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NSE Intra-day chart (03 August 2018)
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Market Commentary 06 August 2018
Markets likely to start in green on firm global cues

 

Friday turned out to be a fabulous day of trade for Indian equity benchmarks with frontline gauges ending near their all-time high levels, recapturing crucial 11,350 (Nifty) and 37,500 (Sensex) marks. After a gap-up opening, there appeared not even an iota of profit booking in the session, with benchmarks fervently gaining from strength to strength to end near intraday highs, as investors continued hunt for fundamentally strong stocks. Sentiments remained up-beat since beginning with traders taking support from a private report that India's economic growth momentum is likely to pick up further in the April-June period and the country is expected to clock GDP growth of 7.5% in this financial year. Sentiments on the street remained positive with the India meteorological department (IMD) stating that India is set to receive average rainfall during the last two months of the crucial monsoon season that stretches between June and September. It also added that the rainfall for the country as a whole during the second half of the season is likely to be 95 percent of a long period average. Furthermore, traders took note of a report which stated that India plans to put off implementation of retaliatory import duties of $241 million against 29 products from the US by another month-and-a-half as its attempt to avoid a tariff war with the US. Markets extended gains in second half to end near intraday high levels with report that India's services sector activity remained in the growth territory for the second consecutive month in July, as business activity witnessed the strongest growth since October 2016 amid improved demand conditions. The seasonally adjusted Nikkei India Services Business Activity Index rose from 52.6 in June to 54.2 in July. Traders shrugged off International Monetary Fund's latest report where it stated that real interest rates in India may drop by more than 150 basis points over the next decade. Finally, the BSE Sensex soared 391.00 points or 1.05% to 37,556.16, while the CNX Nifty was up by 116.10 points or 1.03% to 11,360.80.

 

The US markets ended higher on Friday, as positive earnings helped investors overlook heightened trade tensions and weaker than expected July jobs growth. The Labor Department released a report showing weaker than expected job growth in the month of July due in part to a drop in government employment and the closing of Toys R Us stores. The report said non-farm payroll employment climbed by 157,000 jobs in July compared to street estimates for a jump of about 190,000 jobs. However, the report also showed upward revisions to the increases in employment in May and June, which surged up by 268,000 jobs and 248,000 jobs, respectively. With the upward revisions, employment gains in May and June combined were 59,000 more than previously reported. The report also showed a modest decrease in the unemployment rate, which edged down to 3.9 percent in July from 4.0 percent in June. Meanwhile, the Labor Department said the annual rate of average hourly employee earnings growth was unchanged from the previous month at 2.7 percent. A separate report from the Commerce Department showed the US trade deficit widened in the month of June, amid an increase in imports and a decrease in exports. The report said the trade deficit widened to $46.3 billion in June from a revised $43.2 billion in May. The deficit had been expected to widen to $46.5 billion from the $43.1 billion originally reported for the previous month. Dow Jones Industrial Average surged 136.42 points or 0.54 percent to 25462.58, the S&P 500 gained 13.13 points or 0.46 percent to 2,840.35 and Nasdaq was up by 9.33 points or 0.12 percent to 7,812.02.

 

Crude oil futures ended lower on Friday, as data continue to point to rising global production. Oil prices came under pressure due to an uptick in production from members of the Organization of the Petroleum Exporting Countries-led by Saudi Arabia-and nonmember Russia. As per a report, Russian crude and condensate production increased sharply in July by 150,000 barrels a day month-on-month, while OPEC output rose by around 300,000 barrels a day last month. Oil prices failed to get a boost after data from Baker Hughes on Friday showed a two-rig decline in the number of rigs drilling for oil in the US, a key metric for activity in the sector. Benchmark crude oil futures for September declined 47 cents or 0.7 percent to settle at $68.49 a barrel on the New York Mercantile Exchange. October Brent crude fell 24 cents or 0.3 percent at $73.21 a barrel on London's Intercontinental Exchange.

 

Reversing day's early losses, Indian rupee ended marginally higher against dollar on Friday, owing to dollar sale by exporters and banks. Sentiments turned optimistic with private report that India's economic growth momentum is likely to pick up further in the April-June period and the country is expected to clock GDP growth of 7.5% in this financial year. Local currency also found some support with the India meteorological department (IMD) stating that India is set to receive average rainfall during the last two months of the crucial monsoon season that stretches between June and September. It also added that the rainfall for the country as a whole during the second half of the season is likely to be 95 percent of a long period average. Moreover, a spectacular rebound in domestic equities too supported the rupee. On the flip side, pound fell on Friday as Mark Carney warned the risk of no deal is uncomfortably high and revealed banks had been stress tested for a major recession. Finally, the rupee ended at 68.61, 10 paise stronger from its previous close of 68.71 on Thursday.

 

The FIIs as per Friday'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 4441.16 crore against gross selling of Rs 4993.70 crore, while in the debt segment, the gross purchase was of Rs 1799.07 crore with gross sales of Rs 1034.54 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.80 crore against gross selling of Rs 4.96 crore.

 

The US markets ended higher on Friday, after a string of upbeat earnings, while traders digested the Labor Department's data showing weaker than expected job growth in the month of July. Asian markets were trading in green on Monday, after China's central bank took steps to try to drag the yuan away from 14-month lows. The People's Bank of China late on Friday raised the reserve requirement on foreign exchange forward positions, making it more expensive to bet against the Chinese currency. Indian equity markets ended higher on Friday, after two consecutive sessions of falls, boosted the latest weather office forecast of average rainfall during the last two months of the crucial monsoon season. Today, the start of the new week is likely to be in green, following firm global cues. Some support may also come with the Confederation of Indian Industry's (CII) statement that with the US imposing an additional 25% duty on imports worth $34 billion from China, certain Indian products may become more competitive. Traders will also be reacting to a report that the Goods and Services Tax (GST) Council headed by Finance Minister Piyush Goyal approved setting up of a group of ministers (GoM) to tackle taxation related issues faced by micro, small and medium enterprises (MSMEs). Traders may take note of Principal Economic Adviser to the Finance Ministry, Sanjeev Sanyal's statement that GST slabs may come down to three in addition to the exempted category, in the long-term. He also said the three slabs could be a low of 5%, a central 15% (merging the 12% and 18% slabs that exist now) and a top rate of 25%. There will be buzz in the banking sector stocks with Reserve Bank of India's (RBI) report that bank credit grew by 12.44% to Rs 86131.64 billion in the fortnight to July 20. In the year-ago period, bank credit had stood at Rs 76598.98 billion. The report showed that during the reporting fortnight, deposits increased by 8.15% to Rs 114381.21 billion from Rs 105756.15 billion a year ago. There will be lots of important earnings announcements too, to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,360.80

11,314.23

11,387.68

BSE Sensex

37,556.16

37,389.76

37,652.42

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Vedanta

182.74

222.40

216.93

225.78

SBI

182.54

299.25

295.85

301.30

Hindalco Industries

167.44

211.60

206.50

214.70

Axis Bank

159.54

574.75

554.15

586.95

ICICI Bank

144.79

305.00

299.45

308.65

 

  • Reliance Industries' telecom arm -- Jio and SBI have entered into a digital partnership aimed to increase SBI's digital customer base multi-fold.
  • Tech Mahindra has signed MoU with the Telangana State ITE&C for launch of India's first Blockchain district. 
  • HDFC Bank has raised Rs 2,775 crore by issuing over 1.28 crore shares through QIP. 
  • Power Grid Corporation of India is setting up 5 MWp rooftop solar PV systems at more than 50 premises of the company across the country.
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