Crude and Reforms to take Markets Northwards

Indian equities were warming up for a major uptrend as global leaders were chalking out ways to end trade impasses and reach consensus on various issues concerning businesses at the G20 Summit. The benchmark indices BSE Sensex and Nifty50 gained 1.50 per cent each in the past two weeks. Although it was a bumpy ride upwards, most sectors advanced, fuelled by the broad-based positive sentiments among investors.

In the run-up to Modi Sarkar 2.0’s first Union budget, broader markets have started moving northwards. Following the benchmark Sensex, the BSE Mid-cap and BSE Small-cap indices gained 2.38 per cent and 1.20 per cent, respectively, this fortnight. Sectorally, BSE Realty index gained a stupendous 9.16 per cent on the back of budgetary expectations. On the other hand, BSE Power index was buzzing and was up by 6.55 per cent as the government reiterated its commitment to provide 24X7 power supply to all and resolve the difference between Union and state governments and also outline a five-year plan to revive the power industry. The other indices that were gaining during the fortnight were BSE Bankex, BSE Metal and BSE Auto, which were up by 3.96 per cent, 2.22 per cent and 3.38 per cent, respectively. The only index that experienced selling pressure was the BSE IT, which was down by 2.09 per cent.

At the G20 Summit in Osaka, US President Donald Trump and Chinese Premier Xi Jinping met to signal a truce between the two countries. The US and China agreed to postpone additional tariffs against each other, even as the two economies struggle to live with existing tariffs. But this truce was reason enough for the international markets to stay in the green. The US-based indices S&P 500 and Nasdaq gained 1.60 per cent and 1.73 per cent, respectively, while the Dow Jones was up close to a per cent during the fortnight.

The European indices were also upbeat as UK’s FTSE 100 was up by 0.73 per cent, while the German DAX and the French CAC 40 gained by 1.54 and 3.61 per cent, respectively. Asian markets gained significantly as world leaders interacted with each other in Japan, thereby helping businesses gain confidence in the region’s growth story. The Hang Seng gained by 3.80 per cent, while the Japanese Nikkei gained 3.61 per cent and the Shanghai Composite was pretty excited during the fortnight and gained more than 5 per cent.

Ahead of the budget, institutional investors stayed away from the equity markets. Participation by both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) was lacklustre. Both FIIs and DIIs were net buyers to the tune of Rs. 693.35 crore and Rs. 3,401.26 crore, respectively, during the fortnight.

Another significant event was the OPEC meeting in Vienna. The meeting came at a time when the influence of OPEC’s decision on the world economy is dwindling. Gone are the days when announcements from this mega oil cartel would rattle economies across continents. Last week, OPEC inducted Russia as its member. After the US and Saudi Arabia, Russia is the world’s third-largest oil producer. The member nations for the first time signed a charter of cooperation. Also, OPEC+ members formalised and extended their existing 1.2 million barrel per day output cuts to further support the elevated price of oil for another nine months. However, the effect of this output cut was a steep decline in crude oil prices, reflecting the slowdown in demand for oil. This is good news for Indian equity markets as lower crude prices bode well for the Indian economy. 

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