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Market Commentary 01 November 2018
Markets to make positive start on firm global cues


 

Indian equity indices made strong gains on Wednesday, with Sensex and Nifty ending the trading session near their intraday high points, tracking positive cues from global markets. After a cautious start, the markets traded under pressure during early deals, amid the Reserve Bank of India's (RBI) report showing that India Inc's foreign borrowing more than halved to $1.71 billion in September. The borrowings were $3.48 billion in September last year. Traders' sentiments got impacted by a report stating that Indian stocks are over-valued and that earnings growth could slow in the wake of macro headwinds, foreign funds have been taking risk off the table. The chances of capital losses in the bond markets, as yields rise, has seen money move out of the debt market too. Some concerns also came with a private report stating that India, which presently has a rich demographic dividend, will need 9.94 crore additional jobs over the decade. It highlighted warning that lack of concrete efforts could push India into jobless growth. Moreover, 80% of the new jobs demand will come from Tier 2 and Tier 3 districts of just 10 states. However, the key indices gained the ground in afternoon deals to rally in northward direction, as Commerce and Industry Minister Suresh Prabhu hinted at improvement in India's ranking in the World Bank's ease of doing business report, to be released on Wednesday. India jumped 30 places to rank 100th among 190 nations in the last year's World Bank's ease of doing business index. Adding more optimism, DIPP Secretary Ramesh Abhishek said that the Department of Industrial Policy and Promotion (DIPP) is working with the tax department and regulators to ease the rules and laws for startups to support budding entrepreneurs. The markets participants also got relief with SBI study report showed that inflation is likely to remain below 4% in the coming months, notwithstanding possible increase in onion prices. Sentiments were positive with a private report stating that India's long-term growth story remains robust despite global headwinds as well as rupee depreciation and high oil prices. Meanwhile, the high level the Financial Stability and Development Council (FSDC) meeting chaired by Finance Minister Arun Jaitley discussed liquidity issues being faced by the non-banking financial companies. Finally, the BSE Sensex surged 550.92 points or 1.63% to 34,442.05, while the CNX Nifty was up by 188.20 points or 1.85% to 10,386.60.

 

The US markets ended higher on Wednesday for a second straight day as investors applauded quarterly results from companies and an upbeat jobs report. Facebook shares rose 3.8 percent after the company reported better-than-expected earnings. CEO Mark Zuckerberg said during the company's earnings call Facebook plans to invest significantly in its business next year. Besides, buying interest was also generated in reaction to a report from payroll processor ADP showing stronger than expected private sector job growth in the month of October. Payroll processor ADP released a report showing another significant increase in employment in the US private sector in the month of October. ADP said private employment jumped by 227,000 jobs in October after surging up by a downwardly revised 218,000 jobs in September. Street had expected an increase of about 189,000 jobs compared to the addition of 230,000 jobs originally reported for the previous month. The stronger than expected job growth in October reflected the biggest increase in private sector employment since a jump of 241,000 jobs in February. Dow Jones Industrial Average gained 241.12 points or 0.97 percent to 25115.76, Nasdaq surged 144.25 points or 2.01 percent to 7305.90 and S&P 500 was up by 29.11 points or 1.09 percent to 2711.74.

 

Crude oil futures ended lower on Wednesday as a weekly rise in US crude supplies nearly matched market expectations and product stocks declined. The Energy Information Administration reported that domestic crude supplies rose by 3.2 million barrels for the week ended October 26. That followed five consecutive weeks of gains. Prices also posted their biggest monthly percentage decline in more than two years as rising production and the potential for a slowdown in energy demand outweighed expectations for further declines in Iranian oil exports, with US sanctions set to begin next week. Benchmark crude oil futures for December dropped 87 cents or 1.3 percent to settle at $65.31 a barrel on the New York Mercantile Exchange. December Brent crude lost 44 cents or 0.6 percent to settle at $75.47 a barrel on London's Intercontinental Exchanged.

