BSE / NSE Closing Bell 14 July 2009

Closing Bell 14 July 2009

The final hour saw the Indian markets strengthen further on account of strong buying activity. The BSE-Sensex ended the day higher by around 450 points, while the NSE-Nifty closed higher by about 140 points. The BSE-Midcap and BSE-Smallcap indices also ended the day on a firm note, ending higher by about 4.3% and 4.5% respectively. Today, buying activity was witnessed in stocks across the board with stocks from the realty, metal and power sectors leading the pack of gainers. At the time of writing, the overall advance to decline ratio stood at 3.1 to 1 on the BSE.

Most of the other Asian markets ended the day on a firm note today. The European indices are currently trading in the green as well. Rupee was trading at 48.9 against the US dollar at the time of writing.As per a leading business daily, Cadila Healthcare plans to set up a new unit for its transdermal patch 'NuPatch' on account of rising demand from overseas markets especially the US. The company plans to set up the new unit in a special economic zone near Ahmedabad with an investment of around Rs 1 bn. The new unit will manufacture transdermal patches and various injectables. It may be noted that the company had launched 'NuPatch', India's first indigenously manufactured patch for pain relief in 2005. The overseas market for transdermal patches is estimated to be around US$ 5 bn, while the size of the Indian market has been pegged over US$ 20 m. This move will enable Cadila Healthcare to further enhance its revenues from branded

generics especially in the US market which is highly competitive.

As per a leading business daily, the IDBI led consortium is expected to raise around US$ 2.6 bn for Reliance Power's

Krishnapatanam Ultra Mega Power Projects (UMPP). The funds would be raised along with 13 other banks. It is believed that the bank will also approach market leaders, SBI and ICICI Bank. The deal is expected to be completed in a period of six to seven months. However, the interest rates that the banks will charge have not been divulged. It must be noted that Reliance Power is in the process of executing two UMPPs in Sasan (Madhya Pradesh) and Krishnapatnam (Andhra Pradesh) and has won the bid for building its third UMPP at Tilaiya in the eastern state of Jharkhand.

As per a leading business daily, the World Trade Organisation is of the opinion that the global economy is far from a significant recovery. The WTO believes that while a recovery yet is still far off, not many countries have done away with their respective protectionist barriers. Falling corporate profits and rising unemployment levels have led to some countries imposing trade barriers to protect their countries, little realising that this could have an impact on global trade going forward. In fact, one of the directors of the organisation has remarked that import penalties and other border restrictions are closing off markets and causing more difficulty in a time of depressed demand. Giving its view on the global economy, the director added that while financial markets are showing positive signs, the crisis is far from over.

The markets continued with their northward journey during the previous two hours of trade on account of sustained buying activity witnessed across the board. Except for select auto and FMCG stocks, almost all stocks are trading higher on the Nifty. The overall advance to decline ratio is poised at 3 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading firm, up by around 400 points and 125 points respectively. The BSE-Midcap and the BSE-Smallcap indices are also trading higher, up by around 3.7% each. The Rupee is trading at 48.83 to the Dollar.

Energy stocks are trading higher, led by Reliance Industries, ONGC and GAIL. As per a leading business daily, GAIL, India's leading gas distribution and transmission company and ONGC Videsh (OVL), an overseas arm of ONGC are likely to invest around US$ 3.7 bn along with their South Korean partners-Daewoo and Korea Gas in the Myanmar gas fields. These four partners are expected to invest around US$ 2.8 bn in three gas fields in blocks A-1 and A-3 off the Myanmar coast, while US$ 936 m will be invested for laying an under-sea pipeline. It may be noted that OVL and GAIL hold around 20% and 10% stakes respectively in these blocks, while Daewoo and Korea Gas hold around 60% and 10% stake respectively. It is estimated that the gas from above blocks will be around 500 m standard cubic feet per day for 19 years and the life of the field is predicted to be 28 years.

The field development plan has been prepared by the operator Daewoo and the gas production is likely to start from 2013 onwards. This gas will be sold to China for US$ 7.72 per m British thermal unit at a landfall point in Myanmar. This is a positive development for ONGC and GAIL as it is likely to increase their revenues and profits

Banking stocks are trading higher led by ICICI Bank, Axis bank and SBI. Axis Bank announced its 1QFY10 results last evening. The net interest income grew by 29% YoY in 1QFY10 mainly on account modest growth in advances during the quarter. The advances grew by 28%YoY led mainly by lending to large corporate and small and medium enterprises during the quarter. The net interest margins declined marginally to 3.3% on account of downward re-pricing of loans during the quarter. Although the fee income grew by 17% YoY during the quarter, fee to total income ratio fell from 37% in 1QFY09 to 31% in 1QFY10 mainly on account of slowdown in business activity. Net NPA to advances stood lower at 0.4% in 1QFY10 as against 0.5% in 1QFY09. The capital adequacy ratio stood at 15.3% at the end of the quarter.

Continued buying in stocks across sectors led the Indian markets to gain further during the previous two hours of trade. The buying is being led by stocks from the realty and metal sectors. The overall market breadth is positive, with gainers outnumbering losers in the ratio of 3.1 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading firm, up by around 290 points and 90 points respectively. The BSE-Midcap and the BSE-Smallcap indices are also trading higher, up by around 3.3% each. The Rupee is trading at 48.85 to the Dollar.

