Asian stock markets have opened the day on a mixed note. While stock markets in Japan (down 0.4%), Taiwan (down 0.4%) and Singapore (down 0.4%) are trading in the red, markets in China (up 0.8%) and Indonesia (up 0.3%) are trading firm. Indian stock markets have opened the day in the red on the back of selling pressure faced by stocks in the auto and realty space. However, capital goods and FMCG stocks are trading in the green.
The BSE-Sensex is trading lower by around 90 points (0.5%), while the NSE-Nifty is down by around 25 points (0.4%). Mid and small cap stocks are also trading weak, with both the BSE Midcap index and BSE Small cap index down by 0.5% and 0.1% respectively. The rupee is trading at 44.16 to the US dollar.
Energy stocks have opened the day on a weak note with HPCL, BPCL and ONGC leading the losses. Steel plants, refineries and petrochemical units that source gas from Reliance Industries' (RIL) KG-D6 fields will see their supply get disrupted. That is if the government has its way. As per a new mandate, the government has passed an order asking RIL to first supply fuel to the priority fertilizer and power sectors. The reason for this is that the government is panicking in the light of the decline in output from the said field. RIL produced 47.5 m cubic meters of gas per day in the week ended March 26th, 2011. This is down from 61.5 m cubic meters produced during the same period a year ago. As a result, RIL has gone ahead with pro-rata allocation of gas to all its customers including the fertilizer and power plants. The government wants to ensure that the priority sectors receive the fuel in the right quantities. Lower supply to fertilizer plants would mean that the plants would have to source the higher cost fuels, which would send the fertilizer subsidies soaring. Also, lesser fuel for power plants would mean lower generation.
Steel stocks have opened the day on a mixed note with Sterlite Inds and Tata Steel trading firm, while SAIL and Jindal Steel are trading in the red. SAIL is planning to commence a joint venture with Kobe Steel of Japan. The joint venture involves the revival of the Jagdishpur unit of the former Malvika Steel which SAIL acquired in 2009. SAIL plans to invest about Rs 30 bn in this proposed venture. The project will involve setting up of a sponge iron making facility, electric arc furnace and downstream products such as specialty and auto-grade steel.
The joint venture is expected to be finalised in the next two months after SAIL completes a detailed analysis of the project. The public sector firm also plans to incur a capex of about Rs 150 in the current fiscal year 2011-12. This will involve commissioning a 3 m tonne plant at Burnpur in West Bengal. The company targets annual ore production of 5 m tonnes a year within the next three years. Eventually, it looks forward to scaling it up to 15 m tonnes.