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Market Commentary 15 April 2020
Benchmarks to make cautious start amid mixed cues from Asian peers

 

Indian equity indices ended highly volatile day of trade on lower note on Monday, as the government is set to extend a lockdown to contain the spread of the coronavirus, while a rise in oil prices also weighed on sentiments. Key indices made pessimistic start and traded with heavy losses, as traders remain concerned with the World Bank in its South Asia Economic Focus report stating that India may record its worst growth performance since the 1991 liberalisation this fiscal year (FY21) as the coronavirus outbreak severely disrupts the economy. It said India's economy is expected to grow 1.5 per cent to 2.8 per cent in FY21. Besides, overseas investors pulled out a net Rs 9,103 crore from the Indian markets in April so far as the Covid-19 crisis triggered a return to safe haven assets like gold and dollar-denominated securities. However, markets recovered partly from the lows of the day in afternoon session, taking support from data showing that India's industrial output, measured in Index of Industrial Production (IIP), grew 4.5% in February 2020, mainly on account of higher output in mining, manufacturing and electricity sector. The output for February is the highest number since July 2019 - when it stood at 4.3%. IIP had grown by 0.2% in February 2019 and 2% in the preceding month (January 2020). Though, markets failed to hold the recovery and fell sharply in late afternoon session, as anxiety remained among traders with Federation of Indian Export Organisations (FIEO) stating that India's exports sector may witness about 15 million job losses and rising non-performing assets (NPAs) amongst exporting units, following the cancellation of over 50 percent of orders and gloomy forecast for the future due to the Covid-19 pandemic. Investors also awaited cues from CPI data for March and the minutes of the Monetary Policy Committee's latest meeting scheduled to be released later in the day. Finally, the BSE Sensex lost 469.60 points or 1.51% to 30,690.02, while the CNX Nifty was down by 118.05 points or 1.30% to 8,993.85.

 

The US markets ended higher on Tuesday as traders continued to express optimism about signs of a flattening of the coronavirus curve. President Donald Trump defended his administration's response to the pandemic and indicated he is working on plans to re-open the country. Meanwhile, White House health advisor Dr. Anthony Fauci and New York Governor Andrew Cuomo, have also recently expressed cautious optimism. Cuomo said that the number of coronavirus deaths in New York rose to 778 on Monday after declining for two days but noted other indicators continue to be more encouraging. However, the International Monetary Fund warned the global economy could see the worst recession since the Great Depression as a result of the coronavirus pandemic and the containment measures adopted to slow the outbreak. World GDP is set to contract 3 percent this year, thanks to the lockdowns imposed by countries around the world. The lender expects global GDP to grow 5.8 percent next year. On economic data front, import prices in the US showed a steep drop in the month of March, according to a report released by the Labor Department, while export prices also fell sharply. The Labor Department said import prices plunged by 2.3 percent in March after falling by a revised 0.7 percent in February. The nosedive reflected the largest monthly drop in import prices since January of 2015. Street had expected import prices to tumble by 1.7 percent compared to the 0.5 percent drop originally reported for the previous month. The bigger than expected decrease in import prices came as prices for fuel imports plummeted by 26.8 percent in March after sinking 9.0 percent in February. Prices for petroleum and natural gas both showed substantial decreases. Excluding the steep drop in fuel prices, prices for non-fuel imports were unchanged in March after rising by 0.3 percent in February.

 

Crude oil futures ended deeply in red on Tuesday, as mounting concerns about a drop in energy demand on account of the virus pandemic outweighed planned output cuts from OPEC and its allies. Traders also ignored prospects for a notable drop in US shale oil production in the coming month. Besides, the global economic outlook is still bearish for oil also, with the International Monetary Fund forecasting a contraction in the global economy at a 3% annual rate this year, followed by a 5.8% rebound in 2021. That's a deeper recession than during the 2008-09 financial crisis. The IMF said the US economy would shrink 5.9% this year. Crude oil futures for May dropped $2.30 or 10.3 percent to settle at $ 20.11 a barrel on the New York Mercantile Exchange., June Brent crude fell $2.14 or 6.7 percent to settle at $ 29.60 a barrel on London's Intercontinental Exchange.

