Good start to Samvat 2058 - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Good start to Samvat 2058

Nov 17, 2001

Despite the shortened trading week equity markets rallied handsomely marking a good start to the traditional new year. Confidence of domestic investors was further supported by a shift to equities in the global markets. The Sensex, NASDAQ and Nikkei all rose by more than 3% this week. A breather to the global economy is the steady decline in oil prices since the September 11 incidents. The initial knee-jerk reaction led to prices climbing to 9 month highs of $31 / barrel. But since then prices have moved in only one direction -- down. Crude oil prices (Brent blend) are trading at $17.5 / barrel, touching two year lows.

Oil prices have now traded below the Organisation of Petroleum exporting Countries (OPEC) preferred price band of $22 - $28 / barrel for more than a month. The cartel had designed a mechanism for regulating oil prices. Should prices trade below $22 / barrel for ten consecutive working days the OPEC would adjust production to bring back prices within the preferred band. However, the cartel could not immediately cut production due to retaliatory action against the terrorist attacks. Also, Saudi Arabia, the largest crude producer in the world and member of the cartel, is a close ally of U.S.

A new twist to oil dynamics is the role played by non-OPEC producers. OPEC has cut 3.5 m barrels/day (mbd) this calendar year. Much of the reduced supply has been compensated with increased production from non-OPEC producers especially, Russia. Consequently, the cartel has lost marketshare. Fear, that another cut would further reduce marketshare and non-OPEC producers capitalising on the cartel's effort to push-up prices has made the OPEC wary of an independent cut in production. Consequently, the OPEC has been bargaining for a joint production cut. The cartel is contemplating curtailing production by 1.5-2 mbd with support from non-OPEC countries to the extent of 500,000 bpd. However, the negotiations have not met with much success leading to weakness in oil markets. Reports that the OPEC may adopt a strategy of choking non-OPEC producers indicates that oil prices could be headed below the $15 / barrel mark.

Weaker oil prices are beneficial for India, especially, considering the re-structuring proposed in the sector. The BSE Sensex has crossed September 11 levels of 3,150. The next resistance is at 3,300 levels.

Equitymaster requests your view! Post a comment on "Good start to Samvat 2058". Click here!


More Views on News

An Important Hurricane Update for Energy Traders (Fast Profits Daily)

Sep 22, 2020

In this video, I'll show you how the extended hurricane season in the US will affect traders in crude oil and natural gas.

Mutual Fund Investors Will Now Be Allotted Units Based on NAV of the Day AMCs Receive Funds (Outside View)

Sep 22, 2020

PersonalFN explains how SEBI's new circular on mutual funds impact investors.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

How Much Money Should an Investor Set Aside for Trading? (Fast Profits Daily)

Sep 21, 2020

In this video, I'll give you a simple equation which you can use to decide how much money you can set aside for trading.

Kotak Standard Multicap Fund: Strategizing Growth with Focused Approach (Outside View)

Sep 21, 2020

PersonalFN's analysis on the features and performance of Kotak Standard Multicap Fund.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 22, 2020 03:37 PM