Sensex Opens in Red, Coal Indian Down 2.9%

Tue, 31 Jan 09:30 am

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Asian markets were trading with a negative bias on stringent travel curbs to the US ordered by President Donald Trump. Japan's Nikkei was trading down by 1.33%. Stock markets in the US and Europe closed their previous session in the red.

Meanwhile, Indian share markets have opened the day on a negative note. The BSE Sensex is trading lower by 128 points and the NSE Nifty is trading lower by 38 points. Meanwhile, S&P BSE Mid Cap and S&P BSE Small Cap are trading lower by 0.2% respectively. Losses are largely seen in auto, metal and IT stocks.

The rupee is trading at 68.04 against the US$.

According to a leading financial daily, Steel Authority of India (SAIL) in talks with Coal India Ltd (CIL) over coking coal price hike. CIL arm Bharat Coking Coal Ltd this month increased the prices of coking coal by about 20%. Another subsidiary of the company Central Coalfields Ltd has also increased the price of metallurgical coal this month.

SAIL is a prime consumer of coking coal as well as a major customer of CIL's metallurgical coal. Of its total requirement, SAIL imports 86% of metallurgical coal, while the rest is sourced indigenously. SAIL stated that it was unable to recover its cost of production and there was a lot of pressure on company operations.

In another development, SAIL stated that achieving 60-70% jump in production capacity would be a challenge for the company as demand for domestic steel remains weak. The company reached last leg of its 700 billion modernization program. The production is growing almost 7-8%, but demand is growing by 3%.

SAIL share price began the trading day up by 0.7% on the BSE.

A revival in India's steel consumption from the weakest estimated growth in at least four years hinges on the government boosting spending on infrastructure, housing and road projects to absorb record output.

Steel Demand has Outpaced Supply Over the Last 5 Years in the Country

Any major budget initiatives in infrastructure and construction would stimulate domestic steel demand. The government will increase spending on railways, roads and urban development by Rs 160 billion in the budget for the next fiscal year, according to CARE Ratings Ltd.

Moving on to news from stocks in the banking sector. According to an article in The Financial Express, bank credit growth is likely to remain subdued at 5-6% in the current financial year. This is on account of weak loan demand and as the debt market continues to offer better priced.

Deposit growth is likely to ease further to 12% by end-March 2017, with banks cutting deposit rates and easing the cash availability in the system, from 14.7%.

Deposits of the banking system surged sharply after the note ban, from Rs 101.4 trillion as on September 30 to Rs 105.2 trillion on December 23, and further to Rs 105.8 trillion on January 6.

Accordingly, bank deposit on a YoY basis grew from 11.3% on September 30 to 15.2 per cent on December 23, before easing to 14.7% on January 6, on the back of the sharp uptick in deposits in the corresponding reporting fortnight of January 2016.

Meanwhile, bonds and commercial paper (CP) reportedly continue to be important sources of funds for higher rated entities, as the flows into key investor segments such as mutual funds and insurance companies remain high.

Bank stocks began the trading day on a weak note with Axis Bank and DCB Bank leading the losses.

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