Markets continue to trade firm

Tue, 21 Jun 01:30 pm

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Indian stock markets have been trading firm over the last two hours of trade. Stocks from the oil & gas and banking space are leading the pack of gainers, while stocks from the realty sector are trading weak.

The BSE-Sensex is trading up by 180 points while NSE-Nifty is trading 56 points above the dotted line. BSE Midcap index is up by 0.8%, while the BSE Small cap index is trading 0.6% above yesterday's closing. The rupee is trading at 44.90 to the US dollar.

Power stocks are trading mixed with PTC India Ltd. and Jaiprakash Power trading strong and CESC Ltd. and Gujarat Industrial leading the pack of losers. As per a leading financial daily, Coal India (CIL) is in the process of cancelling all the three bids received for exploration of its Mozambique block due to a technical glitch. The company will now invite fresh bids for the same. This may lead to delay in the commencement of exploration by a few months as the process needs to be started from scratch. Earlier, the company was looking at initiating explorations at its blocks by July this year. Coal India Africana (CIAL), a wholly-owned subsidiary of CIL, acquired two coal blocks in Mozambique during August 2009. The licence is for further exploration and development of these coal blocks over five years.

As per the company officials, it will take about two years for the selected company to complete exploration on the entire acquired stretch. The first phase of production is likely to start by 2013. CIAL will arrive at the final production targets and the capacity of the mine once it has ascertained the quantum of coal reserves in these blocks. There are further plans to offload 15% of CIL's holding in CIAL to an entity nominated by the authorities in Mozambique for its development, once the actual quantum of reserves is ascertained. Rest of the 85% stake will remain with CIL. The initial reserve is estimated at 1 bn tonnes. The coal will be imported to cater to domestic demand from customers in western India. About 20% of the deposits are expected to be coking coal while the remaining is expected to be thermal coal that can be used as fuel in power plants. The stock is trading in the green.

Realty stocks are trading in the red with Jaiprakash Associates and Parsvnath Developers leading the pack of losers. As per a leading financial daily, with rising interest rates pulling down home sales, the developers are lowering inventories by selling at lower margins ranging between 3% and 10%. This compares to a margin range of 30%-50% during boom times. Even the country's top two real estate players - DLF and Unitech - recently stated that slower sales are leading to a build-up of inventory, which may see some price correction, leading to margin pressures. The scenario is expected to remain the same in the near future and a further monetary tightening could lead to a further correction in the property prices. Developers, particularly the smaller ones, are easing their huge inventories by selling at a thin margin of 3% and the only way they can make up for their losses is by a higher volume of sales.