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NSE Intra-day chart (04 January 2016)
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Market Commentary 05 January 2016
Markets to make a cautious start after the big fall

Monday's session turned out to be a awful for the Indian equity benchmarks which tumbled like a 'house of cards' and went on to breach various key technical levels in the over two percent freefall. The frontline gauges which appeared to be on a southbound journey, desperately kept searching for a bottom through the session, but to no avail as the journey only halted with the session's close. Sentiment took a big hit after Indian manufacturing activity contracted in December for the first time in more than two years, hurt by softening domestic demand, adding pressure on the central bank to ease policy. Earlier on Dalal Street, the benchmark got off to a weak start as the indices breached the psychological 7,900 and 26,000 levels in the early moments of trade since investors largely remained influenced by the pessimistic sentiments prevailing in Asian markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. The steep fall turned even acute after the negative opening of European markets in the noon trades, as weak Chinese economic data weighed on world stock markets. The indices barely managed to show signs of stabilizing in the session as the downward drift halted only with the session's close after suffering gargantuan losses. Moreover, the broader markets too failed to show any kind of fervor and settled with large cuts of over a percent. On the BSE sectoral space, the banking pocket finished at the top laggard in the space, registering large cuts of over two and half percent as heavyweights like SBI, ICICI Bank and Axis Bank plummeted by 2.94%, 2.83% and 2.35% respectively. Auto and Capital Goods counters too remained among prominent losers in the space with over two percent cuts. Meanwhile, metal stocks also reeled under pressure following by a weak PMI data in China, while telecom stocks got hit post the order from the Telecom Regulatory Authority of India (Trai) that has written to operators to ensure compliance with call drop regulations, effective January 1, 2016. Finally the NSE's 50-share broadly followed index Nifty, suffered over one hundred and fifty points laceration to settle below the crucial 7,800 support level while Bombay Stock Exchange's Sensitive Index Sensex got obliterated by over five hundred points and closed below the psychological 25,620 mark.

The US markets joining the global slump and suffered sharp cuts on Monday, with the tech heavy Nasdaq falling to over its two months low on renewed concerns about global growth, after a disappointing manufacturing data from China. Sentiments were further weighed down by a report from the Institute for Supply Management, showing a continued contraction in US manufacturing activity. The major averages regained some ground going into the close but still ended the day firmly in the red. The Dow Jones Industrial Average slumped by 276.09 points or 1.6 percent to 17,148.94, the Nasdaq plunged by 104.32 points or 2.1 percent to 4,903.09 and the S&P 500 lost 31.28 points or 1.5 percent to 2,012.66.

Crude oil futures too followed the equities sell-off and ended lower on Monday, though the trade remained volatile. The prices earlier moved higher in aftermath of an attack on the Saudi embassy over the weekend. Later a trio of nations joined Saudi Arabia in severing diplomatic ties with Iran, escalating Islamic sectarian conflict in the Middle East and Africa. It followed statements from Iranian officials over the weekend that a rise in crude oil exports is dependent on future global oil demand and should not further weaken oil prices. Iran oil minister Bijan Zanganeh said the nation expects to raise its crude oil exports by 1 million barrels per day in two phases after economic sanctions are eased later this year. Benchmark crude oil futures for February delivery ended down by $ 0.26, or 0.69 percent to $37.04, after trading in a range of $36.34 and $38.37 a barrel on the New York Mercantile Exchange. In London, Brent crude for February delivery closed at $37.28, lower by $0.27 on the ICE.

Indian rupee ended weaker against dollar on Monday due to increased demand for the American currency from banks and importers, tracking losses in Asian currencies. Besides weak trade in the local equity market also hit the sentiment of the domestic currency. Sentiment remained downbeat after the India's manufacturing sector output dipped in December to a 28-month low, the first contraction in over two years, as new orders fell sharply and production took a big hit from heavy rains in Chennai, putting pressure on RBI to keep rates low. Furthermore, former Finance Minister, P Chidambaram stated that the government has not been able to fulfill its promises, also weighed on the sentiment. On the global front, yen hit its highest level against the dollar since October on Monday as investors moved into the unit due to rising tensions in the Middle East.

The FIIs as per Monday's data were net buyers in equity segment, while they were net sellers in debt segment. In the equity segment gross buying was of Rs 656.76 crore against gross selling of Rs 376.22 crore, while in the debt segment, the gross purchase was of Rs 50.33 crore with gross sales of Rs 416.00 crore.           

The US markets suffered one of the worst yearly starts, with major averages losing over one and half a percent in last session amid weak manufacturing data in China, as the spillover effects from a crash in there weighed on domestic equities. The Asian markets have made a cautious start, with some of the indices trading in red, still weighed down by Chinese economic growth concern. The Indian markets made an awful start of the new week, melting down with global financial markets as worries about a downturn in China and fresh geopolitical tensions in the Middle East spooked investors. Also, the domestic manufacturing sector contracted for the first time in last two years. Today, the start is likely to remain cautious as some of the Asian peers have again made a weak start, though some recovery can be expected in latter part of the trade as traders will opt for some value buying after the butchering of last session. However, there will be some concern too, with retail inflation for farm labourers and rural workers in November rising to 4.92 percent and 5.02 percent, respectively, due to increase in prices of food items. Meanwhile, Finance minister Arun Jaitley held pre-budget talks with farm sectors and trade unions and said that there is a need for more investment in the farm sector as representatives from the key sector sought a string of measures to revive agriculture. He said that reviving the farm sector is a key priority for the government against the backdrop of sluggish growth and two consecutive seasons of patchy monsoon rains. There will be some action in the power sector stocks, as the power ministry Piyush Goyal has said that fifteen states have joined the debt recast scheme for power distribution companies covering 90% of the losses accumulated with the utilities. There will be some buzz in the oil and gas stocks too, as the oil and gas industry body PetroFed, whose members include state-owned ONGC and private major Reliance Industries, has asked the government to allow natural gas pricing freedom to existing fields like KG-D6.

Support and Resistance: CNX Nifty and BSE Sensex


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  • Mahindra & Mahindra has inaugurated its all new Bio-CNG plant in Mahindra World City, Chennai.
  • Coal India's subsidiary Mahanadi Coalfields has unveiled a mobile app for live monitoring of field operations, as a part of vigilance initiative in MCL.
  • Bajaj Auto, the second-largest motorcycle manufacturer has registered a marginal fall of 0.08% in total sales to 2,89,003 units in December 2015 against 2,89,244 units in December 2014.
  • State Bank of India, country's largest public sector lender, has opened its second sbiINTOUCH branch in Mumbai.
  • Punjab National Bank has launched slew of digital banking solutions aimed at improving customer experience.

News Analysis