SC's coal block verdict spooks markets

Sensex hits all-time high of 26,630, before an intra-day fall of 229 points

Despite a good start to the trading session, the markets ended on a sombre note on Monday, following the Supreme Court saying coal block allocations between 1993 and 2010 had flouted norms. It added a final decision on the matter would be taken next week.

On Monday, the BSE’s 30-share Sensex touched a new high of 26,630, before an intra-day slump of 229 points. The index closed at 0.07 per cent higher at 26,437, a record closing high for the index. The National Stock Exchange Nifty hit a lifetime high of 7,968, before closing at 7,906, down 0.09 per cent.

Piyush Garg, executive vice-president, ICICI Securities, said, “That the ruling would be applicable to allocations as far back as 1993 made people nervous because most had felt only allocations during the UPA (United Progressive Alliance)-II government were under review. Now, we know allocations during the NDA (National Democratic Alliance) government are also being reviewed, and this is making people uneasy.”

Market analysts believe the ruling could be seen as a setback to the government’s promise of increasing coal availability. They say now, new policies might be needed, delaying investment prospects further.

Experts said the market sentiment was unlikely to see an immediate improvement till the court’s final decision on the matter next week. Until then, stocks of companies in the power, mining and metal sectors could remain under pressure, they added.

Some attributed the market nervousness to the expiry of the August derivative series later this week. “The fall in the market was also a reflection of the kind of positions being taken in the market ahead of the F&O (futures & options) expiry. Investors were seen booking some profits, and trades were getting unwound,” said Nikhil Golani, head (institutional equity), Tata Securities. The week ahead could see substantial volatility in the Nifty, with the index trading between 7,800 and 8,100, analysts said.

While the BSE metal index fell 4.3 per cent, the realty and power indices declined two per cent and 1.2 per cent, respectively. Defensive sectors such as technology, healthcare and fast-moving consumer goods gained. Tata Consultancy Services, Dr Reddy’s Laboratories and Hindustan Lever were among the Sensex outperformers, as were automobile majors Tata Motors and Maruti.