Indices trimmed losses in the morning trade, with the Nifty reclaiming the 11,000 mark. The recovery was supported by firmness in ONGC, Infosys and TCS. State-run oil marketing firms and aviation stocks slumped amid spurt in crude oil prices.
In the commodities market, Brent crude for November 2019 settlement was up $6.02 at $66.24 a barrel. The contract fell 16 cents or 0.26% to settle at $60.22 a barrel in the previous trading session.
India is heavily dependent on oil imports for satisfying its domestic demand. A high crude price directly maps into a high trade deficit and in turn a high current account deficit (CAD). At the same time, being an important input for the aggregate economy, a crude price shock also leads to a spike in domestic inflation.
At 10:15 IST, the barometer index, the S&P BSE Sensex, was down 138.99 points or 0.37% at 37,246. The Nifty 50 index was down 51.3 points or 0.46% at 11,024.60.
Broader market was positive. The S&P BSE Mid-Cap index was up 0.11%. The S&P BSE Small-Cap index was up 0.25%.
The market breadth, indicating the overall health of the market, was positive. On the BSE, 985 shares rose and 796 shares fell. A total of 121 shares were unchanged.
State-run oil explorer ONGC was up 2.33% at Rs 131.80. TCS was up 0.65% at Rs 2155.25. Infosys was up 0.1% at Rs 829.50.
Shares of state-run oil marketing companies tumbled after Brent crude prices surged in international market. HPCL (down 6.53%), BPCL (down 5.72%) and Indian Oil Corporation (down 3.11%) declined.
Higher crude oil prices could increase under-recoveries of public sector oil marketing companies (PSU OMCs) on domestic sale of LPG and kerosene at controlled prices. The government has already freed pricing of petrol and diesel.
Media reported that the Tehran-backed Huthi rebels in Yemen claimed Saturday's strikes on two plants owned by state energy giant Saudi Aramco. The coordinated strikes on key Saudi Arabian oil facilities in Khurais and Abqaiq - the world's largest oil processing facility and crude oil stabilization plant - disrupted about half of the kingdom's oil capacity, or 5% of the daily global oil supply, the reports added.
Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia.
Saudi Energy Minister Prince Abdulaziz bin Salman was quoted by the media saying that 5.7 million barrels a day of crude oil and gas production have been affected. The latest OPEC figures put total Saudi production at 9.8 million barrels per day.
Last week on Thursday, OPEC agreed to trim oil output by asking over-producing members Iraq and Nigeria to bring production in line with their targets as the group strives to prevent a glut amid soaring U.S. production and a slowing global economy.
Aviation stocks also witnessed selling pressure. SpiceJet (down 4.56%) and Interglobe Aviation (down 3.04%) slumped. Airline shares were trading lower on the worries that surge in crude may lead to hike in jet fuel prices.
Auto major Mahindra & Mahindra (M&M) was down 0.91% after the company announced 'no production days'. The company announced 8-14 days of no production in various plants of the company in the automotive sector. No production days would be observed so as to align company's production with its sales requirement.
Fortis Healthcare was up 0.52% after the credit ratings agency ICRA upgraded company's long term ratings from [ICRA] BBB- to [ICRA] BBB+. ICRA also upgraded company's short term ratings from [ICRA] A3 to [ICRA] A2.
Reliance Home Finance was up 0.35%. The company announced that CARE Ratings, a credit rating agency downgraded its ratings on company's long term debt programme, market linked debentures, subordinated debt, non-convertible debentures (NCDs) and upper Tier-II NCDs. CARE Ratings revised its ratings to 'D' after the company delayed in servicing of principal on one of the NCDs of the Company. The company replied that the above rating action is untimely and uncalled for even after company is working on the resolution plan.
Cinema house PVR was up 0.14%. The company got a notice from Directorate General of Anti-Profiteering for not passing on GST benefits in respect of its cinemas located in State of Telangana. The notice was received on 31 August 2019. The company assured that it has filed its response and provided relevant documents as sought by the authorities.
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