The Hindu Business Line : Commodity stocks ride on rail tariff cut proposal

GUARDED REACTION: A guard walks by the news screen put up at the BSE as the Railway Budget is announced by the Railway Minister, Mr Lalu Prasad. The BSE Sensex swung wildly between a high of 13723.40 points and a low of 13383.88 points before settling flat at 13649.52. - Paul Noronha

Advertisement

Kolkata Feb. 26 Two sets of stocks - bulk commodities and railway wagon and components - responded positively to the railway Budget proposals related to freight rate cuts in limestone and iron ore. It did not, however, have any impact on the low-cost aviation counters at close after initial negative reaction to proposals to reduce railway passenger fares.

Some of the commodity stocks turned buoyant on positive sentiment of possible cost reduction, but could not hold on to the gains fully till the end of the session. Analysts pointed out that in the case of cement and steel stocks, the proposed 6 per cent cuts in freight rates were actually "paper benefits" as most of the Indian manufacturers do not move raw materials such as limestone or iron ore on rails.

"Limestone is hardly moved from the pitheads before crushing and clinkers are also moved rarely. Even cement is moved to a great extent by roadways," said Mr V.K. Sharma, head of research, Anagram Stockbroking.

He felt today's gains reported by the likes of ACC and Gujarat Ambuja could be attributed more to the market expectation that the Union Budget may reduce the excise duty on cement rather than the elusive transport cost benefits. However, the proposal for introducing new trains for cement added to the sense of focus on facilitating reduction in transportation cost and time saving.

According to Mr Rahul Jain of Man Financial, among the iron ore and steel pack, Sesa Goa could get some benefits from the freight rate reduction proposals. "The six per cent reduction is not very significant. However, companies like Sesa Goa, Essar Steel, Ispat Industries and JSW may see marginal cost reduction," Mr Jain felt.

In his opinion, slightly upward bias in the movement of some of the stocks could be for other fundamental reasons specific to the companies.

SAIL's net saving could be a miniscule Rs 70 crore annually if the proposal for the rate cut is carried through, according to an official statement by the company.

The proposals related to dedicated freight corridor next fiscal and additions of 800 new wagons, some market observers said, should prove as psychological boost to the vendors of railway equipment or wagons.

Among the wagon and railway component manufacturers such as BEML, Texmaco, Stone India, Kalindee Rail Nirman and Kernex Microsystmes spurted intra-day on possibilities of increased orders and business opportunities. While BEML finished 3 per cent higher, Texmaco closed 1.15 per cent down. Stone India and Kernex gained 3.5 per cent and 1.68 per cent respectively. Kalindee closed marginally down.

Though there is a proposal of 5 per cent cut in freight rates in petroleum products, closing prices of oil marketing companies reflected a mixed picture. HPCL was up around 1 per cent but IOC finished 3 per cent lower. BPCL closed flat. The sentiment dampened after IOC stated that it could benefit by the freight rate reduction to the extent of Rs 37 crore, analysts said.

Mr Ajay Jaiswal of Angel Broking said that the today's sentiment booster, however, pulled out some of commodity stocks from the dumps they were pushed into in the last few days.

More Stories on : Railway Budget | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
HOV Services to buy US BPO unit for Rs 600 cr

Marine products export to EU up 34% in value

PSU oil marketing cos seek changes in dealership norms

`Iron ore freight cut may not lower steel prices'

Lalu's largesse — All passenger fares cut

Railways not yet a threat to airlines

Non-bulk traffic share in revenues on the rise

A beginning to improve stability with diversified goods traffic

Commodity stocks ride on rail tariff cut proposal

Mahindra-Renault-Nissan car facility near Chennai

Crashing prices fuel demand for laptops

Mercator to open centre in Bangalore

Rail travel still cheaper than airlines