Markets plunge on BJP's Bihar debacle

Mon, 9 Nov 09:30 am

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Barring the stock market in South Korea (down 0.4%), major Asian stock markets have opened the day on a positive note. Stock markets in China (up 1.7%) and Hong Kong (up 0.3%) are the top gainers in the pack. Major stock indices in Europe ended their previous session in the green. Stock markets in US ended their previous session up by 0.4%. The rupee opened trading at 65.79 per US$.

Meanwhile, Indian stock markets have opened the day deep in red mainly on account of National Democratic Alliance's loss in the Bihar Assembly elections. This has adversely impacted BJP's hopes to strength its position in the Upper House of the Parliament where it does not enjoy a majority. This, in turn, may obstruct or slow down the passage of crucial economic reforms.

The BSE-Sensex is trading lower by 435 points (down 1.6%) and NSE-Nifty is trading lower by 142 points (down 1.8%). S&P BSE Midcap and S&P BSE Smallcap is also trading lower by 1.4% and 1.5% respectively. Majority of the sectoral indices have opened the day on a negative note. Stocks from realty and pharmaceutical sector are witnessing majority of selling interest.

According to a leading financial daily, Bharat Heavy Electricals (BHEL) has secured significant orders for setting up two supercritical thermal power projects in Andhra Pradesh. The projects are 1x800 MW Dr. Narla Tata Rao Thermal Power Station (Dr NTTPS) Stage-V of Andhra Pradesh Power Generation Corporation (APGENCO) and 1x800 MW Sri Damodaram Sanjeevaiah Thermal Power Station (SDSTPS) Stage-II, popularly known as Krishnapatnam Supercritical Thermal Power Project, of Andhra Pradesh Power Development Company (APPDCL).

Both the projects are valued at Rs 23.1 bn each. Significantly, 6 units of 210 Mega Watt (MW) rating and 1 unit of 500 MW rating, all supplied earlier by BHEL, are in operation at Dr NTTPS, Vijaywada. Notably, the first unit of 210 MW at Vijayawada has been in operation since 1979. At Krishnapatnam also, 2 units of 800 MW rating each are already in operation at Stage-I of the project.

The orders have reinforced BHEL's position at the forefront of the power equipment suppliers in India. BHEL has been a long standing partner in the development of the state of Andhra Pradesh with 84% of the coal-based power stations having been commissioned by BHEL. Reportedly, these plants are operated at a high Plant Load Factor (PLF) of 78.1% against the national average of 65.6% in 2014-15.

2015 has been a disappointing year for the Indian engineering industry. Majority of the stocks from the engineering sector have underperformed, barring a few exceptions. The current problems that the sector is going through are largely on the account of the economic recovery not panning out as anticipated and the investment cycle not picking up with stalled projects yet to kick off in a big way. In a recent edition of THE 5 MINUTE WRAPUP, we discussed engineering stocks which have underperformed the Sensex and what is expected of engineering sector going forward.

Mining stocks have opened the trading session on a weak note with Vedanta Ltd and Moil Ltd leading the losses. According to a leading economic daily, Coal India Ltd (CIL) is planning to invest Rs 60 bn to set up 1,000 MW of solar power generation capacity over a period of next five to six years. Reportedly, the company will fund 70% of the project through debt, which will come mostly from the banks, while the rest of the project will be funded through internal resources.

As a first step, Coal India has already prepared a detailed project report for setting up 200 MW of solar generation capacity.

Furthermore, the company is also looking at setting up floating solar panels on water bodies that are formed when a mine is closed down. Coal India has numerous water bodies under its command areas. It intends to use them for setting up floating solar panels. This will be the first time in several years that Coal India will be raising debt from the market.