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Market Commentary 14 July 2016
Markets to get a cautious start, TCS results eyed

 

Indian benchmarks staged a lackadaisical performance on Wednesday's trading session after remaining in a narrow band to finally settle flat. The frontline gauges took a breather, after showcasing a scintillating performance in last two sessions, as investors turned jittery after the mixed macro data was announced yesterday. Through, Industrial production growth recovered into the positive zone in May after shrinking in the previous month, the muted growth showed just a tepid recovery. The Index of Industrial Production (IIP) rose 1.2 per cent in May from a year earlier. Furthermore, Retail inflation scaled a 22-month high in June because of a sharp increase in vegetable prices, dampening hopes of a rate cut in August even as the small increase indicated that inflation may start cooling soon. Consumer Price Index (CPI) rose 5.77 percent in June 2016 compared with 5.76 percent rise in May 2016. However, investors got some comfort with report that monsoon rains have covered the entire country, two days ahead of schedule despite the week-long delay in its onset. Also, sowing of kharif crops has gathered pace across the country, raising hopes of higher growth in businesses dependent on the farm sector and lower dependence on imports for commodities such as cotton, maize and soyabean. On the global front, Asian markets ended mostly in green on Wednesday as accommodative economic policy in major countries whet investors risk appetite damaged by uncertainty from Brexit, while European stocks gained ground on Wednesday. Back home, the local indices started the session on positive note as investors were largely influenced by the supportive leads from Asian markets. The frontline indices soon gathered momentum and touched intraday highs in early hours but the optimism fizzled out sooner and the indices see-sawed around the neutral line though rest of the session. Finally, the BSE Sensex ended higher by 7.04 points or 0.03% to 27815.18, while the CNX Nifty dropped 1.55 points or 0.02% to 8,519.50.

                                               

The US markets closed mostly higher on Wednesday, with the S&P 500 and Dow industrials scoring modest gains, but enough to extend their run into record territory and advance for a fourth session in a row. The next two days are heavy on economic indicators with weekly jobless claims due on Thursday and inflation, retail sales and industrial output numbers scheduled for Friday. According to the latest Federal Reserve beige book survey of economic conditions released showed that consumer spending was showing some signs of softening in June, raising questions about the broader health of the US economy in the second half of the year. Overall the survey, based on information collected by July 1, found that growth was continuing at a modest pace across most of the 12 Fed districts. Manufacturing was seen as generally improved from weak conditions over the past year. Labor market conditions remained stable while wage pressures remained modest to moderate. In addition, the real estate sector continued to shine. On the economy front, the cost of imported goods increased for the fourth straight month in June, led again by the higher cost of fuel, adding mild upward pressure to low US inflation. Import prices have risen each month since March following five straight declines, largely because of the oil has climbed from multiyear lows. The Dow Jones Industrial Average was up by 24.45 points or 0.13 percent to 18,372.12, S&P 500 gained 0.29 points or 0.01 percent to 2,152.43, while Nasdaq lost 17.09 points or 0.34 percent to 5,005.73.

 

Crude oil futures suffered sharp slump on Wednesday, slipping back to their two month low levels with focus on the sharpest build in distillate fuel inventories in six months. Traders largely overlooked the report of modest draw in US oil stockpiles. The U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that commercial crude inventories decreased by 2.5 million barrels last week for the week ending on July 8. Gasoline inventories increased by 1.2 million barrels for the week, while distillate fuel stockpiles soared by 4.1 million barrels for the week. Benchmark crude oil futures for August delivery plunged by $1.91 or 4.08 percent to close at $44.90 a barrel after trading in a range of $44.58 and $46.65 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for September delivery slumped by $2.13 or 4.41 percent to $46.34 a barrel on the ICE.

