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NSE Intra-day chart (06 July 2020)
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Market Commentary 07 July 2020
Markets to get negative start amid mixed Asian cues

 

Indian equity indices carried forward their northbound journey for the fourth straight session on Monday, as optimistic cues from across the globe helped the indices to surpass crucial support levels of 10,750 (Nifty) and 36,450 (Sensex). Markets made an optimistic start and traded with a positive bias throughout session, as sentiments got a boost with Commerce and Industry Minister Piyush Goyal's statement the country's exports, after contracting drastically in April and May due to the COVID-19 pandemic, are recovering fast and it will be reflected in the data for June. Some positivity also came with a report stated that in the fourth years of the goods and service tax (GST) regime, the government is determined to focus on the simplification of tax administration and ease of compliance for taxpayers. Key gauges extended gains in late afternoon trading, as traders remained optimistic with a report that farm activity has seen an uptick in June, aided by heavy rainfall, with 87% more area coming under cultivation of various key crops so far in the season compared to last year. Traders also found support with report that promoters of stressed companies will get more flexibility in attracting investors and the process of determining the right price for assets would get easier following a new set of amendments introduced by capital market regulator Sebi in its preferential share issuance norms. However, markets gave up some of their gains in late trade, as some anxiety remained among traders with ICRA's report that the states' combined market borrowings as state development loans (SDL) have doubled to Rs 1.7 lakh crore during Q1 (April-June) of FY 2020-21 from Rs 0.8 lakh crore in same quarter of the previous fiscal year, on account of expenditure to fight Coronavirus disease (COVID-19) pandemic and lower tax realisation due to multiple lockdown extensions. Finally, the BSE Sensex gained 465.86 points or 1.29% to 36,487.28, while the CNX Nifty was up by 156.30 points or 1.47% to 10,763.65.

 

The US markets ended higher on Monday, with the Nasdaq scoring a record close, as led by shares of financial companies and record-setting technology shares. Traders also remained generally optimistic about the US economic outlook following last Thursday's better than expected jobs data. In the latest sign of the rapid economic recovery, the Institute for Supply Management (ISM) released a report showing a substantial turnaround in US service sector activity in the month of June. The ISM said its non-manufacturing index spiked to 57.1 in June from 45.4 in May, with a reading above 50 indicting an increase in service sector activity. Street had expected the index to climb to 50.1. The sharp increase by the non-manufacturing index reflected the largest single-month percentage-point increase since its debut in 1997. The non-manufacturing composite index indicated growth after two consecutive months of contraction, said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. He added respondents remain concerned about the coronavirus and the more recent civil unrest; however, they are cautiously optimistic about business conditions and the economy as businesses are beginning to reopen. The economic optimism continues to overshadow the recent spike in coronavirus cases even as the World Health Organization reported the biggest single-day increase in cases on Saturday.

 

Crude oil futures ended marginally lower on Monday, after swinging between gains and losses, as traders weighed energy demand prospects and fears of another lockdown amid a surge in new coronavirus cases across the globe. The World Health Organization said Saturday that more than 200,000 coronavirus cases were confirmed worldwide over a 24-hour period, with the US accounting for around 130,000 new cases. Several states in the US reported record spikes in new daily cases over the weekend. However, Brent crude prices gained on hopes of China's perceived recovery from the pandemic. Crude oil futures for August lost 2 cents or 0.05 percent to settle at $40.63 a barrel on the New York Mercantile Exchange. However, September Brent crude rose 30 cents or 0.7 percent to settle at $43.10 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker against dollar on Monday due to increased demand for American currency from importers and banks. The sentiments were under pressure with ICRA's latest report stating that the states' combined market borrowings as state development loans (SDL) have doubled to Rs 1.7 lakh crore during Q1 (April-June) of FY 2020-21 from Rs 0.8 lakh crore in same quarter of the previous fiscal year, on account of expenditure to fight Coronavirus disease (COVID-19) pandemic and lower tax realisation due to multiple lockdown extensions. However, gains in domestic equity markets provided some support to the rupee, keeping the downside in check. On the global front; dollar held steady against most currencies on Monday as investors awaited data expected to show the U.S. services sector stopped contracting, which would further lift hope for an economic recovery from the coronavirus pandemic. Finally, the rupee ended at 74.68, 2 paise weaker from its previous close of 74.66 on Friday.

 

The FIIs as per Monday'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 3303.84 crore against gross selling of Rs 2683.11 crore, while in the debt segment, the gross purchase was of Rs 1415.62 crore with gross sales of Rs 1544.42 crore. Besides, in the hybrid segment, the gross buying was of Rs 13.08 crore against gross selling of Rs 12.78 crore.

 

The US markets settled sharply higher on Monday as traders remain optimistic about the US economic outlook following last Thursday's better than expected jobs data. Asian markets are trading mixed on Tuesday as investors await the Reserve Bank of Australia's interest rate decision. Indian markets ended higher for the fourth straight session on Monday even as the country grappled to contain the rising number of coronavirus cases. Today, the start of session is likely to be pessimistic following mixed cues from Asian peers amid a surge in cases of coronavirus. Once again, India has witnessed a massive spike in the number of coronavirus cases. With over 22,000 new cases in a day, the tally has hit 720,346 and 20,174 people have died. There will be some cautiousness as India Ratings and Research in its report said that the COVID-19 pandemic will result in Rs 1.67 lakh crore of debt owed by top-500 corporates turning delinquent by March 2022. This will take the cumulative quantum of delinquencies to Rs 4.21 lakh crore or about 11 percent of overall debt. However, some respite may come later in the day as the Ministry of Finance asserted that green shoots have started to emerge in the domestic economy. In its monthly macroeconomic report, the ministry highlighted that total digital retail financial transactions via NPCI platforms rose sharply from Rs 6.71 lakh crore in April to Rs 9.65 lakh crore in May, a sign of revival in economic activity. Some support may also come with a Ficci-Dhruva Advisors industry survey report stating that the opening up of India's economy post lockdown and implementation of the economic package unveiled by the government have started showing results on the ground with initial signs of improvement in the performance of businesses now visible. Meanwhile, the Finance Ministry has said the government is not considering any proposal to merge the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC). IT stocks will be in focus with rating agency CRISIL's report that the H-1B visa ban could have an impact of nearly Rs 1,200 crore on Indian IT companies. It added that this could mean a marginal impact of 0.25-0.30 percent on their profitability. There will be some reaction in sugar stocks with the All India Sugar Trade Association's statement that Indian mills have contracted to export 5.2 million tonnes of sugar since the current season began on October 1.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,763.65

10,702.03

10,818.33

BSE Sensex

36,487.28

36,273.65

36,681.29

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Tata Motors

919.72

109.00

105.70

111.10

State Bank of India

437.90

188.05

186.18

189.88

ITC

347.11

199.80

198.52

201.52

ICICI Bank

333.34

361.85

358.95

366.30

IndusInd Bank

248.49

495.90

489.97

505.42

 

  • Bharti Airtel has launched Priority 4G Network for its Platinum mobile customers. 
  • Reliance Industries is planning to increase its network of aviation fuel stations by 50 percent.
  • Coal India and NLC India are planning to jointly develop solar power assets of 3,000 MW with a likely investment of around Rs 12,000 crore.
  • Dr. Reddy's Laboratories is expecting its overall performance to be quite volatile in the current fiscal with uncertainties related to COVID-19 set to increase during the period.
News Analysis