Final hour surge

Thu, 15 Sep Closing

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Repeating the trend seen in yesterday's session, the benchmark indices in the Indian stock market surged into the positive territory after a weak start. Speculations of a rate hike by RBI and reports of poor execution of infrastructure projects did not have a very meaningful impact on investor sentiment. The BSE-Sensex finally closed higher by around 167 points (up 1.0%) while the gains on NSE-Nifty stood at around 63 points. The BSE Mid Cap and BSE Small Cap indices edged higher by more than 0.3% each.

While most major Asian indices closed higher, India featured amongst the top gainers. The European markets have started on a positive note. The rupee was trading at Rs 47.5 to the dollar at the time of writing.

Engineering major Bharat Heavy Electricals (BHEL), has bagged an order worth Rs 30 bn from Singareni Collieries, a state-owned mining company. The company has bagged order to supply two 600 MW boiler turbine generators on September 12. BHEL has also participated in bidding for NTPC's Rs 180 bn project for the bulk supply of 800 MW supercritical equipment in which L&T, Bharat Forge, JSW, BGR Energy, Thermax and Doosan have also participated. For FY11, BHEL reported a total order inflow of Rs 605 bn up 2.4% YoY finishing the year with a total order backlog of Rs 1,641 bn. The company is targeting to achieve a net worth of Rs 238 bn in FY12, as it will entail the coveted Maharatna status.

Deputy chairman of the Planning Commission, Mr Montek Singh Ahluwalia has today cited India's inability to meet the US$ 500 bn target for infrastructure investment during the Eleventh Plan (2007- 2012). However, the country will raise at least two US$ 10 bn debt funds for the sector in the next few months. Mr Ahluwalia sees the infrastructure investment targets falling short by around 10% to 12%. However, he believes that the debt funds could bring in additional funding for the twelfth plan period. Over the next five years ending March 2017, India plans to invest US$ 1 trillion in building infrastructure. Given the policy inactions and lack of political will we doubt that the debt funds will ensure better execution during the 12th plan period.

Recently the government relaxed investment norms for FIIs (foreign institutional investors) and increased the investment limit in the long-term infrastructure corporate bonds by US$ 5 bn to US$ 25 bn. However, investment in such infra bonds will come with rider of minimum three years of lock in period and during this lock in period the FIIs cannot trade infra bonds with domestic investors.