Stocks In Action For 5th September 2012

Government auditor CAG today slapped a number of companies including some listed and non listed companies over various reasons. Among the listed companies, SAIL was pulled up for investing in an unutilised pipe-coating plant, commissioned at a cost of Rs 56.36 crore, without assessing market potential and giving Rs 23.82 crore extra by placing orders for more oxygen even when demand could be met from the existing guaranteed off-take, among others, according to Business Standard. CAG said due to this violation of procurement procedure, the company incurred a loss of Rs.4.4 crore and loss of margin of Rs.13.41 crore. The stock price of SAIL is expected to be volatile and see a downward bias today.

Among other companies, even Coal India was brought into the picture by CAG for incurring avoidable expenditure of Rs.20 crore by initiating prudent action. “Due to non-convention of residential connections from industrial to domestic, the company has failed to avail lower electricity tariff applicable for domestic consumption and thus incurred an avoidable expenditure of Rs 7.62 crore during 2007-08 to 2010-11," CAG said. CAG also slammed NALCO for possible ‘governance deficit’ leading to inadequacies and delays in its Rs.4091.51 crore capacity expansion project. Though these amounts are small as compared to the size of these firms, bringing out inefficiencies would certainly see some effect on them.

Tata Motors today said it has tied up with J&K Bank for financing its passenger vehicles segment. With the wide spread operations of the financier, Tata Motors will definitely be in a leveraged position in terms of reaching out geographically and simply on numbers. Stocks of both these companies are expected to see volatility with an upward trend on being mutually beneficially through this alliance.

Bharti Airtel today said it has entered into a synergy with South Africa’s Sanlam Group for the distribution of insurance and health funding products. The agreement covers 7 countries and the company believes this help enable Airtel to enhance the value offered to loyal customers since they will be offering a wide range of products and services. Bharti Airtel’s stock may see volatility today with an upward trend.

There is increasing speculation over a fuel price hike likely this Friday. Media reports have stated an official from the oil ministry to have called the hike imminent. Considering the recent hike in international prices and the unchanged domestic prices, this move seems to come across likely, soon. With this, OMC stocks will see an upswing. Stocks of RIL, Essar Oil, IOC, HPCL and BPCL may remain volatile till the announcement of any move in fuel prices.