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NSE Intra-day chart (06 December 2018)
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Market Commentary 07 December 2018
Markets to make optimistic start on positive Asian cues

 

A sea of red took over Dalal Street on Thursday, as bears tighten their grip amid selloff in majority of sectors along with weak cues from global markets. Both the larger peers ended lower with the losses of more than 1.50%. After a sluggish start, the markets remained under pressure throughout the day, as Fitch Ratings revised downwards India's GDP growth forecast to 7.2% for current fiscal citing higher financing cost and reduced credit availability. In its Global Economic Outlook, Fitch also projected that for 2019-20 and 2020-21 financial years, India's GDP growth will be 7% and 7.1% respectively. The rating agency has also forecasted Indian rupee to weaken to 75 to a dollar by end of 2019. Adding more anxiety among the traders, Fitch Solutions said that the slow pace of land reforms will continue to result in project delays and rising costs, posing a downside risk for the road and rail sectors. Some concerns also came with a private report stating that officers of the indirect tax department have started issuing preliminary notices to captive units of multinationals and Indian companies exporting offshore support services. The street paid no heed towards Finance Minister Arun Jaitley's statement that India, among the world's fastest growing emerging economies, is likely to maintain the high growth rate of 7-8% over the next decade. He emphasized that landmark reforms such as the Insolvency and Bankruptcy Code offer an attractive and conducive environment to foreign investors to the country. The markets participants also overlooked the finance ministry's statement that the assessment of growth and inflation made by the Reserve bank of India's (RBI) Monetary Policy Committee (MPC) is in line with government's reading.  Traders took note of RBI governor Urjit Patel's statement that if the upside risks to inflation do not materialise, the bank may change its monetary policy accordingly, raising prospects of rate cuts. Meanwhile, Economic Affairs Secretary Subhash Chandra Garg said the calibrated tightening stance of RBI's MPC probably needed a rethink even as he welcomed the decision on policy rate. Finally, the BSE Sensex plunged 572.28 points or 1.59% to 35,312.13, while the CNX Nifty was down by 181.75 points or 1.69% to 10,601.15.

 

The US markets ended mostly lower on Thursday after a dramatic session that saw the Dow Jones Industrial Average drop more than 700 points at one point on fears that the arrest of a Huawei executive would reignite trade worries. Huawei CFO Meng Wanzhou was arrested in Canada on suspicion of violating US trade sanctions against Iran and faces possible extradition to the US.  Further, some cautiousness also prevailed in the markets after a report released by the Commerce Department showed a steep drop in new orders for US manufactured goods in the month of October. The Commerce Department said factory orders tumbled by 2.1% in October after rising by a downwardly revised 0.2% in September. However, the markets clawed back most of its losses on a report that the Federal Reserve may turn more accommodative. Federal Reserve officials are considering signaling a wait-and-see mentality after a likely interest rate hike later this month. According to a report released by the Institute for Supply Management, growth in US service sector activity unexpectedly accelerated in the month of November. The ISM said its non-manufacturing index crept up to 60.7 in November after pulling back to 60.3 in October, with a reading above 50 indicating service sector growth. Meanwhile, revised data released by the Labor Department showed labor productivity in the US increased by slightly more than initially estimated in the third quarter. The report also said unit labor costs rebounded by less than previously estimated. The report said productivity surged up by 2.3% in the third quarter compared to the previously reported 2.2% spike. The upward revision to the pace of productivity growth matched street estimates. Dow Jones Industrial Average declined 79.40 points or 0.32 percent to 24947.67 and S&P 500 lost 4.11points or 0.15 percent to 2695.95, while Nasdaq was up by 29.83 points or 0.42 percent to 7188.26.

