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NSE Intra-day chart (06 December 2016)
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Market Commentary 07 December 2016
Markets to get a flat-to-positive start ahead of monetary policy review


Indian equity benchmarks showed a volte-face on Tuesday as what started on a promising note ended as a dismal show. However, the benchmarks managed to extend the winning momentum for the second straight day as local sentiments continued to show signs of improvement ahead of RBI policy review scheduled for Wednesday. The economic slowdown due to demonetization is likely to cut a percentage point from the gross domestic product (GDP) growth and so a rate cut at this point to encourage private-sector loan off-take and spending will be needed. Nevertheless, the US Federal Reserve is likely to increase its policy rate in mid-December. If that happens, the interest rate differential between India and the US will narrow, making it unattractive for foreign investors to put in money in Indian market. Meanwhile, firm global cues coupled with the appreciation in rupee value against the dollar added to the optimistic sentiments. Indian rupee strengthened by 16 paise to 68.05 against the dollar on Tuesday on increased selling of the US currency by exporters and banks.  However, market participants turned cautious after Kerala finance minister Thomas Isaac said he is almost sure the central government will not be able to present the supporting legislation for the goods and services tax (GST) in this session of Parliament. The central government is trying to push the draft GST bill before the Parliament's winter session ends on 16 December, as it tries to roll out the new indirect tax regime by the 1 April deadline. On the global front, barring Shanghai Composite index which declined by 0.16 percent, all the other Asian markets ended higher on Tuesday as investors turned their focus to a highly anticipated ECB meeting this week, with most economists expecting the central bank to expand its quantitative easing program beyond the first quarter of 2017. Back home, finally, the BSE Sensex gained 43.66 points or 0.17% to 26392.76, while the CNX Nifty added 14.40 points or 0.18% to 8,143.15.


The US markets closed higher on Tuesday, with the Dow Jones Industrial Average finishing at an all-time high for a second day in a row. The market is pricing in a high chance of a rate increase by the Federal Reserve next week, while investors also are awaiting the European Central Bank's meeting, set for Thursday, which could help provide clues on the outlook for European markets. The Fed is entering its 'blackout' period on Tuesday, which means there won't be any central bank speakers ahead of the monetary-policy setting meeting on December 13-14. On the economy front, a large surge in the productivity of US companies and employees in the third quarter was left unchanged after a second look by government economists. Productivity rose at an annual 3.1% pace in the three months covering July through September, the same as the initial reading. Output of goods and services - the stuff workers make or provide - was revised up to 3.6% from 3.4%. The Dow Jones Industrial Average added 35.54 points or 0.18 percent to 19,251.78, Nasdaq was up 24.11 points or 0.45 percent to 5,333.00, while S&P 500 gained 7.52 points or 0.34 percent to 2,212.23.


Crude oil futures suffered profit taking on Tuesday, as traders bet the recent rally was overdone. Crude prices had surged over 15 per cent four-day rally since the November 30 after the OPEC members decided to cut output from January. Prices were impacted as Saudi Arabia's state oil company slashed its prices for Asian customers to the lowest in four months, hoping to preserve market share ahead of the supply cuts. Traders will now be paying attention to US inventories data over the next two days. Benchmark crude oil futures for January delivery declined by $0.86 or 1.7 percent to $50.93 on the New York Mercantile Exchange. In London, Brent crude for January delivery ended lower by $1.01 or 2 percent at $53.93 on the ICE.


Indian rupee ended to near 3-week high against US dollar on Tuesday, as investors turned optimistic on the hopes that Reserve Bank of India (RBI) Governor Urjit Patel to again go in for a 0.25% interest rate cut with an aim to cushion the impact of demonetisation. The RBI will announce its Fifth Bi-monthly Monetary Policy review on December 7, 2016. Besides, a firm domestic equity market coupled with dollar weakened against other currencies overseas also influenced the rupee uptrend. This is the sixth consecutive session when the rupee is traded higher against dollar. On the global front, Pound gained against dollar as expectations of the ‘Soft Brexit' deal which could keep the UK within the common market took root. Finally, the rupee ended at 67.90, 31 paise stronger from its previous close of 68.21 on Monday.


The FIIs as per Tuesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3386.98 crore against gross sell of Rs 3665.53 crore, while in the debt segment, the gross purchase was of Rs 972.76 crore with gross sales of Rs 10501.80 crore.


The US markets added modest gains in last session with Dow touching new record highs on gains among financials and telecoms. There was some cautiousness with Commerce Department reporting that the trade deficit widened to $42.6 billion in October from $36.2 billion in September, though it remained on expected lines. The Asian markets have made mostly a positive start following the gains in US markets and the Japanese market advanced with the decline in yen. The Indian markets managed a modestly positive close in last session, with traders turning cautious a day ahead of the monetary policy review. Today, the start is likely to be positive but all eyes will be on monetary policy committee (MPC) of RBI announcing policy rate later in the day. Traders apart from a rate cut would be watching the commentary on inflation and growth, and will look for clarity on market stabilisation scheme (MSS) and CRR measures announced recently. Meanwhile, ahead of the monetary policy announcement by RBI, global rating agency Fitch Ratings has said that there is scope for monetary easing in India as retail inflation is holding below the 5 percent target. There will be some respite in PSU oil marketing companies as the international crude prices have started showing some fatigue following a 15 per cent four-day rally since the November 30 after the Opec members decided to cut output from January. However, a Crisil Research expects the price of petrol to rise 5-8 percent and that of diesel by 6-8 percent over the next 3-4 months after OPEC agreed to cut production of oil for the first time since 2008. There will be some buzz in gold and jewellary stocks too, as the Union Minister Ravi Shankar Prasad has said that government is not considering any plan to impose tax on jewellery of women.


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  • Mahindra & Mahindra's wholly owned subsidiary Mahindra Agri Solutions has acquired 60% stake in the Netherlands-based global fruit distribution company OFD Holding BV for about Rs 36 crore.
  • Lupin's US subsidiary, Lupin Pharmaceuticals, Inc, has received tentative approval for its Diclofenac Capsules USP, 18 mg and 35 mg from the United States Food and Drug Administration.
  • Maruti Suzuki India  has reported 39.08% rise in its production to 1, 43,989 units in November 2016 as compared to 1,03,527 units in November 2015.
  • Bank of Baroda has reduced its marginal cost of funds based lending rate by 20 basis points to 9.05 per cent from 9.25%p.a for 1 year tenor.
  • Tata Steel is planning to keep its Port Talbot plant in South Wales, the UK's biggest steelworks, fully operational.
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