Weak global cues weigh on markets
Closing

After trading below the dotted line for most part of the session today, Indian markets managed to cross over to the positive territory in the final hour. The final hour optimism was on the back of lower food inflation numbers as compared to those in the previous week. While the BSE Sensex closed higher by around 44 points (up 0.2%), the NSE Nifty gained around 3 points (0.3%). The midcap stocks ended the day higher by 0.3%, while those from the small cap index maintained status quo. Stocks from the telecom, commodity and software sectors were the ones that elicited investor interest.

As regards global markets, markets across Asia closed lower today. European indices have also opened lower. The rupee was trading at Rs 45.49 to the dollar at the time of writing.

As per a business daily, the world's largest steelmaker by output, ArcelorMittal, which had earlier proposed a greenfield steel plant in the eastern Indian state of Jharkhand plans to relocate to another state. The primary reason for the same being dispute over land acquisition. The steelmaker will require around 8,000 acres of land for its plant. At the same time it had sought 70 m cubic meters of water a year from the Jharkhand state government for its proposed 12 m metric ton steel plant. Some big-ticket steel plants by global giants such as ArcelorMittal and South Korea's Posco have been stuck for several years due to opposition against land acquisition and lengthy approval procedure for mine leases.

The Indian steel ministry may now acquire land and secure the supply of raw materials such as iron ore for companies seeking to set up large plants with at least 10 m metric tons annual production capacity. The blueprint for the so-called ultra mega steel plants now will be based on the lines of the ultra mega power projects in the country. Already the delays in land acquisition for two projects of Tata Steel and Essar Steel will result in India missing its target to nearly double steel output capacity to 124 m tons by December 2012. India, currently the world's fifth-largest steel producer by volume, has annual capacity of 72 m tons.

The country's largest telecom company, Bharti Airtel has applied for third-generation (3G) mobile spectrum bid in all of the country's 22 telecom zones. The company, which recently entered the African market through acquisition of stake in Zain Telecom's African assets, is also looking to boost its ARPUs in the domestic market through the 3G space. Having said that, the competition will continue to be intense with several companies vying for a share of the pie. India will auction three slots each of 3G wireless spectrum in most of its telecom zones, including the lucrative Delhi and Mumbai regions. The stock of Bharti closed 1% higher.

Coming to global markets, the news that Greece may have to seek assistance from institutions like the IMF to carry out its planned deficit cuts has led to investors staying on the sidelines. Greece has expressed doubts on its ability to resolve its debt problems if it has to continue borrowing money at high interest rates. Greece, which routinely has to pay a premium of at least 3% more than benchmark rates to borrow money, acknowledged last year that it had cheated with its economic statistics to hide the depth of its fiscal problems. Greece's new austerity measures are intended to bring its deficit down from 12.7% to 8.7% of GDP this year, including cuts in public sector pay and tax rises.

In another news, the US has kept up pressure on China to let the yuan appreciate as the latter discussed possibilities with its exporters of coping with a stronger exchange rate. Apprehensions of China's artificially pegged currency rate leading to overcapacity problems and asset bubbles have led to several economies demanding China to unshackle its currency from a 20-month-old peg against the US dollar.

Markets slip further in the red
01:30 pm

The Indian markets continued to remain volatile as alternate bouts of buying and selling led the indices to hover around the dotted line during the previous two hours of trade. However, towards the end of the session, the markets dropped further into the red. Stocks from the FMCG, capital goods and auto spaces are seeing the most pressure, while those from the realty and banking spaces are amongst the few gainers.

The BSE-Sensex and the NSE-Nifty are currently trading lower by around 45 points and 10 points respectively. Stocks from the midcap and small cap spaces are however trading in the green. The BSE-Midcap and the BSE-Smallcap indices are trading higher by 0.4% and 0.3% respectively. The rupee is trading at 45.52 to the US dollar.

