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NSE Intra-day chart (15 October 2019)
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Market Commentary 16 October 2019
Markets to get a positive start amid firm global cues

 

Indian equity benchmarks settled higher for third straight session on Tuesday, despite mixed cues from global markets. The start of the day was firm, aided by Minister of State for Finance Anurag Thakur's statement that Indian economy is structurally and fundamentally very strong and the current slowdown, which is cyclical in nature, would not affect it much. He also exuded confidence that India would achieve the target of becoming $5 trillion economy by 2024-25. Market participants also took a note of the Finance Ministry's statement that loans worth Rs 81,781 crore were disbursed during the nine-day outreach programme or loan mela organized by banks that began on October 1. Bourses extended their gains in the second half of trading session, taking support with Commerce and Industry Minister Piyush Goyal's statement that the recent economic slowdown is a cyclic structural adjustment, and it is the right time to invest in India before growth bounces back. The street overlooked report that the Consumer Price Index (CPI) based inflation jumped to a 14-month high of 3.99% in September as compared to 3.28% in August and 3.70% in the September last year, rising for the second straight month, due to costlier vegetables and pulses. The previous high was 4.17% in July 2018. Though, it still remained within the Reserve Bank of India's target range of 4%, with deviation of 2% on either side. Finally, the BSE Sensex gained 291.62 points or 0.76% to 38,506.09, while the CNX Nifty was up by 87.15 points or 0.77% to 11,428.30.

 

The US markets ended higher on Tuesday as investors cheered a raft of largely upbeat corporate earnings reports, while considering the implications of a partial US-China trade deal announced last Friday and the possibility of a breakthrough in Brexit negotiations. Financial giant JPMorgan Chase (JPM) helped lead the advance on markets after reporting third quarter results that exceeded street estimates on both the top and bottom lines. UnitedHealth (UNH) also reported better than expected third quarter results and raised its full-year guidance. On the economic front, the International Monetary Fund said global economy is set to expand at the slowest pace in a decade this year amid weak manufacturing momentum, and rising trade and geopolitical tensions. The global lender cut the growth forecast for this year to 3 percent from 3.3 percent projected in April, in its latest World Economic Outlook. The pace of growth this year will be the lowest since 2008-09 global financial crisis. The Federal Reserve Bank of New York released a report unexpectedly showing a modest acceleration in the pace of growth in regional manufacturing activity in the month of October. The New York Fed said its headline general business conditions index edged up to 4.0 in October after dipping to 2.0 in September, with a positive reading indicating an increase in regional manufacturing activity. The modest uptick came as a surprise to participants, who had expected the general business conditions index to slip to 0.8. The unexpected increase by the headline index partly reflected a notable acceleration in the pace of growth in shipments, with the shipments index jumping to 13.0 in October from 5.8 in September.

 

Extending previous session losses, crude oil futures ended lower on Tuesday as a lower economic growth forecast from the International Monetary Fund (IMF) fueled worries over energy demand. The IMF said that the global economy is set to expand at the slowest pace in a decade this year.  The IMF said it sees global economic growth falling to a 3% rate this year, the slowest pace since the 2008 financial crisis. Besides, a report from the Energy Information Administration (EIA) that said US shale output will climb notably in November also weighed on the commodity. According to a report from EIA, crude oil production from major US shale plays will likely climb by 58,000 barrels a day in November to 8.971 million barrels a day. Benchmark crude oil futures for November declined 78 cents or 1.5 percent to settle at $52.81 a barrel on the New York Mercantile Exchange. December Brent dropped 61 cents or 1 percent to settle at $58.74 a barrel on London's Intercontinental Exchange.

