Crude oil declined after Iran reached a deal with US, France, Germany, UK, China, and Russia, a positive sign for the Indian economy that relies heavily on Iran for its crude oil needs
The gains came on the back of positive global cues and as Iran reached an agreement with six world powers to curb its nuclear activities in exchange for easing of sanctions.
The Nifty ended at 6115.35, up 2% or 119.90 points, after moving between 6035.95 and 6123.50. The S&P BSE’s 30-share Sensex ended at 20605.08, up 1.9% or 387.69 points. During the day, it moved between 20326.66 and 20626.15 points.
Bank, real estate and capital goods shares led gains. Shares of State Bank of India, ICICI Bank, Larsen & Toubro and Tata Motors ended up 3.2-5.3%.
Crude prices, which eased following the deal, lifted shares in the oil and gas space. Shares of Reliance Industries, Cairn India, GAIL India, Oil & Natural Gas Corp, Essar Oil, Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp and Mangalore Refinery and Petroleum Corp ended up 0.9-6.1%.
Crude oil futures on Indian bourses fell 2.2% as prices on the New York Mercantile Exchange declined after Iran reached a deal with US, France, Germany, UK, China, and Russia–allowing itself a limited relief from sanctions in exchange for a curb on its nuclear programme.
The December crude oil contract on MCX was at 5,860 rupees a barrel, down 2.2% from the previous close, while the same-month contract on NYMEX was at $93.56 a barrel, down 1.4%.
Iran has committed to stop uranium enrichment above a fissile purity of 5%, and the move would neutralise the country’s stockpile of uranium refined to a fissile concentration of 20%, reports said.
“The compromise that has been reached reduces the geopolitical risk premium, while at the same time making Iranian oil more readily available to Asian buyers, as European insurers will in future be allowed to insure oil shipments from Iran again,” a report from Commerzbank said.
The insurance ban that was a part of the sanctions against Iran had made it more difficult for Asian countries to import oil from Iran and with relaxation in sanctions oil shipments from Iran could increase again to China, India, South Korea and Japan, the report said.
A stronger rupee against the US greenback further hammered domestic crude oil prices. The rupee ended sharply higher against the US currency because of heavy dollar sales by foreign banks on behalf of their corporate and custodian clients, dealers said. Strength in the local share indices also supported the rupee, dealers said. The rupee ended at 62.50 a dollar against 62.86 close Friday. A stronger rupee will make imports of dollar-denominated crude oil less expensive for Indian buyers who purchase close to 180 mln tn of the fuel annually from the overseas market. India had bought around 13-14 mln tn of crude oil from Iran in 2012-13 (Apr-Mar).
Benchmark indices are likely to rise more Tuesday, but selling at higher levels may limit the upside, said market participants. Volatility is expected ahead of the expiry of November derivatives contract on Thursday.
Oil marketing companies are likely to rise more if crude oil prices continue to fall, but profit booking could restrict the upside, said dealers.
Cairn India will also remain in focus as its board will consider share buyback on Tuesday. Some dealers expect the buyback price to be set at 360-370 rupees per share. -Cogencis