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Market Commentary 01 October 2019
Markets to open marginally in green amid positive global cues

                                          

Indian equity indices ended Monday's session below their neutral lines. The start of the day was sluggish, impacted with RBI's report showing that India's forex reserves declined by $388 million to $428.572 billion for the week ended September 20 due to a slide in core currency and gold assets. In the week to September 20, foreign currency assets, a major component of overall reserves declined by $125 million to $396.670 billion. Traders remained worried amid report that India had a worrisome debt burden of over Rs 88 lakh crore at the first financial quarter of 2019 with the government apparently having no inkling to deal with the country's economic slowdown. However, key benchmarks managed to cut some of their losses in the last hour of the trade after capital markets regulator SEBI eased its norms for buyback of shares by listed companies, especially those having subsidiaries in housing finance and NBFC segments. The markets also took some support with a report that the World Bank in its Doing Business 2020 report ranked India as one of the top 20 improvers based on the number of reforms which aid ease of doing business. It said that India's achievements this year build on a sustained multi-year reform effort. Since 2003/04, India has implemented 48 reforms captured by Doing Business. Finally, the BSE Sensex fell 155.24 points or 0.40% to 38,667.33, while the CNX Nifty was down by 37.95 points or 0.33% to 11,474.45.

 

The US markets ended higher on Monday after a Treasury Department spokeswoman denied reports the Trump administration is considering delisting Chinese companies from US stock exchanges. Treasury spokeswoman Monica Crowley said the administration is not contemplating blocking Chinese companies from listing shares on US stock exchanges at this time. We welcome investment in the United States. Crowley's statement comes on the heels of reports suggesting the administration is contemplating ways to curb US investments in China.  Besides, better than expected manufacturing data out of China also tempered some of the recent concerns about the impact of the US-China trade war. Meanwhile, MNI Indicators released a report showing Chicago-area business activity unexpectedly returned to contraction in the month of September. MNI Indicators said its Chicago business barometer slumped to 47.1 in September after rebounding to 50.4 in August. A reading below 50 indicates a contraction in Chicago-area business activity. The index indicated a contraction for the third time in four months, while street had expected a much more modest decrease to a reading of 50.2. MNI Indicators said its reading on prices at the factory gate rose 4.1 points to 57.7 in third quarter, with anecdotal evidence pointing to tariffs affecting prices and business activity.

 

Crude oil futures ended sharply lower on Monday following reports that Saudi Aramco has fully restored production capacity that was lost to the crippling attacks on Saudi oil facilities earlier in September. The attacks on the Saudi facilities, which the US and Saudi Arabia have blamed on Iran, had briefly knocked more than 5 million barrels a day of Saudi crude production offline. Saudi oil officials and advisers have said Aramco's production had returned to 9.8 million barrels a day, which is about the same level it was at before the attacks. Besides, concerns surrounding slowing global oil and fuel demands due to disappointing economic data out of Europe and China continued to weigh on the investor sentiments. Benchmark crude oil futures for November fell $1.84 or 3.3 percent to settle at $54.07 a barrel on the New York Mercantile Exchange. November Brent declined $1.13 or 1.8 percent to settle at $60.78 a barrel on London's Intercontinental Exchange.

 

Snapping its two-day winning streak, Indian rupee ended considerably weaker against dollar on Monday as demand for the American unit from importers and banks picked up. Traders remain concerned with report that India had a worrisome debt burden of over Rs 88 lakh crore at the first financial quarter of 2019 with the government apparently having no inkling to deal with the country's economic slowdown. Losses in the domestic equity market along with dollar's strength against major global currencies overseas also weighed on the domestic unit. On the global front, dollar was supported on Monday as worries of an immediate widening of the Sino-US trade war eased. Finally, the rupee ended at 70.87, 31 paise weaker from its previous close of 70.56 on Friday.

 

The FIIs as per Monday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 4162.50 crore against gross selling of Rs 4464.50 crore, while in the debt segment, the gross purchase was of Rs 1066.00 crore with gross sales of Rs 1920.46 crore. Besides, in the hybrid segment, the gross buying was of Rs 11.60 crore against gross selling of Rs 6.29 crore.

 

The US markets settled higher on Monday on improved Chinese data and better sentiment on US-China trade talks. Asian markets are trading mostly in green on Tuesday amid report that the talks between US/China are expected to be positive and decisive. Indian markets ended lower on Monday due to a massive sell-off in banking stocks as investors turned cautious on the financial services space. Today, the start of third quarter of current fiscal year (Q3FY20) is likely to be slightly in green following positive global cues amid lower crude oil prices. Traders will be getting some encouragement with the Reserve Bank of India's (RBI) statement that lower crude prices and higher invisible receipts have helped the country narrow the current account deficit (CAD) to 2% of GDP or at $14.3 billion in the first quarter, down 30 basis points from year-ago. CAD contracted on an annualised basis primarily due to higher invisible receipts at $31.9 billion compared to $29.9 billion a year ago. Though, some cautiousness may come with a private report that India's real GDP growth for the current financial year is likely to be 5.2% as muted business confidence, subdued demand conditions and concerns in the financial sector are hurting investments. Investors may be concerned with the Commerce and Industry Ministry's data showing that the eight core industries in August contracted to over three-and-half year low of 0.5%, due to decline in output of coal, crude oil, natural gas, cement, and electricity. Also, the RBI's data showed that the country's external debt stood at $557.4 billion in the June quarter, an increase of $14.1 billion over the quarter ended March 2019. Besides, the Controller General of Accounts (CGA) in its latest data showed that the country's fiscal deficit touched Rs 5.54 lakh crore at the end of August, which was 78.7% of the Budget Estimate for 2019-20. Traders will be eyeing manufacturing PMI data to be out later in the day. Banking stocks will be in focus with Moody's Investors Service's statement that among the 13 Asia-Pacific economies, India's banking system is the most vulnerable to a deterioration in corporate debt repayment capacity along with Indonesia, followed by Singapore, Malaysia and China. It added that slower economic growth and rising trade and geopolitical tensions could weaken debt servicing abilities of corporates in the region. There will be some buzz in the metal stocks with India Ratings and Research's report that the reduction in raw material prices since July 2019 will provide a major respite to India steel players. Also, there will be some reaction in power stocks with ICRA's statement that the corporate tax cut is a positive development for power sector as it will result in an estimated annual savings of Rs 2,500 crore for the power distribution segment. The auto sector stocks will also be in action, reacting to their monthly sales numbers.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,474.45

11,407.42

11,524.87

BSE Sensex

38,667.33

38,421.24

38,893.27

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

3,566.66

41.40

38.53

46.68

SBI

410.94

270.80

266.68

278.38

Tata Motors

321.59

117.45

115.62

120.07

ICICI Bank

275.25

433.70

428.08

442.23

ZEEL

230.46

265.50

253.10

276.45

 

  • USFDA has completed a cGMP inspection at Cipla's Goa manufacturing facility. 
  • Tata Motors has launched a range of new generation compact truck - the Tata INTRA in Meerut. 
  • Maruti Suzuki India has launched its much-awaited Mini-SUV S-PRESSO. 
  • L&T's shipping arm -- Larsen and Toubro Shipyard has launched the Coast Guard ship Varaha in Chennai, its 51st offshore patrol vessel.
News Analysis