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NSE Intra-day chart (11 December 2019)
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Market Commentary 12 December 2019
Benchmarks to make an optimistic start ahead of macro-economic data


Last hour buying pushed Indian equity bourses to end near their intraday high points on Wednesday. After a positive start, indices traded in green terrain for the most part of the session, aided with Union Surface Transport Minister Nitin Gadkari's statement that the government would spend a whopping Rs 5 trillion over the next two years in infrastructure projects to spur the economy and create thousands of jobs. However, volatility hit over the markets in noon deals, as the Asian Development Bank lowered forecast for India to 5.1% for 2019 from its September estimates of 6.5% as the foundering of a major nonbanking financial company in 2018 led to a rise in risk aversion in the financial sector and a credit crunch. In late noon deals, markets entered into red terrain, after Minister of State for Finance Anurag Singh Thakur informed that as many as 52,720 Integrated GST refund claims are pending for more than one year. But, bourses bounced back to end higher, taking support with Commerce Minister Piyush Goyal's statement that the government has carried out a number of reforms in various sectors & it is a continuous process for improvement in the economy. He said some of the reforms were by way of amendments in various acts such as the Finance (Amendment) Bills, the Special Economic Zones (Amendment) Bill, amendments in the Goods and Services Tax Act and the Insolvency and Bankruptcy Code. Finally, the BSE Sensex gained 172.69 points or 0.43% to 40,412.57, while the CNX Nifty was up by 53.35 points or 0.45% to 11,910.15.


The US markets ended higher on Wednesday after the Federal Reserve announced its decision to leave interest rates unchanged after three straight rate cuts. The Fed said its Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent on the heels of three straight quarter-point reductions. The decision was widely anticipated, although the Fed's economic projections provided along with the announcement also showed a majority of meeting participants now expect interest rates to remain on hold throughout 2020. Fed Chairman Jerome Powell suggested that he would not consider raising rates until inflation picks up significantly. The Fed downwardly revised its forecast for core consumer price growth in 2019 to 1.6 percent from 1.8 percent, while the inflation estimates for the next three years were unchanged. In its accompanying statement, the Fed said the current stance of monetary policy is appropriate to support a sustained economic expansion, strong labor market conditions, and inflation near its symmetric 2 percent objective. On the economic data front, a report released by the Labor Department showed consumer prices in the U.S. increased by slightly more than anticipated in the month of November. The Labor Department said its consumer price index rose by 0.3 percent in November after climbing by 0.4 percent in October. Street had expected prices to edge up by 0.2 percent. The bigger than expected increase in consumer prices partly reflected continued growth in energy prices, which climbed by 0.8 percent in November after spiking by 2.7 percent in October. Gasoline prices jumped by 1.1 percent. Excluding food and energy prices, core consumer prices crept up by 0.2 percent in November, matching the uptick seen in the previous month as well as street estimates. A 0.3 percent increase in prices for shelter contributed to the growth along with higher prices for medical care, recreation, used cars and trucks and apparel.


Crude oil futures ended lower on Wednesday after US government data showed an unexpected climb in domestic supplies of crude oil. The Energy Information Administration (EIA) reported that US crude supplies edged up by 800,000 barrels for the week ended December 6, compared with street's expectation for a 2.8 million-barrel drop. The American Petroleum Institute (API) reported Tuesday that US crude supplies rose by 1.4 million barrels last week. The EIA data also showed supply increases of 5.4 million barrels for gasoline and 4.1 million barrels for distillates. Besides, worries about the outlook for crude demand in the near term amid the ongoing uncertainty about US-China trade deal and slowing global growth also weighed on oil prices. Benchmark crude oil futures for January fell 48 cents or 0.8 percent to settle at $58.76 a barrel on the New York Mercantile Exchange. January Brent declined 62 cents or 1 percent to settle at $ 63.72 a barrel on London's Intercontinental Exchange.


Indian rupee ended higher against dollar for sixth straight session on Wednesday, due to increased selling of the American currency by banks and exporters. Traders took encouragement from government's report that demonetization followed by digitalization has succeeded in reducing incremental growth in currency in circulation by over Rs 3 lakh crore. The notes in circulation (NIC) as on November 4, 2016 were worth Rs 17,74,187 crore which have increased to Rs 22,35,648 crore as on December 2, 2019. However, upward move got restricted with Asian Development Bank's (ADB) report as it lowered its forecast for India to 5.1% for 2019 from its September estimates of 6.5% as the foundering of a major nonbanking financial company in 2018 led to a rise in risk aversion in the financial sector and a credit crunch. On global front, dollar edged higher as investors awaited the outcome of the Federal Reserve meeting and drew some support from hopes that U.S. President Donald Trump will delay the imposition of tariffs on Chinese goods. Finally, the rupee ended at 70.85, 7 paise stronger from its previous close of 70.92 on Tuesday. The currency touched a high and low of 70.94 and 70.74 respectively.


The FIIs as per Wednesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 4305.38 crore against gross selling of Rs 4487.31 crore, while in the debt segment, the gross purchase was of Rs 1188.21 crore with gross sales of Rs 5130.51 crore. In the hybrid segment, the gross buying was of Rs 1.81 crore against gross selling of Rs 2.57 crore. Thus, FIIs stood as net sellers of Rs 0.76 crore in hybrid segment.


The US markets ended higher on Wednesday after the Federal Reserve indicated it will likely not raise rates in 2020, removing the fear among investors that it would repeat a mistake it made last year by tightening monetary policy prematurely and knocking the stock market. Asian markets are trading mostly in green on Thursday following gains on Wall Street. Indian markets ended near intraday high levels on Wednesday mainly on the back of late hour buying led by public sector and information technology stocks. Today, the markets are likely to make optimistic start tracking positive global cues. Market participants will be looking ahead to the industrial production data for the month of October and CPI inflation for November which will be released later in the day. Some support will come as the Union Cabinet approved changes to the insolvency law, including a provision to ring-fence successful resolution applicants from criminal proceedings with regard to offences committed by previous promoters of a company. The amendments to the Insolvency and Bankruptcy Code (IBC) are aimed at removing certain difficulties being faced during insolvency resolution process to realise the objects of the Code and to further ease doing of business. Traders may take note of a US diplomat's statement that India needs to demonstrate to the international community its willingness to become a part of the global supply chain by taking steps towards resolving larger market access issues. However, there may be some cautiousness amid a report that with pressure on revenue collection, the goods and services tax (GST) rates and slabs may be raised during the GST Council meeting next week. Some concern may also come with report that Standard & Poor Global Ratings has said it will downgrade India's sovereign rating if the country's economic growth does not recover. There will be some buzz in the banking stocks as the Union Cabinet approved a partial credit guarantee scheme for public sector banks (PSBs) to purchase high-rated pooled assets from financially sound NBFCs and housing finance companies. Auto stocks will be in focus with automobile dealers' body Federation of Automobile Dealers Associations' (FADA) statement that retail sales of passenger vehicles in November increased 1 per cent to 2,57,271 units against the same period last year, driven by festive demand during the month. Meanwhile, Ujjivan Small Finance Bank will make its market debut on December 12 after an overwhelming response for its Rs 750 crore initial public offering (IPO). There is expectation that the stock may debut at 50 per cent premium over the issue price of Rs 37 per share.


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