Trades Flat, Power Stocks Erase Gains

As we expected in our morning notes, the Indian markets showed a marginal positive opening. Over the course of the morning, though, the markets have turned flat.

The big announcement in the Power sector to restructure the state electricity boards’ debts has kept the Power stocks up, though they have erased some of their morning gains. Investors should note that though the debt restructuring will help distribution companies to buy more power, the chronic issue of coal supply has not yet been addressed. Besides, the CAG allegations are still haunting the generation companies. As the CBI is actively inquiring into the alleged coal blocks, coal supply may remain an issue going ahead. Some of the coal blocks have been cancelled by the government, and hence, investors would need to take a wait-and-watch approach.

The Asian markets are sending negative signals to Indian equities at the moment. Hang Seng is down 0.12%, while Nikkei and Shanghai are lower 0.3% each. Renewed concerns on the global fundamentals have erased the gains that the indices had seen.

In the Indian equity markets, FMCG index is currently the top gainer, up by 0.6%. The defensive Healthcare stocks are also gaining momentum, with the index higher by 0.52%. The Power and CG indices are also positive on hopes that the SEB debt restructuring will help the stocks in both sectors garner better revenues and earning going ahead. The Metals index, though, is down 1.2% at this time.

Among the Sensex stocks, Cipla has gained 2.3%. Private housing lender, HDFC has also gained 1.5% at this morning. Among the power sector, NTPC and Tata Power and in the CG L&T and BHEL has shown gains. Infosys and TCS are also in the gainers list. The metal company, Jindal steel which was on the buyers list yesterday has lost 2.8% while Tata steel has also lost 1.6%.Tata Motors, HDFC Bank, Bharti Airtel, Sterlite and Hero Motocorp all have lost over 1%.

In other stocks, Neyveli Lignite has gained 2.5% as the company remains shielded from issues related to coal (the company has lignite-based production plants) and may emerge as a big beneficiary of the current power sector reforms. Pantaloon Retail has also gained over 1%. Torrent Power, SJVN and JP Infratech have all continued their upward momentum. The shares of Godrej Consumer Products (GCPL) have gained 0.7% over the news that it has entered the second phase of its business with the Darling Group. On the other hand, the stocks of Cairn India, JP Hydro Power, IRB, etc. have lost over 3% each today.

The advance-decline ratio is showing one decline for every one advance in the stocks.

Ahead today, we expect the market to remain volatile due to concerns related with the global fundamentals.