be noted that both companies of late are trying to resolve their liquidity problems. DLF has raised US$ 800 m through a stake sale, while Unitech has raised US$ 325 m through institution placement. Both, DLF and Unitech ended the day higher, along with their peers.

As per a leading business daily, software majors are eyeing a huge government’s IT spend of Rs 400 bn over the next few years. The government is looking for a roadmap for IT-enabled services in order to roll out some critical applications for establishing common service centers. The projects along with the Unique Identification Authority of India are among the series of IT transformation activities. With this, the government plans to maintain a common national database for various records. Infosys already expects around US$ 1 bn of projects from the Indian markets, while TCS, Wipro and HCL Tech are ramping up their capabilities in order to address this opportunity. This huge government spending will help Indian software companies which were under pressure due to the lower IT spending in the developed markets in the wake of the global economic slowdown. Software stocks ended the day on a mixed note.

The prime minister’s economic advisory committee expects the Indian economy to recover after September and expects it to expand by 7% during the current fiscal. However, the committee believes that economic growth may be affected if the monsoon is weak. It also believes that high bank lending rates continue to affect domestic demand. However, the central bank has estimated GDP growth at 6.5% during FY10.

The markets continued to trade upward in the positive territory during the previous two hours of trade on account of sustained buying activity. Currently, stocks from the realty, metal and banking sectors are leading the pack of gainers, while select auto and software stocks are trading weak. The overall advance to decline ratio is poised at 2.1 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading firm, up by around 140 points and 50 points respectively. The BSE-Midcap and BSE-Smallcap indices are trading higher by around 1.7% and 2.0% respectively. The Rupee is trading at 48.12 to the Dollar.

Power stocks are trading mixed. While NTPC and Reliance Power are trading higher, Tata Power and PTC are trading lower. As per a leading business daily, the power ministry is planning to add three more ultra mega power projects (UMPPs) of 4,000 MW each in FY10 in order to increase the power supply in India. The three projects are expected to come in the states of Tamil Nadu, Gujarat and Orissa at a total investment of around Rs 600 bn. It may be noted that UMPPs are large projects conceived to supply power to distribution entities. These projects are formulated on a build own transfer basis and aimed at enhancing capacity addition. The above mentioned project of three UMPPs is a part of the government’s 100 day agenda for power sector. The ministry has already asked the Power Finance Corporation, the nodal agency for developing UMPPs, to complete the formalities within 100 days and invite bids for the same. This is a positive development for the sector as it would open more opportunities for the power companies.

Except for Suzlon, the majority of engineering stocks are trading higher led by BHEL and L&T. Suzlon announced its FY09 results today. The consolidated topline grew by 91% YoY on the back of consolidation and acquisition of further stake in REpower Systems during the fiscal. Operating profits grew by 30.7% YoY, lower than the topline growth mainly on account of increase in other expenses and employee costs. Thus operating margins contracted by 4.7% to 10.1% during the fiscal. Consolidated net profits fell by 77% YoY, mainly on account of contraction in operating margins and significant increases in interest, depreciation, tax expenses and substantially higher extraordinary expenses during the year. However, excluding the extraordinary expenses, net profits fall by 14% YoY during FY09.

Although trading in the green, the Indian markets were volatile during the previous two hours of trade. Heavy buying was witnessed in the stocks from the realty, banking and metals sectors. However, select auto and pharma stocks are finding no takers. The overall advance to decline ratio is poised at 2.3 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading firm, up by around 30 points and 15 points respectively. The BSE-Midcap and BSE-Smallcap indices are trading higher by around 1.6% and 2.0% respectively. The Rupee is trading at 48.18 to the Dollar.

As per a leading business daily, FMCG companies are focusing on volume growth in a move to maintain their market share, although they see a fall in the margins in the process. As per the latest information from the research firm, AC Nielsen, the report exhibits that given the threat of losing market share to cheaper regional brands and private labels, FMCG majors like HUL, Nestle, Marico and Colgate are aggressively boosting their volume sales. In fact, some of these companies have corrected their grammage, pushing lower priced unit packs, increased promotion and highlighted pricing within the communication, in order to boost volumes. Further, Marico's management believes that the topline has become a much focused area currently as compared to the earlier year, where many companies were involved in improving margins. It may be noted that FMCG majors like HUL have witnessed a decline in year-on-year volumes during 4QFY09. The stocks of FMCG are trading mixed.

