Indian equities recover from intraday lows; trade around psychological levels

Profit booking seems to have stopped in the Tuesday afternoon trades as the frontline indices which appeared to be inching closer towards the neutral line have clawed back to important psychological 5,100 and 16,950 levels. The recovery was largely led by gains in software and technology shares which saw renewed buying interests after the recent steep declines as mergers and acquisitions reports from the US revived sentiments. The only chink in the armor in the BSE sectoral space was the high beta Realty counter which plummeted by close to two percent after heavyweights like DLF and HDIL got battered. Meanwhile, commerce ministry released India’s inflation numbers for the month of July which slowed to 9.22% against 9.44% in June despite the spillover of the domestic fuel price hike in May. However, it failed to fillip domestic sentiments as marketmen speculated that the reading may be insufficient for the RBI to pause its liquidity tightening measures as the moderation in the rate of price rise seemed largely insignificant. On the global front, the European markets got off to a somber opening as investors remained reluctant to take significant new positions ahead of a meeting between French and German leaders to discuss the European debt crisis. Sentiments in Europe were also undermined after the release of German GDP numbers for the second quarter which indicated that growth in Europe's largest economy had slowed sharply as it rose merely 0.1% in the second quarter from the first quarter and by 2.7% in annual terms.

Meanwhile, the broader markets traded without any fervor with moderate cuts, underperforming their larger peers. The bourses gained on good volumes while the market breadth on BSE was in favor of declines in the ratio of 1176:1372 while 113 scrips remained unchanged.

The BSE Sensex is currently trading at 16,935.75 up by 96.12 points or 0.57% after trading as high as 17,035.49 and as low as 16,884.70. There were 21 stocks advancing against 9 declines on the index.

The broader indices were trading on a weak note; the BSE Mid cap index slipped 0.51% and Small cap shed 0.25% respectively. 

On the BSE sectoral space, TECk up 1.20%, IT up 0.69%, CG up 0.74%, CD up 0.55% and Oil & Gas up 0.43% were the major gainers while Realty down 1.87% was the only loser on the index.

Bharti Airtel up 2.59%, BHEL up 2.21%, TCS up 1.87%, Sterlite up 1.68% and Coal India up 1.49% were major gainers on the Sensex, while DLF down by 1.89%, HDFC down 1.49%, Maruti Suzuki down 1.09%, Tata Steel down 0.85% and JP Associates down 0.65% were the major losers on the index.

Meanwhile, Indian government will slash the allocation of coal to companies that are not using the dry fuel for their promised projects. The government will cut the coal allocation of the non-serious power, steel and cement companies and would allocate the same to the companies whose projects are in the advance stage. 

This decision of government has come in wake of need to provide additional fuel to the power plants which are suffering from the coal shortage. Around 17,000 Mega Watt (MW) capacity projects are stuck due to coal shortage and another 5,593 MW power plants approved in 2009-10 are producing only 45 % to 50 % of their actual capacity.

A senior coal ministry official said that the stock taking becomes important in view of the coal crisis. The standing committee on long-term linkages would meet in October to review the projects. We have received complaints about companies that have taken linkages but have no end use project or have not achieved required milestones.'

Following the meeting of standing committee, the coal ministry would send notices to companies that are not utilizing or underutilizing the allocated coal. If companies are not able to provide convincing reasons then ministry would cancel the allocated coal. Earlier in the state of the current financial year, the coal ministry had canceled 15 mining licenses of coal and lignite blocks holding 1.5 billion tonne reserves.

The license of allocated coal and lignite blocks were canceled as the companies were not able to meet the milestones. The coal linkages are made to power plants cements and sponge iron units after examining factors like quantity and quality, time frame, location of consuming plants and transport logistics.

For the current financial year, coal ministry estimates 137 million tonne coal shortage, the government owned Coal India, which has reduced its production targets for the current financial year to 454 million tonnes from 461.5 million tonnes in last fiscal year. The coal India has reduced its production target mainly due to issue of forest clearance to coal mines.

Many Indian power companies are importing coal to meet the dry fuel requirement, however, prices of coal also has increased in international market, which is matter of concern for the big power stations, setup by the private companies.

The S&P CNX Nifty is currently trading at 5,097.00, higher by 24.05 points or 0.47% after trading as high as 5,132.20 and as low as 5,083.60. There were 29 stocks advancing against 21 declines on the index.

The top gainers of the Nifty were BHEL up 2.69%, BHarti Airtel up by 2.65%, Ambuja Cement up 2.44%, TCS up 2.39% and Sterlite up 1.91%.

Kotak Bank down 2.51%, GAIL down 2.17%, PNB down 1.87%, DLF down 1.77% and SAIL down 1.54% were the major losers on the index.

Asian markets traded on a mixed note, Shanghai Composite plunged 0.86%, Hang Seng shed 0.27%, Straits Times slipped 0.23% and Taiwan Weighted sank 0.27%.

On the other hand, Nikkei 225 rose 0.23%, Jakarta Composite added 0.16%, KLSE Composite inched up 0.04% and Seoul Composite rocketed 4.83%.

The European markets traded on bleak note as France’s CAC 40 eased 0.94%, Germany's DAX shed 1.20% and London’s FTSE slipped 0.73%.