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Sensex Ends Flat; Oil & Gas Stocks Surge
Tue, 3 Jan Closing

Indian share markets continued to trade near the dotted line with positive bias in the afternoon session. At the closing bell, the BSE Sensex stood higher by 48 points, while the NSE Nifty finished up by 13 points. The S&P BSE Mid Cap & the S&P BSE Small Cap finished up by 0.6% and 1% respectively. Gains were largely seen in energy, consumer durables and PSU stocks.

Chinese markets finished strong following a survey showing a pickup in China's factory activities for December. The Shanghai Composite gained 1.04% and the Hang Seng rose 0.68%. Meanwhile, Japan's Nikkei 225 lost 0.16%. European markets are mixed today. The FTSE 100 is up 0.58% while the CAC 40 gains 0.49%. The DAX is off 0.05%.

The rupee was trading at 68.09 against the US$ in the afternoon session. Oil prices were trading at US$ 55.09 at the time of writing.

Hindustan Petroleum Corporation of India's (HPCL) share price finished on a strong note (up 3.4%) after it was reported that the company is planning to invest Rs 12 billion in the next three to five years in various city gas distribution (CGD) networks in order to expand network and build infrastructure.

The company already has three city gas distribution joint ventures- Aavantika Gas, Bhagyanagar Gas and Godavari Gas.

Meanwhile, Aavantika Gas, a joint venture between HPCL and GAIL (India) is aiming to increase the number of CNG stations and also domestic customers to drive profitability, while at the same time being able to meet Petroleum and Natural Gas Regulatory Board (PNGRB) and (petroleum) Ministry's target of achieving 1 million domestic connections and green corridors for CNG.

Meanwhile, the stock price of HPCL has slipped about 13% since November after a strong run through much of 2016 due to market volatility induced by the demonetisation move and Trump's victory in the US took a toll.

More than oil price fluctuations, what matters for oil marketers is refining margins - the difference between the price of final petro-products and the cost of crude oil. For the half-year ended September 2016, HPCL's gross refining margin was US$5.12 a barrel, a bit lower than US$5.45 a barrel in the year-ago period.

After weakness in the September quarter, refining margins have been improving in recent months. Also, higher oil prices should translate into inventory gains for the oil companies in the near-term. HPCL has grown its market share in fuel retailing over the past few years, and capacity expansions should help it retain and improve its position.

Oil & Gas stocks finished on a strong note with Indian Oil Corporation and Chennai Petroleum leading the gains.

Moving on to news from stocks in power sector. According to an article in The Business Standard, the Central Electricity Authority (CEA) has estimated an investment of Rs 2.6 trillion till 2022 indicating significant growth in the power transmission sector.

The investment figure includes an estimate of Rs 300 billion in transmission systems below 220 kv. About Rs 1.6 trillion would come from states and the other Rs 1 trillion from Power Grid Corporation of India. The government is planning to increase the size of projects and scope of work in transmission. Inter-state lines with capacity of around 56,000 Mw are being planned by the end of the 13th plan.

CEA stated that renewable energy generation would be 20.3% and 24.2% of the total energy requirement in 2021-22 and 2026-27, respectively. The estimate is that India would need 100,000 circuit km (ckm) of transmission lines and 200,000 MVA transformer capacity of substations at 220 kv and above voltage was expected to be added in the 13th plan. It has suggested that investment be invited through competitive bids.

Growth of Tranmission Networks Annually

It was also reported that various high capacity transmission corridors are in various stages of implementation and most are likely to be commissioned by 2021.

In another development, Power Grid Corporation of India's share price surged 2.5% in today's trade after it was reported that the company has transferred 30,640,000 equity shares of Rs 10 each of Power System Operation Corporation to Government of India. This step has been taken on receipt of purchase consideration of Rs 812.1 million.

Power stocks finished on a firm note with KSK Energy and NHPC Ltd leading the gains.

And here's an update from our friends at Daily Profit Hunter...

The S&P Oil & Gas index was one of the best performer in 2016. It rallied strongly on the back of rising crude oil prices. It made a 52-week high of 12,440 in October 2016 before going into consolidation. The index again gained momentum in last week of December. Today the index gained around 2% and hit a new 52-week high of 12,459 on closing basis. It seems that the index is about to resume its prior uptrend.

S&P BSE Oil & Gas at its 52-week High

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Mar 16, 2018 (Close)