Indian Indices Continue Momentum, Oil Prices in Focus, and Top Stocks in Action

Tue, 1 May Pre-Open

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On Monday, share markets in India opened on a positive note and ended the day in green after a positive day of trading.

The BSE Sensex closed higher by 191 points to end the day at 35,160. While the broader NSE Nifty ended the day higher by 47 points to end at 10,739.

Among BSE sectoral indices, realty stocks rose the most by 1.5%, followed by capital goods stocks at 1.4%. Yes Bank and Hindustan Unilever were among the top gainers.

Top Stocks in Action Today

Kotak Mahindra share price is likely to be in focus after the bank reported robust results for the quarter ended March 2018.

The bank's net profit went up by 15.1% in the quarter boosted by higher net interest income and other income.

HDFC Bank share price will be in focus today after the bank raised fixed deposit rates by 10-100 basis points for various tenures.

EPFO Boost for Indian Equities

According to a leading financial daily, India's US$35 billion Employees' Pension Fund Organisation (EPFO) is set to increase the equity proportion for government employees' fund contributions.

Pension Fund Regulatory and Development Authority (PFRDA), which manages the fund, called for a bump to 50%, matching the maximum for private-sector pensions overseen by its National Pension System (NPS) arm.

Government employees contribute about 87% of the 2.3 trillion rupees ($35 billion) overseen by the NPS, which started in 2004 and later opened to all citizens for voluntary contributions. Aside from the NPS, the government operates the Employees' Provident Fund Organization (EPFO), which offers investors defined returns on savings.

There's great appetite for putting money in stocks, and one proposal under consideration is to boost the limit for non-government subscribers to 75%. However, this strategy carries risk.

But with risk comes the potential for outsized gains. After returning less than bonds in 2016 and a loss in 2015, India's NSE Nifty 50 Index of equities had a 31% total return in rupee terms in 2017, compared with the 3.1% on Indian government bonds.

Oil Prices in Focus

Oil prices gave off earlier weakness on the back of a tweet from US President Donald Trump. As per the news, oil traders will continue to weigh ongoing efforts by major global crude producers to reduce a supply glut against a steady increase in US production levels in the week ahead.

Last week, crude oil was headed for its biggest weekly advance in more than eight months on speculation that tensions in the Middle East may lead to supply disruptions, reinforcing a buy call on commodities by Goldman Sachs Group Inc.

The risk of conflict in Syria, as well as ongoing tensions between Saudi Arabia and Iranian-backed rebels in Yemen, has raised concerns over supply security in the energy-rich region.

While OPEC said its output last month fell to the lowest in a year, with worldwide inventories set to decline significantly later this year, the International Energy Agency (IEA) sees a second wave of shale revolution in the US.

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

Note that crude oil prices have been witnessing a rising trend of late. However, this is not good news from India's perspective.

As we wrote in one of the editions of The 5 Minute WrapUp...

• Fiscal revenues are at risk. Particularly if the government is forced to consider a cut in fuel excise duties due to a rally in oil prices. In recent times, a sharp jump in excise collections has helped indirect tax collections. Any risk to revenues and subsequent threat to the fiscal deficit target at 3.2% of GDP would require tighter spending cuts.
  
  Secondly, the impact on inflation needs to be monitored. This narrowing the central bank's scope for further rate cuts.
  
  Lastly, low crude prices were a positive growth impetus through higher discretionary incomes for households and lower input costs for manufacturers and farmers. Part of this benefit is likely to be eroded as retail fuel costs rise. As for corporations, expansion in gross margins caused by falling commodity prices is also likely to wane, pressurising profitability.

You can read the entire article here.

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