Javeri Fiscal Services Ltd. Daily Newsletter
NSE Intra-day chart (15 October 2020)
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Market Commentary 16 October 2020
Benchmarks likely to open in green on Friday

 

Snapping their ten-day gaining streak, Indian equity benchmarks came under selling pressure on Thursday and ended with losses of more than two percent, on account of sustained selling in frontline line blue-chip stocks amid weak cues from global markets. After a slightly positive opening, the domestic bourses soon slipped into negative terrain, as traders turned cautious with Chief Economic Adviser K V Subramanian's statement that there will be a temporary impact on investment flow to start-ups due to the curbs imposed by the government to stop opportunistic takeover by firms from countries with which India has border tensions. Traders also remain concerned with the International Monetary Fund (IMF) stating that India's public debt ratio, which remarkably remained stable at around 70 per cent of the GDP since 1991, is likely to jump by 17 percentage points to nearly 90 per cent because of increase in public spending due to COVID-19. Director of the IMF's Fiscal Affairs Department said in our projections, the increase in public spending, in response to COVID-19, and the fall in tax revenues and economic activity, will make public debt jump up by 17 percentage points to almost 90 per cent of GDP. The selling intensified during the second half of the session to end near day's low point, as sentiments weakened further with World Bank President David Malpass' statement that the world is experiencing one of the deepest recessions since the Great Depression in the 1930s owing to the novel coronavirus. He also termed the COVID-19 pandemic a catastrophic event for many developing and the poorest countries. He also said that given the extent of the economic contraction, there was a rising risk of disruptive debt crises in countries. Market participants also took a note of Finance Minister Nirmala Sitharaman's statement that the International Monetary Fund's (IMF) debt restructuring programme should aim at helping the countries overcome the fiscal stress caused by the coronavirus pandemic. She said it would be important to take into consideration the circumstances and concerns of both creditors and debtors and that in the process of debt restructuring, care must be taken to not saddle the debtor countries with overly burdensome conditionalities. Finally, the BSE Sensex fell 1066.33 points or 2.61% to 39,728.41, while the CNX Nifty was down by 290.70 points or 2.43% to 11,680.35.

 

The US markets ended lower on Thursday amid uncertainty about a new stimulus bill after Treasury Secretary Steven Mnuchin suggested that a new relief package is not likely to pass before next month's elections. Senate Majority Leader Mitch McConnell has also cast doubts on whether a bill can pass before the elections and recently announced plans to vote on a more limited relief package. Further, sentiments were also weak as rising coronavirus cases, especially in Europe, resulted in new restrictions on businesses and travel. Besides, Selling pressure was also generated in reaction to a Labor Department report showing an unexpected increase in first-time claims for US unemployment benefits in the week ended October 10th. The report said initial jobless claims climbed to 898,000, an increase of 53,000 from the previous week's revised level of 845,000. Street had expected jobless claims to edge down to 825,000 from the 840,000 originally reported for the previous week. Meanwhile, growth in New York manufacturing activity slowed by more than expected in the month of October, the Federal Reserve Bank of New York revealed in a report. The New York Fed said its general business conditions index slid to 10.5 in October from 17.0 in September. While a positive reading still indicates growth in regional manufacturing activity, street had expected the index to show a much more modest drop to 15.0. The bigger than expected decrease by the headline index came even though the new orders index climbed to 12.3 in October from 7.1 in September and the shipments index rose to 17.8 from 14.1. The number of employees index also increased to 7.2 in October from 2.6 in September, indicating an acceleration in the pace of job growth. The report also said the prices paid index crept up to 27.8 in October from 25.2 in September, while the prices edged down to 5.3 from 6.5.

