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NSE Intra-day chart (31 August 2017)
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Market Commentary 01 September 2017
Markets to make a soft start of new series on weak GDP data

Bulls which woke up in last leg of trade mainly helped benchmarks to end near intraday highs on the F&O series expiry day, recapturing their crucial 31,700 (Sensex) and 9,900 (Nifty) levels. Though, markets made a cautious start and extended their fall, as traders remained on sidelines ahead of Gross Domestic Product (GDP) figures to be announced later in the day. Investors also remained concerned with assessment of RBI in its annual report that fiscal consolidation may come under threat at the central and state levels due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix. However, markets took U-turn and showed strength to enter into green terrain in afternoon deals with traders taking some encouragement with Finance Minister Arun Jaitley's statement that the GST is bound to impact the direct tax collection as well due to the increased detection technology and greater compliance. The Finance Minister also said that even before GST was rolled out, the impact of demonetisation has expanded the number of assessees under the personal income tax. Markets extended gains in last leg of trade to end near high point of the day, as some support came with Moody's Investors Service's statement that in the near term, the economy will continue to recover from the temporary liquidity shock from demonetization, while adjusting to the new GST. Moody's further said that though the indicators like net new nonperforming loan (NPL) formation and problem loan ratios suggest a bottoming of the credit cycle, deteriorating asset quality in agriculture, and micro, small- and medium-sized enterprise (MSME) portfolios pose risks. Finally, the BSE Sensex gained 84.03 points or 0.27% to 31,730.49, while the CNX Nifty was up by 33.50 points or 0.34% to 9,917.90.


The US markets closed higher on Thursday, with the main indexes posting their fifth consecutive monthly gain. A pair of economic reports that highlighted continued improvement in the economy also boosted sentiment on Wall Street. The Atlanta Federal Reserve's GDP Now forecast model showed that the US economy is on track to grow at a 3.3 percent annualized pace in the third quarter based on the latest data on expected lower contribution from exports and inventory investments. The latest third-quarter gross domestic product estimate was weaker than the one for a 3.4 percent growth rate calculated on August 25. On the economy front, the number of people who applied for unemployment benefits in late August remained close to a post-recession low, pointing to another solid monthly employment report near the end of summer. Initial jobless claims in the period running from August 20 to August 26 rose by 1,000 to 236,000. New claims count people who apply for unemployment benefits after losing their jobs. The average of new claims over the past month, which gives a more stable picture of layoff trends, fell by 1,250 to 236,750. The Dow Jones Industrial Average added 55.67 points or 0.25 percent to 21,948.10, the Nasdaq gained 60.35 points or 0.95 percent to 6,428.66, and the S&P 500 edged higher by 14.06 points or 0.57 percent to 2,471.65.


Crude oil futures bounced back from its recent lows on Thursday, after the U.S. Energy Department's release of 1 million barrels a day from the Strategic Petroleum Reserve. The move was made in the wake of Hurricane Harvey which has disrupted refinery operations on the Texas coast. Though, the gasoline futures remained sharply higher, as markets continued to weigh the impact of Tropical Storm Harvey on supply and demand and ahead of the Labor Day weekend that typically brings a surge in driving. Benchmark crude oil futures for October delivery ended up by 1.4 percent to $46.58 on the New York Mercantile Exchange. In London, Brent crude for October delivery ended up by 1.1 percent at $51.44 a barrel on the ICE.


Indian rupee strengthened for second consecutive session on Thursday, on dollar selling by exporters and banks, and last hour recovery in local equity markets also influenced the rupee sentiment. Some support also came with global rating agency Moody's latest report that its outlook for the Indian banking system is stable on improved prospects for asset quality. However, gains were capped as traders remained cautious ahead of Gross Domestic Product (GDP) figures to be announced later in the day. On the global front, US dollar advanced against euro and yen after strong US growth data fuelled speculations that the Federal Reserve could consider hiking interest rate for a third time this year. Finally, the rupee ended at 63.91, 10 paise stronger from its previous close of 64.01 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 4222.48 crore against gross selling of Rs 4124.26 crore, while in the debt segment, the gross purchase was of Rs 831.57 crore with gross sales of Rs 121.64 crore.


The US markets moved further high in the last session with the tech-heavy Nasdaq reaching a new record closing high, following the release of a slew of U.S. economic data, including a Commerce Department report showing a bigger than expected increase in personal income. The Asian markets have mostly made a positive start, though there is sense of cautiousness ahead of the US jobs data to take clues on the Federal Reserve's policy-tightening path. The Indian equity market extended gains for a second straight session supported by short covering on derivatives expiry. Today, the start is likely to be a bit soft-to-cautious with India's s Gross Domestic Product (GDP) growth for the first quarter of the fiscal coming in at a dismal 5.70 per cent against 7.90 per cent in the same quarter last year and a 13 quarter lowest level. According to data released by the government, quarterly GVA at basic prices for Q1FY18 from manufacturing sector grew by 1.2 per cent as compared to the growth of 10.7 per cent in Q1FY17. Moreover, industrial growth came in at around 1.60 per cent in Q1FY18 against 7.40 per cent in Q1FY17. In a double whammy, the growth of eight core sectors also slowed down to 2.4 per cent in July. The contraction was mainly seen in output of crude oil, refinery products, fertiliser and cement. However, traders may get some support with Finance Minster Arun Jaitley attributing the lower GDP numbers to pre-GST destocking of goods and expressed hope that the economy will grow at 7 percent, saying manufacturing has bottomed out. There will be buzz in the telecom sector stocks, as a government panel has refused to ease spectrum cap rules, which believes extending the fee-payment tenure for auctioned airwaves and lowering interest rates payable on dues will be enough to help restore the heavily indebted industry's financial health. The inter-ministerial group (IMG) on the telecommunications industry has also rejected other big-ticket demands such as lowering the annual licence fee and spectrum usage charges (SUC). There will be some action in PSU oil marketing companies too, as the domestic cooking gas prices in the country were hiked by 14 per cent from midnight.


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