Sensex Opens in Marginally Up; Automobiles and Metal Stocks Gain

Thu, 16 May 09:30 am

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Asian share markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.1% while the Hang Seng is up 0.1%. The Nikkei 225 is trading down by 0.6%. US stocks ended higher on Wednesday as reports that US President Donald Trump would hold off on imposing tariffs on imported cars and parts eased growth concerns, even as economic data disappointed investors.

Back home, India share markets opened marginally higher. The BSE Sensex is trading up by 73 points while the NSE Nifty is trading up by 21 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.2% and 0.1% respectively.

Barring energy, healthcare and capital goods stocks, all sectoral indices have opened the day on a positive note with automobiles and metal stocks witnessing maximum buying interest.

The rupee is currently trading at 70.24 against the US$.

In the news from the economy. India's trade deficit widened to a 5-month high in April due to rise in crude oil imports coupled with muted growth in export amid rising concerns over US-China trade war.

The trade deficit, a gap between exports and imports, expanded to US$15.3 billion in April 2019 as compared to US$13.7 billion in April 2018 and US$10.9 billion in last month, according to data release from the Ministry of Commerce.

Merchandise exports inched up by 0.6% year-on-year to US$26.1 billion in April, while imports rose by 4.5% to US$41.4 billion compared to the same month last year.

In April 2019, major commodity groups of export showing positive growth, includes petroleum products (30.8%), electronic goods (27.8%), organic and inorganic chemical (15.1%), RMG of all textiles (4.4%) and drugs and pharmaceuticals (4%).

Much of the rise in imports came from crude purchases, which rose by 9.3% to US$11.4 billion. In April, Brent crude price was US$71.23 per barrel as compared to US$72.11 per barrel in the same month last year. Non-oil imports increased by 2.8% to US$30 billion in April, compared to US$29.2 billion in April last year.

Meanwhile, gold imports spiked by 54% to US$3.97 billion in April. The rise in imports by the world's second-biggest consumer of the precious metal was driven by strong demand during wedding season along with fall in prices which prompted purchases.

Non-petroleum and non-gems and Jewellery exports stood at US$19.5 billion, as compared to US$19.8 billion in April 2018, exhibiting a negative growth of 1.3%.

Speaking of the India's rising deficit over the years, the one big thing that worked for the Modi government when it came into power was low oil prices.

Given that India largely imports most of the oil it consumes, lower prices meant the trade deficit was kept in check.

Fast forward to recent past...oil prices had risen.

So has the trade deficit. But can this be entirely attributed to rising crude prices? Not really, if an article in Livemint is to be believed.

You see, oil prices inched up in FY18. But they were still not as high as they were in FY14.

Yet, in FY14, the trade deficit was barely anything. Whereas in FY18, India stared at a trade deficit of around US$ 53 billion.

Gold is not the culprit either. Gold imports peaked in FY12, after which they fell and have been at moderate levels.

So it's the non-oil, non-gold deficit that is the big problem today.

You may be aware, dear reader, India's export growth in the last four years has been poor. Meanwhile, imports have risen.

The Real Culprit for India's Rising Deficit

We seem to be staring at a structural problem. While consumption has been a big driver of GDP growth, investments in the economy have not picked up.

This is a crucial issue that must be addressed in the long-term.

Moving on to the news from pharma sector. In the recent development, Lupin on May 15 received 3 observations from the US health regulator for its Aurangabad-based manufacturing facility.

Reportedly, the US Food and Drug Administration (USFDA) carried out the inspection at the plant from May 6 to May 15.

The company is confident of addressing them satisfactorily.

Shareholders will closely monitor further development. According to reports, the unit contributes around 15% to company's US sales.

Meanwhile, Lupin swung to a profit in the fourth quarter ended March 2019. Q4 net profit came in at Rs 2.9 billion as compared to Rs 7.8 billion loss in the same quarter of the previous year.

Revenues for Q4 increased to Rs 44.1 billion in March quarter as compared to Rs 40.3 billion in the year-ago quarter.

North America sales in FY19 were Rs 55.9 billion, as compared to Rs 58.9 billion in FY2018, accounting for 34% of global sales. In Q4 of FY19, North America sales increased by 22.8% to Rs 17.4 billion, an increase of 16.1% as compared to Q4 FY18.

Lupin share price opened the day down by 1.4%.

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