After hovering in narrow range in afternoon trade, key benchmark indices pared gains in mid-afternoon trade. At 14:16 IST, the barometer index, the S&P BSE Sensex, was up 97.86 points or 0.35% at 28,103.23. The gains for the Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty was currently up 40.85 points or 0.47% at 8,664.90. The market sentiment was positive after the minutes of the latest US Federal Reserve meeting showed policymakers were in no rush to raise interest rates. A delay in interest rate increases from the Fed would slow capital flight from emerging markets.
The Sensex rose 208.80 points, or 0.75% at the day's high of 28,214.17 in mid-morning trade, its highest level since 9 August 2016. The index rose 71.63 points, or 0.26% at the day's low of 28,077 in early trade. The Nifty rose 66.65 points, or 0.77% at the day's high of 8,690.70 in mid-morning trade, its highest level since 9 August 2016. The index rose 21 points, or 0.24% at the day's low of 8,645.05 in early trade.
The market breadth indicating the overall health of the market was strong. On BSE, 1,612 shares rose and 926 shares fell. A total of 181 shares were unchanged. The BSE Mid-Cap index was currently up 0.29%, underperforming the Sensex. The BSE Small-Cap index was currently up 0.91%, outperforming the Sensex.
In overseas stock markets, European shares edged higher led by gains in financials and industrial stocks. Asian stocks were mixed after minutes of the US Federal Reserve's latest meeting showed policymakers were in no rush to raise interest rates. US stocks closed slightly higher yesterday, 17 August 2016, sharply paring earlier losses, as minutes from the Federal Reserve's July meeting showed policy makers remain divided on prospects for a near-term rate increase. Stocks bounced off session lows after St. Louis Federal Reserve President James Bullard said that with US growth trending below 2%, interest rates can stay low.
Most capital goods shares rose. Lakshmi Machine Works (up 6.47%), AIA Engineering (up 5.11%), Reliance Defence and Engineering (up 3.11%), Jindal Saw (up 2.37%), Punj Lloyd (up 1.79%), Bharat Heavy Electricals (up 1.23%), SKF India (up 0.47%), Crompton Greaves (up 0.35%), BEML (up 0.31%), ABB India (up 0.19%), ALSTOM India (up 0.17%) and Siemens (up 0.09%), edged higher. Thermax (down 0.29%), Bharat Electronics (down 0.38%), GE T&D India (down 0.44%), Praj Industries (down 0.52%), L&T (down 0.73%) and Havells India (down 0.82%), edged lower.
Shares of oil exploration and production companies rose as global crude oil prices rose. Cairn India (up 1.76%), Oil India (up 0.45%), ONGC (up 0.65%), edged higher. Higher crude oil prices will result in higher realization from crude sales for oil exploration firms.
Reliance Industries (RIL) was up 0.39% at Rs 1,018. With reference to news item suggesting that the oil ministry slapped $250 million profit petroleum penalty on RIL, the company clarified during market hours today, 18 August 2016, that the issue is an ongoing dispute on disallowance of cost recovery by the Ministry of Petroleum and Natural Gas (MoPNG). The dispute started in 2011 and is currently under arbitration in accordance with provisions of the Production Sharing Contract (PSC). The parties to arbitration are Contractor Group (RIL, BP and NIKO) and Government of India (through MoPNG).
Every year, based on its own interpretations of the PSC and assumptions (with which the Contractor Group does not agree), MoPNG revises the total cost it proposes to disallow and consequently aggregates the figure with the figures of the previous years. It also demands additional profit petroleum (in total including previous year claims as well) as GoI share.
Upto financial year 2013-2014, the cost recovery proposed to be disallowed was $2.376 billion and consequent demand of Government of India (GoI) share of additional profit petroleum of $195.3 million on cumulative basis. On 3 June 2016, the company received a revised claim upto year 2014-2015 with a disallowance of $2.756 billion on cumulative basis and consequent demand of GoI share of additional profit petroleum of $246.90 million, also on cumulative basis. The number mentioned in the headline of the news item is a cumulative figure since commencement of the dispute.
RIL also clarified that GoI has already collected gross $81.7 million in Gas Pool Account, towards the aforesaid claim. RIL reiterated that all claims made by GoI are denied by the Contractor Group and currently part of an ongoing arbitration.
In the global commodities markets, Brent crude oil futures edged higher. Brent for October settlement was currently up 7 cents at $49.94 a barrel. The contract had risen 62 cents a barrel or 1.26% to settle at $49.85 a barrel during the previous trading session.
Shares of public sector oil marketing companies (PSU OMCs) rose. Indian Oil Corporation (up 1.90%), HPCL (up 0.22%) and BPCL (up 0.23%) edged higher.
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