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NSE Intra-day chart (12 December 2017)
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Market Commentary 13 December 2017
Markets mood to remain somber on weak macro data

Tuesday turned out to be a dismal day of trade for Indian equity benchmarks with frontline gauges breaching their crucial 10,250 (Nifty) and 33,300 (Sensex) levels, as traders opted to book profit after three day of continuous rally. After a feeble opening, markets never looked confidant and extended their southward journey to at day's lows, as traders remained on sidelines ahead of Index of Industrial Production (IIP) data for October and inflation data based on consumer price index (CPI) for November to be released later in the day. A private poll showed that India's retail inflation likely breached the central bank's 4% medium-term target in November after unseasonably heavy rains sent food prices soaring. The poll enlightened that the higher inflation rate is unlikely to push the Reserve Bank of India (RBI) to change its key rate any time soon. Traders failed to get any sense of relief with the UN DESA's World Economic Situation and Prospects 2018 report, which said that despite a slowdown observed in early 2017, the outlook for India remains positive, underpinned by strong private consumption, robust public investments and structural reforms. Selling got accelerated in second half of trade, as traders failed to hold their nerves. Sentiments remained pessimistic with report that foreign investors offloaded shares worth of over Rs 4,000 crore from domestic equity markets this month so far on account of rising crude prices and widening fiscal deficit. Investors took note of ASSOCHAM report enlightening that the government needs to accord top priority to agriculture in the budget as a major shortfall in kharif production resulted in sluggish growth of farm sector in the second quarter this fiscal. While the year-to-year agriculture Gross Value Addition (GVA) growth for the July-September quarter of 2017-18 dropped to 1.7% from 4.1%, measured on basic prices, the fall looks quite sharp at current prices from 10% to 3.7%. Meanwhile, with the farm loan waiver pitch getting shriller by the day, former RBI governor Y V Reddy has said that the practice is not good for economic or credit culture and insisted that ultimately it is a political decision and cannot be justified in the longer run. Finally, the BSE Sensex declined 227.80 points or 0.68% to 33,227.99, while the CNX Nifty was down by 82.10 points or 0.80% to 10,240.15.


The US markets closed mostly higher on Tuesday, with the S&P 500 and Dow at records for a fourth session in a row, but the Nasdaq bucked the trend to head south as the Federal Reserve kicked off its two-day meeting. The central bank's Federal Open Market Committee is widely expected to announce its third and final interest-rate hike of 2017 on Wednesday, but investors want to see what the policy-making body signals about 2018. The announcement will be followed by departing Fed chief Janet Yellen's last news conference in that role. On the economy front, the US government ran a budget deficit of $139 billion in November, up just 1% from the same month a year ago. Spending rose 3% in the month, and revenues climbed 4%. Some of the biggest drivers of spending in November were for Homeland Security and interest on the public debt. Homeland Security spending more than doubled from last November to $9 billion. Meanwhile, the index of small-business optimism from the National Federation of Independent Business rose 3.7 points to 107.5 in November, the second-highest reading in the 44-year history of the index. The Dow Jones Industrial Average added 118.77 points or 0.49 percent to 24,504.80, the S&P 500 edged higher by 4.12 points or 0.15 percent to 2,664.11, while the Nasdaq lost 12.761 points or 0.19 percent to 6,862.32.


Crude oil futures snapped their gaining streak and ended lower on Tuesday, mainly due to profit taking, amid reports offering clarity on the duration of the Forties pipeline shutdown, which forced traders to take profits on Monday's rally in oil prices. Also, investors continued to fear that the widening Brent-WTI spread would boost demand for US exports, encouraging producers to ramp up output. Meanwhile, the Energy Information Administration (EIA) said it expects U.S. crude production to rise by an average of 800,000 barrels a day next year. Benchmark crude oil futures for January delivery ended lower by $0.85 or 1.5 percent at $57.14 a barrel on the New York Mercantile Exchange. Brent crude for February delivery was down by 2.1 percent to $63.35 a barrel on the ICE.


Indian rupee pared some of its early losses but still ended marginally weaker against the American currency on Tuesday, due to fresh dollar demand from banks and importers. Traders remained cautious ahead of key economic data that is October IIP and November CPI, scheduled to be released later in the day. Investors even overlooked the UN DESA's World Economic Situation and Prospects 2018 report, which said that despite a slowdown observed in early 2017, the outlook for India remains positive, underpinned by strong private consumption, robust public investments and structural reforms. Besides, massive losses in domestic equity markets too weighed on the rupee, but dollar's reduced clout against other currencies overseas helped to cap the losses. On the global front, dollar declined against most major currencies as the US Federal Reserve geared up for a two-day policy meeting at which it is widely expected to raise interest rates for the fifth time since late 2015. Finally, the rupee ended at 64.40, 4 paise weaker from its previous close of 64.36 on Monday.


The FIIs as per Tuesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 4897.42 crore against gross selling of Rs 5033.63 crore, while in the debt segment, the gross purchase was of Rs 1457.24 crore with gross sales of Rs 776.66 crore.


The US markets made a mixed closing in the last session, with the S&P 500 and Dow ending at fresh at records for a fourth consecutive session, while tech heavy Nasdaq ending marginally in red. Traders were cautious with the start of the central bank's Federal Open Market Committee two days meeting. The Asian markets have made a mixed start and some of the indices are down by about half a percent, with investors awaiting central bank decisions in Europe and America for clues on the policy path for next year. The Indian markets snapping their three days gaining streak ended considerably lower in the last session, ahead of the macro data on inflation and industrial output. Today, the start is likely to be somber, as in a double whammy to the economy, industrial output growth slowed down to 2.2 percent in October while retail inflation soared to 15-month high of 4.88 percent in November. Traders will be more concerned with the spike in inflation, as the higher inflation rate is unlikely to push the Reserve Bank of India (RBI) to change its key rate any time soon. Meanwhile, the Finance Ministry has concluded that several businesses have claimed high transitional input tax credit under the GST regime without any bonafide explanation to back such claims. Traders however may get some support with a private survey report, stating that India is the third most optimistic nation in hiring intentions as 22 percent of employers are expected to add more staff in the next three months. It further said that workforce gains were expected across all seven industry sectors monitored and in all four regions. Tourism and hotel stocks will be in focus on a tourism ministry report that more than 10 lakh foreign tourists visited India in November 2017, a rise of 14.4 per cent over the same period last year. FTAs during the period between January and November this year were 90.01 lakh, with a growth of 15.6 per cent over the same period the previous year.





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