Monday, February 16, 2009

Dashes Expectations leads to Crash in NSE and BSE

Disappointed with the interim budget presented today, the Indian markets steadily declined until the end of the trading session thus closing deep in the red. The Sensex closed lower by around 340 points, while the Nifty closed lower by around 100 points. Stocks from the mid-cap and small-cap indices too ended the day on a negative note. Stocks from the metal and capital goods sectors led the pack of losers today. Rupee closed at 48.79 against the US dollar. The Asian markets ended on a mixed note today. The European indices are currently trading weak.

As per a leading business daily, demand for power has fallen by around 600 MW during the period April 2008 to January 2009 as against the corresponding period last year when it had increased by 4,500 MW. The demand for power declined from 106,943 MW to 106,336 MW during the period under consideration on account of slowdown in the industrial consumption due to the current economic crisis. It may be noted that the Ministry of Power had estimated the electricity demand to increase to 859 bn units by 2012, if India were to maintain an 8% GDP growth rate, while to maintain a 7% GDP growth rate it would require an electricity demand of around 820 bn units. However, currently India’s power demand stands at around 730 bn units as against a generation of around 666 bn units of power annually. Any further weakening of demand for power may adversely affect power equipment manufacturers like L&T and BHEL, as the healthy demand for power equipment in the past few years has been largely due to the continuously increasing demand for power in the country. The stocks of L&T and BHEL ended the day on a weak note.
As per a leading business daily, ONGC and other state-run explorers will pay refiners Rs 320 bn as subsidies for selling fuels below cost for FY09. This amount will be part of the compensation for PSU refiners like IOC and HPCL which may lose revenue of about Rs 1 trillion during the year. In January 2009, the PSU retailing companies were making a profit on petrol and diesel. However, those gains were wiped out by losses on kerosene and cylinder of LPG. The refiners will get bonds from the government to cover the remaining amount for which all accounts will be settled at the end of FY09. The stock of ONGC, HPCL and IOC ended the day on a weak note.

As per the interim budget announced today, despite the severe global financial crisis, India recorded a 45% YoY growth in foreign direct investment (FDI) between April and December 2008. It received an FDI inflow of US$ 23.3 bn during the period. This even though during FY08, India's FDI inflow was already a robust US$ 32.4

NTPC's nuclear foray
The markets continued to trade in the negative territory on account of sustained selling activity witnessed during the previous two hours of trade. Stocks from the power, engineering and construction sectors are leading the pack of losers, while select stocks from the media, auto and FMCG sectors are trading higher. The overall decline to advance ratio is poised at 2:1 on the BSE.

As per a leading business daily, the government may soon put in place norms for monitoring prices of costly imported patented medicines for diseases such as diabetes, arthritis, obesity, cancer and heart diseases. Once finalised, the new norms will see the government negotiating prices for imported medicines for identified diseases based on prices of the same medicine in other markets and the estimated cost of production. The companies would be expected to voluntarily keep prices lower in India for other imported patented drugs. Though this move is aimed at increasing the affordability of these medicines for consumers, the same would prevent MNC companies such as GSK Pharma, Eli Lilly, Roche, Aventis and Pfizer from selling their drugs at a huge premium in the country.

Power stocks are trading lower led by Reliance Power, Power Grid Corporation and NTPC. As per a leading business daily, NTPC and Nuclear Power Corporation of India (NPCIL) has signed a MoU to form a joint venture (JV) company that will set up nuclear power projects in India. NTPC would hold around 49% stake in the JV, while the remaining would be with NPCIL. It may be noted that NPCIL is the sole agency generating nuclear power in the country with a capacity of about 4,120 MW. Total nuclear power generation in India is estimated to be around 20,000 MW by 2020. This move would help NTPC to gain presence in the nuclear power segment which is expected to witness strong focus by the government going forward.

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