 

Extending weakness for the second day, Indian rupee depreciated considerably against dollar on Wednesday, amid worsening of the ongoing RBI-govt spat which is seen as a threat to the central bank's autonomy. Traders also remained cautious with a private report stating that India, which presently has a rich demographic dividend, will need 9.94 crore additional jobs over the decade. It highlighted warning that lack of concrete efforts could push India into jobless growth. Moreover, 80% of the new jobs demand will come from Tier 2 and Tier 3 districts of just 10 states. The market participants overlooked SBI study report showing that inflation is likely to remain below 4% in the coming months, notwithstanding possible increase in onion prices.  On the global front, dollar rose to its highest levels in more than a year on Wednesday, as dovish comments by the Bank of Japan and weak data from China reinforced the greenback's attractiveness as an investment destination. Finally, the rupee ended at 73.95, 27 paise weaker from its previous close of 73.68 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 4051.57 crore against gross selling of Rs 5587.33 crore, while in the debt segment, the gross purchase was of Rs 1540.56 crore with gross sales of Rs 944.12 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.81 crore against no selling.

 

The US markets ended sharply higher for second straight session on Wednesday with report from payroll processor ADP showing stronger than expected private sector job growth in October coupled with upbeat corporate earnings. Asian markets were trading mostly in green in early deals on Thursday, as bruised investor sentiment got some relief from another robust Wall Street session. Indian markets erased all of their early losses to settle near intra-day high level on Wednesday on easing of concerns over the ongoing rift between the Reserve Bank of India (RBI) and the government boosting investors sentiment. Today, the start of new month is likely to be in green with positive cues from global markets. Investors will be eyeing manufacturing PMI data to be out later in the day. Traders will be getting encouragement with report that India jumped 23 spots in the World Bank's ease of doing business ranking to 77th place, becoming the top ranked country in South Asia for the first time and third among the BRICS. As per the report, the biggest gain was in construction permit where India climbed 129 ranks to 52nd place on the back of targeted government effort to remove hurdles. Some support may also come with Industry chamber FICCI's statement that more measures are needed to make adequate liquidity available in the system and strengthen the financial sector for attaining 8% plus gross domestic product (GDP) growth. Traders may take note of a report that the Department of Industrial Policy and Promotion (DIPP) is working with the tax department and regulators to ease the rules and laws for startups to support budding entrepreneurs. However, there may be some cautiousness with the commerce and industry ministry's data showing that growth of eight infrastructure sectors slowed down to 4.3% in September, the lowest in the last four months, as production of crude oil and natural gas declined. There will be some buzz in pharma sector stocks with India Ratings' (Ind-Ra) report that the domestic pharmaceutical sector is likely to post higher margins in September quarter (Q2FY19) on a year-on-year basis, largely supported by the depreciation of rupee against the US dollar. Also, there will be some reaction in infra sector related stocks with Niti Aayog CEO Amitabh Kant's statement that India will need around $4.5 trillion till 2040 for development of infrastructure sector in the country. He further said that there is an urgent need to restructure entire existing public private partnership (PPP) framework as there are delays in completion of infrastructure projects due to disputes. The auto sector stocks will also be in action, reacting to their monthly sales numbers. There will be lots of important earnings announcements too, to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,386.60

10,195.80

10,486.70

BSE Sensex

34,442.05

33,865.07

34,741.21

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

532.64

188.10

182.00

191.85

ICICI Bank

312.33

355.00

346.02

360.27

SBI

281.37

281.40

272.42

286.57

Coal India

173.06

266.15

264.00

268.10

Reliance Industries

164.58

266.15

520.15

539.00

 

  • The USFDA has inspected Dr. Reddy's Laboratories' plant at Duvvada, Visakhapatnam in the state of Andhra Pradesh. 
  • Tata Motors has started the production of its upcoming SUV Harrier that will launch in the market early next year. 
  • ITC has decided to enhance its dairy portfolio by entering the Paneer and Milkshakes segments within two months. 
  • Tech Mahindra has received an approval for Merger by Absorption of Tech Mahindra Growth Factories, a wholly owned subsidiary company with itself and their respective Shareholders.
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