Sensex touched record high of 37,000

On a largely uneventful day, the Sensex touched a record high of 37,000 on short covering on F&O expiry day. The market sentiments were also buoyed by spectacular results announced by Maruti, ITC and Dr. Reddy Laboratories. All three companies reported growth in sales and profits. To support the market, the rupee also strengthened another 18 basis points to close the day at 68.66/$. The positive sentiments on the rupee were driven by a slightly weak dollar and also by the impact of strong FII buying in equities. Importer demand for dollars was also tepid as they expect the RBI to defend 69/$ for now.

It could be the biggest consolidation of the aluminum industry happening in the world. Hindalco unit, Novellis, has agreed to buy Aleris for $2.6 billion. Hindalco will be paying $770 million as its share of equity to Novellis. This acquisition will take the combined annual sales of Hindalco to $21 billion and help the company become a global leader in aluminum. The addition of Aleris to its portfolio enables Hindalco to now service automotive and aerospace clients. The stock of Hindalco has been under some pressure in recent months due to fears of a China slowdown.

After Trump spoke at the BRICS summit purely against US unilateralism, Modi focused more on the Industrial Revolution 4.0 in his BRICS Summit Speech. His approach was macro and focused on the bigger challenges for all the BRICS nations. According to Modi, the digital challenge in the form of AI, big data, e-commerce and digital platforms could be a great leveler. Modi also added that the BRICS nations were best poised to leverage the challenge through re-skilling. Of course, that would call for a large-scale revamping of education and re-skilling but the challenge was for the BRICS to take on.

Bharti Airtel’s Africa operations post net profits of Rs.394 crore in Q1. Interestingly, the African operations have come to redeem the Bharti group in a big way at a time when the domestic market is largely pressured by the price competition triggered by Reliance Jio. This growth in profits was driven by increased data consumption in Africa as well as the stabilization of most African currencies. Bharti’s African operations are preparing for an IPO soon. In fact, Sunil Mittal will be using the IPO to partially monetize his African business interest so that the same can be used to create a war chest for Bharti.

Brent Crude prices inched closer to $75/bbl as the battle for oil between the Shias and the Sunni lobbies within the OPEC became sharper. In a surprise move, Saudi Arabia suspended oil shipments through the Bab-Al-Mandeb strait in the Red Sea after an attack on its shipments was attributed to Iran-backed Houthi. While there is no confirmation yet, Saudi Arabia has unilaterally stopped all shipments through the strait. Saudi Arabia has alleged that these attacks were masterminded from Yemen where Iran backed Houthi Rebel forces is quite active. That is not great news because the Strait of Bab-al-Mandeb transports nearly 4.8 million bpd. The other big pain point can be the Strait of Hormuz which is literally controlled by Iran and any blockade there could be disastrous to world oil prices.

In what will go down in history as one of the worst value destruction in a single day, Facebook saw nearly $120 billion of its market capitalization wiped out in a single day. With the controversy over data sharing far from over, the stock reported sales and user growth much lower than expectations. The stock tanked nearly 20% in a single day, leading to a huge loss. This is likely to throw light now only on Facebook’s devious practices of handling data but also the vulnerability of the FANG stocks. Both Apple and Amazon are closing in on $1 trillion market cap and Microsoft is not too far behind.