Software, metal pull down the markets

Thu, 16 Jun 01:30 pm

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The Indian stock market again moved into the red during the previous two hours of trade. All sectoral indices are trading weak. Stocks from the software, metal and capital goods space are leading the pack of losers.

The BSE-Sensexis trading down by 102 points, while NSE-Nifty is trading 34 points below the dotted line. The BSE Midcap and BSE Small cap indices are down by 0.7% and 0.4% respectively. The rupee is trading at 44.84 to the US dollar.

Most of the steel stocks are trading in the red with JSW Steel, Tata Sponge, Tayo Rolls and MMTC Ltd leading the pack of losers. However, Bhushan Steel is trading firm. As per a leading financial daily, follow-on public offer (FPO) by Steel Authority of India Ltd (SAIL) may be deferred till the end of 2011. As per a finance ministry official, the issue will be looked at sometime during end of the October in view of choppy market conditions. He said that all steel firms are under pressure and the government would not be able to raise the required funds at this juncture even after diluting its stake in the steel firm. Currently, steel companies are facing the pressure on margins on account of rising coking coal prices. Besides, there are apprehensions of a strike in some coal mines of Australia. It is important to note here that Indian companies import upto 35 MT of coking coal annually, of which a significant share comes from Australia. If this comes true, it will worsen the supply situation further. The stock of the company is trading weak.

Power stocks are trading mixed with Torrent Power, GVK Power and PTC India Ltd leading the pack of losers. However, Reliance Infrastructure and NTPC are trading firm. As per a leading financial daily, Coal India (CIL) has recentlyexpressed intentionsto lift the 10% cap on e-auction. Instead, it plans to offer the entire production of coking coal through this platform. The company wants abolition of temporary coal supplies to captive coal block owners and to take coal imports outside the purview of the national coal distribution policy. If this development takes place,the company's profits may rise substantially.

During 2010-11, the company earned about 81% over and above the notified prices through e-auction against 63% in the previous fiscal. As per the company's representatives, afteraccounting for the existing commitments and quantity to be offered under e-auction, a shortfall to the extent of 11 m tonnes(MT) is expected for new customers against an estimated coal production of 452 MT during 2011-12. The company Chairman said that if all the letters of assurances issued fructify and if no new letters of assurances are issued, the shortfall could range between 157 MT and 254 MT during 2020-21. He also said that power utilities were not ready to accept the fuel supply agreement that offers to supply 50% of coal through indigenous sources and 50% through imports if feasible. The stock of the company is trading in the green.