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NSE Intra-day chart (19 September 2017)
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Market Commentary 20 September 2017
Markets to make positive start amid fall in crude oil prices

 

Profit booking dragged Indian equity benchmarks in red on Thursday, with Sensex and Nifty closing below their crucial psychological levels of 38,900 and 11,700. The start of the day was fabulous, buoyed by the vote count leads that showed Narendra Modi-led NDA getting a decisive majority. In morning deals, key indices hit their record high peaks and remained positive for the most part of the session, as India Inc expressed hope that a stable government at the centre will boost growth in the country and lead to higher foreign fund inflows as trends pointed to BJP and allies returning to power with a thumping majority. Market participants also remained positive with Niti Aayog Vice Chairman Rajiv Kumar’s statement that the think tank is working on the economic agenda for the new government where the focus will be on achieving long term sustainable growth and boosting private investments in the country. However, the market failed to hold on to their gains and settled the day in red terrain, tracking weak global markets. Anxiety spread among investors, with a private report stating that the value of merger and acquisition deals announced in April stood at $735 million (over Rs 5,100 crore), a decline of 96 per cent from the year-ago period. According to a report, in April last year, the total M&A deal value stood at $19,142 million. Traders also got cautious with another private report indicating that foreign direct investment (FDI) in India has been declining, even though recent US-China trade tensions and the increasing working population should ideally make the world's fastest-growing economy attractive for investors. This could be because of investors' pre-election nerves and also because of recent protectionist measures taken up by India. Finally, the BSE Sensex lost 298.82 points or 0.76% to 38,811.39, while the CNX Nifty was down by 80.85 points or 0.69% to 11,657.05.

 

The US markets ended lower with cut of over one percent on Thursday amid signs that trade tensions between the US and China are escalating. Chinese Commerce Ministry spokesman Gao Feng said the Trump administration must show sincerity and correct their wrong actions if the US wants trade talks to continue. Gao said that negotiations can only continue on the basis of equality and mutual respect, noting that China is closely monitoring developments and preparing a necessary response. The US and China trade talks collapsed earlier this month as President Donald Trump followed through on a threat to raise tariffs on $200 billion worth of Chinese goods to 25% from 10%. The Trump administration also blocked US companies from doing business with Chinese telecom giant Huawei but recently gave the company a 90-day reprieve. With both sides seemingly unwilling to back down, traders are becoming increasingly wary of the impact of the trade dispute on the global economy. On the economic front, after reporting an unexpected jump in new home sales in the US in the previous month, the Commerce Department released a report showing new home sales pulled back by much more than anticipated in the month of April. The Commerce Department said new home sales plunged by 6.9% to an annual rate of 673,000 in April after spiking by 8.1% to an upwardly revised rate of 723,000 in March. Meanwhile, first-time claims for US unemployment benefits unexpectedly edged lower in the week ended May 18, according to a report released by the Labor Department. The report said initial jobless claims dipped to 211,000, a decrease of 1,000 from the previous week’s unrevised level of 212,000. The modest decrease came as a surprise to market participants, who had expected initial jobless claims to inch up to 215,000. Dow Jones Industrial Average declined 286.14 points or 1.11 percent to 25490.47, Nasdaq dropped 122.56 points or 1.58 percent to 7628.28 and S&P 500 was down by 34.03 points or 1.19 percent to 2822.24.

 

