Sensex Opens Firm; Realty & Consumer Durables Stocks Gain

Tue, 16 Oct 09:30 am

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Asian stocks are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.1% while the Hang Seng is up 0.4%. The Nikkei 225 is trading up by 0.6%. Equities in the US ended lower in a choppy trading session on Monday, dragged down by technology stocks amid lingering worries over interest rates and corporate earnings.

Back home, India share markets have opened the day on firm note. The BSE Sensex is trading up by 147 points while the NSE Nifty is trading up by 39 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.7%.

All sectoral indices are trading in green with realty stocks and consumer durables stocks witnessing maximum buying interest.

The rupee is trading at Rs 73.81 against the US$.

In the news from the economy. India's trade deficit narrowed to a five-month low at US$13.98 billion in September despite higher oil prices, even as merchandise exports entered negative territory after a gap of six months.

Data released by the commerce ministry showed that exports contracted 2.15% in September while imports grew 10.45% in dollar terms. In rupee terms, however, exports and imports expanded at 9.65% and 23.78%, respectively, mostly because of a sharp depreciation in the rupee.

Given the country's dependence on imported fuels, the elevated crude oil prices and the modest expected impact of the measures initiated so far by the government to reduce the trade deficit, the CAD is now expected to widen significantly to US$75-79 billion or 2.9% of GDP in the current fiscal year, the reports noted.

The trade deficit stood at US$94.32 billion in the first six months. The government downplayed the fall in exports in September, attributing it to the high base effect of September 2017, when exports grew by 25.67% at over US$28 billion.

In another development, Oil prices rose today on signs of falling Iran oil exports ahead of US sanctions against Tehran in November, while geopolitical tensions remain over a missing Saudi journalist.

International benchmark Brent crude for December delivery rose 9 cents, or 0.1%, to US$80.87 per barrel for Intermediate crude for November delivery was up 5 cents at US$71.83 a barrel.

Saudi Arabia has been under pressure since Khashoggi, a critic of Riyadh and a US resident, disappeared on Oct 2 after visiting the Saudi consulate in Istanbul.

Speaking of crude oil, almost every time a rise or fall in the stock markets is invariably linked to crude oil prices.

Logically, it seems right too. Rise in crude oil increases input costs for dependent firms. It also means rising inflation. Rising inflation means rising interest rates.

It also puts pressure on the government to cut excise duty, thereby impacting its revenues. We have already seen that happening. After all, there is an election year coming up.

But has it really affected the stock markets?

Are Stock Market Returns Really Linked to Crude Oil Prices?

Here's what Girish Shetty wrote about it on one of the recent editions of The 5 Minute WrapUp...

• In the short-term: Yes.
  
  But in the long run, as we can see, Sensex returns have been independent of crude oil prices or even positively co-related!
  
  Crude oil prices doubled from US$ 41 in December 2008 to US$84 in April 2010. In the same time, Sensex also doubled from 8,800 levels to 17,600 levels.
  
  So, please don't fret unnecessarily about crude oil.
  
  Check if your business has a moat that helps it pass on input price increases to its customers. In the long run, they will survive and also gain market share from those that can't pass on prices. Short term pessimism due to rising crude oil prices provides a buying opportunity in these stocks.

As per him, focusing on quality stocks rather than crude oil will matter more in the long run.

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

By the way, in our latest edition of the stock market podcast, we have our Research Analyst, Radhika Pandit present a contrary view on PSU sector. She talks about good PSU stocks that you must look at. Listen in... visit SoundCloud, iTunes or Stitcher.

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

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