The commercial vehicle major, Tata Motors had announced its consolidated FY09 results recently. The results were not comparable with that of the earlier year, as the company has consolidated financials for Jaguar Land Rover (JLR), which it had acquired during FY09. During FY09, Tata Motors reported a loss of Rs 25 bn mainly on account of poor performance of JLR. In fact, JLR had witnessed a 32% YoY decline in volumes between June 2008 and March 2009, the period that it spent as part of Tata Motors. The EBITDA margins had witnessed a decline of almost 12% to 3% in FY09. Interest costs and depreciation charges were also significantly higher during the period. Tata Motors is currently trading weak, while M&M is marginally higher.

The Indian markets have opened the day on a cautious note as mixed sentiments are being witnessed among the investors. While engineering, cement, FMCG and software stocks are trading lower, auto, banking, metals and telecom stocks are witnessing buying currently. The overall advance to decline ratio is in favour of the former in the ratio of 1.4:1 on the NSE. As regards global markets, the US and the European markets ended mixed last Friday. The Asian markets are trading mixed currently.

The BSE Sensex is trading higher by around 60 points. The NSE Nifty is down 10 points. The BSE Midcap and the BSE Smallcap indices are trading firm. The rupee is trading at 48.02 to the dollar.

As per a leading business daily, Wockhardt and Biocon have come under the scanner of the drug price regulator National Pharmaceutical Pricing Authority (NPPA) for allegedly violating pricing norms . Wockhardt's ‘Glaritus' and Biocon's ‘Basalog' have come under the scanner as both these companies are selling these medicines without receiving price approval. Both these drugs are insulin analogue brands and are the brand names of the ‘Glargine' formulation. The NPPA has stated that the ‘Glargine' formulation falls under its price control. According to Wockhardt, the ‘Glaritus' cartridge is priced at Rs 435, which is 11% less than the price of the Aventis' ‘Lantus' cartridge. The company is currently targeting an analogue market of Rs 1.3 bn, which is growing at around 23%. Insulin is a big product for both these companies and hence any negative development on this front can affect their revenues. Pharma stocks are trading mixed.

Cement stocks are trading lower. As per a leading business daily, cement prices are expected to soften by Rs 3 to Rs 5 per 50 kg bag next month due to excess supply and lower demand. Post this cut, the retail cement prices will come down to Rs 255 in Mumbai, Gujarat and South India and around Rs 245 in the northern and eastern markets. The demand fell by 6% YoY and an additional capacity of 20 million tonnes (MT) was added in June. The supply will further go up by 30 MT in December 2009. As per the industry, the demand will further go down during the next few weeks due to the monsoons which might lead to a further reduction in prices by August. According to the Cement Manufacturers' Association, 110 MT of capacity will be added with an investment of about Rs 500 bn in the next three years. This would affect the realisations and operating margins of the cement companies.

If the SEBI were to get its way through, some days later, you will be reading our pre-open commentaries almost an hour earlier than you do now. This is given that the market regulator is contemplating increasing the trading hours for Indian markets by around 2 hours and 25 minutes. From the current schedule of 9.55 am to 3.30 pm, the cash and derivative markets will then remain open from 9.00 am to 5.00 pm.

The rationale SEBI (Securities & Exchange Board of India) gives for proposing increase in trading time is that this would give market participants in India a better chance to 'react' to development in global markets.

Well, at a time when the SEBI still needs to go a long way in establishing better safeguards for minority investors and promote equity culture by way of educating investors on long-term investing, increasing the trading time so that traders are better equipped to track daily global developments doesn't make material sense.

Anyways, this proposal, which is based on the feedback received on a discussion paper floated by SEBI, is likely to be taken up with the Secondary Market Advisory Committee (SMAC), which consists of representatives from SEBI itself along with some investor groups, stock exchanges and other market participants. These representatives will debate the proposal and send it back to the SEBI, which will then take the final decision.

For the broking community, this would mean that their infrastructure needs to be in place to handle the long trading hours. And for banks and financial institutions, this would mean keeping offices open for the extended duration.

For you, dear investor, this would mean longer hours to see Mr. Market in action who, with his baggage of stock quotations, will have a greater chance of frightening or enticing you. And, least to say, for many who are glued to the stock ticker on a minute by minute basis, this would mean lesser productivity at work as more time will be spent in tracking how stocks are doing.

SEBI itself agrees (though indirectly) that this proposal has not really been made with an intention of benefiting the 'investors'. As the regulator's discussion paper on this proposal says, "In a world where different exchanges are competing with each other to increase participation, it is imperative that the Indian markets align themselves to global markets to attract such trading interest. Extension of market hours would enable market participants to execute trading strategies in Indian markets…which otherwise would have been executed outside India."