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NSE Intra-day chart (16 January 2018)
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Market Commentary 17 January 2018
Markets to extend the somberness with a soft start

Snapping three days gaining streak, Indian equity benchmarks ended the volatile day of trade with marginal losses on Tuesday, as traders opted to book profit at higher levels. Markets altered between green and red throughout the session to end marginally in red, as traders remained a bit cautious with the merchandise export growth slowing sequentially to 12.4% in December, while imports jumping 21.1% during the month, aided by a spike in crude oil prices and a favourable base. The trade deficit widened to its highest level in over three years in December to $14.9 billion, a three-year peak. However, excluding the almost 35% rise in oil purchases from overseas, overall imports rose 17.2% in December. Traders also remained on sidelines ahead of GST Council meeting scheduled to be held on January 18, which will also be the last meeting before Budget 2018. The council is likely to revise rates for electric vehicles, farm equipment, ease compliance & modify the reverse charge mechanism. The recommendations of the law review committee are also likely to be taken up for consideration by the GST Council, comprising Centre and states. However, losses remained capped, as International Monetary Fund (IMF) highlighted that India is reclaiming its place as a growth leader after a short period of slowdown in the economy. Some relief also came with Prime Minister Narendra Modi promising more economic reforms to further improve the ease of doing business in India as he invited Israeli companies to invest in India. PM further noted that India is the fastest growing economy with FDI inflows at all time high. Traders also took some solace with private report stating that two Asian economies - India and Indonesia - will see a pick-up in GDP growth in 2018, reaping benefits of the economic reforms. It further noted that in the Indian context, adapting to the new GST regime, economic reforms aiding growth and recapitalisation plan for public sector banks will lead to increased investment growth and economic activity over the coming quarters. Finally, the BSE Sensex declined 72.46 points or 0.21% to 34,771.05, while the CNX Nifty was down by 41.10 points or 0.38% to 10,700.45.



The US markets closed lower on Tuesday, after the blue-chip index relinquished all the early gains in the sharpest daily reversal in nearly two years. On the economy front, the Empire State manufacturing survey slipped to 17.7 in January from a revised 19.6 in December. This is the third straight monthly decline after the index hit 28.1 in October. The new-orders index and shipments gauges fell in January. The new-orders index fell 7 points to 11.9, and the shipments index fell 9 points to 14.4. Unfilled orders and inventory indexes rose. The index for future inventories jumped to a record high, suggesting firms expect to build inventories significantly in coming months. Despite the slowdown, the index remains at a level associated with solid growth, continuing a pattern in place over the past year. The Dow Jones Industrial Average lost 10.33 points or 0.04 percent to 25,792.86, the Nasdaq dropped 37.062 points or 0.51 percent to 7,224.00, and the S&P 500 edged lower by 9.82 points or 0.35 percent to 2,776.42.


Crude oil futures cooled off on Tuesday, dropping off three-year highs as traders booked profits and the dollar stabilized from 3-year lows. However, healthy demand outlook restricted any major decline, it was reported that imports to India, the world's third-biggest oil consumer, rose by about 1.8 percent in 2017 to a record 4.37 million barrels per day (bpd) as the country boosted purchases to feed its expanded refining capacity. Benchmark crude oil futures for February delivery ended lower by $0.57 or 0.9 percent at $63.73 a barrel on the New York Mercantile Exchange. Brent crude for March delivery was down by $1.11 or 1.6 percent to $69.15 a barrel on the ICE.


Indian rupee breached the psychological 64/dollar mark to hit its lowest in three week on Tuesday, on persistent dollar demand and widening trade deficit. Trade deficit or difference between imports and exports was $14.88 billion in December, up about 41 percent year-on-year, as crude oil and gold import bill inflated. Investors even overlooked BMI Research's report that two Asian economies - India and Indonesia - will see a pick-up in GDP growth in 2018, reaping benefits of the economic reforms. Besides, stronger dollar sentiment overseas along with fall in domestic equities also predominantly pressurised the local unit. On the global front, euro held steady on Tuesday, taking a breather after having rallied on the back of optimism about the euro zone‘s economic outlook and expectations for the European Central Bank to wind down its massive monetary stimulus. Finally, the rupee ended at 64.03, 55 paise weaker from its previous close of 63.48 on Monday.


The FIIs as per Tuesday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 5152.89 crore against gross selling of Rs 5000.15 crore, while in the debt segment, the gross purchase was of Rs 1037.56 crore with gross sales of Rs 1899.59 crore. Besides, in the hybrid segment, there was no buying against gross selling of Rs 2.29 crore.


The US markets deposing their early gains ended lower in the last session, some profit taking contributed to the pullback by stocks, although the decline was relatively subdued compared to the recent strength. The Asian markets have made mostly a soft start, pulling back from record highs, following declines in US counterparts. Many traders are questioning the pace of gains in equity markets at the start of 2018 as the earnings season ramps up. The Indian markets consolidated a bit in the last session and the major benchmarks ended modestly in red after a choppy day of trade. Today, the start is likely to remain weak on negative global cues and on lingering concerns over the possibility of some slippage in the fiscal deficit path. Traders however, will be getting some support with a private report stating that business optimism index for the January-March quarter 2018 touched three and half year high on improving demand conditions and expectation that government sops in the budget will revive consumption. It further said that the upcoming Union Budget and assembly elections during 2018 might have generated optimism about government sops that could push revival in consumption. Also, there will be some support with report that agricultural exports from India grew 18 per cent to $21 billion in the April-October 2017-18 period compared to just 5 per cent in 2016-17. There will be some buzz in the FMCG sector stocks, especially the biscuit manufacturers who have demanded a lower GST rate on biscuit and related products than the current 18 per cent, saying it is a mass consumption food product and similar products are subject to lower tax rate. There will be some important earnings announcements too, to keep the markets buzzing.


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