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NSE Intra-day chart (27 July 2020)
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Market Commentary 28 July 2020
Markets to get optimistic start amid positive global cues

 

Indian equity benchmarks ended Monday's trade on a pessimistic note, with Sensex and Nifty settling below their crucial 37,950 and 11,150 levels, respectively. Markets made slightly positive start but soon fell sharply as banking shares came under intense selling pressure after the Reserve Bank of India on Friday warned that the bad loan ratio in the banking industry could rise to at least 12.5 per cent by March 2021, from 8.5 per cent in March 2020. Also, RBI in its half-yearly Financial Stability Report said that the exact duration of how long COVID-19 pandemic will last is still uncertain, therefore the downside risks to growth remain significant in FY21. Traders were also cautious with report that foreign portfolio investors (FPIs) remained net sellers in Indian markets in July so far on account of both domestic and global factors, including rising number of coronavirus cases and increasing tension between the US and China. Benchmarks continued to trade lower in late afternoon session, as private report stated that Indian economy is likely to face inflationary pressures in the near term, as factors like supply chain disruption and lack of low-wage workers are expected to offset the deflationary pressures from subdued demand in the economy. However, further losses got restricted as Union Minister Nitin Gadkari termed India as the best destination for foreign investment with high returns, and urged European investors to invest in India. He said the government is looking at LNG as fuel for trucks and buses in transport on long routes of more than 700 to 800 km. In addition, it is promoting ethanol to reduce Rs 7 lakh crore annual import of crude. Apart from LNG, he said the government's focus is to take ethanol economy from the present Rs 20,000 crore to Rs 1 lakh crore. Traders also took note of Chemicals and Fertilisers Minister D V Sadananda Gowda's statement that the government is taking measures for ease of doing business in the fertiliser sector and to ensure smooth supply of soil nutrients to farmers. Finally, the BSE Sensex fell 194.17 points or 0.51% to 37,934.73, while the CNX Nifty was down by 62.35 points or 0.56% to 11,131.80.

 

The US markets settled higher on Monday on optimism about additional fiscal stimulus after Treasury Secretary Steven Mnuchin said Republicans have finalized their new coronavirus relief legislation. Mnuchin said the GOP intends to introduce the $1 trillion bill after delaying the planned rollout last week. Despite the vast gap in the price tags of the Republican plan and a $3 trillion bill passed by the Democrat-controlled House, Mnuchin said he expects lawmakers can move very quickly to address the differences. Meanwhile, the Federal Reserve will conclude its two-day policy meeting on Wednesday. Investors generally don't expect the central bank to make any major announcements, but are looking for Chairman Jerome Powell to maintain a dovish tone. However, US-China tensions simmered, as the US closed its consulate in the western Chinese city of Chengdu at Beijing's demand, in retaliation for Washington ordering the closure of China's Houston consulate. On the economic data front, following the substantial rebound in new orders for U.S. manufactured durable goods reported for the previous month, the Commerce Department released a report showing durable goods orders continued to move sharply higher in the month of June. The Commerce Department said durable goods orders surged up by 7.3 percent in June after skyrocketing by a downwardly revised 15.1 percent in May. The continued increase comes following the nosedive seen in March and April. Street had expected durable goods orders to leap by 7.2 percent compared to the 15.7 percent jump that had been reported for the previous month. Orders for transportation equipment helped to lead the way higher once again, spiking by 20.0 percent in June after soaring by 78.9 percent in May.

