Markets keep up their good form

Wed, 25 Jan Closing

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While the indices in the Indian stock markets came off their day's highs during the closing stages of the session, they still managed to end on a positive note. Thus, while BSE-Sensex edged higher by around 80 points, (up 0.5%) gains on the NSE-Nifty came in at around 31 points. BSE Mid cap and BSE Small cap indices outperformed their larger sized counterparts, edging higher by 1.3% and 1.1% respectively. Nearly three stocks on the Sensex gained for every two that closed the day in the red.

Gains were also seen across most Asian indices but European stocks are trading in the negative currently. The rupee was placed at Rs 50.1 to the dollar at the time of writing.

With today's gains, the markets have further reinforced the dream start that they got for the year 2012. And this has come on the back of improved macro environment not only internationally but internally as well. While the US seems to be out of trouble as of now, there isn't a lot of bad news coming out of Europe as well. Will this trend sustain itself? We are not so sure. The recovery seems more a matter of liquidity than genuine economic improvement. Thus, it is perhaps only a matter of time before something somewhere threatens to blow up. The long term India story though remains intact and the same will receive a further boost if the Government decides to go down the path of fiscal reforms in the forthcoming Union Budget.

Firms that use coal for their energy needs have a reason to both be happy and disappointed at the same time we believe. This is because while the coal ministry has said that coal prices under Coal India Ltd's new pricing mechanism will be revised downwards by the end of this month, the GCV-based coal pricing for coal will not be abolished. It should be noted that early this month, the PSU behemoth decided to benchmark the pricing for non-coking coal to gross calorific value from the current useful heat value based gradation. While this move was supposed to be revenue neutral, it has led to a substantial increase in the prices of coal. This has led to companies across sectors like power, cement, Tata Steel and aluminium to raise a banner of opposition. They may eventually be forced to increase prices of their products as a last resort step. Coal India closed in the positive today.

Textile equipment major Lakshmi Machine Works also closed strong today. This was despite the below par performance reported by the company for the quarter ended December 2011. Its bottomline fell nearly 14% YoY despite close to 10% growth in its topline. The main culprit for the poor bottomline show was the operating performance as margins fell by 2.6% YoY. The management has opined that the existing orders are active and the company has been supplying for orders booked during FY11. The order inflow however has witnessed a slowdown in recent months. Its profits for the nine month period grew 7% YoY on the back of a 28% growth in topline.