As per a leading business daily, the telecom subscriber base has witnessed a growth of 11.6% QoQ to 429.7 m subscribers for the quarter ended March 2009 (for December 2008 quarter subscriber's base stood at 384.8 m). While the growth in wireless subscriber base came in at 13% QoQ, it remained flat in the wireline segment. The growth has mainly come from the less penetrated rural markets, which saw a wireless subscriber base growth of about 18% during the period. The incremental growth has mainly come to industry majors Bharti Airtel and Reliance Communications (Rcom). It may be noted that Bharti Airtel has the largest network reach in the country, covering over 81% of the population. Further, the company has added around 7% incremental GSM subscribers in the month of June 2009. Telecom stocks are trading firm led by Rcom and Idea Cellular, while Bharti Airtel is marginally higher.

As per a leading business daily, ONGC's board has approved an investment of around US$ 729 m towards expansion in Cairn India's Rajasthan oilfields. This investment accounts for ONGC's 30% share in Cairn India's expansion of US$ 2.4 bn at the latter's main offshore field in Rajasthan. It may be noted that ONGC has approved the investment despite the fact that the project has been offering negative returns. The increase in project cost is attributed to a revised plan of increase in the production rate to 125,000 barrels per day (earlier 96,000 barrels per day) and change in the production and processing hub along with increased service taxes. However, the revenues from the project are expected to generate from FY10 onwards. The expected crude oil production from the field is estimated at 2.6 m tonnes in FY10 and 6.8 m tonnes in FY11. This will lower Indian oil imports requirements to some extent as it is currently around 2/3rd of the country's consumption annually. Currently, both ONGC and Cairn India are trading firm on the bourses.

Tracking its global peers, the Indian bourses too have opened the day's proceedings on a strong note. Buying is being witnessed across sectors with banking and metal stocks leading the pack of gainers. The overall advance to decline ratio stood at 5:1 on the NSE. As regards global markets, the US markets ended higher yesterday led by financial and consumer shares. The European markets too ended in the green, while the Asian markets are trading higher currently.

The BSE Sensex is trading higher by around 280 points. The NSE Nifty is up 70 points. The BSE Midcap and the BSE Smallcap indices are trading higher by 2% each. The rupee is trading at 48.87 to the dollar. As per a leading business daily, Bajaj Auto, through its 100% Dutch subsidiary, Bajaj Auto International Holding BV, is planning to buy additional stakes in KTM. The company has acquired 31.7% stake in the Austrian power bike company with an investment of Rs 7 to Rs 8 bn. Bajaj will gain from KTM's extensive research and development (R&D) support, as well as its dealership size globally. KTM will look to tap into Bajaj's low-cost supplier base to gain economies of scale. KTM is Europe's second largest bike producer and will start production of its high-end bikes at Bajaj's Chakan facility (near Pune)

in the next few months, which will be subsequently launched in the Indian market. The company is looking at increasing its

stake holding going forward to leverage KTM's superior expertise in technology and brand name. The move is part of Bajaj Auto's long term strategy to increase its global presence in overseas markets like Europe and North America. Exports currently contribute 35% to the total volumes sold. Auto stocks are trading in the green.

Hair oil major, Marico is contemplating legal action against a recent Central Board of Excise & Customs (CBEC) circular which says that companies will have to pay 8% excise on coconut oil packs of under 200 ML. According to the circular issued packs of 200 ML or less would be classified as hair oils and therefore would be for cosmetic use, and so would attract an excise. hair oil makers have till now avoided paying excise duty on their coconut hair oil brands, since coconut oils were classified as vegetable oils which have been attracting no excise. The hair oil market in India is estimated at Rs 30 bn with Marico's Parachute brand leading the coconut oil market with a dominant 48% share. If the move is implemented, it would have a significant impact on Marico as coconut oils sold in pack sizes of 200 ML or less contribute about 25% to Marico's total turnover. Hence, if the company is unable to pass on the excise duty impact in the form of a price hike it would impact its profitability. FMCG stocks are trading mixed.

WTO's take on the global economy

Various individual experts and organizations have been giving their take on the global economy and how deep the recession is.

Many are of the opinion that the global economy is far from a significant recovery and the latest to join this bandwagon is the World Trade Organisation (WTO). The WTO believes that while a recovery yet is still far off, not many countries have done away with their respective protectionist barriers. Falling corporate profits and rising unemployment have led to some countries imposing trade barriers to protect their countries, little realising that this could have an impact on global trade going forward.

In fact, this brings to fore the adage, "What goes around comes around," which is all the more relevant in today's world where globalization has significantly enhanced. Thus, increasing protectionism would only serve as a short term measure and may not be healthy in the long term interests of a nation, something which a developed nation like the US also realized. As reported in a leading business daily, the director general of the WTO Pascal Lamy has remarked that import penalties and other border restrictions are closing off markets and causing more difficulty in a time of depressed demand.

On the global economy, this is what Lamy has to say, “I would caution against excessive optimism. Although financial markets are showing signs of stabilizing, the crisis is far from over, in particular in many developing countries that are only now starting to feel its full force on their trade and economic growth.” We couldn't agree with him more!

India's rising status in the global arena

India is making considerable strides in leaving its mark on international policymaking. The recent G8 summit (or should we say G14) in Italy is a case in point where the country made its stand clear on global trade and climate change. While on the climate change issue India refused to give in to the demand of the West with respect to meeting carbon emission targets, as far as global trade is concerned, the country along with the rich nations agreed to conclude the Doha round by 2010 in a bid to end disputes with respect to tariffs and subsidies.

And what has led to the resurgence of India in international policymaking? Ironically, it is the global recession. The country may have logged in a stupendous growth of 9% plus in the two years prior to FY09, but it is during the recession last year that India's strength came to the fore. After all, even though the country's growth slowed down to 6.5%, it was still far superior to the developed world which has been mired in a recession. What is more, the US President Obama is also of the opinion that the big emerging countries should have a greater say in international policymaking. Thus, while India does have its share of serious problems especially on the infrastructural front, it certainly needs to be lauded in making itself heard in the global forum.