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Dull Start to the Week; Oil & Gas Stocks Lead the Losses
Mon, 9 Oct Closing | Karan Janani, TM Team

Indian share markets continued to trade marginally higher in the afternoon session as corporate results kick off later this week. At the closing bell, the BSE Sensex closed higher by 33 points and the NSE Nifty finished up by 9 points. The S&P BSE Mid Cap finished down by 0.1% while S&P BSE Small Cap finished up by 0.6%. Gains were largely seen in realty stocks and FMCG stocks while energy stocks and power stocks witnessed majority of the selling activity.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.76% and the Nikkei 225 rose 0.30%. The Hang Seng lost 0.46%. European markets are lower today with shares in London off the most. The FTSE 100 is down 0.21% while France's CAC 40 is off 0.14% and Germany's DAX is lower by 0.01%.

Rupee was trading at Rs 65.31 against the US$ in the afternoon session. Oil prices were trading at US$ 49.31 at the time of writing.

In news from steel sector, SAIL share price finished on an encouraging note (up 0.8%) after the company entered into a strategic agreement with POSCO for wide ranging technical services for SAIL's IISCO Steel Plant (ISP) at Burnpur to assist in realizing the benefits from its new and state of the art plant.

SAIL-ISP, which has already completed its modernization and expansion, is significantly ramping up production from its new facilities and the 0.55 Million tons Wire rod mill of SAIL-ISP shall soon be producing world class wire rods in special grades to meet both domestic and international requirements.

This agreement is a result of an earlier MoU on Technical Collaboration for Operational improvement and Human Resource Development which SAIL and POSCO had entered in November 2016.

In news from the economy, amid worries over an economic growth slowdown, Reserve Bank of India (RBI) Governor Urjit Patel has raised hopes of upturn in economic growth of the country soon. RBI Governor expects the country's growth to pick up in last two quarters of the current financial year (FY18) to exceed 7%, based on high frequency real economy indicators suggesting that growth will pick up in the third and fourth quarters.

Urjit Patel said that the economy is recovering, after gross domestic product (GDP) growth slipped to its three-year low of 5.7% in the April-June quarter, but reiterated that for them the country's growth is important but not at cost of inflation, adding that the country need to be a careful and should aim at achieving the inflation target without losing sight of supporting economic growth.

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The statement of the RBI governor came in backdrop of some calls for lower interest rates, as RBI left rates unchanged at a review by the monetary policy committee (MPC).

RBI Governor pointed that in the medium term, the RBI aims for annual inflation of 4% with the flexbility of plus/minus 2% on either side to make room for food price volatility and so in view of this the monetary policy committee (MPC) will strive to achieve its 4% inflation target on a 'durable basis'.

In news from the oil & gas sector, as per an article in The Livemint, ONGC is likely to sell some of its stake in Indian Oil Corp. Ltd to institutional investors like Life Insurance Corp. of India (LIC) to part-fund its over Rs 340 billion acquisition of refiner Hindustan Petroleum Corp. Ltd (HPCL).

ONGC holds 13.77% stake in India's biggest refiner Indian Oil. It has another 4.87% stake in GAIL India Ltd worth of Rs 16 billion.

Meanwhile, ONGC has received clearance from the Coastal Regulatory Zone for setting up a seawater desalination plant at its Uran unit in Raigad, Maharashtra at a cost of Rs 2.66 billion.

The proposal is to set up a seawater desalination plant with a capacity to process 20 million litres per day. The proposed site is about 380 meters away from the high tide line of Arabian Sea, along the western coast of India.

In another development, Indian Oil Corp is willing to buy state-owned GAIL (India) Ltd or OIL India Ltd. Indian Oil also plans to open offices in Bangladesh and Myanmar in the next 4-6 months, Sharma told reporters at the India Energy Forum by Ceraweek in New Delhi.

ONGC share price and IOC share price finished the trading day down by 1.6% and 0.2% on the BSE.

In news from IPO segment, the initial public offering (IPO) of Indian Energy Exchange Ltd (IEX) was subscribed 5% on Monday, the first day of share sale.

As of 2pm, the IPO received bids for 293,526 shares against the total issue size of 6,065,009 shares. The IPO will close on 11 October.

IEX, India's largest energy exchange, has priced its shares in the band of Rs1,645-1,650. At the upper end of the price band, the initial share sale values the firm at Rs 50 billion.

The market euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

BSE IPO Index vis-a-vis Sensex

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space. For every Reliance Power - like issue, there have been issues like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders. A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it.

And here's a note from Profit Hunter:

Coal India is among the top gainers in the Nifty 50 index today. It's up 2%.

The last time we reviewed the stock, it was trading near 240 support level. The level acted as a strong support in August 2013 and February 2014. We had mentioned the possibility of the stock bottoming out at this level.

In fact, the stock reversed from the 240 level, and it is currently trading at 282 - up more than 17% from 240.

But now the stock is trading near its resistance level as seen by the red horizontal line in the chart below.

What will be interesting to see is, if the stock can continue this momentum or will it find a resistance at the current level.

Coal India Rallied 2% for the Day
Coal India Rallied 2% for the Day 

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Mar 20, 2018 (Close)