Indian stock markets open weak

Mon, 19 Aug 09:30 am

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Barring Japan (up 0.1%) and Singapore (up 0.1%), the major Asian stock markets have opened in the red with stock markets in Indonesia (down 3.7%) and South Korea (down 0.3%) leading the losses. The Indian stock market indices have opened the day on a weak note. Barring software, all sectoral indices have opened in the red with the stocks in capital goods and metal space leading the losses.

The Sensex today is down by around 173 points (0.9%), while the NSE-Nifty is down by around 70 points (1.3%). Midcap and small cap stocks have opened in the red as well with the BSE Mid Cap and BSE Small Cap indices down by around 1.0% and 0.5% respectively. The rupee is trading at Rs 62.34 to the US dollar.

Mining stocks have opened the day in the red with Sesa Goa Ltd and NMDC Ltd leading the losses in the sector. As per a leading financial daily, the coal ministry has proposed a new method to conduct auctioning of coal blocks for allocation to private companies. The new method will be based on a revenue sharing model under production-linked payment versus the earlier one that included an upfront lump sum payment by the companies. The new method could be the basis to allocate 2.7 bn tonnes of reserves in 22 blocks next month. Under the new method, the bids will be invited based on a production-linked multiple. It is expected to minimize the risk for the developer as compared to the earlier method. In order to ensure the minimum commitment of the winning bidder to develop the block, the coal ministry has prescribed a basic upfront payment which will be 10% of the intrinsic value of the block. The latter would be determined from the average selling price over past five years. Besides, the ministry has preferred a revenue sharing criterion over profit share for selection of the bidder. To further ensure the bidder's commitment in the production-linked system, the companies would be subjected to a minimum work programme (MWP). This will include a detailed exploration and preparation of a geological report, apart from a performance guarantee equal to estimated exploration expenses. As long as the MWP has been carried out , the bidder would be allowed to give up the block after detailed exploration without any penalty. Apart from this, the bidder will have to get environmental clearances for mining.

Energy stocks have opened the day on a mainly in the red with Gujarat Gas and Bharat Petroleum Corporation Ltd. (BPCL) leading the losses in the sector. As per a leading financial daily, in order to arrest the waning production from the Panna field, the state run Oil and Natural Gas Corporation (ONGC)and its consortium partners Reliance Industries Ltd (RIL) and BG Exploration and Production India, are jointly investing Rs 9.5 bn to drill more wells. While ONGC has a participating interest of 40% in the field, BG Group and RIL enjoy a 30% stake each. During the first quarter of the current fiscal year, the crude oil and natural gas production from the field have declined by 19% and 5% on a year on year (YoY) basis. As per a senior ONGC official, the consortium plans to drill a total of 11 by the end of this year. This is likely to result in a total output of over 8,500-9,500 barrels of oil per day. A similar drilling programme is being envisaged for the Mukta and Tapti fields as well.