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NSE Intra-day chart (07 August 2019)
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Market Commentary 08 August 2019
Markets to make a cautious start amid fall in crude oil prices


The Reserve Bank of India's (RBI) repo rate cut decision failed to lift Indian equity benchmarks on Wednesday, as Sensex and Nifty closed sharply in red terrain. After starting a session on cautious note, markets traded volatile, as the National Council of Applied Economic Research (NCAER) in its latest report said that India's GDP growth is likely to be 6.2 per cent during the current fiscal, down from 6.8 per cent in 2018-19, on account of flat growth in agriculture sector. The prospects for agricultural sector in 2019-20 depend largely on the south-west monsoon. It added that the country as a whole has received 7 per cent below normal rainfall by August 5, 2019. It has also experienced temporal variations in rainfall. Traders failed to take any sense of relief with report that the RBI's monetary policy committee (MPC) reduced the repo rate by 35 basis points (bps) to 5.40 percent from 5.75 percent for fourth time in a row, to help revive the economy. In the second half of the session, indices extended losses to settle near their intraday low points, after the RBI lowered the GDP growth projection for 2019-20 to 6.9 per cent from 7 per cent forecast in the June policy, and underlined the need for addressing growth concerns by boosting aggregate demand. Investors were seen taking a note of Former RBI Governor Bimal Jalan's statement that the government must borrow only long-term fund from the external market, and the quantum should not exceed 1.5 percent of Gross domestic product (GDP) under any circumstances. Jalan said that he does not have negative view about overseas sovereign borrowing, but he thinks India does not need to borrow from abroad. Finally, the BSE Sensex fell 286.35 points or 0.77% to 36,690.50, while the CNX Nifty was down by 92.75 points or 0.85% to 10,855.50.


The US markets ended mostly higher on Wednesday on inspiring traders to pick up stocks at reduced levels as treasury yields rebounded from an early move to the downside. However, upside remained capped as the escalating US-China trade war and investors paying close attention to daily developments on the currency front. The People's Bank of China set the midpoint for onshore yuan trading at 6.9996 per dollar, slightly stronger than the key 7.00 per dollar level but 0.4% weaker than 6.9683 on Tuesday. Besides, traders were also digesting aggressive interest rate cuts by central banks in India, New Zealand and Thailand amid concerns about the global impact of the US-China trade war.  Citing the overseas rate cuts, President Donald Trump claimed that the problem is not China but rather a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much and that I was right. On the economic front, with a slight drop in revolving credit partly offsetting a notable increase in non-revolving credit, the Federal Reserve released a report showing US consumer credit rose by less than expected in the month of June. The Fed said consumer credit rose by $14.6 billion in June after climbing by an upwardly revised $17.8 billion in May. Non-revolving credit, such as student loans and car loans, shot up by $14.7 billion in June after rising by $10.3 billion in May. Meanwhile, the report said revolving credit, which largely reflects credit card debt, edged down by $0.1 billion in June after increasing by $7.5 billion in the previous month. Compared to the same month a year ago, consumer credit in June was up by 4.3%, as non-revolving credit jumped by 5.8% but revolving credit dipped by 0.1%. Nasdaq gained 29.56 points or 0.38 percent to 7862.83 and S&P 500 was up by 2.21 points or 0.08 percent to 2883.98, while Dow Jones Industrial Average declined 22.45 points or 0.09 percent to 26007.07.


Crude oil futures ended deeply in red with cut of over four and half percent on Wednesday after US inventory data showed an unexpected increase in supplies for last week, halting a run of what had been seven straight weeks of declines. The Energy Information Administration (EIA) said that US crude oil inventories increased by 2.4 million barrels from the previous week for the week ended August 2. Besides, oil prices also dropped as the White House's tussles with major trade partners are seen as a risk to global energy demand. Benchmark crude oil futures for September plunged $2.54 or 4.7 percent to settle at $51.09 a barrel on the New York Mercantile Exchange. October Brent dropped $2.71 or 4.6 percent to settle at $56.23 a barrel on London's Intercontinental Exchange.


