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Market Commentary 23 January 2020
Benchmarks to get a cautious start amid weakness in Asian peers

 

Indian equity bourses extended their southward journey for third straight session on Wednesday, with Sensex & Nifty ending lower by around 0.50% each. The start of day was on firm note, aided with Union Minister Piyush Goyal's statement that India is working on ways to have fairer and more equitable terms in its trade relationships with various countries. But soon, indices lost gaining momentum, amid report that direct tax collections till January 15 stood at Rs 7.3 lakh crore, down 5.2% from the year-ago period. Gross direct tax collections - after refunds but before devolution to states - for FY20 is budgeted to grow at 17.4% to Rs 13.35 lakh crore. Losses got intensified during second half of the session, as a UN study report stated that economic inequality has risen to historic high levels across various countries with over 70 per cent of the world population living in countries where inequality has grown further and these include India and China. Domestic sentiments remained downbeat, after credit rating agency, Ind-Ra report stated that it expects GDP to grow at 5.5 percent year-on-year in FY21 but added that downside risks persist. This is only a marginal improvement over the GDP growth of 5 percent estimated by the National Statistical Office for the FY20. Finally, the BSE Sensex lost 208.43 points or 0.50% to 41,115.38, while the CNX Nifty was down by 62.95 points or 0.52% to 12,106.90.

 

The US markets ended mostly higher on Wednesday on reports that the Chinese government's efforts to stop the spread of the Wuhan coronavirus outbreak. Chinese health officials said that hospitals are stepping up preventive measures and government officials are recommending that people not enter or leave Wuhan. Meanwhile, China's National Health Commission confirmed more than 500 cases of the deadly coronavirus, which causes pneumonia, and 17 fatalities. Besides, a positive reaction to earnings news from IBM Corp. (IBM) contributed to the strength on markets, with the tech giant jumping by 3.4 percent. The advance by IBM came after the company reported better than expected fourth quarter results and provided upbeat full-year 2020 guidance. On the economic data front, after reporting a notable decrease in US existing home sales in the previous month, the National Association of Realtors (NAR) released a report showing existing home sales rebounded by much more than anticipated in the month of December. NAR said existing home sales spiked by 3.6 percent to an annual rate of 5.54 million in December after tumbling by 1.7 percent to a rate of 5.35 million in November. Street had expected existing home sales to jump by 1.2 percent to an annual rate of 5.43 million. With the much bigger than expected monthly increase, existing home sales in December were up by 10.8 percent compared to the same month a year ago. On a full-year basis, NAR said total existing home sales came in at 5.34 million in 2019, unchanged from the previous year. 

 

Crude oil futures ended sharply lower on Wednesday as fears of an oversupply of crude. In its annual World Energy Outlook report, the Energy Information Administration (IEA) said increasing US shale output will continue to blunt the influence of other energy producers, including members of the Organization of the Petroleum Exporting Countries. Besides, concerns over the potential for oil demand destruction if fears about the spread of the coronavirus increase have also contributed to the weakness in oil prices. Crude oil futures for March dropped $1.64 or 2.8 percent to settle at $56.74 a barrel on the New York Mercantile Exchange. March Brent fell $1.38 or 2.1 percent to settle at $63.21a barrel on London's Intercontinental Exchange.

 

Indian rupee ended marginally higher against dollar on Wednesday, as bankers and exporters took to selling of American currency. Traders took some support with Union Minister Piyush Goyal's statement that India is working on ways to have fairer and more equitable terms in its trade relationships with various countries. Easing crude oil prices also supported the rupee. However, gains were limited as some concern came with a UN study report stated that economic inequality has risen to historic high levels across various countries with over 70 per cent of the world population living in countries where inequality has grown further and these include India and China. On the global front, US dollar edged higher Wednesday as traders took a calmer view of the emergence of the pneumonia-like virus in China, but its gains were minimal and caution was still abundant. Finally, the rupee ended at 71.19, 2 paise stronger from its previous close of 71.21 on Tuesday.

 

The FIIs as per Wednesday'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 7277.92 crore against gross selling of Rs 5581.39 crore, while in the debt segment, the gross purchase was of Rs 392.36 crore with gross sales of Rs 1556.01 crore. Besides, in the hybrid segment, the gross buying was of Rs 6.37 crore against gross selling of Rs 3.63 crore.

 

The US markets ended mostly higher on Wednesday, as a healthy forecast from IBM helped mitigate worries over the developing coronavirus outbreak. Asian markets were trading mostly in red on Thursday as the death toll rises in China due to a mysterious pneumonia-like virus. Indian markets ended lower for third straight session on Wednesday, dragged down by weakness in banking, metal, oil & gas and power stocks. Today, the markets are likely to get a cautious start following weakness in Asian peers amid economic growth concerns. There will be some concern with report that the largest democracy in the world, India, dropped ten places in the Democracy Index's global ranking to 51, with an overall score of 6.90 in 2019 from 7.23 in 2018. The primary cause of democratic regression was an erosion of civil liberties in the country. However, some support may come with rating agency Crisil's statement that it expects a recovery in rural demand in the country from March-April onwards owing to an increase in farm incomes, good monsoons and improving urban demand. Traders may take note of report that in a major relief for small traders with an annual turnover of Rs 5 crore or less, the government has announced the extension of the cut-off date for filing monthly GST returns by up to 4 days. Meanwhile, markets regulator SEBI has notified norms governing portfolio managers, under which the minimum investment limit for investors has been doubled to Rs 50 lakh, and the managers have been directed to increase their net worth to Rs 5 crore within three years. Separately, to streamline the process and reduce the time taken for rights issues by companies, SEBI has cut down the period for advance notice given to stock exchanges to three days from the current seven days. There will be some buzz in the coal stocks with a Central Electricity Authority data showing that coal imports by power producers in the country rose by 17.6 per cent during April-December this fiscal to 52.48 million tonnes compared to 44.64 million tonnes a year ago. Infra stocks will be in focus as the government said that Road Transport and Highways Minister Nitin Gadkari will review road projects worth Rs 3 lakh crore on January 23 and January 24 with a view to fast track highway projects. Besides, a private report indicated that investments in Indian infrastructure increased by around 25 per cent to $ 28.74 billion in 2019, highest since 2016. There will be lots of important earnings announcements too, to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

12,106.90

12,054.85

12,192.00

BSE Sensex

41,115.38

40,938.85

41,412.10

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Indian Oil Corporation

717.29

113.65

111.43

116.38

Yes Bank

624.01

38.45

37.97

38.97

ZEEL

523.16

300.35

280.23

312.23

Tata Motors

329.52

185.60

182.40

190.65

Power Grid Corporation

319.43

200.05

194.62

203.92

 

  • HCL Technologies has launched a dedicated HCL Microsoft Business Unit focused on Microsoft technologies. 
  • Bharti Airtel has received the approval from DoT for increasing the limit of foreign investment upto 100% of the paid up capital of the Company. 
  • GAIL India is ferrying imported LNG in trucks from Gujarat coast to Bhubaneshwar in Odisha as part of a government push for a gas-based economy to reduce emission and carbon footprint. 
  • Tata Motors has entered into the premium hatchback segment with the rollout of Altroz at a starting price of Rs 5.29 lakh.
News Analysis