Sensex Ends 125 Points Higher; Realty and Automobile Stocks Witness Buying

Wed, 11 Sep Closing

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Indian share markets witnessed buying interest throughout the day and ended higher. Gains were largely seen in the metal sector, realty sector and automobile sector, while IT stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 125 points (up 0.3%) and the NSE Nifty closed higher by 33 points (up 0.3%). The BSE Mid Cap index ended the day up 1% and the BSE Small Cap index ended the day up by 1.4%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 1.8% and the Shanghai Composite stood lower by 0.4%. The Nikkei 225 was up 1%.

The rupee was trading at 71.65 against the US$.

Cement stocks witnessed buying interest today on the back of Finance Minister Nirmala Sitharaman's comments that the government will frontload expenditure on infrastructure.

On Tuesday, Sitharaman had said that the government will frontload infrastructure spending in a bid to give the economy a boost and announce one or two more sets of stimulus measures aimed at reviving growth in the coming quarters.

Shares of India Cement, Orient Cement and Everest Industries rose over 4% on back of the above news.

Buying interest was also seen amid hopes of rate cuts for the industry at the upcoming GST council meet.

In news from the energy sector, Oil and Natural Gas Corporation (ONGC) today announced that it will invest more than Rs 130 billion in exploring oil and gas by drilling over 220 wells across Assam in the next five years.

The company said in a statement that it has signed an MoU with the Assam government for enhancing its exploration and production activities in the state.

The company is also planning to buy out the rest of a western Indian petrochemical project and launch a public offering if it fails to find a strategic partner for it.

ONGC Petro additions (OPaL), majority-owned by ONGC, is primarily a polymer manufacturer, a chemical compound used in everything from textiles to plastics and packaging.

Note that ONGC has earlier tried to bring in a strategic partner in the project but failed to strike a deal so far.

ONGC share price ended the day down by 3.2%.

To know more about the company, you can read ONGC's latest result analysis and ONGC's 2018-19 annual report analysis on our website.

Moving on to news from the commodity space, Gold prices inched higher today, snapping a four-day losing streak, amid expectations that the European Central Bank will dole out stimulus and cut interest rates.

At the time of writing, spot gold was up 0.5% at US$ 1,493.5 per ounce. In the previous session, prices fell to their lowest since August 13 at US$ 1,483.9.

Analysts are hoping that the ECB will reduce interest rates further into negative territory. The meeting could serve as a potential catalyst for gold as investors are already buying into the rate cut expectations.

The sharp rally in prices has made investors increase their bets on gold-backed ETFs, which witnessed a net inflow of Rs 1.5 billion in August, the first such infusion in nine months.

This has pushed the latest inflow asset under management (AUM) of gold funds to Rs 58 billion in August end from Rs 50.8 billion at the end of July.

Speaking of gold, globally, gold prices are up around 20% so far this year amid inflows into gold-backed assets. US-China trade war, volatility in risk assets like equities, and central banks signalling a looser monetary policy have boosted the safe-haven appeal of gold.

As per a Bloomberg report, inflows into gold-backed exchange traded funds (ETFs) topped 100 tons in August, the highest since February 2013. Holdings rose 101.9 tons, bringing total known assets to 2,453.4 tons, the third straight monthly increase after the addition of a combined 154.1 tons in June and July.

For domestic markets, jewellers hope that upcoming festive season will improve gold demand, which has been hurt due to high prices.

As many central banks diversify their portfolio, they are adding gold as global growth slows and trade and geopolitical tensions rise.

Also, speaking of gold, co-head of research, Tanushree Banerjee shares some interesting information on the Sensex to Gold (per 10 grams) ratio going back 15 years.

Have a look at the chart below:

Sensex versus Gold in Fairly Valued Zone

Here's what she wrote about it in one of the editions of The 5 Minute WrapUp...

• While the ratio has been quite volatile, the average ratio turns out to be 1.
  
  In other words, whenever the Sensex has risen at a much faster pace than gold prices, its fall has also been equally precipitous. The reason behind this volatility is not hard to find.
  
  Stock markets are more amenable to manipulation than gold prices are.
  
  Thus, if the Sensex to gold price ratio is way more than one, it could be a signal the Sensex is overvalued.
  
  Alternatively, if it is way below one, it could mean that Sensex is undervalued.
  
  The ratio stands at around 1.09 currently, indicating that the Sensex is trading pretty close to its fair value!

Thus, even though the market correction seems overdone in mid and smallcaps, the bluechips, particularly those in the Sensex, aren't undervalued yet.

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

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