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NSE Intra-day chart (11 December 2018)
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Market Commentary 12 December 2018
Markets to make cautious start amid mixed global cues

 

Indian equity markets heaved a sigh of relief on Tuesday, after both the larger peers, Sensex and Nifty, staged recovery to end the trading session in green terrain. The markets made a worst start of the day, as sentiments got hit with the Reserve Bank of India (RBI) governor Urjit Patel's unexpected resignation from his post on Monday. The government and the RBI have been fighting for weeks over how much autonomy the RBI should have as the administration of Prime Minister Narendra Modi seeks to reduce curbs on lending and to gain access to the RBI's surplus reserves. Adding more worries among the traders, Moody's Investors Service's said that the independence of a country's central bank is an important consideration while assessing a country's institutional strength and any attempt by the government to curtail it would be credit negative. To a query on the sovereign rating impact of the developments around RBI, Moody's said while the motivation for the RBI Governor's resignation is unclear, the independence of a country's central bank is an important consideration in their assessment of a sovereign's institutional strength. However, in the second half of the session, the key indices erased all of their losses to settle the day on positive note, tracking firm European markets. The street took support with Commerce and Industry Minister Suresh Prabhu's statement that the New Industrial Policy, which will replace the 27-year-old existing policy, has been sent for the Union Cabinet's consideration. The new industrial policy aims to resolve bottlenecks arising from inadequate infrastructure, restrictive labour laws and complicated business environment. Some relief came after the government made the entire 60% of the corpus withdrawn at the time of retirement tax free. Investors took note of Former chief economic adviser Arvind Subramanian's statement that the inclusion of petrol and diesel in the Goods and Services Tax (GST) ambit is not possible until the revenues under the new tax regime stabilize. Meanwhile, assembly poll results showed BJP losing power in Rajasthan and Chhattisgarh, while having a close finish in Madhya Pradesh. Finally, the BSE Sensex surged 190.29 points or 0.54% to 35,150.01, while the CNX Nifty was up by 60.70 points or 0.58% to 10,549.15.

 

The US markets ended mostly lower on Tuesday after a contentious fight between President Donald Trump and Democratic leadership over border security. Trump threatened to shut down the government if more money was not allocated towards building a wall along the US-Mexico border. Further, cautiousness too prevailed in the markets on report that the US will condemn China over hacking and economic espionage, potentially ratcheting up tension between the two countries once again. However, down-move remain capped on report that the US and China launched formal trade talks with a phone call. The initial conversation included Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He, where they discussed changes to fundamental Chinese economic policies. In the call, China informed US officials that it agreed to reduce tariffs on US autos to 15%, down from 40%. On the economic front, producer prices in the US unexpectedly showed a modest uptick in the month of November, according to a report released by the Labor Department. The Labor Department said its producer price index for final demand inched up by 0.1% in November after climbing by 0.6% in October. Prices for food showed another significant increase, surging up by 1.3% in November after jumping by 1.0% in October. On the other hand, the report said energy prices plunged by 5.0% in November following a 2.7% spike in the previous month. Gasoline prices plummeted by 14.0%. Excluding food and energy prices, core producer prices rose by 0.3% in November after rising by 0.5% in October. Dow Jones Industrial Average declined 53.02 points or 0.22 percent to 24370.24 and S&P 500 lost 0.94 points or 0.04 percent to 2636.78, while Nasdaq was up by 11.31 points or 0.16 percent to 7031.83.

 

