>UTILITIES - FIRMING UP MERCHANT RATES

After witnessing low spot prices over the past four months, rates have bounced back in March'10. Spot rates touched a high of Rs 7.9/unit in March, indicating strong demand. Average rates for March '10, Rs 5.8/unit, were 67% higher over Q3 FY10. With the country entering the summer season and an improvement in the economic environment, we believe demand for power will remain high. The demand-supply gap is expected to remain high as the country witnesses slow capacity addition during the eleventh plan. Hence, we believe spot rates will continue to remain firm.

■ Lower capacity addition will keep deficit high
■ Spot prices regaining firmness
■ Expect average merchant rates to hover around Rs 5.5-6/unit.

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