Coal stocks have pulled back amid speculation about future leadership in India, a major importer, but the sell-off may have more to do with short-term trading sentiment rather than a shift in market fundamentals.
The Range Global Coal Index ETF (NYSE:COAL) fell 3.8% Tuesday as early results in India showed Prime Minister Narendra Modi's party secured a third consecutive term but didn't win enough seats for an outright majority.
That appears to have led to some speculation that his government might face resistance to plans to add at least 55-60 gigawatts of coal-fired electricity generation by 2031-2032.
"Some are saying that Modi's party not achieving the threshold to govern without coalitions is the reason for the sell-off, but frankly I think that's speculative," said Matthew Warder, CEO of energy-, metals- and mining-focused consultancy and analytics firm Seawolf Research.
"A few stocks actually just hit 52-week highs yesterday and the whole sector was overbought," he said. "So I think it's probably more likely that a quick correction was in order anyway."
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Related tickers: COAL, CEIX.
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