Sideways correction continues: Though the one-way rally has been halted, Indian equity market is still not getting into any deep correction. Instead, it is now going through a timewise correction and the Nifty is moving sideways for the last two weeks. Several factors are contributing to this and most important among them is the uncertainty regarding the US Fed’s next action. Since the US inflation number is already at multi-decade high, there are fears that the US Fed may tighten monetary policy quicker than expected. Industry and market friendly actions by the Indian government, like the decision to increase ethanol blending to 20% is also supporting the market. As per the plan, it will start from April 2023 and achieve 20% target by 2025. In addition to supporting sugar sector, this will also reduce our dependence on imported crude. Large number of corporate results are also hitting the market now and therefore, it is natural for the market to take time to digest them.
Technical factors are also behind this movement. After the break of 20 day moving average, 50-day average is providing solid support. “Nifty is respecting the 50-day moving average and is taking support from it for the last 1 year and positive bias can be retained till that remains,” says Vikas Jain, Senior Research Analyst, Reliance Securities. In fact, Nifty has tested the rising 50-day average twice during the last two weeks. Wave wise analysis is also showing sideways move for some more time. “I am not expecting any move beyond 18,300 soon. We are at the last leg of the correction and fresh high is possible only after the 5th wave,” says Sacchidanand Uttekar, Deputy VP, Trade Bulls Securities. The Nifty is placed between 17,700 and 18,200. Short term investors and traders should be careful in sideways moving periods because any breakout from this short range can be sharp.
(Narendra Nathan/ET Bureau)
Macro update: Coal Demand likely to be more than supply The overall coal production
during October 2021 has significantly increased by 28.2% to 63.8 million tonnes (MT) as compared with October 2019 (non-Covid year) and by 14.7% compared with October 2020 (Covid year). Coal production also showed significant improvement on a month-onmonth (m-o-m) basis, and was up by 23.4% as the monsoon season receded leading to a pick-up in mining activities. During the month, Coal India Ltd (CIL) produced 49.8 MT of coal, up 26.4% compared with October 2019. Singareni Collieries Company Limited (SCCL) produced 5.3 MT of coal, 4.7% higher compared with October 2019. Captive coal production jumped by 63.8%.
On a cumulative basis, India’s coal production increased by 12.2% during April 2021 to October 2021 period as compared with the corresponding period of the last year (2020) and 7.8% compared with the same period of 2019. CIL produced 299.6 MT of coal during April 2021 to October 2021 which is 45% of the annual production target of 670 MT for the full year 2021-22.
Despatch of coal
The overall coal despatch has been 70.4 MT in the month of October 2021 as compared with 59.9 MT and 50.5 MT in October 2020 and October 2019, respectively. While despatch of coal to power sector and captive power plants increased by 42% and 44%, respectively, during October 2021 when compared with October 2019, it fell sharply for other sectors like cement, steel, sponge iron as collieries prioritised fuel supply to coal-starved power plants to ensure uninterrupted electricity supply. Coal despatch to other sectors including fertilizers, textile, chemicals etc increased by 39% compared with October 2019 but fell by 38% y-o-y.
Stocks at power plants
Coal stocks at power plants have marginally improved with the average daily stock at 135 coal fired thermal power plants increasing to six days as on 1 November 2021, as against around four days seen in mid-October2021. However, this is still significantly lower than the 22 days of fuel stocks prescribed by the Central Electricity Authority (CEA). 71 power plants with total installed capacity of 84,511 MW have total coal stocks of less than six days (critical level).
Outlook
While domestic demand for coal from power sector picked up from August 2021 onwards as business and economic activities revived as the country unlocked from the second wave of Covid-19 pandemic inflicted lock-downs, supply from coal mines have been interrupted due to extended monsoons. However, India’s coal production is expected to pick up going forward. Demand for coal, on the other hand, is expected to be higher than supply as rising international coal prices will likely keep tab on imports into the country. In order to achieve the annual production target and to meet the rising demand situation, the domestic coal companies, including CIL and SCCL will have to significantly ramp up the production from October 2021.
(CARE Ratings)
