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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.
Support and Resistance: NSE (Nifty) and BSE (Sensex)
Index
|
Previous close
|
Support
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Resistance
|
NSE Nifty
|
10,855.50
|
10,848.97
|
10,848.97
|
BSE Sensex
|
36,690.50
|
36,499.12
|
36,993.34
|
Nifty Top volumes
Stock
|
Volume
|
Previous close (Rs)
|
Support (Rs)
|
Resistance (Rs)
|
(in
Lacs)
|
Yes Bank
|
1,714.30
|
86.85
|
84.63
|
90.53
|
Tata Motors
|
372.88
|
117.40
|
114.65
|
122.00
|
Indiabulls Housing Finance
|
355.53
|
445.40
|
424.33
|
483.23
|
SBI
|
308.20
|
289.90
|
284.98
|
298.63
|
ZEEL
|
219.18
|
327.90
|
313.72
|
341.42
|
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.
News Analysis
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