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Major Asian stock markets have opened the day on a positive note with the stock market in Hong Kong and Japan are trading higher by 1% and 0.3% respectively. Stock Markets in Europe ended their previous session deep in red with benchmark indices in Germany ending the day lower by 2.2%. The rupee is trading at 66.61 per US$.
Indian stock markets have opened the day on a positive note. The BSE Sensex is trading higher by 125 points (up 0.5%) and the NSE Nifty is trading higher by 30 points (up 0.3%). Both, BSE Mid Cap and BSE Small Cap are trading higher by 0.6% and 0.5% respectively.
As per an article in Livemint, while on one hand where the renewable energy capacity additions are taking place at a robust place, the off-takes from the distribution companies (DISCOMS) is far from encouraging.
This puts into jeopardy the massive renewable projects that are scheduled to come up going forward. Owing to this, stranded capacities could build up in-turn hampering the return ratios. Reportedly, solar power offtake is seeing curtailment in the state of Rajasthan and Tamil Nadu.
The DISCOMS are instead buying a cheaper power from the power exchange market at spot prices. The spot price at the power exchange market is hovering somewhere around Rs 2.41/ KWH.
Whereas, tariffs in some of the agreements that these DISCOMS have signed with renewable developers are as high as Rs 7/KWH. Burdened with a huge pile of losses, the DISCOMs are increasingly shifting to purchase cheaper power from the power exchanges. This could hurt the solar developers.
Recently, we had written an article stating the major flaw in the US$ 100 billion solar sector. Click here to read this interesting piece.
In another news update, smaller firms remained on a weak footing in the June quarter results as compared to large and medium sized companies.
Reportedly, firms with net sales of below Rs 1 billion reported a 12.3% decline in revenues on a cumulative basis. Whereas, companies with net sales of over Rs 10 billion reported a 2.1% growth in the revenues.
Further, the subdued performance is also reflected in the bank credit data, wherein bank credit to small and micro industrial units has declined.
However, despite the poor performance of these companies, the valuations of small-cap companies aren't cheap and are trading at expensive valuations.
Going forward, markets are likely to increasingly shift focus to earnings quality and fundamentals. Stocks with poor fundamental quality which have surged purely on market sentiments will face the music.
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