 

Crude oil futures extended their previous session losses and ended with cut of over two percent on Thursday after the Organisation of the Petroleum Exporting Countries (OPEC) failed to offer details on its expected production cut, opting to wait until after it meets with other producers Friday. Growing concerns that oil producers will not reach an agreement to aggressively reduce output has also weighed on price.  However, the Energy Information Administration (EIA) said US crude supplies fell by 7.3 million barrels for the week ended November 30. That marked the EIA's first reported weekly supply decline in 11 weeks. Benchmark crude oil futures for January plunged $1.40 or 2.7 percent to settle $51.49 a barrel on the New York Mercantile Exchange. February Brent crude declined $1.50 or 2.4 percent to settle at $60.06 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended lower against US dollar on Thursday amid strengthening of American currency and weakness in domestic equity markets. Traders got anxious with Fitch Ratings revising downwards India's GDP growth forecast to 7.2% for current fiscal citing higher financing cost and reduced credit availability. In its Global Economic Outlook, Fitch projected that for 2019-20 and 2020-21 financial years, India's GDP growth will be 7% and 7.1% respectively. The rating agency has also forecasted Indian rupee to weaken to 75 to a dollar by end of 2019. Traders failed to get any sense of relief with Finance Minister Arun Jaitley's statement that India, among the world's fastest growing emerging economies, is likely to maintain the high growth rate of 7-8% over the next decade. He emphasized that landmark reforms such as the Insolvency and Bankruptcy Code offer an attractive and conducive environment to foreign investors to the country. Finally, the rupee ended at 70.90, 44 paise weaker from its previous close of 70.46 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 5065.84 crore against gross selling of Rs 5426.67 crore, while in the debt segment, the gross purchase was of Rs 1589.77 crore with gross sales of Rs 452.32 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.03 crore against no selling.

 

The US markets ended mostly lower on Thursday on fears that the arrest of a Huawei executive would reignite trade worries. But, managed to pare early losses after a report indicating Federal Reserve is considering signaling a wait-and-see mentality after a likely interest rate hike later this month. Asian markets were trading in green in early trade on Friday as investors grappled with shifting indications on US-China trade talks and prospects for a pause in Federal Reserve tightening. Indian equity markets extended their losses for third straight session on Thursday, amid weakness in other Asian markets coupled with depreciation in rupee. Investors also remained cautious ahead of the outcome of key assembly elections. Today, the markets are likely to make optimistic start, tracking positive trend in Asian peers after the speculation that the Federal Reserve might be one-and-done with US rate hikes. Also, traders will be looking ahead of five states elections exit poll due on December 07 evening and result on December 11. Traders will be getting some encouragement with the Union Cabinet approving an agriculture export policy with an aim to double the shipments to $60 billion by 2022. The policy would focus on all aspects of agricultural exports including modernising infrastructure, standardisation of products, streamlining regulations, curtailing knee-jerk decisions, and focusing on research and development activities. Traders also will be getting some support with the Reserve Bank of India's (RBI) deputy governor Viral Acharya's statement that the RBI will continue to inject liquidity into the banking system through open market operation (OMO) purchases till the end of this fiscal. In the current financial year, the central bank has conducted OMO purchases to the tune of Rs 1.36 trillion, with over Rs 1 trillion of the infusion in the last three months. Meanwhile, a private report indicated that the investment of $100 billion in the Indian telecom industry as envisioned in the National Digital Communications Policy 2018 (NDCP) would result in an increase of $1.21 trillion in India's Gross Domestic Product (GDP) on a cumulative basis. There will be some buzz in the textile sector stocks with report that India's annual cotton output could drop 12% to the lowest in nine years as limited rainfall in the top two producing states has slashed crop yields, potentially cutting exports from the world's top producer. Also, there will be some reaction in telecom sector stocks with Trai Secretary S K Gupta's statement that the telecom sector will move to 5G by 2022 and access to digital platform will become highly advanced in the next five years.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,601.15

10,552.05

10,686.45

BSE Sensex

35,312.13

35,150.18

35,590.65

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Sun Pharma

560.87

420.15

411.60

430.10

Yes Bank

388.68

168.45

166.37

171.52

ICICI Bank

177.85

347.65

344.02

350.62

Vedanta

156.94

195.35

191.93

197.83

Tata Motors

154.28

162.65

159.93

167.03

 

  • ICICI Bank is planning to raise funds through issuance of bonds on private placement basis. 
  • Power Grid Corporation of India has been declared as the successful bidder under Tariff based competitive bidding. 
  • Tata Motors' wholly owned subsidiary -- Jaguar Land Rover has achieved a five-star Euro NCAP safety rating for its electric model Jaguar I-PACE. 
  • Wipro's digital business unit -- Wipro Digital and Alfresco have expanded global partnership to create, build and run open source based digital transformation programs.
News Analysis