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Indian Indices End on a Positive Note; Banking and Healthcare Stocks Witness Buying Interest
Tue, 25 Sep Closing | Monish Vora, TM Team

Indian share markets ended their session on a positive note today. Gains were largely seen in the banking sector and healthcare sector.

At the closing bell, the BSE Sensex stood higher by 347 points (up 1%) and the NSE Nifty closed higher by 100 points (up 0.9%). The BSE Mid Cap index ended the day up by 0.4%, while the BSE Small Cap index ended the day down by 0.7%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng was down 1.6% and the Nikkei was trading up by 0.3%. The Shanghai Composite stood lower by 0.6%.

The rupee was trading at 72.64 to the US$ at the time of writing.

Stocks from the telecom sector witnessed selling pressure today on news that the Department of Telecommunications (DoT) is set to conduct special audits of mobile phone operators from the fiscal year 2011-12 onwards to check for under-reporting of revenue that might account for a sharp downturn in license fees and spectrum usage charges.

Stocks such as AGC Networks and Reliance Communications were the top losers in the sector.

In the news from the IPO space, garden Reach Shipbuilders and Engineers, which opened its issue for subscription yesterday, received a tepid response as the issue was subscribed 0.01 times on its first day of bidding.

As per the data, of the 2.9 crore equity shares offered by the company, only 1% of the shares were subscribed on the first day of the bidding process. The shares earmarked for the retail segment were subscribed 0.02 times.

The IPO of the company closes on 26 September 2018. The IPO is priced in the range of Rs 115-118 per share. Retail investors and employees will receive shares at a discount of Rs 5 per share on final offer price.

The offering is entirely an offer for sale (OFS) of 29.2 million shares by Government of India. With this OFS, the Government aims to divest 25.5% stake in the company. No new shares are being issued by the company and all the IPO proceeds will go to the Government.

Garden Reach Shipbuilders and Engineers Ltd (GRSE) is a shipbuilding company under the administrative control of the Ministry of Defence (MoD). The company was incorporated in 1934, and was later acquired by the Government of India from Macneill & Barry Limited on 19 May 1960.

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The company primarily caters to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard. It is also engaged in engineering and engine production activities.

To know more about the company, you can read our IPO analysis of Garden Reach Shipbuilders and Engineers Ltd. (requires subscription).

Also, with so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

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In the news from commodity space, crude oil is witnessing buying interest today. Brent crude prices hit a fresh four-year high today as amid looming US sanctions against Iran.

Apart from the above, the rise in crude oil prices was also seen on the back of Organization of the Petroleum Exporting Countries (OPEC) and Russia's unwillingness to raise output to set-off the expected demand.

The US will be targeting Iran's oil exports with sanctions from November 4, and Washington is putting pressure on governments and companies around the world to fall in line and cut oil purchases from Tehran.

As per the news, while Britain, China, France, Germany, Russia and Iran said they were determined to develop payment mechanisms to continue trading despite the sanctions by the United States, most analysts expect Washington's actions to have an effect to the tune of 1-1.5 million barrels per day (bpd) of crude oil supplies out of markets.

The above cues meant tightening supplies and rising crude demand and led crude oil prices to trade on a positive note.

Note that crude oil prices are witnessing buying interest lately. This 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.

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

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 this year.

    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.

It's also interesting to note that whenever oil prices have surpassed US$ 100/barrel, they didn't stay there for very long. In technical term, it is sort of 'resistance level'.

Resistance Kicks in Once Crude Touches US$ 100/barrel

This is what we wrote about this in one of the editions of The 5 Minute WrapUp...

  • Oil prices have collapsed thrice because of demand destruction: in 1979, 2008, and 2014.

    In 1979, the trigger for oil price increase was the Iranian Revolution and the Iran-Iraq war. Due to this, oil prices rose from US$ 50/barrel to above US$ 100/barrel between January 1979 and April 1981.

    Then, new production from the North Sea, Mexico, Alaska, and Siberia flooded the market. By March 1986, prices had fallen to US$ 27/barrel.

    In 2008, when oil touched US$ 150/barrel, it was quickly followed by the financial crisis and recession.

    Then, between 2011 and 2014, when oil was above of US$ 100/barrel, several years of triple-digit oil prices led to a near doubling of shale production in the US, a volume that helped trigger the crash in 2014.

In fact, as per the media reports, even Saudi officials think US$ 60 is a reasonable price for oil in the long term.

It would be interesting to see how Iranian sanctions will influence crude oil prices. Meanwhile, we will keep you posted on all the updates from this space.

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

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Stock Market Updates

INDIABULLS REAL EST Surges by 5%; BSE REALTY Index Up 1.0% (Today's Market)

Apr 24, 2019 09:28 AM

INDIABULLS REAL EST share price has surged by 5% and its current market price is Rs 112. The BSE REALTY is up by 1.0%. The top gainers in the BSE REALTY Index is INDIABULLS REAL EST (up 5.5%). The top losers are PRESTIGE ESTATES (down 0.4%) and OBEROI REALTY (down 0.7%).

INDO COUNT Plunges by 5%; BSE 500 Index Up 0.2% (Today's Market)

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INDO COUNT share price has plunged by 5% and its current market price is Rs 48. The BSE 500 is up by 0.2%. The top gainers in the BSE 500 Index are MOTILAL OSWAL (up 4.2%) and SYMPHONY (up 4.2%). The top losers is INDO COUNT (down 5.0%)..

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