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NSE Intra-day chart (10 May 2016)
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Market Commentary 11 May 2016
Markets to make a weak start reacting to Mauritius tax treaty


Indian benchmark indices though managed to extend the uptrend for the second consecutive session but consolidated their position after showcasing the outstanding feat of registering biggest intra-day gains in nearly four weeks on Monday. It turned out to be a rather volatile day of trade as the indices rebounded after drifting to lower levels in the morning session, sustained position build up was witnessed in select index heavyweights and capital goods shares. Sentiments got some support with the report that the Centre's indirect tax mop-up rose 41 per cent in April led by high excise collections, signaling a pick-up in economic activity. Furthermore, India's food grain production too increased marginally to 252.23 million tonnes in the 2015-16 crop year, despite setback due to deficient rainfall and shortage of water in reservoirs. If the estimates hold up, it would imply that the damage to the agrarian economy is less than what had been initially feared; reflecting a degree of resilience of Indian agriculture to a deficit monsoon. However, investors remained cautious with report that higher food and fuel prices probably nudged India's annual inflation up to 5.0 percent in April from 4.83 percent in March, making it harder for the central bank to follow up last month's interest rate cut too swiftly. On the global front, stock markets across the world rose on Tuesday helped by some solid corporate earnings in Europe and a new pledge by Japan. Back home, the benchmark got off to a flat opening with a negative bias despite mostly positive leads from Asian markets, were sentiments remained optimistic in thin trades triggered by a fresh promise of stimulus from Beijing, which helped to counter pessimism over weak trade data from China for April. Finally, the BSE Sensex surged 83.67 points or 0.33% to 25772.53, while the CNX Nifty rose 21.75 points or 0.28% to 7,887.80.


The US market closed higher on Tuesday, to end with their best one-day percentage gains in two months as oil prices rallied. Despite the broad-market rally, nagging concerns about lofty valuations continue to lead to an undertone of cautiousness among some investors. On the economy front, the number of available jobs rose to an eight-month high in March, in what could be a sign that companies are struggling to find talent to fill the positions they need - but that financial-market turbulence hasn't deterred firms from expanding. The Labor Department stated that there were 5.76 million job openings in March, up from 5.61 million in February. The sector with the largest number of open jobs is the professional and business service sector, with 1.23 million open slots, a 124,000 gain from March. The number of job openings in the construction sector edged up to 210,000, the highest level in nearly nine years, before the Great Recession that wrecked the housing sector. The Dow Jones Industrial Average was up by 222.44 points or 1.26 percent to 17,928.35, Nasdaq gained by 59.67 points or 1.26 percent to 4,809.88, while S&P 500 added 25.70 points or 1.25 percent to 2,084.39. 


Crude oil futures bounced back and rose sharply on Tuesday, after the Energy Information Administration (EIA) hiked its 2017 projection for prices and production. There was heavy short covering too after suffering sharp decline in previous session that supported the prices. Meanwhile, EIA forecast an average U.S. crude output of 8.19 million barrels a day for 2017, up slightly from earlier projections. It also said that the average price will be $50.65 a barrel next year, up sharply from the previous estimate of $40.58. Benchmark crude oil futures for June delivery surged by $1.22 or 2.81percent to $44.66 a barrel after trading in a range of $43.04 and $44.76 a barrel on the New York Mercantile Exchange. In London, Brent crude for June delivery closed at $45.55, up $1.91 or 4.38 percent on the ICE.


Indian rupee extending weakness for the second day declined against dollar on Tuesday on increased demand for the American currency from banks and importers, tracking losses in its Asian peers. Besides, strength in the US dollar against other currencies overseas amid speculation over a Fed rate hike and reversal of key technical supports also hit the rupee sentiment. Moreover, the domestic currency even failed to get solace from the gains in the local equity markets. On the global front, yen fell against the dollar on Tuesday after the warnings by Japan that it was prepared to step in to weaken the currency. Finally, the rupee ended at 66.67, 9 paise weaker from its previous close at 66.58 on Monday.


The FIIs as per Tuesday's data were net buyers in equity and debt segments both. In equity, the gross buying was of Rs 3927.19 crore against gross selling of Rs 3631.91 crore, while in the debt segment, the gross purchase was of Rs 2845.13 crore with gross sales of Rs 2174.07 crore.            


The US markets rallied in last session, coming off their lackluster performance of last some sessions on a notable rebound by most commodities prices and due to the release of disappointing Chinese trade data, which generated some optimism about further monetary policy stimulus. The Asian markets have made a mixed start and some of the indices are down by about half a percent after moving higher in last session on Chinese inflation figures. The Indian markets after showing a choppy trade managed a positive close in last session. Today, the start is likely to be nervy, as the long-negotiated amendments to the existing Double Tax Avoidance Convention between India and Mauritius is done and it is not looking good for FIIs, as the new pact to levy capital gains tax on investments coming through Mauritius may put foreign portfolio investors in a fix. Investments from Mauritius and Singapore account for a big chunk of foreign portfolio funds coming into the Indian stock market. Traders will also be concerned with the government stating that drought has affected nearly a quarter of the country's population and has left an impact on over 1.5 lakh villages. Meanwhile, President Pranab Mukherjee has said that India will have to raise its growth rate to 8.5-9 percent annually for the next 15-20 years in order to ensure that poverty is totally eliminated and is not just confined to being alleviated. Some buzz can be seen in auto stocks, as Supreme Court tweaked its April 30 blanket ban to allow diesel-run All India Travel Permit taxis to operate till the expiry of their permits, but made clear that its final objective is a gradual phase-out of diesel taxis from national capital. There will be lots of important result announcements to keep the markets buzzing.


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  • NTPC has started commercial operation at 200 MW capacities of NP Kunta Ultra Mega Solar Power Project Stage-I at Anantapuram with effect from May 09, 2016.
  • Tata Motors' subsidiary Jaguar Land Rover has reported its best ever April retail sales of 41,341 vehicles, up 11% from April 2015.
  • Mahindra & Mahindra has launched Automatic Transmission in the W6 FWD variant of the New Age XUV500 at Rs 14.29 lakh, ex-showroom Mumbai.
  • ICICI Bank, India's largest private bank, has opened a new branch at Rania in Sirsa district.
  • Sun Pharmaceutical Industries has launched an innovative mobile app to connect doctors with asthma patients.
News Analysis