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Market Commentary 06 December 2019
Markets to start on a positive note on supportive global cues

                                                                                              

Indian equity benchmarks moved in a see-saw manner for some part of the day and ended Thursday's session marginally in red, following the outcome of the Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) meeting where the central bank kept the repo rate unchanged. Markets started off with marginal gains, as traders took some support with the Union Cabinet approving the launch of an exchange-traded fund (ETF) for bonds to create an additional source of funding for Central Public Sector Enterprises (CPSEs) and state-owned financial institutions. Finance Minister Nirmala Sitharaman has said that with the creation and launch of umbrella ETF the government hopes to diversify investor base. She emphasised that this is expected to eventually increase the size of bond ETFs in India, leading to achieving key objectives at a larger scale. However, key indices erased all gains and turned volatile in afternoon session, after RBI raised its inflation projection to 5.1-4.7 percent for the second half of the current fiscal on the back of a spike in prices of vegetables such as onion and tomatoes. RBI also sharply lowered GDP growth forecast for the current financial year to 5 percent from the earlier estimate of 6.1 percent on account weak domestic and external demand. Anxiety also spread among traders with Union Minister Nitin Gadkari expressing regret over hurdles like land acquisition and environment clearance faced by various road projects, saying the country must have a positive approach towards development. The market participants failed to take support with Reserve Bank Governor Shaktikanta Das' statement that there is good coordination between the fiscal and monetary policies so far, in addressing growth concerns and that the central bank is not worried about government missing fiscal deficit target. Finally, the BSE Sensex lost 70.70 points or 0.17% to 40,779.59, while the CNX Nifty was down by 24.80 points or 0.21% to 12,018.40.

 

The US markets ended marginally higher on Thursday as US and Chinese officials continued to express optimism that a limited trade deal can be reached that would ratchet back tensions, though private reports suggested that sticking points remain ahead of a December 15 deadline, when the US plans to implement further tariffs. The strength on the markets also came in following the Labor Department released a report showing an unexpected decrease in first-time claims for US unemployment benefits in the week ended November 30th. The report said initial jobless claims slipped to 203,000, a decrease of 10,000 from the previous week's unrevised level of 213,000. The drop came as a surprise to participants, who had expected jobless claims to inch up to 215,000. With the unexpected decrease, jobless claims fell to their lowest level since hitting 193,000 in the week ended April 13th. Besides, new orders for US manufactured goods increased in line with street estimate in the month of October, according to a report released by the Commerce Department. The Commerce Department said factory orders rose by 0.3 percent in October after falling by a revised 0.8 percent in September. Street had expected orders to rise by 0.3 percent compared to the 0.6 percent drop originally reported for the previous month. Meanwhile, primarily reflecting a notable decrease in the value of imports, the Commerce Department released a report showing the US trade deficit narrowed in the month of October. The Commerce Department said the trade deficit narrowed to $47.2 billion in October from a revised $51.1 billion in September. Street had expected the trade deficit to narrow to $48.7 billion from the $52.5 billion originally reported for the previous month. The narrower trade deficit in October reflected the smallest trade deficit since the $44.4 billion shortfall in May of 2018.

 

Crude oil futures ended flat on Thursday as traders awaited the outcome of the Organization of the Petroleum Exporting Countries (OPEC) meet in Vienna. According to private reports, OPEC and allies led by Russia are planning to deepen output cuts to prevent oversupply. Currently, the oil cartel is curbing supply by 1.2 million barrels per day. The existing curbs are set to expire in March. Now, the OPEC and allies are considering to deepen cuts by 500,000 barrels per day. The cuts would last through the first quarter of 2020 as against calls for extending cuts until June or December 2020. Besides, the Energy Information Administration (EIA) reported that domestic supplies of natural gas fell by 19 billion cubic feet for the week ended November 29. Benchmark crude oil futures for January settled flat at $58.43 a barrel on the New York Mercantile Exchange. However, January Brent gained 39 cents or 0.6 percent to settle at $63.39 a barrel on London's Intercontinental Exchange.

