Monday, July 02, 2012

Kohinoor Broadcasting Corporation Ltd hits the 2nd consecutive buyer freeze on the opening trade. After the restructuring of the company's business, it has started to perform on the bourses. 
My short term call Reliance Power Ltd moved to Rs.107.80 before closing flat. The company has recently completed a project and is expected to complete a couple of Mega Projects in the coming two quarters. Reliance Power, a part of Reliance Group has the largest portfolio of power projects in the private sector based on coal, gas, hydro and renewable energy, with an operating portfolio of 1540 megawatts. After being hit by many negatives in the last few years, there seem to be emerging some positives for the power sector. Recently a tariff hike was implemented in states like West Bengal, Tamil Nadu, Delhi, etc and it is believed that a few other states will also follow suit. The PMO’s office, coal ministry and the power ministry also seem to be very serious about resolving the power crisis situation in the country. And although coal production has not shown any overnight increase, the government has asked the coal ministry to de-allocate the private sector coal blocks and give them to Coal India. Besides, it has asked Coal India to appoint mine developers and operators (MDOs) in order to expedite coal production from these mines. On the international front the coal prices have cooled off. The demand for coal has declined a bit, as reflected in the coal prices. The Indonesian coal reference price in the last one year has come down by 14 per cent and there is mixed opinion about whether the coal prices will down any further from here on. The cooling of the international coal prices looks good for the Indian power sector which has some of the companies importing coal from Indonesia.
Also, the coal prices in other countries such as Australia, South Africa, etc have also shown a significant decline. The Newcastle Index (Australian coal price index) is down by 18 per cent while the Richard Bay Index (South Africa) is also down by 19 per cent. The higher drop in the coal prices is seen in the DES ARA Index which is down by nearly 30 per cent. The fall in the coal prices can be attributed to the over-supply situation created due to the availability of cheap natural gas. The U.S. has been replacing coal with cheap natural gas. Besides, the fall in industrial activity in many countries has also helped the coal prices show correction of between 20-30 per cent in one year’s time. The slowdown in the Chinese economy has resulted in lower coal consumption and thus the Indonesian coal prices have shown a decline.
The situation should look good for sectors dependent on coal, such as power, steel and cement, especially in the view of rupee appreciating sharply against the USD in the last few days. Therefore, there would be some impact on the profits of the companies in the power sector, due to cooling off of the international coal prices.  The stock could be moving towards Rs.125-126 in the coming days. 
My recommended Indiabulls Securities Ltd at around Rs.9 hit the buyer freeze. The stock should be doing well as the market has started to roll on the positive side of the fence. 
My recommended Voltas Ltd at around Rs.100--102, today touched Rs.108.20, where the Paid Members were asked to book profits. 
ARSS Infrastructure Ltd moved to Rs.46.20, before closing around Rs.45. The company is expected to post better Q1FY13 numbers, after restructuring its operations. The infrastructure companies are set to do well in the coming days, as the government goes in for a rate cut and at the same time, recent ECB norms are positive for this sector. The investors should accumulate the scrip on all declines and finish off acquisition before a big ticket players enters the counter and jacks up its share price. 
Lanco Infratech Ltd moved to Rs.15.84 before cooling down a bit. The if you remember was first recommended around Rs.13 and also around Rs.11.80 (was asked to be accumulated on all declines). I  have today that a brokerage house recommending the scrip and an marketman recommending the scrip in a business channel. 
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