Sensex Continues to Drag; Tata Steel & GAIL Stocks Fall

Tue, 25 Oct 01:30 pm

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Indian share markets continued to trade under some pressure in the noon session dragged down by the stocks of Tata Group companies after Cyrus Mistry was ousted as chairman of Tata Sons. Barring healthcare and banking stocks, all the sectoral indices are trading in red.

The BSE Sensex is trading lower by 80 points and the NSE Nifty is trading lower by 17 points. The BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is trading flat. The rupee is trading at 66.83 to the US$.

According to an article in The Economic Times, Larsen and Toubro (L&T) plans to raise as much as US$500 million (Rs 33.5 billion) by selling shares to institutional investors. The company joins the league of a group of large companies taking advantage of a liquidity-driven market rally to fund their capital requirements.

L&T will use the share sale proceeds to fund expansion. The company plans to double its revenues in the next five years as it focuses on sunrise sectors such as defense and explores new markets such as Africa.

The company aims to achieve a 15% compounded annual growth rate to reach that target as it believes a revival in sentiment and an expected further cash flow into the core infrastructure space will help it to keep the order inflow momentum.

Reportedly, many more companies in the engineering and construction sectors are expected to tap the market to raise money with investment activity set to pick up. Between January and September 2016, 13 companies raised Rs 44.68 billion compared with 32 companies that raised Rs 190.64 billion through the QIP route in all of 2015. Earlier last month, Motherson Sumi raised about Rs 20 billion, while Bharat Financials garnered Rs 7.5 billion through QIP.

L&T is presently trading down by 0.6% on the BSE. The stock has gained 20% in six months, significantly outperforming the benchmark index, which has gained 8.7% during this period.

Moving on to news from stocks in power sector. NTPC is reportedly planning to raise above 50,000 MW installed power generation capacity by the end of FY17 with expected addition of over 4630 MW.

The company is expected to commission 550 MW of solar power project at Mandsaur, Ananthapuram and Badhla. Various projects with an aggregate capacity of around 24,000 MW are under implementation at 23 locations across the country. This includes 4,050 MW being undertaken by joint ventures and subsidiary companies.

The company is also quickly moving towards its ambition of achieving a solar portfolio of 10 GW out of the 100 GW target of the government by 2022. Over 1,700 MW renewable energy projects of the company are under execution.

Meanwhile, as per Crisil estimates, around 17,000 MW of operational power projects with a debt of Rs 700 billion and additional 24,000 MW under-construction projects with a debt exposure of around Rs 640 billion are at high risk.

The credit growth to the sector will moderate to 5% over the next three years as compared to an average of 18% witnessed in the last five years. This is primarily because the discoms debt is going to go out of the banking system over a period of time and move to the fold of the state government because of the UDAY scheme. Also the gross NPA's in the sector have increased from 1.3% to 4.4% in the financial year 2015-16.

Power stocks are currently trading on a negative note with NLC India Ltd and Adani Power leading the losses.

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