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Market Commentary 15 January 2020
Markets to get a pessimistic start amid lackluster global cues

 

Indian equity bourses hit yet another record closing highs on Tuesday, with Sensex and Nifty gaining over 0.20% each. The start of the day was sluggish, as India's retail inflation based on Consumer Price Index (CPI) jumped to an over five-year high of 7.35% in December 2019. The CPI was 2.11% in December 2018 and 5.54% in November 2019. Traders remained pessimistic, amid reports that the deepening slowdown has it impact on the deal market in 2019 with mergers and acquisitions (M&As) plummeting over 34 per cent to $67.1 billion but still making it the second best, on the back of the $6-billion ArcelorMittal takeover of Essar Steel. Volatility persisted over the street for the most part of the session, after India's Wholesale price index inflation also worsened to 2.59 percent in the month of December 2019 as against 0.58 percent for the previous month and 3.46 percent during the corresponding month of the previous year.  However, in the last leg of the trade, bourses staged sharp recovery to end higher, as the Reserve Bank of India remained a net purchaser of the US dollar in November, buying $6.928 billion from the spot market on a net basis. The RBI had bought $7.458 billion of the greenback and sold $530 million in the spot market in the reporting month. Finally, the BSE Sensex gained 92.94 points or 0.22% to 41,952.63, while the CNX Nifty was up by 32.75 points or 0.27% to 12,362.30.

 

The US markets ended mostly lower on Tuesday as earnings season opened with mixed banking results. Shares of Wells Fargo (WFC) moved sharply lower after the banking giant reported fourth quarter results that missed expectations. However, shares of JPMorgan Chase (JPM) saw notable strength on the day after the financial giant reported better than expected fourth quarter results. Besides, sentiments were bruised private report that said the United States could maintain tariffs on more than $300 billion in Chinese goods past November 2020. The report came a day before US and Chinese representatives are set to sign a partial trade deal in which the Washington agreed not to impose additional tariffs and to reduce tariffs on about $120 billion of goods. On the economic data front, consumer prices in the US increased by slightly less than anticipated in the month of December, according to a report released by the Labor Department. The Labor Department said its consumer price index rose by 0.2 percent in December after climbing by 0.3 percent in November. Street had been expecting another 0.3 percent increase. The increase in consumer prices was partly due to a jump in energy prices, which surged up by 1.4 percent in December amid a 2.8 percent jump in gasoline prices. Excluding food and energy prices, core consumer prices inched up by 0.1 percent in December after rising by 0.2 percent in November. Core prices had been expected to rise by another 0.2 percent. The uptick on core prices reflected higher prices for shelter and medical care as well as increases by prices for apparel, motor vehicle insurance, recreation, and new vehicles.

 

Snapping a five-day losing streak, crude oil futures settled higher on Tuesday on optimism about a US-China trade deal.  Meanwhile, the Energy Information Administration (EIA) in a monthly report raised its 2020 forecast for WTI oil prices to $59.25 a barrel, up 7.7% from its forecast a month earlier. For Brent crude, it sees an average of $64.83 in 2020, up 7.1% from its previous forecast. Both global oil supply and consumption are expected to grow in 2020, with supply from non-OPEC producers, particularly the Unites States, Norway, Brazil, and Canada, more than offsetting declining production from OPEC. For 2020, the EIA sees total global production of petroleum and other liquids at 102.37 million barrels a day and total global consumption at 102.11 million barrels a day. Crude oil futures for February gained 15 cents or 0.3 percent to settle at $58.23 a barrel on the New York Mercantile Exchange. March Brent rose 29 cents or 0.5 percent to settle at $64.49 a barrel on London's Intercontinental Exchange.

 

Snapping its five-day winning streak, Indian rupee ended almost flat against dollar on Tuesday, as rising crude oil prices kept investors edgy. Traders also remained wary as India's retail inflation spiked to five year high. India's retail inflation spiked to a five-year high in December, breaching the upper end of the RBI's 2-6 percent target for the first time since July 2016. Inflation increased notably to 7.35 percent from 5.54 percent in November, driven by higher food prices. Also, wholesale prices based inflation surged to 2.59 per cent in December, as against 0.58 per cent in November due to increase in prices of food articles like onion and potato. On the global front, euro fell on Tuesday as investors locked in some gains after a recent record-setting rally ahead of the signing of an initial U.S.-China trade truce. Finally, the rupee ended at 70.87, 1 paise weaker from its previous close of 70.86 on Monday.

 

The FIIs as per Tuesday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 4881.89 crore against gross selling of Rs 4761.10 crore, while in the debt segment, the gross purchase was of Rs 595.50 crore with gross sales of Rs 1724.39 crore. Besides, in the hybrid segment, the gross buying was nil against gross selling of Rs 6.54 crore.

 

The US markets ended mostly lower on Tuesday as traders seemed reluctant to make significant moves as they digested quarterly results from several big-name financial companies. All the Asian markets are trading in red on Wednesday as investors awaited the signing of an initial US-China trade deal, with sentiment somewhat dented by comments from the US Treasury Secretary that tariffs would remain in place for now. Indian markets settled at record highs on Tuesday as investors shrugged off data showing high retail inflation. Today, the markets are likely to make pessimistic start amid lackluster global cues. Investors will be eyeing Balance of Trade data for the month of December to be out later in the day. There will be some cautiousness with a private report that a spike in India's retail inflation in December has raised the chances that the Reserve Bank of India (RBI) will put rate cuts on hold for some time despite economic growth languishing at more than six-year lows. As per the report, the RBI's monetary policy committee (MPC) may even change its stance from accommodative to neutral at its February meeting. Traders may also take note of report that new FICCI President Sangita Reddy has urged the government not to worry too much about the fiscal deficit and try to pump the economy by increasing investments to arrest slowdown and accelerate growth. Besides, the government may impose anti-dumping duty on a Chinese medicine used to treat different kind of bacterial infections with a view to guard domestic players from cheap imports. The commerce ministry's investigation arm Directorate General of Trade Remedies (DGTR) has initiated a probe into an alleged dumping of Ciprofloxacin Hydrochloride from China. Meanwhile, according to the much awaited draft Rare Diseases Policy, the government will provide a financial support of up to Rs 15 lakh under its Rashtriya Arogaya Nidhi scheme for one-time treatment of rare diseases. There will be some buzz in the reality stocks with a joint report by Knight Frank-FICCI-Naredco stating that real estate sentiments in the country revived in December quarter and turned optimistic after two quarters on the back of several measures taken by the government and the RBI to boost demand. There will be some reaction in power stocks with the Central Electricity Authority data showing that India's annual electricity demand in 2019 grew at its slowest pace in six years with December marking a fifth straight month of decline. There will be some earnings announcements too to keep the markets buzzing.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

12,362.30

12,322.58

12,388.13

BSE Sensex

41,952.63

41,817.60

42,040.96

 

                                                         Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

3,149.75

38.55

36.15

41.35

Tata Motors

298.68

195.85

193.55

198.20

SBI

262.96

328.00

325.77

330.97

Vedanta

197.28

165.00

161.97

167.07

GAIL (India)

192.61

130.05

128.07

132.42

 

  • IOC has developed a special class diesel conforming to NATO grade for use in ships and vessels of Indian Navy. 
  • Tata Motors has commenced bookings of the BS-VI compliant versions of Tiago, Tigor and the Nexon. 
  • SCR has inked a MoU with SBI in connection with doorstep banking for direct pick up of earnings covering all 585 railway stations. 
  • Bajaj Auto has launched its much-awaited Chetak electric scooter and the bookings will start from January 15.
News Analysis