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Sensex Opens Strong on Firm Global Cues; Metal & Realty Stocks Lead
Wed, 30 Aug 09:30 am

Asian stock markets are higher today as geopolitical tensions eased off after North Korea's missile launch. The Nikkei 225 is up 0.55% while the Hang Seng is up 0.76%. The Shanghai Composite is trading flat. Meanwhile, stock markets in America finished in green overnight.

Back home, share markets in India have opened the day on a firm note. The BSE Sensex is trading higher by 197 points while the NSE Nifty is trading higher by 72 points. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.9% and 1.2% respectively.

All sectoral indices have opened the day in green with stocks from metal sector and realty sector leading the losses. The rupee is trading at 64.02 to the US$.

In news from economic sector, as per Livemint, the Reserve Bank of India (RBI) has sent commercial banks a second list of at least 26 defaulters with which it wants creditors to start the process of debt resolution before initiating bankruptcy proceedings.

As per the reports, the accounts should first be resolved through any of RBI's schemes before 13 December, failing which cases should be filed against these companies under the Insolvency and Bankruptcy Code.

Reportedly, the defaulters' list comprises companies primarily in the power, telecom, steel and infrastructure sectors. Videocon Industries Ltd and Jaiprakash Associates Ltd are the two large companies among the list of 26 defaulters, accounting for over Rs 1 trillion of debt.

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Power stocks opened the day on a firm note with KSK Energy share price and Reliance Infra share price witnessing majority of the buying momentum. As per an a leading financial daily, the government's 5% stake sale in NTPC Ltd got off to a flying start with 86% of shares reserved for institutional investors getting subscribed by yesterday afternoon.

The market sentiment towards NTPC has continued to improve in the past 18 months, with the government's initiative on reforms in the power sector. Revival of state electricity boards (SEBs) will improve electricity demand which are NTPC's major customers, which earlier remained impacted due to the poor financial health of SEBs. Also, improved coal security and supply tie-ups for power plants also helped.

One must note that, the government has so far this fiscal raised over Rs 88 billion through disinvestment in six companies, including selling stake in L&T through Specified Undertaking of Unit Trust of India (SUUTI), and one share buyback.

After three years of underachieving its disinvestment targets, the government is back with a bang. This time, it wants to focus on strategic stake sales of non-public sector units (PSUs) and areas where disinvestment has so far been poor. FY15-16 saw no disinvestment through this route.

Centre Gets Cracking on Disinvestment

For FY18, the total budgeted disinvestment target has been set at Rs 725 billion. Of this, Rs 465 billion is expected to come from minority stake sales, buybacks, mergers, public listings, and the CPSE ETFs. Rs 150 billion is likely to come from strategic sales. And the balance Rs 110 billion from listing of state-owned general insurance companies.

However, if one is inclined to buy when the Government sells, we believe one should keep in mind the valuations at which one buys the stocks.

To know our view on some of these stocks and their valuations, please refer to the Stock Select service - our large cap recommendation service headed by Tanushree Banerjee.

NTPC share price opened the day down by 0.1%.

Moving on to news from energy sector. As per an article in The Economic Times, Indian Oil Corporation (IOC) will invest Rs 320 billion to ramp up its output by fiscal 2021 to meet the rising demand for petrochemicals, especially plastics and polymers.

This investment is part of the overall Rs 1.8 trillion capex planned for the next five to seven years. Indian Oil has already executed petchem projects worth Rs 208 billion and is close to commission a Rs 31.5 billion polypropelene plant at its 15-million tonne refinery at Paradip in Odisha.

The petchem business contributes a quarter of the most profitable PSU's profit, which rose to the highest at Rs 191.06 billion in fiscal 2017.

Meanwhile, in terms of natural gas distribution, where IOC is the second largest player, the company will be investing in gas infra to meet future needs of the nation by building terminals and and pipelines and pursuing city gas distribution.

IOC share price opened the trading day up by 0.9% on the BSE.

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