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Market Commentary 29 June 2018
Markets likely to start new series in green amid mixed global cues

 

Magnifying previous day's losses, the local equity indices ended Thursday's session on disappointing note, in line with weak global markets on deteriorating trade relations between the US and China along with weakness in rupee. After a cautious start, the markets remained under pressure, as anxiety spread among investors with outgoing chief economic adviser Arvind Subramanian's statement that apart from high oil prices, the biggest headwind for India's growth prospects was stigmatised capitalism, or the view that the private sector could not be trusted. Traders also remained cautious with a report stating that the Goods and Services Tax (GST) investigation wing has detected tax evasion of over Rs 2,000 crore in two months, and data analysis reveals that only 1% of over 1.11 crore registered businesses pay 80% of the taxes. Further, in the last hours of the trade, selling got intensified on the counters, ahead of June F&O expiry due today. Domestic sentiments also got hit with a report stating that the US has issued a strict warning and threatened all countries including India and China to stop oil imports from Iran or face sanctions. However, the markets participants paid no heed towards the Indian Meteorological Department's latest report that monsoon will cover the entire country in the next 2-3 days. Investors also failed to take any sense of relief from interim Finance Minister Piyush Goyal's statement that cabinet has approved establishment of two strategic petroleum reserves (SPRs) with a total capacity of 6.5 mln tonnes. India has built three SPR of 5.33 million tonnes in southern India equivalent to meet 10 days of crude requirement. Finally, the BSE Sensex slipped 179.47 points or 0.51% to 35,037.64, while the CNX Nifty was down by 82.30 points or 0.77% to 10,589.10.

 

The US markets ended higher on Thursday as the Trump's administration backed away from invoking executive authority to impose a crackdown on Chinese investment in the US, but strategists are still sounding wary about what could be ahead. Sentiment got some with broad-based gains led by a rally in financials and technology sectors. Further, some support came in with a separate report from the Labor Department showing a bigger than expected increase in initial jobless claims in the week ended June 23. The report said initial jobless claims rose to 227,000, an increase of 9,000 from the previous week's unrevised level of 218,000. Street had expected jobless claims to inch up to 220,000. However,  the weakness seen earlier in the day partly reflected lingering concerns about the global economic impact of the ongoing trade dispute between the US and other major economies. Negative sentiments were also generated in reaction to a Commerce Department report showing weaker than previously estimated US economic growth in the first quarter. The report said real gross domestic product increased by 2.0 percent in the first quarter compared to the previous estimate of 2.2 percent growth. Street had expected the pace of GDP growth to be unrevised. The weaker than previously estimated growth reflected downward revisions to private inventory investment, consumer spending, and exports. The Dow Jones Industrial Average gained 98.46 points or 0.41percent to 24216.05, the S&P 500 rose 16.68 points or 0.62 percent to 2716.31 and the Nasdaq was up by 58.60 points or 0.79 percent to 7503.68.

 

Extending northward journey for the third straight day, Crude oil futures ended higher on Thursday, with benchmark again marking its highest level since 2014 in the wake of the biggest weekly decline of the year for domestic crude supplies and ongoing global output risks. Adding to supply worries, production at Syncrude Canada's 360,000 barrel-per-day oil sands facility has been shut down for more than a week. Further, traders also showed concerns that US sanctions on Iranian oil and production issues at a Canadian oil sands facility will contribute to tighter global supplies. Benchmark crude oil futures for August delivery rose 69 cents or 1 percent to settle at $73.45 a barrel on the New York Mercantile Exchange. August Brent crude added 23 cents or 0.3 percent at $77.85 a barrel on London's Intercontinental Exchange.

 

Indian rupee extended its weakness for the third straight day against dollar on Thursday amid heavy month-end demand for the American currency from importers and banks. The rupee hit it's all time low in early trade by breaching 69 a dollar mark, following further spike in crude oil prices and concerns of higher inflation and widening current account deficit. Traders remained concerned with outgoing chief economic adviser Arvind Subramanian's statement that apart from high oil prices, the biggest headwind for India's growth prospects was stigmatised capitalism, or the view that the private sector could not be trusted. However, the local currency trimmed most of its initial losses, as traders found some support with the Indian Meteorological Department's latest report that monsoon will cover the entire country in the next 2-3 days. On the global front, dollar turned lower on Thursday, giving up early gains as rising inflation in some German regions prompted some traders to buy the euro, though rebalancing flows for the half year checked sharp losses. Finally, the rupee ended at 68.79, 17 paise weaker from its previous close of 68.62 on Wednesday.

 

The FIIs as per Thursday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 5654.82 crore against gross selling of Rs 5595.63 crore, while in the debt segment, the gross purchase was of Rs 1363.39 crore with gross sales of Rs 667.90 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.05 crore against gross selling of Rs 1.23 crore.

 

The US markets ended higher on Thursday, as strength emerged on Wall Street on the back of bargain hunting, while investors shrugged off lingering concerns about the global economic impact of the ongoing trade dispute between the US and other major economies. Asian markets were trading mostly in green on Friday, as investors took note that China released details of a long-anticipated easing on foreign investment curbs on sectors including banking, automobiles, heavy industry and agriculture, as it moved to open its domestic markets. Indian equity markets ended lower on Thursday, as escalating trade war concerns coupled with fresh worries over the impact of high oil prices on inflation, current account deficit, fiscal deficit and capital inflows dented investors' appetite for risk. Today, the start of the new series is likely to be in the green amid mixed global cues. Traders may get some encouragement with the International Monetary Fund (IMF) suggesting steps to sustain the high growth rate which India has achieved. It said that the country should carry out banking sector reforms; continue with fiscal consolidation, simplify and streamline GST; and renew impetus on reforms. Traders may take note of Moody's Investors Service report that India is among the 5 countries which are least vulnerable to currency pressures amid strengthening of the US dollar, because of low dependence on external capital inflows. However, there may be some cautiousness with a report that money parked by Indians in Swiss banks rose over 50% to CHF 1.01 billion (Rs 7,000 crore) in 2017, reversing a three-year downward trend amid India's clampdown on suspected black money stashed there. Meanwhile, Finance Secretary Hasmukh Adhia has said that the new GST return forms would be introduced from January 1 after successful beta-testing of the software.


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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,589.10

10,539.80

10,656.30

BSE Sensex

35,037.64

34,889.06

35,234.31

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

ICICI Bank

341.98

271.40

268.00

276.60

SBI

213.50

257.00

254.47

260.77

Tata Motors

195.07

263.35

259.25

270.05

ONGC

176.70

153.50

150.67

157.47

IOC

168.11

154.35

149.40

159.90

 

  • Lupin and Mylan N.V. will partner to commercialize a biosimilar to Enbrel. 
  • Yes Bank has signed a Memorandum of Understanding with the Kerala Startup Mission. 
  • APSEZ has signed Share Purchase Agreement between L&T, Marine Infrastructure Developer, L&T Shipbuilding and Adani Kattupalli Port to acquire 97% stake of Marine Infrastructure Developer. 
  • Eicher Motors and Swedish automaker Volvo's JV Company -- VE Commercial Vehicles is planning to invest Rs 500 crore in FY19 for business growth.
News Analysis