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Market Commentary 04 July 2016
Markets to make a positive start of the new week


The Indian stock markets ended the first day of new F&O series on an optimistic note, on the back of bottom fishing in fundamentally strong shares gathering greater force. Sentiments remained buoyant across the board as the frontline indices registered strong back-to-back gains in last three trading sessions scaling beyond psychological levels. Investors got some confidence with the report that Indian manufacturing activity surged to a three-month high in June, driven by stronger demand, while the firms barely raised prices, leaving the door open for another rate cut by the central bank this year. The Nikkei/Markit Manufacturing Purchasing Managers' Index (PMI) rose to 51.7 in June from May's 50.7, its sixth month above the 50 mark that separates growth from contraction after it fell below that level in December for the first time in more than two years. On the monsoon front, the India Meteorological Department (IMD) stated that during the week ended June 29, monsoon rains were 1% above the long-term average. The June-September monsoon has remained 12 percent lower than average so far, but rains have covered almost the entire country, and helped quicken the planting process of summer crops such as rice, soybeans, cotton and pulses. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 1,107 crore on June 30, 2016. However, gains remained capped with the report that Infrastructure sectors grew at five-month low rate of 2.8 per cent in May, slipping from a four-year high of 8.5 per cent in previous month, as oil and natural gas output contracted. Also, there are reports that India and Cyprus are poised to ink a new tax treaty which, like in the case of a similar deal with Mauritius, shuts the door on investors using the country's tax loopholes to avoid paying taxes in India. On the global front, Asian stock markets ended mostly in green on Friday, while the European stock indices continued their post-Brexit recovery. Back home, the local benchmark got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. Thereafter, the frontline indices slowly but steadily started gathering steam and surged by over half a percent. Finally, the BSE Sensex surged by 145.19 points or 0.54% to 27144.91, while the CNX Nifty rose 40.60 points or 0.49% to 8,328.35.


The US markets closed higher on Friday, for fourth straight session with the Dow and S&P 500 marking their best week this year. Better-than-expected manufacturing data combined with fading worries about the Brexit, stoked appetite for equities. US manufacturing grew in June at the fastest pace in 15 months, signaling a clear if modest uptrend after a bout of extended weakness. The Institute for Supply Management stated that its manufacturing index jumped to 53.2% in June from 51.3% in May. That's the highest level since February 2015. The ISM's new-orders index increased to 57% in June from 55.7%, a three-month high. The employment gauge moved back into positive territory, though barely so, at 50.4%. Separately, spending on construction tumbled in May, with weakness mostly concentrated in the public sector. The 0.8% decline was well below forecasts. The Dow Jones Industrial Average was up by 19.38 points or 0.11 percent to 17,949.37, Nasdaq added 19.90 points or 0.41 percent to 4,862.57, while S&P 500 gained 4.09 points or 0.19 percent to 2,102.95.


Crude oil futures gained on Friday, marking an end to a topsy-turvy week in reaction to the UK's Brexit vote, on a positive note. Traders even overlooked weekly US oil-rig count report that said rig count rose sharply last week, hitting its highest level since late-April. Oil services firm Baker Hughes said that US oil rigs increased by 11 to 341 for the week ending on June 24. At the same time, natural gas rigs inched up by one to 90, helping push the overall count up to 431.  Benchmark crude oil futures for August delivery was up 0.69 or 1.43 percent to close at $49.02 a barrel after trading in a range of $47.91 and $49.08 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for September delivery gained 0.68 or 1.37 percent to $50.39 a barrel on the ICE.


Indian rupee ended substantially stronger against dollar on last day of the week on sustained selling of greenback by banks and exporter, tracking firm cues from other Asian currency markets. This was the third day of consecutive gains for the domestic currency. Indian currency looked strong from the very beginning and was supported by the gains in the local equity markets. Sentiments got boost with the report that Indian manufacturing activity surged to a three-month high in June, driven by stronger demand. The Nikkei/Markit Manufacturing Purchasing Managers' Index (PMI) rose to 51.7 in June from May's 50.7, above the 50 mark that separates growth from contraction. On the global front, yen has higher against the dollar on Friday on speculation the Bank of Japan will expand its already massive stimulus programme, while the greenback was also hurt by waning US interest rate hike expectations. Finally, the rupee ended at 67.32, 20 paise stronger from its previous close at 67.52 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 8452.22 crore against gross sell of Rs 6970.64 crore. While, in the debt segment the gross purchase was of Rs 992.40 crore with gross sales of Rs 1529.21 crore.


The US markets posted modest gains in last session to make it a four days winning streak, as the traders were seem optimistic that the US economy will not be seriously hurt by the Brexit referendum. The Asian markets made an all green start and some of the indices are trading higher by over half a percent amid expectations that central banks in the world's leading economies will add to monetary stimulus. The Indian markets extended their jubilation in the last session and posted gains of over half a percent. Today, the start is likely to remain good on supportive global cues and the markets will be taking some encouragement with the report that rain deficit has now been reduced to 6%, after a slow start. However, there will be some cautiousness too, with RBI Governor Raghuram Rajan, cautioning against expecting too much from central banks, stating that it is wrong on their part also to always claim a 'bazooka' left up their sleeves. Also, there are reports that Central trade unions are up in arms against a proposal to raise proportion of EPFO's investment in Exchange Trade Funds (ETFs) this fiscal. A proposal to increase proportion of EPFO's investment in ETFs from 5 per cent of its investible deposits, will be taken up for discussion later in the week. There will be buzz in the fertilizer stocks, as the government has decided to reduce prices of key fertilisers like Diammonium Phosphate (DAP), Muriate of Potash (MOP) and Nitrogen Phosphate and Potash composition (NPK). The aviation stocks too may see some action, as the country will push to get 90 new airports up and running over the next 12 months, under a government plan to service smaller cities that have missed out on the country's air travel boom. The PSU oil marketing companies will be under pressure, on reports that government may not cut excise duty on petrol and diesel in the near-term if it accepts the suggestions made in the approach paper submitted by Chief Economic Adviser for maintaining status quo when oil prices can climb by another $15 a barrel.


Support and Resistance: CNX Nifty and BSE Sensex


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  • Mahindra & Mahindra has reported its auto sales numbers which stood at 39,011 units during June 2016 as against 36,134 units during June 2015, representing a growth of 8%.
  • Bharti Airtel has expanded its footprint in Arunachal Pradesh by launching 2G and 3G mobile services in Lumla, Nafra and Longding towns as part of its ‘Project Leap'.
  • Yes Bank has reportedly charted out plans to expand its branch banking business aggressively across the country in the next four years.
  • Maruti Suzuki India has registered a fall of 13.9% in its total car sales for the month of June 2016 at 98,840 units, as against 114,756 units in June 2015.
  • NTPC has registered a jump of 10% in power generation for the first quarter of fiscal 2016-17. The company's power generation during the quarter stood at 64.6 billion units as against 58.7 billion units in corresponding quarter previous year.
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