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Market Commentary 14 June 2018
Markets to make pessimistic start amid sluggish global cues


Paring most of their early gains, Indian equity benchmarks ended the Wednesday's trade with marginal gains as investors digested macro-economic data and looked ahead to the Fed and ECB meetings for direction. Markets started the session on an optimistic note boosted by good industrial production data for April. India's industrial production grew 4.9 percent in April, as compared with 4.4 percent in March. The factory output index growth rate moderated in March after consistently being above 7 percent between November and February. It expanded 6 percent a year ago. Some support came with markets regulator Sebi's proposal to allow direct listing of Indian companies on overseas bourses and of foreign firms on Indian exchanges, while setting up an expert panel to look into the details. Currently, Indian companies can list their shares through depository receipts abroad, while foreign companies need to go through the Indian Depository Receipt route for listing of equities. Some support also came with a report that the Central Board of Indirect Taxes and Customs (CBIC) has extended the refund fortnight for fast track clearance of pending dues to exporters by two days till June 16. However, market participants pared most of their early gains in last leg of trade to end slightly higher ahead of the wholesale price index (WPI) inflation data will be announced on June 14, 2018. Traders also remained on sidelines ahead of the outcome of US Federal Reserve's two-day policy meeting concludes on June 13 and the European Central Bank (ECB) policy meeting to be held on June 14, 2018. Anxiety also spread among the investors, as industry body CII warned that rate hike by the Reserve Bank will increase the cost of doing business and impact capital expenditure by India Inc. Sentiments also weighed down on report that that India's retail inflation hit a four-month high after jumping to 4.87 percent in May from April's 4.58 percent driven by costlier food and fuel. Retail inflation, measured by Consumer Price Index (CPI), had fallen to 2.18 percent in May 2017. Finally, the BSE Sensex gained 46.64 points or 0.13% to 35,739.16, while the CNX Nifty was up by 13.85 points or 0.13% to 10,856.70.


The US markets ended the Wednesday's trade in red terrain after the Fed announced its decision to raise interest rates by 25 basis points to a range of 1.75 percent to 2 percent. While the rate hike was widely expected, the Fed seemed to surprise investors by forecasting two additional rate hikes this year after previously predicting one rate increase. The Fed reiterated that it expects further gradual rate increases but dropped language predicting rates are likely to remain below levels that are expected to prevail in the longer run. The central bank said data received since its May meeting indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Annual overall inflation and core inflation have moved close to 2 percent, the Fed said and noted indicators of longer-term inflation expectations are little changed. On the economic front, the Labor Department released a report showing a bigger than expected increase in producer prices in the month of May. The Labor Department said its producer price index for final demand climbed by 0.5 percent in May after inching up by 0.1 percent in April. The street had expected producer prices to rise by 0.3 percent. The Nasdaq declined 8.10 points or 0.11 percent to 7,695.70, the S&P 500 shed 11.22 points or 0.40% to 2,775.63 and the Dow Jones Industrial Average was down by 119.53 points or 0.47 percent to 25,201.20.


Rising for the third consecutive session, Crude oil futures ended higher on Wednesday, settling at a nearly two-week high, as U.S. crude supplies fell more than expected last week, which was the largest one-week drop since the end of March. The U.S. Energy Information Administration (EIA) reported that crude supplies fell by 4.1 million barrels for the week ended June 8. That was the biggest one-week drop since the 4.6 million-barrel decline reported for the week ending March 30. However, gains were limited as the Energy Information Administration report showed a sizable weekly climb in total U.S. crude production and recent data offered evidence of a pickup in output from the Organization of the Petroleum Exporting Countries. Benchmark crude oil futures for July delivery surged 28 cents or 0.4 percent to settle at $66.64 a barrel on the New York Mercantile Exchange. August Brent crude rose 86 cents or 1.1% at $76.74 a barrel on London's Intercontinental Exchange.


Falling for the second consecutive session, Indian rupee depreciated against dollar on Wednesday, on continued demand for the American unit coupled with its growing strength overseas. Traders remained concerned with report that that India's retail inflation hit a four-month high to 4.87 percent in May from April's 4.58 percent driven by costlier food and fuel. Retail inflation, measured by Consumer Price Index (CPI), had fallen to 2.18 percent in May 2017. Anxiety also spread among the investors, as industry body CII warned that rate hike by the Reserve Bank will increase the cost of doing business and impact capital expenditure by India Inc. However, losses got restricted with data indicating that India's Industrial output expanded by 4.9 percent in April this year, spurred by higher growth in manufacturing and mining sectors. The industrial growth, measured on the Index of Industrial Production (IIP), was 3.2 per cent in April last year. On the global front, dollar edged up against yen on Wednesday ahead of a Federal Reserve policy announcement that investors will scan for clues on how many more U.S. rate hikes there will be this year.


The FIIs as per Wednesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 4086.23 crore against gross selling of Rs 5407.87 crore, while in the debt segment, the gross purchase was of Rs 1045.61 crore with gross sales of Rs 1819.56 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.15 crore against gross selling of Rs 0.91 crore.


The US markets ended in red on Wednesday, as the Federal Reserve completed its second increase to benchmark interest rates in 2018, as expected, but signaled a slightly more aggressive plan to tighten monetary policy this year than had previously been projected. Asian markets trading lower after the Fed raised interest rates and took a more hawkish tone in forecasting a slightly faster pace of tightening for the rest of the year, while concerns about US-China trade frictions kept investors on edge. Indian equity benchmarks ended higher for a third straight session on Wednesday, although markets ended off their day's highs ahead of the Fed and ECB meetings. Today, the markets are likely to make pessimistic start amid feeble global cues. Sentiments will remain dampen on report that the country's current account deficit (CAD) rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth and final quarter (Q4 of 2017-18), compared to $2.6 billion (Rs 176 billion and 0.4 per cent of GDP) in the same period of 2016 -17. Traders will also remain concern on report that Reserve Bank of India to hike rates once again at its August monetary policy review as headline inflation surging to a four-month high of 4.87 per cent in May. However, traders will get some support later in the day with Fitch Ratings raising India growth forecast for 2018-19 to 7.4 per cent from 7.3 per cent, but cited higher financing costs and rising oil prices as risks to growth. For 2019-20, it estimated the country to grow at 7.5 per cent. Traders will also get some solace with report that India will push for amicable solutions to trade disputes with the United States while hoping to address American concerns over market access and tariff levels during bilateral meetings between the two nations due soon.


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  • Yes Bank is in the process of acquiring stake in an unlisted company, namely, India International Exchange. 
  • Sun Pharma has received the EIR from the USFDA for the inspection conducted at its Halol facility in the state of Gujarat, during the period February 12-23, 2018.
  • Reliance Industries' telecom arm Reliance Jio has started offering 1.5 GB additional data per day to customers on all pre-paid plans priced in the range of Rs 149 to Rs 499. 
  • Lupin has launched its Tobramycin Inhalation Solution USP, having received an approval from the USFDA earlier.
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