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NSE Intra-day chart (11 May 2020)
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Market Commentary 12 May 2020
Benchmarks to make pessimistic start amid weakness in Asian peers

 

Indian equity benchmarks traded with a positive bias for most part of the day but selling activity which took place during dying hour of trade mainly forced the markets to cut all of their gains and ended Monday's session marginally in red. The benchmarks staged a gap up opening, tracking gains in Asian peers. Traders took encouragement with report that the government is working on several initiatives, such as preparation of huge land pools, to attract potential investors to India amid the coronavirus-triggered turbulence. Indian indices climbed off the session's top but were still trading over half a percent higher in afternoon session, as some optimism remained among traders with report that in view of the impact of lockdown on tax collection and need to garner additional resources to fight the menace of coronavirus, the government has substantially increased its market borrowing programme for the current financial year (FY21) by about 54 percent or Rs 4.2 lakh crore to Rs 12 lakh crore, a development that will have severe implications for the fiscal deficit. Though, key indices failed to hold initial gains and traded in red in last hour of trade amid cooling off buying interest across sectors. Traders turned wary with Former chief economist of World Bank -- Kaushik Basu's statement that India needs a large fiscal stimulus as the country faces big risk of slowdown in the economic growth on account of COVID-19. Basu suggested that the government may need monetisation by the Reserve Bank of India. Traders also took a note of report that as many as 401 infrastructure projects, each worth Rs 150 crore or more, have been hit by cost overruns of over Rs 4.06 lakh crore owing to delays and other reasons. Finally, the BSE Sensex lost 81.48 points or 0.26% to 31,561.22, while the CNX Nifty was down by 12.30 points or 0.13% to 9,239.20.

 

The US markets ended mostly higher on Monday with traders continuing to express optimism about a quick economic recovery as some states around the US have already begun to reopen. New York Governor Andrew Cuomo revealed that certain low-risk businesses and recreational activities can reopen statewide beginning May 15. Cuomo also said some upstate regions are ready to move into phase one of the state's reopening plan, which will allow them to resume manufacturing, construction and agricultural operations as well curbside pickup at retail stores. However, upside remain capped as traders cashed in on recent strength in the markets amid concerns about a second wave of coronavirus infections. Reports of new clusters of coronavirus cases in South Korea and China raised worries about the potential threats of reopening the economy too quickly. Data from Germany's public health agency also indicated coronavirus cases in the country are once again on the rise following recent steps to ease lockdown measures. Meanwhile, Steel stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Steel Index down by 4.9 percent. Considerable weakness was also visible among gold stocks, which moved sharply lower along with the price of the precious metal.

 

Crude oil futures ended lower on Monday amid concerns about outlook for energy demand due to the impact of the coronavirus pandemic even as several countries across the world announced plans to reopen their economies. China, Germany, and South Korea have all reported substantial new outbreaks of Covid-19 after they eased lockdown restrictions. Oil prices fell despite the United Arab Emirates and Kuwait saying they would cut output by larger quantities that announced earlier. The move by these countries follows Saudi Arabia's pledge to cut crude output by 1 million barrels per day in June. Crude oil futures for June dropped 60 cents or 2.4 percent to settle at $24.14 a barrel on the New York Mercantile Exchange. July Brent crude fell $1.34 or 4.3 percent to settle at $29.63 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker against the US dollar on Monday, on increased demand for the greenback from importers and banks. Investors remain concerned with Former chief economist of World Bank -- Kaushik Basu's statement that India needs a large fiscal stimulus as the country faces big risk of slowdown in the economic growth on account of COVID-19. Basu suggested that the government may need monetisation by the Reserve Bank of India. Market participants were also concerned about the impact of spiking coronavirus cases on the economy. However, losses remain capped as some support came with report that the government is working on several initiatives, such as preparation of huge land pools, to attract potential investors to India amid the coronavirus-triggered turbulence. On the global front, dollar rose against most of its major peers on Monday as moves by the United States and other countries to re-open their economies raised hopes for a quicker global recovery from a deep recession triggered by the coronavirus health crisis. Finally, the rupee ended at 75.73, 19 paise weaker from its previous close of 75.54 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 5946.45 crore against gross selling of Rs 3792.89 crore, while in the debt segment, the gross purchase was of Rs 466.90 crore with gross sales of Rs 2908.62 crore. Besides, in the hybrid segment, the gross buying was of Rs 7.02 crore against gross selling of Rs 1.59 crore.

 

The US markets ended mostly higher on Monday as traders continued to express optimism about a quick economic recovery as some states around the US have already begun to reopen. Asian markets are trading in red on Tuesday as investors await the release of Chinese inflation data expected to be out later in the day. Indian markets wiped out early gains and ended lower on Monday dragged down by financials. Today, the markets are likely to make negative start following weakness in Asian peers and ahead of the macro-economic data. Investors will await the industrial production data for March and consumer inflation for April, slated to be announced later in the day. Traders will be concerned amid report that the nationwide lockdown may extend amid a rise in virus-infected cases. Prime Minister Narendra Modi has told the state chief ministers that the lockdown may have to continue after May 17. Covid-19 cases in India have seen a dramatic surge in the past two weeks. The total number of corona cases rose to 70,768 as of May 12 morning and death toll hit 2,294. India at present is the 11th most affected among 187 countries with coronavirus cases. Also, there will be some cautiousness as a foreign brokerage in its report estimated that the fiscal deficit to come at 5.8% of the GDP in FY21 as against the budget target of 3.5%, after the government's move to raise its market borrowing programme for the current financial year by Rs 4.2 lakh crore. Though, traders may get some encouragement with Union minister Nitin Gadkari's statement that he expects the Centre to unveil a financial package in two-three days, observing that the situation was very bad despite the three-month moratorium on loan repayments announced by the RBI. Some support may come with report that the government released Rs 6,195.08 crore to 14 states as the second equated monthly installment of the Post Devolution Revenue Deficit Grant on May 11. Traders may take note of report that Chief Economic Advisor Krishnamurthy Subramanian said that according to data obtained after analyzing GST figures and e-bills economic activity has resumed up to 40 per cent of pre-lockdown times in the third phase of the lockdown. Auto stocks will be in focus with report that India's automakers have warned that total automobile sales could fall as much as 45% in the current fiscal year in a worst-case scenario as economic growth slumps due to the COVID-19 pandemic, and they are seeking government help through the crisis. There will be some reaction in media stocks with Crisil's report that the media and entertainment sector is expected to witness 16% decline in revenue for FY21, due to fall in advertisement and subscription income in the wake of coronavirus-induced lockdown. There will be some earnings announcements too to keep the markets buzzing.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

9,239.20

9,159.47

9,379.42

BSE Sensex

31,561.22

31,274.20

32,074.91

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Tata Motors

1,525.92

86.10

81.45

90.70

ICICI Bank

836.66

320.15

311.05

336.40

State Bank of India

545.94

165.45

164.00

167.90

Vedanta

333.45

79.60

78.23

80.73

Zee Entertainment Enterprises

322.88

155.40

151.82

160.42

 

  • Hero MotoCorp has commenced its retail operations with the re-opening of more than 1500 customer touch-points including authorized dealerships and service centers. 
  • ICICI Bank has reported a rise of 6.92% in its consolidated net profit at Rs 1251.32 crore for Q4FY20 as compared to Rs 1170.36 crore for Q4FY19. 
  • Titan Company's subsidiary company -- Tanishq has re-opened its first 50 stores on May 10, 2020. 
  • Tech Mahindra is expecting 5G rollout, demand for home connectivity and digitisation will drive business growth in the coming days.
News Analysis