Sensex Ends 174 Points Lower; Rupee Hits Lifetime Low of 74.27 Against USD
Closing

After trading on a volatile note throughout the day, share markets in India witnessed selling pressure during the closing hours and ended the day in red. All sectoral indices traded in red, with stocks in the energy sector and consumer durables sector leading the losses.

At the closing bell, the BSE Sensex stood lower by 174 points (down 0.5%) and the NSE Nifty closed down by 47 points (down 0.5%). The BSE Mid Cap index ended the day down 0.1%, while the BSE Small Cap index ended the day down by 0.5%.

The rupee was trading at Rs 72.32 against the US$ in the afternoon session.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.1% and the Shanghai Composite was up by 0.2%. The Nikkei 225 was down by 1.3%. Meanwhile, European markets were also trading on a negative note. The FTSE 100 was down by 0.4%. The DAX was down by 0.6%, while the CAC 40 was down by 0.4%

In the news from currency markets, the rupee hit a fresh record low of 74.28 against the US dollar today.

The selling pressure came on the back of rising crude oil prices and strengthening of the US dollar overseas.

Apart from the above, foreign fund flows also weighed on the rupee.

Note that the rupee has been witnessing selling pressure against the US dollar since the start of this calendar year.

What does the fall in rupee mean for the Indian economy?

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A depreciation in rupee means importers buying goods and services at a higher rate that earlier. This doesn't bode well for a developing economy that relies heavily on imports.

Also, India imports most of its oil requirements. So, a fall in rupee leads to a consequent rise in the import bill. The depreciation of the rupee will also add to crude oil's rising cost.

On the corporate side, companies who have taken foreign loans from abroad will be impacted. The repayment obligations in terms of principal and interest will rise, leading to a dent in the cash flows and financials.

Further, companies who import a majority of their raw material requirements will get impacted provided they have not hedged their foreign currency exposure.

Looking at the brighter side, rupee depreciation brings a cheer on the exports front.

A depreciating rupee will provide a much-needed cushion to falling exports. However, a falling rupee will not be the only factor to boost exports. There are certain structural issues too which the government needs to address.

Ankit Shah has explained how the depreciation in rupee is linked to foreign investor outflows and forex reserves in one of his editions of Equitymaster Insider. You can read the entire article here (requires subscription).

Also, here's what we wrote about the falling rupee and its repercussions in a recent edition of The 5 Minute WrapUp...

  • The rupee is under pressure due to a strong dollar and high oil prices. Similarly, the spill-over from the emerging-market turmoil in Argentina and Turkey is weighing on the rupee.

    The falling rupee is also triggering sales of bonds and stocks, which in turn is further pressuring the rupee.

    Nevertheless, last week, the government announced several measures. This includes cutting down non-necessary imports, removal of withholding tax on rupee-denominated bonds, and easing overseas borrowing norms.

    That said, in the near term, the rupee being under pressure could benefit export-oriented businesses.

Kunal Thanvi's recent Smart Money Secrets recommendation benefits from the rupee depreciation as the company derives around 65% of the revenue from exports. The icing on the cake is the company's focused entry into the B2C segment, which provides it a long runway for future growth.

If you're a Smart Money Secrets subscriber, read the detailed report here.

If not... you can get the report by signing up here.

In the news from commodity markets, crude oil was witnessing buying interest today as more evidence emerged that crude exports from Iran, OPEC's third-largest producer, are declining in the run-up to the re-imposition of US sanctions.

Gains were also seen as a hurricane moved across the Gulf of Mexico.

As per the data released, Iran's crude exports fell further in the first week of October as buyers are seeking alternatives ahead of the start of the US sanctions on November 4 and creating a challenge to other OPEC oil producers as they seek to cover the shortfall.

Market participants are worried that Iranian sanctions could severely undersupply the oil market in 2018 and that will mean further rise in crude oil prices.

Speaking of crude oil, oil prices have climbed steadily this year, helped by rising demand. However, rising crude oil prices 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.

They 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.

Also, it's 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.

In the news from steel sector, Steel Authority of India Ltd (SAIL) share price was in focus today. The stock of the company witnessed selling pressure on reports of a gas pipeline explosion in its Bhilai plant.


Sensex Trades Flat; Tata Motors Tanks 14%
12:30 pm

After opening the day flat share markets in India are trading on a volatile note and are presently trading below the dotted line. Sectoral indices are trading on a mixed note, with stocks in the energy sector and stocks in the PSU sector witnessing maximum buying interest.

The BSE Sensex is trading down by 35 points (down 0.1%) and the NSE Nifty is trading down by 30 points (down 0.3%). Meanwhile, the BSE Mid Cap index is trading down by 0.6%, while the BSE Small Cap index is trading down by 1%. The rupee is trading at 74.17 to the US$.

In news from stocks in the auto sector. Tata Motors share price among the top losers today after the company's subsidiary Jaguar Land Rover (JLR) reported a fall in sales.

JLR Rover reported a 12.3% decline in global sales, and announced shutdown of its West Midland plant for two weeks due weak global demand.

