Sensex, Nifty move higher on low volumes: Thursday Closing Report

The Nifty has to sustain itself above 5,900 for the upward momentum to continue

Assurances from the US Fed that it will continue with its stimulus programme boosted markets across the globe, with India also joining the rally. The Nifty has to sustain itself above 5,900 for the upward momentum to continue. The National Stock Exchange (NSE) reported a lower volume of 48.25 crore shares and advance-decline ratio of 864:487.


The market witnessed  a gap up opening on comments from US Federal Reserve chairman Ben Bernanke that monetary policy would remain accommodative for the foreseeable future, even if the US unemployment rate hits the Fed's target of 6.5%. The comments also saw the Asian pack in the positive in morning trade today.


The Nifty opened 78 point higher at 5,895 and the Sensex resumed trade at 19,468, a jump of 174 points over its previous close. While the opening figure of the Sensex was also its intraday low, the Nifty’s low was at 5,888.


The optimism from the US saw all sectoral indices higher in morning trade led by banking, realty, metal, PSU and oil & gas. The gains helped the benchmarks hit their highs in noon trade. The Nifty rose to 5,949 and the Sensex surged to 19,724 at their respective highs.


The market continued remain firm in the second half of the trading session on support from the European markets which opened higher on assurance from the Fed. The benchmarks were range-bound in the positive till the end of the session.


The Nifty closed with a gain of 118 points (2.04%) to 5.935 and the Sensex ended the session at 19,677, a jump of 382 points (1.98%).


Although the broader indices also settled in the green, they lagged the Sensex today. The BSE Mid-cap index gained 0.675 and the BSE Small-cap index advanced 0.66%.


With the exception of BSE Consumer Durables (down 0.64%), all other sectoral indices settled in the green. The top gainers were BSE Metal (up 3%); BSE Bankex (up 2.48%); BSE Realty (up 2.44%); BSE Capital Goods (up 1.84%); BSE Oil & Gas (up 1.80%) and BSE PSU (up 1.77%).


Out of the 30 stocks on the Sensex, 27 stocks settled higher. The main gainers were Sterlite Industries (up 4.78%); Hindalco Industries (up 4.74%); HDFC Bank (up 3.32%); Bharti Airtel (up 3.31%) and TCS (up 3.10%). The losers were Maruti Suzuki (down 2.43%); Wipro (down 0.45%) and Cipla (down 0.11%).


The top two A Group gainers on the BSE were—Indiabulls Real Estate (up 12.17%) and Sesa Goa (up 5.89%).

The top two A Group losers on the BSE were—Gitanjali Gems (down 5%) and MMTC (down 4.97%).


The top two B Group gainers on the BSE were—Minaxi Textiles (up 19.74%) and Gennex Laboratories (up 19.74%).

The top two B Group losers on the BSE were—Microsec Financial Services (down 17.24%); and Riga Sugar Company (down 16.92%).


Of the 50 stocks on the Nifty, 46 ended in the in the green. The major gainers were Sesa Goa (up 6.25%); Hindalco Ind (up 4.43%); Bharti Airtel (up 3.43%); Kotak Mahindra Bank (up 3.26%) and IndusInd Bank (up 3.24%). The losers were Larsen & Toubro (down 31.73%); Maruti Suzuki (down 2.84); Ranbaxy (down 1.10%) and Tata Motors (down 0.30%).


Markets in Asia closed in the positive following assurances from US Fed chief Ben Bernanke that the central bank will continue with its stimulus programme  and indications that Chinese policymakers will adopt an accommodative monetary policy to spur growth. The Japanese market underperformed the Asian pack as analysts believed that the Bank of Japan may hold additional steps on signs of positive growth.


The Shanghai Composite jumped 3.23%; the Hang Seng surged 2.5%; the Jakarta Composite climbed 2.80%; the KLSE Composite advanced 0.70%; the Nikkei 225 gained 0.39%; the Straits Times surged 1.91%; the Seoul Composite climbed 2.93% and the Taiwan Weighted settled 2.10% higher.


At the time of writing, the key European indices were trading higher and the US stock futures were trading with good gains.


Back home, institutional investors—foreign as well as domestic—were net buyers in the equities segment on Wednesday. While FIIs bought shares totalling Rs75.46 crore, DIIs invested Rs28.77 crore.


Anil Ambani-controlled Reliance Communications (RCom) today said it has completed securitisation of proceeds from its Rs1,200 crore ($200 million) deal with Reliance Jio. The amount from securitisation has been utilised to repay rupee debt, saving significant interest costs for the company. RCom gained 1.07% to close at Rs141.80 on the NSE.