After falling in previous session, Crude oil futures ended higher on Tuesday in the wake of a short-term disruption in Libyan output. Libya's national oil company has declared force majeure on exports from its El Sharara field after a weekend militia attack on the facility. Meanwhile, the Energy Information Administration (EIA) in its latest report has said that it reduced its oil-price forecasts for this year and next, following the recent price declines that came ahead of Friday's decision by the Organization of the Petroleum Exporting Countries and some nonmember allies to cut production starting in January. The EIA forecasts an average 2018 WTI price of $65.18 a barrel, down 2.4% from the November report's forecast. It also cut its 2019 view by 16.4% to $54.19. For Brent, the EIA lowered its forecast by 2.3% to $71.30 in 2018 and by 15.2% to $61 in 2019. Benchmark crude oil futures for January rose 65 cents or 1.3 percent to settle $51.65 a barrel on the New York Mercantile Exchange. February Brent crude added 23 cents or 0.4 percent to settle at $60.20 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker on Tuesday as sentiments got hit with the Reserve Bank of India (RBI) governor Urjit Patel's unexpected resignation from his post on Monday. The government and the RBI have been fighting for weeks over how much autonomy the RBI should have as the administration of Prime Minister Narendra Modi seeks to reduce curbs on lending and to gain access to the RBI's surplus reserves. Sentiments also remain dampened after Moody's Investors Service's said that the independence of a country's central bank is an important consideration while assessing a country's institutional strength and any attempt by the government to curtail it would be credit negative. To a query on the sovereign rating impact of the developments around RBI, Moody's said while the motivation for the RBI Governor's resignation is unclear, the independence of a country's central bank is an important consideration in their assessment of a sovereign's institutional strength. Assembly poll results showed BJP losing power in Rajasthan and Chhattisgarh, while having a close finish in Madhya Pradesh, too dampened sentiments. Finally, the rupee ended at 71.85, 53 paise weaker from its previous close of 71.32 on Monday.

 

The FIIs as per Tuesday'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 5963.87 crore against gross selling of Rs 4169.29 crore, while in the debt segment, the gross purchase was of Rs 553.34 crore with gross sales of Rs 1996.02 crore. Besides, in the hybrid segment, there was no buying and selling.

 

The US markets ended Tuesday's volatile session mostly in red as investors weighed mounting political tension in the nation's capital. Asian markets were trading mostly in green on Wednesday following positive signs on the outlook for US-China trade talks. Indian markets recouped early losses and ended higher on Tuesday mainly on the back of strong buying across consumer durable pharma, banking and information technology stocks. Also, investors awaited the final outcome of the state assembly elections results. Today, the markets are likely to make a cautious start ahead of macro-economic data amid mixed global cues. Market-men will be eyeing the macro economic data of industrial production and consumer price inflation to be released after the market hours. There will be some cautiousness with the Reserve Bank of India's (RBI) data showing that the Central Bank continued to remain a net seller of the US dollar in October, as it sold $7.204 billion of the greenback in the spot market. In the reporting month, the central bank purchased $945 million, while sold $8.149 billion in the spot market. RBI maintains that its intervention in the foreign exchange market is to curb volatility in the rupee and not to target a level of the domestic currency. However, traders may take some support with Industry body CII's statement that the appointment of former bureaucrat Shaktikanta Das as the new Reserve Bank of India (RBI) Governor comes as a huge sentiment booster to the industry and expressed confidence that he will take urgent steps to address the liquidity squeeze in economy. Das was appointed as the new governor of the RBI, a day after his predecessor Urjit Patel's resignation. Moreover, CII also said that the government should consider permitting 100% foreign direct investment (FDI) in multi-brand retail trade and further improve ease of doing business for the sector to promote growth in the segment. Meanwhile, the Agriculture Ministry launched online portal Ensure to connect with direct benefit transfer and provide simple, useful and transparent system to the beneficiary. There will be some reaction in stocks related to renewable energy (RE) sector with rating agency ICRA expecting a capacity addition of 10,000 MW in fiscal year 2020, and has maintained a stable outlook for the sector. The share of renewable energy in the generation mix has increased from 5.6% in FY2015 to 7.8% in FY2018. Also, there will be some buzz in construction sector stocks with CARE Ratings' report that the pace of the construction sector is set to face a decline in FY20 on funding shortage for new projects.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,549.15

10,399.62

10,632.92

BSE Sensex

35,150.01

34,648.42

35,429.46

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

851.03

177.85

167.82

183.87

ICICI Bank

368.86

342.80

337.53

346.53

SBI

309.27

281.25

271.98

286.88

Sun Pharma

246.88

422.30

400.33

434.53

IOC

217.99

131.95

129.67

134.12

 

  • Tata Motors' wholly owned subsidiary -- Jaguar Land Rover has launched the latest version of its SUV Discovery Sport priced at Rs 44.68 lakh. 
  • Tata Consultancy Services and Singapore Airlines have launched the Intelligent Airline Operations Solution. 
  • Dr. Reddy's Laboratories has launched Omeprazole Delayed-Release Tablets, 20 mg in the United States market. 
  • Mahindra & Mahindra's owned -- Mahindra Racing has launched M5 Electro race car in India.
News Analysis