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NSE Intra-day chart (11 June 2020)
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Market Commentary 12 June 2020
Markets to get gap-down opening amid feeble global cues

 

Thursday turned out to be a disappointing session for the Indian equity indices which got crushed by over two percent, on the back of weakness in global stocks along with rising COVID-19 cases in India. After a negative start, the domestic bourses never looked in recovery mood, as the Organization for Economic Co-operation and Development (OECD) projected that India's economy will contract 7.3% in the current fiscal year if there is a second wave of the coronavirus (Covid-19) later this year. This is so far the steepest contraction that any agency has predicted for the country. The sentiment was also weighed as global rating agency -- S&P Global Ratings has affirmed 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings on India, dispelling fears that a rating downgrade is on the cards. The agency said the outlook on the long-term rating is stable. It reflects India's above-average real GDP growth, sound external profile, and evolving monetary settings. Markets extended their free fall in late afternoon session to end near day's low, as traders remained anxious with Union minister Nitin Gadkari's statement that India was expected to lose revenue of Rs 10 lakh crore due to the coronavirus crisis. He also said the situation was so grim that some states do not have money to pay salaries next month, and the country needs to tackle the crisis with positivity. Adding to the pain, ratings agency Fitch warned that concentration of ownership after delisting may create governance and key-man issues at the companies adopting such strategies. It noted that corporates can also simplify or reorganise complex group structures without the interference of minority shareholders through such moves. Finally, the BSE Sensex lost 708.68 points or 2.07% to 33,538.37, while the CNX Nifty was down by 214.15 points or 2.12% to 9,902.00.

 

The US markets ended sharply lower on Thursday on concerns about a second wave of coronavirus cases, as recent data has led to worries about economic reopening leading to a spike in infections. The number of US coronavirus infections passed the two million mark and over 112,000 Americans have died. Despite fewer cases being recorded in some cities and states, the seven-day average of new cases over the past two weeks is still rising in more than 20 states, leading investors to worry about a second wave of the epidemic just as business activity is resuming. The global case tally for the coronavirus climbed to 7.39 million on Thursday. The death toll rose to 417,022. Besides, Substantial weakness was visible among steel stocks, as reflected by the 9.6 percent nosedive by the NYSE Arca Steel Index. The index continued to give back ground after ending Monday's trading at a three-month closing high. On the economic data front, the Labor Department released a report showing a continued decrease in first-time claims for US unemployment benefits in the week ended June 6th. The report said initial jobless claims tumbled to 1.542 million, a decrease of 355,000 from the previous week's revised level of 1.897 million. Street had expected jobless claims to slump to 1.550 million from the 1.877 million originally reported for the previous week. Meanwhile, a report released by the Labor Department showed a much bigger than expected increase in US producer prices in the month of May. The Labor Department said its producer price index for final demand climbed by 0.4 percent in May after tumbling by 1.3 percent in April. Street had expected the index to inch up by just 0.1 percent.

 

Crude oil futures ended lower with cut of over 8 percent on Thursday as resurgence in coronavirus cases dulled demand outlook. Coronavirus cases in the US are continuing to rise and topped the 2 million mark just as businesses are resuming activity. The global case tally for the coronavirus that causes COVID-19 climbed to 7.39 million on Thursday. Besides, a weak economic outlook from the US Federal Reserve after the conclusion of its monetary policy meeting, when it also said interest rates will likely remain near zero percent through 2022, further weakened sentiment in the oil market. Crude oil futures for July fell $3.26 or 8.2 percent to settle at $36.34 a barrel on the New York Mercantile Exchange. August Brent crude dropped $3.18 or 7.6 percent to settle at $38.55 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended weaker against the US dollar on Thursday, on increased demand for the greenback from importers and banks. Investors remain concerned as the Organization for Economic Co-operation and Development (OECD) projected that India's economy will contract 7.3% in the current fiscal year if there is a second wave of the coronavirus (Covid-19) later this year. This is so far the steepest contraction that any agency has predicted for the country. On the global front, dollar rose on Thursday from a three-month low which it hit in the previous session, as expectations that the global economy will recover swiftly from the coronavirus pandemic took a beating after a U.S. central bank policy meeting. Finally, the rupee ended at 75.79, 20 paise weaker from its previous close of 75.59 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 5030.96 crore against gross selling of Rs 5401.53 crore, while in the debt segment, the gross purchase was of Rs 841.82 crore with gross sales of Rs 917.70 crore. Besides, in the hybrid segment, the gross buying was of Rs 10.11 crore against gross selling of Rs 1.45 crore.

