Volatility mars Indian indices

Fri, 16 Sep Closing

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Indian stock market traded in the positive throughout today's trading session although alternate bouts of buying and selling restricted them within a range. Some profit booking was witnessed in the final hours but the indices managed to close above the dotted line. While the BSE-Sensex closed higher by around 57 points (up 0.3%), the NSE-Nifty closed higher by around 9 points (up 0.2%). While the BSE Mid Cap closed higher by 0.4%, the BSE Small Cap closed flat. Gains were largely seen in auto, healthcare and banking stocks.

As regards global markets, Asian indices closed in firm today while European indices have also opened on a positive note. The rupee was trading at Rs 47.33 to the dollar at the time of writing.

Power stocks closed mixed today. While National Thermal Power Corporation (NTPC), Power Grid Corporation and Tata Power closed firm, Reliance Power closed in the red. As per a leading business daily, power major NTPC is expected to raise generation capacity to 36,000 MW by the end of this fiscal with the commissioning of two more 660 MW units at Sipat power project. The first 660 MW plant has already been commissioned. The 1,980 MW Sipat power project is the company's first supercritical plant and is 2% more efficient as compared to other thermal plants. Further, the company is working on projects of about 40,000 MW at present. Projects with capacity of over 14,000 MW are under various stages of implementation. It must be noted that NTPC is targeting to become a 128,000 MW company by 2032 with 28% capacity from non-fossil sources. NTPC's share in the country's generation was 27.4% in 2010-11, with 17.75% of the national capacity. It has planned capex of Rs 264 bn for FY12. However, fuel linkages and execution will be the key.

In its mid-quarter review of the monetary policy, the Reserve Bank of India (RBI) has continued with its rate hiking exercise. By raising the repo and the reverse repo rate, the central bank has now hiked policy rates for the 12th time in last one and half years. The repo rate was raised by 0.25 percentage points to 8.25%, while the reverse repo rate will now be 7.25%. The primary reason for the same has been the persistently high inflation that has been prevailing for quite some time now, which has been well out of the comfort range of the central bank. Further, the Rs 3.14 hike in petrol prices that was announced by the government yesterday is expected to add more pressure. It must be noted that these hikes have come at a time when there have been some signs of slowdown being witnessed in the Indian economy. The latest IIP (Index of Industrial Production) was quite low at 3.3% and many companies are facing the pressure of rising interest rates and input costs, which have hurt profits. Having said that, the RBI has stated in its guidance that there is likely to be a moderation in demand and reversal of inflation towards the later part of 2011-12.