Javeri Fiscal Services Ltd. Daily Newsletter
NSE Intra-day chart (18 September 2018)
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Market Commentary 19 September 2018
Markets likely to make optimistic start on firm global cues

 

Tuesday turned-out to be a disappointing day of trade for Indian equity benchmarks with frontline gauges ending near intraday low levels, breaching their crucial 37,300 (Sensex) and 11,300 (Nifty) mark. Markets started the session with cautious tone as traders remain concerned with report that in an escalation to the trade war with China, US President Donald Trump announced imposition of new tariffs on additional $200 billion worth of Chinese imports. On the domestic turf, market participants remained cautious with International Monetary Fund's (IMF) estimates that the real effective depreciation of Indian rupees is between 6-7% compared to December 2017. It said broadly since the beginning of the year, Indian rupee has lost about 11% of its value in nominal terms vis-a-vis the US dollar. However, losses remain capped as some relief came with CBDT Chairman Sushil Chandra expressing confidence in exceeding Rs 11.5 lakh crore direct tax collection target in current fiscal. Some support also came with report stating that Markets regulator SEBI has relaxed initial public offer (IPO) norms to allow companies to announce the price band two days before an offering. But selling in last leg of trade mainly played spoil sports for domestic markets and dragged key gauges near intraday lows as sentiments got hit with credit rating agency, India Ratings and Research's latest report that banks' credit costs are likely to remain elevated at 2%-3% during FY19-FY20, on the back of ageing of non-performing assets (NPAs), accelerated provisioning and slippages especially from non-corporate accounts. Traders took note of a report that with interest rates cycle reversing, cost of borrowing for housing finance companies (HFCs) and microfinance institutions (MFIs) is likely to increase by over 30 basis points in the current fiscal year, and by another 40-50 basis in FY20. Separately, the indebtedness of Indian households nearly doubled in the year to March 2018, with their financial liabilities rising 80% to Rs 6.74 lakh crore. Traders overlooked Finance minister Arun Jaitley's statement that the reforms undertaken by the government in the banking sector have started to yield results and recoveries increased on bad loans that had ballooned because of disproportionate lending during the Congress-led UPA rule. Finally, the BSE Sensex declined 294.84 points or 0.78% to 37,290.67, while the CNX Nifty was down by 98.85 points or 0.87% to 11,278.90.

 

The US markets ended higher on Tuesday, as traders shrugged off concerns about the escalating trade war between the U.S. and China. Traders seemed to be expressing relief that the rates of tariffs the U.S. will impose on Chinese goods and retaliatory tariffs China will impose on U.S. goods are not as high as feared. US President Donald Trump announced new tariffs on approximately $200 billion worth of Chinese imports on Monday, although the tariffs will initially be set at 10 percent compared to the 25 percent previously floated by the administration. However, the tariffs are set to rise to 25 percent on January 1, and Trump said the U.S. would impose tariffs on another $267 billion worth of Chinese imports if China takes retaliatory action. Despite the threat from Trump, China announced it will retaliate by imposing tariffs on $60 billion worth of U.S. goods, effective September 24. The Chinese tariffs will reportedly range from 5 percent to 10 percent after China previously earmarked some goods for a 20 percent levy. On the economic front, the National Association of Home Builders released a report showing homebuilder confidence has held steady in the month of September. The report said the NAHB/Wells Fargo Housing Market Index came in at 67 in September, unchanged from August. The street had expected the index to edge down to 66. Dow Jones Industrial Average surged 184.84 points or 0.71 percent to 26,246.96, the S&P 500 gained 60.31 points or 0.76 percent to 7956.11 and Nasdaq was up by 15.51 points or 0.54 percent to 2,904.31.