 

The US markets ended deeply in red on Thursday amid concerns about a second wave of coronavirus cases, as recent data has led to worries about economic reopening leading to a spike in infections. Asian markets are trading lower on Friday after an overnight plunge on Wall Street amid fears of a second wave resurgence of the coronavirus pandemic. Indian markets ended sharply lower on Thursday on the back of weak global cues after the US Federal Reserve indicated that the US economy will shrink 6.5 per cent in 2020. Today, the markets are likely to make gap-down opening following a mammoth plunge on the Wall Street coupled with rising coronavirus cases in India. With over 10,000 cases in a day, India has taken over the UK as the fourth-most-affected nation by number of coronavirus cases. The country's count of people infected by the highly contagious virus now stands at 298,283, according to data compiled by Worldometer. India's death toll has also seen a sharp spike, with 390 fatalities being registered in a single day taking the total to 8,500. Market participants will keep a keen eye on industrial production data for April and CPI inflation for May which are due later in the day. Investors will be eyeing the 40th meeting of the GST Council, headed by Finance Minister Nirmala Sitharaman and comprising state counterparts, to be held later in the day. The GST Council is likely to discuss the impact of COVID-19 on tax revenues and may decide on the framework for compensation payout to states. There will be some cautiousness with United Nations Conference on Trade and Development's (UNCTAD) statement that the value of international trade in goods declined around 5% in the first quarter of 2020 and is expected to decline further by 27% in the ongoing quarter with trade in many developing countries projected to nosedive due to the unprecedented effects of the pandemic. However, some respite may come later in the day with Niti Aayog vice-chairman Rajiv Kumar's statement that India's economy will recover after the containment of the COVID-19 pandemic and the country will maintain its sound net external position. Some support may also come with Commerce and Industry Minister Piyush Goyal's statement that the country's exports are drastically improving with the outbound shipments contracting 36 percent in May as compared to 60 percent in April. There will be some buzz in the coal stocks as Prime Minister Narendra Modi will launch the auction of coal mines for commercial mining in the country on June 18. Telecom and banking stocks will be in focus as the Supreme Court termed as totally impermissible the demand by Department of Telecom (DoT) for dues of Rs 4 lakh crore in Adjusted Gross Revenue (AGR) from the public sector undertakings (PSUs) and said DoT must consider withdrawing it.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

9,902.00

9,820.68

10,047.68

BSE Sensex

33,538.37

33,272.73

34,011.70

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

State Bank of India

917.30

177.15

172.20

186.25

Indusind Bank

786.70

523.15

502.67

546.07

Tata Motors

554.89

106.15

103.72

109.87

GAIL (India)

505.76

95.55

92.10

101.60

Axis Bank

455.63

413.45

402.92

429.77

 

  • Dr. Reddy's Laboratories has completed the acquisition of select divisions of Wockhardt's branded generics business in India. 
  • NTPC's board has approved Rebate of Rs 1,363 crore on the capacity charges billed during the lock-down period to DISCOMs on account of COVID-19, in financial year 2020-21. 
  • UPL's subsidiary company -- UPL Corporation, Mauritius, has successfully placed 10-year dollar-denominated senior unsecured notes for an aggregate amount of $500 million. 
  • SBI is planning to divest over 2% stake for at least Rs 1,522.50 crore in its subsidiary SBI Life to comply with the minimum public shareholding norms.
News Analysis