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Weak Start to the Week; Bank Stocks Tumble
Mon, 12 Jun Closing

Indian share markets continued to trade witness selling pressure during the afternoon session ahead of inflation data due later in the day, while sentiment was cautious ahead of the US Federal Reserve policy meeting this week. Sentiments also remained weak amid weak international markets.

At the closing bell, the BSE Sensex closed lower by 166 points, while the NSE Nifty closed lower by 52 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished down by 0.5% and 0.6% respectively. Losses were largely seen in capital goods stocks, bank stocks and consumer durables stocks.

Which Way Will Inflation Go?

The RBI's status quo in the latest Monetary Policy review seems to have disappointed many. Especially the government. A rate cut may have underscored the government's claims of revival in the economy. But unlike the new GDP and IIP data, the RBI's monetary policy did nothing to support the claims. Also, while the RBI has lowered its inflation expectations, it maintains a hawkish stance.

Bank stocks fell as sentiment took a hit after Maharashtra agreed on Sunday to write off all loans availed by farmers.

SBI share price finished down by 1.2%, while Indian bank share price and Bank of Baroda share price fell 3.2% and 3.1% respectively.

Asian stock markets finished broadly lower today with shares in Hong Kong leading the region. The Hang Seng is down 1.24% while China's Shanghai Composite is off 0.59% and Japan's Nikkei 225 is lower by 0.52%. European markets too are lower today with shares in France off the most. The CAC 40 is down 0.79% while Germany's DAX is off 0.62% and London's FTSE 100 is lower by 0.21%.

The rupee was trading at Rs 64.34 against the US$ in the afternoon session. Oil prices were trading at US$ 45.95 at the time of writing.

As per an article in The Livemint, Oil and Natural Gas Corp (ONGC) is keen to acquire India's third-biggest fuel retailer Hindustan Petroleum Corp Ltd (HPCL) in a Rs 422.5 billion deal after finding Bharat Petroleum Corp Ltd (BPCL) too expensive to buy.

Reportedly, an open offer to buy another 26% stake from other shareholders of HPCL would at current price cost ONGC another Rs 142.47 billion.

Following up on finance minister Arun Jaitley's budget announcement of creating an integrated oil company, ONGC evaluated options of acquiring either HPCL or BPCL. While acquiring either one of them made a lot of business sense, ONGC found the nation's second-biggest fuel retailer, BPCL too expensive.

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As per the reports, initially the government was looking at creating an integrated oil company by merging an oil producer with a refiner, the idea was dropped for the fear of not repeating of the Air India-Indian Airlines merger.

HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries. ONGC already is majority owner of MRPL, which has a 15 million tonnes refinery.

ONGC share price finished the trading day down by 0.5% on the BSE.

Moving on to news from autombile sector. Tata Motors share price finished the trading day down by 2.3% after the company announced weak global wholesale sales in May.

Tata Motors Group global wholesales in May 2017, including Jaguar Land Rover (JLR), were at 86,385 units, lower by 1%, over May 2016.

Global wholesales of all commercial vehicles and Tata Daewoo range in May 2017 were down 13% at 28,310 units, while global wholesales of all passenger vehicles in the month increased 6% to 58,075 units in the month.

The company expects sales to pick up going forward as the all-new Discovery model continues to go on sale across the world, particularly in China and North America, two of Jaguar Land Rover's biggest markets.

In another development, Jaguar Land Rover announced that it's working with Lyft on autonomous-driving technology and will offer vehicles for rent to the San Francisco-based startup's drivers. The automaker, which is a subsidiary of Tata Motors Ltd., also disclosed an investment of US$25 million in Lyft as part of a funding round that closed in April, valuing the business at US$7.5 billion.

Tata Group previously invested at least US$100 million in Uber, and they formed a financing partnership in India last year.

In news from pharma sector, as per an article in The Economic Times, the organized pharma retail market witnessed a decent growth of over 7% in May, debunking fears of a slower growth with GST around the corner.

There were fears that the market may witness a lower growth in May before GST kicks in, as there would be ostensible attempts to maintain a low inventory at both distributors' level and across retail pharmacies. It seems the retail market has managed to shrug off uncertainty fears to report a positive trend.

The organized retail market was valued at Rs 94.01 billion in May.

Meanwhile, Strides Shasun has received the US health regulator's nod for Amantadine Hydrochloride tablets, used in the treatment of Parkinson's disease and Shingles to reduce pain. According to IMS data, the US market for this product is approximately US$22 million (around Rs 1.41 billion).

Meanwhile, the company has also raised Rs 5 billion from global private equity fund. As per The Livemint, the money will be used to restructure existing loans as well as expand some of the businesses.

Strides Shasun share price finished the day down by 2.7% on the BSE.

Gems and Jewellery stocks were trading largely higher before closing in red after the goods and services tax (GST) Council slashed the applicable rate on making charges from the 18% decided earlier to 5%.

And here's a note from Profit Hunter:

Larsen and Toubro (L&T) was one of the most active stocks in the market today. The stock opened at its day high, fell sharply 4%, and then recovered some in the last hour of trading to end the day with a 2% loss.

We showed you in an earlier note that L&T respects the 200-day exponential moving average (EMA) very well. At that time, the stock was trading very close to the 200 EMA, and told you a sustained close on either side of the average could show us the next trend.

Well, the stock gave a sustained close above the 200 EMA and it rallied 28% from there.

But recently, the stock has found strong resistance at the horizontal resistance zone of 1,820-1,875. The declines from this resistance zone have been sharp and with heavy volumes.

So is this resistance a sign that the stock is about to revert to its mean (200 EMA), or will it continue with its ongoing upside momentum?

L&T Encounters Strong Resistance Zone
L&T Encounters Strong Resistance Zone

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Nov 20, 2017 (Close)