Sensex Trades in Deep Red; Power Stocks Witness Selling

Tue, 29 Aug 01:30 pm

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After opening the day marginally higher, share markets in India have continued the momentum and are trading above the dotted line. All sectoral indices are trading on a negative note with stocks in the power sector and stocks in the consumer durables sector leading the losses.

The BSE Sensex is trading down by 290 points (down 0.9%), and the NSE Nifty is trading down by 92 points (down 0.9%). Meanwhile, the BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is trading down by 0.4%. The rupee is trading at 64.02 to the US$.

In news about the economy, according to a leading financial daily, India's steel sector witnessed growth in the January-July period of 2017.

Domestic steel production increased by 5.4% in the period under review according to the report from World Steel Association (WSA), which compiles global steel production data from 67 countries reporting to it.

For the first seven months of 2017, global steel production went up to to 977.3 mt, up 4.6% from 933.97 mt in the same period of 2016. In July 2017, global steel production stood at 143.4 mt, showing a rise of 6.3% over 134.8 mt in July 2016. Out of this China, the world's leading steel producer reported an output of 74 mt last month, up 10.3% over July 2016, when the country had produced 67.1 mt.

India's crude steel production grew 3.5% to 8.4 million tonnes. India's steel output stood at 8.1 mt in the same month last year. With this development, India strode past the US to become the third largest steel producer and is on track to replace Japan as the second largest steel producer in the world.

The growth in the steel sector is the core reason why the Index of Industrial Production (IIP) registered a growth in June this year.

Steel Sector Softens Slowdown in Manufacturing

The output of eight core industries slowed down in June as the total output moved up marginally by 0.4% as against an increase of 4.1% in May 2017.

Coal production, petroleum refinery production and cement production declined by 6.7%, 0.2% and 5.8% respectively in June 2017 as compared with the corresponding month of last year. However, growth in steel production, natural gas production meant that the sectors grew by 5.8% and 6.4% respectively. Thus, keeping the decline in manufacturing in check.

However, manufacturing data still indicates a subdued picture of industrial growth in June 2017. PMI data also highlighted a slowdown in growth across India's manufacturing sector during June 2017. As per the survey report, challenging economic conditions, water shortages and the implementation of the GST reportedly hampered growth.

Nevertheless, growth recovery is expected to accelerate in the second half of 2017. This will be on the back of a resumption of production after GST, normal monsoons and lower lending rates.

Moving on to news from the power sector. The government 5% offer for sale for NTPC today started out positively with over 86% of shares reserved for institutional investors getting subscribed by afternoon.

The government is selling over 412 million shares or 5% of its stake in state-run power producer NTPC, with an option to retain oversubscription of similar amount.

The share sale through an offer for sale (OFS) will happen over two days beginning from today.

At the floor price of Rs 168 apiece, sale of 5% stake would fetch around Rs 70 billion to the exchequer. In today's offer for sale (OFS), the government is selling over 329.8 million shares to institutional buyers.

Institutional investors had placed bids for 284 million shares, or 86% of the total size, by 12 noon, the NSE data showed. The OFS issue will open for retail investors tomorrow.

The stake sale is in line with the government's divestment target.

At the time of writing, NTPC share price was trading down by 4%.

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