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Market Commentary 26 July 2018
Markets likely to make optimistic start amid positive global cues

 

Indian equity benchmarks ended the choppy day of trade almost flat, as traders remained on sidelines ahead of November derivatives expiry on Thursday. Markets traded lackluster throughout the session with report that the International Monetary Fund (IMF) has cautioned India it should not rely on global financial markets to finance its current account deficit (CAD) when it goes above 3% of gross domestic product (GDP). The Fund basically advised India to rely more on stable sources of foreign inflow - foreign direct investment (FDI). Investors remained concerned with Minister of State for Agriculture Parshottam Rupala's statement that Union Government, at present, is not considering any loan waiver Scheme for farmers, as such, waivers may impact the credit culture of a State by incentivising the defaulters, even if they are in a position to repay the loan, and thus, create/amplify the moral hazard by discouraging those borrowers who have been regular in repaying their loans. Anxiety also persisted with a private report stating that India's low trade-to-gross domestic product (GDP) ratio, favourable demographics, high commodity imports and pro-reform government will shield it to a large extent should trade tensions escalate and lead to a global economic slowdown. Though, traders took some solace with Prime Minister Narendra Modi's statement that India is emerging as a global manufacturing and start-up hub and many of the Made-in-India products, including cars and smartphones, are today exported to nations from whom the country used to import. Market participants also took some support with Chairman of the PHD Chamber of Commerce and Industry, Anil Khaitan's statement that India needs to focus on exports and regulatory reform to propel the Indian economy forward. Local gauges also get some support with a private poll stating that India will remain the fastest-growing major economy this year supported by increased government spending ahead of next year's general election, but rising oil prices pose the biggest downside risk. Finally, the BSE Sensex rose 33.13 points or 0.09% to 36,858.23, while the CNX Nifty was down by 2.30 points or 0.2% to 11,132.00.

 

The US markets ended higher on Wednesday, following the announcement of a pact to ease trade tensions between the US and the European Union after an important tete-a-tete between President Donald Trump and the EU's Jean-Claude Juncker in Washington. Trump said that the US and the EU will maintain a close relationship with strong trade relations. He further said Washington and Europe would work together toward zero tariffs, zero non-tariff barriers, zero subsidies on non auto-industrial goods. The eurozone and Washington also agreed to lower industrial tariffs on both sides and increase liquefied natural gas and soybean exports to Europe, with an agreement to avoid tariffs on European auto makers in the works. On the economic front, the Commerce Department released a report showing a bigger than expected pullback in new home sales in the month of June. The report said new home sales plunged by 5.3% to an annual rate of 631,000 in June after jumping by 3.9% to a rate of 666,000 in May. Street had expected new home sales to fall by 2.8%. The bigger than expected decrease in new home sales came as sales in the Mid-west plummeted by 13.4% to a rate of 71,000. New home sales in the South and West also tumbled by 7.7% and 5.2%, respectively, while new home sales in the Northeast spiked by 36.8%. The Commerce Department also said the median sales price of new houses sold in June was $302,100, down 4.2% from $315,200 in the same month a year ago. The Dow Jones Industrial Average surged 172.16 points or 0.68 percent to 25414.10, the S&P 500 gained 25.67 points or 0.91 percent to 2846.07 and the Nasdaq was up by 91.47 points or 1.17 percent to 7932.24.

 

Crude oil futures ended higher on Wednesday, following a larger-than-expected drop in weekly inventories. The Energy Information Administration said oil stocks fell by 6.1 million barrels in the week ended July 20. Analysts surveyed by the Wall Street Journal had forecast a fall of 2.9 million barrels, while the American Petroleum Institute, an industry trade group, had reported a 4.2 million barrel decline. Besides, prices have also been buoyed this week in part by escalating tensions between the US and Iran, which have reignited investor concerns that stricter American economic sanctions against the Islamic Republic could significantly disrupt its oil exports. Benchmark crude oil futures for September rose 78 cents or 1.1 percent to settle at $69.30 a barrel on the New York Mercantile Exchange. September Brent crude gained 49 cents or 0.7% at $73.93 a barrel on London's Intercontinental Exchange.

