Markets weak on profit booking

Mon, 8 Nov 11:30 am

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Indian indices continued to languish in the red on selling in heavy weights over the previous two hours of trade. Stocks from IT and PSU space are trading weak while stocks from the metal and healthcare space are trading firm.

The BSE-Sensex is trading down by 97 points while NSE-Nifty is trading 24 points below the dotted line. BSE-Midcap is down by 0.2% while BSE-Smallcap index is trading flat. The rupee is trading at 44.24 to the US dollar.

Energy stocks are trading mixed with Reliance Natural Resources and Reliance Industries Limited (RIL) trading firm while HPCL and IOC are trading weak. As per a leading financial daily, RIL may lose authorization for the proposed 1,100-km pipeline from Kakinada in Andhra to Haldia in West Bengal. This may happen as the company has failed to make progress on this project. In 2007, Reliance Gas Transportation Infrastructure Ltd (RGTIL), a RIL group company received authorization from the ministry of petroleum and natural gas for this truck pipeline. However, industry experts felt that it did not make sense for RIL to construct this pipeline as a quantity of at least 30 m standard cubic metres of gas per day is required to make this project feasible. RIL can move its entire production from its D6 block in the Krishna-Godavari basin to the east west pipeline and GAIL's Hazira-Vijaipur-Jagdishpur pipeline making this project for the company unnecessary.

This project may be instead given to Andhra Pradesh Gas Infrastructure Corporation, a joint venture of AP Industrial Infrastructure Corporation and AP Genco. The Andhra government is keen to expand the gas pipeline network in the state and to Vizag. Vizag is an important industrial centre, with the presence of companies such as Hindustan Petroleum Corporation, Coromandel Fertilizers, Hindustan Zinc, Visakhapatnam Steel Plant, etc.

Power stocks are currently trading weak led by NTPC, Torrent Power and Tata Power. A leading business daily has reported that power major NTPC is looking at increasing its generation capacity by 13,000 MW (megawatts) by the end of the eleventh five-year plan, which ends in 2012. As per the company's senior management, NTPC plans to contribute to 20% of India's plan of adding 68,000 MW during the rest of the period. Further, the company has also set itself an ambitious target of having an installed capacity of 75,000 MW by 2017. At present, the company has a generation capacity of about 32,000 MW. Not so long ago, the company had released its plan for the year 2032. By then, it plans to take its generation capacity to a mammoth 128,000 MW, which is nearly four times its current installed capacity. This plan is possibly an extension of the company's target of achieving 75,000 MW by 2017. NTPC has slipped up of late in executing its plan on time. As such, we see the extension of the target as a way to buy time. This we do not see as making much sense given that such a huge target requires perfect execution capabilities and falling in line of several issues like fuel supply and pricing, and land availability among others.