Sensex falls after court ruling on coal blocks

By Indulal PM

MUMBAI (Reuters) - The BSE Sensex and Nifty fell for a second straight day as resources firms such as Jindal Steel and Power, and public sector lenders that lent to them, slumped after the Supreme Court cancelled most coal blocks allocated since 1993.

The Supreme Court ruled on Wednesday that companies will have until end of March next year to return most of the coal blocks allocated by the government since 1993 even after they have spent billions of dollars on projects around them.

Adding to the concerns, overseas investors sold Indian shares worth of $194 million on Tuesday, after buying for the past four sessions, while caution also prevailed ahead of the expiry of monthly derivatives contract on Thursday.

However, losses were trimmed as consumer-related stocks gained as investors preferred to derisk portfolio.

"It's a sensitive industry and ramifications (of the Supreme Court's decision) will be quite big. They (the government) have to take a final stand and have to move quickly," said Jagannadham Thunuguntla, head of research and chief strategist at SMC Global Securities Ltd.

"The market is in a consolidation mode. Now, the good companies will stand different and quality of companies will play a role."

The Sensex closed 0.12 percent lower at 26,744.69, while the Nifty ended 0.19 percent lower at 8,002.40.

The companies that received coal allocations led decliners on Wednesday. Jindal Steel and Power Ltd ended 10.15 percent.

Among other decliners, GMR Infrastructure fell 11.5 percent, Adani Power Ltd closed down 2.1 percent.

Lenders or financial firms which have loan exposure to the sector were also hit. State Bank of India closed 2.7 percent lower, while IDBI Bank ended 5.46 percent lower.

Infrastructure stocks fell, with Larsen and Toubro ending 2.12 percent lower as investors shifted focus from the sector and added defensive stocks into the portfolio amid risk aversion.

However, among the gainers, Coal India Ltd closed 4.8 percent higher after the top court ruling on coal blocks and on expectations that the state-run firm may be allowed to manage illegal mines until they get re-auctioned. 0

Shares in Reliance Power Ltd gained 5.5 percent and NTPC Ltd added 1 percent after the court, let off two coal blocks operated by these companies.

Consumer durable companies were also among the gainers as investors were churning their portfolios to reduce volatility in their holdings. Hindustan Unilever added 3 percent, while ITC Ltd closed 1.7 percent higher.

(Editing by Anand Basu)