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Market Commentary 02 January 2017
Markets to start the first session of the new year on a flat-to-positive note


Indian benchmark indices showcased courageous performance and went on to outclass indices around the world by vivaciously rallying around a percent in the session and settling above the psychological 8,150 (Nifty) and 26,600 (Sensex) levels. Sentiments remained up-beat with Finance Minister Arun Jaitley's statement that the impact of demonetisation is clearly visible with tax collection figures seeing double-digit growth. He had said that there has been a 26.2 per cent increase in central indirect tax collection till November 30, while till December 19, direct tax collection increase has been to the extent of 14.4 per cent against a growth rate of only 8.3 per cent previous year. Adding optimism among investors, Agriculture Minister Radha Mohan Singh said that the growth in agriculture and allied sectors will be higher during this fiscal as the country is likely to harvest bumper crop buoyed by good rains. The Minister also assurance that the Centre will procure pulses and other crops if rates fall below the minimum support price (MSP) level. Furthermore, Union government has charted out a roadmap for the early completion of 99 irrigation projects under the Accelerated Irrigation Benefits Programme (AIBP) and Pradhan Mantri Krishi Sinchayee Yojana (PMKSY). Some support also came with the Reserve Bank of India (RBI) easing norms for working capital lending to micro and small enterprises (MSEs) on difficulties faced by them, as a result of the sudden withdrawal of legal tender status of high-value currency notes. Meanwhile, market participants give littlie importance to RBI's Financial Stability Report, which indicated a sharp rise in the non-performing assets (NPAs) of banks as “the banking stability indicator shows that the risks to the banking sector remained elevated due to continuous deterioration in asset quality, low profitability and liquidity”. The stress test indicated that under the baseline scenario, the GNPA ratio may increase from 9.1% in September 2016 to 9.8% by March 2017 and further to 10.1% by March 2018. Finally, the BSE Sensex gained 260.31 points or 0.99% to 26626.46, while the CNX Nifty rose 82.20 points or 1.01% to 8,185.80.


The US markets on the final trading day of the year closed lower on Friday, as investors took profits on some of 2016's highflying sectors, although major indexes posted strong annual gains and the Dow closed out its best year since 2013. However, trading volume was light, as is typical for the final trading week of the year. On the economy front, manufacturing activity in the Chicago-area fell more than expected in December, dropping back from a previous reading that had been the highest since January 2015 and dampening optimism over the US economic outlook. The Institute for Supply Management (ISM) said its Chicago purchasing managers' index decreased by 3.0 points to a seasonally adjusted 54.6 this month from a reading of 57.6 in November. MNI Indicators, which helps elaborate the report, noted that three of the five components included in the barometer decreased, while employment held firm and supplier deliveries increased slightly. New orders led the decline, falling 6.7 points to 56.5. Despite the decline in the general index, MNI Indicators pointed out that the reading for the fourth quarter hit a two-year high. The Dow Jones Industrial Average dropped 57.18 points or 0.29 percent to 19,762.60, Nasdaq slipped 48.97 points or 0.90 percent to 5,383.12 and S&P 500 was down by 10.43 points or 0.46 percent to 2,238.83.


Crude oil futures ended extended their decline on Friday, amid signs that U.S. producers are picking up the slack for OPEC supply cuts, however they attained their biggest annual gain since 2009, after OPEC and partners agreed to cut output to reduce a supply overhang that has depressed prices for two years. The bearish sentiment in the trade was generated oilfield services provider Baker Hughes report that the US oil rig count increased by two to 525 in the final week of 2016, rising to the highest level in a year. But the total count of 525 for the week, the last for the year, was still below last year's level by 11 rigs. Benchmark crude oil futures for February delivery declined by $0.05 or 0.1 percent to $53.72 on the New York Mercantile Exchange. In London, Brent crude for February delivery ended lower by $0.03 or 0.1 percent at $56.82 on the ICE.


Indian rupee extended its gains on Friday for the second consecutive day as exporters and banks intensified selling of the US currency. Sentiments remained up-beat with Finance Minister Arun Jaitley's statement that the impact of demonetisation is clearly visible with tax collection figures seeing double-digit growth. He had said that there has been a 26.2 per cent increase in central indirect tax collection till November 30, while till December 19, direct tax collection increase has been to the extent of 14.4 per cent against a growth rate of only 8.3 per cent previous year. Additionally, smart rally in the local equity markets coupled with dollar weakness against some currencies overseas also added to the positive milieu of Indian currency. On the global front, euro rose on Friday, briefly climbing more than two U.S. cents against the dollar, as market participants awaited further details of President-elect Donald Trump's economic policies. Finally, the rupee ended at 67.92, 18 paise stronger from its previous close of 68.10 on Thursday.


The FIIs as per Friday'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 4482.30 crore against gross selling of Rs 5143.60 crore, while in the debt segment, the gross purchase was of Rs 349.80 crore with gross sales of Rs 59.19 crore.


The US markets ended in red on the last session of the year but were well off the day's low. Profit taking mainly contributed to the continued weakness on Wall Street after the tech-heavy Nasdaq had reached a record closing high. The Asian markets are mostly closed for the day; meanwhile an adviser to the People's Bank of China has said that China should set a more flexible 2017 economic growth target to give policy makers more room to enact reform. The Indian markets snapped the month and the year on a high note, with benchmarks ending higher by around a percent. Today, the start of the New Year is likely to be in green and market will be getting some support with Prime Minister Narendra Modi's announcement of a range of schemes targeting the poor, lower middle class, senior citizens and small businessmen. Meanwhile, the Reserve Bank of India (RBI) governor Urjit Patel in his Financial Stability Report published by the RBI has expressed that Goods and Services Tax and the withdrawal of specified bank notes will impart far reaching changes going forward. There will be buzz in the banking stocks, as after the PM's call to lenders to do more to increase lending for the poor, State Bank of India has slashed interest rates by 0.9 percentage point, or 90 basis points (bps), bringing down the rates to the lowest in about a decade, forcing rivals to follow suit. The realty sector is likely to rejoice with the decision most. In other development, in a bid to strengthen capital base of public sector banks (PSBs), the government has allowed 12 lenders to raise nearly Rs 3,000 crore via preferential shares over and above the Rs 22,915 crore capital support committed to them in July last year. The PSU oil marketing companies will be in action, as petrol price has been hiked by Rs 1.29 per litre and diesel by 97 paise per litre excluding state levies. The auto companies will be in focus too, as they will be announcing their monthly sales numbers, which will show the demonetization impact.


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  • Yes Bank has successfully raised Rs 330 crore of Green Infrastructure Bonds through private placement.
  • Lupin has received tentative approval for its Pitavastatin Tablets, 1 mg, 2 mg, and 4 mg from the United States Food and Drug Administration.
  • Bank of Baroda has inked a Memorandum of Understanding with Heritage Foods to provide dairy loans to farmers through the lender's branches across the country. 
  • Ambuja Cements has entered into agreement with ICICI Bank to drive cashless transactions among its business partners.
  • Tata Motors is going to expand 200 more touch points in 2017, with an aim to triple the number to 1500 dealerships in the next five years across India.
News Analysis