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NSE Intra-day chart (15 January 2019)
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Market Commentary 16 January 2019
Markets to make pessimistic start amid mixed Asian cues


Bulls made comeback on Dalal Street on Tuesday, with both the larger peers ending the trading session with strong gains of around 1.30% each. After a fabulous start, the key indices remained firm throughout the session, as India's retail inflation based on Consumer Price Index (CPI) continued its easing trend for third straight month in December mainly on account of sliding prices of fruits, vegetables and fuel. CPI softened to an 18-month low of 2.19% in December 2018 as compared to 2.33% in November and 5.21% in December 2017. The inflation has remained below the RBI's medium-term target of 4% for the fifth straight month and it fell to its lowest level since June 2017 of 1.46%. Investors remained encouraged amid reports that the government is considering credit guarantee for term loans of up to Rs 100 crore as well as interest subsidy on loans up to Rs 1,000 crore for electronic manufacturing companies under the new policy in works. Some comfort also came with another report that India is likely be a larger economy than the US by 2030, while China will top the list and Indonesia will figure among the top five. India will likely be the main mover, with its trend growth accelerating to 7.8% by 2020s, partly due to ongoing reforms, including introduction of GST and the Insolvency and Bankruptcy Code (IBC). The markets managed to hold their rally with a report that the total of investments during 2018 by private equity (PE) and venture capital (VC) companies was $35.1 billion (nearly Rs 2.5 trillion), surpassing the previous high of $26.1 billion (Rs 1.8 trillion) in 2017 by 35 per cent. The report further said that start-ups rebounded in 2018, attracting $6.4 billion (Rs 45,000 crore) or 83 per cent higher than in 2017. Trading sentiments were also got boost after UN report showed that India's creative goods exports nearly tripled from $7.4 billion in 2005 to $20.2 billion in 2014, making it one of the world's leading exporters of such products in the top 10 developing economies. Adding more support, apex industry body, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said that the continuing deceleration in the growth of WPI and softening of global fuel prices provide ample opportunity to MPC (monetary policy committee) to cut down policy rate at earliest which will kick start investment and revival in overall industrial growth. Finally, the BSE Sensex gained 464.77 points or 1.30% to 36,318.33, while the CNX Nifty was up by 149.20 points or 1.39% to 10,886.80.


The US markets ended higher on Tuesday, with the S&P 500 and the Nasdaq settling above psychologically important levels for the first time in a month, as a robust tech rally offset lackluster results from major US banks, including Dow-component JPMorgan Chase & Co. Meanwhile, fresh round of stimulus in China have also helped to calm fears about the impact of slower Chinese growth on the global economy. An announcement from the People's Bank of China that it would increase efforts to spur their economy by improving credit availability for smaller companies and a pledge by the Chinese Ministry of Finance to cut taxes and ramp up infrastructure spending helped to buoy market sentiment. On the economic front, a report released by the Labor Department showed a modest decrease in producer prices in the month of December. The Labor Department said its producer price index for final demand dipped by 0.2% in December after inching up by 0.1% in November. Excluding food and energy prices, core producer prices edged down by 0.1% in December after climbing by 0.3% in November. Meanwhile, a separate report released by the Federal Reserve Bank of New York showed New York manufacturing activity grew at its slowest pace in over a year in the month of January. The New York Fed said its general business conditions index slumped to 3.9 in January after tumbling to a revised 11.5 in December. A positive reading still indicates growth. Dow Jones Industrial Average gained 155.75 points or 0.65 percent to 24065.59, Nasdaq surged 117.92 points or 1.71 percent to 7023.83 and S&P 500 was up by 27.69 points or 1.07 to 2610.30.