Extending losses for the fifth day in a row, Indian rupee ended marginally weaker against the US dollar on Wednesday, due to increased demand of the greenback from the importers and the banks. Investors remained cautious with the Reserve Bank of India (RBI) lowered the GDP growth projection for 2019-20 to 6.9 per cent from 7 per cent forecast in the June policy, and underlined the need for addressing growth concerns by boosting aggregate demand. The rupee's losses were also caused by late hour sell-off in domestic equity market. However, losses were limited as traders found some support after the RBI cut key interest rate by 35 basis points to boost the slowing economy. On the global front, dollar fell against yen in a sign investors remain wary that China's currency policy has become a new flashpoint in its trade war with the United States. Finally, the rupee ended at 70.89, 8 paise weaker from its previous close of 70.81 on Tuesday.


The FIIs as per Wednesday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 5409.57 crore against gross selling of Rs 7273.75 crore, while in the debt segment, the gross purchase was of Rs 1230.94 crore with gross sales of Rs 1542.16 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.92 crore against gross selling of Rs 1.45 crore.


The US markets ended mostly higher on Wednesday as investors turned more positive on the outlook for global growth amid central-bank moves to ease monetary policy. Asian markets are trading mostly in green on Thursday as investors mulled China's daily currency fixing and a recovery in US equities overnight. Indian markets ended in red on Wednesday after the Reserve Bank of India lowered the GDP growth forecast for current financial year to 6.9% from 7%. Today, the markets are likely to make a cautious start amid fall in crude oil prices. There will be some cautiousness as the Reserve Bank of India's (RBI) consumer confidence declined in July as reflected in the current situation index (CSI); the future expectations index (FEI) fell by about 4 points. It added that consumers' perceptions on the general economic situation and the employment scenario softened, while their assessment of their own incomes turned out to be less optimistic than in May 2019. However, traders may take note of report that with the RBI slashing the repo rate by 35 basis points, India Inc said its swift and full transmission by banks in the form of lower lending rates will be crucial to lift consumption and investment in the economy. Meanwhile, the Securities and Exchange Board of India (SEBI) has tightened the norms for pledging of shares by promoters of listed companies. In its circular, SEBI directed every listed firm to disclose detailed reasons for pledging of shares by its promoters along with the amount of stake pledged within two days if the total amount of shares pledged by the promoter or the promoter group crosses 50% of the total stake held by the promoter or if it is more than 20% of the concerned company's total share capital. There will be some buzz in non-banking financial companies (NBFCs) stocks with report that taking cognizance of the precarious position of NBFCs, the Reserve Bank's Monetary Policy Committee (MPC) announced key measures to tackle the crisis-hit sector. These include setting up a central payments fraud registry to track the systems for frauds and increasing exposure limits for lending banks to single NBFCs to 20 per cent. The previous limit was 15 per cent of the bank's Tier-I capital. There will be some reaction in power stocks with the Central Electricity Authority (CEA) data showing that fresh capacity addition in power has started on a sombre note. Out of the 1820 Mw envisaged to be added during April-June of this fiscal year, only 45 Mw has been added in thermal power generation. There will be some earnings announcements too to keep the markets buzzing.


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  • Reliance Industries and UK's BP have agreed to form a new JV to set up 5,500 petrol pumps and retail aviation turbine fuel to airlines in India. 
  • Hindalco Industries' wholly owned subsidiary -- Novelis Inc. is expecting to close Aleris Corporation acquisition in the fourth quarter of calendar year 2019. 
  • Tata Steel's wholly owned subsidiary -- T S Global Holdings has terminated pact with HBIS Group to sell stake in South-East Asia business. 
  • M&M has reported a fall of 52.56% in its net profit at Rs 894.11 crore for Q1FY20 as compared to Rs 1,884.66 crore for Q1FY19.
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