Outlook of Indian market with NTPC Largest Divestment Drive

Indian Market corrected when Global market are turning positive as investor turned nervous ahead of NTPC FPO which would rise Rs.8287crs. FPO has been priced attractive @ Rs.201, discount to closing price of Rs.206 this will reduce government holding from 89.5% to 84.5%. NTPC is expanding its generation capacity to 52,000 MW by 2014 from 30,644 MW on Sept. 30, 2009, to meet growing demand. Between April and May last year, India had a peak energy deficit—the difference between energy demand and supply--of 12.3%. The success of NTPC issue is very important for the disinvestment plans of current government as fiscal deficit is expected to cross budgeted 6.8% of GDP also given postponement of 3G auction and rise in Fertilizer subsidy bill. If NTPC issue gets oversubscribed 1st day itself, other PSU stocks HIND COPPER / STC / MRPL / SAIL may get a boost in secondary market too.

Parikh Committee Report:-

• The government may take a decision on freeing petrol and diesel prices after the Kirit Parikh committee on rationalising fuel  subsidies submits its report this week, oil minister Murli Deora said. Price of petrol may go up by Rs 4.70 a litre and diesel by Rs 2.30 a litre if the government gives the pricing freedom to state-owned oil marketing companies — IndianOil Corporation (IOC) Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL).
• Media reports say the committe may table the report tomorrow itself and there is a mention of  allowing just 6 cylinders for one family and freeing up of fuel prices.
• If these reports are to be believed, the recommendations, if followed, may take away huge burden of subsidies from the back of current government and state-run HPCL/IOC/BPCL stocks can benefit.
• Freeing up of Fuel prices will benefit ONGC, GAIL and OIL also which have to share subsidy burden for state-run refineries.

• RELIANCE IND and ESSAR OIL would be other stocks to benefit after free pricing as they have had to stop many retail fuel outlets after not being able to compete forced lower prices of state-run outlets. If current regime of controlled pricing is over, RIL and ESSAR OIL may once again go full throttle for their retail outlets and there will be more competition and better service for final consumer, RIL / ESSAR OIL to benefit.   

Further direction of the market depends on various government moves and time and again it has been proved that many announcements have led to major moves in stock markets.The average value of assets managed by mutual funds in India declined at its sharpest pace in 13 months in January, slipping 4% from December, as banks likely cut holdings in debt schemes due to heightened central bank scrutiny and on a decline in stock prices. Indian mutual funds' average assets under management dropped to about INR7.62 trillion ($164.72 billion) from INR7.94 trillion in December, according to data issued by the Association of Mutual Funds in India. RBI has indicated banks not to pursue MF investments in a big way as these funds many times come back to banks as deposits from MFs and this may have put pressure on banks to exit their debt MF holdings slowly which has made AUMs fall for 2nd month running.
Watch SUNNEWS on Thursday 4th February 2010 live on stock market 9.30-10.30