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Sensex Finishes Firm; Oil & Gas Sector Up 0.4%
Thu, 12 Jan Closing

Share markets in India continued to trade marginally higher in the afternoon session and finished on a positive note despite weak global trend. At the closing bell, the BSE Sensex stood higher by 107 points, while the NSE Nifty finished up by 27 points. The S&P BSE Mid Cap finished up by 0.2% while the S&P BSE Small Cap finished down by 0.2%. Among BSE sectoral indices, power sector gained the most, followed by IT sector. On the other hand, pharma stocks and FMCG stocks led the losses. Top BSE Sensex gainers were NTPC, Power Grid Corp, Infosys and L&T.

Asian markets finished broadly lower today with shares in Japan leading the region. The Nikkei 225 is down 1.19% while China's Shanghai Composite is off 0.56% and Hong Kong's Hang Seng is lower by 0.46%. European markets too are lower today with shares in Germany off the most. The DAX is down 0.68% while France's CAC 40 is off 0.39% and London's FTSE 100 is lower by 0.31%.

The rupee was trading at 68.09 against the US$ in the afternoon session. Oil prices were trading at US$ 51.23 at the time of writing.

According to an article in The Business Standard, MRF has signed a memorandum of understanding with the Gujarat government to set up a manufacturing facility for automotive tyres, tubes, flaps and related products.

The company plans to invest Rs 45 billion over a ten-year period in a phased manner. MRF plans to broad-base its manufacturing facilities across India. The project will be funded through internal accruals and debt. Apart from providing cost advantage in the domestic market, it may also help boost its exports given the strong port connectivity in the State.

The company has also identified motorsports tyres as a new vertical for its International Business Division. After the roll out of MRF Motorsport Tyres in the UK in January 2016, the company has been focusing on boosting its brand profile in developed markets such as Europe and Australia as a precursor to launching its passenger brands in those markets.

MRF share price finished the trading day down by 1.1% on the BSE. The share price of the company has rallied 57% in the last six months.

MRF Hits All Time High
MRF Hits All Time High

Meanwhile, as per the reports, Chinese tyre sales, which rose by about 40% in the Indian replacement market between April and October 2016, saw a de-growth of around 17% after the note ban. While this may be a good news for Indian tyre makers at least in the short-term, the pressure will rise once things ease down (Subscription Required). Chinese tyres are getting dumped mainly in the replacement market, which is estimated to be around 900,000 tyres a month.

Moving on to news from energy sector. According to an article in The Economic Times, fuel demand growth in India is expected to slow by as much as 40% in 2017 from last year as a government-induced cash shortage is presumed to hurt businesses, industry and car sales.

Oil product demand growth in 2017 is expected to drop to 160,000 barrels per day (bpd), from 270,000 bpd in 2016.

Currency crackdown has led to a cash crunch that has severely hurt overall output and consumer demand, with December factory activity contracting in its biggest monthly decline in eight years and last month's car sales dropping the most in 16 years.

Reportedly, growth in both diesel consumption, which is used mainly for heavy industrial vehicles and gasoline burned to power cars, is expected to slow, especially in the first quarter.

As per the reports, diesel demand is expected to grow only 2% in the first quarter of 2017 compared with a year ago, less than half of the 5% growth rate seen in the first 10 months of 2016.

Though the dent in demand growth is expected to be temporary as long term prospects remain strong, with spending on infrastructure projects and a resumption in economic growth and freight shipments supporting diesel.

Oil & gas stocks finished the trading day on a positive note with Indian Oil Corporation and Cairn India leading the gains.

And here's a note from Profit Hunter:

The S&P BSE Oil & Gas index was among the best performers in 2016. It hit a low, as did the Nifty-50 index, in February 2016. From these lows, the Nifty-50 index returned just under 17%. The S&P BSE Oil & Gas index on the other hand returned a whopping 50%.

Most of the stocks in the sector participated in the rally on the back of rising crude oil prices.

After bottoming in February, the S&P BSE Oil & Gas index had a very strong Bull Run. The index made a 52-week high of 12,440 in October 2016 before going into consolidation. The index again gained momentum in the last week of December. Coming into the New Year, the index traded at its new 52-week high of 12,459.

Interestingly, the RSI recently broke out of double bottom pattern indicating strength in the sectorial index.

Although there are many other factors to be considered, purely based on the above, the Oil & Gas sector index appears to well positioned from a short-term perspective.

S&P BSE Oil & Gas Trading at its 9-Year High (Comparison with Nifty-50 Index)
 S&P BSE Oil & Gas Trading  

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