Oil and gas stocks buck the trend

Tue, 15 Mar 01:30 pm

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After languishing in the negative territory during the previous two hours, the Indian stock market indices have recovered marginally, but continue to remain in the red. News of rising radiation levels following a quake in Japan has had a negative impact on investor sentiments, with all the key Asian markets plunging deep into red. As far as India is concerned, all the sectoral indices except oil & gas are currently in the red.

The BSE-Sensex is down by 193 points while NSE-Nifty is trading 47 points below the dotted line. BSE Midcap and BSE Small cap indices are both down by 1.15% and 1.20% respectively.

Engineering stocks are trading weak with Areva T&D and Alstom Projects leading the pack of losers. However, Honeywell Automation and Thermax are trading strong. Promoters of wind turbine maker Suzlon Energy have offloaded 2.25% of their equity in the company in order to extend strategic fund support to the ailing company. Two promoter entities namely Vinod Ranchhodbhai HUF and Sanman Holdings Pvt Ltd have sold 20 m shares each which would fetch them about Rs 1.85 bn. Following the stake sale the promoter holding in the company would stand at 54.8%. (It may be noted that as on date 60% of the promoter equity in Suzlon is pledged. However, none of the shares from the pledged equity were part of this deal). The money raised via share sale will be lent back to the company by the promoters in order to fund its strategic initiatives. It may be noted that the company has huge debt on its balance sheet (Rs 120 bn at the end of Dec 10) and has been facing quite a few issues on the repayment of its loans.

Power companies are amongst the top losers of the market. Government-run power generation utility, NTPC is likely to revise its coal sourcing strategy. According to a leading financial daily, NTPC intends to change its strategy on securing critical fuel supplies by seeking long-term coal supply agreements instead of buying overseas mines outright. This change in strategy is probably because NTPC failed to secure equity in coal mines in countries such as Australia, Indonesia and South Africa. NTPC intends to enter into long term overseas coal supply contracts and in some cases it may also try to take small stakes in overseas mines to ensure supply security.

Coal is critical fuel for NTPC as over 80% of its installed capacity runs on coal. At present, the firm has a power generation capacity of 33,194 MW. It will need 160 MT of coal in fiscal 2012, of which around 16 MT will be imported. It may be noted that NTPC has already placed orders for the import of 12 MT of coal in the next fiscal.