Gas price hike sends Sensex surging

Key benchmark indices pared gains after striking fresh intraday high in late trade. The barometer index, S&P BSE Sensex Sensex, was provisionally up 484.24 points or 2.58%, off 70.75 points from the day's high and up 269.01 points from the day's low. The market breadth, indicating the overall health of the market, was strong. The market sentiment was boosted by gas and energy sector reforms announced by the government on Thursday, 27 June 2013.

Metal stocks edged higher on renewed buying. Coal India jumped after the government on Thursday, 27 June 2013, approved setting up of a coal regulator in a bid to further liberalize the energy sector and revitalize economic growth. ONGC and Reliance Industries (RIL) edged higher after the government's decision to revise gas pricing to the one based on global trade transactions of gas.

Power generation stocks gained after the Finance Minister P Chidambaram on Friday said that the government would consider helping the power and fertiliser industries to cope with the doubling of domestic gas prices from 1 April 2014. Power finance stocks also gained.

The Cabinet Committee on Economic Affairs (CCEA) on Thursday, 27 June 2013, approved a hefty increase in gas prices by clearing a proposal for fixation of price of domestic natural gas according to the recommendations of the committee constituted under the Chairmanship of Dr. C. Rangarajan on Production Sharing Contract (PSC) mechanism in the petroleum industry. In another decision, the government on Thursday approved setting up of a coal regulator in a bid to further liberalize the energy sector and revitalize economic growth.

Key benchmark indices rallied in early trade on the government's gas and energy sector reforms, with market sentiment also lifted by higher Asian stocks. The barometer index, the S&P BSE Sensex, hit over one-week high above the psychological 19,000 mark. Key benchmark indices regained strength after paring gains after an initial surge. Key benchmark indices extended gains to strike fresh intraday high in mid-morning trade. Key benchmark indices held firm in early afternoon trade. The market extended gains to hit fresh intraday high in afternoon trade. Key benchmark indices extended gains to strike fresh intraday high in mid-afternoon trade. Key benchmark indices pared gains after striking fresh intraday high in late trade. The Sensex hit 2-1/2-week high.

As per provisional closing, the S&P BSE Sensex was up 484.24 points or 2.58% to 19,362.19. The index jumped 556.99 points at the day's high of 19,432.94 in late trade, its highest level since 10 June 2013. The index gained 217.23 points at the day's low of 19,093.18 in opening trade.

The CNX Nifty was up 146.45 points or 2.58% to 5,828.80. The index hit a high of 5,852.95 in intraday trade, its highest level since 18 June 2013. The index hit a low of 5,749.50 in intraday trade.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,566 shares gained and 880 shares fell. A total of 130 shares were unchanged.

The total turnover on BSE amounted to Rs 1985.62 crore, higher than Rs 1647.01 crore on Thursday, 27 June 2013.

Hindustan Unilever was the lone loser from the 30-share Sensex pack. The stock fell 0.59% to Rs 585.55. Anglo-Dutch consumer goods major Unilever's open offer to raise its stake in Indian unit, which opened on 21 June 2013, closes on 4 July 2013. Unilever will buyback shares from minority shareholders at Rs 600 per share to hike its stake in Hindustan Unilever from 52.48% to up to 75%.

Metal stocks edged higher on renewed buying. Jindal Steel & Power (up 7.25%), Sterlite Industries (India) (up 6.18%), JSW Steel (up 1.69%), Sail (up 4.63%), National Aluminium Company (up 1.4%), Hindustan Zinc (up 6.08%), Tata Steel (up 3.71%) and Hindalco Industries (up 3.18%) edged higher.

Coal India jumped 5.26% to Rs 302.05 after the government on Thursday, 27 June 2013, approved setting up of a coal regulator in a bid to further liberalize the energy sector and revitalize economic growth. The coal ministry today, 28 June 2013, said that the Union Cabinet has approved the proposal for setting up of an independent regulatory authority for the coal sector and also approved the introduction of the Coal Regulatory Authority Bill, 2013 in Parliament. The coal ministry said that the setting up of an independent regulatory body for the coal sector shall help in the regulation and conservation of coal resources and will benefit all stakeholders; that is coal companies, coal consuming industries such as power, steel, cement and coal bearing states and people, directly or indirectly associated with the coal industry.

