Review of REC Trading-September 2011

Trade session this month again brought a pleasant surprise for sellers with REC prices rising to Rs.2300/REC about 30% w.r.t last month.As the second quarter ended, buyers might have tried to secure RECs and limit their liabilities against future price rise which seems evident.
Market has picked up a great momentum and the same is reflected from today’s turnover which just crossed about Rs. 100Million mark for the first time!! We can expect REC market to mature much faster than anticipated as it appears from last few trades that the liquidity crunch from buy side may not remain a major concern at the current sale side participation.

As per our understanding form the trade session, the reason for high price during this trade session could be the Quarter 2 ending as obligated entities might have tried to secure RECs to ensure their quarterly RPO compliance targets are met. States like Gujarat, Chhattisgarh and Maharashtra et. all have mandated state nodal agencies to report quarterly compliance status to the state commission. This effect is very evident from the fact that this month, even though very high number of RECs available for sale compared to last month, the price rose. Comparative price chart is shown inn the figure below.