 

Indian rupee continued its upward momentum for the second day on Thursday on persistent selling of the American currency by exporters. Traders took some support with Reserve Bank Governor Shaktikanta Das' statement that there is good coordination between the fiscal and monetary policies so far, in addressing growth concerns and that the central bank is not worried about government missing fiscal deficit target. Besides, dollar's weakness against some currencies overseas supported the rupee. However, gains remain capped as anxiety remained among the traders after Reserve Bank of India (RBI) kept the repo rate unchanged at 5.15 percent and continue with its accommodative stance. It also sharply lowered the growth forecast for the current financial year to 5 percent from the earlier estimate of 6.1 percent on account weak domestic and external demand. On the global front, dollar retreated on Thursday towards one-month lows against a basket of currencies, pressured by a slew of weaker-than-expected economic data and this week's robust performance by the euro and the British pound. Finally, the rupee ended at 71.29, 24 paise stronger from its previous close of 71.53 on Wednesday.

 

The FIIs as per Thursday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 5702.75 crore against gross selling of Rs 5507.30 crore, while in the debt segment, the gross purchase was of Rs 1091.48 crore with gross sales of Rs 1044.22 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.80 crore against gross selling of Rs 10.19 crore.

 

The US stocks closed higher for a second consecutive session Thursday as investors remained optimistic about prospects for a US-China trade deal. Asian markets are trading in green in early deals on Friday as US President Donald Trump's rhetoric kept investors' hopes up on a trade deal with China. India equity markets witnessed volatile session and ended lower on Thursday after Reserve Bank of India (RBI) kept its repo rate unchanged at 5.15% with accommodative stance. Today, the start is likely to be good on positive global cues and traders will be drawing encouragement with Reserve Bank of India (RBI) Governor Shaktikanta Das indicating that the government may come up with some countercyclical policy measures on the fiscal side to revive growth which may be another reason why the Monetary Policy Committee did not vote for a policy rate cut despite popular expectation. Support may also come with Commerce and Industry Minister Piyush Goyal's statement the target of Rs 5 lakh crore business through government's e-marketplace GeM is achievable in less than five years given the huge amount of procurement done via the platform. Meanwhile, Assocham President B K Goenka said a temporary pause by the RBI to the policy interest rate reduction cycle while keeping its stance accommodative is understandable as long as it keeps nudging the banks to significantly pass the benefits of earlier rate combined repo rate cuts of 135 basis points since February this year. However, expressing disappointment at the RBI's decision to keep interest rates unchanged, industry body Ficci said there is a need for continued action on the policy rate front to boost growth. Banking stocks will be in action with Fitch Ratings stating that Indian banks are likely to take significantly more loan write-offs to reduce bad loans against a backdrop of rising provisions and weak recovery prospects. The state-owned banks account for around 90 per cent of impaired loan stock, and have cumulatively written off nearly $30 billion in bad loans in the past three years. There will be buzz in aviation stocks with the International Air Transport Association (IATA) stating that India's domestic air passenger traffic grew 3.6 per cent in October 2019 but the expansion was slower than last year, reflecting general economic slowdown and disruptive impact of Jet Airways' collapse. There will be some reaction in information technology (IT) stocks with report that Finance Minister Nirmala Sitharman said the lower 15 per cent tax rate for new manufacturing companies will not apply to computer software development, mining and printing of books.

 

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

12,018.40

11,984.37

12,066.82

BSE Sensex

40,779.59

40,665.70

40,947.94

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

2,249.91

62.10

60.63

63.78

ZEEL

492.60

300.05

288.20

307.10

ICICI Bank

323.54

528.10

523.60

535.05

Tata Motors

317.87

166.10

163.47

170.47

SBI

304.30

336.20

332.70

342.15

 

  • Hindalco Industries has launched India's first all-aluminium freight trailer in Jaipur in the state of Rajasthan.
  •  Wipro has launched its NextGen Cyber Defence Centre in Melbourne, Australia.
  •  SBI has received approval for divestment of its stake in UTI AMC up to 8.25 per cent through IPO.
  •  Tata Motors' wholly owned subsidiary -- JLR has reported November 2019 US sales.
News Analysis