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Market Commentary 01 August 2019
Markets likely to make pessimistic start amid weak global cues


Indian equity bourses managed to close in green terrain on Wednesday after a volatile session.  The start of the day was negative, amid reports that the bilateral relationship between India and the US, which has continuously experienced an upward trajectory for the last two decades, faces the risk of a downward spiral unless urgent steps are taken by both the countries to resolve their trade differences. Adding more worries, a private report stated that despite the policymakers' efforts to revive the sagging growth momentum, the economy is set to print in a 5.7 percent uptick in the June quarter and is likely to bottom out from there. It noted that India presents a picture of short-term despair and medium term hope. In the last leg of trade, indices staged recovery to end higher, aided by reports that India received the foreign direct investments (FDI) inflow of $64.37 billion during the financial year 2018-19 (FY19). As per the Annual Report 2018-19 of the Department for Promotion of Industry and Internal Trade (DPIIT), FDI worth $286 billion were received in the country in past five years. The street also got comfort as Minister of Petroleum and Natural Gas & Steel Dharmendra Pradhan launched Atal Community Innovation Centre (ACIC) in New Delhi, to encourage the spirit of innovation at the community level. This initiative aims to encourage the spirit of innovation through solution-driven design thinking to serve society. Finally, the BSE Sensex gained 83.88 points or 0.22% to 37,481.12, while the CNX Nifty was up by 32.60 points or 0.29% to 11,118.00.


The US markets ended sharply lower with cut of over one percent on Wednesday after the Fed reduced interest rates by quarter point, as expected, but Fed Chairman Jerome Powell signaled the rate cut is not the start of a trend. The Fed said it decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent, down 25 basis points from the previous range of 2-1/4 to 2-1/2 percent. This marks the first rate cut by the Fed since December of 2008. The central bank cited implications of global developments for the economic outlook as well as muted inflation pressures as reasons for the rate cut. Powell suggested that rate cut should not be seen as the beginning of a lengthy cutting cycle, adding, that is not what we are seeing now, that is not our perspective now. Besides, a report released by payroll processor ADP showed private sector employment in the US increased by slightly more than anticipated in the month of July. ADP said private sector employment climbed by 156,000 jobs in July after rising by an upwardly revised 112,000 jobs in June. The report said employment in the service-providing sector jumped by 146,000 jobs, while employment in the goods-producing sector inched up by 9,000 jobs. Meanwhile, MNI Indicators released a report unexpectedly showing a continued contraction in Chicago-area business activity in the month of July. The report said the Chicago business barometer tumbled to 44.4 in July from 49.7 in June, with a reading below 50 indicating a contraction in regional business activity. Dow Jones Industrial Average plunged 333.75 points or 1.23 percent to 26864.27, Nasdaq dropped 98.19 points or 1.19 percent to 8175.42 and S&P 500 was down by 32.80 points or 1.09 percent to 2980.38.


Crude oil futures ended higher on Wednesday as government data showed that domestic crude inventories dropped for a seventh week in a row, the longest stretch of declines in a year and a half. The Energy Information Administration (EIA) reported that US crude supplies declined by 8.5 million barrels for the week ended July 26. Analysts polled by S&P Global Platts, on average, expected a decline of 3.9 million barrels, while the American Petroleum Institute on Tuesday reported a 6 million-barrel drop. Besides, oil prices also climbed in the wake of the Federal Reserve's decision to cut its key interest rate by a quarter percentage point. Benchmark crude oil futures for September gained 53 cents or 0.9 percent to settle at $58.58 a barrel on the New York Mercantile Exchange. October Brent surged 42 cents or 0.7 percent to settle at $65.05 a barrel on London's Intercontinental Exchange.


Indian rupee ended stronger against dollar on Wednesday due to increased selling of the American currency by exporters and banks. Sentiments remained positive with the government data showing that India received the highest-ever FDI inflow of $64.37 billion during the fiscal ended March 2019. According to the Annual Report 2018-19 of the Department for Promotion of Industry and Internal Trade (DPIIT), foreign direct investments (FDI) worth $286 billion were received in the country in past five years. However, upside remained capped with a private report that despite the policymakers' efforts to revive the sagging growth momentum, the economy is set to print in a 5.7 percent uptick in the June quarter and is likely to bottom out from there. It noted that India presents a picture of short-term despair and medium term hope. On the global front, dollar held firm, as a wait-and-see mood prevailed, with traders looking ahead to the outcome of the Federal Reserve's meeting later in the day when policymakers are expected to cut interest rates for the first time since 2008. Finally, the rupee ended at 68.79, 6 paise stronger from its previous close of 68.85 on Tuesday.


The FIIs as per Wednesday'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 4544.50 crore against gross selling of Rs 5219.86 crore while in the debt segment, the gross purchase was of Rs 2380.11 crore with gross sales of Rs 2125.90 crore. Besides, in the hybrid segment, the gross buying was of Rs 3.38 crore against gross selling of Rs 4.64 crore.


The US markets declined on Wednesday after the Federal Reserve signaled caution on future interest-rate cuts shortly after the central bank lowered rates for the first time in a decade. Asian markets are trading mixed on Thursday as a private survey showed Chinese factory activity contracted in July. Indian markets snapped two-day losing streak and ended in green on Wednesday mainly on the back of late buying by market participants. Today, the start of the August month is likely to be negative amid mixed cues from Asian peers and lackluster domestic data. There will be concerned with the government data showing that growth of eight core industries dropped to 0.2 per cent in June mainly due to a contraction in oil-related sectors as well as in cement production. The eight core sector industries - coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity - had expanded by 7.8 per cent in June last year. Also, there will be some cautiousness with the Controller General of Accounts (CGA) data showing that the government's fiscal deficit touched Rs 4.32 trillion for the June quarter, which is 61.4 per cent of the budget estimate for 2019-20 fiscal. In absolute terms, the fiscal deficit, the gap between expenditure and revenue, was Rs 4.32 trillion at June-end. However, some support may come later in the day with report that India's monsoon rains in the week ending on July 31 were above average for the second time since the start of the season on June 1, helping farmers accelerate the planting of summer-sown crops and easing concerns of drought. Traders may also take note of Commerce and Industry Minister Piyush Goyal's statement that India's exports will have to contribute $1 trillion as the country aims to become a $5 trillion economy in the next few years. Meanwhile, the government has decided to hike the subsidy on sulphur fertiliser to Rs 3.56 per kg and keep the support unchanged for other non-urea nutrients for promoting balanced use of farm supplements. The auto sector stocks will also be in action, reacting to their monthly sales numbers. Besides, Ind-Ra said that automobile manufacturers in the country slashed production by 11 percent in April-June period this fiscal over the year-ago period amid the industry facing the worst slowdown with sales declining month after month. There will be lots of earnings reaction based on the performance of the companies, to keep markets buzzing.


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  • Maruti Suzuki India has introduced its multi-utility vehicle Ertiga (Petrol) compliant with BS VI emission norms. 
  • JSW Steel has been declared as the Preferred Bidder for another 3 iron ore mines in the auctions held by the Government of Karnataka in July 2019. 
  • Tata motors' wholly owned subsidiary -- Jaguar Land Rover is looking for partnerships in China to lessen the financial burden on group's bottomline. 
  • Tech Mahindra has acquired MadPow, a strategic design consultancy headquartered in the US.
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