Sensex Opens Marginally Higher; Pharma Stocks Witness Buying

Asian shares are trading on a negative note today. The Nikkei 225 is down 0.35% while the Shanghai Composite is trading down by 0.93%.

Back home, India share markets opened the day marginally higher. The BSE Sensex is trading up by 34 points (up 0.1%) while the NSE Nifty is trading flat. The BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is trading down by 0.2%.

Sectoral indices have opened the day on a mixed note with healthcare stocks and power stocks witnessing maximum buying interest.

The rupee is trading at 71.43 to the US dollar.

In the news from pharma space, Lupin share price will be in focus as the United States Food and Drug Administration (USFDA) has completed cGMP inspection at Lupin's Tarapur API Manufacturing Facility.

To know more about the company, you can access to Lupin's Q1FY19 result analysis and Lupin's 2017-18 Annual Report Analysis on our website.

From the airline's sector, Jet Airways share price will be in focus today as the company, as per a leading financial daily, has finalized boutique investment bank Moelis & Co to manage a stake sale in the loyalty rewards programme that the carrier co-owns with Etihad Airways.

In the news from macroeconomic space, as per a leading financial daily, the government will not cut excise duty on petrol and diesel to cushion rising prices as it has limited fiscal space available to take any loss in its revenue collections.NTPC share price will be in focus today as the company has turned down a proposal from bankers, led by State Bank of India, to buy the stressed power assets estimated to be close to Rs 1.9 lakh crore.

Note that petrol and diesel prices on Tuesday touched fresh highs as rupee dipped to a record low of 71.54 against US dollar, making imports costlier.

In the news from commodity markets, crude oil prices are witnessing selling pressure and have reversed their uptrend seen yesterday. This is seen as the impact of a tropical storm on US Gulf coast production was not as strong as initially expected.

Oil prices rose during the start of this week as dozens of US oil and gas platforms in the Gulf of Mexico were shut in anticipation of tropical storm Gordon hitting the region. However, the storm shifted eastward late on Tuesday, reducing its threat to producers on the western side of the Gulf and most Gulf Coast refineries.

Note that oil prices have climbed steadily this year, helped by rising demand. This is seen on the back of signs that Iran sanctions may limit global crude oil supply.

As per a leading financial daily, oil customers for Iran have started to drastically wind down purchases of Iranian crude ahead of the US sanctions. This was evident from Iran's exports plunging by 6,00,000 barrels per day (bpd) in August compared with July loadings due to declining flows to India.

On the back of above worries, 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.

But rising crude oil prices don'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?

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.