Indian Indices Trade on a Flat Note; Energy Stocks Witness Buying

Wed, 12 Jul 11:30 am

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Share markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the energy sector and telecom sector witnessing maximum buying interest. IT stocks are trading in the red.

The BSE Sensex is trading up 31 points (up 0.1%) and the NSE Nifty is trading up by 16 points (up 0.2%). The BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.2%. The rupee is trading at 64.49 to the US$.

In the news from commodity markets, crude oil is witnessing buying interest today. Most of the gains are seen as the US government cut its crude production outlook for the next year. Also, the fall in fuel inventories aided the rally in crude oil prices.

The Energy Information Agency (EIA) cut next year's crude production forecast for US, while US crude inventories fell by 8.1 million barrels in the week to July 7.

The U.S. Energy Information Administration said late on Tuesday that it expected 2018 crude oil output to rise to 9.9 million barrels per day (bpd) from 9.3 million bpd this year, a 570,000-bpd increase. This was down from last month's forecast 680,000 bpd YoY increase.

While the above gains come as a welcome breather, crude oil has been witnessing losses lately on concerns regarding the rising output from OPEC.

Owing to the supply glut, crude oil prices have been remarkably silent over the last two years. Prices have remained within a tight range, rarely dropping below US$40 or rising above US$60. Volatility has crashed. And if you are trading in crude oil, it's critical to understand why this has occurred.

One of the issues of Vivek Kaul's Inner Circle (requires subscription) explains what has triggered the above taming in crude oil prices.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.

On the domestic front, rising oil prices do not bode well for the Indian economy. This we say is because India is hugely dependent on petroleum imports. In fact, the share of petroleum imports for India has only increased over the years, as can be seen from the chart below:

India's Growing Dependence on Petroleum Imports

India is the world's third-largest oil consumer. And energy consumption in India is set to grow as our economy remains one of the few 'bright spots' in a slowing, aging world economy. And India could face a potent risk with a rise in crude oil prices.

The only way out for India is to reduce its dependence on oil imports and achieve fuel-sufficiency.

In other news, as per an article in the Economic Times, cabinet secretary PK Sinha has initiated a mechanism to keep ground level checks on the implementation of the good and services tax (GST) regime.

As per the fresh directive from Sinha, all central ministries are asked to keep an eye on price rise and shortage of any commodity. They are also asked to report any software glitches and complaints from traders.

Government officials are also asked to get reports right down to the district level and compile weekly reports in the GST cell at the ministry.

The above measures bode well for a smooth transition to the newly implemented GST regime.

With GST being implemented from this month, things are rolling at a fast pace and for the betterment of the economy. One of the major changes GST brings is that it will become increasingly difficult for the unorganised sector to get away with underreporting and cheating.

The unorganised sector will now be forced to report and pay taxes on everything they sell. And, as mentioned in a recent edition of the 5 Minute WrapUp:

• ...if the unorganised sector will be forced to report and pay taxes on everything they sell, the price differential with the organised sector is really going to narrow, giving a big boost to the latter.
  
  This is perhaps why - when most of us are nervous about the roll out of this big-bang reform - stock markets are surging.

The white economy bodes well for all stakeholders including the consumers, manufacturers and the government.

While there may be short term hiccups in the implementation of GST, we believe the positives will far outweigh the negatives in the long term.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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