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NSE Intra-day chart (07 January 2019)
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Market Commentary 08 January 2019
Markets to make cautious start amid higher oil prices

 

Firm cues from Asian counters coupled with rising direct tax collection data kept Indian equity benchmarks higher on Monday, with Sensex and Nifty closing the trading session above 35,800 and 10,750 levels, respectively. Revenue from direct tax grew 13.6% to Rs 7.43 lakh crore in the first nine months of the current financial year 2018-19 (April-March). The government has met more than 64.7% of the total budget estimate of direct taxes, for which the mop-up target is Rs 11.50 lakh crore.  After a firm start, the key indices remained positive throughout the day, aided by the Federation of Indian Chambers of Commerce and Industry (FICCI) president Sandip Somany's statement that agricultural reforms, interest rate cut and credit availability to micro, small and medium enterprises will drive India's economic growth to 7.5-7.6% in 2019-20. He added that the economy is on a good footing. Some support also came with Reserve Bank of India (RBI) data showing that the country's foreign exchange reserves increased by $116.4 million to $393.404 billion in the week to December 28, on account of rise in foreign currency assets. In the previous week, the reserves had increased by $167.2 million to $393.287 billion. The street also got relief with reports that Commerce and industry minister Suresh Prabhu will meet the banking and financial services secretaries next week to resolve the huge decline in bank credit to exporters. During the trade, the market participants were also seen taking note of Governor Shaktikanta Das' statement that the Reserve Bank of India (RBI) will not like the banking system to be in a situation of loose money. He further said that the RBI is also looking at new governance reforms for state-owned banks but will not throttle their functioning. However, the last leg sell-off along with weak cues from European markets dragged the markets from their intraday high points. Domestic sentiments got hit with a private report stating that India may have to forgo as much as $1.97 trillion in gross domestic product (GDP) growth promised by investment in intelligent technologies over the next decade if the country fails to bridge the skill gap. Anxiety also persisted among the traders, as the RBI warned that a sudden surge in crude prices can upset the country's key macro-stability parameters, as it can sharply spike the current account deficit (CAD), inflation and the fiscal numbers, whittling the benefits of higher growth. Finally, the BSE Sensex gained 155.06 points or 0.43% to 35,850.16, while the CNX Nifty was up by 44.45 points or 0.41% to 10,771.80.

 

The US markets ended higher on Monday, building on Friday's powerful rally, as investors pored through the latest US-China trade developments. Sentiment got boost as senior officials from China unexpectedly showed up for negotiations between Beijing and their counterparts in Washington in an effort to resolve longstanding trade disagreements that have triggered uncertainty in global markets. Trade officials from both countries are looking to hammer out an agreement over the next 48 hours, however, there are doubts over how to best ensure that both countries follow through on promises made during talks with Trump administration worried about enforcement. Investors were also keeping an eye on the partial government shutdown, now in its 17th day, with some government employees expected to see their first missed paycheck as a result of an impasse between President Donald Trump and Democratic lawmakers over funding for a US-Mexico border wall. On the economic front, a report released by the Institute for Supply Management (ISM) showed growth in US service sector activity slowed by more than anticipated in the month of December. The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. The bigger than expected decrease by the headline index was partly due to notably slower growth in business activity, with the business activity index tumbling to 59.9 in December from 65.2 in November. Dow Jones Industrial Average jumped 98.19 points or 0.42 percent to 23531.35, Nasdaq surged 84.61 points or 1.26 percent to 6823.47 and S&P 500 was up by 17.75 points or 0.70 percent to 2549.69.

 

Crude oil futures ended higher on Monday, buoyed by optimism tied to trade talks between the US and China as well as output reductions by major oil producers. Sentiment got boost as senior officials from China unexpectedly attended negotiations between Beijing and their counterparts in Washington, in an effort to resolve longstanding trade disagreements that have underpinned uncertainty in global markets. Meanwhile, Saudi Arabia plans to cut its crude exports by 800,000 barrels a day from around 7.9 million barrels a day in November, in a move aimed at lifting prices above $80 a barrel. Benchmark crude oil futures for February gained 56 cents or 1.2 percent to settle $48.52 a barrel on the New York Mercantile Exchange. March Brent crude added 27 cents or 0.5 percent to settle at $57.33 a barrel on London's Intercontinental Exchange.