The Union Cabinet also approved that pending enactment of the legislation, the regulator will be set up through an executive order. The coal regulatory authority will specify methods of testing for declaration of grades or quality of coal, monitor and enforce closure of mines, specify principles and methodologies for price determination of raw coal and washed coal and any other by-produce generated during the process of coal washing, adjudicate upon disputes between parties and discharge other functions as the Central Government may entrust to it.

ONGC and Reliance Industries (RIL) edged higher after the government's decision to revise gas pricing to the one based on global trade transactions of gas.

ONGC was up 2.81% to Rs 329.55 on high volume of 20.79 lakh shares. The stock surged as much as 10.12% to strike an intraday high of Rs 353 in early trade.

Reliance Industries (RIL) was up 3.32% to Rs 858. The stock gained as much as 5.12% at an intraday high of Rs 873.

Oil India fell 0.52% to Rs 570. The stock reversed direction after surging as much as 9.08% to high of Rs 625 at the onset of the trading session.

The government on Thursday, 27 June 2013, agreed to double natural gas prices to industrial and retail consumers to help fund investment in exploration and reverse declining domestic gas output. The price of gas could go up to $8.4 per million metric British thermal units (mmBtu), effective 1 April next year, from current $4.2 mmBtu.

The oil ministry today, 28 June 2013, said that that the Cabinet Committee on Economic Affairs (CCEA) has approved fixation of price of domestic natural gas according to the recommendations of the committee constituted under the Chairmanship of Dr. C. Rangarajan on Production Sharing Contract (PSC) mechanism in the petroleum industry. The approved recommendations known as the Natural Gas Pricing Guidelines, 2013 will remain valid for five years. On the one hand these guidelines will help incentivize investment in the Indian upstream sector, so that production reaches optimum levels and all exploitable reserves are put to production expeditiously. At the same time these guidelines will ensure that producers do not cartelize because of the huge unmet demand. This will protect consumer interests, the oil ministry said in a statement.

The approved policy derives from global trade transactions of gas, the competitive price of gas at the global level by combining two methods. First, the netback price of Indian LNG term imports (excluding spot imports) at the wellhead of the exporting countries will be estimated. Such a netback weighted average price will be interpreted as the arm's length competitive price applicable for India. The second method of searching for a competitive price for India will be to take the weighted average of pricing prevailing at trading points of transactions. For this, the hub price at the Henry Hub in the US (for North America), the price at the National Balancing Point of the UK (for Europe) and the netback price at the sources of supply for Japan will be taken. Finally, the simple average of the prices arrived at through the aforementioned two methods will be taken. Such an overall average of global prices, derived on the basis of netback and hub/balancing point principles, will be taken as the economically appropriate estimate of the arm's length competitive prices applicable for India, the oil ministry said.

These guidelines will be applicable from 1 April 2014 to all domestically produced gas. However, the guidelines will not be applicable in respect of gas for which prices have been fixed contractually for a certain period of time, till the end of such period. These guidelines will also not be applicable where the contract provides a specific formula.

The present gas pricing policy under the New Exploration Licensing Policy (NELP) had been approved by the Government for five years beginning April 2009. This pricing policy will be due for revision with effect from April 2014.

Power generation stocks gained after the Finance Minister P Chidambaram on Friday said that the government would consider helping the power and fertiliser industries to cope with the doubling of domestic gas prices from 1 April 2014. The power and fertiliser ministries have raised the issue. The government can look at fixing the input costs for these sectors, he said. The issues will be addressed in course of time, Chidambaram said.

Tata Power Company (up 5.9%), Reliance Infrastructure (up 7.02%), CESC (up 2.58%), Reliance Power (up 5.81%) and Adani Power (up 3.12%) edged higher from the power generation pack.