The company's sales in China declined by 46.2% during September compared to the same month last year as ongoing market uncertainty resulting from import duty changes and continued trade tensions held back consumer demand.

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The Tata Motors share price fell as much as 14% in intraday trade to Rs 183-a level last seen in 2012.

Tata Motors has corrected significantly since the beginning of the year. But its not the only one. The average stock has crashed over 46% from its 52-week high.

The Average Stock Has Crashed 46% From Its 52-Week High

Here's what Ankit Shah, Research Analyst and Editor of Insider wrote in a recent edition of The 5 Minute WrapUp:

  • As I mentioned earlier, the total market capitalisation of all listed companies on the BSE on 31 August 2018 was Rs 159.3 lakh crore (1 lakh crore = 1 trillion). As per my study, this was the highest aggregate market cap level ever.

    Over the 22 trading sessions that followed since then, the total market cap of all BSE companies declined by 14% to Rs 136.6 lakh crore. Rs 22.7 lakh crore worth of shareholder wealth has been destroyed in just 22 days.

    During this period, foreign investors sold Indian equities worth Rs 17,919 crore.

    I want to show you the extent of correction that stocks have faced from their respective 52-week highs.

    Over the weekend, I compiled the stock price data of 2,733 listed companies on the BSE. I wanted to know how much each stock had fallen from its respective 52-week high.

    Here's what I found out...
    • 688 stocks (25% of the active stock universe) have crashed 61% or more from their respective 52-week highs.
    • On average (in both mean and median terms), Indian stocks have corrected 46% from their 52-week high.
    • There are just 112 stocks (4% of the active stock universe) that have corrected 10% or less.

    While the recent market crash and the macro uncertainty is a big cause of worry for investors, it must be recalled that Indian stocks were driven to unsustainably expensive valuations on the back of a flood of domestic liquidity.

    The ongoing market crash has brought down stock valuations to more reasonable levels. This may be a good time to scoop up great long-term investing opportunities.

    Of course, this doesn't mean that stocks couldn't crash further if things get worse.

    The correction could last longer.

    But looking at the history of equity returns, I can tell you that this would be just a passing correction phase.

    Despite all the volatility and periodic crashes, equities are still one of the most rewarding and safe asset classes over the long run.

Moving on to news from stocks in the banking sector. Yes Bank share price is in focus today after it was reported that the succession plan for the bank is already underway and will reach is logical conclusion.

Notably, Yes Bank needs to find a new CEO to replace the outgoing Promoter CEO Rana Kapoor as the Reserve Bank of India (RBI) refused to extend his tenure.

Earlier it was reported that the bank had appointed two former chairmen -- TS Vijayan of LIC and OP Bhatt of SBI to its search and selection committee to find the CEO's successor.

Notably, Yes Bank shares have plunged by nearly 50% from their 52-week highs after RBI's decision to cut short Rana Kapoor's tenure. On September 17, RBI curtailed the CEO's term to January 31, 2019 without citing any reason.

While the bank's board has initiated proceedings to find a new CEO it has also petitioned to the RBI to grant an extension to Rana Kapoor. The bank's board earlier said that it would ask the Reserve Bank of India (RBI) to grant an extension of eight months to managing director (MD) and chief executive Rana Kapoor.

The board will first seek an extension for Kapoor till 30 April for finalization of financial statements for the year to 31 March, and thereafter a further extension till 30 September for completing the annual general meeting process, it said in an exchange filing.

At the time of writing, Yes Bank share price was trading up by 4%.


Sensex Opens in Green; Yes Bank & Adani Ports Top Gainers
09:30 am

Asian stocks are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.9% while the Hang Seng is up 0.4%. The Shanghai Composite is trading up by 0.5%. Meanwhile, the Nasdaq fell on Monday for the third straight day as a sell-off in Chinese markets sparked concerns about slowing global economic growth, though the S&P 500 pared losses to end nearly flat.

Back home, India share markets opened in green today. The BSE Sensex is trading up by 76 points while the NSE Nifty is trading up by 42 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.5%.

Sectoral indices are trading on a mixed note with automobile stocks and energy stocks witnessing maximum selling pressure. While, capital goods stocks and healthcare stocks have opened the day in green.

The rupee is trading at Rs 73.97 against the US$.

Speaking of the market correction, over the 22 trading sessions that followed since then, the total market cap of all BSE companies declined by 14% to Rs 136.6 trillion. Rs 22.7 trillion worth of shareholder wealth has been destroyed in just 22 days.

Ankit Shah, our research analyst, compiled the stock price data of 2,733 listed companies on the BSE. He found out how much each stock had fallen from its respective 52-week high.

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Here's what he found out...

  • 688 stocks (25% of the active stock universe) have crashed 61% or more from their respective 52-week highs.
  • On average (in both mean and median terms), Indian stocks have corrected 46% from their 52-week high.
  • There are just 112 stocks (4% of the active stock universe) that have corrected 10% or less.
The Average Stock Has Crashed 46% From Its 52-Week High

During this period, foreign investors sold Indian equities worth Rs 179.2 billion.

