URL: indian-shares-rise-energy-stocks-windfall-tax-cut-august-2024
Byline: Bharath Rajeswaran and Kashish Tandon | August 18, 2024
Introduction
Indian shares saw a rise on Monday, primarily driven by energy stocks, after the government reduced the windfall tax on crude oil. Positive sentiment in other Asian markets, bolstered by strong U.S. economic data, further supported the upward trend.
Key Points
Market Performance: The NSE Nifty 50 index climbed by 0.23% to 24,599.4, while the S&P BSE Sensex increased by 0.14% to 80,540.75 as of 9:50 a.m. IST.
Energy Sector Boost: The energy sector led the gains, with the Nifty Energy index rising about 1.5% and the Oil & Gas index increasing by 2%. This surge was spurred by the government’s decision to cut the windfall tax on crude oil from 4,600 Indian rupees to 2,100 rupees per tonne, effective from August 17.
Top Gainers
Oil & Natural Gas Corp (ONGC): ONGC shares jumped 3%, making it one of the top gainers on the Nifty 50 index. Other oil upstream companies, such as Oil India and Mangalore Refinery, also saw significant gains, with each rising around 2.5%.
Reliance Industries: The oil-to-telecom conglomerate added 1.2%, contributing to the overall market uplift.
NTPC: Shares of NTPC gained 2% after brokerage CLSA rated it as the best play on energy transition in India, reiterating its “outperform” rating. NTPC and ONGC were among the top five gainers on the Nifty 50 by percentage.
Broader Market Sentiment
Asian Market Influence: The MSCI Asia ex-Japan index rose nearly 1.1%, reflecting broader market optimism as easing inflation and robust U.S. retail spending data helped allay recession fears in the world’s largest economy.
Sector Performance: Twelve of the 13 major sectors logged gains, with energy and oil & gas leading the charge.
Small and Mid-Caps: The broader market also performed well, with small-cap and mid-cap indices gaining 1.4% and 0.75%, respectively.
Company Highlights
Zomato: Food delivery giant Zomato saw a 2.5% rise in its share price after brokerage UBS reiterated its “buy” rating and raised the target price to 320 rupees from 260 rupees. UBS cited strong growth prospects in Zomato’s quick commerce and food delivery segments as reasons for the upgrade.
Analyst Insights
Despite the positive momentum, analysts at Emkay Global, led by Seshadri Sen, noted that the recent earnings season has been weak. However, earnings forecasts for Nifty 50 companies and the broader market remain stable. They also cautioned that significant near-term upside would require a revival in earnings momentum, highlighting an increase in profit-booking frequency.
Indian shares started the week on a positive note, bolstered by energy stocks following a cut in windfall tax on crude oil. As global market sentiment remains cautiously optimistic, driven by encouraging U.S. data, investors will be closely watching for further developments in earnings performance and sector-specific gains.
Market Overview
- NSE Nifty 50 Index: The Nifty 50 index saw a rise of 0.23%, closing at 24,599.4, continuing its positive trend over the past week.
- S&P BSE Sensex: The Sensex index climbed 0.14% to reach 80,540.75, supported by gains in heavyweight stocks like Reliance Industries and NTPC.
- Broader Market Indices: The NSE small-cap index gained 1.4%, while the mid-cap index rose by 0.75%, reflecting broader investor confidence across market segments.
Sectoral Performance
- Energy Sector: The Nifty Energy index advanced by 1.5%, while the Oil & Gas index saw a 2% increase. The gains were led by a 3% surge in Oil & Natural Gas Corp (ONGC) shares.
- Top Performers: Other notable gainers in the energy sector included Oil India and Mangalore Refinery, which both added around 2.5% to their share prices. Reliance Industries, a major player in the oil-to-telecom sector, saw a 1.2% increase, contributing significantly to the overall market gains.
Government Policy Impact
Windfall Tax Reduction: The Indian government’s decision to reduce the windfall tax on crude oil from 4,600 INR per tonne to 2,100 INR per tonne with effect from August 17 had an immediate positive impact on the stock prices of oil producers. This move is expected to boost profitability for companies like ONGC and Oil India, which are heavily reliant on crude oil production.