 

Crude oil futures ended higher on Tuesday as risks to global crude supplies escalated ahead of data that are expected to reveal a fifth-straight weekly decline in US inventories. Saudi Arabia's remarks that it was comfortable with Brent oil above $80 a barrel, at least in the short term, supported oil's up move. Besides, rising geopolitical tensions after Russia blamed Israel for the loss of one of its reconnaissance planes shot down overnight by Syrian defense systems, too contributed to oil's rise. Investors looking for the data from the US Energy Information Administration, to be released September 20. Benchmark crude oil futures for October gained 94 cents or 1.4 percent to settle at $69.85 a barrel on the New York Mercantile Exchange. November Brent crude fell 98 cents or 1.3% to settle at $79.03 a barrel on London's Intercontinental Exchanged.

 

Continuing its losing streak for the second straight session, Rupee weakened significantly against the American currency on Tuesday. Investors remained cautious with International Monetary Fund's (IMF) estimates that the real effective depreciation of Indian rupees is between 6-7% compared to December 2017. It said broadly since the beginning of the year, Indian rupee has lost about 11% of its value in nominal terms vis-a-vis the US dollar. Rupee sentiments got hit with credit rating agency, India Ratings and Research's latest report that banks' credit costs are likely to remain elevated at 2%-3% during FY19-FY20, on the back of ageing of non-performing assets (NPAs), accelerated provisioning and slippages especially from non-corporate accounts.  On the global front, the US dollar was flat against other currencies on Tuesday as the White House imposed fresh tariffs on China. Finally, the rupee ended at 72.97, 48 paise weaker from its previous close of 72.49 on Monday.

 

The FIIs as per Tuesday'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 4181.98 crore against gross selling of Rs 4086.32 crore, while in the debt segment, the gross purchase was of Rs 384.14 crore with gross sales of Rs 1129.90 crore. Besides, in the hybrid segment, the gross selling was of Rs 0.09 crore as against no buying.

 

The US markets ended higher on Tuesday, as investors shrugged off concerns about the escalating trade war between the US-China and shifted focus on the robust economy. Asian markets were trading mostly in green on Wednesday as investors looked past the latest escalation in the US-China trade conflict, seen by some market participants as less severe than expected. Late hour selloff mainly dragged the Indian markets lower for the second straight session on Tuesday following weak trade in global counterparts amid worsened trade tensions between the US and China coupled with surge in crude prices. Today, the markets are likely to make a positive start following firm trade in other global markets. Traders will be getting some encouragement with report that the finance ministry on September 18 asked ministries to shortlist commodities and goods for import curbs by increasing customs duty, to ease the pressure on the rupee and keep the widening Current Account Deficit (CAD) on check. Besides, Finance Minister Arun Jaitley made a case for blending subsidy with investment to augment farm sector growth and make it sustainable and self-sufficient. However, traders will be concerned about India Ratings' report that though the Centre may manage to achieve the debt-to-GDP ratio target of 40% by FY23, the states achieving the 20% target looks difficult as most of them have not budgeted so far. There will be some cautiousness with report that the country's rainfall deficit in the ongoing monsoon season widened to 10%, hovering on borderline drought conditions, following below-normal showers every month - a pattern of consistent shortfall not seen since 2004. There will be some buzz in sugar sector stocks with report that the government is now expected to come out with a bailout package for sugar sector, after announcing a higher price for ethanol manufacturers.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,278.90

11,228.08

11,370.58

BSE Sensex

37,290.67

37,107.20

37,609.79

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

SBI

339.01

273.80

268.50

283.00

Yes Bank

302.44

323.55

318.78

328.63

ICICI Bank

148.25

318.85

315.02

325.37

Vedanta 

132.29

230.15

227.10

234.10

Tata Motors

115.54

251.50

248.13

257.33

 

  • Larsen & Toubro's construction arm -- L&T Construction has won orders worth Rs 2,048 crore across two business segments. 
  • State Bank of India is planning to sell eight non-performing assets in order to recover dues worth over Rs 3,900 crore. 
  • Adani Ports and Special Economic Zones' wholly owned subsidiary Adani Logistics has incorporated a Joint Venture company namely Adani NYK Auto Logistics Solutions on September 17, 2018. 
  • NTPC has received an approval to invest in Talcher Thermal Power Project, Stage-III (2x660 MW) at an appraised current estimated cost of Rs 9,785.79 crore.
News Analysis