Sensex Opens Flat, Kotak Mahindra Bank Surges 2.3%

Wed, 8 Mar 09:30 am

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Asian stock markets are lower in morning trade tracking losses on Wall Street ahead of China trade data set to be released today. The Shanghai Composite is off 0.12%, while the Nikkei 225 is down 0.50%. The Hang Seng is up 0.40%. Stock markets in Europe also closed their previous session in the red.

Meanwhile, Indian share markets have opened the day on a flat note. The BSE Sensex is trading lower by 7 points and the NSE Nifty is trading lower by 2 points. Meanwhile, S&P BSE Mid Cap and S&P BSE Small Cap are trading higher by 0.1% respectively.

Sectoral indices have opened the day on a mixed note with bank stocks and pharma stocks witnessing buying momentum. While, IT stocks and consumer durables' stocks are among the top losers on the BSE.

The rupee is trading at 66.63 against the US$.

Kotak Mahindra Bank share price opened the trading day up by 2.3% after it was reported that Canadian pension fund manager Caisse de Depot et Placement du Quebec is among suitors vying to buy a stake in the bank. Shares of Kotak Mahindra Bank have gained 14% this year, giving it a market value of $22.5 billion.

According to an article in The Economic Times, India has moved down the order on the overall investment attractiveness index to 97 from the earlier 73. India dropped from its previous rank in the overall investment attractiveness index and has been placed among the 10 lowest nations.

Reportedly, the main reasons behind India's poor show are low score in policy perception, uncertainty concerning the administration, interpretation and enforcement of existing regulations, regulatory duplication, inconsistencies and multiple taxes, legal system and uncertainty concerning disputed land claims.

Meanwhile, to give a boost to mineral exploration, the government has devised a new scheme for rewarding exploration companies with an upfront payment. The payment will be either 0.5% of the reserve value (value of recoverable resources) or 10 times the monthly retention fee for the explorer.

The proposed model is likely to attract not only large mining companies with risk capital for exploration but also other mining, engineering and technology services companies with innovative technology.

The mines ministry is trying to raise the share of mining and quarrying in the country's gross domestic product (GDP) by at least one percentage point from 2.4% at present.

In another development, Coal India will pay the government over Rs 150 billion through dividend, distribution tax and proceeds of a share buyback this year, a drop of 13% from the amount paid in 2015-16.

Coal India's ability to pay more was limited as profit fell. Net profit declined 20% in the quarter ended December 2016 from a year earlier as less-than-anticipated growth in demand for power resulted in coal stocks piling up at power plants, its primary consumers. It is to be noted that government is the largest shareholder in Coal India.

As per the reports, Coal India set aside about Rs 21 billion to cover salary increases that are currently being negotiated. Income from fixed deposits declined by as much as Rs 3 billion due to falling interest rates. The combined effect of these factors hampered the company's ability to reward its shareholders with a larger payout.

Coal India share price began the trading day up 0.5% on the BSE.

Moving on to news from stocks in oil & gas sector. According to an article in a leading financial daily, ONGC Videsh Ltd has finalised an over US$ 3 billion development plan for the coveted Farzad-B gas field off Iran and is likely to wrap up a deal by September.

The new plan is filed with the Iranian Offshore Oil Company (IOOC). The plan excludes liquefaction facilities to turn the gas into LNG for ease of shipping to nations like India.

Farzad B was discovered by OVL, the overseas arm of ONGC, in the Farsi block about 10 years ago. The project has so far cost the OVL-led consortium, which also includes Oil India Ltd and Indian Oil Corp (IOC), over US$ 80 million.

OVL's Production Data for the Last 5 Years

Meanwhile, the Directorate General of Hydrocarbons (DGH) is planning to push ONGC into more production enhancement contracts (PEC) owing to the sustained and steady fall in production from both onshore and offshore fields (Subscription Required) of ONGC. ONGC's production from major onshore fields has fallen from 4.84 million tonnes (MT) in 2006-07 to 2.79 MT by 2015-16.

Interestingly, the production figures have shown a continuous fall. However, the fields are not declining resource-wise, but extraction has been poor, the reports noted. PEC would include bettering some surface facilities such as separators, pipelines and tanks as often these get choked, corroded or starts leaking.

In another development, as per International Energy Agency (IEA) report, India is moving to the centre stage of global energy market. By the early 2020s, it will replace Russia as the world's third largest refiner.

India overtakes China as the main driver of energy demand growth, as was foreseen by the IEA. Noting that Indian per capita oil consumption is just 1.2 barrels per year today, the report said the number is expected to reach 1.5 barrels per year by 2022. This compares to China's three barrels per capita per year today, a figure expected to be 2.5 by 2022.

Further, In the next five years, capacity additions totalling 860 thousand barrels per day (kb/d) will be made, but as a sign of the relative maturity of its downstream industry (Subscription Required), all of these will be expansion projects at existing refineries.

ONGC share price opened the day up by 0.1%.

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