Indian Indices End Strong, Developments in the Oil & Gas Space, and Top Cues in Focus Today

Thu, 21 Feb Pre-Open

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Indian share markets ended the day on a strong note yesterday. Gains were largely seen in the metal sector and oil & gas sector.

At the closing bell yesterday, the BSE Sensex stood higher by 404 points (up 1.1%) and the NSE Nifty closed higher by 131 points (up 1.2%). The BSE Mid Cap index closed up by 0.9%, while the BSE Small Cap index ended the day up by 0.8%.

Top Stocks in Focus Today

From the pharma sector, Alembic Pharmaceuticals share price will be in focus today as the company has received approval from the US health regulator for Acetazolamide extended-release capsules.

The capsules are used for treatment of various kinds of glaucoma.

The approved product is therapeutically equivalent to the reference listed drug Diamox Sequels, 500 mg, of Teva Branded Pharmaceutical Products R&D Inc.

Last week, the company received approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Moxifloxacin Ophthalmic Solution USP, 0.5%.

From the energy space, Indian Oil Corporation share price was also in focus today as the company's chairman said the company has signed its first annual deal to buy US oil by paying about US$ 1.5 billion for 60,000 barrels a day in the year to March 2020 to diversify its crude sources.

IOC is the first Indian state refiner to buy US oil under an annual contract. This deal will also help boost trade between New Delhi and Washington.

The company has previously purchased US oil from spot markets and signed a mini-term deal in August to buy 6 million barrels of US oil between November and January.

From the Currencies Space...

The dollar sagged against its peers on Wednesday in the wake of falling US yields and as investors remained cautious ahead of the Federal Reserve's policy meeting minutes due later in the session.

The US currency has also been weighed down as safe-haven demand for the liquid dollar has ebbed on optimism that a fresh round of talks between China and the United States would help resolve their trade conflict.

The benchmark 10-year US Treasury yield fell sharply to an 11-day low on Tuesday ahead of the Fed meeting minutes, which are due today.

The minutes from the January Fed meeting will be closely watched following a dovish statement from the central bank at their January policy-setting meeting.

Note that, one of the key determinants of liquidity flows in the stock markets is interest rates. The 10-year US Treasury bond is a global interest rate benchmark.

The prolonged artificial suppression of interest rates and money printing by the US Fed, flooded the global financial markets with cheap liquidity and lifted stock prices to frothy levels.

Now, just the way lower interest rates can fuel stock market rallies, the vice-versa is also true. If interest rates start firming higher, it can play spoilsport to the unbridled global stock market bull run.

In fact, the market correction we witnessed in February-March in 2018 can be attributed to the rising yield on the 10-year US Treasury bond.

If interest rates go up further, foreign investors will either go slow on India or exit all together.

So, be careful. Don't take the abnormally high valuation multiples as the new normal. At the same time, don't exit the markets out of panic.

Stay invested.

Saudi Aramco to Invest in Indian Petrochemicals and Refinery Projects

In other news, as per a leading financial daily, Saudi Aramco, the world's largest oil exporter, said it is in talks with Reliance Industries and other Indian companies for investing in petrochemicals and refinery projects in India.

The Saudi national oil company, along with its partner UAE's Adnoc, has taken a 50% stake in a planned USD 44-billion mega refinery-cum-petrochemical complex in Maharashtra by state-owned oil companies and has bullish outlook on India's energy demand and, as per the news, is keen on investing here.

How this deal pans out remains to be seen. Stay tuned to get all the updates from this space.

Speaking of foreign players investing in India, many private equity funds have joined hands to increase their controlling stakes in Indian investments lately.

Here are some examples...

• A joint venture between Brookfield Asset Management Inc. and State Bank of India for distressed assets.
• The acquisition of a stake in Mankind Pharma by ChrysCapital, GIC and the Canada Pension Plan Investment Board.
• Resurgent Power Ventures Pvt. Ltd, a platform created by Tata Power and ICICI Venture, raising capital from Kuwait Investment Authority and State General Reserve Fund of Oman.

Here's what Tanushree Banerjee, co-head of Research at Equitymaster, wrote about this in one of the recent editions of The 5 Minute WrapUp...

Enticed by their long-term prospects, these funds are losing no time to enhance stake in their Indian investments.

And this is possibly just the start.

According to OECD, the 20 largest pension funds together hold about 43.2% of total global pension assets. Even if India receives a 5% allocation, it will mean a boom in the stock market.

In last three years, these funds have consolidated because of stronger growth among the bigger pension players.

These players are likely to focus on countries offering strong returns apart from relative safety, like India.

From the Banking Space...

Moving on to the news from the banking sector, Yes Bank share price will be in focus today as the lender yesterday denied any wrongdoing stating that the 'zero divergence' disclosure was done to comply with the listing regulations and to ensure information symmetry.

As per reports, Yes Bank said the disclosure it made on February 14 was in line with the guidelines laid down by the Reserve Bank of India (RBI) and markets regulator.

It said it treated the information pertaining to divergence in the RBI's risk assessment report (RAR) as unpublished price sensitive information (UPSI) and hence, it required an immediate disclosure.

Last week, shares of Yes Bank recorded their sharpest intra-day rally since listing on news that the bank received "no observation on divergence" in the bank's asset classification and provisioning in the RBI's Risk Assessment Report for FY2018.

As per an article in The Economic Times, against the Rs 7.5 billion of gross NPAs reported by the lender as on March 31, 2016, the RBI assessment showed the tally at Rs 49.3 billion, leading to a divergence of Rs 41.8 billion.

Reportedly, the divergence increased to Rs 63.4 billion in FY17 which was the main reason former CEO Rana Kapoor's tenure was reduced last year by the central bank.

To know more about the company, you can read Yes bank's latest result analysis on our website.

Speaking of the banking sector, Tanushree Banerjee, Co-head of Research at Equitymaster believes that financial inclusion will be an important element in driving the growth for India.

Here's what she wrote in one of the editions of The 5 Minute WrapUp...

Financial inclusion is an important element of economic growth because it enables individuals and businesses to access financial products that meet their needs.

As mentioned earlier, the reform that the Prime Minister Modi introduced - the opening of Jandhan accounts - was a big positive for India.

The opening of these accounts helped increase the number of savings and current accounts in the country.

And this trend is not done. It will play out in the coming years too.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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