 

Crude oil futures end higher on Monday buoyed by a drop in the US dollar index to its lowest in two years. However, the continued spread of COVID-19 and its impact on the economy, as well as US-China tensions limited the rise in prices. The number of confirmed cases of COVID-19 world-wide climbed above 16.2 million on Monday and the death toll rose to 648,966. The US case tally climbed to 4.23 million and the death toll rose to 146,935. Crude oil futures for September gained 31 cents or 0.8 percent to settle at $41.60 a barrel on the New York Mercantile Exchange. September Brent crude added 7 cents or 0.2 percent to settle at $43.41 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended flat on Monday as traders remained cautious as RBI in its half-yearly Financial Stability Report said that the exact duration of how long COVID-19 pandemic will last is still uncertain, therefore the downside risks to growth remain significant in FY21. However, sentiments got some support as Union Minister Nitin Gadkari termed India as the best destination for foreign investment with high returns, and urged European investors to invest in India. On the global front, dollar steadied Monday after reaching its lowest since September 2018 overnight, weakened by deteriorating U.S.-China relations and domestic economic concerns as U.S. COVID-19 infections showed no sign of slowing. Finally, the rupee ended unchanged from its previous close of 74.83 on Friday.

 

The FIIs as per Monday's data were net buyers in equity, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 9141.94 crore against gross selling of Rs 5269.05 crore, while in the debt segment, the gross purchase was of Rs 743.82 crore with gross sales of Rs 951.23 crore. Besides, in the hybrid segment, the gross buying was of Rs 19.39 crore against gross selling of Rs 4.85 crore.

 

The US markets ended higher on Monday as investors weighed progress in US government stimulus efforts against rising Covid-19 cases. Asian markets are trading mostly in green on Tuesday as investors continue to monitor developments over coronavirus vaccine. Indian markets ended lower on Monday, with banks suffering heavy losses amid the RBI's warning about rising bad loans due to the coronavirus pandemic. Today, the markets are likely to get optimistic start tracking positive global cues. Traders will be getting some encouragement as RBI Governor Shaktikanta Das made a strong case for stepping up investments in the infrastructure sector to restart the economy reeling under the impact of the COVID-19 pandemic. Some support will also come with Commerce and Industry Minister Piyush Goyal's statement that the government will soon set up a single window system for clearances and approvals for industry, and is working on creating a land bank with a view to attract investments. Besides, the Finance Ministry said the Centre has released over Rs 1.65 lakh crore as GST compensation to states for 2019-20 financial year, including Rs 13,806 crore for March. Though, rising coronavirus cases may impact the markets. India recorded over 45,000 coronavirus cases in the past 24 hours, taking its total to 1,482,503. The country's current Covid-19 death toll stands at 33,448. There may be some cautiousness with 15th Finance Commission Chairman N K Singh's statement that India will see a sharp V-shaped recovery in the third and fourth quarter of the current fiscal, but FY21 GDP growth would ultimately be in negative territory as the coronavirus lockdown led to serious demand and supply dislocations. Pharma stocks will be in focus as the central government launched four schemes of Department of Pharmaceuticals for promotion of domestic manufacturing of bulk drugs and medical devices parks in the country. There will be some reaction in PSU stocks with Finance Minister Nirmala Sitharaman's statement that the government is working on completing the stake sale process of about 23 public sector companies whose divestment has already been cleared by the Cabinet. There will be earnings announcements too, to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,131.80

11,114.50

11,249.60

BSE Sensex

37,934.73

11,071.43

11,208.58

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

ICICI Bank

732.77

358.50

348.13

377.33

State Bank of India

507.14

187.15

184.70

191.40

Zee Entertainment Enterprises

399.24

145.40

141.63

152.13

Indian Oil Corporation

391.39

93.75

91.55

95.80

Reliance Industries

370.61

2,156.20

2123.13

2,194.03

 

  • Dr. Reddy's Laboratories has received approval of XEGLYZE (abametapir) lotion, 0.74%, a 505(b)(1) NDA by the USFDA. 
  • Bajaj Auto has unveiled a financing plan to offer its adventure touring motorcycle KTM 390 Adventure at an EMI of Rs 6,999. 
  • Reliance Industries (RIL) has overtaken ExxonMobil to become the world's second most valuable energy company. 
  • ICICI Bank has reported 24.03% rise in its consolidated net profit at Rs 3117.68 crore for Q1FY21 as against Rs 2513.69 crore for Q1FY20.
News Analysis