India's NSE index edged lower for a second consecutive session on Tuesday as firms including Jindal Steel and Power extended their slump after a Supreme Court ruling on coal allocation, while lenders fell due to concerns over their loan exposure. India's top court ruled on Monday that the allocation of more than 200 coal blocks since 1993 was illegal and analysts warned any mass cancellation could have a wider corporate and economic impact.
But broader losses on NSE were capped as defensive stocks such as ITC Ltd rose as investors cut risk in portfolios amid uncertainty over the coal allocation ruling and ahead of the expiry of derivatives on Thursday. "The coal block surprise seems discounted now but it will remain as a hangover on markets till the final judgement comes from the Supreme Court," said G. Chokkalingam, founder of Equinomics, a research and fund advisory firm.
The broader NSE index fell 0.02 percent, or 1.55 points, to end at 7,904.75, retreating further from a record high of 7,968.25 hit on Monday. Still, the NSE managed to close above the psychologically important 7,900 level. The benchmark BSE index gained 0.02 percent, or 5.79 points, to end at 26,442.81.
Coal users fell further, following a broad sell-off on Monday after the ruling, which jeopardised projects built around the blocks and threatens to exacerbate a shortage of the fuel. Jindal Steel and Power Ltd fell 6.5 percent, adding to Monday's 13.9 percent slump. Tata Power fell 2.8 percent after the company said the Supreme Court ruling includes the Tubed, Mandakini coal blocks allotted to the company.
Reliance Power fell 6.9 percent, while Adani Power lost 6.4 percent. Among lenders that have exposure to the power sector, State Bank of India lost 0.4 percent, Power Finance Corp lost 1.1 percent and Union Bank lost 3.4 percent. Oil and Natural Gas Corp ended down 2.5 percent on equity dilution concerns due to a potential share sale by the government. Maruti Suzuki Ltd fell 1.2 percent while Mahindra and Mahindra lost 0.8 percent after India's pricing regulator imposed penalties on car makers. However, Tata Steel gained 2.5 percent, recovering after a 4.8 percent fall on Monday. Analysts said the company would not be hurt by the ruling on coal allocations. Meanwhile, defensive stocks rose, with cigarette maker ITC gaining 0.9 percent and Sun Pharmaceutical Industries closing up 1.3 percent.
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