After opening the day on a positive note, stock markets in India have continued their momentum. Sectoral indices are trading on a positive note with stocks in the consumer durables sector and metal sector witnessing maximum buying interest.
The BSE Sensex is trading up 131 points (up 0.4%) and the NSE Nifty is trading up 46 points (up 0.4%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up by 0.5%.
The rupee is trading at 67.10 to the US$.
In the news from pharmaceuticals sector, as per an article in the Economic Times, China removed import duties on as many as 28 Indian medicines, including all cancer drugs, from May 1.
The above development would help India to export these pharmaceuticals to the neighboring country and also assumes importance as India has time and again asked for greater market access for its goods and services, including IT, pharmaceuticals and agriculture, in the Chinese market to reduce the widening trade deficit.
From the banking space, ICICI Bank share price is witnessing buying interest ahead of its March quarter results to be announced today.
Vakrangee share price is witnessing selling pressure today. The stock of the company has hit its lower circuit limit as auditing major Price Waterhouse quit audit mandate of the company on concerns relating to the corporate affairs ministry about the books of accounts, mainly related to its bullion and jewellery business.
In the news from commodity space, crude oil prices rose above US$ 70 a barrel today. This is the highest level seen since 2014. Most of the gains were seen ahead of the decision on whether the Unites States walks away from a deal with Iran and instead re-imposes sanctions on Middle East crude producer Iran.
Note that crude oil prices have been witnessing a rising trend of late. Prices have been escalating due to a pick-up in global demand coupled with supply cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and Russia. Even geopolitical tensions between US, Russia, North Korea and Iran have kept prices on the boil.
Steadily Rising Crude Oil Prices
Rising crude oil prices is not good news from India's perspective.
As we wrote in a recent edition of The 5 Minute WrapUp...
- Fiscal revenues are at risk. Particularly if the government is forced to consider a cut in fuel excise duties due to a rally in oil prices. In recent times, a sharp jump in excise collections has helped indirect tax collections. Any risk to revenues and subsequent threat to the fiscal deficit target at 3.2% of GDP would require tighter spending cuts.
Secondly, the impact on inflation needs to be monitored. This narrowing the central bank's scope for further rate cuts.
Lastly, low crude prices were a positive growth impetus through higher discretionary incomes for households and lower input costs for manufacturers and farmers. Part of this benefit is likely to be eroded as retail fuel costs rise. As for corporations, expansion in gross margins caused by falling commodity prices is also likely to wane, pressurising profitability.
You can read the entire article here.
What does rising crude 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.
What decision the US takes remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.
This article was originally published in English at www.equitymaster.com
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