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NSE Intra-day chart (04 June 2020)
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Market Commentary 05 June 2020
Markets to open marginally in green tracking Asian peers

 

Snapping 6-day gaining streak, Indian equity benchmarks ended Thursday's session in red terrain, as investors remained anxious about rising number of coronavirus cases and its impact on the global as well as domestic economy. Markets made slightly positive start, tracking positive global shares. Traders also took some support with Union minister Prakash Javdekar's statement that the government has formed an empowered group of secretaries to enhance investment in the country to offset the impact of coronavirus. However, key indices failed to hold on to gains and slipped into red terrain, as traders turned wary with Moody's Investors Service stating that the quality of retail and small business loans will deteriorate, which account of 44 per cent of the total loans. Elaborating on the key drivers behind India's sovereign downgrade, it said that the risks to the financial system are rising. Markets extended their losses in afternoon session, as former chief economic adviser Arvind Subramanian said the FRBM Act will probably have to be revised by the end of the year as India will witness a sharp decline in GDP growth due to the COVID-19 crisis. Subramanian further said while labor reforms were necessary, the way they have been done by some states has undermined basic protections to workers, especially in light of the migrant crisis. However, domestic bourses managed to pare most of losses in final hour of session as the Confederation of Indian Industry (CII) has laid out a 10-point roadmap to revive growth and navigate the challenges of loss of lives and livelihoods posed by the global pandemic COVID-19 that has forced countries across the world to reset their growth paths. Finally, the BSE Sensex lost 128.84 points or 0.38% to 33,980.70, while the CNX Nifty was down by 32.45 points or 0.32% to 10,029.10.

 

The US markets ended mostly lower on Thursday, following the strong upward move seen over the past several sessions, as traders took a breath to digest the recent strength on Wall Street, which lifted the Nasdaq-100 to a record intraday high in early trading. Traders seemed reluctant to make more significant moves ahead of the release of the Labor Department's closely watched monthly jobs report on Friday.  Street currently expect employment to tumble by about 8.0 million jobs in May after plunging by 20.5 million jobs in April. The unemployment rate is expected to jump to 19.8 percent from 14.7 percent. The Labor Department released a report showing the pace of decline in first-time claims for unemployment benefits has begun to stall a bit. The report showed initial jobless claims tumbled to 1.877 million in the week ended May 30th, a decrease of 249,000 from the previous week's revised level of 2.126 million. However, street had expected jobless claims to slump to 1.800 million from the 2.123 million originally reported for the previous week. Jobless claims pulled back further off the record high of 6.867 million set in the week ended March 28th, although the number of new claims since the coronavirus lockdowns now exceeds 42.6 million. The report also showed an unexpected increase in continuing claims, a reading on the number of people receiving ongoing unemployment assistance, which jumped by 649,000 to 21.487 million in the week ended May 23.

 

Crude oil futures ended higher on Thursday, extending the upward trend seen in recent sessions, after data showed leading oil producers were in compliance with agreed production cuts. Commodity data tracker Kpler said OPEC+ reduced production by around 8.6 million barrels per day in May, suggesting total compliance of 89% with the output cut deal reached in April. OPEC+ has another 1.1 million barrels per day to cut in order to reach 100% compliance with the reduction pledge of 9.7 million barrels per day from May to the end of June. The Organization of the Petroleum Exporting Countries and its major allies, including Russia, a group known as OPEC+, have yet to announce a new meeting date amid reports that the group planned to bring forward a virtual gathering that had been planned for next week. Crude oil futures for July rose 12 cents or 0.3 percent to settle at $37.41 a barrel on the New York Mercantile Exchange. August Brent crude gained 20 cents or 0.5 percent to settle at $39.99 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended marginally lower against dollar on Thursday, due to fresh demand for the American currency from banks and importers. Traders remain concerned with Global credit ratings agency Moody's Investors Service stating that the quality of retail and small business loans will deteriorate, which account of 44 per cent of the total loans. Elaborating on the key drivers behind India's sovereign downgrade, it said that the risks to the financial system are rising. Investors were also anxious about rising number of coronavirus cases and its impact on the global as well as domestic economy. On the global front, dollar strengthened on Thursday, reversing its weakening trend of the past seven days, while the euro slipped ahead of a European Central Bank meeting at which policymakers could step up stimulus measures. Finally, the rupee ended at 75.57, 10 paise weaker from its previous close of 75.47 on Wednesday.

 

The FIIs as per Thursday'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 10111.12 crore against gross selling of Rs 7949.15 crore, while in the debt segment, the gross purchase was of Rs 469.49 crore with gross sales of Rs 1434.24 crore. Besides, in the hybrid segment, the gross buying was of Rs 7.40 crore against gross selling of Rs 5.09 crore.

 

The US markets ended mostly lower on Thursday ahead of the release of the Labor Department's closely watched monthly jobs report on June 05. Asian markets are trading mostly higher on Friday amid hopes about a global economic recovery. Indian markets ended lower after a volatile session on Thursday, following a more than 1,000-point rally in the last six sessions led by losses in financials. Today, the markets are likely to make slightly positive start following positive cues from Asian peers. Traders will be getting some encouragement with the government data showing that the country's job situation registered an improvement during 2018-19 with unemployment rate declining to 5.8 per cent, down from 6.1 per cent in the previous financial year. Some support will also come with Crisil Research report that even as coronavirus pandemic has impacted many sectors, the agriculture could be the only bright spot as real agriculture is likely to witness a 2.5 percent growth in 2020-21. Though, there may be some cautiousness with report that the total number of coronavirus cases in India has risen to 226,713 and 6,363 have died from the fatal disease. Traders may be concerned with surveys released by the Reserve Bank showing that consumer confidence has collapsed amid the coronavirus pandemic and it may result in contraction of the economy by 1.5 per cent during 2020-21. Meanwhile, the Centre has released Rs 36,400 crore as Goods & Services Tax (GST) compensation to states for the period December 2019 to February. This comes at a time when the resources of various state governments have taken a hit due to the novel coronavirus, or COVID-19, pandemic. There will be some buzz in the steel stocks as the government extended anti-dumping duty on certain variety of steel products till December 4 this year with a view to guard domestic manufacturers from cheap imports coming from China, Malaysia and Korea. Banking stocks will be in focus with ICRA's report that gross non-performing assets (NPAs) of banks are likely to worsen to 11.3-11.6 percent by the end of this financial year from 8.6 percent as of March 2020, due to disruptions caused by the coronavirus pandemic. There will be some reaction in construction sector stocks with Crisil's report that investment in Indian construction industry is likely to witness a 12-16% decline to nearly Rs 7.3 lakh crore during the current fiscal year, as COVID-19 pandemic has severely impacted the economy and liquidity scenario.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,029.10

9,940.95

10,120.55

BSE Sensex

33,980.70

33,691.25

34,290.15

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

State Bank of India

834.95

174.05

171.15

177.30

Tata Motors

720.81

98.50

96.40

101.00

ICICI Bank

570.62

347.85

341.23

358.73

Vedanta

559.83

104.40

98.60

107.70

Zee Entertainment Enterprises

475.68

205.60

192.60

213.20

 

  • GAIL (India) has signed a MoU with Energy Efficiency Services for cooperation in development of Trigeneration projects in India. 
  • Reliance Industries has achieved successful closure of India's largest ever Rights Issue of Rs 53,124.20 crore. 
  • Maruti Suzuki has introduced a new range of Health and Hygiene, Genuine Accessories for car and personal care. 
  • IndusInd Bank has launched a first-of-its-kind assisted mobile application-based facility.
News Analysis