Markets snap 6-week rally on SC coal verdict, gas hike delay

Sensex ends week down 464 points; Nifty closes 153 points lower; S&P move comes as a late booster

Benchmark share indices snapped their six-week winning streak after the Supreme Court cancelled most of the coal block allocations and the government's decision to postpone hike in gas prices led to a sell off by institutional investors.

In the week to September 26, the 30-share Sensex ended down 464 points or 1.7 per cent at 26,626 and the 50-share Nifty ended down 153 points or 1.9 per cent at 7,969.

Foreign portfolio investors were net sellers in equities to the tune of Rs 2,779 crore in the last three trading sessions, as per provisional stock exchange data.

The September derivative contracts also expired during the week under review. Nifty September F&O series ended lower after seven consecutive positive series with Metal Index falling the most.

The Supreme Court cancelled 214 of 218 coal block allocations, made by successive governments over the past two decades, on the grounds of illegality under the Coal Mining Nationalisation Act.

Meanwhile, Coal India Limited has been asked to take over operational blocks for 6 months.

The court directed the companies, which were allocated coal blocks but had not operationalised them, to pay a compensation of Rs 295 per tonnne to the government for the loss of exchequer.

Further, the government also said it had deferred the much-awaited decision on new pricing guidelines till November 15.

Meanwhile, On Friday, global rating agency Standard & Poor's raised the outlook on India’s sovereign rating from negative to stable on the grounds that the National Democratic Alliance (NDA) government offered a suitable environment for reforms.

With this, S&P’s outlook is in sync with that of two other rating agencies — Moody’s Investors Service and Fitch Ratings; all three agencies have the lowest investment grade rating for India, with a stable outlook.

Except for FMCG all other sectoral indices ended in the red with Realty, Capital Goods, Metal, Power, Bankex, Oil and Gas indices down 3.3-4.6 per cent each.

The apex court's verdict on coal block allocations weighed on power and metal companies, as they would have to import coal at higher costs while power equipment makers fell on worries of slowdown in orders from power generators.

In the metal pack, Tata Steel, Hindalco, Sesa Sterlite ended down 3-7 per cent each. Jindal and Power slumped nearly 13 per cent, as the penalty for the company post the SC verdict translates to around Rs 3,000 crore.

Power equipment makers L&T and BHEL ended down 4-9.5 per cent each.

State-owned banks fell sharply on concerns their loans to companies whose coal block allocations have been cancelled may turn may become non-performing assets.

Bank of Baroda, Bank of India, Canara Bank, SBI, PNB ended down 5-14 per cent each. ICICI Bank ended nearly 6 per cent down on concerns over the bank’s huge advances to the debt-ridden Jaiprakash Group and all the four coal blocks awarded to the group were de-allocated post the Supreme Court verdict.

Reliance Industries ended down 6 per cent after the deferment of hike in gas prices dashed the hopes of private-sector player.

Week ahead

The Reserve Bank of India's stance on key policy rates at its monetary policy review will be the key event during the truncated week ahead.

Further, HSBC India is scheduled to release manufacturing PMI for September on Wednesday.

Financial markets will remain closed on Thursday, on October 2 for Mahatma Gandhi Jayanthi and on October 3 on account of Dussehra.

Automobile stocks will be in focus following release of September sales numbers.