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NSE Intra-day chart (16 May 2018)
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Market Commentary 17 May 2018
Markets likely to start slightly in green

 

Indian equity benchmarks ended the Wednesday's session with a cut of around half a percent with frontline gauges breaching their crucial 35,400 (Sensex) and 10,750 (Nifty) levels, amid uncertainty over government formation in Karnataka. Markets started the session on subdued note as sentiments remained downbeat on report that India's trade deficit slightly widened to $13.72 billion in April from $13.25 billion a year ago. Exports grew by 5.17% to $25.91 billion in April compared to the same month last year on account of healthy performance by engineering, chemicals and pharmaceutical segments. Imports too grew by 4.60% to $39.63 billion in the month on yearly basis. Traders also reacted negatively to a private report which stated that inflation is set to rise further towards the second half of the fiscal, and could average 5.1% this financial year compared to 3.6% last year. According to the global financial services major, the factors that are likely to impact inflation going forward include higher oil prices, a weaker rupee, higher MSPs and more currency in circulation. Though, markets trimmed most of their losses in second half of the session as traders took some solace with media reports that Yeddyurappa was elected as BJP legislature party head and Karnataka governor may invite BJP to form the government. Meanwhile, in a bid to promote growth of the global economy, Commerce and Industry Minister Suresh Prabhu has pitched for inclusion of a comprehensive trade facilitation agreement (TFA) on services in the World Trade Organization (WTO). However, the recovery was not enough to bring markets back in green and selling in dying hour of trade dragged markets below their respective crucial levels as traders turned pessimistic on report that the total investment via Participatory notes (P-notes) into Indian capital markets plunged to nearly 9-year low of Rs 1 lakh crore in April amid stringent norms put in place by the regulator SEBI to check misuse of these instruments. Finally, the BSE Sensex shed 156.06 points or 0.44% to 35,387.88, while the CNX Nifty was down by 60.75 points or 0.56% to 10,741.10.

 

The US markets closed higher on Wednesday, with major indexes advancing in a broad rally as investors appeared to shake off fears of rising bond yields, helping equities resume a recent uptrend. In addition, there was some political uncertainty surrounding North Korea, after Pyongyang overnight signaled its leader, Kim Jong Un, might pull out of next month's summit with President Donald Trump if the US insists on denuclearization for the isolated nation. St. Louis Federal Reserve Bank President James Bullard said he believes the Fed's policy rate is pretty close to neutral, and that further rate hikes would act to slow economic growth and push downward on inflation. On the economy front, industrial production rose 0.7% in April. The gain was slightly above expectations of a 0.6% increase. There was a mix of revisions to the prior two months that were downward on net. Still, output rose at a 2.3% rate in the first quarter. Capacity utilization rose to 78% in April, a three-year high. Manufacturing output rose 0.5% in April after a flat reading in March. Motor vehicle output fell 1.3%. Mining output, which includes oil and gas production, rose 1.1% while utility output was up 1.9%. In April, the rise in industrial production was supported by increases in every major market group. The Dow Jones Industrial Average gained 62.52 points or 0.25 percent to 24,768.93, the Nasdaq gained 46.668 points or 0.63 percent to 7,398.30, and the S&P 500 was up by 11.01 points or 0.41 percent to 2,722.46.

 

Crude oil futures extended gains on Wednesday, on the back of second consecutive weekly decline in US crude inventories and continued signs of a pullback in the global glut of oil. The US Energy Information Administration (EIA) in its report said that US crude oil inventories decreased in the week to May 11, and the refining sector increased 149,000 barrels per day. According to the Weekly Petroleum Status Report, US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 1.4 million barrels during the week ending May 11. Benchmark crude oil futures for June delivery gained 18 cents or 0.30 percent to settle at $71.49 a barrel on the New York Mercantile Exchange. July Brent crude surged 85 cents or 1.10 percent to settle at $79.28 a barrel on London's Intercontinental Exchange.

 

Indian rupee staged a smart recovery from its sixteenth-month low on Wednesday, following heavy dollar selling from banks and exporters. Sentiments turned optimistic with media reports that Yeddyurappa was elected as BJP legislature party head and Karnataka governor may invite BJP to form the government. Sentiments remained up-beat despite report that India's trade deficit slightly widened to $13.72 billion in April from $13.25 billion a year ago. Exports grew by 5.17% to $25.91 billion in April compared to the same month last year on account of healthy performance by engineering, chemicals and pharmaceutical segments. Imports too grew by 4.60% to $39.63 billion in the month on yearly basis. Besides, dollar's weakness against some currencies in the global market largely helped the rupee to rebound from early plunge. On the global front, euro slumped to a five-month low on Wednesday after reports that a possible future Italian government would seek debt forgiveness from European creditors and as the dollar resumed its month-long and powerful rally. Finally, the rupee ended at 67.78, 32 paise stronger from its previous close of 68.10 on Tuesday.

 

The FIIs as per Wednesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 5348.46 crore against gross selling of Rs 5532.49 crore, while in the debt segment, the gross purchase was of Rs 493.97 crore with gross sales of Rs 860.75 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.41 crore against gross selling of Rs 0.03 crore.

 

The US markets ended higher on Wednesday, as investors shrugged off geopolitical uncertainty after North Korea threatened to cancel an historic meeting between leader Kim Jong Un and President Donald Trump. Asian markets are exhibiting mixed trend in early deals on Thursday. However, the Japanese stock market edged higher as investors shrugged off weak Japanese core machinery orders data for March. Indian equity benchmarks ended Wednesday's session lower amid uncertainty over the composition of the next government in Karnataka. Today, the markets are likely to make flat-to-positive start amid mixed global cues. Traders will get some support from report that the Centre has contained its fiscal deficit for FY18 at 3.42% of gross domestic product (GDP), down from 3.5% estimated (RE) when Budget FY19 was presented on February 1. An Rs 85,000 crore (3.8%) reduction in expenditure from the RE level of Rs 22.18 lakh crore and a marginal upward revision in nominal GDP in the second advance estimate (the Budget relied on the first advance estimate) allowed the government to curb the deficit. However, traders will remain little concern on report that total investments via participatory notes (P-notes) into Indian capital markets plunged to a 9-year low of Rs 1 lakh crore in April amid stringent norms put in place by the Securities and Exchange Board of India to check the misuse of these instruments. There will be buzz in public sector undertakings (PSU) related stocks after the Cabinet approved a mechanism within the government for speedy resolution of commercial disputes of central public sector enterprises without cases going to courts. A new two-tier mechanism will be put in place of the existing Permanent Machinery of Arbitration mechanism to resolve such commercial disputes. There will be some important earnings announcements too, to keep the markets buzzing.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,741.10

10,697.05

10,787.80

BSE Sensex

35,387.88

35,238.38

35,540.64

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank

255.16

297.25

293.40

303.00

ITC

180.63

285.85

280.67

289.92

Hindalco Industries

172.98

239.75

235.30

245.90

State Bank of India

172.22

243.10

239.57

247.67

Yes Bank

127.08

349.75

342.35

356.80

 

  • ICICI Bank has acquired 168,999,900 shares of Gammon Infrastructure Projects through pledge invocation. 
  • M&M's arm - EPC Industrie has entered into an agreement to form a JVC in India with Top Greenhouses, Israel. 
  • TCS has welcomed more than 200 new employees to Little Rock, Arkansas, as part of its groundbreaking agreement with Transamerica to transform the administration of its US insurance and annuity business lines. 
  • ITC has reported a rise of 9.86% in its net profit at Rs 2932.71 crore for Q4FY18 as compared to Rs 2669.47 crore for Q4FY17.
News Analysis