Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.05% while the Hang Seng is up 0.49%. The Shanghai Composite is trading up by 0.04%. Meanwhile, The Dow Jones industrial average rose to an all-time high on Thursday as investors bet economic growth would pick up steam.
Back home, India share markets opened the day on a strong note. The BSE Sensex is trading higher by 110 points while the NSE Nifty is trading higher by 37 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.4% & 0.6% respectively.
All sectoral indices have opened the day in green with metal stocks and energy stocks witnessing maximum buying interest. The rupee is trading at 63.74 to the US$.
2017. What a year this has been for equity investors. The BSE Sensex is trading close to 34,000 mark. The Nifty is trading above 10,500 levels.
India was among the three emerging markets, which gained more than 35% in dollar terms. The other two are Hungary and South Korea.
India Outperforms Emerging Market Peers in 2017
The BSE Sensex earned a 35.1% return in the dollar terms and 28% in the local currency in 2017. However, this wasn't enough to beat the midcap and smallcap indices. The midcap and smallcap indices saw a sharp increase of 47% and 58% respectively in 2017.
With this, the market cap to GDP ratio is close to 100%, indicating market at its peak. So, how will 2018 turn out? Here's what Tanushree Banerjee, Co-head of Research thinks:
- "In 2018, the market would be more volatile and under pressure. Investors should brace themselves for the increasing volatility. Although, earnings are likely to recover, profit margins could get squeezed as companies face rising input cost pressures. Rising oil prices may prompt the government to abandon fiscal prudence at a time when GST collections have been lower than expected.
2018 will, therefore, be critical for Indian companies to justify their valuations with earnings growth. If the earnings growth does not materialize, correction could be on the cards."
TCS share price fell 1.2% in the opening trade after the company posted December quarter revenue growth that fell short of already downbeat Street expectations, as it battled headwinds in the US and soft demand from financial services clients. TCS net profit fell 3.6% to Rs 65.3 billion in the December 2017 quarter as compared to Rs 67.8 billion in the October-December quarter of the previous fiscal.
Bank stocks have opened the day on a mixed note with Bank of India and SBI being the most active stocks in this space. At a time when rating agencies have flagged concerns over the rising delinquencies in the affordable housingsegment, State Bank of India (SBI) on Thursday said it plans to raise Rs 200 billion through long term bonds to fund affordable housing.
Reportedly, a proposal will be submitted to executive committee of central board (ECCB) for approval for issuance of long-term bonds of Rs 200 billion for financing of infrastructure and affordable housing in domestic and overseas market instead of Rs 50 billion intimated earlier.
Earlier this week, SBI had announced plans to raise up to US$2 billion by issuing bonds in US dollar or other convertible currency to fund overseas expansion.
It said the fund-raising will take place through a public offer and/or private placement of senior unsecured notes in US dollar or any other convertible currency during 2017-18 and 2018-19.
Last month, SBI board had approved raising of Rs 80 billion through various sources, including masala bonds, to meet Basel III capital norms. Masala bonds are rupee denominated specialised debt instruments that can be floated in overseas markets only to raise capital. The bank said it has time till March 2018 to raise the funds.
One shall note that, banks in India have to comply with the global capital norms under Basel III by March 2019. Internationally agreed timeframe for the same is January 2019.
SBI share price opened the day up by 0.6%.
Moving on to the news from oil & gas sector. As per an article in a leading financial daily, Indian Oil Corporation (IOC) bought its third shipload or cargo of US crude oil as it looks at cheaper alternatives that have emerged due to the global supply glut.
Reportedly, IOC bought 2 million barrels of light Louisiana sweet crude oil in a tender. The oil is for delivery at its Paradip refinery in Odisha during 11-20 April.
IOC's Paradip refinery had in October last year received India's first ever shipment of US crude oil when it imported a 1.6 million barrels parcel.
Further, Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corp Limited (HPCL) had also placed orders for about 2.95 million barrels and 1 million barrels of US crude respectively for their Kochi and Visakhapatnam refineries recently.
The October cargo was the first shipments to India since the US stopped oil exports in 1975.
IOC's first purchase of US crude comprised 1.6 million barrels of high sulphur crude Mars and 400,000 barrels of Western Canadian Select oil. In the second, it bought 1.9 million barrels of US crude, half of it being shale oil.
The second shipment was for the west coast.
India, the world's third-largest oil importer, joins Asian countries like South Korea, Japan and China to buy US crude after production cuts by oil cartel OPEC drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.
Notably, buying US crude has become attractive for Indian refiners after the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in the western world) and Dubai (which serves as a benchmark for countries in the east) has narrowed.
IOC share price opened up by 1.2%.
This article was originally published in English at www.equitymaster.com
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