Analysis: NTPC

Today’s pick is NTPC NTPC 146.30 -1.25 (-0.85%). The stock started the year with a surge to Rs. 190 levels, and soon lost its mojo to drop down to Rs. 140 levels by mid of May. Since then the stock has been on an uptrend with some correction on the way. In the last three months, the stock has moved -9% vs. +4% of the Nifty’s.

NTPC technical analysis chart

Oscillator RSI and CMO are hovering in no man’s land. The stock is trading in the middle of Bollinger band not giving any directional bias. Short-term technical just saw a 18×9 bearish crossover.

The MACD line and the signal line are moving very close to each other unable to provide any direction for the stock. Also, both long-term and short-term GMMA lines are very close to each other not giving any direction to the stock.

NTPC correlation chart

NTPC’s average correlation with the Nifty is 0.57 which is positive and quite strong. The scrip will be replicating movement of Nifty. NIFTYBEES 807.00 9.66 (1.21%)

NTPC volatility chart

NTPC has a historical volatility in the range of 0.3 to 0.7. The scrip’s volatility is currently in the lower end of the range.

Given these technicals, we suggest a short-term Sell. For the long-term, we will have to wait and watch how the GMMA lines unravel themselves. However, we suggest having trailing stop-losses in case sudden trend-reversal were to take place.

The government is selling its 9.5% stake (78.3 Cr shares) at a floor price of Rs. 145 per stock, a discount of Rs. 10 per share. The stock is currently trading at a PE of 13.05, a price of Rs. 145 will bring it down to 12.17, lesser than comparables. With the US power industry rotating from coal to domestic natural gas, we expect the international price of coal, the main input cost for NTPC, come down over a period of time. We give the government’s OFS a BUY at this price.

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Sunder’s List

Global Roundup: Dow +0.25% to 13068. S&P +0.25%. Crude -1.72% to $86.36. Gold +0.34% to $1699.55. London +0.16%. Germany +1.07%. France +0.31%.

The government today said it has decided to divest stake in 10 companies, including Oil India, SAIL, HAL, RINL, NMDC, NALCO, NTPC, BHEL, MMTC and Hindustan Copper. (ET)

Will Retail FDI clear Rajya Sabha? Nothing is certain yet. (ET)

Singapore Court of Appeal: the Maldives government has the authority to take back Male airport from GMR. The Maldives Government will now go ahead with the airport transfer as scheduled. (ET)

Except for dairy, international prices of all the commodity groups included in the FAO Food Price Index fell in November, with sugar undergoing the sharpest dip, followed by oils and cereals.  The decline puts the November index value nearly 3% below one year ago. (FAO)

So now that you can afford food, you can sped that extra money on a new car. General Motor will increase the price of cars it sells in India by 1% to 3% from January 2013 due to high input costs and currency fluctuation. (Reuters)

A Wall Street Journal analysis of daily trading in roughly 10,000 stocks since 2004 found that on the final trading day of each quarter, there was a sharp increase in the number of stocks that beat the market by at least five percentage points, then trailed it by three points or more the next trading day. Some money managers wait until the waning moments of the quarter to bid aggressively for more shares of a stock they already own, which drives up the value of their entire position in the stock. That, in turn, boosts their performance at the very moment when they report results, making their funds look more appealing to potential investors. Even if the jump in stock price is only temporary, the managers can attract new money and earn higher fees. How is your Mutual Fund investment looking lately? (WSJ)

Have a nice weekend!

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BHEL 242.65 4.20 (1.76%) GMRINFRA 21.40 0.05 (0.23%) HINDCOPPER 81.25 3.05 (3.90%) MMTC 67.60 2.65 (4.08%) NATIONALUM 59.45 0.50 (0.85%) NMDC 161.00 -1.90 (-1.17%) NTPC 146.30 -1.25 (-0.85%) OIL 586.00 -1.20 (-0.20%) SAIL 83.50 1.10 (1.33%)

A Coal Story

The Economist has an interesting article about power generation in India. Given the near impossibility of constructing large dams and nuclear power plants, coal is taking up an ever larger pie of our energy sources. However,

Coal India is not digging fast enough. Output has been flat for the past two years.

And the private sector reacts by setting up backups to backups in typical Indian fashion:

Private generating firms are not waiting to find out the answer to this identity crisis. Instead they have assumed that the state will not deliver enough and are prepared to import vast amounts of coal to fire their plants, either by acquiring it from wholesalers or by buying foreign coal mines. Some $7 billion has been spent in the past six years on pits in Australia, Indonesia and Africa. Gautam Adani, a Gujarat-based tycoon, is building a private network of mines abroad that feeds ports and power stations in India.

The high debt loads that this entails might drag down the banks:

The central bank has been forced to reassure financial markets that a wave of defaults in the sector will not hurt the banks, which have about 7% of their loans to the power industry, mainly to generation firms.

It’s a fun read. Go read the whole article.