GVK Power has asked the government to consider its request for tapering linkages to meet the coal requirement of its 540 MW thermal power plant in Punjab, saying that if allocation is done the company will then be in a position to begin electricity generation from next month. The stock fell 0.68% to close at Rs7.25 on the NSE.


BGR Energy Systems has bagged the balance of plant (BoP) contract valued at Rs1,573 crore from Odisha Power Generation Corporation (OPGC) for its expansion project wherein the state owned generator would add two 660 Mw units to its existing power station. The stock gained 3.95% to Rs125.10 on the NSE.


Cabinet clears proposal to replace DGCA with Civil Aviation Authority

The CAA would replace the DGCA and administer and regulate civil aviation safety, manage safety oversight over air transport operators, air service navigation operators and operators of other civil aviation facilities

A bill to replace the DGCA (Directorate General of Civil Aviation) by a new aviation regulator, the Civil Aviation Authority (CAA), with full operational and financial autonomy is likely to be tabled in the upcoming Monsoon Session of Parliament.


The Union Cabinet, at its meeting today, accorded in-principle approval to the proposal of the Civil Aviation Ministry, information and broadcasting minister Manish Tewari said after the meeting.


The bill to establish the CAA is likely to be brought in the Monsoon Session, he said.


The CAA would replace the DGCA and administer and regulate civil aviation safety, manage safety oversight over air transport operators, air service navigation operators and operators of other civil aviation facilities.


Interestingly, the proposed CAA, like the DGCA, would also deal with matters relating to financial stress on safety of air operations, as witnessed in connection with the closure of the bankrupt Kingfisher Airlines last year.


Issues relating to consumer protection and environment regulations in civil aviation sector would also be addressed by the CAA, according to the draft legislation.


The proposed authority would have a chairperson, a director General and seven to nine members, including five whole-time members. All of them would be appointed by the Centre on the recommendation of a selection committee headed by the Cabinet secretary.


The CAA is being established by the government to meet the standards set by the UN’s International Civil Aviation Organisation (ICAO) and in line with aviation regulators in other countries like the US Federal Aviation Administration and UK’s CAA, official sources had said earlier.


The estimated cost of establishing the new Authority would be over Rs110 crore, they said.


Noting that DGCA has limited delegation of financial powers and hence was “incapable of making adequate structural changes” to meet the demands of a dynamic civil aviation sector, the sources said this had necessitated its replacement with CAA.


The CAA would have more administrative and financial powers to deal with the fast-changing aviation scenario.


While passenger and freight traffic as also aircraft movement has grown manifold in the past six years, the sources said the strength of DGCA, which regulates all these activities, has gone up only in “a miniscule manner” primarily due to the cumbersome recruitment process under the UPSC.


With full functional and financial autonomy, the proposed CAA would be able to recruit its own staff, decide on their pay structure and the powers to fix and collect fees for rendering services like safety oversight and surveillance of air navigation services, they said.


As it would be self-financing, the CAA would establish a separate fund, called the Civil Aviation Authority of India Fund, which would be used for all expenses of the authority.

In addition, this fund would also get budgetary support, the sources said.


Keywords: Civil Aviation Authority, aviation regulator, Directorate General of Civil Aviation, DGCA, Civil Aviation Ministry, Manish Tewari, aviation sector, Kingfisher Airlines


“Power Grid Corp is likely to be the sole bright spot, delivering another par performance”

Reported net profit of private IPPs (excluding Reliance Power) would be dented by the significant rupee depreciation against the dollar during the current quarter, says Nomura Equity Research

Nomura Equity Research expects IPPs (including NTPC) and Coal India (CIL) to post a sub-par show in 1QFY14; reported PAT of private independent power producers (IPPs, excluding Reliance Power) would be dented by the significant rupee depreciation against the dollar during the quarter (8.6% on period-end basis, 3.2% on period average basis). Power Grid Corporation is likely to be the sole bright spot, delivering another par performance, believes Nomura.


In terms of normalized PAT (i.e. excluding the likely MTM exchange fluctuation losses), Nomura is cautious for all private IPPs in its coverage universe. Amongst private IPPs, its normalized loss forecasts are significantly above consensus for Adani and Lanco Infratech; normalized PAT forecasts for JSW Energy and Reliance Power are around 15% below and in line with consensus, respectively.

Nomura believes NTPC would have done well if it sustains normalized PAT at around Rs25 billion (in-line with consensus, up 3% q-o-q, 4% y-o-y), given the likelihood of a 300bps dip in coal-fired plant availability and lower generation. As regards Power Grid, the kicker from Rs40 billion effective incremental capitalization would help post a 22% y-o-y rise in EBITDA and 17% y-o-y rise in normalized PAT. Nomura’s earnings forecast for Power Grid is broadly in line with consensus.


