Volatility mars Indian indices

Mon, 19 Mar Closing

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Indian stock markets had a volatile outing today. The indices began the day's proceedings on a cautious note and the subsequent hours saw them struggle to stay afloat. In the afternoon session, however selling pressure intensified and pushed the indices into the red. There was no respite in the final trading hour either and the indices closed well below the dotted line. While the BSE-Sensex closed lower by around 193 points (down 1%), the NSE-Nifty closed lower by around 61 points (down 1%). The BSE Mid cap and the BSE Small cap were not spared either as they closed lower by 1% each.

As regards global markets, Asian indices closed mixed today while European indices have also opened mixed. The rupee was trading at Rs 50.23 to the dollar at the time of writing.

Barring Mahindra & Mahindra (M&M), most auto stocks closed in the red today. With the Finance Minister announcing a hike in basic excise duty from 10% to 12%, Tata Motors has decided to hike prices with the aim of passing on the impact of the rise in excise. In passenger cars, the increase will vary between Rs 2,000 and Rs 8,000 depending upon various models. Under this the company sells small car Nano, hatchback Indica and sedan Indigo. In case of utility vehicles like Safari, Aria and Sumo, the hike will be from Rs 8,000 to Rs 35,000. The company's commercial vehicles will also witness a rise in prices. It must be noted that auto companies have had a difficult fiscal so far what with the rise in interest rates and fuel prices which dampened demand. High commodity costs also took its toll in the form of rise in input costs which dented operating margins. Hence, the companies have been left with no option but to pass on the excise duty hike to customers.

While the Union Budget had special fiscal impetus for thermal power projects, the outlay of Rs 533 bn for seven PSU power generators has also offered long term growth visibility for entities like NHPC and National Thermal Power Corporation (NTPC). Of the total sum, allocation of 40% or Rs 210 bn is towards NTPC alone. NTPC grew its sales by 14% YoY during 9mFY12. This was largely a result of improvement in electricity tariffs, as the growth in volume sales was negligible. The operating margins were primarily hurt by high coal costs. Going forward, however, the margin pressure is expected to gradually ease off.

NTPC had capacity of 36,014 MW at the end of December 2011 and is targeting capacity addition of 4,320 MW in FY12. While the company has coal linkages for 9 new projects with a total capacity of 10,920 MW and a gas supply agreement for 14.5 MMSCMD of gas, fuel supplies remain a hindrance to growth. The impact of higher fuel prices was seen in the decline in its capacity utilisation. In order to meet some of its future fuel requirements, the company is looking to produce 45 m tonne of coal from its own mines by 2017. The stock of NTPC closed marginally lower in today's trade.