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NSE Intra-day chart (03 January 2020)
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Market Commentary 06 January 2020
Markets to make pessimistic start amid geopolitical tensions

 

Weakness hit the Dalal Street on Friday, with Sensex & Nifty losing over 150 & 50 points, respectively. After a lackluster opening, indices remained negative for the whole day, impacted with a private report indicating that India's real GDP growth would weaken further in Q3 of the financial year due to slow economic activity in the first two months of the second half and the GDP for FY20 could be around 4.5%. Adding more worries, think-tank Centre for Monitoring Indian Economy (CMIE) stated that India's unemployment rate increased to 7.7% in December, slightly higher than 7.48% reported in the previous month. In the second half of the session, losses got intensified, on the back of negative cues from European markets. Traders remained pessimistic, even after a private report stated that the Indian economy benefited from 'favourable external environment' in 2019, following which portfolio inflows into equity and debt touched a multi-year high, and if this momentum is sustained it will bode well for the country's external balance. The street overlooked a report that India can explore an annual $82-billion export potential in twenty products, including electrical equipment and ferro alloys, in the world's second largest economy China. Finally, the BSE Sensex fell 162.03 points or 0.39% to 41,464.61, while the CNX Nifty was down by 55.55 points or 0.45% to 12,226.65.

 

The US markets settled lower with notable losses on Friday following escalating tensions in the Middle East and US manufacturing activity that fell to its lowest reading in about a decade. The US Department of Defense said in a statement that it had killed the head of the Islamic Revolutionary Guard's elite Quds Forces in an airstrike on the Baghdad International Airport in Iraq. The Pentagon claims Soleimani was behind the recent attacks on the US embassy in Baghdad and said the strike was aimed at deterring future Iranian attack plans. Iranian leader Ayatollah Ali Khamenei said there would be revenge for Soleimani's death, while President Donald Trump said Iran never won a war, but never lost a negotiation. Trump later claimed that he does not want to start a war with Iran but said he is ready and prepared to take whatever action is necessary to protect American lives. Separately, the Institute for Supply Management (ISM) released a report showing US manufacturing activity unexpectedly contracted at a faster rate in the month of December. The ISM said its purchasing managers index slid to 47.2 in December from 48.1 in November, with a reading below 50 indicating a contraction in manufacturing activity. The modest decrease came as a surprise to street, who had expected the manufacturing index to inch up to 49.0. With the unexpected drop, the index pointed to the fastest rate of contraction in manufacturing activity since June of 2009.

 

Crude oil futures rallied and ended at their highest finish in more than seven months on Friday, with gains of over 3%, amid an escalation in tensions in the Middle East after an airstrike by the US killed Iranian military leader Qassem Soleimani. The US Department of Defense said that it had killed Qassem Soleimani for his alleged role behind the recent attacks on the US embassy in Baghdad. Moreover, data showing a sharp drop in US crude stockpiles last week and China's recent policy easing move also contributed to oil's uptick. As per the Energy Information Administration (EIA) data, crude stockpiles fell by 11.5 million barrels last week, about 3.5 times the expected drop. Meanwhile, data released by Baker Hughes said crude oil rigs in the US decreased to 670 in the week to January 3, from 677 in the previous week. Crude oil futures for February jumped $1.87 or 3.1 percent to settle at $63.05 a barrel on the New York Mercantile Exchange. March Brent rose $2.35 or 3.6 percent to settle at $68.60 a barrel on London's Intercontinental Exchange.

 

Extending weakness for the second day, Indian rupee ended considerably lower against dollar on Friday, as good demand for the greenback from importers. Traders remain concerned with a private report indicating that India's real GDP growth would weaken further in Q3 of the financial year due to slow economic activity in the first two months of the second half and the GDP for FY20 could be around 4.5%. Some pessimism also came with think-tank Centre for Monitoring Indian Economy (CMIE) stated that India's unemployment rate increased to 7.7% in December, slightly higher than 7.48% reported in the previous month. Also, weak trade in the local equity market and rising crude oil prices kept pressure on the Indian rupee. On the global front, Sterling pound fell against the US dollar on Friday as tensions between the US and Iran escalated overnight and investors dumped riskier assets such as the pound. Finally, the rupee ended at 71.80, 42 paise weaker from its previous close of 71.38 on Thursday.

