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NSE Intra-day chart (04 October 2018)
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Market Commentary 05 October 2018
Markets to make negative start on weak global cues

Bears tightened their grip on Dalal Street with frontline gauges ending below their crucial 10,600 (Nifty) and 35,200 (Sensex) levels. Once again it turned out to be a horrendous day of trade for local bourses where key gauges settling with a cut of over two percentage points amid feeble global cues. Markets started the session on pessimistic note and never looked in recovery mood to end near intraday low levels, as traders remained on sidelines ahead of the Reserve Bank of India's (RBI) monetary policy review later this week. Traders remained cautious with Exporters' body Federation of Indian Export Organisations' (FIEO) statement that the growth of country's exports is likely to slow in the coming months owing to various domestic and global factors. It said Indian exports have always been influenced by the growth in global trade and therefore, the subdued global trade forecast of 3.9% in 2018 and 3.7% in 2019 will have adverse bearing on export. Besides, the Confederation of Indian Industry (CII) has submitted a dozen suggestions to the Prime Minister's Office, the finance minister and RBI on curbing rupee volatility and controlling the current account deficit (CAD). Markets extended southward journey after India's services sector activity fell for the second straight month in September 2018. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index dropped to 50.9 in September from 51.5 in August, signaling the slowest growth in the current four-month sequence of rising activity. Adding some anxiety, Nitin Gadkari said that India is facing an economic crisis due to its huge oil imports. Some concerns also came with a private report stating that new investment announcements have declined in the July-September period for the second quarter in a row. As per the report, private and public sector companies together announced new projects worth Rs 1.49 trillion in the quarter which ended in September, 41% lower than the preceding quarter. Investors failed to draw any sense of relief with Finance Ministry indicating that gross direct tax collection in the first six months of the financial year grew 16.7% to Rs 5.47 lakh crore. Finally, the BSE Sensex tumbled 806.47 points or 2.24% to 35,169.16, while the CNX Nifty was down by 259.00 points or 2.39% to 10,599.25.

The US markets declined on Thursday as a recent jump by US treasury yields has raised concerns about the outlook for interest rates. With the ten-year yield reaching its highest levels in over seven years, traders seem worried the Federal Reserve may raise rates more aggressively than currently anticipated. Adding to the concerns Fed Chairman Jerome Powell said in remarks at the Atlantic Festival in Washington, D.C. after the close of trading on Wednesday that interest rates are a long way from neutral even after recent increases. Powell said the really extremely accommodative low interest rates that they needed when the economy was quite weak, they don't need those anymore. They are not appropriate anymore. He added interest rates are still accommodative, but they are gradually moving to a place where they will be neutral. He also said they may go past neutral, but they are a long way from neutral at this point. On the economic front, the Labor Department released a report showing a bigger than expected drop in initial jobless claims in the week ended September 29. The Labor Department said initial jobless claims fell to 207,000, a decrease of 8,000 from the previous week's revised level of 215,000. Street had expected jobless claims to edge down to 213,000 from the 214,000 originally reported for the previous week. A separate report from the Commerce Department showed a bigger than expected rebound in factory orders in the month of August. The Commerce Department said factory orders surged up by 2.3% in August after falling by a revised 0.5% in July, while street had expected factory orders to jump by 2.1%. Dow Jones Industrial Average slipped 200.91points or 0.75 percent to 26,627.48, Nasdaq declined 145.57 points or 1.81 percent to 7,879.51 and the S&P 500 was down by 23.90 points or 0.82 percent to 2,901.61.


Crude oil futures ended lower on Thursday, with the US benchmark suffering its largest one-day percentage decline since mid-August. Reports suggesting Russia and Saudi Arabia have struck a private deal to raise crude output weighted on oil prices. According to reports, Russia and Saudi Arabia, after a series of private meetings last month, struck a deal, to raise oil production from September through December to cool rising prices and to help offset loss of Iranian oil to some extent. Benchmark crude oil futures for November fall $2.08 or 2.7 percent to settle at $74.33 a barrel on the New York Mercantile Exchange. December Brent crude declined $1.71 or 2 percent to settle at $84.58 a barrel on London's Intercontinental Exchanged.


Continuing its free fall for the third straight session, Indian rupee slumped to a fresh record closing low against the US dollar on Thursday, on the back of rising global oil prices, and concerns over current account deficit and capital outflows. Traders remained cautious with survey indicating that the India's services sector expanded at a slower pace in September as higher fuel costs and stronger US dollar made imported goods expensive. The seasonally-adjusted Nikkei India Services Business Activity Index touched 50.9 in September, down from 51.5 recorded in August. Moreover, sharp fall in equities too affected the rupee. However, the local currency trimmed most of its initial losses, as traders found some support with Finance Ministry indicating that gross direct tax collection in the first six months of the financial year grew 16.7 per cent to Rs 5.47 lakh crore. On the global front, dollar held at a six-week high on Thursday as an overnight jump in US Treasury yields on the back of strong data prompted investors to add long bets in the greenback against higher-yielding and emerging market currencies. Finally, the rupee ended at 73.58, 24 paise weaker from its previous close of 73.34 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 7576.31 crore against gross selling of Rs 9103.01 crore, while in the debt segment, the gross purchase was of Rs 1551.17 crore with gross sales of Rs 1465.23 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.28 crore against gross selling of Rs 1.84 crore.


The US markets ended lower on Thursday, as US Treasury yields surged to multi-year highs on robust economic data and upbeat comments from the Federal Reserve, sparking fears of accelerating inflation. Asian markets were trading in red on Friday amid region-wide concern over a strengthening greenback and higher United States Treasury yields. Extending losses for second straight session, the Indian markets witnessed bloodbath on Thursday as rupee dropped to another low amid boiling crude prices and weak global cues. Today, the markets are likely to make pessimistic start ahead of the Reserve Bank of India's (RBI) policy decision coupled with weak global cues. Street expecting that the RBI will raise rates for a third time since June on Friday to combat inflationary pressures as it grapples with a weakening rupee, surging oil prices and market instability sparked by a major non-bank finance firm's defaults. Traders will be concerned about Union minister Nitin Gadkari's statement that the country is facing lot of economic crisis due to crude oil imports and need to reduce imports and increase exports. There will be some cautiousness with a private report that liberalising foreign borrowings for oil companies to raise to $10 billion will not have a material impact on arresting the slide of the rupee. However, trades may get some support later in the day with the finance ministry's statement that the government's gross direct tax collection rose 16.7% to Rs 5.47 lakh crore in the first six months of the financial year. Meanwhile, concerned over the spike in fuel prices, the government on Thursday announced to cut excise duty on petrol and diesel by Rs 1.50 per litre. Finance Minister Arun Jaitley said that Oil Marketing Companies (OMCs) will absorb Re 1 per litre on fuel. There will be some buzz in the banking sector stocks with Crisil's report that state-run lenders will narrow down their losses to Rs 500 billion in fiscal year 2018-19, from Rs 850 billion in the previous fiscal year, as the quantum of dud loans reduce. Also, there will be some reaction in metal sector stocks with ICRA's report that the global prices of non-ferrous metals which have witnessed a correction due to global macroeconomic concerns in the last three months is unlikely to go down further.


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