Asian stock markets continued yesterday's winning streak and have opened the day in the green. Benchmark indices in Taiwan (up 1.8%), Korea (up 1.2%) and Hong Kong (up 1.0%) are leading the pack of gainers. However, markets in Indonesia and Malaysia have opened the day in the red. The Indian stock markets have opened the day on a positive note as well. Stocks in the metal and realty space are leading the gains.
The BSE-Sensex is trading higher by around 116 points (0.6%), while the NSE-Nifty is up by around 25 points (0.4%). Midcap and small cap stocks are trading in the positive as well, with the BSE Midcap and BSE Small cap indices up by about 0.4% each. The rupee is trading at 44.29 to the US dollar.
Energy stocks have opened the day on a tepid note. HPCL, BPCL and IOC are all trading in the red. However, ONGC and Oil India are witnessing buying interest. The turmoil in the Middle East has led to the oil prices scaling new heights. These higher prices have added to the debt burden of the oil marketing companies (OMCs). The under recoveries due to the higher oil prices have led to a debt burden of a whopping Rs 2,000 bn. The under recovery arises as the OMCs have to sell the diesel, kerosene and cooking gas at the subsidized rates. As a result, when oil prices trend higher, there is an under-recovery of the prices as there is a huge differential between the cost and the selling price. The debt burden for the OMCs has been on the rise. It has gone up from the level of Rs 490 bn in 2006-07 to its current levels. The matter is being taken up by the finance ministry. However, if the oil prices continue to be where they are currently and the government does not de-regularize the prices, one of the two things would happen. Either the OMCs would continue facing higher debt burdens. Or the government's subsidy bill would keep going up.
Power stocks have opened the day on a positive note. Tata Power, NTPC and JSW Energy are leading the pack of gainers. There has been a burgeoning gap between estimated demand and supply of domestic coal. This has been a major concern for power producers in the face of rising demand for electricity. As a result, the government has now asked power generators to ensure that their upcoming projects use more imported coal. The problem with the equipment at existing plants is that they cannot use more than 15% imported fuel in their coal supply. It causes pollution and also corrosion of boilers. The Central Electricity Authority (CEA) has told central and private power utilities and equipment manufacturers to use boilers and auxiliaries that are designed for blending at least 30% or more imported coal.