NTPC rose 2.53% to Rs 144 after a block deal of 10 lakh shares was executed on BSE at Rs 142 per share at 11:13 IST. The block deal constitutes 0.01% of NTPC's equity.

Meanwhile, NTPC said that it has tied up a fixed interest rate term loan facility for euro 95 million on 27 June 2013 with KfW, the German government developmental financial institution to part finance the capital expenditure on renovation and retrofitting of Electro Static Precipitators at its various stations. The loan is to be repaid in 16 equal semi annual installments after moratorium of 4 years. NTPC is one of the few companies around the world considered as sovereign by the German government for lending on a standalone basis without sovereign guarantee.

Further, a loan agreement of Rs 2000 crore was signed with Bank of India on 28 June 2013 to finance capital expenditure of generation projects and coal mining activities, NTPC said. The loan facility has a door-to-door maturity of 15 years including a drawdown period of 5 years.

Power Grid Corporation of India surged 4.23%.

Among power finance stocks, REC (up 4.13%) and Power Finance Corporation (up 4.03%) gained.

Sun Pharmaceutical Industries jumped 3.74% to Rs 1,009.95, with the stock extending Thursday's 3.5% rally.

Cipla rose 0.84% after the company said today, 28 June 2013 that the company received approval from the takeover regulation panel of South Africa on 27 June 2013 regarding the proposed acquisition of 100% of issued shares of Medpro by the company and that all conditions precedent to the scheme have now been fulfilled or waived and accordingly on 27 June 2013 scheme has become unconditional.

Ranbaxy Laboratories fell 2.24%.

European stock markets were higher on Friday, 28 June 2013, ahead of US sentiment data and ahead of speeches by some Federal Reserve officials later in the global day. Key benchmark indices in Germany and France rose by 0.06% to 0.21%. In France, the CAC 40 index was down 0.47%.

German retail sales were better than expected in May, as consumers returned to the shops after being kept away for months by the cold and rainy weather, data from the Federal Statistics Office showed on Friday. Retail sales in May increased 0.8% from April, following three consecutive months of declines, beating economists' forecasts of a 0.3% drop in sales. The data are inflation-adjusted and also consider calendar effects.

Asian stocks edged higher on Friday, 28 June 2013, tracking an overnight rise in global equities on easing fears of an early end to US monetary stimulus. Key benchmark indices in China, Hong Kong, Indonesia, Taiwan, Singapore and South Korea were up 1.04% to 2.26%.

In Japan, the Nikkei 225 index jumped 3.51% as a weakened yen combined with upbeat industrial-production data to lift sentiment.

Japan's industrial production showed a surprise jump in May, while retail sales for the same month also gained, though the largest retailers saw a decline. Industrial output rose 2% during the last month, the Ministry of Economy, Trade and Industry said Friday, accelerating from a 0.9% gain in April.

Trading in US index futures indicated that the Dow could gain 47points at the opening bell on Friday, 28 June 2013. US stocks surged for a third session on Thursday on upbeat economic data and reiterations from Federal Reserve officials that monetary policy depends on the economic outlook. In a speech on Thursday, Federal Reserve Bank of New York President William Dudley played down the possibility that rate hikes are in the cards anytime soon. Atlanta Fed President Dennis Lockhart said that the markets had mistaken Bernanke's framework for tapering central-bank asset purchases, and reiterated the Fed's approach would be flexible, and based on economic conditions. On Wednesday, Fed Bank of Richmond President Jeffrey Lacker said he believes the economic recovery will remain lackluster for a few more years.

The US Department of Labor reported the number of Americans filing for state unemployment benefits fell by 9,000 to 346,000 last week. The National Association of Realtors reported that pending home sales jumped to a six-year high in May.

Federal Reserve Chairman Ben Bernanke on 19 June 2013 said that the central bank may taper the pace of its bond purchases, currently set at $85 billion a month, as early as this year if the economy continues to improve in line with its forecasts.

Data on Wednesday had gross domestic product expanding at a less-than-estimated 1.8% annualized pace in the first quarter, bolstering the view that the Fed would continue the rate of its quantitative easing until late this year or early in 2014.

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