Tuesday’s Market Preview: Gap-up opening likely

The market is likely to witness a gap-up opening today on positive global cues. Wall Street closed mixed for the second day in low volume trade while markets in Asia were in the green on higher commodity prices and optimism about growth in the US next year. The SGX Nifty was two points higher at 5,955 compared to its previous close of 5,953 on Monday.

The market opened in the negative zone on Monday on weak cues from its Asian peers, due to fears of fresh skirmishes between North Korea and South Korea. It touched the day’s low in early trade but soon witnessed a gradual climb beyond the neutral line amid volatility, recovering the losses suffered earlier in the day. The Sensex regained the 20,000-mark in post-noon trade but could not retain the gains as investors took the opportunity of taking profits off the table. This resulted in the market erasing all the gains to end flat, with a mixed bias.

The Sensex added 24.03 points (0.12%) to close at 19,888.88. On the other hand, the Nifty lost 1.70 points (0.03%) to settle at 5,947.05.

Markets in the US closed mixed for the second successive day in low volume trade. Good economic news was offset by concerns regarding the sovereign debt crisis in Europe and geo-political tensions in the Korean region. Meanwhile, a host of US retailers are avoiding high discounts late in the holiday season, helping them wring more out of sales in the days before Christmas.

The Dow declined 13.78 points (0.12%) to 11,478.13. The S&P 500 added 3.17 points (0.25%) to 1,247.08. The Nasdaq gained 6.59 points (0.25%) to end at 2,649.56. US markets will be closed on Friday to for the Christmas Eve holiday.

Markets in Asia were in the green in early trade on Tuesday on higher commodity prices and optimism about growth in the US next year. Easing of tensions between the two Korean nations also supported the gains. Crude rose on hopes that US growth will spur demand for the commodity.

The Shanghai Composite gained 0.23%, the Hang Seng rose 0.43%, the KLSE Composite was up 0.21%, the Nikkei 225 advanced 0.75%, the Straits Times added 0.12%, the Seoul Composite surged 0.71% and the Taiwan Weighted was up 0.05% in early trade. The SGX Nifty was two points higher at 5,955 compared to its previous close of 5,953 on Monday.

The government on Monday decided to suspend onion exports till 15th January in the wake of skyrocketing prices of the commodity which is selling between Rs60-Rs70 a kg.

Agriculture cooperative major Nafed, a regulating agency, has been asked to stop giving fresh clearance to exporters. The government has also made exports almost impossible for those who are already in possession of ‘no objection certificate’ (NOC) given by the Nafed and 12 other agencies.


RIL’s D-1, D-3 fields to hit peak output of 80 mmscmd in 2012-13

New Delhi: Reliance Industries’ (RIL) prolific D-1 and D-3 gas fields off the east coast, which have seen a 15% drop in production in recent times, are likely to touch a peak output of 80 million metric standard cubic metres per day (mmscmd) in 2012-13, reports PTI.

According to a Directorate General of Hydrocarbons (DGH) report to the oil ministry, the Dhirubhai-1 and 3 fields—also known as D-1 and D-3—in the KG-D6 block are likely to produce 80 mmscmd of gas for six years, from 2012-13 to 2017-18.

Together with gas output from the MA field in the same block, KG-D6 production in 2012-13 will touch 88.5 mmscmd, the report said.

The MA field currently produces about 8 mmscmd out of KG-D6's total output of around 54 mmscmd.

According to the production profile prepared by the DGH, production from KG-D6 will be 86-87 mmscmd between 2013 and 2016 before dipping to 81.24 mmscmd in 2017-18. Subsequently, the output will gradually taper down to less than 40 mmscmd by 2020-21.

Sources said the D-1 and D-3 fields have seen output fall from 53-54 mmscmd in mid-2010 to 45-46 mmscmd at present.

D-1 and D-3 are the largest among the 20 oil and gas finds that Reliance and its Canadian partner Niko Resources have made in the KG-D6 block, also known as KG-DWN-98/3, in the Krishna-Godavari Basin, off the Andhra Pradesh coast.

Besides D-1 and D-3, the D-26 or MA oilfield in the same block is producing about 8 mmscmd of associated gas.

Cumulatively, the output from KG-D6 currently stands at around 54 mmscmd.

Earlier this year, the KG-D6 block hit a peak production rate of 60 mmscmd after which output has fallen, sources said, adding that the DGH has projected an output of 60.16 mmscmd in 2011-12.

