Indian markets gather steam

Mon, 20 Oct Closing

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Thanks to the slew of government reforms (particularly in the energy sector) and the state elections, the Indian equity markets remained buoyant throughout the day. The strong rally in benchmark indices today was led by auto, Capital goods, oil and gas, metals and power sectors. While BSE Sensex was seen up by 321 points, the NSE-Nifty too rose higher by 100 points. While most of the sectoral indices ended in green, the mid and small cap indices too gathered steam. Both the BSE Mid Cap and the BSE Small Cap indices were up by 1.1% and 0.5% respectively.

On the global front, the Asian indices closed the day in green today. The European indices however have opened mixed today. The rupee was trading at Rs 61.25 to the dollar at the time of writing.

Barring few such as Jindal Steel, Tata Sponge and Bhushan Steel that witnessed severe selling pressures, the other stocks from the Steel sector closed the day in green. Jindal Saw Ltd and Tayo Rolls have led the pack of gainers.

In one set of news, Moody's Investor Service has stated that the recent plans of Tata Steel will prove credit positive. Tata Steel has decided to sell its long product business in the UK and its bank debt refinance plan and this would prove credit positive. That's because this sale would dispose off loss-making assets, alleviating funding pressures for the next six years. Moreover, now the company can focus on growing the profitable Indian business. The Moody's Investor Service expects the company to maintain its volume growth and strong profitability with EBITDA per tonne of around USD 260. Moreover, Tata Steel is slated to launch the first phase of the Odisha project early next year which will add 3 million tonnes of crude steel capacity. This will bring the capacity of the Indian business to 10 million metric tonnes, or 50% of Tata Steel's total capacity. When Tata Steel India acquired Corus in 2007, this proportion was 15%.

Barring MRPL and Reliance Industries, all the other Energy stocks today closed on a positive note. Stocks of HPCL and ONGC have led the pack of gainers.

In another set of news the government is said to meet bankers today to discuss a planned share sale in state-run ONGC as it deems the time is right to sell stakes in oil firms following freeing up of diesel pricing, as mentioned by the Ministry officials. The government has lifted diesel price controls and raised the cost of natural gas, thus allowing markets to attract energy investment, boost competition and cut subsidy costs.

Also, the gas price hike has also turned out to be a big positive for the company as every 1$ rise in gas price increases the company's revenues by Rs 40 bn and net profit by Rs 23. 5 bn. Therefore, ONGC stands to benefit from this.