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Sensex Ends Day Flat, Global Markets Cautious, and Top Stocks in Action
Tue, 4 Dec Pre-Open | Rini Mehta, TM Team

On Monday, share markets in India opened on a positive note and ended the day in red after a volatile day of trading.

The BSE Sensex closed higher by 47 points to end the day at 36,241. While the broader NSE Nifty ended the up by 7 points to end at 10,884.

Among BSE sectoral indices, pharma stocks fell the most by 1.2%, followed by auto stocks at 0.2%. Sun Pharma and M&M were among the top losers.

Top Stocks in Action Today

HUL, GSK Pharma share prices are likely to be in focus as Hindustan Unilever Ltd (HUL) is set to merge with GSK Consumer for a transaction valued at Rs 317 billion in India's largest deal in consumer goods space.

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

Sun Pharma share price is among the stocks to watch today as the stock hit a six-month low after various allegations of misgovernance and insider trading.

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Oil Prices in Focus

Crude oil was witnessing buying interest recently. Crude oil prices rose by around 4% in early trades yesterday 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 6th and 7th 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.

Note that high crude oil prices 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

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?

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.

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

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