Indian Markets Trade Flat

Fri, 22 Apr 11:30 am

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After opening the day on a bearish note, the Indian Markets registered some gains and are presently trading near the dotted line. Sectoral indices are trading on a mixed note with stocks from the auto and metal sectors leading the gains. IT and consumer durables stocks are trading in the red.

The BSE Sensex is trading down by 20 points (down 0.1%) and the NSE Nifty is trading down by 8 points (down 0.1%). The BSE Mid Cap index and the BSE Small Cap index are also trading flat, both up by 0.1%. The rupee is trading at 66.53 to the US$.

Energy stocks are trading on a mixed note with Indraprastha Gas and Oil and Natural Gas Corporation (ONGC) leading the gains. As per an article in Economic Times, India's crude oil production fell for the fourth straight year in 2015-16. This was witnessed even as oil consumption surged 11% in the same period on a YoY basis.

A collapse in oil prices coupled with a rapid economic growth has helped push up oil consumption in domestic markets. It was noted that more vehicle purchases, increased use of diesel for irrigation due to weak monsoon and rising air traffic mainly drove up consumption to 183.5 million metric tonne (mmt), compared to 165.5 mmt in the previous year.

However, in contrast, India produced only 36.9 mmt of crude oil in 2015-16, lower than 37.5 mmt in the previous year.

These low levels of production coupled with a global supply glut has meant increased oil imports for India in recent times. Also, the country has resumed its unrestricted import of oil from Iran with international nuclear sanctions on Iran being lifted in the last financial year. All of these developments have meant India being more dependent on imports of oil.

As the article states, India's import dependence on oil rose to 81% in 2015-16 from 78.5% in the previous year. One shall note that last year Prime Minister Narendra Modi has set a target of bringing this down to 67% by 2022.

What one shall keep in mind is that increasing import dependence does not bode well for India in the longer term. This is because the increasing oil imports will add constant pressure on the Indian rupee and could have major implications in terms of managing trade balances. We believe that India now needs to focus on becoming self-reliant as far as its energy needs are concerned.

At the time of writing, crude oil was trading up by nearly 1% at Rs 2,929 per barrel. To keep a regular tab on the movements in crude oil prices, you can read weekly updates from the Daily Profit Hunter teamhere. Their roundup tracks the developments in the global economy as well as currency and commodity markets.

Most of the stocks in the steel sector are trading on a positive note with Tata Sponge and Bhushan Steel witnessing maximum buying interest.

In another news update, it was reported that the UK government is ready to take a minority stake of as much as 25% in Tata Steel's UK business. This will be in order to support the sale and offer hundreds of millions of pounds in debt relief as the government is making an urgent bid to stop the Britain's largest steel maker from shutting down.

One must note that Tata Steel has announced to sell its UK operations, called Tata Steel Europe Ltd. The company bought it as part of the takeover of Corus at the height of the commodity boom in 2007 for US$12.1 billion. The business has suffered almost a decade of losses amid poor demand and cheap Chinese imports. Even the Tatas have failed to turn around this business and are finally giving up in it.

My colleague Radhika Pandit, Managing Editor, ValuePro has written a piece on this matter in one of the editions of The 5 Minute WrapUp titled The Perils of Big Acquisitions Spare No One...Not Even the Tatas that makes for an interesting read.

Stock of Tata Steel is presently trading up by 1.7% on the BSE.

By the way, we are in a celebratory mood today as we commemorate Equitymaster's 20th Anniversary.

It is indeed a nostalgic moment for us. When our co-founder Ajit Dayal launched Equitymaster - India's first financial website in 1996, we were a team of just five members. The internet had barely arrived in India. There were just about 10,000 VSNL connections.

Our vision...to empower the small investor...was our greatest asset. And it is this vision that helped us sail through many constraints and challenges.

Today, Equitymaster has more than 1,764,790 registered members across 72 countries...who trust our views and opinions on investing in the Indian stock markets.

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