Sensex Ends 106 Points Lower; Oil & Gas and Banking Stocks Witness Selling

Thu, 13 Feb Closing

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India share markets witnessed selling pressure during closing hours and ended their day marginally lower.

At the closing bell, the BSE Sensex stood lower by 106 points (down 0.3%) and the NSE Nifty stood down by 26 points (down 0.2%).

The BSE Mid Cap index ended the day down 0.2%, while the BSE Small Cap index stood flat.

Stocks in the banking sector and oil & gas sector witnessed huge selling pressure, while healthcare stocks were trading in the green.

The rupee was trading at 71.33 against the US$.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 0.34% and the Shanghai Composite was down by 0.71%. The Nikkei 225 was down 0.14%.

European markets were also trading on a negative note. The FTSE 100 was down by 1.16%. The DAX was trading down by 0.69%, while the CAC 40 stood down 0.55%.

Speaking of Indian share markets, should there be a marked change in the way we go about investing amid the ongoing volatility?

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Also, speaking of the Indian share markets, note that Indian indices have witnessed a starkly polarised situation since 2018, after the uninterrupted bull rally of 2017 entered a period of correction.

While the Sensex recovered from the correction and went on to hitting new life-time highs, the broader markets - predominantly the small and midcap stocks - haven't recovered much.

Ankit Shah, the editor of daily premium newsletter Equitymaster Insider (requires subscription), has been talking about this trend since a long time. But now, he has even more elaborate data to show you how deep this trend has been.

He pulled out data on 1,638 companies listed on the NSE.

And he shares his observations in a recent edition of The 5 Minute WrapUp...

• Between 29 December 2017 and 30 December 2019, just 246 companies have witnessed gains. Together, these 246 companies added Rs 29.8 trillion worth of market capitalisation.
  
  In other words, 1,392 companies are below the levels they traded at the end of December 2017. Together, these 1,392 companies lost Rs 28.6 trillion worth of market capitalisation.
  
  So, you see the money has literally shifted from one place to another.

Even among the 246 companies that witnessed gains, the major chunk was captured by just a small list of companies.

This can be seen from the chart below...

A Very Small Group of Stocks Captured All the Gains

As you can see, the top 5 companies captured 41% of all the gains in market capitalisation over the last two years. In fact, the top 30 stocks captured more than 80% of the gains.

In short, money has been rushing to safety, into large, liquid, bluechips stocks.

This brings the question: Where can you look for such bluechip stocks?

You can consider the bluechip recommendations made by our Safe Stocks guru, Tanushree Banerjee. She has picked her top 7 stocks for 2020.

In news from the commodity space, the Organization of the Petroleum Exporting Countries (OPEC) warned that uncertainties surrounding the coronavirus outbreak that started in China, the world's leading oil importer, will depress global oil demand growth this year.

In its monthly report, OPEC said that world oil demand is now expected to rise by 990,000 barrels per day (bpd) this year - roughly 19% less than previously forecast.

The report also noted that January saw a sharp decline in OPEC's output as producers implemented a new production-cut pact that the cartel's allies agreed to in December in order to buoy crude prices.

The revised forecast for global oil demand could bolster the case for even more production curbs. Last week, a technical panel advising OPEC and its allies, a grouping known as OPEC+, recommended an immediate additional output cut of 600,000 bpd.

OPEC and its allies led by Russia have implemented such curbs since 2017 to revive prices that had become depressed by a glut of crude.

According to the report, in January, OPEC members over-delivered on production cuts to which they had agreed, lowering supply by 509,000 bpd to 28.86 million bpd. Russian output, however, increased.

OPEC also trimmed its 2020 forecast for growth in non-OPEC supply to 2.25 million bpd, 100,000 bpd less than previously forecast.

While a slowdown in non-OPEC supply would help the cartel's efforts to manage the market, non-OPEC output is still expected to grow at over twice the rate of world oil demand in 2020.

How this development pans out remains to be seen. Meanwhile, we will keep you updated on all the news from this space.

Speaking of crude oil, where do you think are oil prices headed? And what does it mean for the Indian markets?

Well, India's no.1 trader, Vijay Bhambwani shares his insights and updates on his YouTube channel regularly.

In one of his videos, he talks about how you can hedge against the rising crude oil prices and also gives a perspective as to what's actually happening in this space.

Tune in to find out more...

Moving on to news from the macroeconomic space, factory output shrank in December after a mild pickup in November while retail inflation accelerated to a 68-month high in January.

Data released by the statistics office showed industrial output contracted 0.3% in December compared with a 1.8% rise in November. April-November industrial growth was 0.5% against 4.7% in the year-earlier period.

The simultaneously released Consumer Price Index (CPI) showed retail inflation raced to 7.59% in January from 7.35% in December, strengthening the likelihood of a prolonged pause in interest rates by the Reserve Bank of India (RBI) despite muted growth.

At two-digit classification, 16 out of the 23 industry groups in the manufacturing sector showed negative growth during the month of December 2019.

Manufacturing output contracted 1.2% compared with 2.9% growth in the same month a year ago while electricity generation shrank for a fifth month in a row, declining 0.1% in December as against 4.5% growth in the year ago.

At the use-based level, the steepest contraction was in the capital goods sector at 18.2% followed by 6.7% in consumer durables and 3.7% in consumer non-durables. The only silver lining came from intermediate goods which has been showing a positive growth momentum and expanded in double digits at 12.5% for the third consecutive month.

The statistics office has lowered the FY19 GDP growth rate to 6.1% from the provisional estimate of 6.8% and has forecast 5% growth in FY20, its slowest pace in 11 years. The Economic Survey 2020 sees a recovery to 6-6.5% in FY21.

At 7.59%, January retail inflation was well above the RBI's medium-term target for the fourth straight month. The target is 4% with a margin of two percentage points on either side.

The previous high for retail inflation was 8.3% in May 2014.

Food inflation declined to 13.63% from 14.19% in December as that for vegetables slightly cooled to 50.2%, as against 60.5% in December 2019. Among protein-rich items, meat and fish inflation was 10.50% during the month, while that for eggs was 10.41%.

Driven by various services, core inflation, which excludes food and fuel, was 4.1% and is a cause for concern as per economists. Average inflation in the April-January period stood at 4.5%, which was highest in the past three years. It was higher than 3.6% inflation registered during the same months in FY19.

In its monetary policy review last week, the RBI had maintained status quo on rates, as it revised the consumer inflation target upward to 6.5% for the January-March quarter.

How these numbers pan out in the coming months remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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