So, what should you do in such times? How is all of this going to impact you and your portfolio? Amid uncertainty, panic and despair, Tanushree Banerjee, Co-head of Research is finding safe stocks. In our latest edition of the stock market podcast, she talks about such stocks. Listen in... visit SoundCloud, iTunes or Stitcher.

In the news from the mining sector. As per an article in a leading financial daily, Coal India has inked a pact with NLC India Limited (formerly Neyveli Lignite Corporation) to generate power from both conventional and renewable sources.

Reportedly, a memorandum of understanding has been signed with NLC India to form a joint venture company for 3000MW of solar power and 2000MW of thermal power projects. The cumulative investment in the projects is estimated at Rs 120 billion.

Further, as per the reports, there were two reasons for the joint venture. First, the PSU is looking to increase its own consumption of renewable power and second, it is exploring the possibility of power plants at pitheads where costs will be low.

The joint venture would have equal equity participation and has set a deadline of 15 months to complete the solar power project and four years for the thermal power project.

The projects would be financed through a debt equity ratio of 70:30, according to Central Electricity Regulatory Commission norms.

The solar power projects will be set up in identified barren and reclaimed free land of Coal India and also across the country where land is available. The cumulative land required is estimated at around 15,000 acres. The memorandum also extends to thermal power generation across CIL's subsidiaries.

Coal India share price opened the day up by 1.6%.

Moving on to the news from the economy. In the latest development, the International Monetary Fund (IMF) on Tuesday acknowledged the economic reforms carried out under Prime Minister Narendra Modi and projected India to be the world's fastest growing major economy this year and next.

The World Economic Outlook (WEO) released ahead of the IMF annual meeting in Bali stated that in India, important reforms have been implemented in recent years, including the Goods and Services Tax, the inflation-targeting framework, the Insolvency and Bankruptcy Code, and steps to liberalize foreign investment and make it easier to do business.

But citing external factors, the recent increase in oil prices and the tightening of global financial conditions, it cut India's growth projection made in July for next year by 0.1% to 7.4%, which would still be the world's fastest growth rate for major economies.

It kept the 7.3% growth projection for this year made in July.

Compared to the projections made in April, the current one for 2018 is lower by 0.1% and for 2019 by 0.4%.

Up from India's growth rate of 6.7 per cent in 2016, the growth projections for this year and the next reflect a rebound from transitory shocks of demonetisation and the implementation of the national Goods and Services Tax" and "strengthening investment and robust private consumption, the report stated.

Overall for the global economy, the IMF cut the growth projections made in July for this year and the next by 0.2% to 3.7%, as IMF warned that there are clouds on the horizon and the likelihood of further negative shocks to our growth forecast has risen.

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


Indian Indices Trade Volatile, Energy Stocks Show Uptick
Pre-Open

On Friday, share markets in India opened on a negative note and ended the day in green after a volatile day of trading.

The BSE Sensex closed higher by 97 points to end the day at 34,474. While the broader NSE Nifty ended the day up by 283 points to end at 10,348.

Among BSE sectoral indices, energy stocks rose the most by 3.3%, followed by bank stocks at 1.2%. Yes Bank and Reliance Industries. were among the top gainers.

Top Stocks in Action Today

L&T share price is likely to be in focus today after the company's subsidiary bagged major orders.

The power and transmission business of the subsidiary L&T Construction won orders worth Rs 18.8 billion in both domestic and international markets.

Yes Bank share price will be in focus today after the bank announced that it appointed a search committee to find the current CEO Rana Kapoor's successor.

Company has appointed two former chairmen -- TS Vijayan of LIC and OP Bhatt of SBI to its search and selection committee to find the CEO's successor.

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Fuel Price Reduction to Hurt OMCs: Moody's

According to global credit ratings agency Moody's, the government's decision last week to reduce fuel prices through a mix of state and centre tax cuts and price cuts taken by oil marketing companies (OMCs) may have far-flung impact on the domestic oil industry.

The immediate impact, according to the rating agency's note would be a credit negative for the OMCs.

Moody's raised concerns over increased borrowings for OMCs, rating downgrades, further directives to absorb fuel prices and pressure on upstream companies to increase in shareholder returns or subsidise crude oil prices.

On October 4, the government reduced petrol and diesel retail selling prices by Rs 2.50 per litre, through cuts in excise duties by Rs 1.50 per litre and asking OMCs to absorb the remaining Re 1 per litre price cut.

Moody's estimated the government's decision will reduce the combined Earnings before interest, taxation, depreciation and ammortisation (EBITDA) of the three OMCs by Rs 65 billion in fiscal 2019, ending March 2019, which is around 9% of their total EBITDA of Rs 692 billion in fiscal 2018.

The agency added that despite the negative earnings effect of the government's decision, we continue to expect the three OMC to report higher EBITDA in fiscal 2019 versus fiscal 2018, given higher sales volume, stable refining margins and the depreciating rupee. However, borrowing for these OMCs is likely to increase.