Avoid metals until clarity on coal block allocation: Analysts

MUMBAI: Shares of metal and power companies witnessed a sharp sell-off after the Supreme Court ruled that all coal block allocations post 1992 as illegal.

Metals and power companies depend heavily on coal to run smelters and generate electricity. These sectors had run-up on expectations of reforms by the new government. The Prime Minister Narendra Modi has been emphasizing on power generation in his recent speeches as well.

According to analysts tracking metal sector, there is uncertainty in these companies after the ruling and that is the reason they are down sharply.

They are advising investors not enter these stocks at the moment but wait for clarity from the Supreme Court.

The apex court observed that allocation of coal blocks done under screening committee rule was irregular. No proper procedure for allocation was followed since 1992, the court said.

The SC has said further hearing is required to determine whether there is a need for cancelling 218 coal block allocations.

It will hear arguments on September 1 on canceling of coal block licences.

According to CBI lawyer, Amitanand Tiwari, SC will look into coal block allocation in greater detail and decide whether it will de-allocate illegal coal blocks.

The Court is aware of the impact of cancelling blocks on economy, the lawyer said.

The BSE Metal Index fell 3.81 per cent and the S&P BSE Power Index was down 1.01 per cent.

Hindalco plunged 10.05 per cent, JSPL fell 14.21 per cent, Tata Steel was 4.74 per cent lower and JSW Steel declined 4.05 per cent.