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Dull End to the Week; Oil & Gas Stocks Rally
Fri, 31 Mar Closing

Indian share markets continued to trade flat in the afternoon session and finished marginally lower. At the closing bell, the BSE Sensex stood lower by 27 points, while the NSE Nifty finished flat. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished up by 0.7% respectively. Gains were largely seen in oil & gas stocks, metal stocks and PSU stocks, while bank stocks and IT stocks witnessed maximum selling pressure.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.38%, while the Nikkei 225 & Hang Seng fell 0.81% and 0.78% respectively. European markets are lower today with shares in London off the most. The FTSE 100 is down 0.48% while France's CAC 40 is off 0.36% and Germany's DAX is lower by 0.08%.

The rupee was trading at Rs 64.84 against the US$ in the afternoon session. Oil prices were trading at US$ 50.30 at the time of writing.

Indian Oil Corporation share price surged 3.5% as the company signed a memorandum of understanding to supply petroleum products to Nepal Oil Corporation (NOC) for a further five years.

Indian Oil has been supplying petroleum, oil and lubricants (POL) to NOC since 1974 when the first supply agreement was signed, which has been renewed periodically. The latest agreement has been signed for the period of April 2017 to March 2022.

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This agreement will enable NOC to meet its requirements of all major POL products, including petrol, diesel, kerosene, aviation turbine fuel and LPG. Under the new agreement, Indian Oil will supply BS-IV grade fuels to Nepal from 1 April to assist the country with opting for greener fuel.

In another development, Oil & Natural Gas Corp (ONGC) and Bharat Petroleum Corporation ltd (BPCL) are set to overtake Reliance Industries in overseas fund raising in FY17.

The change in the league tables comes against a backdrop of a slowdown in fundraising by Indian corporates during the year. Overseas fundraising by Indian companies slowed to US$19.02 billion in 2016-17 from US$21.06 billion in 2015-16.

Reportedly, BPCL and ONGC raised US$4.9 billion in 2016-17 against US$1.65 billion raised by Reliance. ONGC raised US$2 billion and State Bank of India raised US$1.7 billion.

Last year, a consortium of state-owned oil companies, led by ONGC, BPCL and Oil India had invested US$ 3.2 billion to acquire stakes in two Russian oil fields. The consortium raised money at attractive interest rates as compared to domestic ones.

Going forward, the fund-raising activity of Indian companies is anticipated to climb in FY18 on a revival in economic activity, the reports noted.

Meanwhile, Livemint reported that Royal Dutch Shell Plc's India unit and BPCL are planning to team up to help the latter set up an energy trading unit in Singapore.

BPCL and Shell India are working together to develop a joint trading desk where Shell will support BPCL in terms of techniques, and talent training in trading.

ONGC share price and BPCL share price finished up by 0.3% and 1.3% respectively.

Moving on to news from bank stocks. According to a leading financial daily, Kotak Mahindra Bank plans to sell shares worth as much as US$825 million at the current market price to pursue acquisitions and grow other businesses.

The fundraising is aimed at augmenting the bank's capital base to pursue mergers and acquisitions, acquire stressed banking assets, grow subsidiaries, and expand its digital banking and international lending operations.

Kotak will also focus on building its stressed asset resolution and turnaround business in the coming years. The Indian banking system currently has about Rs 14 trillion worth stressed assets parked as non-performing loans and in various stressed asset resolution schemes.

While stressed assets is a key focus, Kotak Mahindra Bank is also aiming to double its 8 million-strong customer base in 18 months by launching the paperless zero-balance savings account, called 811.

Kotak Mahindra bank share price finished the day up by 0.8% on the BSE.

Meanwhile, SBI share price finished the trading day up by 0.9% on the BSE after it was reported that the bank is looking to raise US$500 million in bonds under its medium term note program at a fine rate of three months LIBOR plus 95 basis points, or roughly 2.1%. The bonds are part of the Bank's US$10 billion medium term note program.

The pricing is at par with bonds issue by top institutions of many developed countries, despite the Bank being limited by its sovereign rating of BBB- in international markets. The bonds mature in three years. The Reg S bonds were oversubscribed more than three times by investors all across the globe.

Bad Loans Inventory Bloats Up

Bad Loans Inventory Bloats Up

Rising to the menace of bad debts, the Reserve Bank of India is mulling tough measures against willful defaulters. Gross NPAs have risen at an alarming rate over the past 1 year. While RBI's proactive measure to tighten NPAs is proactive, banks need to take their share of blame. In our recent The 5 MinWrapUp edition, we had highlighted how the banks return ratios had deteriorated due to its profits written off on account of NPA provisions.

Power Grid Corp. of India share price finished on a positive note (up 0.6%) after the company received an approval for investment proposals worth Rs 429.21 crore for power transmission related projects.

And here's a note from Profit Hunter:

In an earlier note, we mentioned the S&P BSE Oil & Gas index was the best performer of 2016. It outperformed the Nifty 50 Index 33% from the February 2016 lows.

Most stocks in the sector participated in the rally thanks to rising crude oil prices.

The index was well positioned from a short-term perspective and has rallied 10% since our earlier note.

But recently, crude oil saw some massive selling, dropping nearly 13% in just two weeks. But the drop was associated with a sideways movement in the oil and gas index, which indicated strength in the index. The sideways movement formed a pennant pattern. And today, the index broke out of the pattern, indicating a continuation of its uptrend.

Crude oil prices have also seen some buying interest after the drop. All of this bodes well for the oil and gas index. But on the flipside, if crude oil experiences selling pressure again, the oil and gas sector might take a backseat.

S&P BSE Oil & Gas Index in Strong Uptrend
MRF Near Life High

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Mar 22, 2018 (Close)