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NSE Intra-day chart (18 May 2020)
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Market Commentary 19 May 2020
Benchmarks to make positive start amid firm global cues

 

Indian equity benchmarks ended Monday's trade on a pessimistic note with heavy losses of around three and half percent as Union home ministry extended the lockdown for another two weeks till May 31 to contain the spread of coronavirus. Markets traded in negative note since beginning, as domestic cases of the novel coronavirus continued to rise steadily. Selling further crept in with the commerce and industry ministry's data showing that India's exports contracted by a record 60.28 per cent to $10.36 billion in April amid the coronavirus lockdown. Imports too tumbled by 58.65 per cent to $17.12 billion in April from $41.4 billion in the same month last year. Besides, the trade deficit narrowed to $6.76 billion. Trade deficit in April 2019 stood at $15.33 billion. Local bourses added more losses in late afternoon session, as sentiments remained down-beat with former finance minister P Chidambaram's statement that the fiscal stimulus package announced by the government is hopelessly inadequate given the gravity of the economic crisis as it amounts to only Rs 1.86 lakh crore, which is 0.91 percent of the GDP. He also said the stimulus package has left several sections like the poor, migrants, farmers, laborers, workers, small shopkeepers, and middle class high and dry. Traders even overlooked Finance Minister Nirmala Sitharaman's statement that the government would frame a policy where private entities are allowed to participate in all sectors. The government will also notify a list of strategic sectors where the presence of public sector enterprises (PSEs) is required. Finally, the BSE Sensex fell 1068.75 points or 3.44% to 30,028.98, while the CNX Nifty was down by 313.60 points or 3.43% to 8,823.25.

 

The US markets ended higher on Monday, on optimism that the American economy might be percolating again, while the medical community works toward a potential COVID-19 vaccine. Moderna (MRNA) reported positive phase one results for a potential coronavirus vaccine. Shares of Moderna spiked by 20 percent after the biotechnology company said an early-stage human trial for a vaccine produced antibodies in all 45 participants. The next step for Moderna is a phase-two trial, which has been approved to move forward by the Food and Drug Administration. The phase-one trial was done in partnership with the National Institute of Allergy and Infectious Diseases. Meanwhile, support was also tied to remarks by Federal Reserve Chairman Jerome Powell, striking a more upbeat tone on US growth prospects, while reiterating that the central bank still retained tools to limit the economic downturn. Besides, reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 12.5 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index jumped by 8.5 percent and 8 percent, respectively. Significant strength was also visible among housing stocks, as reflected by the 9 percent spike by the Philadelphia Housing Sector Index.

 

Magnifying their previous session's rally, crude oil futures ended higher on Monday supported in large part by efforts to rebalance a supply-demand dynamic that has been blown out of whack due to the debilitating effects of the COVID-19 pandemic. A report from the Energy Information Administration saying crude oil production from major US shale producers will see a significant decline in June. Meanwhile, Saudi Arabia said it would cut an extra 1 million barrels a day in June, with the United Arab Emirates and Kuwait also contributing more than their targeted reductions. Besides, the demand for oil has improved with the resumption of economic activity. Crude oil futures for June surged $2.39 or 8.1 percent to settle at $31.82 a barrel on the New York Mercantile Exchange. July Brent crude rose $2.31 or 7.1 percent to settle at $34.81 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended considerably weaker against U.S. dollar on Monday, due to fresh demand for the American currency from banks and importers. Traders were concerned with the commerce and industry ministry's data showing that India's exports contracted by a record 60.28 per cent to $10.36 billion in April amid the coronavirus lockdown. Imports too tumbled by 58.65 per cent to $17.12 billion in April from $41.4 billion in the same month last year. Market participants also concerned about the effectiveness of the fiscal stimulus package and the impact of extended nationwide lockdown amid a significant rise in COVID-19 cases on the domestic economy. Stronger dollar against key global currencies and subdued equity market too put pressure on the domestic unit. On the global front, dollar held its ground on Monday as concern about global tensions with China overshadowed improving sentiment from easing coronavirus lockdowns, while talk of negative interest rates pushed the pound to an almost two-month low. Finally, the rupee ended at 75.91, 33 paise weaker from its previous close of 75.58 on Friday.

 

The FIIs as per Monday'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 3877.98 crore against gross selling of Rs 6388.56 crore, while in the debt segment, the gross purchase was of Rs 1728.67 crore with gross sales of Rs 763.06 crore. Besides, in the hybrid segment, the gross buying was of Rs 13.77 crore against gross selling of Rs 16.66 crore.

 

The US markets ended sharply higher on Monday after Moderna (MRNA) reported positive phase one results for a potential coronavirus vaccine. Asian markets are trading in green on Tuesday as hopes rise on a potential coronavirus vaccine after a positive development from a Moderna trial. Indian markets ended deeply in red on Monday as investors were disappointed by government measures to aid an economic recovery. Today, the markets are likely to make optimistic start following firm cues from global markets. Some support will come with Minister for MSMEs and road transport and highways Nitin Gadkari's statement that the recent steps announced by the government to boost liquidity and credit flows would also bolster the purchasing power of the people via employment creation and help accelerate the wheels of the economy. Traders may take note of Expenditure secretary TV Somanathan's statement that this is a challenging year for the central government due to the serious revenue impact of the coronavirus crisis, but added that the Centre had no plan of carrying out poorly calibrated expenditure cuts. Though, there may be some cautiousness amid rising coronavirus cases in India as the Worldometer data showed that the total number of coronavirus cases in the country has topped the 100,000 mark. As many as 3,156 people have died from the disease in the country, while a little over 39,000 have recovered. Traders may be also concerned with a private report that the combined fiscal deficit of the Centre and states will top 12 percent of the GDP because of the recent economy boosting measures, and higher borrowings by States to meet COVID-19 exigencies. There will be some buzz in the power stocks with global ratings agency Standard & Poor's (S&P) statement that the government's stimulus measures will only provide a temporary lifeline to state-owned power distribution companies as the coronavirus pandemic has increased liquidity pressure for these firms. Auto stocks will be in focus with Industry body Society of Indian Automobile Manufacturers' (SIAM) statement that the government's economic stimulus package will not create demand.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

8,823.25

8,700.57

9,052.12

BSE Sensex

30,028.98

29,582.20

30,862.01

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Vedanta

880.09

92.50

89.85

95.40

State Bank of India

773.51

155.30

151.40

162.80

ICICI Bank

740.34

298.50

287.67

314.92

Axis Bank

478.65

358.80

344.40

381.10

Tata Motors

442.22

80.65

78.67

83.57

 

  • Coal India has initiated the process of development of coal bed methane projects with an estimated investment of Rs 2,474 crore. 
  • ITC has resumed operations at its factories and plant locations manufacturing non-essential items with limited workforce. 
  • Maruti Suzuki India is all set to restart production of vehicles at its Gurgaon plant from the May 18, 2020. 
  • Cipla has submitted an ANDA for Fluticasone propionate and Salmeterol inhalation powder (100/50 mcg, 250/50 mcg and 500/50 mcg) to the USFDA.
News Analysis