Of Crude Oil, MF Investment in Domestic Equities, and Top Cues in Focus Today

Fri, 12 Oct Pre-Open

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Indian share markets ended over 2% lower yesterday following a sharp selloff in the global markets. At the closing bell yesterday, BSE Sensex ended down by 760 points, while, NSE Nifty ended down by 225 points.

Except oil & gas stocks, all sectoral indices ended the day in red with realty sector, IT sector and metal sector plunging over 3%.

Top Stocks in Focus Today

From the pharma sector, Aurobindo Pharma share price will be in focus today as the company has received final approval from the US Food & Drug Administration (USFDA) to manufacture and market Azithromycin Oral Suspension 100 mg /5 mL and 200 mg/5 mL.

To know more about the company, you can access to Aurobindo Pharma's Q1FY19 result analysis and Aurobindo Pharma FY18 annual report analysis on our website.

From the banking space, IDBI Bank share price will be in focus today as the bank said that Life Insurance Corporation of India's (LIC) open offer to purchase shares from the minority shareholders of IDBI Bank will kickstart from December 3. The open offer is at Rs 61.73 per equity share and will close on December 14. It is in connection with the LIC's acquisition of 51% controlling stake in the state-owned IDBI Bank.

OPEC Sees Oil Market Well Supplied

In the news from commodity space, the Organisation of the Petroleum Exporting Countries (OPEC) is seeing the oil market as well supplied an is cautious of creating a glut next year.

Also, it was reported that producers are in no rush to expand a June agreement that raises oil output.

Note that oil prices are rising on expectations that US sanctions on Iran will strain supplies by lowering shipments from OPEC's third largest oil producer - Iran.

Oil prices have also climbed steadily this year, helped by rising demand. However, 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.

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.

Also, it's 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'.

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.

Bandhan Bank to Bring Down its Promoter Holding

From the banking sector, Bandhan Bank share price will also be in focus today after its CEO and MD said that the bank will soon submit its plan to bring down its promoter holding to comply with the Reserve Bank of India's (RBI) directions.

Last month, the RBI had barred Bandhan Bank from opening new branches without its approval and had ordered it to freeze the MD's salary over its failure to meet shareholding rules.

The RBI took the decision as the bank was not able to bring down the shareholding of non-operative financial holding company to 40%, as required under the licensing condition.

According to RBI's new licensing guidelines, the bank's promoter, Bandhan Financial Holdings Ltd, has to reduce its stake from 82% to 40% within three years of commencing the business.

Thereafter, banks are required to reduce their shareholding to 20% and 15% within 10 years and 12 years, respectively. Bandhan Bank's deadline for the same ended on 23 August.

MFs Invest Over Rs 116 Billion in Domestic Equities in September

Mutual fund houses have made investments of over Rs 116 billion in domestic equities in September despite volatility in stock markets. This was seen even as foreign investors pulled out a massive Rs 108.3 billion.

As per an article in The Economic Times, investment in domestic equities by fund managers could be largely attributed to retail investors who continue to invest through systematic investment plan (SIP).

Note that, the Sensex slumped 6.2% last month owing to sharp fall in the rupee and boiling crude oil prices, turning FPIs into net sellers.

Reportedly, for domestic equity mutual funds, the recent market correction has provided a good buying opportunity for investors, and mutual funds are trying to capitalise on the same.

While there is a legitimate fear about the bleak macro environment along with the liquidity in the NBFC space, Kunal Thanvi, Editor of Smart Money Secrets & Research Analyst, believes this fear is being extended too far... to some very strong business. Here's an excerpt of what he wrote:

• These corrections are a clear sign of fear across sectors and individual stocks.
  
  While considering stocks for Smart Money Secrets, I believe these deep corrections are a buying signal for select quality companies.
  
  And for strong business you've already bought, this can be a good time to add more.

More Share Market Updates...

Speaking of falling markets, amid uncertainty, panic and despair, we have talked to Tanushree Banerjee, Co-head of Research about finding safe stocks in our latest edition of the stock market podcast. Listen in... visit SoundCloud, iTunes or Stitcher.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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