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NSE Intra-day chart (01 February 2016)
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Market Commentary 02 February 2016
Markets to get a soft-to-cautious start; RBI policy announcement eyed

Indian stock indices showed a disappointing performance in today's trading session after a fantastic show in Friday's trade. Investors squared off position in the dying hours of trade as sentiments turned pessimistic ahead of Reserve Bank of India's next monetary policy, slated to be announced tomorrow. The central bank is widely expected to maintain status quo thus adding pressure on banking and financial shares. ICICI Bank was the worst performing stock on both the benchmark indices and lost nearly 5.63 per cent. Other banking stocks such as SBI, Bank of Baroda and Axis Bank also shed up to 4 per cent.  Sentiments remained down-beat with Standard & Poor's Ratings Services' statement that India will face challenges in sticking to the fiscal consolidation roadmap as the expected revenues may not be fully realised and subsidy cuts may be delayed. Besides, a fall in auto stocks on tepid January sales data and mixed cues from global markets pulled the indices down towards the end of the session. However, losses remained capped with the report that India's manufacturing activity unexpectedly returned to growth in January as firms raised output on stronger demand.  The Nikkei Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, jumped to a four-month high of 51.1 in January after slumping to a 28-month low of 49.1 in December. Some support also came with Finance Minister Arun Jaitley's statement that the 8% GDP growth can be achieved next fiscal on account of improved rural demand and better monsoon. On the global front, Asian markets ended mostly in green, though the European markets started on a negative note. Back home, the benchmark got off to a positive start after sentiments got buttressed by sharp gains on Wall Street on Friday and firms gains in Japanese shares amid Bank of Japan's surprise decision to cut interest rates to negative territory. But the optimism soon started showing signs of easing in late hours of trade and profit booking in few sectors and drifting European markets weighed down the local bourses by the end of session. Finally, the BSE Sensex declined by 45.86 points or 0.18% to 24824.83, while the CNX Nifty ended down by 7.60 points or 0.10% to 7,555.95.


The US markets closed mostly lower on Monday, as the sentiment were hit by renewed declines in oil futures, amid fresh signs of sluggishness in China's economy and dimming prospects of a coordinated oil production cut by key producers. Federal Reserve Vice Chairman Stanley Fischer stated that the US central bank was worried the global market selloff could sap the strength of the US economy, suggesting the market's expectations of barely any interest rate hikes this year could turn out to be right.  On the economy front, consumer spending was flat in December as Americans mostly pocketed their income gains, but outlays in 2015 were the strongest in a decade. Americans bought fewer new cars and trucks last month. Meanwhile, US manufacturing activity contracted for the fourth straight month, albeit at a slower pace in January than expected. The Institute for Supply Management's manufacturing index rose to 48.2% in January from 48%. The Dow Jones Industrial Average lost 17.12 points or 0.10 percent to 16,449.18, the S&P 500 was down by 0.86 points or 0.04 percent to 1,939.38 while the Nasdaq was up 6.42 points or 0.14 percent to 4,620.37. 


Crude oil futures suffered sharp sell off on Monday, resuming their downtrend and erasing most of their gains from last week's rally, as optimism for supply cuts from OPEC faded, amid soft manufacturing activity in China. Meanwhile, OPEC continued to pump oil at a breakneck pace even as smaller member states like Nigeria run out of cash. Nigeria, the sixth-largest producer in OPEC, pumped more than 1.78 million bpd in December. Benchmark crude oil futures for March delivery plunged by $1.99 or 5.92 percent to $31.63 a barrel after trading in a range of $31.30 and $34.07 a barrel on the New York Mercantile Exchange. In London, Brent crude for April delivery closed at $34.30, down $1.71 or 4.74 percent on the ICE.


Indian rupee erasing its early gains depreciated against dollar on Monday as investors remained cautious ahead of RBI monetary policy review on Tuesday. The RBI is widely expected to keep policy rates unchanged at the bi-monthly review. Besides, dollar demand from banks and importers and weak trade in local equity market too put pressure on the currency. Sentiments remained down-beat with Standard & Poor's Ratings Services' statement that India will face challenges in sticking to the fiscal consolidation roadmap as the expected revenues may not be fully realised and subsidy cuts may be delayed. On the global front, dollar was firmer against yen on Monday, supported by the Bank of Japan's surprise decision Friday to cut interest rates below zero, while traders were waiting to see a series of key U.S. economic data this week. Finally, the rupee ended at 67.84, 5 paise weaker from its previous close of 67.79 on Friday.


The FIIs as per Monday's data were net buyers in equity and in debt segments both. In equity segment, the gross buying was of Rs 5713.96 crore against gross selling of Rs 4954.12 crore, while in the debt segment, the gross purchase was of Rs 1275.69 crore with gross sales of Rs 916.05 crore.     


The US markets ended mostly flat in last session amid a sharp drop by the price of crude oil, though stocks came out of the early pressure after a Commerce Department report showed that personal income rose in line with estimates, however any major gains were capped as manufacturing activity continued to contract in January. The Asian markets have made mostly a lower start as oil extended its decline, though the Chinese market has bounced back on stimulus hopes. The Indian markets lost the momentum in second half and after a choppy trade ended modestly in red in last session. Today, the start of the crucial day is likely to be cautious and all eyes will be on Reserve Bank of India (RBI), which will be announcing its monetary policy review. Though, general expectation is that RBI will leave its key policy rate unchanged, as it awaits clarity on the government's fiscal stance. Recently, RBI governor Raghuram Rajan had urged the government to stay on the path of fiscal consolidation. Traders are likely to get some support with Core sector output returning to positive territory in December 2015 by registering a 0.9 per cent growth after shrinking (-)1.3 per cent in November last year. During April-December 2015 period this fiscal, the output of these eight sectors slowed to a 1.9 per cent growth from 5.7 per cent growth in the same period last fiscal. There will also be buzz in the markets, as a government-appointed panel has suggested sweeping changes to the Companies Act, 2013, making it easier for companies to raise funds and reward senior management. There will be some action in power and capital goods sector stocks, as the government has banned duty-free imports of capital goods for power generation and transmission projects under the Export Promotion Capital Goods (EPCG) scheme.


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  • Mahindra & Mahindra has reported its auto sales numbers which stood at 43,789 units during January 2016 as against 39,930 units during January 2015, registering a growth of 10%.
  • BHEL has bagged a prestigious order for setting up a supercritical thermal power project involving one unit of the country's highest rating 800 MW sets, in Tamil Nadu.
  • Dr. Reddy's Laboratories has received US Food and Drug Administration tentative approval for Zenavod Capsules, 40 mg.
  • Maruti Suzuki India, country's largest car maker, has registered a fall of 2.6% in its total car sales for the month of January 2016 at 113,606 units, as against 116,606 units in 2015.
  • Aditya Birla Group firm Grasim Industries will spend more than Rs 4,000 crore on capacity expansion of its various businesses - cement, chemicals and VSF - in the coming financial year.
News Analysis