Sensex Ends Marginally Higher; Realty and Power Stocks Witness Buying

Mon, 3 Dec Closing

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After trading on a volatile note, Indian share markets witnessed some buying interest and ended the day marginally higher. Gains were largely seen in the realty sector and power sector, while healthcare stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 46 points (up 0.1%) and the NSE Nifty closed higher by 7 points (up 0.1%). Both, the BSE Mid Cap index and the BSE Small Cap index, ended the day up by 0.5%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 2.4% and the Nikkei was trading up by 0.9%. The Shanghai Composite stood higher by 2.5%.

European markets were also trading on a positive note. The FTSE 100 was up by 2.2%. The DAX was up by 2.5% while the CAC 40 was up by 2%.

The rupee was trading at 70.22 to the US$ at the time of writing.

GSK Consumer share price was in focus today on reports that Hindustan Unilever Ltd (HUL) will merge with GSK Consumer for a transaction valued at Rs 317 billion in India's largest deal in consumer goods space.

In the news from automobile space, Ashok Leyland share price was witnessing selling pressure on the back of weak auto sales numbers reported by the company.

Moving on to the news from the commodity space, crude oil was witnessing buying interest today. Crude oil prices rose by around 4% in early trades today after the United States and China agreed a truce in their trade conflict.

Gains were also seen ahead of a meeting by producer club OPEC this week that is expected to result in a supply cut.

As per the news, the Organization of the Petroleum Exporting Countries (OPEC) plus Russia and other allies are meeting on 6^th and 7^th December. Producers are discussing a supply curb of 1 million to 1.4 million barrels per day (bpd) and possibly more.

The OPEC meeting in Vienna will follow a gathering by the Group of 20 (G20) nations in Argentina, at which oil policy is expected to be discussed. The meet will also potentially lay the groundwork for an OPEC deal.

Note that OPEC's de-facto leader Saudi Arabia wants the cartel and its allies to cut output by about 1.4 million barrels per day (bpd), around 1.5% of global supply.

However, while OPEC is considering withholding supply, US crude oil production reached another record high last week at 11.7 million barrels per day (bpd), according to U.S. Energy Information Administration (EIA). So, this, on the other hand, is helping cap the sharp rise in crude oil prices.

Speaking of crude oil, 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 one of the editions 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 this pans out. Meanwhile, we will keep you updated on all the developments from this space.

From the banking space, Yes Bank share price was in focus today. The stock of the bank was among the most traded stocks in the NSE today.

The stock of the company plunged to its lowest levels in over two years last week after credit rating agencies ICRA and CARE ratings downgraded the bank's debt instruments.

ICRA downgraded domestic long-term ratings of the bank's senior debt instruments to 'ICRA AA' from 'ICRA AA+' and its subordinate debt instruments to 'ICRA AA-' from 'ICRA AA'.

Meanwhile, CARE Ratings cut domestic ratings of Yes Bank's senior debt instruments to 'CARE AA+' from 'CARE AAA' and subordinate debt instruments to 'CARE AA' from 'CARE AA+'.

Earlier last week, Moody's also downgraded the bank's foreign currency issuer rating and changed the outlook on the bank to 'negative' from 'stable'.

To know more about the company, you can access to Yes bank Q2FY19 result analysis and Yes bank Stock Analysis on our website.

Speaking of corporate banks, Sarvajeet offers an interesting observation on a corporate bank stock.

Here's what he wrote in one of the recent editions of The 5 Minute WrapUp...

Corporate banks have underperformed retail-focused banks in the last five years. The chart below shows the annualised returns of the last five years.

Corporate Banks Underperforming Retail-focused Banks



Retail-focused banks such as HDFC Bank and Kotak Mahindra bank performed significantly better compared to corporate banks. One of the important reasons for this outperformance is stable asset quality. They could maintain gross NPAs below 1% in the previous five years.

Whereas corporate focused banks such as ICICI Bank, Axis Bank, and SBI are facing serious asset quality issues. Not to mention, some of these banks had management issues as well. No wonder these banks not only underperformed retail-focused banks, but also the BSE Bank index as well.

But as I mentioned earlier, the worst is behind them.

We recommended a corporate bank in Smart Money Secrets.

Its aggressive clean-up of its corporate loan book, hiring the right people at the top, adoption of digital technology, and using algorithms in its core operations, bodes well for the bank and its stock. Smart Money Subscribers can access the report here.

If you do not have access to Smart Money Secrets, you can sign up 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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