After trading strong during post noon trading session, the Indian equity markets gathered steam and ended the day in the green. While the BSE-Sensex today closed higher by 288 points, the NSE-Nifty closed higher by 83 points. Even Midcaps and Smallcaps followed broader market trend and closed with healthy gains. Both the BSE Mid Cap index and the BSE Small Cap index recorded gains of 1.8% and 2.2% respectively. IT and FMCG stocks were the only ones to end their day in the red.
As regards global markets, Asian indices closed on a mixed note today. The rupee was trading at Rs 60.7 to the dollar at the time of writing.
Energy stocks ended the day on a strong note. Shares of oil marketing companies (OMC's) namely Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd. (BPCL) and Indian Oil Corporation (IOC) have gained in the region of 4-6% today on the back of declining crude prices. It is believed that the decline in crude prices will help reduce the under recoveries of OMC's. It may be noted that OMC's are mandated to sell fuel below market prices (though we are moving towards gradual de-regulation) by the government. This results in under recovery burden which is to be shared by the upstream and downstream companies as well as the government. As such, a decline in crude prices is likely to reduce the under recovery burden of the OMC's. It is believed that crude prices had a built-in risk premium amidst tensions between Russia and Ukraine. However, with tensions easing a bit crude prices have taken a breather.
Banking stocks too ended the day on a strong note. Central Bank and Union Bank were the biggest gainers. With economy picking up growth and purchasing power being on the rise, car loan books of most retail lenders like State Bank of India (SBI), ICICI Bank, Axis Bank and HDFC Bank are increasing. It may be noted that car sales grew for the third straight month in July this fiscal. This growth has come in after a lull of almost two years. The primary reason for rising car sales is the extension of excise duty benefit by the new government until December. It may be noted that SBI has the largest car loan portfolio of about Rs 282 bn followed by ICICI Bank which has a portfolio of about Rs 278 bn. As such, these banks are expected to be biggest beneficiaries.