Sensex Ends 139 Points Higher; Realty and Metal Stocks Witness Buying

Mon, 15 Apr Closing

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Indian share markets traded on a positive note throughout the day and ended higher. Gains were seen in the metal sector, automobile sector and realty sector, while oil & gas stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 139 points (up 0.4%) and the NSE Nifty closed higher by 47 points (up 0.4%). The BSE Mid Cap index ended the day up 0.5% and the BSE Small Cap index ended the day up by 0.6%.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.3% and the Shanghai Composite was down by 0.4%. The Nikkei 225 was up 1.4%.

The rupee was trading at 69.38 against the US$.

In the news from the macroeconomic space, government data released today showed wholesale price-based inflation rose for the second consecutive month to 3.18% in March on costlier food and fuel.

The Wholesale Price Index (WPI) based inflation was at 2.93% in February. It was 2.74% in March 2018.

As per the data, Inflation in food articles hardened with steep rise in prices of vegetables during March 2019.

Vegetables inflation was at 28.13% in March, up from 6.82% in the previous month.

However, inflation in potato cooled substantially to 1.30%, from 23.40% in February.

Inflation in food articles basket was 5.68% during March.

Inflation in 'Fuel and power' category also spiked to 5.41%, from 2.23% in February.

Note that the Reserve Bank of India (RBI) has projected retail inflation at 2.9-3%, mainly due to lower food and fuel prices as well as expectation of a normal monsoon for April-September period.

In its latest monetary policy meet, the RBI announced a 25 basis points cut in the short-term lending rate, also known as repo or repurchase rate, in its first bi-monthly rate review of financial year 2019-20.

In 2016, the RBI had adopted an inflation target of 4% (+/-2%) for next five years under the monetary policy framework.

However, since August last year, inflation has stayed below RBI's target of 4%.

Here's what Sarvajeet wrote about it in one of the editions of The 5 Minute WrapUp...

• In December, CPI-based retail inflation declined to an 18-month low of 2.2%.
  
  Currently, the RBI's policy stance was 'calibrated tightening'.
  
  But with the recent inflation data, the MPC may change its monetary stance to 'neutral', even if it does not cut the repo rate.

In the news from the commodity space, as per a leading financial daily, Russia and the Organization of the Petroleum Exporting Countries (OPEC) may decide to boost production to fight for market share with the United States.

However, this would push oil prices as low as US$ 40 per barrel, TASS news agency cited Russia's Finance Minister Anton Siluanov as saying on Saturday.

Crude oil prices were near 2019 highs last month, supported by supply cuts led by producer club OPEC. Reportedly, US sanctions against oil producers Iran and Venezuela are boosting prices.

Last month, the OPEC scrapped its planned meeting in April, effectively extending supply cuts that have been in place since January until at least June, when the next meeting is scheduled.

The OPEC and non-affiliated allies like Russia - known as the OPEC+ alliance - have been withholding around 1.2 million barrels per day (bpd) in crude supply from the start of the year to tighten markets and prop up prices.

US crude oil output has soared by more than 2 million barrels per day (bpd) since early 2018, to around 12 million bpd, making America the world's biggest producer ahead of Russia and Saudi Arabia.

On the demand-side, there is concern that an economic slowdown as well as improving energy efficiency and the emergence of alternative transport fuels will erode oil consumption.

How all this pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

In other news, Rail Vikas Nigam Ltd (RVNL) share price was in focus today. The stock of the company surged as much as 20% in today's session.

Incorporated in 2003 by the Ministry of Railways, RVNL is a wholly-owned government company, founded as a project executing agency working for and on behalf of the Ministry of Railways.

The company is in the business of executing all types of railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable stayed bridges, institution buildings, etc.

It goes without saying that the company's key client is the Indian Railways. The other clients include various central and state government ministries, departments, and public-sector undertakings.

Speaking of PSU companies it's election time and PSU stocks are back in vogue.

The last election saw a short-term outperformance of the PSU Index compared to the Sensex.

Will history repeat itself? Have a look at the chart below to see how PSUs have performed the overall markets in the long run:

PSU Stocks - Perpetual Value Traps?

Here's what Tanushree Banerjee, Co-head of research at Equitymaster, wrote about it in one of the recent edition of The 5 Minute WrapUp...

• What we have seen from history, is that PSUs have underperformed the overall markets in the long run.
  
  Non-performing assets (NPA) in the banking space and rising crude oil prices impacting oil marketing companies have all taken a toll in recent years.
  
  On top of that, when the government is in desperate need of money, they turn to PSUs. This usually leaves minority shareholders shortchanged.
  
  Not all companies in the sector can be ignored. But most of them turn out to be value traps.

She believes, a better alternative is to look at quality companies which are not restricted by regulatory hurdles.

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

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