Energy sector reforms boost Indian markets

Indian markets strengthened after opening positively and surged ahead on back of Government's gas and energy sector reforms and firm Asian stocks. Sentiments were high after the Government on Thursday approved nearly doubling of natural gas prices to $8.4, triggering a surge in oil gas sector stock prices. A firming trend in the Asian region following overnight gains in the US markets too fuelled the rally on the domestic bourses. The rally was led by positive global cues after three US Federal Reserve officials sought to downplay market fears that the central bank would soon ease its unprecedented bond-buying stimulus programme known as quantitative easing.

On the global front, all the Asian markets were trading higher led by rally in Japanese market after the nation’s core consumer prices came flat in May compared with a year earlier, marking the first time they have stopped falling in seven months. Back home, the traders were seen piling up positions in Oil & Gas, PSU and Capital Goods while selling was seen in IT, Consumer Durables and Teck sector. In scrip specific developments, Oil & Gas stocks such as ONGC, Reliance Industries and Oil India surged after the government on Thursday almost doubled the price at which natural gas will be sold to producers of power, fertilizer, minerals and steel. The price of gas could go up to $8.4 per million metric British thermal units (mmBtu), effective 1 April next year, from current $4.2 mmBtu.

In scrip specific actions, Dewan Housing Finance (DHFL) soared after the third largest housing finance firm in the country, has entered into negotiations to acquire majority stake in DLF Pramerica Life Insurance Company, a joint venture with US-based Prudential Financial .Bajaj Finserv surged after the company said that it is in the race for applying for banking license. It is the holding company for the financial services businesses of the Bajaj Group.

Meanwhile, the NSE Nifty and BSE Sensex were trading just above their psychological 5,700 and 19,100 levels respectively. The market breadth on BSE was showing positive trend with advances to declines in ratio of 1216:467. The BSE Sensex is currently trading at 19180.68, up by 304.73 points or 1.61% after trading in a range of 19209.09 and 19093.18. There were 25 stocks advancing against 5 declines on the index. The broader indices were trading on green; the BSE Mid cap index was up by 1.16% and Small cap index was up by 1.22%.

The top gaining sectoral indices on the BSE were, Oil & Gas up by 3.24%, PSU up by 2.66%, Capital Goods up by 2.63%, Metal up by 2.36% and Power up by 1.85%, while IT down by 0.72%, Consumer Durables down by 0.64%, Teck down by 0.24% and FMCG down by 0.16% were the sole losers on the BSE.

The top gainers on the Sensex were ONGC up by 4.94%, Coal India up by 4.08%, BHEL up by 4.02%, Tata Motors up by 3.54% and Jindal Steel up by 3.35%. On the flip side, Wipro was down by 0.95%, Hindustan Unilever was down by 0.42%,Infosys was down by 0.37%,  TCS was down by 0.24% and Cipla was down by 0.12% were the only losers on the Sensex.

Meanwhile, Delivering a potential boost to the revenue of gas producers, the government has approved doubling of natural gas prices from the present $4.2 per million British thermal unit (mbtu) to $8.4 per mbtu from April 1, 2014. It is the first revision in gas prices in 3 years and will likely result in rise in power tariffs and fertilizer cost and will make CNG transportation more expensive. However, the price will still be lower than that of imported natural gas, which costs around $14.17 per mbtu.

The Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Manmohan Singh approved Rangarajan panel formula for pricing of gas and would be applicable for next five years. As per the Rangarajan formula, long-term and spot liquid gas (LNG) import contracts as well as international trading benchmarks will be used to arrive at a competitive price for India. The natural gas prices will be revised on the quarterly basis and for the April-June quarter of 2014, it comes to $8.4 per mbtu.

Further, the new price will be uniformly applicable to all public and private sector producers alike. The increase in gas prices will directly benefit these local producers. Earlier, Oil minister M V Moily said that the revision in rates was a contractual requirement which will help remove policy uncertainties and spur investments, citing that the current rate of $4.2 per mbtu is uneconomical to produce gas from deep-sea fields.

The CNX Nifty is currently trading at 5,779.80 up by 97.45 points or 1.71% after trading in a range of 5,784.30 and 5,749.50. There were 44 stocks advancing against 6 declines on the index.

The top gainers of the Nifty were ONGC up by 5.07%, BPCL by 4.25%, BHEL up by 4.20%, Coal India up by 4.02%, and Tata Motors up by 3.37%. On the flip side, HCL Tech down by 2.18%, Ranbaxy down by 1.53%, Infosys down by 0.74%, Hindustan Unilever down by 0.33% and TCS down by 0.32% were the major losers on the index.

The Asian equity indices were trading in green; Shanghai Composite rose 15.26 points or 0.78% to 1,965.27, Hang Seng surged 263.61 points or 1.29% to 20,703.69, Jakarta Composite soared 77.97 points or 1.67% to 4,753.72, KLSE Composite jumped 15.23 points or 0.87% to 1,766.80, Nikkei 225 zoomed 454.84 points or 3.44% to , Straits Times increased 30.15 points or 0.95% to 3,147.57, KOSPI Composite added 25.27 points or 1.38% to 1,860.28  and Taiwan Weighted was up by 77.83 points or 0.99% to 7,961.73.