Bangalore: The media-talks have now shifted their focus to the “coalgate” scam of 1.86 lakh crore, leaving behind the older 2G spectrum issue, Commonwealth Games scam, public-private partnership issue of airports and the rest.  Here we are trying to unwind the issues and impact of the prevailing coal block allocations controversy on the market. It is expected that as a result of this mess, there will be some complex as well as long-term implications for the energy sector in the coming future.

Market Impacts

The whole muddle raises several crucial questions, politically. Will the government cancel the coal block allocations? Will it maintain the status quo? Or, will it settle them up with some compromise? Or, most of all, will the government fall on this issue? All these possibilities should be taken into consideration as the chances are equal. But the impact on the market will surely be different in each case.

If the coal block allocations are cancelled all of a sudden, it will adversely affect the market and it would by all means crash. If the status quo it maintained, on the other hand, there would be a relief period which would positively reflected on the directly impacted stocks. And the third probability, whether some mid-point solution is found, there would be a much restricted impact on some specific stocks.

As the deal is more or less favorable to the recipients of the blocks, any change in it will be bearish in effect; and the most obvious to be affected will be Reliance Power. Other ADAG Companies are also likely to be affected. The other listed companies, which are expected to be affected, are Tata Power, Jindal Steel and Power, NTPC and possibly, Coal India.

No analysis on the market can possibly help the investors. Since the news-flow out of the Parliament seems to be ambiguous, the actual results are unpredictable and volatile. The trends will be unveiled only when there is hard news from the political front. Those with strong nerves can have a play—Deal, if you think the government can maintain status quo; or, No-Deal, if you think it will be forced to cancel the allocations. Keep a margin to face either event.