Stock markets cheer big ticket reforms

Mon, 20 Oct 09:30 am

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Asian stock markets have opened the day on a firm note with the markets in Japan (up 3.5%), and Korea (up 1.5%) leading the gains. The Indian share markets have also opened the day on a positive note, cheering the recently announced fuel sector reforms. All sectoral indices are trading in the green with energy and banking indices leading the gains.

The Sensex today is up by around 358 points (1.4%), while the NSE-Nifty is up by about 111 points (1.4%). The mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 1.5% and 1.6% respectively. The rupee is currently trading at Rs 61.27 to the US dollar.

Barring Reliance Industries Ltd (RIL), energy stocks have opened mainly in the green with Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) leading the pack of gainers. In a key development in the energy sector, diesel prices have been deregulated and price formula for natural gas has been formalized. Just like petrol, diesel prices will be allowed to move as per market conditions. It will immediately lead to easing of diesel prices by Rs 3.5 per litre , since crude prices have come down considerably. The move will reduce the subsidy burden for Government, upstream and downstream oil companies. In another development, gas prices have been raised by about a third to US$ 5.61 per million British thermal units (mBtu). Initially, the proposal was to double the prices. The move is likely to boost investment in the gas sector. However, RIL will keep be paid the earlier price of US$ 4.2 per million British thermal units until they make good the shortfall in the envisaged production from D1, D3 discoveries of Block KG-DWN-98-3. One must note that the matter is still under arbitration. The difference between the new prices and US$ 4.2 per mBtu would be credited to the gas pool account and outcome of arbitration will decide whether or not it will be paid to RIL. The new gas price will be effective from November 1 until March 2015, but the next revision would be valid for six months.

Cement stocks have opened the day on a strong note with JK Lakshmi Cement and India Cements Ltd leading the gains. Ultratech Cement Ltd has announced results for the quarter ending September 2014 (2QFY14). The company has reported net sales growth of around 20% on a year on year (YoY) basis helped by the growth in the cement volumes. The volumes for the quarter grew 11% YoY on the back of higher demand and additional volume from the acquired units in Gujarat. Operating profit of the cement company spiked 29.2 % YoY. The net profits for the quarter grew by 55% YoY on standalone basis. On a consolidated basis, the bottomline was up 47% YoY while revenue growth came in at 18% YoY. The management has stated that the cement demand is likely to grow at 8%, driven by renewed government focus on housing and infrastructure spending. The company plans to increase its cement capacity by bidding for assets of Lafarge and Holcim and aims to add 20 million tonnes per annum to its capacity over the next three years.