Sensex Trades in Red; Services PMI Continues Uptrend

Fri, 4 May 12:30 pm

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After opening the day in red, share markets in India witnessed choppy trades and have continued the downtrend. Sectoral indices are trading on a mixed note with stocks in the realty sector and stocks in the oil and gas sector leading the gains. Stocks in the pharma sector are trading in red.

The BSE Sensex is trading down by 160 points (down 0.5%), and the NSE Nifty is trading down by 46 points (down 0.5%). Meanwhile, the BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is trading down by 0.1%. The rupee is trading at 66.79 to the US$.

In news about the economy. India's services sector activity continued its slow but sustained growth. The country's predominant sector witnessed expansion for the second consecutive month, according to the Nikkei Services Purchasing Managers' Index (PMI) survey by Markit.

The Services PMI is the reading of the country's services sector output and is updated monthly. A reading above 50 indicates expansion, while any score below the mark denotes contraction.

A second consecutive growth in new business resulted in another monthly climb in activity. The services PMI for April finished at 51.4 signaling a steady recovery from the 47.8 in February.

Services PMI Growth Back on Track

Indian services sector activity returned to its growth track in March, driven by greater inflows of new work, following which firms increased their staffing levels at the fastest pace in 7 years. Reflecting improved demand conditions and pressure on current resources, service providers expanded capacity by raising their staffing levels at the quickest pace since June 2011.

On the price front, India's service sector firms continued to face higher cost burdens during March. Meanwhile, pressure is seen to be mounting on the Reserve Bank of India to cut interest rates in the wake of declining retail inflation and the need to fuel growth momentum.

The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, will announce the resolution of the MPC on its first bi-monthly monetary policy for financial year 2018-19 later today.

Moving on to news from stocks in the oil and gas sector. ONGC share price is in focus today, after the state-run oil major drilled record number of oil wells in the financial year gone by.

ONGC announced that it drilled 503 wells in 2017-18, which is the highest number of wells drilled in last 27 years.

Among the 503 wells, 119 exploratory and 384 development wells were drilled.

In order to assess the prospectivity of existing acreages in a time-bound manner and add to the company's reserve base, more focus was laid on exploratory drilling.

During FY'18, ONGC's planned capex outlay on drilling activities was Rs 160 billion with a target to drill 496 wells including 110 exploratory and 386 development wells.

However, the company has drilled 503 wells at a cost of approx Rs 142 billion which is 11.5% lower than the budget outlay.

The initiatives taken by the company to optimise cost and enhance operational efficiencies has yielded additional savings in the fiscal year ended March 31, 2018.

This is the second consecutive year that ONGC has drilled over 500 wells.

Last year, the oil major drilled 501 oil wells at a cost of Rs 154.4 billion.

This year, ONGC has set a capex outlay of Rs 176 billion on drilling activities and plans to drill well over 500 oil wells this year as well.

There is a significant upside in the number of deepwater development wells planned by the company.

The company has set an ambitious target to drill 535 wells, of which 24 are deep-water development wells as part of Cluster-2 development, off the East-Coast of India.

At the time of writing, ONGC share price was trading up by 1%.

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