Nomura expects Coal India’s earnings to disappoint on the back of a flat topline (higher FSA realization offset by lower e-auction revenues) and higher opex (employee & diesel expenses). At Rs37.6 billion, the brokerage’s normalized net profit forecast is 10% below consensus.


Nomura pegs Adani Power’s revenue at Rs23.7 billion (around 8.5 billion kWh sales, Rs2.7/kWh blended realization, Rs4/kWh merchant realization) and normalized EBITDA

(EBITDA excluding fuel creditors-linked MTM exchange fluctuation loss) at Rs5.5 billion (up 50% q-o-q). Including fuel creditors-linked MTM exchange fluctuation loss and assuming 15% effective tax provision, Nomura pegs normalized net loss at Rs7.9 billion (against a consensus net loss forecast of Rs4.4 billion). Together with potential MTM exchange fluctuation loss on derivative instruments, the brokerage expects reported net loss at Rs10.6 billion. Fuel mix at Mundra remains the key swing factor for profitability.


Nomura pegs JSW Energy’s 4QFY13 revenue at around Rss23.2 billion assuming blended realization at around Rs4.1/kWh and sales volume of around 5.0bn kWh. It expects a 5%

q-o-q rise in the coal cost (per kWh) resulting in EBITDA at Rs7.9 billion (34.1% margin) and normalized net profit at rs3.3 billion. Including potential MTM exchange fluctuation loss, we expect reported PAT at Rs2.53 billion (down around 20% q-o-q). Nomura’s forecast EBITDA for JSW Energy is marginally below consensus; normalized net profit is 17% below the street’s forecast.


Nomura expects Lanco Infratech’s consolidated revenues/EBITDA to drop 13%/14% q-o-q as contribution from the EPC business (solar and non-solar) tumbles due to slowdown in execution on the back of cash constraints. Together with a marginal uptick in interest outgo and assuming an effective 15% tax outgo, the brokerage forecasts normalized net loss at Rs5.3 billion (up 66% q-o-q); including potential MTM forex losses, it pegs reported net loss at Rs9.6 billion. Nomura’s 4QFY13 EBITDA forecast is 17% below consensus while its normalized net loss forecast is 56% above consensus.


Nomura believes NTPC’s key operating metrics for the quarter were weak—it estimates Plant Availability (PAF) for coal fired plants at around 85% (compared to 88% in 1QFY13) and coal-fired generation at around 57bn kWh (against 58.9 billion kWh in 1QFY13). Accordingly, the brokerage expects only a marginal uptick in normalized net profit to Rs24.9 billion (up 4% y-o-y, 3% q-o-q); its net profit forecast is in line with consensus.


Factoring in 40% RoE and higher proportion of linkage coal consumption at Rosa (1200MW), together with marginal operating loss at Butibori (300MW), Nomura expects Reliance Power’s consolidated EBITDA at around Rs4.1 billion (up 15.4% y-o-y, down 9.6% q-o-q). It expects non-operating income to spike to Rs1.2 billion on account of potential gains on translation of f/x treasury income (given the sharp rupee depreciation during the quarter). Assuming a 15% potential tax incidence, the brokerage expects normalized net profit at Rs2.2 billion (down 2% y-o-y, up 30% q-o-q) and reported PAT at Rs2.2 billion. Nomura’s 1QFY14F normalized earnings forecast is in-line with consensus.


Nomura expects a 5.2%/5.9% q-o-q growth in Power Grid’s revenues and EBITDA, driven by around Rs40 billion effective incremental capitalization of transmission assets on a sequential basis. Building in a 10% drop in non-operating income (on the back of a lower cash chest), it expects normalized net profit to be up around 3% q-o-q (up 17% y-o-y) at Rs10.6 billion. Nomura’s 4QFY13F earnings forecast is in-line with consensus.


On the back of Coal India’s 115million tonne (mt) offtake, Nomura expects [1] 10% sales via e-auction, and [2] blended realization at Rs1437 per tonne (in-line with ex-incentives realization in 4QFY13). Despite an effective hike in FSA coal prices effective 29th May, lower contribution from e-auction sales is expected to keep revenues flat y-o-y, said the Nomura report. As higher diesel cost and employee expenses take a toll, Nomura pegs EBITDA at Rs36.4 billion (post OB removal adjustment of Rs8.8 billion), implying a 640bps y-o-y drop in margins. This translates to a 16% y-o-y drop in normalized PAT to Rs37.6 billion. Its net profit forecast is 10% below consensus.


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