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NSE Intra-day chart (03 February 2020)
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Market Commentary 04 February 2020
Markets to get positive opening amid firm global cues

 

Indian equity indices staged rebound from the Union Budget day carnage, with Sensex and Nifty ending higher by around 140 and 50 points, respectively. After a cautious opening, indices remained volatile, as rating agency CRISIL in its report expressed concerns over the budget attaining its targets on growth, given the rural boost and thus consumption and revenue realisations, and said that planned budgetary measures are not expected to provide a short-term boost. Anxiety remained among traders, on the back of Moody's statement that India's nominal growth projection and fiscal deficit target for 2020-21 will be challenging to achieve. Despite high volatility, bourses managed to keep their heads above water for the most part of the day, after Indian manufacturing industry saw a solid rise in activities at the start of 2020. As per the survey report, the Nikkei India Manufacturing Purchasing Managers' Index - a composite single-figure indicator of manufacturing performance - surged to 55.3 in January from 52.7 in December, its highest level in just under eight years. Some support also came with Commerce & Industry Minister Piyush Goyal's statement that a set of measures announced in the Union Budget for 2020-21 will help boost investment and the country's gross domestic product growth. Finally, the BSE Sensex gained 136.78 points or 0.34% to 39,872.31, while the CNX Nifty was up by 46.05 points or 0.39% to 11,707.90.

 

The US markets ended higher on Monday as traders picked up stocks at reduced levels on the heels of the steep drop seen in the previous session. Adding to the positive sentiment, US manufacturing activity unexpectedly expanded for the first time in several months in January, according to a report released by the Institute for Supply Management (ISM). The ISM said its purchasing managers index surged up to 50.9 in January after slipping to a revised 47.8 in December, with a reading above 50 indicating growth in manufacturing activity. Street had expected the index to show a more modest increase to a reading of 48.5, which would have still indicated a contraction. With the much bigger than expected increase, the index returned to expansion territory for the first time since July 2019. The jump by the headline index came as the production index soared to 54.3 in January from 44.8 in December and the new orders spiked to 52.0 from 47.6. However, after reporting a bigger than expected increase in US construction spending in the previous month, the Commerce Department released a report showing construction spending unexpectedly edged lower in the month of December. The Commerce Department said construction spending dipped by 0.2 percent to an annual rate of $1.328 trillion in December after climbing by 0.7 percent to a revised rate of $1.330 trillion in November. The modest pullback came as a surprise to participants, who had expected construction spending to increase by 0.5 percent. With the unexpected decrease, construction spending pulled back off the more than one-year high reached in the previous month. Spending on private construction edged down by 0.1 percent to a rate of $991.2 billion, as a 1.4 percent jump in spending on residential construction was more than offset by 1.8 percent slump in spending on non-residential construction.

 

Crude oil futures ended deeply in red on Monday, with prices logging their lowest settlement in more than a year and marking their entry into a bear market, amid continued concerns about the outlook for energy demand, especially from China, amid the rapid spread of coronavirus and worries about its impact on the global economy. According to private report, oil demand in China has dropped by about three million barrels a day, or 20% of total consumption amid the virus outbreak. Several airlines have cancelled flights to China and supply chains across the world's second-largest economy have also been disrupted, prompting its biggest refiner Sinopec to cut output. Crude oil futures for March fell $1.45 or 2.8 percent to settle at $50.11 a barrel on the New York Mercantile Exchange. April Brent dropped $2.17 or 3.8 percent to settle at $54.45 a barrel on London's Intercontinental Exchange.

 

Indian rupee depreciated marginally against dollar on Monday due to fresh demand for the American currency from banks and importers. Traders remain concerned with Moody's statement that India's nominal growth projection and fiscal deficit target for 2020-21 will be challenging to achieve. It added that the 10% nominal growth expectation that's in the 2021 budget is going to be challenging to achieve and as a result that would present some fiscal challenges as well. Moreover, dollar's strength against major global currencies overseas affected the rupee. However, losses remain capped as some optimism came with SBI Research's report that the revised 3.8 percent fiscal deficit for FY20 looks ambitious as it is based on projected 18% rise in tax collections against a paltry 5.1% higher realisaition so far, and around Rs 65,000 crore mop-up through disinvestment in the last two months of the current fiscal. On the global front, pound fell against the dollar on Monday after Boris Johnson laid out a hard-line approach to Brexit negotiations with Brussels, prompting renewed fears that Britain will leave the EU without a trade deal in 11 months. Finally, the last traded price of rupee was 71.35, 3 paise weaker from its previous close of 71.32 on Friday.

