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Market Commentary 01 June 2018
Markets likely to make positive start on better-than-expected GDP numbers

 

May F&O expiry session turned out to be a fabulous day of trade for Indian equity benchmarks with frontline gauges recapturing their crucial 10,700 (Nifty) and 35,300 (Sensex) levels, on the back of predictions of normal southwest monsoon rains and expectations of an improved gross domestic product data due later in the day. The markets' mood remained up-beat throughout the day and benchmarks fervently gained from strength to strength, as investors continued hunt for fundamentally strong stocks. Key gauges made an optimistic start with traders taking some encouragement with report that India is likely to retain the position of world's fastest growing major economy in the January-March quarter, surpassing China's growth of 6.8%, driven by gains in manufacturing and consumer spending. The poll on the latest quarter's annual growth was 7.3%, the best pace since July-September 2016, the quarter before the government unexpectedly scrapped high-value currency notes. Investors took note of a report that India will endeavour to have a balanced Regional Comprehensive Economic Partnership (RECP) trade agreement as it would cover 40% of the global GDP and over 42% of the world's population. Adding to the optimism, commerce and industry minister Suresh Prabhu said that India will pitch for continuing the eligibility of its 3,500-odd goods for low or zero duties in the US. Markets extended gains in last leg of trade as traders covered-up of pending short positions on expiry of the May derivatives contracts. Sentiments also remained up-beat with SBI research report, where it expecting GDP growth for Q4FY18 to be around 7.6% and the FY18 growth to be at 6.7%. It also said that the GDP growth for Q4 and FY18 is likely to spring a positive surprise. Some support also came with report showing that the country's special economic zones (SEZs) grew 5.44% in April to Rs 20,548 crore as against Rs 19,488 crore in the same month a year ago. Finally, the BSE Sensex surged 416.27 points or 1.19% to 35,322.38, while the CNX Nifty was up by 121.80 points or 1.15% to 10,736.15.

 

The US markets ended lower on Thursday, after showing sharp recovery in the previous session, amid trade war concerns. Commerce Secretary Wilbur Ross said that the US will impose tariffs on steel and aluminum products from the EU, Mexico and Canada beginning Friday. Canada and Mexico had previously received temporary exemptions as negotiators worked on a new version of the North American Free Trade Agreement, or Nafta. The move to impose the tariffs represents the latest in a series of protectionist moves by President Donald Trump and has drawn threats of retaliation by some of the major US allies. Meanwhile, Canadian Prime Minister Justin Trudeau has said that Ottawa would impose a 25% tariff on steel imports from the US, a 10% tariff on aluminum and other US goods. Moreover, Mexico said that it would target several US goods in response. On the economic front, a day ahead of the release of the closely watched monthly jobs report, the Labor Department released a report showing a bigger than expected decrease in first-time claims for US unemployment benefits in the week ended May 26, 2018. The Dow Jones Industrial Average slipped 251.94 points or 1.02 percent to 24415.84 and the S&P 500 declined 18.74 points or 0.69% to 2705.27 and the Nasdaq was down by 20.34 points or 0.27 percent to 7442.12.

 

