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Sensex Hits Record High; Capital Goods & Bank Stocks Rally
Thu, 25 May Closing

Indian share markets continued to witness strong buying momentum in the afternoon trade tracking a firm trend in international markets. Fresh spell of buying by foreign investors and further recovery in the rupee, also lifted the mood.

At the closing bell, the BSE Sensex stood higher by 448 points, while the NSE Nifty finished up by 149 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished up by 1.4% and 2% respectively. Gains were largely seen in capital goods stocks, bank stocks and software stocks.

However, Lupin share price tumbled 7.3% to Rs 1,129.30 after the company yesterday reported over 49% dip in consolidated net profit for the fourth quarter ended March. Meanwhile pharma stocks continued to trade in red with Dr Reddy's share price and Cipla share price plunging 3.7% and 3.4% respectively.

China stocks rose sharply, as market appeared to have shrugged off Moody's downgrade of China's credit rating. The rating cut was followed by criticism from senior government officials in Beijing. Other Asian markets also rose after Fed signaled that interest rates could be raised soon and oil prices rallied ahead of an OPEC meeting. The Shanghai Composite is up 1.43% while Japan's Nikkei 225 is up 0.98% and Hong Kong's Hang Seng is up 0.86%. European markets too are higher today. The CAC 40 is up 0.23% while the FTSE 100 and DAX are up 0.1%.

The rupee was trading at Rs 64.50 against the US$ in the afternoon session. Oil prices were trading at US$ 50.86 at the time of writing.

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The Union Cabinet led by Prime Minister Narendra Modi has approved the abolition of the 25-year-old Foreign Investment Promotion Board (FIPB) in a move to facilitate ease of doing business and easing the flow of foreign capital into the country,

The FIPB, which was earlier vetting FDI proposals and requiring Government approvals, will now be replaced by a new mechanism under which the proposals will be approved by the concerned ministries. Finance Minister Arun Jaitley has said that the decision to abolish the FIPB meant that around 90% of foreign direct investment (FDI) would be automatically approved.

However, he noted that there are still 11 sectors including defense and retail trading where government approval for FDI is required. Therefore, he explained that in the case of the 11 sectors that need prior approval for FDI, these would now be given by the ministries concerned and added that wherever there are security considerations, the Home Minister's approval would also be taken.

In Budget 2017-18, Jaitley had announced scrapping of the FIPB - an inter-ministerial body under the finance ministry's Department of Economic Affairs that processes FDI proposals and makes recommendations for government approval.

The FDI proposals above Rs 50 billion would continue to be cleared by the Cabinet Committee on Economic Affairs. Inflow of foreign direct investment into India has been increased by 9% to US$43.48 billion in 2016-17.

Moving on to news from oil & gas sector. As per an article in The Economic Times, State oil companies have planned a capex of Rs 870 billion, or US$13 billion, in 2017-18 to develop oil and gas fields, expand refining capacity, and build pipelines.

Oil and Natural Gas Corp (ONGC) plans to invest Rs 300 billion, the maximum among all state oil firms. This is slightly higher than the company's spending of about Rs 280 billion in 2016-17.

GAIL, HPCL, Mangalore Refinery and Numaligarh Refinery have also planned to spend more this year than they did last year, but others will spend less, making the total capex nearly a fifth less than the last fiscal year's Rs 1.06 trillion.

Also, Indian Oil Corporation (IOC) is reportedly planning to invest around Rs 200 billion in 2017-18 to augment their marketing and distribution infrastructure, including storage, pipeline and retail outlets. This is lower than the company's spending of about Rs 220 billion in 2016-17.

State refiners are spending heavily to upgrade facilities to produce fuel with higher emission norms. All petrol and diesel sold must meet BS-VI emission norms from April 2020, according to the government mandate. Refiners today sell BS-IV fuels. All state refiners are also adding capacity at their existing plants to raise output to meet growing fuel demand in the country that rose 5% in 2016-17.

As per the reports, India needs big investment in exploration and production to raise domestic crude output that fell for the fifth straight year in 2016-17. Lower output pushed up India's import dependence to 82% of its requirement in 2016-17 from 81% in the previous year.

India's Growing Dependence on Petroleum Imports

As per Business Standard, during the financial year 2016-17, India's total gross petroleum imports inclusive of crude and petroleum, oil and lubricants segment stood at US$80.8 billion. India's petroleum self-sufficiency dropped to 17.9% in 2016-17 from 24.1% in 2011-12. The other way to look at it is that India's dependence on petroleum imports has been increasing. And that's not good news.

Oil & Gas stocks finished the day on a firm note with Oil India Ltd and Gujarat Gas Ltd leading the gains.

In news from engineering sector, BHEL share price finished the trading day up by 1.1% on the BSE after it was reported that the company has successfully commissioned another 270 MW thermal unit at Rattanlndia Nasik Power's 5x270 MW thermal power project. This is the fourth unit to be commissioned at this project. Significantly, the milestone has been achieved within 35 days of commissioning of the third unit.

So far, BHEL has successfully commissioned 14 sets of 270 MW rating in the country, including 9 sets for the Rattanlndia group. In addition to four units at Nasik, BHEL has earlier commissioned 5 sets of 270 MW each at Amravati, for Rattanlndia. The fifth unit at the Nasik project is also in advanced stages of completion.

Engineering stocks too finished strong with Voltas share price and L&T share price leading the gains.

And here's a note from Profit Hunter:

The Nifty 50 Index snapped five consecutive days of losses to reclaim the 9,500 level on the final day of the May expiry. The index is up 149 points with all its constituents supporting the rally except pharma stocks.

The index started the May expiry on a dull note, trading sideways for the first week. But it resumed its uptrend rising 240 points to hit a high of 9,523 during the midpoint of the expiry. The index then traded negatively to erase 165 points until the day before expiry. Today, the last day of the May expiry, the index recovered smartly and aimed for a new life high.

The negative divergence indicated by the RSI indicator brought a decent correction in the index. The indicator found support from the 50 level as indicated by green line in the chart below. This suggest the Nifty might resume its uptrend.

But since this was the last day of the expiry, the index might have rallied only on short covering.

So was the 150-point rally a resumption of the uptrend or only short covering? The rollover of the Nifty might give us a clearer picture. Watch out for the rollover report in tomorrow's Profit Hunter newsletter in the Market Notes section.

Nifty 50 Index Reclaims 9,500
Nifty 50 Index Reclaims 9,500 

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Aug 18, 2017 (Close)

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