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NSE Intra-day chart (03 November 2016)
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Market Commentary 04 November 2016
Markets to continue the bearish trend with a soft start

Indian benchmark indices extended the sorrow of closing in the red territory for the second consecutive session on Thursday as investors fretted over the rising chances that maverick tycoon Donald Trump could win the US presidency in next Tuesday's election. Trump's provocative stand on key issues like global trade, immigration, outsourcing, internal security, globalization and trade barriers have caused a considerable amount of anxiety among the global business community. Further, the US Federal Reserve on Wednesday indicated a likely hike in interest rates in December due to improving economic conditions, too induced a prolonged spell of volatility in the local market. On the domestic front, sentiments were undermined by the repot that GST Council, which began 2-day deliberations today, is likely to shortly finalize a tax structure as Centre and states seeming to harden their positions with respect to the issues they disagree on.  There is a raging debate on the Centre's proposal for having multiple rates for GST. Market participants were also disappointed with the S&P Global Ratings' decision to rule out an upgrade for India over the next two years even as it affirmed the stable outlook on the country's ‘BBB-' long-term and ‘A-3' short-term sovereign credit ratings. The global rating agency has stuck to its rating, saying it would need to see more efforts to lower the country's net general government debt level to below 60% of gross domestic product. However, investors got some comfort with the report indicating India's Services sector activity gathered pace in October, driven by sharper increase in new business orders amid strong demand and improved market conditions. The Nikkei India Services Purchasing Managers' Index (PMI), which tracks services sector companies on a monthly basis, stood at 54.5 in October as against 52.0 in September. Some support also came with the report that India Inc is optimistic about its business prospects with a majority of firms saying current economic conditions are 'moderately to substantially better' compared to the last six months, even as cost and availability of credit remain a concern. The Overall Business Confidence Index (OBCI) rose to a six quarter high in the Business Confidence Survey conducted by FICCI, indicating that demand is gaining traction. The index value stood at 67.3 in the current round as against 62.8 in the previous poll. Finally, the BSE Sensex declined by 96.94 points or 0.35% to 27430.28, while the CNX Nifty dropped 29.05 points or 0.34% to 8,484.95. 

The US markets extended their fall on Thursday and the S&P 500 fell for an eighth straight session, its longest losing streak since the 2008 financial crisis, as Facebook shares weighed. Facebook shares tumbled 5.7 percent as the world's largest online social media network warned that revenue growth would slow this quarter. Investors were also unnerved by signs the US presidential race between Democrat Hillary Clinton and Republican Donald Trump is tightening. Weak oil prices pressured energy shares, while lackluster economic data contributed to the weakness on Wall Street ahead of Friday's October jobs report. The Dow Jones Industrial Average lost 28.97 points or 0.16 percent to 17,930.67, Nasdaq dropped 47.16 points or 0.92 percent to 5,058.41, while S&P 500 was down by 9.28 points or 0.44 percent to 2,088.66. 

Crude oil futures stabilized and moved a bit higher on Thursday, after plunging nearly 3% to five-week lows in the prior session. However, any major gains were capped with the possibility that producers could walk away empty-handed from the November meeting looms large after Iraq, Iran, Nigeria and Libya all signaled they might not take part in the proposed production cut deal. Benchmark crude oil futures for December delivery gained $0.06 or 0.13 percent to close at $45.40 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for December delivery was up by $0.23 or 0.49 percent to $47.09 a barrel on the ICE.

Indian rupee depreciated for the second consecutive session against the US dollar on Thursday due to fresh demand for the American currency from banks and importers. Sentiments remained dampened as global rating agency, Standard & Poor (S&P) retained India's sovereign rating at ‘BBB-' with stable outlook and ruled out any upgrade in two years, citing weak public finances. S&P maintained the lowest investment grade rating saying it wants to see more efforts to lower government debt to below 60 percent of GDP and that it did not expect revenues to rise enough to meaningfully lower the deficit over the medium term. Losses in equity market and uncertainties about the outcome of the US elections next week also weighed on the rupee sentiments. On the global front, sterling jumped against dollar on Thursday after a UK court ruled that the government must seek parliamentary approval to begin the formal process of leaving the European Union. Finally, the rupee ended at 66.74, 2 paise weaker from its previous close of 66.72 on Wednesday.

The FIIs as per Thursday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 3695.41 crore against gross selling of Rs 4309.18 crore, while in the debt segment, the gross purchase was of Rs 723.30 crore with gross sales of Rs 603.06 crore. 

The US markets continued their slide in last session on concern over the Presidential election outcome amid lackluster economic data. The Asian markets have extended the somberness and most of the indices have made a weak start with Japanese market taking the lead despite the services sector in Japan swinging to expansion in October, as yen turned stronger. The Indian markets lost their tempo in the final hours and ended in red again, with Nifty slipping below 8500 mark. Traders even over looked the good services PMI amid global concern. Today, the start is likely to be in red on feeble global cues but traders may get some respite with report that in a major breakthrough for rollout of the Goods and Services Tax regime from April 1 next year, the government finalized four-tier GST tax structure of 5, 12, 18 and 28 percent that aims to lower tax incidence on most goods and keep out essential items. Luxury items like high-end cars and demerit goods including tobacco, pan masala and aerated drinks, will be taxed at the highest rate and would also attract a cess in a way that the total incidence of tax remains at almost the current level. Chief Economic Advisor Arvind Subramanian has said that the GST Council's decision to peg the tax rate on items of mass consumption at 5 per cent will bring down prices and soften inflation. Though, all the cigarette companies are likely to be under pressure. There will be some buzz in the coal sector stocks, as the Coal secretary Anil Swarup has said that the government was considering giving mines to private players for commercial mining but the demand situation was holding it back from taking a final call. There will be some buzz in steel stocks too, as the Finance Ministry has imposed provisional anti-dumping duty on import of hot rolled steel products (bars and rods) from China. This anti-dumping duty will be valid for a period of six months.

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  • ICICI Bank has launched a credit facility against home loans for salaried customers.
  • Hero MotoCorp has reported a 3.65% increase in sales at 6,63,153 units in October, its third consecutive month of six-lakh plus sales after August (616,424) and September (674,961).
  • Tech Mahindra has launched its Virtual Network Function Exchange, along with a number of leading new age providers of Software Defined Networks and Network Functions Virtualization products.
  • Ambuja Cements has reported 80.39% jump in its net profit at Rs 277.02 crore for the quarter under review as compared to Rs 153.57 crore for the same quarter in the previous year.
  • Mahindra and Mahindra's South Korean subsidiary SsangYong Motor, has sold a total of 13,728 units in October 2016.

News Analysis