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Market Commentary 14 July 2020
Benchmarks to get negative start amid sell-off in global markets

 

In a highly volatile session, Indian stock markets climbed off the day's high but ended with decent gains on Monday, tracking positive Asian shares. Both the topline indices had opened nearly one percent higher and progressed further during the early morning trade, as traders took encouragement with RBI Governor Shaktikanta Das' statement that the Indian economy has started showing signs of normalcy with ease in lockdown restrictions across the country. He added that post containment of COVID-19, a very careful trajectory has to be followed in orderly unwinding of countercyclical regulatory measures. Traders took note of the International Monetary Fund's (IMF) statement that given the severity of the country's economic situation due to the COVID-19 pandemic, there is a scope for more near term fiscal support in India, especially for vulnerable households and SMEs. However, in the afternoon session of trade, the indices pared their gains and briefly turned negative, as traders got anxious with Industry body FICCI's Survey in which it has projected India's annual median GDP growth for FY21 at (-) 4.5 percent. It said with the rapid spread of COVID-19 pandemic manifesting into an economic and healthcare crisis globally, the latest forecast marks a sharp downward revision from the growth estimate of 5.5 per cent reported in the January 2020 survey. Some pessimism also came as the finance ministry has written to the states on additional borrowing of 2 per cent of their projected GSDP in the current financial year, amid stress in revenue due to coronavirus-induced lockdown. But, key gauges picked up some steam and ended with gains, as some optimism remained among traders with agriculture ministry's statement that the government is on track to achieving the target of doubling farmers' income by 2024 and recent farm reforms, including setting up of a Rs 1 trillion agri-infra fund, are steps in that direction. Finally, the BSE Sensex rose 99.36 points or 0.27% to 36,693.69, while the CNX Nifty was up by 34.65 points or 0.32% to 10802.70.

 

The US markets ended mostly lower on Monday after technology stocks fell and rising coronavirus cases led California's governor Gavin Newsom to order businesses across the state to shutter once again. Newsom ordered a statewide closure of all indoor operations at restaurants, bars, movie theaters, zoos and museums, with other businesses like gyms and hair salons being required to close their doors in counties on the state's watch list. Meanwhile, New York Gov. Andrew Cuomo also issued an emergency health order that requires all travelers to New York from high-COVID states to provide location details or face a summons and $2.000 fine, while also outlining a formula to reopen New York schools in the fall that will require infection rates to be below 5% based on 14-day averages. Besides, investors have been keeping an eye on threats of renewed US-China tensions. President Donald Trump said there was no scope for a phase-two agreement on trade between the two countries, saying Washington's relationship with China had been severely damaged by the coronavirus pandemic, which the administration has sought to blame on Beijing. China's move to crack down on Hong Kong with the passage of strict new national security laws has also raised tensions.

 

Crude oil futures ended lower on Monday as concerns about the energy demand outlook resurfaced amid worries about rising new coronavirus cases over the weekend. According to a report from the World Health Organization (WHO), global coronavirus cases rose by over 230,000 across the globe over a 24-hour period. The United States topped the list, with more than 66,000 cases recorded, as Florida surpassed the 15,000 mark of new cases on Sunday. Crude oil futures for August fell 45 cents or about 1.1 percent to settle at $40.10 a barrel on the New York Mercantile Exchange. September Brent crude declined 52 cents or 1.2 percent to settle at $42.72 a barrel on London's Intercontinental Exchange.

 

Indian rupee trimmed most of its early gains but managed to end marginally higher against the American currency on Monday, due to selling of the US currency by exporters and banks. Traders took some support with the Reserve Bank of India (RBI) Governor Shaktikanta Das' statement that the Indian economy has started showing signs of going back to normalcy. He added that post containment of COVID-19, a very careful trajectory has to be followed in orderly unwinding of countercyclical regulatory measures. On the global front, dollar edged lower on Monday as investors looked to incoming global economic data and U.S. corporate earnings to gauge whether the markets' guarded optimism on the economic outlook is justified. Finally, the rupee ended at 75.19, 1 paise stronger from its previous close of 75.20 on Friday.

 

The FIIs as per Monday'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 2590.15 crore against gross selling of Rs 3524.44 crore, while in the debt segment, the gross purchase was of Rs 2018.86 crore with gross sales of Rs 1549.39 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.28 crore against gross selling of Rs 4.60 crore.

 

The US markets ended mostly in red on Monday as California Governor Gavin Newsom rolled back the state's reopening following a recent spike in coronavirus cases. Asian markets are trading lower on Tuesday amid persistent concerns over the record number of new coronavirus cases worldwide. Indian markets ended higher after a volatile session on Monday led by gains in IT, FMCG stocks and index heavyweight RIL. Today, the markets are likely to make pessimistic start following sell-off in the Asian peers. Investors will be eyeing the wholesale inflation data to be out later in the day. There will be some cautiousness with rising coronavirus cases. India has recorded over 28,000 new cases in a day to take its total number of Covid-19 cases to 907,645. This is the third consecutive day when India has recorded over 28,000 new cases. Traders will be concerned as the government data showed retail inflation increased to 6.09 per cent in June, mainly on account of higher prices of food items.  As per the data, food inflation in June increased to 7.87 per cent. The numbers for April and May were not released due to insufficient data collection in wake of the ongoing Covid-19 crisis. Market participants may take note of report that agency S&P Global cut its emerging market growth forecasts, predicting a 4.7 percent slump on average this year due to the coronavirus and warned that all countries would be left with permanent scars too. However, some respite may come later in the day as Prime Minister Narendra Modi took stock of the financial sector which has been hit hard by the outbreak of COVID-19 pandemic. He also reviewed the progress of a host of measures announced under the Rs 20-lakh crore Aatmanirbhar Bharat Abhiyan package to stimulate the economy and help the MSME sector and poor sections of society. Some support may also come as after being net seller of the US currency in the first month of this fiscal, the Reserve Bank of India (RBI) turned net purchaser in May as it bought $4.363 billion of the greenback on net basis. There will be some buzz in the insurance stocks with CARE Ratings' statement that life insurers, which have seen their first-year premiums contract 18.6 per cent in the first quarter of the financial year 2020-21 (FY21), could see recovery in the next quarter. IT stocks will be in focus with ICRA's report that the Indian IT services sector may see an up to 3 per cent contraction in its revenues in the current fiscal amid multiple challenges on the demand side. There will be some reaction aviation stocks with the International Air Transport Association's (IATA) statement the passenger demand for air travel will contract by 49 per cent this year for Indian carriers in comparison to last year due to the Covid-19 crisis. There will be lots of important earnings announcements too, to keep the markets in action.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

10,802.70

10,741.15

10,879.15

BSE Sensex

36,693.69

36,477.03

36,967.27

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

 

Support  (Rs)

 

Resistance (Rs)

 

(in Lacs)

Tata Motors

819.00

108.00

105.87

111.12

State Bank of India

619.52

192.70

189.60

197.80

ICICI Bank

323.80

353.60

348.40

362.90

Reliance Industries

321.24

1,935.00

1,907.43

1,955.13

Hindalco Industries

218.95

169.25

165.40

171.80

 

  • HDFC ERGO General Insurance Company, a 51:49 JV between HDFC and ERGO International AG, has launched Corona Kavach policy. 
  • Tata Motors has launched Fleet Edge, a next-generation connected vehicle fleet management solution with informed decision making. 
  • Fitch Ratings has assigned the ratings to Adani Ports and SEZ's proposed foreign currency denominated bonds issuance. 
  • Power Grid Corporation of India has received an approval for an investment of Rs 239.89 crore in an electricity transmission project.
News Analysis