The major Asian stock markets have opened the day in the red with stock markets in Japan (down 1.6%) and Indonesia (down 1.0%) leading the losses. The Indian share market indices have opened the day on a weak note as well. Barring FMCG, all sectoral indices have opened in the red with the stocks in the capital goods and auto space leading the losses.
The Sensex today is down by around 115 points (0.5%), while the NSE-Nifty is down by around 35 points (0.6%). Mid cap stocks have also opened in the red with the BSE Mid Cap index down by around 0.1%. However, the BSE Small Cap stocks have opened on a flat note. The rupee is currently trading at Rs 61.65 to the US dollar.
Energy stocks have opened the day mainly in the red with Jindal Drill Ltd and Petronet LNG Ltd leading the losses. As per a leading financial daily, Oil and Natural Gas Corporation's (ONGC) Chairman and Managing Director Mr. Sudhir Vasudeva has stated that the net price realizations on the sale of crude oil have been declining due to subsidy discounts on crude oil to oil marketing companies and have almost fallen to the cost of oil production. The management has stated that ONGC needs a minimum realization of US$ 65 per barrel to keep investing in oil and gas hunt. As against a cost of production of US$ 40 per barrel of oil (without considering return on investment), ONGC's net price realizations on crude stood at US$ 40.17 per barrel and US$ 44.84 per barrel in the first and second quarters respectively of the current fiscal year (FY14). The management has stated that this leaves the company with small margin and hardly any investible surplus. Since most of its production is from mature and ageing fields that need huge capital to raise output, a lot of development plans have become unviable at the current pricing. Since 2004, ONGC has paid around Rs 2,428 bn in fuel subsidy, but for which its net profit would have been higher by Rs 1,403 bn. As per the management, this amount is enough to buy properties producing 10-15 million tonnes of oil per annum (mtpa). The management has further said that if the trend continues, entire oil production from nominated blocks (more than 80% of ONGC's production) will become unprofitable.
Power stocks have opened on a mixed note with GVK Power and Infrastructure Ltd and JSW Energy Ltd leading the losses. However, KSK Energy Ltd and Satluj Jal Vidyut Nigam Ltd (SJVN) have opened on a firm note. As per a leading financial daily, the government has fixed the issue price for the sale of Power Grid Corporation of India Ltd (PGCIL) shares at Rs 90 apiece, the upper end of the band. The price band for the FPO was Rs 85-90 apiece. The offer is expected to fetch about Rs 70 bn crore. The follow-on public offer (FPO) of the company last week witnessed bids for 530 crore shares, or 6.74 times the 78.7 crore shares on offer. As per the company's filing to the BSE, retail investors and eligible employees will get a discount of Rs 4.50 a share on the issue price. The Cabinet had approved the FPO last month. The offer comprised 13% fresh equity by the company and 4 % stake sale by the central government. The government will get about Rs 16 bn from selling 18.51 crore shares, while the company will raise around Rs 54 bn from its offer of 60.18 crore new shares. After the issue, the government's holding in the company will come down to 57.89 % from the present level of 69.42 %. The retail portion of the FPO, which closed on December 6, was subscribed 2.17 times. Qualified institutional buyers (QIBs) bid for 9.09 times the shares reserved for them and non-institutional buyers bid for 9.7 times the shares they were offered.