Trading in a narrow trajectory

Fri, 18 Feb 11:30 am

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After starting today's session on a positive note Indian indices lost initial ground and are currently trading flat. Stocks from auto and realty space are trading weak while those from FMCG and IT space are trading firm.

Currently, the BSE-Sensex is up by 12 points while NSE-Nifty is trading 11 points below the dotted line. BSE Midcap and BSE Small cap indices are both down by 0.11% and 0.15% respectively. The rupee is trading at 45.24 to the US dollar.

Textile stocks are trading mixed with Raymond and Himatsingka Seide leading the gains. However, Arvind and Welspun India are trading weak. Raymond is planning to sell 12 acres of its factory land outside Mumbai (Thane) for around Rs 2.5bn. It may be noted that in September 2009 the company had announced its maiden venture into the realty space at Thane where it had a defunct factory. But the project could not gather pace due to compensation issue with the factory workers. The company mulled on various options like developing the land on its own or through partnership. However, finally it has decided to unlock some value by undertaking a part sale. If the sale happens at the expected price it would be one of the most expensive deals in the suburbs, at around Rs 200 m an acre. Raymond is likely to command a huge premium as it has an extensive land parcel with a clean title.

Power stocks are trading weak led by Neyveli Lignite and Reliance Power. As per a leading financial daily, NTPC is negotiating a long term LNG purchase agreement with Petronet LNG Limited (PLL). NTPC had recently approached Tamil Nadu, Andhra Pradesh, Kerala and Karnataka for selling power from its 1,030-Mw, Stage II power project in Kayamkulum, Kerala. However, all four states had refused to sign a power purchase agreements (PPAs) as the cost of power is turning out to be quite high. This is due to the high cost of LNG which is pushing power cost to Rs 8 per unit. NTPC has also offered RasGas of Qatar a stake in the power plant with the hope of getting an assured supply of LNG. However, Qatar is hold on, to see that the phase of global over-capacity of LNG was over to ensure a better price. NTPC currently buys around 15.5 million standard cubic metres a day (mscmd) of gas, of which 4-5 mscmd is regasified LNG (RLNG) and the remaining domestic gas. At an average cost of around US$ 7 per mBtu, the power rate works out at Rs 5 a unit. NTPC is currently buying RLNG at US$ 10-16 per mBtu from PLL's Dahej terminal, depending on whether it is spot or long-term LNG.

It may be noted that signing of a gas sales purchase agreement (GSPA) with NTPC is crucial for PLL's Kochi regasification terminal, some 120 km away from NTPC's power plant, since it provides a surety of offtake to the marketers of RLNG. PLL has a long-term supply contract with RasGas for supply of 7.5 m tonnes LNG annually. This gas is currently being received at its Dahej terminal in Gujarat. For Kochi, 1.4 m tonnes LNG supply is expected to start in 2014 from the Gorgon field in Australia. The delivered price of Gorgon LNG would work out to be almost double the current RLNG price.