Wednesday 22 October 2014

Power sector stocks advance as Govt to auction 74 coal-mining licenses

October 21, 2014
After a sudden slide in early afternoon trade, key benchmark indices erased a lion's portion of intraday gains. The barometer index, the S&P BSE Sensex, was currently up 43.66 points or 0.17% at 26,473.51. The market breadth indicating the overall health of the market was positive. Asian stocks and US index futures fell after the latest data showed that China's gross domestic product (GDP) rose 7.3% year-over-year in Q3 September 2014, marking its slowest pace of growth in five years.

Meanwhile, the Narendra Modi government yesterday, 20 October 2014, announced that it will auction 74 coal-mining licenses to private companies in the next three to four months after the Supreme Court last month canceled 214 coal licenses issued to private and public companies since 1993. The move came after the government freed diesel from price controls and increased natural-gas tariffs over the weekend to curb subsidies and cut the fiscal deficit.

Meanwhile, investors are watching political developments in Maharashtra as the BJP is set to form the government in the state after the party emerged as the single largest party after assembly election in the state. The BJP won 122 seats in the 288-member assembly, falling few seats short of the 145 seats required for a simple majority. Its ally Rashtriya Samaj Paksha won one.

Shares of power companies rose after the government yesterday, 20 October 2014, announced that it will auction 74 coal-mining licenses to private companies in the next three to four months after the Supreme Court last month canceled 214 coal licenses issued to private and public companies since 1993. Power Finance Corporation and Rural Electrification Corporation edged higher as coal block auctions will reduce uncertainty regarding power generation companies that depend on the dry fuel. Coal India declined.

Earlier, key indices had extended initial gains in morning trade that took the Sensex and the 50-unit CNX Nifty to their highest level in almost two weeks.

In the foreign exchange market, the rupee edged higher against the dollar.

Brent crude prices edged higher after a mixed bag of Chinese economic data.

At 12:20 IST, the S&P BSE Sensex was up 43.66 points or 0.17% at 26,473.51. The index jumped 185.56 points at the day's high of 26,615.41 in morning trade, its highest level since 9 October 2014. The index rose 12.24 points at the day's low of 26,442.09 in early afternoon trade.

The CNX Nifty was up 19 points or 0.24% at 7,898.40. The index hit a high of 7,934.50 in intraday trade, its highest level since 9 October 2014. The index hit a low of 7,883.65 in intraday trade.

The BSE Mid-Cap index was up 76.19 points or 0.81% at 9,452.27. The BSE Small-Cap index was up 45.40 points or 0.44% at 10,408.85. Both theses indices outperformed the Sensex.

The market breadth indicating the overall health of the market was positive. On BSE, 1,379 shares rose while 994 shares declined. A total of 101 shares were unchanged.

Among the 30 Sensex shares, 19 rose and the remaining shares fell.

Shares of power companies rose after the government yesterday, 20 October 2014, announced that it will auction 74 coal-mining licenses to private companies in the next three to four months after the Supreme Court last month canceled 214 coal licenses issued to private and public companies since 1993. Adani Power (up 2.18%), Reliance Power (up 2.06%), Torrent Power (up 1.8%), NTPC (up 1.67%), NHPC (up 1.31%), Tata Power (up 1.27%) and JSW Energy (up 0.97%), edged higher.

The government is reallocating hundreds of mining licenses after the Supreme Court last month canceled 214 coal licenses issued to private and public companies since 1993, saying the way they were given out was nontransparent and arbitrary. The licenses will be auctioned to private-sector companies only for captive use. Finance Minister Arun Jaitley said yesterday, 20 October 2014, that allowing private-sector companies to mine coal to sell to others is something the government may consider in the future.

Shares of state-run Coal India were off 1.91% at Rs 353.80.

Power Finance Corporation and Rural Electrification Corporation edged higher as coal block auctions will reduce uncertainty regarding power generation companies that depend on the dry fuel. Power Finance Corporation was up 6.24% and Rural Electrification Corporation was up 5.58%.

M M Forgings jumped 5.58% after net profit surged 97.3% to Rs 13.14 crore on 25% rise in net sales to Rs 122.07 crore in Q2 September 2014 over Q2 September 2013. The result was announced after market hours yesterday, 20 October 2014.

BGR Energy Systems gained 4.22% after the company bagged orders worth Rs 250 crore in the electrical sub-stations segment of its electrical projects division. The announcement was made after market hours on Monday, 20 October 2014.

Meanwhile, provisional data released by the stock exchanges after trading hours yesterday, 20 October 2014, showed that foreign portfolio investors (FPIs) bought shares worth a net Rs 1040.08 crore on that day.

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 61.3025, compared with its close of 61.365 during the previous trading session.

Brent crude prices edged higher after a mixed bag of Chinese economic data. Brent for December settlement was up 17 cents at $85.57 a barrel. The contract had lost 76 cents or 0.9% to settle at $85.40 a barrel yesterday, 20 October 2014.

Ashima Goyal, a member of the Reserve Bank of India's (RBI) technical advisory committee reportedly said yesterday, 20 October 2014, that the RBI may consider easing monetary policy as early as March after global crude prices fell to a four-year low this month. Real interest rates are becoming more and more positive, which would be severely disinflationary, and that means the RBI has to cut rates, Goyal said. The RBI's technical advisory committee makes policy recommendations to RBI Governor Raghuram Rajan.
Meanwhile, the Narendra Modi government yesterday, 20 October 2014, announced that it will auction 74 coal-mining licenses to private companies in the next three to four months after the Supreme Court last month canceled 214 coal licenses issued to private and public companies since 1993. The licenses will be auctioned to private-sector companies only for captive use. Finance Minister Arun Jaitley said allowing private-sector companies to mine coal to sell to others is something the government may consider in the future.
Mr. Jaitley said state-run, coal-consuming companies that want to mine for their own use won't have to compete against the private sector for coal licenses, especially in key industries such as power. The government will allocate government companies licenses without an auction.

Asian stocks edged lower today, 21 October 2014, after a mixed bag of Chinese economic data, including the slowest GDP growth in five years, and a drop in housing prices, but a better-than-expected gain for September industrial production. Key benchmark indices in China, Indonesia, Hong Kong, Taiwan, Japan and South Korea were off 0.10% to 2.03%. Singapore's Straits Times was up 0.22%.

China posted a 7.3% year-over-year quarterly growth rate, marking growth at its slowest pace in five years amid a slumping real-estate market and weak domestic demand and industrial production. Value-added industrial output in China rose by a larger-than-expected 8% in September from a year earlier, accelerating from a 6.9% year-over-year increase in August, the statistics bureau said. Industrial production also increased 0.91% in September from August, when it rose 0.2% from the preceding month, it said.

Trading in US index futures indicated that the Dow could fall 93 points at the opening bell today, 21 October 2014. US equity investors began the week on an optimistic, albeit cautious, note on Monday, 20 October 2014, with gains in broader markets led by defensive sectors such as consumer staples and utilities.

The Federal Open Market Committee (FOMC) next undertakes a monetary policy review at a two-day meeting on 28-29 October 2014.

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