Sensex Opens Lower; Oil & Gas Stocks Fall after Attacks on Saudi Aramco

Mon, 16 Sep 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 flat while the Hang Seng is up 1.1%. The Nikkei 225 is trading up by 1.1%. The S&P 500 ended the day down slightly on Friday but less than 1% below its all-time high as a drop in Apple stock countered cooling US-China trade tensions. Tariff-vulnerable industrials helped keep the Dow in positive territory, which has now gained in eight straight sessions, its longest winning streak since May 2018.

Back home, India share markets opened lower. The BSE Sensex is trading down by 262 points while the NSE Nifty is trading down by 80 points. The BSE Mid Cap index and BSE Small Cap index opened down by 0.4% and 0.1% respectively.

Except FMCG stocks, consumer durables and IT stocks, all sectoral indices have opened the day on a negative note with oil & gas stocks witnessing maximum selling pressure.

The rupee is currently trading at 71 against the US$.

• "Be fearful when others are greedy and greedy when others are fearful." - Warren Buffett

You'll hear this often but how do you practice this?

How do you know when everyone is greedy or fearful?

Well, the media is one source. When you hear headlines predicting gloom and doom, pessimism is strong all around.

Google trends are an interesting source too.

Are We Close to Peak Pessimism in the Stock Market?

The keyword 'Multibagger' tends to peak when there is euphoria all round. The same keyword drops when there is pessimism.

'Multibagger' search term peaked in India in Jan 2018. Mid and small caps were at multi-year highs. Since then, Mid and small caps corrected by 26% and 37% respectively.

Similarly, 'Multibagger' search was at its lowest in August 2013. Mid and small caps were at multi-year lows. Then from 1 Aug 2013 to 15 Jan 2018, mid and small caps were up by 233% and 282% respectively.

Currently, 'Multibagger' search is at its lowest levels. Like in 2013, retail investors are dumping stocks and looking for other safe assets.

Will history repeat itself?

In the news from the oil space. Global oil prices surged the most on record after a strike on a Saudi Arabian oil facility removed about 5% of global supplies, an attack the US has blamed on Iran.

In an extraordinary start to trading, Brent futures jumped almost US$12 a barrel in the seconds after the open today, the biggest intraday advance in dollar terms since they were launched in 1988.

On the New York Mercantile Exchange, West Texas Intermediate contracts were frozen for about two minutes after the scale of the move delayed the market open.

While Brent futures pulled back after their initial surge of almost 20%, taking the global benchmark just shy of US$72 a barrel, they were still headed for the biggest percentage gain since 2008.

The unprecedented move in oil reverberated around financial markets. Haven assets including gold, the yen and Treasuries surged on concern over the geopolitical fallout from the attacks.

State energy producer Saudi Aramco lost about 5.7 million barrels per day of output on Saturday after 10 unmanned aerial vehicles struck the world's biggest crude-processing facility in Abqaiq and the kingdom's second-biggest oil field in Khurais.

For oil markets, it's the single worst sudden disruption ever, surpassing the loss of Kuwaiti and Iraqi petroleum supply in August 1990, when Saddam Hussein invaded his neighbor.

It also exceeds the loss of Iranian oil output in 1979 during the Islamic Revolution, the reports noted.

This would rattle oil markets and cast a shadow on Aramco's preparations for what could be the world's biggest initial public offering.

It's also set to escalate a showdown pitting Saudi Arabia and the US against Iran, which backs proxy groups from Yemen to Syria and Lebanon.

Iran-backed Houthi rebels in Yemen claimed credit for the attack, but US President Donald Trump and Secretary of State Mike Pompeo have already pointed the finger directly at Iran.

Now how all these developments pan out going forward remains to be seen. Meanwhile, we will keep you updated on the developments from this space.

Moving on to the news from the Indian economy. India's merchandise exports in August declined for the second time in the current financial year, which began in April.

Meanwhile, imports dropped for the third consecutive month, signaling that rising protectionism and trade tensions between the US and China are impacting India's trade prospects as well.

Data released by the commerce ministry showed India's merchandise exports declined 6.1% in August while merchandise imports dropped 13.5% leading to the narrowing of trade deficit to US$13.5 billion during the same month.

Comparatively, China's exports in August fell 1%, while imports shrank 5.6%, amidst intensifying trade war with the US.

Export sectors that recorded positive growth in the last month include iron ore, electronic goods, spices, and marine products.

Shipments of gems and jewellery, engineering goods, petroleum products recorded negative growth, according to the data.

In March, the World Trade Organization (WTO) projected trade growth to fall from 3.9% in 2018 to 3.7% in 2019. It had cautioned that these estimates could be revised downward if trade conditions continue to deteriorate.

The International Monetary Fund also cut the global growth forecast for 2019 by 20 basis points to 3.3%, the lowest since the 2008 financial crisis, blaming the US-China trade tensions, loss of momentum in Europe and the uncertainty surrounding Brexit.

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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