 

Extending weakness for the second day, Indian rupee ended lower against dollar on Tuesday, as good demand for the greenback from importers. Traders remain concerned with a data released by the Central Statistics Office (CSO) showing that India's retail inflation rate grew 3.99% in September which is very close to the Reserve Bank of India's (RBI) target level of 4%. The retail inflation for August was 3.21%. Cautiousness also crept in with former RBI Governor Raghuram Rajan expressed concern over India's fiscal deficit figures, stating that it is the likely reason behind the slowdown in Indian economy. He also criticised the government over its populist decision-making which failed to focus on economic growth. Dollar weakened against some currencies overseas coupled with strong gains in the local equity market failed to cast any impact on the rupee. On the global front, dollar slipped against its rivals on Tuesday as optimism over trade negotiations between the world's two largest economies and for an orderly British exit from the European Union started to fade. Finally, the rupee ended at 71.54, 31 paise weaker from its previous close of 71.23 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 10106.27 crore against gross selling of Rs 3953.01 crore, while in the debt segment, the gross purchase was of Rs 867.41 crore with gross sales of Rs 924.06 crore. Besides, in the hybrid segment, the gross buying was of Rs 5.31 crore against gross selling of Rs 3.11 crore.

 

The US markets ended higher on Tuesday on strong US corporate results and a possible deal to avoid a disorderly British exit from the European Union. Asian markets are trading in green on Wednesday as Britain and the EU made headway on a Brexit deal ahead of a leaders' summit though it remained unclear if London could avoid postponing its scheduled departure on October 31. Indian markets extended their gains for third consecutive session and ended in green on Tuesday led by gains in auto, financial and FMCG stocks. Today, the markets are likely to make positive start following firm global cues coupled with falling oil prices and hopes of more interest rate cuts by the Reserve Bank of India (RBI). A private report stated that the RBI will continue to be accommodative and deliver one more rate cut in the December policy review despite the surprising spike in headline inflation for September. However, there may be some cautiousness as the International Monetary Fund (IMF) slashed India's GDP growth projection for the year 2019 to 6.1%, which is 1.2% down from its April projections and noted that the Indian economy is expected to pick up the next year at 7.0 % in 2020. Traders may be concerned with government data showing that India's exports contracted by 6.57% to $26 billion in September mainly due to significant dip in shipments from key sectors such as petroleum, engineering, leather, chemicals, and gems & jewellery. Imports too declined by 13.85% to $36.89 billion, narrowing trade deficit to $10.86 billion in September. There will be some buzz in the auto stocks with Ind-Ra's report that the much-awaited vehicle scrappage policy, which is under consideration of the Cabinet, is unlikely to help revive demand for new commercial vehicles (CVs) in the short-term, though used CVs sale may see an improvement. Aviation stocks will be in focus with Icra's report that Indian airlines international air passenger traffic degrew 8.2% in August as against a 3.9% growth in the domestic volume in the same month, with market share declining to 34.2% in the month due to under-performance. There will be some reaction in services industry stocks with the RBI's data showing that India's services exports rose by 10.4% to $18.24 billion in August in the current financial year. Also, there will be some buzz in the port stocks with Union Minister Mansukh Mandaviya's statement that the government will put in place a comprehensive Port Grid and Port Development plan in six months for 204 minor ports in the country to boost coastal shipping and inland waterways, and bring a Bill in Parliament to provide a fillip to major ports. There will be some result announcements to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,428.30

11,359.48

11,479.73

BSE Sensex

38,506.09

38,284.51

38,681.43

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

1,936.02

40.60

39.25

41.70

Tata Motors

575.49

126.95

124.13

129.33

SBI

234.45

258.45

255.53

260.63

Tata Steel

179.72

349.20

339.15

358.80

Vedanta

177.89

153.50

146.70

158.10

 

  • ICICI Bank has launched FD Health, a FD offering the dual-benefit of investment growth via FD and protection through a critical illness coverage. 
  • Mahindra group's truck and bus division has rolled out a new variant of its Blazo series of trucks in the 16-wheeler category, and it is on track to make its products BSVI compliant. 
  • Reliance Industries' telecom arm -- Jio has launched its patent-filed innovation an artificial intelligence based video call assistant. 
  • HCL Technologies has extended its IT operations and transformation agreement with Equinor.
News Analysis