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NSE Intra-day chart (01 August 2016)
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Market Commentary 02 August 2016
Markets to remain in consolidation mood with a soft start


Indian benchmark indices showed a volte-face on the first day of a new trading week as what started on a promising note ended as a gloomy show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory for second consecutive session despite getting off to a gap-up opening.  Marketmen were optimistic in early part of the session, as the government is going to table the Constitutional Amendment Bill for introduction of GST in Rajya Sabha for consideration and passage this week. The proposed tax reform, the biggest since India's independence from Britain in 1947, seeks to replace a slew of federal taxes and levies in 29 states, transforming the nation of near 1.3 billion people into a customs union. Sentiments got further support with the report that manufacturing activities gathered pace slightly in July compared to the previous month to post a four-month high expansion, on high demand from both domestic and external markets. The widely-tracked Nikkei purchasing managers' index (PMI) inched up to 51.8 points in July against 51.7 in the previous month, indicating a further improvement in overall business conditions across the sector. However, the sanguinity in local markets was under check as profit booking in Capital Goods and rate sensitive Banking counters exerted downside pressure on the frontline indices and dragged them below to the psychological 8,650 (Nifty) and 28,100 (Sensex) levels.  Banking stocks declined on account of sharp selloff in ICICI Bank amid weak June quarter results. ICICI Bank reported a 22 percent year-on-year (YoY) fall in its consolidated net profit at Rs 2515.85 crore in the June quarter, compared with Rs 3232.37 crore in the same period a year ago. However, good buying was observed in auto stocks post better July sales numbers by many large automakers. On the global front, Asian markets ended mostly in green, while European stocks edged lower in early trade. Back home, the benchmark got off to a rollicking opening as investors rejoiced after the government listed the much-awaited GST Bill for consideration and passage in Rajya Sabha's agenda for this week. But the optimism soon started showing signs of easing in late hours of trade and profit booking in few sectors, while drifting European markets too weighed down the local bourses by the end of session. Finally, the BSE Sensex declined by 48.74  points or 0.17% to 28003.12, while the CNX Nifty lost 1.95 points or 0.02% to 8,636.55.


The US markets closed mostly lower on Monday, as crude-oil futures returned to bear-market territory and weaker-than-expected manufacturing data raised doubts about the strength of the economy. The losses for crude snowballed, with the US oil benchmark at one point trading below the key $40 level amid worries about a supply glut and subdued demand. Corporate quarterly results will continue to feature prominently this week even as the season winds down. So far, about two-thirds of S&P 500 companies have announced quarterly results thus far, with 71% beating on earnings and 57% reporting revenue above estimates. On the economy front, US manufacturers grew at a modestly slower rate in July but are still expanding at a pace that is likely to offer the broader economy more support. The Institute for Supply Management stated that its manufacturing index dipped to 52.6 % last month from 53.2% in June, which marked a one-year high. The Dow Jones Industrial Average lost 27.73 points or 0.15 percent to 18,404.51, S&P 500 was down by 2.76 points or 0.13 percent to 2,170.84, while Nasdaq added 22.07 points or 0.43 percent to 5,184.20. 


Crude oil futures suffered sharp plunge on Monday, with Nymex crude once slipping below the crucial $40 a barrel mark for the first time since April, on heightened worries of a crude glut despite peak summer fuel demand. Crude prices have been tumbling amid expectations' that supplies will continue to outpace demand. There were some reports that output from the Organization of the Petroleum Exporting Countries likely rose in July to its highest in recent history as Saudi Arabia pumped at near optimum level, Iraq raised production and Nigeria boosted crude exports. Benchmark crude oil futures for September delivery plunged by $1.54 or 3.7 percent to close at $40.06 a barrel after trading in a range of $41.69 and $39.86 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for October delivery declined by $1.39 or 3.2 percent to $42.14 a barrel on the ICE.


Indian rupee strengthened for fifth consecutive session on Monday on sustained selling of the US currency by exporters and banks amid sustained foreign fund inflows. Besides, gains in the Asian currencies markets along with expectations that the goods and services tax bill may get approval from Rajya Sabha this week also added support to domestic currency. Sentiments got further support with the report that manufacturing activities gathered pace slightly in July compared to the previous month to post a four-month high expansion, on high demand from both domestic and external markets. The widely-tracked Nikkei purchasing managers' index (PMI) inched up to 51.8 points in July against 51.7 in the previous month, indicating a further improvement in overall business conditions across the sector. On the global front, yen pared some of its large gains against dollar after the Bank of Japan's smaller-than-expected stimulus steps. Finally, the rupee ended 66.75, 25 paise stronger from its previous close at 67.00 on Friday


The FIIs as per Monday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 5754.32 crore against gross selling of Rs 5545.54 crore. While in the debt segment, the gross purchase was of Rs 1494.76 crore with gross sales of Rs 1911.81 crore. Thus, FIIs stood as net sellers of Rs 417.05 crore in debt.


The US markets continued their consolidation run and made another mixed closing in last session, with the major averages bouncing back and forth the neutral line and traders remained reluctant to make any significant moves ahead of some key events later this week. The Asian markets have made mostly a lower start and some of the indices are even down by around half a percent, as the oil dropped further, the Japanese market was leading the losers pack ahead of details on the government's fiscal stimulus plans. The Indian markets losing their early momentum ended flat with a negative bias in the last session. The optimism over passage of the GST Bill in Parliament was overshadowed by some earnings disappointments. Today, the start is likely to be cautious on sluggish global cues. However, in the latter part of the trade some recovery and upmoves can be seen, with the government listing the Goods and Services Tax (GST) Bill in the Rajya Sabha for consideration and passage on Wednesday. Parliamentary Affairs Minister Ananth Kumar has said that the GST bill has been listed for discussion in the Rajya Sabha on Wednesday and hoped it will be passed through consensus. Traders will also be getting some support with India's core sector expanding 5.2 per cent in June compared with a 2.8 per cent rise in May and 3.1 per cent in the year ago period. The growth was the fastest in two months riding on double digit growth in the cement and coal sector. The banking and steel sector stocks will keep buzzing with report that the steel industry has outstanding loans of around Rs 3 lakh crore in various banks, thus making the sector one of the largest contributors to non-performing assets (NPA) in the country. Also, as the Reserve Bank of India (RBI) has issued new licensing guidelines that seek to encourage non-banking finance companies (NBFCs) to turn themselves into full-fledged banks. Sugar stocks too may remain in action on latest estimates of ISMA that the country's annual sugar output may fall short by 8 per cent. There will be lots of important earnings announcements too, to keep the markets buzzing.


                                Support and Resistance: CNX Nifty and BSE Sensex


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  • Tech Mahindra has reported 8.17% fall in its net profit at Rs 737.48 crore for the quarter ended June 30, 2016 as compared to Rs 803.10 crore for the same quarter in the previous year.
  • Mahindra & Mahindra, India's leading SUV manufacturer has reported its auto sales numbers for the month of July 2016, which stood at 39,458 units as against 34,652 units during July 2015, representing a growth of 14%.
  • Larsen & Toubro's construction arm -- L&T Constructions has bagged orders worth Rs. 1167 Crores across various business segments.
  • Reliance Industries has opened AJIO 'shop-in-shops' in more than 100 Reliance Trends stores.
  • Eicher Motors' motorcycle division has reported a 31% jump in total sales in July 2016 at 53,378 units, as against 40,760 units in the same month last year.
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