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Sensex Ends Week Volatile Amid Trade War Fears
Fri, 6 Apr Closing

After opening the day in red, share markets in India witnessed volatile trading activity throughout the day and ended the day on a flat note. Sectoral indices traded on a mixed note, with stocks in the IT sector and stocks in the capital goods sector, leading the losses.

At the closing bell, the BSE Sensex stood higher by 30 points (up 0.1%) and the NSE Nifty closed flat. The BSE Mid Cap index ended the day up 0.7%, while the BSE Small Cap index ended the day up by 0.6%.

The rupee was trading at Rs 64.95 against the US$ in the afternoon session. Oil prices were trading at US$ 63.25 at the time of writing.

Global financial markets this week were overshadowed by the volatility stemming from the trade war between US and China.

The ongoing trade war between US and China is showing no signs of stopping. Earlier this week, China imposed fresh tariffs on US goods. It hit back at the Trump administration's plans to slap tariffs on US$50 billion in Chinese goods, retaliating with a list of similar duties on key US imports including soybeans, planes, cars, whiskey and chemicals.

China said it would levy 25% tariffs on imports of 106 US products.

Chinese retaliation for the Trump administration's latest move had been widely expected. Chinese officials had promised a proportional response if the Trump administration went ahead this week with the next step toward broad tariffs on Chinese goods.

Stock markets around the world have also taken a hit in recent weeks as Washington and Beijing have escalated their trade dispute.

More recently President Donald Trump announced that he has instructed US trade officials to consider US$100 billion in additional tariffs on China.

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Signs are imminent that the trade war may continue well within the next week.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was up by 1.1% and the Shanghai Composite was down by 0.2%. The Nikkei 225 was down by 0.4%. Meanwhile, European markets, were trading on a negative note. The FTSE 100 was down by 0.2%, The DAX, was down by 0.5% while the CAC 40 was down by 0.4%. Meanwhile, the US benchmark, Dow was trading up by 1%

In news from stocks in the aviation sector. According to data from the International Air Transport Association (IATA), domestic air traffic was up by over 23% in February, compared to the same month last year. Notably, the traffic was more than two-fold of the global average, propelled by the launch of new flights and routes by the local airlines during the period.

February was also the 42nd month of double-digit year-on-year growth on a trot, with a record more than 90% cent occupancy on aircraft operated by the domestic airline.

Indian carriers flew 10.7 million passengers in the past month, up from 8.6 million in February 2017,

SpiceJet maintained its pole position in terms of load factor at 96.3%, followed by IndiGo at 91.8% despite problems with its Airbus 320 Neo aircraft.

Vistara was a surprise third, flying its planes with 91.2% seats full, the highest ever for the airline that flies its planes in a three-class configuration: economy, premium economy and business.

IndiGo remained the market leader, flying 39.9% of the industry passenger traffic. Jet Airways came in next with 16.8%, followed by national carrier Air India with 13.2%.

Indian Aviation Spreading its Wings

Air travel has recorded double-digit growth for 40 consecutive months, thanks to low fares, the addition of new flights/destinations, and overall growth in the economy.

What's foreseeable for India's aviation traffic in 2018 is some pressure on the back of the consistent rise in crude oil prices. Earlier this month, Brent crude oil briefly breached US$70 per barrel and touched its highest level since December 2014. Crude prices have been driven up by production curbs in OPEC nations and Russia, as well as by robust demand on the back of healthy global economic growth.

Oil prices are closely monitored by the Indian air carriers, as aviation turbine fuel is their single largest input cost. A sharp rise in the cost of fuel puts pressure on margins, and consequently an increase in air fares.

Although air travel is becoming the new normal, investors need to understand the industry dynamics before buying up aviation stocks.

Moving on to news from stocks in the Oil and gas sector. Indian Oil (IOC) share price ended the day on an encouraging note, as the state run oil major announced a new acquisition.

IOC announced that it acquired Royal Dutch Shell's 17% stake in the Makhaizna oilfield in Oman for US$329 million.

Mukhaizna oilfield is the single largest producing individual oilfield in Oman, contributing about 13% of total Omani crude oil production of 120,000 barrels per day.

IOC made the acquisition through its wholly-owned subsidiary, IOCL Singapore Pte Ltd. The effective date of transaction is January 1, 2017.

The field is operated by Occidental Mukhaizna LLC with 45% stake. The other partners are Oman Oil Company S.A.O.C (20%), Liwa Energy Ltd (15%), Total E&P Oman (2%) and Partex (Oman) Corporation (1%).

IOC share price ended the day up by 0.6%.

Speaking of acquisitions, HCL Technologies announced an acquisition.

The software services firm acquired C3i Solutions for US$60 million, a move aimed at accelerating the Indian IT firm's growth in life sciences and consumer services.

C3i Solutions is a wholly owned, independently operated subsidiary of Merck & Co, (known as MSD outside the US and Canada) and provides multi-channel customer engagement services for life sciences and consumer packaged goods (CPG) industries.

HCL Technologies, through its subsidiary - HCL America Inc - will acquire 100% stock of Telerx Marketing that operates as C3i Solutions. C3i's revenue for the financial year ended December 31, 2017 stood at USD$199 million. It has over 3,700 employees located in the US, India, Bulgaria, China, UK, and Japan.

HCL Technologies share price ended the day down 1%.

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