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NSE Intra-day chart (30 June 2020)
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Market Commentary 01 July 2020
Benchmarks to get cautious start; manufacturing PMI eyed

 

In spite of trading positive for most part of the day, the Indian equity benchmarks gave up their gains and ended flat with a negative bias, on the back of concerns over rising COVID-19 cases and its impact on economic recovery. Key indices kicked off session on higher note, tracking firm cues from global peers. Traders also took encouragement with Union minister Mahendra Nath Pandey's statement that the government has approved the third phase of skill development scheme, Pradhan Mantri Kaushal Vikas Yojana (PMKVY), with an increased focus on digital technology and industry 4.0. Traders also were taking support with report that India has been holding up better in hiring than other economies as the COVID-19 pandemic has caused disruptions across the globe with reports of layoffs, furlough and organisations freezing their hiring intentions across sector. Indian bourses continued to show positive trend in afternoon session, taking support from report that India has finally developed its first indigenous COVID-19 vaccine named COAXING. A Hyderabad-based company called Bharat Biotech has achieved this success in collaboration with the Indian Council of Medical Research (ICMR) and National Institute of Virology, Pune. The recently developed coronavirus vaccine has got the approval for human trials by the Drug Controller General of India (DCGI). However, markets failed to maintain their gaining momentum in late afternoon session and ended with minor cut, as traders turned cautious with India Ratings and Research (Ind-Ra) in its latest report stated that the gross state domestic product (GSDP) of all states in India is likely to contract in the range of 1.4 to 14.3 percent in the current financial year (FY21) due to the impact of Covid-19-induced lockdown on economic activities. Finally, the BSE Sensex lost 45.72 points or 0.13% to 34,915.80, while the CNX Nifty was down by 10.30 points or 0.10% to 10,302.10.

 

The US markets ended higher on Tuesday, extending the strong upward move seen in the previous session, as traders continued to express optimism about the economic outlook despite the continued spike in new coronavirus cases across several states.  Adding to the positive sentiment, the Conference Board released a report showing a bigger than expected improvement in consumer confidence in the month of June. The Conference Board said its consumer confidence index jumped to 98.1 in June from a downwardly revised 85.9 in May. Street had expected the consumer confidence index to climb to 90.0 from the 86.6 originally reported for the previous month. Meanwhile, a separate report released by MNI Indicators showed a continued contraction in Chicago-area business activity in the month of June. MNI Indicators said its Chicago business barometer rose to 36.6 in June from 32.3 in May, but a reading below 50 still indicates a contraction in regional business activity. Street had expected the index to jump to 45.0. Traders also kept an eye on Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin's testimony before the House Financial Services Committee regarding the response to the coronavirus pandemic. In prepared remarks, Powell noted that output and employment remain far below their pre-pandemic levels and cautioned that the outlook for the economy is extraordinarily uncertain. Powell said a full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities. He added the path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.

 

Crude oil futures ended lower on Tuesday as persistent concerns about the rising number of cases of COVID-19. With several states in the US reportedly looking to reconsider their decision to reopen businesses, concerns about energy demand are rising. Reports that Libya is likely to resume oil production also weighed on crude prices. Libya, which can produce about 1% of global supply, is likely to resume exports. Libya's National Oil Corporation is hopeful that oil production will resume as a result of talks between the UN, US, France and Egypt to end a blockade by forces based in the east of the North African country. Crude oil futures for August declined 43 cents or 1.1 percent to settle at $39.27 a barrel on the New York Mercantile Exchange. August Brent crude lost 56 cents or 1.3 percent to settle at $41.15 a barrel on London's Intercontinental Exchange.