 

The FIIs as per Friday'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 3066.58 crore against gross selling of Rs 1978.34 crore, while in the debt segment, the gross purchase was of Rs 885.80 crore with gross sales of Rs 2234.63 crore. Besides, in the hybrid segment, the gross buying was of Rs 4.92 crore against gross selling of Rs 3.17 crore.

 

The US markets ended in red on Friday after a US airstrike killed a top Iranian general, reigniting geopolitical tensions in the Middle East coupled with weak US factory data. Asian markets are trading mostly lower on Monday following heightened geopolitical tensions in the Middle East. Indian markets ended lower on Friday as oil prices surged after US airstrikes killed a top Iranian commander, intensifying geopolitical tensions in the Middle East. Today, the start of new week is likely to be negative tracking weakness in global peers amid US-Iran tensions. Investors will be eyeing Services Purchasing Managers Index (PMI) for the month of December to be out later in the day. There will be some cautiousness with report that foreign portfolio investors (FPIs) began the year with profit booking as they withdrew a net sum of Rs 2,418 crore from the Indian capital markets in the first three trading sessions of January. Traders will be concerned with apex exporters body FIEO's statement that further escalation in the tension between the US and Iran will have implications on India's exports to the Persian Gulf nation. However, some support may come later in the day with the Reserve Bank of India's (RBI) data showing that the country's foreign exchange reserves swelled by $2.520 billion to touch a record high of $457.468 billion in the week to December 27. Some support may also come on report that the Commerce and Industry Ministry has prepared a blueprint to further improve India's ranking in the World Bank's ease of doing business index with a focus on six parameters, including enforcing contracts and starting a business. Meanwhile, the RBI will carry out its third round of simultaneous purchase and sale of government securities today. The central bank would purchase Rs 10,000 crore worth of long-term government bonds and sell an equivalent amount of short-term securities. There will be some buzz in the auto stocks as rating agency ICRA maintained a negative outlook on the passenger vehicle (PV) and commercial vehicle (CV) segments. It said the negative outlook on the PV sector was due to the slowing economic growth, the sharp decline in wholesale despatches to destock dealership inventory as well as tepid retail demand. IT stocks will be in focus with a private report stating that the US Citizenship and Immigration Services' (USCIS), the department in charge of issuing the coveted H-1B visas, will switch to a new system come April that could hurt the Indian IT industry. There will be some reaction in banking stocks with report that the government is unlikely to announce capital infusion for the public sector banks (PSBs) in the upcoming Budget and will rather encourage them to expedite recovery of bad loans and raise funds from the market.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

12,226.65

12,190.13

12,264.38

BSE Sensex

41,464.61

41,330.13

41,617.63

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

948.28

47.10

46.55

47.95

Tata Motors

475.73

191.10

188.35

194.75

ONGC

313.82

128.45

126.53

131.88

ZEEL

230.62

273.70

267.67

284.37

SBI

218.53

333.70

331.15

337.10

 

  • Bharti Airtel has launched its high speed 4G and 2G services in 26 villages in Ladakh. 
  • SBI is looking to sell its non-performing loans for Rs 1,554.87 crore to banks, asset reconstruction companies and other financial institutions.
  • ONGC has secured all the blocks on offer in the fourth round of Open Acreage Licensing Policy. 
  • Wipro 3D, the additive manufacturing arm of Wipro, has tied up with Hindustan Aeronautics, to design, develop, test, manufacture, and repair of aerospace components using metal additive technology.
News Analysis