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NSE Intra-day chart (11 August 2020)
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Market Commentary 12 August 2020
Markets to get pessimistic start ahead of CPI data

 

Indian equity markets traded with volatility but in green and ended higher on Tuesday, buoyed by banks and metal stocks amid positive cues from global peers. Sensex and Nifty closed above their crucial 38,400 and 11,300 levels, respectively. Markets had a gap up opening, supported by better-than-expected quarterly earnings together with rupee appreciation. Traders took encouragement with Commerce and Industry Minister Piyush Goyal's statement that India's balance of payments this year is going to be very, very strong on the back of significant improvement in exports and a fall in imports. Some support also came in as Union Minister Nitin Gadkari said the government is working on the idea of a land bank and a social microfinance institution to help people run small shops and businesses. However, key gauges trimmed most of their gains to come off day's high in afternoon session, as the Covid-19 cases continued to rise unabated. Some cautiousness prevailed with ratings agency ICRA's report that the coronavirus pandemic will significantly impact performance of companies and it is likely to be severe and prolonged for select sectors, especially aviation, hospitality and retail. It added the pandemic, followed by extended lockdowns in India both nationally and then localised, has impacted India Inc for the major part of the first quarter of the current financial year. But, markets regained some momentum in final hour of trade, taking support from Food and Public Distribution Secretary Sudhanshu Pandey's statement that the country's economy is reviving from the impact of COVID-19 pandemic and this is visible from the performance of sectors such as FMCG and agriculture. He said that FMCG revenues have come back to almost 85 percent of pre-COVID times, which is an important indicator. Finally, the BSE Sensex gained 224.93 points or 0.59% to 38,407.01, while the CNX Nifty was up by 52.35 points or 0.46% to 11,322.50.

 

The US markets ended lower on Tuesday as a selloff in tech shares continued and investors assessed the outlook for the economy amid a slowing in the number of new coronavirus cases and a lack of progress toward additional coronavirus aid from Washington. However, downside remained capped as white House officials and top Democratic lawmakers indicated they were ready to resume talks on a coronavirus aid package after President Donald Trump over the weekend signed executive orders that would extend some elements of existing help that lapsed at the end of July, though there as little sign of movement. Trump's orders, meanwhile, could face legal and logistical hurdles. On the economic data front, partly reflecting a notable increase in prices for services, the Labor Department released a report showing US producer prices climbed by more than expected in the month of July. The Labor Department said its producer price index for final demand rose by 0.6 percent in July after dipping by 0.2 percent in June. The rebound in producer prices reflected the largest increase since October of 2018 and exceeded street estimates for an uptick of 0.3 percent. Energy prices showed another substantial increase during the month, spiking by 5.3 percent in July after soaring by 7.7 percent in June.

 

Crude oil futures settled lower on Tuesday amid traders eyed developments tied to efforts toward economic relief from the impact of the coronavirus. White House officials and top Democratic lawmakers indicated they were ready to resume talks on a coronavirus aid package after President Donald Trump over the weekend signed executive orders that would extend some elements of existing help that lapsed at the end of July, though there as little sign of movement. Besides, in a monthly report issued, the US Energy Information Administration raised its 2020 forecasts for US and global benchmark oil prices, but reduced its US crude production outlook for this year. It also lifted its outlook for natural-gas prices to $2.03 per million Btus, up 5.4% from the July forecast. Crude oil futures for September declined 33 cents or 0.8 percent to settle at $41.61 a barrel on the New York Mercantile Exchange. October Brent crude fell 49 cents or 1.1 percent to settle at $44.50 a barrel on London's Intercontinental Exchange.

