Created: Tuesday, 09 September 2014 18:18
India's power sector is riding a dangerous tide as policy paradigm hits its trading amid coal block allocation case which ruined the sentiments of the markets. Indian market representatives, Nifty and Sensex framed in slower movements as power stocks stumbled ahead of Supreme Court's (SC) ruling today.
The new pro-reform government under the leadership of Prime Minister Narendra Modi is working faster to sort out cases held in court blocking growth in industries. As the new government marked 100-days of successful governance, Coal and Power Minister, Piyush Goyal announced, "Effective management and rationalization of coal supplies are holding the next priority in line to improvise long-term outputs from power sector of India."
Major question of looking at the change is an affirmative as top analytical and research firms quote. Asia's leading equity brokers and investment group CLSA said, "A comprehensive study of 11 power companies asset and liability data disclosed that most of the companies are reducing their capex with aggressive measures as 35 to 40 percent of the credit is outstanding in the sector."
On the other hand, the growth from the sector is booming with new projects developing their plants in the country with their previous investments. A major boost is coming in EBIDTA (Earnings Before Interest Depreciation and Tax) according to the CLSA published report.
Market researchers are citing gains from the present outlook of the companies as net debt and net gearing is improving it's ratio over EBIDTA and is likely to record better balance sheet review in the coming years. Coal India, the biggest coal company of India is powering up for a bull run and is likely to record one of highest growing stocks with the growing power demand in the country.
Though, according to SC's decision some companies are facing temporary troubles because of compensatory tariffs, all the companies surviving further will enter the race to succeed.
Though coal companies are fearing SC's final decision which might not favor them if all the coal allocations are canceling pulling down their EBIDTA growth as per their plans. Private power majors are standing on a bridge where SC's ruling will decide their destination to grow as independent power producers (IPPs) at slower or faster rate.
Tata Power, Adani Power and other power sector companies will be encircling a down trend in their EBIDTA if a ban on compensatory tariffs forms a part in SC's verdict.
Among top advices CLSA is marking Power Grid on a buying note with a targeted price of Rs 162 per share as it is hoping record 17 percent bump in the compounded annual growth in EPS over FY15-17.
Among Independent Power Producers, JSW Energy and CESC are blinking at the top listed companies. CLSA said, "JSW Energy is hovering with its key strength in international thermal coal prices with its strong merchant power tariffs."
Created: Monday, 08 September 2014 18:04
Wall street traders are enjoying the bull run in the market as Nifty recorded above 8,000 level and Sensex broke 27,000 mark. Key market indices continued to gain in the markets today as Nifty and Sensex surged 1.08 percent each accommodating 8173.90 level and 27,319.85 on Monday beginning the second trading week of September 2014.
As both the market indices make their lifetime high hits, cynical viewpoint questions the correction point of the flourishing market indices. There is no designated pinpointed answer as when the correction will start in the market, but an investor has to look at the wider definition of correction in order to point commencement of it.
Market corrections are of two types, one is where a stock price records a steep fall in the market marking a consecutive hit downward to balance hiking market gains. Another is when there is a sideways correction, i.e. when the prices trend in a range bound trading without forming an inflating or depreciating trend.
In Indian markets, benchmark indices are experiencing the second type of correction, i.e. sideways shift where there are narrow range bounds inhibiting movement. Therefore, if a break out occurs in the running markets, a further upward shift is likely to come in the picture soon.
Experts advised traders to flow with the trend rather than contradicting their positions in short-term before the market indicates a reversed trend.
Global markets are pushing up Indian equity valuations as Indian market is among the top growing markets in the world economy. Foreign portfolio investors paused their investment in the beginning of September but inflows surged the trading as the week advanced, overall their investments stand higher at $13.7 billion in the current fiscal.
The risk taking appetite of Foreign investors in the emerging equity market of India is recording high and awaiting more opportunities from the robust economy.
According to EPFR Global, a global fund tracker, commitments to Emerging Markets Equity Funds, crossed 82-week highest peak in last week. It recorded as the 14th week of net inflows in the category in record of past 15 weeks.
Global Market Factors to keep an eye on this week:
Most global indices held on to their gains last week. European stocks surged after the ECB announced a stimulus package.
The Germany DAX, the France CAC and the UK's FTSE recorded strong gains last week. Though, FTSE dropped down as the news of Scotland's independence hit the market, CAC and DAX continued to rise today.
The DJ Euro STOXX 50 index rallied 3 per cent and is moving close to its recent peak at 3325.
The portfolio trading in the Dow index is like formation of Sensex and the Nifty. It is trading in sideways correction, i.e. holding up in narrow band near its highest levels. It is waiting for a break to 17,830 range bound level.
Most Asian indices including the Shanghai Composite are trading up since the last the week's closing note and opening on Monday.
Nymex crude recorded lowest at the price of $ 92.7 in the last week. It is holding near hiking strong support at $90 region where it is likely to stop. But if the fall continues, crude might come down to $85 barging the value of Indian Rupee.