Mining stocks in the pit

Mining stocks are down in the red today, led by Sesa Sterlite, down 2%, followed by NMDC down 1.7% and SAIL is also down 1.5%. All three figure out amongst the top losers on the BSE currently.

Mining stocks have dipped into the red after the Union Cabinet hiked royalty rates on minerals, including iron ore and bauxite but excludes coal, lignite and sand for stowing. Though this is expected to rake in a lot of moolah for mineral rich State govt in terms of revenue, almost to the tune of Rs.15,000 crore. This rate hike has come in after August 2009 and many say, this is a move by the Govt to mollycoddle the states so that it can usher in its GST with ease. The mineral rich states have been asking for a rate hike for some years now; royalty rates are hiked every 3 years and it has not happened since 2009.

The mining companies will have to pay more but the overall impact is expected to be marginal as this was a much anticipated expense. The market is over reacting at the moment but once it becomes clear that the impact will not exactly cripple the companies, this too shall pass.