Textile stocks are currently trading firm led by Bombay Dyeing, Arvind, Raymond and Alok Industries. In an interview with a leading business daily, the management of textile major, Alok Industries gave his views on the outlook of the sector. The company's management is of the view that there is a certain level of buoyancy in the industry at present. This is on the back of the world retailers looking at India to meet their additional volume requirements. As per the management, China currently meets nearly 40% requirements of the global retailers, while India contributes to a mere 4%. As such, to reduce their dependency on China, more and more retailers are looking at India as a strategic destination of sourcing their requirements. The management expects the industry to expand to about US$ 40 bn within the next five years. Last year the industry size stood at about US$ 15 bn, of which export formed the majority portion.

In addition, the management also gave his views on raw material prices. Cotton prices have gone up by about 15% to 20% in the last few months on the back of strong demand. Considering that India is the only textile manufacturing country which has surplus cotton, it exports a large portion of it to other textile manufacturing nations such as Pakistan, China and Bangladesh. US also supplies cotton, but the farmers there are believed to be shifting to other crops. As such, with the demand for textile on a global scale expected to rise, so will the demand for cotton. Hence prices are expected to move upwards going forward. However, at the same time, the management also went on to say that it is easy for the company to pass on prices to its customers.

Food inflation numbers for the week ending March 6 were announced recently. Food inflation stood at about 16.3%, which is lower as compared to the preceding week's figure of 17.8%. This decline has been mainly due to lowering prices of pulses and vegetables. While vegetable prices declined by about 10% as compared to the previous week, prices of pulses decreased by about 4%.

While food prices managed to decline to a certain extent, this decline was offset by the increase in fuel inflation, which stood at 12.7% as compared to 11.4% during the previous week. This was mainly led by an approximate 17% and 15% increase in petrol and diesel prices. The rise in fuel prices is as a result of the budgetary announcement of a hike in excise and customs duty on petrol and diesel. It may be noted that food inflation number would have gone down even more had it not been for the rise in fuel prices. This could have an impact on food manufacturing companies as their entire supply chain would be impacted on the back of higher transportation and freight charges. Food stocks are currently trading weak led by Britannia, Nestle and Tata Tea.

Small and midcaps buck the trend
11:30 am

The Indian markets continued to remain extremely volatile, dragging the benchmark index below the dotted line during the previous two hours of trade. The indices pared all of their early gains on account of selling activity across stocks from the auto, FMCG, capital goods and oil & gas sector. Nevertheless, stocks from realty, consumer durables, banking and healthcare sectors are managing to garner investors' interest.

The BSE-Sensex and the NSE-Nifty are currently trading lower by around 31 points and 6 points respectively. Stocks from the midcap and small cap spaces are currently trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 0.3% each. The rupee is trading at 45.46 to the US dollar.

According to a leading business daily, India's largest IT services exporter TCS, has indicated that the business sentiment and momentum in its IT market is improving. It believes that 4QFY10 will be all the more better than the recent quarters for the company as well as the entire IT industry as a whole. The company believes that the growth in IT demand over the last few quarters is quite encouraging from a long term perspective. However, it remains to be seen if the momentum of the pre-recession days can be attained any time soon.

TCS like its peers from the sector will be giving salary hikes to its employees in April. Though the numbers have not been disclosed, increments can be expected to be in line with the industry standard. We believe that given the spurt in attrition rates that the IT companies are witnessing currently, they are bound to face wage inflation. The company will have to incur increased employee cost in order to retain its best talent and to hire more. TCS plans to hire about 30,000 more employees in FY11.

As per a leading business daily, FMCG major Godrej Consumer Products (GCP) is scouting for more acquisition targets in the emerging countries in order to broaden its geographical reach and product portfolio. It may be noted that last week the company acquired a leading African personal care brand, Tura from Nigeria's Tura Group. This acquisition is believed to pave way for company's entry into Nigeria and other West African markets. Apart from this, the company also bought out Rapidol and Kinky in South Africa in the last two years.