 

Rising for third straight session, Indian Rupee ended stronger against dollar on Tuesday due to selling of the American currency by banks and exporters. Traders were optimistic with Commerce and Industry Minister Piyush Goyal's statement that India's balance of payments this year is going to be very, very strong on the back of significant improvement in exports and a fall in imports. He said that good green shoots are visible in the economy and exports have shown a good turnaround. Gains in domestic equity markets also provided support to the rupee. On the global front, dollar maintained its gains on Tuesday after rising to a one-week high against the euro as US-China tensions and a stalemate in the US Congress over fiscal stimulus supported safe-haven assets. Finally, the rupee ended at 74.78, 12 paise stronger from its previous close of 74.90 on Monday.

 

The FIIs as per Tuesday's data were net buyers in equity, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 5867.71 crore against gross selling of Rs 4595.39 crore, while in the debt segment, the gross purchase was of Rs 142.47 crore with gross sales of Rs 439.31 crore. Besides, in the hybrid segment, the gross buying was of Rs 34.66 crore against gross selling of Rs 27.14 crore.

 

The US markets ended lower on Tuesday amid growing uncertainty about an additional round of US fiscal stimulus. Asian markets are trading mostly in red on Wednesday as investors continue to monitor coronavirus developments. Indian markets ended higher on Tuesday with consistent foreign fund flows on the back of better-than-expected corporate earnings coupled with a sustained increase in coronavirus recoveries. Today, the markets are likely to make negative start tracking weakness in global peers. Investors will be looking ahead to the CPI inflation data for July which is released later in the day. there are expectations that India's retail inflation edged up slightly in July due to higher food prices, remaining firmly above the RBI's medium-term target of 4 per cent for a 10th straight month. Traders will be eyeing the upcoming GST Council meeting, which shall meet on only a single-point agenda, anytime in August, to iron out measures to meet the compensation requirements, is likely to discuss three top suggestions to raise compensation funds. There will be some cautiousness as India again recorded over 61,000 cases in 24 hours, taking its tally way past the 2.3-million mark. With 835 fatalities in a single day, the country's death toll has risen to 46,188, very close to the UK's toll. Market participants will be concerned with the government data showing that industrial production declined by 16.6 percent in June, mainly due to lower output of manufacturing, mining, and power generation. According to the Index of Industrial Production (IIP) data, manufacturing sector production registered a decline of 17.1 percent, while the output of mining and power fell 19.8 percent and 10 percent, respectively. Though, some support may come later in the day with a private report that the Department of Promotion of Industry and Internal Trade (DPIIT) has proposed short- and-long-term measures to turn Indian into a manufacturing hub for auto components and air conditioning. Traders may take note of a report that industry body Confederation of Indian Industry (CII) suggested an open and facilitative import environment on the lines of ASEAN, to make India an exporting hub. Banking stocks will be in focus as Fitch Ratings believes Reserve Bank of India's (RBI) recent proposal to allow banks to restructure loans may extend uncertainty over the banking sector's asset quality. There will be some reaction in rail-related stocks after the Railways stated that all regular passenger train services will remain suspended till further notice, although 230 special trains will continue to be in service. There will be earnings reaction based on the performance of the companies.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,322.50

11,289.90

11,364.35

BSE Sensex

38,407.01

38,294.63

38,537.84

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

ITC

551.43

203.05

 199.46

 207.16

Tata Motors

502.25

122.30

 120.54

 124.94

Zee Entertainment Enterprises

466.05

159.75

 154.55

 162.95

ICICI Bank

454.47

367.35

 362.84

 373.09

State Bank of India

438.92

195.05

 193.60

 196.65

 

  • Dr. Reddy's Laboratories has launched Ciprofloxacin 0.3% and Dexamethasone 0.1% Otic Suspension, USP, approved by the USFDA. 
  • Titan Company has incorporated a wholly owned subsidiary company Titan Commodity Trading on August 10, 2020. 
  • Axis Bank has raised Rs 10,000 crore through allotment of equity shares to qualified institutional buyers. 
  • Tata Motors in association with WATConsult has launched Atmanirbharta - a digital campaign highlighting the existence of localisation in everything that the company do.
News Analysis