Indian Indices Trade Marginally Higher; Metal Stocks Witness Buying

Wed, 25 Jul 12:30 pm | Monish Vora, TM Team

   Previous Close   

   Pre-Open   

   09:30 am   

   Closing   

Share markets in India are presently trading marginally higher. Sectoral indices are trading on a positive note with stocks in the metal sector and finance sector witnessing maximum buying interest.

The BSE Sensex is trading up by 77 points (up 0.2%), while the NSE Nifty is trading up by 11 points (up 0.1%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up by 0.6%.

The rupee is trading at 68.79 to the US$.

In the news from the IPO space, as per the news, HDFC Asset Management Company (AMC) raised Rs 7,320 million from anchor investors. The fund house has allotted 66.53 lakh shares at Rs 1,100 per share to 61 anchor investors garnering Rs 732 crore.

The company has opened its initial public offering for subscription today.

This is the sixth public offer of the current financial year 2018-19, after TCNS Clothing, Varroc Engineering, RITES, Fine Organics Industries and Indostar Capital Finance.

The price band of the issue is set at Rs 1,095 to Rs 1,100 apiece.

To know our view on this IPO, you can read our IPO note on HDFC Asset Management Company Ltd (requires subscription).

In other news, Symphony share price is witnessing selling pressure today. Losses are seen as the company reported a 48.7% year-on-year (YoY) fall in consolidated net profit at Rs 200 million for the quarter to June.

In the news from the commodity space, crude oil is witnessing buying interest today. Gains are seen as data showed US crude inventories fell more than expected last week, thereby easing worries about oversupply.

As per the data by the American Petroleum Institute (API), US crude inventories fell by 3.2 million barrels in the week to July 20 to 407.6 million barrels. This was compared with analyst expectations for a decrease of 2.3 million barrels.

Further, crude stocks at the Cushing, Oklahoma, delivery hub dropped by 808,000 barrels and refinery crude runs declined by 60,000 barrels per day. Gasoline stocks fell by 4.9 million barrels.

Market participants are now awaiting official figures from the US Department of Energy Information Administration which are to be released today.

Note that, global oil prices have climbed steadily this year, helped by rising demand. They have topped US$ 80 per barrel in May for the first time in three and a half years.

Rising crude oil prices doesn't bode well for the Indian economy, as it not only affects fuel prices, but also has many other repercussions on the macroeconomic level.

They can be a big worry for the Modi government as well as it has been a big beneficiary of lower crude oil prices.

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

As Ankit Shah wrote in one of the editions 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.

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

Read the latest Market Commentary

Indian Share Market Update: Top Gainers and Losers

What else is happening in the markets today? Dig in...