Pharma and Metal Stocks Lead the Losses

Tue, 10 Nov 11:30 am

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After opening the day in the red, the Indian Indices have failed to inch upwards and have continued to trade negatively. Sectoral indices are trading on a discouraging note with stocks from the pharma, oil & gas and metal sector witnessing maximum selling pressure.

The BSE-Sensex is trading down 131 points (down 0.5%) and the NSE- Nifty is trading down 50 points (down 0.6%). The BSE Mid Cap index is trading lower by 0.3% while the BSE Small Cap index is trading higher by 0.3%. The rupee is trading at 66.33 to the US$.

Power stocks are trading on a mixed note with GVK Power and Infra leading the gains and Gujarat Industries Power leading the losses. As per a leading financial daily, Tata Power will carve out a separate fully-owned subsidiary - Tata Power Renewable Energy Ltd (TPREL) - in order to enhance its focus on clean energy. This will be initiated by aggregating its renewable energy assets.

As the company stated, the proposed structure involves carving out of 500 MW of renewable assets of the company to its subsidiary Tata Power Renewable Energy Ltd (TPREL) and its subsidiaries. Also, other existing waste heat recovery based power plants of the company in certain JVs (joint ventures) are also intended to be aggregated. The company aims at focus mainly on renewable energy capacity addition and restructuring of assets.

The proposed move will be implemented by way of a Scheme of Arrangement under Sections 391 and Section 394 and other applicable provisions of the Companies Act, 1956.

The current installed capacity of TPREL stands at 220 mega watts (MW) with 250 MW of renewable energy projects under construction. Post the re-structuring the total installed capacity of TPREL will be about 720 MW with additional 250 MW under construction.

Tata Power has recently reported its results for the quarter ended September 2015. The company reported a growth in consolidated revenues by 7% on a YoY basis. The revenues expanded on the back of increase in generation of electricity which grew by 6.6% YoY. The operating profits of the company reported a growth of 19% owing to lower fuels costs and higher output. The company reported a profit of Rs 2473 million during the quarter as compared to a loss of Rs 777 million in the year ago period.

Presently the stock of Tata Power is trading flat.

Stocks in the mining space are trading negatively with Hindustan Zinc and Vedanta Ltd bearing the maximum brunt. According to an article in Economic Times, the government has reported that coal imports have dropped for the fourth consecutive month to 14.52 million tonnes (MT) during October. On a YoY basis, the import of coal has come down by 5.1% during the month of October.

The country's coal import during the month of September 2015 stood at 12.64 MT as against 17.30 MT in the same month last year.

Furthermore, a total reduction of 4.56% in coal imports was recorded during the April-October 2015 period on a YoY basis. In value terms, it was less by Rs 82 billion.

This is in line with the initiatives taken by the government in increasing the country's coal production. The government is eyeing to achieve 1.5 billion tonnes of coal production by 2020. Of this 1.5 billion tonnes, one billion tonnes is expected from Coal India which accounts for over 80% of the domestic coal production.

We have shared some views on the obstacles that stand ahead for the coal sector in one of our articles. It points out what developments are planned and what needs to be done in order to revive the coal sector. You can read it here.