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Market Commentary 27 September 2019
Markets to get a pessimistic start amid weak global cues

                                          

Indian equity bourses gained momentum on Thursday to settle in green terrain. Key indices started on a positive note, after the Employees' State Insurance Corporation (ESIC) in its latest payroll report showed that around 14.24 lakh jobs were created in July 2019, higher than 12.49 lakh in the previous month. Adding more relief, Union minister Som Parkash said that the Centre is determined to bring economic growth to 7-8% at the earliest, asserting that the government has taken many steps to boost the economy. Separately, the SEBI eased the regulatory framework for foreign portfolio investors (FPIs) and simplified KYC requirements for them and permitted them to carry out off-market transfer of securities. Key benchmarks remained positive throughout the trading day, amid a private report stating that the Indian economy is expected to start its recovery from later part of this fiscal thanks to the initiatives taken by the Reserve Bank for policy rate transmission and steps by the government to boost growth. Domestic sentiments also remained in optimistic mood, even though the United Nations Conference on Trade and Development (UNCTAD) in its Trade and Development 2019 report projected India's gross domestic product (GDP) growth at 6% for 2019 from 7.4% in 2018. It said slowdown in growth rate is attributed to a sharp fall to 5.8% in the first quarter of 2019. Finally, the BSE Sensex gained 396.22 points or 1.03% to 38,989.74, while the CNX Nifty was up by 131.00 points or 1.15% to 11,571.20.

 

The US markets ended lower on Thursday on renewed political uncertainty following the release of the whistleblower complaint that sparked the impeachment inquiry into President Donald Trump. The document outlines concerns about Trump using the power of his office to solicit interference from a foreign country in the 2020 US election. This interference includes, among other things, pressuring a foreign country to investigate one of the President's main domestic political rivals, the complaint reads. The complaint relates to Trump's calls on Ukrainian President Volodymyr Zelensky to conduct an investigation of former Vice President Joe Biden, the frontrunner for the Democratic presidential nomination. Besides, weakness on the markets also came following a report that Washington was unlikely to extend a waiver that allows US firms to supply equipment to China telecom equipment firm Huawei. On the economic front, the Commerce Department released its final report on US gross domestic product in the second quarter, showing the pace of GDP growth was unrevised from the previous estimate. The report said real GDP increased at an annual rate of 2.0 percent in the second quarter, unchanged from the previous estimate and in line with street estimates. The unrevised 2.0 percent GDP growth in the second quarter still reflects a notable slowdown compared to the 3.1 percent jump in the first quarter. Meanwhile, a separate report from the National Association of Realtors showed a much bigger than expected rebound in pending home sales in the month of August. NAR said its pending home sales index surged up by 1.6 percent to 107.3 in August after plunging by 2.5 percent to 105.6 in July. Dow Jones Industrial Average dropped 79.59 points or 0.30 percent to 26891.12, Nasdaq declined 46.72 points or 0.58 percent to 8030.66 and S&P 500 was down by 7.25 points or 0.24 percent to 2977.62.

 

Crude oil futures ended slightly higher on Thursday as traders continued to weigh global crude demand and supply positions. However, oil prices were supported by the US government's move to deploy defense equipment and security forces to Saudi Arabia to help prevent attacks on the kingdom's oil infrastructure. Meanwhile, according to reports, Saudi Arabia has restored most of its production capacity. Besides, the Energy Information Administration (EIA) reported that US supplies of natural gas rose by 102 billion cubic feet for the week ended September 20. The data were expected to show a build of 93 billion cubic feet, on average, according to S&P Global Platts. Benchmark crude oil futures for November declined 8 cents or 0.1 percent to settle at $56.41 a barrel on the New York Mercantile Exchange. However, November Brent gained 35 cents or 0.6 percent to settle at $62.74 a barrel on London's Intercontinental Exchange.