It may also be noted that the company is cash rich and believes that it will not face any problem in funding its inorganic expansion. By the end of FY09, GCP has around Rs 3.8 bn of cash on its books. It made investments worth Rs 75 m in the last fiscal. It has also won board's approval for raising Rs 30 bn to fund its expansion plans. The company plans to utilize as much as Rs 10 bn for its acquisition plans. The company has hinted of its plans to acquire in FMCG categories like hair care, household insecticides, toilet and soaps. Meanwhile, it will continue to expand organically in India by adding more products to its portfolio. We believe that going forward, the company will continue to benefit from higher consumption. Its international brands are expected to grow well whereas the domestic growth will largely be volume driven.

Markets begin on a volatile note
09:30 am

The Indian markets have started today's session on a volatile note. The benchmark indices opened above the breakeven mark, slipped into the red and are inching towards the positive territory since then. Other key Asian markets are trading in the green with Taiwan (up 0.4%) leading the pack of gainers. The US markets closed higher by 0.5% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading a mixed bag with telecom stocks attracting investors' interest. However, select software stocks are in the red. The BSE-Sensex is trading lower by around 15 points, while the NSE-Nifty is down by about 2 points. However, buying interest is being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.1% and 0.2% respectively. The rupee is trading at 45.43 to the US dollar.

Energy stocks have opened the day on a negative note. Losers here include HPCL and BPCL. As per a leading business daily, NTPC and Indian Oil plan to jointly produce bio-diesel and specialised lubricants for power plants. They plan to set up an integrated bio-diesel unit for developing new technology. They are also identifying research projects for high end lubricants, which are in great demand at a time when around 180,000 MW of additional power generation capacity is set to come up in the 11th and 12th five year plans. While the projects are still in their initial stages, the tie up makes business sense as NTPC is one of the largest customers of Indian Oil for industrial lubricants and other oils. Currently, most of these products are imported. Bio-diesel is a focus area with the government planning to replace around 10% of the requirement of petroleum products in India through bio-fuels.

Pharma stocks have opened the day on a positive note. Gainers here include Dishman Pharma and Panacea Biotech. As per a leading business daily, Lupin has received the US Food and Drug Association (FDA) approval for its anti-depressant. The company can now make imipramine hydrochloride tablets of 10 mg, 25 mg and 50 mg strengths. The market size for the product in the US is estimated at US$ 21 m. This is the fifth drug approval for the company since January this year when the FDA cleared its Mandideep facility. As such, this is a positive development for the company.

Are you optimistic or fearful?
Pre-Open

There are way too many concerns surrounding the markets these days. The global economic recovery is under doubt. Now the war of words between the US and China over Yuan's appreciation has become another issue of concern for investors. Investors also seem bothered about the poor finances of the government. Then, there is the spectre of rising inflation that is creating a bigger hole in household budgets. Not to forget that the overall market volatility is another concern that is sending confusing signals for investors.

In times like these, it sometimes becomes difficult for investors to put proper thoughts to work. Probably you might be having similar thoughts as well. One question that must be cropping up in your mind in these times is - Should I invest now or wait for a correction?

Now that is a very valid question. Investing in a volatile market has its risks. The optimistic mind tells you that stocks can go up from here on, as the India story remains strong etc. etc. But the fearful mind directs you to hold on, as there might be a correction round the corner. And you might get a better price for stocks you have set your eyes upon.

So what should you do?

Well, it depends on what you think is right on your part. Trying to find cheap and good quality stocks and investing in bits and pieces despite the market conditions is a good way to gradually build a large portfolio. It is like investing systematically in a mutual fund in small installments…month after month. Then, if you are not able to find any stocks to invest given the high valuations, it is also not wrong to hold on to that precious cash and wait for your target companies to come down in price.

All in all, whether to invest in volatile markets or wait for correction, will depend on your temperament and the ability to find the right stocks. But you have to be very careful in your stock selection. Buying a 'hot stock' (and there are too many of such stocks these days) because everyone else around you is buying, can be highly risky. While you can still search and find some good long term opportunities even as of now, always remember to double check the background of such companies and their promoters, and their past financial performance.

Stocks that might appear cheap might not necessarily be bought. These have to be studied very carefully before an investment decision is made.