CAG-Hit Coalgate Companies Show Sharp Decline

The recent report by the Comptroller & Auditor General of India on coal block allocations has severely impacted the Indian stock market. The shares of CAG-hit companies have declined sharply on the bourses. The CAG list contains names of some of the biggies like Jindal Steel & Power, Reliance Infrastructure, Sterlite Industries (India), Hindalco Industries, JSW Steel, Tata Power, Tata Steel, Tata Sponge, Adani Power, GMR Infra, Lanco Infra, GVK Power, Ambuja Cements, Hindustan Zinc and CESC. A separate report on UMPPs has already hit Reliance Power which has tanked by 15 per cent from the time the report was made public. 

From the list only two companies have shown gains i.e. Hindustan Zinc and Bihar Sponge Iron Company while the shares of all the rest have gone down. The shares of Jayaswal Neco Industries, that was allocated a coal block in 2005 and which is not operational as of now, have declined the most i.e. by 25 per cent from the time the CAG report was made available. The Sensex during this period has remained flat. As such, investors would have to be cautious while investing in these companies. Our call is that the power and metal sector are showing a negative bias and hence it would be best to avoid these companies at present.