Stocks fluctuate as oil, state Assembly elections offset trade truce cheer

Stocks were volatile on Monday as the biggest surge in oil prices in two years and uncertainty over the outcome of state elections offset cheer from a US-China trade truce. The S&P BSE Sensex rose 0.1 per cent to 36,241, paring an earlier gain of 0.7 per cent. The NSE Nifty 50 Index rose 0.1 per cent to end at 10,884, after climbing to 10,941. 

Most global markets rallied after the US and China leaders agreed to pause the introduction of new tariffs and intensify trade talks. 

US President Donald Trump and China President Xi Jinping agreed to keep their trade war from escalating with a promise to halt the imposition of new tariffs for 90 days during a meeting at the Group of 20 summit in Argentina over the weekend. Trump later said China had agreed to “reduce and remove” tariffs on imported American-made cars. The price of crude oil — India’s biggest import — rallied as much as 6.6 per cent, weighing on domestic investor sentiments. 

“There is some caution around both oil and election results,” said Jitendra Panda, managing director at Peerless Securities. The “sharp rise in crude oil prices also weighs on the local currency. The market was at a high, which provided some investors opportunity to exit, and sit on cash until the events are over.” The rupee ended at 70.45 against the dollar, down 1.26 per cent compared to the previous close of 69.58. The 10-year government bond yield rose two basis points to 7.63.

Foreign institutional investors (FIIs) were net buyers to the tune of Rs2.93 billion, while domestic investors pulled out Rs 8 billion. 

Fifteen of the 19-sector sub-gauges compiled by BSE advanced, led the BSE Utilities Index's 2.7 per cent gain. Hindustan Unilever and NTPC provided the biggest boosts to the benchmark.

InterGlobe Aviation, Hindustan Petroleum Corporation, Bharat Petroleum Corporation, Indian Oil Corporation fell on higher oil prices. 

Vinod Nair, head of research at Geojit Financial Services said markets swung between gains and losses as positive sentiment from US China trade truce was offset by rebound in oil prices and a weak rupee.  The concern over OPEC's production cut and slow growth in Q2 GDP affected sentiment. While global markets stay positive because of ease in trade tensions. On the other hand, investors are looking ahead to the outcome of RBI's monetary policy this week, which is expected to be status quo but a likely cut in inflation forecasts and measures towards improving liquidity will support the market.