morning thoughts...
The markets remained under pressure ahead of f/o expiry and coming session is likely to be volatile with stock specific movements and good movements in IT stocks.
State Electricity Boards (SEBs) are in a dismal financial health with huge losses accumulated over the years. In FY14, the state electricity utilities had a negative networth of Rs 1.06 trillion (Source Power Finance Corporation Report). And the major reason for the colossal loss is that the SEBs sell power at a price much lower than their actual cost. In FY14 this deficit differential stood as high as Rs 1.15 per unit.
Power theft and technical losses in distribution due to poor infrastructure have led to lower recovery by SEBs. The distorted tariff structure across consumer categories has further compounded their problem of poor realizations. The agricultural consumers paid only Rs 1.83 per unit of electricity as compared to actual cost of Rs 5.15 per unit in FY14. This is on account of huge subsidies being offered by state governments to build their vote banks.
On the other hand, large industrial and commercial users in many states such as Haryana, Andhra Pradesh, Uttar Pradesh and Maharashtra end up paying much higher tariff as compared to agricultural consumers. This is driving away the largest and strong customers of SEBs who are setting up their own captive generation plants. As a result, the cash flows of the indebted SEBs are getting constrained further thereby curtailing their ability to upgrade infrastructure.
Thus SEBs are caught in a vicious cycle. They have piled on large amounts of bank borrowings that they are unable to service on account of continued losses. As a result the financial soundness of banks particularly state-owned has come under strain. In a bid to resolve the logjam, the government is contemplating to restructure the debt of the SEBs by allowing them to be taken over by the respective State Governments. The State Government would in turn be issuing bonds that would be subscribed by banks and financial institutions.
However, we believe that instead of such short term solutions, the government should focus on rectifying the anomaly in the tariff structure to ensure long term viability and profitability of SEBs.
Emerging economies, that had been resilient since the global financial crisis in 2008, are now beginning to buckle under the stress of the commodity meltdown and fall in global trade. The corporate earnings in emerging countries such as India, Brazil, South Africa, Indonesia, Malaysia and China have slid in the past one year. Amongst them, China and India are still better off with the fall in year-on-year earnings limited to less than 15%.
In contrast the corporate earnings of developed economies of Europe, US, Japan and Korea have registered double-digit growth in the last one year. But a comforting factor for emerging countries is that the strong corporate performance in developed markets is still not reflected in their economic growth that continues to remain anemic. On the other hand, developing countries like India are still posting robust economic growth and continue to attract foreign investors. But if emerging economies take a longer time to revamp their corporate performance in the changed economic climate, they face the risk of losing the favoured investment destination status. Not to mention, the rate hike by the US Fed will further skew the risk-to-reward ratio towards developed economies.
Thursday wealth gains
Jackpot buy Mphasis bfl , sparc
Sell gold , silver , crude
Buy bank nifty november for targets 17500-17600
Buy nov bank nifty targets 8230-8260
Buy tata steel 250 ca , yes bank 740 ca
The markets remained under pressure ahead of f/o expiry and coming session is likely to be volatile with stock specific movements and good movements in IT stocks.
State Electricity Boards (SEBs) are in a dismal financial health with huge losses accumulated over the years. In FY14, the state electricity utilities had a negative networth of Rs 1.06 trillion (Source Power Finance Corporation Report). And the major reason for the colossal loss is that the SEBs sell power at a price much lower than their actual cost. In FY14 this deficit differential stood as high as Rs 1.15 per unit.
Power theft and technical losses in distribution due to poor infrastructure have led to lower recovery by SEBs. The distorted tariff structure across consumer categories has further compounded their problem of poor realizations. The agricultural consumers paid only Rs 1.83 per unit of electricity as compared to actual cost of Rs 5.15 per unit in FY14. This is on account of huge subsidies being offered by state governments to build their vote banks.
On the other hand, large industrial and commercial users in many states such as Haryana, Andhra Pradesh, Uttar Pradesh and Maharashtra end up paying much higher tariff as compared to agricultural consumers. This is driving away the largest and strong customers of SEBs who are setting up their own captive generation plants. As a result, the cash flows of the indebted SEBs are getting constrained further thereby curtailing their ability to upgrade infrastructure.
Thus SEBs are caught in a vicious cycle. They have piled on large amounts of bank borrowings that they are unable to service on account of continued losses. As a result the financial soundness of banks particularly state-owned has come under strain. In a bid to resolve the logjam, the government is contemplating to restructure the debt of the SEBs by allowing them to be taken over by the respective State Governments. The State Government would in turn be issuing bonds that would be subscribed by banks and financial institutions.
However, we believe that instead of such short term solutions, the government should focus on rectifying the anomaly in the tariff structure to ensure long term viability and profitability of SEBs.
Emerging economies, that had been resilient since the global financial crisis in 2008, are now beginning to buckle under the stress of the commodity meltdown and fall in global trade. The corporate earnings in emerging countries such as India, Brazil, South Africa, Indonesia, Malaysia and China have slid in the past one year. Amongst them, China and India are still better off with the fall in year-on-year earnings limited to less than 15%.
In contrast the corporate earnings of developed economies of Europe, US, Japan and Korea have registered double-digit growth in the last one year. But a comforting factor for emerging countries is that the strong corporate performance in developed markets is still not reflected in their economic growth that continues to remain anemic. On the other hand, developing countries like India are still posting robust economic growth and continue to attract foreign investors. But if emerging economies take a longer time to revamp their corporate performance in the changed economic climate, they face the risk of losing the favoured investment destination status. Not to mention, the rate hike by the US Fed will further skew the risk-to-reward ratio towards developed economies.
Thursday wealth gains
Jackpot buy Mphasis bfl , sparc
Sell gold , silver , crude
Buy bank nifty november for targets 17500-17600
Buy nov bank nifty targets 8230-8260
Buy tata steel 250 ca , yes bank 740 ca
