Indian share markets open firm

Mon, 1 Jul 09:30 am

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Asian stock markets have opened the day on a weak note with Indonesia (down 0.8%) and China (down 0.8%) leading the losses. The Indian share market indices have opened the day on a positive note. Stocks in the power, capital goods and oil & gas space are leading the gains. However, information technology and auto stocks are trading weak.

The Sensex today is up by around 70 points (0.4%), while the NSE-Nifty is up by around 20 points (0.3%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.8% and 0.6% respectively. The rupee is trading at Rs 59.52 to the US dollar.

Oil & gas stocks have opened the day on a firm note with Essar Oil, Oil India Ltd (OIL) and Oil & Natural Gas Corporation (ONGC) leading the gains. Recently the Cabinet Committee on Economic Affairs (CCEA) approved doubling of domestic natural gas prices from US$ 4.2 per million metric British thermal units (mmBtu) to US$ 8.4 per mmBtu starting from April 2014. This is likely significantly boost margins and future growth prospects of exploration and production companies. As per a leading financial daily, the average cost of gas production for state-run ONGC is currently US$ 3.7 per mmBtu. Given that the new pricing policy would be applicable for five years along with a provision for quarterly revisions, upstream gas companies would be able make bigger investments in further exploration. As per ONGC's Director (Finance) Mr A K Banerjee, the gas price hike was imperative as several new blocks that are coming up are deep-water blocks which need bigger investments. With new gas prices at US$ 8.4 per mmBtu, ONGC's average production cost, including royalty and tax, would increase to US$ 4.25 mmBtu. The substantial jump in margins could increase the company's net profits by Rs 85 bn. For the financial year 2013-14 (FY14), ONGC has a capital expenditure plan of Rs 350 bn, whereas for the 12th Five-Year Plan period, the company plans to incur a capital expenditure of Rs 1.64 trillion.

Power stocks have opened the day on a firm note with Indiabulls Power, Tata Power and JSW Energy leading the gains. As per a leading financial daily, India's largest power producer National Thermal Power Corporation (NTPC) has tied up with German government-owned development bank KfW for a term loan facility of 95 m euros (approximately Rs 7.38 bn). NTPC would use the funds to part finance the capital expenditure on renovation and retrofitting of Electro Static Precipitators at its various generation stations in order to cut down fly ash emissions. It must be noted that the term loan facility would have fixed interest rate. The facility has a door to door maturity period of 12 years. This includes a grace period of 4 years. The loan shall be repaid in 16 equal semi-annual installments.