Sensex Ends Over 200 Points Lower; Realty Stocks Witness Selling Pressure

Thu, 27 Sep Closing

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Share markets in India continued their sell-off seen during the day and ended the trading session deep in the red. All sectoral indices traded on a negative note, with stocks in the realty sector and capital goods sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 218 points (down 0.6%) and the NSE Nifty closed down by 76 points (down 0.7%). The BSE Mid Cap index ended the day down 2.2%, while the BSE Small Cap index ended the day down 2%.

The rupee was trading at Rs 72.57 against the US$ in the afternoon session.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 0.4% and the Shanghai Composite was down by 0.5%. The Nikkei 225 was up down 1%.

Speaking of the sell-off seen in the Indian stock markets, in our latest edition of the stock market podcast, Apurva Sheth, our lead Chartist and Editor of the premium newsletter, Profit Hunter Pro joins us to share his technical view on the massive stock market crash that we witnessed on Friday last week.

He also talks about the stocks that could create value in such times. Listen in...visit SoundCloud, iTunes or Stitcher.

Shares of companies from the airlines sector and consumer durables sector were witnessing selling pressure today as the government yesterday increased import duty on 19 non-essential items.

India raised import duty on a range of items including air-conditioners, refrigerators, washing machines, footwear, jewellery, furniture fittings and tableware besides imposing it on aviation turbine fuel (ATF).

Basic customs duties have been raised on 19 tariff lines that accounted for an import bill of Rs 860 billion in FY18 by 2.5-10%. Basic customs duty of 5% has been imposed on ATF. The prices of jet fuel will be increased by Rs 2,000 per kilolitre from Thursday, oil refiners have communicated to airlines.

The increased duty is likely to yield about Rs 40 billion in revenue.

In the news from the banking sector, as per a leading financial daily, the Reserve Bank of India (RBI) announced a measure that will allow banks more access to funds as it moved to ease a liquidity squeeze afflicting the nation's money markets.

The central bank increased the facility to avail funds for liquidity coverage ratio to 13% from 11%, effective 1 October.

The above development will take the cut out from the statutory-liquidity ratio that is available to banks to 15% of their deposits.

The central bank also said that it is ready to meet the durable liquidity requirements of the system.

In the news from the commodity space, crude oil witnessed buying interest today. Oil prices rose by as much 1% on prospects of tighter markets due to US sanctions against major crude exporter Iran, which are set to be implemented in November.

The US will be targeting Iran's oil exports with sanctions from November 4, and Washington is putting pressure on governments and companies around the world to fall in line and cut oil purchases from Tehran.

As per the news, while Britain, China, France, Germany, Russia and Iran said they were determined to develop payment mechanisms to continue trading despite the sanctions by the United States, most analysts expect Washington's actions to have an effect to the tune of 1-1.5 million barrels per day (bpd) of crude oil supplies out of markets.

The above cues meant tightening supplies and rising crude demand and led crude oil prices to trade on a positive note.

Note that crude oil prices are witnessing buying interest lately. This doesn't bode well for the Indian economy, as it not only affects fuel prices, but also has many other repercussions on the macroeconomic level.

Rising 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.

Apart from that, what does rising crude oil prices mean for stock markets?

Richa Agarwal, editor of Hidden Treasure, tracks the oil and gas sector very closely. She believes the rise in crude oil prices is a bearish sign for stock markets globally. At the same time, any market correction, will throw up interesting buying opportunities in small-cap stocks.

This is what she wrote...

• After hitting a low of US$ 30 per barrel in January 2016, prices have more than doubled this year.
  
  While the Hidden Treasure team looks for long-term wealth creators, such macro situations can help to recommend such stocks at a bargain. The ones who keeps calm, when everyone else is losing their heads, will gain the most when the tide turns.

It's also interesting to note that whenever oil prices have surpassed US$ 100/barrel, they didn't stay there for very long. In technical term, it is sort of 'resistance level'.

Resistance Kicks in Once Crude Touches US$ 100/barrel

This is what we wrote about this in one of the editions of The 5 Minute WrapUp...

• Oil prices have collapsed thrice because of demand destruction: in 1979, 2008, and 2014.
  
  In 1979, the trigger for oil price increase was the Iranian Revolution and the Iran-Iraq war. Due to this, oil prices rose from US$ 50/barrel to above US$ 100/barrel between January 1979 and April 1981.
  
  Then, new production from the North Sea, Mexico, Alaska, and Siberia flooded the market. By March 1986, prices had fallen to US$ 27/barrel.
  
  In 2008, when oil touched US$ 150/barrel, it was quickly followed by the financial crisis and recession.
  
  Then, between 2011 and 2014, when oil was above of US$ 100/barrel, several years of triple-digit oil prices led to a near doubling of shale production in the US, a volume that helped trigger the crash in 2014.

In fact, as per the media reports, even Saudi officials think US$ 60 is a reasonable price for oil in the long term.

It would be interesting to see how Iranian sanctions will influence crude oil prices. Meanwhile, we will keep you posted on all the updates from this space.

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

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