                        

Crude oil futures ended marginally lower on Thursday as rising COVID-19 infections led to renewed restrictions on movement in several European countries, raising concerns over a further slowdown in energy demand. However, downside remained capped after US government data showed a better-than-expected weekly decline in domestic crude supplies.  The Energy Information Administration reported that US crude inventories fell by 3.8 million barrels for the week ended October 9. The data, which was delayed by a day because of Monday's US federal holiday, followed a 500,000-barrel increase in the previous week. Crude oil futures for November fell 8 cents or 0.2 percent to settle at $40.96 a barrel on the New York Mercantile Exchange. December Brent crude declined 16 cents or 0.4 percent to settle at $43.16 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended lower against dollar on Thursday, on account of sustained dollar demand from importers and banks. Traders were concerned with International Monetary Fund (IMF) statement that India's public debt ratio, which remarkably remained stable at around 70 per cent of the GDP since 1991, is likely to jump by 17 percentage points to nearly 90 per cent because of increase in public spending due to COVID-19. Director of the IMF's Fiscal Affairs Department said in our projections, the increase in public spending, in response to COVID-19, and the fall in tax revenues and economic activity, will make public debt jump up by 17 percentage points to almost 90 per cent of GDP. However, weakness in domestic equity markets also put pressure on Indian currency. On the global front, Sterling struggled to cling on to the $1.30 level on Thursday as traders waited to see whether a meeting of European Union leaders in Brussels would signal any progress in troubled Brexit talks with Britain. Finally, the rupee ended at 73.36, 5 paise weaker from its previous close of 73.31 on Wednesday.

 

The FIIs as per Thursday's data were net buyers in equity segment, while net seller in debt segment. In equity segment, the gross buying was of Rs 7132.17 crore against gross selling of Rs 5983.04 crore, while in the debt segment, the gross purchase was of Rs 964.88 crore with gross sales of Rs 968.75 crore. Besides, in the hybrid segment, the gross buying was of Rs 16.09 crore against gross selling of Rs 21.37 crore.

 

The US markets ended lower on Thursday amid uncertainty about a new stimulus bill after Treasury Secretary Steven Mnuchin suggested on Wednesday that a new relief package is not likely to pass before next month's elections. Asian markets are trading mixed on Friday as investors assess fresh restrictions in various parts of Europe amid a resurgence in Covid-19 cases. Indian markets ended sharply lower on Thursday, snapping gains after 10 straight sessions, amid a selloff in all key sectors. Today, markets are likely to open in green on short-covering after a sharp fall in the previous session. Some encouragement will come with union health minister Harsh Vardhan's statement that India is expected to have a COVID-19 vaccine in a few months and the country should be in the process of delivering it to people in the next six months. Some support will also come with the government data showing that India's exports increased 5.99 percent year-on-year to $27.58 billion in September. Exports stood at $26.02 billion in September 2019. The country's imports declined 19.6 percent to $30.31 billion in September. It was $37.69 billion in the same month last year. The trade deficit in September was $2.72 billion, compared to $11.67 billion in the year-ago month. Though, rising coronavirus cases may dampen sentiments in the markets. India on Thursday registered a spike of 60,365 cases, taking the total count to 7,365,435, and the death toll reached 112,144. Traders may take note of Moody's Investors Service's statement that the government's second round of stimulus will spur consumer spending in the near term but support to economic growth will be minimal. Apparel industry stocks will be in focus with ICRA's report that Indian apparel exporters are likely to see a decline of 20-25 per cent in their turnover in 2020-21, while those focused on domestic market are expected to witness a 30-40 per cent decline in revenue due to the COVID-19 pandemic. There will be some reaction in real estate sector stocks with a private report that private equity (PE) investment in Indian real estate fell 57 per cent year-on-year to around $2.3 billion during January-September this year as investors remained cautious due to COVID-19 pandemic. There will be some earnings announcements too to keep the markets buzzing.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,680.35

11,552.61

11,916.76

BSE Sensex

39,728.41

39,247.91

40,628.49

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Tata Motors

640.05

126.95

124.19

132.04

State Bank of India

491.85

192.85

189.06

199.56

Infosys

442.89

1,108.25

1,071.84

1,165.34

Wipro

389.62

341.60

335.61

350.91

ICICI Bank

342.39

391.00

383.46

404.21

 

  • Infosys is planning to roll out salary hikes and promotions across all levels effective January 1, 2020. 
  • Reliance Industries' subsidiary company -- Reliance Retail Ventures has received the subscription amount of Rs 5,550 crore from Alyssum Asia Holdings II Pte.  
  • M&M has introduced new features of Android Auto and Car Play in the top-end variants of its popular SUV Scorpio. 
  • Tata Motors' wholly owned subsidiary -- Jaguar Land Rover has launched its iconic SUV Defender in the country with price starting at Rs 73.98 lakh (ex-showroom).
News Analysis