As per the approved Field Development Plan (FDP), the D-1 and D-3 gas fields—which began gas production in April last year—have a field life of 13 years, with a plateau period of six years.

“The reservoir is a complex reservoir and has not behaved as previously modelled,” a source said.

Reliance has been forced to restrict oil production from the MA field to under 20,000 barrels per day (bpd) due to high water and gas output, sources said, adding the field was yielding more water than oil and even 8 mmscmd of gas in comparison to 20,000 bpd of oil was considered quite high.

Sources said Reliance will have to drill more wells to boost output to the approved peak of 80 mmscmd. Currently, 18 wells on D-1 and D-3 have been completed and hooked up to the production system, but only 17 are producing gas.

The company is currently selling 14.5 mmscmd of gas produced from the KG-D6 block to fertiliser plants, 26.5 mmscmd to power plants and the remaining 13 mmscmd to other sectors like sponge iron plants, LPG, city gas distribution (CGD), petrochemical plants and refineries.


JSW takes over Ispat Industries

The saga of continuing losses at Ispat Industries and repeated fund injection by banks and financial institutions is over. It is reliably learnt that JSW controlled by Sajjan Jindal has clinched the deal to acquire Ispat Industries.

The promoters of Ispat Industries, Promod and Vinod Mittal, who have been struggling to keep the plants of Ispat Industries running since October and pay salaries on time, has finally thrown in the towel.

It is reliably learnt that the consortium of banks, which lent a helping hand to Ispat for over a decade, has now finally got the Mittals to relinquish control over Ispat in favour of Sajjan Jindal controlled JSW Steel, India's third-largest steel producer.
A meeting of lenders, which includes IDBI, ICICI Bank, IFCI and State Bank of India and others, has been called on Monday to implement this decision.
According to sources close to the transaction, JSW Steel and entities controlled by Sajjan Jindal, are buying 45.5% stake in Ispat Industries through a fresh issue of shares. This will trigger an open offer. After the deal, Mittal (mainly Vinod Mittal) and family will continue to hold close to 26% in Ispat.
Moneylife reported on 1st December that Ispat was facing in an acute cash crunch, which forced the closure of the company's electric arc furnace in Dolvi, Maharashtra, which has a capacity to make 3.3 million tonnes of steel and also the cold rolling and galvanizing mill at Kalmeshwar, near Nagpur.
A sell-out by the Mittals at this stage was inevitable, as Moneylife has been hinting in its various reports in December. After almost two decades of severe mismanagement, Ispat has been way behind in meeting every commitment to the lenders.
In a remarkable case of management failure, Ispat has posted losses for each of the past five years except 2008, a period which saw a steel market booming worldwide, leading to highest ever steel prices.
With over Rs7,000 crore debt on its books, Ispat Industries has been under a Corporate Debt Restructuring (CDR) plan.
However, the company has been failing quite miserably to stick to its commitments. A report of the lenders dated 22nd October says that the Lenders' Monitoring Committee (LMC) "felt that in order to bring financial discipline in the company, TRA mechanism should be strictly implemented immediately and close monitoring for the same is required by the TRA bank, viz. SBI." (TRA stands for Trust and Retention Account.) The report goes on to state that "the company was directed to submit expenses budget on a monthly basis in advance in respect of subsequent month to the lenders for their examination and approval by the LMC for effective monitoring of TRA." The report goes on to discuss the various compliance steps that Ispat has failed to take as part of the CDR.

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V Jayaraman

6 years ago

This is a classic case of allowing drowning public money into the ocean. I am sure in the scheme of things which shall be sought by JSW Steel, they would look for good amount of haircuts on the IIL loans. This would erode profitability in a big way for lenders like ICICI Bank, SBI etc. This would also allow Mittals to keep intact with them the real estate company having building in Pedder Road, Mumbai. With this merger talk, the Banks / Institutions should seize the opportunity of Mittals going ahead and gaining from the real estate project. I fail to understand why should Mittals should hold 26% and issue fresh shares to JSW Steel. Instead, the lenders should have insisted that Mittals offload their portion to JSW Steel or in the alternate allow the pledged shares of Mittals with Banks / FIs to be handed over to JSW Steel. Hapless minority shareholders can stand in queue in the next AGM of IIL. JSW Steel shall bring laddoos from Tirupati and shall distribute to minority shareholders of IIL (in lieu of dividend which cannot be dreamt of atleast for the next 5 years).

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