 

Rising for the second consecutive day, Indian rupee ended higher against dollar on Tuesday, on easing crude oil prices and a weak dollar in overseas markets. Sentiments remained buoyant despite India Ratings and Research's (Ind-Ra) latest report stated that the gross state domestic product (GSDP) of all states in India is likely to contract in the range of 1.4 to 14.3 percent in the current financial year (FY21) due to the impact of Covid-19-induced lockdown on economic activities. Market participants also remained cautious and awaited for more clarity on the ongoing tension between India and China. Meanwhile, investors will also keenly looking forward for the government's guidelines for second phase of Unlock and PM Narendra Modi's address to the nation at 4 pm. On the global front; pound retreated against a broadly firmer dollar on Tuesday, as investors awaited confirmation of the government's spending plans to lift an economy that posted its biggest contraction in 40 years in early-2020. Finally, the rupee ended at 75.51, 7 paise stronger from its previous close of 75.58 on Monday.

 

The FIIs as per Tuesday'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 5411.14 crore against gross selling of Rs 5515.05 crore, while in the debt segment, the gross purchase was of Rs 2542.26 crore with gross sales of Rs 1566.54 crore. Besides, in the hybrid segment, the gross buying was of Rs 56.25 crore against gross selling of Rs 47.96 crore.

 

The US markets ended higher on Tuesday as traders continued to express optimism about the economic outlook despite the continued spike in new coronavirus cases across several states. Asian markets are trading mostly in green on Wednesday following overnight gains on the Wall Street. Indian markets wiped out early gains and ended slightly lower on Tuesday ahead of Prime Minister Narendra Modi's address to the nation. Today, the start of July month is likely to cautious amid mixed economic data coupled with rising coronavirus cases in the country. India has yet again recorded more than 18,000 cases in 24 hours, taking its total number of coronavirus cases to 585,792. Around 17,400 people have died from the fatal disease. Investors will be eyeing the manufacturing PMI for June which is slated to be released later in the day. Traders will be concerned as Fitch Ratings lowered India's growth forecast for 2021-22 fiscal to 8 percent from 9.5 percent projected last month. The rating agency retained its projection of Indian economy contracting by 5 percent in the current fiscal. Market participants may react to the government data showing that output of the 8 core sectors of the economy shrank by 23.4 per cent in May, as factories remained hamstrung by a lack of labour and cash in the wake of the nationwide coronavirus (Covid-19) lockdown. Also, the finance ministry's report stated that the government's total liabilities increased 0.8 percent to Rs 94.62 lakh crore at March-end 2020 as compared to the preceding quarter. Though, some support may come as the data released by the Reserve Bank of India (RBI) showed that India's current account balance recorded a marginal surplus in the January-March quarter of FY20. Meanwhile, the report released by the Centre showed that India's fiscal deficit for the first two months of the fiscal year 2020-21 has come in at around 4.66 lakh crore. There will be some buzz in the auto stocks as automobile firms will report their June sales figures beginning today. Banking stocks will be in focus as S&P Global Ratings said the coronavirus pandemic may push back the recovery of India's banking sector by years, which could hit credit flows and, ultimately, the economy. There will be some reaction in automotive component sector stocks as CRISIL Ratings in its report said that supply chain disruptions in the wake of COVID-19 outbreak coupled with weak demand for vehicles in India and overseas is likely to squeeze the revenue of the automotive component sector by 16 percent this fiscal.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,302.10

10,245.95

10,379.65

BSE Sensex

34,915.80

34,741.10

35,162.21

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Tata Motors

98.75

98.25

96.27

101.27

ICICI Bank

352.00

351.45

347.02

355.17

State Bank of India

179.05

178.45

176.17

181.82

ITC

195.25

194.65

192.63

198.03

Tata Steel

327.25

326.70

320.65

335.20

 

  • Coal India's Odisha-based subsidiary -- Mahanadi Coalfields has set a target of producing 263 million tonne of coal by 2023-24.
  • IOC is planning to set up a new technology development centre focussed on clean and alternative energy solutions. 
  • Bajaj Finance's 100% subsidiary -- Bajaj Financial Securities with its disruptive pricing model is aiming at offering attractive brokerage rates to professional traders and investors. 
  • SBI has launched Yono branches in select cities, aimed at driving adoption of digital banking among its customers.
News Analysis