 

Snapping two days depreciating streak, Indian rupee ended higher against dollar on Wednesday, on persistent selling of the American currency by exporters. Sentiments turned optimistic with Prime Minister Narendra Modi's statement that India is emerging as a global manufacturing and start-up hub and many of the Made-in-India products, including cars and smartphones, are today exported to nations from whom the country used to import. Besides, the dollar losing muscle against other currencies overseas too supported the rupee. However, there was some cautiousness too with report that the International Monetary Fund (IMF) has cautioned India it should not rely on global financial markets to finance its current account deficit (CAD) when it goes above 3% of gross domestic product (GDP). The Fund basically advised India to rely more on stable sources of foreign inflow - foreign direct investment (FDI). On the global front, euro edged higher on Wednesday ahead of a meeting between U.S. President Donald Trump and European Commission President Jean-Claude Juncker but gains were limited with investors cautious about a trade rift between the two powers. Finally, the rupee ended at 68.79, 16 paise stronger from its previous close of 68.95 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 5098.84 crore against gross selling of Rs 5044.88 crore, while in the debt segment, the gross purchase was of Rs 872.18 crore with gross sales of Rs 1415.57 crore. Besides in the hybrid segment, the gross selling was of Rs 2.51 crore against no buying.

 

The US markets ended higher on Wednesday, after President Trump secured some concessions from the European Union to avoid an escalation in trade tensions. Asian markets were reading mostly in green on Thursday, taking leads from gains on Wall Street after US President Donald Trump and European Commission President Jean-Claude Juncker agreed to work toward eliminating trade barriers on industrial goods. Indian equity markets ended flat on Wednesday, amid mixed global cues as investors awaited the outcome of a key meeting between US President Donald Trump and European Commission President. Today, the markets are likely to make optimistic start of the F&O expiry session, tracking positive global cues. Traders will be getting encouragement with Commerce and Industry Minister Suresh Prabhu's statement that India's exports would register healthy growth rates in the coming months and are expected to touch $350 billion in 2018-19. He also said that services sector is set to become a dominant driver of the Indian economy and will contribute $3 trillion to the GDP by 2025. There will be some support with Housing and Urban Affairs Minister Hardeep Singh Puri's statement that India's economy will breach the $5 trillion mark by 2025. Traders will be getting some support with the global rating agency Moody's Investor Service's statement that the fund infusion in five weak public sector banks will be credit positive and strengthen their capitalization. Traders will also be reacting to outgoing Chief Economic Adviser Arvind Subramanian exuded confidence that the highest slab of 28% tax under the Goods and Services Tax (GST) would be virtually a hollow shell over the next year or so. The CEA also said that a lot of effort and time was devoted to the simplifying the burden on small and medium enterprises.  Meanwhile, notwithstanding the demand from the airlines, the government has said there was no proposal to bring Aviation Turbine Fuel (ATF) under GST. Besides, the Securities and Exchange Board of India (SEBI) said that the mutual fund industry, which is witnessing record growth, needs a good governance system. 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

11,132.00

11,111.12

11,155.02

BSE Sensex

36,858.23

36,791.86

36,935.89

 

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank

179.47

274.65

272.40

276.75

Hindalco Industries

153.44

209.00

206.57

212.37

ITC

133.02

286.15

283.92

287.67

SBI

130.99

271.85

267.38

274.58

NTPC

126.94

151.00

148.18

155.48

 

  • Infosys Finacle, part of EdgeVerve Systems, a wholly-owned subsidiary of Infosys, has secured an order from Ayeyarwaddy Farmers Development Bank. 
  • Tech Mahindra has been allotted 12,000 square feet space at Technopark to set up a 200-seat office. 
  • Sun Pharmaceutical Industries' wholly owned subsidiary has launched the generic versions of Glumetza extended release tablets, 500 mg and 1000 mg in the US. 
  • Hero MotoCorp is planning to launch new 125cc scooters and Xtreme 200R motorcycle in September-October 2018 with an eye on double-digit growth in festive season.
News Analysis