How to trade metal majors post Supreme Court order

MUMBAI: The Supreme Court’s landmark judgement to cancel allocation of 214 coal blocks came as a lightning bolt to metal majors.

The apex court not only cancelled the non-operational coal blocks but also ones run by companies such as Hindalco, Jindal Steel & Power, Tata Steel and Usha Martin. The companies will also have to pay a penalty for the production so far.

The allottees have been given a breathing period of six months. It is not clear whether the SC will review its decision after seeking replies from affected companies.

The government will be free to auction coal blocks post March 31, 2015. Coal India has been asked to take over operational blocks for six months.

According to analysts tracking the sector, JSPL will be the worst hit by the order. The stock has corrected nearly 10 per cent and in all likelihood may fall another 5 per cent in next couple of weeks.

They don’t expect too much fall in Hindalco Industries. The company will lose three coal blocks.

Ashwani Gujral, Fund Manager, ashwanigujral.com is of the view both JSPL and Hindalco are avoidable at current levels. There are chances of further weakness emerging in coming sessions.

Siddharth Bhamre, Head Derivatives, Angel Broking, is of the view that Hindalco will be a good buy at Rs 145-150. According to him, traders can start accumulating the stock near Rs 145.

Coal India, which gets to run the mines from the April 2015 till the government initiates auction, has been on a run post SC order.

Gujral is of the view that Coal India has made some sort of intermediate bottom. Traders can expect another 10-15 per cent rise in the stock.

Bhamre is of the view that Coal India corrected in Septemer series and there build-up of short positions. As a result of news flow, these shorts will be covered. According to him, momentum oscillators are positive and over 7 per cent upside can be expected.

JSPL fell 10.60 per cent, Monnet Ispat plunged 8.16 per cent, Prakash Industries was 8.20 per cent lower and Usha Martin tanked 11.83 per cent. Hindalco recoved intraday losses to close 0.48 per cent lower.