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NSE Intra-day chart (06 August 2019)
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Market Commentary 07 August 2019
Markets to get a negative start amid weakness in Asian peers


Tuesday brought positive vibes for Indian equity markets, with Sensex and Nifty closing higher by around 0.75% each. Key indices made a cautious start but soon gained momentum, aided with Finance Minister Nirmala Sitharaman's statement that the government planned steps to improve the state of the economy fairly quickly after getting inputs from business leaders. Traders took a note of a report that India's economy needs external capital flow to grow at nine per cent and touch $5 trillion in the next five years. It also said that one of the positive thing in India is the monsoon is good and expecting rural economy to pick up and therefore slowly the country will see economy coming back to normalcy. Benchmarks extended their gains in late afternoon session to trade near their intraday high points, on account of positive European markets. The street remained optimistic, as the ASSOCHAM expects the Reserve Bank of India (RBI) to cut the benchmark policy Repo rate by 50 basis points or more, in the wake of a realistic assessment of the state of economy which needs an immediate demand push and investment support by way of reduced cost of borrowing. Meanwhile, the finance ministry has said that banks have agreed to take measures as per RBI guidelines to review their lending rates as they have not commensurately transmitted to borrowers benefits of reduction in the policy rate by the RBI. Finally, the BSE Sensex gained 277.01 points or 0.75% to 36,976.85, while the CNX Nifty was up by 85.65 points or 0.79% to 10,948.25.


The US markets ended in green with gains of over one percent on Tuesday on account of bargain hunting, with traders picking up stocks at reduced levels after the major averages ended Monday's trading at their lowest closing levels in two months. A report stated that the People's Bank of China set the midpoint for the Chinese currency at a stronger than expected level also helped ease investor jitters. Traders were too encouraged by China's central bank moving to restrain the fall in its currency with a fix Tuesday at 6.9683 yuan. A breach of the 7-to-the dollar level on Monday, interpreted by some as an intentional weakening of its currency, helped to ignite a global stock market selloff and slump in bond yields. A recent drop in the value of the Chinese yuan further fueled speculation Beijing is devaluing its currency to counter President Donald Trump's latest tariff threat. After refusing to do so several times in the past, Treasury Secretary Steven Mnuchin officially declared China a currency manipulator on Monday. The Treasury Department said Mnuchin will subsequently engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China's latest actions. On the economic front, job vacancies fell slightly to 7.35 million in June according to the US Labor Dept's JOLTS report. Dow Jones Industrial Average surged 311.78 points or 1.21 percent to 26029.52, Nasdaq gained 107.22 points or 1.39 percent to 7833.27 and S&P 500 was up by 37.03 points or 1.30 percent to 2881.77.


Crude oil futures end lower with cut of over a percent on Tuesday as questions persisted over global demand for energy, uncertainty that is tied to US tensions with major trade partners. Oil prices remained weak as US government data for the sector forecast growth in the Permian basin and other shale formations would largely offset production losses from the Gulf of Mexico due to Hurricane Barry. The Energy Information Administration (EIA) said in its short-term outlook issued that Brent crude spot prices will average $64 a barrel in the second half of 2019 and $65 in 2020. The forecast of stable crude oil prices is the result of EIA's expectations of a relatively balanced global oil market. EIA forecasted that WTI crude oil prices will average $5.50 per barrel less than Brent prices from the fourth quarter of 2019 through the end of 2020. Benchmark crude oil futures for September dropped $1.06 or 1.9 percent to settle at $53.63 a barrel on the New York Mercantile Exchange. October Brent declined 87 cents or 1.4 percent to settle at $58.94 a barrel on London's Intercontinental Exchange.


Indian rupee ended marginally lower against the American currency on Tuesday, due to fresh dollar demand from banks and importers. Investors remained concerned ahead of the Reserve Bank of India (RBI) monetary policy announcement due tomorrow. Traders took note of a private report indicated that India's economy needs external capital flow to grow at 9% and touch $5 trillion in the next five years. However, positive trend in equity market helped in restricting the slide in the Indian unit. On the global front, US dollar continued to decline against a basket of currency majors due to tense trade relations between the US and China. Finally, the rupee ended at 70.81, 8 paise weaker from its previous close of 70.73 on Monday.


The FIIs as per Tuesday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 4736.41 crore against gross selling of Rs 6907.37 crore, while in the debt segment, the gross purchase was of Rs 1787.31 crore with gross sales of Rs 1893.09 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.15 crore against gross selling of Rs 2.31 crore.


The US markets ended higher on Tuesday after China backed off from a further escalation in the country's trade and currency dispute with Washington. Asian markets are trading mostly lower on Wednesday as investors waited for the People's Bank of China to set its daily midpoint fix for the Chinese yuan. Indian markets settled higher on Tuesday on report that government will soon hold discussions with representatives of foreign portfolio investors, amid continuing overseas fund outflow from the markets following the decision to impose surcharge on certain class of such investors. Today, the markets are likely to make a negative start amid weakness in Asian peers. Some cautiousness will come with economic think-tank NCAER's statement that India's GDP growth is likely to be 6.2 per cent during the current fiscal, down from 6.8 per cent in 2018-19, on account of flat growth in agriculture sector. The prospects for agricultural sector in 2019-20 depend largely on the south-west monsoon. It added that the country as a whole has received 7 per cent below normal rainfall by August 5, 2019. It has also experienced temporal variations in rainfall. Traders will be looking ahead to the outcome of the Reserve Bank of India's (RBI) third bi-monthly policy of the ongoing fiscal later in the day. With inflation under control, there are expectations of another 25 basis points rate cut by the RBI for a fourth time in a row to boost economic activities. Traders may take note of Former RBI Governor Bimal Jalan's statement that the government should borrow only long-term fund from the overseas market, and the quantum should not exceed 1.5% of GDP under any circumstances. Jalan said that he does not have negative view about overseas sovereign borrowing, but he thinks India does not need to borrow from abroad. Meanwhile, amid concerns over banks citing 'client confidentiality' to resist sharing of information on delayed loan repayments and possible defaults by their borrowers, capital market regulator SEBI is planning to tighten its norms to make it mandatory for companies to provide these details to credit rating agencies. There will be some reaction in tyre stocks with ratings agency Icra's statement that demand slowdown will curtail tyre industry's revenue growth to 3-4 per cent in 2019-20, and margins are expected to decline. It also said the credit profile of Indian tyre industry is likely to weaken in FY2020 affected by the ongoing slowdown in domestic automotive industry, rising raw material (RM) prices and higher spend towards debt-funded capacity expansion. There will be also some buzz in the aviation stocks with report that Aviation regulator DGCA has directed all airport operators to carry out compulsory periodic inspection of runway surface. There will be some earnings announcements too to keep the markets buzzing.


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News Analysis