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Major Asian stock markets are closed today on the back of Lunar New Year holiday. Stock markets in Japan are trading down by 0.5%. Major indices in Europe and US ended their previous session deep in red, thanks to weak job employment data from the US. The rupee is trading at 67.63 per US$.
Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading lower by 30 points (down 0.1%) and NSE Nifty is trading lower by 5 points (down 0.1%). Both, BSE Mid Cap and BSE SmallCap are trading higher by 0.2% and 0.3% respectively. Barring stocks from information technology sector, major sectoral indices have opened the day on a positive note with stocks from metal and capital goods sectors witnessing maximum buying interest.
Tata Power reported its results for the quarter ended December 2015. The company's consolidated net profit declined by 87.6% YoY to Rs 244.6 million. Impairment and foreign exchange losses dragged down the profitability of the company. The company provided an impairment loss of Rs 25 billion in relation to its Indonesian coal mine. However, there was some respite on account of falling coal prices with relation to its Mundra plant. Falling coal prices led to a reversal of its impairment loss in relation to its Mundra project by Rs 23 billion.
Additionally, foreign exchange loss was pegged at Rs 608 million as compared with an exchange gain of Rs 4210 million a year ago.
Revenues from the power segment fell 2.3% YoY to Rs 64.5 billion. Further, revenues from coal segment too declined by 8.6% YoY to Rs 19.2 billion. However, revenue from other segments, including defence electronics, solar equipment, and infrastructure management services, grew by 59.5% YoY to Rs 6.2 billion.
The trend in power demand will be the key metric to gauge going forward. The government has launched the 'UjwalDiscom Assurance Yojana' scheme; this would provide certain amount of financial relief to the State Electricity Boards (SEBs). However, such schemes will not have an immediate effect on the financials of SEBs; the improvement process would be gradual. Further, order on the compensatory tariff issue coupled with a stake sale in the Arutmin coal plant will also be the key things to watch out for going forward.
The government has notified a minimum floor price in relation to imports of 173 lines of steel for a period of six months. This will come as a huge respite to the steel majors as cheaper imports from China were flooding the domestic market. This move will benefit the domestic steel producers as well as the banks having considerable exposure to the steel industry. Reportedly, many companies such as Tata Steel, JSW Steel and Steel Authority of India Ltd (SAIL) are expected to benefit from this move
The floor price for hot rolled steel has been set in the range of US$ 445-500 a tonne, with higher prices for cold rolled and coated steel products. Further, an article in Livemint reports that as the price gap between the current prices and floor prices is substantial, steel producers will have an edge in the price negotiations. The notified floor price will be reviewed after a period of six months.
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