Resuming southward journey, crude oil futures ended lower on Thursday after a day of halt, amid unexpected increases in US petroleum-product stockpiles. Besides, ongoing growth in domestic crude output and uncertainty surrounding OPEC's plans for production, too added pressure on crude prices. The US Energy Information Administration (EIA) reported Thursday that crude supplies fell by 4.2 million barrels for the week ended May 25. According to the EIA, gasoline stockpiles edged up by 500,000 barrels for the week, while distillate stockpiles also rose by 600,000 barrels. Meanwhile, OPEC and non-OPEC producers have committed to cut output by 1.8 million bpd until the end of 2018 but are ready to make gradual supply adjustments to deal with shortages. Benchmark crude oil futures for July delivery declined $1.17 or 1.7 percent to settle at $67.04 a barrel on the New York Mercantile Exchange. July Brent crude rose 9 cents or 0.1 percent to settle at $77.59 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended marginally higher against dollar on Thursday, due to increased selling of the American currency by exporters and banks. Traders took some support with SBI research report, where it is expecting GDP growth for Q4FY18 to be around 7.6% and the FY18 growth to be at 6.7%. It also said that the GDP growth for Q4 and FY18 is likely to spring a positive surprise. Some support also came with report that India is likely to retain the position of world's fastest growing major economy in the January-March quarter, surpassing China's growth of 6.8%, driven by gains in manufacturing and consumer spending. The poll on the latest quarter's annual growth was 7.3%, the best pace since July-September 2016, the quarter before the government unexpectedly scrapped high-value currency notes. Besides, splendid gains of local equities along with dollar's slide against some currencies overseas, too supported the rupee. On the global front, euro rallied further on Thursday as Italian parties renewed attempts to form a government, easing concerns about the wider impact of a political crisis in the euro zone's third-largest economy. Finally, the rupee ended at 67.40, 3 paise stronger from its previous close of 67.43 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 5358.28 crore against gross selling of Rs 6439.13 crore, while in the debt segment, the gross purchase was of Rs 708.83 crore with gross sales of Rs 1463.52 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.49 crore against gross selling of Rs 0.24 crore.

 

The US markets ended lower on Thursday following news that the Trump administration plans to impose steel and aluminum tariffs on Canada, Mexico and the European Union. Asian markets are trading mostly in green in early deals, as the political turmoil in Italy that roiled global financial markets showed signs of easing. Indian equity benchmarks closed sharply higher on Thursday on eve of expiry of May series derivative contracts. Today, the markets are likely to make optimistic start as Q4 GDP data beat market expectations. Indian economy grew at 7.7 percent during January-March quarter of financial year 2017-18 compared to 6.1 percent a year ago, driven by gains in manufacturing and consumer spending. However, the GDP growth for the entire fiscal of 2017-18 was at 6.7%, lower than 7.1 percent in 2016-17. Traders will also get some support with report that eight infrastructure industries recorded 4.7 percent growth in April helped by healthy performance in segments like coal, natural gas and cement. The growth rate of eight core sectors, which also include fertilisers and steel, was 2.6 percent in April 2017. Some support may also come with report that Fiscal deficit for 2017-18 worked out to be 3.53 per cent of the GDP, broadly in line with the government's revised estimates. The revenue deficit was 2.65 per cent of the GDP. In absolute terms, the fiscal deficit was Rs 5.91 lakh crore or 99.5 per cent of the Budget estimates. Some optimism will also come with Moody's Investors Service's statement that tax reforms are likely to expand revenue base in fast growing economies like India but they will be most effective when accompanied by lowering of fiscal deficit and effective management of expenditure. Traders will also get some encouragement with report that India's per capita income grew at a slower pace of 8.6 per cent to Rs 1,12,835 during the last fiscal ended March 2018. The per capita net national income in 2016-17 stood at Rs 1,03,870, witnessing a growth of over 10.3 per cent from the preceding fiscal ended March 2016 (at Rs 94,130).

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,736.15

10,649.77

10,793.17

BSE Sensex

35,322.38

35,026.96

35,516.91

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Power Grid

1,543.23

209.45

203.13

214.23

Indian Oil

328.72

174.10

170.20

176.85

SBI

319.36

269.55

263.53

275.18

Vedanta 

293.27

248.30

245.42

252.02

Tata Motors

287.72

282.50

279.12

288.37

 

  • Maruti Suzuki India has crossed the mark of 3-lakh cumulative sale of cars with the acclaimed Auto Gear Shift technology. 
  • Lupin has launched Solosec 2g oral granules in the US market, having received an approval from the USFDA earlier. 
  • Reliance Industries is planning to stop oil import from Iran, since the new US sanctions is compelling buyers to avoid oil purchases from Tehran. 
  • Tata Motors has inked pact with the Maharashtra Government for deployment of 1000 EV across its range of passenger and commercial vehicles in the State.
News Analysis