 

Indian rupee, after making a good start, gave away most of its gains but managed to end marginally higher against dollar on Monday, due to sustained selling of the US currency by exporters and banks. Local currency got some support with the Federation of Indian Chambers of Commerce and Industry (FICCI) president Sandip Somany's statement that agricultural reforms, interest rate cut and credit availability to micro, small and medium enterprises will drive India's economic growth to 7.5-7.6% in 2019-20. However, local unit cut most of the early gains, as anxiety remained among the traders with the RBI warned that a sudden surge in crude prices can upset the country's key macro-stability parameters, as it can sharply spike the current account deficit (CAD), inflation and the fiscal numbers, whittling the benefits of higher growth. On the global front, dollar fell for a third consecutive day against its rivals on Monday on growing bets the US central bank will press the pause button on its rate hike cycle in the coming months. Finally, the rupee ended at 69.68, 4 paise stronger from its previous close of 69.72 on Friday.

 

The FIIs as per Monday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3137.93 crore against gross selling of Rs 3547.50 crore, while in the debt segment, the gross purchase was of Rs 1584.76 crore with gross sales of Rs 2384.44 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.04 crore against gross selling of Rs 0.40 crore.

 

The US markets ended higher on Monday as gains in the technology and consumer discretionary sectors helped extend Friday's rally, with investors focused on the ongoing US-China trade talks. Asian markets were trading mostly in green on Tuesday tracking overnight rise on the Wall Street, where equities rallied on optimism fresh talks on trade will be productive. Indian markets extended their gains for second straight session on Monday, helped led by IT, realty and select bank stocks. Sentiments also got boost on positive Asian cues and continued buying by domestic investors. Today, the markets are likely to make cautious start amid higher oil prices. Traders will be concerned with Crisil's report that India Inc is set to report a decline in both revenue as well as profit growth numbers in the December quarter. It said revenue growth will dip by up to 5 percentage points on average to 12-13%. Traders will be reacting to report that Reserve Bank of India (RBI) governor Shaktikanta Das struck a note of caution on farm loan waivers, saying open-ended forgiveness would affect credit culture and the behaviour of borrowers. He also said the central bank is open to taking more steps to infuse liquidity if the need arises but it doesn't want too much cash sloshing around in the banking system. Also, there will be some cautiousness with a report that the growth in direct tax collection in the first nine months of the year was marginally lower than the rate of 14.4% required to meet the budget estimate of Rs 11.5 lakh crore for direct taxes in FY19. The net (post-refunds) direct tax collection for April-December period this fiscal was Rs 7.43 lakh crore, up 13.6% from the year-ago period. However, traders may be getting some encouragement with the central statistics office's (CSO) latest data showing that Indian economy is expected to grow at 7.2% in 2018-19, a tad higher from 6.7% in the previous fiscal, mainly due to improvement in the performance of agriculture and manufacturing sectors. Besides, describing the 7.2% GDP growth projection for 2018-19 as very healthy, Economic Affairs Secretary Subhash Chandra Garg said India remains to be the fastest growing economy in the world. Meanwhile, Reserve Bank Governor Shaktikanta Das said the central bank will take steps if there is a shortage of liquidity in the economy though the current cash needs are largely met. Pointing out that liquidity in the system is regularly monitored, Das said the RBI will take steps whenever there is any deficit.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,771.80

10,735.98

10,821.78

BSE Sensex

35,850.16

35,747.28

36,015.00

 

Nifty Top volumes

 

Stock

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Yes Bank

405.15

187.15

183.83

192.43

Tata Motors

214.38

175.35

172.97

177.97

SBI

145.79

296.30

293.83

300.13

ICICI Bank

127.20

367.70

365.83

370.28

ONGC

127.01

147.85

146.27

148.92

 

  • ONGC will be investing up to Rs 6,000 crore in drilling 200 wells across fields of Assam under ONGC Assam Asset in Sivasagar and Charaideo districts. 
  • Indiabulls Housing Finance has reported over Rs 17,700 crore net-worth as at December 31, 2018, representing net gearing of less than 5 times. 
  • Indian Oil Corporation is planning to raise funds up to $1.5 billion from international bond sale. 
  • Tata Motors' wholly owned subsidiary - JLR has reported 14,079 units US sales for the month of December 2018, a 24% increase from 11,394 units in December 2017.
News Analysis