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NSE Intra-day chart (31 August 2018)
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Market Commentary 03 September 2018
Markets to make a positive start amid strong economic data


Indian equity benchmarks ended the first day of new F&O expiry series on quite note, as traders remained on sidelines ahead of first quarter gross domestic product (GDP) data to be released in evening of August 31. Markets made a cautious start as sentiments remain dampened with Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta's statement that exporters are facing uncertainty due to a continuous depreciation of the domestic currency as they are not able to negotiate properly prices of goods in the global markets. Sentiments also weighed down after rupee slumped to a fresh record low of 71 against the dollar for the first time ever by falling 26 paise on persistent demand for the US currency amid rising crude prices. Some concerns also came after the International Energy Agency (IEA) said crude oil prices are likely to rise further in 2018 and may remain above $75 a barrel for some time, owing to the geo-political situations across the world - including Iran sanctions and drop in Venezuela production. However, traders pare almost all of their losses to end flat as some support came with Finance Minister Arun Jaitley's statement that India is likely to surpass the UK to become the world's fifth largest economy next year on growing consumption and strong economic activity. Also, some solace came with a private report that the economic growth is expected to rise to 7.6% in the April-June quarter of 2018-19 from a sub-6% figure in the year-ago period mainly due to a low-base effect. Traders got some comfort with report that India on Thursday made a strong pitch to Standard & Poor's (S&P) for a rating upgrade, citing improving economic growth prospects, fiscal discipline, stabilization of the GST regime and broader macroeconomic stability despite elevated oil prices and a depreciating rupee. Finally, the BSE Sensex declined 45.03 points or 0.12% to 38,645.07, while the CNX Nifty was up by 3.70 points or 0.03% to 11,680.50.


The US markets ended slightly higher on Friday, as Canada and the United States concluded trade talks without resolution ahead of the Labor Day weekend. The Wall Street Journal late Friday indicated that talks between the US and Canada had broken off with no agreement before an unofficial White House deadline of Friday. The US Trade Representative's office cited progress in talks that were constructive to revise the North American Free Trade Agreement. It said talks would resume on September 5. Trump sent a formal notice to Congress stating that he still intends to sign a revised version of Nafta by late November. That statement is likely to say he is willing to proceed only with Mexico, but that he is also open to continuing negotiations with Canada. On the economic front, the August Chicago purchasing managers index came in at 63.6, compared with estimates for a reading of 63.8. Still, the data were above the July reading of 65.5. Any reading above 50 indicates improving conditions. Meanwhile, the final reading of the University of Michigan's consumer-sentiment index in August was 96.2, below July's level of 97.9, but above estimates for 95.5. Despite the improvement, the sentiment level is at its lowest level since January. The S&P 500 gained 0.39 points or 0.01 percent to 2,901.52 and Nasdaq was up by 21.17 points or 0.26 percent to 8,109.54, while Dow Jones Industrial Average declined 22.10 points or 0.09 percent to 25,964.82.


Crude oil futures ended lower on Friday on signs of expanding US output and fears over lower oil-demand growth amid rising global trade tensions. A report released by Baker Hughes, the oilfield services firm, said that the number of US oil drilling rigs in operation rose by 2 to 862. It is widely expected that demand for crude will drop due to US-China trade dispute. However, the US sanctions on Iranian oil may significantly reduce global crude supplies and limit crude's downside. Renewed concerns over an escalation in the US-China trade war stoked fears of lower oil demand growth also added pressure on oil prices.  Benchmark crude oil futures for October declined 45 cents or 0.6 percent to settle at $69.80 a barrel on the New York Mercantile Exchange. October Brent crude fell 35 cents or 0.5 percent at $77.42 a barrel on London's Intercontinental Exchange.


Extending its southward journey for third straight session, Indian rupee settled at fresh all-time low of 71-mark against US dollar on Friday, following bouts of month-end dollar demand from banks and importers. Sentiments remained down-beat with the International Energy Agency (IEA) stating that crude oil prices are likely to rise further in 2018 and may remain above $75 a barrel for some time, owing to the geo-political situations across the world - including Iran sanctions and drop in Venezuela production. Caution also crept in ahead of the release of the gross domestic product (GDP) data for April-June quarter today. Market participants even overlooked a private report that the economic growth is expected to rise to 7.6% in the April-June quarter of 2018-19 from a sub-6% figure in the year-ago period mainly due to a low-base effect. On the global front, euro fell on Friday on anxiety about an escalating trade conflict between the U.S. and the European Union. Finally, the rupee ended at 71.00, 27 paise weaker from its previous close of 70.73 on Thursday.


The FIIs as per Friday'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 6978.04 crore against gross selling of Rs 6179.07 crore, while in the debt segment, the gross purchase was of Rs 968.05 crore with gross sales of Rs 2062.95 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.38 crore against gross selling of Rs 0.84 crore.


The US markets closed slightly higher on Friday after President Donald Trump warned that he could pull the United States out of the World Trade Organization. Asian markets were trading mostly in red on Monday on worries about further escalation of the US China trade war and unstable emerging market currencies. Indian markets ended mix on Friday as trade war worries resurfaced and investors waited for Q1 GDP data release later in the day for directional cues. Rupee depreciation, which hit a historic low of 71 against the dollar, on worries about rising oil prices too weighed on markets. Today, the start is likely to be in green on the back of good economic data.  India's economy grew at its fastest in over two years, propelled by double-digit growth in manufacturing and robust consumer spending, making for a strong start to the last financial year before the ruling party faces polls in 2019. Gross domestic product (GDP) expanded quicker than even the most optimistic forecast at 8.2% in the First quarter of current financial year (Q1FY19). GDP had grown 5.6% in the year earlier quarter and 7.7% in the March quarter. Further, traders will also be getting some support with Principal Economic Adviser in the Ministry of Finance, Sanjeev Sanyal stating that the growth rate will be affected in next reading, but India would remain world's fastest-growing major economy, as he countered scepticism over GDP growth rate. Meanwhile, RBI in its latest data has showed that Non-food credit growth in the system accelerated to 10.6 per cent for July as compared to the previous year, driven by loans to the services sector growing at a faster clip. However, there will be some cautiousness in the later part of day as the country's fiscal deficit in the first four months of FY19 came in at Rs 5,40,257 crore or 86.5% of the FY19 target.  Meanwhile, the eight core sectors of the economy saw a slight bump in its growth path in July, rising 6.6 per cent, down from an updated 7.6 per cent in June. Also, GST collections dropped to Rs 939.60 billion in August from Rs 964.83 billion in the previous month. There will be some buzz in the Banking stocks with Union Minister Ravi Shankar Prasad stating that the operations of the India Post Payments Bank (IPPB) will strengthen the financial inclusion programme in India and make country's village systems stronger.  Energy stocks may take note of India's coal import rose 11.9% to 78.7 million tonnes in the first four months of the current fiscal.




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