Metals lead the rally

Mon, 3 Jan 11:30 am

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After starting today’s session on a positive note, Indian indices continue to trade in the green. However, other key Asian markets are trading mixed. Currently, heavyweights in the Sensex are trading firm with stocks from the consumer durables and metals space leading the gains. However, stocks from the IT space are trading in the red.

Currently, the BSE-Sensex is trading up by around 79 points, while the NSE-Nifty is up by about 19 points. There has been some buying interest amongst the mid and small cap stocks as well with the BSE Midcap and BSE Small cap indices trading higher by 0.97% and 1.46% respectively.

Engineering stocks are trading firm led by Bharat Bijlee and Emco Ltd. However, Kalpataru Power and Atlas Copco are trading weak. The finance ministry has decided not to impose any duty on import of power equipments used for mega power projects during the current five year plan. This is likely to upset power equipment manufacturers like BHEL and L&T which have been insisting for a level playing field since long. It may be noted that in the absence of any import duty Chinese equipments are about 20% cheaper than the ones produced by Indian manufacturers. Thus, continuing with the zero duty regime might pose a threat to the indigenous manufacturers.

However, the government decided to go ahead with the zero duty regime as most of the projects are underway and levying the duty mid way could upset the cost structure and thereby the delivery schedule. Again we believe that since most of the Indian manufacturers are facing execution issues India’s capacity addition targets have gone for a toss. And levying duty on Chinese imports at this juncture would make the equipments all the more expensive (which are facing shortage) further delaying the capacity addition plans.

Power stocks are trading firm with GVK Power & Infra and Jaiprakash Power leading the gainers. As per a leading financial daily, NPTC will be setting up another power plant in Andhra Pradesh. This plant will have a capacity of 4,000 MW and an estimated cost of Rs 230 bn. As per the agreement, the state government of Andhra Pradesh would be purchasing and availing 50% of the power generated at a tariff decided by the Central Electricity Regulatory Authority (CERC). In return, the state government will help the company get all the clearance required for the project and allocate land. It may be noted that this unit will be set up in Vishakhapatnam and will help improve the power availability in the state. For the 12th five year plan, India plans to add 65,000 mw of power.