Sensex Ends 345 Points Lower; Auto and Telecom Stocks Witness Selling

Mon, 12 Nov Closing

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Share markets in India witnessed most of the selling pressure during closing hours and ended their trading session on a negative note. Sectoral indices ended on a negative note with stocks in the auto sector and telecom sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 345 points (down 1%) and the NSE Nifty closed down by 103 points (down 1%). The BSE Mid Cap index ended the day down 0.9%, while the BSE Small Cap index ended the day down 0.8%.

The rupee was trading at 72.97 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.1% and the Shanghai Composite was up by 1.2%. The Nikkei 225 was up 0.1%.

Ankit Shah offers an interesting observation around the falling stock markets in India.

Here's what he wrote in a recent edition of The 5 Minute WrapUp...

• The BSE Sensex closed at 34,057 at the end of 2017. It gained 14% to hit a life-time high of 38,897 on 28 August 2018. Thereafter, the Sensex has been in correction mode through September and October. However, after hitting a year-to-date low of 33,349 in the last week of October, the Sensex has reclaimed the 35k level.
  
  While the Sensex has shed most of its gains in 2018, it still doesn't appear so bad in Indian rupee terms. But for foreign investors, the fall in the Sensex has been worse, because they're also exposed the currency risk.

The below chart shows the difference between the performance of the Sensex and the Dollex 30 index (Sensex in US dollar terms).

Dollex-30 Is Down 10% in 2018

You can see how the trend between the Sensex and Dollex-30 diverged since February 2018.

The Dollex-30 index has declined 10% in 2018 so far.

No wonder that foreign investors have been dumping Indian stocks. Since April 2018, foreign investors have sold equities worth Rs 56,550 crores. What is worth noting is that Rs 27,623 crores worth of equities were sold in the month of October alone.

It would be interesting to see how this trend follows.

From the auto sector, Tata Motors share price was in focus today as the company reported weak Jaguar Land Rover (JLR) sales for the month of October.

As per the data, JLR's total retail sales fell 4.6% in October. Its sales fell 46% in China and 13.5% in Europe for the concerned month.

Moving on, stocks from the airlines sector were witnessing selling pressure today. Losses were seen on the back of rising crude oil prices, which rose more than 1.5% today.

Shares of Jet Airways, Interglobe Aviation, and SpiceJet fell as much as 5% on the back of the above development.

Crude oil prices jumped today as top exporter Saudi Arabia announced a supply cut in December and other producers also considered supply reductions in 2019.

As per the news, Saudi Arabia is planning to reduce oil supply to world markets by 500,000 barrels per day (bpd) in December. This is because the country is facing uncertain prospects in getting other producers to agree to a coordinated output cut.

Khalid al-Falih, the country's energy minister, told reporters that Saudi Aramco's customer nominations would fall by 500,000 bpd in December versus November due to seasonal lower demand. The cut represents a reduction in global oil supply of about 0.5%.

The above situation along with the falling rupee doesn't bode well for the Indian economy.

This is because rising crude oil prices not only affect fuel prices, but also has many other repercussions on the macroeconomic level for the Indian economy.

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

Also, note that India's crude oil production was lower by 4.2% in September 2018 as compared to last year.

The worrying factor is this was the lowest production this year.

Here's what Tanushree Banerjee wrote about it in a recent edition of The 5 Minute WrapUp...

• Comparing domestic production with the crude oil processed by refineries gives an idea of the demand supply gap. Low domestic production as compared to the demand for crude oil places a huge burden on India's import bill.
  
  Rising crude oil prices could have severe implications. Rising inflation. Rising interest rates. Pressure on the government to cut excise duty, thereby impacting its revenues.
  
  We have seen some of this play out. With elections around the corner, expect a lot of subsidies on fuel prices. This is bound to worsen India's fiscal deficit further.

It would be interesting to see how the above supply reductions come into effect. Meanwhile, we will keep you updated on all the developments from this space.

To know more on what moved the Indian stock markets today, you can check out the most recent share market updates here.

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