Sensex Ends Day in Red; Bank Stocks Top Losers

Indian share markets continued their momentum during closing hours and ended the day on a positive note. Gains were largely seen in the energy sector and realty sector.

At the closing bell, the BSE Sensex stood higher by 305 points (up 0.9%) and the NSE Nifty closed higher by 94 points (up 0.9%). The BSE Mid Cap index ended the day up by 1%, while the BSE Small Cap index ended the day up by 1.1%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood flat and the Nikkei was trading up by 0.65%. The Shanghai Composite stood higher by 0.44%.

European markets were also trading on a positive note. The FTSE 100 was up by 0.18%. The DAX, was up by 0.17% while the CAC 40 was up by 0.42%

The rupee was trading at 68.77 to the US$ at the time of writing.

In the news from IT sector, HCL Technologies share price witnessed buying interest today on news of a possible share buyback.

As per the news, the company's board is going to consider the share buyback proposal on Thursday. Market participants largely believe the size of the buyback would be around Rs 35 billion, which would be same as the one announced last year.

At the closing bell, HCL Technologies share price closed higher by 2% on the BSE.

Speaking of share buybacks, the quantum of share buybacks has increased lately. As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

• The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

The topic also brings us to ask: Do buy-backs offer an arbitrage opportunity for retail investors? Ankit Shah has answered this question in one of the editions of Equitymaster Insider. You can access the issue here (requires subscription).

In the news from commodity space, the president of Organisation of Petroleum Exporting Countries (OPEC) defended the oil producer group on Monday against US President Donald Trump's recent demands regarding higher oil output.

The president said that OPEC alone cannot be blamed for all the problems that are happening in the oil industry, and the group was responsive in terms of the measures it took in its latest meeting in June.

Note that Trump had recently accused OPEC of driving gasoline prices higher and stepped up pressure on US ally Saudi Arabia to raise supplies to compensate for lower exports from Iran.

As per the news, OPEC is willing to listen to major oil-producing countries, including the United States.

In June, OPEC had agreed on a modest increase in oil production starting in July after its leader, Saudi Arabia, persuaded arch-rival Iran to cooperate, following calls from major consumers to curb rising fuel costs.

Global oil prices have climbed steadily this year, helped by rising demand. They have topped US$ 80 per barrel in May for the first time in three and a half years.

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.

Have a look at the chart below. It shows India's total import bill of crude oil and petroleum products on an annual basis during the Manmohan Singh regime and the Narendra Modi regime.

Here's Why Crude Oil Was Modi's Best Friend So Far

 

As Ankit Shah wrote in one of the editions of The 5 Minute WrapUp...

• During the UPA II regime, India's average annual oil import bill was US$ 133 billion. In fact, in the last three years of Manmohan Singh's leadership, the oil import bill exceeded US$ 150 billion. Compare that with an average annual oil bill of US$ 95 billion during the four years of Modi's leadership.
  
  The actual savings would have been even higher, because I believe the consumption of crude oil and petroleum products would have been quite higher in the Modi era than the Manmohan era.
  
  Last Thursday, Brent crude oil prices shot above US$ 80 a barrel.
  
  This is the highest level since 2014. In the past one year alone, oil prices have surged more than 50%.
  
  Now, what if oil prices go back to the levels during the Manmohan Singh regime? What would happen to India's current account and fiscal deficit? What would happen to inflation and RBI's stance on interest rates?
  
  With the next general elections just a year away, rising crude oil prices are going to be a big worry for the Modi government.
  
  It should worry you too...

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 to US$ 68 in April 2018.
  
  The recent news of Saudi Arabia wanting crude oil prices to touch US$ 100 per barrel doesn't help. The 2008 recession was preceded by crude oil touching US$ 150 per barrel. Any movement upwards can result in a possible downturn for the global market.
  
  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.

How the government handles this situation of rising crude oil and fuel prices remains to be seen. Meanwhile, we will keep you posted on all the developments from this space. Stay tuned.