Strong Railway Budget Lifts Metal Stocks

123jump.com Staff
26 Feb, 2008
New York City

Railway Minister Lalu Prasad presented a budget to parliament that showed rising revenue, improving operation efficiency, and strong financial surplus. The general strength in the economy helped the minster to lower petrol and diesel freight duty and project rising capital expenditure in the next fiscal year. Steel and other metal stocks rallied on the higher outlays from the budget. Railway ministry expect the surplus fund at the end of the current fiscal year to be near 21,000 crore rupees.

[R]1:00PM New York, 7:30PM Mumbai – Railway budget reflected strong general economic conditions and lifted capital expense and lowered freight rates on higher operating efficiency.[/R]

Indian shares rose for a second day in a row lifted by gains in oil, metal and cement shares after railway budget.

Railway Budget 2008-09

The stocks surged after Railway Minister Lalu Prasad announced a reduction in freight charges for gasoline and diesel by 5%. The minister also cut freight charges ash, a raw material used by cement companies, by 14%.

The Railway Minister Lalu Prasad, in presenting the budget to the parliament said that for the nine months passenger earnings rose 14%, passenger growth increased 5.6%, and freight revenue rose 14%. Prasad said that gross traffic revenue rose 16% to 72,755 crore rupees or $14.5 billion.

The Railway revised its target for freight transportation to 790 million tons, and increase of 62 million tons, and freight earnings to increase 14% for the year.

Operating ratio, key measure of asset utilization efficiency is expected to rise to 79.6% from 79.3% in the previous year, a four decade record. The higher efficiency is expected to increase its return on capital to 21% and increase the end of the year fund balances to 20,483 crore rupees.

Market Sentiment

Reliance Energy Ltd., India''s second-biggest utility, rose after saying it may buy back shares.

The 30-share BSE Sensex rose 0.9% or 155.62 at 17,806.19 with 19 stocks gaining while the rest fell. The National Stocks Exchange index, Nifty also gained 1.3% or 69.35 points at 5,270.05.

Petroleum stocks such as Indian Oil, Hindustan Petroleum Corp., Bharat Petroleum Corp climbed between 4.2% and 5.4%. Cement stocks surged on railways freight reduction.

Metal stocks rose on the hopes of higher demand for stainless steel, after the railway budget announced introduction of stainless steel coaches in express trains.

With 1,652 stocks climbing on the BSE, 1,081 stocks declined, and 41 shares were unchanged.

Market Turnover Statistics

Daily turnover on the BSE stood at 4,818 crore rupees and on the National Stock Exchange was recorded at 11,061 crore rupees.

Tulsi Extrusions was the most active stocks on the BSE with a turnover of 338.44 crore rupees. Reliance Power, Onmobile Global, Reliance Capital and Reliance Natural Resources were also among the active stock.

Gainers and Decliners

Bharat Heavy Electricals Ltd. 4.6% or 95.45 to 2,180.55. The company, whose boilers and turbines produce about two-thirds of India''s electricity requirements, said it won a 10.75 billion rupee ($269 million) order for a power project in Gujarat.

ONGC climbed 1.4% or 14.3 to 1,027.75 after the company announced on Tuesday that it had made four oil and gas discoveries in the past month that may help boost output to meet the nation''s growing fuel demand.

IT stocks traded mixed. Infosys gained 3% to 1,662.10 rupees, Wipro surged 1.1% to 444.15 rupees. However Satyam Computer Services declined 0.1% to 449.75 rupees and Tata Consultancy Services fell 0.2% to 897.85 rupees.

Andhra Cements gained 3.4% to 31.80 rupees, Grasim Industries advanced 5.1% to 3042.70 rupees, ACC was up 1.5% to 830.90 rupees and Ambuja Cement jumped 0.7% to 123.35 rupees.

Metal stocks increased, Jindal Stainless surge of 7.2% to 160.35 rupees, National Aluminium Company added 7.4% to 465.85 rupees, Steel Authority of India gained 2.6% to 245.40 rupees, and Sterlite Industries was up 3.9% to 846.05 rupees. However, Tata Steel rose 0.1% to 809.25 rupees.

Capital goods stocks rose after rail budget. Thermax gained 5.9% to 681.30 rupees, Suzlon Energy added 6.3% to 314.85 rupees, Bharat Heavy Electricals climbed 4.6% to 2,180.55 rupees and Larsen & Toubro closed firm at 0.7% to 3,518.25 rupees.

HDFC Bank rose 2.3% to 1,455 rupees on the reports that after acquiring Centurion Bank of Punjab, HDFC Bank, the second largest private sector bank after ICICI Bank, may look at an overseas acquisition.

ICICI Bank rose 0.7% to 1,118.05 rupees and State Bank of India declined 0.4% to 2,119.85 rupees.

Tata Power Company gained 0.4% to 1,356.05 rupees, Power Grid Corporation of India surged 0.4% to 102.45 rupees and NTPC added 0.3% to 203.90 rupees.

Reliance Update

Reliance Energy rose 74.55 rupees, or 4.6%, to 1,697.25. In a statement the company said the board will meet next week on Tuesday to consider the share buyback plan. Reliance Industries rose 0.9% to Rs 2,575.75.

However, Reliance Power declined 0.5% to 447.95 rupees after the board of directors approved bonus three shared for every five shares to investors participating in the public offering. After the bonus, Anil D. Ambani stake in the company will decline to 40% from 45%.