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Market Commentary 06 September 2019
Markets to start in green on positive global cues

                                          

Indian equity bourses gave up their gains on Thursday to end the session flat. After a positive start, the markets traded firmly during morning deals, as the government data showed that foreign direct investment into India grew by 28 per cent to $16.33 billion during the first quarter of the current fiscal. Inflow of FDI during April-June of 2018-19 stood at $12.75 billion. Some support also came with reports that a top advisory body on external trade will meet next week to discuss issues related to export promotion, domestic manufacturing and competitiveness in the wake of a fall in exports of traditional, employment-generating sectors such as gems and jewellery, leather, handloom and cotton yarn and fabrics. But in noon deals, key indices erased gains, as India Ratings and Research (Ind-Ra) believes India's increased dependence on foreign portfolio investment (FPI) makes the country highly vulnerable to global shocks. The surplus generated in the services trade combined with remittances is insufficient to cover India's trade deficit. Adding anxiety among market participants, domestic credit rating agency CRISIL cut India's current financial year (FY20) Gross domestic products (GDP) growth forecast to 6.3% from its earlier forecast of 6.9%. The agency said that lower GDP growth forecast corroborates that India's economic slowdown is deeper and more broad-based than suspected. Finally, the BSE Sensex lost 80.32 points or 0.22% to 36,644.42, while the CNX Nifty was up by 3.25 points or 0.03% to 10847.90.

 

The US markets ended higher on Thursday on reports that the US and China plan to hold high level trade talks in early October. A statement from China's Commerce Ministry said both sides agreed to the new round of talks during a phone call between Chinese Vice Premier and chief trade negotiator Liu He and US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. A spokesperson for the US Trade Representative's office confirmed the phone call and said the US and China agreed to hold meetings in the coming weeks. The US and Chinese officials will purportedly hold deputy-level talks later this month in preparation for the meeting in October. On the economic data front, new orders for US manufactured goods jumped more than expected in the month of July, the Commerce Department revealed in a report released. The report said factory orders surged up by 1.4 percent in July after climbing by a downwardly revised 0.5 percent in June. Street had expected factory orders to jump by 1.0 percent compared to the 0.6 percent increase originally reported for the previous month. Meanwhile, the Institute for Supply Management (ISM) released a separate report showing a notable acceleration in the pace of growth in US service sector activity in the month of August. The ISM said its non-manufacturing index climbed to 56.4 in August after falling to 53.7 in July, with a reading above 50 indicating growth in service sector activity. Street had expected the index to inch up to 54.0.

 

Crude oil futures ended slightly in green on Thursday after the Energy Information Administration (EIA) reported that US crude supplies declined by 4.8 million barrels for the week ended August 30. That followed declines in each of the previous two weeks. The EIA data also showed weekly supply declines of 2.4 million barrels for gasoline and 2.5 million barrels for distillates.  Besides, some support also came in on reports of heightened tensions in the Middle East. Yemeni troops launched missile attacks against Saudi troops in Jizan and Haradh, Saudi Arabia, killing and injuring more than 30 Saudi troops. Benchmark crude oil futures for October added 4 cents or 0.07 percent to settle at $56.30 a barrel on the New York Mercantile Exchange. November Brent gained 25 cents or 0.4 percent to settle at $60.95 a barrel on London's Intercontinental Exchange.


Continuing strong recovery momentum for the second day, Indian rupee ended higher against US dollar on Thursday, driven by weakening of the greenback in overseas markets. Traders took support with the government data showed that foreign direct investment into India grew by 28 percent to $16.33 billion during the first quarter of the current fiscal. Inflow of FDI during April-June of 2018-19 stood at $12.75 billion. Market participants paid no heed towards domestic credit rating agency CRISIL cut India's current financial year (FY20) Gross domestic products (GDP) growth forecast to 6.3% from its earlier forecast of 6.9%. The agency said that lower GDP growth forecast corroborates that India's economic slowdown is deeper and more broad-based than suspected. On the global front, safe-haven dollar and yen fell on Wednesday after global political worries eased with what markets perceived as positive news in Hong Kong, Italy and Britain. Finally, the rupee ended at 71.84, 28 paise stronger from its previous close of 72.12 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 4198.57 crore against gross selling of Rs 5458.64 crore, while in the debt segment, the gross purchase was of Rs 1428.04 crore with gross sales of Rs 1605.87 crore. Besides, in the hybrid segment, the gross buying was of Rs 15.33 crore against gross selling of Rs 15.56 crore.

 

The US markets ended higher on Thursday on expectations of de-escalation in US-China trade tensions, while strong US economic data eased fears of a domestic slowdown. Asian markets are trading in green in early deals on Friday as investors cheered plans for more trade negotiations between Washington and Beijing. Indian markets remained volatile throughout the trading session and ended flat on Thursday.  Today, the start of the session is likely to be in green on positive global cues. Traders will be getting support with union minister of state for heavy industries and public enterprises, Arjun Ram Meghwal's statement that the government will do everything to ensure that the economy remains on track and is not weakened so that the country reaches its target of $5 trillion economy. He also said during the tenure of the UPA government the country's economy was ranked 11th in the world and now under the BJP-led NDA government it has climbed to the fifth position. He added ‘our target is the third position. So we cannot afford to allow the economic growth to be weakened.' Meanwhile, to revive sagging economy, the finance ministry will hold meeting with heads of central public sector enterprises (CPSEs) today to impress upon them the need to expedite capital expenditure. The government has a capital expenditure plan of Rs 3.3 lakh crore during the current financial year. These include expenditure by the Ministry of Railways and Road Transport. However, there will be some cautiousness latter in the day on report that CARE Ratings revised India's GDP growth forecast on account of subdued growth in the industrial sector and weakness in the agricultural sector during Q1FY20. The agency cut the GDP estimate downward from 6.7-6.8% earlier to 6.4-6.5% for FY20 with the underlying GVA growth of 6.3-6.4%.  The MSME sector will be in action on report that the government launched the updated Credit linked Capital Subsidy Scheme (CLCSS) to allow micro, small and medium enterprises (MSMEs) access to capital. The scheme provides an upfront subsidy of 15 per cent on institutional credit up to Rs 1 crore for MSMEs in the specified 51 sub-sectors. There will be some buzz in the sugar stocks on report that sugar exports, estimated at 3.8 MT for sugar season (SS 2019), are expected to rise to 4.5-5 MT in SS 2020.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,847.90

10,802.57

10,906.67

BSE Sensex

36,644.42

36,491.20

36,848.31

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

1,779.20

61.95

59.75

63.25

Tata Motors

757.90

118.05

111.92

121.77

ONGC

322.26

125.15

119.77

130.22

Coal India

290.83

194.85

186.97

199.57

Indian Oil Corporation

252.13

124.70

120.47

129.07

 

  • Wipro has secured a strategic seven-year engagement, valued at $300 million, from ICICI Bank to provide a comprehensive suite of services.
  •  L&T has built advanced metering infrastructure solutions for 5 lakh smart meters for Energy Efficiency Services.
  •  Bajaj Finance has raised funds worth Rs 1,400 crore through allotment of 14,000 Secured Redeemable NCDs of face value of Rs 10 lakh on Private Placement basis.
  •  SBI and Edelweiss Financial Services' subsidiary -- ECL Finance have signed a Co-Origination agreement to increase access to credit for MSMEs.
News Analysis