 

Indian rupee ended substantially stronger on fresh selling of American currency by banks and exporters amid positive economic data. While, industrial production recovered, growing by 1.2 percent in May compared to (-) 0.8 percent in April, the retail inflation based on Consumer Price Index (CPI) rose marginally to 5.77 percent in June as against 5.76 percent in May. Besides, dollar's weakness against other currencies overseas too supported the rupee. Further, investors got some comfort with report that monsoon rains have covered the entire country, two days ahead of schedule despite the week-long delay in its onset. On the global front, the yen wiped out its first gain in three days against the dollar as a rally in global stocks fueled optimism the fallout from Britain's decision to leave the European Union is being contained. Finally, the rupee ended 67.05, 13 paise stronger from its previous close at 67.18 on Tuesday

 

The FIIs as per Wednesday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 4192.19 crore against gross sell of Rs 3827.05 crore. While, in the debt segment the gross purchase was of Rs 3366.83 crore with gross sales of Rs 840.41 crore. Thus, FIIs stood as net buyers of Rs 2526.42 crore in debt.

 

The US markets made a mixed closing in the last session, though the Dow and the S&P 500 still reached new record closing highs. The traders remained reluctant to make significant moves ahead of the release of a slew of US economic data and important results over the coming days. The Asian markets too have made a mixed start and some of the indices are trading lower in early deals, however Japanese shares headed for their longest rally since April as investors awaited details of Prime Minister Shinzo Abe's stimulus plans. The Indian markets giving up their early gains entered the consolidation phase in last session, though the benchmarks ended flat but fatigue after two straight sessions of gains was clearly visible, while traders also reacted to the mixed set of economic data. Today, the start is likely to be cautious and the consolidation will extend. Today all eyes will be on TCS and the whole IT pack, as the largest IT outsourcing firm by sales, will announce its June quarter numbers and is expected to report modest drop in net profit. Markets will be getting some support with the cabinet approving a Rs 12,000-crore outlay for Pradhan Mantri Kaushal Vikas Yojana (PMKVY) to impart skills to 1 crore people over the next four years (2016-20). Skill training would be done based on industry-led standards aligned to the National Skill Qualification Framework. There will be some buzz in the gold and jewellary stocks, as the government has relaxed the rules for its tax on gold jewellery sales that was introduced earlier this year in an attempt to address concerns raised by the industry. As per the new rules, jewellers with turnover up to Rs 150 million ($2.2 million) a year will be exempt from the excise duty. The aviation stocks too may see some action, with the Directorate General of Civil Aviation (DGCA) coming up with the revised norms that cap ticket cancellation charges and bar airlines from levying an additional amount for refund.

 

                          Support and Resistance: CNX Nifty and BSE Sensex

Index

Previous close

Support

Resistance

CNX Nifty

8519.50

8491.95

8548.65

BSE Sensex

27815.18

27735.29

27911.91

 

Nifty Top volumes

Stock

Volume

(in Lacs)

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

ICICI Bank

256.81

261.15

257.60

266.20

Hindalco

202.41

135.80

133.70

138.90

State Bank of India

183.77

227.70

224.93

229.48

Tata Steel

133.46

357.75

348.48

362.83

BHEL

130.74

141.50

138.00

146.00

  • Mahindra Aerostructures, a subsidiary of Mahindra & Mahindra, has received a contract from Airbus Helicopters to make airframe parts for the AS565 MBe Panther.
  • Bharti Airtel, a leading global telecommunications services provider, has unveiled Kabali exclusive products and services, including Kabali recharge packs with unlimited 2G internet, Kabali Hello Tunes and new Kabali branded SIM packs.
  • HDFC Bank has emerged as the most honoured company in the latest ranking released by Institutional Investor magazine.
  • Tata Steel's Kalinganagar steel project in Odisha targets to sell 1.5 million tonne of hot rolled coils in FY17.
  • Tata Motors has set its eyes on being amongst the top three global commercial vehicle makers and reclaim its number three spot in the domestic car and sports utility vehicle segment.
News Analysis