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NSE Intra-day chart (06 January 2020)
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Market Commentary 07 January 2020
Benchmarks to make positive start following Asian peers

 

Dalal Street headed for the worst performance on Monday, with Sensex and Nifty crashing nearly 2 per cent each. After a sluggish start, key indices traded in red terrain for the whole day, impacted by apex exporters' body FIEO's statement that further escalation in the tension between the US and Iran will have implications on India's exports to the Persian Gulf nation. Market participants also got cautious due to a report stating that foreign portfolio investors (FPIs) began the year with profit booking as they withdrew a net sum of Rs 2,418 crore from the Indian capital markets in the first three trading sessions of January. Bears tighten their grip over the street in the second half of the trading session, on account of weak cues from global markets. Domestic sentiments remained pessimistic, amid reports that investors wealth tumbled by a whopping Rs 3.11 lakh crore in two successive sessions of decline in the equity market following escalation in tensions in the Middle East. Adding more anxiety among investors, economic think tank NIPFP said that states might be facing a consolidated revenue gap of up to Rs 1.23 lakh crore on account of withdrawal of compensation after the five-year GST transition period ends on June 30, 2022. Finally, the BSE Sensex fell 787.98 points or 1.90% to 40,676.63, while the CNX Nifty was down by 233.60 points or 1.91% to 11,993.05.

 

The US markets ended higher on Monday as traders seem optimistic that the bluster will not amount to much and that tensions will eventually subside without a major impact on the global economy.  Besides,  Chinese officials were set to arrive in Washington on January 13 for a four-day meeting with US counterparts, to sign a preliminary trade pact to end their protracted tariff conflict- a trade clash that had been a the center of investors' minds before the Mideast worries. Reports said that China had planned to arrive earlier, but delayed their plans after President Trump announced a January 15 date for the signing of the deal. However, upside remained capped as rising geopolitical tensions continued to weigh on the markets after contributing to the pullback off record highs seen last Friday. Washington and Tehran continue to engage in an escalating war of words after the US killing of top Iranian military commander Qasem Soleimani in an airstrike last week. With Iran's Supreme Leader Ali Khamenei vowing severe revenge against the US, President Donald Trump threatened to retaliate against any attacks on Americans or American assets. Trump said the US has targeted 52 Iranian sites to strike if Tehran launches an attack, with the number representing the 52 American hostages held during the Iran hostage crisis. Meanwhile, Trump also threatened to impose harsh sanctions on Iraq after its parliament passed a resolution calling on US forces to leave the country.

 

Crude oil futures ended higher on Monday amid concerns about possible supply disruptions due to an escalation in tensions in the Middle East. President Donald Trump threatened potentially disproportionate attacks if Iran strikes back against US targets. Trump also threatened harsh sanctions against Iraq if it expels US troops, and doubled down on earlier comments threatening to target Iranian cultural sites if Iran were to strike back against the US. Meanwhile, traders also took note of reports that all the four oil export terminals in eastern Libya were forced to shut on Sunday due to bad weather and that the closure could last three days. Crude oil futures for February added 22 cents or 0.4 percent to settle at $63.27 a barrel on the New York Mercantile Exchange. March Brent gained 31 cents or 0.5 percent to settle at $68.91 a barrel on London's Intercontinental Exchange.

 

Indian rupee continued to slide against the American currency for the third day on Monday, on increased demand for the greenback from importers and banks. Traders remained anxious with apex exporters' body FIEO's statement that further escalation in the tension between the US and Iran will have implications on India's exports to the Persian Gulf nation. Besides, a sharp sell-off in the domestic stock market put pressure on the rupee. However, local unit cut most of the early losses, taking support from the a private survey showed that the services industry accelerated to a five-month high in December 2019, raising hopes of an economic recovery. The IHS Markit Services Purchasing Managers' Index (PMI) rose to 53.3 in December from 52.7 in November. This is the second straight month of expansion for Services PMI. On the global front, safe-haven Japanese yen hit a three-month high on Monday, as increasing tensions between Iran and the United States sent investors scurrying to less risky assets. Finally, the rupee ended at 71.93, 13 paise weaker from its previous close of 71.80 on Friday.

 

The FIIs as per Monday'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 4535.04 crore against gross selling of Rs 3233.07 crore, while in the debt segment, the gross purchase was of Rs 1459.13 crore with gross sales of Rs 2758.24 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.32 crore against gross selling of Rs 0.38 crore.

 

The US markets ended in green on Monday as heavyweight technology companies led a rebound. Asian markets are trading mostly higher on Tuesday after surveys of service sectors out overnight showed an improvement in the United States, U.K. and EU. Indian markets ended sharply lower with losses of around 2 percent on Monday as investors flocked to safe havens after tensions in the Middle East lifted crude oil prices amid depression in rupee. Today, the markets are likely to make positive start on short-covering after a steep fall in the previous session following Asian peers. Investors will be eyeing the release of the first advance estimates of the GDP for FY20 by the government later in the day. The estimates will be keenly watched for as the economic turbulence has taken a toll on growth numbers in the first and the second quarter. Some support will come with Commerce and Industry Minister Piyush Goyal's statement that use of artificial intelligence (AI) in different forms can help achieve the target of making India a $5 trillion economy in the coming years. However, there may be some cautiousness amid concerns over fiscal deficit and CAD imbalances. A private report said that India's government is likely to cut spending for the current fiscal year by as much as Rs 2 lakh crore ($27.82 billion) as it faces one of the biggest tax shortfalls in recent year. It added that Asia's third largest economy, which is growing at its slowest pace in over six years because of lack of private investment, could be hurt further if the government cuts spending. There will be some buzz in the banking stocks with a report that starting the January-March quarter, banks will begin to see the impact of the Reserve Bank of India's June 7 circular, in the form of higher provisioning for stressed accounts that have not found resolution thus far. Telecom stocks will be in focus as the telecom industry urged the government to facilitate funding for telecom companies at lower interest rates to help them reduce capital costs. There will be some reaction in non-bank finance companies (NBFCs) stocks with ICRA's report indicating that infrastructure finance companies might have to brace for additional pressure on asset quality from exposure to renewable energy (RE) projects, which face rate risks.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

11,993.05

11,918.47

12,123.37

BSE Sensex

40,676.63

40,400.95

41,165.33

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

1,028.80

45.15

44.52

46.27

SBI

356.45

319.00

313.90

327.90

Tata Motors

286.21

185.65

183.47

189.42

ZEEL

172.25

261.50

256.20

271.00

ONGC

146.11

126.25

124.30

129.00

 

  • Bharti Airtel has received shareholder's approval for rising up to $2 billion in equity and another $1 billion in debt. 
  • HDFC is all set to raise up to Rs 5,000 crore by issuing bonds on a private placement basis to shore up its long-term capital needs. 
  • Vedanta has proposed to offer Rated, Secured, Redeemable, Non-Cumulative, Non-Convertible Debentures aggregating upto Rs 2,000 crore in one or more tranches. 
  • HDFC Bank has opened 8 more branches in the state of Rajasthan, taking its total branch network in the state to 200.
News Analysis