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Market Commentary 15 May 2017
Markets to make a positive start reacting to inflation numbers

Indian markets finished last trading session of the week on a pessimistic note, as investors remained cautious ahead of macroeconomic data - industrial production numbers for March and inflation data for April based on Consumer Price Index (CPI) - to be announced later in the day. CPI is expected to have eased to a three-month low of 3.49% in April from 3.81% the previous month. The government will release the new series of Index of Industrial Production (IIP) as well as Wholesale Price Index (WPI), with 2011-12 as the base year, so as to map economic activities more accurately. Also, there was some profit taking in the high fliers of the recent rally that once led Sensex slip below the crucial level of 30,200, but despite the rallies losing fizz, downside remains capped with SBI Research's Ecowrap report, indicating that the easing of crude oil prices will have positive effect not only on inflation but also on GDP growth. It said that average crude oil prices will be around $45 for the next half of this year and this, coupled with positive macro fundamentals, could translate into better growth numbers for the country. Some support also came with Finance Secretary Ashok Lavasa's statement that India can clock a GDP growth of over 7.5 percent in the fiscal 2017-18 and the country's macro-economic fundamentals, including fiscal deficit and inflation, are all very sound. Lavasa also said that while there has been a general climate of economic slowdown in the last few years across the world, India has managed to maintain a healthy rate of growth. In scrip specific development, the top loser in Nifty was Yes Bank, which came under selling pressure after the bank disclosed that it had reported lower non-performing assets (NPAs) than what was judged by the banking regulator for the year ended March 31, 2016. According to its annual report, the bank had reported gross NPAs worth Rs 748.9 crore as on March 31, 2016, while the RBI, as part of its annual supervisory action, had asked the lender to report gross NPAs worth Rs 4,925.6 crore. Finally, the BSE Sensex decreased 62.83 points or 0.21% to 30188.15, while the CNX Nifty was down by 21.50 points or 0.23% to 9,400.90.


The US markets ended the choppy day of trade mostly in red terrain on Friday, as sentiments remained dampened following the release of a Commerce Department report showing a smaller than expected increase in retail sales in the month of April. The Commerce Department said retail sales climbed by 0.4 percent in April compared to economist estimates for 0.6 percent growth. However, the report also said retail sales inched up by a revised 0.1 percent in March versus the 0.2 percent drop originally reported. Excluding a rebound in auto sales, retail sales rose by 0.3 percent in April. A separate report from the Labor Department showed that consumer prices rebounded in line with economist estimates in the month of April. The Labor Department said its consumer price index rose by 0.2 percent in April after falling by 0.3 percent in March. Excluding food and energy prices, core consumer prices inched up by 0.1 percent in April after dipping by 0.1 percent in March. Core prices had been expected to rise by 0.2 percent. Meanwhile, the University of Michigan released a report showing a modest improvement in consumer sentiment in the month of May. The report said the preliminary reading on the consumer sentiment index for May came in at 97.7 compared to the final April reading of 97.0. Economists had expected the index to inch up to 97.3. The Dow Jones Industrial Average slipped 22.81 points or 0.11 percent to 20,896.61 and while the S&P 500 was down by 3.54 points or 0.15 percent to 2,390.90, while the Nasdaq ended higher by 5.27 points or 0.09 percent to 6,121.23.


Crude oil futures ended flat with a positive bias on Friday, as investors appeared to take profit from the two-day rally in oil prices while the number of active U.S. drilling rigs rose for a seventeenth straight week.  Also, there was some cautiousness with Commerzbank doubts of whether OPEC's supply quota plan can alleviate the global supply glut anytime soon. It said that extending the plan is unlikely to be more successful than the cuts implemented so far in the longer-term. Earlier, OPEC's monthly report showed U.S. production accounted for around 93%, roughly 540,000 barrels of total non-OPEC growth in April. Meanwhile, oilfield services firm, Baker Hughes, reported its weekly U.S. rig count rose by 9 to 712. Benchmark crude oil futures for June delivery ended higher by $0.01 to $47.84 on the New York Mercantile Exchange. In London, Brent crude for July delivery ended up by $0.08 to end at $50.85 on the ICE.


Appreciating for second consecutive sessions, Indian rupee ended stronger on Friday ahead of key economic data, i.e. March IIP and April CPI data, scheduled to be released later in the day. Local currency got some support with SBI Research's Ecowrap report, which said that the easing of crude oil prices will have positive effect not only on inflation but also on GDP growth. It has said that average crude oil prices will be around $ 45 for the next half of this year and this, coupled with positive macro fundamentals, could translate into better growth numbers for the country. On the global front, dollar traded near a three-week high on Friday, on track for its strongest week this year, as robust producer price and labour market data bolstered expectations that the Federal Reserve will raise US interest rates again in June. Finally, the rupee ended at 64.31, 6 paise stronger from its previous close of 64.37 on Thursday.


The FIIs as per Friday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 5112.04 crore against gross selling of Rs 3677.16 crore, while in the debt segment, the gross purchase was of Rs 1273.18 crore with gross sales of Rs 482.26 crore.


The US markets despite coming off their early weakness made a mixed closing in last session, snapping the lackluster week on mostly a negative note, after a weaker than expected retail sales data. The Asian markets have made a mixed start and some of the indices are down by over a quarter percent led by the Japanese market. The Chinese market which started in green, too has pared some of the gains, as data showed China's industrial production slowed, adding to concerns over the strength of the global economy. The Indian markets snapping their winning streak had ended lower in the last session, with traders turning cautious ahead of key macro data. Today, the start of the new week is likely to be in green, though the regional peers are showing mixed trend, Indian markets will be getting encouragement with the consumer price index (CPI) inflation easing to 2.99 per cent in the first month of the new financial year compared with 3.89 per cent in March and 5.47 per cent in the year earlier. Also, the inflation based on the wholesale price index (WPI) slipped to a four-month low of 3.85 percent in April as both food articles and manufactured items showed cooling in prices. However, there will be some cautiousness too, with industrial output growth slipping to 2.7 percent in March compared to 5.5 percent in March 2016, mainly on account of poor performance of manufacturing sector. Meanwhile, India Inc has invoked the demand supply dynamics, calling for lower interest rates for private investment to pick up that will help the government achieve full benefit of cash ban. There will be buzz in the power sector, as India has climbed up to twenty sixth position in World Bank's electricity accessibility ranking in the current year from 99th spot in 2014. There will be lots of important earnings announcements to keep the markets buzzing.


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  • BPCL has signed MoU with Kerala Startup Mission, a state government nodal agency for promoting entrepreneurship, to provide aid and investments in start-ups from various technology domains. 
  • SBI is planning introduce new facility that would enable withdrawal of cash through ATMs using the Bank's mobile wallet.
  • L&T has entered into a contract with the Ministry of Defence for supply of 100 units of 155mm/ 52 calibre Tracked Self-Propelled Gun systems to the Indian Army.
  • Dr. Reddy's Laboratories has reported around three fold rise in its consolidated net profit after tax and share of profits of associates at Rs 337.60 crore for the quarter ended March 31, 2017 as compared to Rs 122.60 crore for the same quarter in the previous year.


News Analysis