 

Erasing all of its initial losses, Indian rupee ended almost flat against dollar on Monday, tracking weak domestic equities and sharp rise in coronavirus cases in the country. Market participants were concerned as the World Bank said India is likely to record its worst growth performance since the 1991 liberalisation this fiscal year as the coronavirus outbreak severely disrupts the economy. Besides, investors awaited cues from CPI data for March and the minutes of the Monetary Policy Committee's latest meeting scheduled to be released later in the day. However, traders found some support with data showing that India's industrial output, measured in Index of Industrial Production (IIP), grew 4.5% in February 2020, mainly on account of higher output in mining, manufacturing and electricity sector. The output for February is the highest number since July 2019 - when it stood at 4.3%. IIP had grown by 0.2% in February 2019 and 2% in the preceding month (January 2020). Finally, the rupee ended at 76.27, 1 paisa stronger from its previous close of 76.28 on Thursday.

 

The FIIs as per Monday'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 7376.33 crore against gross selling of Rs 5489.37 crore, while in the debt segment, the gross purchase was of Rs 825.07 crore with gross sales of Rs 2224.60 crore. Besides, in the hybrid segment, the gross buying was of Rs 15.34 crore against gross selling of Rs 3.78 crore.

 

The US markets ended higher on Tuesday as traders continued to express optimism about signs of a flattening of the coronavirus curve. Asian markets are trading mixed on Wednesday as warnings of the worst global recession since the 1930s underlined the economic damage already done even as some countries tried to re-open for business. Indian markets ended sharply lower on Monday, with rate-sensitive financials, auto and realty stocks pacing the decliners. Markets remain closed on Tuesday on account of Dr. Babasaheb Ambedkar Jayanti. Today, the start of session is likely to be cautious amid mixed cues from Asian peers and the government's decision to extend the nation-wide lockdown till May 3. There will be concerned with report that confirmed COVID-19 cases in India stand at 10,815. The death toll from the outbreak in India is at 353. Maharashtra, Delhi and Tamil Nadu have reported the highest number of cases. Also, there will be some cautiousness as the International Monetary Fund (IMF) cut its projection for India's economic growth to 1.9% for the current financial year, the lowest since the 1991 balance of payments (BoP) crisis, against its 5.8% forecast earlier. Meanwhile, investors will keep eye on start of earnings numbers for the fourth quarter ended and year ended March 31, 2020. Though, some support may come later in the day with supporting macro-economic data. The government data showed that the consumer Price Index-based (CPI) inflation eased for the second month in a row in March, at 5.91%, on the back of further reduction in rate of food inflation. Market participants may take encouragement with report that the government may soon come up with details of a second stimulus package. Traders may take note of report that India may soon start trials of treatment protocols on coronavirus (Covid-19) patients using ayurvedic medicines. Aviation stocks will be in focus with report that India will keep domestic and international flights suspended till May 3 in alignment with a national lockdown being extended. 

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

8,993.85

8,900.15

9,099.80

BSE Sensex

30,690.02

30,377.54

31,099.11

                                                 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Tata Motors

704.14

74.25

72.10

77.00

State Bank of India

518.48

183.50

181.50

187.10

Vedanta

374.71

78.30

74.82

80.62

Axis Bank

334.32

418.95

404.67

430.57

NTPC

332.67

88.65

85.88

90.28

 

  • L&T's construction arm -- L&T construction has bagged three EPC Water Management orders from the KUIDFC for its Water a Effluent Treatment Business. 
  • Dr. Reddy's Laboratories has launched blood cancer drug Invista in India. 
  • APSEZ has raised Rs 1,500 crore and allotted 15,000 Rated, Listed, Secured, Redeemable, NCDs of the face value of Rs 10,00,000 each on private placement basis. 
  • Tata Steel has received approval from Committee of Directors to raise Rs 7,000 crore, 70,000 Unsecured, Redeemable, Rated, Listed, NCDs of face value Rs 10,00,000 each to be issued in one or more issues on the Private Placement Basis.
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