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NSE Intra-day chart (07 December 2018)
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Market Commentary 10 December 2018
Markets to make pessimistic start on weak global cues

 

Indian equity benchmarks got a breather on the last trading day of the week, with Sensex and Nifty showing a smart recovery of 1.02% and 0.87%, respectively. The markets made a firm start, aided by 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. Traders took encouragement with a private report stating that in the next 16 years, India will dominate the list of fastest growing cities in the world. Domestic sentiments also got boost with another private report 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. In the last leg of the trade, the key indices added gains to end the session near intraday high points, tracking firm global cues. Traders were optimistic with a report that the RBI is likely to cut key interest rates by 25 basis points either at the upcoming policy review in February or the one after that in April. Adding more comfort, the Cabinet raised the government's contribution to National Pension Scheme (NPS) to 14% of basic salary from the current 10%. Some support also came with reports that the total wealth held by individuals in the country is expected to touch Rs 517.88 lakh crore by FY23, growing at an annual rate of 16.99%. Direct equity and mutual funds are expected to be the growth drivers of this northward trend, growing at a CAGR of 24.41% and 21.04%, respectively, over the next five years.  Meanwhile, Commerce and Industry Minister Suresh Prabhu sought investments from global funds in startups from different sectors including infrastructure, agriculture and healthcare. Finally, the BSE Sensex gained 361.12 points or 1.02% to 35,673.25, while the CNX Nifty was up by 92.55 points or 0.87% to 10,693.70.

 

Extending southward journey for third straight session, the US markets ended the Friday's trade sharply lower with major settled with a cut of around three percent. Sentiments remained dampened after the Labor Department's closely watched monthly jobs report showed US employment increased by much less than expected in the month of November. The Labor Department said non-farm payroll employment rose by 155,000 jobs in November after surging up by a downwardly revised 237,000 jobs in October. The street had expected employment to climb by about 200,000 jobs compared to the jump of 250,000 jobs originally reported for the previous month. Meanwhile, the report said the unemployment rate in November remained unchanged for the second straight month at 3.7 percent, holding at its lowest level since hitting 3.5 percent in December of 1969. Average hourly employee earnings rose by $0.06 to $27.35 in November, reflecting a 3.1 percent increase compared to the same month a year ago. The annual rate of growth was unchanged from October. Lingering skepticism about a US-China trade agreement also weighed on the markets even though President Donald Trump tweeted, China talks are going very well. Dow Jones Industrial Average declined 558.72 points or 2.24 percent to 24388.95 and S&P 500 lost 62.87 points or 2.33 percent to 2633.08 and Nasdaq was down by 219.01 points or 3.05 percent to 6969.25.

 

Crude oil futures ended sharply higher on Friday after OPEC and non-OPEC members reached an agreement to cut crude production next year. Oil prices had stayed weak early on in the session amid doubts over whether the OPEC will decide on a reduction in crude oil production. On the third day of their meeting in Vienna, OPEC members decided to reduce oil production by a total of 800,000 barrels per day, from October levels. Non-OPEC nations, led by Russia, agreed to reduce output by 400,000 barrels per day. The proposed reduction of 1.2 million barrels per day, is much more than the anticipated cut of about 1 million barrels per day. Earlier, there was talk of a 1.4 million barrel cut, but media reports suggested that Saudi Arabia was keen for a cut of only 1 million barrels. Benchmark crude oil futures for January plunged $1.12 or 2.2 percent to settle $52.61 a barrel on the New York Mercantile Exchange. February Brent crude declined $1.61 or 2.7 percent to settle at $61.67 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended higher against US dollar on Friday amid weakening American currency and firm performance in domestic equity markets. Traders took some comfort with 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. Traders remained optimistic with a report that the RBI is likely to cut key interest rates by 25 basis points either at the upcoming policy review in February or the one after that in April. Adding to the optimism, the Cabinet raised the government's contribution to National Pension Scheme (NPS) to 14% of basic salary from the current 10%. over the next five years. Finally, the rupee ended at 70.67, 23 paise stronger from its previous close of 70.90 on Thursday.

 

The FIIs as per Friday'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 5395.85 crore against gross selling of Rs 5449.24 crore, while in the debt segment, the gross purchase was of Rs 3739.53 crore with gross sales of Rs 1161.05 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.41 crore against gross selling of Rs 0.09 crore.

 

The US markets extended their losses for third straight session and ended sharply lower on Friday on weaker-than-expected jobs report and China-US trade tensions. Asian markets were trading in red on Monday on worries over slowing growth and fears that a fresh flare-up in tensions between Washington and Beijing could quash any chances of a trade deal. Snapping three-day losing streak, Indian markets ended significantly higher on Friday as a strong rupee amid positive cues from Asia and Europe bolstered investor sentiment. Today, the markets are likely to make gap-down opening on weak global cues amid US-China trade tensions. Traders may remain cautious ahead of the election results outcome of the five major states - Chhattisgarh, Madhya Pradesh, Mizoram, Telangana and Rajasthan - on December 11. The exit polls for five states showed that Prime Minister Narendra Modi's popularity is in doubt going into 2019 election. Traders will be reacting to a report that foreign investors have pulled put close to Rs 400 crore from the Indian stock market in the last five trading sessions amid weakness in global equities due to the arrest of a high-profile Chinese executive. Traders will also be concerned about the Reserve Bank of India's (RBI) data showing that India's current account deficit (CAD) widened to 2.9% of the Gross Domestic Product (GDP) in the second quarter of the fiscal compared to 1.1% in the year-ago period, mainly due to a large trade deficit. However, traders may take some support later in the day with the RBI's weekly statistical supplement showing that India's foreign exchange (forex) reserves rose by $932.8 million during the week ended November 30. Also, traders may take note of IMF's Chief Economist Maurice Obstfeld's statement that India's growth has been very solid over the past four years and he praised the fundamental economic reforms like the GST and the Insolvency and Bankruptcy Code carried out by the government. There will be some reaction in steel sector stocks with the Joint Plant Committee's (JPC) report showing that India's crude steel output grew 3.8% to 8.92 million tonne (MT) in November 2018as compared to 8.60 MT crude steel produced during the same period a year ago. There will be some buzz in the gem and jewellery sector stocks with report that India's gem and jewellery exports, which witnessed a decline of 4.35% in dollar terms during April-October, may post a recovery in the remaining five months of the current fiscal year, thanks to improved macroeconomic conditions in the US. Also, there will be some buzz in the coal sector stocks with a private repro that India's coal import rose 9.7% to 156.08 MT in the April-November period of the ongoing fiscal, as against 142.25 MT in the corresponding months a year ago.

 

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

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

NSE Nifty

10,693.70

10,627.18

10,732.38

BSE Sensex

35,673.25

35,457.66

35,809.44

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

497.51

166.20

161.47

171.47

Kotak Mahindra Bank

338.08

1,279.65

1,188.55

1,358.35

Sun Pharma

239.06

411.25

404.27

422.12

ICICI Bank

149.80

352.20

347.33

355.03

IOC

137.48

129.75

127.77

132.67

 

  • Larsen & Toubro's construction arm -- L&T Construction has won orders worth Rs 2,547 crore. 
  • Tata Motors' wholly owned subsidiary -- JLR has reported total retail sales of 48,160 vehicles in November 2018, down 8.0% year-on-year. 
  • Government has sold 2.21%, i.e. 13,73,11,943 equity shares in Coal India to CPSE ETF mutual fund scheme. 
  • NTPC is likely to acquire the central government's stake in SJVN.
News Analysis