 

The FIIs as per Monday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 8006.13 crore against gross selling of Rs 12381.69 crore, while in the debt segment, the gross purchase was of Rs 1442.97 crore with gross sales of Rs 1552.57 crore. Besides, in the hybrid segment, the gross buying was of Rs 45.43 crore against gross selling of Rs 45.89 crore.

 

The US markets ended higher on Monday as gains in Amazon and Nike as well as a surprise rebound in US factory activity helped markets attempt a recovery from steep weekly losses. The Asian markets are trading in green on Tuesday following overnight gains on Wall Street. Indian markets ended volatile session in green territory on Monday after a private survey showed that activity in India's beleaguered manufacturing sector hit a near eight-year high in January. Today, the start of session is likely to be in green tracking positive leads from global markets coupled with sharp fall in crude oil prices overnight. Investors are looking forward to the Reserve Bank of India's (RBI) February bi-monthly policy outcome. The central bank's MPC will begin its three-day meeting today, and will announce its decision on February 6. There are expectations that the central bank to maintain a status quo. Traders will be getting encouragement as the government said the economy is not in recession and India recorded the highest average growth among the G-20 nations during 2014-19. Minister of State for Finance Anurag Thakur said that according to the IMF estimates, India continues to be among the fastest-growing economies in the world and its GDP is estimated to grow at 5.8% in 2020-21 and is further projected to surpass China with a growth rate of 6.5% in 2021-22. Also, terming the Union Budget pragmatic, Niti Aayog CEO Amitabh Kant said the government is determined to take India on a high growth path. He further said if the government will be able to achieve disinvestment target of 2020-21 then the Budget will be very successful. Though, some cautiousness may come with Fitch Ratings' statement that India is expected to clock a GDP growth of 5.6% in the next financial year, lower than the projection made by the government's Economic Survey, as Budget 2020 has not materially altered its view on the country's growth outlook. Banking stocks will be in focus as RBI's data showed that banks credit and deposits grew 7.21% and 9.51% to Rs 100.05 lakh crore and Rs 131.26 lakh crore, respectively, in the fortnight ended January 17. There will be some buzz in the infrastructure stocks with Finance Minister Nirmala Sitharaman's statement that the money raised through disinvestment will be used to develop infrastructure, which will have multiplier effect on the economy and not bridging revenue deficit. Metal stocks will be in focus as Ind-Ra revised its outlook on the steel sector to stable-to-negative for the remainder of the ongoing fiscal due to sluggish steel demand growth expectations. There will be some reaction in sugar stocks with the Indian Sugar Mills Association's (ISMA) statement that Indian mills produced 14.1 MT of sugar between October 1 and January 31, down nearly 24% from a year earlier. Also, there will be lots of earnings reaction based on the performance of the companies.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,707.90

11,631.65

11,767.00

BSE Sensex

39,872.31

39,618.62

40,070.45

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

1,480.30

36.00

35.00

37.70

ITC

797.64

207.60

202.77

214.67

Tata Motors

666.16

163.85

159.50

168.25

SBI

560.60

298.10

293.35

304.85

IOC

250.72

108.05

106.27

111.12

 

  • HCL Technologies has declared establishment of its global delivery center in Colombo, signing an agreement with the Board of Investment of Sri Lanka.  
  • Coal India has reported rise in its production by 10.3% to 63.11 million tonnes in January 2020. 
  • Hero MotoCorp has reported sales of 5,01,622 units of motorcycles and scooters in the month of January 2020. 
  • Tata Motors has reported domestic sales of 45,242 units for January 2020, as compared to 54,915 units for January 2019, posting a decline of 18%.
News Analysis