IT, Telecom weigh heavily on indices

Tue, 30 Mar 11:30 am

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Unabated selling activity in index heavyweights made the benchmark indices pare almost all of the early gains during previous two hours of the trade. Currently, selling activity witnessed among IT, telecom, healthcare, capital goods and FMCG sectors is weighing heavily on the indices. However, buying in realty, auto, metals and energy sectors is keeping the markets in green.

The BSE-Sensex is trading marginally up by around 13 points and 1 point respectively. Currently, the BSE-Midcap and BSE-Smallcap indices are trading is the green, higher by 0.4% and 1% respectively. The Rupee is trading at 44.96 to the Dollar.

According to a leading business daily, India's largest private sector power generator, Tata Power is planning to sell 8-10% stake in its two coal mines in Indonesia for US$ 300 m. It is believed that a private capital firm, Olympus Capital will be buying this stake. However the companies have not confirmed this deal yet.

It may be noted that Tata Power acquired 30% stake in these 2 coal mines and a coal mining company in Indonesia for US$ 1.1 bn. The company is believed to use the funds raised by the stake sale for equity infusion in its power projects or buy stakes in more coal mines. Nevertheless, as the coal supply from these mines will continue even after the stake dilution, this move will not impact the supply situations for Tata Power. The company has an installed capacity of around 3,000 MW. It plans to increase it up to 25,000 MW by 2017 at a cost of Rs 293 bn. The company presently imports 1 metric tonne of coal from Indonesia.

Steel stocks are currently trading firm led by SAIL, Tata Steel and JSW Steel. A leading business daily has reported that steel major, SAIL has signed an agreement with Shipping Corporation of India (SCI) to meet its import needs. The two companies will form a joint venture company in which both will have equal stake. It is reported that the JV company will ship nearly 1 m tonnes of raw material used by SAIL for manufacturing steel. These imports are likely to increase going forward. SAIL currently imports nearly 10 m tonnes of coking coal, which is the key raw material for manufacturing steel, per annum.

SAIL's requirements for coking coal are set to increase in the future considering that the company is expanding its steel manufacturing capacity. This venture will enable it to have control over part of its raw material needs as well as in mitigating the risks related to the volatile shipping market. Partnering with a shipping company (SCI in this case) would allow SAIL to use the former's expertise in running operations smoothly. It is believed that SCI is already in the process of acquiring new vessels, and the JV will give its efforts a further boost. It must be noted that SAIL is amongst the largest importers of coking coal in the country. A large portion of its raw materials are sourced from Australia. It also imports coking coal from New Zealand and the US.