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Indian Indices Trade Flat; Oil & Gas Sector Down 2.3%
Wed, 23 May 12:30 pm

Share markets in India are presently trading near the dotted line. Sectoral indices are trading on a mixed note with stocks in the metal sector and capital goods sector witnessing maximum selling pressure.

The BSE Sensex is trading flat, while the NSE Nifty is trading down by 20 points (down 0.2%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up by 0.5%.

The rupee is trading at 68.23 to the US$.

Cipla share price, Tata Motors share price, Jet Airways share price, Dhanlaxmi Bank share price, and Bajaj Electricals share price are among the stocks in focus today as these companies are scheduled to report their results for the quarter ended March 2018.

In the news from pharma space, as per an article in the Economic Times, companies marketing medicines in India will soon be as much as liable as the manufacturers for any violations of drug regulations that could lead to spurious or substandard medicines.

The above move is expected to check lapses in quality of medicines consumed by patients in the country. There could be punishment like 3 to 5 years imprisonment for medicines flagged by regulators as not of standard quality or life imprisonment in cases where they are found spurious.

In other news, Congress leader P Chidambaram criticized the Centre for the fuel price hike and claimed that the rate can be reduced by Rs 25 per litre.

The comments come on the back of petrol and diesel prices across the country hitting all-time high levels. Fuel prices across the four metropolitan cities were raised around 30 paise on Tuesday. As per the news, the government is likely to come out with some steps this week to deal with the above situation of record high petrol and diesel rates.

Note that the above development is seen on the back of rising crude oil prices, which shot above US$ 80 per barrel. This is the highest level seen since November 2014. In the past one year alone, oil prices have surged more than 50%.

Also note that rising crude oil prices not only affect fuel prices, but also has many other repercussions for the Indian economy.

They can be a big worry for the Modi government as well.

Have a look at the chart below. It shows India's total import bill of crude oil and petroleum products on an annual basis during the Manmohan Singh regime and the Narendra Modi regime.

Here's Why Crude Oil Was Modi's Best Friend So Far


It is clearly evident that the Modi government has been a big beneficiary of lower crude oil prices.

As Ankit Shah wrote in a recent edition of The 5 Minute WrapUp...

  • During the UPA II regime, India's average annual oil import bill was US$ 133 billion. In fact, in the last three years of Manmohan Singh's leadership, the oil import bill exceeded US$ 150 billion. Compare that with an average annual oil bill of US$ 95 billion during the four years of Modi's leadership.

    The actual savings would have been even higher, because I believe the consumption of crude oil and petroleum products would have been quite higher in the Modi era than the Manmohan era.

    Last Thursday, Brent crude oil prices shot above US$ 80 a barrel.

    This is the highest level since 2014. In the past one year alone, oil prices have surged more than 50%.

    Now, what if oil prices go back to the levels during the Manmohan Singh regime? What would happen to India's current account and fiscal deficit? What would happen to inflation and RBI's stance on interest rates?

    With the next general elections just a year away, rising crude oil prices are going to be a big worry for the Modi government.

    It should worry you too...

Apart from that, what does rising crude oil prices mean for stock markets?

Richa Agarwal, editor of Hidden Treasure, tracks the oil and gas sector very closely. She believes the rise in crude oil prices is a bearish sign for stock markets globally. At the same time, any market correction, will throw up interesting buying opportunities in small-cap stocks.

This is what she wrote...

  • After hitting a low of US$ 30 per barrel in January 2016, prices have more than doubled to US$ 68 in April 2018.

    The recent news of Saudi Arabia wanting crude oil prices to touch US$ 100 per barrel doesn't help. The 2008 recession was preceded by crude oil touching US$ 150 per barrel. Any movement upwards can result in a possible downturn for the global market.

    While the Hidden Treasure team looks for long-term wealth creators, such macro situations can help to recommend such stocks at a bargain. The ones who keeps calm, when everyone else is losing their heads, will gain the most when the tide turns.

How the government handles this situation of rising crude oil and fuel prices remains to be seen. Meanwhile, we will keep you posted on all the developments from this space. Stay tuned.

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