Aviation Stocks In Demand As Crude Slumps

Aviation Stocks In Demand As Crude Slumps



Firmness continued on the bourses with the barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty,both,hitting fresh record high in mid morning trade. The Sensex was currently up 319.55 points or 1.12% at 28,758.46. Overnight steep slide in global crude oil prices triggered fresh rally in benchmark indices today, 28 November 2014. The market breadth indicating the overall health of the market was strong. The BSE Mid-Cap index was up 1.35%, outperforming the Sensex.

Auto stocks edged higher on hopes PSU OMCs may cut petrol and diesel prices after the latest slump in crude oil prices. Airline stocks jumped after global crude oil prices tumbled yesterday, 27 November 2014. Shares of paint makers were in demand as crude oil prices fell, with Asian Paints hitting record high.

Brent crude traded near a four year low after OPEC decided to keep the cartel's production levels unchanged at a meeting in Vienna yesterday, 27 November 2014. Indian government's decision last month to decontrol diesel prices and a sharp decline in global crude oil prices over the past few months will help reduce the government's fuel subsidy burden and help contain its fiscal deficit. The steep slide in global crude oil prices will also help India in containing its current account deficit and fuel price inflation. India imports 80% of its crude oil requirement. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports.


  
The Reserve Bank of India (RBI) yesterday, 27 November 2014, set Rs 100 crore as minimum paid-up equity capital requirement for setting up payments banks and small finance banks.

Foreign portfolio investors (FPIs) bought shares worth a net Rs 389.73 crore yesterday, 27 November 2014, as per provisional data.

In overseas markets, Japanese stocks led gains in Asian stocks after the latest data showed Japan's October retail sales rose 1.4% on year and industrial production beat forecasts with a month-on-month increase of 0.2

In the foreign exchange market, the rupee edged lower against the dollar.

At 11:17 IST, the S&P BSE Sensex was up 319.55 points or 1.12% at 28,758.46. The index jumped 327.13 points at the day's high of 28,766.04 in mid-morning trade, a record high for the index. The index rose 45.08 points at the day's low of 28,483.99 in early trade.

The CNX Nifty was up 101.60 points or 1.2% at 8,595.80. The index hit a high of 8,597.75 in intraday trade, a record high for the index. The index hit a low of 8,516.25 in intraday trade.

The market breadth indicating the overall health of the market was strong. On BSE, 1,558 shares gained and 896 shares fell. A total of 89 shares were unchanged.

The BSE Mid-Cap index was up 136.99 points or 1.35% at 10,308.91, outperforming the Sensex. The BSE Small-Cap index was up 103.01 points or 0.92% at 11,344.66, underperforming the Sensex.

Auto stocks edged higher on hopes PSU OMCs may cut petrol and diesel prices after the latest slump in crude oil prices. Tata Motors (up 1.67%), Maruti Suzuki India (up 1.33 %), TVS Motor Company (up 0.91%), Hero MotoCorp (up 1.44%), Escorts (up 1.04%), Eicher Motors (up 1.33%), Mahindra & Mahindra (up 0.93%) edged higher. Bajaj Auto fell 0.17%.

PSU OMCs review fuel prices during the middle of the month and on the last day of the month based on the average imported oil price in the preceding fortnight.

Meanwhile, as per recent media reports the government may extend excise duty concessions on automobiles beyond 31 December 2014 as the industry continues to struggle with sluggish demand due to high interest rates. In February this year, the Congress led UPA government in its interim budget had reduced excise duty on automobiles for a limited period until 30 June 2014. Later, the new BJP government which came to power in May this year extended the concessional excise duty on automobiles until 31 December 2014. The excise duty on small cars, scooters, motorcycles and commercial vehicles was cut to 8% from 12%. The same for SUVs (sports utility vehicles) was slashed to 24% from 30%, while on large cars it was reduced to 24% from 27% and mid-sized cars to 20% from 24%.

Airline stocks jumped after global crude oil prices tumbled yesterday, 27 November 2014. Jet Airways (India) (up 11.07%) and SpiceJet (up 4.61) surged. Aviation turbine fuel (ATF) or jet fuel price is linked to international crude oil prices. Jet fuel constitutes about 40% of airlines' operating cost. PSU OMCs review jet fuel prices during the middle of the month and on the last day of the month based on the average imported oil price in the preceding fortnight.

Shares of paint makers were in demand as crude oil prices fell. Berger Paints (up 3.27%), Shalimar Paints (up 6.39%), Akzo Nobel India (up 1.49%) and Kansai Nerolac Paints (up 2.16%), edged higher.

Falling crude oil prices augur well for paints makers. Titanium dioxide is a key raw material for paint companies and is derived from crude oil.

Asian Paints surged 5.17% to Rs 741.90 after hitting record high of Rs 748.25 in intraday trade.

Meanwhile, the National Stock Exchange (NSE) yesterday, 27 November 2014, announced that the exchange has decided to provide a flat concession of 40% in the transaction charges on the incremental billable volume (i.e. the Premium value) above Rs 750 crore in a month for a period of 2 months from 1 December 2014 to 31 January 2015 on a pilot basis on NSE's equity options segment. In order to improve the liquidity in the equity options segment and to align with the feedback received from the market, an exercise to review the transaction charges in the equity options segment was carried out by the exchange, NSE said in a circular.




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Mohini Porwal [ B Sc]
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