Sensex Ends 86 Points Higher; Telecom and Banking Stocks Witness Buying

Fri, 7 Jun Closing

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Indian share markets ended their volatile day on a positive note today.

Gains were seen in the telecom sector, banking sector and consumer durables sector, while stocks from the power sector witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 86 points (up 0.2%) and the NSE Nifty closed higher by 26 points (up 0.2%).

The BSE Mid Cap index ended down by 0.2%, while the BSE Small Cap index ended the day down by 0.1%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng stood up by 0.26% and the Nikkei was trading up by 0.53%, while the Shanghai Composite was trading down by 1.2%.

European markets were trading on a positive note. The FTSE 100 was up by 0.7%. The DAX was trading up by 0.8%, while the CAC 40 was up by 1.4%.

The rupee was trading at 69.47 to the US$ at the time of writing.

In the news from the commodity space, crude oil was witnessing buying interest today. Crude oil prices climbed around 1% yesterday and continued their momentum today on the back of a report that Washington could postpone trade tariffs on Mexico.

Also, signs that the Organization of the Petroleum Exporting Countries (OPEC) and other producers may extend crude supply cuts helped crude oil trade on a positive note.

In the coming days, members of the OPEC+ group are set to discuss whether to extend their supply curbs further.

President Vladimir Putin said that Russia had differences with OPEC over what constituted a fair price for oil. However, he said, Moscow would take a joint decision with OPEC colleagues on output at a policy meeting in the coming weeks.

Note that within the oil industry, there are signs of a further rise in output from the United States, where crude production has already surged by more than 2 million barrels per day (bpd) since early 2018.

That has made the United States the world's biggest producer ahead of Russia and Saudi Arabia.

Also, crude oil prices have quietly creeped up this year.

Oil prices have jumped as much as 3.2% to their highest level since late 2018.

As you know, rising crude oil prices have a big impact on the Indian economy as it imports over 70% of its energy needs.

Rise in crude oil increases input costs for dependent firms. It also means rising inflation. Rising inflation means rising interest rates.

It also puts pressure on the government to cut excise duty, thereby impacting its revenues. We have already seen that happening.

Research Analyst, Richa Agarwal believes that this has the potential to bring down sentiments in the domestic markets. She further believes that, if oil prices continue their upward march in a tight global environment, a broader correction in the sentiment fueled domestic market cannot be ruled out.

Speaking of crude oil, Vijay Bhambwani, editor of Weekly Cash Alerts, called the US President Donald Trump's bluff on crude oil in one of his recent articles. Here's an excerpt of what he wrote...

• From 2018 US is the largest oil producing country in the world with 13.4% of the global oil output daily.
  
  The USA has jumped ahead of Saudi Arabia and Russia in oil output. My question to every oil trader out there is this - as long as the USA was an importer, it made sense to push for lower oil prices. There were tangible benefits in doing so.
  
  President Donald Trump runs the world's largest debtor nation. One that is gasping for export income and a strong dollar. A firm USD ensures easier servicing and repayment of debt and vice versa. So now that Trump wants to export oil, and earn petro dollars does it benefit him if oil prices were to go up or down? So why does he tweet for lower oil prices?

To know more, you can read Vijay's entire article here: Crude Oil - What 'Trump Nation' Really Wants

Dewan Housing Finance Corporation (DHFL) share price was in focus today. The stock of the company witnessed selling pressure and went on to touch its fresh 52-week low in today's session. This was the third consecutive session the stock has been witnessing selling.

Yesterday, the stock plunged around 16% after rating agencies Crisil, CARE and ICRA downgraded commercial papers (CP) issued by DHFL to default or 'D' category. The move came after the company missed an interest payment on its non-convertible debentures (NCDs).

In response, DHFL said that the action by the rating agencies was extremely surprising as the company has been making & continues to make substantial efforts in ensuring no defaults on any bonds, repayment of its financial obligations.

Since September 2018, the company has repaid close to Rs 400 billion of obligations and also sold its strategic retail assets.

Note that DHFL is also facing questions about its financial health after the IL&FS default pushed up the cost of funds for the mortgage lender and made borrowing difficult.

Speaking of non-banking financial companies (NBFCs), it is evident from the chart below that their credit growth has seen robust growth in recent years.

Is the NBFC Party in India Coming to an End?

From 2013-2017, NBFCs grew by 13% as compared to 5.4% for banks. A major reason for this is the gain in market share from public sector banks (PSBs). The recent NPA woes of the PSBs has seen them tighten up their credit lines.

The NBFCs have stepped in, along with private sector banks, to fill this gap. But the recent liquidity crisis at IL&FS has raised concerns over how long this growth will continue.

It would be interesting to see how this all pans out. Meanwhile, we will keep you updated on the latest developments from this space.

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

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