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Market Commentary 16 May 2019
Benchmarks to make a cautious start amid mixed cues from Asian peers


After a sigh of relief in the previous trading session, Indian equity benchmarks again bled on Wednesday, with Sensex and Nifty closing lower by losses of over half a percent each. After a firm start, key indices remained positive for the most part of the day, aided by rating agency Crisil's latest report stating that recovery of stressed assets through Insolvency and Bankruptcy Code (IBC) doubled to Rs 70,000 crore in 2018-19, as against Rs 35,000 crore recovered using other resolution mechanism including Debt Recovery Tribunal (DRT), Securitisation and Reconstruction of Financial Assets (Sarfaesi), Enforcement of Securities Interest Act, and Lok Adalat. The street took encouragement with a private report that the Indian private equity (PE) market remained a hotbed for deal making in 2018 with investments across 793 deals at $26.3 billion, which was the second highest in the last decade in terms of total investment value. However, the markets turned volatile during late afternoon session, mirroring weak European markets. Markets witnessed heavy selling in last leg of trade which dragged both the major indices near intraday lows, as domestic sentiments got hampered with a private report stating that venture investments in the country declined marginally to $26.3 billion in 2018, even though there was a surge in number of deals announced. Investments by venture capital and private equity funds in the country declined in 2018 from $26.8 billion in the previous year. Besides, market participants also got cautious, after domestic rating agency India Ratings said that a fall in recoveries due to weak property markets in metros, coupled with rising delinquencies has led to weakening of the loans against property (LAP) segment for financiers. It further noted that other segments, especially commercial vehicle loans which were not doing so good recently, are showing signs of improvement. Finally, the BSE Sensex slipped 203.65 points or 0.55% to 37,114.88, while the CNX Nifty was down by 65.05 points or 0.58% to 11,157.00.


The US markets ended higher on Wednesday on reports that President Donald Trump plans to delay imposing steep tariffs on auto imports. Reports indicated Trump plans to delay imposing the auto tariffs by up to six months in order to allow negotiations to continue. Trump faces a May 18 deadline to decide whether to slap a tariff of as much as 25% on imported cars and parts due to national security concerns. Besides, some support also came in as Homebuilder confidence has improved by much more than anticipated in the month of May, according to a report released by the National Association of Home Builders (NAHB). The report said the NAHB/Wells Fargo Housing Market Index climbed to 66 in May from 63 in April, while Street had expected the index to inch up to 64. Following declines in late 2018 due to higher interest rates and concerns over slower growth, the index has reached its highest level since October of 2018. However, industrial production in the US unexpectedly showed a notable decrease in the month of April, according to a report released by the Federal Reserve. The Fed said industrial production fell by 0.5% in April following a revised 0.2% uptick in March. Street had expected production to come in unchanged compared to the 0.1% dip originally reported for the previous month. The unexpected drop in production partly reflected a sharp pullback in utilities output, which plunged by 3.5% in April after jumping by 2.2% in March. Manufacturing output also slumped by 0.5% in April after coming in unchanged in the previous month. Dow Jones Industrial Average surged 115.97 points or 0.45 percent to 25648.02, Nasdaq rose 87.65 points or 1.13 percent to 7822.15 and S&P 500 was up by 16.55 points or 0.58 percent to 2850.96.


Crude oil futures ended higher on Wednesday as investors focused on rising Middle East tensions. The US ordered all nonemergency staff to leave Iraq immediately amid heightened tensions with Iran over recent attacks against oil tankers and facilities in the Persian Gulf region. However, the Energy Information Administration (EIA) has said that US crude supplies rose by 5.4 million barrels for the week ended May 10. Traders expected a fall of 1.4 million barrels. The EIA also said that gasoline inventories were down 1.1 million barrels, while distillate stockpiles edged up by 100,000 barrels last week. Benchmark crude oil futures for June gained 24 cents or 0.4 percent to settle at $62.02 a barrel on the New York Mercantile Exchange. July Brent crude rose 53 cents or 0.7 percent to settle at $71.77 a barrel on London's Intercontinental Exchange.


Gaining for the second day, Indian rupee ended stronger against the US dollar on Wednesday, on continued selling of the US currency by banks and exporters. Traders took some solace with rating agency Crisil's report that recovery of stressed assets through the Insolvency and Bankruptcy Code (IBC) was two-times at Rs 70,000 crore compared to that through other mechanisms in 2018-19 but resolution timelines for bad loans still remains an issue. However, late hour sell-off in domestic equity market along with dollar's strength against major global currencies capped the gains. On the global front, euro held at a one-week low on Wednesday, ignoring data from Germany that showed the economy returned to growth in the first quarter, as trade tensions between the world's two biggest economies cast a shadow over risk appetite. Finally, the rupee ended at 70.34, 10 paise stronger from its previous close of 70.44 on Tuesday.


The FIIs as per Wednesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 4678.80 crore against gross selling of Rs 6636.81 crore, while in the debt segment, the gross purchase was of Rs 2060.57 crore with gross sales of Rs 959.79 crore. Besides, in the hybrid segment, the gross buying was of Rs 29.54 crore against gross selling of Rs 27.82 crore.


The US markets ended higher on Wednesday on hopes that thawing trade tensions will boost the outlook for the world economy. Asian markets are trading mixed on Thursday on reports that US President Donald Trump is planning to delay tariffs on auto imports. Indian markets ended sharply lower on Wednesday, after a day's breather, mainly on account of late hour sell-off as fears of worsening US-China trade tensions prompted profit booking. Today, the markets are likely to make a cautious start amid mixed cues from Asian peers. There will be some cautiousness with report that India's export growth slid to a four-month low of 0.64% in April as shipments of engineering goods, gems and jewellery, leather and other products declined, widening the trade deficit to a five-month high. Imports increased by 4.5%, the highest growth in the last six months as crude oil and gold shipments shot up in the month. Also, traders will be concerned about report monsoon rains are expected to hit Kerala on June 6, five days after its normal onset date. The India Meteorological Department (IMD) also said the southwest monsoon arrival over the State is likely to be slightly delayed. The agriculture in India is heavily dependent on the monsoon rains due to lackluster irrigation facilities. Meanwhile, the corporate affairs ministry has amended the rules pertaining to incorporation of companies to provide more clarity and uniformity in choosing names for the companies. The ministry has brought in amendments to the Companies (Incorporation) Rules, 2014. The move also comes against the backdrop of instances where applications by companies for registering their names have been rejected due to various reasons, including trademark issues and proposed names being too general. There may be some reaction in sugar sector stocks with the US Department of Agriculture's (USDA) statement that India's sugar production is likely to decline 8.4% to 30.3 million tonnes for the second straight year in the 2019-20 marketing year that would begin from October because of likely fall in sugarcane output. There will be some buzz in the power sector stocks with the Central Electricity Authority estimation that power generation from thermal, hydel and nuclear plants is expected to grow 6.5% this fiscal, nearly double of last year's rise of 3.5%. There will be some important earnings announcements too to keep the markets buzzing.


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  • L&T's real estate arm -- L&T Realty is eyeing revenues of Rs 3,200 crore from an upcoming project in Navi Mumbai. 
  • Dr. Reddy's Laboratories has launched the Daptomycin for Injection, 500mg/vial single-dose vial, a therapeutic equivalent generic version of Cubicin for Injection, approved by the USFDA. 
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  • NTPC has participated in the 250 MW tender floated by Solar Energy Corporation of India for Dondaicha Solar Park, District Dhule, Maharashtra.
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