Auto, energy bolster the uptick

Fri, 26 Mar 11:30 am

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The Indian markets continued to move upwards on account of sustained buying activity witnessed during the previous two hours of trade. Stocks from the auto, consumer durables, energy, metal and banking sectors are leading the pack of gainers. Telecom and IT stocks are the only ones failing to garner investors’ interest.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 96 points and 24 points up by 0.6% and 0.5% respectively. The BSE-Midcap and BSE-Smallcap are also trading higher, up by around 0.9% each. The rupee is trading at 45.40 to the dollar.

According to a leading business daily, state-owned oil major ONGC is scouting for oil-sands acquisition in Canada as a part of its strategy of going global in terms of assets. The company is believed to be evaluating the financials of a Canadian field and is in preliminary talks with the target company. ONGC is planning to buy assets producing about 10,000 barrels of heavy oil a day worth around US$ 1 bn.

It may be noted that the government has asked the two major energy-sector PSUs ONGC and Oil India to make at least one acquisition each in FY11 so as to meet the growing demand in the country. Indian companies are now vying with China for winning overseas energy assets. The dragon nation has spent a huge US$ 32 bn last year for amassing oil, coal and metal assets in overseas markets. Given the exploding demand in the world’s fastest growing economies and China’s aggressiveness in garnering oil-assets, we believe that Indian energy majors with their ageing oil-fields will have to fight really aggressively to fetch oil for India.

As per a leading business daily, state-owned power utility NTPC is in planning to acquire a coal mine having 1.8 bn tones of reserves in Indonesia. NTPC is in talks with Indonesia’s Sugico Group for buying this asset. It is believed that the Indonesian company which has 2 mines has offered one of its mines to NTPC for partnership. This will involve a stake sale along with a long term coal supply agreement. The deal is estimated to be around US$ 1 bn (or Rs 45.6 bn).

It may be noted that NTPC requires around 160 m tones of coal of which 10% is imported. We believe that fresh coal supplies are paramount for NTPC as coal fuels over 80% of its installed capacity of 31,134 MW. It may be noted that the company is expanding its capacity quite aggressively and has pegged a capital expenditure of Rs 177 bn and Rs 240 bn respectively, in FY11 and FY12. However shortage of coal supply at home is a lingering concern for the company.