Magnifying their previous session losses, crude oil futures ended sharply lower on Thursday  as the potential for a lengthy US-China trade standoff led to a broad aversion to assets perceived as risky, knocking down global equities. The flare-up in trade tensions between the world’s largest economies, US and China, has raised doubt about near-term appetite for crude if a tariff conflict remains unresolved for a protracted period. Both WTI and Brent crude saw their biggest single-session dollar and percentage losses year to date. Besides, the Energy Information Administration (EIA) reported that domestic supplies of natural gas rose by 100 billion cubic feet for the week ended May 17. Benchmark crude oil futures for July dropped $3.51 or 5.7 percent to settle at $57.91 a barrel on the New York Mercantile Exchange. July Brent crude declined $3.23 or 4.6 percent to settle at $67.76 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended considerably weaker against the US dollar on Thursday, as demand for the American unit from importers and banks picked up. Investors remained concerned with another private report indicating that foreign direct investment (FDI) in India has been declining, even though recent US-China trade tensions and the increasing working population should ideally make the world's fastest-growing economy attractive for investors. This could be because of investors' pre-election nerves and also because of recent protectionist measures taken up by India. The rupee’s losses were also caused by late hour sell-off in domestic equity market along with dollar’s strength against major global currencies. On the global front, dollar hit its highest level in a month as economic and political uncertainties swept through Europe and Asia, pinning down most major currencies like the euro and the yuan. Finally, the rupee ended at 70.02, 35 paise weaker from its previous close of 69.66 on Wednesday.

 

The FIIs as per Thursday’s data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 4866.64 crore against gross selling of Rs 5608.01 crore, while in the debt segment, the gross purchase was of Rs 633.95 crore with gross sales of Rs 1191.91 crore. Besides, in the hybrid segment, the gross buying was of Rs 3.08 crore against gross selling of Rs 4.66 crore.

 

The US markets declined on Thursday, with losses of over a percent, after the latest flare-up in US-China trade tensions damped investors’ expectations of a near-term resolution between the world’s two biggest economies. Asian markets are trading mixed on Friday on worries the US-China trade spat was developing into a more entrenched strategic dispute between the world's two largest economies. Indian markets erased early gains and ended the session in red territory on Thursday as investors booked profits after stocks soared to record highs after BJP’s strong showing in the Lok Sabha polls. Today, the markets are likely to make optimistic start after a historic mandate won by the Narendra Modi government. Election commission data showed Modi’s National Democratic Alliance has secured around 350 seats, with BJP alone winning around 303 seats in the 2019 general elections. Besides, fall in crude oil prices may also aid the markets sentiment. Some support will come with Fitch Ratings’ statement that the Bharatiya Janata Party’s (BJP) apparent landslide victory is likely to improve business sentiment and outlook for private investment. It said that from a credit rating perspective, Fitch would focus on the extent of the next government's efforts to improve India's weak fiscal finances. Besides, India Inc has welcomed the thumping majority accorded to the BJP in Lok Sabha Elections 2019. At the same time, head honchos of the corporate world have called for strong economic reforms, including measures to boost the agrarian economy and manufacturing sector. Traders may take note of Moody's statement that its credit view on India will depend on policies of the new government and expressed hope that the country would continue with its fiscal consolidation plan. However, there may be some cautiousness amid negative global sentiment. Meanwhile, markets regulator SEBI has levied a total fine of over Rs 39 lakh on five entities for indulging in fraudulent trades in the illiquid stock options segment of BSE. There will be some buzz in the aviation sector stocks with ICRA’s report that the grounding of Jet Airways has impacted industry's capacity by as much as 14%, resulting in a 4.2% fall in domestic air traffic to 10.99 million in April. There will be lots of earnings announcements too, to keep the markets in action.

 

Support and Resistance: NSE (Nifty) and BSE (Sensex)

 

Index

Previous close

Support

Resistance

NSE Nifty

11,657.05

11,500.65

11,927.30

BSE Sensex

38,811.39

38,267.01

39,740.36

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

1,117.19

139.75

135.40

147.45

State Bank of India

744.13

342.20

332.93

357.73

ICICI Bank

432.80

410.85

402.85

423.40

ITC

313.81

288.20

281.60

300.20

Adani Ports

230.21

407.55

389.60

428.05

 

  • L&T has raised amount aggregating to Rs 2,000 crore through issuance and allotment of 20,000 or 8.02% Rated Listed Unsecured Redeemable NCDs. 
  • Adani Ports and Special Economic Zone has signed an agreement to develop and operate a container terminal at Yangon Port in Myanmar. 
  • Bharti Airtel has awarded a multi-million-dollar contract to IBM to deploy a blockchain-based pan India network. 
  • Tata Motors has launched compact truck Intra with a starting price of Rs 5.35 lakh.
News Analysis