The Indian markets have started today's session on a choppy note. The benchmark indices opened below the breakeven mark but have just managed to enter into the positive territory. Other key Asian markets are trading in the red with Japan (down 1.8%) leading the pack of losers. The US markets closed lower by 1% yesterday.
Currently in India, heavyweights from the BSE-Sensex are trading a mixed bag with power and software stocks attracting investors' interest. However, auto stocks are trading in the red. The BSE-Sensex is trading higher by around 15 points, while the NSE-Nifty is up by about 2 points. However, selling interest is being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.2% and 0.3% respectively. The rupee is trading at 46.28 to the US dollar.
Energy stocks have opened the day on a mixed note. Gainers here include Reliance Industries (RIL) and HPCL. However, Petronet LNG is trading in the red. As per a leading business daily, India's petroleum minister Murli Deora has said that RIL does not have to include marketing margins while calculating the royalty to be paid to the government on the production of natural gas from KG basin. This is in sharp contrast to the opinion of the upstream regulator, Directorate General of Hydrocarbons (DGH). DGH wanted to add the marketing margin of US$ 0.135 per m British thermal unit (mBtu) which RIL charges to the sale price of US$ 4.2 mBtu, while calculating government royalty. As per Mr. Deora, the production sharing contract states that royalty should be calculated at the delivery point which does not include marketing efforts. In our view, while there could be difference in interpretation over technical points, the constant dispute over KG basin gas sends the wrong signals at time when India urgently needs global investors in the sector.
Cement stocks have opened the day on a mixed note. Gainers here include Shree Cement and ACC. However, Mangalam Cement is in the red. As per a leading business daily, Shree Cement plans to derisk its income from the cyclical downturn of the cement industry by diversifying into power. The company has a sales target of Rs 4.6 bn next year from power, up from Rs 0.6 bn this year. At present, it consumes the majority of its generation of 120 mw, leaving only 20 to 30 mw available for the grid. However, it is expanding its power generation capacity to 560 mw by the next year. Shree Cement plans to invest Rs 12 bn for the same. It plans to initially sell power to states like Rajasthan and Punjab on a spot basis in the open market. Gradually it will seek to move to long-term contracts.