Snapping their two days losing streak, crude oil futures settled higher on Tuesday as China took steps to boost its economy a day after another round of downbeat data. The People's Bank of China will increase efforts to spur their economy by improving credit availability for smaller companies, cutting taxes and ramping up infrastructure investments. Meanwhile, the US Energy Information Administration (EIA), in its Short-term Energy Outlook report, cut its previous 2019 price forecast by 0.8% for Brent crude to $60.52 a barrel and said it expects to see an average of $64.76 in 2020. The EIA kept its forecast for West Texas Intermediate crude prices at $54.19 for 2019 and expects to see an average of $60.76 in 2020. Benchmark crude oil futures for February surged $1.60 or 3.2 percent to settle $52.11 a barrel on the New York Mercantile Exchange. March Brent crude rose $1.65 or 2.8 percent to settle at $60.64 a barrel on London's Intercontinental Exchange.


Indian rupee continued to slide against the American currency for the third day on Tuesday, on increased demand for the American currency from importers and banks. The weakness of the rupee also comes amid rise in crude oil prices. Traders failed to get relief with data showing that India's retail inflation hit an 18-month low, rising 2.19 percent in December as compared with 2.3 percent in November due to cheaper fuel and food items. Besides, strength in the dollar in global markets affected the market sentiment, however good going in local equities capped the rupee fall to some extent. On the global front, euro fell against the US dollar on Tuesday after data showed Germany's economy slowed in 2018, underscoring fears about a broader slump in Europe. Finally, the rupee ended at 71.05, 13 paise weaker from its previous close of 70.92 on Monday.


The FIIs as per Tuesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3162.16 crore against gross selling of Rs 4027.62 crore, while in the debt segment, the gross purchase was of Rs 621.85 crore with gross sales of Rs 812.46 crore. Besides, in the hybrid segment, the gross buying was of Rs 8.76 crore against no selling.


The US markets ended in green on Tuesday as investors welcomed China's pledge to stimulate the country's ailing economy coupled with the rally in technology companies stocks. Asian markets were trading mixed on Wednesday with investors assessing Brexit options after British lawmakers trounced Prime Minister Theresa May's deal to pull out Britain from the European Union. Indian markets snapped three-day losing streak and ended higher with notable gains on Tuesday on easing retail inflation and hopes of monetary easing. Today, the markets are likely to make negative start amid mixed cues from Asian counterparts. Traders may take note of the commerce ministry's data showing that the country's exports grew marginally by 0.34% to $27.93 billion in December 2018 on account of negative growth in sectors such as engineering and gems & jewellery. Besides, imports dipped by 2.44% to $41 billion during the last month due to lesser imports of gold, pearls, precious and semi- precious stones. India's trade deficit narrowed to $13.08 billion in December, the lowest in 10 months, as compared with $16.7 billion in November, due to a fall in gold imports. However, traders may take some support with the Reserve Bank of India's (RBI) statement that it would inject Rs 10,000 crore into the system through purchase of government securities on January 17 to increase liquidity. The purchase will be made through open market operations (OMOs). The RBI plans to inject liquidity under OMOs for Rs 50,000 crore in January 2019. The central bank has so far injected Rs 20,000 through OMOs in January. Meanwhile, the Fertiliser Ministry has sought additional Rs 23,000 crore from the Finance counterpart to meet the subsidy requirement for the January-March quarter. Till December, a subsidy payment of Rs 23,283 crore was due towards fertiliser companies and the ministry was left with about Rs 13,056 crore from the budgeted allocation. There will be some reaction in steel sector stocks with report that the government is considering raising import duty on iron ore, a key raw material used in steel making, with a view to protecting the domestic industry. The low import duty of 2.5% encourages steel players to go for import rather than utilising the local ore. There will be some buzz in the real estate sector stocks with report that a ministerial panel headed by Gujarat Deputy Chief Minister Nitin Patel would look into the possibility of rationalisation of GST rate in real estate sector besides formulating a composition scheme. The Group of Ministers (GoM) will also analyse tax rate of GST, including issues/challenges in view of the proposal for shoring up the real estate sector. There will be some important result announcements to keep the markets in action.


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