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NSE Intra-day chart (01 October 2019)
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Market Commentary 03 October 2019
Benchmarks to get a pessimistic start amid weak global cues

                                          

Indian equity bourses ended in red for yet another trading session. The start of the day was positive, amid report that the government has stayed with the borrowing plan for the fiscal, as announced in the budget, sending a strong signal that it will try and meet the fiscal deficit target despite a sharp cut in corporate tax rate that is expected to cost Rs 1.45 lakh crore. But, soon key indices turned volatile, as India's manufacturing activity remained unchanged in September 2019, hit by subdued demand conditions domestically and externally. As per the survey report, the Nikkei India Manufacturing Purchasing Managers' Index (PMI) was at 51.4 in September, unchanged from August. Markets extended their losses in the last hours of the trade. Sentiments got impacted with the Commerce and Industry Ministry's data showing that the eight core industries in August contracted to over three-and-half year low of 0.5%, due to decline in output of coal, crude oil, natural gas, cement, and electricity. Adding more worries among traders, the RBI's data showed that the country's external debt stood at $557.4 billion in the June quarter, an increase of $14.1 billion over the quarter ended March 2019. Separately, a survey of World Economic Forum business leaders showed that the possibility of a fiscal crisis is the biggest risk to doing business globally. Finally, the BSE Sensex fell 361.92 points or 0.94% to 38,305.41, while the CNX Nifty was down by 114.55 points or 1.00% to 11,359.90.

 

The US markets settled lower with cut of over one and half percent on Wednesday as disappointing jobs data from payroll processor ADP added to the economic concerns raised by yesterday's weak manufacturing data. Adding to signs of a slowdown in the US job market, payroll processor ADP released a report showing private sector employment rose by slightly less than expected in the month of September. ADP said private sector employment climbed by 135,000 jobs in September compared to street estimates for an increase of about 140,000 jobs. The report also showed a significant downward revision to the increase in private sector jobs in August, which was slashed to 157,000 jobs from the originally reported 195,000 jobs. The Labor Department is scheduled to release its more closely watched monthly jobs report on Friday which includes both public and private sector jobs. Employment is expected to increase by 140,000 jobs in September after rising by 130,000 jobs in August, while the unemployment rate is expected to hold at 3.7 percent. Besides, Automobile manufacturers stocks fell after quarterly sales reports from Ford and General Motors added to concern over profit margins in the industry. All 11 S&P 500 sectors were down with industries sensitive to economic growth dropping most. The last time all 11 sectors fell for two straight days was December 24, 2018.

 

Crude oil futures ended lower on Wednesday after the Energy Information Administration (EIA) reported that US crude supplies rose for a third week in a row, by 3.1 million barrels for the week ended September 27. The American Petroleum Institute on Tuesday, however, reported a drop of 5.9 million barrels. Discrepancies between the reports from the EIA, a government agency, and the API, a trade group, are not unusual, and are often attributed to the different ways the data are reported to the two groups. Besides, oil price also fell on account of downbeat economic data weighed on prospects for energy demand. Benchmark crude oil futures for November dropped 98 cents or 1.8 percent to settle at $52.64 a barrel on the New York Mercantile Exchange. December Brent fell $1.20 or 2 percent to settle at $57.69 a barrel on London's Intercontinental Exchange.

 

Extending weakness for the second day, Indian rupee ended weaker against dollar on Tuesday, as good demand for the greenback from importers and weakness in domestic shares. Traders remain concerned with a monthly survey showing that the manufacturing sector activity in September remained unchanged amid subdued demand conditions both domestically as well as externally. The IHS Markit India Manufacturing PMI was at 51.4 in September, unchanged from August and thereby posting its joint-lowest reading since May 2018. Separately, a survey of World Economic Forum business leaders showed that the possibility of a fiscal crisis is the biggest risk to doing business globally. On the global front, dollar held at a 29-month high on Tuesday as renewed evidence of strength in the US economy encouraged investors to buy the greenback. Finally, the rupee ended at 71.07, 20 paise weaker from its previous close of 70.87 on Monday.

 

The FIIs as per Tuesday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 5998.43 crore against gross selling of Rs 6297.25 crore, while in the debt segment, the gross purchase was of Rs 2179.41 crore with gross sales of Rs 2508.79 crore. Besides, in the hybrid segment, the gross buying was of Rs 8.25 crore against gross selling of Rs 7.88 crore.

 

The US markets declined on Wednesday as worries intensified about slowing US manufacturing activity that could presage a possible economic downturn. Asian markets are trading in red on Thursday after the US opened a new trade war front by saying it will impose tariffs on $7.5 billion of goods from the European Union. Indian markets ended lower with cut of around a percent on Tuesday amid heavy selloffs in shares of banking as investors fretted about the exposure of major banks to the troubled real estate sector, compounding worries about a slowdown in economic growth. Today, the markets are likely to extend previous session's losses with negative start tracking weak global cues. Markets were closed on Wednesday on account of Gandhi Jayanti. There will be some cautiousness with the finance ministry data showing that Goods and services tax (GST) collection fell to a 19-month low of Rs 91,916 crore in September, pointing to a deepening economic slowdown. It is the second straight month when the collection has fallen below the Rs 1-trillion mark. Traders will be also concerned with report that the Finance Ministry made it clear that companies opting for a lower tax of 22% will not be eligible for accumulated additional depreciation and Minimum Alternative Tax (MAT) credit. Also, an another report stated that India Inc's debt servicing woes, which seemed to be getting better from FY15 to FY19, now seem to be taking a distinct turn for the worse. Though, some respite may come later in the day with India Ratings and Research's statement that the corporate tax cut will help India Inc save up to Rs 65,000 crore of outgo in FY20. Some support may also come with World Economic Forum's (WEF) statement that India, a young economy with lot of potential, has demonstrated remarkable strength and resilience amid global slowdown. Traders may take note of report that India and America will launch a new initiative for clean energy to fuel economic growth in the strategically-important Indo-Pacific region where China has been trying to expand its sphere of influence. Besides, the Reserve Bank assured the general public that the Indian banking system is safe and stable and there is no need for panic based on rumours. Banking stocks will be in focus with domestic ratings agency Crisil's report said that the Indian banking system's stock of dud assets will further reduce to up to 8 per cent level by March 2020, but the NBFCs may continue to face challenges. There will be some buzz in the auto stocks with report that low consumer sentiment continued to subdue sales performance of the Indian automobile sector in September, as major industry players reported a significant decline in their respective sales figures.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,359.90

11,220.47

11,526.77

BSE Sensex

38,305.41

37,848.94

38,842.83

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

8,089.59

32.00

25.90

41.20

SBI

793.50

255.95

242.50

272.45

Axis Bank

494.42

679.15

656.52

701.52

Tata Motors

402.33

115.30

112.25

119.10

BPCL

341.01

493.90

477.92

510.72

 

  • Bajaj Auto has registered a fall of 20% in total sales to 402,035 units in September 2019 against 502,009 units in September 2018.
  • Bharti Airtel has installed 100 hops of 5G technology transmission equipment of Chinese technology major Huawei in last six months. 
  • M&M has reported auto sales performance for September 2019 which stood at 43343 vehicles, compared to 55022 vehicles during September 2018, registering a fall of 21%. 
  • Axis Bank has launched a digital fixed-deposit product called Express FD.
News Analysis