Declining Crude Prices Cause Spike In The Market

With Diwali fever in the air, Indian equity markets are in an upbeat mood. The benchmark index BSE Sensex was up close to 1 per cent and Nifty50 was up 1.38 per cent in the two-week period when the global indices were trading mixed. After continuous rounds of bear hammering, the markets are regaining vigour on the back of a retreat in crude oil prices and positive cues from corporate earnings growth. This can be seen in the strong recovery posted by the mid-cap and small-cap stocks. The broader indices, BSE Mid-cap Index gained 5.83 per cent, while the Small-cap Index gained 4 per cent.

Although the NBFC crisis had an overhang on the financial sector, the market sentiments improved as the government and RBI sorted out their differences to address the liquidity crunch issue. The banking sector benchmark BSE Bankex was up 2.26 per cent in the two-week period. Also, taking cues from the relief expected for non-banking lenders and good corporate earnings, the BSE Realty index recovered and staged a 9 per cent gain, while the Power index gained 1.58 per cent. Positive October sales data helped the BSE Auto index gain 1.62 per cent in the period under review. The BSE IT index saw huge volatility during the two-week period, but it managed to register a gain of 0.84 per cent. FMCG and Metal, however, posted negative gains and were down by 1.14 per cent and 0.28 per cent, respectively.

On the global front, most international indices posted losses, except UK’s FTSE100, French CAC40 and Dow Jones Industrial which were up 1.02, 0.64 and 0.25 per cent, respectively. The US-based indices S&P500, Nasdaq and the German DAX were down by 0.56, 0.46 and 0.48 per cent, respectively. Hurt by the heightening trade war concerns and faster-than-expected slowing of the Chinese economy, all major Asian indices recorded losses. In the two-week period, Nikkei was down 4.10 per cent, Shanghai Composite was down 1.83 per cent and Hang Seng was down 0.49 per cent.

The crude oil prices dipped due to the supply-demand imbalance in the crude oil market, arising due to slowdown in the Chinese economy and the oversupply of oil as the US and the OPEC hiked oil production in October. Overall, the oil-producing countries are off-setting the supply cut expected from the US sanctions on Iran. Also, the US administration has agreed to let a few countries, including India, Japan and Korea, to import oil from Iran. This decision is favourable to the Indian rupee as well. The Brent crude was at US$72.86 per barrel, which is its 6-month low and correspondingly the Indian rupee was quoting atRs.72.94 per dollar.

The trading data of the FIIs and DIIs for the two-week period showed the usual trend of FIIs being the net sellers to the tune Rs.10,278.21 crore, while the DIIs were net buyers with a net inflow of Rs.8669.06 crore.

As it is Diwali time, the Indian jewellery market is shining the brightest. In the domestic market, 10 grammes of gold is fetching around Rs.32,600, while in the international market it is trading at US$1,230 per ounce.

The positive trend of crude slipping and rupee gaining is fuelling the Indian equity market’s upward rally. Also, the GST collection was back at theRs.1 trillion mark in October, indicating the feel-good vibes in the Indian economy. With the easing of domestic fuel prices, the prospects of a second term for PM Modi increases, thereby reducing the uncertainty around 2019 general election results. All these factors provide the market necessary support to overcome the bouts of profit-booking and fuel a fresh upward momentum.

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