In the last few days, brokerages and analysts have feverishly tried to predict the trajectory of specific stocks depending on the turn of fortunes in UP. Market analyst SP Tulsian told FE: If SP forms a government on its own, it will be a great positive for RPower and Bajaj Hindusthan, since these companies are perceived to be close to it.
Such a development would, however, be negative for Jaypee Group companies, who are seen to be aligned with the BSP.
Tulsian, however, capped losses for Jaypee if SP returns to power, stating JP Infra has already built 165 km of expressways in the state, a project no party will annul. It has to be completed, he said. He pointed out that JP Power would be hit harder because the SP would prefer RPower for power projects.
Agrees Jagannathan Thunuguntla of SMC Capital: SPs return will be positive for ADAG and sugar stocks and negative for Jaypee. If SP and Congress form a coalition, it would be a positive for the whole market. But I dont see that happening now.
On Monday, Jaiprakash Associates opened at Rs 73.60 and fell to the days low of Rs 69.50 before marginally recovering to close down 6% at Rs 70.20. A similar trend was observed in Jaiprakash Power Ventures, which opened at Rs 43.10, fell to the days low of Rs 39.55 before closing nearly 6% down. Jaypee Infratech opened at Rs 45.90 and touched the days low of Rs 42.40, finally closing down 5% at Rs 43.60.
In sharp contrast, Reliance ADAG shares rose in a falling market with Reliance Infra closing up 5.5% and Reliance Power up 5% on the National Stock Exchange. ADAG is firmly entrenched in Uttar Pradesh, constructing a 5,500-MW gas generation power plant in Dadri, besides road projects in the state.
The prospect of SPs victory boosted sugar companies too, with Bajaj Hindusthan, Triveni Engineering, Balrampur Chini Mills, Oudh Sugar Mills and Dwarikesh Sugar rising 2-10% in early trades. Bajaj Hindusthan closed up nearly 3% while Balarampur Chini was initially up, before closing a percentage point down. The general perception is that while BSP was pro-sugar farmer increasing support prices for cane SP is seen to be friendlier with mill owners.
Analysts said sugarcane companies are hoping to get cane arrears which have crossed Rs 3,700 crore. While BSP raised sugarcane price by over 80% in five years, SP had raised cane prices by only 25% during its previous tenure.
Sugar is UPs largest industry, accounting for around 15% of area under cultivation. The Mayawati government gave a sweet deal to 3.5 million sugarcane farmers and slapped cases against sugarcane mills for one reason or the other. She reversed the Samajwadi Partys sugar policy that incentivised mills to expand capacity, said a senior analyst explaining the reason for market enthusiasm in sugar stocks.