 

Indian rupee strengthened against dollar on Thursday, on good bouts of dollar-selling by banks and exporters. Traders took support with a private report stating that the Indian economy is expected to start its recovery from later part of this fiscal thanks to the initiatives taken by the Reserve Bank for policy rate transmission and steps by the government to boost growth. Some optimism also came in with Union minister Som Parkash's statement that the Centre is determined to bring economic growth to 7-8% at the earliest, asserting that the government has taken many steps to boost the economy. That apart, the rupee derived its strength from strong gains in the local equity markets. On the global front, dollar edged lower but held close to its recent highs on Thursday as investors struggled to make sense of U.S. President Donald Trump's mixed signals on a trade deal with China. Finally, the rupee ended at 70.88, 16 paise stronger from its previous close of 71.04 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 7209.67 crore against gross selling of Rs 7561.99 crore, while in the debt segment, the gross purchase was of Rs 832.72 crore with gross sales of Rs 759.30 crore. Besides, in the hybrid segment, the gross buying was of Rs 3.38 crore against gross selling of Rs 3.75 crore.

 

The US markets ended in red on Thursday as traders monitored the latest trade developments and assessed a whistleblower complaint against President Donald Trump that was released. Asian markets are trading lower on Friday as the release of a whistleblower complaint against US President Donald Trump heightened uncertainties about the global economy, already reeling from Sino-US trade war. Indian markets ended the F&O expiry session on positive note, riding on optimism of a likely US-China trade deal and softening crude oil prices. Today, the markets are likely to make negative start amid weak global cues. There will be some cautiousness with Fitch Ratings' statement that the steep cut in tax paid by companies may stimulate investments and economic growth only in the medium term, but it will lead to breach fiscal targets in the current fiscal itself. It expects India to miss its fiscal deficit target of 3.3% of GDP for the current financial year by about 40 basis points following last week's decision to reduce corporate tax rates, resulting in the loss of an estimated Rs 1.45 trillion in tax revenue. Though, some support may come later in the day on report that Union Finance Minister Nirmala hoped the economy will start looking up in the second half of the current financial year as consumption rises and banks increase their lending operations. She also said private sector banks were not facing any liquidity crisis while exuding confidence that demand would return and motivate the economy to move at a faster rate. Meanwhile, a panel set up by the Reserve Bank of India (RBI) has recommended that the central bank's liquidity framework be made flexible enough to adapt to conditions when the system requires liquidity to be in surplus mode. Under the current setup, system liquidity is required to be in a small deficit, which could be an impediment when surplus liquidity is essential. There will be some buzz in the telecom stocks with ICRA's statement that after scaling a high propelled by 4G network expansion, the capex intensity of the telecom industry is expected to witness moderation till the point there is technology upgrade to 5G, which is still some time away. Banking stocks will be in focus with the RBI's data showing that bank credit and deposits grew at 10.26% and 10.02% to Rs 97.01 lakh crore and Rs 127.22 lakh crore, respectively, in the fortnight ended September 13.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,571.20

11,488.08

11,632.58

BSE Sensex

38,989.74

38,724.54

39,206.50

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

2,496.70

51.05

49.65

53.35

SBIN

790.06

281.85

275.93

288.83

Tata Motors

458.66

124.50

122.45

126.90

ICICI Bank

409.09

451.95

440.78

460.88

Zee Entertainment Enterprises

390.01

286.70

274.77

294.12

 

  • HDFC Bank and IOCL have launched a co-branded fuel credit card for users from non-metro cities and towns. 
  • Cipla has launched Daptomycin for Injection, 500mg/vial, single-dose vial, AP-rated generic equivalent of Cubicin for Injection in the United States.  
  • Mahindra Electric, the electric vehicle arm of M&M, has launched the Treo electric three-wheeler in two variants -- Treo and Treo Yaari, in Kerala.  
  • NTPC has signed a MoU with the Himachal Pradesh government to set up two hydro projects totalling 520 MW in the state.
News Analysis