Realty stocks bring some respite

Thu, 23 Dec 09:30 am

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Asian markets have opened on a mixed note today. While gains are seen in Hong Kong (up 0.1%) and Singapore (up 0.4%), selling is seen in China (down 0.5%) and Japan (down 0.2%). The US markets closed with 0.2% gains yesterday. As for the Indian markets, these have also opened marginally in the positive. Realty and banking stocks are leading the gains currently. Auto and energy stocks are however trading with some losses.

The BSE-Sensex is trading higher by around 15 points (0.1%), while the NSE-Nifty is up about 5 points (0.1%). Mid and small cap stocks are also trading with gains, with the BSE-Midcap and BSE-Smallcap indices up by 0.3% apiece. The rupee is trading at 44.99 to the US dollar.

Power stocks have opened mixed today. While gains are seen in NHPC and Neyveli Lignite, selling pressure marks trading in Torrent Power and CESC. As per a leading business daily, India's largest private sector power company Tata Power has signed a solar power deal with the Gujarat-based Gujarat Urja Vikas Nigam Ltd. As per this deal, the former will be developing a 25 MW (megawatt) solar power project in the state and the power will be supplied to the latter based on a power purchase agreement (PPA). Spread over 100 acre of land, this plant is expected to be commissioned by the end of next year. It will be one of the largest solar power plants in the country. Well, this is not the only major project that Tata Power is doing in Gujarat. Its 4,000 MW Mundra ultra mega power project (UMPP) is also coming up in the state. The first unit of this project will become operational by August 2011. Overall, Tata Power is in an aggressive capacity expansion phase that will aid its revenue and profit growth over the next few years. It in fact plans to add 1,900 MW (or 60% of its current capacity) by the end of September 2011. The key risk however remains that of timely execution of these projects, especially considering that most of them involve large capacities.

India's largest crude oil producer ONGC will see its production dip by 1-2% over the next few years. The reason behind this is that the company has not made any onshore discovery for over two decades. The last major oil discovery was made in 1985. Most of its onshore fields have been in operation for almost 30 to 50 years. There is a natural decline of 8-9% from oil fields over a period of time. While use of new technologies and exploratory drilling will help the company to offset the natural decline to an extent, the overall production will still decline by 1-2%. The company has a current budget of Rs 30 bn for its on exploration projects. Most of this money is being currently spent towards sustaining production from matured fields. Anyways, global crude oil prices have hit the US$ 90 per barrel mark. Now if Indian companies like ONGC are to see decline in their production going forward, India's energy bill will become a big headache for the government. ONGC's stock is currently trading with gains. As for the other key stocks from the energy sector, while Petronet LNG and BPCL are up, selling pressure is being seen in Castrol and Reliance.